not for distribution in the united states or to us persons

NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO U.S. PERSONS

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the offering

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Offering Circular dated July 14, 2005

GT 2005 BONDS B.V.(incorporated with limited liability under the laws of The Netherlands)

US$325,000,000 10.25% Guaranteed Bonds due 2010 with Issue Price 99.522%unconditionally and irrevocably guaranteed by

(incorporated with limited liability under the laws of the Republic of Indonesia)

The US$325,000,000 10.25% Guaranteed Bonds due 2010 (the “Bonds”) to be issued by GT 2005 Bonds B.V.(the “Issuer”) will bear interest from July 21, 2005 (the “Issue Date”) at the rate of 10.25% per annum payablesemi-annually in arrear on January 21 and July 21 each year (each, an “Interest Payment Date”) commencing onJanuary 21, 2006, and will mature on July 21, 2010.

Payments on the Bonds will be made in U.S. dollars without deduction for or on account of taxes imposed orlevied by the Republic of Indonesia (“Indonesia”) or The Netherlands to the extent described under “Terms andConditions of the Bonds.” PT Gajah Tunggal Tbk (the “Guarantor” or the “Company”) will unconditionally andirrevocably guarantee (the “Guarantee”) the due and punctual payment of all amounts at any time becoming dueand payable in respect of the Bonds. The Issuer is a wholly-owned subsidiary of the Guarantor.

The Bonds are subject to redemption in whole at their principal amount at the option of the Issuer at any timein the event of certain changes affecting taxation in The Netherlands or Indonesia. See “Terms and Conditionsof the Bonds.”

The Guarantor is concurrently conducting a consent solicitation of its existing floating rate noteholders and apurchase of a selected portion of its existing floating rate notes. See “Concurrent FRN Purchase and ConsentSolicitation.”

Investing in the Bonds involves certain risks. See “Risk Factors” beginning on page 14.

The Bonds have not been and will not be registered under the U.S. Securities Act of 1933 (the “SecuritiesAct”). The Bonds may not be offered or sold within the United States or to, or for the account or benefit of, anyU.S. person (as defined in Regulation S under the Securities Act). Accordingly, the Bonds are only beingoffered outside the United States to persons other than U.S. persons in reliance upon Regulation S. See“Transfer Restrictions.”

Approval in-principle has been obtained from the Singapore Exchange Securities Trading Limited (the“SGX-ST”) for permission to deal in and quotation of the Bonds on the SGX-ST. Such permission will begranted when the Bonds have been admitted to the Official List of the SGX-ST. The SGX-ST assumes noresponsibility for the correctness of any of the statements made or opinions or reports contained in thisOffering Circular. Admission to the Official List of the SGX-ST is not to be taken as an indication of the meritsof the Issuer, the Guarantor or the Bonds.

The Bonds will be in the denomination of US$1,000 each or integral multiples thereof. The Bonds will betraded on the SGX-ST in minimum board lot size of US$200,000 as long as any of the Bonds remain listed onthe SGX-ST.

The Bonds have been rated “B2” by Moody’s Investors Service, Inc. (“Moody’s”) and “B” by Standard andPoor’s Ratings Group, a division of McGraw-Hill Companies, Inc. (“Standard & Poor’s”). A security rating is nota recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal atany time by the assigning rating agency.

It is expected that delivery of the Bonds will be made on or about July 21, 2005 through the facilities ofEuroclear Bank S.A./N.V. as operator of the Euroclear System (“Euroclear”) and Clearstream Banking, societeanonyme, Luxembourg (“Clearstream, Luxembourg”).

Joint Bookrunners and Lead Managers

Credit Suisse First Boston UBS Investment Bank

TABLE OF CONTENTS

Page

SUMMARY ................................................... 1

RISK FACTORS ............................................. 14

USE OF PROCEEDS ........................................ 29

EXCHANGE RATES ........................................ 30

CAPITALISATION ........................................... 32

SELECTED HISTORICAL CONSOLIDATED

FINANCIAL AND OPERATING DATA ............... 33

SELECTED SEGMENT INFORMATION OF ONGOING

OPERATIONS ............................................. 37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF

OPERATIONS ............................................. 40

BUSINESS .................................................... 54

MANAGEMENT .............................................. 79

FINANCIAL AND CORPORATE RESTRUCTURING .... 82

PRINCIPAL SHAREHOLDERS ............................. 86

DESCRIPTION OF THE ISSUER .......................... 87

Page

TERMS AND CONDITIONS OF THE BONDS .......... 89

DESCRIPTION OF THE BONDS WHILE IN GLOBAL

FORM ..................................................... 130

CONCURRENT FRN PURCHASE AND CONSENT

SOLICITATION ........................................... 133

SUBSCRIPTION AND SALE ............................... 134

TRANSFER RESTRICTIONS ............................... 138

GLOBAL CLEARANCE AND SETTLEMENT ............ 139

TAXATION ................................................... 140

CERTAIN PRINCIPAL DIFFERENCES BETWEEN

INDONESIAN GAAP AND U.S. GAAP ......... 144

LEGAL MATTERS .......................................... 148

INDEPENDENT ACCOUNTANTS .......................... 148

RATINGS ..................................................... 149

GENERAL INFORMATION ................................. 150

INDEX TO CONSOLIDATED FINANCIAL

STATEMENTS ............................................ F-1

Each of the Issuer and the Guarantor accepts responsibility for the information contained in thisOffering Circular. Having made all reasonable inquiries, each of the Issuer and the Guarantor confirmsthat this Offering Circular contains all information with respect to the Issuer, the Guarantor, theconsolidated subsidiaries of the Guarantor and the Bonds that is material in the context of the issueand offering of the Bonds, and that the information in this Offering Circular is true and accurate inall material respects, that the opinions and intentions expressed in this Offering Circular are honestlyheld and are not misleading in any material respect, that neither the Issuer nor the Guarantor is awareof any other facts the omission of which in its reasonable opinion might make this document as awhole or any of such information or the expression of any such opinions or intentions materiallymisleading, and that all reasonable inquiries have been made by the Issuer and the Guarantor to verifythe accuracy of such information. Where information contained in this Offering Circular includesextracts from summaries of information and data from various published and private sources, each ofthe Issuer and the Guarantor accepts responsibility for accurately reproducing such summaries anddata but accepts no further or other responsibility in respect of such information.

This Offering Circular is confidential and has been prepared by the Issuer and the Guarantorsolely for use in connection with the issue and offering of the Bonds described herein. Each of theIssuer, the Guarantor and Credit Suisse First Boston (Europe) Limited and UBS Limited (together, the“Joint Lead Managers”) reserves the right to reject any offer to purchase the Bonds, in whole or inpart, for any reason. This Offering Circular is personal to each offeree and does not constitute an offerto any other person or to the public generally to subscribe for or otherwise acquire the Bonds. Anydisclosure of any of the contents of this Offering Circular, without the prior written consent of theIssuer and the Guarantor, is prohibited. Each prospective purchaser, by accepting delivery of thisOffering Circular, agrees to the foregoing and to make no photocopies of this Offering Circular or anydocuments attached hereto.

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The distribution of this Offering Circular and the offer, sale and delivery of the Bonds in certainjurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes arerequired by each of the Issuer, the Guarantor and the Joint Lead Managers to inform themselves aboutand to observe any such restrictions. No action is being taken to permit a public offering of the Bondsor the distribution of this Offering Circular (in preliminary or final form) in any jurisdiction whereaction would be required for such purposes. No representation or warranty, express or implied, is madeas to the accuracy or completeness of the information set forth herein, and nothing contained in thisOffering Circular is, or shall be relied upon as, a promise or representation, whether as to the past orthe future. None of the Joint Lead Managers, the Trustee, the Registrar, the Paying Agents and theTransfer Agents (each as defined herein) has independently verified any of such information andassumes no responsibility for its accuracy or completeness.

THE BONDS MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, ININDONESIA OR TO ANY INDONESIAN CITIZEN OR CORPORATION (WHEREVERLOCATED) OR ANY INDONESIAN RESIDENT IN A MANNER WHICH CONSTITUTES APUBLIC OFFERING UNDER INDONESIAN LAWS AND REGULATIONS.

No person has been or is authorised to give any information or to make any representationsconcerning the Issuer, the Guarantor, the Guarantor’s subsidiaries or the Bonds other than thosecontained in this Offering Circular in connection with this offering and, if given or made, any suchother information or representations should not be relied upon as having been authorised by the Issuer,the Guarantor or the Joint Lead Managers. Neither the delivery of this Offering Circular nor anyoffering, sale or delivery made hereunder shall, under any circumstances, create any implication thatthe information contained herein is correct at any date subsequent to the date hereof. This OfferingCircular does not constitute an offer of, or an invitation by or on behalf of, the Issuer, the Guarantoror the Joint Lead Managers to subscribe for or purchase the Bonds and may not be used for the purposeof an offer to or a solicitation by anyone in any jurisdiction or in any circumstances in which suchoffer or solicitation is not authorised or is unlawful.

The Joint Lead Managers, the Trustee, the Registrar, the Paying Agents and the Transfer Agentsdo not make any representation or warranty, express or implied, as to the accuracy or completenessof the information contained in this Offering Circular. Each person receiving this Offering Circularacknowledges that such person has not relied on the Joint Lead Managers, the Trustee, the Registrar,the Paying Agents and the Transfer Agents or any person affiliated with any of them in connection withits investigation of the accuracy of such information or its investment decision. Each personcontemplating making an investment in the Bonds must make its own investigation and analysis of thecreditworthiness of the Issuer and the Guarantor and its own determination of the suitability of anysuch investment, with particular reference to its own investment objectives and experience, and anyother factors which may be relevant to it in connection with such investment. Each person should notconstrue the contents of this Offering Circular as legal, business or tax advice and should be awarethat it may be required to bear the financial risks of an investment in the Bonds for an indefinite periodof time. Each person should consult its own counsel, accountant and other advisors as to legal, tax,business, financial and related aspects of a purchase of the Bonds.

In connection with the issue of the Bonds, one or more of the Joint Lead Managers may, ifpermitted by applicable laws, act as stabilising manager(s). In connection with the issue of the Bonds,the stabilising manager may effect transactions with a view to supporting the market price of theBonds at a level higher than that which might not otherwise prevail. However, there is no assurancethat the stabilising manager (or persons acting on behalf of the stabilising manager) will undertakestabilisation action. Any stabilisation action may begin on or after the date on which adequate publicdisclosure of the terms of the offer of the relevant Bonds is made and, if begun, may be ended at anytime, but it must end no later than 30 days after the issue date of the Bonds.

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CERTAIN TERMS AND CONVENTIONS

Unless indicated otherwise in this Offering Circular, all references to (i) the “Issuer” are to GT2005 Bonds B.V., and (ii) the “Guarantor” or the “Company” are to PT Gajah Tunggal Tbk, and whererelevant, its consolidated subsidiaries, as of the date of this Offering Circular.

All references herein to “Indonesia” are references to the Republic of Indonesia. References tothe “United States” or “U.S.” are to the United States of America. All references herein to“Government” are to the Government of Indonesia.

References herein to “US$,” “$” or “U.S. dollars” are to United States dollars, references to“ C= ” or “EUR” are to Euros and references to “Rupiah” or “Rp.” are to Indonesian Rupiah. Solely forconvenience only, this Offering Circular contains translations of certain Rupiah amounts into U.S.dollars at the exchange rate of Rp.9,480 = US$1.00 set by Bank Indonesia, Bank Sentral RepublikIndonesia, prevailing as of March 31, 2005. No representation is made that the Rupiah or U.S. dollaramounts referred to in this Offering Circular could have been or could be converted into U.S. dollarsor Rupiah, as the case may be, at any particular rate or at all. See “Exchange Rates.”

Certain amounts (including percentage amounts) have been rounded for convenience; as a result,certain figures may not sum to total amounts or equal quotients.

The Company’s consolidated financial statements are prepared using accounting principles andreporting practices generally accepted in Indonesia (“Indonesian GAAP”) and are not intended topresent the Company’s consolidated financial condition, results of operations and cash flows inaccordance with accounting principles and practices generally accepted in countries and jurisdictions,including the United States, other than those in Indonesia. The material differences betweenIndonesian GAAP and generally accepted accounting principles in the United States (“U.S. GAAP”)as applicable to the Company are discussed under the caption “Certain Principal Differences betweenIndonesian GAAP and U.S. GAAP.”

Market data and certain industry information used throughout this Offering Circular have beenobtained from market research, publicly-available information and industry publications. Certainstatistical information included herein relating to the Indonesian tire industry has been reproducedfrom data of the Indonesian Tire Manufacturers Association (“APBI”). APBI is a trade associationcomprising members of the tire industry in Indonesia and compiles industry statistics based oninformation provided by its members. Such industry statistics therefore excludes information onnon-APBI member tire companies and tires imported into Indonesia.

ENFORCEABILITY

Enforceability of Foreign Judgments in Indonesia

The Issuer is incorporated in The Netherlands and the Guarantor is incorporated in Indonesia.The Issuer’s sole director resides in The Netherlands, while all of the Guarantor’s commissioners,directors and executive officers (and certain experts named in this Offering Circular) reside inIndonesia. The Issuer is a special-purpose company with limited assets, while all or a substantialportion of the assets of the Guarantor are located in Indonesia. As a result, it may be difficult forinvestors to effect service of process upon such persons, or to enforce against the Guarantor in courtjudgments obtained in courts outside of Indonesia.

The Guarantor has been advised by Indonesian counsel, Makes & Partners Law Firm, thatjudgments of courts outside Indonesia are not enforceable in Indonesian courts. A foreign courtjudgment could be offered and accepted into evidence in a proceeding on the underlying claim in anIndonesian court and may be given such evidentiary weight as the Indonesian court may deemappropriate in its sole discretion. A claimant may be required to pursue claims in Indonesian courtson the basis of Indonesian law.

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The Issuer is incorporated as a private company with limited liability (besloten vennootschap metbeperkte aansprakelijkheid) under the laws of The Netherlands. As a result, it may be difficult forinvestors to enforce against the Issuer judgments obtained in non-Dutch courts.

As Indonesia and The Netherlands do not currently have a treaty providing for reciprocalrecognition and enforcement of judgments (other than arbitral awards) in civil and commercialmatters, a final judgment for the payment of money rendered by any courts in Indonesia based on civilliability, would not be enforceable in The Netherlands. However, if the party in whose favour suchfinal judgment is rendered brings a new suit in a competent court in The Netherlands, such party maysubmit to a Dutch court the final judgment that has been rendered in Indonesia. If the Dutch court findsthat the jurisdiction of any courts in Indonesia has been based on grounds which are internationallyacceptable and that proper legal procedures have been observed, the Dutch court will, in principle,uphold such final judgment and regard it as conclusive evidence, without substantive re-examinationor re-litigation on the merits of the subject matter thereof, unless such judgment contravenes publicorder in The Netherlands.

The agreements entered into with respect to the issue of the Bonds are governed by the laws ofEngland. The recognition and enforcement in The Netherlands of a judgment rendered by an Englishcourt will be subject to the provisions of the European Communities, or EC, Regulation on Jurisdictionand the Recognition and Enforcement of Judgments in Civil and Commercial Matters, of December22, 2000, as amended from time to time.

Enforceability of the Guarantee in IndonesiaUnder the Indonesian Civil Code, a guarantor may waive its right to require the obligee to

exhaust its legal remedies against the obligor’s assets on a guaranteed obligation prior to the obligeeexercising its rights under the related guarantee, and the waiver is enforceable against the guarantor.The Guarantee provided by the Guarantor contains a waiver of this obligation. The Guarantor has beenadvised by its Indonesian counsel that a guarantor may successfully argue that even though aguarantee contains such waiver, the guarantor may nevertheless require that the obligee must firstprove that all available legal remedies against the obligor have, in fact, been exhausted. Accordingly,the Guarantor may not be required to comply with its obligations under the Guarantee it provides inrespect of the Bonds until all legal remedies against the Issuer have been exhausted.

For a description of potential limitations on enforcement against the Guarantor and holders of theBonds’ (“Bondholders”) rights under the Guarantee, see “Risk Factors — Risks Relating to the Bonds— Through the purchase of the Bonds, Bondholders may be exposed to a legal system subject toconsiderable discretion and uncertainty; Bondholders may have difficulty pursuing claims under theBonds and the Guarantee provided by the Guarantor in respect of the Bonds.”

Reports to Bank IndonesiaPursuant to Presidential Decree No. 59/1972, the Guarantor is required to report particulars of

its offshore borrowings to the Minister of Finance of Indonesia and Bank Indonesia, on the acceptance,implementation, and repayment of principal and interest. Ministry of Finance Decree No. KEP-261/MK/IV/5/73, as the implementing regulation of Presidential Decree No. 59/1972, sets out therequirements to submit periodic reports to the Minister of Finance of Indonesia and Bank Indonesiaon the effective date of the contract and each subsequent three-month period. Further, pursuant toPresidential Decree No. 39/1991, all offshore commercial borrowers must submit periodic reports tothe Offshore Commercial Borrowing Team on the implementation of their offshore commercialborrowings. Presidential Decree No. 39/1991 stipulates neither the time-frame nor the format and thecontent of the periodic reports that must be submitted. According to Circular Letter of the Directorsof Bank Indonesia No. 6/51/DLN Year 2004, anyone who obtains offshore commercial borrowings inthe form of a loan agreement (in an amount exceeding US$200,000 or its equivalent in any othercurrency), commercial paper or other agreements must submit reports to Bank Indonesia. Such reportsconsist of the main data report and the realisation data report. The main data report must be submittedto Bank Indonesia no later than ten days after the signing of the loan agreement or the issuance of thedebt securities, and a monthly realisation data report must be submitted to Bank Indonesia no laterthan the tenth day of each month, until the debt securities have been repaid in full. The Guarantor willundertake in the Trust Deed (as hereinafter defined) to comply with all such requirements in respect

— iv —

of the loan agreement between the Issuer and the Guarantor and the Guarantee provided by theGuarantor. The Guarantor has been advised by its Indonesian counsel that any failure to submit therequired reports will subject the Guarantor to certain administrative sanctions in the form of fines, butshould not invalidate the obligations of the Guarantor under the loan agreement between the Issuer andthe Guarantor nor under the Guarantee provided by the Guarantor in respect of the Bonds.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Offering Circular contains words such as “believe,” “plan,” “expect” and “anticipate” andsimilar expressions that constitute “forward-looking statements”. Specifically, statements under thecaptions “Summary — Introduction,” “Management’s Discussion and Analysis of Financial Conditionand Results of Operations,” “Risk Factors” and “Business” relating to the following matters mayinclude forward-looking statements:

● the expected results of research, development and related capital expenditures andinvestments,

● the success of business co-operation arrangements with other tire companies, especiallyMichelin (as defined herein), and motor vehicle manufacturers,

● the anticipated demand and selling prices for tires,

● environmental compliance and remediation,

● the anticipated demand for tire products and related capital expenditures and investments,

● future capital expenditures and investments in general,

● the ability of the Company to be and remain competitive,

● the Company’s financial condition, business strategy, budgets and projected financial andoperating data, as well as the plans and objectives of management for future operations,

● generation of future receivables, and

● sales to customers.

Such statements are subject to certain risks and uncertainties, including:

● economic, social and political conditions in Indonesia and other countries in which theCompany transacts business,

● fluctuations in foreign currency exchange rates,

● increases in regulatory burdens in Indonesia and such countries, including environmentalregulations, compliance costs, and product liability regulation, and

● changes in import or export controls, duties, levies or taxes, either in international marketsor in Indonesia.

Should one or more of these uncertainties or risks, among others, materialise, actual results mayvary materially from those estimated, anticipated or projected. Specifically, but without limitation,capital costs could increase, projects could be delayed and anticipated improvements in production,capacity or performance might not be fully realised. Although the Company believes that theexpectations of its management as reflected by such forward-looking statements are reasonable basedon information currently available to it, no assurances can be given that such expectations will proveto have been correct. Accordingly, prospective purchasers are cautioned not to place undue relianceon forward-looking statements. In any event, these statements speak only as of their dates, and theCompany undertakes no obligation to update or revise any of them, whether as a result of newinformation, future events or otherwise.

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SUMMARY

The following summary is qualified in its entirety by the more detailed information and theconsolidated financial statements of the Company, including the notes thereto, appearing elsewherein this Offering Circular. Prospective purchasers should carefully consider the information set forthin “Risk Factors.” To understand the terms of the Bonds, you should carefully read the section of thisOffering Circular entitled “Terms and Conditions of the Bonds.”

Introduction

The Company owns and operates the largest integrated tire manufacturing facilities in South-EastAsia. The Company’s shares have been listed on the Jakarta Stock Exchange (“JSX”) and the SurabayaStock Exchange (“SSX”) since May 1990, and had a market capitalisation of Rp.2,408 billion (US$254million) as of July 13, 2005.

The Company derives the majority of its revenue from the sales of tires and tire-related productsin Indonesia and overseas. The Company’s tire division recorded total sales to external parties(comprising sales of radial, bias and motorcycle tires, as well as tire tubes, flaps, rim tape, O-rings,valves and reclaimed rubber) of Rp.3,291 billion (US$347.1 million) for the year ended December 31,2004, and total sales to external parties of Rp.943 billion (US$99.4 million) for the three monthsended March 31, 2005. Tire division sales comprised approximately 87%, 87%, 85% and 84% of theCompany’s combined external sales of tires and tire-related products in 2002, 2003, 2004 and the threemonths ended March 31, 2005, respectively.

The Company also derives revenue from the sales of tire-related products, comprising tire cordand synthetic rubber. The Company, through its tire-related product divisions, also manufactures tirecord and synthetic rubber for the Company’s tire production as part of its strategy of verticallyintegrating its production facilities to enhance cost controls, and also sells tire cord and syntheticrubber to external parties. The Company recorded total tire-related product sales to external partiesof Rp.586 billion (US$61.8 million) for the year ended December 31, 2004, and total tire-relatedproduct sales to external parties of Rp.182 billion (US$19.1 million) for the three months ended March31, 2005.

According to data from the APBI (which excludes imported tire sales and non-APBI members’tire sales), the Company had a 64% market share for two-wheeled vehicle tires and a 28% market sharefor four-wheeled vehicle tires in the Indonesian replacement tire market in 2004 in terms of salesvolumes. In the four-wheeled vehicle market, the Company had a 36% market share for bias tires anda 23% market share for radial tires in the Indonesian replacement market in 2004 in terms of salesvolumes. In 2004, the Company manufactured over 21.5 million units of tires.

As of December 31, 2004, the Company had total consolidated assets of Rp.6,341 billion(US$668.9 million). As of March 31, 2005, the Company had total consolidated assets of Rp.6,474billion (US$683.0 million).

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Overview” and “Business — Overview.”

Strategic Partnership with Michelin

The Company has recently entered into a business co-operation arrangement with certainaffiliates of Groupe Michelin (“Michelin”), the world’s largest tire manufacturer in 2004 (based on2003 sales) according to the European Rubber Journal. The business co-operation arrangementbetween the Company and Michelin comprises a manufacturing agreement focusing on themanufacture of Michelin’s associated brand tires (excluding “Michelin”-branded tires), and anagreement on joint distribution activities in Indonesia. As part of its strategic alliance with theCompany, Michelin acquired a 10% equity stake in the Company in May 2004 through one of itssubsidiaries. See “Business — Strategic Alliance with Michelin.”

1

Under its manufacturing agreement with Michelin, the Company will manufacture a selectedrange of Michelin’s associated brand tires (excluding “Michelin”-branded tires) for markets served byMichelin outside Indonesia. The Company’s and Michelin’s strategic plan is to increase the volumemanufactured by the Company for Michelin to up to five million units of tires per year by 2010.

Under its distribution agreement with Michelin, the Company will distribute a selected range ofMichelin’s passenger car and light truck radial tires in the Indonesian domestic replacement market,together with the Company’s “GT Radial” brand tires, through a specialised distribution network ofkey retailers. To implement this distribution arrangement, the Company has created the “TireZone”retail concept, and selects key retailers to own and operate “TireZone” outlets according to specificquality and service criteria that have been agreed upon between the Company and Michelin. TheCompany intends to use these retail outlets to strengthen its brand equity, thereby preserving its abilityto price its tires at a premium while increasing sales volumes. The Company currently has 15“TireZone” outlets in eight major cities in Indonesia.

Corporate Restructuring

The Company completed a corporate restructuring exercise in December 2004 pursuant to whichits shareholding in a subsidiary, GT Petrochem Industries Tbk (“GT Petrochem Industries”), wasreduced from 50.01% to 28.91%. Following this corporate restructuring, GT Petrochem Industriesceased to be a subsidiary of the Company and its results of operations have not been consolidated intothe Company’s results of operations since December 1, 2004. See “Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Overview — Financial impact ofcorporate restructuring” and “Financial and Corporate Restructuring.”

As part of the December 2004 corporate restructuring, the Company also acquired the tire cordand synthetic rubber manufacturing assets, respectively, of GT Petrochem Industries and PT SentraSintetikajaya, a subsidiary of GT Petrochem Industries. These assets are now organised as divisionswithin the Company. These acquisitions allowed the Company to vertically integrate its productionfacilities, and to enhance its internal cost controls.

Since completion of the corporate restructuring in December 2004, the Company no longerconsolidates revenue from the businesses of GT Petrochem Industries, which are not directly relatedto the Company’s tire and tire-related product business. The Company believes that the presentationof historical sales information of tires and tire-related products derived from the segment informationin the Company’s historical audited consolidated financial statements will be more meaningful toinvestors in understanding the Company’s business which focuses on tires and tire-related productsafter completion of its corporate restructuring in December 2004. See “Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Results of Ongoing Operations” and“Selected Segment Information of Ongoing Operations.”

Key Competitive Strengths

The Company believes its key business strengths are as follows:

Leading domestic market position. The Company enjoys a dominant market share fortwo-wheeled vehicle tires and a substantial market share for four-wheeled vehicle tires in theIndonesian replacement tire market. The Company also has an established distribution network, andits range of products holds strong brand equity, particularly in the Indonesian market.

Cost leadership. The Company has highly competitive labour costs and land costs compared totire manufacturers in other countries. Due to its relatively large size, the Company also achievesproduction cost economies by commanding pricing leverage for its raw materials in Indonesia.

2

Relationships with leading tire companies. The Company has secured long-term relationshipswith leading tire companies, including Nokian Tyres Group (“Nokian Tyres”) and Michelin. Theserelationships have helped the Company not only to secure long-term demand for its manufacturingcapacity, but also to improve its production efficiency and quality control.

Vertically integrated production. The Company has vertically integrated its tire cord andsynthetic rubber manufacturing assets, which are key raw materials required by its tire manufacturingplants. The Company’s control of its synthetic rubber plant and tire cord plant allows the Companyto secure its supply of synthetic rubber and tire cord for its tire production while improving its costcontrols.

Quality products. The Company is recognised as a leading manufacturer of quality products,particularly in the domestic motorcycle tire market. The Company has continually strived to improveits product quality and has consistently achieved quality certifications from various international andindustry organisations over the years.

Strategy

The principal components of the Company’s strategy are as follows:

● Diversify and increase focus on higher margin products.

● Increase production capacity through improvements in production efficiency and newexpansion.

● Strengthen brand equity.

● Enhance domestic distribution through the establishment of new distribution channels.

● Continue to exercise prudent financial measures.

See also “Business — Strategy.”

The Company’s registered and principal executive office is located at Wisma Hayam Wuruk 10thFloor, Jl. Hayam Wuruk No. 8, Jakarta 10120, Indonesia.

3

The Offering

Issuer ........................................... GT 2005 Bonds B.V.

Guarantor/the Company .............. PT Gajah Tunggal Tbk.

The Issue .................................... US$325,000,000 aggregate principal amount of 10.25%Guaranteed Bonds due 2010.

Issue Price .................................. 99.522% of the principal amount of the Bonds.

Guarantee ................................... Payment of principal, interest and any additional amounts onthe Bonds is irrevocably and unconditionally guaranteed bythe Guarantor.

Issue Date .................................. July 21, 2005.

Maturity Date ............................. July 21, 2010.

Interest ....................................... The Bonds will bear interest from the Issue Date at the rate of10.25% per annum and will be payable semi-annually inarrear on January 21 and July 21 of each year.

Denomination ............................. The Bonds will be in the denomination of US$1,000 each orintegral multiples thereof. The Bonds will be traded on theSGX-ST in minimum board lot sizes of US$200,000 as longas any of the Bonds remain listed on the SGX-ST.

Withholding Taxes ...................... Payment of principal of, premium, if any, interest on, and anyadditional amounts on the Bonds, will be made by the Issuerthrough The Hongkong and Shanghai Banking CorporationLimited as principal paying agent in immediately availablefunds. All payments in respect of the Bonds and the Guaranteeshall be made free and clear of, and without withholding ordeduction for Dutch or Indonesian taxes, unless suchwithholding or deduction is required by law. In the event thatthe Issuer or the Guarantor is required by law to deduct orwithhold Dutch or Indonesian taxes, the Issuer or theGuarantor, as the case may be, will pay additional amounts(subject to certain exceptions) in respect of such withholdingtax on such payments.

Ranking ...................................... The Bonds will be unsecured and will be the direct,unconditional and unsubordinated obligations of the Issuer.The Guarantee will be the direct, unconditional,unsubordinated and unsecured obligation of the Guarantor.

The Bonds will rank at least pari passu with all existing andfuture unsecured obligations of the Issuer. The Guarantee willrank at least pari passu with all existing and futureunsubordinated and unsecured obligations of the Guarantor(including the FRNs, as defined below).

4

Optional Tax Redemption ........... Subject to certain exceptions and as more fully describedherein, the Bonds may be redeemed, in whole but not in part,at the option of the Issuer, at a redemption price equal to100% of the principal amount thereof, plus accrued andunpaid interest to the redemption date (plus additionalamounts due thereon, if any) if, as a result of certain changesin the laws, treaties, regulations or rulings (or the applicationor interpretation thereof) affecting Dutch or Indonesian taxes,the Issuer or the Guarantor (as the case may be) would berequired to pay certain additional amounts; provided thatwhere the additional amounts are due as a result of suchchanges affecting Dutch or Indonesian taxes, the Bonds maybe redeemed only in the event that the withholding raterequired under Indonesian law or laws is in excess of 20%.

Certain Covenants ....................... The Issuer and the Guarantor have agreed in the Trust Deedconstituting the Bonds and the Conditions related thereto toobserve certain covenants, including, among other things,incurrence of additional debt; grant of security interests;payment of dividends; mergers, acquisitions and disposals;and certain other covenants. See “Terms and Conditions of theBonds.”

Events of Default ....................... Certain events will permit acceleration of the principal of theBonds (together with all interest and additional amountsaccrued and unpaid thereon). These events include defaultwith respect to the payment of principal of, premium, if any,or interest on, the Bonds.

Use of Proceeds .......................... The Issuer expects the net proceeds from this offering to beapproximately US$318.6 million, after payment of fees andcommissions but prior to deduction of expenses incurred inconnection with the issue of the Bonds.

The Issuer will lend the proceeds from the sale of the Bondsto the Guarantor. The Guarantor intends to use the netproceeds of the aforementioned loan to finance its productioncapacity expansion, for general corporate purposes relatingdirectly to its business and to purchase a portion of the SeriesA FRNs and all of the Series B FRNs (each as defined below)of the Company, with an aggregate principal amount ofUS$221.5 million, from selected holders thereof.

Book-entry; Delivery and Form .. The Bonds will be represented by a Global Certificate in fullyregistered form without interest coupons deposited with acommon depositary for Euroclear and ClearstreamLuxembourg and registered in the name of a nominee for suchcommon depositary.

Transfer Restrictions .................... The Bonds have not been registered under the Securities Actand are subject to certain restrictions on transfer. See“Transfer Restrictions.”

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Listing and Trading for theBonds ...................................... Approval in-principle has been obtained from the SGX-ST for

permission to deal in and quotation of the Bonds on theSGX-ST. The Bonds will be traded on the SGX-ST in aminimum board lot size of US$200,000 for so long as theBonds are listed on the SGX-ST.

Identification Numbers ............... ISIN:XS0224891944.Common Code:022489194.

Principal Paying Agent, PayingAgent, Transfer Agent andRegistrar .................................

The Hongkong and Shanghai Banking Corporation Limited.

Trustee ....................................... The Hongkong and Shanghai Banking Corporation Limited.

Governing Law ........................... The Conditions, the Bonds, the Guarantee and the Trust Deedwill be governed by, and construed in accordance with, thelaws of England.

Ratings ....................................... The Bonds have been rated “B2” by Moody’s and “B” byStandard & Poor’s. The credit ratings accorded the Bonds arenot a recommendation to purchase, hold or sell the Bondsinasmuch as such ratings do not comment as to market priceor suitability for a particular investor. There can be noassurance that the ratings will remain in effect for any givenperiod or that the ratings will not be revised by the ratingagencies in the future if, in their judgment, circumstances sowarrant. See “Risk Factors — Risks Relating to the Bonds —The ratings assigned to the Bonds may be lowered orwithdrawn entirely in the future.”

6

Concurrent FRN Purchase andConsent Solicitation ................ The Guarantor is purchasing its Series A FRNs and Series B

FRNs (each as defined below) from selected holders thereofin bilateral transactions (the “FRN Purchase”).

The Company is concurrently soliciting (the “ConsentSolicitation”) the holders of its outstanding FRNs (as definedbelow) to pass a resolution in writing (the “AmendingResolutions”) in relation to their respective series of FRNs:(a) to waive certain covenants contained in the respectivetrust deeds for the FRNs to allow the issue of the Bonds andthe Guarantee; and (b) subject to the issue of the Bonds, toamend certain covenants contained in the respective trustdeeds for the FRNs.

The FRN Purchase, the Consent Solicitation and the issue ofthe Bonds are inter-conditional. In addition, the FRNPurchase is conditional on, among other things, the AmendingResolutions having been duly passed by a resolution of theholders of FRNs in respect of the respective series of FRNsthey hold. Subject to the fulfilment of the conditionsprecedent thereto, the FRN Purchase and Consent Solicitationare expected to be consummated on the Issue Date.

US$174.2 million in aggregate principal amount of Series AFRNs and US$47.2 million in aggregate principal amount ofSeries B FRNs are currently proposed to be purchased by theCompany from selected holders of FRNs.

See “Concurrent FRN Purchase and Consent Solicitation.”

Risk Factors ............................... Investors should consider all the information contained in thisOffering Circular and, in particular, investors should evaluatethe specific factors described in “Risk Factors” for risksinvolved with investing in the Bonds.

7

Summary Selected Historical Consolidated FinancialInformation and Operating Data

The following tables set forth certain summary historical consolidated financial data for theCompany as of the dates and for each of the periods indicated. The summary historical consolidatedfinancial data as of and for the years ended December 31, 2002, 2003 and 2004 has been derived fromthe consolidated financial statements of the Company audited by Hans Tuanakotta Mustofa & Halim(formerly Hans Tuanakotta & Mustofa) independent public accountants, the member firm of DeloitteTouche Tohmatsu in Indonesia. The summary historical consolidated financial data as of and for thethree months ended March 31, 2004 and 2005 set forth below have been derived from the unauditedconsolidated financial statements of the Company included elsewhere in this Offering Circular. Thehistorical results presented below are not necessarily indicative of the results that may be expectedfor the full year ending December 31, 2005 or any future period.

Due to various recent changes to the corporate structure of the Company, including thedeconsolidation of a material subsidiary, GT Petrochem Industries and the transfer of the tire cordand synthetic rubber manufacturing assets thereof to the Company in December 2004, as well as thedivestment of certain non-core businesses and assets of the Company in February 2005, aperiod-to-period comparison of the historical consolidated financial information included in thisOffering Circular may not be meaningful. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations — Overview — Financial impact of corporate restructuring” and“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Resultsof Ongoing Operations.”

The Company’s consolidated financial statements have been prepared in accordance withIndonesian GAAP, which differs in certain respects from U.S. GAAP. See “Certain PrincipalDifferences between Indonesian GAAP and U.S. GAAP” and “Risk Factors — Risks Relating toIndonesia — Indonesian corporate and other disclosure and accounting standards differ from thosein the United States.”

The following information should be read in conjunction with “Selected Segment Information ofOngoing Operations”, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and the consolidated financial statements of the Company and the notes thereto includedelsewhere in this Offering Circular.

8

Years ended December 31, Three months ended March 31,

2002 2003 2004 2004 2004 2005 2005

(Audited) (Audited) (Audited) (Unaudited) (Unaudited)

(Rp.) (Rp.) (Rp.) (US$) (Rp.) (Rp.) (US$)

(Rp. amounts in billions and US$ amounts in millions, except where otherwise indicated)

Consolidated statements of income:NET SALES........................................... 5,561 5,730 6,808 718.1 1,641 1,158 122.2COST OF SALES................................... 4,713 4,858 5,683 599.5 1,380 967 102.0GROSS PROFIT..................................... 848 872 1,124 118.6 261 192 20.2OPERATING EXPENSES:Selling .................................................. 247 294 196 20.7 60 35 3.7General and administrative ..................... 229 312 245 25.8 62 32 3.4

Total operating expenses ....................... 475 606 441 46.5 123 67 7.1INCOME FROM OPERATIONS ............. 373 266 684 72.1 138 124 13.1

OTHER INCOME (CHARGES):Gain on sale of subsidiary...................... — — — — — 124 13.0Gain (loss) on foreign exchange — net .. 1,707 389 (466) (49.1) (91) (63) (6.6)Interest income ..................................... 109 24 5 0.6 5 —(1) —(1)

Interest expense ..................................... (450) (66) (45) (4.7) (7) (16) (1.7)Reversal of (provision for) allowance

for doubtful accounts ........................ (4) (1) 28 3.0 — — —Impairment of unused of property, plant

and equipment ................................... (4) (4) (4) (0.5) — — —Others — net ......................................... 105 49 45 4.8 8 2 0.2

Other Income (Charges) — net ............... 1,463 391 (437) (46.1) (85) 47 5.0Equity in net income of associate

company ............................................ — — 17 1.8 — 48 5.1INCOME BEFORE TAX ........................ 1,836 656 264 27.8 54 219 23.1TAX BENEFIT (EXPENSE) ................... (695) (223) 178 18.7 (19) (15) (1.5)INCOME FROM ORDINARY

ACTIVITIES ..................................... 1,141 433 441 46.6 34 205 21.6EXTRAORDINARY ITEMS:Restructuring gain — net of tax expense

and restructuring charges ................... 3,081 593 119 12.6 103 — —INCOME BEFORE MINORITY

INTERESTS IN NET INCOMEOF SUBSIDIARIES .......................... 4,223 1,027 560 59.1 138 205 21.6

MINORITY INTERESTS IN NETINCOME OF SUBSIDIARIES............ (400) (156) (82) (8.7) 2 — —

NET INCOME........................................ 3,823 871 478 50.4 140 205 21.6BASIC EARNINGS PER SHARE

(in full Rupiah):Including extraordinary item .................. 1,207 275 151 0.02 44 65 0.01Excluding extraordinary item ................. 234 88 113 0.01 11 65 0.01

Note:

(1) Less than Rp.500 million or equivalent U.S. dollar amount.

9

As of December 31, As of March 31,

2002 2003 2004 2004 2005 2005

(Audited) (Audited) (Audited) (Unaudited)(Rp.) (Rp.) (Rp.) (US$) (Rp.) (US$)

(Rp. amounts in billions and US$ amounts in millions,except where otherwise indicated)

Selected consolidated balance sheet items:CURRENT ASSETS:Cash and cash equivalents ................................. 268 272 104 10.9 53 5.6Temporary investments ...................................... 423 372 200 21.1 145 15.3Trade accounts receivable — net ........................... 840 921 534 56.3 636 67.1Inventories — net.............................................. 1,013 1,050 687 72.5 753 79.4

Total Current Assets .......................................... 2,884 3,076 1,849 195.1 1,970 207.8

NON-CURRENT ASSETS:Accounts receivable from related parties ........... 2,160 2,289 808 85.2 869 91.6Property, plant and equipment — net................. 6,824 6,515 3,186 336.1 3,100 327.0

Total Non-Current Assets .................................. 9,573 9,097 4,492 473.8 4,504 475.1

TOTAL ASSETS................................................ 12,457 12,173 6,341 668.9 6,474 683.0

LIABILITIES AND EQUITY:CURRENT LIABILITIESTrade accounts payable ..................................... 321 347 363 38.3 591 62.3Current maturities of long-term liabilities

Liability for the purchase of property, plantand equipment .......................................... 35 33 — — — —

Bank loans .................................................... 206 224 206 21.7 — —Notes payable ............................................... 186 487 472 49.8 495 52.2

Loans under restructuring process — net ........... 2,220 — — — — —

Total Current Liabilities .................................... 4,754 1,970 1,298 136.9 1,356 143.1

NON-CURRENT LIABILITIESLong-term liabilities — net of current

maturitiesBank loans .................................................... 825 702 — — — —Notes payable ............................................... 3,001 4,471 2,996 316.0 2,926 308.6

Accounts payable to related parties ................... 3,283 3,138 —(1) —(1) 1 0.1

Total Non-Current Liabilities............................. 7,505 8,952 3,359 354.3 3,229 340.6

TOTAL EQUITY ............................................... 430 1,326 1,685 177.7 1,889 199.3

TOTAL LIABILITIES AND EQUITY ................ 12,457 12,173 6,341 668.9 6,474 683.0


2002 2003 2004 2004 2004 2005 2005

(Audited) (Audited) (Audited) (Unaudited) (Unaudited)(Rp.) (Rp.) (Rp.) (US$) (Rp.) (Rp.) (US$)

(Rp. amounts in billions and US$ amounts in millions, except where otherwise indicated)Selected consolidated cash flow

statement items:Net cash provided by operating

activities ............................................ 559 564 591 62.3 305 60 6.3Net cash provided by (used in)

investing activities ............................. (602) (7) (18) (1.9) (155) 1 0.1Net cash used in

financing activities ............................ (169) (545) (628) (66.2) (212) (99) (10.4)

Note:

(1) Less than Rp.500 million or equivalent U.S. dollar amount.

10

Summary Selected Segment Information of Ongoing Operations

The following tables set forth certain summary selected segment information for the Company asof and for each of the periods indicated. The summary selected segment information is derivedprincipally from the audited and unaudited consolidated financial statements of the Company includedelsewhere in this Offering Circular.

The Company has provided this summary selected segment information because it believes thatsuch financial information is important to an investor’s understanding of the Company’s results ofoperations following the deconsolidation of a material subsidiary, GT Petrochem Industries, and thetransfer of the tire cord and synthetic rubber manufacturing assets thereof to the Company inDecember 2004. See “Management’s Discussion and Analysis of Results of Operations and FinancialCondition — Overview — Financial impact of corporate restructuring” and “Financial and CorporateRestructuring.” However, the summary selected segment information provided should not be reliedupon as indicative of the financial condition or operating results that would have been achieved hadthe deconsolidation of GT Petrochem Industries and the transfer of the tire cord and synthetic rubbermanufacturing assets been consummated as of the dates indicated, nor are they indicative of futurefinancial condition or operating results.

Typically, a company presents a pro forma profit and loss statement and balance sheet after amaterial acquisition or disposition. In the case of the Company’s recent corporate restructuring, thepro forma financial statements would have been completed in order to show the effects of theDecember 2004 corporate restructuring as if it had been completed on December 31, 2003. Due to thecomplex nature of its corporate restructuring and structure, the Company is unable to prepare areliable pro forma presentation because certain items in the consolidated statements of income andconsolidated balance sheets cannot be allocated among its various segments and businesses. TheCompany believes that the presentation of historical aggregated segment financial information for itstire and tire-related businesses derived from the segment information in the Company’s historicalaudited and unaudited consolidated financial statements is more meaningful to investors inunderstanding the Company’s business which focuses on tires and tire-related products aftercompletion of its corporate restructuring in December 2004. The following segment information hasbeen prepared on the following basis:

● The tire division has historically been operated at the Company level and therefore thecorporate restructuring has not resulted in a change in the assets used in connection withthe tire division.

● The tire cord division’s revenues were derived using solely the tire cord manufacturingassets transferred to the Company in connection with the corporate restructuring. Prior tothe restructuring, the tire cord manufacturing assets were operated by GT PetrochemIndustries.

● The synthetic rubber division’s revenues were derived using solely the synthetic rubbermanufacturing assets transferred to the Company in connection with the corporaterestructuring. Prior to the restructuring, the synthetic rubber manufacturing assets wereoperated by PT Sentra Sintetikajaya.

● The segment results (as presented in the notes to the audited and unaudited consolidatedfinancial statements of the Company included elsewhere in this Offering Circular)generated by the tire cord division’s manufacturing assets operated by GT PetrochemIndustries and the synthetic rubber division’s manufacturing assets operated by PT SentraSintetikajaya had been consolidated into the results of operations of the Company untilNovember 30, 2004.

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● After the corporate restructuring in December 2004 and the divestment of certain non-corebusinesses and assets in February 2005, the only remaining significant operating divisionsof the Company are the tire, tire cord and synthetic rubber divisions. In order to calculatethe aggregate segment information for the ongoing operations for each of the periods setforth below, the Company has aggregated certain selected line items after eliminatingintersegment purchases, sales and transfers presented under “Tyre,” “Tyre Cord” and“Synthetic rubber” in the tables under Note 37 to the consolidated financial statements forthe three-month periods ended March 31, 2005 and 2004 and Note 38 to the consolidatedfinancial statements for the years ended December 31, 2002, 2003 and 2004 includedelsewhere in this Offering Circular. For example, “external sales” in the table belowrepresents the aggregate external sales of the tire division, the tire cord division and thesynthetic rubber division, eliminating inter-segment sales and transfers of the tire corddivision and synthetic rubber division to the tire division.

A discussion of statement of income segment line items below operating profit (such as interestincome, interest expense and gain (loss) on foreign exchange) for such periods has not been providedby the Company because the allocation of such items to different segments is not possible due to thecomplexity of the corporate restructuring. In addition, only selected segment information (namely,capital expenditures and depreciation) is presented here, together with actual historical selectedconsolidated balance sheet information as of December 31, 2004 and March 31, 2005 for comparativepurposes. Selected historical consolidated balance sheet information as of December 31, 2002 and2003 and as of March 31, 2004 has not been presented as the consolidated balance sheets of theCompany for such periods consolidate the balance sheet of GT Petrochem Industries.

The following information should be read in conjunction with “Selected Historical ConsolidatedFinancial and Operating Data”, “Management’s Discussion and Analysis of Financial Condition andResults of Operations — Overview — Financial impact of corporate restructuring” and the historicalaudited and unaudited consolidated financial statements of the Company and the related notes theretoincluded elsewhere in this Offering Circular.


2002 2003 2004 2004 2004 2005 2005

(Unaudited, aggregate segment information) (Unaudited, aggregatesegment information)

(Rp.) (Rp.) (Rp.) (US$) (Rp.) (Rp.) (US$)


Segment statements of income andsegment balance sheet items:

External sales(1) ..................................... 3,247 3,440 3,877 409.0 917 1,124 118.6Cost of sales(1) ....................................... 2,446 2,726 3,124 329.5 715 933 98.4Gross profit .......................................... 801 713 753 79.4 202 191 20.2Operating expenses ................................ 375 465 334 35.2 90 64 6.7Selling .................................................. 205 256 163 17.2 50 34 3.6General and administration ..................... 170 208 171 18.0 39 29 3.1Income from operations.......................... 426 248 419 44.2 113 128 13.5EBITDA(2) ............................................. 650 476 657 69.3 171 189 19.9Interest expense(3) .................................. 17 91 118 12.5 23 42 4.5Depreciation........................................... 224 227 238 25.1 58 61 6.4Capital expenditures ............................... 88 110 108 11.3 27 55 5.8

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2004 2004 2005 2005

(Audited) (Unaudited)

(Rp.) (US$) (Rp.) (US$)


Selected historical consolidated balance sheet items(4):Total assets ......................................................................... 6,341 668.9 6,474 683.0Total debt(3) ........................................................................ 3,674 387.6 3,420 360.8Total equity ........................................................................ 1,685 177.7 1,889 199.3

Notes:

(1) Reflecting sales to and purchases from external parties only, eliminating inter-segment transfer, sales and purchases.

(2) The segment EBITDA information herein is derived principally from segment financial information on the Company’saudited and unaudited consolidated financial statements and is calculated by adding segment depreciation to income fromoperations. It is not comparable to the actual historical EBITDA of the Company for the periods presented. See“Management’s Discussion and Analysis of Financial Condition and Results of Operation” and “Selected SegmentInformation of Ongoing Operations.”

(3) Interest expense excludes the amortisation on the premium on debt restructuring on the Series A FRNs, while total debtincludes the premium on debt restructuring on the Series A FRNs. See Note 2(q) of the consolidated financial statementsof the Company included elsewhere in this Offering Circular.

(4) Actual historical consolidated balance sheet items, derived from the consolidated financial statements of the Companyincluded elsewhere in this Offering Circular.

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RISK FACTORS

This Offering Circular contains forward-looking statements that involve risks and uncertainties.Prospective purchasers of the Bonds should carefully consider the risk factors set forth below, as wellas the other information contained in this Offering Circular. The risks described below are not theonly ones that may affect the Company or the Bonds. In general, investing in securities of issuers orguarantors in emerging market countries such as Indonesia involves risks not typically associatedwith investing in the securities of companies in countries with more developed economies. To theextent it relates to the Government or Indonesian macroeconomic data, the following information hasbeen extracted from official Government publications or other third party sources and has not beenindependently verified by the Issuer or the Guarantor.

Risks Relating to the Company and its Business

The Company has a significant level of debt, and its ability to operate its business could beadversely affected if it is unable to service its debt, or if it breaches the covenants of its FRNsor the Bonds and such breach is not waived.

As of March 31, 2005, on a pro forma basis, after giving effect to the issue of the Bonds andapplying the net proceeds as described under “Use of Proceeds,” the Company would have had totaloutstanding debt of approximately US$446 million. See “Capitalisation.” Such debt would haverepresented, on a pro forma basis, approximately 66.6% of the Company’s total capitalisation as ofsuch date. The Company has substantial payment obligations and must comply with financial and othercovenants contained in the Company’s outstanding Series A FRNs, Series B FRNs and Series C FRNs(each as defined herein, and together, the “FRNs”), as well as the terms of the Bonds, when they areissued. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources” and “Concurrent FRN Purchase and Consent Solicitation.” Thebreach of such covenants, if not waived by the holders of the FRNs or the Bondholders, may constitutean event of default under such borrowings which would have a material adverse effect on theCompany.

The Company’s ability to make payments on and to service its indebtedness, including the FRNsand the Bonds, to comply with the financial covenants of such FRNs and the Bonds and to fundplanned capital expenditures will depend on its ability to generate sufficient cash in the future, whichis subject to many factors beyond the control of the Company. The Company has had to restructureits indebtedness in the past, and no assurance can be given that the Company will not need torestructure its indebtedness in the future or that the Company will be able to refinance any of itsindebtedness on commercially acceptable terms or at all. In addition, the Company may be exposedto risks inherent in interest rate fluctuations because all of its FRNs have floating rates of interest,which may result in the Company incurring higher interest expense in the event of increases in interestrates. The Company does not hedge against interest rate fluctuations to limit its liability to such risksand the Company’s profitability and financial condition could accordingly be adversely affected byinterest rate increases. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations — Liquidity and Capital Resources.”

Loss by the Company of its competitiveness and market share in the Indonesian and exportmarkets could materially and adversely affect the Company’s future growth, profitability andresults of operations, including as a result of price erosion caused by increased competition.

The Company sells its products principally in the domestic replacement tire and OriginalEquipment (“OE”) markets as well as in the international replacement market. All these marketsegments are highly competitive.

The Company’s percentage share of the Indonesian motorcycle tire market, which is one of itsrevenue-generating mainstays, has decreased over the past few years in the face of competition fromsmaller domestic tire manufacturers and imported tires.

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In the international tire market, which is the primary source of demand for the Company’shigher-end radial tire products, the Company generally sells its exported radial tires at prices lowerthan those offered by other leading international players. The Company can do this because of its lowcost structure which enables it to receive better margins on its sales at very competitive prices.

The Company’s competitors for radial tire sales in the international tire market consist of anumber of small to medium sized low cost producers, some of whom have stronger distributionnetworks and better brand equity than the Company. In South-East Asia and the Middle East, whichare some of the Company’s major export markets for bias tires, a number of Chinese and Indian tiremanufacturers who are able to compete with the Company on the basis of price, by virtue of their lowproduction costs, have the potential to become major competitors.

There can be no assurance that the Company will be successful in recapturing and growing itsshare of the motorcycle tire market in Indonesia, or in maintaining or enhancing its position in itsprimary radial or bias tire export markets. There can also be no assurance that the Company will beable to maintain its cost leadership advantage over its competitors, particularly as lower costcompetitors emerge from other developing nations such as China and India.

Supplies of the Company’s principal raw materials are subject to price fluctuations, includinghighly volatile natural rubber prices and oil prices.

The Company’s principal raw materials are natural rubber (used by the Company in its tiremanufacturing division) and petrochemical products (used by the Company in its tire cord andsynthetic rubber divisions, which in turn supply the Company’s tire manufacturing division). See“Management’s Discussion and Analysis of Financial Condition and Results of Operations —Overview — Costs of Sales — Fluctuations in raw material prices.” In the past two years, the costsof these raw materials have increased with surges in natural rubber prices and international crude oilprices. Natural rubber prices and global oil prices have increased significantly in the past two yearsand are expected to continue to be highly volatile in the future. Any further increase in natural rubberand global oil prices is likely to result in an increase in the prices charged by suppliers of these rawmaterials to the Company. Particularly, if market conditions do not permit, the Company may beunable to fully pass on the increase in its raw materials prices to its customers through timely priceincreases. Accordingly, any increase in the prices of raw materials may materially and adversely affectthe Company’s profit margins and operating results.

The Company’s future growth and profitability may be adversely affected if it fails to properlyimplement and manage its production expansion plans.

As part of its focus on the radial tire and motorcycle tire markets, the Company plans to expandits production capacity from approximately 30,000 radial tires and 35,000 motorcycle tires per day atthe end of 2004 to approximately 48,000 radial tires and 105,000 motorcycle tires per day by the endof 2008. This expansion strategy will require proper planning, implementation and management,particularly as the Company expands the capacity at its existing radial tire plant and integrates a newmotorcycle tire production line into its existing motorcycle tire manufacturing operation, whilecontinuing operations at both plants. The Company’s strategy of broad expansion raises issues ofscale, integration, business disruption and management. There can be no assurance that the Companywill be able to successfully implement and manage its production expansion plans. Failure to properlyplan, implement and manage the Company’s production expansion while ensuring no disruption to itsexisting operations could have a material adverse effect on the Company’s future growth, business,results of operations and financial condition.

The Company’s future growth and prospects may be adversely affected if it fails to market itsproducts on a timely basis by increasing its production volumes and/or production efficiencyand improving its product mix.

Although the Company expects to significantly expand its production capacity over the next fewyears, short-term increases in production volume will depend significantly upon the Company’s abilityto develop and implement more efficient production techniques. The Company’s continuedprofitability in the medium to long-term will also depend on its ability to bring new products to the

15

market in line with market demand, as well as to optimise its product mix and develop and implementmore efficient production techniques while it expands its production capacity. However, if theCompany fails to implement any of these measures, its future results of operations could be materiallyand adversely affected.

At present, the Company’s strongest market lies in the bias automobile tire and motorcycle tiresegments of the Indonesian market. If the Company is unable to develop and market a mix of productsthat is in line with market demands, its financial results and long-term profitability could be materiallyand adversely affected.

Due to the complex nature of the Company’s corporate restructuring in December 2004 it hasused only limited financial information from its various business segments in preparing thecomparative financial information provided in this Offering Circular, which may result in thefinancial information herein presenting an incomplete or inaccurate presentation of theCompany’s financial position.

Typically, a company presents a pro forma profit and loss statement and balance sheet after amajor corporate restructuring, including material asset acquisitions or dispositions. In the case of theCompany, the pro forma financial statements would have been completed in order to show the effectsof the December 2004 corporate restructuring as if it had been completed on December 31, 2003. Dueto the complex nature of its corporate restructuring and structure, the Company is unable to preparea reliable pro forma presentation because certain items in the consolidated statements of income andconsolidated balance sheets cannot be allocated among its various segments and businesses. TheCompany believes that the presentation of historical aggregated segment financial information for itstire and tire-related businesses derived principally from the segment information in the Company’shistorical audited and unaudited consolidated financial statements is more meaningful to investors inunderstanding the Company’s business which focuses on tires and tire-related products aftercompletion of its corporate restructuring in December 2004. However, there can be no assurance thatthe segment information provided is indicative of the financial condition or operating results thatwould have been achieved had the deconsolidation of GT Petrochem Industries and the transfer of thetire cord and synthetic rubber manufacturing assets been consummated as of the dates indicated, andsuch segment information is not indicative of the future financial condition or operating results of theCompany and may present an incomplete or inaccurate presentation of the Company’s financialposition.

Termination of the Company’s third party manufacturing and licensing arrangements couldadversely affect the Company’s operating results.

The Company has entered into manufacturing agreements and licenses to manufacture tires forother tire companies. These manufacturing and licensing arrangements are valuable and consistentsources of sales revenues to the Company. For example, in 2004, the Company entered into amanufacturing agreement with a subsidiary of Michelin, through which it manufactures Michelinassociated brand tires, excluding “Michelin”-branded tires. The Company’s manufacturingarrangement with Michelin provides valuable operational and technological relationships with one ofthe world’s leading tire manufacturers, while securing volume demand for the radial tiresmanufactured by the Company. Since 1973, under a licensing arrangement with Inoue Rubber Co.(“IRC”), a leading motorcycle tire company based in Japan, the Company has the right to use the“IRC” brand on its motorcycle tires, which holds significant market share and pricing premium inIndonesia.

Each of these arrangements is subject to termination in accordance with its terms, and theCompany’s third party partners and licensors may decide at any time to terminate their arrangementswith the Company. In the event of any such termination, the Company’s business and financial resultscould be materially and adversely affected.

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Demand and pricing in the Indonesian tire market are subject to cycles in the automotiveindustry and global economic conditions.

For the years ended December 31, 2002, 2003 and 2004, the Company derived approximately44.2%, 44.2% and 44.5%, respectively of its aggregate tire and tire-related product sales from tiresales in the Indonesian domestic tire market. Demand for tires in the domestic market is primarilydriven by the sales of new vehicles and the willingness of Indonesian consumers to invest inreplacement tires for their existing cars and motorcycles. Economic developments adversely affectingconsumer spending and other factors adversely affecting consumer confidence such as political andsocial instability, rising energy prices, foreign exchange fluctuations, terrorism and unstable economicconditions, could materially and adversely affect the demand for the Company’s products.

PT Filamendo Sakti may not succeed in settling or restructuring its debts, resulting in theCompany being unable to recover its accounts receivable from PT Filamendo Sakti.

The Company had total outstanding accounts receivables from PT Filamendo Sakti, a subsidiaryof GT Petrochem Industries, totalling Rp.700 billion (US$73.9 million) as of December 31, 2004, ofwhich Rp.667 billion (US$70.4 million) represented an accounts receivable arising from a transferthereof from Garibaldi Venture Fund Limited (“Garibaldi Venture Fund”) to the Company in April2004. The Company had outstanding accounts receivables from PT Filamendo Sakti totalling Rp.707billion (US$74.6 million) as of March 31, 2005, of which Rp.667 billion (US$70.4 million)represented the accounts receivable arising from the transfer described above. See “ManagementDiscussion and Analysis of Financial Condition and Results of Operations — Overview — Financialimpact of corporate restructuring — Balance sheet changes,” “Financial and Corporate Restructuring,”“Business — Related Party Transactions” and Notes 9(a) and (b) of the consolidated financialstatements of the Company for the years ended December 31, 2002, 2003 and 2004, and Notes 8(a)and (b) of the consolidated financial statements for the three-month periods ended March 31, 2004 and2005 included elsewhere in this Offering Circular.

PT Filamendo Sakti is currently in default under two loans from its financial institution creditors.There can be no assurance that PT Filamendo Sakti will be able to settle or restructure such loans. IfPT Filamendo Sakti is unable to settle or restructure its loans, there can be no assurance that it willbe able to settle its outstanding accounts receivable due to the Company. The inability of the Companyto recover all or a significant part of such accounts receivable due from PT Filamendo Sakti wouldhave a material adverse effect on the Company’s financial condition and results of operations.

Infringement of the Company’s intellectual property rights, or the termination of the Company’slicences to use the “GT Radial”, “Gajah Tunggal” and “GT Motor” trademarks and productnames could adversely affect the Company’s operating results.

Similar to other companies in Indonesia, intellectual property infringement is a problem for theCompany. The Company has made substantial investments in the registration and protection of itsintellectual property rights, particularly its distinctive tire tread patterns. However, various tireretailers have begun selling imitation tires using the Company’s brand names. These infringing tirestend to be low quality and, in some cases, unsafe. The infringement of its intellectual property couldpotentially affect its reputation among consumers and damage its brand equity. The Company has fileda report with the police against infringers of its intellectual property, but there can be no assurancethat actions by the Indonesian authorities will be sufficient to prevent or curtail future infringementsof its intellectual property rights. If the Company is unable to protect its intellectual property rightsfrom infringement, its brand equity will be compromised, and its business and operating results willbe materially and adversely affected.

In addition, while the Company owns the “GT Radial,” “Gajah Tunggal” and “GT Motor”trademarks, as well as the rights to its tire product names, in Indonesia, the intellectual property rightsto these trade names and tire product names in countries other than Indonesia are held by third parties.The “GT Radial” trademark is held by GITI Tire Pte Ltd, while the “Gajah Tunggal” trademark is heldby GT International (Singapore) Pte Ltd, which are holding companies incorporated in Singapore andowned by the former majority shareholder of the Company. Each of GITI Tire Pte Ltd and GTInternational (Singapore) Pte Ltd has granted the Company a royalty-free, non-exclusive perpetuallicence to use these trademarks and product names in each of the territories to which the Companysells its products. However, such licence agreement is subject to termination in accordance with its

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terms, and GITI Tire Pte Ltd or GT International (Singapore) Pte Ltd may decide, with only minimalnotice, to terminate their respective licenses to the Company. In the event of any such termination, theCompany would not have the right to use its brands outside of Indonesia and its business and financialresults could be materially adversely affected by the inability to use its brand name for its productsoutside of Indonesia.

The growth of illegal tire imports could affect the Company’s market share, thereby having amaterial and adverse impact on the Company’s business.

Illegally imported tires represent a growing threat to Indonesian domestic tire producers. Theseillegal imports are generally seen as lower quality, but can be popular with motorists on account oftheir low prices. The threat posed by illegal tire imports to the Company’s market share is likely togrow as the Indonesian economy recovers and the Rupiah strengthens in relation to foreign currencies.If the Company is unable to maintain its market position against these lower-cost illegal tire imports,its financial performance and operating results could be materially and adversely affected.

Fluctuations of the Indonesian Rupiah against the U.S. dollar and/or Euro may have a materialadverse effect on the Company’s results of operations.

Approximately 56%, 56% and 55% of the Company’s total external tire and tire-related productsales were made in foreign currencies in 2002, 2003 and 2004, respectively. Such foreign currencysales are translated into Rupiah at the applicable exchange rate for inclusion in the Company’sconsolidated financial statements. Approximately 66% of the Company’s export tires sales for the yearended December 31, 2004 were denominated in U.S. dollars and approximately 34% weredenominated in other foreign currencies. Approximately 59% of the total cost of sales and operatingexpenses of the Company’s tire and tire-related product divisions (excluding debt servicing under itsFRNs and other charges) for the year ended December 31, 2004 were incurred in foreign currencies,principally in U.S. dollars. Any significant appreciation of the U.S. dollar against the IndonesianRupiah could have a material adverse impact on the Company’s results of operations, since the amountof U.S. dollar outflows, including purchases of raw materials and export freight and debt servicingexpenses, generally exceed the amount of U.S. dollar inflows from tire sales. See “Management’sDiscussion and Analysis of Financial Condition and Results of Operations — Market Risks.” TheCompany does not hedge its foreign currency exposure through the use of financial instruments. Giventhe volatility of current exchange rates, currency transaction risks and changes in currency translationrates may adversely affect the Company’s operating results.

Compliance with environmental and occupational health and safety laws and regulations mayrequire the Company to incur costs or restrict its operations in a manner that could have amaterial adverse effect on its financial condition and results of operations.

The Company is subject to a variety of environmental laws, including those which regulate theuse, handling, treatment, storage, discharge and disposal of substances and hazardous wastes used orgenerated in its manufacturing facilities. These laws and regulations may expose the Company toliability for the conduct of, or conditions caused by, its acts. The Company is required to investfinancial and managerial resources to comply with environmental and safety laws and regulations andanticipates that it will continue to be required to do so in the future in order to comply with laws inIndonesia and the primary markets the Company sells to. It is likely that the Company will be subjectto increasingly stringent environmental standards in the future and may be required to make additionalcapital expenditures relating to environmental and safety matters on an ongoing basis. For example,certain legislation in Europe that is expected to become effective in 2009 and certain pendinglegislation in the United States would require tires distributed into these markets to be manufacturedusing non-carcinogenic rubber treatment processes, the implementation of which may require theCompany to incur significant expenses. Failure by the Company to comply with present and futureenvironmental and safety laws could subject it to future liabilities or suspension of production and/ordistribution. Environmental and safety laws could also restrict the Company’s ability to expand itsfacilities or could require it to acquire costly equipment or to incur other additional expenses inconnection with the Company’s manufacturing and distribution processes.

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The Company must comply with product liability laws and may be subject to product liabilityclaims and product recalls which may require the Company to incur substantial costs in amanner that could have a material adverse effect on its financial condition and results ofoperations.

Product quality or the perception thereof significantly influences a customer’s decision topurchase tires, and any material product defect could require the Company to publicly undertakeservice actions or recall campaigns. Any of these actions or campaigns in the future could require theCompany to incur considerable expense in correcting problems and could influence purchasingdecisions of customers of the Company’s products, thereby negatively affecting the future sales andprofitability of the Company. The Company is currently a party in a product liability claim in theUnited States. There can be no assurance the Company will be able to successfully defend against suchclaim, or that the Company’s product liability insurance will be sufficient to cover liability arisingfrom such claim or at all. No assurance can be given that future claims or recalls having a materialadverse effect on the Company will not occur.

The Company’s distribution of tires into the United States requires it to comply with the UnitedStates’ Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREADAct”). The TREAD Act imposes numerous requirements with respect to the early warning reportingof property damage, injury and fatality claims and tire recalls and also requires tire manufacturers,among other things, to conform with revised and more rigorous tire standards, once the revisedstandards are implemented. Compliance with the TREAD Act regulations entails significantadministrative expenditures by tire manufacturers in order to implement the monitoring regimerequired under those regulations. These expenditures are likely to increase the Company’s cost ofdistributing its tires. In addition, while the Company believes that its tires are free from design andmanufacturing defects, it is possible that a recall of the Company’s tires, under the TREAD Act orotherwise, could occur in the future. A substantial recall could have a material adverse effect on theCompany’s reputation, operating results and financial condition. Compliance with these and otherregulatory requirements in the future may require a material increase in the Company’s capitalexpenditures and could materially and adversely affect the Company’s earnings and competitiveposition.

Unexpected production interruptions may materially and adversely affect the Company’sfinancial condition and results of operations.

The Company’s tire manufacturing processes depend upon a stable supply of energy and certaincritical equipment, such as its mixer, calendar and vulcaniser (curing press), which are subject tounexpected interruptions. The Company’s production facilities could be adversely affected by eventssuch as the breakdown of equipment, difficulties or delays in obtaining spare parts and equipment, rawmaterial shortages, power shortages and blackouts, fire, natural disasters, civil disorders, industrialaccidents and the need to comply with Government directives concerning matters such as hygiene,safety and environmental protection. Additionally, labour activism and unrest represent a continuingthreat to the business of many Indonesian companies. See “— Risks Relating to Indonesia — Labouractivism and unrest may materially and adversely affect the Company.” No assurance can be given thatany such material production interruption will not occur in the future or that such interruptions wouldnot have a material adverse effect on the Company’s financial condition and results of operations.

The Company plans to increase its sales in the Indonesian OE market, and has accordinglyexposed itself to pricing pressures from vehicle manufacturers, which may adversely affect itsbusiness.

The Company regards the OE market as an important market for its products, as OE sales canhelp raise the Company’s profile among automobile and motorcycle purchasers, increase theawareness of its brand and product among end-users, broaden the distribution of its tires and generatenew demand for the Company’s tires in the higher-margin replacement market. Accordingly, it hasfocused part of its marketing efforts and production capacity on gaining market share in the domesticOE market. However, margins in the OE market are considerably lower than those of the replacementmarket, and pricing pressure from vehicle manufacturers continues to be a characteristic of thissegment of the tire industry. Many vehicle manufacturers tend to seek price reductions for OE tirepurchases each year. Although the Company has taken steps to reduce costs and resist price reductions,

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current and future price reductions could materially adversely impact its sales and profit margins. Ifthe Company is unable to offset continued price reductions through improved operating efficienciesand reduced expenditures or increase sales in the replacement market, such price reductions may resultin declining margins and operating results.

The Company’s future growth and prospects may be adversely affected if it is unable to keep upwith its customers’ quality expectations and emerging technological trends affecting the tiremarket.

Technological innovation is an integral feature of the global high-end tire industry. Innovativetechnologies such as run-flat or “airless” tire technology continue to be introduced, especially in thehigher-priced value-added segment of the replacement tire market, and present an as-yet unpredictablechallenge to general tire manufacturers. These innovations have traditionally been developed andmarketed by large leading tire manufacturers such as Michelin, The Goodyear Tire & Rubber Company(“Goodyear”) and Bridgestone Corporation (“Bridgestone”). To the extent that these new technologiescome to be expected by the mass market, the Company may have to alter or re-tool its productionprocesses and incur capital expenditure to keep up with market trends. There can be no assurance thatit will be able to successfully accomplish any such transition or be able to match the research anddevelopment efforts of its competitors. If the Company is unable to introduce new tire technology intoits product mix on a timely basis, its operating margins and financial results could be materially andadversely affected.

Trade regulating actions by the Government could adversely affect the Company’s profitabilityand/or increase its cost of raw materials.

The Government has entered into various trade agreements, such as the ASEAN Free TradeAgreement and other bilateral agreements, with the objective of reducing or eliminating tariffs ofgoods that are imported into Indonesia. The reduction of general trade tariffs permits lower costforeign goods to be brought into Indonesia, and could potentially result in an opening of the domestictire market to low cost tire imports. Accordingly, if the Company loses domestic market share to lowercost imported tires, its financial results and operating margins may be materially and adverselyaffected.

Conversely, certain of the Company’s raw materials, such as carbon black, are largely suppliedby domestic manufacturers. These raw materials are occasionally subject to trade disputes, and theGovernment may potentially impose anti-dumping price control measures to regulate prices of theseraw materials, making it more difficult for foreign suppliers of these materials to compete. Suchmeasures may potentially increase the prices charged to the Company by domestic suppliers of theseraw materials, which could in turn significantly increase the Company’s operating costs. In such asituation, the Company’s operating results may be materially and adversely affected.

Risks Relating to Indonesia

The Company is incorporated in Indonesia and substantially all of the Company’s assets andoperations are located in Indonesia. The Company may be adversely affected by changes inGovernment policies, social instability or other political, economic, legal, regulatory or internationaldevelopments in or affecting Indonesia which are not within the control of the Company, includingthose set forth below.

The Company is subject to Indonesian political and social risks which may materially andadversely affect the Company, its business, results of operations or financial condition.

The Company’s business is affected by various actions that may be undertaken by theGovernment, including, without limitation, responses to war and terrorist acts, renegotiation ornullification of existing concessions and contracts, a change in taxation, the imposition of foreignexchange restrictions and responses to international developments.

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Indonesia has from time to time experienced incidents of labour, political and ethnicdisturbances. A number of political and ethnic disturbances have occurred during the past five yearsin both large urban areas as well as more remote areas demanding regional autonomy. There can beno assurance that further tensions will not surface or that future disturbances will not materially andadversely affect the Company.

Indonesia is located in an earthquake zone, and is subject to significant geological risk thatcould lead to social and economic unrest.

The Indonesian archipelago is one of the most volcanically active regions in the world. Becauseit is located in the convergence zone of three major lithospheric plates, it is subject to significantseismic activity that can lead to destructive earthquakes and tsunamis, or tidal waves. On December26, 2004, an underwater earthquake off the coast of Sumatra released a tsunami that devastated coastalcommunities in Indonesia, Thailand and Sri Lanka. In Indonesia, more than 220,000 died or wentmissing in the disaster. Aftershocks from the December 2004 tsunami have also claimed casualties.

While the December 2004 tsunami did not have a significant economic impact on the Indonesiancapital markets, the Government has had to spend significant amounts on emergency aid andresettlement efforts. Most of these costs have been underwritten by foreign governments andinternational aid agencies. However, there can be no assurance that such aid will continue to beforthcoming, or that it will be delivered to recipients on a timely basis. If the Government is unableto timely deliver foreign aid to affected communities, political and social unrest could result.Additionally, recovery and relief efforts are likely to continue to impose a strain on the Government’sfinances, and may affect its ability to meet its obligations on its sovereign debt. Any such failure onthe part of the Government, or declaration by it of a moratorium on its sovereign debt, couldpotentially trigger an event of default under numerous private-sector borrowings including those ofthe Company, thereby materially and adversely affecting the Company’s business and financial results.

In addition, there can be no assurance that future geological occurrences will not have more ofan impact on the Indonesian economy. A significant earthquake or other geological disturbance in anyof Indonesia’s more populated cities and financial centres can severely disrupt the Indonesianeconomy and undermine investor confidence, thereby materially and adversely affecting theCompany’s business, financial condition, results of operations and prospects.

Changes in Government and Government policies may have a direct impact on the Company’sbusiness and the market price of the Bonds.

In 1998, political unrest resulted in the resignation of then President Suharto. With the end ofthe 32-year Suharto era, Indonesia entered an era of democratic change, with resulting political andsocial events that highlighted the unpredictable nature of Indonesia’s changing political landscape.

Following the resignation of President Suharto, Vice President Baharuddin Jusuf Habibie wassworn in as President and called for reforms and parliamentary elections held in October 1999. Priorto and during the presidential and parliamentary elections, there was significant social unrest thatresulted in additional rioting, unrest and destruction of property. Following the elections, the People’sConsultative Assembly, Majelis Permusyawaratan Rakyat, or MPR, selected Abdurrahman Wahid asPresident and Megawati Sukarnoputri as Vice President. In February 2001, a committee of theIndonesian parliament, the People’s Representative Council, Dewan Perwakilan Rakyat, or DPR,alleged that President Wahid was involved in instances of corruption. In July 2001, the MPRimpeached President Wahid and elected Megawati Sukarnoputri in his place.

On April 5, 2004, Indonesians for the first time directly elected representatives to the Indonesianparliament via proportional voting with an open list of candidates. The first direct presidentialelections followed in September 2004, and in the second round of these elections, Susilo BambangYudhoyono, a former security minister and military commander, defeated the incumbent President,Megawati Sukarnoputri, and took office as Indonesia’s first directly elected President. Since hisinauguration, President Yudhoyono’s government has adopted an agenda that has been positivelyreceived in both domestic and international circles. However, there is no guarantee that these newpolicies will result in political stability in either the short or long-term future.

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Some of the Government’s policies have also been unpopular, and have led to general domesticsocial and civil unrest on a number of occasions in the past few years. For example, in June 2001,violent demonstrations and strikes affected at least 19 cities after the Government mandated a 30%increase in fuel prices. Similar demonstrations occurred in January 2003 when the Government againtried to increase fuel prices as well as electricity and telephone charges. In both instances, theGovernment was forced to drop or substantially reduce such proposed increases. On March 1, 2005,the Government implemented an approximately 29% increase in fuel prices. In response, several massprotests were organised in opposition to the increases in domestic fuel prices, and political tensionshave resulted from the Government’s decision. There can be no assurance that this situation will notlead to further political and social instability.

Political and related social developments in Indonesia have been unpredictable in the past andthere can be no assurance that social and civil disturbances will not occur in the future and on a widerscale, or that any such disturbances will not, directly or indirectly, have a material adverse effect onthe Company, which may harm its ability to meet its obligations with respect to the Bonds.

Terrorist attacks on the United States and responses of the United States and/or its alliesthereto; terrorist attacks in South-East Asia; the war in Iraq and certain destabilising events inthe region, including the outbreak of SARS in 2003, have led to substantial and continuingeconomic and social volatility, which may materially and adversely affect the Company’sbusiness.

The terrorist attacks on the United States on September 11, 2001, together with the militaryresponse by the United States and its allies in Afghanistan and Iraq, have resulted in substantial andcontinuing economic volatility and social unrest in the Asia Pacific region. The subsequent anthraxattacks in the United States, the recent terrorist attacks in South-East Asia, and the outbreak in 2003of severe acute respiratory syndrome, or SARS, in China, Taiwan, Hong Kong, Singapore, Vietnamand Canada have exacerbated this volatility. Further developments stemming from these events couldexacerbate this volatility. Any additional significant military or other response by the United Statesand/or its allies or any further terrorist activities could also have a material adverse effect oninternational financial markets and the Indonesian economy.

In Indonesia in the last five years, there have been various bombing incidents directed towardsthe Government, public and commercial buildings frequented by foreigners, including the JakartaStock Exchange Building and the departure lounge of Jakarta’s Soekarno-Hatta International Airport.On October 12, 2002, over 200 people were killed in a bombing at a tourist area in Bali. On August5, 2003, a bomb exploded at the JW Marriott Hotel in Jakarta, killing at least 13 people and injuring149 others. On September 9, 2004, a car bomb exploded at the Australian Embassy in Jakarta, killing11 people. Indonesian, Australian and U.S. governmental officials have indicated that these bombingsmay be linked to an international terrorist organisation. Demonstrations have also taken place inIndonesia in response to plans for and subsequent to U.S., British and Australian military action inIraq. Most recently, on May 28, 2005, bomb blasts in Central Sulawesi killed at least 22 people andinjured 46 others. The Indonesian authorities are still investigating these incidents, but have suggestedthat they may be linked to the activities of certain Islamic militant groups.

There can be no assurance that further terrorist acts will not occur in the future. Following themilitary involvement of the United States and its allies in Iraq, a number of governments have issuedwarnings to their citizens in relation to a perceived increase in the possibility of terrorist activities inIndonesia, targeting foreign, particularly U.S., interests. Such terrorist acts could destabiliseIndonesia and increase internal divisions within the Government as it considers responses to suchinstability and unrest, thereby adversely affecting investors’ confidence in Indonesia and theIndonesian economy. Violent acts arising from and leading to instability and unrest have in the pasthad, and could continue to have, a material adverse effect on investment and confidence in, and theperformance of, the Indonesian economy, and in turn the Company’s business. In addition, althoughsuch acts have not in the past targeted the Company’s assets or those of the Company’s customers,there can be no assurance that they will not do so in the future. The Company’s current insurancepolicies do not cover terrorist attacks. Any terrorist attack including damage to the Company’sinfrastructure or that of the Company’s customers could cause interruption to parts of the Company’sbusiness and materially and adversely affect the Company’s financial condition and results ofoperations.

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Separatist movements and clashes between religious and ethnic groups, demands of localgovernments and social unrest in Indonesia could materially and adversely affect the Companyand the market price of the Bonds.

Separatist movements and clashes between religious and ethnic groups have resulted in socialand civil unrest in parts of Indonesia. In the provinces of Aceh and Papua (formerly Irian Jaya), therehave been clashes between supporters of those separatist movements and the Indonesian military. Inthe province of the Maluku (formerly the Spice Islands), clashes between religious groups haveresulted in thousands of casualties and displaced persons, while in the province of Kalimantan, clashesbetween ethnic groups have produced fatalities and refugees over the past several years. In recentyears, the Government has made progress in negotiations with these troubled regions, but has not beenable to reach a successful resolution of all of the outstanding issues. In Aceh in particular, the FreeAceh Movement, Gerakan Aceh Merdeka, or GAM, continues to wage a campaign of armed resistanceagainst the Government.

Social and civil unrest could continue to have a material adverse effect on business investmentand confidence in the Indonesian economy. The Company cannot be certain that social and civildisturbances will not occur in the future. If further unrest, disturbance or violence does occur, it mayresult in further political and economic instability and may materially and adversely affect theCompany.

Labour activism and unrest may materially and adversely affect the Company.The liberalisation of laws governing the formation of labour unions combined with weak

economic conditions has resulted in, and may continue to give rise to, labour unrest and activism inIndonesia. In 2003, the Government enacted new labour regulations which, among other things,increased the amount of severance payable to terminated employees and extended service andcompensation payments to employees who resign. The new labour regulations may make it moredifficult for businesses, including the Company, to maintain flexible labour policies.

The Company currently has a Cooperative Labour Agreement (Perjanjian Kerja Bersama) inplace with one labour union, which covers approximately 9,400 employees. The Company has not beenthe target of any union action in the past, and believes that it has very good relations with its workers.However, there can be no assurance that additional unions will not be formed, or that the Companywill be able to maintain its traditionally good relations with its workers.

Labour unrest and activism in Indonesia could disrupt the operations of the Company’soperations and those of its customers and suppliers and could affect the financial condition ofIndonesian companies in general, depressing the prices of Indonesian securities on the Jakarta andother stock exchanges and the value of the Rupiah relative to other currencies. Such events wouldlikely have a material adverse effect on the Company.

Indonesian corporate and other disclosure and accounting standards differ from those in theUnited States.

The Company prepares its financial statements in accordance with Indonesian GAAP, whichdiffers from U.S. GAAP. As a result, the Company’s consolidated financial statements and reportedearnings could be significantly different from those that would be reported under U.S. GAAP. ThisOffering Circular does not contain a reconciliation of the Company’s consolidated financial statementsto U.S. GAAP, and there can be no assurance that such reconciliation would not reveal materialdifference. See “Certain Principal Differences between Indonesian GAAP and U.S. GAAP” for asummary of certain principal accounting differences that may be applicable to the Company.

Domestic, regional or global economic changes may materially and adversely affect theCompany’s business.

The economic crisis which affected South-East Asia, including Indonesia, from mid-1997 wascharacterised in Indonesia by, among other effects, currency depreciation, a significant decline in realgross domestic product (“GDP”), high interest rates, social unrest and extraordinary politicaldevelopments. These conditions had a material adverse effect on Indonesian businesses, including theCompany’s business and financial condition. See “Financial and Corporate Restructuring.” Indonesia

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entered a recessionary phase with relatively low levels of growth in 1999, 2000, 2001 and 2002. Therate of growth has increased in recent years, from 3.5% in 2001 to 4.1% in 2003 and 4.8% in 2004.However, Indonesia’s economy remains significantly affected by the Asian economic crisis and theGovernment has had to rely on the support of international agencies and governments to preventsovereign debt defaults.

The Government continues to have a large fiscal deficit and a high level of sovereign debt, itsforeign currency reserves are modest, the Rupiah continues to be volatile and has poor liquidity, andthe banking sector is weak and suffers from high levels of non-performing loans. Inflation has alsoremained high, with an estimated annual inflation rate of 6.4% in 2004, according to Bank Indonesia.The economic difficulties faced by Indonesia during the Asian economic crisis that began in 1997resulted in, among other things, significant volatility in interest rates, which had a material adverseimpact on the ability of many Indonesian companies, including the Company, to service their existingindebtedness. While the interest rate for one-month Bank Indonesia certificates (“SBI”) has declinedfrom a peak of 70.0% in late August 1998 to 8.18% on June 22, 2005, there can be no assurance thatthe recent improvement in economic condition will continue or the previous adverse economiccondition in Indonesia and the rest of the Asia Pacific region will not occur in the future. In particular,a loss of investor confidence in the financial systems of emerging and other markets, or other factors,may cause increased volatility in the Indonesian financial markets and inhibit or reverse the growthof the Indonesian economy. An increase in the interest rate might also make it more difficult forconsumers to obtain vehicle financing loans and lead to reduced automobile and motorcycle sales,which would in turn adversely affect demand for the Company’s products. Any such increasedvolatility or slowdown or negative growth could have a material adverse effect on the Company’sbusiness, financial condition, results of operations and prospects.

Fluctuations in the value of the Rupiah may materially and adversely affect the Company’sfinancial condition and results of operations.

One of the most important immediate causes of the economic crisis which began in Indonesia inmid-1997 was the depreciation and volatility of the value of the Rupiah as measured against othercurrencies, such as the U.S. dollar. Although the Rupiah has appreciated considerably from its lowpoint of approximately Rp.17,000 per U.S. dollar in January 1998, the Rupiah continues to experiencesignificant volatility. See “Exchange Rates” for further information on changes in the value of theRupiah as measured against the U.S. dollar in recent periods.

The Rupiah has generally been freely convertible and transferable (except that Indonesian banksmay not transfer Rupiah to persons outside of Indonesia who lack a bona fide trade or investmentpurpose). However, from time to time, Bank Indonesia has intervened in the currency exchangemarkets in furtherance of its policies, either by selling Rupiah or by using its foreign currency reservesto purchase Rupiah. There can be no assurance that the current floating exchange rate policy of BankIndonesia will not be modified, that additional depreciation of the Rupiah against other currencies,including the U.S. dollar, will not occur, or that the Government will take additional action tostabilise, maintain or increase the value of the Rupiah, or that any of these actions, if taken, will besuccessful.

An appreciation in the value of the U.S. dollar could also have an adverse effect on the Company.See “— Risks Relating to the Company and its Business — Fluctuations of the Indonesian Rupiahagainst the U.S. dollar and/or Euro may have a material adverse effect on the Company’s results ofoperations.”

Changes in exchange rates have affected and may continue to affect the Company’s results ofoperations and cash flows. Modification of the current floating exchange rate policy could result insignificantly higher domestic interest rates, liquidity shortages, capital or exchange controls or thewithholding of additional financial assistance by multinational lenders. This could result in areduction of economic activity, an economic recession, loan defaults and increases in the price ofimports. Any of the foregoing consequences could have a material adverse effect on the Company’sbusiness, financial conditions, results of operations and prospects, and could harm the ability of theCompany to meet its obligations under the Bonds.

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Downgrades of credit ratings of Indonesia and Indonesian companies could materially andadversely affect the Company and the market price of the Bonds.

Beginning in 1997, certain international credit rating agencies, including Moody’s and Standard& Poor’s, downgraded Indonesia’s sovereign rating and the credit ratings of various credit instrumentsof the Government and a large number of Indonesian banks and other companies. Currently,Indonesia’s sovereign foreign currency long-term debt is rated “B2” by Moody’s, “B+” by Standard& Poor’s and “BB-” by Fitch ICBA and Duff & Phelps (“Fitch”), and its short-term foreign currencydebt is rated “NP” by Moody’s, “B” by Standard & Poor’s and “B” by Fitch. In April 2002, Standard& Poor’s downgraded Indonesia’s long-term foreign currency sovereign rating to “selective default”after the Paris Club, an informal voluntary group of 19 creditor nations that seeks to coordinatesolutions for payment difficulties experienced by debtor nations, rescheduled US$5.4 billion ofsovereign debt on April 13, 2002 on the condition that the London Club of private creditors alsoreschedule certain debt obligations. On September 5, 2002 following the completion of a reschedulingagreement with the London Club of private creditors, Standard & Poor’s upgraded Indonesia’slong-term foreign currency sovereign rating to B+ and assigned the rating a stable outlook. Thesovereign foreign currency long-term debt ratings reflect an assessment of the Government’s overallfinancial capacity to pay its obligations, and its ability or willingness to meet its financialcommitments as they become due. No assurance can be given that Moody’s, Standard & Poor’s, Fitchor any other international credit rating agency will not further downgrade the credit ratings ofIndonesia or Indonesian companies. Any such downgrade would have an adverse impact on the abilityof Indonesian companies, including the Company, to raise additional financing and the interest ratesand other commercial terms at which such additional financing is available and could have a materialadverse effect on the Company.

The inability or failure of the Government to complete reforms necessary to receive financialassistance from multi-lateral agencies could adversely affect the Indonesian economy and theCompany.

The sharp depreciation of the Rupiah against the U.S. dollar and other currencies in 1997 and1998 had severe repercussions throughout most sectors of the Indonesian economy. As part of itsresponse to the situation, the Government turned to the International Monetary Fund (the “IMF”) forfinancial assistance. In October 1997, the IMF agreed to provide financial assistance contingent uponthe implementation of economic reforms, such as undertaking asset sales and abolishing subsidies forcommodities and other consumer products. The Government did not renew its programme with theIMF when it expired at the end of 2003.

In addition to the IMF, the World Bank, the members of the Paris Club, the Consultative Groupon Indonesia (“CGI”) and the Inter-Governmental Group on Indonesia (“IGGI”) are all importantsources of funding for the Government. CGI is a group of 19 donor countries and 13 internationalorganisations formed to coordinate donor assistance to Indonesia. IGGI is an international group oflenders established in 1967 by The Netherlands to coordinate multilateral aid to Indonesia. Othermembers of IGGI include the Asian Development Bank, IMF, the United Nations DevelopmentProgramme, the World Bank, Australia, Belgium, Britain, Canada, France, Germany, Italy, Japan, NewZealand, Switzerland and the U.S. Lending from members of the Paris Club, CGI and IGGI to theGovernment accounted for approximately one third of the Government’s total debt at the end of 2004.

Over the years, the Government has been able to reschedule debt owed to its creditors on variousoccasions. The agreement of the Government’s creditors to reschedule such debt has generally beenconditional upon the Government’s implementation of certain financial reforms. However, in 2004,following the Government’s decision not to renew the IMF programme, the Paris Club publicly statedthat it would no longer reschedule payments of debt owed to its members or to other creditors by theGovernment. Following the tsunami disaster that devastated portions of Indonesia on December 26,2004, the Paris Club, CGI and IGGI announced that they would consider rescheduling theGovernment’s debt repayments in order to allow funds to be channelled to relieve and rebuildcommunities affected by the disaster. As of the date hereof, however, no definitive debt reschedulingprogrammes have been announced.

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There can be no assurance that any of the Paris Club, CGI or IGGI will agree in the future toreschedule debt owed to its members or to other creditors by the Government. If any of theGovernment’s creditors refuses to reschedule Government debt in the future, it could impair the abilityof the Government to service or repay its debts. Failure by the Government to secure alternativefunding could cause it to default on its debts, resulting in an economic crisis which may in turn havea material adverse impact on the Company. Funding restrictions might also cause the Government tobe unable to fund subsidies for staples such as food and fuel which, in turn, could have serious social,economic and political consequences and could have a material adverse effect on the Company or itsbusiness. The Government may, in connection with future agreements with its creditors, undertakeadditional economic or structural initiatives the effects of which are presently unknown.

Risks Relating to the Bonds

Through the purchase of the Bonds, Bondholders may be exposed to a legal system subject toconsiderable discretion and uncertainty; Bondholders may have difficulty pursuing claims underthe Bonds and the Guarantee provided by the Guarantor in respect of the Bonds.

Indonesian principles of law relating to the rights of debtors and creditors may differ from thosethat would apply if the Guarantor were established in a jurisdiction within the United States or theEuropean Union. Neither the rights of debtors nor the rights of creditors under Indonesian law are asclearly established as under legislation or judicial precedent in most United States and EuropeanUnion jurisdictions. In addition, under Indonesian law, debtors may have rights and defences toactions filed by creditors that these debtors would not have in jurisdictions with more established legalregimes, such as those in the United States and the European Union member states.

Indonesia’s legal system is a civil law system based on written statutes in which judicial andadministrative decisions do not constitute binding precedent and are not systematically published.Many of Indonesia’s commercial and civil laws and rules on judicial process are based on Dutch lawas in effect prior to Indonesia’s independence in 1945, and have not been revised to reflect thecomplexities of modern financial transactions and instruments. Indonesian courts are often unfamiliarwith sophisticated commercial or financial transactions, leading in practice to uncertainty in theinterpretation and application of Indonesian legal principles. The application of many Indonesian lawsdepends, in large part, upon subjective criteria such as the good faith of the parties to the transactionand principles of public policy. Indonesian judges operate in an inquisitorial legal system and havevery broad fact-finding powers and a high level of discretion in relation to the manner in which thosepowers are exercised. In practice, Indonesian court decisions may omit, or may not be decided upon,a legal and factual analysis of the issues presented in a case. As a result, the administration andenforcement of laws and regulations by Indonesian courts and Governmental agencies may be subjectto considerable discretion and uncertainty.

The Bonds will be guaranteed by the Company under English law. Indonesia law acknowledgesthe concept of a corporate guarantee as set out in Articles 1820 to 1850 of the Indonesian Civil Code.Accordingly, the corporate guarantee issued by the Company to secure the Bonds should beenforceable in accordance with its terms. However, there have been at least two recent decisions byIndonesian courts of first instance that have annulled the transaction documents in a structure wherea guarantee was issued by an Indonesian company for debt of an offshore subsidiary, on the basis thatthe guarantor’s acting in the capacity of borrower for the same loan amounted to a legal fraud and legalengineering. Following a settlement between the parties in one of these civil cases, the District Courtdecision was not challenged in the High Court or the Supreme Court of Indonesia, and there is anothersimilar case is on appeal. The Company believes that these recent court decisions were not renderedon a salient basis. The decisions have also been criticised by Indonesian legal academics andpractitioners, and may not be binding, as Indonesian law places a lower value on precedent case lawthan Anglo-American legal systems. However, there is no assurance that a higher Indonesian courtwould reject the basis of the above decision, or that another district court would not make a judgmenton a similar basis.

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In addition, under the Indonesian Civil Code, although a guarantor may waive its right to requirethe obligee to exhaust its legal remedies against the obligor’s assets prior to the obligee exercising itsrights under the related guarantee, a guarantor may be able to argue successfully that even though aguarantee contains such a waiver, the guarantor can require that the obligee first prove that allavailable legal remedies against the obligor have been exhausted. No assurance can be given that inthe future an Indonesian court may not impose an obligation on holders of the Bonds to pursue all legalremedies against the Issuer if it were to default in its obligations even though the Guarantor hasexpressly waived this obligation in the Guarantee.

As a result, it may be more difficult for Bondholders to pursue a claim against the Guarantor inIndonesia than it would be to do so in other jurisdictions, such as the United States and those in theEuropean Union, which may adversely affect Bondholders’ ability to obtain and enforce a judgmentagainst the Guarantor in Indonesia and increase Bondholders’ costs of pursuing, and the time requiredto pursue, claims against the Guarantor.

The Bonds and the Guarantee will be subordinated to secured indebtedness of the Issuer andthe Guarantor.

The Bonds will be unsubordinated and unsecured obligations of the Issuer and will rank paripassu in right of payment with all other existing and future unsubordinated and unsecuredindebtedness of the Issuer and senior in right of payment to all subordinated indebtedness of theIssuer, if any. The Guarantee will be issued as a general/unsecured obligation of the Guarantor,pursuant to Article 1131 of the Indonesian Civil Code, and the Guarantor therefore believes that theissue of the Guarantee is not subject to Article 88 of the Indonesian Company Law, and that theGuarantee will be an unsubordinated and unsecured obligation of the Guarantor and will rank paripassu in right of payment to all other existing and future unsubordinated and unsecured indebtednessof the Guarantor and senior in right of payment to all subordinated indebtedness of the Guarantor, ifany. However, the Bonds and the Guarantee will be effectively subordinated to any secured obligationsof the Issuer and of the Guarantor, as the case may be, to the extent of the assets serving as securitytherefor. In bankruptcy, the holder of a security interest with respect to any assets of the Issuer or ofthe Guarantor would be entitled to have the proceeds of such assets applied to the payment of suchholder’s claim before the remaining proceeds, if any, are applied to the claims of the Bondholders. Asof the date of this Offering Circular, the Issuer and the Guarantor have no secured obligations. In thefuture, the Issuer and the Guarantor may incur secured obligations.

The Issuer may be unable to redeem the Bonds.

On certain dates, including (i) delisting of the Bonds; and (ii) upon the maturity of the Bonds,the Issuer will be required to redeem the Bonds. The Issuer and the Guarantor may not have sufficientcash in hand and may not be able to arrange financing to redeem the Bonds in time, or on acceptableterms, or at all. The ability to redeem the Bonds may also be limited by the terms of other debtinstruments.

There has been no prior public market for the Bonds; the liquidity and market price of theBonds following the offering may be volatile.

There is no existing market for the Bonds. If such a market were to develop, the Bonds couldtrade at prices that might be higher or lower than the initial Issue Price depending on many factors,including prevailing interest rates, the Company’s operating results and the market for similarsecurities. The Joint Lead Managers have advised the Issuer that they presently intend to make amarket in the Bonds as permitted by applicable laws and regulations. The Joint Lead Managers are not,however, obliged to make a market in the Bonds and any such market making may be discontinued atany time. Accordingly, no assurance can be given as to the liquidity of, or trading market for, theBonds. Approval in-principle has been obtained from the SGX-ST for permission to deal in andquotation of the Bonds on the SGX-ST. However, there can be no guarantee that a liquid tradingmarket for the Bonds will develop, and the Company cannot predict whether a trading market for theBonds will develop or how liquid that market might become.

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Historically, the market for non-investment grade debt has been subject to disruptions that havecaused substantial volatility in the prices of such securities. There can be no assurance that the marketfor the Bonds will not be subject to similar disruptions. Any such disruption may have an adverseeffect on holders of the Bonds.

The ratings assigned to the Bonds may be lowered or withdrawn entirely in the future.

The Bonds have been assigned a rating of “B2” by Moody’s and “B” by Standard & Poor’s. Theratings address the Issuer’s the Guarantor’s ability to perform their respective obligations under theterms of the Bonds and the Guarantee and the credit risks in determining the likelihood that paymentswill be made when due under the Bonds. A rating is not a recommendation to buy, sell or holdsecurities and may be subject to revision, suspension or withdrawal at any time. There is no assurancethat a rating will remain for any given period of time or that a rating will not be lowered or withdrawnentirely by the relevant rating agency. Except in limited circumstances, the Company has no obligationto inform Bondholders of any such revision, downgrade or withdrawal. A suspension, reduction orwithdrawal at any time of the rating assigned to the Bonds may adversely affect the market price ofthe Bonds.

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USE OF PROCEEDS

The Issuer will lend the proceeds from the sale of the Bonds to the Guarantor. The Guarantorintends to use the net proceeds of the issue of the Bonds, expected to be approximately US$318.6million after deduction of fees and commissions but prior to deduction of expenses incurred inconnection with the issue of the Bonds, to finance its production capacity expansion, for generalcorporate purposes relating directly to its business and to purchase a portion of the Series A FRNs andall of the Series B FRNs of the Company, with an aggregate principal amount of US$221.5 million,from selected holders thereof.

Pending application of the net proceeds from the sale of the Bonds, the Guarantor intends toinvest the net proceeds in U.S. dollar denominated money market instruments, certificates of deposit,time deposits or other short-term investments.

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EXCHANGE RATES

Prior to August 1997, Bank Indonesia maintained the value of the Rupiah based on a basket offoreign currencies, the composition of which was based on Indonesia’s main trading partner countries.In July 1997, Bank Indonesia widened the exchange rate band, and in August 1997, Bank Indonesiaannounced it would no longer intervene to maintain the exchange rate at any pre-determined level,which resulted in a substantial decrease in the value of the Rupiah relative to the U.S. dollar.

The following table shows the exchange rate of Rupiah for U.S. dollars based on the middleexchange rates at the end of each month during the periods indicated. The Rupiah middle exchangerate is calculated based on Bank Indonesia’s buying and selling rates.

Exchange RatesRp. per US$

Low (1) High (1) Average (2) Period End

2000 ........................................ 7,425 9,595 8,534 9,5952001 ........................................ 8,865 11,675 10,266 10,4002002 ........................................ 8,730 10,320 9,261 8,9402003 ........................................ 8,279 8,908 8,571 8,4652004 ........................................ 8,441 9,415 8,985 9,2902005 ........................................

January ................................. 9,133 9,305 9,204 9,165February ............................... 9,166 9,300 9,245 9,260March ................................... 9,250 9,520 9,371 9,480April .................................... 9,475 9,755 9,539 9,570May...................................... 9,435 9,545 9,480 9,495June...................................... 9,528 9,713 9,616 9,713July (through July 13, 2005) . 9,740 9,860 9,785 9,750

Notes:

(1) For full years, the high and low amounts are determined based upon the month-end middle exchange rateannounced by Bank Indonesia during the year indicated. The high and low figures for January 2005 to June 2005are determined based on the daily middle exchange rates during the month indicated.

(2) For full years, the average shown is calculated based on the middle exchange rate announced by Bank Indonesiaon the last day of each month during the year indicated. For monthly averages from January 2005 to June 2005,the average shown is calculated based on the daily middle exchange rates during the month indicated.

Bank Indonesia is the sole issuer of Rupiah and is responsible for maintaining the stability of theRupiah. Prior to August 14, 1997, Bank Indonesia maintained stability of the Rupiah through a tradingband policy, pursuant to which Bank Indonesia would enter the foreign currency market and buy orsell Rupiah, as required, when trading in the Rupiah exceeded bid and offer prices announced by BankIndonesia on a daily basis. On August 14, 1997, Bank Indonesia terminated the trading band policyand permitted the exchange rate for the Rupiah to float without an announced level at which it wouldintervene. The exchange rate on December 31, 2004 was Rp.9,290 = US$1.00 as compared withRp.8,940 = US$1.00 on December 31, 2002. On July 13, 2005, the exchange rate was Rp.9,750 =US$1.00.

Solely for convenience only, this Offering Circular contains translations of certain Rupiahamounts into U.S. dollars at the exchange rate of Rp.9,480 = US$1.00 set by Bank Indonesiaprevailing as of March 31, 2005. No representation is made that the Rupiah or U.S. dollar amountsreferred to in this Offering Circular could have been or could be converted into U.S. dollars or Rupiah,as the case may be, at any particular rate or at all.

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Exchange Controls

Currently, no exchange control restrictions exist in Indonesia or The Netherlands. The Rupiahhas been and in general is freely convertible. Bank Indonesia has introduced regulations to restrict themovement of Rupiah from banks within Indonesia to offshore banks without underlying trade orinvestment reasons, thereby limiting offshore trading to existing sources of liquidity. In addition,Bank Indonesia has the authority to request information and data concerning the foreign exchangeactivities of all people and legal entities that are domiciled, or who plan to reside in Indonesia for atleast one year.

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CAPITALISATION

The following table sets forth (i) the unaudited selected short-term and long-term debt andcapitalisation of the Company as of March 31, 2005 as determined under Indonesian GAAP and (ii)the selected short-term and long-term debt and capitalisation of the Company as adjusted to give effectto (a) the issue of the Bonds, and (b) the purchase of US$221.5 million in aggregate principal amountof Series A FRNs and Series B FRNs.

This table should be read in conjunction with “Use of Proceeds,” “Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Liquidity and Capital Resources,”“Concurrent FRN Purchase and Consent Solicitation,” and the consolidated financial statements of theCompany and the related notes thereto included elsewhere in this Offering Circular. There have beenno material changes to the capitalisation of the Company since March 31, 2005.

As of March 31, 2005

Actual,unaudited Actual As adjusted As adjusted

(Rupiah inbillions)

(US$ inmillions)

(Rupiah inbillions)(1)

(US$ inmillions)

Short-term debt:Current maturities of long-term

liabilities ................................... 495 52 254 27

Total short-term debt ........................ 495 52 254 27

Long-term debt — net of currentmaturities:Notes payable ................................ — — 3,081 325FRNs payable ................................ 2,926 309 892 94

Total long-term liabilities .................. 2,926 309 3,973 419

Total debt(2) ..................................... 3,420 361 4,226 446

Stockholders’ equity:Capital stock —

Rp.500 par value per share:Authorised capital

(12,000,000,000 shares)Subscribed and paid-up

(3,168,000,000 shares) ................ 1,584 167 1,584 167Additional paid-in capital .................. 52 5 52 5Retained earnings ............................. 335 35 568 60Total stockholders’ equity.................. 1,889 199 2,122 224

TOTAL CAPITALISATION ............ 5,310 560 6,349 670

Notes:

(1) Short-term and long-term debt is based on actual U.S. dollar values and translated into Rupiah using the prevailingexchange rate as of March 31, 2005 of US$1.00 = Rp.9,480, solely for convenience. Stockholders’ equity is basedon Rupiah values and translated into U.S. dollars using the prevailing exchange rate as of March 31, 2005 ofRp.9,480 = US$1.00, solely for convenience.

(2) Short-term and long-term debt — net of current maturities are presented to include the premium on restructuring.See Note 2(q) of the consolidated financial statements of the Company included elsewhere in this OfferingCircular.

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SELECTED HISTORICAL CONSOLIDATED FINANCIALAND OPERATING DATA

The following tables set forth certain selected historical consolidated financial and operatingdata for the Company as of the dates and for each of the periods indicated. The selected historicalconsolidated financial data as of and for the years ended December 31, 2002, 2003 and 2004 has beenderived from the consolidated financial statements of the Company audited by Hans TuanakottaMustofa & Halim (formerly Hans Tuanakotta & Mustofa), independent public accountants, themember firm of Deloitte Touche Tohmatsu in Indonesia. The selected historical consolidated financialdata as of and for the three months ended March 31, 2004 and 2005 set forth below have been derivedfrom the unaudited consolidated financial statements of the Company included elsewhere in thisOffering Circular. The historical results presented below are not necessarily indicative of the resultsthat may be expected for the full year ending December 31, 2005 or any future period.

Due to various recent changes to the corporate structure of the Company, including thedeconsolidation of a material subsidiary, GT Petrochem Industries, and the transfer of the tire cordand synthetic rubber manufacturing assets thereof to the Company in December 2004, as well as thedivestment of certain non-core businesses and assets of the Company in February 2005, a period toperiod comparison of the historical consolidated financial information included in this OfferingCircular may not be meaningful. See “Management’s Discussion and Analysis of Financial Conditionand Results of Operations — Overview — Financial impact of corporate restructuring” and“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Resultsof Ongoing Operations.”

The Company’s consolidated financial statements have been prepared in accordance withIndonesian GAAP, which differs in certain respects from U.S. GAAP. See “Certain PrincipalDifferences between Indonesian GAAP and U.S. GAAP” and “Risk Factors — Risks Relating toIndonesia — Indonesian corporate and other disclosure and accounting standards differ from thosein the United States.”

The following information should be read in conjunction with “Selected Segment Information ofOngoing Operations,” “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and the consolidated financial statements of the Company and the notes thereto includedelsewhere in this Offering Circular.

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2002 2003 2004 2004 2004 2005 2005


(Rp.) (Rp.) (Rp.) (US$) (Rp.) (Rp.) (US$)


Consolidated statements of income:NET SALES........................................... 5,561 5,730 6,808 718.1 1,641 1,158 122.2COST OF SALES................................... 4,713 4,858 5,683 599.5 1,380 967 102.0GROSS PROFIT..................................... 848 872 1,124 118.6 261 192 20.2OPERATING EXPENSES:Selling .................................................. 247 294 196 20.7 60 35 3.7General and administrative ..................... 229 312 245 25.8 62 32 3.4

Total operating expenses ....................... 475 606 441 46.5 123 67 7.1INCOME FROM OPERATIONS ............. 373 266 684 72.1 138 124 13.1

OTHER INCOME (CHARGES):Gain on sale of subsidiary...................... — — — — — 124 13.0Gain (loss) on foreign exchange — net .. 1,707 389 (466) (49.1) (91) (63) (6.6)Interest income ..................................... 109 24 5 0.6 5 —(1) —(1)

Interest expense ..................................... (450) (66) (45) (4.7) (7) (16) (1.7)Reversal of (provision for) allowance

for doubtful accounts ........................ (4) (1) 28 3.0 — — —Impairment of unused of property, plant

and equipment ................................... (4) (4) (4) (0.5) — — —Others — net ......................................... 105 49 45 4.8 8 2 0.2

Other Income (Charges) — net ............... 1,463 391 (437) (46.1) (85) 47 5.0Equity in net income of associate

company ............................................ — — 17 1.8 — 48 5.1INCOME BEFORE TAX ........................ 1,836 656 264 27.8 54 219 23.1TAX BENEFIT (EXPENSE) ................... (695) (223) 178 18.7 (19) (15) (1.5)INCOME FROM ORDINARY

ACTIVITIES ..................................... 1,141 433 441 46.6 34 205 21.6

EXTRAORDINARY ITEMS:Restructuring gain — net of tax expense

and restructuring charges ................... 3,081 593 119 12.6 103 — —INCOME BEFORE MINORITY

INTERESTS IN NET INCOMEOF SUBSIDIARIES .......................... 4,223 1,027 560 59.1 138 205 21.6

MINORITY INTERESTS IN NETINCOME OF SUBSIDIARIES............ (400) (156) (82) (8.7) 2 — —

NET INCOME........................................ 3,823 871 478 50.4 140 205 21.6

BASIC EARNINGS PER SHARE(in full Rupiah):

Including extraordinary item .................. 1,207 275 151 0.02 44 65 0.01Excluding extraordinary item ................. 234 88 113 0.01 11 65 0.01

Note:

(1) Less than Rp. 500 million or equivalent U.S. dollar amount.

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2002 2003 2004 2004 2005 2005

(Audited) (Audited) (Audited) (Unaudited)

(Rp.) (Rp.) (Rp.) (US$) (Rp.) (US$)


Selected consolidated balance sheetitems:

CURRENT ASSETS:Cash and cash equivalents .................. 268 272 104 10.9 53 5.6Temporary investments ....................... 423 372 200 21.1 145 15.3Trade accounts receivable — net ........ 840 921 534 56.3 636 67.1Inventories — net ............................... 1,013 1,050 687 72.5 753 79.4

Total Current Assets ........................... 2,884 3,076 1,849 195.1 1,970 207.8

NON-CURRENT ASSETS:Accounts receivable from related

parties ............................................ 2,160 2,289 808 85.2 869 91.6Property, plant and equipment — net .. 6,824 6,515 3,186 336.1 3,100 327.0

Total Non-Current Assets .................... 9,573 9,097 4,492 473.8 4,504 475.1

TOTAL ASSETS ................................. 12,457 12,173 6,341 668.9 6,474 683.0

LIABILITIES AND EQUITY:CURRENT LIABILITIESTrade accounts payable ....................... 321 347 363 38.3 591 62.3Current maturities of long-term

liabilitiesLiability for the purchase of

property, plant and equipment .... 35 33 — — — —Bank loans ..................................... 206 224 206 21.7 — —Notes payable ................................ 186 487 472 49.8 495 52.2

Loans under restructuring process —net ................................................. 2,220 — — — — —

Total Current Liabilities ..................... 4,754 1,970 1,298 136.9 1,356 143.1

NON-CURRENT LIABILITIESLong-term liabilities — net of current

maturities:Bank loans ..................................... 825 702 — — — —Notes payable ................................ 3,001 4,471 2,996 316.0 2,926 308.6

Accounts payable to related parties..... 3,283 3,138 —(1) —(1) 1 0.1

Total Non-Current Liabilities .............. 7,505 8,952 3,359 354.3 3,229 340.6

TOTAL EQUITY ................................ 430 1,326 1,685 177.7 1,889 199.3

TOTAL LIABILITIES AND EQUITY . 12,457 12,173 6,341 668.9 6,474 683.0

Note:

(1) Less than Rp. 500 million or equivalent U.S. dollar amount.

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2002 2003 2004 2004 2004 2005 2005


(Rp.) (Rp.) (Rp.) (US$) (Rp.) (Rp.) (US$)


Selected consolidated cash flowstatement items:

Net cash provided by operatingactivities ............................................ 559 564 591 62.3 305 60 6.3

Net cash provided by (used in) investingactivities ............................................ (602) (7) (18) (1.9) (155) 1 0.1

Net cash used in financing activities ...... (169) (545) (628) (66.2) (212) (99) (10.4)

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SELECTED SEGMENT INFORMATION OF ONGOING OPERATIONS

The following tables set forth certain selected segment information for the Company as of andfor each of the periods indicated. The selected segment information is derived principally from theaudited and unaudited consolidated financial statements of the Company included elsewhere in thisOffering Circular.

The Company has provided this selected segment information because it believes that suchfinancial information is important to an investor’s understanding of the Company’s results ofoperations following the deconsolidation of a material subsidiary, GT Petrochem Industries, and thetransfer of the tire cord and synthetic rubber manufacturing assets thereof to the Company inDecember 2004. See “Management’s Discussion and Analysis of Results of Operations and FinancialCondition — Overview — Financial impact of corporate restructuring” and “Financial and CorporateRestructuring.” However, the selected segment information provided should not be relied upon asindicative of the financial condition or operating results that would have been achieved had thedeconsolidation of GT Petrochem Industries and the transfer of the tire cord and synthetic rubbermanufacturing assets been consummated as of the dates indicated, nor are they indicative of futurefinancial condition or operating results.

Typically, a company presents a pro forma profit and loss statement and balance sheet after amaterial acquisition or disposition. In the case of the Company’s recent corporate restructuring, thepro forma financial statements would have been completed in order to show the effects of theDecember 2004 corporate restructuring as if it had been completed on December 31, 2003. Due to thecomplex nature of its corporate restructuring and structure, the Company is unable to prepare areliable pro forma presentation because certain items in the consolidated statements of income andconsolidated balance sheets cannot be allocated among its various segments and businesses. TheCompany believes that the presentation of historical aggregated segment financial information for itstire and tire-related businesses derived from the segment information in the Company’s historicalaudited and unaudited consolidated financial statements is more meaningful to investors inunderstanding the Company’s business which focuses on tires and tire-related products aftercompletion of its corporate restructuring in December 2004. The following segment information hasbeen prepared on the following basis:

● The tire division has historically been operated at the Company level and therefore thecorporate restructuring has not resulted in a change in the assets used in connection withthe tire division.

● The tire cord division’s revenues were derived using solely the tire cord manufacturingassets transferred to the Company in connection with the corporate restructuring. Prior tothe restructuring, the tire cord manufacturing assets were operated by GT PetrochemIndustries.

● The synthetic rubber division’s revenues were derived using solely the synthetic rubbermanufacturing assets transferred to the Company in connection with the corporaterestructuring. Prior to the restructuring, the synthetic rubber manufacturing assets, wereoperated by PT Sentra Sintetikajaya,

● The segment results (as presented in the notes to the audited and unaudited consolidatedfinancial statements of the Company included elsewhere in this Offering Circular)generated by the tire cord division’s manufacturing assets operated by GT PetrochemIndustries and the synthetic rubber division’s manufacturing assets operated by PT SentraSintetikajaya had been consolidated into the results of operations of the Company untilNovember 30, 2004.

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● After the corporate restructuring in December 2004 and the divestment of certain non-corebusinesses and assets in February 2005, the only remaining significant operating divisionsof the Company are the tire, tire cord and synthetic rubber divisions. In order to calculatethe aggregate segment information for the ongoing operations for each of the periods setforth below, the Company has aggregated certain selected line items after eliminatingintersegment purchases, sales and transfers presented under “Tyre,” “Tyre Cord” and“Synthetic rubber” in the tables under Note 37 to the consolidated financial statements forthe three-month periods ended March 31, 2005 and 2004 and Note 38 to the consolidatedfinancial statements for the years ended December 31, 2002, 2003 and 2004 includedelsewhere in this Offering Circular. For example, “external sales” in the table belowrepresents the aggregate external sales of the tire division, the tire cord division and thesynthetic rubber division, eliminating inter-segment sales and transfers of the tire corddivision and synthetic rubber division to the tire division.

A discussion of statement of income segment line items below operating profit (such as interestincome, interest expense and gain (loss) on foreign exchange) for such periods has not been providedby the Company because the allocation of such items to different segments is not possible due to thecomplexity of the corporate restructuring. In addition, only selected segment information (namely,capital expenditures and depreciation) is presented here, together with actual historical selectedconsolidated balance sheet information as of December 31, 2004 and March 31, 2005 for comparativepurposes. Selected historical consolidated balance sheet information as of December 31, 2002 and2003 and as of March 31, 2004 has not been presented as the consolidated balance sheets of theCompany for such periods consolidate the balance sheet of GT Petrochem Industries.

The following information should be read in conjunction with “Selected Historical ConsolidatedFinancial and Operating Data”, “Management’s Discussion and Analysis of Financial Condition andResults of Operations — Overview — Financial impact of corporate restructuring” and the historicalaudited and unaudited consolidated financial statements of the Company and the related notes theretoincluded elsewhere in this Offering Circular.


2002 2003 2004 2004 2004 2005 2005

(Unaudited, aggregate segment information) (Unaudited, aggregatesegment information)

(Rp.) (Rp.) (Rp.) (US$) (Rp.) (Rp.) (US$)


Segment statements of income andsegment balance sheet items:

External sales(1) ..................................... 3,247 3,440 3,877 409.0 917 1,124 118.6Cost of sales(1) ....................................... 2,446 2,726 3,124 329.5 715 933 98.4Gross profit .......................................... 801 713 753 79.4 202 191 20.2Operating expenses ................................ 375 465 334 35.2 90 64 6.7

Selling .............................................. 205 256 163 17.2 50 34 3.6General and administration ................ 170 208 171 18.0 39 29 3.1

Income from operations.......................... 426 248 419 44.2 113 128 13.5EBITDA(2) ............................................. 650 476 657 69.3 171 189 19.9Interest expense(3) .................................. 17 91 118 12.5 23 42 4.5Depreciation........................................... 224 227 238 25.1 58 61 6.4Capital expenditures ............................... 88 110 108 11.3 27 55 5.8

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2004 2004 2005 2005

(Audited) (Unaudited)

(Rp.) (US$) (Rp.) (US$)


Selected consolidated balance sheet items(4):Total assets ....................................................................... 6,341 668.9 6,474 683.0Total debt(3) ...................................................................... 3,674 387.6 3,420 360.8Total equity ....................................................................... 1,685 177.7 1,889 199.3

Notes:

(1) Reflecting sales to and purchases from external parties only, eliminating inter-segment transfers sales and purchases.

(2) Aggregate segment EBITDA is calculated by adding segment depreciation to income from operations. EBITDA is not astandard measure under Indonesian GAAP.

EBITDA is a widely accepted financial indicator of a company’s ability to service and incur debt. EBITDA should notbe considered in isolation or construed as an alternative to cash flows, earnings or any other measure of performance oras an indicator of the Company’s operating performance, liquidity, profitability or cash flows generated by operating,investing or financing activities. EBITDA fails to account for taxes, interest expense and other non-operating cashexpenses. In evaluating EBITDA, investors should consider, among other things, the components of EBITDA such asrevenues and operating expenses and the amount by which EBITDA exceeds capital expenditures and other charges.

The segment EBITDA information herein is based on segment financial information of the Company principally derivedfrom the Company’s audited and unaudited consolidated financial statements and is not comparable to the actualhistorical EBITDA of the Company for the periods presented. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations.”

(3) Interest expense excludes the amortisation on the premium on debt restructuring on the Series A FRNs, while total debtincludes the premium on debt restructuring on the Series A FRNs. See Note 2(q) of the consolidated financial statementsof the Company included elsewhere in this Offering Circular.

(4) Actual historical consolidated balance sheet items, derived from the consolidated financial statements of the Companyincluded elsewhere in this Offering Circular.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

The discussion and analysis below should be read together with the audited and unauditedconsolidated financial statements of the Company and the selected segment financial and operatingdata, in each case together with the accompanying notes, bases and assumptions, contained elsewherein this Offering Circular.

Due to various recent changes to the corporate structure of the Company, including thedeconsolidation of a material subsidiary, GT Petrochem Industries and the transfer of the tire cordand synthetic rubber manufacturing assets thereof to the Company in December 2004, as well as thedivestment of certain non-core businesses and assets of the Company in February 2005, a period toperiod comparison of the historical consolidated financial information included in this OfferingCircular may not be meaningful. The Company has provided certain segment information because itbelieves that such financial information is important to an investor’s understanding of the Company’sresults of operations following the deconsolidation of a material subsidiary, GT Petrochem Industriesand the transfer of the tire cord and synthetic rubber manufacturing assets thereof to the Company inDecember 2004. See “ — Overview — Financial impact of corporate restructuring” and “Financialand Corporate Restructuring.” However, the aggregate segment information provided herein shouldnot be relied upon as indicative of the financial condition or operating results that would have beenachieved had the deconsolidation of GT Petrochem Industries and the transfer of the tire cord andsynthetic rubber manufacturing assets been consummated as of the dates indicated, nor are theyindicative of future financial condition or operating results.

The discussion herein contains forward-looking statements and reflects the current views of theCompany with respect to future events and financial performance. Actual results may differ materiallyfrom those anticipated in these forward-looking statements as a result of certain factors such as thoseset forth under “Risk Factors” and elsewhere in this Offering Circular.

Overview

The Company owns and operates the largest integrated tire manufacturing facilities in South-EastAsia. The Company’s principal business is the development, manufacture, distribution and sale ofradial tires, bias tires, motorcycle tires and tire inner tubes, as well as tire-related products such astire cord and synthetic rubber.

The Company completed a major corporate restructuring exercise in December 2004, in whichit acquired the tire cord and synthetic rubber manufacturing assets of its subsidiary, GT PetrochemIndustries, and diluted its majority stake in GT Petrochem Industries, which owns petrochemicalbusinesses not core to the Company’s tire business. See “Financial and Corporate Restructuring.”After giving effect to the corporate restructuring and deconsolidation of GT Petrochem Industries, theCompany derives the majority of its revenue from the sales of tires, comprising radial tires, bias tiresand motorcycle tires, as well as inner tubes for bias and motorcycle tires. The remainder of theCompany’s revenue is derived from tire-related products, comprising tire cord and synthetic rubbersales to external parties.

After the completion of the corporate restructuring in December 2004, the Company no longerconsolidates revenue from the businesses of GT Petrochem Industries, which are not directly relatedto the Company’s tire and tire-related product business. See “— Financial impact of corporaterestructuring.” Total sales of tires and tire-related products have therefore been presented anddiscussed herein instead of the Company’s total sales in the historical audited consolidated financialstatements for the years ended December 31, 2002, 2003 and 2004, which reflect the consolidatedrevenue of the Company and its subsidiaries, including GT Petrochem Industries’ textile and chemicalbusinesses, until November 30, 2004, which have been deconsolidated since December 1, 2004 aftercompletion of the corporate restructuring. See “Selected Segment Information of OngoingOperations,” “— Financial impact of corporate restructuring” and “Financial and CorporateRestructuring.”

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The Company’s tire division recorded total sales (comprising sales of radial, bias and motorcycletires, as well as tire tubes, flaps, rim tape, O-rings, valves and reclaimed rubber) of Rp.3,291 billion(US$347.1 million) for the year ended December 31, 2004, and total sales to external parties of Rp.943billion (US$99.4 million) for the three months ended March 31, 2005. The Company recorded totaltire-related product sales to external parties of Rp.586 billion (US$61.8 million) for the year endedDecember 31, 2004, and total tire-related product sales to external parties of Rp.182 billion (US$19.1million) for the three months ended March 31, 2005.

The Company’s tire-related product divisions manufacture tire cord and synthetic rubber for theCompany’s tire production as part of its strategy of vertically integrating its production facilities toenhance cost controls. For the periods presented, the Company utilised approximately half of itstire-related products for its own tire manufacturing business and sells its excess production to externalparties, primarily other tire manufacturing companies in Indonesia and a small number of internationalcustomers.

The Company sells its tires into the domestic OE market and to the replacement markets inIndonesia and overseas. The export market has historically been a key market for both tire andtire-related products of the Company. 56%, 56% and 55% of the Company’s combined external salesof tires and tire-related products was denominated in foreign currencies in 2002, 2003 and 2004,respectively, primarily in U.S. dollars and in Euro.

The Company’s profitability is primarily driven by its volume of sales, its product mix, as wellas the difference between prices received for tires manufactured by it and its raw material costs,manufacturing costs, marketing costs and general and administrative costs. The Company’s financialperformance is also affected by a number of other variables outside of its control, such as trends inthe automotive and tire manufacturing industry, and political, economic and social conditions inIndonesia. For a description of these and other factors affecting the Company’s financial performance,see “Risk Factors.”

The Company currently operates five tire plants, all located in Indonesia, where it manufacturesradial tires, bias tires, motorcycle tires and tire inner tubes, as well as reclaiming rubber, and twotire-related product plants which manufacture tire cord and synthetic rubber.

As of December 31, 2004, the Company had total consolidated assets of Rp.6,341 billion(US$668.9 million). As of March 31, 2005, the Company had total consolidated assets of Rp.6.474billion (US$683.0 million).

The following table sets forth the Company’s total tire and tire-related product sales to externalparties by major product and market categories for the periods indicated.

Years ended December 31,Three months ended

March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

TiresRadial tires:

Export(1) ............................. 1,030 89 1,142 89 1,217 87 349 84

Replacement(2).................... 112 10 123 10 161 12 61 15

OE(3) .................................. 16 1 16 1 16 1 5 1

Total radial tires ..................... 1,159 100 1,280 100 1,394 100 414 100

Bias tires:

Export(1) ............................. 294 31 296 31 324 29 75 24

Replacement(2).................... 605 65 599 63 696 63 216 69

OE(3) .................................. 38 4 55 6 88 8 24 7

Total bias tires........................ 937 100 950 100 1,108 100 315 100

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March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Motorcycle tires:

Export(1) ............................. 13 3 5 1 4 1 —(8) —(8)

Replacement(2).................... 365 87 378 82 364 75 100 75

OE(3) .................................. 43 10 79 17 119 24 34 25

Total motorcycle tires ............. 422 100 463 100 488 100 134 100

Others(4):

Export(1) ............................. 60 19 17 6 20 7 4 5

Replacement(2).................... 238 76 245 85 243 80 64 81

OE(3) .................................. 16 5 27 9 38 13 11 14

Total others ............................ 314 100 289 100 302 100 79 100

Total tire sales ........................ 2,832 87 2,981 87 3,291 85 943 84

Tire-related productsTire cord:

The Company ..................... 308 — 328 — 365 — 111(5) —

Domestic(6) ......................... 63 20 56 18 84 24 39 27

Export(7) ............................. 244 80 261 82 267 76 102 73

Total tire cord external sales... 307 100 316 100 351 100 141 100

Synthetic rubber:

The Company ..................... 118 — 169 — 224 — 74(5) —

Domestic(6) ......................... 54 50 49 35 107 46 24 59

Export(7) ............................. 54 50 93 65 128 54 16 41

Total synthetic rubber externalsales ................................... 108 100 142 100 235 100 40 100

Total tire-related productexternal sales...................... 415 13 458 13 586 15 182 16

Total external sales of tiresand tire-related products .. 3,247 100% 3,440 100% 3,877 100% 1,124 100%

Notes:

(1) Export sales comprise all tire sales to customers outside Indonesia and, in the case of radial tires, include salesto Michelin and Nokian Tyres.

(2) Replacement sales comprise all sales to Indonesian customers, less OE sales.

(3) OE sales comprise all sales to domestic vehicle manufacturers.

(4) Others comprise tire components such as automobile tire tubes, flaps, motorcycle tubes, rim tape, o-rings, tirevalves and reclaimed rubber.

(5) Prior to December 1, 2004, sales to the Company comprised sales of tire cord and synthetic rubber by GTPetrochem Industries and PT Sentra Sintetikajaya, respectively, to the Company. From December 1, 2004, as aresult of the transfer of the respective tire cord and synthetic rubber manufacturing assets of GT PetrochemIndustries and PT Sentra Sintetikajaya, respectively, to the Company, no separate sales are recorded because suchassets have been integrated as divisions of the Company since the completion of the Company’s corporaterestructuring in December 2004 but have instead been accounted for as internal transfers. See Note 37 to theconsolidated financial statements of the Company for the three-month periods ended March 31, 2004 and 2005included elsewhere in this Offering Circular. See “Management’s Discussion and Analysis of Financial Conditionand Results of Operations — Critical Accounting Policies.”

(6) Domestic sales comprise all tire-related product sales to customers within Indonesia, excluding the Company.

(7) Export sales in 2002, 2003 and 2004 comprise all direct tire-related product sales to customers outside Indonesia,while export sales in 2005 comprise all direct and indirect (made through a subsidiary) tire-related product salesto customers outside Indonesia.

(8) Less than Rp.500 million or its equivalent U.S. dollar amount.

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Sales

Demand for tires

The Company presently derives the majority of its revenue from the sales of tires, comprisingradial tires, bias tires and motorcycle tires. The remainder of the Company’s revenue is derived fromtire-related products, comprising tire cord and synthetic rubber sales to external parties. Tire divisionsales (which include sales of tires, as well as tire components such as inner tubes, flaps and rim tape)comprised approximately 87%, 87% and 85% of the Company’s combined sales of tires andtire-related products in 2002, 2003 and 2004, respectively, with the balance comprising sales oftire-related products.

The Company sells its tires to the export, domestic and OE markets. Export sales include salesto customers outside Indonesia and sales to Michelin and Nokian Tyres for export outside Indonesiaunder their respective manufacturing agreements with the Company. Domestic sales comprise sales tocustomers in Indonesia less OE sales, while OE sales comprise sales to vehicle manufacturers whichpurchase Company’s tires for installation on the vehicles they manufacture in Indonesia. See“Business — Markets and Sales.”

Demand for the Company’s radial tires in the export market is driven by a range of factors suchas end-users’ perception of competitive pricing for the quality of the Company’s radial tires, aneffective geographical distribution network in overseas markets and brand awareness; while demandfor the Company’s bias tires in the export market is driven by the durability and retreadability of theCompany’s tires compared to other brands, end-users’ perception of competitive pricing for the qualityof the Company’s bias tires, brand awareness and a strong local distribution network in the respectivecountries where the Company’s bias tires are sold. The Company does not export motorcycle tires.

Demand for the Company’s radial, bias and motorcycle tires in the domestic Indonesianreplacement market is driven by a variety of factors, including the brand awareness and perception ofquality of the tires sold by the Company, the willingness of Indonesian consumers to invest inreplacement tires for their existing cars and motorcycles and the sales of new vehicles in Indonesia.According to data from the APBI (which excludes imported tire sales and non-APBI members’ sales),the Company had a 64% market share for two-wheeled vehicle tires and a 28% market share forfour-wheeled vehicles in the Indonesian replacement tire market in 2004 in terms of sales volumes.In the four-wheeled vehicle market, the Company had a 36% market share for bias tires and a 23%market share for radial tires in the Indonesian replacement market in 2004 in terms of sales volumes.

Demand from the OE market is primarily driven by new passenger car, truck and bus andmotorcycle sales in Indonesia, and to a lesser extent, the Company’s marketing and competitivepricing for its tires to OE customers.

Currently, the Company’s ability to meet demand for its tires is limited by its productioncapacity. See “— Production efficiency.”

Selling prices for tires

In the export market, the Company’s tires are generally priced between the middle to low pricedtire segments in the passenger car replacement tire markets in Europe, Asia and North America, butpricing for specific products may vary depending on the market. The Company’s average export priceshave gradually increased, but may fluctuate in the short-term depending on product mix, local marketconditions, raw material prices, exchange rates and other factors. The Company believes thatconsumers in its export markets base their choices among different brands of tires more on brandawareness than on pricing. The Company believes that its pricing and the growth of its export marketsales are driven by its international distributors’ sales and marketing efforts to strengthen the brandequity of the Company’s radial and bias tires in export markets where the Company is a relatively newentrant.

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The increase in automobile and motorcycle sales in Indonesia in recent years has resulted in thegrowth of the Indonesian replacement tire market. However, domestic tire prices for radial, bias andmotorcycle tires have only experienced moderate increases. In setting prices in the replacementmarket, the Company takes into account its costs, its target gross and operating margins and pricecomparisons with competing manufacturers. The Company’s motorcycle tires sold in Indonesia aregenerally priced in the higher price tire segment for motorcycle tires, while the Company’s radial andbias tires are generally priced in the middle to lower price tire segment for radial and bias tires. TheCompany has historically priced its radial tires at a discount to competing international tirecompanies’ tires, which are priced in the higher price segment for similar tires. Depending upon thetire series and brand, the Company’s replacement market radial tires are competitively priced at adiscount to comparable locally-manufactured tires of competing international tire companies.

For the OE market, the Company has historically priced OE tires at a discount to the tires thatit sells in the replacement market. In setting prices in the OE market, the Company takes into accountits costs and demand from OE customers. The Company plans to increase its focus on OE market aspart of its strategy to grow its replacement market sales. See “ Business — Strategy.”

Product mix and margins

The Company generally achieves higher gross margins per kilogram from the sale of highervalue-added tires such as Ultra-High Performance (“UHP”) and high-performance radial tires, as wellas from the sale of motorcycle tires, compared to standard radial and bias tires. The demand inIndonesia and internationally for higher value-added products such as UHP and high performance tireshas increased in recent years. Consistent with this trend, the Company has gradually shifted its productfocus towards higher value-added products to achieve higher gross margins. The Company plans tocontinue to shift its product focus towards higher-margin products such as UHP and high-performanceradial tires and motorcycle tires.

Cost of Sales

Competitive costs in Indonesia

The Company benefits from its location in Indonesia where it has highly competitive labourcosts, compared to tire manufacturers in other countries. The Company’s labour costs comprisedapproximately 8% of its total manufacturing costs for the year ended December 31, 2004, which theCompany believes is relatively lower than the labour costs of other leading global tire manufacturers.In addition, the vertical integration of its tire cord and synthetic rubber manufacturing assets, whichsupply the Company’s tire manufacturing plants at cost, has also improved its cost controls. As aresult, the Company believes it has significant cost advantages over certain of its competitors outsideIndonesia, including those in Europe and North America. See “Business — Competitive Strengths.”

Fluctuations in raw material prices

The raw materials required to manufacture tires are natural rubber, synthetic rubber, tire cord,carbon black, steel cord and other rubber chemicals. For the year ended December 31, 2004, naturalrubber, synthetic rubber and tire cord accounted for approximately 29%, 21% and 21% of theCompany’s total raw material costs of its tire division, respectively. The prices of all of these rawmaterials are subject to fluctuation.

The prices of natural rubber have been increasing significantly in recent years. The Company’saverage price per tonne of natural rubber increased by 71% between 2002 and 2004. For the year endedDecember 31, 2004, all of the Company’s natural rubber purchases were from Indonesian suppliers,of which the top supplier provided approximately 41% and the top five suppliers providedapproximately 86% of the Company’s total natural rubber purchases.

The Company recently restructured its ownership of its synthetic rubber and tire cordmanufacturing assets in December 2004. See “ — Financial impact of corporate restructuring.” As aresult, the Company manufactures its own tire cord and synthetic rubber to ensure secure supply and

44

enhance cost controls. The price of other raw materials such as carbon black and rubber chemicals,as well as the price of the butadiene, styrene and nylon yarn for the production of synthetic rubber andtire cord are sensitive to oil prices, and therefore, any increase in oil prices has a major negative effecton the Company’s suppliers which in turn affects the Company.

Operating expensesThe Company’s operating expenses are comprised of selling, general and administrative

expenses. The Company’s selling expenses are comprised primarily of freight charges and promotionalexpenses. Freight charges principally comprise the cost of transporting products domestically and thecost of shipping products to export markets and insurance (depending on the type of contract of sale).Promotional expenses principally comprise expenses on promotional activities for its tire andtire-related product sales such as sponsoring domestic automotive activities in the form of tradeexhibits, races and car rally events, advertising expenditure on TV commercials and print advertising,and joint promotions with the Company’s distributors and “TireZone” retailers in the form of cashbonus payments based on sales targets and other incentives. See “Business — Markets and Sales.”

The Company spent Rp.60 billion (US$6.3 million) and Rp.13 billion (US$1.4 million) on freightcharges for the year ended December 31, 2004 and for the three months ended March 31, 2005,respectively. The Company spent Rp.47 billion (US$4.8 million) and Rp.7 billion (US$0.8 million) onpromotional expenses for the year ended December 31, 2004 and for the three months ended March31, 2005, respectively.

The Company’s general and administrative expenses are comprised primarily of labour costs. See“— Cost of Sales — Competitive costs in Indonesia.”

Production efficiencyThe efficiency of the Company’s manufacturing facilities is measured by its utilisation ratios,

calculated as the actual average daily output divided by installed capacity. Due to factors such asnormal machinery maintenance, change in product mix and other down times, the Company believesthat the maximum achievable utilisation ratios for its plants are approximately 90%, except for itsradial tire plant which the Company believes has a maximum achievable utilisation ratio of 85%.Average daily output is calculated as total annual production (in units of tires) divided by the numberof operating days in the relevant period. The Company generally records approximately 350 operatingdays each calendar year, based on plant shutdown days for public holidays and scheduled maintenance.As of March 31, 2005, the Company’s radial tire, bias tire and motorcycle plant average dailyproduction capacity was 30,000, 12,000 and 37,000 units per day, respectively. See “Business —Manufacturing Facilities.”

The following table sets forth the capacity utilisation of the Company’s tire and tire-relatedproduct plants (excluding the Company’s reclaimed and crumbed rubber plant) for the periodsindicated:

Plant and location Product

Capacityutilisation for

the year endedDecember 31,

2004

Capacityutilisation for

the three monthsended March 31,

2005

(%) (%)Tire manufacturing plantsPlant A, Tangerang ................. Automobile bias tires 80 87Plant B, Tangerang ................. Motorcycle tires and

tubes89 84

Plant C, Tangerang ................. Automobile tubes andbladders

70 74

Plant D, Tangerang ................. Radial tires 70 74Plant F, Tangerang.................. Tire cord 65 84Plant G, Merak....................... Synthetic rubber 75 80

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The Company’s ability to meet demand for its tires is limited by its production capacity. Forexample, the Company’s market share in the domestic motorcycle replacement market decreasedslightly in 2003 and 2004. The Company believes that its loss of market share in the domesticmotorcycle replacement market is primarily due to its insufficient production capacity to meet rapidlygrowing demand.

The Company plans to increase the capacity in its existing radial tire plant and the constructionand commissioning of a new radial tire plant and a new motorcycle tire plant.

Financial impact of corporate restructuring

The Company completed a corporate restructuring exercise in December 2004 as reflected in itsconsolidated financial statements for the year ended December 31, 2004. This restructuring mayrender it difficult for investors to compare the Company’s consolidated financial statements for priorperiods. See “Financial and Corporate Restructuring.” The changes in the presentation of theCompany’s results of operations and financial condition include the following:

Deconsolidation of GT Petrochem Industries

Prior to the corporate restructuring, GT Petrochem Industries was 50.01% owned by theCompany. For the year ended December 31, 2004 and prior to the deconsolidation of GT PetrochemIndustries, approximately 40% of the Company’s consolidated net sales was derived from GTPetrochem Industries. Upon completion of the corporate restructuring when the Company’sshareholding in GT Petrochem Industries was diluted as a result of the issue of shares by GTPetrochem Industries to its creditors, the Company held 28.91% of GT Petrochem Industries. As aresult, GT Petrochem Industries has no longer been treated as a subsidiary of the Company and itsresults of operations have not been consolidated into the Company’s results of operations sinceDecember 1, 2004.

Since December 1, 2004, the Company has only recorded its equity in the net income of GTPetrochem Industries. Therefore, the consolidated financial results reported in the auditedconsolidated financial statements of the Company for the year ended December 31, 2004 include 11months of GT Petrochem Industries’ results of operations and the Company’s equity in the financialresults of GT Petrochem Industries for the one-month period from December 1, 2004 to December 31,2004. From December 1, 2004, the Company’s revenue will be reduced as a result of the Companyonly recording its equity in the net income of GT Petrochem Industries instead of consolidating GTPetrochem Industries’ results of operations.

Transfer of tire cord and synthetic rubber manufacturing assets to the Company

While the Company’s results of operations from December 1, 2004 no longer consolidate theresults of operations of GT Petrochem Industries, the reduction in revenue and assets as a result of thedeconsolidation of GT Petrochem Industries has been partly offset by the transfer of the tire cordmanufacturing assets of GT Petrochem Industries and the synthetic rubber manufacturing assets of PTSentra Sintetikajaya to the Company in December 2004.

Prior to December 1, 2004, intra-group sales to the Company primarily comprised of sales of tirecord and synthetic rubber by GT Petrochem Industries and PT Sentra Sintetikajaya, respectively, to theCompany, as well as the sales of nylon and steel wire from a subsidiary of GT Petrochem Industries.As a result of the transfer of the respective tire cord and synthetic rubber manufacturing assets of GTPetrochem Industries and PT Sentra Sintetikajaya to the Company, such assets have been integratedas divisions of the Company since the completion of the Company’s corporate restructuring inDecember 2004. Since December 2004, tire cord and synthetic rubber has been manufactured by theCompany for its own use and for sale to external parties, including to GT Petrochem Industries andPT Sentra Sintetikajaya to meet ongoing obligations to their respective customers.

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Prior to the transfer of the tire cord and synthetic rubber manufacturing assets from GTPetrochem Industries and PT Sentra Sintetikajaya to the Company, sales by GT Petrochem Industriesand PT Sentra Sintetikajaya to the Company were made on an arm’s-length basis. After the tire cordand synthetic rubber manufacturing assets were transferred to, and became divisions within, theCompany, the Company continued to purchase, on arm’s-length terms, unsold synthetic rubberinventory carried by PT Sentra Sintetikajaya through February 2005.

In addition, as a result of certain ongoing contracts between GT Petrochem Industries and PTSentra Sintetikajaya and their respective customers, the Company has between December 2004 andApril 2005 sold tire cord and synthetic rubber to GT Petrochem Industries and PT Sentra Sintetikajaya,respectively, in order for GT Petrochem Industries and PT Sentra Sintetikajaya to meet their respectivecommitments to third party customers. Since February 2005, the Company has sold its tire cord andsynthetic rubber to external parties through its subsidiary, PT Prima Sentra Megah and uponcompletion of the contracts between GT Petrochem Industries and PT Sentra Sintetikajaya and theirrespective customers, all of the Company’s tire cord and synthetic rubber will be sold through PTPrima Sentra Megah. See “Business — Associated Companies and Subsidiaries.”

The Company’s audited consolidated financial statements report certain financial data based onthe Company’s various operating segments. Upon completion of the corporate restructuring inDecember 2004 and divestment of certain non-core businesses in 2005, the Company’s remainingsignificant operating segments are tire, tire cord and synthetic rubber.

Disposals

In December 2004, as part of the Company’s corporate restructuring and the disposal of PTLanggeng Bajapratama, the Company’s entire shareholding in PT Langgeng Bajapratama was acquiredby PT Gajah Tunggal Prakarsa, formerly an affiliated company of the Company, for a totalconsideration of Rp.8 billion. In February 2005, PT Gema Arta Persada, an unrelated party, acquiredthe Company’s entire shareholding in PT Meshindo Alloy Wheel Corporation for a total considerationof Rp.7 billion. As a result of such disposals, the results of operations of these companies are no longerconsolidated and no longer have an impact on the Company’s future consolidated results of operations.

Balance sheet changes

Upon completion of the corporate restructuring and the sale of PT Langgeng Bajapratama (whichhad debts totalling Rp.116 billion (US$12.3 million) as of September 30, 2004) in December 2004, theCompany’s total consolidated debt to financial institutions was reduced from Rp.5,896 billion as ofDecember 31, 2003 to Rp.3,674 billion (US$387.6 million) as of December 31, 2004 and the totalconsolidated assets of the Company were reduced from Rp.12,173 billion as of December 31, 2003 toRp.6,341 billion (US$668.9 million) as at December 31, 2004.

In April 2004, Garibaldi Venture Fund acquired the accounts receivables of TSI from PTFilamendo Sakti (a subsidiary of GT Petrochem Industries and a supplier of nylon filament to theCompany’s tire cord division) and subsequently transferred such accounts receivable to the Company.The Company had outstanding accounts receivables from PT Filamendo Sakti totalling Rp.700 billion(US$73.9 million) as of December 31, 2004, of which Rp.667 billion (US$70.4 million) representedthe transferred accounts receivable described above. The Company had total outstanding accountsreceivables from PT Filamendo Sakti totalling Rp.707 billion (US$74.6 million) as of March 31, 2005,of which Rp.667 billion (US$70.4 million) represented the transferred account receivable describedabove. PT Filamendo Sakti is currently in default of certain of its financial indebtedness. However,the Company believes that such default may be resolved by way of a consensual settlement with thefinancial institution creditors of PT Filamendo and the Company is confident that its accountsreceivable from PT Filamendo Sakti will be settled in full by way of a corporate restructuring, eitherby way of an asset swap or by the issue of equity, of PT Filamendo Sakti. See “Risk Factors — RisksRelating to the Company and its Business — PT Filamendo Sakti may not succeed in settling orrestructuring its debts, resulting in the Company being unable to recover its accounts receivable fromPT Filamendo Sakti,” “Financial and Corporate Restructuring,” “Business — Related Party

47

Transactions” and Notes 9(a) and (b) of the consolidated financial statements of the Company for theyears ended December 31, 2002, 2003, and 2004 and Notes 8(a) and 8(b) to the consolidated financialstatements for the three month ended March 31, 2004 and 2005 included elsewhere in this OfferingCircular.

Upon completion of the Company’s debt restructuring and corporate restructuring described in“Financial and Corporate Restructuring”, the Company’s FRNs were the only outstanding debts of theCompany on a consolidated basis (excluding premium on debt restructuring), with an outstandingprincipal amount of US$336.5 million as of December 31, 2004. The Company had FRNs with anoutstanding principal amount of US$326.8 million (excluding premium on debt restructuring) as ofMarch 31, 2005.

Critical Accounting Policies

The audited consolidated financial statements of the Company contained elsewhere in thisOffering Circular have been prepared in accordance with Indonesian GAAP, which differ in certainmaterial respects from U.S. GAAP. For a summary of the significant differences between IndonesianGAAP and U.S. GAAP that are relevant to the Company, see “Certain Principal Differences betweenIndonesian GAAP and U.S. GAAP.”

When preparing its consolidated financial statements in accordance with Indonesian GAAP, theCompany is required to make estimates and judgments that affect the reported amounts of its assets,liabilities, sales revenues and costs. It is also required to make disclosures of contingent assets andliabilities. On an on-going basis, the Company evaluates its estimates, including those related toallowances for doubtful accounts and impairment of assets. The Company bases its estimates onhistorical experience and on various other assumptions that it believes to be reasonable under thecircumstances, the results of which form the basis for making judgments about the carrying value ofassets and liabilities that are not readily apparent from other sources. Actual results may differ fromthese estimates under different assumptions or conditions.

The Company believes the following critical accounting policies used in the preparation of itsfinancial statements are significantly affected by its judgment and estimates. For other significantaccounting policies, see Note 2 of the Company’s consolidated financial statements includedelsewhere in this Offering Circular.

Revenue recognition

The Company’s domestic and export sales are recognised when the goods are delivered and titlehas passed to customers. In the case of domestic sales (including OE sales), goods are generallydeemed to be delivered and titles passed when the goods leave the Company’s warehouse. In the caseof export sales, title generally passes when goods reach the destination port and when the necessarytransfer documentation is completed (in the case of CIF, or cost, insurance and freight sales) or whenthe goods are delivered on board a vessel for shipment (in the case of FOB, or free-on-board sales).Expenses are recognised when incurred.

Allowance for doubtful accounts

Allowance for doubtful accounts is provided based on a review of the status of the individualreceivable accounts at the end of the year.

Depreciation of property, plant and equipment

The Company’s depreciation expenses for its tire and tire-related product division assets wereRp.224 billion, Rp.227 billion and Rp.238 billion (US$25.1 million) in 2002, 2003 and 2004,respectively.

Property, plant and equipment, except for certain revalued assets, are stated at cost lessaccumulated depreciation.

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Depreciation, except land, is computed using the straight-line method based on the estimateduseful lives of the assets, as determined by the Company’s management. Land is stated at cost and isnot depreciated. Unused property, plant and equipment is presented as other assets and is stated at thelower of carrying value or net realisable value.

When the carrying amount of an asset exceeds its estimated recoverable amount, the asset iswritten down to its recoverable amount, as estimated by the Company’s management, which isdetermined as the higher of net selling price or value in use.

The impairment of assets is recognised as loss on the impairment of assets and charged to currentoperations. If an impairment is reversed, the carrying amount of the asset is increased to itsrecoverable amount, subject to the limit that the increased carrying amount should not exceed thecarrying amount that would have been determined had no impairment loss been recognised for theasset in prior years. The reversal of an impairment loss is recognised as income in the current year.

The cost of maintenance and repairs is charged to operations as incurred; expenditures whichextend the useful life of an asset or results in increased future economic benefits such as increasedcapacity and improvement in the quality of output or standard of performance are capitalised. Whenassets are retired or otherwise disposed of, their carrying values and the related accumulateddepreciation are removed from the accounts and any resulting gain or loss is reflected in currentoperations.

Construction in progress is stated at cost which includes borrowing costs during construction ondebts incurred to finance the construction. Construction in progress is transferred to the respectiveproperty, plant and equipment account when completed and ready for use.

Results of Ongoing Operations

The following section discusses the results of the ongoing operations of the Company for 2002compared against 2003, 2003 compared against 2004 and for the three months ended March 31, 2004compared against the results of operations for the three months ended March 31, 2005. The followingselected segment financial information has been prepared by aggregating the results of operations forthe tire, tire cord and synthetic rubber segments presented in the Company’s audited consolidatedfinancial statements for the years ended December 31, 2002, 2003 and 2004 and the unauditedconsolidated financial statements for the three months ended March 31, 2004 and 2005 each asincluded elsewhere in this Offering Circular.

The Company has provided the following comparative discussion because it believes that suchsegment information of ongoing operations is important to an investor’s understanding of theCompany’s future presentation of its results of operations following the deconsolidation of a materialsubsidiary, GT Petrochem Industries, and the transfer of the tire cord and synthetic rubbermanufacturing assets to the Company in December 2004, as well as ensuring the comparabilitybetween such periods. However, the selected segment information included here is not necessarilyindicative of the financial condition or operating results that would have been achieved had theDecember 2004 corporate restructuring been consummated prior to such periods, nor is it necessarilyindicative of future financial condition or operating results. In addition, while this segment financialinformation has been provided in order to give a more meaningful discussion of the periods presented,this presentation is not made in accordance with Indonesian GAAP.

A discussion of statement of income segment line items below income from operations (such asinterest income, interest expense and gain (loss) on foreign exchange) and balance sheet line items forsuch periods has not been provided by the Company because the allocation of such items to differentsegments is not possible.

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The following table sets forth the Company’s combined statements of income of ongoingoperations (comprising the aggregate of selected segment statements of income information for theCompany’s tire, tire cord and synthetic rubber segments presented in the notes to the Company’saudited and unaudited consolidated financial statements) and selected line items from the actualunaudited consolidated historical statements of income for the periods indicated.


2002 2003 2004 2004 2004 2005 2005 2005 2005

(Unaudited, aggregatesegment information)

(Unaudited, aggregatesegment information)

(Unauditedhistorical)

(Rp.billion)

(Rp.billion)

(Rp.billion)

(US$million)

(Rp.billion)

(Rp.billion)

(US$million)

(Rp.billion)

(US$million)

External sales(1) ............... 3,247 3,440 3,877 409.0 917 1,124 118.6 1,158 122.2

Cost of sales(1)................. 2,446 2,726 3,124 329.5 715 933 98.4 967 102.0

Gross profit .................... 801 713 753 79.4 202 191 20.2 192 20.2

Operating expenses .......... 375 465 334 35.2 90 64 6.7 67 7.1

Income from operations ... 426 248 419 44.2 113 128 13.5 124 13.1

Notes:

(1) Reflecting sales to and purchases from external parties only, eliminating inter-segment transfers, sales and purchases.

The unaudited consolidated financial statements of the Company for the three months endedMarch 31, 2005 are the first unaudited consolidated financial statements which present the results ofoperations and financial condition of the Company after completion of its corporate restructuring inDecember 2004. However, the Company has provided its selected segment statements of income ofongoing operations for the three months ending March 31, 2005 in this section in order to ensure thatthese are comparable to prior periods where selected segment statements of income of ongoingoperations are presented for the reasons given above. The following comparison between the selectedsegment selected statements of income of ongoing operations and selected line items from theunaudited historical statements of income for the three months ended March 31, 2005 are provided togive investors an understanding of the difference between the two presentations.

The difference between the unaudited segment external sales of Rp.1,124 billion (US$118.6million) and the unaudited historical net sales of Rp.1,158 billion (US$122.2 million) is primarily dueto the sales from PT Meshindo Alloy Wheel Corporation during the period prior to its disposal inFebruary 2005 and to the margins attributable to the sale of tire cord and synthetic rubber by theCompany to its wholly-owned subsidiary, PT Prima Sentra Megah. The difference between theunaudited segment cost of sales of Rp.933 billion (US$98.4 million) and the unaudited historical costof sales of Rp.967 billion (US$102.0 million) is primarily due to the cost of sales of PT MeshindoAlloy Wheel Corporation during the period prior to its disposal. The difference between the unauditedsegment operating expenses of Rp.64 billion (US$6.7 million) and the unaudited historical operatingexpenses of Rp.67 billion (US$7.1 million) is primarily due to the operating expenses of PT MeshindoAlloy Wheel Corporation and PT Prima Sentra Megah. The difference between the unaudited segmentincome from operations of Rp.128 billion (US$13.5 million) and the unaudited historical income fromoperations of Rp.124 billion (US$13.1 million) is primarily due to the consolidation of the loss fromoperations of PT Meshindo Alloy Wheel Corporation, partly offset by the income from operations ofPT Prima Sentra Megah.

See “Risk Factors — Risks Relating to the Company and its Business — Due to the complexnature of the Company’s corporate restructuring in December 2004 it has used only limited financialinformation from its various business segments in preparing the comparative financial informationprovided in this Offering Circular, which may result in the financial information herein presenting anincomplete or inaccurate presentation of the Company’s financial position.”

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Comparison of Three Months ended March 31, 2004 (unaudited, aggregate segment information)and 2005 (unaudited, aggregate segment information)

External sales. External sales, comprising sales to external parties by the Company and itssubsidiaries, increased by 23% from Rp.917 billion in the three months ended March 31, 2004 toRp.1,124 billion (US$118.6 million) for the three months ended March 31, 2005, primarily due to a12% increase in the volume of bias tires sold, a 10% increase in the volume of radial tires sold anda 48% increase in the volume of tire cord sold offset by lower synthetic rubber sales. See “ —Overview — Financial impact of corporate restructuring — Transfer of tire cord and synthetic rubbermanufacturing assets to the Company.”

Cost of sales. Cost of sales, comprising raw materials used, direct labour, manufacturingexpenses and changes in works-in-progress and finished goods, increased by 30% from Rp.715 billionfor the three months ended March 31, 2004 to Rp.933 billion (US$98.4 million) for the three monthsended March 31, 2005, primarily due to increases in raw material prices, including a 13% increase inthe costs of carbon black, a 64% increase in the costs of butadiene and a 34% increase in the costsof styrene (all raw materials used in the manufacture of synthetic rubber) and a 34% increase in thecosts of nylon yarn (a raw material used in the manufacture of tire cord).

Operating expenses. Operating expenses, comprising selling and general and administrativeexpenses, decreased by 29% from Rp.90 billion for the three months ended March 31, 2004 to Rp.64billion (US$6.7 million) for the three months ended March 31, 2005, primarily due to a 32% decreasein selling, promotional and advertising expenses for the three months ended March 31, 2005 resultingfrom demand for the Company’s products exceeding supply and a 25% decrease in general andadministrative expenses as a result of the discontinuation of management, administrative and technicalservices. See Note 38(c) of the unaudited consolidated financial statements of the Company includedelsewhere in this Offering Circular.

Income from operations. Income from operations increased by 13% from Rp.113 billion in thethree months ended March 31, 2004 to Rp.128 billion (US$13.5 million) in the three months endedMarch 31, 2005, primarily due to a decrease in selling and general administrative expenses.

Comparison of Years Ended December 31, 2003 (unaudited, aggregate segment information) and2004 (unaudited, aggregate segment information)

External sales. External sales increased by 13% from Rp.3,440 billion in 2003 to Rp.3,877billion (US$409.0 million) in 2004, primarily due to a 14% increase in the volumes of tires sold,particularly, the volume of bias tires sold, a 19% increase in the volume of synthetic rubber sold anda 39% increase in average selling prices for synthetic rubber.

Cost of sales. Cost of sales increased by 15% from Rp.2,726 billion in 2003 to Rp.3,124 billion(US$329.5 million) in 2004, primarily due to increases in raw material costs such as a 28% increasein costs of natural rubber, a 24% increase in the cost of butadiene (a raw material for themanufacturing of synthetic rubber) and a 34% increase in the cost of styrene (also a raw material forthe manufacturing of synthetic rubber).

Operating expenses. Operating expenses decreased by 28% from Rp.465 billion in 2003 toRp.334 billion (US$35.2 million) in 2004, primarily due to significant promotional activities in theform of distributor and retailer incentives in 2003 which were scaled back by Rp.83 billion whendemand for the Company’s tires exceeded its production capacity, as well as a decrease in managementand professional fees by Rp.40 billion.

Income from operations. Income from operations increased by 69% from Rp.248 billion in 2003to Rp.419 billion (US$44.2 million) in 2004, primarily due to decreases in selling and generaladministrative expenses.

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Comparison of Years Ended December 31, 2002 (unaudited, aggregate segment information) and2003 (unaudited, aggregate segment information)

External sales. External sales increased by 6% from Rp.3,247 billion in 2002 to Rp.3,440 billionin 2003, primarily due to an 11% increase in volume of radial tires sold and a 10% increase in thevolume of synthetic rubber sold, as well as due to a 19% increase in the Company’s average sellingprice for synthetic rubber.

Cost of sales. Cost of sales increased by 11% from Rp.2,446 billion in 2002 to Rp.2,726 billionin 2003, primarily due to increases in raw material prices, including a 34% increase in the cost ofnatural rubber prices, a 42% increase in the cost of butadiene and a 15% increase in the cost of styrene,as well as a 10% increase in the cost of tire cord.

Operating expenses. Operating expenses increased by 24% from Rp.375 billion in 2002 toRp.465 billion in 2003, primarily due to a 25% increase in selling, promotional and advertisingactivities in 2003, especially in relationship incentives offered to domestic motorcycle and radialdistributors. The Company also experienced a 100% increase in its bad debt expenses totalling toRp.36 billion..

Income from operations. Income from operations decreased by 42% from Rp.426 billion in 2002to Rp.248 billion in 2003, primarily due to increases in raw material costs and other operatingexpenses such as promotional expenses in 2003.

Liquidity and Capital Resources

Funding and capital expendituresThe Company’s operations, repayment of principal and interest, capital expenditures and

working capital requirements in 2002, 2003 and 2004 have primarily been funded from cash generatedfrom operations, existing cash and temporary investments. The Company has paid an aggregate ofUS$89.5 million in principal and interest payments on its outstanding FRNs from their respectiveissue dates to June 18, 2005. The Company had aggregate capital expenditures of Rp.306 billiontowards its tire, tire cord and synthetic rubber divisions from January 1, 2002 to December 31, 2004.

The Company anticipates that capital expenditure and repayment of outstanding debts will be themost significant use of its funds for the next several years. The Company has budgeted expansionarycapital expenditures of approximately US$180 million for the next three years, relating primarily tocapacity expansion in its existing radial tire plant and the construction and commissioning of a newradial tire plant (approximately US$110 million) and the construction and commissioning of a newmotorcycle tire plant (approximately US$70 million).

The Company plans to expand its production capacity from approximately 30,000 radial tires and35,000 motorcycle tires per day at the end of 2004 to approximately 48,000 radial tires and 105,000motorcycle tires per day by the end of 2008. In addition to the budgeted expenditures described above,the Company may make additional capital expenditures and investments during these periodsconsistent with its business strategy.

The Company’s ability to maintain and grow its revenues, net income and cash flows dependsupon capital spending. The Company’s capital expenditure plans are subject to a number of risks,contingencies and other factors, such as tire prices, market demand, raw material prices and exchangerates, some of which are beyond the Company’s control. The Company adjusts its capital expenditureand investment budget periodically, based on factors deemed relevant by the Company. Therefore theCompany’s actual future capital expenditures and investments are likely to be different from itscurrent planned amounts, and such differences may be significant.

The Company believes that its future cash flows from operations, the net proceeds of the issuanceof the Bonds and the Company’s borrowing capacity will be sufficient to fund its planned capitalexpenditures and investments, debt repayments and working capital requirements. However, theCompany’s ability to operate its business, to make payments on and to refinance its indebtedness,including the FRNs and the Bonds, to comply with the financial covenants of such FRNs and Bondsand to fund planned capital expenditures will depend on its ability to generate sufficient cash in the

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future, which is subject to many factors beyond the control of the Company. See “Risk Factors —Risks Relating to the Company and its Business — The Company has a significant level of debt, andits ability to operate its business could be adversely affected if it is unable to service its debt, or ifit breaches the covenants of its FRNs or the Bonds and such breach is not waived.”

Indebtedness

In connection with its debt restructuring and corporate restructuring, the Company issued theSeries A FRNs in November 2002 (which are due in 2008), the Series B FRNs in April 2004 (due in2008) and the Series C FRNs in December 2004 (due in 2009). The aggregate principal amount of thethree series of FRNs was US$336.5 million (excluding premium on debt restructuring) as of December31, 2004. The aggregate principal amount of the three series of FRNs was US$326.8 million(excluding premium on debt restructuring) as of March 31, 2005. The Series A FRNs and Series BFRNs bear interest at a rate equal to 2% over the Singapore Interbank Offered Rate (“SIBOR”) withan annual 25-basis point step-up (capped at a 3% margin over SIBOR). The Series C FRNs bearinterest at a rate equal to 1% over SIBOR.

Under the FRN Purchase and Consent Solicitation, the Company plans to use part of the proceedsof the issue of the Bonds to purchase a portion of the Series A FRNs and all of the Series B FRNs fromselected holders thereof. Upon completion of the FRN Purchase, it is expected that only US$70.7million and US$25.8 million in aggregate principal amount of Series A FRNs and Series C FRNs,respectively, will remain outstanding. See “Capitalisation” and “Concurrent FRN Purchase andConsent Solicitation.”

Market Risks

Commodity price risks

The Company is exposed to fluctuations in the cost of its raw materials including the prices fornatural rubber as well as other raw materials such as chemicals which are driven by oil prices anddetermined by reference to international market prices. Natural rubber and oil prices are volatile andthis volatility has a significant effect on the Company’s cost of raw materials. The Company does nothedge market risk resulting from fluctuations in its raw materials prices.

Exchange rate risksThe Company’s exposure to financial market risks stems primarily from fluctuations in foreign

exchange rates.

The Company maintains its accounting records and prepares its financial statements inIndonesian Rupiah. The Company’s export sales (which include sales to Michelin and Nokian Tyresunder their respective manufacturing agreements) are denominated in foreign currency, primarily U.S.dollars. For the past three years, an average of approximately 55% of the Company’s revenues weredenominated in foreign currency while approximately 59% of its total cost and expenses of theCompany’s tire and tire-related product divisions (excluding debt servicing under its FRNs) weredenominated in foreign currency. In addition, the Company’s interest payments and principalrepayments due on its outstanding FRNs are, and the interest and principal repayments on the Bonds,when issued, will be, denominated in U.S. dollars. As a result, a rapid weakening of the Rupiah againstthe U.S. dollar and other currencies may have a negative impact on the Company’s revenue andprofitability. The Company’s foreign currency denominated revenue, to a limited extent, mitigates theCompany’s risks to cash flows denominated in foreign currency. The Company does not currentlyhedge against these risks.

Interest rate risksAn increase in interest rates may also have an impact on the Company’s interest expenses, as the

Company’s outstanding FRNs all bear floating interest rates. The Company does not hedge againstinterest rate risks. The Company has experienced and can be expected to experience gains and losseson obligations or interest expense denominated in foreign currencies.

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BUSINESS

OverviewThe Company owns and operates the largest integrated tire manufacturing facilities in South-East

Asia. The Company’s shares have been listed on the JSX and the SSX since May 1990, and had amarket capitalisation of Rp.2,408 billion (US$254 million) as of July 13, 2005.

Since the Company’s establishment in 1951, the Company’s principal businesses have expandedto include the development, manufacture and sale of radial tires, bias tires and motorcycle tires, innertubes, flaps and rim tapes. The Company also manufactures and sells tire cord and synthetic rubber(specifically styrene butadeine rubber, or “SBR”), which are key components used in the manufactureof tires.

The Company derives the majority of its revenue from the sales of tires and tire-related productsin Indonesia and overseas. The Company’s tire division recorded total sales (comprising sales ofradial, bias and motorcycle tires, as well as tire tubes, flaps, rim tape, O-rings, valves and reclaimedrubber) of Rp.3,291 billion (US$347.1 million) in 2004, and total sales of Rp.943 billion (US$99.4million) for the three months ended March 31, 2005. Tire division sales comprised approximately87%, 87%, 85% and 84% of the Company’s combined external sales of tires and tire-related productsin 2002, 2003, 2004 and the three months ended March 31, 2005, respectively.

The Company also derives revenue from the sales of tire-related products, comprising tire cordand synthetic rubber sales. The Company, through its tire-related product divisions, also manufacturestire cord and synthetic rubber for the Company’s tire production as part of its strategy of verticallyintegrating its production facilities to enhance cost controls, and also sells tire cord and syntheticrubber to external parties. The Company recorded total tire-related product sales of Rp.586 billion(US$61.8 million) for the year ended December 31, 2004, and total tire-related product sales ofRp.182 billion (US$19.1 million) for the three months ended March 31, 2005.

The Company was ranked the 21st largest tire producer in the world in 2004 (based on 2003sales) according to the European Rubber Journal, a Europe-based industry magazine. According todata from the APBI (which excludes imported tire sales and non-APBI members’ sales), the Companyhad a 64% market share for two-wheeled vehicle tires and a 28% market share for four-wheeledvehicles in the Indonesian replacement tire market in 2004 in terms of sales volumes. In thefour-wheeled vehicle market, the Company had a 36% market share for bias tires and a 23% marketshare for radial tires in the Indonesian replacement market in 2004 in terms of sales volumes. In 2004,the Company manufactured over 21.5 million units of tires.

As of December 31, 2004, the Company had total consolidated assets of Rp.6,341 billion(US$668.9 million). As of March 31, 2005, the Company had total consolidated assets of Rp.6,474billion (US$683.0 million).

HistoryThe Company was established in 1951 as a bicycle tire manufacturer. The founders of the

Company were the Nursalim family in Indonesia.

The Company expanded its production capacity and diversified initially into the manufacture ofmotorcycle tires and tubes and eventually into the manufacture of passenger and commercial vehicletires. The Company started producing motorcycle tires in 1973. It began manufacturing bias tires forpassenger and commercial vehicles in 1981. In 1993, the Company started producing and selling radialtires for passenger cars and light trucks.

The Company was listed on the JSX and the SSX in May 1990.

In 1991, the Company acquired a controlling interest in GT Petrochem Industries, the shares ofwhich are listed on the JSX and the SSX, as part of its strategy to lower costs by vertically integratingits operations. GT Petrochem Industries was at the time a manufacturer of tire cord and nylon filament.GT Petrochem Industries later expanded its operations to include synthetic rubber, ethylene glycol,polyester filament and polyester staple fibre in the late 1990s.

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The Company acquired 51% of PT Langgeng Bajapratama, a steel and bead wire producer, in1995 and subsequently acquired 51% of PT Meshindo Alloy Wheel Corporation, the second largestmanufacturer of aluminium alloy wheels in Indonesia, in 1996.

In 1998, the Company experienced significant financial difficulties as a result of the Asianfinancial crisis. Between 2002 and 2004, it restructured its debts on a consensual basis with itscreditors and implemented a corporate restructuring. Upon completion of the corporate restructuringin December 2004, the Company, as part of its vertical integration strategy, acquired the tire cord andsynthetic rubber manufacturing assets of GT Petrochem Industries, diluted its majority stake in GTPetrochem Industries, which owns petrochemical businesses not core to the Company’s tire businessand disposed of its entire holding in PT Langgeng Bajapratama to PT Gajah Tunggal Prakarsa,formerly an affiliated company of the Company. See “Financial and Corporate Restructuring.”

In February 2005, PT Gema Arta Persada, an unrelated party, acquired the Company’s entireshareholding in PT Meshindo Alloy Wheel Corporation.

Competitive Strengths

The Company believes its key business strengths are as follows:

Leading domestic market position. According to the APBI data (which excludes imported tiresales and non-APBI members’ sales), the Company had a 64% market share for two-wheeled vehicletires and 28% market share for four-wheeled vehicles tires in the Indonesian replacement tire marketin 2004 in terms of sales volumes. In the four-wheeled vehicle market, the Company had a 36% marketshare for bias tires and a 23% market share for radial tires in the Indonesian replacement market in2004 in terms of sales volumes based on APBI data. Furthermore, the Company has an establisheddomestic distribution network. The Company’s distributors have been distributing its tires for anaverage of 20 years. The Company’s various brands are household names and hold strong brand equity,allowing the Company to command a price premium in the domestic market for motorcycle and selectbias tires.

Cost leadership. The Company benefits from its location in Indonesia where it has highlycompetitive labour costs and land costs, compared to tire manufacturers in other countries. Due to itsrelatively large size, the Company also achieves production cost economies in terms of pricingleverage for its raw materials in Indonesia. For example, the Company believes it was the singlelargest consumer of carbon black (a raw material used in the manufacture of tires) in Indonesia in2004, which afforded it significant pricing leverage.

Relationships with leading tire companies. The Company’s high quality control standards andcost leadership has enabled the Company to secure long-term relationships with leading tirecompanies. The Company is a contract manufacturer for leading tire companies which has helpedsecure long-term demand for the Company’s manufacturing capacity. The Company has in the pastmanufactured tires for leading tire companies such as Pirelli and Yokohama. Since 2001, the Companyhas had a manufacturing agreement with Nokian Tyres, a leading tire manufacturer based in Finland,pursuant to which the Company has agreed to manufacture tires for export. In May 2004, the Companyentered into business co-operation agreements with Michelin, one of the leading tire manufacturers inthe world and a shareholder of the Company. Under such agreements, the Company has agreed to actas a contract manufacturer for certain of Michelin’s associated brand tires, excluding “Michelin”-branded tires, for markets outside Indonesia. Under the sales and distribution agreement, the Companyand Michelin have developed the “TireZone” retail store concept in Indonesia, through which theCompany will distribute Michelin, BFGoodrich and the Company’s passenger car and light truckradial tires to the Indonesian replacement market. See “— Strategic Alliance with Michelin.” TheCompany has co-operated with IRC, a leading motorcycle tire company based in Japan, to manufactureand sell “IRC” branded motorcycle tires since 1973. Some of the tire companies with whom theCompany has relationships have provided technical advice and support to help improve the Company’sproduction efficiency and quality controls.

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Vertically integrated production. The Company has vertically integrated its tire cord andsynthetic rubber manufacturing assets to secure the supply of such raw materials for its tiremanufacturing plants. Around half of the Company’s tire cord and synthetic rubber production isconsumed internally by the Company’s tire production, with the excess being sold to external parties.The Company’s control of its synthetic rubber plant (which it believes is the only synthetic rubbermanufacturing plant in Indonesia) and tire cord plant (which it believes is one of only two tire cordmanufacturing plants in Indonesia) allows the Company to secure priority of supply. The Company istherefore able to manage any shortages in supply of synthetic rubber and tire cord for its tireproduction. The vertical integration of its tire cord and synthetic rubber manufacturing assets, whichsupply the Company’s tire manufacturing plants at cost, has also improved its cost controls.

Quality products. The Company is recognised as a leading manufacturer of quality products. TheCompany’s “IRC” brand tires are regarded as a premium product in the domestic motorcycle tiremarket. The Company’s bias tires are also recognised for their quality and durability in the domesticand export markets. The Company has continually improved its product quality and in 1995, theCompany received the International Organisation for Standardisation (ISO) 9002 international qualitycertification for its radial tire production quality control system. By 1997, all of the Company’s plantswere ISO 9002 certified. In 2002, all of the Company’s tire plants obtained ISO 9001/QS-9000certification for their quality design, development and production systems. The Company hascompleted the certification process for ISO/Technical Specification (TS) 16949, an automotiveindustry-specific quality certification which represents an upgrade from the QS-9000 certificationlevel. The Company has also received product certifications in various countries in which it sells tires,including the ECE-Mark from the European Community, the TUV CERT from Germany, the qualitytesting certification from the U.S. Department of Transportation and various other certifications fromthe relevant authorities in other countries such as the Bureau of Product Standards (“BPS”) in thePhilippines, The National Institute of Metrology, Standardisation and Industrial Quality, Ministry ofDevelopment, Industry and Foreign Trade (Inmetro) of Brazil, The Public Authority for Industry(“PAI”) in Kuwait, Saudi Arabian Standards Organisation (“SASO”) in Saudi Arabia and The BureauVeritas Quality International (“BVQI”) international certification. The Company generally guaranteesits tires from all defects caused by workmanship for a period of three years from the date ofproduction. The Company estimates that its product warranty related expenses over the past two yearshave been less than 1% of total tire and tire-related product sales per year. The Company has notexperienced any product recalls in its operating history.

Strategy

The principal components of the Company’s strategy are as follows:

Diversifying and increasing focus on higher margin products. The Company believes thathigh-performance tires have experienced higher growth due to the market shift towards performanceautomobiles, and achieve higher margins because target customers tend to be less price sensitive. TheCompany achieves higher margins from its radial tires and motorcycle tires compared to its other tires,due to its cost leadership in manufacturing such tires. The Company plans to increase its radial tiremarket share for higher margin products such as high-performance and UHP tires in Indonesia andoverseas through its various marketing and distribution channels, as well as growing its market sharefor motorcycle tires in Indonesia by increasing its production of motorcycle tires to meet the growthin demand for such tires.

Increasing production capacity through improvements in production efficiency and newexpansion. Demand in recent years for the Company’s tires has exceeded the Company’s productioncapacity. For example, the Company has a backlog of orders from the export market for its highermargin radial tires. In addition, despite its success in refocusing and increasing its production capacityin its motorcycle tire manufacturing plant and increasing its sales of motorcycle tires, the Company’sshare of domestic replacement market has been decreasing because the significant growth in domesticdemand for motorcycle tires continues to outpace the Company’s ability to meet such demand. In theshort term, the Company will continue to purchase new equipment to increase capacity and plans tofurther increase the efficiency of its production through better production planning and scheduling,

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de-bottlenecking the production process, improving labour productivity, enhancing raw materialutilisation, minimising downtime arising from machine maintenance and applying product lifecycleplanning to rationalise its product lines. In the medium term, the Company also plans to construct newplants that will increase its production capacity of higher margin products. Specifically, the Companyplans to expand its production capacity from approximately 30,000 radial tires and 35,000 motorcycletires per day at the end of 2004 to approximately 48,000 radial tires and 105,000 motorcycle tires perday by the end of 2008.

Strengthening brand equity. Brand equity comprises brand awareness and perceived quality. TheCompany believes that its existing brand equity contributes to premium pricing and volume demandsfor certain of its tires. While the Company enjoys premium pricing for certain of its products, theCompany plans to further strengthen brand awareness of its products by continuing to provideincentives in the form of technical and marketing support to its distributors. The Company also plansto further strengthen brand equity of its brands and products through other means, such as expandingits network of “TireZone” retail stores in Indonesia, sponsoring domestic automotive activities suchas trade exhibits, races and car rally events, and increasing advertising expenditure on TVcommercials and print advertising.

Enhancing its domestic distribution though the establishment of new distribution channels. Inaddition to continuing to manage its long-term relationships with its various domestic distributors, theCompany plans to establish and focus on other distribution channels such as “TireZone” retail storesand the OE market to distribute its tires. The Company currently has 15 “TireZone” outlets in eightmajor cities in Indonesia, and plans to open up to 60 outlets by the end of 2010. The establishmentof “TireZone” retail concept stores together with Michelin will enable the Company to distribute itsreplacement radial tires to a wider retail market. In relation to the OE market, the Company believesthat replacement market sales are correlated with OE market share as consumers generally replacetires on their automobiles and motorcycles with the same brand of tires as the original equipmentsupplied by the automobile or motorcycle manufacturer, resulting in a multiplier effect as its OE salesto vehicle manufacturers evolve into replacement sales to end-users who have purchased vehiclesoriginally equipped with the Company’s tires. The Company plans to strategically expand its tire sales(especially its motorcycle tire sales) to the lower margin OE market in the short term in order to beable to capture higher margin replacement market share in the future when consumers replace the tireson their vehicles.

Continuing to exercise prudent financial measures. The Company has strong cash flows as aresult of its sales volumes, cost control and prudent working capital management resulting in surpluscash. In addition to financing its operations from its cash flows, the Company has been fulfilling itsinterest and principal repayment obligations under its Series A FRNs, Series B FRNs and Series CFRNs since their respective issues, repaying an aggregate of US$89.5 million to its FRN holders toJune 18, 2005. The Company plans to continue to exercise such prudent financial measures to executeits strategic initiatives, including implementing its capital expenditure plans, funding its workingcapital and repaying debt.

Major ProductsThe Company primarily manufactures and sells a variety of tire and tire-related products. The

Company manufactures and sells the following types of tires:

● passenger car radial tires (comprising standard, high performance, UHP and winter radialtires for use on passenger cars);

● light truck radial tires (comprising four-wheel drive sport utility vehicles, commercial vanand winter radial tires);

● bias tires (comprising ultra light truck, light truck, truck and bus, off-road, industrial andagricultural tires, and bias tire tubes and flaps); and

● motorcycle tires (comprising street/highway, motorcross and scooter tires and tubes, andrim tape for motorcycles).

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The Company currently produces 17 different designs of passenger car radial tires, 23 differentdesigns of bias tires and 26 different designs of motorcycle tires, in a full range of sizes for allvehicles.

The Company’s radial tires are sold under the “GT Radial” brand, while its bias tires are soldunder the “Gajah Tunggal” brand. The Company is also licensed by IRC, a leading motorcycle tirecompany based in Japan, to manufacture and sell “IRC” brand motorcycle tires. See “— IntellectualProperty Rights.”

In addition to its own brands and the “IRC” brand it is licensed to manufacture and sell, theCompany is a contract manufacturer for Michelin’s associated brand tires, excluding “Michelin”-branded tires, for markets outside Indonesia. The Company is also a contract manufacturer to NokianTyres, manufacturing Nokian-branded tires, including winter tires.

In addition, the Company also manufactures and sells tire-related products comprising tire cord(a component used in manufacturing tires) and synthetic rubber (a raw material used in themanufacture of tires). The Company uses around half of its tire-related products for its own tiremanufacturing business and sells its excess production to external parties, primarily other tiremanufacturing companies in Indonesia.

SalesThe following table sets forth the Company’s historical total tire and tire-related product sales

to external parties by major product categories for the periods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

TiresRadial tires......................... 1,159 36 1,280 37 1,394 36 414 37

Bias tires ............................ 937 29 950 28 1,108 28 315 28

Motorcycle tires ................. 422 13 463 14 488 13 134 12

Others(1) ............................. 314 10 289 8 302 8 79 7

Total tire sales ........................ 2,832 88 2,981 87 3,291 85 943 84

Tire-related productsTire cord ............................ 307 9 316 9 351 9 141 12

Synthetic rubber ................. 108 3 142 4 235 6 40 4

Total tire-related productsales ................................... 415 12 458 13 586 15 182 16

Total sales of tires and tire-related products(2) ............. 3,247 100% 3,440 100% 3,877 100% 1,124 100%

Notes:

(1) Others comprise tire components such as automobile tire tubes, flaps, motorcycle tubes, rim tape, o-rings, tirevalves and reclaimed rubber.

(2) Total sales of tires and tire-related products have been presented here because the Company’s total sales in thehistorical audited consolidated financial statements for the years ended December 31, 2002, 2003 and 2004 reflectthe consolidated revenue of the Company and its subsidiaries, including GT Petrochem Industries’ textile andchemical businesses until completion of the Company’s corporate restructuring in December 2004. Sincecompletion of the corporate restructuring in December 2004, the Company no longer consolidates revenue fromGT Petrochem Industries’ textile and chemical businesses, which are not directly related to the tire and tire-relatedbusiness of the Company. The Company believes that the presentation of historical sales information of tires andtire-related products derived from the segment information in the Company’s historical audited consolidatedfinancial statements is more meaningful to investors in understanding the Company’s business which focuses ontires and tire-related products after completion of its corporate restructuring in December 2004.

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Tire division sales

The following table sets forth the historical sales to external parties recorded by the Company’stire division in Rupiah for the periods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

Total tires sales(Rp. billions, exceptpercentages)

Export(1) ............................. 1,398 49 1,460 49 1,565 48 428 45

Replacement(2).................... 1,321 47 1,345 45 1,464 44 441 47

OE(3) .................................. 113 4 176 6 261 8 74 8

Total sales (Rp. billions) ........ 2,832 100% 2,981 100% 3,291 100% 943 100%

Notes:

(1) Export sales comprise all tire sales to customers outside Indonesia.



Radial tires

Radial tires are tires which have plies (which is a type of fabric woven from tire cord) that runfrom head to head (side to side) perpendicularly against the circumference of the tire. Radial tires alsohave two layers of steel belts running the circumference of the tire tread. Radial tires tend to be bettersuited for comfortable ride and higher-speed operation on roads with good conditions and generallyoffer better vehicle handling, longer tread life and better shock absorption compared to bias tires.

The Company manufactures a full range of radial tires using polyester tire cord and nylon tirecord, both of which are supplied by the Company’s tire cord division. The Company primarilymanufactures radial tires for passenger cars and light trucks, and believes it generally achieves highergross margins from selling radial tires compared to bias tires. In recent years, the Company has beensuccessful in realising its strategy to increase the sales of its higher margin radial tires, such as itshigh-performance tires, UHP tires and winter tires, which achieve a premium in pricing to the otherstandard radial tires it manufactures.

Radial tire sales accounted for approximately 37% and 36% of the Company’s total tire andtire-related product sales in 2003 and 2004, respectively. Radial tire sales accounted for approximately37% of the Company’s total tire and tire-related product sales for the three months ended March 31,2005.

The following table sets forth the Company’s historical radial tire sales and its segments toexternal parties for the periods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Radial tiresExport(1) ............................. 1,030 89 1,142 89 1,217 87 349 84

Replacement(2).................... 112 10 123 10 161 12 61 15

OE(3) .................................. 16 1 16 1 16 1 5 1

Total ....................................... 1,159 100% 1,280 100% 1,394 100% 414 100%

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Notes:

(1) Export sales comprise all tire sales to customers outside Indonesia and includes sales to Michelin and NokianTyres.



The Company’s export sales of radial tires consist of sales made to the overseas replacementmarket. The Company’s top five export customers for radial tires accounted for almost 52% of theCompany’s total radial tire export sales in 2004.

The Company’s radial tire sales in the Indonesian replacement market were made primarily towholesale distributors and retail chains that sell tires (including the Company’s “TireZone” retailoutlets beginning in 2004). The Company’s top five domestic customers accounted for 41% of theCompany’s total radial tire replacement market sales in 2004.

Bias tires

Bias tires are tires which have nylon plies that run at an angle from each side with differentlayers having opposing angles that criss-cross the tire. Bias tires are primarily suited for use onoff-road or poor road conditions and are durable and resistant to bursting resulting from overloading.The Company believes it generally achieves lower gross margins on bias tires compared to radial tires.

The Company manufactures a full range of bias tires, using nylon tire cord supplied by theCompany’s tire cord division. The Company primarily manufactures bias tires for commercial vehiclessuch as trucks, buses and agricultural and construction vehicles. Bias tire sales accounted forapproximately 28% and 28% of the Company’s total tire and tire-related product sales in 2003 and2004, respectively. Bias tire sales accounted for approximately 28% of the Company’s total tire andtire-related product sales for the three months ended March 31, 2005.

The following table sets forth the Company’s historical bias tire sales and its segments toexternal parties for the periods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Bias tiresExport(1) ............................. 294 31 296 31 324 29 75 24

Replacement(2).................... 605 65 599 63 696 63 216 69

OE(3) .................................. 38 4 55 6 88 8 24 7

Total ....................................... 937 100% 950 100% 1,108 100% 315 100%

Notes:


(2) Replacement market sales comprise all sales to Indonesian customers, less OE sales.


The Company’s export sales of bias tires are made to the replacement market. Because of thenature of bias tires, the Company’s demand originates from countries such as Saudi Arabia, Egypt andthe Philippines, and other countries in Asia, the Middle East and Africa, as bias tires are generallymore durable, and consequently are better suited for driving conditions in such regions. TheCompany’s top five export customers for bias tires accounted for 74% of the Company’s total bias tireexport sales in 2004.

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In the Indonesian replacement market, the Company generally sells its bias tires to the samedistributors which market its radial tires. Bias tires are not sold at “TireZone” outlets, which focusonly on four-wheel vehicle radial tire sales. The Company’s top five domestic customers accountedfor 46% of the Company’s total bias tire replacement market sales in 2004.

The Company’s main OE customers for bias tires are Mitsubishi Motors Indonesia (Krama YudhaTiga Berlian) and Toyota Astra Motor, which together accounted for Rp.67 billion (US$7.1 million)of the Company’s bias tire sales (or 76% of the Company’s total bias tire OE sales) in 2004.

Motorcycle tires

The Company manufactures its motorcycle tires using bias tire technology. The Companymanufactures a full range of “IRC” brand motorcycle tires under its license from IRC. The license isvalid for five-year terms, and is automatically extended for additional five-year terms unless one partynotifies the other of its intention to terminate the arrangement. The license was automatically renewedin March 2005. In consideration for the license to manufacture “IRC” brand tires in Indonesia, theCompany has agreed to pay royalties to IRC. The “IRC” brand is regarded as a premium brand inIndonesia and is primarily sold to the OE and replacement market. See “ — Intellectual PropertyRights.”

The Company believes that it generally achieves higher gross margins for motorcycle tirescompared to bias tires, as a result of the premium received on its motorcycle tires. The Company hasrecently focused on expanding the capacity of its motorcycle tire plant as part of its strategy to focuson higher margin products.

Motorcycle tire sales accounted for approximately 14% and 13% of the Company’s total tire andtire-related product sales in 2003 and 2004, respectively, and accounted for 12% of the Company’stotal tire and tire-related product sales in the three months ended March 31, 2005.

The following table sets forth the Company’s historical motorcycle tire sales and its segments toexternal parties for the periods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Motorcycle tiresExport(1) ............................. 13 3 5 1 4 1 0 0

Replacement(2).................... 365 87 378 82 364 75 100 75

OE(3) .................................. 43 10 79 17 119 24 34 25

Total ....................................... 422 100% 463 100% 488 100% 134 100%

Notes:




The Company’s main OE customers for motorcycle tires were PT Yamaha Indonesia MotorManufacturing and PT Indomobil Suzuki International, which together accounted for Rp.77 billion(US$8.1 million) of the Company’s motorcycle tire sales (or 64% of the Company’s total motorcycletire OE sales) in 2004.

The Company’s Indonesian replacement market motorcycle tires are generally sold to the samedistributors as its radial and bias tires, but also to other distributors specialising in motorcycle tiresonly. Motorcycle tires are not sold at “TireZone” outlets, which focus only on four-wheel vehicleradial tire sales.

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Other tire components

The Company manufactures and sells other tire components, primarily automobile tire tubes,flaps, motorcycle tire tubes and rim tape, but also tire valves and reclaimed rubber produced from thetire manufacturing process.

Tire tubes are primarily used in bias tires and motorcycle tires. The Company sells more unitsof tire tubes compared to tires because tire tubes are replaced by consumers more often than tires.Flaps are rubber pieces that are installed between the inner tube and the wheel to provide additionalprotection to the inner tube, and are primarily used on bias tires. Rim tape functions similarly to tireflaps, but is used on motorcycle tires. Tire tubes for automobiles and motorcycles, flaps and rim tapeare generally bundled and sold together with tires sold to the OE market, but are sold separately tothe domestic replacement and export markets.

Other tire component sales accounted for approximately 8% of the Company’s historical total tireand tire-related product sales in both 2003 and 2004. Other tire component sales accounted forapproximately 7% of the Company’s total tire and tire-related product external sales for the threemonths ended March 31, 2005.


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Other tire componentsReplacement(1).................... 238 76 245 85 243 80 64 81

Export(2) ............................. 60 19 17 6 20 7 4 5

OE(3) .................................. 16 5 27 9 38 13 11 14

Total ....................................... 314 100% 289 100% 302 100% 79 100%

Notes:




Tire-related product sales

The Company’s tire-related products comprise tire cord and synthetic rubber. The following tablesets forth the Company’s historical tire-related product sales in Rupiah and in units for the periodsindicated:


March 31,

2002 % 2003 % 2004 % 2005 %

Tire-related product sales(Rp. billions, exceptpercentages)(1)

The Company ......................... 426 51 497 52 589 50 185(2) 50(2)

External sales

Export(3) ............................. 299 35 354 37 395 34 63 17

Domestic(4) ......................... 117 14 105 11 191 16 118 33

Total external sales ................. 415 49 458 48 586 50 182 50

Total sales .............................. 841 100% 955 100% 1,175 100% 367 100%

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Notes:

(1) Tire-related product sales are calculated as the aggregate of tire cord and synthetic rubber segment sales recordedin the Company’s consolidated financial statements.

(2) Prior to December 1, 2004, sales to the Company comprised sales of tire cord and synthetic rubber by GTPetrochem Industries and PT Sentra Sintetikajaya, respectively, to the Company. As a result of the transfer of therespective tire cord and synthetic rubber manufacturing assets of GT Petrochem Industries and PT SentraSintetikajaya to the Company, such assets have been integrated as divisions within the Company and themanufacture of tire cord and synthetic rubber by the Company for its own tire production have since December1, 2004 not been recorded as separate sales to the Company but have instead been accounted for as internaltransfers. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Overview — Financial impact of corporate restructuring — Transfer of tire cord and synthetic rubbermanufacturing assets to the Company.”

(3) Export sales in 2002, 2003 and 2004 comprise all direct tire-related product sales to customers outside Indonesia.Export sales in 2005 comprise all indirect (through a subsidiary) tire-related product sales to customers outsideIndonesia.

(4) Domestic sales comprise all tire-related product sales to customers within Indonesia, excluding the Company.

Tire cord

Tire cord is a raw material that is made from filaments which are woven into a fabric, stretchedto increase tensile strength and then treated in chemicals to facilitate bonding with rubber compounds.The Company manufactures polyester tire cord, which is used as a component in radial tires, andNylon 6 and Nylon 66, which are used as raw materials in bias and motorcycle tires.

Tire cord sales to external parties accounted for approximately 9% of the Company’s total tireand tire-related product sales in both 2003 and 2004. Tire cord sales to external parties accounted forapproximately 12% of the Company’s total tire and tire-related product sales for the three monthsended March 31, 2005.

Tire cord comprised approximately 21% of the Company’s tire division’s raw material costs in2004. The manufacturing cost of tire cord is affected by fluctuations in oil prices. See “— RawMaterials and Suppliers.” However, the Company has benefited from better cost controls due to thevertical integration of the Company’s tire cord production. The Company previously manufactured tirecord through a division of GT Petrochem Industries. In December 2004, the tire cord manufacturingassets were transferred from GT Petrochem Industries to the Company pursuant to the corporaterestructuring exercise. See “Financial and Corporate Restructuring.” Following the completion of thecorporate restructuring exercise, the tire cord business is no longer held under a subsidiary and is nowa division within the Company. Prior to the transfer of the tire cord manufacturing assets to theCompany, sales by GT Petrochem Industries to the Company were made on an arm’s-length basis.From January 1, 2005 after the tire cord manufacturing assets were transferred to, and became adivision of, the Company, the supply of tire cord to the Company has been accounted for at cost.

The following table sets forth the Company’s historical tire cord sales and its segments for theperiods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Tire cordThe Company ......................... 308 50 328 51 365 51 111(1) 44(1)

External sales

Export(2) ............................. 244 40 261 40 267 37 103 40

Domestic(3) ......................... 63 10 56 9 84 12 39 16


Total ....................................... 615 100% 644 100% 716 100% 252 100%

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Notes:

(1) Prior to December, 2004, sales to the Company comprised sales of tire cord by GT Petrochem Industries to theCompany. As a result of the transfer of the tire cord manufacturing assets of GT Petrochem Industries to theCompany, the tire cord manufacturing assets have been integrated as divisions within the Company and themanufacture of tire cord by the Company for its own tire production have since December 1, 2004 not beenrecorded as separate sales to the Company but have instead been accounted for as internal transfers. See“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview —Financial impact of corporate restructuring — Transfer of tire cord and synthetic rubber manufacturing assets tothe Company” and Note 37 to the consolidated financial statements for the three-month periods ended March 31,2004 and 2005 include elsewhere in this Offering Circular.

(2) Export sales in 2002, 2003 and 2004 comprise all direct tire cord sales to customers outside Indonesia, whileexport sales in 2005 comprise all direct and indirect (made through a subsidiary) tire cord sales to customersoutside Indonesia.

(3) Domestic sales comprise all tire cord sales to customers in Indonesia, excluding the Company.

The Company uses around half of its tire cord division’s production for its own tire production.Excess tire cord which is not used by the Company for its own tire manufacturing business is suppliedto the export market and to other tire manufacturers in Indonesia. The Company’s top five third partycustomers for tire cord accounted for approximately 53% of the Company’s total tire cord sales toexternal parties in 2004.

Synthetic rubber

Synthetic rubber is made from raw materials derived from petroleum, coal, oil, natural gas, andacetylene. The Company produces a form of synthetic rubber known as Styrene Butadiene Rubber, orSBR, a primary raw material used in the manufacture of tires. The Company produces and sells variousSBR products which are used as raw materials in the manufacture of tires and other rubber products,such as mechanical parts, automotive components, foam rubber, sponge, insulator cable, coatings andadhesives.

Synthetic rubber sales to external parties accounted for approximately 4% and 6% of theCompany’s total tire and tire-related product sales in 2003 and 2004. Synthetic rubber sales to externalparties accounted for approximately 4% of the Company’s total tire and tire-related product sales forthe three months ended March 31, 2005.

Synthetic rubber comprised approximately 21% of the Company’s tire division’s raw materialcosts in 2004. Synthetic rubber has experienced the highest increase in price of any raw materialsconsumed by the Company for its tire production since 2002. However, the Company has benefitedfrom better cost controls due to the vertical integration of the Company’s synthetic rubber production,as well as from higher selling prices for the sale of excess synthetic rubber to external parties. TheCompany previously manufactured synthetic rubber through PT Sentra Sintetikajaya, a subsidiary ofGT Petrochem Industries. In December 2004, PT Sentra Sintetikajaya’s synthetic rubbermanufacturing assets were transferred to the Company pursuant to the corporate restructuringexercise. See “Financial and Corporate Restructuring.” Since completion of the corporaterestructuring exercise, the synthetic rubber business is no longer held under a subsidiary and is nowa division within the Company. Prior to the transfer of synthetic rubber asset from PT SentraSintetikajaya to the Company, sales by PT Sentra Sintetikajaya to the Company were made on anarm’s-length basis. From January 1, 2005, after the synthetic rubber manufacturing assets weretransferred to, and became a division of, the Company, the supply of synthetic rubber to the Companyhas been accounted for at cost.

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The following table sets forth the Company’s historical synthetic rubber sales and its segmentsfor the periods indicated:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Synthetic rubberThe Company ......................... 118 53 169 54 224 49 74(1) 65(1)

External sales

Export(2) ............................. 54 24 93 30 128 28 16 14

Domestic(3) ......................... 54 23 49 16 107 23 24 21


Total ....................................... 226 100% 311 100% 459 100% 114 100%

Notes:

(1) Prior to December 1, 2004, sales to the Company comprised sales of synthetic rubber by PT Sentra Sintetikajayato the Company. As a result of the transfer of the synthetic rubber manufacturing assets of PT Sentra Sintetikajayato the Company, such assets have been integrated as divisions within the Company and the manufacture ofsynthetic rubber by the Company for its own tire production have since December 1, 2004 not been recorded asseparate sales to the Company but have instead been accounted for as internal transfers. See “Management’sDiscussion and Analysis of Financial Condition and Results of Operations — Overview — Financial impact ofcorporate restructuring — Transfer of tire cord and synthetic rubber manufacturing assets to the Company” andNote 37 to the consolidated financial statements for the three-month periods ended March 31, 2004 and 2005included elsewhere in this Offering Circular.

(2) Export sales in 2002, 2003 and 2004 comprise all direct synthetic rubber sales to customers outside Indonesia,while export sales in 2005 comprise all direct and indirect (made through a subsidiary) synthetic rubber sales tocustomers outside Indonesia.

(3) Domestic sales comprise all synthetic rubber sales to customers in Indonesia, excluding the Company.

The Company uses nearly half of its synthetic rubber division’s production for its own tireproduction. Excess synthetic rubber which is not used by the Company for its own tire manufacturingbusiness is supplied to other tire manufacturers in Indonesia and overseas, but also to domesticfootwear manufacturers. The Company’s top five third party customers for synthetic rubber accountedfor approximately 68% of the Company’s total synthetic rubber sales to external parties in 2004.

Markets and Sales

The Company markets and distributes its tires through a combination of its network of domesticdistributors, its “TireZone” retail outlets, OE customers, export arrangements with its internationaldistributors and manufacturing arrangements with third parties such as Michelin and Nokian Tyres.Most of the Company’s tire distribution arrangements are made on an order-by-order basis, except forits manufacturing arrangements and OE sales agreements. The Company engages periodically in jointpromotions and advertising to raise the profile of its tires, and offers various forms of technicalsupport and collaboration to its international and domestic distributors.

Export market

Export sales include sales to customers outside Indonesia and sales to Michelin and Nokian Tyresfor export outside Indonesia under their respective manufacturing agreements with the Company. TheCompany’s export sales are primarily to the radial tire replacement market.

The Company’s export sales network consists primarily of distributors who supply theCompany’s tires to wholesalers and retailers outside Indonesia. The Company’s top five tiredistributors accounted for approximately 47% of its total tire export sales in 2004. The Company’stires are currently sold to end-users in approximately 90 countries.

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Other than the manufacturing and distribution agreements with Michelin and Nokian Tyres andits OE sales agreements, the Company generally does not have any long-term contracts and makessales on an order-by-order basis from distributors. Nevertheless, the Company has had long-termrelationships with most of its international distributors, many of whom have been customers of theCompany for more than ten years.

International distributors make payment through the issuance of letters of credit in favour of theCompany, but also in some cases, by advance down payment before shipment of their orders with finalpayment being made after shipment. The Company offers operational support in the form of trainingprogrammes The Company also provides marketing support to export customers by contributing tojoint promotions with selected distributors, depending on the form of joint promotion proposed by thedistributor.

The Company’s geographical market breakdown based on its historical export sales from tires forthe periods indicated are set forth below:


March 31,

2002 % 2003 % 2004 % 2005 %

(Rp.billions)

(Rp.billions)

(Rp.billions)

(Rp.billions)

Europe .................................... 360 26 484 33 524 34 136 31

Asia........................................ 338 24 337 23 354 23 84 20

Middle East ............................ 280 20 295 20 335 21 102 24

America .................................. 246 17 179 12 159 10 46 11

Africa ..................................... 94 7 84 6 111 7 39 9

Oceania .................................. 80 6 81 6 83 5 21 5

Total ....................................... 1,398 100% 1,460 100% 1,565 100% 428 100%

The Company’s two largest export markets in 2004 were Europe and Asia, with United Kingdom,the Philippines and Germany accounting for approximately 24% of the Company’s total exportrevenues from tire sales in that same period. The Company’s principal products exported to Europeare radial tires for passenger cars and light trucks, primarily to the United Kingdom and Germany. TheCompany’s principal products exported to Asian countries are bias tires for trucks and buses, primarilyin the Philippines and South-East Asia in general.

To capture additional market share and to achieve higher prices, the Company has beenincreasing its marketing efforts to improve brand equity through such means as sponsoring motorsports teams such as the Dean Perkin’s racing team in New Zealand, participating in auto shows (suchas Tire Expo Asia in Singapore, the Autopromotech in Italy and Equipe Auto in France) and purchasingprint advertising in magazines widely distributed in Europe such as “Tires & Accessories.”

Indonesian replacement market

A significant part of the Company’s domestic sales are made into the motorcycle tire and biastire replacement markets. In 2004, the Company supplied tires to retailers and to wholesaledistributors, who distribute the Company’s tires to independent tire dealers, retail chains that sell tires,as well as other automotive products sellers, repair garages and to certain commercial vehicle fleetoperating companies (such as bus companies and transport companies). The Company’s top fivedistributors of its tires in Indonesia accounted for approximately 32% of the Company’s total tire salesin the domestic replacement market in 2004.

The Company’s wholesale distributors’ appointments are renewed on an annual basis andpurchases are made on order-by-order basis. The Company has had long-term relationships with nearlyall of its wholesale distributors, some of which have been customers of the Company for over 30 years.The Company offers operational support to wholesale distributors in the form of technical support andtraining programmes on request as well as offering incentive schemes such as the two-yearly

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wholesale distributors’ tour hosted by the Company. The Company assists in wholesale distributors’marketing by offering advertising promotions and materials, point-of-sale displays and a reward pointsprogramme to retailers. Nearly all of the Company’s Indonesian wholesale distributors in thereplacement market pay cash in advance for their orders. All the Company’s domestic sales are madein Rupiah.

The Company also sells radial automobile tires through its “TireZone” retail outlets which havebeen recently established as part of its distribution co-operation arrangement with Michelin. See “—Strategic Alliance with Michelin.” The Company currently has 15 “TireZone” outlets in eight majorcities in Indonesia. Under the “TireZone” concept, retailers for “TireZone” outlets are selected basedon specific criteria set by the Company relating to the location, reputation and historical sales volumesof the retail outlets. Retailers selected by the Company remain independent and own and operate theirown retail operations but the Company supports such retailers by subsidising the conversion andbranding of their existing retail outlets as “TireZone” retail outlets in accordance with certainspecified requirements such as retail layout, service quality, signage and other sales aspects. TheCompany also offers technical support and training to all of its “TireZone” retailers to improve thelevel of service provided to customers. “TireZone” retailers sell “GT Radial,” “Michelin” and“BFGoodrich” branded radial tires but are also allowed to sell competing brands of tires. “TireZone”retailers generally purchase from the Company on an order-by-order basis and are given limited creditterms for their tire orders from the Company.

In addition to price, distribution network and brand equity are important competitive factors inthe domestic replacement tire market. To capture additional market share and to achieve higher pricesfor its radial tires, the Company has been increasing its marketing efforts to improve brand equitythrough such means as sponsoring regional beauty pageants such as the 2005 Miss ASEANcompetition in Indonesia, sponsoring motor sports such as the Indonesian GT Radial Eneos race,television commercials and print advertisements in car magazines.

OE market

The Company sells tires to nine four-wheel vehicle manufacturers in Indonesia, includingMitsubishi Motors Indonesia (Krama Yudha Tiga Berlian) and Toyota Astra Motor (both of whichprimarily purchase truck and light truck bias tires) and PT Indomobil Suzuki International (whichprimarily purchases light truck bias tires).

The Company sells motorcycle tires to 12 motorcycle manufacturers in Indonesia, the largest ofwhich are PT Yamaha Indonesia Motor Manufacturing and PT Indomobil Suzuki International. TheCompany also supplies all of the tires for Kawasaki, Vespa and Kymco motorcycles manufactured inIndonesia. In aggregate, the Company’s top five OE passenger car vehicle and motorcyclemanufacturer customers accounted for approximately 82% of total OE sales in Indonesia in 2004.

The Company generally enters into contracts which are renewable on an annual basis with its OEcustomers. OE sales are made based on firm orders from vehicle manufacturers that the Companyreceives approximately one month before delivery. OE customers are offered 30-day payment terms.The Company provides operational support to OE customers in the form of technical collaboration inquality control and development and participates in its OE customers’ seasonal promotions.

Strategic Alliance with Michelin

In May 2004, the Company entered into a five-year business co-operation arrangement withMichelin, one of the leading global tire manufacturers, comprising a manufacturing agreementfocusing on the manufacture of passenger car tires for Michelin, and an agreement on joint distributionactivities in Indonesia.

Under the manufacturing agreement, the Company will manufacture a selected range ofMichelin’s associated brands of car tires (excluding “Michelin”-branded tires) including UHP tires,for markets served by Michelin outside Indonesia. The Company’s and Michelin’s strategic plans areto increase the volume manufactured by the Company for Michelin to up to five million units of tires

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per year by 2010. The tires to be manufactured by the Company for Michelin will be based onindividual programmes, with each programme specifying the types of tires, prices and volumes to beachieved over an agreed period during the term of the manufacturing agreement, to form part of theCompany’s production planning process.

Under the distribution agreement, the Company will distribute a selected range of Michelin’spassenger car and light truck tires in Indonesia, including Michelin and BFGoodrich brands, in thedomestic replacement market, as well as the Company’s “GT Radial” brand tires through “TireZone”retail outlets. See “— Markets and Sales — Indonesian replacement market.”

As part of its strategic alliance with the Company, Michelin acquired a 10% equity stake in theCompany in May 2004.

Manufacturing FacilitiesThe Company currently operates five tire plants, all located in Indonesia, where it manufactures

radial tires, bias tires, motorcycle tires and tire inner tubes, as well as reclaiming rubber, and twotire-related product plants where it manufactures tire cord and synthetic rubber.

Quality assurance controls are incorporated into various stages of the manufacturing process atall of the Company’s tire manufacturing plants in compliance with international standards, such asISO/TS 16949, under which the Company has been recently certified. The Company has proceduresat each plant for testing incoming raw materials and component parts as well as for testing its finishedgoods. The Company maintains standard quality reporting measurement reports to maintain a historyof quality control at its plants.

Other than the rubber reclamation plant, the Company operates all of its plants 24 hours a day,employing four work groups on a three-shifts-a-day basis. The Company’s plants are generally shuton Indonesia’s independence day, on new year’s day and for two weeks during the Muslim holiday ofRamadhan during which the Company performs major maintenance on its plants and equipment. TheCompany practices a comprehensive maintenance and loss prevention programme, has on-sitemaintenance and repair facilities and maintains an inventory of spare parts and machinery, to reducethe risk of equipment failure, which results in only minimal interruption to production.

The Company calculates its plant capacity based on installed capacity and its utilisation ratesbased on an average daily output divided by installed capacity. For details on how average dailyproduction capacity, average daily output and utilisation are calculated, see “Management’sDiscussion and Analysis of Financial Condition and Results of Operations — Cost of Sales —Production efficiency.”

Tire manufacturing plantsThe Company’s tire manufacturing facilities comprise five plants which are located on a

126-hectare industrial complex in Tangerang, about 30 kilometres west of Jakarta, Indonesia. TheCompany holds the Tangerang industrial complex through 20-year and 30-year land-use rights grantedby the Government due to expire between 2014 and 2030.

The following table sets forth a summary description of the Company’s plants as of March 31,2005.

Tire ManufacturingPlant and Location Product Installed capacity

(units per day, except asindicated)

Plant A, Tangerang Automobile bias tires 12,000Plant B, Tangerang Motorcycle tires and tubes 37,000Plant C, Tangerang Automobile tubes and bladders 10,000Plant D, Tangerang Radial tires 30,000Plant E, Tangerang Rubber and crumbed rubber reclamation 11,000 (kilogrammes per day)

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Plant A — Automobile bias tires

Plant A commenced operations in 1981 and primarily manufactures automobile bias tires such asoff-road, truck and bus, light truck, ultra light truck, industrial and agricultural tires. The plant hasa total floor area of 110,364 square metres, excluding parking, street, pavement and sewage areas.Plant A has approximately 2,320 employees.

The following table sets forth the bias tire installed capacity of Plant A for the periods indicated.

Years ended December 31

Three monthsended

March 31,

2002 2003 2004 2005

Production capacity (in units per day) ........ 12,000 12,000 12,000 12,000Actual average daily output

(in units per day) .................................... 8,125 8,496 9,642 10,398Utilisation rate (%) .................................... 68 71 80 87

Plant B — Motorcycle tires and tubes

Plant B commenced operations in 1976 and primarily manufactures motorcycle tires, tubes andflaps. The plant has a total floor area of 42,097 square metres, excluding parking, street, pavement andsewage areas. Plant B has approximately 2,070 employees.

The following table sets forth the motorcycle tire installed capacity of Plant B for the periodsindicated.


Three monthsended

March 31,

2002 2003 2004 2005



The following table sets forth the inner tube and flap installed capacity of Plant B for the periodsindicated.


Three monthsended

March 31,

2002 2003 2004 2005



Plant C — Automobile tubes and bladders

Plant C commenced operations in 1973 and primarily manufactures automobile tubes (foroff-road, truck and bus, light truck, ultra light truck, industrial and agricultural bias tires) andbladders. The plant has a total floor area of 11,976 square metres, excluding parking, street, pavementand sewage areas. Plant C has approximately 240 employees.

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The following table sets forth the automobile tube installed capacity of Plant C for the periodsindicated.


Three monthsended

March 31,

2002 2003 2004 2005

Production capacity (in units per day) ............... 10,000 10,000 10,000 10,000Actual average daily output

(in units per day) ........................................... 6,832 6,999 6,959 7,358Utilisation rate (%) ............................................ 68 70 70 74

Plant D — Radial tires

Plant D commenced operations in 1993 and primarily manufactures radial tires (comprising lighttruck, passenger car and four-wheel drive tires). The plant has a total floor area of 184,667 squaremetres, excluding parking, street, pavement and sewage areas. Plant D has approximately 2,320employees.

The following table sets forth the radial installed capacity of Plant D for the periods indicated.


Three monthsended

March 31,

2002 2003 2004 2005

Production capacity (in units per day) ............... 30,000 30,000 30,000 30,000Actual average daily output

(in units per day) ........................................... 18,439 20,293 20,858 22,095Utilisation rate (%) ............................................ 61 68 70 74

Plant E — Reclaimed and crumbed rubber

Plant E primarily reclaims rubber and crumbed rubber. The plant has a total floor area ofapproximately 4,000 square metres, excluding parking, street, pavement and sewage areas. Plant E hasapproximately 50 employees. Reclaimed rubber and crumbed rubber are used primarily in theproduction of bias tires and tire flaps.

Tire-related product manufacturing plants

Plant F was previously owned by a division of GT Petrochem Industries while Plant G waspreviously owned by PT Sentra Sintetikajaya, a subsidiary of GT Petrochem Industries, untilcompletion of the Company’s corporate restructuring in December 2004 when both plants, and theiremployees at such plants, were transferred to the Company. GT Petrochem Industries and PT SentraSintetikajaya’s respective land-use rights were contractually transferred to the Company in December2004. However, the Company is still in the process of registering its legal title to the land-use rightswith the relevant authorities.

The Company’s tire cord plant (Plant F) is strategically located in the Tangerang industrialcomplex where its tire manufacturing plants are located, while the Company’s synthetic rubber plant(Plant G) is located in Merak, a short distance from the Tangerang industrial complex. The Companycontractually holds the synthetic rubber plant in Merak through 20-year and 30-year land-use rights,originally granted by the Government to PT Sentra Sintetikajaya, due to expire between 2029 and2034.

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Plant F and Plant G supply tire cord and synthetic rubber as raw materials to the Company’s tiremanufacturing facilities as well as selling excess production to external parties. For the year endedDecember 31, 2004, approximately 51% and 49% of tire cord and synthetic rubber sales were madeto the Company to meet the Company’s tire cord and synthetic rubber raw materials requirements. Thisintegrated approach to raw materials supply has enabled the Company to better control its productioncosts and improve its operating margins.

Tire-Related ProductManufacturing Plant and Location Product

Productioncapacity

(tonnes peryear)

Plant F, Tangerang ....................................... Tire cord 36,000Plant G, Merak ............................................ Synthetic rubber 60,000

Plant F — Tire Cord

Plant F commenced operations in 1991 and primarily manufactures tire cord, which is weavednylon and polyester. The plant has a total floor area of 84,185 square metres, excluding parking, street,pavement and sewage areas. Plant F has approximately 1,280 employees.

The following table sets forth the tire cord installed capacity of Plant F for the periods indicated.


Three monthsended

March 31,

2002 2003 2004 2005

Production capacity (in tonnes for the period) ... 36,000 36,000 36,000 36,000Actual output (in tonnes) ................................... 19,971 22,365 23,386 30,318Utilisation rate (%) ............................................ 55 62 65 84

Plant G — Synthetic rubber

Plant G commenced operations in 1998 and primarily manufactures synthetic rubber for use intire manufacturing. Plant G produces four main varieties of synthetic rubber, SBR1502, SBR1712 andSBR1721, which are used as raw materials in manufacturing processes of tire and other rubber-relatedproducts such as mechanical products, automotive components, foam rubber, sponge, insulator cable,coatings and adhesives. The plant is held through a 30-year land-use rights granted by the Governmentdue to expire in 2023, and has a total floor area of 23,805 square metres, excluding parking, street,pavement and sewage areas. Plant G has approximately 330 employees.

The following table sets forth the synthetic rubber production capacity of Plant G for the periodsindicated.

Years ended December 31,

Three monthsended

March 31,

2002 2003 2004 2005

Production capacity (in tonnes for the period) ... 60,000 60,000 60,000 60,000Actual output (in tonnes) ................................... 34,044 36,300 44,889 48,213Utilisation rate (%) ............................................ 57 61 75 80

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Research and Development

The Company incurred Rp.14.3 billion (US$1.5 million) in 2004 on research and development.The Company’s research and development department is headed by a director who has more than 40years of experience in the global tire industry, and employs 22 personnel who focus on tire design anddevelopment, development of new materials and compounds and indoor and outdoor testing of tires.At present, the Company tests its high-performance products at commercial proving grounds in Italy,Spain and Finland. The Company plans to streamline this process by investing in the construction ofan outdoor tire test track in Indonesia.

Raw Materials and Suppliers

The main raw materials required to manufacture tires are natural rubber, synthetic rubber, tirecord, carbon black, steel cord and other rubber chemicals. In 2004, natural rubber, synthetic rubber,tire cord and carbon black accounted for approximately 29%, 21%, 21% and 11%, respectively, of theCompany’s tire division’s total raw material costs. The remainder of the Company’s tire division’s rawmaterial costs were made up principally of tire chemicals, steel cord and bead wire, which accountedfor the remaining 18%.

The Company procures almost all of its natural rubber requirements from Government-ownedrubber plantations and other Indonesian suppliers based on annual contracts, of which the top supplierprovided approximately 41% and the top five suppliers provided approximately 86% of the Company’stotal natural rubber purchases. The pricing of natural rubber under such contracts is generally basedon the average future price of natural rubber for the month prior to physical delivery based on theSingapore Commodity Exchange or Standard Malaysian Rubber price quotations. The remainder of theCompany’s natural rubber supply is acquired in the spot market.

The Company recently restructured its ownership of its synthetic rubber and tire cordmanufacturing assets in December 2004. As a result, the Company manufactures its own tire cord andsynthetic rubber to ensure secure supply and enhance cost controls, but relies on chemical supplies,such as butadiene and styrene supplied by external parties, and nylon yarn supplied by a related party,which are sensitive to oil prices, to manufacture tire cord and synthetic rubber.

The Company acquires its other raw materials from multiple sources both within and outsideIndonesia and maintains long-term relationships with key suppliers while securing multiple sourcesfor key raw materials.

The Company has a centralised purchasing function which manages orders set out in periodicbills of material for each plant. The Company’s research and development department generallypre-approves various suppliers of raw materials based on the testing of the raw material supply quality.The Company generally conducts tenders for most of its raw materials, which are open to approvedsuppliers. Supply contracts are awarded based on pricing, ability to supply and quality. Supplierswinning the tender will generally be given the largest purchase orders but the Company also purchasesfrom other alternative suppliers to maintain relationships and alternative delivery capabilities.

The Company believes that all of the Company’s raw material requirements are currentlyavailable in adequate supply from domestic and foreign sources. The Company has not experienced,and does not anticipate, any difficulties in obtaining its raw materials. Should any of its suppliers beunable to supply it in the future, the Company believes it will be able to obtain alternative sources ofsupply at reasonable costs. Purchase contracts for imported raw materials are mostly denominated inU.S. dollars.

See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations— Cost of Sales — Fluctuations in raw material prices” and “Risk Factors — Risks Relating to theCompany and its Business — Supplies of the Company’s principal raw materials are subject to pricefluctuations, including highly volatile natural rubber prices and oil prices.”

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Intellectual Property Rights

The Company believes that the trademarks which are of material importance and most significantto its business are those using the words “GT Radial,” “Gajah Tunggal” and “IRC.”

The Company owns the “GT Radial,” “Gajah Tunggal” and “GT Motor” trademarks, as well asthe rights to its tire product names, in Indonesia. However, the property rights to these trade namesand tire product names in countries other than Indonesia are held by third parties. The “GT Radial”trademark is held by GITI Tire Pte Ltd, while the “Gajah Tunggal” trademark is held by GTInternational (Singapore) Pte Ltd.

GITI Tire Pte Ltd and GT International (Singapore) Pte Ltd are holding companies incorporatedin Singapore and owned by the former majority shareholders of the Company. In connection with theCompany’s debt restructuring in 1999 whereby a controlling stake in the Company was transferred toTSI, each of GITI Tire Pte Ltd and GT International (Singapore) Pte Ltd granted the Company aroyalty free non-exclusive perpetual licence to use their respective trademarks and product names ineach of the territories to which the Company sells its products. Under the terms of the licence, eachof GITI Tyre Pte Ltd and GT International (Singapore) Pte Ltd may withdraw the respective licenceswithout giving notice to the Company. See “Risk Factors — Risks Relating to the Company and itsBusiness — Termination of the Company’s third party manufacturing and licensing arrangementscould adversely affect the Company’s operating results.”

The Company has been licensed the use of the “IRC” trademark by IRC. The licence is valid forfive-year terms, and is automatically extended for additional five-year terms unless one of the partiesnotifies the other of its intention to terminate the arrangement. In consideration for the licence to usethe “IRC” brand name, the Company pays royalties to IRC comprising a fixed percentage of its netdomestic sales of “IRC” branded motorcycle tires and tire tubes, a fixed percentage of its net domesticsales of non-“IRC” branded motorcycle tires and tubes which are developed using IRC technicalassistance, and a fixed percentage of its net export sales of motorcycle tires and tubes.

The Company has licences to use most of the patents and intellectual property rights that coverthe design and manufacture of its products and processes. While the Company believes that theseassets as a group are of material importance and continuously manages them so as to avoid loss orexpiration thereof, it does not consider any one asset or group of these assets to be of such directimportance that the loss or expiration thereof would materially affect its business considered as awhole.

Industry and Competition

The information in the section below has been derived, in part, from various publications. Thisinformation has not been independently verified by the Company, the Joint Lead Managers, theTrustee, the Registrar, the Paying Agents and the Transfer Agents or any of their respective affiliatesor advisors. The information may not be consistent with other information compiled within or outsideIndonesia. Neither the Company, the Joint Lead Managers, the Trustee, the Registrar, the PayingAgents nor the Transfer Agents have any actual knowledge of any material misstatement contained inthis section.

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Global Tire Market

According to the Michelin Factbook 2004, the value of the world tire market was approximatelyUS$80 billion in 2003, with passenger cars, light trucks and trucks accounting for around 85% of thetotal market. The three largest markets are Europe, North America and Asia Pacific, which, inaggregate, account for more than 80% of the global market.

Market by Product Segments (by value) Market by Geography (by sales volume)

Source: LMC 2004, Michelin Factbook

Tire manufacturers have two primary sales channels, the OE market and the replacement market.In the OE market, the tire manufacturers sell tires to Original Equipment Manufacturers (“OEMs”).OEMs are vehicle manufacturers, where new vehicles are equipped with the “original” first set oftires. These vehicles, together with the new fitted tires, are then sold to the consumers. In thereplacement market, the tires are sold to tire distributors, such as tire dealers and car specialists. Thesetires are then sold in the replacement market to replace the original tires. Margins in the OE marketare lower than those in the replacement market, and pricing pressure from vehicle manufacturerscontinues to be a characteristic of this segment of the tire industry. According to the MichelinFactbook 2004, the replacement market is estimated to be at least 70% of the total global tire marketby volume.

The global tire market is led by three major companies — Michelin, Goodyear and Bridgestone— which together have a market share of approximately 55.4% in 2003 by sales volume, accordingto Tire Business, a leading industry source. These three manufacturers have market shares each ofapproximately 15% to 20%, with Michelin as the market leader. They are followed by a number ofmid-sized companies — including Continental AG, Pirelli, Sumitomo Rubber Industries, Yokohama,Cooper Tire & Rubber Company, Hankook Tire Co. Ltd., Toyo Tire & Rubber Co. Ltd. and KumhoTires Co., Inc. — with market shares ranging from 1% to 10%. There are also local and niche tiremanufacturers which tend to focus on more specific geographic markets and product lines.

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Indonesian Tire Market

The Indonesian tire market is made up of the automotive and motorcycle segments. Accordingto the APBI, the Indonesian tire market size in 2004 was estimated to be approximately 29.8 millionunits of tires, of which the automotive segment accounted for approximately 11.7 million units of tiresand the motorcycle segment accounted for approximately 18.2 million units of tires.

Demand for tires manufactured in Indonesia has increased both domestically and in the overseasmarket, especially in Asia. In the domestic market, demand has been driven by the increase in car andmotorcycle sales. Currently, due to the poor road conditions in Indonesia, domestic demand for themore durable bias tires is higher than for the radial tires. However, as the roads become moredeveloped, domestic demand for radial tires, as well as for high performance and UHP tires is expectedto increase.

Indonesia’s Annual Auto Sales (’000 units) Indonesia’s Annual Motorcycle Sales (’000 units)

979

1,651

2,318

2,810

3,901

301 300318

355

483

2000 2001 2002 2003 20042000 2001 2002 2003 2004

Source: The Association of Indonesian AutomotiveManufacturers

Source: The Association of Indonesian Motorcycle Industry

While international players seem to be more active in the automobile tire market, domesticplayers are more dominant in the motorcycle market. In the Indonesian automobile tire market,Bridgestone is the market leader, with more than 40% of the total market share in 2004.

Market Industry Trends

Shift in demand from bias to radial tires

There has been an increasing preference for radial tires globally, in particular in the passengercar markets. Bias tires, which are more durable but provide a less comfortable ride, have traditionallysold better in countries with poor road conditions, while radial tires tend to be more popular incountries with better maintained road systems as they are better suited for higher-speed operations andgenerally offer better handling, longer tread life and better shock absorption. As countries becomeincreasingly developed, the demand for radial tires is expected to continue to increase.

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Growth of high performance tire and UHP tire markets

The demand for high performance and UHP tires has increased, particularly in North Americaand Europe, and is gradually increasing in other markets such as Asia. High performance and UHPtires are generally rated with higher speed ratings. They have a longer rim diameter, and a lowerrespect ratio, which provide greater response to high-speed cornering and precision handling. Thesetires are generally installed on high performance vehicles, such as higher end sports vehicles or sportsutility vehicles.

With technological advances and improving lifestyles, the demand for high performance vehicleswill continue to increase, which will drive the growth in demand for high performance and UHP tires.

Emphasis on cost efficiency

With the increase in the number of low cost manufacturers, especially in Asian countries suchas China, there has been increasing price pressure on tire manufacturers. Consequently, a number ofglobal tire manufacturers are trying to decrease costs of production by either shifting manufacturingbases to low cost countries, or by trying to increase the level of automation and efficiency of theirmanufacturing processes.

Associated Companies and Subsidiaries

The following table sets forth certain information with respect to the Company’s associatedcompanies and subsidiaries as of March 31, 2005.

NamePercentageownership Principal business

GT Petrochem Industries 28.91% Manufacture of ethylene glycol and ethoxylate,polyester filament, polyester staple fibre andspin-drawn polyester yarn

PT Prima Sentra Megah 99% Established upon completion of the Company’scorporate restructuring in December 2004 tomanage sales of tire cord and synthetic rubberto external parties.

GTT Netherlands B.V. 100% In the process of being liquidated.

The Company had no other associated companies or subsidiaries as of March 31, 2005.

Related Party Transactions

Under the regulations of the Indonesian Capital Markets Supervisory Authority (BadanPengawas Pasar Modal, or BAPEPAM), any transaction by a company listed on an Indonesian stockexchange in which there is a conflict of interest (as defined below) must be approved by a majorityof the shareholders who do not have a conflict of interest in the proposed transaction. A “conflict ofinterest” is defined in BAPEPAM regulations to mean a conflict between the common interests of thecompany and its registered shareholders, on the one hand, and the personal economic interests of anymember of the Board of Commissioners, Board of Directors or principal shareholders (a holder of 20%or more of the issued shares, as registered in the Company’s stockholders list) or any of their affiliates.BAPEPAM does not apply this regulation to beneficial holders of shares. BAPEPAM has the powerto enforce this rule, and shareholders of the Company may also bring enforcement action based on thisrule.

The Company believes that there are currently no conflicts of interests between the Company andits Board of Commissioners, Board of Directors or principal shareholders registered in the Company’sstockholders list or any of their affiliates.

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However, the Company has entered into the following transactions with related parties:

Business co-operation agreements. The Company is a party to manufacturing and distributionagreements with Michelin, which is a holder of 10% of the Company’s issued capital. See “—Strategic Alliance with Michelin.”

Nylon filament purchases, common management and accounts receivable. The Companypurchases nylon filament from PT Filamendo Sakti, a subsidiary of GT Petrochem Industries, on anarm’s-length basis. GT Petrochem Industries is an associate of the Company. The Company and PTFilamendo Sakti have a common director, Mr. Hendra Soerijadi. See “Management — Commissionersand Directors of the Company — Board of Directors.” In addition, PT Filamendo Sakti has an accountspayable due to the Company. See “Risk Factors — Risks Relating to the Company and its Business— PT Filamendo Sakti may not succeed in setting or restructuring its debts, resulting in the Companybeing unable to recover its accounts receivable from PT Filamendo Sakti, ” “Management’s Discussionand Analysis of Financial Condition and Results of Operations — Overview — Financial impact ofcorporate restructuring — Balance sheet changes,” and Note 9(b) of the consolidated financialstatements of the Company for the years ended December 31, 2002, 2003 and 2004, and Notes 8(a)and (b) of the consolidated financial statements for the three-month periods ended March 31, 2004 and2005, included elsewhere in this Offering Circular.

Tire cord and synthetic rubber distribution. The Company has appointed PT Prima SentraMegah, a subsidiary of the Company, as a distributor of tire cord and synthetic rubber produced bythe Company.

Employees

As of March 31, 2005, the Company’s total workforce was 9,969 employees, a majority of whomwere engaged in production-related activities at its production plants.

As of March 31, 2005, approximately 9,400 of the Company’s employees belonged to theCompany’s single union, Serikat Pekerja Seluruh Indonesia. Informal meetings take place betweenemployees and management representatives as and when necessary, while formal meetings take placeperiodically. A Cooperative Labour Agreement (Perjanjian Kerja Bersama) was last concludedbetween the Company and the union in 2004. The Company believes that it has been able to maintainvery good relations with its workers.

The Company provides a wide range of benefits to its employees, including pension benefits,subsidised housing and housing loans, medical insurance, periodic health checks, regular in-houseeducational programmes and the use of recreational facilities.

In 1981, the Company established Gajah Tunggal Polytechnic, a vocational training schoollocated on the Company’s industrial complex, as part of its commitment to community service and toprovide relevant technical training to its workforce and potential employees. Gajah TunggalPolytechnic is affiliated with the Bandung Institute of Technology, a leading educational institutionin Indonesia, and offers training programmes in skills related to the Company’s technical andoperational needs, as well as other technical areas. The Company offers fully-sponsored scholarshipsto selected high school graduates to undertake a three-year technical training programme conductedat the Gajah Tunggal Polytechnic. The Company spent Rp.2.9 billion (US$0.3 million) on operatingthe technical training programme at Gajah Tunggal Polytechnic in 2004. As of March 31, 2005, theGajah Tunggal Polytechnic had over 200 full-time students. The Company employed over 360graduates of the Gajah Tunggal Polytechnic in 2004.

The Company believes that its combination of ongoing training, competitive compensation andopportunities for advancement have ensured significant retention of its employees. The average termof service of the Company’s senior technical management personnel is 23 years.

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Environmental and Safety Matters

The Company’s operations are subject to Indonesian laws and regulations governing thedischarge of materials into the environment or otherwise relating to environmental protection. Theselaws and regulations impose substantial liabilities for pollution resulting from the Company’soperations. The Company is required to provide a report containing an environmental impact analysisto the Indonesian environmental agency on a bi-annual basis. The regulatory burden on the Companyonly marginally increases its cost of doing business and consequently does not materially affect itsprofitability.

Changes in environmental laws and regulations occur frequently, and any changes that result inmore stringent and costly waste handling, disposal and clean-up requirements could have a significantimpact on the operating costs of the Company. The Company emphasises the protection of itsenvironment and has an organisational structure to supervise environmental activities and to ensurethat it complies with or exceeds all environmental regulations applicable to it. The Company believesit is in compliance with all current applicable environmental laws and regulations and that continuedcompliance with existing requirements will not have a material adverse impact on the Company.

The Company has extensive safety procedures designed to ensure the safety of its workers, theassets of the Company, the public and the environment. The Company provides its employees withcomprehensive training in safety and environmental related matters. Government officials and theCompany’s managers make both scheduled and random checks at the Company’s operating facilitiesto ensure that safety procedures are being followed. The Company also provides its employees withcomprehensive medical and accident insurance, and maintains medical treatment facilities at all of itsmanufacturing sites. Between 2002 and 2004, no more than 0.4% of the Company’s employees wererequired to be hospitalised for work-related injuries in any year.

Insurance

The Company maintains casualty and fire insurance for its plants. The Company also maintainsproduct liability insurance in Indonesia and overseas, including in North America and in Europe. TheCompany maintains medical and accident insurance for its employees. The Company also maintainsbusiness interruption insurance, as well as various levels of commercial excess liability. TheCompany’s insurance policies are provided by Indonesian and international insurance companies. Asof March 31, 2005, the Company had no material outstanding and pending claims under its insurancepolicies. The Company has not had to implement any product recalls during its lifetime.

Legal and Regulatory Proceedings

From time to time, the Company may be a party to various legal proceedings. The Company isnot currently party to any material pending legal proceedings; however, the Company is a defendantin various judicial proceedings arising in the ordinary course of business. As of December 31, 2004,the Company was involved as a defendant in one pending judicial proceeding in Indonesia.

From time to time, the Company may also be subject to products liability litigation in whichindividuals in vehicle accidents seek damages resulting from allegedly defective tires manufacturedby the Company. Litigation of this type has increased significantly throughout the tire industry inNorth America following the Firestone tire recall announced in 2000. The Company is currently namedas a party in two product liability claims in the United States. In the opinion of the management ofthe Company, the Company is unlikely to incur liability under such claims and claims of this natureare unlikely to have a material adverse effect, individually or in the aggregate, on the Company’sfinancial condition or results of operations. As of the date of this Offering Circular, except asdescribed herein, neither the Company nor its subsidiaries are involved in, nor has the Company anyknowledge of any threat of, any legal, arbitral, administrative or other proceedings relating to, claimswhich are material to the Company’s business or results of operations.

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MANAGEMENT

Commissioners and Directors of the Company

The management and day-to-day operations of the Company are carried out by the Board ofDirectors under the supervision of the Board of Commissioners, the members of whom are appointedthrough a general meeting of shareholders. In addition, the Company has an Audit Committee that ischaired by one of its Independent Commissioners. The current chair of the Audit Committee is Mr.Sunaria Tadjudin. The Audit Committee meets at least once each quarter and is responsible forsupervising the Company’s Internal Audit Unit as well as its external auditors. The Audit Committeereviews the plan, execution and results of each audit of the Company, and oversees any follow-upaction that may be required as a result of each audit. The Audit Committee also actively participatesin the selection and evaluation of the Company’s public accountants.

The rights and obligations of each member of the Board of Commissioners and Board ofDirectors are regulated by the Company’s articles of association (the “Articles”) and by the decisionsof the shareholders of the Company in general meeting. Under the Articles, the Board of Directorsmust consist of at least three members including a President Director, Vice President Director and oneor more Directors. Any two Directors acting together can legally bind the Company. The Board ofCommissioners must have at least three members: a President Commissioner, Vice PresidentCommissioner and one or more Commissioners. Any two Commissioners acting together are entitledto act for and on behalf of the Board of Commissioners.

The Board of Commissioners is currently composed of seven members. The Board of Directorsis currently composed of seven members. Commissioners and Directors are elected for a term of officeof two years, without prejudice to the rights of the general meeting of shareholders to dismiss aCommissioner or Director during his or her term of office or to reappoint a Commissioner or Directorwhose term of office has expired. The officers of the Company serve at the discretion of the Boardof Directors.

Information regarding the Commissioners, Directors and Advisors of the Company is set forthbelow:

Board of Commissioners

Name Position Age

Rudolf Kasenda ................................... President Commissioner 70Pang Shun Pen ..................................... Vice President Commissioner 48Sunaria Tadjudin .................................. Commissioner (Independent) 70Howell Rembrandt Picket Keezell ........ Commissioner (Independent) 62Gautama Hartarto ................................. Commissioner 39Sutrisno ............................................... Commissioner 63Mohendra Asoka Bratanata................... Commissioner 42

Mr. Rudolf Kasenda was appointed as a Commissioner of the Company in 1994, and wasappointed as President Commissioner in 2004. Prior to joining the Company, he served as Indonesia’sAmbassador to South Korea from 1990 to 1993. Mr. Kasenda graduated from the Indonesia NavalAcademy and Naval Staff Command College in 1971, and served in various appointments with theIndonesian Armed Forces for 26 years, including as Chief of Staff of the Indonesia Navy from 1986to 1989.

Mr. Pang Shun Pen was appointed as Vice President Commissioner of the Company in 2004. Heis a Partner of HSZ Group, a Swiss-based international fund management company, and a director andshareholder of HSZ Limited, the holding company of HSZ Group. Mr. Pang is also a director ofGaribaldi Venture Fund. Mr. Pang graduated from Kolej Tunku Abdul Rahman, Kuala Lumpur,

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Malaysia in 1978 with a degree in Accounting, and subsequently obtained a certificate in InternationalManagement from INSEAD in 1993. Mr Pang is a Fellow of the Chartered Institute of ManagementAccountants of the United Kingdom, and a Registered Accountant with the Malaysian Institute ofAccountants.

Mr. Sunaria Tadjudin was appointed as an Independent Commissioner of the Company in 2004.He served as a Government tax officer for 30 years, where he rose to become the Value-Added TaxDirector. Mr Tadjudin graduated from the University of Indonesia in 1965 with a Bachelor of Artsdegree in Accounting.

Mr. Howell Rembrandt Picket Keezell was appointed as an Independent Commissioner of theCompany in 2004. He is the Vice President Commissioner of GT Petrochem Industries, and has alsoserved since 1997 as Principal and Executive Director of Windichine, Ltd, Hong Kong and Bangkok.Prior to 1997, Mr. Keezell worked in a number of banks and other financial institutions, including asRegional Director of Banque Worms and Vice Chairman of East West Bank, San Marino, California.Mr. Keezell graduated from the University of North Carolina in 1968 and received a Masters inBusiness Administration from the Fuqua School of Business, Duke University in 1978.

Mr. Gautama Hartarto was appointed a Commissioner of the Company in 2004. He currentlyholds several senior positions in other companies, including as President Director of GT PetrochemIndustries, and President Director of PT Grahasatria Dayatama. Mr. Hartarto graduated from BostonUniversity in 1991 with a Master of Arts in Economic Policy, and received a Certificate ofProfessional Study in Project Management from Arthur D. Little in 1990.

Mr. Sutrisno joined the Company as a Commissioner in 1989. He obtained a Bachelors ofMedicine from Airlangga University in 1967, a Bachelor of Arts in Economics from UniversitasIndonesia in 1977, and received a Masters of Business Administration from the University ofWisconsin in 1971. Mr. Sutrisno has also been a Commissioner in GT Petrochem Industries since2004.

Mr. Mohendra Asoka Bratanata was appointed a Commissioner of the Company in 2004. From1997 to 1999 he was a Project Director of PT Indo-Hansin Department Store. Prior to that, he servedas a member of the board of directors of PT Great River International Tbk, a garment company. Hereceived a Bachelor of Arts in Economics from the University of Indonesia in 1987, and obtained aMasters of Business Administration from Boston University in 1987. He has also attended theExecutive Program in Mergers and Acquisitions from the Darden Graduate School of Business of theUniversity of Virginia.

Board of Directors

Name Position Age

Chan Siew Choong............................... President Director 48Mulyati Gozali ..................................... Vice President Director 52Hendra Soerijadi .................................. Director 60Veli Ilmari Nikkari............................... Director 63Budhi Santoso Tanasaleh ...................... Director 43Catharina Widjaja ................................ Director 43Kisyuwono ........................................... Director 44

Mr. Chan Siew Choong joined the Company in 1991 and was appointed the President Directorof the Company in 2004. Mr. Chan graduated from Kolej Tunku Abdul Rahman, Kuala Lumpur,Malaysia in 1979. He is a Fellow of the Chartered Institute of Management Accountants of the UnitedKingdom, a member of the Chartered Accountants of Malaysia and a former member of the Board ofGovernors of the Malaysian Institute of Internal Auditors. Prior to joining the Company, Mr. Chan wasthe Internal Audit Manager, Head of Budget and Financial Account Manager at Nestle MalaysiaBerhad, Malaysia.

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Ms. Mulyati Gozali was appointed as a Director of the Company in 1989, and was appointedVice President Director in 2004. She has held various positions with the Company since 1972,including as Finance and Accounting Director. Ms. Gozali attended the Akademi Akuntansi Jayabaya,Jakarta until 1972.

Mr. Hendra Soerijadi was appointed as a Director of the Company in 2004. He served as VicePresident Director of PT Filamendo Sakti from 1997 to the present, and as a Vice President Directorof GT Petrochem Industries from 1996 to 1999. Mr. Soerijadi holds a Diploma in BusinessManagement from the National University of Singapore.

Mr. Veli Ilmari Nikkari was appointed as a Director of the Company in 2004. He joined theCompany in 1997 as Technical Advisor, and currently serves as the Director of research anddevelopment. Prior to joining the Company, Mr. Nikkari was the Director of Tire Research at NokianTyres Ltd, and spent 32 years working in its Rubber Division. Mr. Nikkari holds a Diploma inChemical Engineering from Helsinki Technical University in Finland and a Bachelor of Arts inStatistical Science, ADP, Economics from the University of Tampere in Finland.

Mr. Budhi Santoso Tanasaleh was appointed as a Director of the Company in 2004, andcurrently serves as the Chief Operating Officer of the Company. Mr Tanasaleh received his Bachelorand Masters of Science degrees in Electrical Engineering from the University of Texas at Arlingtonin 1983 and 1989, and took several Masters of Business Administration courses from the Universityof Dallas and Nova University, Florida from 1989 to 1991. Prior to joining the Company, Mr.Tanasaleh worked in Motorola, Inc., U.S.A. for eight years and PT Motorola Indonesia for six years,where he last held the position as Country Manager, Pager Division. He spent one year as the VicePresident for Marketing at Citibank, N.A., Jakarta in 1998. Mr. Tanasaleh joined the Company as anexport manager in 2001. He holds a U.S. patent registered with the United States Patent Office anda number of pending patent disclosures.

Ms. Catharina Widjaja was appointed a Director of the Company in 2004. Ms. Widjaja was theExecutive Vice President, Corporate Communications of the Gajah Tunggal Group from 2000 to 2004;and the Gajah Tunggal Group Head of PT GTF Indonesia Asset Management, Jakarta from 1998 to2000. Prior to joining the Gajah Tunggal Group, Ms. Widjaja worked for various multinationalcompanies including The Hongkong and Shanghai Banking Corporation, Jakarta for nine years, whereshe last held the position of Country Treasurer, and Deutsche Bank AG, Jakarta as a Foreign ExchangeDealer for two years. She received a Master of Science in Control Engineering from the Universityof Bradford 1986, and Graduateship in Mathematics and its Applications from Sheffield Polytechnic,in 1985 and a Higher National Diploma in Mathematics, Statistics and Computer Studies from LeedsPolytechnic, United Kingdom in 1984.

Mr. Kisyuwono was appointed as a Director of the Company in 2004. He joined the Companyas an Assistant Accounting Manager in 1992. Prior to joining the Company, Mr. Kisyuwono workedas an Auditor with the Government’s Internal Audit Board Financial and Development SupervisoryBoard, Badan Pengawasan Keuangan dan Pembangunan (BPKP), from 1982 to 1992. Mr. Kisyuwonograduated with a Bachelor of Accounting from Sekolah Tinggi Akuntansi Negara.

Compensation of Commissioners and Directors

The aggregate compensation that was paid to or accrued by all of the commissioners anddirectors of the Company for services rendered to the Company during the fiscal year ended December31, 2004 was Rp.23 billion (US$2.4 million).

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FINANCIAL AND CORPORATE RESTRUCTURING

Background and Settlement of Indebtedness

At the time of the Asian financial crisis in 1998, the Company and its subsidiaries, like otherIndonesian companies, were adversely affected by the significant depreciation in value of theIndonesian Rupiah. As a result, the Company was unable to service its debt obligations and, soonthereafter, engaged its creditors in negotiations to restructure its outstanding indebtedness on aconsensual basis. Following these negotiations to restructure its outstanding indebtedness, theCompany and its international creditors entered into a restructuring agreement in September 2002whereby the Company settled in full its outstanding indebtedness through the issue of US$296 millionof floating rate notes due 2008 (“Series A FRNs”) to its international creditors and retired certainindebtedness purchased from the secondary debt markets. Since it issued the Series A FRNs, theCompany has been fulfilling its interest and principal repayment obligations under its Series A FRNsand has paid US$76.9 million to its Series A FRN holders to June 18, 2005.

The Company and its subsidiaries also had, at the time of the Asian financial crisis in 1998,outstanding loans from PT Bank Dagang Nasional Indonesia (“BDNI”), which were primarilydenominated in U.S. dollars. BDNI’s majority shareholder at that time was Mr. Sjamsul Nursalim, whowas also, at the time, the majority shareholder in the Company (the “Former Majority Shareholder”).BDNI, which was similarly affected by the financial crisis, was taken over by the Indonesian BankRestructuring Agency (“IBRA”), Badan Penyehatan Perbankan Nasional, in April 1998. This resultedin the repayment obligations of the Company and its subsidiaries due to BDNI (the “BDNI Loans”)being transferred from BDNI to IBRA, and subsequently to TSI.

In September 1998, IBRA and the Former Majority Shareholder entered into a settlementagreement in relation to IBRA’s takeover of BDNI and the settlement of the Former MajorityShareholder’s obligations to IBRA. Under the settlement agreement, the Former Majority Shareholderagreed to transfer all his direct and indirect shareholdings in the Company and in GT PetrochemIndustries to IBRA through TSI, a holding company and a special purpose vehicle effectivelycontrolled by IBRA and whose shares were pledged to IBRA. The settlement agreement also providedfor the transfer of the BDNI Loans to TSI. Upon completion of the exercise, TSI became the majorityshareholder of the Company and the Company’s obligations under the BDNI Loans were owed to TSI.

Subsequently, at an open public tender conducted by IBRA which was concluded in April 2004,TSI sold to Garibaldi Venture Fund (a) the shares of the Company held by TSI (totalling 78% of theCompany’s outstanding share capital at the time), (b) the BDNI Loans and (c) the shares of GTPetrochem Industries held by TSI. As a result, Garibaldi Venture Fund became the majorityshareholder of the Company and the Company’s obligations under the BDNI Loans were owed toGaribaldi Venture Fund.

Upon completion of the open public tender, the Company still had outstanding indebtedness dueto (i) its restructured international creditors and (ii) to Garibaldi Venture Fund, in the form of theBDNI Loans.

In April 2004, the Company settled the BDNI Loans due to Garibaldi Venture Fund by:

● issuing US$53 million of floating rate notes due 2008 (“Series B FRNs”), the proceeds ofwhich were paid to Garibaldi Venture Fund. Since it issued the Series B FRNs, theCompany has been fulfilling its interest and principal repayment obligations under itsSeries B FRNs and has repaid US$8.0 million to its Series B FRN holders to June 18, 2005;

● transferring the value of its deposits formerly held in BDNI to Garibaldi Venture Fund; and

● transferring its accounts receivables from related parties at the time to Garibaldi VentureFund.

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As part of the exercise in April 2004, the accounts receivables from PT Filamendo Sakti (asubsidiary of GT Petrochem Industries and a supplier of nylon filament to the Company’s tire corddivision) were transferred to the Company from Garibaldi Venture Fund, which had acquired suchaccounts receivable from TSI. The Company had total outstanding accounts receivables from PTFilamendo Sakti totalling Rp.700 billion (US$73.9 million) as of December 31, 2004, of which Rp.667billion (US$70.4 million) represented the transferred accounts receivable described above. TheCompany had outstanding accounts receivables from PT Filamendo Sakti totalling Rp.707 billion(US$74.6 million) as of March 31, 2005, of which Rp.667 billion (US$70.4 million) represented thetransferred accounts receivable described above. See “Risk Factors — Risks Relating to the Companyand its Business — PT Filamendo Sakti may not succeed in settling or restructuring its debts, resultingin the Company being unable to recover its accounts receivable from PT Filamendo Sakti,”“Management’s Discussion and Analysis of Financial Condition and Results of Operations —Financial impact of corporate restructuring — Balance sheet changes,” “Business — Related PartyTransactions” and Note 9(b) of the consolidated financial statements of the Company for the yearsended December 31, 2002, 2003 and 2004, and Notes 8(a) and (b) of the consolidated financialstatements for the three-month periods ended March 31, 2004 and 2005, included elsewhere in thisOffering Circular.

Upon completion of this exercise in May 2004, the obligations representing what were previouslyBDNI Loans were fully settled by the Company.

Corporate restructuring and the issue of the Series C FRNsIn May 2004, Garibaldi Venture Fund sold approximately 10% of the outstanding shares in the

Company to Michelin.

In December 2004, the Company undertook a corporate restructuring to rationalise its tirebusiness and to assist in the restructuring of GT Petrochem Industries’ indebtedness. The corporaterestructuring exercise was approved by a meeting of disinterested shareholders in November 2004, asrequired by BAPEPAM.

Pursuant to the corporate restructuring exercise,

• the Company entered into a purchase arrangement with GT Petrochem Industries, pursuantto which GT Petrochem Industries transferred its tire cord division to the Company, inconsideration for (a) the settlement of certain inter-company debts owed to the Companyby GT Petrochem Industries and (b) the settlement by the Company of US$30 million of GTPetrochem Industries’ capital markets indebtedness, which was financed by the Companythrough the issue of US$30 million of floating rate notes due 2009 (“Series C FRNs”).Since it issued the Series C FRNs, the Company has been fulfilling its interest and principalrepayment obligations under its Series C FRNs and has repaid US$4.5 million to its SeriesC FRN holders to June 18, 2005;

• the synthetic rubber manufacturing assets of PT Sentra Sintetikajaya, a subsidiary of GTPetrochem Industries, were transferred to the Company in consideration for the settlementof part of PT Sentra Sintetikajaya’s inter-company debt owed to the Company; and

• the Company’s entire shareholding in PT Langgeng Bajapratama was acquired by PT GajahTunggal Prakarsa, formerly an associated company of the Company, for a totalconsideration of Rp.8 billion.

At the same time, GT Petrochem Industries entered into a separate debt restructuring exercisewith its creditors, in which it settled some of its remaining indebtedness to its creditors by issuing itsshares to its creditors. As a result of the new issue of shares to settle its indebtedness amounting toUS$73.3 million and Rp.165 billion to creditors, the Company’s holdings in GT Petrochem Industrieswere diluted from 50.01% to 28.91%. Upon completion of this exercise, the results of operations ofGT Petrochem Industries were no longer consolidated into the Company’s results of operations. See“Management’s Discussion and Analysis of Financial Condition and Results of Operations —Overview — Financial impact of corporate restructuring.”

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As a result of the corporate restructuring exercise, the Company, as part of its vertical integrationstrategy, acquired the tire cord and synthetic rubber manufacturing assets of GT Petrochem Industries,and diluted its majority stake in GT Petrochem Industries, which owns petrochemical businesses notcore to the Company’s tire business.

The following chart sets forth the group structure of the Company before and after the corporaterestructuring exercise, as of December 31, 2004:

Corporate Structure Pre-Corporate Restructuring

PT MeshindoAlloy WheelCorporation

• Aluminium AlloyWheels

GT Petrochem Industries

• Tire cord business• Chemicals• Polyester

PT LanggengBajapratama

• Steel and bead wire

PT GT Megah Prima

• Trading company tomarket tire cord andsynthetic rubber toexternal parties

PT Gajah Tunggal Tbk

• Radial Tires• Bias Tires and Tubes• Motorcycle Tires and Tubes

PT Filamendo Sakti

• Nylon filament

PT Sentra Sintetikajaya

• Synthetic rubber business

51.0% 50.01% 51.0% 99.0%

92.9% 95.0%

GTT Netherlands B.V.

• In process of liquidation

100.0%

Corporate Structure Post-Corporate Restructuring

PT Filamendo Sakti

• Nylon filament

PT Sentra Sintetikajaya

• Dormant

92.9% 95.0%

PT Gajah Tunggal Tbk

• Radial Tires• Bias Tires and Tubes• Motorcycle Tires and Tubes• Tire Cord (transferred from GT Petrochem

Industries)• Synthetic Rubber (transferred from PT

Sentra Sintetikajaya)

PT Prima Sentra Megah(formerly known as PT GT Megah Prima)

GT Petrochem Industries

• Chemicals• Polyester

GTT Netherlands B.V.

• In process of liquidation

28.91% 100.0%99.0%

• Trading company to market tire cordand synthetic rubber to external parties

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Additional Corporate Events

In February 2005, PT Gema Arta Persada, an unrelated party, acquired the Company’s entireshareholding in PT Meshindo Alloy Wheel Corporation for a total consideration of Rp.7 billion.

Based on public notifications filed with BAPEPAM, Garibaldi Venture Fund disposed of 18.9%of the Company’s common shares in market transactions between May and December 2004. Based onpublic notifications filed with BAPEPAM, Global Union Fiber Investment Ltd had purchased 11.0%of the Company’s common shares from market transactions by the end of 2004. See “PrincipalShareholders.”

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PRINCIPAL SHAREHOLDERS

The following table sets forth certain information, as of May 31, 2005, with respect to theownership of the common shares by each person who, according to the stockholders list issued by BiroAdministrasi Efek Perusahaan (Administration Office of Listed Shares of the Company), owned morethan 5% of the Company’s common shares, and ownership by the public.

Name of Stakeholder

Number ofcommon shares

held

Percentage oftotal outstanding

common shares

Garibaldi Venture Fund Limited .......................... 1,555,760,000 49.1%Compagnie Financiere Michelin .......................... 316,800,000 10.0%Global Union Fiber Investment Ltd. .................... 348,480,000 11.0%Ownership by public ............................................ 946,960,000 29.9%

The authorised share capital of the Company is Rp.6,000,000,000,000 comprising12,000,000,000 shares of Rp.500 each, of which 3,168,000,000 shares were issued and outstandingand were fully paid-up as of May 31, 2005.

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DESCRIPTION OF THE ISSUER

General

The Issuer was incorporated on June 2, 2005 by means of a notarial deed, executed before Mr.Gerard Cornelis van Eck, a civil law notary in Rotterdam, The Netherlands, as a Dutch privatecompany with limited liability (besloten vennootschap met beperkte aansprakelijkheid). The Issuerhas its corporate seat in Amsterdam, and is registered with the trade register of the Chamber ofCommerce and Industries for Amsterdam under number 34227468. The registered address of the Issueris Prof. J.H. Bavincklaan 7, 1183 AT Amstelveen. The Issuer is a wholly-owned subsidiary of theCompany.

Business Activity

The Issuer was established solely for the purpose of issuing the Bonds. The Issuer has notengaged, since its incorporation, in any business activities other than the proposed issue of the Bondsand the authorisation of documents and agreements referred to in this Offering Circular to which it isor will be a party.

The Issuer may be appointed by the Dutch Central Bank (De Nederlandsche Bank, “DCB”) as areporter, pursuant to the Regulation of 4 February 2003, issued by DCB, implementing reportinginstructions under the Act on Financial Foreign Relations 1994 (Wet financiele dienstbetrekkingenbuitenland 1994) and if so appointed, the Issuer has to file reports with DCB for the benefit of thecomposition of the balance of payments for The Netherlands by DCB.

In view of the activities of the Issuer, the Issuer is a credit institution within the meaning of theDutch Act on the Supervision of Credit Institutions 1992 (Wet toezicht kredietwezen 1992), which isexempted from the obligation to obtain a licence from the DCB pursuant to Section 3 of the ExemptionRegulation of June 26, 2002 in respect of the Act on the Supervision of Credit Institutions 1992(Vrijstellingsregeling Wet toezicht kredietwezen 1992, the “Exemption Regulation”), as (i) the fundsare obtained by the Issuer by means of the issue of securities in compliance with the Act on theSupervision of Securities Transactions 1995 (Wet toezicht effectenverkeer 1995), (ii) at least 95% ofthe balance sheet total of the Issuer will be invested or on-lent within the group, and (iii) the Guarantorprovides an unconditional and irrevocable Guarantee in respect of the obligations of the Issuer,provided that the Guarantor has a positive consolidated equity capital during the full term of theGuarantee. The Issuer shall notify the DCB in accordance with Section 4 of the Exemption Regulation.

Capitalisation

The authorised capital of the Issuer is EUR 90,000 divided into 90,000 shares with a nominalvalue of one Euro each. At incorporation, the issued capital of the Issuer equals EUR 18,000 and isdivided into 18,000 shares with a nominal value of one Euro. The issued shares have been paid for incash. The issued shares have been issued to the Company. As of the date of this Offering Circular andother than as disclosed in this Offering Circular, the Issuer has no borrowings, indebtedness in thenature of borrowings, loan capital outstanding or created but unissued (including term loans),guarantees or material contingent liabilities.

Management

The Company, as the incorporator and sole shareholder of the Issuer, has appointed AmicorpNetherlands B.V., a limited liability company (besloten vennootschap met beperkteaansprakelijkheid), with official seat in Amsterdam, The Netherlands, and address at Prof. J.H.Bavincklaan 7, 1183 AT Amstelveen (registered with the trade register of the Chamber of Commerceand Industries for Amsterdam under number 33228837), to serve as the director of the Issuer.

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No financial statements for the Issuer are included in this Offering Circular, and the Issuer willnot publish financial statements on an interim basis or otherwise (except for such statements, if any,which the Issuer is required by Dutch law to publish), because the Issuer will not have any operationsindependent from the Company and the Issuer’s obligations under the Bonds will be guaranteed by theGuarantor to the extent set forth in this Offering Circular. In addition, the Issuer does not intend tofurnish to the Trustee or the Bondholders financial statements of, or other reports relating to, theIssuer. Any such information or reports, if published, will be delivered to and made available at theSpecified Office of the Principal Paying Agent.

Since June 2, 2005, there has been no material adverse change in the financial condition orresults of operations of the Issuer.

The issuance of the Bonds was approved by the Board of Directors on behalf of the Issuer as ofJune 8, 2005.

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TERMS AND CONDITIONS OF THE BONDS

The following (subject to completion and amendment and other than the words in italics andsubject to the provisions of the global Bonds) are the terms and conditions substantially in the formin which they will be endorsed on the Bonds if issued in definitive certificated form, which will beincorporated by reference into the Global Certificate representing the Bonds, subject to the provisionsof such Global Certificate. See “Covenants and Definitions” below for the definitions of certaincapitalised terms used herein.

The issue of the US$325,000,000 aggregate principal amount of 10.25% guaranteed bonds due2010 (the “Bonds”) and of any Additional Bonds of GT 2005 Bonds B.V. (the “Issuer”), wasauthorised by a resolution of the Board of Directors of the Issuer passed on June 8, 2005 and theguarantee of the Bonds (the “Guarantee”) was authorised by a resolution of the Board of Directorsof PT Gajah Tunggal Tbk (the “Guarantor”) on July 11, 2005. The Bonds are constituted by a trustdeed (the “Trust Deed”) dated on or before July 21, 2005 and made between the Issuer, the Guarantorand The Hongkong and Shanghai Banking Corporation Limited as trustee (the “Trustee” which termshall, where the context so permits, include all other persons or companies for the time being actingas trustee or trustees under the Trust Deed) for the holders of the Bonds (the “Bondholders”). TheIssuer and the Guarantor have entered into a registrar and paying agency agreement (the “AgencyAgreement”) dated on or before July 21, 2005 with the Trustee, The Hongkong and Shanghai BankingCorporation Limited as principal paying agent (the “Principal Paying Agent”), The Hongkong andShanghai Banking Corporation Limited as registrar (the “Registrar”), The Hongkong and ShanghaiBanking Corporation Limited as transfer agent (the “Transfer Agent”) and other paying agentsappointed under it (each a “Paying Agent” and together with the Principal Paying Agent, the “PayingAgents”), relating to the Bonds. The Paying Agents, the Registrar and the Transfer Agent arecollectively referred to as the “Agents” and such expression includes any successor or additional agentappointed pursuant to the Agency Agreement with respect to the Bonds. References to the “PrincipalPaying Agent”, “Paying Agent”, “Registrar”, “Transfer Agent” and “Agents” below are referencesto the principal paying agent, paying agent, registrar, transfer agent and agents for the time being. Solong as the Bonds are listed on the Singapore Exchange Securities Trading Limited (the “SGX-ST”),and, if so required by the SGX-ST, references to “Agents” shall include the Singapore Agent (asdefined in Condition 17). The statements in these Conditions include summaries of, and are subjectto, the detailed provisions of the Trust Deed and the Agency Agreement. Copies of the Trust Deed andof the Agency Agreement are available for inspection during normal business hours on any weekday(except public holidays) by Bondholders at the specified office of the Principal Paying Agent beingat the date hereof at Level 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong. TheBondholders are entitled to the benefit of the Trust Deed and are bound by, and are deemed to havenotice of, all the provisions of the Trust Deed and the Agency Agreement applicable to them. In actingunder the Agency Agreement and in connection with the Bonds, the Agents act solely as agents of theIssuer and (to the extent provided therein) the Trustee and do not assume any obligations towards orrelationship of agency or trust for or with any of the Bondholders. Capitalised terms not otherwisedefined shall have the meanings given to them in Condition 4.14 herein. Terms used in theseConditions have the meaning given to them in the Trust Deed unless the context otherwise requires.

1. STATUS AND GUARANTEE

1.1 Status of the Bonds

The Bonds constitute direct, unsubordinated, unconditional and unsecured obligations of theIssuer and shall at all times rank pari passu and without any preference or priority among themselves.The payment obligations of the Issuer under the Bonds shall, save for such obligations as may bepreferred by provisions of law that are both mandatory and of general application and subject toCondition 4, at all times rank at least equally with all of its other present and future unsecured andunsubordinated obligations.

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1.2 GuaranteeThe Guarantor has in the Trust Deed unconditionally and irrevocably guaranteed the due and

punctual payment of all sums from time to time payable by the Issuer in respect of its obligationsunder the Bonds, the Trust Deed and the Agency Agreement. This Guarantee constitutes the direct,unsubordinated, unconditional and unsecured obligation of the Guarantor which will at all times rankat least equally in right of payment to all present and future unsecured and unsubordinated obligationsof the Guarantor (including without limitation the Series A FRNs and Series C FRNs), save for suchobligations may be preferred by provisions of law that are both mandatory and of general application.

2. FORM AND DENOMINATION

The Bonds are issued in individual fully registered form, without interest coupons or principalreceipts attached, in minimum denominations of US$1,000. An individual certificate will be issued toeach Bondholder in respect of its registered holding or holdings of Bonds. Upon issue, the Bonds willbe represented by a permanent global certificate (a “ Global Certificate”) in fully registered formwhich will be deposited with the custodian for and registered in the name of a nominee for a commondepositary for Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”) andClearstream Banking, societe anonyme (“Clearstream, Luxembourg”).

If the Bonds are issued in definitive form pursuant to their terms, a definitive certificate inrespect of each Bond (a “Definitive Certificate”) will be issued in registered form and seriallynumbered with an identifying number which will be recorded in the register (the “Register”) whichthe Issuer shall procure to be kept by the Registrar.

3. TITLE AND TRANSFER

(a) Title to the Bonds passes upon registration of transfers in the register which the Issuer willprocure to be kept by the Registrar in accordance with the provisions of the AgencyAgreement and the Trust Deed. The registered holder of any Bond will (except as otherwiserequired by law) be treated as its absolute owner for all purposes (whether or not anypayment in respect of it is overdue and regardless of any notice of ownership, trust or anyinterest in it, any writing on it, (other than a duly completed and endorsed form of transferin respect of such Bond) or its theft or loss) and no person will be liable for so treating suchholder.

(b) Subject to Condition 3(e), one or more Bonds may be transferred in whole or in part innominal amounts equal to US$1,000. Transfers of beneficial interests in the GlobalCertificate will be effected subject to and in accordance with the Agency Agreement. Bondsrepresented by Definitive Certificates may be transferred only upon the surrender, at thespecified office of the Registrar or Transfer Agent, of the Definitive Certificaterepresenting such Bond(s) to be transferred, with the form of transfer endorsed on suchDefinitive Certificate duly completed and executed and together with such other evidenceas the Registrar or Transfer Agent may reasonably require. In the case of a transfer of partonly of a holding of Bonds represented by one Definitive Certificate, a new DefinitiveCertificate will be issued to the transferee in respect of the part transferred and a furthernew Definitive Certificate in respect of the balance of the holding not transferred will beissued to the transferor.

(c) Each new Definitive Certificate to be issued pursuant to Condition 3(b) will be availablefor delivery and the Registrar shall register the transfer in question within five BusinessDays of receipt of such form of transfer. Delivery of new Definitive Certificate(s) shall bemade at the specified office of the Transfer Agent or of the Registrar, as the case may be,to whom delivery shall have been made or, at the option of the holder making such deliveryas aforesaid and as specified in the form of transfer or otherwise in writing, shall be mailedby pre-paid first class post at the risk of the holder entitled to the new Definitive Certificateto such address as may be so specified. For the purposes only of this Condition 3(c),“Business Day” means a day, other than a Saturday or Sunday, on which banks are open forbusiness in the place of the specified office of the Transfer Agent and the Registrar.

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(d) Transfers of Bonds and Definitive Certificates representing such Bonds in accordance withthese Conditions on registration or transfer will be effected without charge by or on behalfof the Issuer, the Registrar or the Transfer Agent, but upon payment (or the giving of suchindemnity as the Registrar or the Transfer Agent may require in respect thereof) of any taxor other governmental charges which may be imposed in relation to it.

(e) No Bondholder may require the transfer of a Bond to be registered during the period of 15calendar days ending on the due date for any payment of principal or interest or redemptionof that Bond.

(f) All transfers of Bonds and entries on the Register will be made subject to the detailedregulations concerning the transfer of Bonds scheduled to the Agency Agreement. Theregulations may be changed by the Issuer in any manner which is reasonably required bythe Issuer with the prior written approval of the Trustee and the Registrar. A copy of thecurrent regulations will be sent by the Registrar to any Bondholder upon request and isavailable at the offices of each of the Registrar and Transfer Agent.

4. COVENANTS AND DEFINITIONS

4.1 Limitation on Restricted Payments

(a) So long as any of the Bonds are outstanding, the Guarantor shall not, and shall not permitany of its Restricted Subsidiaries to, directly or indirectly:

(i) declare or pay any dividend on or make any distribution or other payment of any sortin respect of the Guarantor’s or any such Restricted Subsidiary’s Equity Interests(including any payment in connection with any merger or consolidation involving theGuarantor or any such Restricted Subsidiary) or to the direct or indirect holders of theGuarantor’s or any such Restricted Subsidiary’s Equity Interests, in their capacity assuch (other than dividends or distributions payable to the Guarantor or a RestrictedSubsidiary of the Guarantor);

(ii) purchase, redeem, defease or otherwise acquire or retire for value (including, withoutlimitation, in connection with any merger or consolidation involving the Guarantor orany such Restricted Subsidiary) any Equity Interests of the Guarantor or any direct orindirect parent of the Guarantor;

(iii) make any payment on or with respect to, or purchase, repurchase, redeem, defease orotherwise acquire or retire for value any Indebtedness that is contractuallysubordinated to the Bonds or the Guarantee (excluding any intercompanyIndebtedness between or among the Guarantor or any such Restricted Subsidiaries),except a payment of interest or principal at the Stated Maturity thereof; or

(iv) make any Investment, other than a Permitted Investment (a “Restricted Investment”),

(each such prohibited payment described in paragraphs (i) through (iv) of this Condition,being a “Restricted Payment”) unless at the time of and immediately after giving effectto the proposed Restricted Payment:

(A) no Default or Event of Default shall have occurred and be continuing (or would resulttherefrom);

(B) the Guarantor would, at the time of such Restricted Payment and after giving proforma effect thereto as if such Restricted Payment had been made at the beginning ofthe applicable four quarter period, have been permitted to Incur an additional US$1.00of Indebtedness pursuant to the provisions of Condition 4.2(a);

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(C) such Restricted Payment, together with the aggregate amount of all other RestrictedPayments made by the Guarantor and its Restricted Subsidiaries after the Issue Date(excluding Restricted Payments permitted by paragraphs (b)(i) and (b)(ii) below), isless than the sum, without duplication, of:

(1) 50% of the Consolidated Net Income of the Guarantor for the period (taken asone accounting period) from the beginning of the first fiscal quarter commencingafter the Issue Date to the end of the Guarantor’s most recently ended fiscalquarter for which internal financial statements are available at the time of suchRestricted Payment (or, if such Consolidated Net Income for such period is adeficit, less 100% of such deficit), plus

(2) 100% of the aggregate net cash proceeds received by the Guarantor since theIssue Date as a contribution to its common equity capital or from the issue orsale of Equity Interests of the Guarantor (other than Disqualified Stock) or fromthe issue or sale of convertible or exchangeable Disqualified Stock orconvertible or exchangeable debt securities of the Guarantor that have beenconverted into or exchanged for such Equity Interests (other than EquityInterests (or Disqualified Stock or debt securities) sold to a Subsidiary of theGuarantor), plus

(3) to the extent that any Restricted Investment that was made after the Issue Dateis sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) thecash return of capital with respect to such Restricted Investment (less the cost ofdisposition, if any) and (ii) the initial amount of such Restricted Investment.

(D) provided that, to the extent that any of the following would be a Restricted Paymentand would otherwise be prohibited under this Condition 4.1(a), the Guarantor may,and the Guarantor may permit any of its Restricted Subsidiaries to, make directly orindirectly:

(1) Restricted Payment (or, if such Consolidated Net Income for such period is adeficit, less 100% of such deficit), plus Restricted Payments otherwiseprohibited by paragraph (i) of this Condition 4.1(a) within 60 days after the dateof the declaration to make such a payment or payments; provided that theprovisions of paragraphs (A), (B) and (C) of this Condition 4.1(a) are satisfiedat the date of such declaration even if the provisions of paragraphs (A), (B) and(C) are not satisfied at the date of payment; and

(2) the payment of any dividend by a Restricted Subsidiary of the Guarantor toholders of its Equity Interests on a pro rata basis.

(b) So long as no Default or Event of Default has occurred and is continuing or would becaused thereby, the provisions of Condition 4.1(a) shall not prohibit any of the following:

(i) any purchase, redemption, defeasance, or other acquisition or retirement for value ofEquity Interests of the Guarantor or Subordinated Indebtedness of the Guarantor madeby exchange for, or out of the proceeds of the substantially concurrent sale (other thanto a Subsidiary of the Guarantor) of, Equity Interests of the Guarantor (other thanDisqualified Stock), provided that the amount of any such net cash proceeds that areutilised for any such purchase, redemption, defeasance or other acquisition orretirement will be excluded from paragraph (B) of Condition 4.1(a);

(ii) any purchase, redemption, defeasance or other acquisition or retirement for value ofSubordinated Indebtedness of the Guarantor (at maturity or otherwise) made byexchange for, or out of the cash proceeds of the substantially concurrent Incurrence(other than to a Subsidiary) of, Refinancing Indebtedness;

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(iii) any repurchase or other acquisition of Capital Stock of the Guarantor or any of itsSubsidiaries from employees, former employees, directors or former directors of theGuarantor or any of its Subsidiaries, pursuant to the terms of any management equityplan or stock option plan or any other management or employee benefit plan,agreement or trust; provided that the aggregate amount of such repurchases and otheracquisitions shall not exceed US$1,000,000 in any fiscal year; and

(iv) Restricted Payments referred to in clauses (i), (ii) and (iii) of Condition 4.1(a) in anaggregate amount not to exceed, together with all other such Restricted Paymentsmade pursuant to this clause (iv), US$20,000,000 since the Issue Date.

The amount of all Restricted Payments (other than cash) will be the fair market value on the dateof the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by theGuarantor or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Thefair market value of any assets or securities that are required to be valued by this Condition 4.1 willbe determined by two Authorised Officers and set forth in an Officers’ Certificate delivered to theTrustee if the fair market value of such assets or securities is at least US$1,000,000; provided,however, that if the fair market value of such assets or securities is at least US$3,000,000, the fairmarket value will be determined by the relevant Board of Directors, whose Board Resolution withrespect thereto will be delivered to the Trustee. The Board of Directors’ determination must be basedupon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of nationalstanding if the fair market value of such assets or securities is at least US$5,000,000. Not later thanthe date of making any Restricted Payment, the Guarantor will deliver to the Trustee an Officers’Certificate stating that such Restricted Payment is permitted and setting forth the basis upon whichthe calculation required by this Condition 4.1 were computed, together with a copy of any BoardResolution or fairness opinion or appraisal required hereby.

4.2 Limitation on Incurrence of Indebtedness

(a) The Guarantor shall not, and shall not permit any of its Restricted Subsidiaries to, directlyor indirectly, Incur any Indebtedness (including Acquired Debt), and the Guarantor will notissue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issueany shares of Preferred Stock, except that the Guarantor may, subject to paragraph (c)below, Incur Indebtedness (including Acquired Debt) or issue Disqualified Stock and itsRestricted Subsidiaries may Incur Indebtedness (including Acquired Debt) or issuePreferred Stock if, determined on a pro forma basis (including pro forma application of thenet proceeds from such Incurrence of Indebtedness), as if the additional Indebtedness hadbeen Incurred or such Disqualified Stock or Preferred Stock had been issued at thebeginning of the Relevant Period:

(i) the Leverage Ratio would have been less than:

(x) 5.50 to 1.00 if the date of such Incurrence is prior to January 1, 2007, or

(y) 4.00 to 1.00 if the date of such Incurrence is on or after January 1, 2007;

(ii) the Consolidated Debt to Consolidated Tangible Net Worth Ratio would have been lessthan:

(x) 2.50 to 1.00 if the date of such Incurrence is prior to January 1, 2007, or

(y) 2.00 to 1.00 if the date of such Incurrence is on or after January 1, 2007; and

(iii) the Consolidated Current Assets to Consolidated Current Liabilities Ratio would havebeen at least 1.00 to 1.00.

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(b) Notwithstanding Condition 4.2(a), nothing in this Condition shall limit the ability of theIssuer or the Guarantor to Incur the following Indebtedness:

(i) Indebtedness of the Guarantor outstanding on the Issue Date (including the Series AFRNs and the Series C FRNs after giving effect to the redemption of the Series AFRNs and the Series C FRNs on the Issue Date;

(ii) Indebtedness of the Issuer represented by the Bonds to be issued on the Issue Date,and of the Guarantor under the Guarantee, to be issued on the Issue Date and of theGuarantor under the Intercompany Loan (for the avoidance of doubt, no AdditionalBonds may be issued in reliance on this Condition 4.2(b)(ii));

(iii) Indebtedness Incurred by the Guarantor or any of its Restricted Subsidiaries pursuantto letters of credit which are entered into in the ordinary course of business in anaggregate principal amount at any one time outstanding (such amount being deemedto be the maximum potential liability of the Guarantor and its Restricted Subsidiariesthereunder) not exceeding (A) US$150,000,000 if such Indebtedness is Incurred on orprior to the second anniversary of the Issue Date, or (B) US$100,000,000 if suchIndebtedness is Incurred thereafter; provided that upon the drawing of such letters ofcredit, such obligations are reimbursed within 120 days following such drawing;provided further that the aggregate of all principal amounts drawn and outstandingunder such letters of credit is reduced to an outstanding balance of (A) US$30,000,000or less during a period of at least seven consecutive days (each such period, a “LCClean Down Period”) prior to each of the first and second anniversaries of the IssueDate and (B) US$20,000,000 or less during a LC Clean Down Period prior to eachsuch anniversary thereafter; and provided further, that not less than six months elapsebetween LC Clean Down Periods;

(iv) Subordinated Shareholder Funding;

(v) Indebtedness of the Guarantor maturing within 12 months and Incurred underunsecured financing facilities to meet ordinary course operational needs in anaggregate principal amount outstanding at any one time not exceeding US$30,000,000(or its foreign currency equivalent); provided that the aggregate principal amount ofall Indebtedness Incurred pursuant to this clause (v) is reduced to an outstandingbalance of US$20,000,000 or less for at least seven consecutive days in each fiscalyear (each, a “Clean Down Period” and that not less than six months elapse betweentwo Clean Down Periods;

(vi) Indebtedness of the Guarantor under any Hedge Agreement in each case entered intoin the ordinary course of the Guarantor’s business, and not for investment orspeculative purposes; provided that such Hedge Agreement does not increase theIndebtedness of the Guarantor outstanding at any time other than as a result offluctuations in interest rates, foreign currency exchange rates or commodity prices orby reason of fees, indemnities and compensation payable thereunder;

(vii) Obligations of the Guarantor in respect of performance, customs or other similarbonds and shipping guarantees provided by, or similar credit transactions entered intoby, the Guarantor in the ordinary course of business;

(viii) Refinancing Indebtedness Incurred by the Guarantor or a Restricted Subsidiary inexchange for, or the net proceeds of which are used to renew, refund, refinance,replace, defease or discharge, any Indebtedness (other than intercompanyIndebtedness) that was permitted to be incurred under Condition 4.2(a) or clause (ii)or (xiii) of this Condition 4.2(b);

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(ix) the Incurrence by the Guarantor or any of its Restricted Subsidiaries of intercompanyIndebtedness between the Guarantor and any of its Restricted Subsidiaries; provided,however, that:

(A) if the Guarantor is the obligor on such Indebtedness, such Indebtedness isexpressly subordinated to the prior payment in full in cash of all Obligationswith respect to the Bonds; and

(B) (i) any subsequent issuance or transfer of Equity Interests that results in any suchIndebtedness being held by a Person other than the Guarantor or a RestrictedSubsidiary of the Guarantor and (ii) any sale or other transfer of any suchIndebtedness to a Person that is not either the Guarantor or a RestrictedSubsidiary of the Guarantor; will be deemed, in each case, to constitute anIncurrence of such Indebtedness by the Guarantor or such Restricted Subsidiary,as the case may be, that was not permitted by this clause (ix);

(x) any other Indebtedness approved by Bondholders holding at least a 662⁄3% of theaggregate principal amount of Bonds then outstanding;

(xi) Indebtedness of the Guarantor represented by Purchase Money Obligations or CapitalLease Obligations, in each case, Incurred for the purpose of financing all or any partof the purchase price or cost of construction or improvement of property, plant orequipment used in the Line of Business of the Guarantor or its Subsidiaries, in anaggregate amount which, when taken together with all other Indebtedness Incurred bythe Guarantor pursuant to this clause (xi) and then outstanding, does not exceedUS$25,000,000;

(xii) Indebtedness of a Finance Subsidiary, provided, however, that:

(A) such Indebtedness is unconditionally guaranteed by the Guarantor;

(B) such Indebtedness, if Incurred by the Guarantor, would be permitted to beIncurred by the Guarantor under another provision of this Condition 4.2(including, without limitation, clause (viii) above), and the Guarantor’sguarantee thereof will be deemed to be an Incurrence of such Indebtedness by theGuarantor under the relevant other provision of this Condition 4.2; and

(C) all of the net proceeds of such Indebtedness (net of related expenses) are lent,directly or indirectly, by such Finance Subsidiary to the Guarantor or a WhollyOwned Subsidiary of the Guarantor; and

(xiii) Indebtedness of the Issuer represented by Additional Bonds, if any, issued inaccordance with Condition 15, of the Guarantor under the Guarantee in respect ofAdditional Bonds and of the Guarantor under the Intercompany Loan funded with theproceeds of Additional Bonds, provided that the aggregate principal amount ofAdditional Bonds at any time outstanding does not exceed an amount equal to (A)US$450,000,000, less (B) the aggregate principal amount of the Bonds issued on theIssue Date; and provided further that the proceeds of the Intercompany Loan fundedwith the proceeds of Additional Bonds shall be applied by the Guarantor only to fundcapital expenditures of the Guarantor or its Restricted Subsidiaries and, at the timesuch Additional Bonds are issued, the Guarantor provides an Officers’ Certificatesetting forth such expenditures in reasonable detail and confirming that they arecapital expenditures for purposes of GAAP.

(c) Notwithstanding Conditions 4.2(a) and (b), the Guarantor shall not, and shall not permitany of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness if theproceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire,refund or refinance any Indebtedness (other than Refinancing Indebtedness Incurred underclause (viii) above) where the new Indebtedness will be Incurred by a reason of acomputation of the Leverage Ratio which calculation includes the effect of a proposal to

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repay existing Indebtedness by the Guarantor or a Restricted Subsidiary (and where theIncurrence of the new Indebtedness by the Guarantor or such Restricted Subsidiary wouldonly be permitted because of the effect on such calculation of the proposal to repay theother existing Indebtedness) unless:

(i) the Guarantor or such Restricted Subsidiary, as applicable, shall have given anirrevocable notice of redemption, prepayment or repayment (as the case may be) onthe Incurrence of the new Indebtedness to the holders of the existing Indebtedness tobe redeemed, prepaid or repaid (as the case may be) by the Guarantor or suchRestricted Subsidiary, as applicable; and

(ii) an amount equal to the Net Available Cash from the new Indebtedness shall be heldon trust by the Guarantor or such Restricted Subsidiary, as applicable, for the benefitof the holders of the existing Indebtedness to be redeemed, prepaid or repaid by theGuarantor or such Restricted Subsidiary, as applicable, until the earlier of (i) its usefor the purposes of redemption, prepayment or repayment of such existingIndebtedness or (ii) the full discharge of such existing Indebtedness by any othermeans,

provided that no payment of a Restricted Payment shall be made from or in respect of theamount held in trust in accordance with paragraph (B) until the Existing Indebtedness to beredeemed, prepaid or repaid has been irrevocably redeemed, prepaid or repaid or has orotherwise been discharged in accordance with paragraph (B).

For purposes of determining compliance with this Condition 4.2, (1) the outstandingprincipal amount of any particular Indebtedness shall be counted only once and any Obligationarising under any guarantee, Security Interest, letter of credit or similar instrument supportingsuch Indebtedness shall be disregarded, and (2) in the event that an item of proposedIndebtedness meets the criteria of more than one of the categories of Indebtedness permittedunder clause (i) to (xi) above, or is entitled to be Incurred pursuant to the first paragraph of thisCondition 4.2, the Guarantor in its sole discretion will be permitted to divide and classify suchitem of Indebtedness on the date of its Incurrence or later classify, reclassify or divide andclassify such item of Indebtedness on the date of its Incurrence or later classify, reclassify ordivide all or a portion of such Indebtedness in any manner that complies with this Condition 4.2.The accrual of interest, the accretion or amortisation of original issue discount, the payment ofany interest on any Indebtedness in the form of additional Indebtedness with the same terms, thereclassification of Preferred Stock as Indebtedness due to a change in accounting principles, andthe payment of dividends on Disqualified Stock in the form of additional shares of the same classof Disqualified Stock will not be deemed to be an Incurrence of Indebtedness or Issuance ofDisqualified Stock for purposes of this Condition 4.2; provided, in each such case, that theamount of any such accrual, accretion or payment is included in Consolidated Debt of theGuarantor as accrued. Notwithstanding any other provision of this Condition 4.2, the maximumamount of Indebtedness that the Guarantor or any Restricted Subsidiary of the Guarantor mayincur pursuant to this Condition 4.2 shall not be deemed to be exceeded solely as a result offluctuations in exchange rates or currency values.

4.3 Limitation on Payment Restrictions Affecting Restricted SubsidiariesThe Guarantor shall not, and shall not permit any of its Restricted Subsidiaries to, create or

otherwise cause or permit to exist or become effective any consensual encumbrance or restriction onthe ability of any Restricted Subsidiary to:

(a) pay dividends or make any other distributions on its Equity Interests to the Guarantor or anyof its Restricted Subsidiaries, or with respect to any other interest or participation in, ormeasured by, its profits;

(b) pay any Indebtedness owed to the Guarantor or any of its Restricted Subsidiaries;

(c) make any loans or advances to the Guarantor or any of its Restricted Subsidiaries; or

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(d) transfer any of its properties or assets to the Guarantor or any of its Restricted Subsidiaries;

provided, that the foregoing shall not apply to encumbrances or restrictions existing under or byreason of:

(i) the Bonds and the Trust Deed;

(ii) applicable law;

(iii) any instrument governing Indebtedness or Capital Stock of a Person acquired by theGuarantor or any of its Subsidiaries as in effect at the time of such acquisition (except tothe extent such Indebtedness or Capital Stock was incurred in connection with or incontemplation of such acquisition), which encumbrance or restriction is not applicable toany Person, or the properties or assets of any Person, other than the Person, or the propertyor assets of the Person, so acquired, provided that, in the case of Indebtedness, suchIndebtedness was permitted by Condition 4.2 to be Incurred;

(iv) customary non-assignment provisions in leases entered into in the ordinary course ofbusiness and consistent with past practices;

(v) purchase money obligations for property acquired in the ordinary course of business thatimpose restrictions on that property of the nature described in paragraph (d) of thepreceding paragraph;

(vi) any agreement for the sale or other disposition of a Restricted Subsidiary that restrictsdistributions by that Restricted Subsidiary pending its sale or other disposition;

(vii) Permitted Refinancing Indebtedness, provided that the restrictions contained in theagreements governing such Permitted Refinancing Indebtedness are no more restrictive,taken as a whole, than those contained in the agreements governing the Indebtedness beingrefinanced;

(viii) Security Interests securing Indebtedness otherwise permitted to be incurred under theprovisions of Condition 4.4 that limit the right of the debtor to dispose of the assets subjectto such Security Interests;

(ix) provisions with respect to the disposition or distribution of assets or property in jointventure agreements, assets sale agreements, stock sale agreements and other similaragreements entered into in the ordinary course of business; and

(x) restrictions on cash or other deposits or net worth imposed by customers under contractsentered into in the ordinary course of business.

4.4 Negative Pledge

So long as any of the Bonds are outstanding:

(a) the Guarantor shall not, and shall procure that none of its Restricted Subsidiaries shall, (i)directly or indirectly, incur or permit to exist any Security Interest (other than a PermittedSecurity Interest) of any nature whatsoever upon the whole or any part of its present orfuture undertaking, assets or revenue to secure any Indebtedness or any guarantee ofIndebtedness unless all payments due under the Bonds and the Trust Deed are secured onan equal and rateable basis with the Indebtedness so secured until such time as suchIndebtedness is no longer secured by such Security Interest and (ii) give any guarantee withrespect to Indebtedness of any Person (other than a Permitted Loan/Guarantee);

(b) the Guarantor shall not permit any Person which is not the Guarantor or its RestrictedSubsidiary to give any guarantee with respect to any Indebtedness of any RestrictedSubsidiary of the Guarantor and/or the Guarantor; and

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(c) the Issuer shall not (i) directly or indirectly, incur or permit to exist any Security Interestof any nature whatsoever upon the whole or any part of its present or future undertaking,assets or revenue to secure any Indebtedness or any guarantee of any Indebtedness or (ii)give any guarantee with respect to any Indebtedness of any Person.

4.5 Compliance Certificate

(a) The Issuer and Guarantor shall, within 120 calendar days after the close of each annualFiscal Period following the issuance of the Bonds, file with the Trustee, together with thefinancial statements for such Fiscal Period filed pursuant to Condition 4.6(a), an Officers’Certificate, covering the period from the Issue Date to the end of the annual Fiscal Periodin which the Bonds were issued, in the case of the first such certificate, and covering thepreceding annual Fiscal Period in the case of each subsequent certificate, and statingwhether or not, to the best knowledge of each such executing Officer of the Issuer orGuarantor, as the case may be, has complied with and performed and fulfilled all covenantsand obligations on its part contained in the Conditions and the Trust Deed and is not indefault in the performance or observance of any of the terms or provisions contained in theConditions and the Trust Deed, and, if any such signatory has obtained knowledge of anydefault by the Issuer or Guarantor, as the case may be, in the performance, observance orfulfilment of any such covenant, term or provision specifying each such default and thenature thereof. For the purpose of this Condition 4.5, compliance shall be determinedwithout regard to any grace period or requirement of notice provided pursuant to the termsof the Bonds and the Trust Deed.

(b) The Officers’ Certificate filed pursuant to Condition 4.5(a) shall also set forth a calculationof (i) the Leverage Ratio, (ii) the Consolidated Debt to Consolidated Tangible Net WorthRatio, and (iii) the Consolidated Current Assets to Consolidated Current Liabilities Ratio,in each case as of the balance sheet date of the most recent quarterly Fiscal Period for whichfinancial information is available, setting forth each component of the calculation thereof.

4.6 Reports and financial information

The Guarantor shall file with the Trustee, in the case of each annual Fiscal Period, within 120days and, in the case of each quarterly Fiscal Period (other than the last quarterly Fiscal Period in anannual Fiscal Period), within 90 calendar days after the close of each Fiscal Period, three copies, ineach case in the English language, (and shall make available to the Trustee and the Agents as manyfurther copies as they may reasonably request in order to satisfy requests from Bondholders for them)of the following:

(a) in the case of each annual Fiscal Period of the Guarantor, the audited consolidated financialstatements of the Guarantor (including an audit report by the Guarantor’s auditors inrelation to such audited financial statements) as at the end of, and for, such Fiscal Periodand prepared in accordance with GAAP; and

(b) in the case of each quarterly Fiscal Period falling within each of the annual Fiscal Periods(other than the last quarterly Fiscal Period in an annual Fiscal Period), the quarterly interimreport containing unaudited Consolidated profit and loss account, balance sheet and cashflow statement in respect of such quarterly Fiscal Period for the Guarantor, which accountsor financial statements are prepared on a basis substantially consistent with the most recentaudited financial statements, or which indicate the way in which their basis of preparationis different.

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4.7 Limitation on Transactions with Affiliates

The Guarantor shall not, and shall not permit any of its Restricted Subsidiaries to, make anypayment to or sell, lease, transfer, or otherwise dispose of any of its properties or assets to, or purchaseany property or assets from, or enter into or make or amend any transaction, contract, agreement,understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an “AffiliateTransaction”) unless:

(a) the terms of such Affiliate Transaction are no less favourable to the Guarantor or RestrictedSubsidiary, as the case may be, than would have been obtained in a comparable transactionby the Guarantor or such Restricted Subsidiary with an unrelated Person; and

(b) the Guarantor delivers to the Trustee:

(i) with respect to any Affiliate Transaction or series of related Affiliate Transactionsinvolving aggregate consideration in excess of US$3,000,000, a resolution of therelevant Board of Directors set forth in an Officers’ Certificate certifying that suchAffiliate Transaction complies with this Condition 4.7 and that such AffiliateTransaction has been approved by a majority of the disinterested members of theBoard of Directors; and

(ii) with respect to any Affiliate Transaction or series of related Affiliate Transactionsinvolving aggregate consideration in excess of US$5,000,000, an opinion as to thefairness to the Bondholders of such Affiliate Transaction from a financial point ofview issued by an accounting, appraisal or investment banking firm of internationalstanding.

The foregoing will not prohibit:

(a) any employment agreement entered into by the Guarantor or any of its RestrictedSubsidiaries in the ordinary course of business of the Guarantor or such RestrictedSubsidiary and agreements relating to employment matters between the Guarantor andconsistent with the past practice of the Guarantor or such Restricted Subsidiary;

(b) transactions between or among the Guarantor and/or its Restricted Subsidiaries;

(c) transactions with a Person that is an Affiliate of the Guarantor solely because the Guarantorowns an Equity Interest in, or controls, such Person;

(d) payment of reasonable directors fees to Persons who are not otherwise Affiliates of theGuarantor;

(e) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Guarantor;

(f) transactions with purchasers or suppliers of goods or services, in each case in the ordinarycourse of business, provided that with respect to any such transactions involving aggregateconsideration in excess of US$3,000,000, the Guarantor delivers to the Trustee a resolutionof the relevant Board of Directors set forth in an Officers’ Certificate certifying that theterms of such transactions are no less favourable to the Guarantor or Restricted Subsidiary,as the case may be, than would have been obtained in a comparable transaction by theGuarantor or such Restricted Subsidiary with an unrelated Person; and

(g) transactions pursuant to agreements in existence on the Issue Date (on the terms in effecton such date) and any amendment or supplement thereto that is not less favourable to theGuarantor or Restricted Subsidiary, as the case may be, than such agreement as in effect ofthe Issue Date; and

(h) Restricted Payments that are permitted by Condition 4.1.

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4.8 Limitation on Sales of AssetsThe Guarantor shall not, and shall not permit any of its Restricted Subsidiaries to, consummate

an Asset Sale unless:

(a) the Guarantor or such Restricted Subsidiary as the case may be, receives consideration atthe time of such Asset Sale at least equal to the fair market value of the assets or EquityInterests issued or sold or otherwise disposed of;

(b) the fair market value is determined by two Authorised Officers of the Guarantor, andevidenced by an Officers’ Certificate delivered to the Trustee; and

(c) at least 75% of the consideration received in the Asset Sale by the Guarantor or suchRestricted Subsidiary is in the form of cash or cash equivalents, provided that such cashequivalents are converted into cash within seven days of receipt by the Person receivingsuch payment. For purposes of this provision, each of the following will be deemed to becash:

(i) any liabilities, as shown on the Guarantor’s or such Restricted Subsidiary’s mostrecent balance sheet, of the Guarantor, or such Restricted Subsidiary (other thancontingent liabilities and liabilities that are by their terms subordinated to the Bondsor the Guarantee) that are assumed by the transferee of any such assets pursuant to acustomary novation agreement that releases the Guarantor or such RestrictedSubsidiary from further liability; and

(ii) any securities, notes or other obligations received by Guarantor or such RestrictedSubsidiary from such transferee that are contemporaneously, subject to ordinarysettlement periods, converted by Guarantor or such Restricted Subsidiary into cash, tothe extent of the cash received in that conversion.

Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Guarantormay apply those Net Cash Proceeds:

(i) to repay Indebtedness and other obligations senior to the Bonds and, if the Indebtednessrepaid is revolving credit Indebtedness, to correspondingly reduce commitments withrespect thereto;

(ii) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, aPerson engaged in the same Line of Business;

(iii) to make a capital expenditure; or

(iv) to acquire other long-term assets that are used or useful in the Line of Business.

Pending the final application of any Net Cash Proceeds, such Net Cash Proceeds may be investedin cash equivalents or applied temporarily to reduce revolving credit borrowings.

Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in thepreceding paragraph will constitute “Excess Proceeds” When the aggregate amount of ExcessProceeds exceeds US$20,000,000, Guarantor and Issuer will make an offer (“Excess Proceeds Offer”)to all Bondholders and holders of other Indebtedness that is pari passu with the Bonds containingprovisions similar to those set forth herein with respect to offers to purchase or redeem with theproceeds of Asset Sales to purchase the maximum principal amount of Bonds and such other paripassu Indebtedness that may be purchased out of the Excess Proceeds, pro rata, not more than 60calendar days thereafter (“Excess Proceeds Payment Date”). The offer price in any Excess ProceedsOffer will be equal to 100% of principal amount plus accrued and unpaid interest to the date ofpurchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an ExcessProceeds Offer, Guarantor and its Restricted Subsidiaries may use those Excess Proceeds for anypurpose not otherwise prohibited by these Conditions. If the aggregate principal amount of Bonds and

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other pari passu Indebtedness tendered into such Excess Proceeds Offer exceeds the amount of ExcessProceeds, the Trustee will select the Bonds and such other pari passu Indebtedness to be purchasedon a pro rata basis. Upon completion of each Excess Proceeds Offer, the amount of Excess Proceedswill be reset at zero.

4.9 Sale and Leaseback Transactions

The Guarantor will not, and will not permit any of its Restricted Subsidiaries to, enter into anysale and leaseback transaction; provided that the Guarantor or any of its Restricted Subsidiaries mayenter into a sale and leaseback transaction if:

(a) the Guarantor or such Restricted Subsidiary, as applicable, could have (i) incurredIndebtedness in an amount equal to the Attributable Debt relating to such sale and leasebacktransaction under Condition 4.2(a) and (ii) incurred a Security Interest to secure suchIndebtedness pursuant to Condition 4.4;

(b) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fairmarket value, as determined by two Authorised Officers and as set forth in an Officers’Certificate delivered to the Trustee, of the property that is the subject of that sale andleaseback transaction; and

(c) the transfer of assets in that sale and leaseback transaction is permitted by, and theGuarantor or such Restricted Subsidiary applies the proceeds of such transaction incompliance with, Condition 4.8.

4.10 Payment of Stamp Duty and Other Taxes

The Issuer and Guarantor will pay any present or future stamp, court or documentary taxes, orany other excise or property taxes, charges or similar levies which arise under the laws of TheNetherlands and the Republic of Indonesia, respectively, from the execution, delivery or registrationof the Bonds or any other document or instrument referred to in these Conditions.

4.11 Limitation on Changes in the Nature of the Business

The Guarantor shall not, and shall not permit any of its Restricted Subsidiaries to, engage in anyactivity other than the Line of Business and any other activities reasonably related to the Line ofBusiness.

4.12 Limitation on Activities of the Issuer

Notwithstanding anything contained in the Trust Deed to the contrary, the Issuer will not engagein any business activity or undertake any other activity, except any activity (a) relating to the offering,sale or issuance of the Bonds, the Incurrence of Indebtedness represented by the Bonds, lending theproceeds thereof to the Guarantor under the terms of the Intercompany Loan and any other activitiesin connection therewith, (b) undertaken with the purpose of fulfilling any obligations under the Bonds,the Trust Deed or the Agency Agreement or (c) directly related to the establishment and/ormaintenance of the Issuer’s corporate existence.

The Issuer shall not (a) issue any Capital Stock other than the issuance of its ordinary shares tothe Guarantor or otherwise in a de minimis amount to local residents to the extent required byapplicable law or (b) acquire or receive any property or assets (including, without limitation, anyEquity Interests or Indebtedness of any Person), other than the Intercompany Loan or payments inrespect thereof.

The Issuer shall at all times remain a Wholly Owned Subsidiary of the Guarantor.

Whenever the Issuer receives a payment or prepayment under the Intercompany Loan, it shall usethe funds received solely to satisfy its obligations (to the extent of the amount owing in respect of suchobligations) under the Bonds, the Trust Deed and the Agency Agreement.

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For so long as any Bonds are outstanding, neither the Issuer nor the Guarantor will commenceor take any action to cause a winding-up or liquidation of the Issuer.

Except as provided in the Trust Deed, the Issuer shall not, and the Guarantor shall procure thatthe Issuer does not, assign or novate its rights under the Intercompany Loan.

4.13 Payments for Consent

The Guarantor will not, and will not permit any of its Restricted Subsidiaries to, directly orindirectly, pay or cause to be paid any consideration to or for the benefit of any holder of Bonds foror as an inducement to any consent, waiver or amendment of any of the terms or provisions of the TrustDeed or the Bonds unless such consideration is offered to be paid and is paid to all Bondholders thatconsent, waive or agree to amend in the time frame set forth in the solicitation documents relating tosuch consent, waiver or agreement.

4.14 Definitions

In these Conditions, the following terms shall have the meaning set out below:

“Acquired Debt” means, with respect to any specified Person:

(a) Indebtedness of any other Person existing at the time such other Person is merged with orinto or became a Subsidiary of such specified Person, whether or not such Indebtedness isincurred in connection with, or in contemplation of, such other Person merging with or into,or becoming a Subsidiary of, such specified Person; and

(b) Indebtedness secured by a Security Interest encumbering any asset acquired by suchspecified Person.

“Affiliate” of any specified Person means any other Person, directly or indirectly, controlling orcontrolled by or under direct or indirect common control with such specified Person. For the purposesof this definition, “control” when used with respect to any Person means the power to direct themanagement and policies of such Person, directly or indirectly, whether through the ownership ofvoting securities, by contract or otherwise; and the terms “controlling” and “controlled” havemeanings correlative to the foregoing. For the purposes of Condition 4.7 only, “Affiliate” shall alsomean any beneficial owner of 5% or more of the total Voting Shares (on a Fully Diluted Basis) of theGuarantor or any of its Restricted Subsidiaries, as applicable, or of rights or warrants to purchase suchstock (whether or not currently exercisable) and any Person who would be an Affiliate of any suchbeneficial owner pursuant to the first sentence of this definition.

“Asset Sale” means:

(a) the sale, lease, conveyance or other disposition of any assets or rights, other than sales ofinventory in the ordinary course of business consistent with past practices; provided that thesale, conveyance or other disposition of all or substantially all of the assets of Guarantorand its Subsidiaries taken as a whole will be governed by the provisions of Condition 7 andnot by the provisions of Condition 4.8; and

(b) the issuance of Equity Interests in any of the Guarantor’s Restricted Subsidiaries or the saleof Equity Interests in any of such Restricted Subsidiaries (other than directors’ qualifyingshares or shares or interests required to be held by foreign nationals to the extend mandatedby applicable law).

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Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

(i) any single transaction or series of related transactions that involves assets having a fairmarket value of less than $5,000,000;

(ii) a transfer of assets between or among Guarantor and its Restricted Subsidiaries,

(iii) an issuance of Equity Interests by a Subsidiary to Guarantor or to another Subsidiary;

(iv) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinarycourse of business;

(v) the sale or other disposition of cash or cash equivalents; and

(vi) a Restricted Payment or Permitted Investment that is permitted by the provisions ofCondition 4.1.

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time ofdetermination, the present value of the obligation of the lessee for net rental payments during theremaining term of the lease included in such sale and leaseback transaction including any period forwhich such lease has been extended or may, at the option of the lessor, be extended. Such present valueshall be calculated using a discount rate equal to the rate of interest implicit in such transaction,determined in accordance with GAAP; provided, however, that if such sale and leaseback transactionresults in a Capitalised Lease Obligation, the amount of Indebtedness represented thereby will bedetermined in accordance with the definition of “Capitalised Lease Obligation.”

“Authorised Officers” means with respect to the Guarantor, the president director of theGuarantor and any director of the Guarantor.

“Average Life” means, as of the date of determination, with respect to any Indebtedness orPreferred Stock, the quotient obtained by dividing (i) the sum of the products of (A) the numbers ofyears from the date of determination to the dates of each successive scheduled principal payment ofsuch Indebtedness or scheduled redemption or similar payment with respect to such Indebtedness orPreferred Stock multiplied by (B) the amount of such payment by (ii) the sum of all such payments.

“Board of Directors” means:

(a) with respect to a corporation, the board of directors of the corporation;

(b) with respect to a partnership, the board of directors of the general partner of thepartnership; and

(c) with respect to any other Person, the board or committee of such Person serving a similarfunction.

“Board Resolution” means a copy of a resolution certified by a director of the Issuer to havebeen duly adopted by the Board of Directors or the board of directors or other governing body of theGuarantor or any of its Restricted Subsidiaries to be in full force and effect on the date of suchcertification, and delivered to the Trustee.

“Business Day” means any day except a Saturday, Sunday or other day on which commercialbanks and foreign exchange markets in London, Hong Kong and New York City are authorised by lawto close or are otherwise not open for business.

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“Capital Stock” means any and all shares, interests (including Joint Venture and partnershipinterests), participations or other equivalents (however designated) of capital stock of a corporationor any and all equivalent ownership interests in a Person (other than a corporation).

“Capitalised Lease” means any lease of any property (whether real, personal or mixed), ofwhich the discounted present value of the rental obligations of the lessee, in conformity with GAAP,are required to be capitalised on the balance sheet of such lessee; the Stated Maturity thereof shall bethe date of the last payment of rent or any other amount due under such lease prior to the first dateupon which such lease may be terminated by the lessee without payment of a penalty; and“Capitalised Lease Obligations” means the rental obligations, as aforesaid, under such lease.

“Consolidated Current Assets” means the aggregate of all current assets (including inventory,trade and other receivables and sundry debtors maturing within twelve months from the date ofcomputation) of the Guarantor and its Restricted Subsidiaries, as determined by reference to theaudited annual or (as the case may be) unaudited quarterly Consolidated financial statements of theGuarantor for the Relevant Period.

“Consolidated Current Assets to Consolidated Current Liabilities Ratio” means, as of anydate of determination, the ratio of (x) Consolidated Current Assets to (y) Consolidated CurrentLiabilities.

“Consolidated Current Liabilities” means the aggregate of all current liabilities (includingtrade creditors, accruals and provisions and prepayments) of the Guarantor and its RestrictedSubsidiaries falling due within twelve months from the date of computation, as determined byreference to the audited annual or (as the case may be) unaudited quarterly Consolidated financialstatements of the Guarantor for the Relevant Period.

“Consolidated Debt” means at any time the aggregate amount of all obligations of the Guarantorand its Subsidiaries for or in respect of Indebtedness but excluding any such obligations to theGuarantor and/or any Subsidiary (and so that no amount shall be included or excluded more thanonce).

“Consolidated Debt to Consolidated Tangible Net Worth Ratio” means, as of any date ofdetermination, the ratio of (x) the Consolidated Debt at such date to (y) Consolidated Tangible NetWorth.

“Consolidated Net Income” means, with respect to any specified Person for any period, theaggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidatedbasis, determined in accordance with GAAP; provided that:

(a) the Net Income (but not loss) of any Person that is not a Subsidiary or that is accounted forby the equity method of accounting will be included only to the extent of the amount ofdividends or distributions paid in cash to the specified Person or a Wholly OwnedSubsidiary of the Person;

(b) the Net Income of any Subsidiary will be excluded to the extent that the declaration orpayment of dividends or similar distributions by that Subsidiary of that Net Income is notat the date of determination permitted without any prior governmental approval (that hasnot been obtained) or, directly or indirectly, by operation of the terms of its charter or anyagreement, instrument, judgment, decree, order, statute, rule or governmental regulationapplicable to that Subsidiary or its stockholders;

(c) the Net Income of any Person acquired in a pooling of interests transaction for any periodprior to the date of such acquisition will be excluded; and

(d) the cumulative effect of a change in accounting principles will be excluded.

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“Consolidated Net Tangible Assets” means, as of any date of determination, as applied to theGuarantor and its Subsidiaries, the total amount of assets (less accumulated depreciation oramortisation, allowances for doubtful receivables, other applicable reserves and other properlydeductible items) as set forth on the most recently available quarterly or annual Consolidated balancesheet of the Guarantor and its Subsidiaries, determined in accordance with GAAP, and after givingeffect to purchase accounting and after deducting therefrom, to the extent otherwise included, theamounts of:

(a) Consolidated Current Liabilities;

(b) minority interests in Subsidiaries of the Guarantor held by Persons other than the Guarantoror another Subsidiary of the Guarantor;

(c) excess of cost over fair value of assets of businesses acquired, as determined in good faithby the Board of Directors as evidenced by a Board Resolution;

(d) any revaluation or other write-up in value of assets subsequent to December 31, 2004 as aresult of a change in the method of valuation in accordance with GAAP;

(e) unamortised debt discount and expenses and other unamortised deferred charges, goodwill,patents, trademarks, service marks, trade names, copyrights, licenses, organisation ordevelopmental expenses and other intangible items;

(f) treasury stock; and

(g) any cash set apart and held in a sinking or other analogous fund established for the purposeof redemption or other retirement of Capital Stock to the extent such obligation is notreflected in Consolidated Current Liabilities.

“Consolidated Tangible Net Worth” means at any time the aggregate of the amounts paid upor credited as paid up on the issued Capital Stock of the Guarantor (other than any redeemable shares)and the aggregate amount of the reserves of the Guarantor and its Subsidiaries including:

(a) any amount credited to the share premium account;

(b) any capital redemption reserve fund; and

(d) any balance standing to the credit of the Consolidated profit and loss account of theGuarantor and its Subsidiaries,

but deducting:

(a) any debit balance on the Consolidated profit and loss account of the Guarantor and itsSubsidiaries;

(b) (to the extent included) any amount shown in respect of goodwill (including goodwillarising only on Consolidation) or other intangible assets of the Guarantor and itsSubsidiaries and interests of any Person (other than the Guarantor and/or any Subsidiary ofthe Guarantor) in any Subsidiary of the Guarantor;

(c) (to the extent included) any amount set aside for taxation, deferred taxation or bad debts;and

(d) (to the extent included) any amounts arising from an upward revaluation of assets made atany time after the Issue Date,

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and so that no amount shall be included or excluded more than once.

“Consolidated Total Revenues” means, as of any date of determination, as applied to theGuarantor and its Subsidiaries, the total amount of revenues as set forth on the most recently availableannual Consolidated of the Guarantor determined in accordance with GAAP.

“Consolidation” means, with respect to any Person, the consolidation of accounts of such Personand each of its Subsidiaries if and to the extent the accounts of such Person and such Subsidiaries areconsolidated in accordance with GAAP. The term “Consolidated” shall have a correlative meaning.

“Default” means any event which is, or, after notice or passage of time or both, would be, anEvent of Default.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any securityinto which it is convertible, or for which it is exchangeable, in each case at the option of the holderof the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable,pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of theCapital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which theBonds mature. Notwithstanding the preceding sentence, any Capital Stock that would constituteDisqualified Stock solely because the holders of the Capital Stock have the right to require the Issuerto repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will notconstitute Disqualified Stock if the terms of such Capital Stock provide that the Issuer may notrepurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase orredemption complies with Condition 4.1(a).

“Dollars,” “US$” and “US dollars” mean United States dollars.

“EBIT” means, in respect of any Relevant Period, the Consolidated Net Income of theGuarantors and its Subsidiaries before:

(a) any provision on account of taxation;

(b) any interest, commission, discounts or other fees incurred or payable, received orreceivable by the Guarantors and its Subsidiaries in respect of Indebtedness;

(c) any gain or loss on foreign exchange; and

(d) any items treated as exceptional or extraordinary items,

but including any non-cash items increasing Consolidated Net Income for such Relevant Period,to the extent deducted for the purpose of determining Consolidated Net Income for such RelevantPeriod.

“EBITDA” means, for any Relevant Period, EBIT before any amount attributable to theamortisation of intangible assets and depreciation of tangible assets.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquireCapital Stock (but excluding any debt security that is convertible into, or exchangeable for, CapitalStock).

“Event of Default” means any event described in Condition 10.

“Exchangeable Stock” means any Capital Stock which by its terms is exchangeable orconvertible at the option of any Person other than the Issuer into another security (other than CapitalStock of the Issuer which is neither Exchangeable Stock nor Redeemable Stock).

“Extraordinary Resolution” shall have the meaning set out in the Trust Deed.

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“Finance Subsidiary” means a Wholly-Owned Restricted Subsidiary of the Guarantor (1) whosesole operations are comprised of incurring or issuing Indebtedness from time to time to finance theoperations of the Guarantor and/or its Restricted Subsidiaries and (2) which conducts no business andowns no material assets other than any intercompany Indebtedness.

“Fiscal Period” means, as the context may require, a period: (i) commencing on 1 January andending on the succeeding 31 December, or (ii) commencing on 1 January and ending on the succeeding31 March and each successive period of three months provided that if the Issuer shall change itsfinancial year so as to end on a date other than 31 December, the foregoing shall be amended asnecessary.

“Fully Diluted Basis” means after giving effect to the exercise of any outstanding options,warrants or rights to purchase Voting Shares and the conversion or exchange of any securitiesconvertible into or exchangeable for Voting Shares.

“GAAP” means generally accepted accounting principles in the Republic of Indonesia.

“guarantee” means, as applied to any obligation, contingent or otherwise, of any Person, (a) aguarantee, direct or indirect, in any manner, of any part or all of such obligation, (other than byendorsement of negotiable instruments for collection in the ordinary course of business) and (b) anagreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in anyway the payment or performance (or payment of damages in the event of non-performance) of any partor all of such obligation, including the payment of amounts drawn down under letters of credit.

“Hedge Agreement” means interest rate swaps, caps or collar agreements or similararrangements, other agreements or arrangements designed to manage interest rates or interest rate risk,and other agreements or arrangements designed to protect against fluctuations in currency exchangerates or commodity prices.

“Incur” means, as applied to any Obligation, to create, incur, issue, assume, guarantee or in anyother manner become liable with respect to, contingently or otherwise, such obligation, and“Incurred,” “Incurrence,” and “Incurring” shall each have a correlative meaning; provided that anyamendment, modification or waiver of any provision of any document pursuant to which Indebtednesswas previously Incurred shall not be deemed to be an Incurrence of Indebtedness as long as suchamendment, modification or waiver does not:

(a) increase the principal or premium thereof or interest rate thereon;

(b) change to an earlier date the Stated Maturity thereof or the date of any scheduled orrequired principal payment thereon or the time or circumstances under which suchIndebtedness may or shall be redeemed;

(c) if such Indebtedness is contractually subordinated in right of payment to the Bonds, modifyor affect, in any manner adverse to the Bondholders, such subordination;

(d) if such Indebtedness is Non-Recourse Indebtedness, cause such Indebtedness to no longerconstitute Non-Recourse Indebtedness; or

(e) violate, or cause the Indebtedness to violate, the provisions of Conditions 4.3 or 4.4.

“Indebtedness” of any Person means, without duplication,

(a) the principal of and premium (if any such premium is then due and owing) in respect of (i)indebtedness of such Person for money borrowed and (ii) indebtedness evidenced by notes,debentures, bonds, loan agreements or other similar instruments for the payment of whichsuch Person is responsible or liable;

(b) all Purchase Money Obligations and Capitalised Lease Obligations of such Person;

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(c) all obligations of such Person Incurred as the deferred purchase price of property, allconditional sale obligations of such Person and all obligations of such Person under anytitle retention agreement;

(d) all obligations of such Person for the reimbursement of any obligor on any letter of credit,banker’s acceptance or similar credit transaction;

(e) Redeemable Stock of such Person and, in the case of any Subsidiary, any other PreferredStock not owned by the Issuer or a Wholly Owned Subsidiary, in either case valued at, inthe case of Redeemable Stock, the greater of its voluntary or involuntary maximum fixedrepurchase price exclusive of accrued and unpaid dividends or, in the case of PreferredStock that is not Redeemable Stock, its liquidation preference exclusive of accrued andunpaid dividends;

(f) all obligations of such Person in respect of Hedge Agreements;

(g) all obligations of the type referred to in paragraphs (a) to (f) above of other Persons andall dividends of other Persons for the payment of which, in either case, such Person isresponsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including bymeans of any guarantee; and

(h) all obligations of the type referred to in paragraphs (a) to (g) above of other Persons securedby any Security Interest on any property or asset of such Person (whether or not suchobligation is assumed by such Person), the amount of such obligation being deemed to bethe lesser of the value of such property or assets or the amount of the obligation so secured;

provided that Indebtedness shall not include trade accounts or tax payable arising in the ordinarycourse of business. For the purposes of this definition, the “maximum fixed repurchase price” of anyRedeemable Stock which does not have a fixed repurchase price shall be calculated in accordance withthe terms of such Redeemable Stock as if such Redeemable Stock were purchased on any date onwhich Indebtedness shall be required to be determined pursuant to the Trust Deed, and if such priceis based upon, or measured by, the fair market value of such Redeemable Stock, such fair market valueto be determined in good faith by the Board of Directors as evidenced by a Board Resolution.

The amount of Indebtedness of any Person at any date shall be, with respect to unconditionalobligations, the outstanding balance at such date of all such obligations as described above and, withrespect to any contingent obligations at such date, the maximum liability determined by such Person’sBoard of Directors, in good faith, as, in light of the facts and circumstances existing at the time,reasonably likely to be Incurred upon the occurrence of the contingency giving rise to such obligation;provided that the amount outstanding at any time of any Indebtedness issued with original issuediscount is the face amount of such Indebtedness less the remaining unamortised portion of theoriginal issue discount of such Indebtedness as determined in accordance with GAAP.

“Intercompany Loan” means the loan by the Issuer of the proceeds of the Bonds and AdditionalBonds, if any, to the Guarantor pursuant to the Intercompany Loan Agreement dated the Issue Datebetween the Issuer and the Guarantor;

“Interest Payment Date” shall have the meaning set out in Condition 5.1.

“Investment” means, with respect to any Person, any direct or indirect advance, loan or otherextension of credit or capital contribution to (by means of any transfer of cash or other property toothers or any payment for property or services for the account or use of others), or any otherinvestment in any other Person, or any purchase or acquisition by such Person of any Capital Stock,bonds, notes, debentures or other securities or assets issued or owned by any other Person (whetherby merger, consolidation, amalgamation, sale of assets or otherwise).

“Issue Date” means the date on which the Bonds are originally issued under the Trust Deed.

“Joint Venture” means a joint venture, partnership or other similar arrangement, whethercorporation, partnership or other legal form.

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“Leverage Ratio” means, as of any date of determination, the ratio of (x) the Consolidated Debtat such date to (y) EBITDA; provided, however, that if, as of such date of determination:

(a) the Guarantor or any Restricted Subsidiary of the Guarantor has (x) Incurred anyIndebtedness, (y) issued any Disqualified Stock, or (z) issued any Preferred Stock, in eachcase, since the beginning of the Relevant Period that remains outstanding, or if thetransaction giving rise to the need to calculate the Leverage Ratio is an Incurrence ofIndebtedness or an issuance of Disqualified Stock or Preferred Stock, or any combinationof the above, EBITDA and Consolidated Debt for such period shall be calculated aftergiving effect on a pro forma basis to such Indebtedness as if such Indebtedness had beenIncurred on the first day of the Relevant Period;

(b) the Guarantor or any Restricted Subsidiary of the Guarantor has repaid, repurchased,defeased or otherwise discharged any Indebtedness, Disqualified Stock or Preferred Stocksince the beginning of the Relevant Period or if any Indebtedness, Disqualified Stock orPreferred Stock is to be repaid, repurchased, defeased or otherwise discharged (in each caseother than Indebtedness Incurred under any revolving credit facility unless suchIndebtedness has been permanently repaid and has not been replaced) on the date of thetransaction giving rise to the need to calculate the Leverage Ratio, EBITDA andConsolidated Debt for the Relevant Period shall be calculated on a pro forma basis as ifsuch discharge had occurred on the first day of the Relevant Period and as if the Guarantoror such Restricted Subsidiary had not earned the interest income actually earned during theRelevant Period in respect of such cash used to repay, repurchase, defease or otherwisedischarge such Indebtedness;

(c) since the beginning of the Relevant Period, the Guarantor or any Restricted Subsidiary ofthe Guarantor has made an Asset Sale, EBITDA for the Relevant Period shall be reducedby an amount equal to the EBITDA (if positive) directly attributable thereto for theRelevant Period, or increased by an amount equal to EBITDA (if negative) attributablethereto for the Relevant Period and Consolidated Debt for the Relevant Period shall bereduced by an amount equal to the Consolidated Debt directly attributable to anyIndebtedness of the Guarantor or any Restricted Subsidiary repaid, repurchased, defeasedor otherwise discharged with respect to the Guarantor and its continuing RestrictedSubsidiaries in connection with such Asset Sale for the Relevant Period (or, if the CapitalStock of any Restricted Subsidiary is sold, the Consolidated Debt for such period directlyattributable to the Indebtedness of such Restricted Subsidiary to the extent the Guarantorand its continuing Restricted Subsidiaries are no longer liable for such Indebtedness aftersuch sale);

(d) since the beginning of the Relevant Period, the Guarantor or any Restricted Subsidiary ofthe Guarantor (by merger, consolidation or otherwise) has made an Investment in anyPerson that thereby becomes a Restricted Subsidiary, or otherwise has acquired anycompany, any business, or any group of assets constituting an operating unit of a business,including any such Investment or acquisition occurring in connection with a transactioncausing a calculation to be made hereunder, EBITDA for the Relevant Period will becalculated after giving pro forma effect thereto (including the Incurrence of anyIndebtedness or the issuance of any Disqualified Stock or Preferred Stock) as if suchInvestment or acquisition occurred on the first day of the Relevant Period; and

(e) since the beginning of Relevant Period, any Person (that became a Restricted Subsidiary ofthe Guarantor or was merged or otherwise combined with or into the Guarantor or anyRestricted Subsidiary of the Guarantor since the beginning of the Relevant Period) willhave made any Asset Sale or any Investment or acquisition of assets that would haverequired an adjustment pursuant to clause (c) or (d) above if made by the Guarantor or aRestricted Subsidiary of the Guarantor since the beginning of the Relevant Period, EBITDAfor the Relevant Period will be calculated after giving pro forma effect thereto as if suchAsset Sale, Investment or acquisition occurred on the first date of the Relevant Period.

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For purposes of this definition, whenever a pro forma effect is to be given to any transaction orcalculation under this definition, the pro forma calculations will be as determined in good faith by aresponsible financial or accounting officer of the Issuer (including in respect of anticipated expenseand cost reductions and synergies). If any Indebtedness, Disqualified Stock or Preferred Stock bearsa floating rate of interest or dividends and is being given pro forma effect, such interest or dividendsshall be calculated as if the rate in effect on the date of determination had been the applicable rate forthe entire Relevant Period (taking into account any Hedge Agreement applicable to the Indebtedness,Disqualified Stock or Preferred Stock if the Hedge Agreement has a remaining term in excess of 12months).

“Line of Business” means the development, manufacture, distribution and sale of tires, innertubes, flaps, rim tapes and the manufacture and sale of tire cord and synthetic rubber.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Net Available Cash” means:

(a) with respect to any Asset Sale, the cash or cash equivalent payments received by theGuarantor or any of its Restricted Subsidiaries in connection with such Asset Sale(including any cash received by way of distribution, deferred payment of principal pursuantto a note or instalment receivable or otherwise, but only as or when received and alsoincluding the proceeds of other property received when converted to cash or cashequivalents) net of the sum of, without duplication:

(i) all reasonable legal, title and recording tax expenses, reasonable commissions, andother reasonable fees and expenses Incurred directly relating to such Asset Sale;

(ii) all local, state, federal and foreign taxes required to be paid or accrued as a liabilityby the Guarantor or any of its Restricted Subsidiaries as a consequence of such AssetSale; and

(iii) payments made to repay Indebtedness which is secured by any assets subject to suchAsset Sale in accordance with the terms of any Security Interest upon or other securityagreement of any kind with respect to such assets, or which must by its terms, or byapplicable law, be repaid out of the proceeds from such Asset Sale; or

(b) with respect to the Incurrence of Indebtedness by the Guarantor for the purposes ofrefinancing existing Indebtedness of the Guarantor or any of its Restricted Subsidiarieswithin 60 days of such Incurrence, the principal amount of such existing Indebtedness plusthe amount of accrued interest payable thereon to the date of redemption, prepayment orrepayment of such existing Indebtedness.

“Net Cash Proceeds” means the aggregate cash proceeds received by Guarantor or any of itsSubsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon thesale or other disposition of any non-cash consideration received in any Asset Sale), net of the directcosts relating to such Asset Sale, including, without limitation, legal, accounting and investmentbanking fees, and sales commissions, and any relocation expenses incurred as a result of the AssetSale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account anyavailable tax credits or deductions and any tax sharing arrangements, and any reserve for adjustmentin respect of the sale price of such asset or assets established in accordance with GAAP.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person,determined in accordance with GAAP and before any reduction in respect of Preferred Stockdividends, excluding, however:

(a) any gain (but not loss), together with any related provision for taxes on such gain (but notloss), realised in connection with: (a) any Asset Sale; or (b) the disposition of any securitiesby such Person or any of its Subsidiaries or the extinguishments of any Indebtedness ofsuch Person or any of its Subsidiaries; and

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(b) any extraordinary gain (but not loss), together with any related provision for taxes on suchextraordinary gain (but not loss).

“Non-Recourse Indebtedness” means Indebtedness:

(a) as to which neither the Guarantor nor any of its Restricted Subsidiaries (a) provides creditsupport of any kind (including any undertaking, agreement or instrument that wouldconstitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or(c) constitutes the lender, other than, in each case, pledges of Equity Interests ofUnrestricted Subsidiaries for the benefit of the lenders to Unrestricted Subsidiaries or creditsupport or guarantees permitted by Conditions 4.1 and 4.2;

(b) no default with respect to which (including any rights that the holders of the Indebtednessmay have to take enforcement action against an Unrestricted Subsidiary) would permit uponnotice, lapse of time or both any holder of any other Indebtedness of the Guarantor or anyof its Restricted Subsidiaries to declare a default on such other Indebtedness or cause thepayment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and

(c) as to which the lenders have been notified in writing that they will not have any recourseto the stock or assets of the Guarantor or any of its Restricted Subsidiaries (other than aspermitted in clause (a) above).

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements,damages and other liabilities payable under the documentation governing Indebtedness.

“Officers’ Certificate” means a certificate signed by (i) in the case of the Guarantor, twoAuthorised Officers of the Guarantor, one of whom must be the president director of the Guarantor;or, (ii) in the case of the Issuer, one director of the Issuer. Each Officers’ Certificate shall include:

(a) a statement that the person making such certificate or opinion has read such covenant orcondition;

(b) a brief statement as to the nature and scope of the examination or investigation upon whichthe statements or opinions contained in such certificate or opinion are based;

(c) a statement that, in the opinion of such person, he has made such examination orinvestigation as is necessary to enable him to express an informed opinion as to whether ornot such covenant or condition has been complied with; and

(d) a statement as to whether or not, in the opinion of such person, such condition or covenanthas been complied with.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to theTrustee. The counsel, if so acceptable, may be an employee of or counsel to the Issuer, Guarantor orthe Trustee. Each such Opinion of Counsel shall include:

(a) a statement that the person making such certificate or opinion has read such covenant orcondition;

(b) a brief statement as to the nature and scope of the examination or investigation upon whichthe statements or opinions contained in such certificate or opinion are based;

(c) a statement that, in the opinion of such person, he has made such examination orinvestigation as is necessary to enable him to express an informed opinion as to whether ornot such covenant or condition has been complied with; and

(d) a statement as to whether or not, in the opinion of such person, such condition or covenanthas been complied with.

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“Permitted Investments” means:

(a) any Investment (i) in any Restricted Subsidiary of the Guarantor (or any Person that wouldbecome a Restricted Subsidiary of the Guarantor as a result of such Investment) by theGuarantor or any of its Restricted Subsidiaries or (ii) in the Guarantor by any of itsRestricted Subsidiaries;

(b) Investments in existence on the Issue Date and Investments pursuant to letters of intent orlegally binding commitments in existence on the Issue Date;

(c) loans made to employees of the Issuer or Guarantor in the ordinary course of business inor aggregate amount up to US$1,000,000 at any time outstanding;

(d) cash and Temporary Cash Investments;

(e) Investments in receivables owing to the Guarantor or any Restricted Subsidiary if createdor acquired in the ordinary course of business and payable or dischargeable in accordancewith customary trade terms; provided, however, that such trade terms may include suchconcessionary trade terms as the Guarantor or any such Restricted Subsidiary deems ingood faith to be reasonable under the circumstances;

(f) payroll, travel and similar advances to cover matters that are expected at the time of suchadvances ultimately to be treated as expenses for accounting purposes and that are made inthe ordinary course of business;

(g) Investments in stock, obligations or securities received in settlement of debts created in theordinary course of business and owing to the Guarantor or any Restricted Subsidiary or insatisfaction of judgments;

(h) Investments made as a result of the receipt of non-cash consideration from an Asset Saleas permitted pursuant to Condition 4.8(c);

(i) Investments acquired:

(i) in connection with or as a result of a bankruptcy, workout or reorganisation; or

(ii) as a result of foreclosure by the Guarantor or any of its Restricted Subsidiaries withrespect to any secured Investment;

(j) Hedge Agreements;

(k) advances to customers in the ordinary course of business that are recorded as accountsreceivable on the Guarantor’s consolidated balance sheet, provided that any such customeris not an Affiliate of the Guarantor or any of its Subsidiaries;

(l) advances to suppliers in the ordinary course of business that are recorded as deposits orprepaid expenses on the Guarantor’s consolidated balance sheet provided that any suchsupplier is not an Affiliate of the Guarantor of any or its Subsidiaries; and

(m) any Investment in, or directly related to, the Line of Business; provided that the amount ofsuch Investment, when aggregated with the amount (measured on the date each suchInvestment was made and without giving effect to subsequent changes in value) of all otherInvestments made pursuant to this clause (m) after the Issue Date, does not exceedUS$20,000,000.

“Permitted Loan/Guarantee” means:

(a) the Guarantee in respect of the Bonds and any Additional Bonds;

(b) any loan made, credit granted or guarantee of the Indebtedness of any Person given by theGuarantor or any Restricted Subsidiary of the Guarantor in the ordinary course of business;

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(c) any loan, credit or guarantee of the Indebtedness of any Person by the Guarantor or anyRestricted Subsidiary of the Guarantor in existence as of the Issue Date;

(d) provided that the same is permitted under Condition 4.2, any loan or credit (A) by theGuarantor to or for the benefit of the Guarantor and/or any other Restricted Subsidiary ofthe Guarantor or (B) by any Restricted Subsidiary of the Guarantor to or for the benefit ofthe Guarantor and/or any other Restricted Subsidiary of the Guarantor;

(e) provided that the same is permitted under Condition 4.2, any guarantee of the Indebtednessof any Person (A) by the Guarantor to or for the benefit of any Restricted Subsidiary of theGuarantor or (B) by any Restricted Subsidiary of the Guarantor to or for the benefit of theGuarantor and/or any other Restricted Subsidiary of the Guarantor; and

(f) any loan, credit or guarantee of the Indebtedness of any Person by the Guarantor and/or anyRestricted Subsidiary of the Guarantor that does not fall within paragraphs (a) to (d) abovewhich, when aggregated with all other loans, credit or guarantees permitted under thisparagraph does not exceed US$10,000,000 (or its equivalent in another currency);

“Permitted Security Interest” means:

(a) Security Interests of the Guarantor and its Restricted Subsidiaries permitted by the termsof the Trust Deed to be Incurred;

(b) Security Interests in favour of the Guarantor;

(c) Security Interests on property of a Person existing at the time such Person is merged withor into or consolidated with the Guarantor or any Restricted Subsidiary of the Guarantor;provided that such Security Interests were in existence prior to the contemplation of suchmerger or consolidation and do not extend to any assets other than those of the Personmerged into or consolidated with the Guarantor or the Restricted Subsidiary;

(d) Security Interests on the property or shares of stock of a Person existing at the time suchPerson becomes a Restricted Subsidiary; provided that such Security Interests are notcreated or Incurred in connection with, or in contemplation of, such other Person becominga Restricted Subsidiary; provided further that such Security Interests may not extend to anyother property owned by the Guarantor or any other Restricted Subsidiary of the Guarantor;

(e) Security Interests on property existing at the time of acquisition of the property by theGuarantor or any Restricted Subsidiary of the Guarantor, provided that such SecurityInterests were in existence prior to the contemplation of such acquisition;

(f) Security Interests to secure the performance of statutory obligations, surety or appealbonds, performance bonds or other Obligations of a like nature incurred in the ordinarycourse of business;

(g) Security Interests existing as of the Issue Date;

(h) Security Interests for taxes, assessments or governmental charges or claims that are not yetdelinquent or that are being contested in good faith by appropriate proceedings promptlyinstituted and diligently concluded, provided that any reserve or other appropriateprovisions as is required in conformity with GAAP has been made therefor;

(i) Security Interests to secure any Indebtedness that is permitted to be Incurred pursuant toCondition 4.2(b)(iii);

(j) Security Interests on accounts receivable and inventory to secure any Indebtedness that ispermitted to be Incurred pursuant to Condition 4.2(b)(v); and

(k) Security Interests Incurred in the ordinary course of business of the Guarantor or anyRestricted Subsidiary of the Guarantor with respect to obligations that do not exceed at anyone time outstanding 10% of the Consolidated Net Tangible Assets.

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“Person” means any individual, corporation, partnership, Joint Venture, association, joint stockcompany, trust, unincorporated organisation, government or any agency or political subdivisionthereof or any other entity.

“Preferred Stock,” as applied to the Capital Stock of any corporation, means Capital Stock ofany class or classes (however designated) which is preferred as to the payment of dividends, or as tothe distribution of assets upon any voluntary or involuntary liquidation or dissolution of suchcorporation, over shares of Capital Stock of any other class of such corporation.

“principal” of a Bond means the principal of the Bond plus, if applicable, the premium on theBond.

“Purchase Money Obligations” means Indebtedness (1) consisting of the deferred purchaseprice of property, conditional sale obligations, obligations under any title retention agreement andother purchase money obligations, in each case where the maturity of such Indebtedness does notexceed the anticipated useful life of the asset being financed, and (2) Incurred to finance all or partof the purchase price or cost of construction of or addition or improvement of real or personal propertyused or to be used by the Guarantor or a Restricted Subsidiary in a Line of Business; provided,however, that (i) the principal amount of such Purchase Money Obligations does not exceed 100% ofthe purchase price or cost of the asset being financed, (ii) any Security Interest arising in connectionwith any such Indebtedness shall be limited to the specified asset being financed or, in the case of realproperty or fixtures, or additions and improvements, the property on, or to, which such asset isattached or addition or improvement is made and (iii) such Indebtedness is Incurred within 180calendar days after such purchase of or addition or improvement to such assets is made by theGuarantor or any Restricted Subsidiary.

“Redeemable Stock” means any class or series of Capital Stock of any Person that:

(a) by its terms, by the terms of any security into which it is convertible or exchangeable orotherwise is, or upon the happening of an event or passage of time would be, required tobe redeemed (in whole or in part) on or prior to the first anniversary of the Stated Maturityof the Bonds;

(b) is redeemable at the option of the holder thereof at any time on or prior to the firstanniversary of the Stated Maturity of the Bonds (other than on an Asset Sale, provided thatsuch Asset Sale shall not yet have occurred); or

(c) is convertible into or exchangeable for Capital Stock referred to in paragraph (a) orparagraph (b) above or debt securities at any time prior to the first anniversary of the StatedMaturity of the Bonds.

“Refinancing Indebtedness” means Indebtedness that refunds, refinances, replaces, renews,repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively,“refinances,” and “refinanced” shall have a correlative meaning) any Indebtedness of the Issuer orGuarantor (including (a) Indebtedness of the Issuer that refinances Indebtedness of the Guarantor, and(b) Indebtedness of the Guarantor that refinances Indebtedness of the Issuer) including Indebtednessthat refinances Refinancing Indebtedness, provided that:

(a) if the Indebtedness being refinanced is subordinated in right of payment to the Bonds, theRefinancing Indebtedness shall be subordinated in right of payment to the Bonds to at leastthe same extent as the Indebtedness being refinanced;

(b) the Refinancing Indebtedness is scheduled to mature either (i) no earlier than theIndebtedness being refinanced or (ii) after the Stated Maturity of the Bonds;

(c) the Refinancing Indebtedness has an Average Life at the time such RefinancingIndebtedness is Incurred that is equal to or greater than the Average Life of theIndebtedness being refinanced; and

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(d) such Refinancing Indebtedness is in an aggregate principal amount (or if issued withoriginal issue discount, an aggregate issue price) that is equal to or less than the aggregateprincipal amount (or if issued with original issue discount, the aggregate accreted value)then outstanding (plus fees and expenses, including any premium, swap breakage anddefeasance costs) under the Indebtedness being refinanced.

provided further that provisos (b) and (c) above shall not be applicable with respect to any RefinancingIndebtedness that refinances the Bonds on maturity or redemption in full.

“Relevant Date” means whichever is the later of (a) the date on which the payment in questionfirst becomes due and (b) if the full amount payable has not been received by the Principal PayingAgent on or prior to such due date, the date on which (the full amount having been so received) noticeto that effect has been given to the Bondholders).

“Relevant Period” means, as of the date of any determination, the period of the most recent fourconsecutive fiscal quarters ending prior to the date of any determination for which internal financialconsolidated financial statements of the Guarantor are available.

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not anUnrestricted Subsidiary.

“Security Interest” means, with respect to any asset, any mortgage, lien, pledge, charge,security interest or encumbrance of any kind in respect of such asset, whether or not filed, recordedor otherwise perfected under applicable law, including any conditional sale or other title retentionagreement, any lease in the nature thereof, any option or other agreement to sell or give a securityinterest in and any filing of or agreement to give any financing statement under the UniformCommercial Code (or equivalent statutes) of any jurisdiction and anything analogous to any of theforegoing under the laws of any jurisdiction.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc.and any successor thereto.

“Series A FRNs” means the Guarantor’s Series A Floating Rate Structured Notes due 2008.

“Series C FRNs” means the Guarantor’s Series C Floating Rate Structured Notes due 2009.

“Stated Maturity” means, with respect to any Indebtedness, the date specified in suchinstrument of Indebtedness as the fixed date on which the principal is due and payable, includingpursuant to any mandatory redemption provision (but excluding any provision providing for therepurchase of such security at the option of the holder thereof upon the happening of any contingency).

“Subordinated Indebtedness” means any Indebtedness of the Guarantor which (a) in the caseof the Issuer, is contractually subordinated or junior in right of payment to the Bonds or any otherIndebtedness of the Issuer and (b) in the case of Indebtedness of the Guarantor, is contractuallysubordinated or junior in right of payment to the Guarantee or any other Indebtedness of theGuarantor.

“Subordinated Shareholder Funding” means, collectively, any funds provided to the Guarantorby any shareholder of the Guarantor, or any Affiliate of any such shareholder, in exchange for orpursuant to any security, instrument or agreement other than Capital Stock, in each case issued to andheld by any of the foregoing Persons, together with any such security, instrument or agreement andany other security or instrument other than Capital Stock issued in payment of any obligation underany Subordinated Shareholder Funding; provided, however, that such Subordinated ShareholderFunding:

(a) does not mature or require any amortisation, redemption or other repayment of principal orany sinking fund payment prior to the first anniversary of the Stated Maturity of the Bonds(other than through conversion or exchange of such funding into Capital Stock (other thanDisqualified Stock) of the Guarantor or any funding meeting the requirements of thisdefinition);

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(b) does not require, prior to the first anniversary of the Stated Maturity of the Bonds, paymentof cash interest, cash withholding amounts or other cash gross-ups, or any similar cashamounts;

(c) contains no change of control or similar provisions and does not accelerate and has no rightto declare a default or event of default or take any enforcement action or otherwise requireany cash payment, in each case, prior to the first anniversary of the Stated Maturity of theBonds;

(d) does not provide for or require any security interest or encumbrance over any asset of theGuarantor or any of its Subsidiaries;

(e) does not contain any covenants (financial or otherwise) other than a covenant to pay suchSubordinated Shareholder Funding;

(f) is in, the opinion of internationally recognised legal counsel to the Guarantor fullysubordinated and junior in right of payment of the Bonds pursuant to subordination,payment blockage and enforcement limitation terms which are customary in all materialrespects for similar funding; and

(g) is at least as advantageous to the Guarantor as third party funding.

“Subsidiary” means, as applied to any Person, any company or other entity of which a majorityof the outstanding Voting Shares is, at the time, directly or indirectly, owned by such Person.

“tax” means any tax, duty, levy, impost, assessment or other charge of a similar nature (includingpenalties, interest and any other liabilities related thereto) imposed by any Taxing Authority.

“Taxing Authority” means any government or political subdivision or territory or possession ofany government or any authority or agency therein or thereof having power to tax.

“Temporary Cash Investment” means:

(a) securities issued or directly and fully guaranteed or insured by the United Statesgovernment or any agency or instrumentality of the United States government (providedthat the full faith and credit of the United States is pledged in support of those securities)having maturities of not more than six months from the date of acquisition;

(b) securities issued or directly and fully guaranteed or insured by the Republic of Indonesiaor any agency or instrumentality of the Republic of Indonesia (provided that the full faithand credit of the Republic of Indonesia is pledged in support of those securities) havingmaturities of not more than six months from the date of acquisition;

(c) certificates of deposit and eurodollar time deposits with maturities of six months or lessfrom the date of acquisition, bankers’ acceptances with maturities not exceeding six monthsand overnight bank deposits, in each case, with any commercial bank having capital andsurplus in excess of US$500,000,000 and a Thomson Bank Watch Rating of “B” or better;

(d) repurchase obligations with a term of not more than seven calendar days for underlyingsecurities of the types described in paragraphs (a) and (c) above entered into with anyfinancial institution meeting the qualifications specified in paragraph (c) above;

(e) commercial paper having the highest rating obtainable from Moody’s or S&P and in eachcase maturing within six months after the date of acquisition; and

(f) money market funds at least 95% of the assets of which constitute Temporary CashInvestments of the kinds described in paragraphs (a) to (e) of this definition.

“Transaction Documents” means any document entered into in connection with the issue of theBonds.

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“Trust Deed” means the trust deed constituting the Bonds, dated on or, about the Issue Date andmade between the Company, the Guarantor and the Trustee.

“Unrestricted Subsidiary” means:

(a) any Subsidiary of the Guarantor (other than the Issuer and PT Prima Sentra Megah):

(i) whose gross revenues at the time of designation represent less than 5% of theConsolidated Total Revenues as of the end of the most recently ended fiscal year; and

(ii) whose gross assets at the time of designation represent less than 5% of theConsolidated Net Tangible Assets as of the end of the most recently ended fiscal year;

provided that such Subsidiary may not be designated by the Board of Directors of the Guarantoras an Unrestricted Subsidiary if, at the time of such designation (x) the gross revenues of suchSubsidiary, when aggregated with all other Unrestricted Subsidiaries, would exceed 5.0% of theConsolidated Total Revenues as of the end of the most recently ended annual Fiscal Period or (y)the gross assets of such Subsidiary, when aggregated with all other Unrestricted Subsidiaries,would exceed 5.0% of the Consolidated Net Tangible Assets as of the end of the most recentlyended annual Fiscal period.

(b) any Subsidiary of the Guarantor as shall be designated an Unrestricted Subsidiary by theBoard of Directors of the Guarantor in the manner provided below; and

(c) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of the Guarantor may designate any Subsidiary of the Guarantor(including any newly acquired or newly formed Subsidiary of the Guarantor) to be an UnrestrictedSubsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

(a) has no Indebtedness other than Non-Recourse Indebtedness;

(b) except as permitted by Condition 4.7, is not party to any agreement, contract, arrangementor understanding with the Guarantor or any Restricted Subsidiary of the Guarantor unlessthe terms of any such agreement, contract, arrangement or understanding are no lessfavourable to the Guarantor or such Restricted Subsidiary than those that might be obtainedat the time from Persons who are not Affiliates of the Guarantor;

(c) is a Person with respect to which neither the Guarantor nor any of its RestrictedSubsidiaries has any direct or indirect obligation (a) to subscribe for additional EquityInterests or (b) to maintain or preserve such Person’s financial condition or to cause suchPerson to achieve any specified levels of operating results; and

(d) has not guaranteed or otherwise directly or indirectly provided credit support for anyIndebtedness of the Guarantor or any of its Restricted Subsidiaries.

“Voting Shares” with respect to any Person, means the Capital Stock having the general votingpower under ordinary circumstances to vote on the election of the members of the board of directorsor other governing body of such Person (irrespective of whether or not at the time stock of any otherclass or classes shall have or might have voting power by reason of the happening of any contingency).

“Wholly Owned Subsidiary” means a Subsidiary (other than an Unrestricted Subsidiary) all theCapital Stock of which (other than directors’ qualifying shares) is owned by the Guarantor or anotherWholly Owned Subsidiary of the Guarantor.

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5. INTEREST

5.1 Interest Payment Date

The Bonds bear interest at the rate of 10.25% per annum. Interest is payable semi-annually inarrear on January 21 and July 21 in each year (each payment date, an “Interest Payment Date”),commencing on January 21, 2006. If any Interest Payment Date is not a Business Day, payment maybe made on the next succeeding day that is a Business Day, and no interest shall accrue for theintervening period. Interest on the Bonds will accrue from (and including) the most recent date towhich interest has been paid or, if no interest has been paid, from the Issue Date and ending on (butexcluding) the next Interest Payment Date. Each period beginning on and including the Issue Date orany Interest Payment Date and ending on but excluding the next Interest Payment Date is called an“Interest Period.”

5.2 Cessation of Interest

Each Bond will cease to bear interest from the due date for redemption unless, upon duepresentation, payment of principal is improperly withheld or refused, in which case it will continueto bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) theday on which all sums due in respect of such Bond up to that day are received by or on behalf of therelevant Bondholder and (b) the day which is seven calendar days after the Principal Paying Agent orthe Trustee has notified the relevant Bondholders that it has received all sums due in respect of therelevant Bonds up to such seventh calendar day (except to the extent that there is any subsequentdefault in payment).

5.3 Calculation of Interest

The amount of interest payable in respect of each Bond for any Interest Period shall be calculatedby applying the applicable rate of interest to the principal amount of such Bond (excluding premium,if any), dividing the product by two and rounding the resulting figure to the nearest cent (half a centbeing rounded upwards). If interest is required to be calculated for any period other than a scheduledInterest Period, it will be calculated on the basis of a 360-day year consisting of twelve 30-day monthsand in the case of an incomplete month, the actual number of days elapsed on the basis of a monthof 30 days.

6. PAYMENTS

6.1 Principal and Interest

Payments of principal, premium, if any, and interest on the Bonds will be made in US dollars,against presentation or surrender (as the case may be) (or, in the case of partial payment, endorsement)of the relevant Definitive Certificates at the specified office of any Paying Agent. Payments ofprincipal and/or interest in respect of the Bonds shall be made by cheque in US dollars drawn on, orby transfer to a US dollar account maintained by the payee with, a bank in New York.

Payments of premium, if any, and interest in respect of Certificates may only be made atspecified offices of Paying Agents outside the United States, except that they may be made at thespecified office of a Paying Agent in New York City if (a) the Issuer shall have appointed PayingAgents with specified offices outside the United States with the reasonable expectation that suchPaying Agents would be able to make payment at such offices of the full amount of the premium, ifany, and interest on the Bonds in US dollars when due, (b) payment of the full amount of suchpremium, if any, and interest at all specified offices of the Paying Agents outside the United Statesis illegal or effectively precluded by exchange controls or other similar restrictions, and (c) therelevant payment is permitted by applicable US law. If a Definitive Certificate is presented forpayment of principal at the specified office of the Paying Agent in the United States in circumstanceswhere interest (if any is payable against presentation of the Definitive Certificate) or premium, if any,

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is not to be paid there, the relevant Paying Agent will annotate the Definitive Certificate with therecord of the principal paid and return it to the Bondholder for the obtaining of premium, if any, andinterest elsewhere.

Payments in respect of Definitive Certificates will be made by US dollar cheque drawn on a bankin New York and posted on the Business Day immediately preceding the relevant due date to the holder(or to the first-named of joint holders) of the relevant Bonds appearing on the Register at the closeof business on the fifteenth day before the relevant due date (the “Record Date”) at the risk of suchholder at the address shown on the Register on the Record Date.

Upon application by the holder of any Definitive Certificate to the specified office of theRegistrar not later than the Record Date for any payment in respect of such Definitive Certificate, suchpayment will be made by transfer to the specified account of such holder. Any such application fortransfer to such an account shall be deemed to relate to all future payments in respect of the DefinitiveCertificates which become payable to the Bondholder who has made the initial application until suchtime as the Registrar is notified in writing to the contrary by such Bondholder.

If the due date for payment in respect of any Definitive Certificate is not an Interest PaymentDate, interest (if any) accrued in respect of such Bond from (and including) the preceding InterestPayment Date or, as the case may be, the Issue Date, shall be payable only against surrender of therelevant Definitive Certificate.

6.2 Fiscal Laws

All payments in respect of the Bonds are subject in all cases to any applicable laws andregulations, but without prejudice to the provisions of Condition 10. No commissions or expensesshall be charged to the Bondholders in respect of such payments.

7. CONSOLIDATION AND MERGER

Neither the Issuer nor the Guarantor shall, in a single transaction or through a series of relatedtransactions, consolidate, merge or amalgamate with or into any other Person or sell, assign, convey,transfer or lease or otherwise dispose of all or substantially all of its properties and assets as anentirety to any Person or group of affiliated Persons, unless:

(a) in the case of the Issuer, (i) the Issuer shall be the continuing Person, or (ii) the Person (ifother than the Issuer) formed by such consolidation or into which the Issuer is merged orto which the properties and assets of the Issuer as an entirety are transferred (the “IssuerSuccessor Corporation”) shall be a corporation organised and existing under the laws ofThe Netherlands, or a jurisdiction approved by the Trustee and shall expressly assume, bya supplemental trust deed, executed and delivered to the Trustee, in form and substancereasonably satisfactory to the Trustee, all the obligations of the Issuer under the Trust Deedand the Bonds;

(b) in the case of the Guarantor, (i) the Guarantor shall be the continuing Person, or (ii) thePerson (if other than the Guarantor) formed by such consolidation or into which theGuarantor is merged or to which the properties and assets of the Guarantor as an entiretyare transferred (the “Guarantor Successor Corporation”) shall be a corporation organisedand existing under the laws of the Republic of Indonesia or a jurisdiction approved by theTrustee and shall expressly assume, by a supplemental trust deed, executed and deliveredto the Trustee, in form and substance reasonably satisfactory to the Trustee, all theobligations of the Guarantor under the Trust Deed and the Guarantee;

(c) immediately before and immediately after giving effect to such transaction on a pro formabasis as a result of such transaction as having been Incurred by such Person at the time ofsuch transaction), no Default shall have occurred and be continuing;

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(d) the Issuer and the Guarantor shall have delivered or caused to be delivered, to the Trustee:

(i) an Officers’ Certificate stating that such consolidation, merger or amalgamation orsuch transfer complies with Condition 7 hereof and that all conditions precedent underthe Trust Deed provided for or relating to such transaction have been complied with;and

(ii) to the extent that the provisions of Condition 7(a)(ii) shall apply, an Opinion ofCounsel addressed to, and in a form satisfactory to, the Trustee that the Trust Deed orthe Bonds and any related documents to which the Issuer is a party are (or will be)valid, binding and enforceable against the Issuer Successor Corporation, and to theextent that the provisions of Condition 7(b)(ii) shall apply, an Opinion of Counseladdressed to, and in a form satisfactory to, the Trustee that the Trust Deed or anyrelated documents to which the Guarantor is a party are (or will be) valid, binding andenforceable against the Guarantor Successor Corporation;

(e) the Issuer Successor Corporation or the Guarantor Successor Corporation, as the case maybe, shall expressly agree to indemnify each Bondholder against any tax payable bywithholding or deduction thereafter imposed on such Bondholder or with respect to thepayment of principal and interest on the Bonds solely as a consequence of suchconsolidation, merger or amalgamation or such transfer;

(f) immediately after giving effect to such transaction on a pro forma basis (and treating anyIndebtedness which becomes an obligation of the Issuer or the Guarantor (or the IssuerSuccessor Corporation or the Guarantor Successor Corporation if the Issuer or theGuarantor is not the continuing obligor under the Trust Deed) in connection with or as aresult of such transaction as having been Incurred by such Person at the time of suchtransaction), the Issuer or the Guarantor (or the Issuer Successor Corporation or theGuarantor Successor Corporation if the Issuer or the Guarantor is not the continuing obligorunder the Trust Deed) shall have Consolidated Tangible Net Worth in an amount which isnot less than the Consolidated Tangible Net Worth of the Issuer or the Guarantorimmediately prior to such transaction; and

(g) immediately after giving effect to such transaction on a pro forma basis the Guarantor (orthe Guarantor Successor Corporation if the Guarantor is not the continuing obligor underthe Trust Deed) would be able to Incur at least US$1.00 of additional Indebtedness pursuantto Condition 4.2(a).

In addition, the Guarantor will not, directly or indirectly, lease all or substantially all of theproperties and assets of it and its Restricted Subsidiaries taken as a whole, in one or more transactions,to any other Person.

8. REDEMPTION, PURCHASE AND CANCELLATION

8.1 Scheduled Redemption

Unless previously redeemed or purchased and cancelled as provided in these Conditions, theBonds will be redeemed at their principal amount on the Interest Payment Date falling in July, 2010.

8.2 Optional Redemption for Changes in Withholding Taxes

The Bonds may be redeemed, in whole but not in part, at the option of the Issuer, at any timeupon giving of notice as provided in Condition 8.3 (which notice shall be irrevocable) at a redemptionprice equal to 100.0% of the principal amount at maturity thereof, together with accrued and unpaidinterest to the date fixed by the Issuer for redemption, if the Issuer determines and certifies to theTrustee in an Officers’ Certificate immediately prior to the giving of such notice that, as a result of

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any change in, or amendment to, the laws or treaties (including any regulations or rulings promulgatedthereunder) of the Republic of Indonesia, The Netherlands or such other jurisdiction in which theIssuer or the Guarantor is then organised, as the case may be (or any political subdivision or taxingauthority thereof or therein), affecting taxation, or any change in official position regarding theapplication, interpretation or administration of such laws, treaties, regulations or rulings (including aholding judgment or order by a court of competent jurisdiction), which change, amendment,application, interpretation or administration is announced or becomes effective on or after the IssueDate with respect to any payment due or to become due under the Bonds or the Trust Deed, the Issuer(or if the Guarantee were called, the Guarantor) is, or on the next Interest Payment Date would be,required to pay Additional Amounts (as defined in Condition 9) on or in respect thereof and suchobligation to pay Additional Amounts cannot be avoided by the taking of reasonable measures by theIssuer or the Guarantor, as the case may be; provided that no such notice of redemption shall be givenearlier than 90 days prior to the earliest date on which the Issuer or Guarantor would be obliged topay such Additional Amounts; provided that where any Additional Amounts due in accordance withClause 9 are in consequence of the laws and treaties of the Republic of Indonesia this Clause 8 shallonly have effect to permit the Bonds to be redeemed in the event that the rate of withholding ordeduction required by such law or treaty is in excess of 20 per cent (the “Minimum WithholdingLevel”).

Prior to the publication and giving of any notice of redemption of the Bonds pursuant toCondition 8.3, the Issuer will deliver to the Trustee:

(a) an Officers’ Certificate, stating that the Issuer is entitled to effect such redemption andsetting forth a statement of facts showing that the conditions precedent to the right of theIssuer so to redeem have occurred;

(b) an Opinion of Counsel or written advice of a qualified tax expert, such counsel or tax expertbeing from an internationally recognised law or accountancy firm reasonably acceptable tothe Trustee, that the Issuer or the Guarantor, as the case may be, has or will become obligedto pay Additional Amounts as a result of such change, amendment, application,interpretation or administration. Such certificate and opinion or advice shall be madeavailable for inspection by the Bondholders; and

(c) in the case of a redemption where the Minimum Withholding Level has been exceeded, anOpinion of Counsel or written advice of a qualified tax expert of the standing set out inCondition 8.2(b) above, that the Issuer or Guarantor, as the case may be, has or will becomeobliged to pay Additional Amounts and that the Minimum Withholding Level has beenexceeded.

8.3 Notice of Redemption

Notice of redemption will be given or published at least 30 days but not more than 60 days beforethe redemption date to the Bondholders. Unless the Issuer shall default in payment of the redemptionprice plus accrued interest to the redemption date specified in such notice, on and after the redemptiondate interest ceases to accrue on such Bonds. Bonds in denominations larger than US$1,000 may beredeemed in part but only in whole multiples of US$1,000.

8.4 No other redemption

The Issuer shall not be entitled to redeem the Bonds otherwise than as provided in Conditions8.1 and 8.2 above.

8.5 Purchase

Notwithstanding anything else in these Conditions, the Issuer, the Guarantor and any Subsidiaryof the Guarantor may at any time purchase Bonds in the open market or otherwise and at any priceand such Bonds may be held, resold or, at the option of the Bondholder, surrendered to any PayingAgent for cancellation.

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8.6 Cancellation

All Bonds redeemed shall be cancelled and all Bonds so cancelled and Bonds cancelled pursuantto Condition 8.5 above may not be reissued or resold.

9. TAXATION

All payments by the Issuer or the Guarantor in respect of principal, premium, if any, and intereston the Bonds or under the Guarantee shall be made free and clear of, and without withholding ordeduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed,levied, collected, withheld or assessed by or within the Republic of Indonesia, The Netherlands or anyother jurisdiction in which the Issuer or the Guarantor is organised or any political subdivision or anyauthority therein or thereof having power to tax or from which any payment is made with respect tothe Bonds, unless such withholding or deduction is required by law. In that event, the Issuer or theGuarantor, as the case may be, shall pay such additional amounts (“Additional Amounts”) as willresult in receipt by the Bondholders of such amounts as would have been received by them had no suchwithholding or deduction been required, except that no Additional Amounts shall be payable for or onaccount of:

(a) any tax, duty, assessment or other governmental charge that would not have been imposedbut for:

(i) the existence of any present or former connection between such Bondholder and TheNetherlands or, in the case of payments made by the Guarantor, the Republic ofIndonesia, or such other jurisdiction in which the Issuer or the Guarantor is organised,as the case may be, other than merely holding such Bond; or

(ii) presentation of such Bond (where presentation is required) more than 30 calendar daysafter the later of (A) the date on which the payment first became due and (B) if thefull amount payable has not been received in New York City by the Trustee or thePrincipal Paying Agent on or prior to such due date, the date on which, the full amounthaving been so received, notice to that effect shall have been given to theBondholders, except to the extent that such Bondholder would have been entitled tosuch Additional Amounts if it had presented such Bond for payment on the last dayof such period of 30 calendar days; or

(b) any withholding or deduction imposed as a result of any holder who would not be liable orsubject to the withholding or a deduction by making a declaration of non-residence or othersimilar claim for exemption to the relevant tax authority;

(c) any withholding or deduction imposed on a payment to an individual and required to bemade pursuant to European Council Directive 2003/48/EC or any other European UnionDirective implementing the conclusions of the ECOFIN Council meeting of 26-27November 2000 on the taxation of savings income or any law implementing or complyingwith, or introduced in order to conform to, such Directive; or

(d) any withholding or deduction by or on behalf of a Bondholder who would have been ableto avoid such withholding or deduction by presenting the relevant Bond to another PayingAgent in a Member State of the European Union.

The payment of principal or interest in respect of any Bond or the net proceeds received on thesale or exchange of any Bond or the payment of any amount in respect of the Guarantee shall bedeemed to include the payment of Additional Amounts provided for in these Conditions or the TrustDeed to the extent that Additional Amounts are, were or would be payable in respect thereof pursuantto these Conditions or the Trust Deed.

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10. EVENTS OF DEFAULT

If any of the following events (other than an Event of Default specified in paragraphs (f) or (g)of this Condition 10) occurs and is continuing, the Trustee at its discretion may, and if so requestedin writing by the Bondholders representing at least 25% in principal amount of the Bonds thenoutstanding or if so directed by an Extraordinary Resolution, shall (subject to the Trustee beingindemnified to its satisfaction) give written notice to the Issuer and the Guarantor declaring that theBonds are, and upon such declaration they shall become, immediately due and payable at theirprincipal amount together with any accrued interest, any premium, and any Additional Amounts,without further action or formality:

(a) Non-payment of interest: default in the payment of interest on any Bond when the samebecomes due and payable, and such default continues for a period of ten calendar days;

(b) Non-payment of principal: default in the payment of the principal or premium, if any, of anyBond when the same becomes due and payable at maturity or otherwise or a failure toredeem or purchase Bonds when required pursuant to the Trust Deed or the Bonds;

(c) Breach of other obligations: the Issuer or the Guarantor defaults in the performance orobservance of any other covenants or agreements in the Trust Deed or the Bonds and thedefault (i) is, in the opinion of the Trustee, incapable of remedy or (ii) being a default whichis capable of remedy continues for 30 calendar days after the date on which written noticeof such default is given to the Issuer and the Guarantor by the Trustee or given to the Issuer,the Guarantor and the Trustee by Bondholders of at least 25% in aggregate principal amountof the Bonds then outstanding hereunder;

(d) Cross-default:

(i) any Indebtedness of the Issuer, the Guarantor or any Restricted Subsidiary is not paidwhen due or within any originally applicable grace period (as the case may be);

(ii) any default by the Issuer or the Guarantor under any instrument or instruments underwhich there is or may be secured or evidenced any Indebtedness of the Issuer or theGuarantor that has caused the holders thereof to declare such Indebtedness to be dueand payable prior to its Stated Maturity; or

(iii) a default by the Issuer or the Guarantor in the payment when due of any portion of theprincipal under any instrument or instruments under which there is or may be securedor evidenced any Indebtedness of the Issuer or the Guarantor, and such unpaid portionexceeds US$5,000,000 (or its foreign currency equivalent) individually or in theaggregate and is not paid, or such default is not cured or waived, within any graceperiod applicable thereto;

(e) Unsatisfied judgment: any final judgment or order from which no further appeal or judicialreview is permissible for the payment of money shall be rendered against the Issuer or theGuarantor in an amount in excess of US$5,000,000 (or its foreign currency equivalent)individually or in the aggregate for all such final judgments or orders against all suchPersons (treating any deductibles, self-insurance or retention as not so covered) and shallnot be discharged, and there shall be any period of 30 consecutive days following entry ofthe final judgment or order in excess of US$5,000,000 (or its foreign currency equivalent)individually or in the aggregate during which a stay of enforcement of such final judgmentor order, irrespective of reason, shall not be in effect;

(f) Insolvency and Rescheduling:

if, in relation to the Issuer or the Guarantor:

(i) it ceases or threatens to cease to carry on its business or a substantial part of itsbusiness;

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(ii) any order shall be made by any competent court or other authority or a resolutionpassed for the dissolution or winding-up of the Issuer or the Guarantor or for theappointment of a liquidator, curator in bankruptcy, or receiver of the Issuer or theGuarantor or of all or substantially all of their assets;

(iii) it is unable to honour its obligations as they fall due;

(iv) it commences negotiations with one or more of its creditors with a view to the generalreadjustment or rescheduling of its Indebtedness, or the Issuer makes an assignmentfor the benefit of, or enters into any general assignment (akkoord) with; its creditors;

(v) the Issuer files a petition for a suspension of payments (surseance van betaling) or forbankruptcy (faillissement) or is declared bankrupt or becomes subject to any otherregulation having similar effect; or

(vi) the Guarantor files a petition for a suspension of payments or for bankruptcy or isdeclared bankrupt or becomes subject to any other regulation having similar effect.

(g) Creditors’ Process: any expropriation, attachment, sequestration, distress or execution(including, in relation to the Issuer conservatory attachment (conservatoir beslag) orexecutory attachment (executoriaal beslag)) affects any asset or assets of the Issuer or theGuarantor and is not discharged within 30 days.

(h) Analogous Events: any event occurs in respect of the Issuer or the Guarantor which underthe laws of any relevant jurisdiction has a similar or analogous effect to any of those eventsmentioned in paragraphs (f) and (g) above.

(i) Guarantee Not in Force: any Guarantee of the Bonds is not (or is claimed by the Guarantornot to be) in full force and effect;

(j) Moratorium or Expropriation: a moratorium is agreed or declared in respect of anyIndebtedness of the Issuer or the Guarantor or any governmental authority shall take anyaction to condemn, seize, nationalise or appropriate all or a substantial part of the assetsof the Issuer or the Guarantor or any of the Capital Stock of the Guarantor or shall take anyaction that adversely affects the ability of the Issuer or the Guarantor to perform itsobligations under the Trust Deed or the Bonds, or the Issuer or the Guarantor shall beprevented from exercising normal control over all or a substantial part of its property;

(k) Repudiation: the Issuer or the Guarantor repudiates the Trust Deed, the Agency Agreement,the Guarantee or the Bonds or does or causes or permits to be done any act or thingevidencing an intention to repudiate such agreement;

(l) Licence, etc.: any licence, consent, authorisation, registration or approval at any timenecessary to enable the Issuer or the Guarantor to comply with any of its obligations underthe Trust Deed, the Agency Agreement, any Guarantee, the Intercompany Loan or theBonds, as applicable, to which it is a party, shall be revoked, withdrawn or withheld or shallbe modified or amended in a manner prejudicial to the interests of the Trustee or theBondholders;

(m) Currency Controls: the capital and/or currency exchange controls in place in the Republicof Indonesia or The Netherlands on the Issue Date shall be modified or amended in anymanner that may adversely affect the ability of the Issuer or the Guarantor from performingits obligations under these Conditions, the Trust Deed, the Guarantee or the Bonds;

(n) Cessation of Ownership: the entire issued share capital of the Issuer ceases to be whollyowned, directly or indirectly, by the Guarantor; or

(o) Unlawfulness: it is or will become unlawful for the Issuer or the Guarantor to perform orcomply with any of its obligations under or in respect of the Bonds or the Trust Deed.

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If an Event of Default specified in paragraph (f) or (g) of this Condition 10 occurs, the principalof, premium on, if any, and accrued interest (and any Additional Amounts thereon) on all the Bondsshall become and be immediately due and payable without any declaration or other act on the part ofthe Trustee or any Bondholders.

If the Trustee is unable in its sole discretion to determine whether an Event of Default or Defaultis capable or incapable of remedy and/or an event is materially prejudicial to the interests of theBondholders, it may call for and rely on a resolution of the Bondholders to make such determinationand the Trustee shall not be obliged to make any determination unless it has been indemnified to itssatisfaction.

The Issuer and the Guarantor shall promptly deliver to the Trustee written notice of any Defaultor Event of Default upon the Issuer or the Guarantor, as the case may be, becoming aware of suchDefault or Event of Default. The Trustee shall notify the Bondholders of the receipt of any suchcertificate or notice.

11. PRESCRIPTION

Claims for principal shall become void unless the relevant Bonds are presented for payment asrequired by Condition 6 within ten years of the appropriate Relevant Date. Claims for interest shallbecome void unless the relevant Bonds are presented for payment as required by Condition 6 withinfive years of the appropriate Relevant Date.

12. REPLACEMENT OF BONDS

If any Definitive Certificate or the Global Certificate is lost, stolen, mutilated, defaced ordestroyed, it may be replaced at the specified office of the Transfer Agent, subject to all applicablelaws and stock exchange requirements, upon payment by the claimant of the expenses incurred inconnection with such replacement and on such terms as to evidence, security, indemnity and otherwiseas the Issuer and the Transfer Agent may reasonably require. Mutilated or defaced DefinitiveCertificates or the Global Certificate must be surrendered before replacements will be issued.

13. ENFORCEMENT

At any time after the Bonds have become due and payable, the Trustee may, at its discretion andwithout further notice, institute such proceedings against the Issuer and/or the Guarantor as it maythink appropriate to enforce terms of the Trust Deed and the Bonds but it will not be bound to takeany such proceedings unless (a) it shall have been so requested in writing by the holders of not lessthan 25% in principal amount of the Bonds then outstanding or shall have been so directed by anExtraordinary Resolution of the Bondholders and (b) it shall have been indemnified to its satisfaction.No Bondholder may proceed directly against the Issuer or the Guarantor unless the Trustee, havingbecome bound to do so, fails to do so within a reasonable period and such failure shall be continuing.

14. MODIFICATION, WAIVER AND SUBSTITUTION

14.1 Meetings

The Trust Deed contains provisions for convening meetings of Bondholders to consider mattersaffecting their interests, including the sanctioning by Extraordinary Resolution of a modification ofany of these Conditions or any provisions of the Trust Deed. Such a meeting may be convened byBondholders holding not less than 50% in principal amount of the Bonds for the time beingoutstanding. Except where the business of such a meeting includes consideration of a Reserved Matter(as defined below), the quorum for any meeting convened to consider an Extraordinary Resolution will

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be two or more persons holding or representing over 662⁄3% in principal amount of the Bonds for thetime being outstanding, or at any adjourned meeting, two or more persons being or representingBondholders whatever the principal amount of the Bonds held or represented, unless the business ofsuch meeting includes consideration of proposals:

(a) to modify the maturity of any Bonds or the dates on which interest is payable in respect ofany Bonds;

(b) to reduce or cancel the principal amount of, any premium payable on redemption of, oramount of interest on or to vary the method of calculating the rate of interest on, any Bonds;

(c) to change the currency of payment of any Bonds;

(d) to modify or cancel the Guarantee; or

(e) to amend this provision or to modify the provisions concerning the quorum required at anymeeting of the Bondholders or the majority required to pass an Extraordinary Resolution

(each of (a), (b), (c), (d) and (e) above, a “Reserved Matter”),

in which case the necessary quorum for passing an Extraordinary Resolution will be two or morepersons holding or representing not less than 90%, or at any adjourned such meeting not less than 50%,in principal amount of the Bonds for the time being outstanding. An Extraordinary Resolution dulypassed at any meeting of Bondholders will be binding on all Bondholders, whether or not they arepresent at the meeting at which such resolution was passed. The Trust Deed provides that a writtenresolution signed by or on behalf of the holders of not less than 90% of the aggregate principal amountof Bonds outstanding shall be as valid and effective as a duly passed Extraordinary Resolution.

The provisions of this Condition 14.1 are subject to the further provisions of the Trust Deed.

14.2 Modification and WaiverThe Trustee may agree, without the consent of the Bondholders, to (a) any modification (except

as mentioned in Condition 14.1 above) to, or the waiver or authorisation of any breach or proposedbreach of, the Bonds or the Trust Deed which is not, in the opinion of the Trustee, materiallyprejudicial to the interests of the Bondholders or (b) any modification to these Conditions or the TrustDeed which, in the Trustee’s opinion, is of a formal, minor or technical nature or to correct a manifesterror or to comply with mandatory provisions of law. Any such modification, waiver or authorisationwill be binding on the Bondholders and, unless the Trustee so agrees otherwise, any suchmodifications will be notified by the Issuer to the Bondholders as soon as practicable thereafter.

14.3 Interests of BondholdersIn connection with the exercise of its functions (including but not limited to those in relation to

any proposed modification, authorisation, waiver or substitution), the Trustee shall have regard to theinterests of the Bondholders as a class and shall not have regard to the consequences of such exercisefor individual Bondholders and the Trustee shall not be entitled to require, nor shall any Bondholderbe entitled to claim, from the Issuer or the Guarantor, any indemnification or payment in respect ofany tax consequences of any such exercise upon individual Bondholders.

14.4 SubstitutionThe Trust Deed contains provisions under which (a) the Guarantor or any Subsidiary may,

without the consent of the Bondholders, assume the obligations of the Issuer as principal debtor underthe Trust Deed and the Bonds and (b) any Subsidiary may, without the consent of the Bondholdersassume the obligations of the Guarantor as guarantor under the Trust Deed and the Bonds, providedthat, in each case, certain conditions specified in the Trust Deed are fulfilled, including (i) in the caseof a substitution of the Issuer by a company other than the Guarantor, a requirement that the Guarantee

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of the Bonds is fully effective in relation to the obligations of the new principal debtor under the TrustDeed and the Bonds and (ii) in the case of a substitution of the Guarantor as guarantor under the TrustDeed, a requirement that the Trustee is satisfied that the interests of the Bondholders will not bematerially prejudiced thereby and a requirement that the Guarantee of the Bonds by the new guarantoris fully effective in relation to the obligations of the new guarantor under the Trust Deed and theBonds.

No Bondholder shall, in connection with any substitution, be entitled to claim anyindemnification or payment in respect of any tax consequence thereof for such Bondholder except tothe extent provided for in Condition 9 (or any undertaking given in addition to or substitution for itpursuant to the provisions of the Trust Deed).

15. FURTHER ISSUES

To the extent permitted by Condition 4.2(b)(xiii), the Issuer may from time to time, without theconsent of the Bondholders and in accordance with the Trust Deed, create and issue further bonds(“Additional Bonds”) having, in all respects (or in all respects except for the Issue Date and the firstpayment of interest), the same terms and conditions as the Bonds issued on the Issue Date so that suchfurther issue shall be consolidated and form a single series with the Bonds. Additional Bonds shallhave the full benefit of the Guarantee. Bonds issued on the Issue Date and Additional Bonds will betreated as a single series for all purposes, including, without limitation, waivers, amendments andredemptions. References in these Conditions to the Bonds include (unless the context requiresotherwise) any other securities issued pursuant to this Condition and forming a single series with theBonds. Any further securities forming a single series with the outstanding securities of any series(including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any othersecurities may (with the consent of the Trustee), be constituted by a deed supplemental to the TrustDeed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and theholders of securities of other series where the Trustee so decides.

16. NOTICES

Without prejudice to the requirement of the SGX-ST, all notices to Bondholders shall be validlygiven if published in a leading newspaper having general circulation in Asia (which is expected to bethe Asian Wall Street Journal) and so long as the Bonds are listed on the SGX-ST and the rules of theSGX-ST so require, published in a leading newspaper having general circulation in Singapore (whichis expected to be The Business Times, Singapore edition.) Any such notice shall be deemed to havebeen given on the date of such publication or, if published more than once or on different dates, onthe first date on which publication is made.

17. AGENTS

The Issuer reserves the right, in accordance with the Agency Agreement, at any time to vary orterminate the appointment of any Agent and to appoint additional or other Agents. The Issuer will atall times maintain (a) a Principal Paying Agent and (b) a Paying Agent in Singapore upon the issueof any Bonds in definitive form so long as the Bonds are listed on the SGX-ST and the rules of theSGX-ST so requires, and which shall be referred to in these Conditions as the “Singapore Agent”.

Notice of any such termination or appointment, of any changes in the specified offices of anyAgent, and of any change in the identity of the Agent will be given promptly by or on behalf of theIssuer to the SGX-ST and the Bondholders and in any event not less than 45 calendar days’ notice willbe given. To the extent required, the Issuer will maintain a Paying Agent with a specified office in aEuropean Union member state that will not be obliged to withhold or deduct tax pursuant to EuropeanCouncil Directive 2003/48/EC or any other European Union Directive implementing the conclusionsof the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or anylaw implementing or complying with, or introduced in order to conform to, such Directive.

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18. TRUSTEE

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief fromresponsibility, including provisions relieving it from taking proceedings to enforce repayment unlessindemnified to its satisfaction. The Trustee is entitled to enter into business transactions with theIssuer, the Guarantor and any entity related to the Guarantor without accounting for any profit.

The Trust Deed contains provisions expressly declaring that the Trustee has no liabilitywhatsoever to the Issuer or the Guarantor other than in respect of any breach by the Trustee of anyexpress contractual obligations that the Trustee has undertaken for the benefit of the Issuer or theGuarantor pursuant to the Transaction Documents.

19. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 AND TRUSTEE ACTS

No person shall have any right to enforce any term or condition of the Bonds under the Contracts(Rights of Third Parties) Act 1999.

20. CURRENCY INDEMNITY

U.S. dollars (the “Contractual Currency”) is the sole currency of account and payment for allsums payable by the Issuer in respect of the Bonds and the Guarantor in respect of the Guarantee,including damages.

Any amount received or recovered in a currency other than the Contractual Currency (whetheras a result of or an amount received or recovered in a currency other than the Contractual Currency(whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction,in the insolvency, winding-up or dissolution of the Issuer or the Guarantor or otherwise), by theTrustee or any Bondholder in respect of any sum expressed to be due to it from the Issuer or theGuarantor shall only discharge the Issuer and the Guarantor to the extent of the Contractual Currencyamount which the recipient is able to purchase with the amount so received or recovered in that othercurrency on the date of that receipt or recovery (or, if it is not practicable to make that purchase onthat date, on the first date on which it is practicable to do so). If that Contractual Currency amountis less than the Contractual Currency amount expressed to be due to the recipient in respect of theBonds, the Trust Deed or the Agency Agreement, the Issuer or the Guarantor, as the case may be, shallindemnify it against any loss sustained by it as a result. In any event, the Issuer or the Guarantor, asthe case may be, shall indemnify the recipient against the cost of making any such purchase.

These indemnities constitute separate and independent obligations from the Issuer’s and theGuarantor’s other obligations, shall give rise to a separate and independent cause of action, shall applyirrespective of any indulgence granted by any Trustee and/or any Bondholder and shall continue in fullforce and effect despite any judgment, order, claim or proof for a liquidated amount in respect of anysum due under any Bond, the Trust Deed or the Agency Agreement or any other judgment or order.

21. WAIVER OF IMMUNITY

To the extent that the Issuer or the Guarantor may in any jurisdiction claim for itself or its assetsor revenues immunity from suit, execution, attachment (whether in aid or execution, before judgmentor otherwise) or other legal process and to the extent that such immunity (whether or not claimed) maybe attributed in any such jurisdiction to the Issuer or the Guarantor or its assets or revenues, the Issuerand the Guarantor in the Trust Deed have agreed not to claim and have irrevocably waived suchimmunity to the full extent permitted by the laws of such jurisdiction.

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22. GOVERNING LAW

(a) The Trust Deed and the Bonds are governed by and shall be construed in accordance withEnglish law.

(b) The courts of England are to have jurisdiction to settle any disputes which may arise outof or in connection with the Bonds or the Guarantee and accordingly any legal action orproceedings arising out of or in connection with the Bonds or the Guarantee(“Proceedings”) may be brought in such courts. Each of the Issuer and the Guarantor hasin the Trust Deed irrevocably submitted to the jurisdiction of such courts and waives anyobjection to Proceedings in such courts whether on the ground of venue or on the groundthat the Proceedings have been brought in an inconvenient forum. These submissions aremade for the benefit of each of the Bondholders and shall not limit the right of any of themto take Proceedings in any other court of competent jurisdiction nor shall the taking ofProceedings in one or more jurisdictions preclude the taking of Proceedings in any otherjurisdiction (whether concurrently or not).

(c) Each of the Issuer and the Guarantor has irrevocably appointed in the Trust Deed LawDebenture Corporate Services Limited as its irrevocably appointed agent in England toreceive service of process in any Proceedings in England based on any of the Bonds or theGuarantee.

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DESCRIPTION OF THE BONDS WHILE IN GLOBAL FORM

See “Definitions” in ’Terms and Conditions of the Bonds” for the definitions of certaincapitalised terms used in this section.

Book-entry; Delivery and Form

The Bonds will be offered and sold pursuant to Regulation S. The Bonds will be represented bya Global Certificate, which will be deposited with a common depositary for Euroclear andClearstream, Luxembourg and registered in the name of a nominee of such common depositary.Beneficial interests in the Global Certificate may at all times be held only through Euroclear orClearstream, Luxembourg, as the case may be. The Global Certificate (and any Definitive Certificates(as defined below) issued in exchange therefor) will be subject to certain restrictions on transfer, asset out under “Transfer Restrictions.” In the circumstances described below, interests in the GlobalCertificate will be exchangeable for definitive notes in certificated form (each a “DefinitiveCertificate”).

The Global Certificate will have an ISIN number and a common code.

The Bonds are not issuable in bearer form.

Global Certificates

Upon the issuance of the Global Certificate, Euroclear or Clearstream, Luxembourg, as the casemay be, will credit, on their internal system, the respective principal amounts of the individualbeneficial interests represented by such Global Certificate to the respective accounts of persons whohave accounts with them. Such accounts will be designated by the Joint Lead Managers. Ownershipof beneficial interests in the Global Certificate will be shown on, and the transfer of such ownershipinterests will be effected only through records maintained by Euroclear and Clearstream, Luxembourg(with respect to interests of participants) and on the records of participants (with respect to interestsof persons holding through participants).

Investors may hold their interest in the Global Certificate directly through Euroclear orClearstream, Luxembourg, as the case may be, if they are participants in such systems, or indirectlythrough organisations that are participants in such systems. The laws of some jurisdictions may requirethat certain purchasers of securities take physical delivery of such securities in definitive form. Suchlimits and such laws may impair the ability to own, transfer or pledge beneficial interests in the GlobalCertificate.

Payments of principal of, and interest on, Bonds represented by the Global Certificate will bemade to Euroclear or Clearstream, Luxembourg or the nominee for their common depositary, as thecase may be, as the registered owner of such Global Certificate. None of the Issuer, the Trustee, theRegistrar, the Paying Agents, the Transfer Agents or any other agent of any of them will have anyresponsibility or liability for any aspect of the records relating to or payments made on account ofbeneficial ownership interests in the Global Certificate or for maintaining, supervising or reviewingany records relating to such beneficial ownership interests.

The Issuer expects that Euroclear, Clearstream, Luxembourg or the nominee of their commondepositary, upon receipt of any payment of principal or interest in respect of the Global Certificate,will immediately credit participants’ accounts with payments in amounts proportionate to theirrespective beneficial interests in such Global Certificate as shown on the records of Euroclear,Clearstream, Luxembourg or such nominees, as the case may be. The Issuer also expects that paymentsby participants to owners of beneficial interests in such Global Certificate held through suchparticipants will be governed by standing customer instructions and customary practices, as is now thecase with securities held for the accounts of customers registered in “street name,” and will be theresponsibility of such participants.

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Euroclear and Clearstream, Luxembourg will take any action permitted to be taken by aBondholder only at the direction of one or more participants to whose accounts the Euroclear orClearstream Luxembourg, as the case may be, interests in the Global Certificate are credited and onlyin respect of such portion of the aggregate principal amount of Bonds as to which such participant orparticipants has or have given such direction.

Although the Issuer and the Guarantor understand that Euroclear and Clearstream, Luxembourgwill comply with the foregoing procedures in order to facilitate transfers in interests in the GlobalCertificate among participants of Euroclear and Clearstream Luxembourg, they are under noobligation to perform or continue to perform such procedures, and such procedures may bediscontinued at any time. None of the Issuer, the Guarantor, the Trustee, the Registrar, the PayingAgents, the Transfer Agents or any other agent of any of them will have any responsibility for theperformance by Euroclear or Clearstream, Luxembourg or their respective participants or indirectparticipants of their respective obligations under the rules and procedures governing their operations.

In addition, the Global Certificate will contain the following provisions which modify the termsand conditions of the Bonds as they apply to the Bonds evidenced by a Global Certificate.

Meetings

The registered holder of the Global Certificate shall be treated as two persons for the purposesof any quorum requirements of a meeting of Bondholders and, at any such meeting, as having one votein respect of each US$1,000 principal amount of Bonds in respect of which the Global Certificate (asdefined in the Trust Deed) is issued. The Trustee may allow to attend and speak (but not vote) at anymeeting of Bondholders any accountholder (or the representative of such person) of Euroclear orClearstream, Luxembourg who is the owner of a beneficial interest in the Global Certificate uponcertification of entitlement and proof of identity satisfactory to the Trustee.

Trustee’s Powers

In considering the interests of Bondholders the Trustee may, to the extent it considers itappropriate to do so in the circumstances, (a) have regard to such information as may have been madeavailable to it by or on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, or itsoperator as to the identity of its accountholders (either individually or by way of category) withentitlements in respect of the Bonds and (b) consider such interests as if such accountholders were theholders of the Bonds in respect of which the Global Certificate is issued.

Transfers

Transfers of interests in the Bonds with respect to which the Global Certificate is issued shallbe made in accordance with the Agency Agreement.

Purchase and Cancellation

Cancellation of any Bond(s) represented by the Global Certificate which are required by theConditions to be cancelled following its/their redemption or purchase will be effected by reduction inthe principal amount of the Bonds represented by the Global Certificate by the Registrar or thePrincipal Paying Agent. The Bonds may only be purchased by the Issuer or the Guarantor if they arepurchased together with the right to receive all future payments of interest thereon.

Payments

Payments of principal, premium (if any) and interest in respect of the Bonds in respect of whichthe Global Certificate is issued will be made without presentation or, if no further payment falls to bemade in respect of the Bonds, against presentation and surrender of the Global Certificate to or to theorder of the Principal Paying Agent at its specified office or such other Agent as shall have beennotified to the Bondholders for such purpose.

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Enforcement

For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, thepersons named in a certificate of the holder of the Bonds in respect of which the Global Certificateis issued shall be recognised as the beneficiaries of the trusts set out in the Trust Deed to the extentof the principal amount of their interest in the Bonds set out in the Global Certificate of the holderas if they were themselves the holders of Bonds in such principal amounts.

Notices

So long as the Bonds evidenced by the Global Certificate are held on behalf of Euroclear,Clearstream, Luxembourg or any other clearing system as shall be nominated by the Issuer or theGuarantor (the “Alternative Clearing System”), notices required to be given to Bondholders may begiven by their being delivered to Euroclear, Clearstream, Luxembourg or, as the case may be, theAlternative Clearing System, rather than by publication as required by the Conditions except that solong as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, notices shall alsobe published in a leading English language newspaper having general circulation in Singapore (whichis expected to be the Business Times, Singapore edition). Any such notice shall be deemed to havebeen given on the date of first publication.

Definitive Certificates

If Euroclear or Clearstream, Luxembourg or any Alternative Clearing System is closed forbusiness for a continuous period of 14 calendar days (other than by reason of holidays, statutory orotherwise) or announces an intention permanently to cease business or does in fact do so or if a defaultdescribed in Condition 10 (Events of Default) has occurred and is continuing, the Issuer will, uponrequest, issue Definitive Certificates in exchange for the Global Certificate.

So long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuershall appoint and maintain a Paying Agent in Singapore, where the Bonds may be presented orsurrendered for payment or redemption, in the event that the Global Certificate is exchanged forDefinitive Certificates in the circumstances set out above. In addition, in the event that the GlobalCertificate is exchanged for Definitive Certificates in the circumstances set out above, announcementof such exchange shall be made through the SGX-ST and such announcement will include all materialinformation with respect to the delivery of the Definitive Certificates, including details of the PayingAgent in Singapore.

Payments of principal on Definitive Certificates shall be made only against and (provided thatpayment is made in full) surrender of Definitive Certificates at the specified office of any PayingAgent.

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CONCURRENT FRN PURCHASE AND CONSENT SOLICITATION

The Guarantor has agreed to purchase US$174.2 million in aggregate principal amount of SeriesA FRNs and US$47.2 million in aggregate principal amount of Series B FRNs from selected holdersthereof in bilateral transactions under the FRN Purchase. The Guarantor will not purchase outstandingSeries C FRNs.

The purchase of these Series A FRNs and Series B FRNs is intended to be financed from theproceeds of the issue of the Bonds. See “Use of Proceeds.”

Upon completion of the FRN Purchase, all FRNs purchased by the Guarantor will be cancelledand the Guarantor shall no longer be obliged to pay any principal, accrued or unpaid interest, or anyother amounts payable, on such FRNs purchased by the Guarantor. It is expected that US$70.7 millionand US$25.8 million in aggregate principal amount of Series A FRNs and Series C FRNs will remainoutstanding, respectively, and that no Series B FRNs will remain outstanding after the purchases areclosed.

In conjunction with the FRN Purchase, the Company is concurrently soliciting the holders of itsoutstanding FRNs to pass the Amending Resolutions in relation to their respective series of FRNs: (a)to waive certain covenants contained in the respective trust deeds for the FRNs to allow the issue ofthe Bonds; and (b) subject to the issue of the Bonds, to amend certain covenants contained in therespective trust deeds for the FRNs. The amendments to the trust deeds for the respective FRNs areintended to align the terms of the FRNs with those of the Bonds.

The FRN Purchase, the Consent Solicitation and the issue of the Bonds are inter-conditional. Inaddition, the FRN Purchase is conditional on, among other things, the Amending Resolutions havingbeen duly passed by a resolution of the holders of FRNs in respect of the respective series of FRNsthey hold. Subject to the fulfilment of the conditions precedent thereto, the FRN Purchase and ConsentSolicitation are expected to be consummated on the Issue Date.

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SUBSCRIPTION AND SALE

Under the terms and conditions contained in a subscription agreement between Credit SuisseFirst Boston (Europe) Limited and UBS Limited, as Joint Lead Managers, the Issuer and the Guarantor(the “Subscription Agreement”), the Joint Lead Managers have severally agreed to purchase from theIssuer, and the Issuer has agreed to sell to the Joint Lead Managers, the Bonds at their issue price of99.522% of their principal amount, less a combined management, underwriting and sellingcommission. The Joint Lead Managers may, in certain circumstances, act through certain of theiraffiliates from time to time. In addition, the Issuer has agreed to reimburse the Joint Lead Managersfor certain of their expenses in connection with the issue of the Bonds.

The Subscription Agreement provides that the obligations of the Joint Lead Managers are subjectto approval of certain legal matters by their counsel and certain other conditions.

The Subscription Agreement provides that the Issuer and the Guarantor will indemnify the JointLead Managers against certain liabilities.

The Subscription Agreement further provides that the Joint Lead Managers are entitled in certaincircumstances to be released and discharged from their obligations under the Subscription Agreementprior to the closing of the issue of the Bonds.

The Joint Lead Managers and their affiliates have performed and expect to perform in the futurevarious financial advisory, investment banking and commercial banking services for the Issuer, theGuarantor and each of their affiliates.

General

No action has been or will be taken in any jurisdiction by any Joint Lead Manager that wouldpermit a public offering of the Bonds, or possession or distribution of the Offering Circular (inpreliminary, proof or final form) or any other offering or publicity material relating to the Bonds, inany country or jurisdiction where action for that purpose is required. Each Joint Lead Manager willcomply with all applicable laws and regulations in each jurisdiction in which it offers Bonds or hasin its possession or distributes the Offering Circular (in preliminary, proof or final form) or any suchother material, in all cases at its own expense. The Issuer will not have any responsibility for, and eachJoint Lead Manager will obtain any consent, approval or permission required by it for the offer by itof the Bonds under the laws and regulations in force in any jurisdiction to which it is subject or inor from which it makes any acquisition, offer, sale or delivery. No Joint Lead Manager is authorisedto make any representation or use any information in connection with the offer, subscription or issueof the Bonds other than as contained in the Offering Circular or any amendment or supplement to it.

Hong Kong

Each of the Joint Lead Managers has represented and agreed that (a) it has not offered or soldand will not offer or sell in Hong Kong, by means of any document, any Bonds other than (a) to“professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kongand any rules made under that Ordinance; or (b) in other circumstances which do not result in thedocument being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong orwhich do not constitute an offer to the public within the meaning of that Ordinance; and (b) it has notissued or had in its possession for the purposes of issue, and will not issue or have in its possessionfor the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation ordocument relating to the Bonds, which is directed at, or the contents of which are likely to be accessedor read by, the public of Hong Kong (except if permitted to do so under the securities laws of HongKong) other than with respect to Bonds which are or are intended to be disposed of only to personsoutside Hong Kong or only to “professional investors” as defined in the Securities and FuturesOrdinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.

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Indonesia

Each of the Joint Lead Managers has represented and agreed that it (i) has not offered or soldand will not offer or sell any Bonds in Indonesia or to Indonesian nationals, corporations or residents,including by way of invitation, offering or advertisement, and (ii) has not distributed, and will notdistribute, the memorandum or any other offering material relating to the Bonds in Indonesia or toIndonesian nationals, corporations or residents (except that the Joint Lead Managers, may offer andsell to Indonesian nationals, corporations and residents pursuant to certain limitations in accordancewith Indonesian laws and regulations as set forth in the Subscription Agreement.

Singapore

This Offering Circular has not been registered as a prospectus with the Monetary Authority ofSingapore. Each of the Joint Lead Managers has represented and agreed that it has not offered or soldthe Bonds or caused the Bonds to be made the subject of an invitation for subscription or purchaseand will not offer or sell the Bonds or cause the Bonds to be made the subject of an invitation forsubscription or purchase, nor has it circulated or distributed nor will it circulate or distribute thisOffering Circular or any other document or material in connection with the offer or sale, or invitationfor subscription or purchase, of the Bonds, whether directly or indirectly, to the public or any memberof the public in Singapore other than (a) to an institutional investor specified in Section 274 of theSecurities and Futures Act, Chapter 289 of Singapore (the “SFA”), (b) to a sophisticated investor, andin accordance with the conditions, specified in Section 275 of the SFA or (c) otherwise pursuant to,and in accordance with the conditions of, any other applicable provision of the SFA.

The Netherlands

Up to July 1, 2005, the Bonds may only be, directly or indirectly, offered, sold, transferred ordelivered to (i) persons established, resident or domiciled in The Netherlands, who or which trade orinvest in securities in the conduct of their profession or trade (which includes banks, investmentinstitutions, securities institutions, insurance companies, pension funds, other institutional investorsand treasury departments and finance companies of large enterprises) and (ii) persons established,resident or domiciled outside The Netherlands, provided that ordinary sales of the Bonds conductedon a foreign exchange (where the Bonds are listed) after initial distribution has taken place shall notconstitute an “offer” in the meaning of this sentence. The Issuer declares that it has satisfied theapplicable requirements of the law of the jurisdiction in which the persons to whom the Bonds are orwill be offered, sold, transferred or delivered, are established, domiciled or resident. A statement tothis effect was submitted by the Issuer to The Netherlands Authority for the Financial Markets beforethe offering date. For the relevant selling restrictions after July 1, 2005, see “— European EconomicArea.”

The Bonds will only be issued by the Issuer if the Issuer fulfils the requirements of theExemption Regulation of June 26, 2002 in respect of the Act on the Supervision of Credit Institutions1992 (Vrijstellingsregeling Wet toezicht kredietwezen 1992, as amended from time to time, the“Exemption Regulation”), including but not limited to the requirement that (i) amounts totalling atleast 95.0% of the balance sheet of the Issuer are either to grant loans or by the Issuer within the groupof companies of which it is a part, (ii) the repayable funds are received against the issue of securitiesin accordance with the provisions of the Act on the Supervision of Securities Transactions 1995 (Wettoezicht effectenverkeer 1995), (iii) the obligations of the Issuer are secured by an unconditional andirrevocable guarantee from its parent company, the Guarantor, provided that the Guarantor has apositive consolidated equity capital during the full term of the funding and (iv) the notificationrequirement of Section 4 of the Exemption Regulation is complied with.

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United Kingdom

Each of the Joint Lead Managers has represented, warranted and undertaken that:

General Prohibition

(i) It is a person whose ordinary activities involve it in acquiring, holding, managing or disposingof investments (as principal or agent) for the purposes of its business and (ii) it has not offered or soldand will not offer or sell the Bonds other than to persons whose ordinary activities involve them inacquiring, holding, managing or disposing of investments (as principal or as agent) for the purposesof their businesses or who it is reasonable to expect will acquire, hold, manage or dispose ofinvestments (as principal or agent) for the purposes of their businesses where the issue of the Bondswould otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act2000 (the “FSMA”) by the Issuer;

Financial promotion

It has only communicated or caused to be communicated, and will only communicate or causeto be communicated, an invitation or inducement to engage in investment activity (within the meaningof section 21 of the FSMA received by it in connection with the issue or the sale of the Bonds incircumstances in which section 21(l) of the FSMA does not apply to the Issuer or the Guarantor; and

General Compliance

It has complied and will comply with all applicable provisions of the FSMA with respect toanything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.

United States

The Bonds have not been, and will not be, registered under the Securities Act and may not beoffered or sold within the United States or to, or for the account or benefit of, U.S. persons except incertain transactions exempt from the registration requirements of the Securities Act. Terms used in thisparagraph have the meaning given to them by Regulation S under the Securities Act.

Each of the Joint Lead Managers has agreed that, except as permitted by the SubscriptionAgreement, it will not offer, sell or deliver the Bonds, (a) as part of their distribution at any time or(b) otherwise until 40 days after the later of the commencement of the offering and the Issue Date,within the United States or to, or for the account or benefit of, U.S. persons, and that it will have sentto each dealer to which it sells Bonds during the distribution compliance period, as defined inRegulation S, a confirmation or other notice setting forth the restrictions on offers and sales of theBonds within the United States or to, or for the account or benefit of, U.S. persons.

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European Economic Area

In relation to each Member State of the European Economic Area which has implemented theProspectus Directive (each, a “Relevant Member State”), each Joint Lead Manager has represented andagreed that with effect from and including the date on which the Prospectus Directive is implementedin that Relevant Member State (the “Relevant Implementation Date”), it has not made and will notmake an offer of Bonds to the public in that Relevant Member State prior to the publication of aprospectus in relation to the Bonds which has been approved by the competent authority in thatRelevant Member State or, where appropriate, approved in another Relevant Member State andnotified to the competent authority in that Relevant Member State, all in accordance with theProspectus Directive, except that it may, with effect from and including the Relevant ImplementationDate, make an offer of Bonds to the public in that Relevant Member State at any time:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, ifnot so authorised or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees duringthe last financial year; (2) a total balance sheet of more than C= 43,000,000 and (3) an annualnet turnover of more than C= 50,000,000, as shown in its last annual or consolidatedaccounts; or

(c) in any other circumstances which do not require the publication by the Issuer of aprospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Bonds to the public” in relationto any Bonds in any Relevant Member State means the communication in any form and by any meansof sufficient information on the terms of the offer and the Bonds to be offered so as to enable aninvestor to decide to purchase or subscribe the Bonds, as the same may be varied in that Member Stateby any measure implementing the Prospectus Directive in that Member State, and the expression“Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measurein each Relevant Member State.

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TRANSFER RESTRICTIONS

Each purchaser of the Bonds and each subsequent purchaser of Bonds in resales prior to theexpiration of a period ending 40 days after the later of the commencement of the offering and the IssueDate of the Bonds (the “Distribution Compliance Period”), by accepting delivery of this OfferingCircular and the Bonds, will be deemed to have represented, agreed and acknowledged that:

(1) The Bonds have not been and are not expected to be registered under the Securities Act orwith any securities regulatory authority of any state of the United States and are subject tosignificant restrictions on transfer.

(2) Each owner purchasing during the Distribution Compliance Period is not a U.S. person asdefined under Regulation S and is purchasing the Bonds in an offshore transaction meetingthe requirements of Rule 903 or 904 of Regulation S.

(3) During the Distribution Compliance Period, such owner will not offer, sell, pledge orotherwise transfer any interest in the Bonds except to a non-U.S. person in an offshoretransaction meeting the requirements of Regulation S under the Securities Act.

(4) The Bonds will bear a legend to the foregoing effect, unless the Issuer determines otherwisein compliance with applicable law.

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GLOBAL CLEARANCE AND SETTLEMENT

See “Definitions” in “Terms and Conditions of the Bonds” for the definitions of certaincapitalised terms used in this section.

Investors in the Bonds may hold Bonds through Euroclear or Clearstream, Luxembourg. Initialsettlement and all secondary trades will settle as described below. Although the Issuer understands thatEuroclear and Clearstream, Luxembourg will comply with the procedures provided below in order tofacilitate transfers of Bonds among participants of Euroclear and Clearstream, Luxembourg, they areunder no obligation to perform or continue to perform such procedures, and such procedures may bemodified or discontinued at any time. None of the Issuer, the Guarantor, the Trustee, the Registrar, theTransfer Agents, the Paying Agents or any other agent of any of them will have any responsibility forthe performance by Euroclear or Clearstream Luxembourg or their respective participants or indirectparticipants of their respective obligations under the rules and procedures governing their operations.With respect to clearance and settlement through Euroclear and Clearstream, Luxembourg, the Issuerunderstands as follows:

The Clearing Systems

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg hold securities for participating organisations andfacilitate the clearance and settlement of securities transactions between their respective participantsthrough electronic book-entry changes in accounts of such participants. Euroclear and Clearstream,Luxembourg provide to their participants, among other things, services for safekeeping,administration, clearance and settlement of internationally traded securities and securities lending andborrowing. Euroclear and Clearstream, Luxembourg interface with domestic securities markets.

Euroclear and Clearstream, Luxembourg participants are financial institutions such asunderwriters, securities brokers and dealers, banks, trust companies and certain other organisations.Indirect access to Euroclear or Clearstream Luxembourg is also available to others such as banks,brokers, dealers and trust companies that clear through or maintain a custodial relationship with aEuroclear or Clearstream, Luxembourg participant, either directly or indirectly.

Initial settlement

The Bonds will be issued initially in the form of a Global Certificate in book-entry form and willbe deposited with a common depository for Euroclear and Clearstream, Luxembourg. Investors’interests in Bonds held in book-entry form by Euroclear or Clearstream, Luxembourg, as the case maybe, will be represented through financial institutions acting on their behalf as direct and indirectparticipants in Euroclear or Clearstream, Luxembourg, as the case may be. In addition, Euroclear andClearstream, Luxembourg may hold positions in the Bonds on behalf of their participants through theirrespective depositories.

Investors electing to hold their Bonds through Euroclear or Clearstream, Luxembourg accountswill follow the settlement procedures applicable to conventional bonds. Bonds will be credited to theaccounts of depositories and will be processed by Euroclear or Clearstream, Luxembourg inaccordance with usual new issue procedures.

Because the purchaser determines the place of delivery, it is important to establish at the timeof trading of any Bonds where both the purchaser’s and seller’s accounts are located to ensure thatsettlement can be made on the desired value date.

Trading between Euroclear and/or Clearstream, Luxembourg participants

Secondary market trading between Euroclear participants and/or Clearstream, Luxembourgparticipants will be settled using the procedures applicable to conventional bonds in same-day funds.

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TAXATION

The following summary is based on tax laws of The Netherlands and Indonesia as in effect onthe date of this Offering Circular, and is subject to changes in Dutch or Indonesian law, includingchanges that could have retroactive effect. The following summary does not take into account ordiscuss the tax laws of any countries other than The Netherlands and Indonesia. Prospectivepurchasers in all jurisdictions are advised to consult their own tax advisors as to Dutch, Indonesianor other tax consequence of the acquisition, ownership and disposition of the Bonds.

DUTCH TAXATION

This is a general summary and the tax consequences as described here may not apply to a holderof Bonds. Any potential investor should consult his own tax adviser for more information about thetax consequences of acquiring, owning and disposing of Bonds in his particular circumstances.

This taxation summary solely addresses the principal Dutch tax consequences of the acquisition,the ownership and disposition of Bonds. Where in this summary English terms and expressions areused to refer to Dutch concepts, the meaning to be attributed to such terms and expressions shall bethe meaning to be attributed to the equivalent Dutch concepts under Dutch tax law. It does not considerevery aspect of taxation that may be relevant to a particular holder of Bonds under specialcircumstances or who is subject to special treatment under applicable law.

This summary is based on the tax laws of The Netherlands as they are in force and in effect onthe date of this Offering Circular. The laws upon which this summary is based are subject to change,perhaps with retroactive effect. A change to such laws may invalidate the contents of this summary,which will not be updated to reflect any such change. This summary assumes that each transactionwith respect to Bonds is at arm’s length.

Withholding taxAll payments under the Bonds may be made free from withholding or deduction of, for or on

account of any taxes of whatever nature imposed, levied, withheld or assessed by The Netherlands orany political subdivision or taxing authority thereof or therein.

Taxes on income and capital gainsThe summary set out in this section “Taxes on income and capital gains” only applies to a holder

of Bonds who is neither resident nor deemed to be resident in The Netherlands for purposes of Dutchincome tax or corporation tax, as the case may be, and, in the case of an individual, has not electedto be treated as a resident of The Netherlands for Dutch income tax purposes (a “Non-Resident holderof Bonds”).

Individuals

A Non-Resident holder of Bonds who is an individual will not be subject to any Dutch taxes onincome or capital gains in respect of any benefit derived or deemed to be derived from Bonds,including any payment under Bonds and any gain realised on the disposal of Bonds, provided that bothof the following conditions are satisfied.

1. If he derives profits from an enterprise, whether as an entrepreneur (ondernemer) orpursuant to a co-entitlement to the net value of such enterprise, other than as anentrepreneur or a shareholder, which enterprise is either managed in The Netherlands orcarried on, in whole or in part, through a permanent establishment or a permanentrepresentative in The Netherlands, as the case may be, his Bonds are not attributable to suchenterprise.

2. He does not derive benefits and is not deemed to derive benefits from Bonds that are taxableas benefits from miscellaneous activities in The Netherlands (resultaat uit overigewerkzaamheden in Nederland).

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Benefits derived or deemed to be derived from Bonds by a Non-Resident holder of Bonds whois an individual and who satisfies condition 1. above, including any gain realised on the disposalthereof, are taxable as benefits from miscellaneous activities in The Netherlands if he, or an individualwho is a connected person in relation to him as meant in article 3.91, paragraph 2, letter b, or letterc, of the Dutch Income Tax Act 2001 (Wet inkomstenbelasting 2001), has a substantial interest(aanmerkelijk belang) in the Issuer.

A person has a substantial interest in the Issuer if such person — either alone or, in the case ofan individual, together with his partner (partner), if any — has, directly or indirectly, either theownership of shares representing 5% or more of the total issued and outstanding capital (or the issuedand outstanding capital of any class of shares) of the Issuer, or rights to acquire, directly or indirectly,shares, whether or not already issued, that represent 5% or more of the total issued and outstandingcapital (or the issued and outstanding capital of any class of shares) of the Issuer, or the ownershipof profit participating certificates (winstbewijzen) that relate to 5% or more of the annual profit of theIssuer or to 5% or more of the liquidation proceeds of the Issuer.

A person who is entitled to the benefits from shares or profit participating certificates (forinstance a holder of a right of usufruct) is deemed to be a holder of shares or profit participatingcertificates, as the case may be, and such person’s entitlement to such benefits is considered a shareor a profit participating certificate, as the case may be.

Furthermore, a Non-Resident holder of Bonds who is an individual and who satisfies condition1. above may, inter alia, derive benefits from Bonds that are taxable as benefits from miscellaneousactivities in the following circumstances, if such activities are performed or deemed to be performedin The Netherlands:

a. if his investment activities go beyond the activities of an active portfolio investor, forinstance in case of the use of insider knowledge (voorkennis) or comparable forms ofspecial knowledge; or

b. if he makes Bonds available or is deemed to make Bonds available, legally or in fact,directly or indirectly, to certain parties as meant in articles 3.91 and 3.92 of the DutchIncome Tax Act 2001 under circumstances described there.

Entities

A Non-Resident holder of Bonds other than an individual will not be subject to any Dutch taxeson income or capital gains in respect of any payment under Bonds or in respect of any gain realisedon the disposal of Bonds, provided that (a) if such Non-Resident holder of Bonds derives profits froman enterprise that is either managed in The Netherlands or carried on, in whole or in part, through apermanent establishment or a permanent representative in The Netherlands, whether as anentrepreneur (ondernemer) or pursuant to a co-entitlement to the net value of such enterprise (otherthan as an entrepreneur or as a holder of securities), its Bonds are not attributable to such enterprise,and (b) such Non-Resident holder of Bonds does not have a substantial interest in the Issuer.

A person other than an individual has a substantial interest in the Issuer, (x) if it has a substantialinterest in the Issuer (as described above under Individuals) or (y) if it has a deemed substantialinterest in the Issuer. A deemed substantial interest may be present if its shares, profit participatingcertificates or rights to acquire shares or profit participating certificates in the Issuer have beenacquired by such person or are deemed to have been acquired by such person on a non-recognitionbasis.

General

Subject to the above, a Non-Resident holder of Bonds will not be subject to income taxation inThe Netherlands by reason only of the execution (ondertekening), delivery (overhandiging) and/orenforcement of the documents relating to the issue of the Bonds or the performance by the Issuer ofits obligations thereunder or under the Bonds.

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Gift and inheritance taxesA person who acquires Bonds as a gift, in form or in substance, or who acquires or is deemed

to acquire Bonds on the death of an individual, will not be subject to Dutch gift tax or to Dutchinheritance tax, as the case may be, unless:

(i) the donor is, or the deceased was resident or deemed to be resident in The Netherlands forpurposes of gift or inheritance tax, as the case may be; or

(ii) the Bonds are or were attributable to an enterprise or part of an enterprise that the donoror the deceased carried on through a permanent establishment or a permanent representativein The Netherlands at the time of the gift or of the death of the deceased; or

(iii) the donor made a gift of Bonds, then became a resident or deemed resident of TheNetherlands, and died as a resident or deemed resident of The Netherlands within 180 daysafter the date of the gift.

Other taxes and dutiesNo Dutch registration tax, transfer tax, stamp duty or any other similar documentary tax or duty,

other than court fees, will be payable by a holder of Bonds in The Netherlands in respect of or inconnection with the execution, delivery and/or enforcement by legal proceedings (including theenforcement of any foreign judgment in the courts of The Netherlands) of the documents relating tothe issue of the Bonds or the performance by the Issuer of its obligations thereunder or under theBonds.

INDONESIAN TAXATION

The following is a summary with respect to taxes imposed by the Government of Indonesia. Thesummary does not address any laws other than the tax laws of Indonesia in force and as they areapplied in practice as of the date of this Offering Circular.

GeneralResident taxpayers, individual or corporate, are subject to income tax in Indonesia. Subject to

the provisions of any applicable agreement for the avoidance of double taxation (a “tax treaty”),non-resident taxpayers, namely individuals or corporations not domiciled or established in Indonesiawhich derive income sourced in Indonesia from, among other things, the sale of assets situated inIndonesia, services performed in or outside Indonesia or interest, royalties or dividends fromIndonesia, are subject to a withholding tax on that income at the rate of 20.0%, so long as the incomeis not effectively connected with a permanent establishment of such individuals or corporations inIndonesia. If the income is effectively connected with a permanent establishment in Indonesia, theincome is subject to income tax up to a maximum rate of 35.0% for individuals or 30.0% forcorporations. With regard to asset sales, withholding tax is imposed on the estimated net income.There are implementing regulations to impose tax on sales of unlisted shares of Indonesiancorporations but not on sales of bonds. Gains on the sale of bonds traded on, or whose transactionsare reported to, an Indonesian stock exchange are taxed as interest but gains on other bonds, includingthe Bonds, are not subject to this treatment.

Withholding TaxPayments of principal under the Bonds are not subject to withholding tax in Indonesia, but

interest income sourced from Indonesia is. The amount of any payment (or accrual) by the Guarantorunder the Guarantee attributable to interest payable on the Bonds will be subject to withholding taxin Indonesia at the rate of 20.0% or the relevant reduced rate under an applicable tax treaty. Payments(or accruals) of interest in whatever name or form under the Guarantee are subject to withholding taxat the rate of 20.0% on the gross amount if paid by a resident taxpayer to a non-resident taxpayer andto withholding tax at the rate of 15.0% if paid by a resident taxpayer to another resident taxpayer(other than an Indonesian bank). In the case of non-resident taxpayers which do not have a permanentestablishment in Indonesia, the withholding tax is a final tax and the effective rate of tax may bereduced by virtue of a tax treaty provided the relevant certificate of residence is available.

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Payments (or accruals) of interest made by the Guarantor to the Issuer with respect to the loansfrom the Issuer to the Guarantor on-lending the proceeds from the Bonds will be subject towithholding tax in Indonesia. As described above, the statutory rate of such withholding is 20.0%. TheNetherlands-Indonesia tax treaty provides for a reduced rate of 0% withholding tax on interest (if therecipient has no permanent establishment in Indonesia) provided that the interest is paid on loans witha term of more than two years and the recipient is the beneficial owner of the interest; otherwise, theprevailing 10.0% rate of withholding tax provided by the tax treaty would apply. The application ofthe 0% rate of withholding tax is subject to settlement of a mode of application between the competenttax authorities of Indonesia and The Netherlands. Since the mode of application has not been settled,the Indonesian Directorate General of Taxes through its Circular No. SE-17/PJ./2005 dated June 1,2005, has taken the position that the application of 0% withholding tax on interest is not yet operativeand that, consequently, payments (or accruals) of interest by a resident of Indonesia to a resident ofThe Netherlands are subject to 10.0% withholding tax, provided that a relevant certificate of residenceis available for presentation to the competent tax authorities in Indonesia.

Taxes from Capital Gains

Non-resident individuals and companies without a permanent establishment in Indonesiaderiving capital gains from the disposal of the Bonds are not subject to Indonesian income tax.However if the gain is derived by an Indonesian tax resident, whether an individual or a company, suchgain is taxable in Indonesia.

Other Indonesian Taxes

There are no Indonesian estate, inheritance, succession, or gift taxes generally applicable to theacquisition, ownership or disposition of the Bonds. There are no Indonesian stamp, issue, registrationor similar taxes or duties payable by holders of the Bonds as a result of their holding of the Bonds.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSISOF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF THE BONDS.PROSPECTIVE PURCHASERS OF THE BONDS SHOULD CONSULT THEIR OWN TAXADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

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CERTAIN PRINCIPAL DIFFERENCES BETWEEN INDONESIAN GAAPAND U.S. GAAP

The consolidated financial statements of the Company and its subsidiaries included in theOffering Circular are prepared and presented in accordance with Indonesian GAAP, which differ incertain material respects from U.S. GAAP.

A brief description of certain significant differences between Indonesian GAAP applicable to theCompany and U.S. GAAP are summarised below. This summary should not be taken as an exhaustivelist of all the differences between the Indonesian GAAP and U.S. GAAP. In making an investmentdecision, investors must rely upon their own examination of the Company, the terms of the offeringand the Company’s financial information. Potential investors should consult their own professionaladvisors for an understanding of the differences between Indonesian GAAP and U.S. GAAP, and howthese differences might affect the financial information contained herein. No attempt has been madeto identify all disclosure, presentation or classification differences that would affect the manner inwhich transactions and events are presented in the financial statements or notes thereto. Further, noattempt has been made to identify future differences between Indonesian GAAP and U.S. GAAP as aresult of proposed changes in accounting standards. Regulatory bodies that promulgate IndonesianGAAP and U.S. GAAP may have projects ongoing that could affect future comparisons such as thisone. No attempt has been made to identify all future differences between Indonesian GAAP and U.S.GAAP that may affect the Company’s financial information as a result of transactions or events thatmay occur in the future.

Revaluation of Property, Plant and Equipment

While Indonesian GAAP does not generally allow companies to recognise an increase in thevalue of property, plant and equipment that occurs subsequent to its acquisition, an exception isprovided for revaluations made in accordance with specific government regulations.

Under U.S. GAAP, property, plant and equipment may not be written up by an entity to reflectappraisal, market or current values that are above cost to the entity.

Foreign Exchange Differences on Property Under Construction

Under Indonesian GAAP, foreign exchange differences on loans used to finance property underconstruction are capitalised. Capitalisation of foreign exchange differences cease when theconstruction is substantially completed and the property is ready for intended use.

Under U.S. GAAP, foreign exchange differences are charged to current operations.

Capitalisation of Interest on Property Under Construction

Under Indonesian GAAP, borrowing costs directly attributable to the acquisition, construction orproduction of a qualifying asset should be capitalised as part of the acquisition cost of the qualifyingasset. Qualifying assets are assets that necessarily require a substantial period of time (i.e. 12 monthsor more) to be developed or constructed for their intended use or sale. If the borrowing is specificallyused for the purpose of acquiring a qualifying asset, the total borrowing costs capitalised shouldinclude all borrowing costs incurred in respect of that borrowing. The interest income arising from thetemporary investment of any unused borrowings is offset against any capitalised interest expense. Ifborrowed funds are not used specifically for the purpose of acquiring qualifying assets, but aresubsequently used to acquire qualifying assets, the amount of borrowing costs eligible forcapitalisation is determined by applying a capitalisation rate to the expenditures on those assets.

Under U.S. GAAP, the borrowing need not be directly linked to the construction of a qualifyingasset, and no minimum construction period is specified. The interest income arising from thetemporary investment of any unused borrowings is recognised directly to current operations.

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Impairment of Assets

Under Indonesian GAAP, an enterprise is required to assess at each balance sheet date whetherthere is any indication that an asset may be impaired. If any such indication exists, the enterpriseshould estimate the recoverable amount of the asset. The estimated recoverable amount of the assetor the cash-generating unit to which it belongs is the higher of the net selling price (e.g. price in abinding sales agreement in an arm’s-length transaction or the market price less cost of disposal) orvalue in use (i.e. discounted estimated future cash inflows and outflows to be derived from continuinguse of the asset and from its ultimate disposal). An impairment loss is recognised for the excess of thecarrying amount of the asset or the cash-generating unit to which it belongs over the estimatedrecoverable amount. An impairment loss is only reversed to the extent that the asset’s carrying amountdoes not exceed the carrying amount that would have been determined, net of depreciation, if noimpairment loss had been recognised.

U.S. GAAP requires that a long-lived asset or asset group held and used by an entity be testedfor recoverability whenever events or changes in circumstances indicate that the carrying amount ofsuch asset or asset group may not be recoverable.

In assessing the recoverability of an asset or asset group, the entity estimates the future cashflows under U.S. GAAP, undiscounted and without interest charges, that are expected to result fromthe use of the asset or asset group and its eventual disposal. If the sum of such expected future cashflows is less than the carrying amount of the asset or asset group, an impairment loss is recognised;otherwise it is not.

An impaired asset is written down to its estimated fair value based on quoted market prices inthe active market or by discounting estimated future cash flows. Reversal of previously recognisedimpairment losses is prohibited.

Land RightsIn Indonesia, all title to land rests with the state under Basic Agrarian Law No. 5/1960. Land use

is regulated through the granting of land rights where the holder of the right enjoys the full use of theland for a stated period of time, subject to extensions. Land rights generally are freely tradable andmay be pledged as security under borrowing agreements. Under Indonesian GAAP, the cost ofownership rights are not amortised unless the holder judges the likelihood of its obtaining an extensionor renewal of the right to be remote.

Under U.S. GAAP, the cost of acquired land rights is amortised over the period for which theholder is expected to retain the land rights.

InventoryUnder Indonesian GAAP, inventories are stated at cost or net realisable value, whichever is

lower. Net realisable value is defined as the estimated selling price in the ordinary course of businessless the estimated costs of completion and the estimated costs necessary to make the sale.

U.S. GAAP normally requires the use of historical cost, but a departure from the cost basis ofpricing the inventory is required when the cost of the goods exceeds their utility. Where there isevidence that the utility of the goods, in the ordinary course of business, will be less than their cost,whether due to physical deterioration, obsolescence, changes in price levels or other causes, thedifference should be recognised as a loss in the current period. This is generally accomplished bystating such goods at market value. The term “market value” means current replacement cost (bypurchase or by reproduction, as the case may be), except that:

● Market value should not exceed the net realisable value (i.e. the estimated selling price inthe ordinary course of business less reasonably predictable costs of completion anddisposal); and

● Market value should not be less than net realisable value reduced by an allowance for anapproximately normal profit margin.

145

Under U.S. GAAP, a write-down of inventory to the lower of cost or market value creates a newcost basis that subsequently cannot be marked up based on changes in underlying facts andcircumstances.

Defined Benefit Plans

Under Indonesian GAAP, past service cost is recognised immediately to the extent that thebenefits of such service have already vested, and is otherwise amortised on a straight-line basis overthe average periods until the benefits become vested. There is also no specific requirement torecognise minimum liability.

Under U.S. GAAP, unrecognised prior service cost is amortised by assigning an equal amount toeach future period of service of each employee. Additionally, if the accumulated benefit obligationexceeds the fair value of plan assets, the employer is required to recognise in its financial statementsa liability (including unfunded accrued pension cost) that is at least equal to the unfunded accumulatedbenefit obligation. Recognition of an additional minimum liability is required if an unfundedaccumulated benefit obligation exists and (a) an asset has been recognised as prepaid pension cost, (b)the liability already recognised as unfunded accrued pension cost is less than the unfundedaccumulated benefit obligation, or (c) no accrued or prepaid pension cost has been recognised.

Development costs

Under Indonesian GAAP, development costs of a project are recognised as an expense in theperiod incurred, but may be recognised as an asset and amortised if certain criteria are met andprovided there is sufficient certainty that future economic benefits will flow to the enterprise as aresult of development costs.

Under U.S. GAAP, development costs are expensed except when incurred for others undercontractual arrangements or costs unique to extractive industries.

Equity in net income of associated company

Under Indonesian GAAP, the Company records its equity in the net income of an associatedcompany based on the associate company’s consolidated financial statements prepared under inaccordance with Indonesian GAAP.

For U.S. GAAP reporting purposes, a company should recognise the effect of the differencesbetween U.S. GAAP and Indonesian GAAP on the financial statements of the associated company.

Embedded derivatives

Under Indonesian GAAP, contracts denominated in currencies other than the functional currencyof either of the contracting parties do not contain embedded foreign currency derivatives if suchcontracts are denominated in a currency that is commonly used in local business transactions.

Under U.S. GAAP, an embedded foreign currency derivative instrument may not be separatedfrom the host contract and considered a derivative instrument if the host contract is not a financialinstrument and it requires payment(s) denominated in (a) the functional currency of any substantialparty to that contract, (b) the currency in which the price of the related good or service that is acquiredor delivered is routinely denominated in international commerce (for example, the U.S. dollar forcrude oil transactions), (c) the local currency of any substantial party to the contract, or (d) thecurrency used by a substantial party to the contract as if it were the functional currency because theprimary economic environment in which the party operates is highly inflationary.

146

Segment Information

Under Indonesian GAAP, segment information is prepared and reported using the accountingpolicies adopted for preparing and presenting the consolidated financial statements. The primaryformat in reporting segment information is based on business segments, while secondary segmentinformation is based on geographical segments. Under Indonesian GAAP, a business segment is adistinguishable component of an enterprise that is engaged in providing an individual product orservice or a group of related products or services and that is subject to risks and returns that aredifferent from those of other business segments.

Under U.S. GAAP and SFAS No. 131, “Disclosures about Segments of an Enterprise and RelatedInformation”, a public business enterprise is required to present segment information based onoperating segments. Several operating segments may, provided aggregation criteria are met, beaggregated to reportable segments for which the required information is disclosed. Disclosure is basedon management’s approach for reporting segments information to the company’s chief operatingdecision-makers.

Disclosures

Certain additional disclosures not required under Indonesian GAAP are required to be disclosedunder U.S. GAAP. Some of the areas where U.S. GAAP requires specific additional disclosuresinclude, among others, concentrations of credit risk, significant customers and suppliers, pensions,comprehensive income, new accounting pronouncements, fair value of financial instruments, and cashflows (i.e., reconciliation of direct to indirect method of cash flows from operating activities). Inaddition, certain line items included in Indonesian GAAP balance sheets, cash flow statements andprofit and loss statements would be reclassified in preparing and presenting U.S. GAAP balancesheets, statements of income and statements of cash flows.

147

LEGAL MATTERS

Certain legal matters in connection with the issue and sale of the Bonds offered hereby will bepassed upon for the Issuer and the Guarantor by Latham & Watkins with respect to English law andby Loyens & Loeff N.V. with respect to Dutch law, and for the Joint Lead Managers by Makes &Partners Law Firm with respect to Indonesian law. The validity of the Bonds will be passed upon forthe Joint Lead Managers by Milbank, Tweed, Hadley & McCloy LLP.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements of the Company as of and for the years ended December31, 2004, 2003 and 2002 included in this Offering Circular have been audited by Hans TuanakottaMustofa & Halim (formerly Hans Tuanakotta & Mustofa), independent accountants, as stated in theirreport appearing herein.

With respect to the unaudited interim consolidated financial statements for the periods endedMarch 31, 2004 and 2005 included in this Offering Circular, Hans Tuanakotta Mustofa & Halim,independent accountants, have applied limited procedures in accordance with Indonesian standards fora review of such financial statements. However, as stated in their report included herein, they did notaudit and they do not express an opinion on those financial statements. Accordingly, the degree ofreliance on their report on such financial statements should be restricted in light of the limited natureof the review procedures applied.

148

RATINGS

The Bonds have been rated “B2” by Moody’s and “B” by Standard & Poor’s. The credit ratingsaccorded the Bonds are not a recommendation to purchase, hold or sell the Bonds inasmuch as suchratings do not comment as to market price or suitability for a particular investor. There can be noassurance that the ratings will remain in effect for any given period or that the ratings will not berevised by the rating agencies in the future if, in their judgment, circumstances so warrant. See “RiskFactors — Risks Relating to the Bonds — The ratings assigned to the Bonds may be lowered orwithdrawn entirely in the future.”

149

GENERAL INFORMATION

Consents

The creation and issue of the Bonds has been authorised by resolutions of the Board of Directorsof the Issuer dated June 8, 2005. The giving of the Guarantee has been authorised by resolutions ofthe Board of Directors of the Guarantor dated July 11, 2005.

Litigation

Save as disclosed in this Offering Circular, there are no legal or arbitration proceedings againstor affecting the Issuer, the Guarantor, any of its subsidiaries or any of their respective assets, nor isthe Issuer or the Guarantor aware of any pending or threatened proceedings, which are or might bematerial in the context of the issue of the Bonds.

No Material Adverse Change

There has been no adverse change or any development reasonably likely to involve an adversechange, in the condition (financial or otherwise) or general affairs of the Issuer or the Guarantor sinceDecember 31, 2004 that is material in the context of the issue of the Bonds.

Documents Available

For so long as any of the Bonds are outstanding, copies of the following documents may beinspected during normal business hours at the specified office of each Paying Agent:

(1) the Agency Agreement; and

(2) the Trust Deed.

For so long as any of the Bonds are outstanding, copies of the following documents (togetherwith English translations thereof) may be obtained during normal business hours at the SpecifiedOffice of each Paying Agent (other than a Paying Agent in Singapore):

(1) the audited financial statements of the Issuer for the last two financial years, if any;

(2) the audited consolidated financial statements of the Guarantor for the last two financialyears; and

(3) the unaudited consolidated financial statements of the Guarantor for each quarter endedMarch 31, June 30 and September 30.

Clearing System and Settlement

The Bonds have been accepted for clearance through Clearstream, Luxembourg and Euroclear.The ISIN and common code for the Bonds are XS0224891944 and 022489194.

Governing Law

The Agency Agreement and Trust Deed are governed by English law. The SubscriptionAgreement is also governed by English law.

Listing

Approval in-principle has been obtained from the SGX-ST for permission to deal in andquotation of the listing of the Bonds on the SGX-ST. The Bonds will be traded on the SGX-ST in aminimum board size lot of US$200,000 for so long as the Bonds remain listed on the SGX-ST.

150

PT GAJAH TUNGGAL TBK.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

INDEPENDENT ACCOUNTANTS’ REPORT ........................................................................................... F-2

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2004 AND 2005 AND FOR THE THREE MONTHS THEN ENDED

CONSOLIDATED BALANCE SHEETS .............................................................................................. F-3

CONSOLIDATED STATEMENTS OF INCOME ...................................................................................... F-5

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY..................................................................... F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS............................................................................... F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................................................................ F-9

INDEPENDENT AUDITORS’ REPORT ................................................................................................. F-55

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2002, 2003 AND 2004 AND FOR THE YEARS THEN ENDED

CONSOLIDATED BALANCE SHEETS .............................................................................................. F-56

CONSOLIDATED STATEMENTS OF INCOME ...................................................................................... F-58

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY..................................................................... F-59

CONSOLIDATED STATEMENTS OF CASH FLOWS............................................................................... F-60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................................................................ F-62

F-1

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMARCH 31, 2005 AND 2004 — Unaudited

Notes 2005*) 2004

Rp’Million Rp’MillionASSETS

CURRENT ASSETSCash and cash equivalents............................................ 2d,2f,3,36 53,481 211,833Temporary investments................................................. 2d,2g,4,36 144,873 484,408Trade accounts receivable 2h,5

Related parties .......................................................... 2d,36 72,137 73,421Third parties — net of allowance for doubtful

accounts of Rp 63,289 million in 2005 andRp 98,219 million in 2004 .................................... 563,620 835,057

Other accounts receivable from third parties —net of allowance for doubtful accounts ofRp14,462 million ...................................................... 2h 98,897 143,284

Inventories — net of allowance for decline invalue of Rp 2,973 million in 2004 ............................ 2i,6 752,812 1,009,214

Advances ..................................................................... 181,345 295,552Prepaid taxes ............................................................... 2r,7 95,985 117,373Prepaid expenses .......................................................... 2j 7,119 13,382

Total Current Assets..................................................... 1,970,269 3,183,524

NONCURRENT ASSETSAccounts receivable from related parties ...................... 2d,8a,36 868,666 2,403,686Deferred tax assets — net ............................................ 2r,30 59,456 —Investments in shares of stock ..................................... 2g,9 475,838 2,645Property, plant and equipment — net of accumulated

depreciation of Rp 1,796,298 million in 2005 andRp 2,912,060 million in 2004 ................................... 2k,10 3,100,147 6,453,037

Unused property, plant and equipment — net ............... 2k,10 — 11,594Deposits in suspended bank ......................................... 2d,11,36 — 276,223Others .......................................................................... 2l,2m,12 — 4,262

Total Noncurrent Assets ............................................... 4,504,107 9,151,447

TOTAL ASSETS ......................................................... 6,474,376 12,334,971

*) The 2005 consolidated balance sheets do not include the balance sheets of GTPI, MAWC and LBP which were no longerconsolidated as discussed in Notes 1b and 33.

See accompanying notes to consolidated financial statements which are an integral part of theconsolidated financial statements.

F-3

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMARCH 31, 2005 AND 2004 (Continued) — Unaudited

Notes 2005*) 2004

Rp’Million Rp’MillionLIABILITIES AND EQUITY

CURRENT LIABILITIESTrade accounts payable 13

Related parties .......................................................... 2d,36 268,118 784Third parties ............................................................. 322,787 408,645

Other accounts payable to third parties ........................ 126,487 185,049Taxes payable .............................................................. 2r,14 30,577 61,179Dividends payable........................................................ 1,577 1,707Accrued expenses......................................................... 15 94,452 554,870Sales advances ............................................................. 17,663 22,741Current maturities of long-term liabilities

Notes payable ........................................................... 16 494,657 501,443Liability for the purchase of property,

plant and equipment .............................................. 17 — 33,540Bank loans ............................................................... 18 — 271,533

Total Current Liabilities ............................................... 1,356,318 2,041,491

NONCURRENT LIABILITIESDeferred tax liabilities — net....................................... 2r,30 — 291,975Long-term liabilities — net of current maturities

Notes payable ........................................................... 16 2,925,697 4,408,886Bank loans ............................................................... 18 — 541,111

Accounts payable to related parties .............................. 2d,8b,36 788 3,175,937Other accounts payable to third party........................... 19 — 116,348Dealers’ deposits .......................................................... 156,203 176,390Post-employment benefits obligation ............................ 2e,2n,20 146,007 187,348Negative goodwill — net ............................................. 2b — 2,014

Total Noncurrent Liabilities ......................................... 3,228,695 8,900,009

MINORITY INTERESTS IN NET ASSETS OFSUBSIDIARIES ....................................................... 21 — (76,421)

EQUITYCapital stock — Rp 500 par value per share

Authorised — 12,000,000,000 sharesSubscribed and paid-up — 3,168,000,000 shares....... 22 1,584,000 1,584,000

Additional paid-in capital............................................. 23 51,500 51,500Difference in value of restructuring transactions

between entities under common control .................... 2o,24 (494,895) —Difference due to change of equity in subsidiary ......... 2g,25 412,398 28,728Unrealised gain on increase in value of available for

sale securities — net ................................................ 2g,4,9 1,607 14,415Retained earnings (Deficit) .......................................... 334,753 (208,751)

Total Equity ................................................................. 1,889,363 1,469,892

TOTAL LIABILITIES AND EQUITY ........................ 6,474,376 12,334,971

*) The 2005 consolidated balance sheets do not include the balance sheets of GTPI, MAWC and LBP which were no longerconsolidated as discussed in Notes 1b and 33.


F-4

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 — Unaudited

Notes 2005 2004

Rp’Million Rp’MillionNET SALES ................................................................ 2d,2p,26,36 1,158,434 1,641,201COST OF SALES ....................................................... 2d,2p,27,36 966,897 1,380,226

GROSS PROFIT ......................................................... 191,537 260,975

OPERATING EXPENSES 2p,28Selling ......................................................................... 35,107 60,240General and administrative ........................................... 31,970 62,274

Total Operating Expenses ............................................. 67,077 122,514

INCOME FROM OPERATIONS ................................ 124,460 138,461

OTHER INCOME (CHARGES) 2pGain on sale of subsidiary ........................................... 33,34 123,532 —Interest income ............................................................ 397 4,918Loss on foreign exchange — net .................................. 2c (62,776) (90,563)Interest expense ........................................................... 29 (15,837) (6,672)Others — net ............................................................... 1,755 7,659

Other Income (Charges) — Net .................................... 47,071 (84,658)

EQUITY IN NET INCOME OF ASSOCIATEDCOMPANY .............................................................. 2g,9 47,884 —

INCOME BEFORE TAX ............................................ 219,415 53,803TAX EXPENSE........................................................... 2r,30 (14,510) (19,479)

INCOME FROM ORDINARY ACTIVITIES ............. 204,905 34,324EXTRAORDINARY ITEMRestructuring gain — no tax effect .............................. 2q,31 — 103,376

INCOME BEFORE MINORITY INTERESTSIN NET LOSS OF SUBSIDIARIES ........................ 204,905 137,700

MINORITY INTERESTS IN NET LOSS OFSUBSIDIARIES ....................................................... 21 — 1,851

NET INCOME ............................................................ 204,905 139,551

BASIC EARNINGS PER SHARE (In full Rupiah) 2s,32Including extraordinary item ..................................... 65 44Excluding extraordinary item .................................... 65 11


F-5

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 — Unaudited

NotesPaid-upcapital

Additionalpaid-incapital

Differencein value of

restructuringtransaction

betweenentities

undercommoncontrol

Differencedue to

change ofequity in

subsidiary

Unrealisedgain on

increase invalue of

availablefor sale

securities— net

Retainedearnings(Deficit)

Totalequity

Rp’Million Rp’Million Rp’Million Rp’Million Rp’Million Rp’Million Rp’Million

Balance as of January 1, 2004 ................ 1,584,000 51,500 — 28,728 10,355 (348,302) 1,326,281Unrealised gain on increase in value of

securities............................................ 2g,4,9 — — — — 4,060 — 4,060Net income for the period ....................... — — — — — 139,551 139,551

Balance as of March 31, 2004................. 1,584,000 51,500 — 28,728 14,415 (208,751) 1,469,892

Balance as of January 1, 2005 ................ 1,584,000 51,500 (494,895) 412,398 1,686 129,848 1,684,537Unrealised loss on decrease in value of

securities............................................ 2g,4,9 — — — — (79) — (79)Net income for the period ....................... — — — — — 204,905 204,905

Balance as of March 31, 2005................. 1,584,000 51,500 (494,895) 412,398 1,607 334,753 1,889,363


F-6

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 — Unaudited

2005 2004

Rp’Million Rp’MillionCASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers........................................................... 1,031,214 1,680,468Cash paid to suppliers and employees .............................................. (952,457) (1,360,932)

Cash generated from operations ....................................................... 78,757 319,536Interest and financing charges paid .................................................. (36,120) (27,935)Tax restitution received.................................................................... 25,451 22,764Income tax paid ............................................................................... (8,454) (9,811)

Net Cash Provided by Operating Activities ...................................... 59,634 304,554

CASH FLOWS FROM INVESTING ACTIVITIESWithdrawals (placements) of temporary investments......................... 36,150 (105,888)Interest received .............................................................................. 395 5,078Proceeds from sale of property, plant and equipment ....................... 250 233Acquisitions of property, plant and equipment.................................. (35,451) (54,302)Placements of refundable deposits .................................................... — (4)Legal processing of landrights ......................................................... — 12

Net Cash Provided by (Used in) Investing Activities ........................ 1,344 (154,871)

CASH FLOWS FROM FINANCING ACTIVITIESPayment of restructured loan............................................................ — (3,407)Payments of bank loans ................................................................... — (1,850)Accounts receivable from and payable to related parties — net........ (10,135) (122,814)Payment of notes payable ................................................................ (88,572) (84,021)

Net Cash Used in Financing Activities ............................................. (98,707) (212,092)

NET DECREASE IN CASH AND CASH EQUIVALENTS ........... (37,729) (62,409)CASH AND CASH EQUIVALENTS AT BEGINNING

OF PERIOD ............................................................................... 103,785 272,319Balance of unconsolidated subsidiary ............................................... (11,014) —Effect of foreign exchange rate changes ........................................... (1,561) 1,923

CASH AND CASH EQUIVALENTS AT END OF PERIOD .......... 53,481 211,833


F-7

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 (Continued) — Unaudited

2005 2004

Rp’Million Rp’MillionSUPPLEMENTAL DISCLOSURESNoncash investing and financing activities:

Ordinary activities:Acquisition of property, plant and equipment through advances

and other accounts payable to third parties ................................ 21,181 —Increase of other accounts receivable to third party arising from

sale of subsidiary ...................................................................... 6,885 —Reclassification of property, plant and equipment from unused

property, plant and equipment ................................................... — 118Extraordinary item (see Note 31):

Decrease in short-term and long-term liabilities in connectionwith credit restructuring ......................................................... — 103,376


F-8

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2005 AND 2004 AND FOR THE THREE-MONTH PERIODS THEN ENDED —Unaudited

1. GENERAL

a. Establishment and General Information

PT. Gajah Tunggal Tbk (the “Company”) was established based on notarial deed No. 54 dated August 24, 1951of Raden Meester Soewandi, SH, notary public in Jakarta. The deed of establishment was approved by the Minister ofJustice of the Republic of Indonesia in his Decision Letter No. J.A.5/69/23 dated May 29, 1952, and was published inState Gazette of the Republic of Indonesia No. 63 dated August 5, 1952, Supplement No. 884. The Company’s articlesof association have been amended by notarial deed No. 54 dated July 15, 1997 of Indah Budiana, SH, substitute for AmrulPartomuan Pohan, SH, Lex Legibus Magister, notary public in Jakarta, to conform with Law No. 1 year 1995 on LimitedLiability Companies and the decision from the Chairman of the Capital Market Supervisory Agency No. KEP-13/PM/1997 dated April 30, 1997 regarding fundamental articles of association of public companies and companies whoundertake a public offering. The amendment deed was approved by the Minister of Justice of the Republic of Indonesiain his Decision Letter No. C2-9167.HT.01.04.TH.97 dated September 8, 1997. The Company’s articles of associationhave been amended, most recently by Notarial deed No. 36 dated June 28, 1999 of Amrul Partomuan Pohan, SH, LexLegibus Magister, notary public in Jakarta, concerning the approval of changes in the Company’s articles of associationto conform with the decision of the Chairman of the Capital Market Supervisory Agency No. Kep-41/PM/1998 andKep-44/PM/1998 dated August 14, 1998 regarding the change of regulations on pre-emptive rights and additional capitalwithout pre-emptive rights. The amendment deed was approved by the Minister of Justice of the Republic of Indonesiain his Decision Letter No. C-15658.HT.01.04.Th.99 dated August 30, 1999, and was published in State Gazette of theRepublic of Indonesia No. 40 dated May 19, 2000, Supplement No. 98.

The Company is domiciled in Jakarta, and its plants are located in Tangerang. The Company’s head office islocated in Wisma Hayam Wuruk, 10th Floor, Jl. Hayam Wuruk 8, Jakarta.

In accordance with article 3 of the Company’s articles of association, the scope of its activities consists ofmanufacturing of goods made of rubber, primarily tyres and tubes for vehicles, goods or equipment. The Company startedcommercial operations in 1953. The Company’s products are marketed both domestic and international, including USA,Asia, Australia and Europe. The Company had 9,969 employees in 2005 and 9,007 employees in 2004.

The Company’s management as of March 31, 2005 consisted of the following:

President CommissionerVice President CommissionerCommissioners

Rudolf KasendaPang Shun PenGautama HartartoSutrisnoMohendra Asoka Bratanata

Independent Commissioners Howell Rembrandt Pickett KeezellSunaria Tadjuddin

President DirectorVice President DirectorDirectors

Christopher Chan Siew ChoongMulyati GozaliBudhi Santoso TanasalehVeli Ilmari NikkariCatharina WidjajaHendra SoerijadiKisyuwono

Total salaries and benefits paid to commissioners and directors of the Company amounted to Rp 5,805 million andRp 4,530 million, respectively, in 2005 and 2004.

As discussed in Notes 22 and 35, in relation to the settlement of loans from Bank Dagang Nasional Indonesia(BDNI) — Suspended Bank (BBO) between the Founder of Gajah Tunggal Group and Indonesian Bank RestructuringAgency (IBRA), all of the shares owned by PT Gajah Tunggal Mulia and PT Gajah Tunggal Sakti in the Company andGTPI and the obligations of the Company and its subsidiaries to BDNI — BBO were transferred to PT Tunas SepadanInvestama (“TSI”). TSI was a holding company established by the Founder of Gajah Tunggal Group and IBRA in relationto the settlement of the Founder’s obligations with IBRA.

Based on the Receivables Transfer (Cessie) Agreement between TSI and Garibaldi Venture Fund Limited(Garibaldi) No. 48 and 49 dated April 8, 2004, by Dr. Irawan Soerodjo, S.H., Msi, notary public in Jakarta, both partiesagreed to transfer to Garibaldi all accounts payable of the Company, GTPI, FS, SS and LBP to TSI.

F-9

Based on Deed No. 414 dated April 27, 2004 of the same notary public, all Company shares owned by TSI havebeen transferred to Garibaldi (see Note 22).

b. Consolidated Subsidiaries

The Company has direct or indirect ownership interest of more than 50% in, and/or have significant influence overthe management of, the following subsidiaries:

Subsidiary Domicile Nature of Business

Percentage ofOwnership Start of

CommercialOperations2005 2004

GTT NetherlandsB.V. (“GTTN”)

TheNetherlands

General trading andfinancial services

100% 100% 1996

PT Prima SentraMegah (formerlyPT GT MegahPrima) (PSM)

Jakarta General trading 99% 99% 2005

PT GT PetrochemIndustries Tbk(“GTPI”)

Jakarta Manufacturing ofnylon cord, polyester,ethylene glycol, andpetrochemical

— 50.01% 1990

PT Filamendo Sakti(“FS”) 92.90%owned by GTPI

Jakarta Manufacturing ofnylon filament yarn,polyester-chips as rawmaterials for nyloncord and fishing netyarn

— 46.46% 1993

PT SentraSintetikajaya(“SS”) 95%owned by GTPI

Jakarta Manufacturing ofsynthetic rubber

— 47.51% 1998

GTPI NetherlandsB.V. (“GTPIN”)100% owned byGTPI

TheNetherlands


— 50.01% 1997

PT LanggengBajapratama(“LBP”)

Jakarta Trading andmanufacturing of steelwire

— 51% 1997

PT Meshindo AlloyWheelCorporation(“MAWC”)

Surabaya Manufacturing of rimsof wheel

— 51% 1991

PT Auto BahnMandiri(“ABM”) 95%owned byMAWC

Jakarta Trading of caraccessories andgeneral trading

— 48.45% 1995

Total assets of GTTN and PSM as of March 31, 2005 amounted to Rp 1,918 million and Rp 80,027 million,respectively.

In connection with the restructuring of the Company’s group, starting at the end of November 2004 for GTPI, FS,SS, GTPIN, and LBP and starting at the end of February 2005 for MAWC, those companies are no longer considered assubsidiaries as discussed in Notes 9 and 33.

F-10

Based on Share Sale and Purchase Agreement No. 28 dated September 29, 2004 and Share Sale and Purchase DeedNo. 45 dated November 30, 2004 by Fenny Tjitra, SH, the stockholders of LBP approved the sale of all shares of LBPowned by the Company, totaling 41,310 shares (51%), to PT Gajah Tunggal Prakarsa (see Note 34).

Based on the Resolution of GTPI’s Extraordinary Shareholders Meeting No. 16 dated November 25, 2004 fromAmrul Partomuan Pohan, SH, Lex Legibus Magister, GTPI’s stockholders agreed to issue 1,649,179,559 new shares ofGTPI to Garibaldi and other stockholders, accordingly, the Company’s ownership in GTPI was diluted from 50.01% to28.91% (see Notes 8b and 16).

The above transactions has been approved by the stockholders including independent stockholders in theCompany’s Extraordinary Meeting of Shareholders held on November 25, 2004.

Based on Share Sale and Purchase Deed No. 57 dated February 28, 2005 from Fenny Tjitra SH, the Company soldall of its shares of stock in MAWC to PT Gema Arta Persada (see Note 34).

c. Public Offering of the Company’s Shares

On March 15, 1990, the Company obtained the notice of effectivity from the Chairman of Capital MarketSupervisory Agency (“Bapepam”) in his letter No. SI-087/SHM/MK.10/1990 for its public offering of 20,000,000 shares.On May 8, 1990, these shares were listed on the Jakarta Stock Exchange.

On January 21, 1994, the Company obtained the notice of effectivity from the Chairman of Bapepam in his letterNo.S-115/PM/1994 for its limited offering of 198,000,000 shares through rights issue to stockholders. These shares werelisted on the Jakarta and Surabaya stock exchanges on February 11, 1994.

On August 23, 1996, the Company obtained the notice of effectivity from the Chairman of Bapepam in his letterNo. S-1365/PM/1996 for its limited offering of 792,000,000 shares through rights issue II to stockholders. These shareswere listed on the Jakarta and Surabaya stock exchanges on October 16, 1996.

As of March 31, 2005, all of the Company’s outstanding shares totaling 3,168,000,000 shares have been listed onthe Jakarta and Surabaya stock exchanges.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Consolidated Financial Statement Presentation

The consolidated financial statements have been prepared using accounting principles and reporting practicesgenerally accepted in Indonesia. Such consolidated financial statements are an English translation of the Company andits subsidiaries’ statutory report in Indonesia, and are not intended to present the consolidated financial position andconsolidated results of operations, and cash flows in accordance with accounting principles and reporting practicesgenerally accepted in other countries and jurisdictions.

The consolidated financial statements, except for the consolidated statements of cash flows, are prepared underthe accrual basis of accounting. The reporting currency used in the preparation of the consolidated financial statementsis the Indonesian Rupiah, while the measurement basis used is the historical cost, except for certain accounts which aremeasured on the bases described in the related accounting policies.

The consolidated statements of cash flows are prepared using the direct method with classifications of cash flowsinto operating, investing and financing activities.

b. Principles of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlledby the Company and its subsidiaries (see Note 1b). Control is achieved where the Company has the power to govern thefinancial and operating policies of the investee entity so as to obtain benefits from its activities. Control is presumed toexist when the Company owns directly or indirectly through subsidiaries, more than 50% of the voting rights, other thanthose excluded because control is temporary or due to long-term restrictions significantly impairing the subsidiary’sability to transfer funds to the Company.

On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition.Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwilland amortised using the straight-line method over five years. When the cost of acquisition is less than the interest in thefair values of the identifiable assets and liabilities acquired as at the date of acquisition (i.e. discount on acquisition),the fair values of the acquired non-monetary assets are reduced proportionately until all the excess is eliminated. Theexcess remaining after reducing the fair values of non-monetary assets acquired is recognised as negative goodwill,treated as deferred revenue and recognised as revenue on a straight-line method over twenty years.

F-11

The interest of the minority shareholders is stated at the minority’s proportion of the historical cost of the netassets. The minority interest is subsequently adjusted for the minority’s share of movements in equity. Any lossesapplicable to the minority interest in excess of the minority interest are allocated against the interests of the parent.

The results of subsidiaries disposed of during the year are included in the consolidated statements of income upto the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of the subsidiaries to bring the accountingpolicies used in line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

c. Foreign Currency Transactions and Translation

The books of accounts of the Company and its subsidiaries, except GTTN and GTPIN, are maintained inIndonesian Rupiah. Transactions during the period involving foreign currencies are recorded at the rates of exchangeprevailing at the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated inforeign currencies are adjusted to reflect the rates of exchange prevailing at that date. The resulting gains or losses arecredited or charged to current operations.

The books of accounts of GTTN and GTPIN are maintained in Euro. For consolidation purposes, assets andliabilities of GTTN and GTPIN at balance sheet date are translated into Indonesian Rupiah using the rate of exchangeprevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the average rate for theperiod. The resulting translation adjustment is charged to current operations in the consolidated financial statementsbecause all the transactions of GTTN and GTPIN were made with the Company and its subsidiary (GTPI).

d. Transactions With Related Parties

Related parties consist of the following:

1) companies that directly, or indirectly through one or more intermediaries, control, or are controlled by, orare under common control with, the Company (including holding companies, subsidiaries and fellowsubsidiaries);

2) associated companies;

3) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives themsignificant influence over the Company, and close members of the family of any such individuals (closemembers of the family are those who can influence or can be influenced by such individuals in theirtransactions with the Company);

4) key management personnel who have the authority and responsibility for planning, directing and controllingthe Company’s activities, including commissioners, directors and managers of the Company and closemembers of their families; and

5) companies in which a substantial interest in the voting power is owned, directly or indirectly, by any persondescribed in (3) or (4) or over which such a person is able to exercise significant influence. This includescompanies owned by commissioners, directors or major stockholders of the Company and companies whichhave a common key member of management as the Company.

All transactions with related parties, whether or not made at similar terms and conditions as those done with thirdparties, are disclosed in the consolidated financial statements.

e. Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could be different from these estimates.

f. Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks and all unrestricted investments with maturitiesof three months or less from the dates of placement.

F-12

g. Investments

Investments in equity securities that have readily determinable fair values and debt securities

Investments in available-for-sale securities are stated at fair values. Unrealised gains or losses from theincrease or decrease in fair values are recorded as part of equity and recognised as income or expense of the yearwhen realised.

Investments in securities held-to-maturity are stated at cost, adjusted for the unamortised premiums ordiscounts.

Securities available-for-sale held temporarily and debt securities held-to-maturity with terms of less thanone year are presented as temporary investments.

To calculate the realised gains or losses, cost of securities sold is determined using the weighted averagemethod.

Investment in associated companies

An associate is an entity over which the Company is in a position to exercise significant influence, but notcontrol or joint control, through participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in these consolidated financialstatements using the equity method of accounting. Investments in associates are carried in the balance sheet at costas adjusted by post-acquisition changes in the Company, and share of the net assets of the associate, less anyimpairment in the value of the individual investments. Losses of the associates in excess of the Company, interestin those associates are not recognised except if the Company has incurred obligations or made payments on behalfof the associates to satisfy obligations of the associates that the Company has guaranteed, in which case, additionallosses are recognised to the extent of such obligations or payments.

Goodwill and negative goodwill from investments in associates are recognised and amortised in the samemanner as that for acquisition of controlled entities (see accounting policy for principles of consolidation). Theamortisation of goodwill and negative goodwill are included in the Company’s share in the results of theassociates.

Other investments

Investments in shares of stock with ownership interest of less than 20% that do not have readilydeterminable fair values and are intended for long-term investments are stated at cost. The carrying amount of theinvestments is written down to recognise a permanent decline in the value of the individual investments. Any suchwrite-down is charged directly to current operations.

Change of equity in subsidiary

Changes in value of investment due to change in the equity of a subsidiary arising from capital transactionsof such subsidiary with other parties is recognised in equity as Difference Due to Change of Equity in Subsidiary,and recognised as income or expense in the year the investment is disposed of.

h. Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided based on a review of the status of the individual receivable accountsat the end of the period.

i. Inventories

Inventories are stated at cost or net realisable value, whichever is lower. The cost of raw materials and suppliesis determined using the moving average method, while the cost of finished goods and work in process is determined usingthe average cost of production.

j. Prepaid Expenses

Prepaid expenses are amortised over their beneficial periods using the straight-line method.

F-13

k. Property, Plant and Equipment

Property, plant and equipment, except for certain revalued assets, are stated at cost less accumulated depreciation.

Depreciation, except land, is computed using the straight-line method based on the estimated useful lives of theassets as follows:

Years

Buildings and improvements ................................................................................................ 10 - 25

Machinery and factory equipment ........................................................................................ 5 - 20

Vehicles ............................................................................................................................... 5

Office furniture and fixtures ................................................................................................ 5

Land are stated at cost and are not depreciated. Unused property, plant and equipment are presented as other assetsand are stated at the lower of carrying value or net realisable value.

When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to itsestimated recoverable amount, which is determined as the higher of net selling price or value in use. Impairment of assetis recognised as loss on impairment of asset which is charged to current operations. If a reversal of an impairment hasoccurred, the carrying amount of the asset is increased to its recoverable amount, subject to the limit that the increasedcarrying amount should not exceed the carrying amount that would have been determined had no impairment loss beenrecognised for the asset in prior periods. The reversal of an impairment loss is recognised as income in the currentperiods.

The cost of maintenance and repairs is charged to operations as incurred; expenditures which extend the usefullife of the asset or result in increased future economic benefits such as increase in capacity and improvement in thequality of output or standard of performance are capitalised. When assets are retired or otherwise disposed of, theircarrying values and the related accumulated depreciation are removed from the accounts and any resulting gain or lossis reflected in the current operations.

Construction in progress is stated at cost which includes borrowing costs during construction on debts incurredto finance the construction. Construction in progress is transferred to the respective property, plant and equipmentaccount when completed and ready for use.

l. Deferred Development Expenses

Expenses related to the development of new products are deferred and are amortised using the straight-line methodover five years.

m. Deferred Charges — Landrights

Expenses related to the legal processing of landrights are deferred and amortised using the straight-line methodover the legal terms of the landrights which are shorter than their economic lives.

n. Post-Employment Benefits

The Company and its subsidiaries calculate defined post-employment benefits to employees in accordance withLabor Law No. 13/2003. No funding has been made to this defined benefit plan.

The cost of providing post-employment benefits is determined using the Projected Unit Credit Method. Theaccumulated unrecognised actuarial gains and losses that exceed 10% of the present value of the Company’s definedbenefit obligations is recognised on a straight-line basis over the expected average remaining working lives of theparticipating employees. Past service cost is recognised immediately to the extent that the benefits are already vested,and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.

The post-employment benefit obligation recognised in the consolidated balance sheets represent the present valueof the defined benefit obligation, as adjusted for unrecognised actuarial gains and losses and unrecognised past servicecost.

F-14

o. Difference in Value of Restructuring Transactions Between Entities Under Common Control

The difference between the transfer price and book value of assets, liabilities, shares or other forms of ownershipinstruments in a restructuring transaction between entities under common control is recorded as “Difference in value ofrestructuring transactions between entities under common control” and presented as part of equity.

p. Revenue and Expense Recognition

Local and exports sales are recognised when the goods are delivered and title has passed to the customers.Expenses are recognised when incurred (accrual basis).

q. Troubled Debt Restructuring

The excess of the carrying amount of the loan and related accounts over the total future cash payments specifiedby the new terms of the loan in a troubled debt restructuring (after deduction of related expenses) is recognisedimmediately as restructuring gain which is recorded as extraordinary item. After the restructuring, all cash paymentsunder the terms of the loan are deducted from the carrying amount of the loan and related accounts, and no interestexpense is recognised on such loan until maturity.

If the carrying amount of the loan and related accounts is less than the total future cash payments specified bythe new terms of the loan in a troubled debt restructuring, no restructuring gain or loss is recognised. After therestructuring, interest expense is computed by applying a constant effective interest rate to the carrying amount of theloan and related accounts at the beginning of each period until maturity.

Gain on debt restructuring is recognised as extraordinary item.

r. Income Tax

Current tax expense is determined based on the taxable income for the period computed using prevailing tax rates.

Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised fordeductible temporary differences to the extent that it is probable that taxable income will be available in future periodsagainst which the deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that have been enacted or substantively enacted as of the balance sheetdate. Deferred tax is charged or credited in the statement of income, except when it relates to items charged or crediteddirectly to equity, in which case the deferred tax is also charged or credited directly to equity.

Deferred tax assets and liabilities are offset in the consolidated balance sheets, except if these are for differentlegal entities, in the same manner the current tax assets and liabilities are presented.

s. Earnings Per Share

Basic earnings per share is computed by dividing net earnings by the weighted average number of sharesoutstanding during the period.

t. Segment Information

Segment information is prepared using the accounting policies adopted for preparing and presenting theconsolidated financial statements. The primary format in reporting segment information is based on business segment,while secondary segment information is based on geographical segment.

A business segment is a distinguishable component of an enterprise that is engaged in providing an individualproduct or service or a group of related products or services and that is subject to risks and returns that are different fromthose of other business segments.

A geographical segment is a distinguishable component of an enterprise that is engaged in providing products orservices within a particular economic environment and that is subject to risks and returns that are different from thosecomponents operating in other economic environments.

F-15

3. CASH AND CASH EQUIVALENTS

2005 2004

Rp’Million Rp’Million

Cash on hand

Rupiah ......................................................................................................... 1,307 779

U.S. Dollar .................................................................................................. 1,532 748

Other foreign currencies .............................................................................. — 21

Total cash on hand....................................................................................... 2,839 1,548

Savings account — Rupiah

Related party — Bank Ganesha.................................................................... — 5,638

Current accounts

Related party ............................................................................................... — 4,582

Third parties ................................................................................................ 50,642 145,791

Total current accounts .................................................................................. 50,642 150,373

Time and on call deposits

Related party ............................................................................................... — 28,274

Third parties ................................................................................................ — 26,000

Total time and on call deposits .................................................................... — 54,274

Total Cash and Cash Equivalents ..................................................................... 53,481 211,833

Details of the current accounts and time and on call deposits are as follows:

Current Accounts

2005 2004

Rp’Million Rp’MillionRelated party

Bank GaneshaRupiah........................................................................................... — 463U.S. Dollar .................................................................................... — 4,119

Third partiesRupiah

Bank Negara Indonesia .................................................................. 4,938 14,912Bank Central Asia ......................................................................... 4,778 14,738Deutsche Bank, Jakarta .................................................................. — 1,394The Hongkong and Shanghai Banking Corp. Ltd., Jakarta .............. — 3,743Others (below Rp 1 billion each) ................................................... 562 1,305

U.S. DollarBank Negara Indonesia .................................................................. 30,483 50,785Bank Internasional Indonesia ......................................................... 2,949 1,231ABN Amro Bank, Jakarta .............................................................. 1,918 1,738Bank Ganesha ................................................................................ 1,687 —Bank Central Asia ......................................................................... 1,478 2,058Bank NISP .................................................................................... 1,319 2,493The Hongkong and Shanghai Banking Corp. Ltd., Jakarta .............. — 39,362Deutsche Bank, Jakarta .................................................................. — 5,940Bank Mandiri ................................................................................ — 3,201Others (below Rp 1 billion each) ................................................... 383 790

EuroBank Negara Indonesia .................................................................. 128 1,252

Other foreign currencies .................................................................... 19 849

Total Current Accounts ...................................................................... 50,642 150,373

F-16

Time and On Call Deposits

2004

Rp’MillionRelated party

Bank GaneshaRupiah......................................................................................................................... 5,850U.S. Dollar .................................................................................................................. 22,424

Third partiesRupiah

Bank Central Asia ....................................................................................................... 25,000Bank Negara Indonesia ................................................................................................ 1,000

Total Time and On Call Deposits ................................................................................. 54,274

Interest rates of time and on call deposits per annumRupiah ............................................................................................................................. 5.50% - 6.18%U.S. Dollar ...................................................................................................................... 0.68% - 0.80%

Placements with a related party bank, according to management, were made at similar interest rates, terms andconditions with those placements with third party banks (see Note 36).

4. TEMPORARY INVESTMENTS

2005 2004

Rp’Million Rp’MillionNotes receivable held-to-maturity — net .......................................................... 86,389 173,474Investments with fund managers ...................................................................... 44,593 132,157Securities available-for-sale ............................................................................. 13,891 169,327Shares of PT Sunda Kelapa Permai .................................................................. — 9,025Shares of stock available-for-sale ..................................................................... — 425

Total ................................................................................................................ 144,873 484,408

The details of temporary investments are as follows:

Notes Receivable Held-to-Maturity — Net

2005 2004

Rp’Million Rp’MillionCommercial Paper

RupiahPT Graha Mitra Santosa................................................................. 8,460 8,460PT Indonesia Prima Property Tbk .................................................. 5,208 5,208PT Andalan Artha Advisindo Sekuritas .......................................... — 45,000PT Dipasena Citra Darmaja ........................................................... — 21,000

U.S. DollarPT Graha Mitra Santosa................................................................. 63,876 57,859PT Indonesia Prima Property Tbk .................................................. 8,845 8,012PT Dipasena Citra Darmaja ........................................................... — 21,468

Total ...................................................................................................... 86,389 167,007Unamortised discount ............................................................................. — (317)

Commercial Paper — Net ...................................................................... 86,389 166,690Republic of Indonesia Bonds — U.S. Dollar .......................................... — 6,784

Notes Receivable Held-to-Maturity — Net ............................................. 86,389 173,474

Interest rates per annumRupiah ............................................................................................... 7% - 8% 7% - 8%U.S. Dollar ........................................................................................ 3% - 4% 3% - 4%

F-17

The above notes receivable have terms of 1 month and are renewable.

In April 2004, the Commercial Paper of PT Dipasena Citra Darmaja amounting to Rp 21,000 million andUS$2,500,000 were used to settle the accounts payable to Garibaldi as discussed in Note 8b.

On April 20, 2004, the Republic of Indonesia Bonds have matured.

Investments with Fund Managers

This represents investments through fund managers as follows:

2005 2004


Cost

Triton Asset Management Ltd. ........................................................... 33,718 —

PT Andalan Artha Advisindo Sekuritas............................................... 10,875 109,880

PT Gani Aset Manajemen................................................................... — 18,447

Total ...................................................................................................... 44,593 128,327

Unrealised gain ...................................................................................... — 3,830

Fair Value .............................................................................................. 44,593 132,157

The Company appointed Triton Asset Management Ltd. to manage the Company’s funds with focus in promissorynotes of listed companies on the stock exchange. This contract has a term of 18 months and can be rolled over for oneyear unless one of the party terminates the agreement.

The Company appointed PT Andalan Artha Advisindo Sekuritas (“AAA”) as the provider of fund managementservices and securities settlement services. The agreement can be terminated at anytime by written notice to the otherparty.

The Company appointed PT Gani Aset Manajemen to invest the Company’s funds in promissory notes of listedcompanies. This contract has a term of 18 months and can be extended for one year unless one of the party terminatesthe agreement.

Securities Available-for-Sale

2005 2004


Acquisition cost

Mutual funds

Rupiah

Related parties .......................................................................... — 18,940

Third parties.............................................................................. 12,838 84,993

U.S. Dollar — Third party ............................................................. 132 53,781

Bonds

Third party — Rupiah ................................................................... — 500

Total ...................................................................................................... 12,970 158,214

Unrealised gain ...................................................................................... 921 11,113

Fair value .............................................................................................. 13,891 169,327

F-18

The details of fair value of securities available-for-sale are as follows:

2005 2004


Mutual funds

Related parties

Reksa Dana Prima ......................................................................... — 19,312

GTF Discretionary ......................................................................... — 448

Third parties

Reksa Dana Prima ......................................................................... 13,247 —

Reksadana Trimegah Dana Kas ...................................................... — 40,472

Nikko Uang Likuid ........................................................................ — 9,366

Danareksa Melati Dollar ................................................................ — 54,890

Trimegah Dana Tetap ..................................................................... — 20,140

Nikko Tron .................................................................................... — 9,961

Reksadana Tetap Optima................................................................ — 5,523

Schroders Panin Dana Terpadu....................................................... — 3,660

Dana Investa Pasar Uang ............................................................... — 5,055

Others (below Rp 550 million each) .............................................. 644 —

Bonds

Third party — Bank Rakyat Indonesia

Rupiah....................................................................................... — 500

Fair Value ................................................................................. 13,891 169,327

Shares of PT Sunda Kelapa Permai

Shares of stocks of PT Sunda Kelapa Permai totaling to 16,875 shares and amounting to Rp 9,025 million is ownedby a subsidiary (MAWC).

Shares of Stock Available-For-Sale

Represents shares of stock available-for-sale after deducting unrealised loss amounting to Rp 573 million as ofMarch 31, 2004.

Net Unrealised Gain (Loss)

The changes in net unrealised gain (loss) on changes in value of available for sale investments are as follows:

2005 2004


Beginning balance.................................................................................. 1,440 10,803

Increase (decrease) in value of temporary investments

Investments with fund managers ........................................................ (682) 1,609

Securities available-for-sale ............................................................... 163 1,946

Shares of stock available-for-sale....................................................... — 12

Ending balance ...................................................................................... 921 14,370

Investments made with related parties, according to management, have similar interest rates, terms and conditionsas those placed with third parties (see Note 36).

F-19

5. TRADE ACCOUNTS RECEIVABLE

2005 2004


a. By Debtor

Related parties

PT GT Petrochem Industries Tbk ............................................................. 69,005 —

PT Bando Indonesia................................................................................. 2,368 4,662

PT Glorindo Fileatex ............................................................................... — 64,190

PT Nitto Rubber Indonesia ...................................................................... — 1,980

PT IRC Inoac Indonesia........................................................................... — 2,050

Others (below Rp 500 million each) ........................................................ 764 539

Total ........................................................................................................ 72,137 73,421

Third parties

Local debtors........................................................................................... 83,491 247,403

Foreign debtors........................................................................................ 543,418 685,873

Total ........................................................................................................ 626,909 933,276

Allowance for doubtful accounts.............................................................. (63,289) (98,219)

Net .......................................................................................................... 563,620 835,057

Accounts Receivable — Net ........................................................................ 635,757 908,478

b. By Age Category

Not yet due.................................................................................................. 444,947 543,149

Past due

1 - 30 days .............................................................................................. 69,900 127,296

31 - 60 days ............................................................................................ 9,127 27,117

61 - 90 days ............................................................................................ 10,087 27,470

91 - 120 days .......................................................................................... 29,994 50,964

More than 120 days ................................................................................. 134,991 230,701

Total ............................................................................................................ 699,046 1,006,697

Allowance for doubtful accounts .................................................................. (63,289) (98,219)

Net .............................................................................................................. 635,757 908,478

c. By Currency

Rupiah ......................................................................................................... 90,161 81,048

U.S. Dollar .................................................................................................. 465,049 812,999

Euro ............................................................................................................ 75,650 53,661

Pound sterling.............................................................................................. 67,564 58,446

Japanese Yen ............................................................................................... 622 543

Total ............................................................................................................ 699,046 1,006,697

Allowance for doubtful accounts .................................................................. (63,289) (98,219)

Net .............................................................................................................. 635,757 908,478

The changes in the allowance for doubtful accounts are as follows:

Beginning balance ................................................................................... 62,069 95,297

Provisions during the year (see Note 28) ................................................. 1,245 2,922

Balance of unconsolidated subsidiary....................................................... (25) —

Ending balance ........................................................................................ 63,289 98,219

F-20

In April 2004, accounts receivable of FS amounting to US$13,449,457 was used as payment for a portion of accountspayable to Garibaldi as discussed in Note 8b.

Management believes that the allowance for doubtful accounts receivable from third parties is adequate to cover possiblelosses on uncollectible accounts. No allowance for doubtful accounts was provided on receivables from related parties asmanagement believes that all such receivables are collectible.

Management also believes that there are no significant concentrations of credit risk in third party receivables.

Trade accounts receivable of FS amounting to Rp 153,413 million in 2004 are used as collateral for long-term bank loans(see Note 18).

6. INVENTORIES

2005 2004


Finished goods ................................................................................................. 234,292 378,442

Work in process ............................................................................................... 103,892 111,836

Raw materials .................................................................................................. 313,798 325,532

Indirect materials ............................................................................................. 100,830 196,377

Total ................................................................................................................ 752,812 1,012,187

Allowance for decline in value of inventories .................................................. — (2,973)

Net .................................................................................................................. 752,812 1,009,214

The changes in allowance for decline in value of inventories are as follows:

Beginning balance ....................................................................................... 1,094 2,973

Balance of unconsolidated subsidiary ........................................................... (1,094) —

Ending balance ............................................................................................ — 2,973

Inventories of FS amounting to Rp 112,313 million in 2004 are used as collateral for long-term bank loans (see Note 18).

Inventories are insured with PT Asuransi Dayin Mitra Tbk and PT Asuransi Wahana Tata for US$35 million and Euro24 million as of March 31, 2005 and Rp 21,000 million, US$74 million and Euro 13 million as of March 31, 2004.

7. PREPAID TAXES

2005 2004


Income tax — Article 28A (see Note 30)

The Company .............................................................................................. 4,228 —

Subsidiaries ................................................................................................. — 36,822

Value Added Tax — Net .................................................................................. 91,757 80,551

Total ................................................................................................................ 95,985 117,373

F-21

8. ACCOUNTS RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES

a. Accounts Receivable

2005 2004


By Company

PT Filamendo Sakti (FS) ................................................................... 706,992 —

PT Langgeng Bajapratama (LBP) ....................................................... 79,051 —

PT GT Petrochem Industries Tbk (GTPI) ........................................... 54,248 —

PT Graha Mitra Santosa (GMS) ......................................................... 14,695 13,612

PT Gajah Tunggal Prakarsa (GTP) ..................................................... 8,486 —

PT Indonesia Prima Property Tbk (IPP) ............................................. 3,558 3,409

PT Wachyuni Mandira (WM) ............................................................. — 1,192,035

PT Gajah Tunggal Mulia (GTM) ........................................................ — 544,513

PT Gajah Tunggal Sakti (GTS) .......................................................... — 218,740

PT Dipasena Citra Darmaja (DCD) .................................................... — 200,582

PT Daya Indria Permai (DIP) ............................................................. — 93,201

PT Daya Patria Corporation (DPC) .................................................... — 89,728

PT Tunas Sepadan Investama (TSI) .................................................... — 37,859

PT Tunas Sepadan Cemerlang Manajemen (TSCM) ............................ — 4,794

PT Gemapersada Polimer (GMP)........................................................ — 3,102

Others (below Rp 1 billion each) ....................................................... 1,636 2,111

Total ...................................................................................................... 868,666 2,403,686

Receivable from FS mainly came from settlement of accounts payable to TSI as discussed in Note 8b. Thereceivable will be settled through the restructuring of FS in the near future.

Receivable from LBP represents settlement of accounts payable to TSI (see Note 8b) and advance payments ofexpenses from prior years arising from deconsolidation of LBP’s financial statements since end of November 2004.

The receivable from GTP represents receivable of the Company for sale of shares of LBP.

Accounts receivable from TSI represents loan provided to TSI for TSI’s operations as a holding company (see Note1a). The loan is not subject to interest and is compensated against the Company’s and its subsidiaries’ payables to TSI.

Accounts receivable from GTPI, GMS, IPP, WM, TSCM, GMP and others represents receivables from sales ofsupplies and spare parts, accrued interest income on notes receivable, loans and advance payments of expenses for relatedparties (see Note 36). These loans are not subject to interest and have no definite terms of repayment.

Accounts receivable from GTM, GTS, DCD, DIP and DPC, represent converted short-term notes receivable andrelated interest receivable from such related parties and bear interest at SIBOR + 2% for receivables in U.S. Dollar.

In April 2004, the Company and its subsidiaries’ accounts receivable from WM, GTM, GTS, DCD, DIP, DPC, TSIand TSCM were used to settle the accounts payable to Garibaldi (see Note 8b).

Based on review of the financial condition of the related parties, management believes that the receivables arefully collectible or can be settled, thus no allowance for doubtful accounts was provided.

b. Accounts Payable

2005 2004


PT Tunas Sepadan Investama (TSI) — 3,174,978

Others (below Rp 1 billion each) ........................................................... 788 959

Total ...................................................................................................... 788 3,175,937

F-22

Accounts payable to TSI represents loans of the Company and its subsidiaries which were transferred to TSI fromBank Dagang Nasional Indonesia amounting to Rp 255,130 million and US$340,031,210 as discussed in Note 35. Thedetails of liabilities of the Company and its subsidiaries to TSI are as follows:

2004

Rp’Million

Rupiah

The Company .................................................................................................................. 226,283

Subsidiaries

LBP ........................................................................................................................... 18,147

FS.............................................................................................................................. 10,700

U.S. Dollar

The Company .................................................................................................................. 90,467

Subsidiaries

GTPI.......................................................................................................................... 1,584,184

FS.............................................................................................................................. 678,086

SS.............................................................................................................................. 560,831

LBP ........................................................................................................................... 6,280

Total .................................................................................................................................... 3,174,978

Since 2000, these loans are not subject to interest.

Other accounts payable to related parties mainly consist of advance payments of expenses by related parties withoutstanding balance ranging between Rp 0.5 million to Rp 950 million and are not subject to interest (see Note 36).

Settlement of Accounts Receivable from and Payable to Related Parties

Based on the Sale and Purchase of Receivables Agreement between the Company and Garibaldi Venture FundLimited (Garibaldi) as legalised on April 8, 2004 by Dr. Irawan Soerodjo, S.H., Msi, notary public in Jakarta and basedon the Transfer of Receivables (Cessie) Agreement between TSI and Garibaldi No. 48 and 49 dated April 8, 2004 of thesame notary public, both parties agreed:

— To transfer the entire accounts payable (which includes accrued interest — see Note 15) of the Companyand its subsidiaries to TSI amounting to Rp 713,665 million and US$338,452,216 to Garibaldi.

— To transfer the Company’s receivables from DCD, WM and TSI amounting to Rp 890,431 million andUS$63,877,857 (see Notes 4 and 8a) to Garibaldi. The transfer represents settlement of the Company’saccounts payable to Garibaldi amounting to US$164,491,519. Such accounts payable which has been settledoriginated from GTPI, FS and SS accounts payable to Garibaldi which has been transferred to the Companyaccording to the Transfer Payable Agreement dated April 8, 2004.

On April 14, 2004, accounts payable of GTPI, LBP and FS to Garibaldi amounting to Rp 58,518 million andUS$79,979,058 was settled using trade accounts receivable (see Note 5), accounts receivable from related party (see Note8a) and deposits in suspended bank (see Note 11).

Based on Restructuring Agreement dated April 14, 2004 and Assignment of Receivables Agreement dated April16, 2004 and June 30, 2004 between the Company and Garibaldi, the Company’s accounts payable to Garibaldiamounting to Rp 508,847 million and US$91,882,126 (including GTPI and LBP accounts payable to Garibaldi which hasbeen transferred to the Company on April 14, 2004, amounting to Rp 216,327 million and US$80,820,897) was settledby the Company through transfer of accounts receivable from related parties (see Note 8a) and deposits in suspendedbank (see Note 11) and the issuance of long-term notes payable to Garibaldi amounting to US$53,000,000 as discussedin Note 16.

After settlement of the above payables and receivables, the Company recognised receivable from FS amountingto Rp 667,264 million, receivable from GTPI amounting to Rp 1,055,753 million, receivable from LBP amounting to Rp31,560 million and receivable from SS amounting to Rp 632,874 million. Receivable from GTPI and SS have been settledthrough the transfer of property, plant and equipment as discussed in Note 10. Receivables from FS and LBP wererecorded as accounts receivable from related party.

The remaining accounts payable of GTPI to Garibaldi were converted into capital stock of GTPI, thus theCompany’s ownership in GTPI was diluted (see Note 1b).

F-23

9. INVESTMENTS IN SHARES OF STOCK

2005 2004


Investments in shares of associated company ................................................... 472,552 —

Available-for-sale investments in shares of stock ............................................. 3,286 2,645

Total ................................................................................................................ 475,838 2,645

Investment in shares of associated company

This represents investment in GTPI equivalent to 28.91% as result of the dilution of the Company’s ownership inGTPI in 2004 as discussed in Notes 1b, 8b and 16.

Details of changes in investment in GTPI are as follows:

2005

Rp’Million

Beginning balance................................................................................................................ 424,668

Equity in net income of associated company ........................................................................ 47,884

Ending balance .................................................................................................................... 472,552

Available-for-sale investments in shares of stock

2005 2004


PT Hotel Sahid Jaya Tbk — 420,320 shares, market priceper share of Rp 175 in 2005 and Rp 165 in 2004 .............................. 1,839 1,839

Others (below Rp 500 million each)....................................................... 761 761

Total ...................................................................................................... 2,600 2,600

Unrealised gain ...................................................................................... 686 45

Fair value .............................................................................................. 3,286 2,645

The changes in net unrealised gain (loss) on increase (decline) in value of available for sale investments in sharesof stock are as follows:

2005 2004


Beginning balance.................................................................................. 246 (448)

Net increase in value of investments in shares of stock.......................... 440 493

Ending balance ...................................................................................... 686 45

F-24

10. PROPERTY, PLANT AND EQUIPMENT

January 1,2005 Additions Deductions *) Reclassifications

March 31,2005

Rp’Million Rp’Million Rp’Million Rp’Million Rp’Million

Cost:

Land........................................ 104,960 — 6,543 — 98,417

Buildings and improvements .... 409,322 — 11,639 2,478 400,161

Machinery and factoryequipment ........................... 4,397,013 15,919 188,223 29,204 4,253,913

Vehicles................................... 31,151 — 3,300 736 28,587

Office furniture and fixtures .... 38,454 110 3,481 995 36,078

Construction in progress

Buildings andimprovements ................ 3,917 641 — (2,478) 2,080

Machinery and factoryequipment...................... 69,869 38,700 425 (30,935) 77,209

Total ............................................ 5,054,686 55,370 213,611 — 4,896,445

Accumulated depreciation:

Buildings and improvements .... 161,332 4,966 5,769 — 160,529

Machinery and factoryequipment ........................... 1,663,941 57,252 125,546 — 1,595,647

Vehicles................................... 20,856 1,047 2,392 — 19,511

Office furniture and fixtures .... 22,259 1,249 2,897 — 20,611

Total ............................................ 1,868,388 64,514 136,604 — 1,796,298

Net Book Value ........................... 3,186,298 3,100,147

Cost:

Land........................................ 210,302 — — — 210,302

Buildings and improvements .... 731,082 — — 5 731,087

Machinery and factoryequipment ........................... 8,040,904 27,432 — 1,827 8,070,163

Vehicles................................... 39,505 409 163 — 39,751

Office furniture and fixtures .... 57,138 590 — — 57,728


Buildings andimprovements ................ 2,466 657 — (5) 3,118

Machinery and factoryequipment...................... 229,445 25,212 — (1,709) 252,948

Total ............................................ 9,310,842 54,300 163 118 9,365,097


Buildings and improvements .... 230,998 9,098 — — 240,096

Machinery and factoryequipment ........................... 2,506,262 103,816 — — 2,610,078

Vehicles................................... 25,587 1,304 163 — 26,728

Office furniture and fixtures .... 33,239 1,919 — — 35,158

Total ............................................ 2,796,086 116,137 163 — 2,912,060

Net Book Value ........................... 6,514,756 6,453,037

F-25

*) Deductions in 2005 include MAWC’s property, plant and equipment. The Company’s investment in the subsidiarywas sold in 2005 (see Notes 1b and 34), and thus its financial statements were no longer consolidated in 2005.Details are as follows:

Net book value

Rp’Million

Land .................................................................................................................................... 6,543

Buildings and improvements ................................................................................................ 5,869

Machinery and factory equipment ........................................................................................ 62,507

Vehicles ............................................................................................................................... 1,046

Office furniture and fixtures ................................................................................................ 617


Machinery and factory equipment .................................................................................... 425

Total .................................................................................................................................... 77,007

Property, plant and equipment of GTPI (excluding carrying values of property, plant and equipment of the tyre cord andsynthetic rubber segments taken over by the Company), a subsidiary which Company’s ownership was diluted, and LBP, asubsidiary which was sold at the end of November 2004, (see Notes 1b and 33) were no longer consolidated in the 2005 financialstatements.

Based on Sale and Purchase Agreement No. 26 and 27 dated September 29, 2004 and Sale and Purchase Deed No. 68and No. 43 dated November 30, 2004 of Fenny Tjitra, SH, the Company bought GTPI’s tyre cord division’s property, plant andequipment and SS’s property, plant and equipment. The purchase has been approved by the independent stockholders in theCompany’s Extraordinary Meeting of Shareholders on November 25, 2004. The details of property, plant and equipmentpurchased are as follows:

CostAccumulateddepreciation Net book value

Rp’Million Rp’Million Rp’Million

Land .................................................................................. 44,885 — 44,885

Buildings and improvements .............................................. 175,815 67,923 107,892

Machinery and factory equipment ...................................... 1,207,707 443,233 764,474

Total .................................................................................. 1,428,407 511,156 917,251

Difference in value of restructuring transaction betweenentities under common control ....................................... 771,376

Purchase price.................................................................... 1,688,627

The settlement of the property, plant and equipment purchased from GTPI and SS was made through compensation ofpurchase price against the Company’s accounts receivable from related parties (GTPI and SS) (see Note 8) and assumption oflong-term notes payable, Tranche A Notes, owned by GTPI amounting to US$30,000,000 (see Note 16).

Depreciation expense was allocated to the following:

2005 2004


Manufacturing expenses ................................................................................... 61,769 112,695

Operating expenses .......................................................................................... 2,745 3,442

Total ................................................................................................................ 64,514 116,137

Construction in progress represents buildings under construction and machinery under installation for the expansion ofthe Company and its subsidiaries. Management believes that there is no impediment to the completion of the construction inprogress.

Buildings and improvements and machinery and factory equipment which are not used in operations are presented asunused property, plant and equipment net of impairment in value of assets amounting to Rp 9,191 million as of March 31, 2004.

F-26

As of March 31, 2005, the Company own several pieces of land measuring 1,483,970 square meters located in Jakartaand Tangerang. The periods of HGBs are 20 to 30 years until 2008 to 2030. The Company’s management believes that therewill be no difficulty in the extension of the landrights and in the processing of certificates since all the land were acquiredlegally and supported by sufficient evidence of ownership.

Property, plant and equipment of GTPI, a subsidiary in Karawang with net book values aggregating to Rp 722,410 millionas of March 31, 2004 are used as collateral for long-term notes payable (see Note 16).

Property, plant and equipment of FS and MAWC with net book values aggregating to Rp 1,176,253 million as of March31, 2004, are used as collateral for long-term bank loans (see Note 18).

Property, plant and equipment, excluding land, are insured with PT Asuransi Dayin Mitra Tbk and PT Maskapai AsuransiSonwelis for Rp 501,741 million, US$597 million and Euro 193 million as of March 31, 2005 and Rp 589,306 million, US$754million and Euro 229 million as of March 31, 2004. Management believes that the insurance coverage is adequate to cover risksfrom fire, disasters and other risks to the Company and its subsidiaries.

11. DEPOSITS IN SUSPENDED BANK

This account represents deposits in Bank Dagang Nasional Indonesia (BDNI) which operations were suspended onAugust 21, 1998 by the Government and were transferred to the Indonesian Bank Restructuring Agency (IBRA). Since theCompany and its subsidiaries are related parties of BDNI, the bank deposits are subject to withdrawal restriction. The balancesof these deposits are as follows:

2004

Rp’Million

Savings accounts — Rupiah ........................................................................................................... 30,418

Current accounts

Rupiah ....................................................................................................................................... 24,024

U.S. Dollar ................................................................................................................................ 186,592

Japanese Yen ............................................................................................................................. 5

Time deposits

Rupiah ....................................................................................................................................... 18,000

U.S. Dollar ................................................................................................................................ 15,865

Euro .......................................................................................................................................... 1,319

Total .............................................................................................................................................. 276,223

In April 2004, deposits in suspended bank were used as settlement of accounts payable to Garibaldi Venture Fund Limitedas discussed in Note 8b.

12. OTHER ASSETS

2004

Rp’Million

Deferred charges — land rights...................................................................................................... 1,245

Deferred development expenses ..................................................................................................... 796

Restricted cash in bank .................................................................................................................. 1

Others ............................................................................................................................................ 2,220

Total .............................................................................................................................................. 4,262

Restricted cash in bank represents placements with JP Morgan Chase Bank, Jakarta which is restricted and will be usedonly for the restructuring of the loans of Company.

F-27

13. TRADE ACCOUNTS PAYABLE

2005 2004


a By Debtor

Related parties

PT Filamendo Sakti ................................................................................ 185,974 —

PT Sentra Sintetikajaya........................................................................... 80,446 —

PT Langgeng Bajapratama ...................................................................... 1,285 —

Others (below Rp 500 million each) ....................................................... 413 784

Total ....................................................................................................... 268,118 784

Third parties

Local suppliers ....................................................................................... 232,570 305,651

Foreign suppliers .................................................................................... 90,217 102,994

Total ....................................................................................................... 322,787 408,645

Total Trade Accounts Payable ...................................................................... 590,905 409,429

b By Currency

Rupiah ........................................................................................................ 148,808 84,346

U.S. Dollar ................................................................................................. 436,824 306,121

Japanese Yen............................................................................................... 4,090 13,174

Euro ........................................................................................................... 1,145 5,253

Singapore Dollar ......................................................................................... 38 367

Others ......................................................................................................... — 168

Total ........................................................................................................... 590,905 409,429

Purchases of raw and indirect materials, both from local and foreign suppliers, have credit terms of 7 to 100 days.

14. TAXES PAYABLE

2005 2004


Income taxes

Article 21 .................................................................................................... 7,998 3,085

Article 23 .................................................................................................... 226 410

Article 25 .................................................................................................... 227 85

Article 26 .................................................................................................... 589 971

Article 29 (see Note 30)

The Company .......................................................................................... 21,122 56,155

PSM ........................................................................................................ 415 —

Value added tax — net ..................................................................................... — 473

Total ................................................................................................................ 30,577 61,179

F-28

15. ACCRUED EXPENSES

2005 2004


Interest ........................................................................................................... 22,679 467,855

Salaries and allowances ................................................................................... 16,694 22,004

Electricity, water and telephone ....................................................................... 13,142 21,550

Export charges ................................................................................................. 10,558 9,856

Promotion ........................................................................................................ 9,787 13,783

Royalty ............................................................................................................ 6,674 1,488

Gas .................................................................................................................. 5,233 4,824

Dealer deposit discounts .................................................................................. 4,943 4,943

Generator set ................................................................................................... — 129

Others .............................................................................................................. 4,742 8,438

Total ................................................................................................................ 94,452 554,870

In April 2004, accrued interest amounting to Rp 166,878 million and US$32,502,178 arising from accounts payable toPT Tunas Sepadan Investama (TSI) were transferred to Garibaldi (see Note 8b).

In 2004, LBP’s interest payable amounting to Rp 87,304 million has been written off and recorded as extraordinary item(see Note 31).

16. LONG-TERM NOTES PAYABLE

2005 2004


Company

Global Note A — US$250,943,503 in 2005and US$274,943,503 in 2004 ................................................................... 2,378,945 2,360,940

Global Note B — US$48,373,596 in 2005 ................................................... 458,582 —

Global Note C — US$27,500,000 in 2005 ................................................... 260,700 —

GTPI ..............................................................................................................

Trance A Notes — US$73,719,000 ............................................................... — 633,025

Trance B Notes — US$85,757,000............................................................... — 736,395

Trance C Notes — US$73,301,000............................................................... — 629,436

Total ................................................................................................................ 3,098,227 4,359,796

Premium on debt restructuring ......................................................................... 322,127 550,533

Total ................................................................................................................ 3,420,354 4,910,329

Current maturity .............................................................................................. (494,657) (501,443)

Long-term portion — net ................................................................................. 2,925,697 4,408,886

Company

Global Note A

Represents Floating Rate Notes issued by the Company with a nominal value of US$295,943,503 in accordancewith the result of the Company’s debt restructuring. JP Morgan Chase Bank was appointed as trustee.

The global note is repayable in quarterly installments commencing in February 2003 until October 2008 withinterest rate per annum of SIBOR plus a certain margin.

F-29

The installments due on the notes payable based on the repayment schedule are as follows:

Year Amount

US$

2005 ........................................................................................................... 27,000,000

2006 ........................................................................................................... 30,000,000

2007 ........................................................................................................... 40,000,000

2008 ........................................................................................................... All unpaid balance

Global Note B

Represents Floating Rate Notes issued by the Company with a nominal value of US$53,000,000 in accordance withthe result of the Company’s payments of accounts payable to Garibaldi Venture Fund Limited, a related party as discussedin Note 8b. In this case, JP Morgan Chase Bank was appointed as trustee.

The global note is repayable in quarterly installments commencing in May 2004 until November 2008 with interestrate per annum of SIBOR plus margin.

The installments due on the note payable based on the repayment schedule are as follows:

Year Amount

US$

2005 ........................................................................................................... 5,204,705

2006 ........................................................................................................... 5,783,006

2007 ........................................................................................................... 7,710,675


Global Note C

Represents Floating Rate Structured Notes issued by the Company with a nominal value of US$30,000,000 assettlement of Tranche A Notes from GTPI in November 2004. In this case, HSBC Institutional Trust Services (Singapore)Limited was appointed as trustee.

The global note is repayable in quarterly installments commencing in March 2005 until March 2009 with interestrate per annum of SIBOR plus 1%.


Year Amount

US$

2005 ........................................................................................................... 7,450,660

2006 ........................................................................................................... 7,108,420

2007 ........................................................................................................... 8,836,450

2008 ........................................................................................................... 5,536,000


GTPI

Represents restructured principal and accrued interest of long-term bank loan based on the Master RestructuringAgreement (MRA), Trust Deed and Agency Agreement dated January 17, 2003 and March 7, 2003, respectively,amounting to US$248,303,145. Based on the restructuring:

— The financial obligations owed to each original creditor of the syndicated loan amounting toUS$162,541,000 was divided into Tranche A Notes amounting to US$89,240,000 and Tranche C Notesamounting to US$73,301,000 and the balance amounting to US$4,454 was paid in cash. The allocation intoTranche A Notes and Tranche C Notes is based on the percentage of the total amount of the financialobligations owed to each creditors.

F-30

— The Bayerische Hypo-und Vereinsbank AG, Munich (BVA) facility amounting to US$85,757,000 will beconverted into Tranche B Notes and the balance amounting to US$691 was paid in cash.

The agreement also required that the debt owed to PT Tunas Sepadan Investama (TSI) will be a non-recourseobligation.

Tranche A Notes

Tranche A Notes with a principal of US$89,240,000 will be paid quarterly within six (6) years from the effectivedate. Each holder of Tranche A Notes has a right to convert the Notes into equity in GTPI using the conversion priceat the date that TSI has elected to convert the restructured debt it holds into equity. The Tranche A Notes will bear interestat SIBOR plus certain premium. There is a cap at the total interest of 6% per annum.

In November 2004, Tranche A Notes amounting to US$30,000,000 were transferred to the Company as settlementof sale of GTPI’s property, plant and equipment as described in Note 10. Transfer of the Tranche A Notes have beenapproved by noteholders on December 23, 2004.

Tranche B Notes

Tranche B Notes with principal loan amounting to US$85,757,000 will be paid quarterly within twelve (12) yearsfrom 2005. The Tranche B Notes bears fixed interest rate from the first to fifth year, SIBOR for the sixth year and SIBORplus certain premium from the seventh year to twelfth year. There is cap at the total interest rate of 6% per annum.

The notes payable are guaranteed by property, plant and equipment of GTPI in Karawang (see Note 10).

Tranche C Notes

Tranche C Notes with a principal of US$73,301,000, will be automatically converted into equity in GTPI at theconversion price on the same date as TSI elects to convert the restructured debt it holds into equity.

If not converted into equity, installment payments of Tranche C Notes shall commence when the Tranche A Notesare fully paid, which will be paid quarterly, within ten (10) years. Tranche C Notes will bear no interest.

In November 2004, all Tranche C Notes with principal loan amounting to US$73,301,000 was converted intoequity of GTPI, at Rp 500 par value per share, which also represented the agreed value with the creditors (see Note 1b).

Premium on debt restructuring

All interest accrued and unpaid as at the effective date in respect of the financial obligations was written off.

The difference between the loan carrying amount (principal and accrued interest) and total restructured loanamounting to US$22,114,486 was recognised as premium on restructured loan which was presented as addition to notespayable.

The notes payable agreement also has limitations and specific prohibitions and also conditions or certain risks ofinfringement of the agreement.

As discussed in Notes 1b and 33, GTPI’s financial statements were no longer consolidated in 2005.

17. LIABILITY FOR THE PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

Represents remaining retention payable of SS to Niigata Engineering Co., Ltd., Japan (NE) which payment has beendeferred.

Based on the Memorandum of Understanding (MoU) between SS and NE dated May 15, 2004, both parties agreed thatSS have to pay to NE the amount of US$420,000 on June 30, 2004 as final settlement of SS payable to NE. Such amount hasbeen paid on June 16, 2004.

F-31

18. LONG-TERM BANK LOANS

2004

Rp’Million

Syndicated loan US$22,146,275.53 in 2004.................................................................................... 190,165

Bank Negara Indonesia 1946

Rupiah ....................................................................................................................................... 115,760

U.S. Dollar — US$52,062,010 in 2004 ...................................................................................... 447,056

JP Morgan Chase Bank

U.S. Dollar — US$5,780,000 in 2004 ........................................................................................ 49,633

Total .............................................................................................................................................. 802,614

Premium on restructured loans ....................................................................................................... 10,030

Net ................................................................................................................................................ 812,644

Current maturities .......................................................................................................................... 271,533

Long-term Portion — Net .............................................................................................................. 541,111

Interest rates per annum during the year — U.S. Dollar ................................................................. 1.13%-7.25%

Syndicated Loan

On December 22, 2000, MAWC entered into a credit restructuring agreement coordinated by PT Bank SumitomoIndonesia. Within such agreement, the restructuring of the loans amounting to US$23,053,247.03 (syndicated loan andshort-term bank loan amounting to US$20,000,000 and US$3,053,247.03, respectively) has been agreed and approvedwith the terms of the loans being rescheduled to 8 years starting from restructuring date up to September 2008. Theseloans will be repaid quarterly for 5 years with first installment due in March 2003. These loans bear progressive annualinterest starting at SIBOR up to SIBOR + 3%.

The loans are secured by fiduciary transfer over factory building with a value of US$670,000 and machinery andequipment of MAWC with agreed value for fiduciary transfer of US$14,400,000.

As of March 31, 2004, MAWC deferred the payments of loan principal due amounting to US$2,250,000. MAWCis still negotiating with the creditor on the settlement of these loans. Accordingly, the loans are presented under currentmaturity of long-term bank loans.


Represent loans of FS with details as follows:

2004

Rp’Million

Rupiah ................................................................................................................................. 115,760

U.S. Dollar — US$52,062,010 ............................................................................................. 447,056

Total .................................................................................................................................... 562,816

In 2001, long-term and short-term loans obtained by FS, a subsidiary, from Bank Negara Indonesia have beenrestructured with the following results:

a. The loan amounting to Rp 110,000 million which is part of short-term bank loans, had been converted intoUS$11,548,500. This loan is repayable with quarterly installments from December 2001 up to December2009.

b. The loan amounting to US$10,000,000 representing part of the short-term bank loans and US$30,000,000representing part of the long-term bank loans, respectively, have been extended until December 2009. Theseloans are repayable in quarterly installments from December 2001 up to December 2009.

The loans bears interest at 7.25% per annum until December 31, 2002 and, starting January 1, 2003, theminimum interest is 7.25% per annum or quarterly time deposit interest rate prevailing at Bank NegaraIndonesia for the 3-month period plus 2.5%.

F-32

c. The rest of the long-term bank loans representing unpaid interest up to December 31, 2000 were deferredand capitalised to loan principal amounting to Rp 115,760 million and US$10,196,111.11, respectively, withinstallment payments starting from 2010 until December 31, 2012 without interest charges.

The difference between the carrying amount of the loan (principal and accrued interest) and total restructured loanamounting to US$1,835,441 was recognised as premium on restructured loan which was presented as an addition to theloan principal.

The loans are guaranteed by landrights, buildings, machinery and equipment, fiduciary transfer of inventory, andrights over trade accounts receivable of FS and personal guarantee.

JP Morgan Chase Bank, Jakarta

Represents restructured principal and accrued interest of short-term bank loan based on the restructuringagreement dated April 20, 2001 between FS and JP Morgan Chase Bank, Jakarta. Based on the restructuring agreement,the loan is divided into Tranche 1 amounting to US$8,160,000 and Tranche 2 amounting to US$2,792,803.

The loan in Tranche 1 bears interest at SIBOR plus 1% per annum with payments due in 93 months starting fromJune 30, 2001 up to March 30, 2009.

In 2002, FS received a write-off of its Tranche 2 loan, since FS has been able to fulfill the conditions requiredto get a write-off of its Tranche 2 loan.

The difference between the loan carrying amount (principal and accrued interest) and total restructured loanamounting to US$633,631 was recognised as premium on restructured loan which was presented as an addition to theloan principal.

As discussed in Notes 1b and 33, MAWC’s and FS’s financial statements were no longer consolidated in 2005.

19. OTHER ACCOUNTS PAYABLE TO THIRD PARTY

Represents LBP’s payable to Galaxia International Corporation as of March 31, 2004, which was transferred by IBRA(arising from loan facility with Bank Negara Indonesia).

20. POST-EMPLOYMENT BENEFITS OBLIGATION

The Company and its subsidiaries calculate and record post-employment benefits obligation based on Labor Law No.13/2003 dated March 25, 2003. The number of employees entitled to benefits is 8,230 in 2005 and 13,036 in 2004.

Amounts recognised in income in respect of these post-employment benefits are as follows:

2005 2004


Current service cost ......................................................................................... 3,473 4,756

Interest cost ..................................................................................................... 4,944 6,058

Past service cost .............................................................................................. 823 669

Total ................................................................................................................ 9,240 11,483

The amounts included in the consolidated balance sheets arising from the Company’s and its subsidiaries’ obligation inrespect of these post-employment benefits are as follows:

2005 2004


Present value of unfunded obligations .............................................................. 198,939 253,160

Unrecognised actuarial losses........................................................................... (31,228) (30,861)

Unrecognised past service cost......................................................................... (21,704) (34,951)

Net liability ..................................................................................................... 146,007 187,348

F-33

Movements in the net liability recognised in the consolidated balance sheets are as follows:

2005 2004


Beginning of the year ...................................................................................... 141,876 175,934

Balance of unconsolidated subsidiary ............................................................... (5,109) —

Benefits payment ............................................................................................. — (69)

Amount charged to income .............................................................................. 9,240 11,483

End of the year ................................................................................................ 146,007 187,348

The cost of providing post-employment benefits is calculated by an independent actuary PT DayamandiriDharmakonsilindo. The actuarial valuation was carried out using the following key assumptions:

Discount rate : 11% per annum

Salary increment rate : 10% per annum

Normal retirement age : 55 years

Based on the above independent actuarial report, non vested past service cost as of March 31, 2005 amounted to Rp21,704 million.

21. MINORITY INTERESTS

2004

Rp’Million

a. Minority interests in net assets of subsidiaries:

PT Meshindo Alloy Wheel Corporation (MAWC) ...................................................................... (39)

PT GT Petrochem Industries Tbk (GTPI) .................................................................................. (76,382)

Total ......................................................................................................................................... (76,421)

b. Minority interests in net losses of subsidiaries:

PT GT Petrochem Industries Tbk (GTPI) .................................................................................. 1,851

Minority interest in net assets of GTPI and ABM (a subsidiary of MAWC) were negative because the minoritystockholder of GTPI and ABM, will absorb its share in the loss of the subsidiary as a percentage of its interest.

22. CAPITAL STOCK

Based on the stockholders list issued by Biro Administrasi Efek Perusahaan (Administration Office of Listed Shares ofthe Company), PT Datindo Entrycom, the stockholders of the Company are as follows:

2005

Name of StockholderNumber of

SharesPercentage of

OwnershipTotal Paid-up

Capital

% Rp’Million

Garibaldi Venture Fund Limited ......................................... 1,555,760,000 49.11 777,880

Global Union Fiber Investment Limited ............................. 348,480,000 11.00 174,240

Compagnie Financiere Michelin ......................................... 316,800,000 10.00 158,400

Cooperatives ...................................................................... 5,290,020 0.17 2,645

Director ............................................................................. 2,551,000 0.08 1,275

PT Surya Grahareksa ......................................................... 500 — 1

General public (below 5% each) ........................................ 939,118,480 29.64 469,559

Total .................................................................................. 3,168,000,000 100.00 1,584,000

F-34

2004


SharesPercentage of


Capital

% Rp’Million

PT Gajah Tunggal Mulia*) ................................................. 1,613,604,364 50.93 806,802

PT Gajah Tunggal Sakti*) .................................................. 319,382,472 10.08 159,691

Cooperatives ...................................................................... 7,270,020 0.23 3,635

Commissioners and director ............................................... 150,166 0.01 75


General public (below 5% each) ........................................ 1,227,592,478 38.75 613,796

Total .................................................................................. 3,168,000,000 100.00 1,584,000

*) According to transfer deeds No. 38 and No. 39 dated May 25, 1999, the Company’s shares owned by PT GajahTunggal Mulia (“GTM”) and PT Gajah Tunggal Sakti (“GTS”) totaling 1,613,604,364 shares and 319,382,472shares, respectively, have been transferred to PT Tunas Sepadan Investama (“TSI”). As of March 31, 2004, thetransfer of such shares to TSI is still in process, therefore, based on the shareholders’ list issued by BiroAdministrasi Efek Perusahaan (Administration Office of Listed Shares of the Company), GTM and GTS, as ofMarch 31, 2004, are still the stockholders of the Company.

On April 14, 2004, the transfer of the Company shares owned by PT Tunas Sepadan Investama (TSI) were registered onthe list of the Company’s shareholders.

Based on Deed No. 414 by Dr. Irawan Soerodjo, S.H., Msi, notary public in Jakarta dated April 27, 2004, all of theCompany’s shares owned by TSI were transferred to Garibaldi Venture Fund Limited.

23. ADDITIONAL PAID-IN CAPITAL

This account represents additional paid in capital in connection with following:

Rp’Million

Initial public offering in 1990 of 20,000,000 shares with par value ofRp 1,000 per share and selling price of Rp 5,500 per share ....................................................... 90,000

Rights issue in 1994 of 198,000,000 shares with par value of Rp 1,000 per share,and selling price of Rp 3,250 per share ..................................................................................... 445,500

Total .............................................................................................................................................. 535,500

Less bonus shares

1992 .......................................................................................................................................... (88,000)

1995 .......................................................................................................................................... (396,000)

Additional paid-in capital .............................................................................................................. 51,500

24. DIFFERENCE IN VALUE OF RESTRUCTURING TRANSACTION BETWEEN ENTITIES UNDER COMMONCONTROL

This account represents the difference between the recorded amount of property, plant and equipment of GTPI and SSand carrying value of investment in LBP’s shares compared with the purchase and selling price, respectively, in November 2004as described in Notes 10 and 34, with details as follows:

Rp’Million

Difference between purchase price and the recorded amount of property,plant and equipment (see Note 10) ............................................................................................. 771,376

Effect of deferred tax..................................................................................................................... (217,361)

Net ................................................................................................................................................ 554,015

Difference between selling price of LBP’s shares of stock andthe carrying amount of investment (see Note 34) ....................................................................... (59,120)

Total .............................................................................................................................................. 494,895

F-35

25. DIFFERENCE DUE TO CHANGE OF EQUITY IN SUBSIDIARY

Represents the difference between the Company’s interest in GTPI after issuance of the new shares and the carryingamount of its investment before the issuance of new shares.

The change is due to the following:

● In November 2004, GTPI issued 1,649,179,559 new shares to Garibaldi and other shareholders resulting to adilution in the Company’s interest in GTPI from 50.0125% to 28.91%.

● In 1993, GTPI offered its 20,000,000 shares to the public resulting to a decrease in the Company’s interest in GTPIfrom 66.6667% to 50.0125%.

26. NET SALES

2005 2004


Related parties — local.................................................................................... 115,572 152

Third parties

Local ........................................................................................................... 559,424 833,744

Export ......................................................................................................... 483,439 828,502

Total ................................................................................................................ 1,158,435 1,662,398

Sales returns and discounts .............................................................................. (1) (21,197)

Net Sales ......................................................................................................... 1,158,434 1,641,201

There were no sales to specific customer exceeding 10% of net sales for the respective periods.

Sales to related parties, according to management, were made at similar prices, terms and conditions as those done withthird parties (see Note 36).

27. COST OF SALES

2005 2004


Raw materials used .......................................................................................... 734,266 876,195

Direct labor ..................................................................................................... 11,587 19,808

Manufacturing expenses ................................................................................... 260,622 397,894

Total Manufacturing Costs ............................................................................... 1,006,475 1,293,897

Work in Process

At beginning of period................................................................................. 140,138 108,776


At end of period .......................................................................................... (103,892) (111,836)

Cost of Goods Manufactured ............................................................................ 1,035,850 1,290,837

Finished Goods

At beginning of period................................................................................. 169,089 467,814


Used for experimental production, gifts and by the Company ...................... — (54)

At end of period .......................................................................................... (234,292) (378,442)

Cost of Goods Sold — Production ................................................................... 965,245 1,380,155

Cost of Sales — Merchandise .......................................................................... 1,652 71

Total Cost of Sales .......................................................................................... 966,897 1,380,226

There were no purchases to specific supplier exceeding 10% of net purchases for the respective periods.

F-36

28. OPERATING EXPENSES

Selling Expenses

2005 2004


Transportation .................................................................................................. 13,515 18,778

Advertising and promotion ............................................................................... 7,310 25,830


Insurance ......................................................................................................... 2,133 2,625

Royalty (see Note 38) ...................................................................................... 1,798 2,312

Telecommunication .......................................................................................... 432 234

Others .............................................................................................................. 2,660 3,866

Total ................................................................................................................ 35,107 60,240

General and Administrative Expenses

2005 2004



Post-employment benefits (see Note 20) ........................................................... 9,240 11,483

Depreciation and amortisation .......................................................................... 1,536 2,062

Provision for doubtful accounts (see Note 5).................................................... 1,245 2,922

Office rental .................................................................................................... 1,135 1,570

Other professional fees .................................................................................... 937 1,049

Entertainment................................................................................................... 914 292

Office expenses................................................................................................ 491 1,065

Transportation .................................................................................................. 239 1,731

Travelling ........................................................................................................ 219 377

Telecommunication .......................................................................................... 48 671

Management fees ............................................................................................. — 10,323

Others .............................................................................................................. 1,595 9,359

Total ................................................................................................................ 31,970 62,274

29. INTEREST EXPENSE AND FINANCIAL CHARGES

2005 2004


Interest expense and financial charges.............................................................. 43,124 38,792

Amortisation of premium on debt restructuring ................................................ (27,287) (32,120)

Net .................................................................................................................. 15,837 6,672

F-37

30. INCOME TAX

Tax expense (benefit) of the Company and its subsidiaries consists of the following:

2005 2004


Current tax

The Company .............................................................................................. 3,861 27,759

PSM ............................................................................................................ 415 —

Total Current Tax ............................................................................................. 4,276 27,759

Deferred tax expense (benefit)

The Company .............................................................................................. 10,841 4,043

Subsidiaries ................................................................................................

GTPI ....................................................................................................... — (17,568)

FS ........................................................................................................... — 85

MAWC .................................................................................................... (607) (949)

LBP......................................................................................................... — 499

SS ........................................................................................................... — 5,610

Total deferred tax expense (benefit) ................................................................. 10,234 (8,280)

Total Tax Expense............................................................................................ 14,510 19,479

Current tax

A reconciliation between income before tax expense per consolidated statements of income and taxable incomeis as follows:

2005 2004


Income before tax per consolidated statements of income ...................... 219,415 53,803

Loss before tax of subsidiaries............................................................... 3,803 32,950

Income before tax of the Company ........................................................ 223,218 86,753

Temporary differences:

Positive corrections ........................................................................... 10,173 6,626

Negative corrections .......................................................................... (46,311) (20,103)

Total ...................................................................................................... (36,138) (13,477)

Permanent differences:

Positive corrections ........................................................................... 20,223 21,063

Negative corrections .......................................................................... (194,375) (1,750)

Total ...................................................................................................... (174,152) 19,313

Taxable income of the Company ............................................................ 12,928 92,589

F-38

Current tax expense and payable are computed as follows:

2005 2004


Current tax expense — The Company .................................................... 3,861 27,759

Less prepaid taxes

Income taxes

Article 22 .......................................................................................... 7,385 2,481

Article 23 .......................................................................................... 5 —

Article 25 .......................................................................................... 687 256

Fiscal tax ............................................................................................... 12 34

Current tax payable (prepaid taxes) ........................................................ (4,228) 24,988

Previous year tax payable ...................................................................... 21,122 31,167

Total tax payable ................................................................................... 56,155

The Company’s tax payable includes the taxes payable for extraordinary item which was deferred because therestructuring was made through Jakarta Initiative Task Force.

Deferred Tax

Deferred tax is computed based on the effect of the temporary differences between the financial statement carryingamounts of assets and liabilities and their respective tax bases. The details of the deferred tax assets and liabilities areas follows:

Deferred Tax Assets — Net

This account represents deferred tax assets after deducting the deferred tax liabilities of the same business entityas follows:

2005

Rp’Million

Deferred tax assets

Post-employment benefits obligation ..................................................................................... 38,588

Allowance for doubtful accounts ........................................................................................... 25,120

Difference between commercial and fiscal extraordinary item ............................................... 17,325

Total ..................................................................................................................................... 81,033

Deferred tax liability

Depreciation of property, plant and equipment ...................................................................... 21,577

Deferred tax assets — net ......................................................................................................... 59,456

F-39

Deferred Tax Liabilities — Net

This account represents deferred tax liabilities after deducting the deferred tax asset of the same business entityas follows:

2004

Rp’Million

Deferred tax assets

Post-employment benefits obligation ..................................................................................... 56,217

Fiscal loss ............................................................................................................................ 141,400

Allowance for doubtful accounts ........................................................................................... 33,804

Allowance for decline in value of inventories ....................................................................... 892

Difference between commercial and fiscal extraordinary item ............................................... 88,855

Total ..................................................................................................................................... 321,168

Deferred tax liability

Depreciation of property, plant and equipment ...................................................................... 612,532

Deferred charges ................................................................................................................... 373

Deferred development cost .................................................................................................... 238

Total ..................................................................................................................................... 613,143

Deferred tax liabilities — net ................................................................................................... 291,975

A reconciliation between the total tax expense and the amounts computed by applying the effective tax rates toincome before tax is as follows:

2005 2004


Income before tax per consolidated statements of income ...................... 219,415 53,803

Loss before tax of subsidiaries............................................................... 3,803 32,950

Income before tax of the Company ........................................................ 223,218 86,753

Tax at effective tax rate ......................................................................... 66,948 26,009

Permanent differences ............................................................................ (52,246) 5,793

Tax expense of the Company ................................................................. 14,702 31,802

Tax benefit of subsidiaries ..................................................................... (192) (12,323)

Total tax expense ................................................................................... 14,510 19,479

31. EXTRAORDINARY ITEM

Represent the excess of principal and interest due over the future cash payments between LBP accounts payable toFolkingham Investment Ltd. (see Note 19).

F-40

32. BASIC EARNINGS PER SHARE

The computation of basic earnings per share is based on the following data:

a. Including Extraordinary Item

2005 2004


Income

Net income ............................................................................................ 204,905 139,551

Number of shares shares shares

Weighted average number of ordinary shares ......................................... 3,168,000,000 3,168,000,000

b. Excluding Extraordinary Item

2005 2004


Net income for the period ...................................................................... 204,905 139,551

Extraordinary item ................................................................................. — 103,376

Net income excluding extraordinary item ............................................... 204,905 36,175

The weighted average number of shares for computation of basic earning per share including and excludingextraordinary item is the same.

At balance sheet dates, the Company do not have dilutive potential ordinary shares.

33. BUSINESS RESTRUCTURING

In connection with the business restructuring of the Company’s group, the Company executed the following:

● At the end of November 2004, the Company sold all of its ownership interest in LBP to a related party as describedin Notes 1b and 34.

● At the same time, the Company’s ownership in GTPI was diluted as described in Note 1b, however, the Companytook over the assets of the tyre cord and synthetic rubber segments from GTPI and SS as described in Note 10.

● The Company sold all of its ownership interest in MAWC at the end of February 2005 as described in Notes 1band 34.

As a result of the restructuring, the Company no longer have steel wire, polyester, petrochemical, fishing net yarn andcar accessories segments, thus it has only focused in the tyre manufacturing business and related industry.

F-41

A summary of income before tax of the segments which were relinquished at the end of November 2004 and at the endof February 2005, included in the 2005 and 2004 consolidated statements of income are as follows:

2005 2004

(Two months) (Three months)


Net sales .......................................................................................................... 33,660 801,604

Cost of sales .................................................................................................... 34,958 740,813

Gross profit (loss) ............................................................................................ (1,298) 60,791


Income (loss) from operations .......................................................................... (4,690) 27,803

Other charges — net ........................................................................................ (591) (50,757)

Loss before tax ................................................................................................ (5,281) (22,954)

There were no profit (loss) recognised in the restructuring transactions made at the end of November 2004 because thesewere entered into by entities under common control. This has been approved by the independent shareholders in the Company’sExtraordinary Meeting of Shareholders on November 25, 2004.

The assets and liabilities of GTPI and LBP (after deduction of carrying values of property, plant and equipment of thetyre cord and synthetic rubber segments taken over by the Company) and MAWC as of March 31, 2004 which are included inthe consolidated financial statements are as follows:

Rp’Million

Current assetsCash and cash equivalents .............................................................................................................. 148,603

Trade accounts receivable — net .................................................................................................... 583,749

Inventories — net ........................................................................................................................... 712,547

Other current assets ........................................................................................................................ 349,569

Total current assets ......................................................................................................................... 1,794,468

Noncurrent assetsProperty, plant and equipment — net .............................................................................................. 3,265,738

Other noncurrent assets................................................................................................................... 632,332

Total noncurrent assets ................................................................................................................... 3,898,070

Total assets ........................................................................................................................................ 5,692,538

Current liabilitiesTrade accounts payable ................................................................................................................... 262,550

Accrued expenses ........................................................................................................................... 412,807

Current maturities of long-term liabilities ....................................................................................... 501,073

Other current liabilities ................................................................................................................... 33,843

Total current liabilities ................................................................................................................... 1,210,273

Noncurrent liabilitiesDeferred tax liabilities — net ......................................................................................................... 175,090

Long-term liabilities — net of current maturities ............................................................................ 2,245,482

Accounts payable to related parties ................................................................................................. 2,966,070

Other noncurrent liabilities ............................................................................................................. 272,686

Total noncurrent liabilities .............................................................................................................. 5,659,328

Total liabilities ................................................................................................................................. 6,869,601

F-42

34. SALE OF SUBSIDIARY

2004

At the end of November 2004, the Company sold all of its shares in LBP (see Note 1b) to PT Gajah TunggalPrakarsa. The sale of LBP shares has been approved by the independent shareholders in the Company’s ExtraordinaryGeneral Meeting on November 25, 2004. The sale was based on net assets of LBP as of November 30, 2004, as follows:

2004

Rp’Million

Company’s share in net assets as of November 30, 2004 ..................................................................... (50,751)

Difference in value of restructuring transaction between entities undercommon control (see Note 24) ........................................................................................................ 59,120

Selling price ....................................................................................................................................... 8,369

2005

At the end of February 2005, the Company sold all of its shares in MAWC (see Note 1b) to PT Gema Arta Persada.The sale was based on the net assets of MAWC as of February 28, 2005, as follows:

2005

Rp’Million

Company’s share in net assets as of February 28, 2005 ......................................... (116,647)

Gain on sale of subsidiary .................................................................................... 123,532

Selling price ......................................................................................................... 6,885

35. SETTLEMENT OF LOANS FROM BANK DAGANG NASIONAL INDONESIA WITH THE INDONESIANBANK RESTRUCTURING AGENCY

The Company and its subsidiaries had loans from Bank Dagang Nasional Indonesia (“BDNI”) which operations weresuspended on August 21, 1998 by the Government and taken over by the Indonesian Bank Restructuring Agency (“IBRA”), thusthe obligation of the Company and its subsidiaries to settle their loans were transferred to IBRA. On September 21, 1998, IBRAand the major stockholder of BDNI signed a Master Settlement and Acquisition Agreement (“MSAA”) which stated, amongothers, that the loans granted to PT Gajah Tunggal Tbk and its subsidiaries will be transferred to the major stockholder of BDNI(Mr. Sjamsul Nursalim), therefore the loan settlement responsibility was transferred to such major stockholder. In relation tothe MSAA, on May 25, 1999, the supporting agreement was signed, accordingly, the loans granted by BDNI to PT GajahTunggal Tbk and its subsidiaries were legally transferred to BDNI’s major stockholder and were transferred to PT TunasSepadan Investama, the new parent company. Based also on the supporting agreement, the loans to PT Gajah Tunggal Tbk andits subsidiaries cannot be immediately demanded by TSI in the short term. Starting in 1999, the loans were presented aslong-term accounts payable to a related party (see Note 8b).

The settlement also requires for the Company’s shares of stock owned by major stockholders to be transferred to PTTunas Sepadan Investama (see Notes 1a and 22). In April 2004, the accounts payable to TSI has been settled as discussed inNote 8b.

F-43

36. NATURE OF RELATIONSHIP AND TRANSACTIONS WITH RELATED PARTIES

Nature of Relationship

a. Companies which have partly the same management as the Company and its subsidiaries:

— PT Bando Indonesia

— Bank Ganesha

— PT Daya Indria Permai

— PT Glorindo Fileatex

— PT Graha Mitra Santosa

— PT Indonesia Prima Property Tbk

— PT Wachyuni Mandira

— PT Tunas Sepadan Cemerlang Manajemen

— PT Nitto Rubber Indonesia

— PT Dipasena Citra Darmaja *)

— PT Gajah Tunggal Prakarsa *)

— PT Gajah Tunggal Sakti *)

— PT Gemapersada Polimer *)

— PT IRC Inoac Indonesia *)

*) As of March 31, 2004 the abovementioned companies have the same stockholders as the Company and itssubsidiaries.

As discussed in Note 22, on April 27, 2004, the Company’s shares owned by PT Gajah Tunggal Mulia and PTGajah Tunggal Sakti were transferred to TSI and then sold to Garibaldi Venture Fund Limited (Garibaldi). Theabovementioned companies are not related with Garibaldi.

b. As of March 31, 2004, PT Gajah Tunggal Mulia and PT Tunas Sepadan Investama are stockholders of the Company(see Note 22).

c. As of April 27, 2004, Garibaldi Venture Fund Limited is the majority stockholder of the Company (see Note 22).

d. PT Daya Patria Corporation is the majority stockholder of PT Gajah Tunggal Mulia.

F-44

Transactions with Related Parties

In the normal course of business, the Company and its subsidiaries entered into certain transactions with relatedparties, including the following:

a. Net sales to related parties accounted for 9.98% in 2005 and 0.01% in 2004 of the total sales (see Note 26)which, according to management, were made at normal terms and conditions as those done with thirdparties. At balance sheet date, the receivables from these sales were presented as trade accounts receivable,which constituted 1.11% and 0.60%, respectively, of the total assets as of March 31, 2005 and 2004.

The details of net sales to related parties are as follows:

2005 2004


Local

PT GT Petrochem Industries Tbk ............................................. 103,983 —

PT Sentra Sintetikajaya............................................................ 8,955 —

PT Bando Indonesia ................................................................. 2,305 84

Others (below Rp 325 million each) ........................................ 329 68

Total ............................................................................................ 115,572 152

b. At balance sheet dates, the unpaid indirect material purchases were presented as trade accounts payable,which constituted 5.85% and 0.01%, respectively, of the total liabilities as of March 31, 2005 and 2004.

c. Placements of cash and cash equivalents with Bank Ganesha as of March 31, 2004.

d. Placements in Reksa Dana Prima came from conversion of shares of PT Reksadana Perdana Tbk as of March31, 2004.

e. The Company and its subsidiaries also entered into nontrade transactions with related parties as describedin Note 8.

37. SEGMENT INFORMATION

Business Segment

The Company and subsidiaries are presently engaged in the following businesses:

1. Manufacturing of tyre (tyre).

2. Manufacturing of tyre cord (tyre cord).

3. Manufacturing of synthetic rubber (synthetic rubber).

4. Manufacturing of polyester (polyester).

5. Manufacturing of ethylene glycol and petrochemical (petrochemical).

6. Manufacturing of fishing net yarn (fishing net yarn).

7. Manufacturing steel wire (steel wire).

8. Manufacturing of rim of wheel, trading of car accessories and general trading (car accessories).

9. Others.

F-45

The following are segment information based on business segments:

2005

Tyre Tyre Cord

Synthetic

rubber

Car

Accessories Others Elimination Consolidated


STATEMENTS OF INCOME

REVENUES

External sales ........................... 942,521 103,982 8,954 33,660 69,317 — 1,158,434

Inter-segment sales ................... — 37,154 1) 31,429 1) — — (68,583) —

Inter-segment transfer ............... — 111,391 2) 73,625 2) — — (185,016) —

Total revenues .......................... 942,521 252,527 114,008 33,660 69,317 (253,599) 1,158,434

COST OF SALES ..................... 772,025 239,382 106,366 34,958 67,765 (253,599) 3) 966,897

GROSS PROFIT (LOSS) .......... 170,496 13,145 7,642 (1,298) 1,552 — 191,537

OPERATING EXPENSES ......... 60,355 2,007 1,176 3,392 147 — 67,077

SEGMENT RESULT ................. 110,141 11,138 6,466 (4,690) 1,405 — 124,460

UNALLOCATED OTHER

INCOME (CHARGES)

Gain on sale of subsidiary ... 123,532

Interest income .................... 397

Loss on foreign exchange

— net ............................. (62,776)

Interest expense ................... (15,837)

Others — net ....................... 1,755

Other income — net ................. 47,071

Equity in net income of

associated company ............. 47,884

Income before tax..................... 219,415

Tax expense.............................. (14,510)

Net income ............................... 204,905

BALANCE SHEETS

Segment assets ......................... 4,722,097 251,492 98,637 — 81,945 (80,469) 5,073,702

Investment in associated

company .............................. — — — — — — 472,552

Unallocated assets .................... — — — — — — 928,122

Consolidated total assets........... 4,722,097 251,492 98,637 — 81,945 (80,469) 6,474,376

Segment liabilities .................... 4,243,974 246,284 93,022 — 78,726 (77,285) 4,584,721

Unallocated liabilities ............... — — — — — — 292

Consolidated total liabilities ..... 4,243,974 246,284 93,022 — 78,726 (77,285) 4,585,013

OTHER INFORMATION

Capital expenditures ................. 55,170 181 19 — — — 55,370

Depreciation ............................. 43,734 8,989 8,288 3,503 — — 64,514

Notes:

1) represents sale to others segment

2) represents transfer to tyre segment

3) eliminated cost of sales tyre and others segment arising from sale and inter-segment transfer of tyre cordand synthetic rubber

F-46

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F-47

Geographical Segment

Net sales by geographical market

The following table shows the distribution of the Company and subsidiaries’ net sales by geographical market,regardless of where the goods were produced:

2005 2004


Domestic

Java ................................................................................................... 474,478 652,722

Outside Java ...................................................................................... 200,518 160,125

Foreign

Asia ................................................................................................... 252,818 574,124

Africa ................................................................................................ 36,894 29,541

Europe ............................................................................................... 151,373 179,105

America ............................................................................................. 42,353 45,584

Total ...................................................................................................... 1,158,434 1,641,201

All assets from the Company and its subsidiaries are located in Java.

38. COMMITMENTS AND AGREEMENTS

a. On May 12, 2004, the Company entered into a Manufacturing Cooperation Program Agreement (MCPA) andDistribution Cooperation Program Agreement (DCPA) with Michelin Asia-Pacific Pte. Ltd. The MCPA provides,among others, that the Company will manufacture selected brands of Michelin Group’s tyres, but excludingMichelin and BF Goodrich brands. In connection with the MCPA, on May 12, 2004, the Company and Michelinentered into an agreement, which provides, among others, that Michelin undertakes to purchase and pay for andthe Company undertakes to manufacture and deliver certain brands of tyres. The DCPA provides, among others,that the Company will have distribution rights to market and sell Michelin Group tyres in Indonesia, subject tocertain terms and conditions.

The above agreements are valid until December 31, 2010 and can be automatically extended for 5 years unlessterminated by both parties upon prior written consent.

b. Under the agreement between the Company and Inoue Rubber Co. Ltd., Japan, the Company obtained the right touse the IRC brand for bicycle and motorcycle tyres. This license is not transferable, will mature on January 1, 2010and is renewable every 5 years, except when terminated by either party.

The Company agreed to pay royalty equivalent to 0.5% to 1% of net sales of IRC brand motorcycle tyres and tubesand 0.5% of net sales of non-IRC brand motorcycle tyres and tubes.

Total royalty expense amounted to Rp 1,798 million in 2005 and Rp 2,312 million in 2004.

c. Under the agreement dated July 14, 1994 between GTPI and Goodyear Tire & Rubber Company, GTPI obtainedtechnical information and support for dipping machine. As compensation, GTPI should pay fee amounting toUS$2,890,000, where US$300,000 each is paid in 1994 and 1995 and eight installments of US$286,250 each yearis paid starting 1997 until 2004.

d. MAWC entered into an agreement to pay royalty to Central Motor Wheel Co. Ltd. (CMW) equivalent to 1.8% ofnet sales.

F-48

39. MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

At March 31, 2005 and 2004, the Company and its subsidiaries had monetary assets and liabilities in foreign currenciesas follows:

2005 2004

Foreigncurrency

Equivalent inRp’Million

Foreigncurrency

Equivalent inRp’Million

AssetsCash and cash equivalents

USD ............................................ 4,404,022 41,749 15,708,550 134,889

EURO.......................................... 10,457 128 119,396 1,252

Others ......................................... — 19 — 870

Temporary investments — USD ....... 11,241,687 106,571 30,901,951 265,356

Trade accounts receivable

USD ............................................ 49,055,778 465,049 94,677,974 812,999

JPY ............................................. 7,027,515 622 6,606,831 543

GBP ............................................ 3,792,484 67,564 3,715,951 58,446

EURO.......................................... 6,175,935 75,650 5,116,997 53,661

Other accounts receivable fromthird parties

USD ............................................ 1,641,879 15,565 299,400 2,571

EURO.......................................... 77,716 952 27,316 286

Accounts receivable from relatedparties — USD ............................ 35,686,133 338,304 165,357,400 1,419,924

Deposits in suspended bank

USD ............................................ — — 23,577,056 202,457

JPY ............................................. — — 61,733 5

EURO.......................................... — — 153,648 1,319

Others — USD ................................ — — 33,252 286

Total assets ..................................... 1,112,173 2,954,864

LiabilitiesTrade accounts payable

USD ............................................ 46,078,518 436,824 35,649,333 306,121

JPY ............................................. 46,221,705 4,090 160,425,014 13,174

SGD ............................................ 6,536 38 71,700 367

EURO.......................................... 93,504 1,145 50,891 5,253

Others ......................................... — — — 168

Other accounts payable to thirdparties

USD ............................................ 4,006,433 37,982 4,909,430 42,157

EURO.......................................... 244 3 — —

Accrued expenses

USD ............................................ 2,811,129 26,649 60,408,827 518,730

Current maturities of long-termliabilities

USD ............................................ 52,178,970 494,657 82,277,344 706,516

Long-term liabilities — net ofcurrent maturities — USD ........... 307,267,796 2,925,697 574,617,274 4,934,237

Accounts payable to related parties

USD ............................................ 5,888 56 340,031,210 2,919,848

Total liabilities ............................... 3,927,141 9,446,571

Net liabilities .................................. 2,814,968 6,491,707

F-49

The conversion rates used by the Company and its subsidiaries on March 31, 2005 and 2004 and the prevailing rates onMay 12, 2005 were as follows:

Foreign currency May 12, 2005

March 31,

2005 2004

Rp Rp Rp

USD 1 ............................................................................... 9,473.00 9,480.00 8,587.00

SGD 1 ............................................................................... 5,746.97 5,748.60 5,117.56

JPY 1................................................................................. 89.28 88.48 82.12

EURO 1 ............................................................................. 12,121.18 12,249.12 10,486.89

GBP 1................................................................................ 17,734.42 17,815.31 15,728.39

40. CONTINGENCIES

Prior to August 6, 1998, when MAWC was managed by Mr. Soewardi S. Tirta as President Director, there were severaltransactions which were not recorded and presented in MAWC’s financial statements with details as follows:

a. Credit agreement between MAWC with Indover Bank (Asia) Limited, Hongkong (Indover) based on creditagreement No. 141 dated June 14, 1994 amounting to US$4,000,000. The estimated liability of MAWC as ofAugust 6, 2002 amounted to US$4,568,006.65 (principal of US$2,414,300 and interest of US$2,153,706.65). Since1997, MAWC did not pay the loan principal and interest.

On January 22, 2003, Indover filed a request for MAWC’s bankruptcy. On such request, Indover, among others,declared about the existence of MAWC’s liability based on the expired Credit Agreement amounting toUS$3,929,153.24 as of September 17, 2002.

MAWC has made legal efforts to tackle the demand of Indover. The District Court and the Chairman of SupremeCourt has refused the bankruptcy request of Indover. Furthermore, Indover requested for judicial review, whichhowever on January 6, 2004, the Supreme Court of the Republic of Indonesia has made a decision Reg. No.014/PK/N/2003, refusing Indover’s request for judicial review.

The MAWC’s lawyers’ opinion is that the decision on the judicial review described above is a powerful andpermanent legal decision on the judicial review against MAWC which was requested by Indover.

b. Sale and lease-back transactions on MAWC’s alloy wheel machines with PT Garishindo Buana Finance Indonesiawith total contract value of US$2,624,541.

Based on the report of evidence No. LP/60/11/1999/Siaga-III dated February 25, 1999, PT Garishindo BuanaFinance Indonesia reported that Mr. Soewardi S. Tirta and cohorts committed fraud and embezzlement.

For investigation purposes, the police requested the Chairman of the Surabaya State Court to confiscate themachinery and equipment as evidence. Based on decision No. 2184/IX/Pen.Pid/1999/PN.Sby dated September 21,1999, the Chairman agreed on the attachment of MAWC’s machines.

Up to the date of the independent accountants’ report, MAWC has not recorded the liabilities to Indover Ltd., Hongkongand PT Garishindo Buana Finance Indonesia because those transactions, according to management, are presumed to have beenmanaged and utilised by Mr. Soewardi S. Tirta for personal purposes, and the agreements are invalid legally since they wereexecuted without the approval of MAWC’s commissioners, and the original invoices for the sale and lease-back of machineryare still with the Company, thus, those liabilities have not been reflected in the consolidated financial statements.

As discussed in Note 34, the Company has sold all of its shares of stocks in MAWC on February 28, 2005.

F-50

41. FINANCIAL INFORMATION OF THE PARENT COMPANY ONLY

The financial information of the parent Company only presents balance sheets, statements of income, statements ofchanges in equity and statements of cash flows information in which investments in its subsidiaries were accounted for usingthe equity method.

Statements of Balance Sheet Information

2005 2004


ASSETS

CURRENT ASSETSCash and cash equivalents................................................................................ 49,344 61,194

Temporary investments..................................................................................... 144,873 469,391

Trade accounts receivable

Related parties ............................................................................................. 146,751 2,472

Third parties — net of allowance for doubtful accounts of Rp 63,289million in 2005 and Rp 37,316 million in 2004 ....................................... 493,190 424,103

Other accounts receivable from third parties — net of allowance for doubtfulaccounts of Rp 14,462 million ..................................................................... 98,897 132,408

Inventories ....................................................................................................... 751,993 299,080

Advances ......................................................................................................... 181,330 82,571

Prepaid taxes ................................................................................................... 92,079 19,025

Prepaid expenses.............................................................................................. 7,119 2,356

Total Current Assets......................................................................................... 1,965,576 1,492,600

NONCURRENT ASSETSRestricted cash in bank .................................................................................... — 1

Accounts receivable from related parties .......................................................... 868,701 2,184,611

Deferred tax assets — net ................................................................................ 59,456 —

Investments in shares of stock ......................................................................... 479,055 33,372

Property, plant and equipment — net of accumulated depreciation ofRp 1,796,312 million in 2005 and Rp 1,092,947 million in 2004 ................. 3,100,147 2,239,994

Deposits in suspended bank ............................................................................. — 64,772

Total Noncurrent Assets ................................................................................... 4,507,359 4,522,750

TOTAL ASSETS ............................................................................................. 6,472,935 6,015,350

F-51

2005 2004


LIABILITIES AND EQUITY

CURRENT LIABILITIESTrade accounts payable

Related parties ............................................................................................. 268,118 102,086

Third parties ................................................................................................ 322,784 151,415

Other accounts payable to third parties ............................................................ 126,462 173,161

Taxes payable .................................................................................................. 30,161 58,816

Dividends payable............................................................................................ 1,577 1,577

Accrued expenses............................................................................................. 94,452 142,063

Sales advances ................................................................................................. 17,161 3,573

Current maturities of notes payable .................................................................. 494,657 305,444

Total Current Liabilities ................................................................................... 1,355,372 938,135

NONCURRENT LIABILITIESDeferred tax liabilities — net .......................................................................... — 116,811

Long-term note payable — net of current maturity........................................... 2,925,697 2,446,905

Accounts payable to related parties .................................................................. 292 316,486

Dealers’ deposits .............................................................................................. 156,204 176,390

Post-employment benefits obligation ................................................................ 146,007 103,998

Total Noncurrent Liabilities ............................................................................. 3,228,200 3,160,590

EXCESS OF ACCUMULATED LOSSES OF SUBSIDIARIES OVERCOST OF INVESTMENT .......................................................................... — 446,832


Authorised — 12,000,000,000 shares ..........................................................

Subscribed and paid-up — 3,168,000,000 shares .......................................... 1,584,000 1,584,000

Additional paid-in capital................................................................................. 51,500 51,500

Difference in value of restructuring transactions between

entities under common control ......................................................................... (494,895) —

Difference due to change of equity in subsidiary ............................................. 412,398 28,728

Unrealised gain on increase in value securities — net ...................................... 1,607 14,316

Retained earnings (Deficit) .............................................................................. 334,753 (208,751)

Total Equity ..................................................................................................... 1,889,363 1,469,793

TOTAL LIABILITIES AND EQUITY ............................................................ 6,472,935 6,015,350

F-52

Statements of Income Information

2005 2004


NET SALES .................................................................................................... 1,124,040 775,535

COST OF SALES ........................................................................................... 932,757 598,153

GROSS PROFIT ............................................................................................. 191,283 177,382

OPERATING EXPENSESSelling ............................................................................................................. 34,125 46,512

General and administrative............................................................................... 29,413 27,806

Total Operating Expenses ................................................................................. 63,538 74,318

INCOME FROM OPERATIONS .................................................................... 127,745 103,064

OTHER INCOME (CHARGES)Gain on sale of subsidiary ............................................................................... 123,532 —

Interest income ................................................................................................ 379 2,103

Loss on foreign exchange — net ...................................................................... (63,422) (20,971)

Interest expense ............................................................................................... (14,656) —

Equity in net income (loss) of subsidiaries....................................................... (3,611) 82,741

Others — net ................................................................................................... 1,756 4,417

Other Income — Net........................................................................................ 43,978 68,290

EQUITY IN NET INCOME OF ASSOCIATED COMPANY.......................... 47,884 —

INCOME BEFORE TAX EXPENSE .............................................................. 219,607 171,354

TAX EXPENSE............................................................................................... (14,702) (31,803)

NET INCOME ................................................................................................ 204,905 139,551

Statements of Changes in Equity Information

2005 2004


CAPITAL STOCK — Rp 500 par value per share

Authorised — 12,000,000,000 shares

Subscribed and paid-up — 3,168,000,000 shares .......................................... 1,584,000 1,584,000

Additional paid in capital................................................................................. 51,500 51,500

Difference in value of restructuring transactions between entities undercommon control ........................................................................................... (494,895) —

Unrealised gain on increase in value of securities — net ................................. 1,607 14,316

Difference due to change of equity in subsidiary ............................................. 412,398 28,728

RETAINED EARNINGS (DEFICIT)Balance at beginning of period .................................................................... 129,848 (348,302)

Net income for the period ............................................................................ 204,905 139,551

Balance at end of period .............................................................................. 334,753 (208,751)

TOTAL EQUITY ............................................................................................ 1,889,363 1,469,793

F-53

Statements of Cash Flows Information

2005 2004


CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers........................................................................... 999,437 743,471

Cash paid to suppliers and employees .............................................................. (922,826) (559,000)

Cash generated from operations ....................................................................... 76,611 184,471

Interest and financing charges paid .................................................................. (34,896) (20,374)

Tax restitution received.................................................................................... 25,451 22,136

Income tax paid ............................................................................................... (8,089) (2,772)

Net Cash Provided by Operating Activities ...................................................... 59,077 183,461

CASH FLOWS FROM INVESTING ACTIVITIESProceeds (placements) of temporary investments .............................................. 35,900 (105,888)

Interest received .............................................................................................. 376 2,263

Proceeds from sale of property, plant and equipment ....................................... 140 —

Acquisitions of property, plant and equipment.................................................. (34,190) (26,970)

Net Cash Provided By (Used in) Investing Activities ....................................... 2,226 (130,595)

CASH FLOWS FROM FINANCING ACTIVITIESPayments of notes payable ............................................................................... (88,572) (50,700)

Accounts receivable from and payable to related parties — net........................ (9,903) (44,461)

Net Cash Used in Financing Activities ............................................................. (98,475) (95,161)

NET DECREASE IN CASH AND CASH EQUIVALENTS ............................ (37,172) (42,295)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............. 88,153 103,385

Effect of foreign exchange rate changes ........................................................... (1,637) 104

CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................... 49,344 61,194

SUPPLEMENTAL DISCLOSURESNoncash investing and financing activities:

Acquisition of property, plant and equipment through advances and otheraccounts payable to third parties .................................................................. 21,181 —

Increase of other accounts receivable to third party arise from sale ofsubsidiary .................................................................................................... 6,885 —

42. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements on pages F-3 to F-54 were approved by the Company’s Directors and authorisedfor issue on May 12, 2005.

F-54

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2004, 2003 AND 2002

(As restated — Note 42)

Notes 2004*) 2003 2002

Rp’Million Rp’Million Rp’MillionASSETS

CURRENT ASSETSCash and cash equivalents............................ 2d,2f,3,37 103,785 272,318 268,097Temporary investments................................. 2d,2g,4,37 200,173 371,675 423,376Trade accounts receivable 2h,5

Related parties .......................................... 2d,37 276 137,578 152,656Third parties — net of allowance for

doubtful accounts of Rp 62,069 millionin 2004 Rp 95,297 million in 2003 andRp 16,909 million in 2002 .................... 533,852 783,330 687,056

Other accounts receivable from third parties— net of allowance for doubtful accountsof Rp 14,462 million ................................ 2h 58,862 47,889 47,449

Inventories — net of allowance for declinein value of Rp 1,094 million in 2004,Rp 2,973 million in 2003 andRp 979 million in 2002 ............................ 2i,6 686,924 1,050,494 1,013,197

Advances ..................................................... 165,248 228,309 174,157Prepaid taxes ............................................... 2r,7 96,369 177,725 109,003Prepaid expenses .......................................... 2j 3,849 7,163 9,136

Total Current Assets..................................... 1,849,338 3,076,481 2,884,127

NONCURRENT ASSETSRestricted cash in bank ................................ 8 — 1 1Accounts receivable from related parties ...... 2d,9a,37 807,610 2,289,445 2,160,257Deferred tax assets — net ............................ 2r,31 70,297 — 251,396Investments in shares of stock ..................... 2g,10 427,513 2,152 284Property, plant and equipment — net of

accumulated depreciation ofRp 1,868,388 million in 2004,Rp 2,796,086 million in 2003 andRp 2,339,506 million in 2002 ................... 2k,11 3,186,298 6,514,756 6,824,484

Purchase advances ....................................... — — 1,723Unused property, plant and equipment

— net ....................................................... 2k,11 — 12,189 43,445Deposits in suspended bank ......................... 2d,12,37 — 273,366 284,405Deferred development expenses.................... 2l — 1,393 3,782Deferred charges — landrights ..................... 2m — 1,256 1,302Others .......................................................... 61 2,216 2,170

Total Noncurrent Assets ............................... 4,491,779 9,096,774 9,573,249

TOTAL ASSETS ......................................... 6,341,117 12,173,255 12,457,376

*) The 2004 consolidated balance sheets do not include the balance sheets of GTPI and LBP which were no longerconsolidated as discussed in Notes 1b and 34.


F-56

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2004, 2003 AND 2002 (Continued)

(As restated — Note 42)Notes 2004*) 2003 2002

Rp’Million Rp’Million Rp’MillionLIABILITIES AND EQUITY

CURRENT LIABILITIESBank loan .................................................... 13 — 11,500 11,500Trade accounts payable 14

Related parties .......................................... 2d,37 132,411 556 419Third parties ............................................. 230,834 346,659 320,901

Other accounts payable to third parties ........ 126,267 176,787 69,447Taxes payable .............................................. 2r,15 33,853 44,641 22,729Dividends payable........................................ 1,577 1,707 1,707Accrued expenses......................................... 16 86,423 619,846 1,655,666Sales advances ............................................. 8,309 23,669 23,903Current maturities of long-term liabilities

Liability for the purchase of property,plant and equipment .............................. 17 — 33,064 34,920

Bank loans ............................................... 18 205,739 224,133 206,363Notes payable ........................................... 19 472,404 487,026 186,119

Loans under restructuring process — net ..... 20 — — 2,219,830Total Current Liabilities ............................... 1,297,817 1,969,588 4,753,504NONCURRENT LIABILITIESDeferred tax liabilities — net....................... 2r,31 9,413 300,255 111,461Long-term liabilities — net of current

maturitiesBank loans ............................................... 18 — 702,217 824,867Notes payable ........................................... 19 2,995,849 4,471,291 3,000,684

Accounts payable to related parties .............. 2d,9b,37 476 3,137,856 3,283,117Dealers’ deposits .......................................... 211,188 162,343 138,964Post-employment benefits obligation ............ 2e,2n,21 141,876 175,934 143,243Negative goodwill — net ............................. 2b — 2,060 2,243Total Noncurrent Liabilities ......................... 3,358,802 8,951,956 7,504,579MINORITY INTERESTS IN NET

ASSETS OF SUBSIDIARIES .................. 22 (39) (74,570) (230,260)EQUITYCapital stock — Rp 500 par value per share

Authorised — 12,000,000,000 sharesSubscribed and paid-up — 3,168,000,000

shares .................................................... 23 1,584,000 1,584,000 1,584,000Additional paid-in capital............................. 24 51,500 51,500 51,500Difference in value of restructuring

transactions between entities undercommon control ........................................ 2o,25 (494,895) — —

Difference due to change of equity insubsidiary ................................................. 2g,26 412,398 28,728 28,728

Unrealised gain (loss) on increase(decrease) in value of available for salesecurities — net ....................................... 2g,4,10 1,686 10,355 (15,242)

Retained earnings (Deficit) .......................... 129,848 (348,302) (1,219,433)Total Equity ................................................. 1,684,537 1,326,281 429,553TOTAL LIABILITIES AND EQUITY ........ 6,341,117 12,173,255 12,457,376

*) The 2004 consolidated balance sheets do not include the balance sheets of GTPI and LBP which were no longerconsolidated as discussed in Notes 1b and 34.


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PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002


Notes 2004 2003 2002

Rp’Million Rp’Million Rp’MillionNET SALES ............................................. 2d,2p,27,37 6,807,579 5,729,506 5,560,902COST OF SALES ..................................... 2d,2p,28,37 5,683,194 4,857,685 4,712,762

GROSS PROFIT ...................................... 1,124,385 871,821 848,140

OPERATING EXPENSES 2p,29Selling ........................................................ 196,099 293,978 246,546General and administrative .......................... 244,512 312,226 228,502

Total Operating Expenses ............................ 440,611 606,204 475,048

INCOME FROM OPERATIONS ............... 683,774 265,617 373,092

OTHER INCOME (CHARGES) 2pReversal of (provision for) allowance for

doubtful accounts .................................... 2h 28,052 (1,486) (4,412)Interest income ........................................... 5,267 23,644 109,099Gain (loss) on foreign exchange — net ....... 2c (465,887) 388,900 1,706,818Interest expense .......................................... 30 (44,922) (66,339) (449,883)Impairment of unused property, plant

and equipment ......................................... 2k,11 (4,303) (3,528) (3,569)Others — net .............................................. 45,042 49,457 105,138

Other Income (Charges) — Net ................... (436,751) 390,648 1,463,191

EQUITY IN NET INCOME OFASSOCIATED COMPANY ................... 2g,10 16,726 — —

INCOME BEFORE TAX .......................... 263,749 656,265 1,836,283TAX BENEFIT (EXPENSE) ..................... 2r,31 177,726 (222,839) (694,787)

INCOME FROM ORDINARYACTIVITIES ......................................... 441,475 433,426 1,141,496

EXTRAORDINARY ITEMRestructuring gain — net of tax expense

and restructuring charges ......................... 2q,32 118,999 593,395 3,081,365

INCOME BEFORE MINORITYINTEREST IN NET INCOME OFSUBSIDIARIES ..................................... 560,474 1,026,821 4,222,861

MINORITY INTERESTS IN NETINCOME OF SUBSIDIARIES .............. 22 (82,324) (155,690) (400,147)

NET INCOME .......................................... 478,150 871,131 3,822,714

BASIC EARNINGS PER SHARE(In full Rupiah) 2s,33Including extraordinary item .................... 151 275 1,207Excluding extraordinary item ................... 113 88 234


F-58

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

NotesPaid-upcapital

Additionalpaid-incapital

Differencein value of

restructuringtransaction

betweenentities

undercommoncontrol

Differencedue to

change ofequity in

subsidiary

Unrealisedgain (loss)

onincrease

(decrease)in value

ofsecurities

Retainedearnings(Deficit)

Totalequity


Balance as ofJanuary 1, 2002 .......... 1,584,000 51,500 — 28,728 (57,843) (4,998,926) (3,392,541)

Effect of change inaccounting for post-employment benefits .. 42 — — — — — (43,221) (43,221)

Balance as of January 1,2002 (as restated) ....... 1,584,000 51,500 — 28,728 (57,843) (5,042,147) (3,435,762)

Unrealised gain onincrease in value ofsecurities ................... 2g,4,10 — — — — 42,601 — 42,601

Net income for the year(as restated) ............... — — — — — 3,822,714 3,822,714

Balance as ofDecember 31, 2002 ..... 1,584,000 51,500 — 28,728 (15,242) (1,219,433) 429,553

Unrealised gain onincrease in value ofsecurities ................... 2g,4,10 — — — — 25,597 — 25,597

Net income for the year(as restated) ............... — — — — — 871,131 871,131

Balance as ofDecember 31, 2003 ..... 1,584,000 51,500 — 28,728 10,355 (348,302) 1,326,281

Unrealised loss ondecrease in value ofsecurities ................... 2g,4,10 — — — — (8,669) — (8,669)

Difference in value ofrestructuringtransactions betweenentities under commoncontrol ....................... 2o,25 — — (494,895) — — — (494,895)

Difference due to changeof equity in subsidiary 2g,26 — — — 383,670 — — 383,670

Net income for the year .. — — — — — 478,150 478,150

Balance as ofDecember 31, 2004 ..... 1,584,000 51,500 (494,895) 412,398 1,686 129,848 1,684,537


F-59

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

2004 2003 2002

Rp’Million Rp’Million Rp’MillionCASH FLOWS FROM OPERATING

ACTIVITIESCash receipts from customers................................... 6,984,111 5,792,112 5,739,757Cash paid to suppliers and employees ...................... (6,234,785) (5,093,675) (5,075,676)

Cash generated from operations ............................... 749,326 698,437 664,081Interest and financing charges paid .......................... (143,243) (113,586) (118,216)Tax restitution received............................................ 51,242 13,708 32,854Income tax paid ....................................................... (66,287) (35,025) (19,480)

Net Cash Provided by Operating Activities .............. 591,038 563,534 559,239

CASH FLOWS FROM INVESTING ACTIVITIESWithdrawals (placements) of temporary investments. 150,881 87,264 (535,679)Interest received ...................................................... 5,479 9,160 29,011Proceeds from sale of property, plant

and equipment ...................................................... 637 602 1,353Acquisitions of property, plant and equipment.......... (174,163) (103,752) (96,808)Placements of refundable deposits ............................ (368) (45) —Legal processing of landrights ................................. (13) (56) (45)

Net Cash Used in Investing Activities ...................... (17,547) (6,827) (602,168)

CASH FLOWS FROM FINANCINGACTIVITIES

Payments of liability for the purchase of machinery. (3,868) — (4,393)Payment of restructured loan.................................... — (46) —Payments of bank loans ........................................... (5,962) (59,745) (31,757)Accounts receivable from and payable to related

parties — net ........................................................ (11,974) (237,478) (132,793)Payment of notes payable ........................................ (605,928) (247,676) —

Net Cash Used in Financing Activities ..................... (627,732) (544,945) (168,943)

NET INCREASE (DECREASE) IN CASH ANDCASH EQUIVALENTS ...................................... (54,241) 11,762 (211,872)

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR ..................................... 272,318 268,097 506,318

Balance of unconsolidated subsidiary ....................... (118,057) — —Effect of foreign exchange rate changes ................... 3,765 (7,541) (23,824)Restricted cash in bank ............................................ — — (2,525)

CASH AND CASH EQUIVALENTSAT END OF YEAR ............................................ 103,785 272,318 268,097


F-60

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (continued)

2004 2003 2002

Rp’Million Rp’Million Rp’MillionSUPPLEMENTAL DISCLOSURESNoncash investing and financing activities:

Ordinary activities:Settlement of accounts payable to related parties

and accrued expenses are as follows:Transfer of accounts receivable from

related parties ................................................ 2,633,827 — —Transfer of trade accounts receivable ................ 119,028 — —Transfer of deposits in suspended bank ............. 279,305 — —Transfer of temporary investment

— commercial paper ..................................... 43,125 — —Issuance of long-term notes payable .................. 469,650 — —

Reclassification of advances to accountsreceivable from related parties ......................... 26,600 — —

Increase of accounts receivable from relatedparties through sale of subsidiary ..................... 8,369 — —

Increase in investments in shares of stock throughdifference due to change of equity in subsidiary 383,670 — —

Reclassification of property, plant and equipmentfrom unused property, plant and equipment ...... 118 27,416 31,323

Reclassification of restructured bank loans tolong-term notes payable ................................... — 2,399,911 2,726,823

Additions acquisition in property, plant andequipment from other accounts payable to thirdparties .............................................................. — 16,091 —

Increase in accounts receivable from relatedparties from capitalisation of interest income ... — 12,851 45,437

Increase in property, plant and equipment fromsettlement of purchase advances ....................... — 1,723 8,023

Reclassification of unused property, plant andequipment from property, plant and equipment . — 134 —

Bank loan settlement funds through investmentproceeds ............................................................ — — 1,986,769

Interest expense on notes payable, bank loans andlong-term bank loans added to loan principal ... — — 80,384

Extraordinary item (see Note 32):Decrease in short-term and long-term liabilities in

connection with credit restructuring ................. 140,456 851,056 3,084,499


F-61

PT. GAJAH TUNGGAL Tbk AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2004, 2003 AND 2002 AND FOR THE YEARS THEN ENDED

1. GENERAL

a. Establishment and General Information

PT. Gajah Tunggal Tbk (the “Company”) was established based on notarial deed No. 54 dated August 24, 1951of Raden Meester Soewandi, SH, notary public in Jakarta. The deed of establishment was approved by the Minister ofJustice of the Republic of Indonesia in his Decision Letter No. J.A.5/69/23 dated May 29, 1952, and was published inState Gazette of the Republic of Indonesia No. 63 dated August 5, 1952, Supplement No. 884. The Company’s articlesof association have been amended by notarial deed No. 54 dated July 15, 1997 of Indah Budiana, SH, substitute for AmrulPartomuan Pohan, SH, Lex Legibus Magister, notary public in Jakarta, to conform with Law No. 1 year 1995 on LimitedLiability Companies and the decision from the Chairman of the Capital Market Supervisory Agency No. KEP-13/PM/1997 dated April 30, 1997 regarding fundamental articles of association of public companies and companies whoundertake a public offering. The amendment deed was approved by the Minister of Justice of the Republic of Indonesiain his Decision Letter No. C2-9167.HT.01.04.TH.97 dated September 8, 1997. The Company’s articles of associationhave been amended, most recently by Notarial deed No. 36 dated June 28, 1999 of Amrul Partomuan Pohan, SH, LexLegibus Magister, notary public in Jakarta, concerning the approval of changes in the Company’s articles of associationto conform with the decision of the Chairman of the Capital Market Supervisory Agency No. Kep-41/PM/1998 andKep-44/PM/1998 dated August 14, 1998 regarding the change of regulations on pre-emptive rights and additional capitalwithout pre-emptive rights. The amendment deed was approved by the Minister of Justice of the Republic of Indonesiain his Decision Letter No. C-15658.HT.01.04.Th.99 dated August 30, 1999, and was published in State Gazette of theRepublic of Indonesia No. 40 dated May 19, 2000, Supplement No. 98.

The Company is domiciled in Jakarta, and its plants are located in Tangerang. The Company’s head office islocated in Wisma Hayam Wuruk, 10th Floor, Jl. Hayam Wuruk 8, Jakarta.

In accordance with article 3 of the Company’s articles of association, the scope of its activities consists ofmanufacturing of goods made of rubber, primarily tyres and tubes for vehicles, goods or equipment. The Company startedcommercial operations in 1953. The Company’s products are marketed both domestic and international, including USA,Asia, Australia and Europe. The Company had 8,293 employees in 2004, 7,853 employees in 2003 and 7,553 employeesin 2002.

The Company’s management as of December 31, 2004 consisted of the following:

President Commissioner Rudolf Kasenda

Vice President Commissioner Pang Shun Pen

Commissioners Gautama HartartoSutrisnoMohendra Asoka Bratanata

Independent Commissioners Howell Rembrandt Pickett KeezellSunaria Tadjuddin

President Director Christopher Chan Siew Choong

Vice President Director Mulyati Gozali

Directors Budhi Santoso TanasalehVeli Ilmari NikkariCatharina WidjajaHendra SoerijadiKisyuwono

Total salaries and benefits paid to commissioners and directors of the Company amounted to Rp 23,218 million,Rp 18,118 million and Rp 20,321 million, respectively, in 2004, 2003 and 2002.

As discussed in Notes 23 and 36, in relation to the settlement of loans from Bank Dagang Nasional Indonesia(BDNI) — Suspended Bank (BBO) between the Founder of Gajah Tunggal Group and Indonesian Bank RestructuringAgency (IBRA), all of the shares owned by PT Gajah Tunggal Mulia and PT Gajah Tunggal Sakti in the Company andGTPI and the obligations of the Company and its subsidiaries to BDNI — BBO were transferred to PT Tunas SepadanInvestama (“TSI”). TSI was a holding company established by the Founder of Gajah Tunggal Group and IBRA in relationto the settlement of the Founder’s obligations with IBRA.

F-62

Based on the Receivables Transfer (Cessie) Agreement between TSI and Garibaldi Venture Fund Limited(Garibaldi) No. 48 and 49 dated April 8, 2004, by Dr. Irawan Soerodjo, S.H., Msi, notary public in Jakarta, both partiesagreed to transfer to Garibaldi all accounts payable of the Company, GTPI, FS, SS and LBP to TSI.

Based on Deed No. 414 dated April 27, 2004 of the same notary public, all Company shares owned by TSI havebeen transferred to Garibaldi (see Note 23).

b. Consolidated Subsidiaries

The Company has direct or indirect ownership interest of more than 50% in, and/or have significant influence overthe management of, the following subsidiaries:

Subsidiary Domicile Nature of Business

Percentage ofOwnership

Start ofCommercialOperations2004

2003and 2002

Total Assetsas of

December31, 2004

Rp’Million

PT Meshindo AlloyWheel Corporation(“MAWC”)

Surabaya Manufacturing ofrims of wheel

51% 51% 1991 172,436

PT Auto BahnMandiri (“ABM”)95% owned byMAWC

Jakarta Trading of caraccessories andgeneral trading

48.45% 48.45% 1995 196

GTT NetherlandsB.V. (“GTTN”)

TheNetherlands


100% 100% 1996 1,880

PT GT Megah Prima(Developmentstage company)


99.00% 99.00% — 309

PT GT PetrochemIndustries Tbk(“GTPI”)


— 50.01% 1990 —

PT Filamendo Sakti(“FS”) 92.90%owned by GTPI

Jakarta Manufacturing ofnylon filament yarn,polyester-chips asraw materials fornylon cord andfishing net yarn

— 46.46% 1993 —

PT SentraSintetikajaya(“SS”) 95% ownedby GTPI

Jakarta Manufacturing ofsynthetic rubber

— 47.51% 1998 —

GTPI NetherlandsB.V. (“GTPIN”)100% owned byGTPI

TheNetherlands


— 50.01% 1997 —

PT LanggengBajapratama(“LBP”)

Jakarta Trading andmanufacturing ofsteel wire

— 51% 1997 —

In connection with the restructuring of the Company’s group, starting at the end of November 2004, GTPI, FS,SS, GTPIN and LBP are no longer considered as subsidiaries as discussed in Notes 10 and 34.

Based on Share Sale and Purchase Agreement No. 28 dated September 29, 2004 and Share Sale and Purchase DeedNo. 45 dated November 30, 2004 by Fenny Tjitra, SH, the stockholders of LBP approved the sale of all shares of LBPowned by the Company, totaling 41,310 shares (51%), to PT Gajah Tunggal Prakarsa (see Note 35).

F-63

Based on the Resolution of GTPI’s Extraordinary Shareholders Meeting No. 16 dated November 25, 2004 fromAmrul Partomuan Pohan, SH, Lex Legibus Magister, GTPI’s stockholders agreed to issue 1,649,179,559 new shares ofGTPI to Garibaldi and other stockholders, accordingly, the Company’s ownership in GTPI was diluted from 50.01% to28.91% (see Notes 9b and 19).

The above transactions has been approved by the independent stockholders in the Company’s ExtraordinaryMeeting of Shareholders on November 25, 2004.

c. Public Offering of the Company’s Shares

On March 15, 1990, the Company obtained the notice of effectivity from the Chairman of Capital MarketSupervisory Agency (“Bapepam”) in his letter No. SI-087/SHM/MK.10/1990 for its public offering of 20,000,000 shares.On May 8, 1990, these shares were listed on the Jakarta Stock Exchange.

On January 21, 1994, the Company obtained the notice of effectivity from the Chairman of Bapepam in his letterNo.S-115/PM/1994 for its limited offering of 198,000,000 shares through rights issue to stockholders. These shares werelisted on the Jakarta and Surabaya stock exchanges on February 11, 1994.

On August 23, 1996, the Company obtained the notice of effectivity from the Chairman of Bapepam in his letterNo. S-1365/PM/1996 for its limited offering of 792,000,000 shares through rights issue II to stockholders. These shareswere listed on the Jakarta and Surabaya stock exchanges on October 16, 1996.

As of December 31, 2004, all of the Company’s outstanding shares totaling 3,168,000,000 shares have been listedon the Jakarta and Surabaya stock exchanges.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Consolidated Financial Statement Presentation

The consolidated financial statements have been prepared using accounting principles and reporting practicesgenerally accepted in Indonesia. Such consolidated financial statements are an English translation of the Company andits subsidiaries’ statutory report in Indonesia, and are not intended to present the consolidated financial position andconsolidated results of operations, and cash flows in accordance with accounting principles and reporting practicesgenerally accepted in other countries and jurisdictions.

The consolidated financial statements, except for the consolidated statements of cash flows, are prepared underthe accrual basis of accounting. The reporting currency used in the preparation of the consolidated financial statementsis the Indonesian Rupiah, while the measurement basis used is the historical cost, except for certain accounts which aremeasured on the bases described in the related accounting policies.

The consolidated statements of cash flows are prepared using the direct method with classifications of cash flowsinto operating, investing and financing activities.

b. Principles of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlledby the Company and its subsidiaries (see Note 1b). Control is achieved where the Company has the power to govern thefinancial and operating policies of the investee entity so as to obtain benefits from its activities. Control is presumed toexist when the Company owns directly or indirectly through subsidiaries, more than 50% of the voting rights, other thanthose excluded because control is temporary or due to long-term restrictions significantly impairing the subsidiary’sability to transfer funds to the Company.

On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition.Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwilland amortised using the straight-line method over five years. When the cost of acquisition is less than the interest in thefair values of the identifiable assets and liabilities acquired as at the date of acquisition (i.e. discount on acquisition),the fair values of the acquired non-monetary assets are reduced proportionately until all the excess is eliminated. Theexcess remaining after reducing the fair values of non-monetary assets acquired is recognised as negative goodwill,treated as deferred revenue and recognised as revenue on a straight-line method over twenty years.

The interest of the minority shareholders is stated at the minority’s proportion of the historical cost of the netassets. The minority interest is subsequently adjusted for the minority’s share of movements in equity. Any lossesapplicable to the minority interest in excess of the minority interest are allocated against the interests of the parent.

The results of subsidiaries disposed of during the year are included in the consolidated statements of income upto the effective date of disposal, as appropriate.

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Where necessary, adjustments are made to the financial statements of the subsidiaries to bring the accountingpolicies used in line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

c. Foreign Currency Transactions and Translation

The books of accounts of the Company and its subsidiaries, except GTTN and GTPIN, are maintained inIndonesian Rupiah. Transactions during the year involving foreign currencies are recorded at the rates of exchangeprevailing at the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated inforeign currencies are adjusted to reflect the rates of exchange prevailing at that date. The resulting gains or losses arecredited or charged to current operations.

The books of accounts of GTTN and GTPIN are maintained in Euro. For consolidation purposes, assets andliabilities of GTTN and GTPIN at balance sheet date are translated into Indonesian Rupiah using the rate of exchangeprevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the average rate for the year.The resulting translation adjustment is charged to current operations in the consolidated financial statements because allthe transactions of GTTN and GTPIN were made with the Company and its subsidiary (GTPI).

d. Transactions With Related Parties

Related parties consist of the following:

1) companies that directly, or indirectly through one or more intermediaries, control, or are controlled by, orare under common control with, the Company (including holding companies, subsidiaries and fellowsubsidiaries);

2) associated companies;

3) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives themsignificant influence over the Company, and close members of the family of any such individuals (closemembers of the family are those who can influence or can be influenced by such individuals in theirtransactions with the Company);

4) key management personnel who have the authority and responsibility for planning, directing and controllingthe Company’s activities, including commissioners, directors and managers of the Company and closemembers of their families; and

5) companies in which a substantial interest in the voting power is owned, directly or indirectly, by any persondescribed in (3) or (4) or over which such a person is able to exercise significant influence. This includescompanies owned by commissioners, directors or major stockholders of the Company and companies whichhave a common key member of management as the Company.

All transactions with related parties, whether or not made at similar terms and conditions as those done with thirdparties, are disclosed in the consolidated financial statements.

e. Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could be different from these estimates.

f. Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks and all unrestricted investments with maturitiesof three months or less from the dates of placement.

g. Investments

Investments in equity securities that have readily determinable fair values and debt securities

Investments in available-for-sale securities are stated at fair values. Unrealised gains or losses from theincrease or decrease in fair values are recorded as part of equity and recognised as income or expense of the yearwhen realised.

F-65

Investments in securities held-to-maturity are stated at cost, adjusted for the unamortised premiums ordiscounts.

Securities available-for-sale held temporarily and debt securities held-to-maturity with terms of less thanone year are presented as temporary investments.

To calculate the realised gains or losses, cost of securities sold is determined using the weighted averagemethod.

Investment in associated companies

An associate is an entity over which the Company is in a position to exercise significant influence, but notcontrol or joint control, through participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in these consolidated financialstatements using the equity method of accounting. Investments in associates are carried in the balance sheet at costas adjusted by post-acquisition changes in the Company, and share of the net assets of the associate, less anyimpairment in the value of the individual investments. Losses of the associates in excess of the Company, interestin those associates are not recognised except if the Company has incurred obligations or made payments on behalfof the associates to satisfy obligations of the associates that the Company has guaranteed, in which case, additionallosses are recognised to the extent of such obligations or payments.

Goodwill and negative goodwill from investments in associates are recognised and amortised in the samemanner as that for acquisition of controlled entities (see accounting policy for principles of consolidation). Theamortisation of goodwill and negative goodwill are included in the Company’s share in the results of theassociates.

Other investments

Investments in shares of stock with ownership interest of less than 20% that do not have readilydeterminable fair values and are intended for long-term investments are stated at cost. The carrying amount of theinvestments is written down to recognise a permanent decline in the value of the individual investments. Any suchwrite-down is charged directly to current operations.

Change of equity in subsidiary

Changes in value of investment due to change in the equity of a subsidiary arising from capital transactionsof such subsidiary with other parties is recognised in equity as Difference Due to Change of Equity in Subsidiary,and recognised as income or expense in the year the investment is disposed of.

h. Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided based on a review of the status of the individual receivable accountsat the end of the year.

i. Inventories

Inventories are stated at cost or net realisable value, whichever is lower. The cost of raw materials and suppliesis determined using the moving average method, while the cost of finished goods and work in process is determined usingthe average cost of production.

j. Prepaid Expenses

Prepaid expenses are amortised over their beneficial periods using the straight-line method.

k. Property, Plant and Equipment

Property, plant and equipment, except for certain revalued assets, are stated at cost less accumulated depreciation.

F-66

Depreciation, except land, is computed using the straight-line method based on the estimated useful lives of theassets as follows:

Years

Buildings and improvements ..................................................................................................... 10-25

Machinery and factory equipment ............................................................................................. 5-20

Vehicles .................................................................................................................................... 5

Office furniture and fixtures ..................................................................................................... 5

Land are stated at cost and are not depreciated. Unused property, plant and equipment are presented as other assetsand are stated at the lower of carrying value or net realisable value.

When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to itsestimated recoverable amount, which is determined as the higher of net selling price or value in use. Impairment of assetis recognised as loss on impairment of asset which is charged to current operations. If a reversal of an impairment hasoccurred, the carrying amount of the asset is increased to its recoverable amount, subject to the limit that the increasedcarrying amount should not exceed the carrying amount that would have been determined had no impairment loss beenrecognised for the asset in prior years. The reversal of an impairment loss is recognised as income in the current year.

The cost of maintenance and repairs is charged to operations as incurred; expenditures which extend the usefullife of the asset or result in increased future economic benefits such as increase in capacity and improvement in thequality of output or standard of performance are capitalised. When assets are retired or otherwise disposed of, theircarrying values and the related accumulated depreciation are removed from the accounts and any resulting gain or lossis reflected in the current operations.

Construction in progress is stated at cost which includes borrowing costs during construction on debts incurredto finance the construction. Construction in progress is transferred to the respective property, plant and equipmentaccount when completed and ready for use.

l. Deferred Development Expenses

Expenses related to the development of new products are deferred and are amortised using the straight-line methodover five years.

m. Deferred Charges — Landrights

Expenses related to the legal processing of landrights are deferred and amortised using the straight-line methodover the legal terms of the landrights which are shorter than their economic lives.

n. Post-Employment Benefits

The Company and its subsidiaries calculate defined post-employment benefits to employees in accordance withLabor Law No. 13/2003. No funding has been made to this defined benefit plan.

The cost of providing post-employment benefits is determined using the Projected Unit Credit Method. Theaccumulated unrecognised actuarial gains and losses that exceed 10% of the present value of the Company’s definedbenefit obligations is recognised on a straight-line basis over the expected average remaining working lives of theparticipating employees. Past service cost is recognised immediately to the extent that the benefits are already vested,and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.

The post-employment benefit obligation recognised in the consolidated balance sheets represent the present valueof the defined benefit obligation, as adjusted for unrecognised actuarial gains and losses and unrecognised past servicecost.

o. Difference in Value of Restructuring Transactions Between Entities Under Common Control

The difference between the transfer price and book value of assets, liabilities, shares or other forms of ownershipinstruments in a restructuring transaction between entities under common control is recorded as “Difference in value ofrestructuring transactions between entities under common control” and presented as part of equity.

p. Revenue and Expense Recognition

Local and exports sales are recognised when the goods are delivered and title has passed to the customers.Expenses are recognised when incurred.

F-67

q. Troubled Debt Restructuring

The excess of the carrying amount of the loan and related accounts over the total future cash payments specifiedby the new terms of the loan in a troubled debt restructuring (after deduction of related expenses) is recognisedimmediately as restructuring gain which is recorded as extraordinary item. After the restructuring, all cash paymentsunder the terms of the loan are deducted from the carrying amount of the loan and related accounts, and no interestexpense is recognised on such loan until maturity.

If the carrying amount of the loan and related accounts is less than the total future cash payments specified bythe new terms of the loan in a troubled debt restructuring, no restructuring gain or loss is recognised. After therestructuring, interest expense is computed by applying a constant effective interest rate to the carrying amount of theloan and related accounts at the beginning of each period until maturity.

Gain on debt restructuring is recognised as extraordinary item.

r. Income Tax

Current tax expense is determined based on the taxable income for the year computed using prevailing tax rates.

Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised fordeductible temporary differences to the extent that it is probable that taxable income will be available in future periodsagainst which the deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that have been enacted or substantively enacted as of the balance sheetdate. Deferred tax is charged or credited in the statement of income, except when it relates to items charged or crediteddirectly to equity, in which case the deferred tax is also charged or credited directly to equity.

Deferred tax assets and liabilities are offset in the consolidated balance sheets, except if these are for differentlegal entities, in the same manner the current tax assets and liabilities are presented.

s. Earnings Per Share

Basic earnings per share is computed by dividing net earnings by the weighted average number of sharesoutstanding during the year.

t. Segment Information

Segment information is prepared using the accounting policies adopted for preparing and presenting theconsolidated financial statements. The primary format in reporting segment information is based on business segment,while secondary segment information is based on geographical segment.

A business segment is a distinguishable component of an enterprise that is engaged in providing an individualproduct or service or a group of related products or services and that is subject to risks and returns that are different fromthose of other business segments.

A geographical segment is a distinguishable component of an enterprise that is engaged in providing products orservices within a particular economic environment and that is subject to risks and returns that are different from thosecomponents operating in other economic environments.

F-68

3. CASH AND CASH EQUIVALENTS

2004 2003 2002


Cash on hand

Rupiah ........................................................................... 1,406 823 427

U.S. Dollar .................................................................... 1,431 550 719

Other foreign currencies ................................................ 26 16 25

Total cash on hand......................................................... 2,863 1,389 1,171

Savings accounts — Rupiah

Related party — Bank Ganesha...................................... — 880 286

Third party — Bank Negara Indonesia ........................... — — 373

Total savings accounts ................................................... — 880 659

Current accounts

Related party ................................................................. — 6,969 5,647

Third parties .................................................................. 42,485 191,370 183,535

Total current accounts .................................................... 42,485 198,339 189,182

Time and on call deposits

Related party ................................................................. — 14,710 14,353

Third parties .................................................................. 58,437 57,000 62,732

Total time and on call deposits ...................................... 58,437 71,710 77,085

Total Cash and Cash Equivalents ....................................... 103,785 272,318 268,097

Details of the current accounts and time and on call deposits are as follows:

Current Accounts

2004 2003 2002


Related party

Bank Ganesha

Rupiah............................................................. — 2,754 3,432

U.S. Dollar ...................................................... — 4,215 2,215

Third parties

Rupiah

Bank Ganesha .................................................. 3,067 — —

Bank Negara Indonesia .................................... 566 25,253 25,905

Others (below Rp 1 billion each) ..................... 12,612 13,858 12,020

U.S. Dollar

Bank Negara Indonesia .................................... 5,054 48,172 50,592

The Hongkong and Shanghai BankingCorp. Ltd., Jakarta ..................................... — 67,966 56,849

Others (below Rp 1 billion each) ..................... 14,801 22,244 25,169

Euro

Bank Negara Indonesia ........................................ 6,297 13,482 12,621

Other foreign currencies........................................... 88 395 379

Total Current Accounts ............................................ 42,485 198,339 189,182

F-69

Time and On Call Deposits

2004 2003 2002


Related party

Bank Ganesha

Rupiah............................................................. — 3,250 2,250

U.S. Dollar ...................................................... — 11,460 12,103

Third parties

Rupiah

Bank Central Asia ........................................... 21,000 22,000 44,500

Bank Internasional Indonesia ........................... 6,000 — 10,000

Bank Negara Indonesia .................................... 5,000 35,000 1,000

Bank Mega ...................................................... 5,000 — —

Bank Ganesha .................................................. 4,250 — —

Bank Mandiri .................................................. — — 7,232

U.S. Dollar

Bank Internasional Indonesia ........................... 17,187 — —

Total Time and On Call Deposits ............................. 58,437 71,710 77,085

Interest rates of time and on call deposits perannum

Rupiah ................................................................. 5.35-7.30% 6.5%-6.78% 12%-14%

U.S. Dollar .......................................................... 1.15%-1.50% 2.35% 2.5%

Placements with a related party bank, according to management, were made at similar interest rates, terms andconditions with those placements with third party banks (see Note 37).

4. TEMPORARY INVESTMENTS

2004 2003 2002


Notes receivable held-to-maturity — net ............................ 84,931 125,800 132,452

Securities available-for-sale ............................................... 55,277 163,059 224,410

Investments with fund managers ........................................ 50,940 73,378 57,263

Shares of PT Sunda Kelapa Permai .................................... 9,025 9,025 9,025

Shares of stock available-for-sale ....................................... — 413 226

Total .................................................................................. 200,173 371,675 423,376

F-70

The details of temporary investments are as follows:

Notes Receivable Held-to-Maturity — Net

2004 2003 2002


Commercial Paper

Rupiah

PT Graha Mitra Santosa................................... 8,460 8,460 8,460

PT Indonesia Prima Property Tbk .................... 5,208 5,208 5,208

PT Dipasena Citra Darmaja ............................. — 21,000 21,000

U.S. Dollar

PT Graha Mitra Santosa................................... 62,596 57,037 60,238

PT Indonesia Prima Property Tbk .................... 8,667 7,898 8,341

PT Dipasena Citra Darmaja ............................. — 21,163 22,350

Total ........................................................................ 84,931 120,766 125,597

Unamortised discount ............................................... — (1,653) (207)

Commercial Paper — Net ........................................ 84,931 119,113 125,390

Republic of Indonesia Bonds — U.S. Dollar ............ — 6,687 7,062

Notes Receivable Held-to-Maturity — Net ............... 84,931 125,800 132,452

Interest rates per annum

Rupiah ................................................................. 7%-8% 18% 18%

U.S. Dollar .......................................................... 3%-4% 8.5%-8.65% 8.5%-8.65%

The above notes receivable have terms of 1 month and are renewable.

In 2004, the Commercial Paper of PT Dipasena Citra Darmaja amounting to Rp 21,000 million and US$2,500,000were used to settle the accounts payable to Garibaldi as discussed in Note 9b.

On April 20, 2004, the Republic of Indonesia Bonds have matured.

In 2003 and 2002, commercial papers represent commercial papers of related parties.

Securities Available-for-Sale

2004 2003 2002


Acquisition cost

Mutual funds

Rupiah

Related parties ............................................ — 18,940 116,546

Third parties................................................ 43,514 90,400 89,152

U.S. Dollar — Third party ............................... 130 44,552 31,290

Bonds

Third party — Rupiah ..................................... 10,875 — —

Total ........................................................................ 54,519 153,892 236,988

Unrealised gain (loss) .............................................. 758 9,167 (12,578)

Fair value ................................................................ 55,277 163,059 224,410

F-71

The details of fair value of securities available-for-sale are as follows:

2004 2003 2002


Mutual funds

Related parties

Reksa Dana Prima ........................................... — 20,091 18,199

GTF Discretionary ........................................... — — 59,255

Dana Berganda ................................................ — — 14,333

GTF Agresif .................................................... — — 3,305

Others (below Rp 1,100 million each) ............. — — 1,064

Third parties

Reksadana Trimegah Dana Kas ........................ 20,676 34,675 —

Reksa Dana Prima ........................................... 13,061 — —

Nikko Uang Likuid .......................................... 10,063 15,059 12,519

Danareksa Melati Dollar .................................. 185 44,836 33,229

Trimegah Dana Tetap ....................................... — 19,598 17,102

Nikko Tron ...................................................... — 9,687 8,438

Citireksadana Obligasi ..................................... — 9,376 —

Reksadana Tetap Optima.................................. — 5,375 —

Schroders Panin Dana Terpadu......................... — 3,367 2,324

Schroders Panin Dana Mantap Plus .................. — — 26,419

Danareksa Melati Rupiah ................................. — — 10,323

Commonwealth Phinisi Dana Kas .................... — — 5,354

Schroders Panin Dana Prestasi ......................... — — 5,269

BNI Dana Lancar............................................. — — 5,265

Dana Investa Pasar Uang ................................. — — 1,687

Others (below Rp 550 million each) ................ 417 995 325

Bonds

Third party — Bank Rakyat Indonesia

Rupiah............................................................. 10,875 — —

Fair Value ................................................................ 55,277 163,059 224,410

Investments with Fund Managers

This represents investments through fund managers as follows:

2004 2003 2002


Cost

Triton Asset Management Ltd. ............................. 40,367 — —

PT Andalan Artha Advisindo Sekuritas................. 9,891 52,973 37,634

PT Gani Aset Manajemen..................................... — 18,184 19,205

Total ........................................................................ 50,258 71,157 56,839

Unrealised gain ........................................................ 682 2,221 424

Fair Value ................................................................ 50,940 73,378 57,263

In 2004, the Company and MAWC appointed Triton Asset Management Ltd. to manage the Company’s andMAWC’s funds with focus in promissory notes of listed companies on the stock exchange. This contract has a term of18 months and can be rolled over for one year unless one of the party terminates the agreement.

The Company also appointed PT Andalan Artha Advisindo Sekuritas (“AAA”) as the provider of fund managementservices and securities settlement services. The agreement can be terminated at anytime by written notice to the otherparty.

F-72

In 2003 and 2002, the Company appointed PT Gani Aset Manajemen to invest the Company’s funds in promissorynotes of listed companies. This contract has a term of 18 months and can be extended for one year unless one of the partyterminates the agreement. In 2004, the contract has been terminated.

Shares of PT Sunda Kelapa Permai

Shares of stocks of PT Sunda Kelapa Permai totaling to 16,875 shares amounting to Rp 9,025 million and ownedby a subsidiary (MAWC) is planned to be resold.

Net Unrealised Gain (Loss)

The changes in net unrealised gain (loss) on changes in value of available for sale investments are as follows:

2004 2003 2002


Beginning balance.................................................... 10,803 (12,926) (55,579)

Increase (decrease) in value of temporaryinvestments

Investments with fund managers .......................... (1,539) 1,797 (29,285)

Securities available-for-sale ................................. (8,409) 21,745 21,337

Shares of stock available-for-sale......................... 585 187 50,601

Ending balance ........................................................ 1,440 10,803 (12,926)

Investments made with related parties, according to management, have similar interest rates, terms and conditionsas those placed with third parties (see Note 37).

F-73

5. TRADE ACCOUNTS RECEIVABLE

2004 2003 2002


a. By Debtor

Related parties

PT Glorindo Fileatex ................................................. — 131,100 137,441

PT Bando Indonesia................................................... — 3,113 4,425

PT Nitto Rubber Indonesia ........................................ — 1,980 1,980

PT IRC Inoac Indonesia............................................. — 1,214 2,561

Taiwan GT International Co. Ltd. .............................. — — 5,882

Others (below Rp 400 million each) .......................... 276 171 367

Total .......................................................................... 276 137,578 152,656

Third parties

Local debtors............................................................. 44,700 214,332 194,616

Foreign debtors.......................................................... 551,221 664,295 509,349

Total .......................................................................... 595,921 878,627 703,965

Allowance for doubtful accounts................................ (62,069) (95,297) (16,909)

Net ............................................................................ 533,852 783,330 687,056

Accounts Receivable — Net .......................................... 534,128 920,908 839,712

b. By Age Category ..........................................................

Not yet due.................................................................... 326,415 517,973 396,408

Past due

1 - 30 days ................................................................ 80,414 153,606 201,253

31 - 60 days .............................................................. 15,605 59,043 110,921

61 - 90 days .............................................................. 12,790 39,239 54,837

91 - 120 days ............................................................ 59,936 67,509 50,986

More than 120 days ................................................... 101,037 178,835 42,216

Total .............................................................................. 596,197 1,016,205 856,621

Allowance for doubtful accounts .................................... (62,069) (95,297) (16,909)

Net ................................................................................ 534,128 920,908 839,712

c. By Currency

Rupiah ........................................................................... 44,733 85,468 92,371

U.S. Dollar .................................................................... 376,742 779,324 641,056

Euro .............................................................................. 106,045 97,455 89,458

Pound sterling................................................................ 66,358 53,958 33,527

Japanese Yen ................................................................. 2,319 — 209

Total .............................................................................. 596,197 1,016,205 856,621

Allowance for doubtful accounts .................................... (62,069) (95,297) (16,909)

Net ................................................................................ 534,128 920,908 839,712

The changes in the allowance for doubtful accountsare as follows:

Beginning balance ......................................................... 95,297 16,909 17,681

Provisions during the year (see Note 29) ....................... 37,501 78,388 25

Recovery during the year ............................................... (710) — —

Balance of unconsolidated subsidiary ............................. (68,039) — —

Write-offs during the year.............................................. (1,980) — (797)

Ending balance .............................................................. 62,069 95,297 16,909

F-74

In 2004, accounts receivable of FS amounting to US$13,449,457 was used as payment for a portion of accounts payableto Garibaldi as discussed in Note 9b.

Management believes that the allowance for doubtful accounts receivable from third parties is adequate to cover possiblelosses on uncollectible accounts. No allowance for doubtful accounts was provided on receivables from related parties asmanagement believes that all such receivables are collectible.

Management also believes that there are no significant concentrations of credit risk in third party receivables.

Trade accounts receivable of subsidiaries (FS and LBP) amounting to Rp 144,940 million in 2003 and Rp 132,494 millionin 2002 are used as collateral for short-term and long-term bank loans (see Notes 13 and 18).

6. INVENTORIES

2004 2003 2002


Finished goods ................................................................... 169,089 467,907 397,880

Work in process ................................................................. 140,138 108,776 99,622

Raw materials .................................................................... 274,431 289,151 311,907

Indirect materials ............................................................... 104,360 187,633 204,767

Total .................................................................................. 688,018 1,053,467 1,014,176

Allowance for decline in value of inventories .................... (1,094) (2,973) (979)

Net .................................................................................... 686,924 1,050,494 1,013,197

The changes in allowance for decline in value ofinventories are as follows:

Beginning balance ......................................................... 2,973 979 66

Provisions during the year ............................................. — 2,590 913

Balance of unconsolidated subsidiary ............................. (1,879) — —

Written off during the year ............................................ — (596) —

Ending balance .............................................................. 1,094 2,973 979

Inventories of subsidiaries (FS and LBP) amounting to Rp 107,370 million in 2003 and Rp 114,260 million in 2002 areused as collateral for short-term and long-term bank loans (see Notes 13 and 18).

Inventories are insured with PT Asuransi Dayin Mitra Tbk and PT Asuransi Wahana Tata for US$48 million and EUR24 million as of December 31, 2004, Rp 36,706 million, US$74 million and EUR 13 million as of December 31, 2003, and Rp14,527 million, US$74 million and EUR 14 million as of December 31, 2002.

7. PREPAID TAXES

2004 2003 2002


Income tax — Article 28A (see Note 31)

The Company ................................................................ — — 7,683

Subsidiaries ................................................................... 1,464 30,769 18,215

Value Added Tax — Net .................................................... 94,905 146,956 83,105

Total .................................................................................. 96,369 177,725 109,003

8. RESTRICTED CASH IN BANK

This account represents placements with JP Morgan Chase Bank, Jakarta which is restricted and will be used only forthe restructuring of the loans of Company.

F-75

9. ACCOUNTS RECEIVABLE FROM AND PAYABLE TO RELATED PARTIES

a. Accounts Receivable

2004 2003 2002


By Company

PT Filamendo Sakti (FS) ..................................... 700,252 — —

PT Langgeng Bajapratama (LBP) ......................... 78,718 — —

PT Graha Mitra Santosa (GMS) ........................... 14,464 13,464 14,040

PT Gajah Tunggal Prakarsa (GTP) ....................... 8,541 — —

PT Indonesia Prima Property Tbk (IPP) ............... 3,526 3,388 3,467

PT Wachyuni Mandira (WM) ............................... — 1,159,198 1,008,508

PT Gajah Tunggal Mulia (GTM) .......................... — 452,994 476,968

PT Gajah Tunggal Sakti (GTS) ............................ — 215,632 220,294

PT Dipasena Citra Darmaja (DCD) ...................... — 197,803 203,041

PT Daya Indria Permai (DIP) ............................... — 91,877 96,756

PT Daya Patria Corporation (DPC) ...................... — 87,778 96,827

PT Tunas Sepadan Investama (TSI) ...................... — 36,994 34,475

PT Tunas Sepadan Cemerlang Manajemen(TSCM) .......................................................... — 26,592 —

PT Gemapersada Polimer (GMP).......................... — 3,102 3,102

Others (below Rp 1 billion each) ......................... 2,109 623 2,779

Total ........................................................................ 807,610 2,289,445 2,160,257

By Currency

Rupiah ................................................................. 765,869 911,169 710,340

U.S. Dollar .......................................................... 41,741 1,378,276 1,449,917

Total ........................................................................ 807,610 2,289,445 2,160,257

Receivable from FS arose from settlement of accounts payable to TSI as discussed in Note 9b. The receivable willbe settled through the restructuring of FS in the near future.

Receivable from LBP represents settlement of accounts payable to TSI (see Note 9b) and advance payments ofexpenses from prior years arising unconsolidated LBP’s financial statements in 2004.

The receivable from GTP amounted to Rp 8,541 million mainly represents receivable of the Company for sale ofshares of LBP.

Accounts receivable from WM in 2004, 2003 and 2002 includes provision of additional funds amounting to Rp83,525 million, Rp 167,900 million and Rp 255,000 million, respectively.

Accounts receivable from TSI represents loan provided to TSI for TSI’s operations as a holding company (see Note1a). The loan is not subject to interest and is compensated against the Company’s and its subsidiaries’ payables to TSI.

Accounts receivable from GMS, IPP, TSCM, GMP and others represents receivables from sales of supplies andspare parts, accrued interest income on notes receivable, loans and advance payments of expenses for related parties (seeNote 37). These loans are not subject to interest and have no definite terms of repayment.

Accounts receivable from related parties, except receivables from GMS, IPP, FS, LBP, GTP, WM, TSI, TSCM,GMP and others, represent converted short-term notes receivable and the related interest receivable from such relatedparties, bear interest at SIBOR + 2% for U.S. Dollar.

In 2004, the Company and its subsidiaries accounts receivable from WM, GTM, GTS, DCD, DIP, DPC, TSI andTSCM were used as settlement of accounts payable to Garibaldi (see Note 9b).

Based on review of the financial condition of the related parties, management believes that the receivables arefully collectible or can be settled, thus no allowance for doubtful accounts was provided.

F-76

b. Accounts Payable

2004 2003 2002


PT Tunas Sepadan Investama (TSI) .......................... — 3,136,654 3,281,980

Others (below Rp 1 billion each) ............................. 476 1,202 1,137

Total ........................................................................ 476 3,137,856 3,283,117

Accounts payable to TSI represents loans of the Company and its subsidiaries which were transferred to TSI fromBank Dagang Nasional Indonesia amounting to Rp 546,787 million and US$305,950,039 as discussed in Note 36. Thedetails of liabilities of the Company and its subsidiaries to TSI are as follows:

2003 2002


Rupiah

The Company .................................................................................... 226,283 226,283

Subsidiaries

GTPI ............................................................................................. 291,657 291,657

LBP............................................................................................... 18,147 18,147

FS ................................................................................................. 10,700 10,700

U.S. Dollar

The Company .................................................................................... 88,198 93,147

Subsidiaries

GTPI ............................................................................................. 1,274,164 1,345,662

FS ................................................................................................. 668,452 705,961

SS ................................................................................................. 552,862 583,885

LBP............................................................................................... 6,191 6,538

Total ...................................................................................................... 3,136,654 3,281,980

Since 2000, these loans are not subject to interest.

Settlement of Accounts Receivable from and Payable to Related Parties

Based on the Sale and Purchase of Receivables Agreement between the Company and Garibaldi Venture FundLimited (Garibaldi) as legalised on April 8, 2004 by Dr. Irawan Soerodjo, S.H., Msi, notary public in Jakarta and basedon the Transfer of Receivables (Cessie) Agreement between TSI and Garibaldi No. 48 and 49 dated April 8, 2004 of thesame notary public, both parties agreed:

— To transfer the entire accounts payable (which includes accrued interest — see Note 16) of the Companyand its subsidiaries to TSI amounting to Rp 713,665 million and US$338,452,216 to Garibaldi.

— To transfer the Company’s receivables from DCD, WM and TSI amounting to Rp 890,431 million andUS$63,877,857 (see Notes 4 and 9a) to Garibaldi. The transfer represents settlement of the Company’saccounts payable to Garibaldi amounting to US$164,491,519. Such accounts payable which has been settledoriginated from GTPI, FS and SS accounts payable to Garibaldi which has been transferred to the Companyaccording to the Transfer Payable Agreement dated April 8, 2004.

On April 14, 2004, accounts payable of GTPI, LBP and FS to Garibaldi amounting to Rp 58,518 million andUS$79,979,058 was settled using trade accounts receivable (see Note 5), accounts receivable from related party (see Note9a) and deposits in suspended bank (see Note 12).

F-77

Based on Restructuring Agreement dated April 14, 2004 and Assignment of Receivables Agreement dated April16, 2004 and June 30, 2004 between the Company and Garibaldi, the Company’s accounts payable to Garibaldiamounting to Rp 508,847 million and US$91,882,126 (including GTPI and LBP accounts payable to Garibaldi which hasbeen transferred to the Company on April 14, 2004, amounting to Rp 216,327 million and US$80,820,897) was settledby the Company using transfer of accounts receivable from related parties (see Note 9a) and deposits in suspended bank(see Note 12) and the issuance of long-term notes payable to Garibaldi amounting to US$53,000,000 as discussed in Note19.

After settlement of the above payables and receivables, the Company recognised receivable from FS amountingto Rp 667,264 million, receivable from GTPI amounting to Rp 1,055,753 million, receivable from LBP amounting to Rp31,560 million and receivable from SS amounting to Rp 632,874 million. Receivable from GTPI and SS have been settledthrough the transfer of property, plant and equipment as discussed in Note 11. Receivables from FS and LBP wererecorded as accounts receivable from related party.

The remaining accounts payable of GTPI to Garibaldi were converted into capital stock of GTPI, thus theCompany’s ownership in GTPI was diluted (see Note 1b).

Other accounts payable to related parties mainly consist of advance payments of expenses by related parties withoutstanding balance ranging between Rp 0.5 million to Rp 950 million and are not subject to interest (see Note 37).

10. INVESTMENTS IN SHARES OF STOCK

2004 2003 2002


Investments in shares of associated company ..................... 424,667 — —

Available-for-sale investments in shares of stock ............... 2,846 2,152 284

Total .................................................................................. 427,513 2,152 284

Investment in shares of associated company

This represents investment in GTPI equivalent to 28.91% as result of the dilution of the Company’s ownership inGTPI in 2004 as discussed in Notes 1b, 9b and 19.

Details of changes in investment in GTPI are as follows:

2004

Rp’Million

Beginning balance........................................................................................................... —

Carrying amount at the change to equity method as of November 30, 2004..................... 407,941

Equity in net income of associated company ................................................................... 16,726

Ending balance ............................................................................................................... 424,667

Available-for-sale investments in shares of stock

2004 2003 2002


PT Hotel Sahid Jaya Tbk — 420,320 shares, marketprice per share of Rp 140 in 2004, Rp 125 in2003 and Rp 150 in 2002 ................................... 1,839 1,839 1,839

Others (below Rp 500 million each)......................... 761 761 761

Total ........................................................................ 2,600 2,600 2,600

Unrealised gain (loss) .............................................. 246 (448) (2,316)

Fair value ................................................................ 2,846 2,152 284

F-78

The changes in net unrealised gain (loss) on increase (decline) in value of available for sale investments in sharesof stock are as follows:

2004 2003 2002


Beginning balance.................................................... (448) (2,316) (2,264)

Net increase (decrease) in value of investments inshares of stock ................................................... 694 1,868 (52)

Ending balance ........................................................ 246 (448) (2,316)

11. PROPERTY, PLANT AND EQUIPMENT

January 1,2004 Additions Deductions*) Reclassifications

December 31,2004


Cost:

Land .............................. 210,302 — 105,342 — 104,960

Buildings andimprovements ............. 731,082 — 323,567 1,807 409,322

Machinery and factoryequipment .................. 8,040,904 32,012 3,732,544 56,641 4,397,013

Vehicles ......................... 39,505 2,050 12,019 1,615 31,151

Office furniture andfixtures ...................... 57,138 1,271 20,521 566 38,454


Buildings andimprovements......... 2,466 2,125 285 (389) 3,917

Machinery andfactory equipment .. 229,445 78,963 178,299 (60,240) 69,869

Total................................... 9,310,842 116,421 4,372,577 — 5,054,686


Buildings andimprovements ............. 230,998 35,244 104,910 — 161,332

Machinery and factoryequipment .................. 2,506,261 406,603 1,248,924 — 1,663,940

Vehicles ......................... 25,588 6,193 10,924 — 20,857

Office furniture andfixtures ...................... 33,239 6,519 17,499 — 22,259

Total................................... 2,796,086 454,559 1,382,257 — 1,868,388

Net Book Value .................. 6,514,756 3,186,298

F-79

January 1,2003 Additions Deductions Reclassifications

December 31,2003


Cost:

Land .............................. 210,302 — — — 210,302

Buildings andimprovements ............. 728,776 170 — 2,136 731,082

Machinery and factoryequipment .................. 7,892,335 44,877 — 103,692 8,040,904

Vehicles ......................... 34,582 5,849 926 — 39,505

Office furniture andfixtures ...................... 41,128 16,043 33 — 57,138

Construction in progress .

Buildings andimprovements......... 2,152 3,463 1,013 (2,136) 2,466

Machinery andfactory equipment .. 254,715 51,163 — (76,433) 229,445

Total................................... 9,163,990 121,565 1,972 27,259 9,310,842


Buildings andimprovements ............. 194,404 36,594 — — 230,998

Machinery and factoryequipment .................. 2,094,828 411,457 — (24) 2,506,261

Vehicles ......................... 21,746 4,427 585 — 25,588


Total................................... 2,339,506 457,218 614 (24) 2,796,086

Net Book Value .................. 6,824,484 6,514,756

F-80

January 1,2002 Additions Deductions Reclassifications

December 31,2002


Cost:

Land .............................. 210,302 — — — 210,302

Buildings andimprovements ............. 726,577 1,266 — 933 728,776

Machinery and factoryequipment .................. 7,680,622 57,595 1,487 155,605 7,892,335

Vehicles ......................... 28,938 4,230 891 2,305 34,582

Office furniture andfixtures ...................... 36,388 4,270 8 478 41,128

Construction in progress .

Buildings andimprovements......... 1,706 1,342 — (896) 2,152

Machinery andfactory equipment .. 346,559 36,830 — (128,674) 254,715

Total................................... 9,031,092 105,533 2,386 29,751 9,163,990


Buildings andimprovements ............. 158,378 36,026 — — 194,404

Machinery and factoryequipment .................. 1,688,016 407,995 1,183 — 2,094,828

Vehicles ......................... 17,969 4,617 840 — 21,746


Total................................... 1,887,758 453,776 2,028 — 2,339,506

Net Book Value ................. 7,143,334 6,824,484

*) Deductions in 2004, includes GTPI’s (excluding carrying values of property, plant and equipment of the tyre cordand synthetic rubber segment taken over by the Company) and LBP’s property, plant and equipment. TheCompany’s investment in these subsidiaries were diluted and sold, respectively, in 2004 (see Notes 1b and 10),and thus their financial statements were no longer consolidated in 2004. Details are as follows:

Net book value

Rp’Million

Land .................................................................................................................................... 105,342

Buildings and improvements ................................................................................................ 218,656

Machinery and factory equipment ........................................................................................ 2,483,620

Vehicles ............................................................................................................................... 1,095

Office furniture and fixtures ................................................................................................ 3,022


Buildings and improvements ............................................................................................ 285

Machinery and factory equipment .................................................................................... 178,300

Total .................................................................................................................................... 2,990,320

F-81

Depreciation expense was allocated to the following:

2004 2003 2002


Manufacturing expenses ........................................... 442,218 447,334 448,868

Operating expenses .................................................. 12,341 9,884 4,908

Total ........................................................................ 454,559 457,218 453,776

Construction in progress represents buildings under construction and machinery under installation for theexpansion of the Company and its subsidiaries. Management believes that there is no impediment to the completion ofthe construction in progress.

Based on Sale and Purchase Agreement No. 26 and 27 dated September 29, 2004 and Sale and Purchase Deed No.68 and No. 43 dated November 30, 2004 of Fenny Tjitra, SH, the Company bought GTPI’s tyre cord division’s property,plant and equipment and SS’s property, plant and equipment. The purchase has been approved by the independentstockholders in the Company’s Extraordinary Meeting of Shareholders on November 25, 2004. The details of property,plant and equipment purchased are as follows:

CostAccumulateddepreciation Net book value


Land ........................................................................ 44,885 — 44,885

Buildings and improvements .................................... 175,815 67,923 107,892

Machinery and factory equipment ............................ 1,207,707 443,233 764,474

Total ........................................................................ 1,428,407 511,156 917,251

Difference in value of restructuring transactionbetween entities under common control .............. 771,376

Purchase price.......................................................... 1,688,627

The settlement of the property, plant and equipment purchased from GTPI and SS was made through compensationof purchase price against the Company’s accounts receivable from related parties (GTPI and SS) (see Note 9) andassumption of long-term notes payable, Tranche A Notes, owned by GTPI amounting to US$30,000,000 (see Note 19).

Buildings and improvements and machinery and factory equipment which are not used in operations are presentedas unused property, plant and equipment net of impairment in value of assets amounting to Rp 8,714 million in 2003 andRp 8,232 million in 2002.

As of December 31, 2004, the Company and its subsidiaries own several pieces of land measuring 1,604,145square meters located in Jakarta, Tangerang and Surabaya. The periods of HGBs are 20 to 30 years until 2008 to 2030.The Company and its subsidiaries’ management believes that there will be no difficulty in the extension of the landrightsand in the processing of certificates since all the land were acquired legally and supported by sufficient evidence ofownership.

Property, plant and equipment of GTPI, a subsidiary in 2003 and 2002, in Karawang with net book valuesaggregating to Rp 721,372 million as of December 31, 2003 are used as collateral for long-term notes payable (see Note19).

MAWC’s property, plant and equipment with net book values aggregating to Rp 27,884 million as of December31, 2004 and property, plant and equipment of subsidiaries (FS, LBP and MAWC) with net book values aggregating toRp 1,355,703 million and Rp 1,412,640 million as of December 31, 2003 and 2002, respectively, are used as collateralfor short-term and long-term bank loans (see Notes 13 and 18).

Property, plant and equipment, excluding land, are insured with PT Asuransi Dayin Mitra Tbk and PT MaskapaiAsuransi Sonwelis for Rp 550,849 million and US$404 million as of December 31, 2004, Rp 612,650 million, US$783million and EUR 229 million as of December 31, 2003 and Rp 691,454 million, US$796 million and EUR 251 millionas of December 31, 2002. Management believes that the insurance coverage is adequate to cover risks from fire, disastersand other risks to the Company and its subsidiaries.

F-82

12. DEPOSITS IN SUSPENDED BANK

This account represents deposits in Bank Dagang Nasional Indonesia (BDNI) which operations were suspended onAugust 21, 1998 by the Government and were transferred to the Indonesian Bank Restructuring Agency (IBRA). Since theCompany and its subsidiaries are related parties of BDNI, the bank deposits are subject to withdrawal restriction. The balancesof these deposits are as follows:

2003 2002


Savings accounts — Rupiah ............................................................................. 30,418 30,418

Current accounts

Rupiah ......................................................................................................... 24,024 24,024

U.S. Dollar .................................................................................................. 183,941 194,262

Japanese Yen ............................................................................................... 5 5

Time deposits

Rupiah ......................................................................................................... 18,000 18,000

U.S. Dollar .................................................................................................. 15,639 16,517

EUR ............................................................................................................ 1,339 1,179

Total ................................................................................................................ 273,366 284,405

In 2004, deposits in suspended bank were used as settlement of accounts payable to Garibaldi Venture Fund Limited asdiscussed in Note 9b.

13. BANK LOAN

This account represents working capital credit to LBP from Bank Negara Indonesia amounting to Rp 11,500 million withinterest at 20.5% per annum. As discussed in Note 18, the credit facility received by LBP had been transferred to the IndonesianBank Restructuring Agency (IBRA) and in 2004 has been transferred to Folkingham Investment Ltd. and then subsequentlytransferred to Galaxia International Corporation.

14. TRADE ACCOUNTS PAYABLE

2004 2003 2002


a. By Debtor

Related parties

PT Sentra Sintetikajaya ............................................. 60,302 — —

PT Filamendo Sakti .................................................. 58,621 — —

PT GT Petrochem Industries Tbk .............................. 8,082 — —

PT Langgeng Bajapratama ........................................ 5,006 — —

Others (below Rp 500 million each) ......................... 400 556 419

Total ......................................................................... 132,411 556 419

Third parties

Local suppliers ......................................................... 191,376 286,293 247,649

Foreign suppliers ...................................................... 39,458 60,366 73,252

Total ......................................................................... 230,834 346,659 320,901

Total Trade Accounts Payable ....................................... 363,245 347,215 321,320

F-83

2004 2003 2002


b. By Currency ................................................................

Rupiah .......................................................................... 110,369 70,683 77,212

U.S. Dollar ................................................................... 241,943 264,314 238,717

Japanese Yen................................................................. 8,162 7,435 3,187

Eur ............................................................................... 2,277 4,027 1,429

Singapore Dollar ........................................................... 291 482 693

Others ........................................................................... 203 274 82

Total ............................................................................. 363,245 347,215 321,320

Purchases of raw and indirect materials, both from local and foreign suppliers, have credit terms of 7 to 100 days.

15. TAXES PAYABLE

2004 2003 2002


Income taxes

Article 21 ...................................................................... 9,157 10,619 12,083

Article 23 ...................................................................... 217 284 237

Article 25 ...................................................................... 227 85 —

Article 26 ...................................................................... 3,130 2,079 2,589

Article 29 (see Note 31) ................................................ 21,122 31,167 6,842

Value Added Tax — Net .................................................... — 407 978

Total .................................................................................. 33,853 44,641 22,729

16. ACCRUED EXPENSES

2004 2003 2002


Interest .............................................................................. 23,858 550,939 1,586,352

Electricity, water and telephone ......................................... 13,328 16,815 10,209

Export charges ................................................................... 11,249 7,519 3,753

Salaries and allowances ..................................................... 10,209 6,776 9,192

Promotion .......................................................................... 9,787 16,674 20,766

Royalty .............................................................................. 5,127 6,620 9,796

Dealer deposit .................................................................... 4,943 4,943 5,708

Gas .................................................................................... 3,334 3,675 2,805

Generator set ..................................................................... — 1,386 773

Others ................................................................................ 4,588 4,499 6,312

Total .................................................................................. 86,423 619,846 1,655,666

In 2004, accrued interest amounting to Rp 166,878 million and US$32,502,178 arising from accounts payable to PTTunas Sepadan Investama (TSI) were transferred to Garibaldi (see Note 9b).

In 2004, LBP’s interest payable amounting to Rp 87,304 million has been written off and recorded as extraordinary item(see Note 32).

F-84

17. LIABILITY FOR THE PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

Represents remaining retention payable of SS to Niigata Engineering Co., Ltd., Japan (NE) which payment has beendeferred.

Based on the Memorandum of Understanding (MoU) between SS and NE dated May 15, 2004, both parties agreed thatSS have to pay to NE the amount of US$420,000 on June 30, 2004 as final settlement of SS payable to NE. Such amount hasbeen paid on June 16, 2004. The difference between the recorded amounts and the cash payment under MoU was recorded asgain on debt restructuring presented as extraordinary item (see Note 32).

18. LONG-TERM BANK LOANS

2004 2003 2002


Syndicated loan

US$22,146,275.53 in 2004 and 2003 andUS$22,705,598.50 in 2002 ....................................... 205,739 187,468 202,988


Rupiah ........................................................................... — 236,680 236,680

U.S. Dollar — US$52,062,009.86 in 2003 andUS$57,491,860.11 in 2002 ........................................ — 440,705 513,977

JP Morgan Chase Bank

U.S. Dollar — US$6,000,000 in 2003 andUS$6,985,000 in 2002 .............................................. — 50,790 62,446

Total .................................................................................. 205,739 915,643 1,016,091

Premium on restructured loans ........................................... — 10,707 15,139

Net .................................................................................... 205,739 926,350 1,031,230

Current maturities .............................................................. (205,739) (224,133) (206,363)

Long-term Portion — Net .................................................. — 702,217 824,867

Interest rates per annum during the year

Rupiah ........................................................................... — 20.5%-21% 20.5%-21%

U.S. Dollar .................................................................... 1.20%-2.53% 1%-7.25% 1.53%-8.815%

Syndicated Loan

On December 22, 2000, MAWC entered into a credit restructuring agreement coordinated by PT Bank SumitomoIndonesia. Within such agreement, the restructuring of the loans amounting to US$23,053,247.03 (syndicated loan andshort-term bank loan amounting to US$20,000,000 and US$3,053,247.03, respectively) has been agreed and approvedwith the terms of the loans being rescheduled to 8 years starting from restructuring date up to September 2008. Theseloans will be repaid quarterly for 5 years with first installment due in March 2003. These loans bear progressive annualinterest starting at SIBOR up to SIBOR + 3%.

The loans are secured by fiduciary transfer of factory building with a value of US$670,000 and machinery andequipment of MAWC with agreed value for fiduciary transfer of US$14,400,000.

As of December 31, 2004, MAWC deferred the payments of loan principal due amounting to US$4,500,000. Thus,the creditors may require that the loans become immediately due and payable. The debt restructuring of the loans arebeing negotiated by MAWC. Accordingly, the loans are presented under current maturity of long-term bank loans.

F-85


Represent loans of subsidiaries with details as follows:

2003 2002


LBP — Rupiah ...................................................................................... 120,920 120,920

FS

Rupiah ............................................................................................... 115,760 115,760

U.S. Dollar — US$52,062,009.86 in 2003 and 57,491,860.61 in2002 ............................................................................................. 440,705 513,977

Total FS............................................................................................. 556,465 629,737

LBP loan

LBP obtained investment credits with a maximum limit of Rp 70,800 million. Based on the Amendment to theCredit Agreement No. (1) 72 dated October 22, 1998, LBP rescheduled the loan repayments to quarterly installmentsstarting 2000 up to 2004. The loans of LBP from BNI, both short-term and long-term, are secured by land, buildings,machinery and factory equipment, fiduciary transfer of inventories and rights over trade accounts receivable of LBP andby personal guarantee. The loan balance includes the unpaid interest due on such loan. Based on the letter issued by BNINo. DKS/3/0003 dated March 31, 2000, all of the short-term and long-term bank loans received by LBP had beentransferred to Indonesian Bank Restructuring Agency (IBRA), thus all of LBP’s obligations concerning the settlement ofthe loans had been transferred to IBRA. Since 2000, LBP deferred the payments of loan principal and interest.

Based on Sale and Purchase Agreement No. 064/PPAK IV/Obligor-Debitur/Tunai/1103 dated November 6, 2003as approved by Dr. Irawan Soerodjo S.H., Msi, notary in Jakarta No. 3894/L/2003 and Amendment of TransferredReceivables (Cessie) No. 52 of Lim Robbyson Halim, S.H., replacement of Dr. Irawan Soerodjo, S.H., Msi, notary inJakarta, dated January 13, 2004, all of LBP’s loans has been sold and transferred by IBRA to Folkingham Investment Ltd.Based on confirmation from Folkingham Investment Ltd. the accounts payable of LBP amounted to Rp 116,348 million.LBP recorded the difference of Rp 103,376 million between the amounts payable, which included accrued interest, andthe amount as agreed with Folkingham Investment Ltd., as gain on restructuring and presented as extraordinary item (seeNote 32).

Based on Assignment Agreement dated March 4, 2004, Folkingham Investment Ltd. has transferred the accountspayable to Galaxia International Corporation and therefore Folkingham Investment Ltd.’s rights and obligations has beentransferred to Galaxia International Corporation.

FS Loan

In 2001, long-term and short-term loans obtained by FS, a subsidiary, from Bank Negara Indonesia have beenrestructured with the following results:

a. The loan of FS amounting to Rp 110,000 million which is part of short-term bank loans, had been convertedinto US$11,548,500. This loan is repayable with quarterly installments from December 2001 up toDecember 2009.

b. The loan of FS amounting to US$10,000,000 representing part of the short-term bank loans andUS$30,000,000 representing part of the long-term bank loans, respectively, have been extended untilDecember 2009. These loans are repayable in quarterly installments from December 2001 up to December2009.

The loans bears interest at 7.25% per annum until December 31, 2002 and, starting January 1, 2003, theminimum interest is 7.25% per annum or quarterly time deposit interest rate prevailing at Bank NegaraIndonesia for the 3-month period plus 2.5%.

c. The rest of the long-term bank loans representing unpaid interest up to December 31, 2000 were deferredand capitalised to loan principal amounting to Rp 115,760 million and US$10,196,111.11, respectively, withinstallment payments starting from 2010 until December 31, 2012 without interest charges.

The difference between the carrying amount of the loan (principal and accrued interest) and total restructured loanamounting to US$1,835,441 was recognised as premium on restructured loan which was presented as an addition to theloan principal.

The loans are guaranteed by landrights, buildings, machinery and equipment, fiduciary transfer of inventory, andrights over trade accounts receivable of FS and personal guarantee.

F-86

JP Morgan Chase Bank, Jakarta

Represents restructured principal and accrued interest of short-term bank loan based on the restructuringagreement dated April 20, 2001 between FS and JP Morgan Chase Bank, Jakarta. Based on the restructuring agreement,the loan is divided into Tranche 1 amounting to US$8,160,000 and Tranche 2 amounting to US$2,792,803.

The loan in Tranche 1 bears interest at SIBOR plus 1% per annum with payments due in 93 months starting fromJune 30, 2001 up to March 30, 2009.

In 2002, FS received a write-off of its Tranche 2 loan, since FS has been able to fulfill the conditions requiredto get a write-off of its Tranche 2 loan.

The difference between the loan carrying amount (principal and accrued interest) and total restructured loanamounting to US$633,631 was recognised as premium on restructured loan which was presented as an addition to theloan principal.

19. LONG-TERM NOTES PAYABLE

2004 2003 2002


Company

Global Note A — US$256,943,503 in 2004,US$280,943,503 in 2003 andUS$295,943,503 in 2002 .......................................... 2,387,005 2,378,187 2,645,735

Global Note B — US$49,530,197 in 2004 ..................... 460,136 — —

Global Note C — US$30,000,000 in 2004 ..................... 278,700 — —

GTPI

Trance A Notes — US$77,606,000 ................................. — 656,935 —

Trance B Notes — US$85,757,000................................. — 725,933 —

Trance C Notes — US$73,301,000................................. — 620,493 —

Total .................................................................................. 3,125,841 4,381,548 2,645,735

Premium on debt restructuring ........................................... 342,412 576,769 541,068

Total .................................................................................. 3,468,253 4,958,317 3,186,803

Current maturity ................................................................ (472,404) (487,026) (186,119)

Long-term portion — net ................................................... 2,995,849 4,471,291 3,000,684

Company

Global Note A

Represents Floating Rate Notes issued by the Company with a nominal value of US$295,943,503 in accordancewith the result of the Company’s debt restructuring as discussed in Note 20. JP Morgan Chase Bank was appointed astrustee.

The global note is repayable in quarterly installments commencing in February 2003 until October 2008 withinterest rate per annum of SIBOR plus a certain margin.


Year Amount

US$

2004 ........................................................................................................... 24,000,000

2005 ........................................................................................................... 27,000,000

2006 ........................................................................................................... 30,000,000

2007 ........................................................................................................... 40,000,000

2008 ........................................................................................................... 24,000,000


F-87

Global Note B

Represents Floating Rate Notes issued by the Company with a nominal value of US$53,000,000 in accordance withthe result of the Company’s payments of accounts payable to Garibaldi Venture Fund Limited, related parties as discussedin Note 9b. In this case, JP Morgan Chase Bank was appointed as trustee.

The global note is repayable in quarterly installments commencing in May 2004 until November 2008 with interestrate per annum of SIBOR plus margin.

The installments due on the note payable based on the repayment schedule are as follows:

Year Amount

US$

2004 ........................................................................................................... 3,469,803

2005 ........................................................................................................... 5,204,705

2006 ........................................................................................................... 5,783,006

2007 ........................................................................................................... 7,710,675

2008 ........................................................................................................... 4,626,405


Global Note C

Represents Floating Rate Structured Notes issued by the Company with a nominal value of US$30,000,000 assettlement of Tranche A Notes from GTPI. In this case, HSBC Institutional Trust Services (Singapore) Limited wasappointed as trustee.

The global note is repayable in quarterly installments commencing in March 2005 until March 2009 with interestrate per annum of SIBOR plus a certain margin.


Year Amount

US$

2005 ........................................................................................................... 7,450,660

2006 ........................................................................................................... 7,108,420

2007 ........................................................................................................... 8,836,450

2008 ........................................................................................................... 5,536,000


GTPI

Represents restructured principal and accrued interest of long-term bank loan based on the Master RestructuringAgreement (MRA), Trust Deed and Agency Agreement dated January 17, 2003 and March 7, 2003, respectively,amounting to US$248,303,145 as discussed in Note 20. Based on the restructuring:

— The financial obligations owed to each original creditor of the syndicated loan amounting toUS$162,541,000 was divided into Tranche A Notes amounting to US$89,240,000 and Tranche C Notesamounting to US$73,301,000 and the balance amounting to US$4,454 was paid in cash. The allocation intoTranche A Notes and Tranche C Notes is based on the percentage of the total amount of the financialobligations owed to each creditors.

— The Bayerische Hypo-und Vereinsbank AG, Munich (BVA) facility amounting to US$85,757,000 (see Note20) will be converted into Tranche B Notes and the balance amounting to US$691 was paid in cash.

The agreement also required that the debt owed to PT Tunas Sepadan Investama (TSI) will be a non-recourseobligation.

F-88

Tranche A Notes

Tranche A Notes with a principal of US$89,240,000 will be paid quarterly within six (6) years from the effectivedate. Each holder of Tranche A Notes has a right to convert the Notes into equity in GTPI using the conversion priceat the date that TSI has elected to convert the restructured debt it holds into equity. The Tranche A Notes will bear interestat SIBOR plus certain premium. There is a cap at the total interest rate of 6% per annum. In 2004 and 2003, the totalloan principal paid was amounted to US$18,614,000 and US$11,634,000.

In 2004, Tranche A Notes amounting to US$30,000,000 were transferred to the Company as settlement of sale ofGTPI’s property, plant and equipment as describe in Note 11. Transferring of Tranche A Notes have been agreed bynoteholder on December 23, 2004.

Tranche B Notes

Tranche B Notes with principal loan amounting to US$85,757,000 will be paid quarterly within twelve (12) yearsfrom 2005. The Tranche B Notes bears fixed interest rate from the first to fifth year, SIBOR for the sixth year and SIBORplus certain premium from the seventh year to twelfth year. There is cap at the total interest rate of 6% per annum.

The notes payable are guaranteed by property, plant and equipment of GTPI in Karawang (see Note 11).

Tranche C Notes

Tranche C Notes with a principal of US$73,301,000, will be automatically converted into equity in GTPI at theconversion price on the same date as TSI elects to convert the restructured debt it holds into equity.

If not already converted into equity, installment payments of Tranche C Notes shall commence when the TrancheA Notes are fully paid, which will be paid quarterly, within ten (10) years. Tranche C Notes will bear no interest.

In 2004, all Tranche C Notes with principal loan amounting to US$73,301,000 was converted into equity of GTPI,at Rp 500 par value per share, which also represented the agreed value with the creditors (see Note 1b).

The excess of loan principal of GTPI’s notes (Tranche C) which were converted to capital stock of GTPI isrecorded under extraordinary gain (see Note 32).

Premium on debt restructuring

All interest accrued and unpaid as at the effective date in respect of the financial obligations was written off.

The difference between the loan carrying amount (principal and accrued interest) and total restructured loanamounting to US$22,114,486 was recognised as premium on restructured loan which was presented as addition to notespayable.

The notes payable agreement also has limitations and specific prohibitions and also conditions or certain risks ofinfringement of the agreement.

20. LOANS UNDER RESTRUCTURING PROCESS

This account represents GTPI (including loan obtained through GTPIN) loans which have been restructured in 2003.Details of the loans as of December 31, 2002 are as follows:

2002

Rp’Million

Syndicated loan obtained through GTPIN — US$162,545,454.54 .............................................. 1,453,156

Loan obtained from Bayerische Hypo-un Vereinsbank AG,Munic — US$85,757,690.66 ................................................................................................. 766,674

Total ......................................................................................................................................... 2,219,830

Syndicated loan obtained through GTPIN

On July 14, 1997, GTPI obtained a US$300,000,000 syndicated loan from foreign banks with maturity of 5 years.The loan has maturities as follows: US$60,000,000 due on July 14, 2000, US$60,000,000 due on July 14, 2001 andUS$180,000,000 due on July 14, 2002. This loan is guaranteed by corporate guarantee from GTPI and bears interest atSIBOR plus 0.98% per annum.

F-89

On September 30, 2002, the syndicated loan amounting to US$137,454,545 had been transferred to GTPI and hasbeen bought back on November 29, 2002.

The details of members of the syndication for the remaining loan amounting to US$162,545,454.54 as ofDecember 31, 2002 were as follows:

Rp’Million

Raiffeisen Zentral Bank Oesterreich AG, Singapore Branch ............................................ 677,814

UBS AG ......................................................................................................................... 338,095

Transpacific Financial Services Ltd................................................................................. 223,500

Lehman Brothers Commercial Corporation Asia Ltd., Tokyo ........................................... 213,747

Total ............................................................................................................................... 1,453,156

Bayerische Hypo-und Vereinsbank AG, Munich (BVA)

The credit facility obtained by GTPI from BVA represents loan for the purchase of machinery amounting to DEM182,850,000 (equivalent to US$101,019,548), wherein 85% or DEM 155,422,500 (equivalent to US$85,757,691) wasfinanced by BVA and 15% or DEM 27,427,500 (equivalent to US$15,261,857) was financed by BDNI - BBO in the formof import credit facility. The loan is repayable semiannually starting June 30, 1999 up to December 31, 2003. This loanbears interest between 5.39% to 6.99% per annum and guaranteed by corporate guarantee from PT Gajah Tunggal Mulia,a stockholder of GTPI.

On November 30, 2002, GTPI and GTPIN have been signed the Term Sheet to restructure the remaining loanswhich was not bought back. The restructured loans become effective on March 7, 2003 since all requirements andconditions in the Term Sheet has been fulfilled. The said loans were converted into notes payable as discussed in Note19.

GTTN’s loan which has been restructured in 2002

The Company and GTTN had been undertaking a debt restructuring effort with their creditors through themediation of the “Creditors’ Steering Committee” and the Jakarta Initiative Task Force. On September 6, 2002, theCompany and GTTN signed the Restructuring Agreement for the restructuring of all its liabilities. In November 5, 2002,the debt restructuring became effective. The debt restructuring was a combination of debt buyback and issuance ofFloating Rate Notes (FRN).

Debt Buyback

Loan principal amounting to US$245,958,528 were bought back. Accrued interest on the loans amounting toUS$66,326,648 were written off.

Issuance of Floating Rate Notes (FRN)

Loan principal amounting to US$244,190,722 and Rp 140,457 million and notes payable amounting toUS$22,689,791 were restructured through issuance of FRN with a nominal value of US$295,943,503 (see Note 19) whichincludes capitalised interest amounting to US$14,092,548. The remaining carrying amounts which were not restructuredwere discharged.

All interest accrued on the debts from the default date up to April 30, 2002 (Economic Start Date) were writtenoff and, in consideration for the write-off of such accrued interest, the Company issued US$0.05 of additionalrestructured principal for each US$1 of the restructured principal or amounting to US$14,092,548 which was includedin the nominal amount of the FRN. Furthermore, the Company also paid to the creditors initial interest amounting toUS$5,568,448, calculated at SIBOR plus 2% margin from May 1, 2002 (Calculation Date) up to November 5, 2002(Effective Date).

Gain on Debt Restructuring

The Company and its subsidiaries recognised gain on debt restructuring amounting to Rp 593,395 million, net oftax expenses of Rp 254,312 million and restructuring charges of Rp 3,349 million in 2003 and Rp 3,081,365 million, netof restructuring charges of Rp 3,134 million in 2002 (see Note 32). The gain on debt restructuring was presented asextraordinary item in the consolidated statements of income.

The Company obtained tax incentive for the restructuring gain since the restructuring was done under the effortsof the Jakarta Initiative Task Force.

F-90

21. POST-EMPLOYMENT BENEFITS OBLIGATION

The Company and its subsidiaries records post-employment benefits obligation based on Labor Law No. 13/2003 datedMarch 25, 2003. The number of employees entitled to benefits is 9,004 in 2004, 13,036 in 2003 and 13,234 in 2002.

Amounts recognised in income in respect of these post-employment benefits are as follows:


2004 2003 2002


Current service cost ........................................................... 23,767 19,728 15,550

Interest cost ....................................................................... 22,432 19,852 15,758

Past service cost ................................................................ 2,672 2,679 1,899

Total .................................................................................. 48,871 42,259 33,207

The amounts included in the consolidated balance sheets arising from the Company’s and its subsidiaries’ obligation inrespect of these post-employment benefits are as follows:


2004 2003 2002


Present value of unfunded obligations ................................ 181,431 223,074 170,759

Unrecognised actuarial losses............................................. (17,076) (11,519) (1,695)

Unrecognised past service cost ........................................... (22,479) (35,621) (25,821)

Net liability ....................................................................... 141,876 175,934 143,243

Movements in the net liability recognised in the consolidated balance sheets are as follows:


2004 2003 2002


Beginning of the year ........................................................ 175,934 143,243 117,356

Balance of unconsolidated subsidiary ................................. (79,052) — —

Benefits payment ............................................................... (3,877) (9,568) (7,320)

Amount charged to income................................................. 48,871 42,259 33,207

End of the year .................................................................. 141,876 175,934 143,243

The cost of providing post-employment benefits is calculated by an independent actuary PT DayamandiriDharmakonsilindo. The actuarial valuation was carried out using the following key assumptions:

Discount rate: 11%

Salary increment rate: 10%

Normal retirement rate: 55 age

Based on above independent actuary report, non vested past service cost as of December 31, 2004 amounted to Rp 22,479million.

F-91

22. MINORITY INTERESTS


2004 2003 2002


a. Minority interests in net assets of subsidiaries: .............

PT Meshindo Alloy Wheel Corporation (MAWC) ........... (39) (39) 15

PT GT Petrochem Industries Tbk (GTPI) ....................... — (74,531) (230,275)

Total .............................................................................. (39) (74,570) (230,260)

b. Minority interests in net losses (income ) ofsubsidiaries: .................................................................

PT Meshindo Alloy Wheel Corporation (MAWC) ........... — 54 8

PT GT Petrochem Industries Tbk (GTPI) ....................... (82,324) (155,744) (400,155)

Total .............................................................................. (82,324) (155,690) (400,147)

Minority interest in net assets of GTPI and ABM (a subsidiary of MAWC) were negative because the minoritystockholder of GTPI and ABM, will absorb its share in the loss of the subsidiary as a percentage of its interest.

23. CAPITAL STOCK

Based on the stockholders list issued by Biro Administrasi Efek Perusahaan (Administration Office of Listed Shares ofthe Company), PT Datindo Entrycom, the stockholders of the Company are as follows:

2004


SharesPercentage of


Capital

% Rp’Million

Garibaldi Venture Fund Limited ......................................... 1,555,760,000 49.11 777,880

Global Union Fiber Investment Limited ............................. 348,480,000 11.00 174,240

Compagnie Financiere Michelin ......................................... 316,800,000 10.00 158,400

Cooperatives ...................................................................... 5,650,000 0.18 2,825

Director ............................................................................. 2,551,000 0.08 1,275


General public (below 5% each) ........................................ 938,758,500 29.63 469,379

Total .................................................................................. 3,168,000,000 100.00 1,584,000

2003


SharesPercentage of


Capital

% Rp’Million



Cooperatives ...................................................................... 7,270,020 0.23 3,635

Commissioners and directors .............................................. 150,166 — 75

PT Surya Grahareksa ......................................................... 1,000 — 1


Total .................................................................................. 3,168,000,000 100.00 1,584,000

F-92

2002


SharesPercentage of


Capital

% Rp’Million



Cooperatives ...................................................................... 7,270,020 0.23 3,635

Commissioners and directors .............................................. 150,166 — 75

PT Surya Grahareksa ......................................................... 1,000 — 1


Total .................................................................................. 3,168,000,000 100.00 1,584,000

*) According to transfer deeds No. 38 and No. 39 dated May 25, 1999, the Company’s shares owned by PT GajahTunggal Mulia (“GTM”) and PT Gajah Tunggal Sakti (“GTS”) as of December 31, 2003 totaling 1,613,604,364shares and 319,382,472 shares, respectively, have been transferred to PT Tunas Sepadan Investama (“TSI”). Asof December 31, 2003, the transfer of such shares TSI is still in process, therefore, based on the shareholders’ listissued by Biro Administrasi Efek Perusahaan (Administration Office of Listed Shares of the Company), GTM andGTS, as of December 31, 2003, are still the stockholders of the Company.

On April 14, 2004, the transfer of the Company shares owned by PT Tunas Sepadan Investama (TSI) were registered onthe list of the Company’s shareholders.

Based on Deed No. 414 by Dr. Irawan Soerodjo, S.H., Msi, notary public in Jakarta dated April 27, 2004, all of theCompany’s shares owned by TSI were transferred to Garibaldi Venture Fund Limited.

24. ADDITIONAL PAID-IN CAPITAL

This account represents additional paid in capital in connection with following:

Rp’Million

Initial public offering in 1990 of 20,000,000 shares with par value ofRp 1,000 per share and selling price of Rp 5,500 per share .................................................. 90,000

Rights issue in 1994 of 198,000,000 shares with par value ofRp 1,000 per share, and selling price of Rp 3,250 per share ................................................. 445,500

Total ......................................................................................................................................... 535,500

Less bonus shares

1992 ..................................................................................................................................... (88,000)

1995 ..................................................................................................................................... (396,000)

Additional paid-in capital ......................................................................................................... 51,500

25. DIFFERENCE IN VALUE OF RESTRUCTURING TRANSACTION BETWEEN ENTITIES UNDER COMMONCONTROL

This account represents the difference between the recorded amount of property, plant and equipment of GTPI and SSand carrying value of investment in LBP’s shares compared with the purchase and selling price, respectively, in 2004 asdescribed in Notes 11 and 35, with details are as follows:

Rp’Million

Difference between purchase price and the recorded amount of property,plant and equipment (see Note 11) ........................................................................................ 771,376

Effect of deferred tax................................................................................................................ (217,361)

Net ........................................................................................................................................... 554,015

Difference between selling price of LBP’s shares of stock and the carryingamount of investment (see Note 35) ...................................................................................... (59,120)

Total ......................................................................................................................................... 494,895

F-93

26. DIFFERENCE DUE TO CHANGE OF EQUITY IN SUBSIDIARY

Represents the difference between the Company’s interest in GTPI after issuance of the new shares and the carryingamount of its investment before the issuance of new shares.

The change is due to the following:

● In 2004, GTPI issued 1,649,179,559 new shares to Garibaldi and other shareholders resulting to a dilution in theCompany’s interest in GTPI from 50.0125% to 28.91%.

● In 1993, GTPI offered its 20,000,000 shares to the public resulting to a decrease in the Company’s interest in GTPIfrom 66.6667% to 50.0125%.

27. NET SALES

2004 2003 2002


Related parties

Local ............................................................................. 192,636 146,615 209,864

Export ........................................................................... — — 16,859

Third parties

Local ............................................................................. 3,214,785 2,994,381 3,080,250

Export ........................................................................... 3,441,578 3,049,462 2,943,139

Total .................................................................................. 6,848,999 6,190,458 6,250,112

Sales returns and discounts ................................................ (41,420) (460,952) (689,210)

Net Sales ........................................................................... 6,807,579 5,729,506 5,560,902

There were no sales to specific customer exceeding 10% of net sales in 2004, 2003 and 2002.

Sales to related parties, according to management, were made at similar prices, terms and conditions as those done withthird parties (see Note 37).

28. COST OF SALES

2004 2003 2002


Raw materials used ............................................................ 3,999,233 3,202,180 3,003,485

Direct labor ....................................................................... 72,255 78,202 68,001

Manufacturing expenses ..................................................... 1,635,305 1,653,600 1,474,453

Total Manufacturing Costs ................................................. 5,706,793 4,933,982 4,545,939

Work in Process

At beginning of year...................................................... 108,776 99,622 94,674

Purchase ........................................................................ 19,463 — —

Balance of unconsolidated subsidiaries .......................... (20,790) — —

At end of year ................................................................... (140,138) (108,776) (99,622)

Cost of Goods Manufactured .............................................. 5,674,104 4,924,828 4,540,991

Finished Goods

At beginning of year...................................................... 467,907 397,880 568,780

Purchase ........................................................................ 6,085 3,038 795

Balance of unconsolidated subsidiaries .......................... (295,905) — —

Used for experimental production, gifts and bythe Company ............................................................ (172) (188) (196)

At end of year ............................................................... (169,089) (467,907) (397,880)

Cost of Goods Sold — Production ..................................... 5,682,930 4,857,651 4,712,490

Cost of Sales — Merchandise ............................................ 264 34 272

Total Cost of Sales ............................................................ 5,683,194 4,857,685 4,712,762

F-94

In 2004, there were no purchases to specific supplier exceeding 10% of net purchases.

Purchases of raw materials in 2003 and 2002 include purchases to a supplier, PT Mitsubishi Chemical Ind, amountingto Rp 492,993 million and Rp 400,025 million, respectively, which represent more than 10% of the total raw material purchases.

29. OPERATING EXPENSES

Selling Expenses

2004 2003 2002


Transportation .................................................................... 77,512 91,527 78,956

Advertising and promotion ................................................. 56,501 143,224 119,062


Insurance ........................................................................... 9,198 9,137 7,388

Royalty (see Note 39) ........................................................ 8,667 9,591 9,124

Telecommunication ............................................................ 1,429 1,395 1,467

Others ................................................................................ 16,117 11,891 8,575

Total .................................................................................. 196,099 293,978 246,546

General and Administrative Expenses


2004 2003 2002



Post-employment benefits (see Note 21)............................. 48,871 42,259 33,207

Provision for doubtful accounts (see Note 5) ..................... 37,501 78,388 25

Management fees ............................................................... 13,998 40,587 45,544

Other professional fees ...................................................... 9,175 21,238 11,247

Depreciation and amortisation ............................................ 7,945 5,422 4,463

Transportation .................................................................... 5,808 7,069 6,575

Office expenses.................................................................. 5,439 4,998 4,787

Office rental ...................................................................... 4,996 6,090 4,863

Telecommunication ............................................................ 2,209 2,574 2,507

Entertainment..................................................................... 1,941 3,395 4,632

Travelling .......................................................................... 1,594 1,387 2,061

Others ................................................................................ 23,407 19,750 13,298

Total .................................................................................. 244,512 312,226 228,502

30. INTEREST EXPENSE AND FINANCIAL CHARGES

2004 2003 2002


Interest expense and financial charges................................ 181,608 189,088 465,351

Amortisation of premium on debt restructuring .................. (136,686) (122,749) (15,468)

Net .................................................................................... 44,922 66,339 449,883

F-95

31. INCOME TAX

Tax expense (benefit) of the Company and its subsidiaries consists of the following:


2004 2003 2002

Rp’Million Rp’Million Rp’MillionCurrent tax — the Company .............................................. 32,389 36,962 14,316Deferred tax expense (benefit)

The Company ................................................................ 34,296 120,179 366,671Subsidiaries ..................................................................

GTPI ......................................................................... (179,463) 311,279 186,138FS ............................................................................. 7,904 6,811 70,471MAWC ...................................................................... 1,669 2,669 11,468LBP........................................................................... 1,867 536 19,533SS ............................................................................. (65,660) (1,285) 26,190

Total deferred tax expense (benefit) ................................... (199,387) 440,189 680,471

Total Tax Expense (Benefit) ............................................... (166,998) 477,151 694,787

The tax expense above was allocated as follows:

2004 2003 2002


Total tax expense (benefit) ................................................. (166,998) 477,151 694,787

As deduction from extraordinary item (see Note 32) .......... 10,728 254,312 —

Tax expense (benefit) from ordinary activities ................... (177,726) 222,839 694,787

Current tax

A reconciliation between income before tax expense per consolidated statements of income and taxable incomeis as follows:


2004 2003 2002

Rp’Million Rp’Million Rp’MillionIncome before tax expense per consolidated

statements of income ........................................... 263,749 656,265 1,836,283Income before tax of subsidiaries............................. 77,711 232,597 869,184

Income before tax expense of the Company ............. 186,038 423,668 967,099Extraordinary item ................................................... — — 1,527,881

Total ........................................................................ 186,038 423,668 2,494,980

Temporary differences:Positive corrections ............................................. 53,035 51,748 565,586Negative corrections ............................................ (167,353) (415,031) —

Total ........................................................................ (114,318) (363,283) 565,586

Permanent differences:Positive corrections ............................................. 80,503 87,494 69,452Negative corrections ............................................ (44,202) (24,613) (900,692)

Total ........................................................................ 36,301 62,881 (831,240)

The Company’s taxable income beforecompensation of fiscal loss .................................. 108,021 123,266 2,229,326

Compensation of prior years’ fiscal loss(adjusted to tax decision letter)............................ — — (2,171,855)

Taxable income of the Company .............................. 108,021 123,266 57,471

F-96

Current tax expense and payable are computed as follows:

2004 2003 2002


Current tax expense — the Company

Income tax........................................................... 32,389 36,962 17,224

Less income tax benefit on tax free extraordinaryitem ............................................................... — — (2,908)

Tax payable ......................................................... 32,389 36,962 14,316

Less prepaid taxes

Income taxes

Article 22 ........................................................ 13,333 10,462 7,377

Article 23 ........................................................ 7 279 21

Article 25 ........................................................ 2,438 852 —

Fiscal tax......................................................... 97 99 76

Current tax payable — the Company........................ 16,514 25,270 6,842

Tax liability on restructuring gain which paymentwas deferred ....................................................... 4,608 5,897 —

Total tax payable — the Company ........................... 21,122 31,167 6,842

The Company’s tax payable in 2002 includes the taxes payable for extraordinary item which was deferred becausethe restructuring was made through Jakarta Initiative Task Force.

Details of prepaid taxes:

2004 2003 2002


The Company — — 7,683

Subsidiaries

GTPI ................................................................... — 21,920 11,130

FS ....................................................................... — 5,491 4,123

SS ....................................................................... — 1,191 978

LBP ..................................................................... — 372 594

MAWC ................................................................ 1,464 1,795 1,390

Total .................................................................... 1,464 30,769 25,898

F-97

Deferred Tax

Deferred tax is computed based on the effect of the temporary differences between the financial statement carryingamounts of assets and liabilities and their respective tax bases. The details of the deferred tax assets and liabilities areas follows:

Deferred Tax Assets — Net

This account represents deferred tax assets after deducting the deferred tax liabilities of the same business entityas follows:


2004 2003 2002


Deferred tax assets

Fiscal loss ........................................................... — — 455,710

Post-employment benefit obligations .................... 35,909 — 39,234

Allowance for doubtful accounts .......................... 24,746 — 10,907

Difference between commercial and fiscalextraordinary item .......................................... 23,410 — 162,320

Total .................................................................... 84,065 — 668,171

Deferred tax liability ..............................................

Depreciation of property, plant and equipment ..... (13,768) — (416,775)

Deferred tax assets — net ........................................ 70,297 — 251,396

Deferred Tax Liabilities — Net

This account represents deferred tax liabilities after deducting the deferred tax asset of the same business entityas follows:


2004 2003 2002


Deferred tax assets

Post-employment benefits obligation .................... 1,439 52,779 38,037

Fiscal loss ........................................................... — 127,393 47,529

Allowance for doubtful accounts .......................... 8 32,928 14,688

Allowance for decline in value of inventories ...... 328 892 179

Difference between commercial and fiscalextraordinary item .......................................... — 99,338 329,182

Total .................................................................... 1,775 313,330 429,615


2004 2003 2002


Deferred tax liabilities

Depreciation of property, plant and equipment ..... (11,188) (612,790) (539,575)

Deferred development cost ................................... — (418) (1,134)

Deferred charges .................................................. — (377) (367)

Total .................................................................... (11,188) (613,585) (541,076)

Deferred tax liabilities — net .................................. (9,413) (300,255) (111,461)

F-98

A reconciliation between the total tax expense and the amounts computed by applying the effective tax rates toincome before tax is as follows:


2004 2003 2002


Income before tax expense per consolidatedstatements of income .......................................... 263,749 656,265 1,836,283

Extraordinary gain ................................................... — — 1,527,881

Income before tax of subsidiaries............................. (77,711) (232,597) (869,184)

Income before tax expense of the Company ............. 186,038 423,668 2,494,980

Tax at effective tax rate ........................................... 55,794 127,083 748,476

Permanent differences .............................................. 10,890 18,863 (249,371)

Adjustment to compensate fiscal loss ....................... — — (115,210)

Income tax benefit from tax — free extraordinaryitem ..................................................................... — — (2,908)

Correction of tax bases:

Depreciation of property, plant and equipment ..... — 9,692 —

Allowance for doubtful accounts .......................... 1 1,503 —

Tax expense of the Company ................................... 66,685 157,141 380,987

Tax expense (benefit) of subsidiaries ....................... (233,683) 320,010 313,800

Total ........................................................................ (166,998) 477,151 694,787

32. EXTRAORDINARY ITEM

2004

Represent the difference between the recorded amounts and the cash payment under Memorandum ofUnderstanding (MOU) between SS and Niigata Engineering Co. Ltd., Japan (see Note 17), the excess of principal andinterest due over the future cash payments between LBP accounts payable to Folkingham Investment Ltd. (see Notes 16and 18) and the excess of loan principal of GTPI’s notes (Tranche C) which were converted to capital stock of GTPI (seeNote 19).

2003

Represent the excess of principal and interest due over the future cash payments of the restructured long-term bankloans of GTPI — after deducting tax expense and restructuring charges amounting to Rp 254,312 million and Rp 3,349million, respectively (see Notes 19 and 20).

2002

Represent the excess of principal and interest due with the future cash payments of the restructured long-term bankloans by the Company and a subsidiary (GTTN) and the excess of principal and interest due over total bank and nonbankfinancial institutions loan settlements and loan buybacks as well as the excess of the write-off of a subsidiary’s (FS)Tranche 2 loan and the future interest payments of Tranche 1 loan from JP Morgan Chase Bank, Jakarta.

33. BASIC EARNINGS PER SHARE

The computation of basic earnings per share is based on the following data:

a. Including Extraordinary Item


2004 2003 2002


IncomeNet income .............................................................. 478,150 871,131 3,822,714

F-99

Number of shares shares shares shares

Weighted average number of ordinary shares ........... 3,168,000,000 3,168,000,000 3,168,000,000

b. Excluding Extraordinary Item


2004 2003 2002


Net income for the year ........................................... 478,150 871,131 3,822,714

Extraordinary item ................................................... (118,999) (593,395) (3,081,365)

Net income excluding extraordinary item ................. 359,151 277,736 741,349

The weighted average number of shares for computation of basic earning per share including and excludingextraordinary item is the same.

At balance sheet dates, the Company do not have dilutive potential ordinary shares.

34. BUSINESS RESTRUCTURING

In connection with the business restructuring of the Company’s group, the Company executed the following:

● At the end of November 2004, the Company sold all of its ownership interest in LBP to a related party as describedin Notes 1b and 35.

● At the same time, the Company’s ownership in GTPI was diluted as described in Note 1b, however, the Companytook over the assets of the tyre cord and synthetic rubber segments from GTPI and SS as described in Note 11.

● The Company sold all of its ownership interest in MAWC in 2005 as described in Note 43.

As a result of the restructurings the Company no longer have steel wire, polyester, petrochemical, fishing net yarn andcar accessories segments, thus it has only focused in the tyres manufacturing business and related industry.

A summary of income before tax of the segments which were relinquished in 2004 and will be relinquished in 2005(MAWC), included in the 2004, 2003 and 2002 consolidated statements of income are as follows:

2004 2003 2002


Net sales ............................................................................ 3,262,909 2,557,319 2,583,200

Cost of sales ...................................................................... 2,894,782 2,403,675 2,538,202

Gross profit ....................................................................... 368,127 153,644 44,998

Operating expenses ............................................................ 105,179 141,806 99,815

Income from operations ..................................................... 262,948 11,838 (54,817)

Other income (charges) — net ........................................... (161,963) 751,469 181,648

Income before tax .............................................................. 100,985 763,307 126,831

There were no profit (loss) recognised in the restructuring transactions made in 2004 because these were entered intoby entities under common control. This has been approved by the independent shareholders in the Company’s ExtraordinaryMeeting of Shareholders on November 25, 2004.

The assets and liabilities of GTPI and LBP (after deduction of carrying values of property, plant and equipment of thetyre cord and synthetic rubber segments taken over by the Company) as of December 31, 2003 and 2002 which are includedin the consolidated financial statements are as follows:

F-100

2003 2002


Current assetsCash and cash equivalents ........................................................................... 161,842 152,786

Trade accounts receivable — net ................................................................. 537,907 560,306

Inventories — net ........................................................................................ 703,281 674,442

Other current assets ..................................................................................... 308,873 209,974

Total current assets ...................................................................................... 1,711,903 1,597,508

Noncurrent assetsProperty, plant and equipment — net ........................................................... 3,241,046 3,417,507

Other noncurrent assets................................................................................ 533,325 827,270

Total noncurrent assets ................................................................................ 3,774,371 4,244,777

Total assets ..................................................................................................... 5,486,274 5,842,285

Current liabilitiesTrade accounts payable ................................................................................ 216,978 191,304

Accrued expenses ........................................................................................ 485,628 1,510,315

Current maturities of long-term liabilities .................................................... 403,920 2,443,233

Other current liabilities ................................................................................ 41,306 45,789

Total current liabilities ................................................................................ 1,147,832 4,190,641

Noncurrent liabilitiesDeferred tax liabilities — net ...................................................................... 179,743 106,386

Long-term liabilities — net of current maturities ......................................... 2,283,151 371,559

Accounts payable to related parties .............................................................. 2,975,852 3,113,368

Other noncurrent liabilities .......................................................................... 75,619 59,918

Total noncurrent liabilities ........................................................................... 5,514,365 3,651,231

Total liabilities ............................................................................................... 6,662,197 7,841,872

Assets and liabilities of MAWC as of December 31, 2004 which are included in the consolidated balance sheets are asfollows:

Rp’Million

Current assets ................................................................................................................................ 84,792

Noncurrent assets ........................................................................................................................... 87,662

Total assets .................................................................................................................................... 172,454

Current liabilities ........................................................................................................................... 241,101

Noncurrent liabilities ..................................................................................................................... 36,272

Total liabilities .............................................................................................................................. 277,373

F-101

35. SALE OF SUBSIDIARY

At the end of November 2004, the Company sold all of its shares in LBP (see Note 1b) to PT Gajah Tunggal Prakarsa.The sale of LBP share has been approved by the independent shareholders in the Company’s Extraordinary General Meetingon November 25, 2004. The sale was based on LBP net asset LBP on November 30, 2004, as follows:

2004

Rp’Million

Company’s share in net assets as of November 30, 2004 ................................................................ (50,751)

Difference in value of restructuring transaction between entities under common ...........................

control (see Note 25) ..................................................................................................................... 59,120

Selling price .................................................................................................................................. 8,369

36. SETTLEMENT OF LOANS FROM BANK DAGANG NASIONAL INDONESIA WITH THE INDONESIANBANK RESTRUCTURING AGENCY

The Company and its subsidiaries had loans from Bank Dagang Nasional Indonesia (“BDNI”) which operations weresuspended on August 21, 1998 by the Government and taken over by the Indonesian Bank Restructuring Agency (“IBRA”), thusthe obligation of the Company and its subsidiaries to settle their loans were transferred to IBRA. On September 21, 1998, IBRAand the major stockholder of BDNI signed a Master Settlement and Acquisition Agreement (“MSAA”) which stated, amongothers, that the loans granted to PT Gajah Tunggal Tbk and its subsidiaries will be transferred to the major stockholder of BDNI(Mr. Sjamsul Nursalim), therefore the loan settlement responsibility was transferred to such major stockholder. In relation tothe MSAA, on May 25, 1999, the supporting agreement was signed, accordingly, the loans granted by BDNI to PT GajahTunggal Tbk and its subsidiaries were legally transferred to BDNI’s major stockholder and were transferred to PT TunasSepadan Investama, the new parent company. Based also on the supporting agreement, the loans to PT Gajah Tunggal Tbk andits subsidiaries cannot be immediately demanded by TSI in the short term. Starting in 1999, the loans were presented aslong-term accounts payable to a related party (see Note 9b).

The settlement also requires for the Company’s shares of stock owned by major stockholders to be transferred to PTTunas Sepadan Investama (see Notes 1a and 23). In 2004, the accounts payable to TSI has been settled as discussed in Note9b.

37. NATURE OF RELATIONSHIP AND TRANSACTIONS WITH RELATED PARTIES

Nature of Relationship

a. Companies which have partly the same management as the Company and its subsidiaries:

— PT Bando Indonesia— Bank Ganesha— PT Daya Indria Permai— PT Glorindo Fileatex— PT Graha Mitra Santosa— PT Indonesia Prima Property Tbk— Taiwan GT International Co. Ltd.— PT Wachyuni Mandira— PT Tunas Sepadan Cemerlang Manajemen— PT Nitto Rubber Indonesia— PT Dipasena Citra Darmaja*)— PT Gajah Tunggal Prakarsa*)— PT Gajah Tunggal Sakti*)— PT Gemapersada Polimer*)— PT GT Kabel Indonesia Tbk*)— PT IRC Inoac Indonesia*)

*) In 2003 and 2002, the abovementioned companies have the same stockholders as the Company and itssubsidiaries.

As discussed in Note 23, on April 27, 2004, the Company’s shares owned by PT Gajah Tunggal Mulia and PTGajah Tunggal Sakti were transferred to TSI and then sold to Garibaldi Venture Fund Limited (Garibaldi). Theabovementioned companies are not related with Garibaldi.

F-102

b. In 2003 and 2002, PT Gajah Tunggal Mulia and PT Tunas Sepadan Investama are stockholders of theCompany (see Note 23).

c. In 2004, Garibaldi Venture Fund Limited is the majority stockholder of the Company (see Note 23).

d. PT Daya Patria Corporation is the majority stockholder of PT Gajah Tunggal Mulia.

Transactions with Related Parties

In the normal course of business, the Company and its subsidiaries entered into certain transactions with relatedparties, including the following:

a. Net sales to related parties accounted for 2.83%, in 2004, 2.56% in 2003 and 4.08% in 2002 of the totalsales (see Note 27) which, according to management, were made at normal terms and conditions as thosedone with third parties. At balance sheet date, the receivables from these sales were presented as tradeaccounts receivable, which constituted 0.004%, 1.13% and 1.23%, respectively, of the total assets as ofDecember 31, 2004, 2003 and 2002.

The details of net sales to related parties are as follows:

2004 2003 2002


Local ............................................................

PT Glorindo Fileatex ................................. 131,694 124,259 180,900

PT GT Petrochem Industries Tbk ............... 34,917 — —

PT Bando Indonesia ................................... 19,836 16,693 15,925

PT IRC Inoac Indonesia ............................. 3,612 5,234 9,772

PT GT Kabel Indonesia Tbk ...................... 2,402 394 3,181

Others (below Rp 30 million each) ............ 175 35 86

Export ..........................................................

Taiwan GT International Co., Ltd. ............. — — 16,844

Others........................................................ — — 15

Total .............................................................. 192,636 146,615 226,723

b. At balance sheet dates, the unpaid indirect material purchases were presented as trade accounts payable,which constituted 2.84%, 0.005% and 0.003%, respectively, of the total liabilities as of December 31, 2004,2003 and 2002.

c. Placements of cash and cash equivalents with Bank Ganesha in 2003 and 2002.

d. Placements in Reksa Dana Prima came from conversion of shares of PT Reksadana Perdana Tbk in 2003and 2002.

e. The Company and GTPI pay management fees amounting US$4,800,000 per annum to PT Tunas SepadanCemerlang Manajemen in 2003 and 2002 (see Note 39).

f. The Company and its subsidiaries also entered into nontrade transactions with related parties as describedin Note 9.

F-103

38. SEGMENT INFORMATION

Business Segment

The Company and subsidiaries are presently engaged in the following businesses:

1. Manufacturing of tyre (tyre).

2. Manufacturing of tyre cord (tyre cord).

3. Manufacturing of synthetic rubber (synthetic rubber).

4. Manufacturing of polyester (polyester).

5. Manufacturing of ethylene glycol and petrochemical (petrochemical).

6. Manufacturing of fishing net yarn (fishing net yarn).

7. Manufacturing steel wire (steel wire).

8. Manufacturing of rim of wheel, trading of car accessories and general trading (car accessories).

9. Others.

F-104

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F-110

Geographical Segment

Net sales by geographical market

The following table shows the distribution of the Company and subsidiaries’ net sales by geographical market,regardless of where the goods were produced:

2004 2003 2002


Domestic

Java ..................................................................... 2,707,366 2,061,371 1,993,923

Outside Java ........................................................ 658,635 618,212 606,864

Foreign ...................................................................

Asia ..................................................................... 2,565,151 2,112,937 1,919,864

Africa .................................................................. 110,886 88,881 126,392

Europe ................................................................. 606,823 650,925 580,160

America ............................................................... 158,718 197,180 333,699

Total ........................................................................ 6,807,579 5,729,506 5,560,902

All assets from the Company and its subsidiaries are located in Java.

39. COMMITMENTS AND AGREEMENTS

a. On May 12, 2004, the Company entered into a Manufacturing Cooperation Program Agreement (MCPA) andDistribution Cooperation Program Agreement (DCPA) with Michelin Asia-Pacific Pte. Ltd. The MCPA provides,among others, that the Company will manufacture selected brands of Michelin Group’s tyres, but excludingMichelin and BF Goodrich brands. In connection with the MCPA, on May 12, 2004, the Company and Michelinentered into an agreement, which provides, among others, that Michelin undertakes to purchase and pay for andthe Company undertakes to manufacture and deliver certain brands of tyres. The DCPA provides, among others,that the Company will have distribution rights to market and sell Michelin Group tyres in Indonesia, subject tocertain terms and conditions.

The above agreements are valid until December 31, 2010 and can be automatically extended for 5 years unlessterminated by both parties upon prior written consent.

b. Under the agreement between the Company and Inoue Rubber Co. Ltd., Japan, the Company obtained the right touse the IRC brand for bicycle and motorcycle tyres. This license is not transferable, will mature on January 1, 2005and is renewable every 5 years, except when terminated by either party.

The Company agreed to pay royalty equivalent to 0.5% to 1% of net sales of IRC brand motorcycle tyres and tubesand 0.5% of net sales of non-IRC brand motorcycle tyres and tubes.

Total royalty expense amounted to Rp 5,872 million in 2004, Rp 5,724 million and Rp 4,884 million in 2004, 2003and 2002, respectively.

c. Based on the agreement between the Company and GTPI with PT Tunas Sepadan Cemerlang Manajemen, theCompany and GTPI obtained management, administrative and technical expertise/services. The Company andGTPI pay monthly management fees amounting to US$3,000,000 per year and US$1,800,000 per year,respectively.

In 2004, the agreement was not renewed.

d. Under the agreement dated July 14, 1994 between a subsidiary (GTPI) and Goodyear Tire & Rubber Company,GTPI obtained the technical information and support for dipping machine. As a payment, GTPI should pay feeamounting to US$2,890,000, where US$300,000 each year were paid in 1994 and 1995 and eight installments ofUS$286,250 each year is being paid starting 1997 until 2004.

e. A subsidiary (MAWC) entered into an agreement to pay royalty to Central Motor Wheel Co. Ltd. (CMW) for 1.8%of net sales.

F-111

40. MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

At December 31, 2004, 2003 and 2002, the Company and its subsidiaries had monetary assets and liabilities in foreigncurrencies as follows:

2004 2003 2002

Foreigncurrency

Equivalentin

Foreigncurrency

Equivalentin

Foreigncurrency

Equivalentin

Rp’Million Rp’Million Rp’MillionAssets

Cash and cash equivalentsUSD.......................................... 4,141,346 38,473 18,264,317 154,607 16,515,394 147,648EUR.......................................... 497,706 6,297 1,266,742 13,482 1,347,000 12,621Others ....................................... — 114 — 411 — 404

Temporary investments —USD.......................................... 13,094,771 121,651 23,840,234 201,807 20,028,912 179,058

Trade accounts receivableUSD.......................................... 40,553,528 376,742 92,064,206 779,324 71,706,536 641,056JPY ........................................... 25,644,215 2,319 — — 2,768,700 209GBP .......................................... 3,709,551 66,358 3,578,960 53,958 2,338,872 33,527EUR.......................................... 8,381,633 106,045 9,156,688 97,455 9,547,660 89,458

Other accounts receivable fromthird parties .............................USD.......................................... 1,357,969 12,616 159,292 1,348 720 6EUR.......................................... 9,579 121 27,316 291 — —

Restricted cash in bankUSD.......................................... — — 95 1 95 1

Accounts receivable from relatedparties — USD.......................... 4,493,091 41,741 162,820,515 1,378,276 162,183,084 1,449,917

Deposits in suspended bankUSD.......................................... — — 23,577,055 199,580 23,577,055 210,779JPY ........................................... — — 61,737 5 61,737 5EUR.......................................... — — 125,812 1,339 125,812 1,179

Others — USD .............................. — — 33,252 281 33,252 297

Total assets ................................... 772,477 2,882,165 2,766,165

LiabilitiesTrade accounts payable

USD.......................................... 26,043,328 241,943 31,224,277 264,314 26,702,117 238,717JPY ........................................... 90,268,002 8,162 93,911,936 7,435 42,272,188 3,187SGD.......................................... 51,157 291 96,900 482 134,450 693EUR.......................................... 179,991 2,277 378,341 4,027 152,577 1,429Others ....................................... — 203 — 274 — 82

Other accounts payable to thirdpartiesUSD.......................................... 3,392,860 31,520 4,074,926 34,494 151,443 1,354JPY ........................................... — — 29,262,077 2,316 — —EUR.......................................... 112 1 34,867 371 — —

Accrued expensesUSD.......................................... 2,858,422 26,555 34,795,412 294,543 94,444,458 844,333EUR.......................................... — — 117,500 1,251 1,343,718 12,590JPY ........................................... — — — — 10,436,565 787

Current maturities of long-termliabilities — USD ..................... 72,997,123 678,143 69,133,035 585,211 34,282,074 306,482

Loans under restructuring process— netUSD.......................................... — — — — 248,303,145 2,219,830

Long-term liabilities — net ofcurrent maturitiesUSD.......................................... 322,481,002 2,995,849 600,724,539 5,085,133 413,271,968 3,694,651

Accounts payable to relatedparties — USD.......................... 46,129 429 305,950,039 2,589,867 305,950,039 2,735,193

Total liabilities ............................. 3,985,373 8,869,718 10,059,328

Net liabilities ............................... 3,212,896 5,987,553 7,293,163

F-112

The conversion rates used by the Company and its subsidiaries on December 31, 2004, 2003 and 2002 and the prevailingrates on March 31, 2005 were as follows:

December 31,

Foreign currency March 31, 2005 2004 2003 2002

Rp Rp Rp Rp

USD 1 ................................................. 9,480.00 9,290.00 8,465.00 8,940.00

SGD 1 ................................................. 5,748.60 5,685.45 4,976.50 5,154.73

JPY 1................................................... 88.48 90.42 79.17 75.40

EUR 1 ................................................. 12,249.12 12,652.06 10,643.06 9,369.58

AUD 1 ................................................. 7,313.36 7,242.03 6,347.00 5,064.97

GBP 1.................................................. 17,815.31 17,888.39 15,076.18 14,334.85

41. CONTINGENCIES

Prior to August 6, 1998, when MAWC was managed by Mr. Soewardi S. Tirta as President Director, there were severaltransactions which were not recorded and presented in MAWC’s financial statements with details as follows:

a. Credit agreement between MAWC with Indover Bank (Asia) Limited, Hongkong (Indover) based on creditagreement No. 141 dated June 14, 1994 amounting US$4,000,000. The estimated liability of MAWC as of August6, 2002 amounted to US$4,568,006.65 (principal of US$2,414,300 and interest of US$2,153,706.65). Since 1997,MAWC did not pay the loan principal and interest.

On January 22, 2003, Indover filed a request for MAWC’s bankruptcy. On such request, Indover, among others,declared about the existence of MAWC’s liability based on the expired Credit Agreement amounting toUS$3,929,153.24 as of September 17, 2002.

MAWC has made legal efforts to tackle the demand of Indover. District Court and the Chairman of Supreme Courthas refused the bankruptcy request of Indover. Furthermore, Indover request for juridical review, however onJanuary 6, 2004, the Supreme Court of the Republic of Indonesia has made a decision Reg. No. 014/PK/N/2003,refusing Indover’s request for Judicial review.

The MAWC’s Lawyers’ opinion is that the decision on the judicial review described above is a powerful andpermanent legal decision on the judicial review against MAWC which was requested by Indover.

b. Sale and lease-back transactions on MAWC’s velg machines with PT Garishindo Buana Finance Indonesia withtotal contract value of US$2,624,541.

Based on the report of evidence No. LP/60/11/1999/Siaga-III dated February 25, 1999, PT Garishindo BuanaFinance Indonesia reported that Mr. Soewardi S. Tirta and cohorts committed fraud and embezzlement.

For investigation purposes, the police requested the Chairman of the Surabaya State Court to confiscate themachinery and equipment as evidence. Based on decision No. 2184/IX/Pen.Pid/1999/PN.Sby dated September 21,1999, the Chairman agreed on the attachment of MAWC’s machines.

Up to the date of the independent auditors report, MAWC has not recorded the liabilities to Indover Ltd, Hongkong andPT Garishindo Buana Finance Indonesia because those transactions, according to management, are presumed to have beenmanaged and utilised by Mr. Soewardi S. Tirta for personal purposes, and the agreements are invalid in law since they wereexecuted without the approval of the MAWC’s commissioners, and the original invoices for the sale and lease-back ofmachinery are still with the Company, thus, those liabilities have not been reflected in the consolidated financial statements.

As discussed in Note 43, the Company has sold all of its shares of stocks in MAWC on February 28, 2005.

F-113

42. ACCOUNTING CHANGE

In 2004, the Company and its subsidiaries adopted the Revised Statement of Financial Accounting Standard (PSAK) No.24, regarding employee benefits. This change in accounting policy was applied retroactively thus the comparative amounts for2003 and 2002 have been restated accordingly.

The difference between present value of obligation at the date of adoption and past service cost that should be recognisedin later periods, was adjusted to the beginning retained earnings of 2002, after deducting the liability that has been recognisedunder the Company’s and its subsidiaries previous accounting policy.

Following is a summary of the significant ratios and accounts in the 2003 and 2002 consolidated financial statementsbefore and after the restatement:

2003

As restatedAs previously

reported



Deferred tax liabilities — net .......................................................................... 300,255 301,083

Total Liabilities ............................................................................................... 10,921,544 10,919,611

Minority interest in net assets of subsidiaries................................................... (74,570) (74,587)

Total Equity ..................................................................................................... 1,326,281 1,328,230


Minority interest in net income of subsidiaries ................................................ (155,690) (153,222)

Net income ...................................................................................................... 871,131 844,285

Deficit

Beginning of year ........................................................................................ (1,219,433) (1,190,638)

End of year.................................................................................................. (348,302) (346,353)

Basic earnings per share (in full Rupiah)

Including extraordinary item ........................................................................ 275 267

Excluding extraordinary item ....................................................................... 88 79

2002

As restatedAs previously

reported


Deferred tax assets — net ................................................................................ 251,396 238,184

Total Assets ..................................................................................................... 12,457,376 12,444,164


Deferred tax liabilities — net .......................................................................... 111,461 111,674

Total Liabilities ............................................................................................... 12,258,083 12,213,626

Minority interest in net assets of subsidiaries................................................... (230,260) (227,809)

Total Equity ..................................................................................................... 429,553 458,347


Minority interest in net income of subsidiaries ................................................ (400,147) (399,337)

Net income ...................................................................................................... 3,822,714 3,808,287

Deficit ............................................................................................................

Beginning of year ........................................................................................ (5,042,147) (4,998,926)

End of year.................................................................................................. (1,219,433) (1,190,638)

Basic earnings per share (in full Rupiah)

Including extraordinary item ........................................................................ 1,207 1,202

Excluding extraordinary item ....................................................................... 234 229

43. SUBSEQUENT EVENT

Based on Share Sale and Purchase Deed No. 57 dated February 28, 2005 from Fenny Tjitra SH, The Company sold allof its shares of stock in MAWC to PT Gema Arta Persada, third party at the amount of Rp 6,885 million (see Note 34).

F-114

44. FINANCIAL INFORMATION OF THE PARENT COMPANY ONLY

The financial information of the parent Company only presents balance sheets, statements of income, statements ofchanges in equity and statements of cash flows information in which investments in its subsidiaries were accounted for usingthe equity method.

Statements of Balance Sheet Information


2004 2003 2002


ASSETS

CURRENT ASSETSCash and cash equivalents.................................................. 88,153 103,385 106,181

Temporary investments....................................................... 184,752 356,393 408,954

Trade accounts receivable .................................................

Related parties ................................................................... 276 8,014 7,863

Third parties — net of allowance for doubtful accounts ofRp 62,004 million in 2004, Rp 36,802 million in 2003and Rp 1,071 million in 2002 ....................................... 514,665 413,780 310,351

Other accounts receivable from third parties — net ofallowance for doubtful accounts of Rp 14,462 million .. 58,614 47,534 41,281

Inventories ......................................................................... 658,062 314,867 312,747

Advances ........................................................................... 160,822 63,934 57,349

Prepaid taxes ..................................................................... 93,375 39,220 27,413

Prepaid expenses................................................................ 3,638 2,554 2,885

Total Current Assets........................................................... 1,762,357 1,349,681 1,275,024

NONCURRENT ASSETSRestricted cash in bank ...................................................... — 1 1

Accounts receivable from related parties ............................ 829,657 2,154,314 2,021,425

Deferred tax assets — net .................................................. 70,297 — 7,412

Investments in shares of stock ........................................... 429,665 32,851 31,143

Property, plant and equipment — net of accumulateddepreciation of Rp 1,735,539 million in 2004,Rp 1,052,363 million in 2003 and Rp 896,145 millionin 2002 ......................................................................... 3,105,788 2,253,608 2,301,286

Purchase advances ............................................................. — — 1,723

Deposits in suspended bank ............................................... — 64,383 65,898

Total Noncurrent Assets ..................................................... 4,435,407 4,505,157 4,428,888

TOTAL ASSETS ............................................................... 6,197,764 5,854,838 5,703,912

F-115


2004 2003 2002


LIABILITIES AND EQUITY

CURRENT LIABILITIESTrade accounts payable

Related parties ............................................................... 132,411 53,686 51,191

Third parties .................................................................. 202,208 122,137 128,453

Other accounts payable to third parties .............................. 125,469 167,063 62,755

Taxes payable .................................................................... 33,729 41,023 18,406

Dividends payable.............................................................. 1,577 1,577 1,577

Accrued expenses............................................................... 82,881 133,758 145,045

Sales advances ................................................................... 5,994 3,152 1,447

Current maturities of notes payable .................................... 472,404 302,211 186,119

Total Current Liabilities ..................................................... 1,056,673 824,607 594,993

NONCURRENT LIABILITIESDeferred tax liabilities — net ............................................ — 112,768 —

Long-term note payable — net of current maturity............. 2,995,849 2,487,031 3,000,684

Accounts payable to related parties .................................... 467 314,744 320,028

Dealers’ deposits ................................................................ 211,188 162,342 138,965

Post-employment benefits obligation .................................. 137,079 97,885 81,870

Total Noncurrent Liabilities ............................................... 3,344,583 3,174,770 3,541,547

EXCESS OF ACCUMULATED LOSSES OFSUBSIDIARIES OVER COST OF INVESTMENT ..... 111,971 529,545 1,137,324



Subscribed and paid-up — 3,168,000,000 shares ............ 1,584,000 1,584,000 1,584,000

Additional paid-in capital................................................... 51,500 51,500 51,500

Difference in value of restructuring transactions betweenentities under common control ...................................... (494,895) — —

Unrealised gain (loss) on increase (decrease) in valueof securities — net ....................................................... 1,686 9,990 (14,747)

Difference due to change of equity in subsidiary ............... 412,398 28,728 28,728

Retained earnings (Deficit) ................................................ 129,848 (348,302) (1,219,433)

Total Equity ....................................................................... 1,684,537 1,325,916 430,048

TOTAL LIABILITIES AND EQUITY .............................. 6,197,764 5,854,838 5,703,912

*) Presented in equity method

F-116

Statements of Income Information


2004 2003 2002


NET SALES ...................................................................... 3,325,816 2,981,470 2,831,796

COST OF SALES ............................................................. 2,732,558 2,303,452 2,075,449

GROSS PROFIT ............................................................... 593,258 678,018 756,347

OPERATING EXPENSESSelling ............................................................................... 150,994 242,304 190,168

General and administrative................................................. 138,246 168,898 132,347

Total Operating Expenses ................................................... 289,240 411,202 322,515

INCOME FROM OPERATIONS ...................................... 304,018 266,816 433,832

OTHER INCOME (CHARGES)Equity in net income of subsidiaries .................................. 361,415 607,618 1,713,050

Interest income .................................................................. 4,202 11,459 89,115

Gain (loss) on foreign exchange — net .............................. (154,976) 110,174 514,543

Interest expense ................................................................. (17,116) — (139,031)

Others — net ..................................................................... 30,566 32,206 64,311

Other Income — Net.......................................................... 224,091 761,457 2,241,988

EQUITY IN NET INCOME OF ASSOCIATEDCOMPANY .................................................................. 16,726 — —

INCOME BEFORE TAX EXPENSE ................................ 544,835 1,028,273 2,675,820

TAX EXPENSE................................................................. (66,685) (157,142) (380,987)

NET INCOME FROM ORDINARY ACTIVITIES ........... 478,150 871,131 2,294,833

EXTRAORDINARY ITEMRestructuring gain — net of restructuring charges.............. — — 1,527,881

NET INCOME .................................................................. 478,150 871,131 3,822,714

Statements of Changes in Equity Information


2004 2003 2002


CAPITAL STOCK — Rp 500 par value per share


Subscribed and paid-up — 3,168,000,000 shares ............ 1,584,000 1,584,000 1,584,000

Additional paid in capital................................................... 51,500 51,500 51,500

Difference in value of restructuring transactions betweenentities under common control ...................................... (494,895) — —

Unrealised gain (loss) on increase (decrease) in valueof securities — net ....................................................... 1,686 9,990 (14,747)

Difference due to change of equity in subsidiary ............... 412,398 28,728 28,728

RETAINED EARNINGS (DEFICIT)Balance at beginning of year ......................................... (348,302) (1,219,433) (4,998,926)

Effect of change in accounting for post-employmentbenefits .................................................................... — — (43,221)

Net income for the year ................................................. 478,150 871,131 3,822,714

Balance at end of year ................................................... 129,848 (348,302) (1,219,433)

TOTAL EQUITY .............................................................. 1,684,537 1,325,916 430,048

F-117

Statements of Cash Flows Information

2004 2003 2002


CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers............................................. 3,365,841 2,872,108 2,929,324

Cash paid to suppliers and employees ................................ (3,182,520) (2,475,475) (2,509,919)

Cash generated from operations ......................................... 183,321 396,633 419,405

Interest and financing charges paid .................................... (115,199) (79,637) (51,508)

Tax restitution received...................................................... 42,857 5,672 8,430

Income tax paid ................................................................. (42,434) (12,637) (7,474)

Net Cash Provided by Operating Activities ........................ 68,545 310,031 368,853

CASH FLOWS FROM INVESTING ACTIVITIESProceeds (placements) of temporary investments ................ 150,881 87,264 (176,985)

Interest received ................................................................ 4,415 6,901 8,131

Proceeds from sale of property, plant and equipment ......... 219 131 390

Acquisitions of property, plant and equipment.................... (107,585) (90,863) (79,006)

Net Cash Provided by (Used in) Investing Activities .......... 47,930 3,433 (247,470)

CASH FLOWS FROM FINANCING ACTIVITIESPayments of notes payable ................................................. (243,046) (128,163) —

Accounts receivable from and payable to related parties— net ........................................................................... 114,690 (187,614) (190,008)

Net Cash Used in Financing Activities ............................... (128,356) (315,777) (190,008)

NET DECREASE IN CASH AND CASHEQUIVALENTS ........................................................... (11,881) (2,313) (68,625)

CASH AND CASH EQUIVALENTS AT BEGINNINGOF YEAR .................................................................... 103,385 106,181 182,364

Effect of foreign exchange rate changes ............................. (3,351) (483) (5,033)

Restricted cash in bank ...................................................... — — (2,525)

CASH AND CASH EQUIVALENTS AT END OF YEAR 88,153 103,385 106,181

F-118

2004 2003 2002


SUPPLEMENTAL DISCLOSURESNoncash investing and financing activities:

Ordinary activities:

Increase of accounts payable to related parties whichoriginate from transfer of accounts receivable torelated parties owned by the subsidiaries .............. 2,387,342 — —

Settlement of accounts payable to related parties andaccrued expenses are as follows:

Transfer of accounts receivable from relatedparties .............................................................. 2,199,971 — —

Transfer of deposits in suspended bank ................. 65,612 — —

Transfer of temporary investment —commercial paper ............................................. 43,125 — —

Issuance of long-term notes payable ...................... 469,050 — —

Increase of accounts receivable from related partiesthrough issuance of long-term notes payable ........ 278,700 — —

Increase in property, plant and equipment throughaccounts receivable from related parties ............... 1,688,627 — —

Increase of accounts receivable from related partiesthrough sale of subsidiaries .................................. 8,369 — —

Increase in investments in shares of stock throughdifference due to change of equity in subsidiary .. 383,670 — —

Bank loan settlement funds through investmentproceeds ............................................................... — — 1,561,048

Increase in property, plant and equipment throughother accounts payable to third parties ................. — 16,091 —

Increase in accounts receivable from related partiesfrom capitalisation of interest income .................. — 2,941 —

Increase in property, plant and equipment throughpurchase advances ................................................ — 1,723 —

Reclassifications of restructured bank loans tolong-term notes payable ....................................... — — 2,726,823

Interest expense on notes payable, bank loans andlong-term bank loans added to loan principal ....... — — 80,384

Increase in long-term accounts receivable fromrelated parties from capitalised interest income .... — — 45,437

Increase in property, plant and equipment fromsettlement of purchase advances ........................... — — 8,023

Extraordinary item:

Decrease in short-term and long-term liabilities inconnection with credit restructuring ................. — — 1,531,015

*) Presented in equity method

45. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements on pages F-56 to F-119 were approved by the Company’s Directors and authorisedfor issue on March 31, 2005.

F-119

REGISTERED OFFICE OF THE ISSUERGT 2005 Bonds B.V.

Prof. J.H. Bavincklaan 7,1183 AT Amstelveen

The Netherlands

REGISTERED OFFICE OF THE GUARANTORPT Gajah Tunggal Tbk

Wisma Hayam Wuruk 10th FloorJl. Hayam Wuruk No. 8

Jakarta 10120Indonesia

PRINCIPAL PAYING AGENTThe Hongkong and Shanghai Banking

Corporation LimitedLevel 30,

HSBC Main Building1 Queen’s Road Central

Hong Kong

REGISTRARThe Hongkong and Shanghai Banking



Hong Kong

TRANSFER AGENTThe Hongkong and Shanghai Banking



Hong Kong

TRUSTEEThe Hongkong and Shanghai Banking



Hong Kong

LEGAL ADVISORS

To the Issuer and the Guarantor as to English law:Latham & Watkins LLP80 Raffles Place #14-20

UOB Plaza 2Singapore 048624

To the Issuer and the Guarantoras to Dutch law:

Loyens & Loeff N.V.80 Raffles Place

#14-06 UOB Plaza 1Singapore, 048624

To the Joint Lead Managersas to Indonesian law:

Makes & Partners Law FirmMenara Batavia 7th Floor

Jl. K.H. Mas Mansyur Kav.126Jakarta 10220, Indonesia

To the Joint Lead Managers as to English law:Milbank, Tweed, Hadley & McCloy LLP

30 Raffles Place #14-00Caltex House

Singapore 048622

To the Trustee as to English law:Freshfields Bruckhaus Deringer

11/F Two Exchange SquareCentral

Hong Kong

AUDITORS TO THE GUARANTORHans Tuanakotta Mustofa & Halim

(formerly Hans Tuanakotta & Mustofa)(member firm of Deloitte Touche Tohmatsu)

Registered Public AccountantsWisma Antara, 12th Floor

Jl Medan Merdeka Selatan No. 17Jakarta 10110

Indonesia

SINGAPORE LISTING AGENTVenture Law LLC

50 Raffles Place#31-01 Singapore Land Tower

Singapore 048623

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