annual report - asia pacific fibers...annual report 2013 3 company description pt asia pacific...

Polymer & Fibers -

Desa Kiara Payung,Kecamatan Klari,Karawang 41300

INDONESIA

Tel: + 62 267 431971 / 74Fax: + 62 267 431970

Filament Yarns -

Jalan Raya Kaliwungu KM19,Kendal, Central Jawa,

Semarang 51372INDONESIA

Tel: + 62 24 8660272Fax: + 62 24 8660274 / 75

Corporate Office:

PT Asia Pacific Fibers Tbk.

The East, 35th Floor, Unit 5-6-7,Jl. DR Ide Anak Agung Gde Agung, Kav E 3.2, No. 1,

Jakarta 12950, INDONESIA

Tel: + 62 21 57938555Fax: + 62 21 57938565

Email: [email protected]

Manufacturing facilities:

www.asiapacificfibers.com

Annual Report 2013

Asia Pacific Fibers

PT. ASIA PACIFIC FIBERS Tbk.

ANNUAL REPORT

2 ANNUAL REPORT 2013

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ANNUAL REPORT 2013 3

Company Description

PT Asia Pacific Fibers Tbk (formerly PT Polysindo Eka Perkasa Tbk), established in 1984, is a leading polyester manufacturer in Indonesia. Its manufacturing operations span the entire polyester production chain, from raw materials to end products, ensuring quality and consistency. PT Asia Pacific Fibers is the only integrated producer of polyester in Indonesia. The manufacturing facility for PTA, continuous polymer, and staple fiber is located in Karawang, West Jawa. Filament yarn, produced at the largest yarn facility in Indonesia, is located in Kendal, Central Jawa. PT Asia Pacific Fibers’ current products include Purified Terephthalic Acid (PTA), polyester chips, polyester staple fiber, polyester filament yarn, and performance fabrics. The Company´s products are marketed and sold both in domestic and international markets. The following is the report on the business performance of PT Asia Pacific Fibers Tbk in 2013. The term “Company” used throughout the report refers to PT Asia Pacific Fibers Tbk and all its subsidiaries. The term “APF” refers to PT Asia Pacific Fibers Tbk as a stand-alone entity, while the term “Texmaco Jaya” refers exclusively to PT Texmaco Jaya Tbk.


Financial Highlights

The following table sets forth the financial highlights of the Company for the years ended 31

st December

2009 to 2013. The Company’s current auditors are Drs. Hendrawinata Eddy & Siddhartha (Indonesian Member firm of Kreston International)

Notes: (1)

Current Assets minus Current Liabilities (2)

As Restated


Message from the President Commissioner

Dear Shareholders, The polyester industry witnessed a global down cycle in 2013 triggered by the over capacity of PTA in Asia, mainly led by China. Polyester chain margins continued to remain depressed throughout the year primarily driven by crash in PTA margins. Addition of huge extra capacity in PTA and polyester led to lower operating rates worldwide. These factors coupled with a slowdown in consumption leading to stiff price competition and a sharp fall in margins. Overall growth of polyester production has experienced a slower phase growing at 4.6% and 5.5% year on year in 2012 and 2013 respectively. We expect that 2014 should end up being a pivotal year of change in terms of polyester growth for fibers, PET and film. The performance of PT Asia Pacific Fibers Tbk (the “Company”) during the 2013 has been severely affected by the above factors leading to a significant drop in profitability. EBITDA for the year dipped to US$9.57 million on sales of US$565 million. Nonetheless, the Company was able to operate both its Karawang and Kendal plants at optimum capacity through the year primarily supported by sustained domestic market demand and its strong customer base. The Company increased its supply of its PSF and PFY products to domestic market catering to over 200 downstream units and continued to provide essential raw material to the textiles and clothing sector in Indonesia. Despite the difficult business conditions, the Company is firmly moving ahead in its strategic objective to emerge as a “Product Company”. Towards this end, the Company successfully completed the “Automotive Yarn” project at its Kendal unit, with financial assistance from its majority creditors/shareholders, Damiano Investments BV. This project will enable the Company to diversify into specialty and value added products catering to niche markets. The global economic recovery has been much slower in 2013 than expected. While the US economy has strengthened and European economics are showing signs of escaping from their credit crisis, emerging market economies have started slowing down. The global economic environment has become more uncertain on account of this shift in the economic landscape. In line with this sluggish global economic growth and heightened volatility in the financial markets, commodity prices have continued their downward trend, confirming the end of the commodity super-cycle. Indonesia's economy, Southeast Asia's largest, grew at its slowest pace in four years in 2013, but still managed to beat expectations and showed signs of improvement despite being hard hit by emerging market turmoil. Gross Domestic Product (GDP) moderated to 5.78% in 2013 from an average growth of 6.3% over the previous 3 years, as investments decelerated sharply. Another major challenge faced by the country during the year was surging inflation driven by a fuel price hike and a jump in food prices. Indonesian inflation rates hit a high of 8.4% in the year 2013 against the central bank’s target of 5.5%. However, private consumption continued to remain robust, expanding by 5.3% and contributing to half of the growth in GDP on the expenditure side. This private consumption growth represented a significant driving force for the Indonesian economy. Due to the sharp decline in commodity prices globally and the economic slow down, Indonesia’s exports in value terms have fallen for a second year in a row, to US$182.57 billion in 2013 from US$190.02 billion (-3.92%) with the textiles sector accounted for US$13.06 billion (7.15% of total exports). On the other hand, Indonesian imports for the year declined to US$186.63 billion from US$191.69 billion (-2.64%) with the import of capital goods falling significantly by 17.35% indicating a slowdown in capital formation needed to boost domestic production.


Bank Indonesia, the central bank, raised interest rates by 175 basis points to 7.5% since June to restrain domestic demand at a time of rising inflation and a widening current account deficit. As was the case in many emerging markets in 2013, Indonesia saw its currency weakened sharply and over the course of the year and the Rupiah fell by around 25% against the US dollar.

During 2013, the Company continued its efforts to restructure its secured debts bilaterally with its secured creditors and PT Perusahaan Pengelola Aset (Persero) (PPA). In the process, the Company has recently submitted an updated Restructuring Proposal and sought the help of Ministry of Finance of the Government of Indonesia to resolve the issue very soon. If this restructuring can be completed, the Company will be in a strong position to significantly improve its financial standing and will be able to implement its long-term growth plans. We thank Mr. Masjhud Ali, who served as Director of the Company from 2002, and has retired from Board of Directors of the Company in June 2013.We also welcome Mr. Bonar Firman Hasiholan Sirait has been appointed as Director in the Annual General Meeting of the Shareholders held on 13thJune 2013. The Board of Commissioners wishes to place on record its appreciation to Mr. Masjhud Ali for his contribution to the Company during his tenure and welcome Mr. Bonar as Director. The Board of Commissioners also wishes to extend their appreciation to the Board of Directors and all the employees of the Company for their commitment and dedication throughout 2013, which was a challenging year where the Company continued to strengthen its strategic market position, whilst seeking secured debt-restructuring solutions. The Company continued to improve its corporate governance standards and ensure compliance with the various regulations and requirements promulgated by BAPEPAM and BEI. Finally, we wish to acknowledge our sincere gratitude to our customers, suppliers, and shareholders for their continued support and the confidence they have entrusted to the Company in this critical transition period.

Robert Clive Appleby

President Commissioner


Message to Shareholders

Dear Shareholders: Moderating investment, sluggish external demand and ending of a commodity boom curtailed growth in Southeast Asia’s biggest economy in 2013. Amidst heightened volatility in the financial market and slower Global economic recovery, Indonesia’s economic growth recorded its slowest pace in four years. Indonesia’s GDP grew 5.78% as compared to 6.23% in the previous year. Growth in fixed investments slowed to 4.7% in 2013 after a strong growth of about 9% annually in 2010- 2012. This clearly reflected the impact of higher interest rates and weakening of the currency value on the investment front. However, Indonesia’s domestic consumption continued to remain resilient, strongly contributing to the GDP growth.

Indonesia has also been hard hit by slowing demand for its key commodities exports, particularly from China due to its economic slowdown as well as the fall in commodity prices world over. Country’ exports has declined for a second successive year to US$182.57 billion as compared to US$190.02 billion, down by 3.92% from last year. Imports also had declined US$186.63 billion in 2013, registering a drop of 2.64% from the previous year. Trade deficit had widened to a record level of US$4.10 billion for the full year 2013, following US$1.70 billion deficit in 2012. A large current account deficit, surging inflation after withdrawal of fuel subsidy, which hit a record high of 8.4% had added to the pressure on the economic growth. The Indonesian rupiah, as a result of worsening fundamentals and concerns over the risk of capital outflows triggered by the U.S. Fed tapering, weakened to 12,171 rupiahs per dollar at the end of 2013, compared to 9,793 rupiah at the end of 2012- fall of over 25%

To shore up the economy and to lift the battered currency, Bank of Indonesia raised its benchmark rate by 175 basis points since June to the current 7.5%. Jakarta stock exchange plummeted from a record high of over 5000 to below 4000 mark in September, currently recovered to 4870. Polyester Industry: Global and Domestic Trends Year 2013 was a very challenging for the trade and business in general and for Polyester sector in particular where it undergone very turbulent period. The Global economic slowdown had an impending and prolonged impact on the demand that has been further exacerbated by the excessive supply due to over capacity of PTA, Polyester Fiber and Filament yarn in Asia, mainly led by China. This has triggered a global down-cycle in the polyester chain, which has been lasting for an abnormally longer period and where many of the Asian and Global manufacturers suffered considerably. The product spreads across the polyester value chain continued to remain depressed due to stiff competition and the softening trend in cotton and Rayon prices during the year. Polyester and Raw material chain apparently reflect the current uncertainty and slow down of the global economy and the overall growth of polyester production has slowed down in the past two years 2012 and 2013. With the effective capacity of about 17 million tons added in the last two years, PTA operating dropped to 76% in 2013 from 90.2% and likely to fall below 74% in 2014 with rationalization of the regional capacities. Polyester polymer production reaching 61.68 million tons, a growth of 3.2 million tons or 5.5% in the year 2013, marginally improved from4.6% in 2012 as the global economy recovered in the second half of 2013. Longer-term growth rates are trending better with over 6% look impressive compared with other major petrochemical related business sectors.


Soft outlook for crude, rationalization of PTA capacities supported by softness in PX should ensure stable price structure for polyester in 2014 –15, while the Polyester consumption is expected to remain strong and grow over 6%. However, Cotton prices are expected to be more competitive with manmade fibers in view of the excess production and bulging global cotton inventory. This will put pressure on cotton prices and hence any significant upside in polyester chain margins seems to be limited in the near term. On the other hand, domestic market continued to grow, strongly driven by the sustained domestic demand with per-capita consumption rose to 6.84 Kg in 2013 from 6.22 Kg for the previous year. While the domestic demand for polyester staple fiber increased by 12%, overshooting the production increase of 5% in 2013, leading to significant increase in imports. The filament yarn demand rose by 6%, while the increase in production was only 3% in 2013. With the imbalance in the Demand/supply gap of both Fiber and Filament yarn, Domestic polyester upstream sector had resorted to capacity expansion aimed at making Indonesia self sufficient in PSF & PFY and to provide import substitution primarily. Cheap imports of fiber and Filament yarn in the past have brought pressure on the domestic prices and the industry is taking appropriate trade remedies in terms of anti-dumping duties to overcome this problem. Supported by a fairly good and sustained economic growth of 5.78% in 2013 and projected growth of 5.7% in 2014 with the inflation under check, the consumer confidence level continues to remain robust boosting the domestic consumption. The per capita consumption of textiles is projected to move up to 7.2 Kg in 2014 with corresponding increase in polyester consumption. Textile exports in value terms had increased to US$13.12 billion (4.5% increase) in 2013 as compared to US$12.56 billion in 2012, while the total volume of textile exports increased significantly by 13.2%, mainly driven by yarn and fabrics exports. Whereas, textile imports in 2013 has fallen by 9% resulting in a net trade surplus of US$5.90 billion in 2013, significantly contributing to the trade account balance. Company Performance The Company’s performance was significantly impacted by the down turn in the polyester chain margins, triggered by unprecedented fall in PTA spreads coupled with rising energy costs and high inflation prevailed during the year 2013; Slow recovery of global economy, highly volatile financial markets leading to tight liquidity have further dampened the demand outlook. Despite the adverse trade conditions, the Company was able to operate both of its plants at optimum capacity with high standards of efficiency, primarily supported by the sustained demand from its customer base. The Company has posted a sales turn over of US$572 million as compared to US$600 million in the previous year. Despite increased volume of production and sales, the total sales revenue declined due to drop in selling prices for all products due to fall in PTA prices and margins during the year. The company has therefore ended the year with an operating loss of US$19.85 million as compared to the operating loss of US$23.51 million for the previous year. Reduced operating loss during the year was primarily on account of foreign exchange gain of US$31.41 million consequent to steep fall in Rupiah value. The Company’s EBITDA for the year 2013 has, therefore, fallen significantly to US$9.57million as compared to an EBITDA of US$35.86 million for 2012. Performance fabric division of the Company continue to sustain its good performance during the year 2013 by achieving sales revenue of US$13.69 million with an EBITDA of US$1.57 million. Despite the tough business conditions and tight cash flow situation, the Company continued to move towards its committed strategic direction of product and market diversification with its focused Capex investments for specialty and value added products. We are pleased to inform that the Company has successfully completed and commissioned its “Automotive Yarn Project” at its Kendal unit in November 2013. The Company has also taken up certain critical de-bottlenecking of its Polymer and Fiber Plants at Karawang with a view to optimize its capacity and to go in for specialty polymer and fiber. With the benefits of the on going Capex projects accruing to the Company effective 2014, the Company expects to gain significant contribution to its future earnings.


Outlook Global economy is expected to grow by 3.7% in 2014 and 3.9% in 2015, primarily due to recovery in advanced economies and the emerging economies to expand by 5.10% and 5.4% respectively. Indonesian economy is projected to grow moderately at 5.3% - 5.5% in 2014 and 2015 and the growth will be primarily driven by strong domestic consumptions and modest increase in exports to its major trading partners. The Indonesian rupiah (IDR) is likely to remain under pressure in early 2014 amid uncertainty over the election results and U.S. Fed tapering. Domestic environment for manufacturing sectors expect to pass through a tough phase with the proposed hike in energy and manpower costs. Both Gas prices and Electricity tariff are slated for a significant increase in 2014 putting pressure on cost competitiveness of the domestic manufacturers. Industry is taking up the matter with the ministry for phasing out the hike over a period of time instead at one go. With regard to polyester upstream sector, with the additional capacity of Fiber and Filament yarn going on stream, domestic market is expected to face a stiff price competition for commodity products. However, the Company with its strong customer base, and with a diversified product mix is firmly placed to remain competitive and maintain its leadership position. The delay in finding a solution to its long pending secured debt restructuring continues to remain a set back to carry out its growth plans. To expedite the process, the Company has recently submitted an updated restructuring plan with alternate option to its secured creditors that are under active consideration. Post restructure, the Company will have a sound and healthy financial base with its debts brought down to sustainable levels. This would in turn enable the company to raise finance from market to meet its short and long terms investments to fund its growth plans. All of these efforts will improve the performance of the Company significantly, and to reposition it to the forefront of the polyester industry and retain its strategic and leadership position. We would like to take this opportunity to express our sincere gratitude to our Shareholders, Customers, Suppliers, Bankers, and Employees who continue to support the Company during this challenging period and continue to sustain our strategic position in the polyester industry.

V. Ravi Shankar

President Director


Management of the Company

Commissioners and Directors

In accordance with its Articles of Association, Asia Pacific Fibers is managed by a Board of Directors under the supervision of a Board of Commissioners. The members of the Board of Commissioners and the Board of Directors are chosen and appointed by the shareholders of APF at the Annual General Meeting. The Articles of Association permit the President Director to act alone, or where the President Director is unable to act, any two directors to represent and act on behalf of the Board of Directors. The Current members of the Board of Commissioners of APF are as follows:

Name Age Principal Occupation

Robert Clive Appleby 51 President Commissioner of APF since 2007. Director and Chief Investment officer of Asia Debt Management Hongkong Limited (ADM). Prior to joining ADM, he was a Managing Director of the Asian Fixed Income Division at Credit Agricole Indosuez specializing in structured Asian Debt.

Christopher Robert Botsford 52 Commissioner of APF since 2007. Chief Executive Officer and Director of Asia Debt

Management Hongkong Limited (ADM). Prior to establishing ADM, he ran the Asia-Pacific regional debt and derivatives operations for Republic National Bank of New York which provided hedging and other debt management structures to regional users.

Robert McCarthy 59 Commissioner of APF since June 2008. He holds a Master in Business Administration from Yale School of Management, and a Masters Degree in Medieval History from Columbia University. He manages distressed investments for the Spinnaker Funds. He was founding director of Morgan Grenfell and worked as director of Deutsche Bank.

Dono Iskandar Djojosubroto 69 Commissioner of APF since February 2008. He holds a degree from University of Indonesia and MA & PhD in Economics from The University of Illinois, USA. Previously he worked as the Secretary General of the Minister of Finance, Deputy Governor of Bank Indonesia, and Executive Director representing twelve Asian Countries in the IMF. He was also a member of Board of Commissioners and Supervisory Board in various Government Institutions, such as PT Jasindo, PT Jasa Marga, Bank BRI and Bank BTN.


Timbul Thomas Lubis SH, LLM 61 Commissioner of APF since 1990. Partner of Lubis Ganie & Surowidjojo Law Firm since 1982.

He is a graduate of University of Indonesia and University of Washington Law School.

Kamun Cheong 34 Commissioner of APF since 2012. She is a bachelor degree holder in Commerce (Honours)

from the University of Melbourne. Currently involved in the analysis of equity, credit and private investments in South East Asia region for Spinnaker Capital funds. Prior to joining Spinnaker she worked in Deloitte & Touché and ABN handling financial advisory services and Debt/Investment management functions.


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

Name Age Principal Occupation

V. Ravi Shankar 50 President Director of APF since 2002. He is a graduate of

Production Engineering. He has also completed Advanced Management Programme from Harvard University in 2004. Prior to joining APF, he managed the Textiles Division of the subsidiary Company of APF and also worked in a machinery manufacturing company in Indonesia and India.

Bonar Firman Hasiholan Sirait 66 Director of APF since 2013. He holds post-graduate degree in

Economics from University of Indonesia and completed Ph.D in Economics from the same University. He also attended various advanced management courses on HRD, Business re-engineering, Personal management, Strategic Management etc., in Singapore, Malaysia, France, Switzerland and Canada. He was heading the HRD of APF since 2004 as a Senior Vice President and was head of HRD of Texmaco Group since 1993. Prior to that he was Personnel Director in Bata Shoes Company.

S. Jegatheesan 64 Director of APF since 2002. He is a graduate in Electrical

Engineering and has been with APF since 1989. Prior to joining APF, he was General Manager of a yarn producing company and worked as Project Manager for an engineering company in India.

Peter Vinzenz Merkle 56 Director of APF since 2007. He joined APF in 2000 as head of

the Karawang unit producing PTA, Polymer, and Fiber. Prior to joining APF, he worked in various renowned chemical and fiber companies such as Trevira Group and Hoechst AG as the head of their R&D and Technology Development Divisions. He has an MS in Chemical Engineering from University of Stuttgart, Germany, specializing in polymer processing and environmental technologies.


Annual General Meeting of Shareholders

Board of Commissioner

• ROBERT C. APPLEBY

• CHRISTOPHER ROBERT BOTSFORD

• ROBERT McCARTHY

• KAMUN CHEONG

• TIMBUL THOMAS LUBIS

• DONO ISKANDAR D.

President DirectorV. RAVI SHANKAR

DirectorBONAR F.H.

SIRAIT

Director of SBU Filament YarnS. JEGATHEESAN

H.R. & I.R.Corporate

ITCorporate

FinanceInternal

AuditCorporate Secretary

Performance Fabric Division

Director of SBU Filament Yarn/Chemical & Fiber

Product-ion

Engineer-ing

Account-ing

PPC/Desp/

Material Control

R&D/CTS/

Product Dev.

Admin./Security/

Transport/P.R.

Information Technology

HRD &

LD

Market- ing

Director of SBU Chemical & Fiber

PETER V. MERKLE

ORGANISATION STRUCTURE


Management Report

An Overview of Polyester Industry

Amid continued Global Economic downturn, Indonesia’s GDP growth fell to 5.80% in 2013 as against 6.20% in 2012. There was a sharp decline in the exports in 2013, which stood at USD 182.57 billion as against the exports of USD 190.02 billion in 2012. The inflation shot up to 8.37% from 4.32% in 2012 triggered by removal of subsidy for oil. In spite of adverse conditions, Indonesian economy fared better than other ASEAN countries. This resilience to global economic slowdown was powered by strong growth in domestic consumption. The economic outlook for Indonesia in 2014 remains positive despite slow recovery in global economy, primarily driven by modest investment growth, sustained domestic consumption and projected rise in exports. The inflation is expected to come under control at 5% in the first quarter of 2014. Polyester and raw material chain continued to reflect the uncertainty of the global economy. Overall growth of polyester production has slowed down to 5.50% in 2013. The softening of cotton price due to its increased production and supplies and depressed PTA margins have impacted the performance of Polyester industry globally. Polyester production growth in 2013 has certainly slowed to reflect the economic conditions but the industry continues to add significant capacity with over 12-16 million tons of new Fiber and Filament Yarn capacities still being added in the 2013-2017 timeframe, most of which again is being built in Asia. With the rationalization of capacity and maintaining the utilization rate of PTA production, the PTA margin is expected to improve from 2014 with the resultant margin improvement in Polyester products.

Global petroleum prices have been less volatile during 2013 and the price has increased from a level of USD 91.8/barrel (WTI) to USD 98.1/barrel in 2013. It is now hovering around USD 100/barrel level. The Company’s primary raw material, Paraxylene and MEG price of which remained at a high level during 2013 without a corresponding increase in the finished polyester products due to resistance to price increase in the downstream. The price levels of Paraxylene and MEG are expected to soften in 2014 from Q2 with increased supply position along with improvement in PTA margin over Paraxylene.

Domestic market continued to remain strong with the increase in the per capita consumption of textile products from 6.22 kgs in 2012 to 6.84 kgs in 2013. Domestic demand for both polyester staple fiber and filament yarn increased significantly by 11.8% and 6.6% respectively in the year 2013 over previous year. The import of staple fiber has also increased considerably during 2013 by 25% and filament yarn imports increased by 8.4% over previous year. The increase in the imports is exerting pressure on the domestic selling price and consequently margins. The domestic demand for polyester is expected to grow in the near term, prices and margins will be under pressure due to stiff competition and cheap imports from China and Malaysia.

PTA (Pure Therephthalic Acid) & Polymer

The global production of PTA in 2013 grew by around 7.7% or just over 3.8 million tons to reach 53.2 million tons. The markets are being influenced by massive new PTA investments taking place globally and it is expected that some rationalization will happen going forward with a sharp reduction in the utilization rate from a level of 84% in 2012 to 76% in 2013. It is estimated that total effective PTA capacity will grow by 15 million tons from 53.2 million tons in 2013 to around 67.8 million tons in 2017.


Staple Fiber

Global polyester staple fiber production in 2013 was estimated to be 15.81 million tons as compared to 14.89 million tons in 2012, registering a growth of 6% over 2012. The Company’s staple fiber production in the year 2013 increased by 4.8% over the previous year mainly contributed by the capacity increase supported by steady demand in the domestic market.

Filament Yarn

In 2013, global polyester filament yarn production was estimated at 28.32 million tons as compared to 27.10 million tons in 2012, thus registering a growth of around 4.5%. The Company’s filament yarn production continues to remain at optimum levels with increased value added and specialty yarn production.

Performance Fabric

The performance fabric division continued to operate through a production tolling arrangement with its erstwhile subsidiary, Texmaco Jaya. Even after the bankruptcy of PT Texmaco Jaya, the tolling arrangements continued with the approval of the commercial court. The production and sales of performance fabrics optimized during the year 2013.

Product Range

The Company’s product range includes:


Marketing Distribution

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

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

APF continues to focus its efforts to maintain the leadership position in the domestic market and increase its market share for its products filament yarn and staple fiber. The Company has allocated higher volume of production to domestic market to meet the increased requirement of the down stream customers. Domestic sale proportion has been around 84% in 2013.

Human Resources

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

Environment

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

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

The assets of the Company, which essentially consist of land, building and machinery such as PTA facilities, Polymer facilities, fiber line and filament yarn equipment &other utilities, are located in two manufacturing facilities in Kaliwungu, in Central Java, and Karawang, in West Java.

Hypothecated Fixed Assets

APF has production facilities at Karawang and Kaliwungu. Land totaling 26.40 hectares, with buildings, plant and equipment and located in Kaliwungu facilities and Land totaling 17.67 hectares located at Karawang are hypothecated to PPA. Land totaling 26.62 hectares, with buildings, and production facilities at Karawang are secured to the Company’s Secured Notes.


Dividend Policy

APF has historically paid an annual dividend after approval of the Company’s shareholders at the Annual General Meeting of the shareholders. However in view of the current financial situation, APF has not declared a dividend for 2013.

Stock Price Performance

Restructuring Status & Financing Activities

The Company has recently submitted an updated restructuring plan with alternate options to its secured creditors and PPA. While the majority of its secured creditors favorably considering the proposal, response from Ministry of Finance is still awaited. The Company is engaged in active negotiations with the Governmental Authorities to find a solution to this long pending issue. In the meantime, Damiano Investments BV, the majority shareholder is also the majority holder of secured debts other than the PPA portion,, has provided a working capital and Letter of Credit facilities for the procurement of raw materials. This has primarily helped the Company’s to sustain its operations and maintain optimum capacity utilization of its production facilities. Damiano Investments BV have also extended Capex loan to fund its capital expenditure projects that are critical to improve the competitiveness of the Company.

In view of its tight working capital position and non completion of secured debt restructuring, In January 2012, the Company sought and obtained approval of its unsecured creditors for extension 3 years time and re-schedule principal repayments commencing from February 2015 instead of February 2012. The majority New Note holders have approved the above request by the Company in their meeting held on 16

th January 2012 in Singapore. Due to tight cash flow situation, the Company sought and

obtained the approval of its unsecured creditors for capitalizing the interest on New Notes for the last 2 quarters ending in August and November 2013. The Company has four subsidiaries: PT Texmaco Jaya Tbk. (Bankrupt – under liquidation), Polysindo International Finance Company BV. (PIFC), Polysindo Mauritius Ltd., and PT Eastindo Polymertama (Eastindo).


PT Texmaco Jaya Tbk (Bankrupt – under liquidation)

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

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

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

PT EastindoPolymertama (Eastindo)

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


Management Discussion and Analysis

Overview The revenue of the company is derived from the sale of filament yarn, staple fiber, polyester chips, and performance fabrics, both in domestic and export markets. Total sales in 2013 have decreased from the previous year mainly due to drop in selling prices of filament yarn and staple fiber. The price drop on account of declining polyester chain margins has caused drop in the sales revenue for the year. The rupiah weakened drastically during the year and closed at Rp. 12,189 per USD as at 31st December 2013, compared to Rp. 9,670 per USD in 2012. Pursuant to the Indonesian accounting standards 10 (PASK 10), the Company had changed the reporting currency from IDR to USD with effect from 1st January 2012 and had accordingly published the financial statements in US Dollar. Consequently the assets and liabilities of the Company was recalculated and restated wherever necessitated.

Results of Operations

In 2013, net sales revenue was USD 565.14 million as compared to USD 599.33 million in 2012. The decline in net sales in 2013 was primarily on account of drop in in the selling prices for polyester filament yarn and staple fiber during the year. The drop in selling prices was on account of significant reduction in polyester chain margins triggered by falling PTA prices and margins. Export sales were USD 87.159 million or 15.40% of the net sales, and domestic sales were USD 477.99 million accounting for 84.60% of the net sales. Other operational revenue was USD 6.60 million, realized through the sale of recycle products, indirect materials and waste/scrap.

Gross Profit/ (Loss)

The Company incurred a Gross loss of USD 20.57 million in 2013, as compared to a Gross loss of USD 5.98 Million in 2012. This increase gross loss was mainly due to significant drop is price realization and margins for all polyester products during the year caused by weak market conditions coupled with falling polyester chain margins as explained in the foregoing paragraphs.

Operating Profit / (loss)

The operations of the company had, therefore resulted in an operating loss in 2013 at USD 19.85 million compared to USD 23.51 million in 2012. The operating loss during the year was after considering the foreign exchange gain of US$ 31.41 million and a gain of USD 11.82 million in 2012. Selling and General Administrative overhead in the year 2013 was USD 31.47 million as compared to USD 31.90 million in 2012.

Net Income

The Company incurred net loss of USD 30.06 million in 2013, as compared to a net loss of USD 32.12 million in 2012. However, the Company posted an EBITDA of USD 9.57 million in 2012, compared to an EBITDA of USD 36.84 million in 2012.

Business Risks

Polyester and raw material chain continued to reflect the uncertainty of the global economy and the anticipation of likely demand growth in the major economies like China and India. Overall growth of


polyester production has slowed down to 5.50% in 2013. PTA margins continue to remain depressed through the year and hit the bottom by the end of the year. Worldwide lower operating rates of polyester production capacity putting further downward pressure on polyester chain margins. Cotton prices also remained soft during the year with increased production and supply. These factors impacted the performance of polyester industry globally. Global economic downturns caused by European Debt concerns and US economic concerns continued to impact the Global textile trade leading to sluggish demand outlook. PTA margins are expected to recover in 2014 and improve further beyond 2015 with rationalization of PTA capacities coupled with improved downstream polyester products consumption. The supply of Paraxylene, which was projected to ease in 2013 with addition of new capacities continued to remain tight due to delays in commissioning; This has resulted in prices of PX remaining relatively strong through the year unable to be passed on to the Customer. In 2014, it is expected that Paraxylene supply and price levels will soften with the start up of new capacities and resultant improvement in PTA margins. The Company is still depending on pre-financing arrangements, in addition to the working capital facility provided by the majority owner, for the procurement of raw materials and in the absence of a conventional source of working capital through normal banking channels. A formal working capital loan through a bank will be possible only when the secured debt is restructured.

Debt Restructuring

The secured debt restructuring has not yet been completed, as the Company still awaits a response from the PPA/MoF. Damiano Investments BV, the majority shareholders is also the majority holders of secured debt, other than the PPA/MoF portion. Damiano Investments BV continued to provide working capital loans and a Letter of Credit facility for the procurement of raw materials. This has helped the Company to maintain optimum capacity utilization of the Company’s production facilities.

Corporate Governance

The Company has complied with the various statutory requirements of Indonesian Corporate Law, Capital Market Law, and Stock Exchange Regulations. The Board of Commissioners is represented by eminent people in the field of Finance, Economics, and Law, in addition to the majority shareholders’ representatives. The Board of Commissioners meets on a quarterly basis to review the operations of Board of Directors and the Company. The Board of Directors of the Company meets frequently to review the operations of the Company and to discuss and finalize important issues.

The Company’s Internal Audit Department is headed by Mr. YohanesBaptis Galuh Adjar Pamungkas, ably assisted by experienced staff members. Internal audits on various functions are conducted concurrently and the audit reports are being reviewed by the Independent Commissioner and the Board of Directors periodically to ensure remedial actions. The Company has a “Corporate Secretarial Department” headed by Mr. Tunaryo, and is being ably assisted by experienced staff in the field of finance and legal affairs. The Company has been disclosing material information to the shareholders, stakeholders, and the public. The Company will continue to strive to bring more transparency and fairness in its reporting to its shareholders, stakeholders, and the public. Corporate Social Responsibility (CSR)

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


and focusssed manner through “Yayasan Asia Pacific Fibre”. Some of the major ongoing activities and initiatives are given below:

Education Programmes:

a. Construction of elementary school building in the Blendung Village, Klari, Karawang district. b. Distribution of scholarships to students in Karawang and Kaliwungu region. c. Contruction of educational facilities for pre-schooling (PAUD) in Cibuaya, Karawang, Madrasah

Ibtidaiyah in Cimahi and Tunggakjati, Karawang, and Primary School in Karanganyar, Karawang.

Health care programme:

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

b. Construction of building to house the primary health centre for in patients at Klari, Karawang c. Free distribution of spectacles to the needy students of the primary school and junior high scool

students in Kaliwungu in cooperation with Yayasan Mata Indonesia. d. Assistance for people with Cataract Eyes surgery in Kendal.

Religious and Cultural activities:

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

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

Environmental aspects:

a. “Go Green” movement in coordination with the University of Jenderal Sudirman Purwokerto b. Planting of teakwood trees in Kaliwungu region.

Humanitarian Relief:

a. Renovation.reconstruction of flood effected schools Mangkang Kulon, Kendal. b. Relief assistance to disaster effected people in Megelang and Padang. c. Remodelling House for disanvantaged familied in Sumberejo, kaliwungu, Kendal.

Social and Economic empowerment:

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

people.


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

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

Exchanges.

2. Company Listing in January 1992

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

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

3. Rights Issue Offering in October 1993

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

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

company totaled to 276,000,000.

4. Stock Splits in March 1995

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

5. Bonus issue and dividend shares in April 1995

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

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

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

6. Rights Issue Offering II in June 1996

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

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

Exchange Houses.

7. Rights Issue Offering III in December 1997

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

Jakarta and Surabaya Stock Exchanges. Thus, after the completion of rights Issue III, the Company’s

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

8. Debt to Equity Swap in September 2006

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

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

Jakarta Commercial Court. Out of that as on 31st December 2006, APF has allotted 36,093,831,290

shares to unsecured creditors who have made their claim with the Company. APF has also received

approval from Department of Justice and Human Right for the 40,340,241,250 shares to be issued to

its secured creditors as per Secured Debt Restructure Proposal (“SDRP”). APF has not allotted any

shares so far as of 31st December 2007.

9. Reverse Stock in February 2008

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

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

changes of Articles of Association, the authorized capital of the Company amounts to Rp

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


Justice and Human Rights in its decision letter No. AHU-10588.AH.01.02 Year 2008 dated March 3,

2008.

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

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

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

to the Company management and employees (Management Employee Stock Option Programme).

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

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

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

24, 2009 regarding the issuance of 118,845,397 new authorized shares series ‘C’ (5% of issued and

paid-up capital) without preemptive rights at par value of Rp 40 each. The execution price at March

5, 2012 is Rp 45 each, and the shares have been fully paid-up on February 20, 2012 and February 21,

2012. The shares also registered in the Indonesian Stock Exchange through announcement No. Peng-

P-00032/BEI.PPR/03-2012 dated March 5, 2012 and No. Peng-P-00033/BEI.PPR/03-2012 dated

March 7, 2012.

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

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

2nd December 2009.

Total Structure listed on Indonesia Stock Exchange as of 31 December 2013

2,495,753,347

Capital Structure as 31 December 2013

Serie A

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

Nominal Value per share Rp 10,000

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

Serie C

Authorized Capital Rp 166,968,960,000

Nominal Value per share Rp 40

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

Shareholders

Damiano Investment 51.65%

KYOA Investment Limited 6.04%

PT. Multikarsa Investama* 5.26%

Public 37.05%

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

with Indonesia Stock Exchange yet to be completed.


Board of Commissioners

President Commissioner Robert Clive Appleby Commissioner Kamun Cheong Commissioner Robert McCarthy Commissioner Christopher Robert Botsford Independent Commissioner Dono Iskandar Djojosubroto Independent Commissioner Timbul T. Lubis, SH, LLM Board of Directors

President Director Vasudevan Ravi Shankar Director Bonar Firman Hasiholan Sirait Director Seeniappa Jegatheesan Director Peter Vinzenz Merkle

Company’s Activities

Engaged in the production of PTA, Polymer, Polyester Fiber, Filament Yarn, and Synthetic Fabrics. Production Capacity as of 31 December 2013

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

Representative Office

The East 35th Floor, Unit 5-6-7 Jl. DR. Ide Anak Agung Gde Agung Kav. E3.2 No. 1 Jakarta 12950 Tel : (62-21) 579-38555 Fax : (62-21) 579-38565

Registered Office

Jl. Raya Kaliwungu Km. 19 Kaliwungu, Kendal, Central Java - Indonesia Tel : (62-24) 8660272 Fax : (62-24) 8660275

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


Share Registrar

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

Registered Public Accountant Drs. Hendrawinata Eddy & Siddhartha (Indonesian Member firm of Kreston International) Intiland Tower 18th Floor Jl. Jend. Sudirman 32 Jakarta 10220, Indonesia Tel : (62-21) 5707997 Fax : (62-21) 5707996


REPRESENTATION LETTER MEMBERS OF BOARD OF COMMISSIONERS AND DIRECTORS

REGARDING RESPONSIBILITY FOR ANNUAL REPORT 2013

PT ASIA PACIFIC FIBERS Tbk.

We, the undersigned, certify that all the information in the Annual Report of PT Asia Pacific Fibers Tbk. 2013, is complete and we are fully responsible for the accuracy of the contents. Such statement was made correctly.

Jakarta, 28 April 2014

Robert Clive Appleby President Commissioner

Vasudevan Ravi Shankar President Director

Kamun Cheong Commissioner

Bonar Firman Hasiholan Sirait Director

Christopher Robert Botsford Commissioner

Seeniappa Jegatheesan Director

Robert McCarthy Commissioner

Peter Vinzenz Merkle Director


Timbul Thomas Lubis, SH LLM Independent Commissioner

Dono Iskandar Djojosubroto Independent Commissioner

Consolidated Financial Statements and Independent Auditors’ Report PT Asia Pacific Fibers Tbk And Its Subsidiaries December 31, 2013 and 2012

CONTENTS

Board of Directors’ Statement Independent Auditors’ Report Page Consolidated Financial Statements Consolidated Statements of Financial Position 1 Consolidated Statements of Comprehensive Income 4 Consolidated Statements of Changes in Equity 5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7 Schedule Supplementary Financial Information 1 – 6

ASIA PACIFIC FIBERS

PT. Asia Pacific Fibers Tbk.

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

ll. DR. lde Anak Agung Gde Agung

Kav. E3.2 No. 1

Jakarta 12950 - INDONESIA

Phone ; +62 21 57938555

Fax. : +62 21 57938565

E-mail : [email protected]

BOARD OT' DIRECTORS STATEMENTREGARDING

THE RESPONSIBILITY FOR CONSOLIDATED F"INA}ICIAL STATEMENTSAS AT DECEMBER 31,2013 AND 2012

AND FOR THE YEARS ENDED DECEMBER 31,20t3 AND 2012PT ASIA PACIF'IC FIBERS TbKAND ITS SUBSIDIARIES

We, the undersigned :

1. NameOffice address

2. NameOffice address

: VASUDEVAN RAVI SHANKAR: The East 35th floor Unit 5-6-7Jl. DR. Ide Anak Agung Gde Agung Kav E3-2 No. IJakarta 12950

Residential address : Jl. Jambu No. 30 RT 005/002As stated in ID Gondangdia - Menteng

Central JakartaTelephone number :021-57938555Title : President Director

: BONAR FIRNIAII HASIHOLAN SIRAIT: The East 35th floor Unit 5-6-7Jl. DR. Ide Anak Agung Gde Agung Kav E3-2 No. IJakarta 12950

Residential address : Jl. Pengadegan SelatanNo. 3 RT 002/RW 005As stated in ID Pengadegan, Pancoran,

South JakartaTelephonenumber :021-57938555Title : Director

Declare that :

l. We are responsible for the preparation and presentation of the consolidated financial statements of PT AsiaPacifrc Fibers Tbk and its Subsidiaries;

2. The consolidated financial statements of PT Asia Pacific Fibers Tbk and its Subsidiaries have been preparedand presented in accordance with the Indonesian Financial Accounting Standards;

3. a. All information in the consolidated financial statements of PT AsiaPacific Fibers Tbk and its Subsidiarieshave been disclosed in a complete and truthful manner;

b. The consolidated financial statement of PT Asia Pacific Fibers Tbk and its Subsidiaries do not contain anyincorrect information or material fact, nor do they omit information or material fact;

4. We are responsible for PT Asia Pacific Fibers Tbk and its Subsidiaries' intemal contol system.

Thus this statement is made truthfully.

Jakarta, March 17,2014

President Director Director

tu,{i;/*

VASUDEVAN RAVI SHANKAR BONAR FIRN{AN HASIHOLAN SIRAIT

Registered Office: Jl. Raya Kaliwungu Km.l9, Nolokerto Kaliwungu Kendal 51 3372 Central Java - INDONESIA

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

PT.

Kreston lnternationalA global network of independent accounting firms

No : 053al}2lISS/IIVl4

l*ice nse: L2L2/ V\M.L/ 2A tLlntiland Tower 18tt- floor

Ji. Jend" $udirntan Kari. 32Jakarta l-0220. lndonesia

Tel.: 62'21 571- 2000Fax": 62-21 570 6118, 57i- 1818

e-nra i I : hes-sud i rrna n@kresion-i nd onesia.co. id

wwbv. kreston-i *t don esi ffi .so. i d

+{ENDRAWINATAf DDY€/ SIDDHARTARegistered Pu blic Accou ntants

License: L22A / WM.U ZALL

Kreston BuildingJl. Palang h4erah No. 40

Medan 20111. lndonesiaTet.: 62-61 455 7925, 4L5 7295

Fax.: 62-6L 451- 3l-59e-ma i i : hes-rneda n@kreston-i ndonesia.co. id

INDEPENDENT AUDITORS' REPORT

The Stockholders, Commissioners and DirectorsPT ASIA PASIFIC FIBERS TbK

We have audited the accompanying consolidated financial statements of PT Asia Pasific Fibers Tbk(the "Company") and its subsidiaries, which comprise the consolidated statement of financial position as ofDecember 31, 2013, and the consolidated statements of comprehensive income, changes in equity and cash flowsfor the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated frnancial statements

Management is responsible for the preparation and fair presentation of such consolidated financial statements inaccordance with Indonesian Financial Accounting Standards, and for such internal control as managementdetermines is necessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or enor.

Auditor's responsibility

Our responsibility is to express an opinion on such consolidated financial statements based on our audit. Weconducted our audit in accordance with Standards on Auditing established by the Indonesian Institute of CertifiedPublic Accountants. Those standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether such consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors' judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity's intemal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material

respects, the consolidated financial position of PT Asia Pasific Fibers Tbk and its subsidiaries as of31 December 2013, and their consolidated financial performance and cash flows for the year then ended, inaccordance with Indonesian Financial Accounting Standards.

- ::i:se: 1095rr141Yi "L/?ALL:- ._rc!mo Sentral 3rd floor- r-i.R. Rasuna Said Blok X-2 Kav" 5- e i aila 1-2S50. lndonesia-: , : 62-21- 5290 0918:a.r. : 62-215290 0917=-

1r a ! i : fi es-k u n i nga n@kreston-i ndonesia.cCI. id

Kreston lnternationalA global network of independent accounting firms

{IENDRAWINATATDDY€/ SIDDHARTA

Page2

Emphasis of matter

The accompanying consolidated financial statements have been prepared assuming the Company and itsSubsidiaries will continue as a going concern. As disclosed in Note 2tothe consolidated financial itatements, asof December 31,2013, the Company and its Subsidiaries had capital deficiency of US$ 827,900,780, while thecurrent liabilities exceeded its total of the assets by US$ 779,279,088. The Company and its Subsidiaries, currentliabilities as of December 31,2013 of US$ 965,681,551. or 85Vo of total current liabilities represent the secureddebts. Currently, the operations of the Company's facility in Karawang is still used the energy supplied byPT Wismakarya Prasetya. On October 22, 2013, the Supreme Court has been declared the bankruptcy ofPT Wismakarya Prasetya. However, the Court has decided to keep PT Wismakarya Prasetya as a going .onr".n utit is supplying the energy requirement of the Company's facility in Karawang.In addition, based on thi agreementdated November 16,2006, the Company has purchase advance balance as of December 31,2013 amounting toUS$ 30,499,214 from PT Wismakarya Prasetya. During the year 2014, the Company has reported this mattei tocurator of PT Wismakarya Prasetya. In the other that, as of the date of this report, one of the Company's securedcreditors is PT Perusahaan Pengelola Assets (PPA) (26Eo) has not yet given its approval on the resiruciuring planproposed by the Company. However, Damiano Investments BV., Netherland, a majority shareholder of ttteCompany (51.65Ea ownership) and majority secured debt holder (69Vo) provided working capital loan facilitytotaling US$ 17,340,000 and letter of credit facility of US$ 87,910,672 for raw material procurement. DamianoInvestments BV., Netherland, still provides the requisite funds for the Company's expenses in subsequent yearthrough its Third Loan Agreement. The Company's management also continues to exert effort and expecis toobtain the resolution of the secured debt restructuring in order for the Company to obtain working capital frombanks. The consolidated financial statements do not include adjustments that might result from the outcome of thisuncertainty.

Other matter

Our audit of the accompanying consolidated financial statements of the Company and its Subsidiaries as ofDecember 31, 2013 and for the year then ended was performed for the purpose of forming an opinion on suchconsolidated financial statements taken as a whole. The accompanying financial information of PT Asia pacificFibers Tbk (parent entity only), which comprises the statement of financial position as of Decemb er 37, 2013, and,the statements of comprehensive income, changes in equity and cash flows for the year then ended (collectivelyreferred to as the "Parent Entity Financial Information"), which is presented as a supplementary information to theaccompanying consolidated financial statements, is presented for the purpose of additional analysis and is not arequired part of the accompanying consolidated financial statements under Indonesian Financial AccountingStandards. The Parent Entity Financial Information is the responsibility of management and was derived from andrelates directly to the underlying accounting and other records used to prepare the accompanying consolidatedfinancial statements. The Parent Entity Financial Information has been subjected to thJ auditing proceduresapplied in the audit of the accompanying consolidated financial statements in accordance with Standards onAuditing established by the Indonesian Institute of Certified Public Accountants. In our opinion, the parent EntityFinancial Information is fairly stated, in all material respects, in relation to the accompanying consolidatedfinancial statements taken as a whole.

H DRAWINATA EDDY & SIDDHARTA

Iskariman Supardjo, CPALicense of Public Accountant No. AP. 0336

Jakarta, March 17,2014

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

PT ASIA PACIFIC FIBERS Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31, 2013 and 2012

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

1

Notes 2 0 1 3 2 0 1 2 US$ US$ ASSETS

CURRENT ASSETS Cash and cash equivalents 3f,g,5 5,101,421 9,793,989 Trade receivables, net after allowance for impairment of US$ 15,657,945 in 2013 and 2012 Third parties 3f,h,i,6 51,867,585 57,988,028 Related parties 3f,h,i,6 22,046,308 27,789,291 Other receivables, net after allowance for impairment of US$ 36,721,575 in 2013 and 2012 Third parties 3f,h,i,7 3,355,148 3,300,907 Other current financial assets 3f,h,i,8 9,158,563 7,720,808 Inventories 3j,9 86,227,237 79,954,633 Purchase advances Third parties 10 37,362,097 34,605,192 Related party 10 54,799 – Prepaid taxes 3u,26a 18,903,911 14,786,048 Prepaid expenses 3k,11 1,691,803 1,101,627

Total Current Assets 235,768,872 237,040,523

NON–CURRENT ASSETS Non-trade receivables from related parties, net after allowance for impairment of US$ 111,992,653 in 2013 and 2012 3f,h,i,12 24,836,407 32,474,040 Other non-current financial assets 3f,h,i,13 1,029,093 1,113,711 Property, plant and equipment, net after accumulated depreciation of US$ 1,714,202,396 in 2013 and US$ 1,658,522,816 in 2012 3l,m,o,14 82,224,751 129,394,646 Intangible Assets 3n,o,15 12,087 12,750 Deferred tax assets 3u,26d 9,620,194 3,216,621

Total Non–Current Assets 117,722,532 166,211,768

TOTAL ASSETS 353,491,404 403,252,291


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2013 and 2012


2

Notes 2 0 1 3 2 0 1 2 US$ US$ LIABILITIES AND EQUITY (DEFICIENCY)

CURRENT LIABILITIES Trade payables Third parties 3q,16 33,115,314 22,942,334 Related party 3q,16 – 7,150 Accrued expenses 3q,17 36,967,461 43,319,170 Taxes payable 3u,26b 1,741,319 1,751,095 Bank Loans 3q,18 87,910,672 78,752,462 Secured Debts 3q,19 965,681,557 1,000,263,703 Current portion of long-term liabilities: Credit financing payables 3p,q,22 30,572 64,651 Other short-term financial liabilities 3q,23 6,323,597 4,150,965 Total Current Liabilities 1,131,770,492 1,151,251,530 NON–CURRENT LIABILITIES Borrowing from Other Financial Institutions : Unsecured Debts and Notes Payable 3q,20 22,624,894 22,169,338 Working capital loans 3q,21 17,340,000 17,340,000 Credit financing payables 3p,q,22 27,132 55,535 Deferred revenues 3s,24 237,652 – Long-term employee benefit liabilities 3t,25 9,392,014 10,274,737

Total Non–Current Liabilities 49,621,692 49,839,610


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2013 and 2012


3

Notes 2 0 1 3 2 0 1 2 US$ US$ LIABILITIES AND EQUITY (DEFICIENCY)

EQUITY (DEFICIENCY) Share Capital Authorized 12,357,255,040 shares at Rp 10,000 par value per Series A, Rp 1,000 par value per Series B and Rp 40 par value per Series C in 2013 and 2012 Issued and paid up 219,696,000 Series A and 2,276,057,347 Series C in 2013 and 2012 27 635,689,316 635,689,316 Additional paid-in capital 3v,28 624,344,507 624,344,507 Other components of equity 1c (21,339) (21,339) Retained earnings (accumulated deficit) Appropriated 29 2,345,301 2,345,301 Unappropriated (2,090,258,565 ) (2,060,196,634 )

Total Equity (Deficiency) (827,900,780 ) (797,838,849) TOTAL LIABILITIES AND

EQUITY (DEFICIENCY) 353,491,404 403,252,291


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2013 and 2012


4

Notes 2 0 1 3 2 0 1 2 US$ US$ REVENUES Net sales 3w,33 565,142,440 599,330,876 Other operating revenues 3w,34 6,604,835 1,200,875

Total revenues 571,747,275 600,531,751

COST OF GOODS SOLD 3w,35 (592,318,437 ) (606,514,179 )

GROSS LOSS (20,571,162 ) (5,982,428 )

Selling expenses 3w,37 (13,466,915 ) (14,052,194 ) General and administrative expenses 3w,38 (18,004,104 ) (17,843,646 ) Insurance claim settlement, net 3w,32 651,761 1,667,691 Gain on foreign exchange transactions, net 3c 31,414,704 11,816,164 Miscellaneous income, net 3w,40 126,659 879,907

722,105 (17,532,078 )

LOSS FROM OPERATIONS (19,849,057 ) (23,514,506 )

Finance costs 3w,39 (16,616,447 ) (18,245,491 )

LOSS BEFORE INCOME TAX (36,465,504 ) (41,759,997 )

TAX INCOME (EXPENSE) 3u Current period 26c – – Deferred 26d 6,403,573 9,641,186

Total tax income 26e 6,403,573 9,641,186

TOTAL LOSS FOR THE YEAR (30,061,931 ) (32,118,811 )

OTHER COMPREHENSIVE INCOME, NET AFTER TAX – –

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (30,061,931 ) (32,118,811 )

Total Net Loss Attributable to the Owners of the of the Company (30,061,931 ) (32,118,811 )

Total Comprehensive Loss Attributable to the Owners of the of the Company (30,061,931 ) (32,118,811 )

EARNING (LOSS) PER SHARE : 3x Basic 30a (0.01 ) (0.01 ) Diluted 30b (0.01 ) (0.01 )

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CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2013 and 2012


6

Notes 2 0 1 3 2 0 1 2

US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES Receipt from customers 614,050,209 634,181,470 Payment to suppliers (488,283,983) (512,158,864) Payment of salaries (16,309,277) (16,579,363) Other operating cash payments, net (89,127,238) (63,392,409)

Cash provided by operations 20,329,711 42,050,834 Interest received 7,39 35,938 31,754 Interest expense and bank charges paid 17,39 (14,782,498) (17,979,160) Cash receipt from insurance claim settlement 7,32 271,492 1,667,691 Payment of income tax 26 (6,314,637) (4,911,388) Refund of income tax 26 3,988,440 5,940,924 Net Cash Provided By Operating Activities 3,528,446 26,800,655

CASH FLOWS FROM INVESTING ACTIVITIES Payment to acquire property, plant and equipment 14 (8,471,616) (13,295,299) Increase of other current financial assets 8 370,190 (521,237)

Net Cash Used In Investing Activities (8,101,426 ) (13,816,536 )

CASH FLOWS FROM FINANCING ACTIVITIES Issuance of share capitals 27 – 591,434 Receipt of working capital loans 21 700,000 12,940,000 Payment of working capital loans 21 (700,000) (18,600,000) Payment of credit financing payables 22 (64,843) (68,689)

Net Cash Used In Financing Activities (64,843 ) (5,137,255 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(4,637,823

)

7,846,864

EFFECT OF FOREIGN EXCHANGE RATE (54,745) (1,491,039) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

5

9,793,989

3,438,164

CASH AND CASH EQUIVALENTS AT END OF YEAR

5

5,101,421

9,793,989


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2013 and 2012

7

1. G E N E R A L a. Establishment and Other Information

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



8

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

Further, the Company has received the approval of Chairman of the Capital Investment Coordinating Board (BKPM) for the expansion of the Fibre capacity in Karawang side through the approval letter No. 2/B/II/PMDN/2011 dated February 24, 2011. This project has started in the second quarter of 2012. In accordance with Article 3 of Company’s Article of Association, the Company’s objectives and scope of activities is mainly to engage in the manufacturing of chemical and synthetic fiber, weaving and knitting, and other activities related to the textile industry. The Company is domiciled in Kendal, Central Java with its plants located in Kendal, Central Java and Karawang, West Java. The Company’s representative office is located at The East Building, 35th Floor, Jl. DR. Ide Anak Agung Gde Agung (formerly Jalan Lingkar Mega Kuningan) Kav. E-3.2 No. 1, Jakarta. The Company started its commercial operations in 1986. The Company has many ongoing social activities in the local environs of its two plant location in Semarang and Karawang which the purpose of this activity is to improve the livelihood of the surrounding communities. In order to carry out these programmes more effectively, the Company has established a foundation “Yayasan Asia Pacific Fibre” on January 15, 2010. The deed was approved by the Minister of Justice and Human Rights of Republic of Indonesia based on decision letter No. AHU-960.AH.01.04.Tahun 2010 dated March 15, 2010. The Company’s immediate parent company is Damiano Investments BV., incorporated in Netherland, and its ultimate parent company is ADM Capital and Spinnaker Capital Group, incorporated and domiciled in Hong Kong and United Kingdom, respectively.

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

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

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

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



9

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

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

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

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

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

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

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

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

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



10

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

• Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on February 21, 2008, the stockholders approved the reverse stock split (split down) with a ratio of 20:1 wherein 20 old shares will become 1 new share. Reverse stock splits are conducted for the Company’s shares to be more liquid and in line with the Company’s performance. Due to the changes in the Company’s number of shares and par value, the Company amended its Articles of Association and the notarial deed regarding the changes of the Company’s Article of Association had been approved by the Minister of Justice and Human Rights on March 3, 2008. Further, based on the notarial deed of Sutjipto, S.H., No. 122 dated February 27, 2008 regarding shares purchase as the result of reverse stock split named PT Trimegah Securities Tbk as “Stand by Buyer”. In addition, all shares from reverse stock were traded on March 14, 2008.

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

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

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



11

1. G E N E R A L (Continued) b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries (Continued)

• Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on June 18, 2012 and based on the notarial deed No. 88 dated June 18, 2012 of Aryanti Artisari, S.H., M.Kn., public notary in Jakarta, the stockholders approved the issuance of 74,872,600 new authorized shares series C (3% of issued and paid-up capital) without preemptive rights, for providing stock options to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). Up to December 31, 2013, the Company has not issued shares under this scheme. The Company has sent a letter No. 118/APF-CS/XII/2013 dated December 19, 2013 to OJK for the extension of period till June 30, 2014 due to current market conditions.

c. Consolidated Subsidiaries

The Company has the following non-active subsidiaries are as follows :

Commercial Percentage of Total Assets Subsidiaries Domicile Nature of Business Operations Ownership 2 0 1 3 2 0 1 2

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

Karawang Trading, weaving, knitting and processing

1972 92.00 *) *)

PT Texmaco Graha Jakarta Trading of textile and 1994 91.08 *) *) Busana (TGB) producing ready to (99% owned by TJ) wear garments and accessories Polysindo International Finance Company BV (PIFC)

Netherlands Financial services 1994 100.00 759 759

Polysindo (Mauritius) Ltd. (PML)

Republic of Mauritius

Financial services Pre-operating

100.00 – –

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

deconsolidation.

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



12

1. G E N E R A L (Continued) c. Consolidated Subsidiaries (Continued)

• There were no transactions between the Company and Polysindo (Maurutius) Ltd and Polysindo International Finance Company BV during 2013 and 2012. The Company intends to close the operation of its subsidiaries along with the restructuring of the Company.

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

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

d. Employees, Directors and Commissioners

• The composition of the Company’s Board of Commissioners and Board of Directors as of December 31, 2013 is based on the notarial deed No. 65 and 66 dated June 13, 2013 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta. The composition of the Company’s board of commissioners and directors as of December 31, 2013 and 2012 are as follows : 2 0 1 3 2 0 1 2 Board of Commissioners : President Commissioner : Mr. Robert Clive Appleby Mr. Robert Clive Appleby Independent Commissioners : Mr. Dono Iskandar Djojosubroto Mr. Dono Iskandar Djojosubroto Mr. Timbul Thomas Lubis S.H. Mr. Timbul Thomas Lubis S.H. Commissioners : Mrs. Cheong Kamun Mrs. Cheong Kamun Mr. Christopher Robert Botsford Mr. Christopher Robert Botsford Mr. Robert Mc Carthy Mr. Robert Mc Carthy Board of Directors : President Director : Mr. Vasudevan Ravi Shankar Mr. Vasudevan Ravi Shankar Directors : Mr. Bonar Firman Hasiholan

Sirait Mr. Masjhud Ali

Mr. Seeniappa Jegatheesan Mr. Seeniappa Jegatheesan Mr. Peter Vinzenz Merkle Mr. Peter Vinzenz Merkle

Mr. Masjhud Ali, one of the Directors of the Company, was resigned from the Board of Directors based on the notarial deed of Aryanti Artisari, S.H., M.Kn. No. 66 dated June 13, 2013.

• To comply with BAPEPAM regulation No. IX.1.5 regarding the forming and work guidance of Audit Committee, the Board of Commissioners has formed Audit Committee.



13

1. G E N E R A L (Continued) d. Employees, Directors and Commissioners (Continued)

The members of the Company’s Audit Committee as of December 31, 2013 and 2012 are as follows : Chairman : Mr. Timbul Thomas Lubis, S.H. Member : Mr. Drs. Heroe Pramono Mr. Djati Suara

• The Company’s corporate secretary as of December 31, 2013 and 2012 is Mr. Tunaryo.

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

• As at December 31, 2013, the Company had 3,063 permanent employees (2012 : 3,507 permanent employees). And as at December 31, 2013 and 2012, the Subsidiaries do not have permanent employees.

e. Presentation and Responsibility of the Consolidated Financial Statements

The consolidated financial statements of PT Asia Pacific Fibers Tbk were authorized by the Board of Directors on March 17, 2014.

2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS

a. Going Concern

Polyester and raw material chain continued to reflect the uncertainty of the global economy and the anticipation of likely demand growth in the major economies like China and India. Overall growth of polyester production has slowed down to just 4.60% and 5.50% in 2012 and 2013. PTA margins continue to remain depressed through the year and hit the bottom by the end of the year. Huge capacity additions in PTA, Polyester fiber and filament led to lower operating rates world wide putting further downward pressure on polyester chain margins. Cotton prices also remained soft through out the season with increased production and supply. These factors have impacted the performance of Polyester Industry globally. Global economic downturns driven by European debt concerns and US economic concerns continued to impact the Global textile trade leading to sluggish demand outlook.



14

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

This dampened market conditions and uncertainty have severely impacted the performance of polyester industry globally and in Indonesia as well. Despite the market conditions, the Company continues to operate its plant to its near full capacity supported by its strong customer base and the sustained demand from domestic market. The Company has also carried out its committed Capex investment plans and completed the strategically important project of “Automotive Yarn” during the year 2013. Damiano Investments BV., Netherland has been providing the requisite funds for the above-mentioned capital expenditure through III Loan facility, besides increasing its working capital funding to US$ 92 million from US$ 84 million. While the Paraxylene supply position has been balanced-to-tight and continued to be the star performer in the chain with high operating rates at 89% global average. PTA market remained depressed due to huge capacity additions and the margins nose dived to hit the new bottom by the end of the year. Consequently, the selling prices of PSF and PFY were under pressure during the year and margins squeezed to the lowest levels through the year. Hence the sales revenue has dropped significantly to US$ 571 million as compared to US$ 600 million for the previous year, despite increase in volume of production and sales. The hike in the cost of gas, electricity and manpower had a cascading effect on the cost of productions that further dented the profitability of the Company. However, the Performance Fabrics division of the Company continued to improve its performance during 2013 by achieving sales revenue of US$ 13.69 million with an EBITDA of US$ 1.57 million. The consolidated EBITDA, however, dipped to US$ 9.55 million from the previous level of US$ 36 million. With the result of lower profitability cash flow position remained extremely tight through the year. Prudent working capital management has helped the Company to tide over tough phase and operate the plants at optimum capacity. To tide over the difficult cash flow situation, Damiano Investments BV has provided additional working capital by increasing the letter of credit facility up US$ 92 million. To augment its working capital requirements, the Company continued with the pre-finance facility from the market. Due to the tight cash flow situation caused by significant dip in the earnings, Company could not service of interest to its unsecured creditors (New Notes) fully during the year; Interest amounts due for the quarter ended August 15, 2013 and November 15, 2013 to unsecured creditors were capitalized as per the approval from the majority of the creditors.



15


PTA margins are expected to recover in 2014, and stage further recovery beyond 2015 with the anticipated rationalization of PTA capacities, softness in PX supply and price coupled with improved downstream consumption. Despite fluctuations in the price, polyester sector will grow over 6.00% in the next 3 years. Strengthening of cotton prices due to anticipated shortfall in production would help stabilizing the polyester prices and demand during the year. The Company with its capability to increase the volume of specialty products and cost effective production of commodity products, will be able to face the competition and sustain its market share besides making entry into new market segments. This will enable the Company to sustain its financial performance on a longer term. The Company has submitted a revised Secured Debt Restructuring Plan (SDRP) to PT Perusahaan Pengelola Asset (PPA) on February 10, 2014 updated with the current conditions of the Company. The major terms of the revised Secured Debt Restructuring Plan (SDRP) are as follows:

• New Secured Debt proposed is USD 80 Million

• The allocation of New debt is based on the principal value of debt as at September 30, 2013 (Non- US$ loans are converted into US$ at the BI exchange rates of September 2013)

• Proposed Restructuring Date : April 30, 2014

• Interest on New Notes Interest shall be payable on the New Notes quarterly in arrears and calculated on the outstanding principal amount of the New Notes during the quarter at the per annum rates shown in the table below:

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

0% 2% 2% 2% 4% 4% 4% 4% 4%

• Amortization Principal repayments shall be made at the end of each 12-month period beginning on the fourth anniversary of the Restructuring Date. The amount payable shall be equal to the percentages of the restructured principal amount shown in the table below:

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

0% 0% 0% 5% 17.5% 17.5% 17.5% 17.5% 17.5%



16


• Debt Restructuring New Secured Debt will be exchanged at 8.224 Cents per US$1. The Company will issue further shares of 3,038,067,822 representing 54.90% of the post diluted shares, taking into account the MSOP shares issued by the Company in 2012. Out of which 2,818,371,822equity shares representing 50.93% will allotted to Secured Creditors through the Debt/Equity swap as proposed in the SDRP.

Until March 2014, the Company is still waiting the response from PT Perusahaan Pengelola Aset (PPA) regarding the new SDRP. Upon completion of this restructuring, and the consequent reorganization of its consolidated statements of financial position, the Company is confident of securing a formal working capital lending from a conventional banking sources. PT Wismakarya Prasetya (WKP), which is supplying 100% energy requirement of the Company’s facility at Karawang, has been declared bankrupt effective on October 22, 2013 by the Supreme Court, Jakarta as per its verdict no:440k/Pdt.sus. PAILIT/2013 dated October 22, 2013, based on the debt claim filed by its creditors. However, the Court has decided to keep WKP as a going concern as it is supplying the energy requirement of Karawang facility vide its decision vide no: 440K/PDT.SUS/PAILIT/2013 j.o. No : 05/Pdt.sus/PKPU/2013/PN.Niaga.Jkt.Pst. dated on February 13, 2014. The Company is in the process entering into a rental agreement of WKP facilities with the curator of PT WKP to ensure uninterrupted supply of power, steam and gas. APF will continue to operate and maintain the power plant with proper upkeep of the facilities of WKP. In addition, the Company and its Subsidiaries’ consolidated financial condition in 2013 showed the following :

• Total comprehensive loss amounting to US$ 30,061,931.

• Negative working capital amounting to US$ 896,001,620.

• Capital deficiency amounting to US$ 827,900,780. In 2013, there was a significant improvement in the capacity utilization of APF facilities in Karawang and Semarang. It achieved a capacity utilization level of more than 95% in both the facilities.



17


Subsidiary’s Operations (PT Texmaco Jaya Tbk) : Consequent to declaration of bankruptcy of PT Texmaco Jaya by the commercial court of Jakarta on 19th August 2011 as per the court order 10/PKPU/2010/PN.NIAGA.JKT.PST Jo No: 71/PAILIT/2010/PN.NIAGA.JKT.PST, the management of the company and enforcement of the liquidation process was under the team of curators appointed by the Court and monitored by the supervisory judge. The Curator and the Commercial Court of Jakarta had acknowledged and registered the receivable amount of Rp. 1,106,832,761,717 as unsecured debt. The liquidation process of the Company is still under progress. In the meantime, the Court has approved continued operation of its Fleece division as a going concern with a view to maintain the value of the bankrupt assets. In accordance with the Court approval and pursuant to the tolling agreement between the team of curators and PT Asia Pacific Fibers Tbk, the Fleece division continued to be operated on tolling basis. Pursuant to PSAK 10 (revised 2010), the Company and its Subsidiaries have determined US Dollar as its functional currency as predominant financial transaction such as Sales, Purchases, Pricing etc., are transacted in US Dollar currency. Hence the Company and its Subsidiaries have chosen to prepare and present its consolidated financial statements in US Dollar currency effective January 2012. The consolidated financial statements was prepared in accordance with the guidelines provided under PSAK 10 paragraph 27-34 and paragraph 61-62 and recalculated/ restated its assets and liabilities wherever required. The accompanying consolidated financial statements have been prepared on a going concern basis, and do not include any adjustment that might result from the outcome of these uncertainties. Related effects will be reported in the consolidated financial statements as they become known and can be estimated. To date, the Company, in running its operations is supported through the letter of credit facility and other working capital loans from Damiano Investments BV., Netherland and through the confidence and support of its suppliers and customers. In addition, Damiano Investments BV., Netherlands confirmed that it will provide the assistance to the Company in obtaining letter of credit facilities until such time that the Company can secure a credit facility from banks on its own. Damiano Investments BV., Netherland has also provided the requisite funds for the Company’s capital expenses programs in 2012 through its III Loan agreement.



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

The Company has executed the restructuring agreement with the unsecured creditors as approved by the creditors and ratified by the Court. Accordingly, the total unsecured loans after the restructuring stands at US$ 18,670,630 plus unpaid capitalized interest until November 2013 of US$ 3,954,264 or amounted to US$ 22,624,894. The Company has also submitted restructuring proposal to the secured creditors (SDRP). In March 2007, the Company reissued the SDRP Proposal to all of its secured creditors, including PPA, as the earlier SDRP proposal has time barred. However, no response has been received from PT Perusahaan Pengelola Aset (PPA) on the proposal. The proposal has the support of Damiano Investment BV., Netherland, the majority holder of the other secured debts of the Company. Subsequently on the Company has submitted a revised Secured Debt Restructuring to PPA and other Secured Creditors updated with the current conditions of the industry and the Company’s performance levels. The summary of the revised terms of the SDRP was indicated above. The Company has taken all the required corporate actions towards the implementation of the Composition Plan (“Peace Plan”) as approved by the unsecured creditors of the Company and ratified by the Commercial Court. The steps involve the issuance of the new debts secured or unsecured in exchange of the old unsecured debts and issuance of shares for the reduction of the principal amount of debts as per the terms of the Composition Plan. The Company has reduced its unsecured debts as per the Composition Plan and increased its share capital as additional capital pending allotment to the creditors. The Company has appointed The Hongkong and Shanghai Banking Corporation Limited, Hong Kong to act as its Fiscal Agent, Paying Agent and Trustees for its new unsecured notes which are euro-cleared. In January 2012, the Company sought and got the approval of its Unsecured New Note Holders for the extension of its maturity from February 2012 to February 2015. The details as of December 31, 2013 are as below:

Redemption Date

Redemption Table (Revised for PIK)

Subject to PIK Outstanding Redemption Redemption % Request Amount Amount

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

to Nov 15, 2013 US$ 3,954,264.12 US$ 22,624,894.12 0.00%

February 15, 2015 US$ 21,493,649.41 (US$ 1,131,244.71) 5.00%

February 15, 2016 US$ 17,534,292.94 (US$ 3,959,356.47) 17.50%

February 15, 2017 US$ 13,574,936.47 (US$ 3,959,356.47) 17.50%

February 15, 2018 US$ 9,615,580.00 (US$ 3,959,356.47) 17.50%

February 15, 2019 US$ 5,090,601.18 (US$ 4,524,978.82) 20.00%

February 15, 2020 US$ 0.00 (US$ 5,090,601.18) 22.50%

US$ 22,624,894.12 US$ 22,624,894.12 100.00%



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

Amid continued Global financial turmoil and uncertainty, Indonesia’s GDP growth fell to 5.80% in 2013 as against 6.20% in 2012. There was a sharp decline in the exports in 2013, which stood at US$ 182.57 billion as against the exports of US$ 190.02 billion in 2012. The inflation in 2013 shot upto 8.37% from 4.32% in 2012. The main reason for the high inflation rate was the removal of subsidy for oil. Despite slower global growth and continued uncertainty in the global financial market, Indonesia’s economic growth remained better than other countries in ASEAN. Indonesia's resilience to the global economic slowdown and its strong growth in domestic consumption driving the robust economic growth, have made it an attractive destination for foreign investments.Indonesia has posted a negative annual trade deficit in 2013 with imports at US$ 186.6 billion and exports of US$ 182.6 billion. This has put an enormous pressure on rupiah coupled with high inflation rate resulting in rupiah depreciating by 26% during the year. The exchange rate of Rupiah vis-a-vis US$ which stood at Rp 9,670 in 2012 depreciated to Rp 12,189 at the end of 2013. However, it is also to be noted that almost all countries witnessed a sharp depreciation of their currency against US$ during this year. The economic outlook for Indonesia in 2014 remains positive despite a weak global economy, but maintaining strong investment growth is vital. The World Bank projects a marginal rise in GDP in 2014. This projection assumes that domestic consumption and investment growth remain strong, while improving growth in Indonesia’s major trading partners supports a modest recovery in exports. The inflation seems to have come under control with tight control over the prices of essential commodities in the beginning of 2014 and as result inflation eased to around 5% level in the first quarter of 2014. However, domestic environment for manufacturing sectors expect to undergo a tough phase with the looming escalatory trend on two major fronts viz., manpower and energy. Both Gas prices and Electricity tariff have increased in 2013 and are bound to increase further in 2014 and beyond. These factors will add to the pressure on cost competitiveness of the domestic manufacturers.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Preparation of the Consolidated Financial Statements

The consolidated financial statements of PT Asia Pacific Fibers Tbk have been prepared in accordance with the Indonesian Financial Accounting Standards (“SAK”) comprising of the Statements of Financial Accounting Standards (“PSAK”) and its Interpretation Financial Accounting Standards (“ISAK”), and Financial Institution Suprvisory Agency (BAPEPAM-LK)’s Regulation No. VIII.G.7 regarding the Presentations and Disclosures of Financial Statements of listed entity, enclosed in the decision letter No. KEP-347/BL/2012 and the Circular Letter No. SE-17/BL/2012. The consolidated financial statements are in compliance with the applicable SAK without exception. The consolidated financial statements for the years ended December 31, 2013 and 2012 have been prepared in accordance with PSAK No. 1 (Revised 2009), “Presentation of Financial Statements”. In accordance with PSAK No. 1 (Revised 2009), the consolidated statement of comprehensive income has been presented in the consolidated financial statements. The Company and its Subsidiaries have been elected to present all items of income and expense in the single statement. And in relation to the PSAK No. 4 (Revised 2009), “Consolidated and Separate Financial

Statements”, the Company has measured investment in subsidiaries using cost method. As of August 19, 2011, the Commercial Court had declared that the Subsidiary (PT Texmaco Jaya Tbk) is bankruptcy and insolvency effective on September 26, 2011. Effective this period, the Subsidiary becomes subject to the control of the Court, and causing the Company loss its controls. The consolidated financial statements have been prepared on the historical cost basis of accounting, except for the certain accounts are prepared based on the other measurement that are more fully described in the accounting policies below. The consolidated financial statements are prepared under the accrual basis of accounting, except for the statement of cash flows. The consolidated statements of cash flows are prepared using the direct method and present the sources and uses of cash and cash equivalents according to operating, investing and financing activities. Cash and cash equivalents consist of cash on hand, cash in banks and deposits with original maturitites of 3 (three) months or less. The reporting currency used in preparation of the consolidated financial statements is US Dollar, which is also the Company’s functional and presentation currency. All figures presented in the consolidated financial statements are stated at absolute amounts of US Dollar (“US$”), unless otherwise specified.

b. Principles of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.



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

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of the subsidiaries to bring the accounting policies used in line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in subsidiaries are identified separately and presented within equity. Effective January 1, 2011, the interest of non-controlling shareholders maybe initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net asset. The choice of measurement is made on acquisition by acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. Previously, the non-controlling interest is measured on initial recognition at the non-controlling interests’ proportionate share in the historical cost of the identifiable net assets of the acquiree. Where the losses applicable to the non-controlling interests exceed their interest in the equity of the subsidiary, the excess and any further losses attributable to the non-controlling interest are charged against the majority interest except to the extent that the non-controlling interest has a binding obligation to, and is able to, make good the losses. Changes of the Company interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Company and its subsidiaries interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributable to owners of the Company. According to PSAK No. 4 (Revised 2009), when the Company losses control of a Subsidiary, the Company should derecognizes the assets (including any goodwill) and liabilities of the Subsidiary at their carrying amount at the date when the control is lost. Also, derecognizes the carrying amount of any non-controlling interests in the former Subsidiary at the date when control is lost (including any component of other comprehensive income attributable to them).



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

The Company has carried forward and opted to present as a separate item within equity, the remaining balance related to the effect of prior year’s capital transactions of the Subsidiary with third parties.

c. Foreign Currency Transaction and Balances

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

• Transactions and balances Foreign currency transactions are translated into US Dollar using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are translated into US Dollar using the closing exchange rate. Exchange rate used as benchmark is the rate which is issued by Bank Indonesia. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of comprehensive income. Foreign currency 2 0 1 3 2 0 1 2 Rp Rp US$ 1 12,189 9,670 JPY 1 116 112 HKD 1 1,572 1,247 CHF 1 13,732 10,597 SGD 1 9,628 7,907 GBP 1 20,097 15,579 EUR 1 16,821 12,810 SEK 1 1,898 1,488



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

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

person:

• Has control or joint control over the reporting entity.

• Has significant influence over the reporting entity.

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

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

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

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

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

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

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

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

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

All significant transactions and balances with related parties, whether or not conducted under normal terms and conditions similar to those with third parties are disclosed in Note 41.

e. New Accounting Standards to Existing Standards

The revision of SFAS 60, “Financial Instrument : Disclosure” with an effective date January 1, 2013 did not result in changes to the Company and its Subsidiaries’ accounting policies and had no effect on the amounts reported for current period or prior financial years. The revision to SFAS 38, “Business Combination on Entities under Common Control” and IFAS 21, “Agreements for Construction for Real Estate” with an effective date January 1, 2013 will not impact or not relevant to the consolidated financial statements. The implementation of IFAS 21, “Agreements for Construction for Real Estate” which would previously have been mandatorily applied have been postponed until further notice by the Indonesian Financial Accounting Standards Board.



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

Discussed below are the impacts on the consolidated financial statements of these new and revised accounting standards.

• SFAS 38 : Business Combination on Entities under Common Control. SFAS 38 requires an entity to account a business combination (as defined in PSAK 22) in which the combining entities or businesses ultimately are controlled by the same party, both before and after the combination, and the control is not transitory using pooling of interest method. The revisions to SFAS 38, “Business Combinations on Entities under Common Control” with an effective date of January 1, 2013 did not result in changes to the Company’s accounting policies and had no effect on the amounts reported for current period or prior financial years.

• SFAS 60 : Financial Instruments: Disclosure. SFAS 60 states improvements mainly relate to the disclosure of financial assets, including the removal of the requirement to disclose: a. the fair value of collateral held as security; and b. the carrying amount of financial assets that would otherwise be past due or impaired

whose terms have been renegotiated.

• IFAS 21 : Agreements for Construction for Real Estate. This Interpretation applies to the accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. Agreements in the scope of this Interpretation are agreements for the construction of real estate. In addition to the construction of real estate, such agreements may include the delivery of other goods or services.

f. Financial assets

Non derivatives financial assets are classified into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Regular purchases and sales of financial assets are recognized on their trade date. Financial assets that are not carried at fair value through profit or loss are initially recognized at fair value plus the transaction cost. Financial assets carried at fair value through profit or loss is initially recognized at fair value and transaction costs are expensed in the consolidated statements of comprehensive income. Financial assets are derecognised when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company and its Subsidiaries are recognised as a separate asset or liability.



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

Financial assets and liabilities are offset and the net amount presented in the consolidated statements of financial position when, and only when, the Company and its Subsidiaries have a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in the active market. They arise when the Company and its Subsidiaries provide money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the end of reporting period. These are classified as non-current assets. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less impairment loss, if any. Any change in their value is recognized in the consolidated statements of comprehensive income. Impairment loss is provided when there is objective evidence that the Company and its Subsidiaries will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets’ carrying amount and the present value of estimated cash flows. The Company and its Subsidiaries’ financial assets categorized as loans and receivables are presented as Cash and Cash Equivalents, Trade Receivables, Other Receivables, Other Current Financial Assets, Non-trade Receivables from Related Parties, and Other Non-Current Financial Assets in the consolidated statement of financial position. All income and expenses, including impairment losses, relating to financial assets that are recognized and presented as part of finance costs in the consolidated statement of comprehensive income. Non-compounding interest, dividend income and other cash flows resulting from holding financial assets are recognized in consolidated profit or loss when earned, regardless of how the related carrying amount of financial assets is measured.

g. Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are not subject to an insignificant risk of changes in their fair value, and are used by the Company and its Subsidiaries in the management of its short-term commitments.



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

Trade receivables are amounts due from customers for product sold performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Non-trade receivables from related parties are receivables balance reflecting loan given to related parties of the Company and its Subsidiaries. Trade and non-trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, if the impact of discounting is significant, less any provision for impairment. Collectability of trade and non-trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Company and its Subsidiaries will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognized in the consolidated statement of comprehensive income within “general and administrative expenses”. When a trade and non-trade receivables for which an impairment allowance had been recognized becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against “miscellaneous income (expense), net” in the consolidated statement of comprehensive income.

i. Impairment of Financial Assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event had an impact on the estimated future cash flows of that asset that can be estimated reliably.



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

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company and its Subsidiaries on terms that the debitur would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. The Company and its Subsidiaries considers evidence of impairment for financial assets (loans and receivables) measured at amortized cost both at specific asset level and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company and its Subsidiaries uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in the consolidated statements of comprehensive income and reflected in an impairment account against loans and receivables. Interest on the impaired asset continues to be recognized. When an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through consolidated statements of comprehensive income.

j. Inventories

Inventories are carried at the lower of cost and net realizable value. Cost of inventories is determined using on the average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) j. Inventories (Continued)

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

k. Prepaid Expenses

Prepaid expenses are charged to operations over the periods benefit using the straight-line method.

l. Property, Plant and Equipment

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses, if any, since the Company and its Subsidiaries adopt the cost model. Cost includes expenditure that is directly attributable to the acquisition of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in the consolidated statements of comprehensive income. Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company and its Subsidiaries. Ongoing repairs and maintenance are expensed as incurred. Items of property, plant and equipment are depreciated from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use. Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line basis over their estimated useful lives. Depreciation is generally recognized in the consolidated statements of comprehensive income, unless the amount is included in the carrying amount of another asset.



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

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Land is not depreciated. Depreciation is recognized on straight-line basis to write down the depreciable amount of property, plant and equipment, except land. The estimated useful lives are as follows: Years Buildings and improvement 20 Machinery and equipment 3-20 Transportation equipment 5 Office equipment 5 Initial legal costs incurred to obtain legal rights are recognized as part of the acquisition cost of the land, and these costs are not depreciated. Cost related to renewal of land rights are recognized as intangible assets and amortized during the period of the land rights.

m. Contruction in Progress

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

n. Intangible asset

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

o. Impairment of Non-Financial Assets

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



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) p. Leases

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

q. Financial Liabilities

The Company and its Subsidiaries initially recognizes liabilities on the date that they are originated. All other financial liabilities are recognized initially on the trade date, which is the date that the Company and its Subsidiaries becomes a party to the contractual provisions of the instrument. The Company and its Subsidiaries classify non-derivative financial liabilities into the other financial liabilities category which comprise Trade Payables, Accrued Expenses, Bank Loans, Secured Debts, Other Short-term Financial Liabilities, and Borrowing from Other Financial Institution (such as : Credit Financing Payables, Unsecured Debts and Notes Payables and Working Capital Loans). Such financial liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method. Bank Loans, Secured Debts, Borrowing from Other Financial Institution are raised for support of short-term funding of operations. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. The Company and its Subsidiaries derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.



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

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

s. Government Grant

Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. And the grants related to assets are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. A Government grant is recognized only when there is reasonable assurance that the entity will comply with any conditions attached to the grant and the grant will be received. There are two broad approaches to the accounting for government grants : the capital approach, under which a grant is recognized outside the consolidated statement of comprehensive income, and the income approach, under which a grant is recognized in the consolidated statement of comprehensive income over one or more period. The Company adopts the income approach model and they recognized a government grants through deferred income. It will be amortized as income over the period necessary to match them with related cost of property, plant and equipments, for which they are intended to compensate, on a systematic basis (20 years).

t. Employees’ Benefit

(i) Short-term employee benefits

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



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) t. Employees’ Benefit (Continued)

(ii) Post-employment obligation

Post-employment benefits such as retirement, severance and service payments are calculated based on Labour Law No. 13/2003 (“Law 13/2003”). In accordance with Law 13/2003, the Company and its Subsidairies have further payment obligations if the benefits provided by the existing plan do not adequately cover the obligations under Law 13/2003. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company and its Subsidiaries’ net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the consolidated statements of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Government Bonds (considering currently there is no deep market for high-quality corporate bonds) that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions charged or credited to consolidated statement of comprehensive income in the period in which they arise. The accumulated unrecognized actuarial gains and losses that exceed 10% of the present value of the entity’s defined benefit obligations is recognized on a straight-line basis over the expected average remaining working lives of the participating employees. Past-service costs are recognized immediately in the consolidated statement of comprehensive income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortized on a straight-line basis over the vesting period. Gains or losses on the curtailment or settlement of a defined benefit plan are recognized when the curtailment or settlement occurs.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) t. Employees’ Benefit (Continued)

(iii) Termination benefits

The Company and its Subsidiaries shall recognize termination benefits as a liability and an expense when, and only when, the Company and its Subsidiaries are demontrably committed to either, terminate the employment of employee before the normal retirement date, or provide termination benefits as a result of an offer made in order to encourage voluntary redundancy based on a detailed formal plan and without realistic possibility of withdrawal. Where termination beenfits fall due more than 12 months after the reporting period, they should be discounted using the discount rate.

(iv) Bonus

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

u. Income Tax

The income tax expense comprises current and deferred income tax. Tax is recognized in the consolidated statements of comprehensive income account, except to the extent that it relates to items recognized directly to equity and other comprehensive income. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognized, using the consolidated statements of financial position method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates that have been enacted or substantially enacted as at reporting period and is expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.



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

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Amendments to tax obligations are recorded when an assessment is received or, for assessment amounts appealed against by the Company and its Subsidiaries, when : (1) the result of the appeal is determined, unless there is significant uncertainty as to the outcome of such appeal, in which case the impact of the amendment of tax obligations based on an assessment is recognized at the time making such appeal, or (2) at the time based on knowledge of developments in similar cases involving matters appealed by the Company and its Subsidiaries, based on rulings by the Tax Court or the Supreme Court, that a positive outcome of the Company and its Subsidiaries’ appeals is adjudged to be significantly uncertain, in which event the impact of an amendment of tax obligations based on the assessment amounts appealed is recognized. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

v. Additional Paid-in Capital

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

w. Revenue and Expense Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Company and its Subsidiaries’ activities. Revenue is shown net of value-added tax, returns, rebates and discounts. The Company and its Subsidiaries recognizes revenue when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Company and its Subsidiaries’ activities as described below. The Company and its Subsidiaries bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.



35

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

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

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

effective yield of the asset. Expenses are recognized upon utilization of the service or at the date they are incurred.

x. Earnings per Share

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

y. Segment Information

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

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

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

3. for which discrete financial information is available.



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4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of the consolidated financial statements in conformity with PSAK requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next 12 months are addressed below. Functional currency The functional currency of the Company and its Subsidiaries are the currency of the primary economic environment in which each entity operates. The Company and its Subsidiaries consider some factors in determining its functional currency, among others, the currency that mainly influences the revenue, cost and financing activities, and the currency in which receipts from operating activities are usually retained. Based on the economic substance of the underlying circumstances relevant to the Company and its Subsidiaries, the functional currency has been determined to be United States Dollar (US$), as this reflected the fact that majority of the Company and its Subsidiaries’ operational businesses are influenced by pricing in internationally commodity markets with a United States’ economic environment (US$). Estimating Allowance for Impairment Losses on Receivables The Company and its Subsidiaries performs regular review of the age and status of its receivables, designed to identify accounts with objective evidence of impairment and provides these with the appropriate allowance for impairment losses. The review is accomplished using a combination of specific and collective assessment approaches, with the impairment losses being determined for each risk grouping identified by the Company and its Subsidiaries. The amount and timing of recorded expenses for any period would differ if the Company and its Subsidiaries made different judgments or utilized different methodologies. As of December 31, 2013 and 2012, total allowance for impairment losses recognized on the Company and its Subsidiaries’s receivables amounted to US$ 164,372,173 (see Notes 6, 7 and 12). Estimating Net Realizable Value of Inventories In determining the net realizable value (NRV) of inventories, the Company and its Subsidiaries consider inventory obsolescence, damages, physical deterioration, changes in price levels, changes in consumer demands, or other causes to identify inventories which are to be written down to NRV. The Company and its Subsidiaries adjusts the cost of inventories to recoverable amount at a level considered adequate to reflect market decline in the value of the inventories. As of December 31, 2013 and 2012, there is no allowance for impairment losses recognized on the Company and its Subsidiaries’ inventories (see Note 9).



37

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued) Impairment of Property, Plant and Equipment and Intangible Assets PSAK requires that an impairment review be performed on property, plant and equipment and intangible assets when events or changes in circumstances indicate that the carrying amount may not be recoverable. Determining the net recoverable amount of assets requires the estimation of cash flows expected to be generated from the continued use and ultimate disposition of such assets. While it is believed that the assumptions used in the estimation of fair values reflected in the financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable amounts and any resulting impairment loss could have a material adverse impact on the results of operations. As of December 31, 2013 and 2012, there was no allowance for impairment losses recognized on the Company and its Subsidiaries’ property, plant and equipment and intangible assets (see Notes 14 and 15). Pension and Employees’ Benefit The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost/(income) for pensions include the discount rate and future salary increase. Any changes in these assumptions will have an impact on the carrying amount of pension obligations. The discount rate is interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Company and its Subsidiaries consider the interest rates of government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension obligation. For the rate of future salary increases, the Company and its Subsidiaries collect all historical data relating to changes in base salaries and adjusts it for future business plans. Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in Note 25. Fair Value of Financial Instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. In applying the valuation techniques, management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.



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4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued) Assessing Income Tax and Realization of Deferred Tax Assets Determining the provision for corporate income tax requires significant judgment by management. There are certain transactions and computation for which the ultimate tax determination is uncertain during the ordinary course of business. The Company and its Subsidiaries recognize liabilities for expected corporate income tax issues based on estimates of whether additional corporate income tax will be due. Where the final tax outcome of these matters is different from the amount that are initially recorded, such differences will have an impact on the current and deferred tax assets and liabilities in the period in which such determination is made. The Company and its Subsidiaries conducted a review of the carrying amount of deferred tax assets at every reporting period and reduce the value of such assets by as much as possible cannot be realized, where the availability of taxable income allow to use all or part of the deferred tax assets. The Company and its Subsidiaries’ review on the recognition of deferred tax assets for deductible temporary difference can be deductible based on the level and timing from the estimated taxable income for the next reporting period. The estimation is based on the achievement of the Company and its Subsidiaries in the past and future expectation toward income and expenses, as well as with the tax planning strategies in the future. But there is no certainty that the Company and its Subsidiaries can generate sufficient taxable income to allow use of part or all of these deferred tax assets.

5. CASH AND CASH EQUIVALENTS

2 0 1 3 2 0 1 2 US$ US$ Cash on hand : Rupiah 46,205 37,789 European Euro 3,343 8,315 US Dollar 28,177 27,650 Singapore Dollar 6,260 6,644 Norwegian Krone 173 170

84,158 80,568

Cash in banks : Third Parties : Deutsche Bank, Jakarta US Dollar account 2,658,800 7,780,057 Rupiah account 1,549,669 935,461 PT Bank CIMB Niaga Tbk US Dollar account 36,112 50,152 Rupiah account 376,982 359,146

Carried forward 4,621,563 9,124,816



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5. CASH AND CASH EQUIVALENTS (Continued) 2 0 1 3 2 0 1 2 US$ US$ Cash in banks (Continued): Brought forward 4,621,563 9,124,816 PT Bank Central Asia Tbk US Dollar account 148,161 271,211 Rupiah account 56,882 103,049

PT Bank Negara Indonesia (Persero) Tbk Rupiah account 190,657 214,345

5,017,263 9,713,421

Total 5,101,421 9,793,989

• Cash at bank can be withdrawn at anytime.

• All accounts in banks earn interest at floating rates based on the offered rate from each bank.

• The Company and its Subsidiaries do not have related party relationship with the banks where cash and cash equivalents are placed.

• In 2013, the Company’s cash on hand were not covered by insurance, and in 2012, the Company’s cash on hand were covered by insurance with PT Asuransi Rama Satria Wibawa against direct loss or damage to the cash and cheque of Rp 3,900,000,000 (equivalent to US$ 403,309), respectively.

• The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents is disclosed in Note 47.

6. TRADE RECEIVABLES

This account consists of : Third parties : 2 0 1 3 2 0 1 2 US$ US$ Local debtors 47,424,765 51,373,330 Foreign debtors 4,442,820 6,614,698

Total 51,867,585 57,988,028 Less : Allowance for impairment − −

Net 51,867,585 57,988,028



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6. TRADE RECEIVABLES (Continued) Due to the short-term nature of trade receivables from third parties, their carrying amount approximates their fair values. The aging of trade receivables from third parties is as follows: 2 0 1 3 2 0 1 2 US$ US$ Up to 1 month 39,445,862 43,545,691 > 1 month – 3 months 11,995,741 14,145,445 > 3 months – 6 months 296,128 204,355 > 6 months – 1 year 129,854 92,537 > 1 year – –

Total 51,867,585 57,988,028

As of December 31, 2013, trade receivable of US$ 129,854 (2012 : US$ 92,537) were past due but not impaired. These relate to a number of individual customers for whom there is no recent history of default. The details of trade receivables from third parties based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$ United States Dollar 51,665,168 57,779,157 Rupiah Rp 2,467,263,482 in 2013 and Rp 2,019,778,766 in 2012 202,417 208,871

Total 51,867,585 57,988,028

All amounts of trade receivables from third parties do not bear any interest and have been reviewed for indication of impairment. Based on the review of the status of individual trade receivables from third parties, the Company and its Subsidiaries’ management determined that the trade receivables from third parties are not impaired. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable is disclosed in Note 47.



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6. TRADE RECEIVABLES (Continued) Related parties : 2 0 1 3 2 0 1 2 US$ US$ PT Multikarsa Investama 22,046,308 27,789,291PT Texmaco Jaya Tbk (under bankruptcy) 15,657,945 15,657,945

Total 37,704,253 43,447,236Less : Allowance for impairment (15,657,945) (15,657,945)

Net 22,046,308 27,789,291

Due to the short-term nature of trade receivables from related parties, their carrying amount approximates their fair values. The aging of trade receivables from related parties is as follows: 2 0 1 3 2 0 1 2 US$ US$ Up to 1 month – – > 1 month – 3 months – – > 3 months – 6 months – – > 6 months – 1 year – – > 1 year 37,704,253 43,447,236

Total 37,704,253 43,447,236

Changes in the allowance for impairment from related parties are as follows : 2 0 1 3 2 0 1 2 US$ US$ Beginning balance 15,657,945 15,657,945 Movement during the year : Addition – – Deduction – –

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



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6. TRADE RECEIVABLES (Continued) The details of trade receivables from related parties based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$ United States Dollar 15,657,945 15,657,945 Rupiah Rp 268,722,447,174 in 2013 and 2012 22,046,308 27,789,291

Total 37,704,253 43,447,236

All amounts of trade receivables from related parties do not bear any interest and have been reviewed for indication of impairment. Based on the review of the status of the trade receivables from related parties, management believes that the carrying value is a reasonable approximation of fair value. The impairment was not provided since the related party, PT Multikarsa Investama, is under debt restructuring and the settlement of the receivables from related parties will be done when the debt restructuring is completed. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable is disclosed in Note 47. In 2013 and 2012, all trade receivables are used as collateral for the Company’s bank loans and working capital loans that were received from Damiano Investments BV., Netherland (Notes 18 and 21).

7. OTHER RECEIVABLES

2 0 1 3 2 0 1 2 US$ US$ Third parties : Receivables from purchase discounts 1,039,025 646,363 MESOP Receivables 224,779 341,499 Insurance claims 297,082 – Receivables from import clearance 95,990 144,976 Receivables from employees 53,204 33,612 Interest receivables on time deposits 553 4,486 Others 267,541 369,615

1,978,174 1,540,551



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7. OTHER RECEIVABLES (Continued)

2 0 1 3 2 0 1 2 US$ US$ Other third parties : Operational Advances to : PT Wastra Indah 15,775,280 15,812,049 PT Texmaco Perkasa Engineering Tbk 5,653,761 5,679,940 PT Wahana Perkasa Auto Jaya 5,579,991 5,579,991 PT Sumatex Subur 3,192,784 3,192,784 PT Texmaco Taman Synthetics 3,034,508 3,094,847 Drapper Texmaco Inc. Co., United States of America 2,065,103 2,065,103 Norfil Ltd., Englang 728,191 728,191 Commonwealth Holdings Pte. Ltd., Singapore 496,867 496,867 PT Bina Prima Perdana 463,160 583,812 PT Jaya Perkasa Engineering 351,382 442,916 PT Perkasa Heavindo Engineering 194,587 194,587 PT Wismakarya Prasetya (under bankruptcy) 144,101 181,639 PT Raja Busana Mahameru 136,945 136,945 PT Supermitory Utama Tbk 93,407 93,407 PT Saritex Jaya Swasti 58,497 68,868 PT Merauke Rayon Jaya 49,883 49,883 PT Devrindo Widya 25,434 25,434 PT Perkasa Indobaja 15,816 15,816 PT Perkasa Indosteel 13,327 13,327 PT Wahana Jaya Perkasa 11,102 11,102 PT Sarana Daycrown Industri 11,102 11,102 PT Bina Peranan Busana 2,336 2,336 PT Citra Indah Textile 985 985 Total 38,098,549 38,481,931 Less : Allowance for impairment (36,721,575) (36,721,575)

Net 1,376,974 1,760,356

Total 3,355,148 3,300,907

Other receivables from these above companies represent the loans and advances for working capital purposes. The loans and advances are not subject to interest and have no terms of repayment. Until now, these companies are unable to pay their payables to the Company and its Subsidiaries due to their financial difficulties. Most of the companies have already stopped operations and are still under the restructuring program with PT Perusahaan Pengelola Asset (PPA). As of March 31, 2014, the debt restructuring program has not yet been completed.



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7. OTHER RECEIVABLES (Continued) MESOP receivables are due to loans given to selected employees for purchasing the Company’s shares on the MESOP programme (Note 27). These amounts are being recovered from the employees during 1 (one) period. Other receivables from employees represent advances to employees. These advances are not subject to interest and the payments are made based on the terms of the repayment schedule. Due to the short-term nature of other receivables, their carrying amount approximates their fair values. Changes in the allowance for impairment are as follows : 2 0 1 3 2 0 1 2 US$ US$ Beginning balance 36,721,575 36,721,575 Movement during the year : Addition – – Deduction – –

Ending balance 36,721,575 36,721,575

The details of other receivables based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$ United States Dollars 38,478,969 37,925,716 Rupiah Rp 19,475,029,024 in 2013 and Rp 20,275,727,220 in 2012 1,597,754 2,096,766

Total 40,076,723 40,022,482

All amounts of other receivables have been reviewed for indication of impairment. Based on the review of the status of individual other receivables, the Company and its Subsidiaries’ management believe that the impairment of other receivables are adequate to cover possible losses on uncollectible other receivables. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable is disclosed in Note 47.



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8. OTHER CURRENT FINANCIAL ASSETS This account consists of : 2 0 1 3 2 0 1 2 US$ US$ Time deposits : Third party : Deutsche Bank, Jakarta 328,165 827,301

Bank guarantees / SBLC 8,638,954 6,654,903

Security deposits : Third parties : Security deposit for electricity 143,982 181,489 Security deposit for rental 42,894 51,357 Others 4,568 5,758

191,444 238,604

Total 9,158,563 7,720,808

a. Time Deposits

• In 2013, time deposit with Deutsche Bank, Jakarta of Rp 2,000,000,000 (equivalent to US$ 164,082) represents one year time deposit with interest rate of 6.80% per annum, due on September 30, 2014.

• In 2013, time deposit with Deutsche Bank, Jakarta of Rp 2,000,000,000 (equivalent to US$ 164,083) represents one year time deposit with interest rate of 6.90% per annum, due on December 10, 2014.

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

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

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



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

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

b. Bank Guarantees / SBLC

Based on the purchase and sale gas agreement No. 001016.PK/HK.02/USH/2010 between the Company, PT Perusahaan Gas Negara (Persero) and PT Wismakarya Prasetya (under bankruptcy), the Company should provide the bank guarantee for gas supplies equivalent to approximately two months consumption value and the balance of gas. The Company provided the bank guarantee (SBLC) through Deutsche Bank, Jakarta for an amount equal to US$ 5,777,094 plus Rp 16,498,800,000 (equivalent to US$ 7,130,675) in 2013 and US$ 3,793,043 plus Rp 16,498,800,000 (equivalent to US$ 5,499,227) in 2012 representing two (2) month’s consumption. The bank guarantees still have terms of three (3) and nine (9) months after the reporting date and will due on March 31, 2014 and September 30, 2014. In order to obtain the SBLC, the Company deposited an amount equal to US$ 8,638,954 and US$ 6,654,903 as of December 31, 2013 and 2012 in Deutsche Bank, Hong Kong as collateral through Kyoa account. The collateral represents approximately 120% of SBLC amount for Rupiah portion.

Due to the short-term nature of other current financial assets, their carrying amount approximates their fair values. The details of other current financial assets based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$ United States Dollar 8,645,944 6,661,003 Rupiah Rp 6,248,315,332 in 2013 and Rp 10,248,315,332 in 2012 512,619 1,059,805

Total other current financial assets 9,158,563 7,720,808

No other current financial assets are placed with related parties. The maximum exposure to credit risk at the reporting date is the carrying value of each class of other current financial assets is disclosed in Note 47.



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9. INVENTORIES 2 0 1 3 2 0 1 2 US$ US$ Finished goods 33,734,489 34,787,985 Work in process 6,908,098 6,073,039 Raw materials 22,541,882 19,078,632 Indirect materials 23,042,768 20,014,977

Total 86,227,237 79,954,633 Less : Allowance for impairment – –

Net 86,227,237 79,954,633

Based on the review of the physical condition of the inventories at the end of each year, the management believes that no allowance for impairment is deemed necessary. As at December 31, 2013 and 2012, the inventories are covered by insurance with PT Asuransi Indrapura against fire loss and other risks totaling US$ 84,500,000 and US$ 79,500,000, respectively, which in the opinion of the management is adequate to cover losses arising from such risks. Further, on February 21, 2014, the Company changes their inventory’s insurance from PT Asuransi Indrapura to marine cargo stock throughput insurance PT Talisman Insurance Brokers against fire loss and other risks totalling US$ 86,500,000, which in the opinion of the management is adequate to cover losses arising from such risks. In 2013 and 2012, all inventories were used as collateral for the Company’s bank loans and working capital loans that were received from Damiano Investments BV., Netherland (Notes 18 and 21).

10. PURCHASE ADVANCES

2 0 1 3 2 0 1 2 US$ US$ Third parties : Purchase of turbines’ spareparts 2,865,647 1,109,367 Purchase of inventories and operational 3,427,467 4,680,032 Purchase of property, plant and equipments 569,769 1,865,844 6,862,883 7,655,243

Other third party : PT Wismakarya Prasetya (under bankruptcy) 30,499,214 26,949,949



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10. PURCHASE ADVANCES (Continued) 2 0 1 3 2 0 1 2 US$ US$ Related party : PT Texmaco Jaya Tbk (under bankruptcy) 54,799 –

Total purchase advances 37,416,896 34,605,192

In 2013, total purchases advance of property, plant and equipments of US$ 569,769 (equivalent to Rp 5,926,790,296) represents the balance in connection with the purchases of machineries and equipments with total amounts of US$ 193,110 (equivalent to Rp 1,993,827,786) in filament yarn division and the purchases of fiber machineries and equipments for expansion with total amounts of US$ 376,659 (equivalent to Rp 3,932,962,510). The machineries and equipments will be received in 2014. In 2012, total purchases advance of property, plant and equipments of US$ 1,865,844 (equivalent to Rp 17,513,121,317) represents the balance in connection with the purchases of machineries and equipments with total amounts of US$ 1,055,555 (equivalent to Rp 10,065,798,027) in filament yarn division and the purchases of fiber machineries and equipments for expansion with total amounts of US$ 810,289 (equivalent to Rp 7,447,323,290). The machineries and equipments had been received in 2013. The payment made by the Company to PT Texmaco Jaya Tbk (under bankruptcy) in excess of the payment for tolling expenses and was treated as advance payment for tolling expense in the next month. The payment made by the Company to PT Wismakarya Prasetya (under bankruptcy) in excess of the invoice amount in treated as advance payment to PT Wismakarya Prasetya (under bankruptcy) in line with the agreement between PT Wismakarya Prasetya (under bankruptcy) and the Company on November 16, 2006, and the working capital provided to PT Wismakarya Prasetya in the past for the payment of its old dues to PT Perusahaan Gas Negara (PGN) or PT Perusahaan Listrik Negara (PLN) and taxation. The Company has lodged its claims with the curator for the dues amounting to Rp 279,593,977,457 of principal value and Rp 206,051,448,529 towards interest amount. It will be discussed with the curator.

11. PREPAID EXPENSES

2 0 1 3 2 0 1 2 US$ US$ Prepaid insurance 1,591,903 1,061,627Prepaid rent 99,900 40,000

Total 1,691,803 1,101,627



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12. NON-TRADE RECEIVABLES FROM RELATED PARTIES

2 0 1 3 2 0 1 2 US$ US$ PT Texmaco Jaya Tbk (under bankruptcy) 106,410,712 106,410,712PT Multikarsa Investama 30,388,348 38,025,981

Total 136,799,060 144,436,693Less : Allowance for impairment (111,962,653) (111,962,653) Net 24,836,407 32,474,040

Non-trade receivables from PT Multikarsa Investama represent the cash receipts from AR International Limited, Hong Kong of Rp 51,421,394,625 (equivalent to US$ 4,218,672 in 2013 and US$ 5,317,621 in 2012) for the refund on the Company’s advances for the purchase of property, plant and equipment (machinery and equipment). The remaining balance of US$ 26,169,676 and US$ 32,708,360, respectively as of December 31, 2013 and 2012 represents advance payments for salary and other expenses. Changes in the allowance for impairment are as follows : 2 0 1 3 2 0 1 2 US$ US$ Beginning balance 111,962,653 111,962,653Movement during the period : Addition – – Deduction – –

Ending balance 111,962,653 111,962,653

Based on the review of the status of the non-trade receivables from related parties, management believes that the carrying value is a reasonable approximation of fair value. The impairment was not provided with properly since the related party, PT Multikarsa Investama, is under the debt restructuring and the settlement of the non-trade receivables from related parties will be done when the debt restructuring is completed. The details of non-trade receivables from related parties based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$ United States Dollar 109,297,108 109,297,108

Rupiah Rp 335,221,292,255 in 2013 and Rp 339,799,791,085 in 2012 27,501,952 35,139,585

Total 136,799,060 144,436,693



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13. OTHER NON-CURRENT FINANCIAL ASSETS

2 0 1 3 2 0 1 2 US$ US$ Restricted Cash In Banks :

IBRA (PPA) : PT Bank Dharmala Rupiah account 2,221 2,799 PT Bank Putera Multikarsa Rupiah account 319,504 402,735 US Dollar account 702,330 702,330 PT Bank Papan Sejahtera Rupiah account 3,065 3,863 PT Bank Umum Nasional US Dollar account 1,927 1,927 PT Bank Asia Pacific Rupiah account 46 57

Total 1,029,093 1,113,711

As the Company and its Subsidiaries ire under restructuring process with the Indonesian Bank Restructuring Agency (IBRA), the aggregate balances of cash in banks were restricted by IBRA. The Indonesian government through the Indonesian Bank Restructuring Agency (IBRA) suspended the bank operating licences of PT Bank Putera Multikarsa, a related party, on January 28, 2000; PT Bank Dharmala, PT Bank Asia Pacific and PT Bank Papan Sejahtera on March 13, 1999; and PT Bank Umum Nasional on August 21, 1998. As a result, the balance of banks as of December 31, 2013 and 2012 amounting to US$ 1,029,093 and US$ 1,113,711, respectively, is shown as other non-current financial assets in the consolidated statements of financial position. The Company and its Subsidiaries’ management determined that the restricted cash in banks do not need impaired, because the outstanding balance of restricted cash in banks will be settled upon loan repayment or upon completion of the restructuring program with the creditors and PPA. The net carrying value of restricted cash in banks is considered a reasonable approximation of fair value.



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14. PROPERTY, PLANT AND EQUIPMENT The details of property, plant and equipment are as follows : 2 0 1 3 2 0 1 2 US$ US$ Direct acquisition : Carrying cost 1,786,149,814 1,784,685,143 Accumulated depreciation (1,714,202,396) (1,658,522,816)

Book value 71,947,418 126,162,327

Contruction in progress 10,277,333 3,232,319

Total 82,224,751 129,394,646

Direct acquisition : 2 0 1 3 Changes during the current period

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

Carrying cost : Land 15,529,702 – – – 15,529,702 Building and improvement 47,221,395 – – – 47,221,395 Machinery and equipment 1,713,914,123 88,288 – 1,352,882 1,715,355,293 Transportation equipment 5,145,934 23,142 – – 5,169,076 Office equipment 2,873,989 359 – – 2,874,348 –

1,784,685,143 111,789 – 1,352,882 1,786,149,814

Accumulated depreciation : Building and improvement 41,285,642 1,694,160 – – 42,979,802 Machinery and equipment 1,609,530,729 53,883,012 – – 1,663,413,741 Transportation equipment 4,849,748 98,566 – – 4,948,314 Office equipment 2,856,697 3,842 – – 2,860,539

1,658,522,816 55,679,580 – – 1,714,202,396

Book value 126,162,327 71,947,418

2 0 1 2 Changes during the current period


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

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



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14. PROPERTY, PLANT AND EQUIPMENT (Continued) 2 0 1 2 Changes during the current period


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

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

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

Construction in progress : 2 0 1 3 Changes during the current period

Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Carrying cost : Machinery and equipment 3,232,319 8,397,896 – 1,352,882 10,277,333

2 0 1 2 Changes during the current period

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

2 0 1 3 2 0 1 2 US$ US$ Depreciation expenses is allocated to : Direct acquisition : Manufacturing expense (Note 36) 55,577,173 69,574,411 General and administrative expenses (Note 38) 102,407 95,849

Total 55,679,580 69,670,260

The Company own several pieces of land located in Karawang and Kendal amounted to 754,905 square meters with certificate Building Use Right (Hak Guna Bangunan or HGB) for a period of 20 – 30 years which will be expired between 2006 and 2032. For the ownership certificate of the land were located in Semarang of 78,111 square meters have been extended up to November 29, 2027. Management believes that there will be no difficulty in the extension of the certificate of landrights since all the landrights were acquired legally and supported by sufficient evidence of ownership. The part of the Company’s land in Karawang, with the certificate Building Use Right (HGB) No. 13 of 33,630 square meters and with the certificate Building Use Right (HGB) No. 14 of 35,380 square meters, are pledged to PT Bank Negara Indonesia (BNI) and PT Bina Prima Perdana (BPP) towards secured debts’ PT Texmaco Jaya Tbk (in bankruptcy) (Note 44).



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14. PROPERTY, PLANT AND EQUIPMENT (Continued) The part of additional machinery and equipment amounted to US$ 932,483 (equivalent to Rp 8,519,168,000) represent the expenditure for overhaul PTA machinery and will be extended the useful lives of machinery and equipment of three (3) years. As of December 31, 2012, the construction in progress for machinery and equipment of US$ 3,232,319 are connected with the increasing of the Company’s filament yarn. Up to December 31, 2013, the Company has reclassified the part of them to property, plant and equipments with totaling of US$ 1,352,882, and the remaining balance of US$ 1,879,437 has not been constructed, and will be completed in 2014 together with the new construction in progress in 2013. As of December 31, 2013, the construction in progress for machinery and equipment of US$ 10,277,333, consist of the remaining balance in the contruction in progress for machinery and equipment in 2012 with totaling of US$ 1,879,437 and the addition during the year 2013 with totaling of US$ 8,397,896, are connected with the increasing of the Company’s filament yarn and fiber capacity. Up to December 31, 2013, the total percentage of completion for this project is approximately 75% and will be completed in 2014. Management believes that there is no impediment to the completion of the contruction in progress. Management believes that the estimated recoverable amounts of property, plant and equipment exceed their carrying values and, hence, no impairment of property, plant and equipment should be recorded as at the statement of financial position date. The fair value of land (762,538 sqm) based on NJOP (Tax Object Market Value) is Rp 236,736,440,000 (equivalent to US$ 19,422,138) and the fair value of building (210,582 sqm) based on NJOP is Rp 146,271,550,000 (US$ 12,000,291). Based in the appraisal’s report of KJPP Nirboyo A., Dewi A. & Rekan dated September 3, 2013, total market value of the Company’s property, plant and equipment were US$ 834,183,454 with the liquidation value of US$ 474,205,723. Based on the appraisal’s report of KJPP Wilson and Rekan dated January 30, 2012, total market value of the Company’s land, building and improvement were Rp 444,212,000,000. And based on the appraisal’s report of Nirboyo A., Dewi A. & Rekan dated January 19, 2012, total market value of machinery and transportation equipment in Karawang is US$ 274,860,902. The valuation, which conforms to International Valuation Standards, was determined by reference to recent market transactions on arm’s length terms. Appraisal method used is Market Data Approach Methods. Elements used in data comparison process to determine assets’ fair value are as follows : a. Type of right on property. b. Market condition c. Location d. Land and Physical characteristics e. Income producing characteristics



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14. PROPERTY, PLANT AND EQUIPMENT (Continued) As of December 31, 2013 and 2012, total acquisition cost of fully depreciated property, plant and equipment is amounted to US$ 1,066,237,056 and US$ 742,492,712, respectively, but the Company is still using these assets in their operations. All of the Company’s property, plant and equipment, except land were insured with PT Asuransi Rama Satria Wibawa as lead Insurance Company from loss and other risks including earthquake valuing in total US$ 605,070,000 plus Rp 134,000,000 as of December 31, 2013 and US$ 605,070,000 plus Rp 609,000,000 as of December 31, 2012, respectively. The Company’s management, the sum insured as stated above is adequate to cover possible losses arising from such risks. In 2013 and 2012, all land, machinery and equipment are used as collateral for the secured bond holders and working capital loans from PT Bina Prima Perdana (BPP) / PT Perusahaan Pengelola Asset (PPA) and Damiano Investments BV., Netherland, respectively (Notes 19 and 21).

15. INTANGIBLE ASSETS

2 0 1 3 2 0 1 2 US$ US$ Legal processing of landrights 13,247 13,247Less : accumulated amortization (1,160) (497)

Net 12,087 12,750

Amortization expense are allocated to : General and administrative expenses (Note 38) 663 497

Intangible assets represent legal cost associated with the acquisition of landrights for land located at Bandung (166 square meters) and is amortized over the useful life (Hak Guna Bangunan) of 20 years. As of December 31, 2013 and 2012, the management believes that there was no indication of impairment for intangible assets.



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16. TRADE PAYABLES This account consist of : Third parties : 2 0 1 3 2 0 1 2 US$ US$ Local suppliers 14,855,972 10,537,328 Foreign suppliers 18,259,342 12,405,006

Total 33,115,314 22,942,334

A summary of the aging of trade payables to third parties based on the date of invoice is as follows : 2 0 1 3 2 0 1 2 US$ US$ Up to 1 month 27,377,573 18,541,840 > 1 month – 3 months 4,168,403 2,697,906 > 3 months – 6 months 300,609 565,265 > 6 months – 1 year 579,211 612,648 > 1 year 689,518 524,675

Total 33,115,314 22,942,334

The details of trade payables to third parties based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$ United States Dollar 28,978,426 18,551,978

Rupiah Rp 40,311,478,552 in 2013 and Rp 30,425,613,348 in 2012 3,307,201 3,146,392 European Euro EUR 388,986 in 2013 and EUR 284,392 in 2012 536,821 376,738

Japan Yen Yen 7,433,538 in 2013 and Yen 4,780,473 in 2012 70,847 55,368

Carried forward 32,893,295 22,130,476



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16. TRADE PAYABLES (Continued) 2 0 1 3 2 0 1 2 US$ US$ Brought forward 32,893,295 22,130,476 Great British Poundsterling GBP 10,444 in 2013 17,220 – Singapore Dolar SGD 51,618 in 2013 and SGD 27,904 in 2012 40,773 22,817

Krona Swedish SEK 52,758 in 2013 and SEK 5,128,579 in 2012 8,217 789,041

Swiss Franc CHF 138,304 in 2013 155,809 –

Total 33,115,314 22,942,334

Related party : 2 0 1 3 2 0 1 2 US$ US$ PT Texmaco Jaya Tbk (under bankruptcy) – 7,150

A summary of the aging of trade payables to related party based on the date of invoice is as follows : 2 0 1 3 2 0 1 2 US$ US$ Up to 1 month – 7,150

The details of trade payables to related party based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$

Rupiah Rp 69,142,248 in 2012 – 7,150



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16. TRADE PAYABLES (Continued) Trade payables to local and foreign suppliers represent payables for purchase of raw materials and indirect materials. These are non-interest bearing with clear terms of repayment. Due to their short-term nature, their carrying amount of trade payables approximates their fair value. There is no guarantee given on the trade payables.

17. ACCRUED EXPENSES

2 0 1 3 2 0 1 2 US$ US$ Interest 33,501,676 39,768,727 Electricity 1,870,052 1,925,678 Transportation 887,572 948,570 Salary 270,357 365,393 Rent 184,679 117,671 Profesional fee 122,220 81,000 Others 130,905 112,131

Total 36,967,461 43,319,170

The accrued interest of certain secured debts represent interest expenses accrued from the year 2001 and 2002, while all the unpaid and accrued interest up to 2000 according to the MOA had been waived. The interest expense after the year 2002 has not been recorded by the Company due to the restructuring process that has not yet been completed (Note 19). The details of accrued expenses based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$

Rupiah Rp 419,413,686,457 in 2013 and Rp 413,168,541,805 in 2012 34,409,195 42,726,840 United States Dollar 2,558,266 592,330

Total 36,967,461 43,319,170

Due to their short-term nature, their carrying amount of accrued expenses approximates their fair value.



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18. BANK LOANS 2 0 1 3 2 0 1 2 US$ US$ Related Party : Damiano Investment BV., Netherland 87,910,672 78,752,462

According to the loan agreement dated March 3, 2006 and its amendment dated August 31, 2006 between the Company (Borrower), and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to provide the Letter of Credit facility in the aggregate principal amount of US$ 50,000,000. Accordingly, the Company can also use the lender name as guarantor for opening Letter of Credit in Barclays Bank Plc, Hongkong (Barclays). In addition, the Company should pay a financing fee of 2.25% per month on the aggregate amounts of the facility in Barclays to Damiano Investments BV., Netherland. Based on the amendment loan agreement dated January 1, 2009 between the Company (Borrower), and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), from April 3, 2009 onwards, any and all references to “Barclays Letter of Credit Facility” shall be moved to “Deutsche Bank AG : Letter of Credit Facility”. The fee charges by Damiano Investments BV., Netherland on this facility was 1.25% per month. The Letter of Credit facility always changed based on the Company’s requirements for purchasing of raw materials. Based on the recent amendment loan agreement dated April 8, 2011 between the Company (Borrower) and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to increase the Letter of Credit facility in the aggregate principal amount from US$ 50,000,000 to US$ 80,000,000. Further, based on the recent amendment loan agreement on July 2012 between the Company (Borrower) and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to increase the Letter of Credit facility in the aggregate principal amount from US$ 80,000,000 to US$ 100,000,000. The availability of facility as of December 31, 2013 and 2012 were US$ 92,020,243 and US$ 84,019,693, respectively. And the letter of credit is used by the Company to purchase of raw materials totaling US$ 87,910,672 in 2013 and US$ 78,752,462 in 2012, respectively. This is a revolving facility. All bank loans are denominated in US Dollar. For the years ended December 31, 2013 and 2012, a fee on Bank Loan has been recognized in the amount of US$ 12,393,979 and US$ 13,969,873, respectively, and is presented as part of finance costs accounts in the consolidated statements of comprehensive income (Note 39). All bank loans from Damiano Investments BV., Netherland are collateralized by the Company’s trade receivables and inventories (Notes 6 and 9). Due to their short-term nature, their carrying amount of bank loans approximates their fair value.



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19. SECURED DEBTS 2 0 1 3 2 0 1 2 US$ US$ Bonds : 13% Guaranteed Secured Notes 122,526,000 122,526,000 Secured Floating Rate Notes 50,000,000 50,000,000 9.375% Guaranteed Secured Notes 250,000,000 250,000,000 11.375% Guaranted Secured Notes 260,000,000 260,000,000

682,526,000 682,526,000 PT Bina Prima Perdana PT Bank Negara Indonesia (Persero) Tbk IDR 1,302,583,907,331 106,865,527 134,703,610 United States Dollar 29,055,834 29,055,834 EUR 849,872 1,172,868 1,125,826 YEN 3,001,711,400 28,608,189 34,756,139

165,702,418 199,641,409 Banks Damiano Investments BV., Netherland (Ex. PT Bank Finconesia) EUR 7,471,539 10,311,104 9,897,556

Damiano Investments BV., Netherland (Ex. Union Europeene de CIC, Singapore) EUR 5,941,395 8,199,428 7,870,573

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

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

33,930,717 33,188,314

Ministry of Finance (Ex. BNI LC) : PT Bank Negara Indonesia (Persero) Tbk United States Dollar 80,366,458 78,628,322 IDR 38,468,048,072 in 2013 and IDR 41,968,807,083 in 2012

3,155,964

4,340,104

EUR 1,426,173 – 1,889,252 CHF 45,902 – 50,302

83,522,422 84,907,980

Total 965,681,557 1,000,263,703



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19. SECURED DEBTS (Continued) On November 30, 2001, the Company entered into Definitive Memorandum of Agreement (MOA) with the noteholders regarding the restructuring plan of the Company. However, it has not yet been executed by the Company and the MOA and automatically terminated. On March 14, 2007 and July 2007, the Company has issued a new Secured Debt Restructure Proposal (SDRP) to its secured creditors for the restructure of its Secured debts including the bonds, but the approval from the secured creditors, particularly from PPA (26% of total secured debt) has not given. And, Damiano Investments BV., Netherland currently hold approximately 93% of the secured bonds and banks has been approved the new Secured Debt Restructure Proposal. Further, on February 10, 2014, the Company has submitted a revised Secured Debt Restructuring Plan (SDRP) to PPA (Note 2a). In November 2010 and December 2010, PPA announced a “Sale of Texmaco Assets and Shares” programme which includes the fixed assets held as security by PPA in the Company-Semarang’s site. However for some reasons, the programme was later called off and cancelled. A. 13% Guaranteed Secured Notes, US$ 122,526,000.

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

B. Secured Floating Rates Notes, US$ 50,000,000.

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

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

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



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19. SECURED DEBTS (Continued) D. 11.375% Guaranteed Secured Notes, US$ 260,000,000.

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

Currently all these notes have been delisted from Luxembourg Stock Exchanges and are secured by liens of the collateral, which consist of real property, moveable assets (other than inventories) and proceeds of collateral on a pari-passu basis with the other notes payable and obligations of the Company (Note 14). Loans to PT Bina Prima Perdana (BPP) represent loans from PT Bank Negara Indonesia (Persero) Tbk which had been defaulted and transferred to IBRA. Further, pursuant to debt restructuring scheme in Master Restructuring Agreement (MRA) dated May 23, 2001, in 2002 the Company’s debts to IBRA have been transferred to BPP. For this transfer, BPP issued Exchangeable Bond (EB) to IBRA. But, on February 26, 2004, IBRA issued a letter of default notice to PT Bina Prima Perdana. The letter stated that PT Bina Prima Perdana as the textile holding company had failed to pay the Exchangeable Bond (EB) coupons due on August 18, 2003. The Company did not recognize the interest expenses on secured debts since 2002 since the Company is under restructuring process, and the interest payable will not be counted. As of December 31, 2013 and 2012, the Company had interest payable of Rp 380,648,007,290 (equivalent to US$ 31,228,813 in 2013 and US$ 39,363,806 in 2012) and was presented as part of accrued expenses in the consolidated statements of financial position (Note 17). The breakdown of secured debts by currency is as follows: 2 0 1 3 2 0 1 2 US$ US$ United States Dollar 807,368,477 805,630,341 European Euro (EUR 15,688,979 in 2013 and 2012) 19,683,400 20,783,207 Japan Yen (JPY 3,001,711,400 in 2013 and 2012) 28,608,189 34,756,139 Swiss Franc (CHF 45,902 in 2012) – 50,302

Carried forward 855,660,066 861,219,989



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19. SECURED DEBTS (Continued) 2 0 1 3 2 0 1 2 US$ US$ Brought forward 855,660,066 861,219,989 Rupiah (Rp 1,341,051,955,403 in 2013 and Rp 1,344,552,714,414 in 2012)

110,021,491

139,043,714

Total 965,681,557 1,000,263,703

Due to their short-term nature, their carrying amount of secured debts approximates their fair value.

20. UNSECURED DEBTS AND NOTES PAYABLE

2 0 1 3 2 0 1 2 US$ US$

The Hongkong and Shanghai Banking Corporation Limited 22,624,894 22,169,338

The Company has taking steps to implement the Composition Plan (Rencana Perdamaian) as approved by the unsecured creditors of the Company and ratified by the Commercial Court. On September 29, 2006, the unsecured creditors comprising of Banks, PT Bina Prima Perdana, Leasing, and Notes stand at US$ 18,670,630 was restructured into Fixed Rate Notes under custodian of The Hongkong and Shanghai Banking Corporation Limited, Hong Kong. As of December 31, 2013 and 2012, the total restructured unsecured debt were US$ 22,624,894 and US$ 22,169,338, respectively which are comprising of principal notes at US$ 18,670,630 plus unpaid capitalized interest of 3,954,264 in 2013 and US$ 3,498,708 in 2012. Based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and The Hongkong and Shanghai Banking Corporation Limited (Noteholder) dated January 30, 2009, the Noteholder shall defer the redemption dated of the unsecured debt and notes payable for 3 (three) years by revoking and replacing the table of redemption dates below :

Years Rate of return

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



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20. UNSECURED DEBTS AND NOTES PAYABLE (Continued) Further, based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and The Hongkong and Shanghai Banking Corporation Limited (Noteholder) dated January 16, 2012, the Noteholder shall defer the redemption dated of the unsecured debt and notes payable for 3 (three) years by revoking and replacing the table of redemption dates below :

Years Rate of return

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

All unsecured debts and notes payable are denominated in US Dollar. For the years ended December 31, 2013 and 2012, the interest charges on the unsecured debts were US$ 905,439 and US$ 885,278, respectively, and are presented as part of finance costs accounts in the consolidated statements of comprehensive income (Note 39). The fair value of long-term financial liabilities have been determined by calculating their present value at the consolidated statements of financial position date, using fixed effective market interest rates available to the Company. No fair value changes have been included in consolidated statements of comprehensive income for the period as financial liabilities are carried at amortized cost in the consolidated statements of financial position.

21. WORKING CAPITAL LOANS

2 0 1 3 2 0 1 2 US$ US$ Related Party : Damiano Investments BV., Netherland 17,340,000 17,340,000

Based on the Working Capital Loan Agreement between the Company and Damiano Investments BV., Netherland dated June 1, 2006, Damiano Investments BV., Netherland has provided the working capital loans facility for the Company. The interest chargeable on this loan is 9% per annum till the implementation of the Composition Plan. Upon implementation of the Composition Plan, the rate of interest is as per the terms of the “New Notes / Loan restructure”. The working capital loan shall be repayable on the earlier of 5 (five) years from the date of this agreement. Based on the second amendment of working capital loan agreement dated June 1, 2011, the repayment date has been extended from 5 (five) years to be 7 (seven) years.



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21. WORKING CAPITAL LOANS (Continued) Further, based on the third amendment of third working capital loan agreement dated August 1, 2013, the repayment date has been re-extended from 7 (seven) years to be 9 (nine) years. 1st Loan : In 2006, the Company obtains the working capital loan from Damiano Investments BV., Netherland amounted to US$ 15,000,000, and was repaid by the Company in 2011. 2nd Loan : Damiano Investments BV., Netherland has provided US$ 10,687,669.23 as working capital loans to the Company with interest rate of 15% per annum. The part of these working capital loans with totalling of US$ 6,777,924.23 have been repaid by the Company in 2011 while the remaining balance of US$ 3,909,745 was repaid by the Company in 2012. Damiano Investments BV., Netherland has also provided US$ 3,336,000 as advances. Based on the termination agreement dated January 1, 2008, Damiano Investments BV., Netherland agreed to reclassify the advances into a working capital loan agreement. It has been repaid by the Company in 2012. Based on the termination deed dated January 1, 2008, Damiano Investments BV., Netherland also agreed to reclassify outstanding amounts of principal and its interest from Catora’s pre-financing facility amounting to US$ 4,000,000 and US$ 2,399,255, respectively into a working capital loan agreement. It has been repaid by the Company in 2012. Based on the loan agreement dated August 14, 2008 and September 19, 2008, the Company obtained additional working capital loan from Damiano Investments BV., Netherland amounting to US$ 700,000 and US$ 155,000, respectively. It has been repaid by the Company in 2012. 3rd Loan : During the year 2011, Damiano Investments BV., Netherland has provided US$ 8,500,000 as part of the Company’s capital expenditure. The part of these working capital loans of US$ 4,100,000 have been repaid by the Company in 2012, while the remaining balance of US$ 4,400,000 is still outstanding as of December 31, 2013. During the year 2012, Damiano Investments BV., Netherland has also provided US$ 12,940,000 as part of the Company’s capital expenditure. It was still outstanding as of December 31, 2013. All working capital loans are denominated in US Dollar.



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21. WORKING CAPITAL LOANS (Continued) For the years ended December 31, 2013 and 2012, the interest charge on the working capital loans from Damiano Investments BV., Netherland were US$ 2,885,174 and US$ 2,936,962, respectively, and are presented as part of finance costs accounts in the consolidated statements of comprehensive income (Note 39). The fair value of long-term financial liabilities have been determined by calculating their present value at the consolidated statements of financial position date, using fixed effective market interest rates available to the Company. No fair value changes have been included in consolidated statements of comprehensive income for the period as financial liabilities are carried at amortized cost in the consolidated statements of financial position. In 2013 and 2012, working capital loans from Damiano Investments BV., Netherland are collateralized by the Company’s trade receivables, inventories and property, plant and equipments as collateral (Notes 6, 9 and 14).

22. CREDIT FINANCING PAYABLES

2 0 1 3 2 0 1 2 US$ US$ Credit financing payable: PT Andalan Finance Indonesia 20,377 59,272 PT Toyota Astra Financial Service 18,946 36,958 PT Astra Sedaya Finance 18,381 17,010 PT Staco Estetika Sedaya Finance – 6,946

Total credit financing payables 57,704 120,186

Less : current maturity of credit financing payable: PT Andalan Finance Indonesia (10,473) (33,586) PT Toyota Astra Financial Service (12,131) (13,076) PT Astra Sedaya Finance (7,968) (11,043) PT Staco Estetika Sedaya Finance – (6,946) Total current maturity of credit financing payables (30,572) (64,651)

Credit financing payables – net of current maturity 27,132 55,535

Based on agreement dated May 24, 2010, the Company obtained a credit financing from PT Staco Estetika Sedaya Finance for purchasing of a car (Toyota Fortuner) amounting to Rp 513,000,000 with effective interest rate of 12.83% per annum, repayable in monthly installments from May 28, 2010 up to April 28, 2013. As of December 31, 2013 and 2012, the outstanding credit financing payable balances were Rp Nil (equivalent to US$ Nil) and Rp 67,160,963 (equivalent to US$ 6,946), respectively.



66

22. CREDIT FINANCING PAYABLES (Continued) Based on agreement dated December 14, 2010, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 137,547,400 with effective interest rate of 10.04% per annum, repayable in monthly installments from December 10, 2010 up to November 10, 2013. As of December 31, 2013 and 2012, the outstanding credit financing payable balances were Rp Nil (equivalent to US$ Nil) and Rp 46,118,818 (equivalent to US$ 4,769), respectively. Based on agreement dated December 14, 2010, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 137,547,400 with effective interest rate of 10.04% per annum, repayable in monthly installments from December 10, 2010 up to November 10, 2013. As of December 31, 2013 and 2012, the outstanding credit financing payable balances were Rp Nil (equivalent to US$ Nil) and Rp 46,118,818 (equivalent to US$ 4,770, respectively Based on agreement dated December 14, 2010, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Fortuner) amounting to Rp 346,385,800 with effective interest rate of 10.03% per annum, repayable in monthly installments from December 10, 2010 up to November 10, 2013. As of December 31, 2013 and 2012, the outstanding credit financing payable balances were Rp Nil (equivalent to US$ Nil) and Rp 116,130,040 (equivalent to US$ 12,009), respectively. Based on agreement dated June 16, 2011, the Company obtained a credit financing from PT Astra Sedaya Finance for purchasing of a car (Isuzu Elf) amounting to Rp 185,598,390 with effective interest rate of 10.24% per annum, repayable in monthly installments from July 19, 2011 up to June 19, 2014. As of December 31, 2013 and 2012, the outstanding credit financing payable balances were Rp 35,006,686 (equivalent to US$ 2,872) and Rp 99,884,706 (equivalent to US$ 10,329), respectively. Based on agreement dated June 20, 2011, the Company obtained a credit financing from PT Astra Sedaya Finance for purchasing of a car (Toyota Avanza) amounting to Rp 119,640,000 with effective interest rate of 10.74% per annum, repayable in monthly installments from July 22, 2011 up to June 22, 2014. As of December 31, 2013 and 2012, the outstanding credit financing payable balances were Rp 22,695,944 (equivalent to US$ 1,862) and Rp 64,605,671 (equivalent to US$ 6,681), respectively. Based on agreement dated July 30, 2012, the Company obtained a credit financing from PT Toyota Astra Finance Services for purchasing of a car (Toyota Innova) amounting to Rp 186,160,000 with effective interest rate of 10.24% per annum, repayable in monthly installments from July 24, 2012 up to June 24, 2015. As of December 31, 2013 and 2012, the outstanding credit financing payable balance were Rp 103,954,564 (equivalent to US$ 8,529) and Rp 160,872,118 (equivalent to US$ 16,637), respectively. Based on agreement dated July 30, 2012, the Company obtained a credit financing from PT Toyota Astra Finance Services for purchasing of a car (Toyota Innova) amounting to Rp 227,400,000 with effective interest rate of 10.24% per annum, repayable in monthly installments from July 24, 2012 up to June 24, 2015. As of December 31, 2013 and 2012, the outstanding credit financing payable balance were Rp 126,977,544 (equivalent to US$ 10,417) and Rp 196,507,062 (equivalent to US$ 20,321), respectively.



67

22. CREDIT FINANCING PAYABLES (Continued) Based on agreement dated November 12, 2012, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 221,250,000 with effective interest rate of 9.14% per annum, repayable in monthly installments from November 19, 2012 up to October 19, 2015. As of December 31, 2013 and 2012, the outstanding credit financing payable balance were Rp 141,291,917 (equivalent to US$ 11,592) and Rp 208,935,649 (equivalent to US$ 21,607), respectively. Based on agreement dated November 12, 2012, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 160,950,000 with effective interest rate of 10.24% per annum, repayable in monthly installments from December 3, 2012 up to December 3, 2015. As of December 31, 2013 and 2012, the outstanding credit financing payable balance were Rp 107,078,228 (equivalent to US$ 8,785) and Rp 155,855,000 (equivalent to US$ 16,117), respectively. Based on agreement dated September 14, 2013, the Company obtained a credit financing from PT Astra Sedaya Finance for purchasing of a car (Toyota Innova) amounting to Rp 180,078,500 with effective interest rate of 10.18% per annum, repayable in monthly installments from September 14, 2013 up to September 14, 2017. As of December 31, 2013, the outstanding credit financing payable balances was Rp 166,349,428 (equivalent to US$ 13,647), respectively. The interest expenses incurred on this credit financing for the years ended December 31, 2013 and 2012 were Rp 103,337,921 (equivalent to US$ 9,951) and Rp 118,812,998 (equivalent to US$ 12,287), respectively, and is shown as part of the finance costs accounts in the consolidated statements of comprehensive income (Note 39). The fair value of long-term financial liabilities have been determined by calculating their present value at the consolidated statements of financial position date, using fixed effective market interest rates available to the Company. No fair value changes have been included in consolidated statements of comprehensive income for the period as financial liabilities are carried at amortized cost in the consolidated statements of financial position.

23. OTHER SHORT-TERM FINANCIAL LIABILITIES

2 0 1 3 2 0 1 2 US$ US$ Advance receipts from customers 3,260,959 1,527,619 Insurance 1,604,389 1,148,933 Freight and transportation 776,182 760,651 Others 682,067 713,762

Total 6,323,597 4,150,965



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23. OTHER SHORT-TERM FINANCIAL LIABILITIES (Continued) The details of other short-term financial liabilities based on currencies are as follows : 2 0 1 3 2 0 1 2 US$ US$

Rupiah Rp 9,546,144,873 in 2013, and Rp 18,295,341,577 in 2012 783,177 1,891,973 United States Dollar 5,540,420 2,258,992

Total 6,323,597 4,150,965

Due to their short-term nature, their carrying amount of other short-term financial liabilities approximates their fair value.

24. DEFERRED REVENUE

2 0 1 3 2 0 1 2 US$ US$ Government grant 246,027 – Less : accumulated amortization (8,375) –

Net 237,652 –

Amortization income are allocated to : Miscellaneous income, net (Note 40) 8,375 –

Deferred revenue represents the government grant related to purchase of machinery EFK Multi Spindel Texturing and EFK Coolflex with totaling of Rp 37,629,356,188 (equivalent to US$ 3,972,862). The machinery was located at Semarang, Central Java. The government grant is based on the Letter of Agreement to give the grant for Revitalization Programme and Industrial Growth through Restructuring of machinery / industry equipment TPT, and also IAK from the Ministry of Industry No. 0043/BIM.5/SPPB-TL/A/5/2013 dated May 10, 2013, which stated that the Company obtain the grant for purchasing of machinery amounting to Rp 2,388,181,818 (equivalent to US$ 246,027). And its government grant will be amortized over the useful life of machinery (20 years).



69

25. LONG-TERM EMPLOYEE BENEFITS LIABILITIES On June 20, 2000, the Ministry of Manpower issued Decree No. KEP-150/Men/2000 regarding the settlement of work dismissal and determination of separation, appreciation and compensation payment to employees, which requires companies to pay their employees gratuity and compensation benefits in case of employees resignation based on the employee’s number of years of service and salaries provided the conditions set forth in the decree are met. In April 2003, the Government of the Republic Indonesia issued Labour Law No. 13/2003 replacing the Decree No. KEP-150/Men/2000. The Company has defined benefit pension plans covering substantially all of their eligible permanent employees. The balances of long-term employee benefit liabilities as of December 31, 2013 and 2012, of US$ 9,392,014 and US$ 10,274,737, respectively are calculated by independent actuary on a yearly basis, as set out in their reports dated March 10, 2014. The amounts recognized in the consolidated statements of financial position are determined as follows: 2 0 1 3 2 0 1 2 US$ US$ Present value of obligations 9,975,563 18,296,212Unrecognized past service cost (1,109,574) (1,616,334) Unrecognized actuarial losses 526,025 (6,405,141)

Net liability 9,392,014 10,274,737

The movements in the present value of unfunded obligation over the year are as follows: 2 0 1 3 2 0 1 2 US$ US$ Beginning of the year 18,296,212 15,100,623Foreign exchange translation (3,781,127) (940,080) Current service cost 734,239 1,387,440Interest costs 862,646 960,116Actuarial loss recognized during the year (5,389,716) 2,279,745Benefit paid (746,691) (491,632)

End of the year 9,975,563 18,296,212

As of December 31, 2013 and 2012, all of defined benefit obligation is unfunded obligation so there is no fair value of plan assets.



70

25. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued) The amounts recognized in the consolidated statements of comprehensive income are as follows: 2 0 1 3 2 0 1 2

US$ US$ Current service cost 734,239 1,387,440 Interest costs 862,646 960,116 Past service cost 172,726 217,721 Losses on curtailments and settlements 217,753 172,350

Total (Note 38) 1,987,364 2,737,627

The movements in the net liability recognized in the consolidated statements of financial position are as follows : 2 0 1 3 2 0 1 2 US$ US$

Beginning of the year 10,274,737 8,561,749 Foreign exchange translation (2,123,396 ) (533,007 ) Benefits payment (746,691) (491,632 ) Amount charged to income 1,987,364 2,737,627

Ending of the year 9,392,014 10,274,737

The cost of providing post-employment benefits is calculated by independent actuary, PT Sienco Aktuarindo Utama using the following key assumptions : Discount rate : 9.00% p.a. in 2013 and 6.10% p.a. in 2012 Salary growth rate : 8.00% p.a. in 2013 and 2012 Mortality rate : Table Mortality in Indonesia 2011 Normal retirement age : 10% in 20 years old and decline until 54 years old Probability of resigned : 1% of mortality rate Fund method : Projected Unit Credit Method Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory. In Indonesia, the mortality assumptions used are based on Mortality Table in Indonesia 2011 (“TMI 2011”). Management reviewed the assumptions used and is of the opinion that the assumptions are reasonable. Management believes that the provision for severance provided is adequate to cover the potential liability required by Labour Law No. 13/2003.



71

25. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued) The sensitivity of the present value of defined benefit obligation and current service cost to changes in the weighted principal assumptions of 1% is as follows :

Descriptions Discount Rate Discount Rate

8.00% 10.00% In US$ In % In US$ In %

December 31, 2013 : Present value of defined obligation 10,901,297 9.28% 9,166,367 8.11% Current service cost 814,920 10.99% 666,188 9.27%

Descriptions Discount Rate Discount Rate

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

December 31, 2012 : Present value of defined obligation 20,202,437 10.42% 16,651,745 (8.99%) Current service cost 1,562,980 12.65% 1,241,350 (10.53%) Historical information of present value of unfunded obligation and experience adjustment on plan liabilities was as follows : 2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9 US$ US$ US$ US$ US$ Present value of defined benefit obligation 9,975,563 18,296,212 15,100,623 12,809,715 8,143,997 Fair value of plan assets ─ ─ ─ ─ ─

Deficit in the plan 9,975,563 18,296,212 15,100,623 12,809,715 8,143,997

Experience adjustments on plan liabilities 2,301,812 1,158,683 (65,731) 1,649,536 681,563

Experience adjustments on plan assets ─ ─ ─ ─ ─

26. TAXATION

a. Prepaid Taxes

2 0 1 3 2 0 1 2 US$ US$

Overpayment of corporate income tax 2011 – 3,988,440 2012 4,911,387 4,911,387 2013 6,314,637 – Value added Tax 7,677,887 5,886,221

Total 18,903,911 14,786,048



72

26. TAXATION (Continued) b. Taxes Payable

2 0 1 3 2 0 1 2 US$ US$

Income tax article 21 148,072 127,291 Income tax article 23 42,141 61,260 Income tax article 26 131,687 143,125 Value added tax 1,419,419 1,419,419

Total 1,741,319 1,751,095

c. Corporate Income Tax

A reconciliation between loss before income tax as shown in the consolidated statements of comprehensive income and estimated taxable loss which was calculated by the Company for the years ended December 31, 2013 and 2012 are as follows : 2 0 1 3 2 0 1 2 US$ US$ Loss before income tax as per consolidated statements of comprehensive income (36,465,504 ) (41,759,997 ) Profit before income tax of the Subsidiaries − −

Loss before income tax as per statement of comprehensive income of the Company (36,465,504 ) (41,759,997 )

Fiscal adjustments consisted of : Permanent difference : Non deductible expenses (non taxable income) : Gain on foreign exchange rate, net (193,217,517) (50,856,056 ) Tax expense 1,397,511 920,620 Entertainment and representation 97,208 107,849 Donation 18,585 12,719 Payables’ written-off – (383,000 ) Interest income (31,989) (31,754 )

(191,736,202 ) (50,229,622 )

Timing differences : Depreciation expense of property, plant and Equipment 26,858,983 36,996,057 Intangible assets 662 (12,750 ) Amortization of deferred charges (124,977) (131,555 ) Amortization of deferred revenues (237,652) – Long-term employee benefits liabilities (882,723) 1,712,988

25,614,293 38,564,740



73

26. TAXATION (Continued) c. Corporate Income Tax (Continued)

2 0 1 3 2 0 1 2 US$ US$ Estimated taxable loss for the year before fiscal loss carry forward (202,587,413 ) (53,424,879 ) Fiscal loss carry forward (161,326,942 ) (146,189,664 )

Total estimated accumulated taxable loss (363,914,355) (199,614,543)

Estimated corporate income tax – –

Prepaid taxes : Income tax article 22 (6,314,637) (4,903,200) Income tax article 23 – (8,187)

Total prepaid taxes (6,314,637) (4,911,387)

Estimated overpayment of corporate income tax (6,314,637) (4,911,387)

• A reconciliation the estimated taxable loss between the amounts computed by

functional/presentation currency and taxation purpose for the years ended December 31, 2013 and 2012 are as follows: December 31, 2013 Tax Reporting

Currency

Exchange Rate

Tax Reporting Currency

Functional Currency

Rp Rp US$ US$

Loss before income tax as per consolidated statements of comprehensive income (2,709,248,970,323 ) (36,465,504 ) (36,465,504 ) Profit before income tax of the Subsidiaries

–

–

–

Loss before income tax as per statements of comprehensive Income of the Company (2,709,248,970,323 ) (36,465,504 ) (36,465,504 )

Fiscal adjustments consisted of : Permanent difference : Non deductible expenses (non taxable income) : Gain on foreign exchange rate – – (193,217,517) (193,217,517) Tax expenses 14,761,560,822 10,563 1,397,511 1,397,511 Entertainment and representation 999,827,229 10,285 97,208 97,208 Donation 203,925,564 10,973 18,585 18,585 Interest income (331,823,916 ) 10,373 (31,989 ) (31,989 )

15,633,489,699 (191,736,202 ) (191,736,202 )



74


December 31, 2013 Tax Reporting

Currency

Exchange Rate


Functional Currency

Rp Rp US$ US$ Timing differences : Depreciation expense of property, plant and equipment 210,723,143,923 7,846 26,858,983 26,858,983 Intangible assets 6,000,000 9,063 662 662 Amortization of deferred Charges (280,300,579 ) 2.243 (124,977) (124,977) Amortization of deferred revenue (2,306,882,012 ) 9,707 (237,652) (237,652) Long-term employee benefits liabilities 15,122,550,807 17,132 (882,723) (882,723)

223,264,512,139 25,614,293 25,614,293

Estimated taxable loss for the year before fiscal loss carry forward (2,470,350,968,485 ) 12,194 (202,587,413 ) (202,587,413 ) Fiscal loss carry forward (1,500,017,987,798 ) 9,298 (161,326,942 ) (161,326,942 )

Total estimated accumulated taxable loss (3,970,368,956,283

)

(363,914,355

) (363,914,355

)

Estimated corporate income tax – – –

Prepaid taxes : Income tax article 22 (62,688,150,967) 9,927 (6,314,637) (6,314,637)

Total prepaid taxes (62,688,150,967) (6,314,637) (6,314,637)

Estimated overpayment of corporate income tax (62,688,150,967

) (6,314,637

) (6,314,637

)


Currency

Exchange Rate


Functional Currency

Rp Rp US$ US$

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

–

–

–

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



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Currency

Exchange Rate


Functional Currency

Rp Rp US$ US$ Fiscal adjustments consisted of : Permanent difference : Non deductible expenses (non taxable income) : Gain on foreign exchange rate – – (50,856,056 ) (50,856,056 ) Entertainment and representation 1,010,866,399 9,373 107,849 107,849 Donation 120,247,500 9,454 12,719 12,719 Tax expenses 8,331,874,273 9,050 920,620 920,620 Payables’ written-off (3,483,385,000 ) 9,095 (383,000 ) (383,000 ) Interest income (299,613,563 ) 9,435 (31,754 ) (31,754 )

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

Timing differences : Depreciation expense of property, plant and equipment 254,626,452,689 6,883 36,996,057 36,996,057 Amortization of deferred charges (295,053,242 ) 2,243 (131,555 ) (131,555 ) Intangible assets (115,500,000 ) 9,059 (12,750 ) (12,750 ) Long-term employee benefits liabilities 21,718,769,343 12,679 1,712,988 1,712,988

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

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

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

)

(199,614,543

) (199,614,543

)

Estimated corporate income tax – – –

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

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

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

) (4,911,387

) (4,911,387

)

The estimated taxable loss for the year ended December 31, 2012 as reported in the 2012 corporate income tax return amounted to Rp 518,648,726,687, and the tax return was submitted to the tax office in April 2013.



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In these financial statements, the amount of taxable income is based on preliminary calculations, as the Company has not yet submitted its corporate income tax returns.

d. Deferred Tax Assets (Liabilities)

The calculation of deferred tax assets and deferred tax liabilities with the maximum tax tariff of 25% in 2013 and 2012 are as follows :

2 0 1 3 Credited (charged) to the statements of comprehensive As of Income As of December 31, 2012 for the year December 31, 2013

US$ US$ US$ Deferred tax assets (liabilities) : Accumulated taxable loss 49,903,636 41,074,952 90,978,588 Valuation allowance (49,903,636) (41,074,952 ) (90,978,588) Depreciation expense of property, plant and equipment (153,106

)

6,714,745

6,561,639

Intangible assets (3,187) 165 (3,022) Amortization of deferred charges 804,230 (31,244 ) 772,986 Amortization of deferred revenues – (59,413 ) (59,413) Long-term employee benefit liabilities 2,568,684 (220,680 ) 2,348,004

Total 3,216,621 6,403,573 9,620,194

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

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

)

9,249,015

(153,106

)

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

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



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26. TAXATION (Continued) d. Deferred Tax Assets (Liabilities) (Continued)

There are no income tax charged/(credited) relating to other comprehensive income during the year. The recognition of the Company and its Subsidiaries’ deferred tax assets is based on management’s estimates of the results of future operations including an estimate of output levels and commodity prices for the Company and its Subsidiaries’ products, the timing and extent of the reversal of certain of the Company and its Subsidiaries’s deferred tax liabilities, and certain tax planning strategies. Based on these estimates, management believes that the Company and its Subsidiaries will not realize its deferred tax asset from fiscal loss carry forward. Accordingly, the management had made a valuation allowance of US$ 90,978,588 and US$ 49,903,636 as at December 31, 2013 and 2012, respectively. The basis supporting recognition of the deferred tax assets is reviewed regularly by management.

• A reconciliation between the total tax expense (income) and the amounts computed by applying the effective tax rate to profit (loss) before income tax is as follows : 2 0 1 3 2 0 1 2 US$ US$

Loss before income tax as per consolidated statements of comprehensive income (36,465,504 ) (41,759,997 ) Profit before income tax of the Subsidiaries − −

Loss before income tax as per statement of comprehensive income of the Company (36,465,504 ) (41,759,997 )

Tax benefit at tax rate 25% (9,116,376 ) (10,439,999 )

Taxable loss at tax rate 25% 50,646,853 13,356,219

Tax effect of non-deductible expense (non-taxable income) (47,934,050) (12,557,406)

Total tax income (6,403,573) (9,641,186)



78

26. TAXATION (Continued) e. Tax Income (Expense)

2 0 1 3 2 0 1 2 US$ US$ Current income tax : The Company – – Subsidiaries – –

– – Deferred tax income (expense) : The Company 6,403,573 9,641,186 Subsidiaries – – 6,403,573 9,641,186

Total tax income 6,403,573 9,641,186

f. Tax Assessment Letter

a. Company

• On December 5, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period September 2012. Based on the Indonesian Tax Authorities letter No. 00007/407/12/092/13, the Company had an overpayment of Rp 12,123,297,247. The overpayment of Corporate Income Tax has been received on December 30, 2013.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter for fiscal year 2011. Based on the Indonesian Tax Authorities letter No. 00043/406/11/092/13, the Company had an overpayment of Rp 36,185,444,544. The overpayment of Corporate Income Tax has been compensated in July 2013 with the other tax liabilities for fiscal year 2011 with totalling amount of Rp 272,501,798. And the remaining of its overpayment amounted to Rp 35,912,942,746 were received on July 10, 2013. Further on August 27, 2013, the Company submits the objection letter to the Indonesian Tax Authorities regarding the tax correction on allowance for impairment expenses in PT Texmaco Jaya Tbk amounted to Rp 1,100,061,519,201. Until the date of report finished, the result has not determined yet.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2011. Based on the Indonesian Tax Authorities letter No. 00034/201/11/092/13, the Company had additional tax liability of Rp 120,326,000. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.



79

26. TAXATION (Continued) f. Tax Assessment Letter (Continued)

a. Company (Continued)

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period January 2011. Based on the Indonesian Tax Authorities letter No. 00268/207/11/092/13, the Company had additional tax liability of Rp 2,000,000. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period February 2011. Based on the Indonesian Tax Authorities letter No. 00206/507/11/092/13, the Company had no additional tax liability.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period March 2011. Based on the Indonesian Tax Authorities letter No. 00269/207/11/092/13, the Company had additional tax liability of Rp 7,360,000. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period April 2011. Based on the Indonesian Tax Authorities letter No. 00270/207/11/092/13, the Company had additional tax liability of Rp 2,000,000. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period May 2011. Based on the Indonesian Tax Authorities letter No. 00271/207/11/092/13, the Company had additional tax liability of Rp 4,163,200. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period June 2011. Based on the Indonesian Tax Authorities letter No. 00272/207/11/092/13, the Company had additional tax liability of Rp 6,219,186. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.



80



• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period July 2011. Based on the Indonesian Tax Authorities letter No. 00273/207/11/092/13, the Company had additional tax liability of Rp 10,336,080. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period September 2011. Based on the Indonesian Tax Authorities letter No. 00274/207/11/092/13, the Company had additional tax liability of Rp 3,305,000. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period October 2011. Based on the Indonesian Tax Authorities letter No. 00275/207/11/092/13, the Company had additional tax liability of Rp 8,839,600. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period November 2011. Based on the Indonesian Tax Authorities letter No. 00276/207/11/092/13, the Company had additional tax liability of Rp 65,453,976. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period December 2011. Based on the Indonesian Tax Authorities letter No. 00277/207/11/092/13, the Company had additional tax liability of Rp 42,498,756. The tax liability had been compensated in July 2013 with the overpayment of 2011 Corporate Income Tax.

• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Taxes assessment letter for fiscal period July 2012. Based on the Indonesian Tax Authorities letter No. 00055/407/11/092/13, the Company had an overpayment of Rp 12,006,437,648. The overpayment of Value Added Taxes has been received on December 11, 2013.



81



• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2011. Based on the Indonesian Tax Authorities letter No. 00010/543/11/092/13, the Company had no additional tax liability.


• On June 3, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4(2) assessment letter for fiscal year 2011. Based on the Indonesian Tax Authorities letter No. 00025/540/11/092/13, the Company had no additional tax liability.


• On May 30, 2013, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal period July 2012. Based on the Indonesian Tax Authorities letter No. 00005/104/12/092/13, the Company had additional tax liability of Rp 12,747,875. The tax liability was paid on June 7, 2013.

• On November 7, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal period March 2012. Based on the Indonesian Tax Authorities letter No. 00004/104/12/092/12, the Company had additional tax liability of Rp 20,905,432. The tax liability was paid on November 28, 2012.

• On September 5, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period August 2011. Based on the Indonesian Tax Authorities letter No. 00028/407/11/092/12, the Company had an overpayment of Rp 17,500,076,809. The overpayment of Value Added Tax was received on September 27, 2012.

• On May 30, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 000108/503/10/511/12, the Company had no additional tax liability.



82




• On May 30, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4(2) assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 000109/540/10/511/12, the Company had no additional tax liability.


• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00033/406/10/092/12, the Company had an overpayment of Rp 35,914,770,914. The overpayment of Corporate Income Tax has been compensated in June 2012 with the other tax liabilities for fiscal year 2010 with totalling amount of Rp 2,740,502,844. And the remaining of its overpayment amounted to Rp 33,174,268,070 were received on June 27, 2012. Further on July 24, 2012, the Company submits the objection letter to the Indonesian Tax Authorities regarding the tax correction of interest expenses on bank loans amounted to Rp 2,019,141,457. Until the date of report finished, the result has not determined yet.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00032/203/10/092/12, the Company had additional tax liability of Rp 2,340,007,727. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00021/201/10/092/12, the Company had additional tax liability of Rp 90,627,692. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.



83



• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4(2) assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00016/240/10/092/12, the Company had additional tax liability of Rp 236,944,163. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period December 2010. Based on the Indonesian Tax Authorities letter No. 00013/277/10/092/12, the Company had additional tax liability of Rp 10,742,872. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period December 2010. Based on the Indonesian Tax Authorities letter No. 00278/207/10/092/12, the Company had additional tax liability of Rp 55,069,976. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On September 30, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal year 2006. Based on the Indonesian Tax Authorities letter No. 00015/204/06/092/10, the Company had an overpayment of Income Tax Article 26 of Rp 8,844,864,229. In the other that, the Company also received the interest of Rp 4,245,534,829, the totaling of Rp 13,090,399,058 had been received on November 24, 2010. Direktorat Jenderal Pajak has filed a Review Petition (PK) against the verdict of refund. If Review Petition is accepted and approved, the Company has to refund the above amount along with accrued interest. But until the date of report finished, the result has not been determined yet.

• On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal year 2008. Based on the Indonesian Tax Authorities letter No. 00014/204/08/092/10, the Company had additional tax liability of Rp 20,552,395,501. The tax liability had been compensated in May 2010 with the overpayment of 2008 corporate income tax. And based on the decision from Indonesian Tax Court No. KEP-00127/WPJ.19/KP.0203/2012, the Company had an overpayment of Income Tax Article 26 of Rp 20,544,225,183. The overpayment of Income Tax Article 26 had been received on August 31, 2012.



84



• On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2008. Based on the Indonesian Tax Authorities letter No. 00023/203/08/092/10, the Company had additional tax liability of Rp 2,019,141,457. The tax liability had been compensated in May 2010 with the overpayment of 2008 corporate income tax. Further on July 7, 2010, the Company submits the objection letter to the Indonesian Tax Authorities.Until the date of report finished, the result has not determined yet.

• On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2008. Based on the Indonesian Tax Authorities letter No. 00019/201/08/092/10, the Company had additional tax liability of Rp 901,815,396. The tax liability had been compensated in May 2010 with the overpayment of 2008 corporate income tax. Further on July 7, 2010, the Company submits the objection letter to the Indonesian Tax Authorities.Until the date of report finished, the result has not determined yet.

g. Administration

• It is noted that Value Added Taxes for the fiscal period October 2012 up to June 2013 and the 2012 Corporate Income Tax is under examined by the Tax Authorities, and until the date of report finished, the result has not yet been determined.

• Under the taxation laws of Indonesia, the Company and its Subsidiaries submits tax returns on the basis of self assessment. Under prevailing regulations the Director General of Tax (“DGT”) may assess or amend taxes within a certain period. For the fiscal years of 2007 and before, this period is within 10 (ten) years of the time the tax become due, but not later than 2013, while for the fiscal years of 2008 and onwards, the period is within 5 (five) years of the time the tax becomes due.

• The Company and its Subsidiaries’ management believe that the Company and its Subsidiaries have complied with the prevailing tax regulations.



85

27. SHARE CAPITAL Pursuant to the notarial deed of Januar Tirtaamidjaja, S.H., No. 22 dated February 15, 1984, the authorized capital amounts to Rp 15,000,000,000 consisting of 600 shares with a par value of Rp 25,000,000 each. Issued and fully paid-up capital amounts to Rp 7,500,000,000 (equivalent to US$ 6,710,179) or consist of 300 shares. Pursuant to the General Shareholders Meeting with notarial deed of Aulia Taufani, S.H., No. 100 dated December 27, 2002, the shareholders agreed to approve the changes in the Company’s Articles of Association to increase the authorized capital from Rp 8,500,000,000,000 to become Rp 16,000,000,000,000 and issued and paid-in capital from Rp 2,196,960,000,000 to become Rp 4,174,224,000,000. Pursuant to the notarial deed of Aulia Taufan, S.H., No. 12 dated July 4, 2006 regarding the amendment of the Company’s Article of Association and the Extraordinary Shareholders’ Meeting with notarial deed of the same notary No. 111 dated June 21, 2006, the shareholders approved the following :

• The authorized capital of the Company amounts to Rp 16,000,000,000,000 and issued and fully paid up capital amounts to Rp 4,174,224,000,000.

• The allocation of 83,484,480,000 new shares (series C) par value Rp 2 each with to regard to the debt to equity conversion. The new shares of 43,144,238,750 shares for the unsecured creditors and new working capital lender and 40,340,241,250 shares for secured creditors.

• To record the paid in capital in excess of par value from debt to equity conversion of Rp 5,574,513,535,500 (equivalent to US$ 618,017,022).

The deed was approved by the Minister of Justice and Human Right in his decision letter No. C-25038 HT.01.04.TH.2006 dated August 28, 2006 and registered in the Department of Industry and Trade under No. 233/BH-1/IX/2006 dated September 1, 2006. As of December 31, 2006, the authorized capital of the Company amounted to Rp 16,000,000,000,000 consisting of 247,145,100,800 shares with the following classifications.

• Series A of 17,000,000,000 shares with par value of Rp 500 each.

• Series B of 146,660,620,800 shares with par value of Rp 50 each.

• Series C of 83,484,480,000 shares with par value of Rp 2 each. Issued and fully paid up capital was Rp 2,283,248,477,500 consisting of Series A of 4,393,920,000 shares, and Series C of 43,144,238,750 shares. In February 2008, the Company amended its Articles of Association in connection with the reverse stock split with ratio 20 : 1. Based on the notarial deed of Sutjipto S.H., No. 91 dated February 21, 2008 regarding the changes of the Articles of Association, the authorized capital of the Company amounts to Rp 16,000,000,000,000 consisting of 12,357,255,040 shares with following classifications:

• Series A of 850,000,000 shares with par value of Rp 10,000 each.

• Series B of 7,333,031,040 shares with par value of Rp 1,000 each.

• Series C of 4,174,224,000 shares with par value of Rp 40 each.



86

27. SHARE CAPITAL (Continued) Issued and fully paid in capital amounted to Rp 4,174,224,000,000 (26%) consist of :

• 219,696,000 shares with par value of Rp 10,000 each or totaling Rp 2,196,960,000,000.

• 1,890,975,522 shares with par value of Rp 1,000 each or totaling Rp 1,890,975,522,000.

• 2,157,211,950 shares with par value of Rp 40 each or totaling Rp 86,288,478,000. The composition of stockholders as of February 21, 2008 based on notarial deed is as follows : Numbers of Percentage of Total Stockholders Shares ownership Rp US$ % Shares Series A 219,696,000 5.15 2,196,960,000,000 625,598,841Shares Series B 1,890,975,522 44.30 1,890,975,522,000 209,642,519Shares Series C 2,157,211,950 50.55 86,288,478,000 9,566,350 Total 4,267,883,472 100.00 4,174,224,000,000 844,807,710

The deed was approved by the Minister of Justice and Human Rights in his decision letter No. AHU-10588.AH.01.02 Tahun 2008 dated March 3, 2008. Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on March 24, 2009 and based on notarial deed No. 91 dated March 24, 2009 of Sutjipto, S.H., notary in Jakarta, the stockholders approved the issuance of 118,845,397 new authorized shares series C (5% of issued and paid-up capital) without preemptive rights in the framework of Grant Date I of stock options programme to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). The notarial deed was approved by the Minister of Law of the Republic of Indonesia based on his decision letter No. AHU-0052619.AH.01.09.Tahun 2009 dated August 14, 2009. Based on the Company’s schedule that was reported to PT Bursa Efek Indonesia dated March 17, 2009, this program will be implemented on the period below :

Period Implementation Period I 5 (five) trading days starting from April 1, 2009 II 5 (five) trading days starting from October 1, 2009 III 5 (five) trading days starting from April 1, 2010 IV 5 (five) trading days starting from October 1, 2010 V 5 (five) trading days starting from April 1, 2011 VI 5 (five) trading days starting from October 3, 2011 VII 5 (five) trading days starting from February 1, 2012



87

27. SHARE CAPITAL (Continued) Based on the notarial deed of Aryanti Artisari, S.H., M.Kn. No. 107 dated February 23, 2012, the stockholders approved the exercise proce for the first stock option programme of Rp 45 per share. On March 5, 2012, the Company issued 118,845,397 new authorized shares series C with par value of Rp 40 each or totaling Rp 4,753,815,880 (equivalent to US$ 524,125). The deed was approved by the Minister of Law and Human Rights in his decision letter No. AHU-0018443.AH.01.09.Tahun 2012 dated February 29, 2012. The composition of stockholders as of December 31, 2012, 2011 and 2010 based on the stockholder’s list issued by the Stock Administrative Office, PT Datindo Entrycom, of listed shares of the Company is as follows : 2 0 1 3 Numbers of Percentage of Total Stockholders Shares Ownership Rp US$ % Shares Series A: PT Multikarsa Investama 131,394,719 5.26 1,313,947,195,000 374,155,125Public (below 5% each) 88,301,281 3.54 883,012,805,000 251,443,716

219,696,000 8.80 2,196,960,000,000 625,598,841

Shares Series B: – – – –

Shares Series C: Damiano Investments BV., Netherland 1,289,079,472

51.65

51,563,178,880 5,716,539

Kyoa Investment Limited 154,725,910 6.20 6,189,036,400 686,146Others 649,611,983 26.03 25,984,479,320 2,880,763Unsettled 182,639,982 7.32 7,305,599,320 807,027

2,276,057,347 91.20 91,042,293,920 10,090,475

Total 2,495,753,347 100.00 2,288,002,293,920 635,689,316

2 0 1 2 Numbers of Percentage of Total Stockholders Shares Ownership Rp US$ % Shares Series A: PT Multikarsa Investama 131,394,719 5.26 1,313,947,195,000 374,155,125Public (below 5% each) 88,301,281 3.54 883,012,805,000 251,443,716

219,696,000 8.80 2,196,960,000,000 625,598,841



88

27. SHARE CAPITAL (Continued) 2 0 1 2 Numbers of Percentage of Total Stockholders Shares Ownership Rp US$ % Shares Series B: – – – –

Shares Series C: Damiano Investments BV., Netherland 1,289,079,472

51.65

51,563,178,880 5,716,539

Kyoa Investment Limited 150,837,200 6.04 6,033,488,000 668,901Others 653,500,693 26.19 26,140,027,720 2,895,102Unsettled 182,639,982 7.32 7,305,599,320 809,933

2,276,057,347 91.20 91,042,293,920 10,090,475

Total 2,495,753,347 100.00 2,288,002,293,920 635,689,316

Unsettled shares series C represent the creditors that have not exchanged with the new shares (through The Hongkong and Shanghai Banking Corporation Limited, Hong Kong – the custodian). These shareholders’ name is not yet registered in PT Datindo Entrycom (share administrator). Further, based on the Extraordinary General Stockholders Meeting (RUPSLB) held on June 18, 2012 and based on notarial deed No. 88 dated June 18, 2012 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta, the stockholders approved the issuance of 74,872,600 new authorized shares series C (3% of issued and paid-up capital) without preemptive rights in the framework of Grant Date II of stock options programme to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). The Company’s schedule that was reported to PT Bursa Efek Indonesia dated March 17, 2012 is as follows :

Period Implementation Period I Starting from December 15, 2012 up to December 22, 2012 II Starting from June 18, 2013 up to June 24, 2013 III Starting from December 18, 2013 up to December 24, 2013 IV Starting from June 2, 2014 up to June 24, 2014

Until the date of report finished, it has not yet been implemented due to the share market conditions. According to notarial deed of DR. H. Teddy Anwar, S.H., Spn. No. 111 dated August 16, 2002, the part of PT Multikarsa Investama’s shares of 2,454,081,290 (or after reverse stock 122,704,064 shares) were sold to PT Bina Prima Perdana. However, based on the data issued by PT Datindo Entrycom, the shares are still registered under the name of PT Multikarsa Investama.



89

27. SHARE CAPITAL (Continued) As of December 31, 2013 and 2012, the shares owned by the public included those owned by the directors of the Company are as follows : 2 0 1 3 2 0 1 2 Mr. Seeniappa Jegatheesan 29,713,388 29,713,388Mr. Peter Vinzenz Merkle 2,711,000 2,711,000Mr. Bonar Firman Hasiholan Sirait 1,249,500 –

Total 33,673,888 32,424,388

28. ADDITIONAL PAID-IN CAPITAL

2 0 1 3 2 0 1 2 US$ US$ Paid-in capital in excess of par value from public offering in 1990 13,571,804 13,571,804 Shares issuance cost (7,263,223) (7,263,223)

Subtotal 6,308,581 6,308,581 Paid-in capital in excess of par value from conversion of debt to equity in 2006 618,017,022 618,017,022

Paid-in capital in excess of par value from 1st MESOP in 2012 65,516 65,516Shares issuance cost (46,612) (46,612)

Subtotal 18,904 18,904

Total 624,344,507 624,344,507

As per the Composition Proposal (Rencana Perdamaian) the Company is issuing 16,780,718,747 shares series C to unsecured creditors and 26,363,520,000 shares series C for Damiano Investments BV., Netherland in regard to debt to equity conversion of Rp 5,660,802,013,000. Further, based on the amendment of the Company’s Articles of Association dated July 4, 2006 by notarial deed No. 12 of Aulia Taufani, S.H., the Company has recognized the advances for future stock subscription of Rp 5,660,802,013,000 as issued and paid-in capital amounting to Rp 86,288,477,500 and as additional paid-in capital amounting to Rp 5,574,513,535,500 (equivalent to US$ 618,017,022).



90

28. ADDITIONAL PAID-IN CAPITAL (Continued) Futher, through the framework of Grant Date I of stock options programme in February 23, 2012, the Company received Rp 5,348,042,865 for the issuance of 118,845,397 new authorized shares series C, with a nominal value amounting to Rp 40 per share. The conversion rate of US$ 1 is Rp 9,070.

29. APPROPRIATE RETAINED EARNINGS

Under Indonesian Limited Company Law, the Company is required to set up a statutory reserve amounting to at least 20% of the Company’s issued and paid up capital. And, based on the annual general stockholders’ meeting as stated in notarial deed No. 351 dated June 23, 1997 and No. 402 dated June 24, 1996 of Adam Kasdarmadji SH, notary public in Jakarta, the stockholders agreed to appropriate a general reserve aggregating Rp 8,280,000,000 (equivalent to US$ 2,345,301) from retained earnings in accordance with article 61 of the Corporate Law No. 1 year 1995 for Limited Liability Companies. In 2013 and 2012, the Company was exempted from reserving additional amounts due to its accumulated deficit.

30. EARNINGS (LOSS) PER SHARE

a. Basic earnings (loss) per share

2 0 1 3 2 0 1 2 US$ US$ Weighted average number of shares outstanding 2,495,753,347 2,443,876,388 Total comprehensive loss attributable to owners of the Company

(30,061,931

)

(32,118,811

)

Basic loss per share attributable to the owners of the Company

(0.01

)

(0.01

)



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30. EARNINGS (LOSS) PER SHARE (Continued) b. Dilluted earnings (loss) per share

2 0 1 3 2 0 1 2 US$ US$ Weighted average number of shares outstanding 2,495,753,347 2,431,991,848 Total comprehensive loss attributable to owners of the Company

(30,061,931

)

(32,118,811

)

Dilluted loss per share attributable to the owners of the Company

(0.01

)

(0.01

)

c. Reconciliation of earnings used in calculating earning per share

2 0 1 3 2 0 1 2 US$ US$ Total comprehensive loss attributable to owners of the Company used in calculating basic earnings (loss) per share

(30,061,931

)

(32,118,811

)

Adjustments for calculation of diluted earnings per shares regarding the share options – –

Total comprehensive loss attributable to owners of the Company used in calculating diluted earnings (loss) per share

(30,061,931

)

(32,118,811

)

d. Weighted average number of shares used as the denominator

2 0 1 3 2 0 1 2 Weighted average number of ordinary shares used as the denominator in calculating basic earnings (loss) per share before stock option 2,495,753,347 2,443,876,388 Adjustment regarding the issuance of stock option – –

Weighted average number of ordinary shares used as the denominator in calculating basic earnings (loss) per share after stock option 2,495,753,347 2,443,876,388 Adjustments for calculation of diluted earnings (loss) per shares regarding the share options – (11,884,540)

Weighted average number of ordinary shares used as the denominator in calculating diluted earning (loss) per share 2,495,753,347 2,431,991,848



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30. EARNINGS (LOSS) PER SHARE (Continued) e. Information concerning the classification of securities for diluted earning per share

Options granted to employees are considered to be potential ordinary shares and have been included in the determination of diluted earning per share to the extent to which they are dilutive. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. The options have not been included in the determination of basic earning (loss) per shares.

31. NON-CASH TRANSACTIONS

In 2013 and 2012, the principal non-cash transaction consist of :

a. An acquisition vehicles by means of credit financing payable as discussed in Notes 14 and 22. b. A reclassification of interest payables from accrued expenses to unsecured debts and notes

payables as discussed in Notes 17 and 20. 32. INSURANCE CLAIM SETTLEMENT, NET

This account represents the settlement of insurance claim on inventory loss from damage or theft, and also the settlement of insurance claim on the Company’s property, plant and equipments who suffered losses due to floods. The settlement received by the Company in 2013 and 2012 amounting to US$ 651,761 (equivalent to Rp 6,948,504,974) and US$ 1,667,691 (equivalent to Rp 14,963,001,657), respectively.

33. NET SALES

2 0 1 3 2 0 1 2 US$ US$ Local Fibre 230,400,456 218,908,889 Yarn 203,915,018 220,424,369 Chips 31,313,650 46,116,172 Fleece (Knitting) 11,816,680 10,298,045 Bonded (Coating) – 67,368 Others 539,448 1,726,343

477,985,252 497,541,186



93

33. NET SALES (Continued) 2 0 1 3 2 0 1 2 US$ US$ Export Yarn 70,229,940 75,079,171 Fibre 9,111,724 7,540,421 Chips 6,032,030 17,048,390 Fleece (Knitting) 1,273,533 877,827 PTA 103,750 – Others 406,211 1,243,881

87,157,188 101,789,690

Total 565,142,440 599,330,876

In 2013 and 2012, net sales of fleece (knitting) and bonded (coating) were US$ 13,090,213 and US$ 11,243,240, respectively consists of sales to third parties. The product is manufactured by PT Texmaco Jaya Tbk (under bankruptcy) based on the tolling basis. In 2013 and 2012, no sales were earned from sales to related parties. In 2013 and 2012, no sales to third parties exceeded 10% of the operating revenues.

34. OTHER OPERATING REVENUES

2 0 1 3 2 0 1 2 US$ US$ Indirect materials damage 2,097,716 601,480 Product non-standard and others 4,507,119 599,395

Total 6,604,835 1,200,875

In 2013 and 2012, other operating revenues of fleece, bonded and garment were US$ 611,642 and US$ 83,216 represents the other operating revenues to third parties. The product is manufactured by PT Texmaco Jaya Tbk (under bankruptcy) based on the tolling basis. In 2013 and 2012, no other operating revenues were earned from related parties. In 2013 and 2012, no sales to third parties exceeded 10% of the operating revenues.



94

35. COST OF GOODS SOLD 2 0 1 3 2 0 1 2 US$ US$ Raw materials At beginning of year 19,078,632 28,114,454 Purchases 394,796,044 384,877,731

Available for use 413,874,676 412,992,185 At end of year (22,541,882) (19,078,632) Raw materials used 391,332,794 393,913,553

Indirect materials At beginning of year 20,014,977 17,702,072 Purchases 55,780,776 57,631,156

Available for use 75,795,753 75,333,228 At end of year (23,042,768) (20,014,977) Indirect materials used 52,752,985 55,318,251

Direct labour 9,615,218 10,003,762 Manufacturing expense (Note 36) 138,399,003 146,278,804

Total manufacturing cost 592,100,000 605,514,370

Work in process At beginning of year 6,073,039 6,781,122 At end of year (6,908,098) (6,073,039)

Cost of goods manufactured 591,264,941 606,222,453 Finished goods At beginning of year 34,787,985 35,079,711 At end of year (33,734,489) (34,787,985) Total 592,318,437 606,514,179

In 2013 and 2012, total raw material and indirect material used included the raw material used for fleece (knitting) and bonded (coating) product after eliminated intercompany account were US$ 2,407,895 and US$ 3,145,012, respectively. In 2013 and 2012, there are no purchases from related parties.



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35. COST OF GOODS SOLD (Continued) In 2013, purchases from third parties exceeded 10% of total purchases are as follows : 2 0 1 3 US$ Percentage Kolmar Petrochemicals AG, Switzerland 162,896,476 36.15% PT Cipta Karya Persada 103,329,919 22.93% PT Polychem Indonesia 86,104,603 19.11% In 2012, purchases from third parties exceeded 10% of total purchases are as follows : 2 0 1 2 US$ Percentage PT Cipta Karya Persada 147,310,623 33.29% Kolmar Petrochemicals AG, Switzerland 95,991,285 21.69% PT Polychem Indonesia 85,537,650 19.33%

36. MANUFACTURING EXPENSES

2 0 1 3 2 0 1 2 US$ US$ Depreciation expense of property, plant and equipment (Note 14)

55,577,173

69,574,411

Electricity and gas 63,485,644 57,256,598 Freight 4,223,141 4,680,362 Processing fee (tolling) 2,946,051 3,003,021 Rental 2,574,752 2,480,839 Repair and maintenance 1,730,530 2,059,569 Insurance 1,315,108 1,085,007 Salary and allowances 1,288,406 1,321,414 Others 5,258,198 4,817,583

Total 138,399,003 146,278,804

In 2013, the processing fee (tolling) of US$ 2,946,051 represent the processing fee to PT Texmaco Jaya Tbk (under bankruptcy) amounting to US$ 782,440, PT Multikarsa Investama amounting to US$ 2,145,231, and other parties amounting to US$ 18,380. And in 2012, the processing fee (tolling) of US$ 3,003,021 represent the processing fee to PT Texmaco Jaya Tbk (under bankruptcy) amounting to US$ 763,471, PT Multikarsa Investama amounting to US$ 2,223,148, and other parties amounting to US$ 16,402 (Note 41).

In 2013 and 2012, rental expenses to PT Texmaco Jaya Tbk (under bankruptcy) were US$ 180,857 and US$ 201,348, respectively (Note 41).



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37. SELLING EXPENSES 2 0 1 3 2 0 1 2 US$ US$ Freight 5,306,116 5,522,075 Export charges 4,960,440 5,391,323 Marketing expenses 2,706,661 2,794,758 Advertising and promotion 17,033 20,796 Others 476,665 323,242

Total 13,466,915 14,052,194

38. GENERAL AND ADMINISTRATIVE EXPENSES

2 0 1 3 2 0 1 2 US$ US$ Salaries, wages and benefits 8,469,691 8,601,313 Employees’ entitlement (Note 25) 1,987,364 2,737,627 Professional fees 1,569,852 1,815,789 Tax expense (income) 1,471,789 (235,419 ) Business traveling 1,023,942 1,104,199 Rent 747,925 877,955 Communication 480,102 460,601 Stationery 271,689 246,932 Repairs and maintenance 156,067 170,182 Donation and Corporate Social Responsibility 109,985 300,344 Entertainment and representation 102,882 116,815 Depreciation expense of property, plant and equipment (Note 14) 102,407 95,849 Electricity and water 57,496 65,664 Insurance 16,134 36,620 Amortization expenses (Note 15) 663 497 Others 1,436,116 1,448,678

Total 18,004,104 17,843,646



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39. FINANCE COSTS 2 0 1 3 2 0 1 2 US$ US$ Finance costs : Interest expense from working capital loan (Note 21) (2,885,174) (2,936,962) Interest expense from unsecured debts and notes payable (Note 20)

(905,439

) (885,278

)

Interest expense from credit financing payables (Note 22)

(9,951

) (12,287

)

Total interest expense (3,800,564) (3,834,527) Fee on Bank loans (Note 18) (12,393,979) (13,969,873) Bank charges (453,893) (472,845)

Total finance costs (16,648,436) (18,277,245)

Finance Income : Interest income from current accounts and time deposits

31,989

31,754

Total (16,616,447) (18,245,491)

40. MISCELLANEOUS INCOME, NET

2 0 1 3 2 0 1 2 US$ US$ Payables’ written-off 32,723 383,000 Amortization of deferred revenues (Note 24) 8,375 – Penalty regarding the cancellation of sales – 179,000 Income from land rental – 81,878 Others 85,561 236,029 Total 126,659 879,907

41. RELATED PARTY TRANSACTIONS

The Company is controlled by Damiano Investments BV. (domiciled in Netherland) which owns 1,289,079,472 of the Company’s shares (51.65%). The ultimate parent of the Company is ADM Capital and Spinnaker Capital Group, which are incorporated and domiciled in Hong Kong and United Kingdom, respectively.



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41. RELATED PARTY TRANSACTIONS (Continued) Nature of Relationships and transactions Nature of Nature of Name of related parties relationship Transactions Damiano Investments BV., Netherland Stockholder Loans, shareholder PT Multikarsa Investama Stockholder Tolling arrangement PT Texmaco Jaya Tbk (under bankruptcy) Affiliated company Tolling arrangement Kyoa Investment Limited Stockholder Shareholder Mr. Dono Iskandar Djojosubroto Key Management Personnel Compensation and renumeration Mr. Timbul Thomas Lubis S.H. Key Management Personnel Compensation and renumeration Mr. Vasudevan Ravi Shankar Key Management Personnel Compensation and renumeration Mr. Bonar Firman Hasiholan Sirait Key Management Personnel Compensation and renumeration Mr. Seeniappa Jegatheesan Key Management Personnel Compensation and renumeration Mr. Peter Vinzenz Merkle Key Management Personnel Compensation and renumeration

Related Party Transactions In the normal course of business, the Company and its Subsidiaries entered into certain business and financial transactions with its related parties. These transactions are normally made at normal price and conditions as of they were done with non-related parties. These transactions are as follows : Percentage to total Assets/ Liabilities /Expenses 2 0 1 3 2 0 1 2 2 0 1 3 2 0 1 2 US$ US$ % % Trade receivables 22,046,308 27,789,291 6.24 6.89

Non-trade receivables from related parties

24,836,407

32,474,040

7.03

8.05

Purchase Advances 54,799 – 0.02 –

Trade payables – 7,150 – 0.00

Accrued expenses 2,272,862 404,920 0.19 0.03

Bank loans 87,910,672 78,752,462 7.44 6.56

Secured debts 665,520,622 664,778,224 56,33 55.35

Working capital loans 17,340,000 17,340,000 1.47 1.44

• Manufacturing expenses to related parties accounted for 0.52% and 0.50% for the years ended December 31, 2013 and 2012, respectively (Note 36).



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41. RELATED PARTY TRANSACTIONS (Continued) Related Party Transactions (Continued)

The details of processing fee (tolling) and rental expenses to related parties are as follows : 2 0 1 3 2 0 1 2 US$ US$ PT Texmaco Jaya Tbk (under bankruptcy) 963,297 964,819 PT Multikarsa Investama 2,145,231 2,223,148

Total 3,108,528 3,187,967

• Key management compensation Key management personnel of the Company are the Boards of Commissioners and Directors as detailed in Note 1d. Compensation representing salary was given to the Company’s Commissioners and Directors for the years ended December 31, 2013 and 2012 amounting to Rp 6,847,043,568 and Rp 6,940,860,309, respectively. No contribution to retirement benefits, entitlement benefits and any other special benefits were given during the year 2013 and 2012.

42. SIGNIFICANT AGREEMENTS

Tolling Agreement with PT Texmaco Jaya Tbk (under bankruptcy) On April 1, 2008, the Company arranged the tolling / rental agreement with PT Texmaco Jaya Tbk for a period of twelve (12) months and can be renewed. This agreement is prepared because the Subsidiary does not have the necessary working capital to service the orders from its customers. Based on this agreement, the Company should pay the conversion charges that consisting of tolling fee, building and machinery rental to PT Texmaco Jaya Tbk each month. The tolling fees are calculated based on the production results. On August 3, 2009, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya Tbk for a period of three (3) months and can be renewed. Based on this agreement, the Company should pay the tolling fee of US$ 1.20 per yard with the minimum production results of 100,000 yards to PT Texmaco Jaya Tbk each month. And on October 23, 2009, the Company renewed the tolling / rental agreement for seven (7) months from November 1, 2009 up to June 30, 2010.



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42. SIGNIFICANT AGREEMENTS (Continued) Tolling Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Continued) On July 15, 2010, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya Tbk for fifthteen (15) months from July 1, 2010 up to September 30, 2011 and can be renewed. Based on this agreement, the Company should pay the tolling fee of US$ 1.20 per yard for the contract period from July 1, 2010 up to September 30, 2010, and US$ 0.75 per yard for the contract period from October 1, 2010 up to September 30, 2011. On January 10, 2011, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya Tbk for five (5) years from January 1, 2011 up to December 30, 2016 and can be renewed for three (3) years later. Based on this agreement, the Company should pay the tolling fee of US$ 0.30 per kgs and at least US$ 50,000 per month. Further, based on the latest amendment of tolling agreement with PT Texmaco Jaya Tbk (under bankruptcy) dated March 23, 2012, the Company agreed to pay the tolling fee of US$ 0.30 per kgs and subject to minimum fee of US$ 64,000 per month. Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy)

• Based on the land rental agreement dated June 15, 2009 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the land for 950 meters of gas pipe, 1,500 meters of water pipe, 800 meters of water pump facility and 1,000 meters of electricity cable. This agreement is valid for thirty (30) years from January 1, 2010 up to December 31, 2040. As consequently, the Company should pay the rental expenses amounted to Rp 100,000,000 per month.

• Based on the warehouse rental agreement dated March 30, 2011 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the warehouse for ten (10) months from March 1, 2011 up to December 31, 2011. Based on the amendment agreement dated June 28, 2012, December 28, 2012 and July 1, 2013, the Company agreed to extent the warehouse rental up to December 31, 2013. Further, on January 1, 2014, this agreement has been extended till June 30, 2014. As consequently, the Company should pay the rental expenses amounted to Rp 43,200,000 per month.

• Based on the warehouse rental agreement dated November 17, 2011 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the warehouse for three (3) months from November 17, 2011 up to February 17, 2012. Based on the amendment agreement dated February 15, 2012 and August 16, 2012, the Company agreed to extent the warehouse rental up to June 30, 2013. As consequently, the Company should pay the rental expenses amounted to Rp 9,000,000 per month. As of June 30, 2013, this agreement has been terminated.



101

42. SIGNIFICANT AGREEMENTS (Continued) Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Continued)

• Based on the warehouse rental agreement dated January 2, 2012 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the Coating’s warehouse for one (1) years from January 2, 2012 up to December 31, 2012. Based on the amendment agreement dated November 28, 2012 and June 1, 2013, the Company agreed to extent the warehouse rental up to November 30, 2013. Further, based on the latest amendment agreement dated November 29, 2013, the Company agreed to extent the warehouse rental up to May 31, 2014. As consequently, the Company should pay the rental expenses amounted to Rp 5,000,000 per month.

• Based on the warehouse rental agreement dated November 28, 2012 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the chiller machinery for one (1) years from January 1, 2013 up to December 31, 2013. Based on the amendment agreement dated January 1, 2014, the Company agreed to extent the rental of the chiller machinery up to December 31, 2014. As consequently, the Company should pay the rental expenses amounted to Rp 5,000,000 per month. It is pending approval by curator of PT Texmaco Jaya Tbk (under bankruptcy).

Warehouse Agreement with PT Texmaco Taman Synthetics Based on the rental agreement dated August 1, 2011 between the Company and PT Texmaco Taman Synthetics, the Company agreed to rent the laboratory equipments for five (5) years from August 1, 2011 up to July 31, 2015. As consequently, the Company should pay the rental expenses amounted to Rp 99,000,000 per month. Gas Turbine with PT Wismakarya Prasetya The Company and PT Wismakarya Prasetya (WKP) are operationally integrated as the production of electricity and steam are consumed only by the Company. Since 2004, the Company has been providing working capital support to WKP for the payment of old dues to PGN, PLN and Tax. Subsequent to the change of majority shareholders of the Company in 2006, the Company has entered into an agreement with WKP for the sale purchase of electricity, steam and gas on August 14, 2006. The Company has offered to increase the price of electricity and steam in line with the increase in the price of gas, vide its letter in April 22, 2010. Additionally, the Company would incur the cost of maintenance of turbines as per the standard running hours. The Company should pay the monthly electricity, steam and gas based on their consumption. Additionally, the Company would incur the cost of maintenance of turbines as per the standard running hours as a part of cost of purchase of electricity. This agreement is valid for a period of 5 years, and due on April 22, 2015. The Company has also fully provided for the Bank guarantee through SBLC for an amount of US$ 5,777,094 and Rp.16,498,800,000 as of December 31, 2013 equivalent to two (2) months consumption of gas, as required by the Gas Supply Contract of PGN. The contract for the supply of gas to WKP is due for extension by end of March 2013. The contract has been extended till March 2018.



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42. SIGNIFICANT AGREEMENTS (Continued) Gas Turbine with PT Wismakarya Prasetya (Continued) The Company and PT Wismakarya Prasetya (WKP) are engaged in the commercial discussion for finalizing the prices to be effective from January 1, 2013. WKP has made claims for the past period which are not commercially viable. In order to firm up the claim on WKP arising on account of sales advance, the Company has filed a legal suit through Karawang Court and issued a Default Notice to WKP on December 14, 2012 as per the agreement entered into between the Company (Polysindo/APF) and WKP on November 16, 2006. WKP has also confirmed their dues to the Company as at the end of the year 2012. Beside that, based on the correspondence letter dated March 27, 2013, the Company agreed to pay the extra charges amounted to US$ 250,000 per month for 6 (six) months. Accordingly, the Company has paid US$ 250,000 per month beginning April 2013 untill June 2013 for 3 (three) months. PT Wismakarya Prasetya (WKP), which is supplying 100% energy requirement of the Company’s facility at Karawang, has been declared bankrupt effective on October 22, 2013 by the Supreme Court, Jakarta as per its verdict no:440k/Pdt.sus. PAILIT/2013 dated October 22, 2013, based on the debt claim filed by its creditors. However, the Court has decided to keep WKP as a going concern as it is supplying the energy requirement of Karawang facility vide its decision vide no: 440K/PDT.SUS/PAILIT/2013 j.o. No : 05/Pdt.sus/PKPU/2013/PN.Niaga.Jkt.Pst. dated on February 13, 2014. The Company is in the process entering into a rental agreement of WKP facilities with the curator of PT WKP to ensure uninterrupted supply of power, steam and gas. The Company will continue to operate and maintain the power plant with proper upkeep of the facilities of WKP.

43. COMMITMENT

(a) Capital Commitments

The capital expenditure committed but not yet inccurred as of December 31, 2013 is approximately US$ 3.41 million. Amount outstanding above is relating to commitment made by the Company in development and increase in the Company’s filament yarn and fiber capacity. The commitment has to be exercised at the year 2014.

(b) Operating Lease Commitments

The Company leases various warehouse under non-cancellable operating lease agreements. The lease terms are between 1 (one) year up to thirty (30) years, and the majority of lease agreements are renewable at the end of the lease period.



103

43. COMMITMENT (Continued) (b) Operating Lease Commitments (Continued)

The following are counterparties of the Company’s lease commitments :

Counterparties

Leased items

Period of

agreement

Amount (Rp)

PT Texmaco Jaya Tbk (under bankruptcy)

Warehouse at Karawang

January 1, 2014 – June 30, 2014

Rp 43,200,000 each month

Warehouse at

Karawang December 1, 2013 –

May 31, 2014 Rp 5,000,000

each month Chiller’s Machine at

Karawang January 1, 2014 –

December 31, 2014 Rp 5,000,000

each month Land at Karawang January 1, 2010 –

January 1, 2040 Rp 100,000,000

each month PT Texmaco Taman Synthetics

Warehouse at Semarang

August 1, 2011 – July 31, 2015

Rp 99,000,000 each month

The future aggregate minimum lease payment under non-cancellable operating leases are as follows : 2 0 1 3 2 0 1 2 US$ US$ No later than 1 year 126,688 278,201 Later than 1 year and no later than 5 years 393,798 690,900 Later than 5 years 2,165,887 2,730,093

Total 2,686,373 3,699,194

44. CONTINGENCIES

• The Directorat Jenderal Pajak has filed a Review Petition against the verdict of the tax court for the refund of Rp 13,090,399,058 on November 24, 2010. If the Review Petition filed by the Directorat Jenderal Pajak is won, then the entire refund amount became payable along with the accrued interest till the date of refund. Until the date of report finished, the result has not been determined yet.



104

44. CONTINGENCIES (Continued)

• Effective August 19, 2011, one of Subsidiary (PT Texmaco Jaya Tbk) becomes subject to the control of Court, causing the Company to lose its control. The Count has already set a Supervisory Judge and curator team to maintain and monitor the operation of bankruptcy assets and cash flows of the Subsidiary. Net liabilities at the date of lost its control is Rp 656,593,951,279. PT Asia Pacific Fibers Tbk as parent Company do not have obligation regarding the creditors’ payables of Subsidiary

• Based on the correspondence letter from PT Bina Prima Perdana dated August 8, 2011, PT Bina Prima Perdana claims from the Company being the guarantor of the Subsidiary’s loans from Bank Dharmala and Bank Arya. However, the management of the Company mentioned that the above guarantees (promissory note) were not registered by PT Bina Prima Perdana during the debt verification by the curator of PT Asia Pacific Fibers Tbk (formerly PT Polysindo Eka Perkasa Tbk) during its bankruptcy process in 2005, and consequently, the above claims of PT Bina Prima Perdana were not valid. In addition, the restructuring process of unsecured debt in PT Asia Pacific Fibers Tbk has been completed.

• The Company’s land certificates with HGB No. 13 and HGB No. 14 located in Kiara Payung, Kec. Klari, Karawang have been pledged to PT Bank Negara Indonesia/ PT Bina Prima Perdana in respect of secured debts of PT Texmaco Jaya Tbk (under bankruptcy). PT Bina Prima Perdana has claimed with its letter dated February 21, 2013 amounted to Rp 19 billion from the Company for the release of the pledge. This is under discusson with PT Bina Prima Perdana (Note 14).

45. SEGMENT INFORMATION

The Board of Director is the Company’s chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board of Director for the purposes of allocating resources and accessing performance of the Company and its Subsidiaries. The Board of Director considers the business from both a geographic and product perspective. Geographically, management considers the performance in Indonesia, Asia, America, Europe, Australia and Africa. From a product perspective, management separately considers the business segment are as follows : 1. Chemical industry and synthetic fibre 2. Weaving and knitting Although the weaving and knitting segment does not meet the quantitative thresholds required by SFAS 5 for reportable segments, management has conclude that this segment should be reported, as it is closely monitored by the strategic steering committee as a potential growth and is expected to materially contribute the Company’s revenue in the future.



105

45. SEGMENT INFORMATION (Continued)

Chemical Weaving Industry and and

2 0 1 3 Synthetic fibre Knitting Others Elimination Total US$ US$ US$ US$ US$

SEGMENT SALES :

External sales

Local 472,173,930 12,416,157 − − 484,590,087

Export Europe 40,372,801 95,920 − − 40,468,721

America 24,409,910 − − − 24,409,910

Africa 12,200,180 25,843 − − 12,226,023

Asia 6,883,295 1,151,770 − − 8,035,065

Australia 2,017,469 − − − 2,017,469

Total Export 85,883,655 1,273,533 − − 87,157,188

Inter segment sales 218,957,483 12,165 − (218,969,648 ) −

Total segment sales 777,015,068 13,701,855 − (218,969,648 ) 571,747,275

Segment result (29,712,363 ) 9,141,201 − − (20,571,162 )

Unallocated income (expenses) 1,579,940 (857,835 ) − − 722,105

Profit (loss) from operations (28,132,423 ) 8,283,366 − − (19,849,057 )

Finance costs (16,590,988 ) (25,459 ) − − (16,616,447 )

Profit (loss) before income tax (44,723,411 ) 8,257,907 − − (36,465,504 )

Tax income 6,403,573

Total loss for the year (30,061,931 )

Other comprehensive income, net after tax

–

Total comprehensive loss for the year (30,061,931 )

STATEMENT OF FINANCIAL POSITION :

Segment assets (348,479,882 ) (4,990,946) (20,576) − (353,491,404 )

Segment liabilities 1,180,716,611 600,642 74,931 − 1,181,392,184



106




SEGMENT SALES : OTHER INFORMATION : Capital expenditures (7,999,511 ) (510,174 ) − − (8,509,685 )

Depreciation expense (55,660,882 ) (18,698 ) − − (55,679,580 )



SEGMENT SALES :

External sales

Local 488,293,432 10,448,629 − − 498,742,061

Export Asia 35,709,104 691,483 − − 36,400,587

America 28,909,074 − − − 28,909,074

Europe 16,744,050 186,344 − − 16,930,394

Australia 11,259,124 − − − 11,259,124

Africa 8,290,511 − − − 8,290,511

Total Export 100,911,863 877,827 − − 101,789,690

Inter segment sales 216,141,901 − − (216,141,901 ) −

Total segment sales 805,347,196 11,326,456 − (216,141,901 ) 600,531,751

Segment result (8,447,903 ) 2,465,475 − − (5,982,428 )

Unallocated expenses (16,806,846 ) (725,232 ) − − (17,532,078 )

Profit (loss) from operations (25,254,749 ) 1,740,243 − (23,514,506 )

Finance costs (18,213,903 ) (31,588 ) − − (18,245,491 )

Profit (loss) before income tax (43,468,652 ) 1,708,655 − (41,759,997 )

Tax income 9,641,186

Total loss for the year (32,118,811 )

Other comprehensive income, net after tax −

Total comprehensive loss for the year (32,118,811 )



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2 0 1 2 Synthetic fibre Knitting Others Elimination Total US$ US$ US$ US$ US$ STATEMENT OF FINANCIAL POSITION :

Segment assets (399,690,163 ) (3,541,552) (20,576) (403,252,291 )

Segment liabilities 1,200,226,996 789,213 74,931 1,201,091,140

OTHER INFORMATION : Capital expenditures (14,082,392 ) (145,391 ) − (14,227,783 )

Depreciation expense (69,656,131 ) (14,129 ) − (69,670,260 )

The following table shows the carrying amount of segment non-current assets and additions to property, plant and equipment by geographical area in which the assets are located :

Carrying amount non-current assets Additions to property, plant and equipment

December 31, December 31, December 31, December 31,

2 0 1 3 2 0 1 2 2 0 1 3 2 0 1 2

US$ US$ US$ US$

Indonesia 82,236,838 129,407,396 8,509,685 14,227,783

46. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN

CURRENCIES The Company has assets and liabilities denominated in foreign currencies as follows: 2 0 1 3 2 0 1 2 Foreign Equivalent in Foreign Equivalent in Currency US$ Currency US$ Assets : Cash and cash equivalents IDR 27,064,401,839 2,220,395 15,953,468,926 1,649,790 EUR 2,423 3,343 6,277 8,315 SGD 7,925 6,260 8,125 6,644 SEK 1,108 173 1,108 170 Trade receivables : Third parties IDR 2,467,263,482 202,417 2,019,778,766 208,871 Related parties IDR 268,722,447,174 22,046,308 268,722,447,174 27,789,291 Other receivables IDR 19,475,029,024 1,597,754 20,275,727,220 2,096,766

Carried forward 26,076,650 31,759,847



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46. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (Continued)

2 0 1 3 2 0 1 2 Foreign Equivalent in Foreign Equivalent in Currency US$ Currency US$ Assets : Brought forward 26,076,650 31,759,847

Other current financial assets IDR 6,248,315,332 512,619 10,248,315,332 1,059,805 Non-trade receivables from related parties

IDR

335,221,292,255

27,501,952

339,799,791,085

35,139,585

Other non-current financial Assets

IDR

3,959,414,637

324,836

3,959,414,637

409,454

Total assets 54,416,057 68,368,691

Liabilities Trade payables : Third parties IDR 40,311,478,552 3,307,201 30,425,613,348 3,146,392 YEN 7,433,538 70,847 4,780,473 55,368 SGD 51,618 40,773 27,904 22,817 GBP 10,444 17,220 – – EUR 388,986 536,821 284,392 376,738 SEK 52,758 8,217 5,128,579 789,041 CHF 138,304 155,809 – – Related parties IDR – – 69,142,248 7,150 Accrued expenses IDR 419,413,686,457 34,409,195 413,168,541,805 42,726,840 Secured Debts IDR 1,341,051,955,403 110,021,491 1,344,552,714,414 139,043,714 EUR 15,688,979 19,683,400 15,688,979 20,783,207 YEN 3,001,711,400 28,608,189 3,001,711,400 34,756,139 CHF – – 45,902 50,302 Other short-term financial liabilities IDR 9,546,144,874 783,177 18,295,341,577 1,891,973 Credit financing payables IDR 703,354,301 57,704 1,162,192,835 120,186 Long-term employee benefit IDR 114,479,255,656 9,392,014 99,356,704,849 10,274,737

Total liabilities 207,092,058 254,044,604

Net liabilities (152,676,001 ) (185,675,913 )

Monatary assets and liabilities mentioned above are translated using Bank Indonesia closing rate as at December 31, 2013 and 2012.



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47. FINANCIAL RISK MANAGEMENT The Company and its Subsidiaries have exposure to the following risks from its use of financial instruments:

• Credit Risk

• Liquidity Risk

• Market Risk This note presents information about the Company and its Subsidiaries’ exposure to each of the above risks, the Company and its Subsidiaries’ objectives, policies and processes for measuring and managing risks, and the Company and its Subsidiaries’ management of capital. The main purpose of the Company and its Subsidiaries’ dealings in financial instruments is to fund their respective operations and capital expenditures. The Company and its Subsidiaries do not actively engage in the trading of financial assets for speculative purposes nor does it write options. The BOD has overall responsibility for the establishment and oversight of the Company and its Subsidiaries’ risk management framework. The BOD is also responsible for developing and monitoring the Company and its Subsidiaries’ risk management policies. The Company and its Subsidiaries’ risk management policies are established to identify and analyze the risks faced by the Company and its Subsidiaries, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company and its Subsidiaries’ activities. All risks faced by the Company and its Subsidiaries are incorporated in the annual operating budget. Mitigating strategies and procedures are also devised to address the risks that inevitably occur so as not to affect the Company and its Subsidiaries’ operations and forecasted results. The Company and its Subsidiaries, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The BOD performs oversight role over financial reporting functions, specifically in the areas of managing credit, liquidity, market and other risks of the Company and its Subsidiaries. The BOD undertakes reviews of risk management controls and procedures and ensures the integrity of internal control activities which affect the financial reporting system of the Company and its Subsidiaries. a. Credit Risks

Credit risk represents the risk of loss the Company and its Subsidiaries would incur if customers and counterparties fail to perform their contractual obligations. Financial information on the Company and its Subsidiaries’ maximum exposure to credit risk as of December 31, 2013 and 2012, without considering the effects of collaterals and other risk mitigation techniques, is presented below:



110

47. FINANCIAL RISK MANAGEMENT (Continued) a. Credit Risks (Continued)

2 0 1 3 2 0 1 2 US$ US$ Cash and cash equivalents 5,101,421 9,793,989 Trade receivables, net 73,913,893 85,777,319 Other receivables, net 3,355,148 3,300,907 Other current financial assets 9,158,563 7,720,808

Non-trade receivables from related parties, net 24,836,407 32,474,040 Other non-current financial assets 1,029,093 1,113,711

Total financial assets 117,394,525 140,180,774

(a) Cash and Cash Equivalents

The management evaluates the financial condition of the banking industry and bank deposits/investments are maintained with reputable banks only. For banks, only independently rated parties with a minimum rating of “A” are accepted. The credit quality can be assessed by reference to external credit ratings are as follows :

2 0 1 3 2 0 1 2 US$ US$

Counterparties with external credit rating : - Fitch : F1+ 4,208,469 8,715,518 F3 205,043 374,260 - Pefindo : idAAA 413,094 409,298 idAA+ 190,657 214,345

5,017,263 9,713,421

Counterparties without external credit rating 84,158 80,568

Total cash and cash equivalents 5,101,421 9,793,989

(b) Trade Receivables Majority of the Company and its Subsidiaries’ credit risk on receivables is attributed to its activities influenced mainly by the individual characteristics of each customer and non-interest bearing advances made to the Company and its Subsidiaries with similar operations. The demographics of the Company and its Subsidiaries’ customer base, including the default risk of the industry and regions in which customers operate, has an influence on credit risk.



111


(b) Trade Receivables (Continued)

In respect of trade receivables, the Company and its Subsidiaries are not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers. Based on historical information, the customer default rates in the settlement of receivables is low due to the settlement from customers are normally received by the Company and its Subsidiaries with in the credit term. Moreever, some of export sales are on cash before delivery or a portion of the sales are collected a front (prefinance). Thus, the management noted that the outstanding of trade receivables have not impaired. The Board of Director has established a credit policy under which each advanced amount requested by new customer/counterparties is analyzed individually for creditworthiness before standard credit terms and conditions are granted. The Company and its Subsidiaries’ review includes the requirements of updated credit application documents, credit verifications through the use of no negative record requests and list of blacklisted accounts, and analyses of financial performance to ensure credit capacity. The status of each account is first checked before advances are approved. The credit quality of financial assets that are neither past due or impaired, and past due but not impaired can be assessed by reference to historical information about counterparty default rates.

2 0 1 3 2 0 1 2

Gross Amount Impairment Gross Amount Impairment

Counterparties without external credit rating : Group 1 51,737,731 – 57,895,491 – Group 2 129,854 – 92,537 – Group 3 37,704,253 15,657,945 43,447,236 15,657,945

Total 89,571,838 15,657,945 101,435,264 15,657,945

• Group 1 –customers / related parties (less than six months).

• Group 2 –customers / related parties (more than six months) with no defaults in the past.

• Group 3 –customers / related parties (more than six months) with some defaults in the past. As of reporting date, there were no significant concentrations of credit risk.



112


(b) Trade Receivables (Continued)

Based on historical default rates, the Company and its Subsidiaries believe that no impairment allowance is necessary in respect of receivables in Group 1 and Group 2 not past due or past due can be collected.

(c) Other receivables

In respect of other receivables, the Company and its Subsidiaries are not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Based on historical information about customer default rates, management consider the credit quality of other receivables in Group 1 and Group 2 have not impaired. The credit quality of financial assets that are neither past due or impaired, and past due but not impaired can be assessed by reference to historical information about counterparty default rates.

2 0 1 3 2 0 1 2

Gross Amount Impairment Gross Amount Impairment

Counterparties without external credit rating : Group 1 1,753,395 – 1,199,052 – Group 2 224,779 – 341,499 – Group 3 38,098,549 36,721,575 38,481,931 36,721,575

Total 40,076,723 36,721,575 40,022,482 36,721,575

• Group 1 –customers / related parties (less than six months).

• Group 2 –customers / related parties (more than six months) with no defaults in the past.

• Group 3 –customers / related parties (more than six months) with some defaults in the past. (d) Non-trade receivables from related parties

Non-trade receivables from related party represent the receivables from PT Multikarsa Investama (related party). The Company and its Subsidiaries’ management stated that there is no impairment indication that could be counted from the estimated cash flow in the future, due to PT Multikarsa Investama is still in the debt restructuring process with PT Perusahaan Pengelola Aset (PPA). In addition, the said value will be suitably adjusted at the time of restructuring.



113


(e) Other non-current financial assets

The Company and its Subsidiaries’ management noted that there is no impairment indication in the restricted cash in banks that could be counted from the estimated cash flow in the future, due to the Company and its Subsidiaries are still in the debt restructuring process with PT Perusahaan Pengelola Aset (PPA). In addition, the said amount will be suitably adjusted at the time of restructuring.

b. Liquidity Risk

Liquidity risk pertains to the risk that the Company and its Subsidiaries will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company and its Subsidiaries manage liquidity risk by forecasting projected cash flows and maintaining a balance between continuity of funding and flexibility. Treasury controls and procedures are in place to ensure that sufficient cash is maintained to cover daily operational and working capital requirements. Management closely monitors the Company and its Subsidiaries’ future and contingent obligations and sets up required cash reserves as necessary in accordance with internal requirements. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements of the Company and its Subsidiaries:

Current Non Current Within 6 to 12 1 to 5 More than 6 months months Years 5 years

US$ US$ US$ US$

December 31, 2013 : Trade payables 33,115,314 − − − Accrued expenses 36,967,461 − − − Bank Loans 87,910,672 − − − Secured Debts 965,681,557 − − − Unsecured Debts and Notes payable

−

−

13,009,314

9,615,580

Working Capital Loans − − 17,340,000 − Credit Financing Payables 17,256 13,316 27,132 − Other short-term financial liabilities

6,323,597

−

−

−

Total 1,130,015,857 13,316 30,376,446 9,615,580



114

47. FINANCIAL RISK MANAGEMENT (Continued) b. Liquidity Risk (Continued)

Current Non Current Within 6 to 12 1 to 5 More than 6 months months Years 5 years

US$ US$ US$ US$

December 31, 2012 : Trade payables 22,949,484 − − − Accrued expenses 43,319,170 − − − Bank Loans 78,752,462 − − − Secured Debts 1,000,263,703 − − − Unsecured Debts and Notes payable

−

−

8,867,735

13,301,603

Working Capital Loans − − 17,340,000 − Credit Financing Payables 35,988 28,663 55,535 − Other short-term financial liabilities

4,150,965

−

−

−

Total 1,149,471,772 28,663 26,263,270 13,301,603

c. Market Risks

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates, and other market prices will affect the Company and its Subsidiaries’ income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company and its Subsidiaries are subject to various market risks, including risks from interest rates, and currency exchange rates. (1). Interest Rate Risk

Interest rate risk is the impact of rate changes on interest bearing assets and liabilities. The interest risk exposure is mainly from changes in fixed rate and floating interest rates. When considered appropriate, in order to manage the interest rate risk, interest rate swaps are entered into to mitigate the fair value risk relating to fixed-interest assets or liabilities and the cash flow risk related to variable interest rate assets and liabilities. The Company and its Subsidiaries’ policy are to minimize interest rate risk exposure on long-term financing. Longer-term borrowings are therefore usually at fixed rates. At December 31, 2013 and 2012, the Company and its Subsidiaries have applied the fixed interest rates for their loans to banks, third parties and related parties, so there is no interest rate risk esposure in the Company and its Subsidiaries.



115

47. FINANCIAL RISK MANAGEMENT (Continued) c. Market Risks (Continued)

(2). Foreign Currency Risks

Most of the Company and its Subsidiaries’ transactions are carried out in other currencies. Exposure to currency exchange rates arise from the Company and its Subsidiaries’ operational activities, which are denominated in Indonesian Rupiah and currencies other than United States Dollar. The Company and its Subsidiaries are aware of the market risk due to foreign exchange fluctuation. Management has set up a policy to require Company and its Subsidiaries to manage their foreign exchange risk against their functional currency. There are no specific arrangements to reduce such risk exposures through derivatives and other hedging instruments. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the Company and its Subsidiaries’ functional currency. To mitigate the Company and its Subsidiaries’ exposure to foreign currency risk, the Company and its Subsidiaries actively monitors the foreign currency movements and together with principal to manage the impact of the foreign exchange fluctuations. Foreign currency denominated financial assets and liabilities, translated into United States Dollar at the middle rate, are stated in Assets and Liabilities in Foreign Currency (Note 46). The management believes that the Company and its Subsidiaries are naturally hedged against foreign exchange risk. The risk is measured using cash flow forecasts with sensitivity analysis. The table below summarizes the sensitivity analysis to the possibility changes of foreign exchange rates, with considering all other factors are held constant, to the consolidated statements of comprehensive income for the year ended December 31, 2013 : 2 0 1 3 US$ IDR decreased by 2.13% (2,203,606) YEN increased by 1.96% (562,327) EUR decreased by 0.86% (173,586) CHF decreased by 0.81% (1,264) SGD decreased by 0.25% (86) GBP increased by 0.37% (64) SEK decreased by 0.76% (61)

Net (2,940,994)



116

47. FINANCIAL RISK MANAGEMENT (Continued) a. Market Risks (Continued)

(2). Foreign Currency Risks (Continued)

Management conducted a survey among banks to get an estimate on exchange rate of foreign currencies until the reporting date. The estimate changes of foreign exchange rate are increased by 1.96% for Japanese Yen and 0.37% for Great British Poundsterling. And the estimate changes of foreign exchange rate are decreased by 2.13% for Indonesian Rupiah, 0.86% for European Euro, 0.25% for Singapore Dollar, 0.76% for Krona Swedish, and 0.81% for Swiss Franc if compared with the exchange rate on December 31, 2013. The Company and its Subsidiaries’ policy is to manage the financial assets denominated in foreign currencies are available to settle the financial liabilities denominated in foreign currencies. At December 31, 2013, the financial liabilities denominated in foreign currencies are in excess of financial assets denominated in foreign currencies at amount of US$ 152,676,001 due to unrestructured long-term secured debts are shown in their full value. If the above mentioned secured debts denominated in Indonesian Rupiah and currencies other than US Dollar are not considered, there are no excess of financial liabilities over the assets. This is a manageable level as the loans are repayable over a period of time.

Financing Arrangements The Company has letter of credit facility from Deutsche Bank totaling of US$ 100,000,000. The facility is available on various periods up to March 31, 2014. As of December 31, 2013, the unused portion was US$ 7,979,757. Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. PSAK No. 60, “Financial Instruments : Disclosures” requires disclosure of fair value measurements by level of the following fair value measurement hierarchy : 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

The fair value of financial instrument traded in active markets is based on quoted market prices at the reporting date. The quoted market price used is the current bid price, while financial liabilities use ask price.



117

47. FINANCIAL RISK MANAGEMENT (Continued) Fair value estimation (Continued) 2. Inputs other than quoted prices included within level 1 that are observable for the assets or liability,

either directly (as prices) or indirectly (derived from prices) (level 2), and The fair value of financial instruments that are not traded in active market (such as derivative over-

the-counter) is determined using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

3. Inputs for the asset and liability that are not based on observable market data (unobservable inputs) (level 3). If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Specific valuation techniques used to value financial instruments include: (a) The use of quoted market prices or dealer quotes for similar instruments, and (b) Other techniques, such as discounted cash flow analysis, are used to determine fair value for the

remaining financial instruments. The Company and its Subsidiaries’ financial assets and liabilities that are measured and recognized using the fair value measurement of level 2 and 3. The fair values of financial assets and liabilities together with the carrying amounts are as follows:

December 31, 2013 December 31, 2012 Carrying amount Fair value Carrying amount Fair value US$ US$ US$ US$ Financial assets : Current Assets : Cash and cash equivalents 5,101,421 5,101,421 9,793,989 9,793,989 Trade receivables, net 73,913,893 73,913,893 85,777,319 85,777,319 Other receivables, net 3,355,148 3,355,148 3,300,907 3,300,907 Other current financial assets 9,158,563 9,158,563 7,720,808 7,720,808 Non-current assets : Non-trade receivables from related parties 24,836,407 24,836,407 32,474,040 32,474,040 Other non-current financial Assets 1,029,093 1,029,093 1,113,711 1,113,711

Total financial assets 117,394,525 117,394,525 140,180,774 140,180,774



118

47. FINANCIAL RISK MANAGEMENT (Continued) Fair value estimation (Continued)

December 31, 2013 December 31, 2012 Carrying amount Fair value Carrying amount Fair value US$ US$ US$ US$ Financial liabilities : Current Liabilities: Trade payables 33,115,314 33,115,314 22,949,484 22,949,484 Accrued expenses 36,967,461 36,967,461 43,319,170 43,319,170 Bank Loans 87,910,672 87,324,406 78,752,462 78,563,511 Secured Debts 965,681,557 965,681,557 1,000,263,703 1,000,263,703 Current portion of long- term liabilities:

Credit financing payables 30,572 30,572 64,651 64,651 Other short-term financial liabilities

6,323,597

6,323,597

4,150,965

4,150,965

Non-current: Unsecured Debts and Notes Payable 22,624,894 20,476,087 22,169,338 20,541,883 Working capital loans 17,340,000 16,665,315 17,340,000 17,034,668 Credit financing payables 27,132 27,132 55,535 55,535

Total financial liabilities 1,170,021,199 1,166,611,441 1,189,065,308 1,186,943,570

Short-term financial assets and liabilities with remaining maturities of one (1) year or less (cash and cash equivalents, trade receivables, other receivables, other current financial assets, trade payables, accrued expenses, and other short-term financial liabilities). The net carrying value of these financial assets and liabilities is considered a reasonable approximation of their fair value due to their short-term maturities. Long-term fixed-rate financial instruments with remaining maturities over one (1) years. The fair value of these financial assets and liabilities is determined by discounting future cash flows using applicable interest rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities. Based on the above different level from fair value hierarchy, the following table represents the Company’s assets and liabilities that are measured at fair value as of December 31, 2013 and 2012:

December 31, 2 0 1 3 Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets : Current Assets : Cash and cash equivalents – 5,101,421 – 5,101,421 Trade receivables, net – 73,913,893 – 73,913,893 Other receivables, net – 3,355,148 – 3,355,148 Other current financial assets – 9,158,563 – 9,158,563

Carried forward – 91,529,025 – 91,529,025



119



US$ US$ US$ US$ Brought forward – 91,529,025 – 91,529,025

Non-current assets : Non-trade receivables from related parties – – 24,836,407 24,836,407 Other non-current financial Assets – – 1,029,093 1,029,093

Total financial assets – 91,529,025 25,865,500 117,394,525

Financial liabilities : Current Liabilities: Trade payables – 33,115,314 – 33,115,314 Accrued expenses – 36,967,461 – 36,967,461 Bank Loans – 87,324,406 – 87,324,406 Secured Debts – – 965,681,557 965,681,557 Current portion of long- term liabilities:

Credit financing payables – 30,572 – 30,572 Other short-term financial liabilities

–

6,323,597

–

6,323,597

Non-current: Unsecured Debts and Notes Payable – 20,476,087 – 20,476,087 Working capital loans – 16,665,315 – 16,665,315 Credit financing payables – 27,132 – 27,132

Total financial liabilities – 200,929,884 965,681,557 1,166,611,441


US$ US$ US$ US$ Financial assets : Current Assets : Cash and cash equivalents – 9,793,989 – 9,793,989 Trade receivables, net – 85,777,319 – 85,777,319 Other receivables, net – 3,300,907 – 3,300,907 Other current financial assets – 7,720,808 – 7,720,808

Carried forward – 106,593,023 – 106,593,023



120



US$ US$ US$ US$ Brought forward – 106,593,023 – 106,593,023

Non-current assets : Non-trade receivables from related parties – – 32,474,040 32,474,040 Other non-current financial Assets – – 1,113,711 1,113,711

Total financial assets – 106,593,023 33,587,751 140,180,774

Financial liabilities : Current Liabilities: Trade payables – 22,949,484 – 22,949,484 Accrued expenses – 43,319,170 – 43,319,170 Bank Loans – 78,563,511 – 78,563,511 Secured Debts – – 1,000,263,703 1,000,263,703 Current portion of long- term liabilities:

Credit financing payables – 64,651 – 64,651 Other short-term financial liabilities

–

4,150,965

–

4,150,965

Non-current: Unsecured Debts and Notes Payable – 20,541,883 – 20,541,883 Working capital loans – 17,034,668 – 17,034,668 Credit financing payables – 55,535 – 55,535

Total financial liabilities – 186,679,867 1,000,263,703 1,186,943,570

The following table presents the changes in Level 3 instruments are as follows :

Non-trade Other receivables non-current from related financial Secured parties assets debts Total

US$ US$ US$ US$ Beginning balance 32,474,040 1,113,711 (1,000,263,703 ) (966,675,952) Gain (loss) on foreign exchange, net

(5,320,784

)

(84,618

)

34,582,146

29,176,744

Settlement of tolling expenses (2,316,849 ) – – (2,316,849)

Ending balance 24,836,407 1,029,093 (965,681,557 ) (939,816,057)



121

47. FINANCIAL RISK MANAGEMENT (Continued) Capital risk management The Company and its Subsidiaries’ objective when managing capital is to safeguard the Company and its Subsidiaries’ ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company and its Subsidiaries actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements and capital deficiency of the Company and its Subsidiaries, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. In order to maintain or adjust the capital structure, the Company and its Subsidiaries may from time to time adjust the amount of issue new shares or increase/reduce debt levels. Consistent with others in the industry, the Company and its Subsidiaries monitor capital on the basis of the gearing ratio. The gearing ratio as of December 31, 2013 and 2012 are as follows : 2 0 1 3 2 0 1 2 US$ US$ Total borrowings 1,093,614,827 1,118,645,689 Less : Cash and cash equivalents (5,101,421) (9,793,989 ) Other current financial assets (328,165) (827,301) Other non-current financial assets (1,029,093) (1,113,711)

Net debt 1,087,156,148 1,106,910,688

Total deficiency (827,900,780 ) (797,838,849)

Gearing ratio (0.76 ) (0.72 )

The total borrowings include the unrestructured secured debts of US$ 965,681,557. The Company endevours to restructure this debt to a sustainable level and for which the negotiations are underway with its secured creditors including PPA/BPP. If the proposal of the Company which includes debt to equity swap and waiver of the past interest amounts is accepted by its creditors, it will considerably improve the capital gearing structure of the Company and its Subsidiaries.

48. PRONOUNCEMENT OF NEW ACCOUNTING STANDARD

The Indonesian Institute of Accountants (“IIA”) has issued new or revision of the following the Indonesian Financial Accounting Standards (“PSAK”) and its interpretation (“ISAK”). The accounting standards which will be effective or applicable on the Company and its Subsidiaries’ financial statements covering periods beginning on or after January 1, 2014:



122

48. PRONOUNCEMENT OF NEW ACCOUNTING STANDARD (Continued)

• ISAK 27 : Transfer of Assets from Customers

• ISAK 28 : Extinguishing Financial Liabilities with Equity Instruments

• ISAK 29 : Stripping Costs in the Production Phase of a Surface Mining

The Company and its Subsidiaries’ management is currently evaluating the possible impact on these new and revised accounting standards and interpretations on its consolidated financial statements.

49. ACCOUNT RECLASSIFICATIONS

Certain accounts in the 2012 consolidated financial statements have been reclassified in line with the presentation of the 2013 consolidated financial statements. The details is a follows :

Previous report As Restated Amount Descriptions US$

Current liabilities of Non-current liabilities working capital loan of working capital loan 17,340,000 More appropriate presentation

50. SUPPLEMENTARY FINANCIAL INFORMATION

The Company published consolidated financial statements. The supplementary financial information of PT Asia Pacific Fibers Tbk (Parent Entity only) in schedule 1 until schedule 6 that has been prepared in order to analyse Parent Entity only’s result of operations. The following supplementary financial information of PT Asia Pacific Fibers Tbk (Parent Entity only) should be read in conjuction with the consolidated financial statements of PT Asia Pacific Fibers Tbk and its Subsidiaries.

Schedule -1

SUPPLEMENTARY FINANCIAL INFORMATION

PT ASIA PACIFIC FIBERS Tbk (PARENT ENTITY ONLY)

STATEMENTS OF FINANCIAL POSITION December 31, 2013 and 2012

2 0 1 3 2 0 1 2 US$ US$ ASSETS

CURRENT ASSETS Cash and cash equivalents 5,080,845 9,773,413 Trade receivables, net after allowance for impairment of US$ 15,657,945 in 2013 and 2012 Third parties 51,867,585 57,988,028 Related parties 22,046,308 27,789,291 Other receivables, net after allowance for impairment of US$ 36,721,575 in 2013 and 2012 Third parties 3,355,148 3,300,907 Other current financial assets 9,158,563 7,720,808 Inventories 86,227,237 79,954,633 Purchase advances Third parties 37,362,097 34,605,192 Related party 54,799 – Prepaid taxes 18,903,911 14,786,048 Prepaid expenses 1,691,803 1,101,627

Total Current Assets 235,748,296 237,019,947 NON–CURRENT ASSETS Non-trade receivables from related parties, net after allowance for impairment of US$ 111,997,893 in 2013 and 2012 27,501,952 35,139,585 Other non-current financial assets 1,029,093 1,113,711 Property, plant and equipment, net after accumulated depreciation of US$ 1,714,202,396 in 2013 and US$ 1,658,522,816 in 2012 82,224,751 129,394,646 Intangible Assets 12,087 12,750 Investment in subsidiaries 31,170 31,170 Deferred tax assets 9,620,194 3,216,621

Total Non–Current Assets 120,419,247 168,908,483

TOTAL ASSETS 356,167,543 405,928,430

Schedule -2



STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2013 and 2012

2 0 1 3 2 0 1 2 US$ US$ LIABILITIES AND EQUITY (DEFICIENCY)

CURRENT LIABILITIES Trade payables Third parties 33,115,314 22,942,334 Related party – 7,150 Accrued expenses 36,967,461 43,319,170 Taxes payable 1,741,319 1,751,095 Bank Loans 87,910,672 78,752,462 Secured Debts 965,681,557 1,000,263,703 Current portion of long-term liabilities: Credit financing payables 30,572 64,651 Other short-term financial liabilities 6,248,666 4,076,034 Total Current Liabilities 1,131,695,561 1,151,176,599 NON–CURRENT LIABILITIES Borrowing from Other Financial Institutions : Unsecured Debts and Notes Payable 22,624,894 22,169,338 Working capital loans 17,340,000 17,340,000 Credit financing payables 27,132 55,535 Deferred revenues 237,652 – Long-term employee benefit liabilities 9,392,014 10,274,737

Total Non–Current Liabilities 49,621,692 49,839,610

Schedule -3



STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2013 and 2012

2 0 1 3 2 0 1 2 US$ US$ LIABILITIES AND EQUITY (DEFICIENCY)

EQUITY (DEFICIENCY) Share Capital Authorized 12,357,255,040 shares at Rp 10,000 par value per Series A, Rp 1,000 par value per Series B and Rp 40 par value per Series C in 2013 and 2012 Issued and paid up 219,696,000 Series A and 2,276,057,347 Series C in 2013 and 2012 635,689,316 635,689,316 Additional paid-in capital 624,344,507 624,344,507 Retained earnings (accumulated deficit) Appropriated 2,345,301 2,345,301 Unappropriated (2,087,528,834 ) (2,057,466,903 )

Total equity (deficiency) (825,149,710 ) (795,087,779)

TOTAL LIABILITIES AND

EQUITY (DEFICIENCY) 356,167,543 405,928,430

Schedule -4



STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2013 and 2012

2 0 1 3 2 0 1 2 US$ US$ REVENUES Net sales 565,142,440 599,330,876 Other operating revenues 6,604,835 1,200,875

Total revenues 571,747,275 600,531,751

COST OF GOODS SOLD (592,318,437 ) (606,514,179 )

GROSS LOSS (20,571,162 ) (5,982,428 )

Selling expenses (13,466,915 ) (14,052,194 ) General and administrative expenses (18,004,104 ) (17,843,646 ) Insurance claim settlement, net 651,761 1,667,691 Gain on foreign exchange transactions, net 31,414,704 11,816,164 Miscellaneous income, net 126,659 879,907

722,105 (17,532,078 )

LOSS FROM OPERATIONS (19,849,057 ) (23,514,506 )

Finance costs (16,616,447 ) (18,245,491 )

LOSS BEFORE INCOME TAX (36,465,504 ) (41,759,997 )

TAX INCOME (EXPENSE) Current period – – Deferred 6,403,573 9,641,186

Total tax income 6,403,573 9,641,186

TOTAL LOSS FOR THE YEAR (30,061,931 ) (32,118,811 )

OTHER COMPREHENSIVE INCOME, NET AFTER TAX – –

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (30,061,931 ) (32,118,811 )

EARNING (LOSS) PER SHARE : Basic (0.01 ) (0.01 ) Diluted (0.01 ) (0.01 )

Schedule -5



STATEMENTS OF CHANGES IN EQUITY For the years ended December 31, 2013 and 2012

Retained earnings (accumulated deficit)

Share Capital

Additional paid-in capital

Appropriated

Unappropriated

Total equity (deficiency)

US$ US$ US$ US$ US$ Balance as of December 31, 2011 635,165,191 624,325,603 2,345,301 (2,025,348,092) (763,511,997) Issuance of share capital 524,125 18,904 – – 543,029 Total loss for the year – – – (32,118,811 ) (32,118,811 ) Other comprehensive income, net after tax

–

–

–

–

–

Balance as of December 31, 2012 635,689,316 624,344,507 2,345,301 (2,057,466,903) (795,087,779) Total loss for the year – – – (30,061,931 ) (30,061,931 ) Other comprehensive income, net after tax

–

–

–

–

–

Balance as of December 31, 2013 635,689,316 624,344,507 2,345,301 (2,087,528,834) (825,149,710)

Schedule -6



STATEMENTS OF CASH FLOWS (Continued) For the years ended December 31, 2013 and 2012

2 0 1 3 2 0 1 2 US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES Receipt from customers 614,050,209 634,181,470 Payment to suppliers (488,283,983) (512,158,864) Payment of salaries (16,309,277) (16,579,363) Other operating cash payments, net (89,127,238) (63,392,409)

Cash provided by operations 20,329,711 42,050,834 Interest received 35,938 31,754 Interest expense and bank charges paid (14,782,498) (17,979,160) Cash receipt from insurance claim settlement 271,492 1,667,691 Payment of income tax (6,314,637) (4,911,388) Refund of income tax 3,988,440 5,940,924 Net Cash Provided By Operating Activities 3,528,446 26,800,655

CASH FLOWS FROM INVESTING ACTIVITIES Payment to acquire property, plant and equipment (8,471,616) (13,295,299) Increase of other current financial assets 370,190 (521,237)

Net Cash Used In Investing Activities (8,101,426 ) (13,816,536 )

CASH FLOWS FROM FINANCING ACTIVITIES Issuance of share capitals – 591,434 Receipt of working capital loans 700,000 12,940,000 Payment of working capital loans (700,000) (18,600,000) Payment of credit financing payables (64,843) (68,689)

Net Cash Used In Financing Activities (64,843 ) (5,137,255 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(4,637,823

)

7,846,864

EFFECT OF FOREIGN EXCHANGE RATE (54,745) (1,491,039) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

9,773,413

3,417,588

CASH AND CASH EQUIVALENTS AT END OF YEAR

5,080,845

9,773,413

annual report - asia pacific fibers...annual report 2013 3 company description pt asia pacific...

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