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ASIA PACIFIC FIBERS

1 | ANNUAL REPORT 2015

Contents

3 Company Description

4 Financial Highlights

5 Message from the President Commissioner

8 Message to Shareholders

12 Management Report

18 Management Discussion and Analysis

20 Good Corporate Governance

27 Organisation Structure

28 Corporate Information

34 Independent Auditor Report

ASIA PACIFIC FIBERS


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ASIA PACIFIC FIBERS


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 2015.

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.

ASIA PACIFIC FIBERS


Financial

Highlights

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

31st December 2011 to 2015.

The Company‟s current auditors are Drs. Hendrawinata Eddy Siddhartha & Tanzil (Indonesian

Member firm of Kreston International)

31st December

2015

US$ 000

2014(2)

US$ 000

2013

US$ 000

2012

US$ 000

2011(2)

US$ 000

Current Assets

Fixed Assets-Net

Total Assets

Liabilities

Equity

Net Sales

Gross Profit

Operating Profit

Net Income

Net Working Capital (1)

Profit per Share-Net

Gross Profit Margin %

Net Profit Margin %

Return on Investment %

Return on Equity %

Current Ratio

Debt to Total Assets

Debt to Equity

143,251

61,876

232,495

1,157,902

(925,407)

387,054

8,153

(11,647)

(17,787)

(958,570)

(0.01)

(0.01)

(0.05)

NA

NA

0.2

4,98

(1.25)

177,420

61,366

275,372

1,184,396

(909,024)

493,567

(13,827)

(81,490)

(79,800)

(949,426)

(0.03)

(0.03)

(0.16)

NA

NA

0.2

4,30

(1.30)

235,769

82,225

353,491

1,181,392

(827,901)

565,142

(20,571)

(36,466)

(30,062)

(896,001)

(0.01)

(0.04)

(0.05)

NA

NA

0.2

3.34

(1.43)

237,040

129.394

403.252

1,201,091

(797,838)

599,331

(5,982)

(23,515)

(32,119)

(931,551)

(0.01)

(0.07)

(0.11)

NA

NA

0.2

2.98

(1.51)

231,660

184.837

452.635

1,218,898

(766,263)

635,535

13,879

(19.863)

(8,840)

(936,758)

0.00

2.18

1.39

NA

NA

0.2

2.69

(1.59)

Notes: (1) Current Assets minus Current Liabilities (2) and (3) As Restated

ASIA PACIFIC FIBERS


Message

from the

President

Commissioner

Dear Shareholders,

Amid an unfavourable investment climate, weakened consumer sentiment and low prices for

key export commodities, such as coal, metal minerals, rubber and crude palm oil, Indonesia

has become more dependent on government spending to drive economic growth. Indonesian

GDP in 2015 showed year-on-year (YoY) growth of 4.8%, marking a continuation of the

downtrend seen in recent years.

The petrochemicals industry has had to sail through turbulent weathers in 2015 due to the

volatility in the crude oil price, which has dropped up to 70% since mid-2014, much more

than the market expected. This steep fall in crude prices has caused cascading effect on the

Polyester chain prices and margins leading to significant write-down in inventory valuation.

PTA witnessed a huge capacity addition, disproportionate to demand during 2013-15, brought

down the operating rates to 72%. The TPT sector in Indonesia suffered a contraction with a

negative growth of over 5% during 2015 year due to the economic slowdown leading to

decline in purchasing power causing lower demand for textile products. The domestic market

remained sluggish throughout the year.

Assessment of Performance of Board of Directors

The Board of commissioners continue to supervise the functions of the Board of Directors and

give them necessary policy guidelines in effectively handling the tough challenges faced by

the Company and manage the business affairs prudently. The foregoing adverse market

factors and continuous drop in material prices affected the performance of PT Asia Pacific

Fibers Tbk (the “Company”) significantly during the year 2015 in terms of decline in Sales

revenue and EBITDA losses. Sales revenue for the year 2015 has dropped to US$387 as

compared to US$494 million for the last year. Falling trend in commodity prices and

consequent plunge in polyester prices have also led to significant write-down in inventory

valuation during the third and fourth quarter of the year.

In view of the unsustainability of the PTA operations under the current trading conditions, your

Board of Directors, after careful evaluation of the pros and cons, recommended the strategic

option to temporarily suspend the PTA operations and take up total revamp of the plant in

order to improve its cost efficiency and productivity at par with the latest technology. It was

also decided to outsource PTA from market and mothball the PTA plant till revamp is taken

up. The Board of Commissioners strongly feel that the strategic decision to shut down the PTA

plant temporarily and outsource its PTA requirement externally, is an imperative step in the

right direction to turn around the performance of the Company, especially in the background

ASIA PACIFIC FIBERS


of the global PTA trade and the on going capacity rationalization in China and elsewhere

across Asia.

The Board of Commissioners acknowledges the strategiic efforts taken by the Board of

Directors and values their contribution in the following areas:

a) Continued to retain its dominant position in catering to the raw material needs of the

downstream textile sector in Indonesia, despite the depressed market conditions and

stiff competition.

b) Continous engagement in diversyfying into specialty/distintive products for growing

segments of Automotive, Home textiles and Performance applications, despite the

financial contraints faced by the Company.

c) Cost saving measures in the areas of energy, efficiency improvement and waste

reduction to improve overall operational efficiency.

Review of Business Prospects

The Commissioners have reviewed the strategic plan of the Company for the year 2016 in the

backdrop of the projected recovery in the domestic TPT sector consequent to various stimulus

packages and fiscal support announced by the Government. Soft outlook for crude and the

drop in the polyester prices augurs well for the polyester fibers to be more competitive than

cotton and other fibers, which would improve polyester‟s share in blended textile products.

The key areas of action focussed in the business strategy implemented by the Board of

Directors are expected to significantly improve the performance of the Company in the coming

years.

Cost advantage on the bought out PTA as compared to captive production in the

background of falling PTA spreads.

Continuous optimization of plant utilization troughed-bottlenecking and

commissioning PTA de-bagging/unloading facility by beginning of the second quarter

of 2016.

The Company has re-focussed its marketing strategy to be become a “Product

Company” with value added and specialty products and gradually move away from

commodity segment.

Organizational and human resources development to reinforce its core competency

Continuous improvement in cost saving with focus on energy savings, efficiency and

productivity.

With the strategic guidance from the Board of Commissioners, the Company had renewed its

negotiations with Ministry of Finance to arrive at a solution for its longstanding issue of

secured debt restructuring, which has been a deterrent to the growth of your Company. Based

on the persistent appeal from the Company, the Ministry of Finance have appointed a high

level committee to find an workable debt restructuring plan within a stipulated time frame.

The board of Commissioners is supportive of the initiatives taken by the Board of Directors in

reaching an amicable solution through the Secured Debt restructuring process and hopeful

that this would be completed in 2016. If this secured restructuring is 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.

Corporate Governance

The Board of Commissioners has mandated the Board of Directors to pursue their business

strategies, developmental activities and trade practices in accordance with the principles of

Good Corporate Governance.

ASIA PACIFIC FIBERS


The Board of Commissioners has reviewed the reports of the Audit Committee, Remuneration

Committee and Risk management Committee and are of the view that the internal control

systems and procedures, financial reporting systems and the Risk management process

commensurate with the Company‟s business needs. The Company is committed to improve

its corporate governance standards continuously and ensure compliance to the various

regulations and requirements as applicable.

Change in Board of Commissioners

The Annual General Meeting of Share holders of the Company held on 16th June 2015

approved appointment of Mr. Agus Tjahajana Wirakusumah as independent Commissioner of

the Company in the place Mr. Timbul Thomas Lubis SH, LLM, who resigned from the office of

Independent Commissioner.

The Board of Commissioners is pleased to welcome Mr. AgusTjahajana Wirakusumah as

Independent Commissioner and look forward to his valuable guidance and contribution to the

growth of the Company. The Board also wishes to place on record its deep appreciation of the

valuable contribution and guidance given by Mr. Timbul Thomas Lubis SH, LLM during his

tenure as Independent Commissioner in the Company.

Ms. Kamun Cheong has submitted her resignation from the office of Commissioner. The

Board of Commissioners accordingly recommends that the subject of change of constitution

of the Board of Commissioners may be considered in the ensuing Annual General meeting of

the shareholders. The Board wishes to place on record its appreciation for her contribution to

the Company during her tenure as Commissioner.

Appreciations

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 2015, which can be deemed as ayear of definingwhere the Company continued to

sustain its strategic market position, whilst facing the tough challenges of the surrounding

business and economic environment.

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

ASIA PACIFIC FIBERS


Message to

Shareholders

Dear Shareholders,

Global growth disappointed again in 2015, declining to 2.4%, from 2.6% in 2014. A key

reason for the prolonged growth slowdown is weaker economic activity in emerging and

developing economies. Given the more modest growth trend in large emerging markets,

Indonesia had to adapt to a global economy in which commodity prices remain low and global

trade flows are weaker than in the decade before the global financial crisis. With export

revenues contracting for a fourth consecutive year, Indonesia‟s economic growth, too,slowed

down in 2015. GDP grew by 4.8 percent, though a relatively respectable growth rate,

especially for a commodity exporter, but is not sufficient to provide employment to 3 million

new entrants into the labor force and to reverse the recent sluggish trend in the domestic

manufacturing sector.

Indonesia‟s exports declined to US$150.25 billion in 2015, as compared to the previous year

realization of US$175.98 billion recording an overall dip of 17.66%, primarily driven by low

prices for key export commodities such as coal, metal minerals, rubber and crude palm oil.

Following the downward trend in exports, imports also plunged by 16.02% to US$142.74

billion as compared US$178.18 billion, not only due to lower commodity prices, but also lower

demand for capital goods, raw materials and intermediary inputs, driven by slowdown in

manufacturing activities.

Crude oil prices steeply fallen during the year and reached a low of US$35 per barrel (WTI) in

December 2015 from US$60 per barrel in January 2015. The fall in crude prices continued

thru‟ 1st quarter of 2016 and hit a low of US$26 per barrel in Feb 2016 before recovering to

US$37 in March 2nd week. The high volatility in the crude price coupled with the economic

slowdown in China heavily impacted the global commodity prices. Polyester chain prices have

also been hit badly due to this erratic movement in oil/commodity prices.

The inflation in 2015 was moderate at 3.35% well below the BI targeted rate of 4% as

compared to 8.38% for the previous year. The drop in oil prices and the prices of key

commodities are the primary reason for the drop in inflation. Amid global economic slow

down, stock market meltdown and capital inflow, Indonesia was able to weather the

onslaught with moderate impact on the economy as compared to other emerging economies.

Consequent to the devaluation of Chinese currency, all regional currencies weakened sharply

and Indonesia Rupiah fell below 14,700 in September 15. It has then recovered slowly and

hovering around 13,100 in the 2nd week of March 2016. Indonesian currency remained

resilient despite the expectations of weakened Rupiah. This is backed by the relative stability

of the Indonesian economy and better prospects going forward. BI has lowered its key interest

rate (BI Rate) twice during the period from 1st January 2015 till 17th March 2015 by 100 basis

points (from 7.75% to 6.75%). Amid a sluggish global economic growth, the lower BI Rate is

expected to enhance domestic demand to bolster economic growth momentum, while

maintaining macroeconomic stability.

ASIA PACIFIC FIBERS


Polyester Industry: Global and Domestic Trends

The global polyester chain continued to reel under persistent pressure created by a

combination of excess capacity throughout the chain, and weaker demand growth in the key

market of China. PTA margins that started sliding in 2012 remained below cash cost levels in

2015 also. Cotton prices also remained depressed on the back of huge global inventory, and

steps taken by China to release cotton from their strategic reserves.

Contrary to the last year assessment that PTA market would bottom out in 2015, the

surrounding environments have pulled PTA producers into a deeper trouble and prospect for

2016 is not exactly bright. Global operating rates have come down to 72.7% in 2015 as China

struggled to keep 70% operation with as much as 10 million tonnes of uneconomical

capacities were closed down in China.

The Production of Polyester Staple Fiber (PSF) and Filament Yarn (PFY) registered a year on

year growth of 3.1% and 5.9% respectively, although marginally improved over 2014, the

operating rates almost remained flat.

Continuous dip in the prices of key commodities triggered by the steep fall in crude prices and

its volatile movement has severely impacted the Polyester chain prices through the year and

the product margins remained squeezed.

The market uncertainties on account of commodity price crash and dampened domestic

demand due to slowdown in economy during the year had a painful impact on the domestic

manufacturing sector and the TPT sector was the one hit very badly. The industry remained

sluggish throughout the year with the drop in retail consumption.The sector has suffered a

contraction, or negative growth of over 5 percent as compared to the previous year, which

represents a worse growth rate than that of manufacturing industry that grew at 4.3% as a

whole.

Company Performance

The Company‟s performance during the year 2015 was adversely impacted by the continued

down turn in the polyester chain margins coupled with the rising cost of production and

depressed market conditions due to excessive supplies. Slower than expected recovery of

global economy, highly volatile financial markets leading to tight liquidity and currency

fluctuations and continuous fall in commodity prices led by crude oil, further dampened the

retail demand and the market remained depressed through out the year. Despite these

adverse trade conditions, the Company was able to sustain the operations of both of its plants

at reasonably optimum capacity with high standards of efficiency, supported by the sustained

demand from its strong domestic customer base. The Company sales revenue has fallen to

US$387 million as compared to US$494 million in the previous year, primarily due to sharp

reduction in selling prices triggered by fall in Crude and other key Commodity prices coupled

with the sluggish domestic demand. The drop in sales is attributed to fall in prices and volume

by 17% and 5% respectively. This steep fall in prices had further led to significant write down

in inventory valuation through the second semester. As a result, the Company has ended the

year with an operating loss (before interest charges) of US$3.784 million as compared to the

operating loss of US$32.56 million for the previous year. Lower operating loss during the year

was mainly on reduced depreciation of US$5.94 million as compared to US$32.03 million for

the previous year. The Company incurred anEBITDA Loss of US$6.60 million as compared to a

loss of US$4.86 million for the previous year. Another major factor adversely impacted the

profitability was operational loss of PTA plant as the PTA spreads continued to remain low and

hit the bottom during the year. Our PTA conversion cost was prohibitively high as compared to

the new plants with latest technology that were added in the recent years. Due to sluggish

retail conditions, sales revenue of Performance fabric division of the Company marginally

dipped to US$7.74 million as compared to US$8.20 million for the previous year.

ASIA PACIFIC FIBERS


In view of the un sustainability of the PTA operations under the current trading conditions, the

Company had taken a strategic decision, after careful evaluation of pros and cons, to

temporarily suspend the operations of PTA plant and out source its requirement of PTA. PTA

plant needs to be revamped to improve its cost efficiency at par with the latest technology

plants. It was also decided to keep the plant “mothballed” till the revamp is taken up. The

shut down of the PTA plant will not have any impact on the Company‟s sales revenue going

forward as rest of the plants - Polymer, Fiber, Filament Yarn and Fleece plants at both

locations will be operated as before.

Despite the financial constraints, the Company continued to move towards its committed

strategic direction of product and market diversification with its focused on efforts on

increased the volume of specialty and value added products into new market segments. The

Company has also initiated various cost saving measures at both the locations, especially in

the area of energy that are expected to yield significant cost savings going forward.

The Board of Directors are pleased to inform that all these strategically critical actions should

help the Company to strengthen its competitiveness and significantly enhance its product

offerings in its core product areas and significantly improve its performance in the coming

year.

The Company continued to avail the LC facility of US$92 million provided by its majority

shareholders tomeet its working capital requirements during the year.

Business Outlook

The trajectory of the global economy for the next few years will be characterized by more

modest growth in large emerging markets, low commodity prices and slow recovery in global

trade and capital flows. Indonesia‟s economy gained momentum in the second half of the

year is expected to accelerate in 2016 with the governments focused efforts on improving

investment climate, increased governmental spending on infrastructure development and the

economic policy reforms. GDP growth is forecast to achieve 5.1% in 2016 and 5.3% in 2017

as per the world banks report. Supported by the easing and moderate inflation at 3-4% in

2016, domestic household consumption is expected to rebound and spur the domestic

demand.

Domestic manufacturing sector is expected to recover with the help of series of stimulus/

relief packages announced by the government to boost the battering domestic manufacturing

industries, especially to TPT sector to improve its competitiveness. These packages are aimed

at rationalizing the energy prices, deferral of 40% of the electricity charges for on year to

improve cash flow and various other incentives to protect the domestic industries. In addition,

the government has introduced a number of fiscal measures to support investment and

export. Further, the restrictions imposed on fabric imports and the government‟s efforts to

curb illegal import of textile goods are expected to revitalize the downstream textile sector and

the domestic market to a great extent.

Soft outlook for crude and the drop in the polyester prices bode well with the forecast that the

polyester fiber and filament yarn to be more competitive amongst other synthetics and natural

fiber and continue to remain a very robust commodity, despite the fluctuations in the margins.

Hence, significant growth is forecast in many performance fabrics that are increasingly

developed in Asia for consumption in home textiles, building construction, advanced

sportswear apparel, and fast emerging health and hygiene sectors via non-woven routes. The

Company‟s long-term strategy is focused on entering these niche markets and reduces its

dependence on commodity products, which are highly competitive.

The Company, with its newly built capabilities to increase the volume of specialty products

(Colored yarns/PBT) for automotive and home textiles applications,will be able to face the

ASIA PACIFIC FIBERS


competition and sustain its market share besides making entry into new market segments.

This will in turn enable the company to sustain and improve its financial performance on a

longer term.

The prolonged delay in finding a solution to its secured debt restructuring continues to remain

a roadblock to move forward and carry out its growth plans. Based on the strategic guidance

from the Board of commissioners, the Company has submitted an updated restructuring

proposal with alternate options taking into account the current condition of the business to its

secured creditors including Ministry of Finance in June 2015. While the majority of its secured

creditors are in agreement with the proposal, the Ministry of Finance is actively considering

the proposal for early settlement. We are pleased to inform that a high level committee is

appointed by the Ministry of Finance to find a workable debt restructuring plan within a

stipulated time frame. Post restructure, the Company‟s financial position will improve

significantly 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

implement its growth plans.

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 difficult and challenging period and continue to sustain our strategic position in the

polyester industry.

V. Ravi Shankar

President Director

ASIA PACIFIC FIBERS


Management

Report

Economic and Polyester Industry Overview

Indonesia‟s GDP growth in 2015 was estimated at 4.79%, though fared better than other

Asian economies, was the lowest in the past 6 years. Year 2015 witnessed a decline in

exports, weakened consumer sentiments and declining global prices of key commodities

coupled with continued global economic uncertainties. Exports declined to US$150.25 billion

in 2015 as against the target of US$180 billion set by the government for the year and as

compared to the previous year exports of US$175.98 billion in 2014. The steep fall in exports

was primarily due to fall in the prices of key export commodities such as coal, metal minerals,

rubber and CPO. In line with the exports, the imports also declined to US$142.74 billion as

compared to US$178.18 billion in 2014, not only due to lower oil and gas purchases, but also

declining demand for capital goods, raw materials and intermediary inputs, triggered primarily

by slowdown in manufacturing activities. However, Indonesia posted a positive trade surplus

in 2015 after three years of negative trade balance. The current account deficit also reduced

to US$17.50 billion in 2015 as compared to US$27 billion in 2014. The inflation in 2015 was

well under control at 3.35% due to drastic reduction in the oil price despite the removal of fuel

subsidies. All regional currencies weakened sharply consequent to the devaluation of Yuan

and IDR fell to Rp 14,700 level per US$ and recovered back to Rp 13,795 by end of

December 2015. It further strengthened to a level of Rp 13,150 by end of March 2016 due

to improvements in the trade surplus and low inflationary level. The economic outlook for

Indonesia in 2016 remains positive with the proposed government‟s spending focused on

infrastructure and its plan to inject capital into state owned enterprises are expected to

bolster economic growth between 5.60% and 5.80% in 2016. The inflation is expected to

remain under control in 2016. The economic stimulus policy packages announced by the

Government are expected to boost the manufacturing sector thereby increasing the

availability of goods and services at an affordable price. With an increase in the propensity to

consume due to lower inflation and higher Government spending, it would bolster the GDP

growth in 2016.

In 2015 the high volatility in crude oil price coupled with the economic slowdown in China

heavily impacted the global commodity prices including Polyester chain prices. The Polyester

Industry which witnessed the bottom of the trade cycle during 2014-2015, is expected to

recover in 2016 with the rationalization of capacities in China and elsewhere, stability in Oil

prices and feed stock supply situation. Polyester will continue to remain a very robust

commodity despite fluctuations in the margins. The TPT sector is expected to recover and

improve with the help of series of economic stimulus relief announced by the Government.

The Government efforts in clamping down the illegal import of textile goods will revive the

downstream sector and the domestic market to a large extent. Globally, the polyester

products is estimated to grow at the rate of 4.5% to 5% going forward.

Paraxylene, one of the major raw materials, supply position has remained balanced, despite

slow down in Polyester chain growth with an operating rate of around 79% global average.

Despite the fall in the price of Paraxylene in 2015 as compared to the level in 2014, the delta

of PTA over Paraxylene price fell down further in 2015 without a corresponding improvement

in the price of PTA and remained sluggish through the year. The Polyester products margins

came under pressure due to sluggish PTA margin as well as further drop in the selling prices.

ASIA PACIFIC FIBERS


This has also resulted in significant valuation loss of finished inventory which significantly

impacted the profitability. The price of MEG also dropped in line with oil prices.

PTA (Pure Terephthalic Acid) & Polymer

The global production of PTA in 2015 grew by around 4.8% or just over 2.6 million tons to

reach around 57.0 million tons. The operating rate fell sharply from 77% to 72.4% in 2015

due to emergence of excess capacity. It is expected that some rationalization will happen

going forward resulting in a n improvement in the operating rate. Due to oversupply position

the PTA margin remained depressed in 2015 despite steep fall in Paraxylene price. In view of

the unsustainability of PTA operation under the current trading condition, the Company has

taken a strategic decision to suspend the operation of its PTA plant towards the end of 2015,

which needs to be revamped to improve its cost efficiency at par with the new plants. The

requirement of PTA is being outsourced which will bring about an improvement in Polyester

margins.

Polyester Polymer

World Polymer production in 2015 was 66.54 million tonnes with a growth of 3.01 million

tonnes or 4.9% more over 2014 levels. It is expected to grow at the rate of 5.1% and 4.8% in

2016 and 2017 respectively with an improved demand for Polyester products. The Company‟s

polymer production in 2015 was marginally lower than the level of 2014.

Staple Fiber

Global polyester staple fiber production in 2015 was estimated to be 16.04 million tons as

compared to 15.56 million tons in 2014, registering a growth of 3.1% over 2014. The

Company‟s staple fiber production in the year 2015 decreased due to increase in the imports

of fiber into Indonesia and additional capacity of fiber in the domestic market. Higher imports

into Indonesia coupled with cheaper cotton price levels hampered the margins for Fiber in

2015.The steps are afoot to impose anti dumping duty on imports of fiber from certain

countries to protect the domestic industry.

Filament Yarn

In 2015, global polyester filament yarn production was estimated at 31.82 million tons as

compared to 30.04 million tons in 2014, thus registering a growth of around 4.5%. The

Company‟s filament yarn production reduced in 2015 due to optimization of certain category

of yarn on account of depressed margins. In 2015 a major thrust was given for the specialty

and value added yarn production.The import of filament yarn at cheaper rates into Indonesia

grew drastically in 2014 which was one of the main reasons for the depressed margins.

However, the Government of Indonesia has imposed anti dumping duty on certain category of

yarns to protect the local market.

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

ASIA PACIFIC FIBERS


Texmaco Jaya, the tolling arrangements continued with the approval of the commercial court.

The production and sales of performance fabrics optimized during the year 2015.

Product Range

The Company‟s product range includes:

Product Type Utilization

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

2. Polyester Chips Semi-Dull

Super Bright

Optical Bright

Polyester Filament yarn/staple fiber

Filament yarn/ staple fiber

Polyester staple fiber

Filament yarn

3. Polyester Staple Fiber Normal/Specialty Spun Yarn

Non Woven

Fiber Fill

4. Polyester Filament Yarn Normal/Specialty

Micro Filament

Hi filament

Differential

Shrinkage

Tailored clothing - Formal and Casual

Super fine apparel fabrics with cotton tencel

free

Fine apparel fabrics

Fine apparel fabrics

5. Fabrics High performance

Fabrics

Outdoor wear, Winter clothing active wear,

sportswear, children‟s wear

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 enjoys 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 downstream customers. Domestic sale proportion has been around 83% in

2015.

ASIA PACIFIC FIBERS


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 employee‟s retention scheme based on performance

appraisal is in place to boost the motivation of the employees. The Company has also

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.

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 BPP/PPA. Land totaling 26.62 hectares,

with buildings, and production facilities at Karawang are secured to the Company‟s Secured

Bonds. Some of the machines located in Karawang and Semarang are pledged to Damiano

Investments BV for the Capex Loan provided to the Company. Some portion of POY Spinning

Machines and few types of equipment in Karawang are pledged to the holders of ex banks

bilateral loans.

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 2015.

ASIA PACIFIC FIBERS


Stock Price Performance

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

2015

Highest

Lowest

Volume

2014

Highest

Lowest

Volume

(Rp)

(Rp)

(Shares)

(Rp)

(Rp)

(Shares)

106

74

10.135.400

100

75

2.240.700

86

52

3.988.500

90

60

1.132.900

116

50

28.418.000

90

57

4.802.500

68

50

4.461.300

127

62

30.241.100

Restructuring Status & Financing Activities

The Company has submitted an updated restructuring plan with alternate options taking into

account the current condition of the business to its secured creditors including Ministry of

Finance in June 2015. While the majority of its secured creditors are favorably considering the

proposal, the response from Ministry of Finance is still awaited. The Company is engaged in

active negotiations with the MoF to find an amicable solution to this long pending issue. In the

meantime, Damiano Investments BV, the majority shareholders, continues to provide 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. In view of the current business condition, Damiano Investments BV

have accepted the Company‟s request to reduce the interest rate on its LC facility in 2015.

Additionally they have also waived the last quarter of 2015 interest due on the LC facility.

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 2015 Damiano

has provided further Capex Loan to purchase a gas turbine from the curator of PT Wisma

Karya Prasetya on a public auction. Through this purchase of gas turbine and obtaining gas

supply contract from PT PGN APF has reasonably secured its power and utility requirement for

its Karawang plant. Additionally APF has entered into a rental agreement with the curator of

PT Wisma Karya Prasetya for the use of gas turbines for electricity and steam production.

In view of its tight working capital position and non completion of secured debt restructuring,

in January 2015 the Company sought and obtained approval of its unsecured creditors for

extension 3 years time and re-schedule principal repayments commencing from February

2018 instead of February 2015. The majority New Note holders have approved the above

request of the Company in their meeting held on 21st January 2015 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 due in 2015.

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).

ASIA PACIFIC FIBERS


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 Eastindo Polymertama (Eastindo)

Eastindo was originally formed to implement the expansion of PTA and polymer production in

Karawang which was later implemented through APF. As Eastindo has not engaged in any

manufacturing activity, the Company is planning to wind up PT Eastindo Polymertama.

ASIA PACIFIC FIBERS


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 2015

have decreased from the previous year mainly due to drop in selling prices of filament yarn

and staple fiber. The steep fall in the crude oil price have pushed down the Polyester chain

prices significantly during 2015. The rupiah weakened further during the year and closed at

Rp 13,795 per US$ as at 31st December 2015, compared to Rp 12,440 per US$ in 2014.

Results of Operations

In 2015, net sales revenue was US$387.05 million as compared to US$493.56 million in

2013. The decline in net sales in 2015 was primarily on account of drop 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 the raw material prices consequent to steep fall in the

crude oil prices besides reduction in the polyester chain margin. Export sales were US$68.38

million or 17.67% of the net sales, and domestic sales were US$387.05 million accounting

for 82.33% of the net sales. Other operational revenue was US$3.00 million, realized through

the sale of recycle products, indirect materials and waste/scrap.

Gross Profit/ (Loss)

The Company incurred a Gross profit of US$8.15 million in 2015, as compared to a Gross loss

of US$13.82 Million in 2014. The increase in gross profit was attributable to significant

improvement in the operational efficiency through reduction of waste and off grade

production, cost saving measures besides sizeable reduction in the depreciation charges.

Despite the reduction in the value addition for the polyester products, the benefits accrued

out of the improvements in the efficiency offset the negative effect. The discontinuation of

PTA production due to adverse market condition effective November 2015 also had an impact

in reducing the overall cost of manufacturing.

Profit/ (Loss) Before Tax

The Company incurred loss before tax of US$11.65 million in 2015, as compared to a loss of

US$81.49 million in 2014. The general administrative, selling expenses in year 2015 were

lower by 8% as compared to 2014 levels. In 2015 the finance charges reduced significantly

ASIA PACIFIC FIBERS


due to reduction in the rate of interest on LC loan to 6% pa from 12.5% in 2014 besides

waiving the interest on LC loan for the last quarter of 2015. The gain on account of foreign

exchange in 2015 was US$11.24 million as compared to US$4.97 million in 2014.

Additionally, a provision for impairment of receivable was made in 2014 for US$34.26 million

due to bankruptcy of PT Wismakarya Prasetya. The Insurance Claim included interim

settlement of insurance claim arose on account of fire accident in a manufacturing unit in

Semarang.

Business Risks

The disequilibrium of demand and supply position of polyester products has significantly

pushed down the margin levels. The overall growth of Polyester production remained

stagnant at 5.27% in 2015 despite capacity increase during the year. This has drastically

reduced the utilisation rate to 74% in 2015. Additionally, the significant drop in the price of

crude oil during 2014 resulted in steep drop in the raw material prices which led to valuation

loss of finished goods in 2015. The threat of cheaper cotton has further impacted the

economics of polyester sector with downward pressure on prices. PTA margins continue to

remain depressed through the year. A general recovery in polyester industry in terms of

margins is expected going forward with an underlying growth in global polymer output of

around 6.20% in 2016.The Company has taken a strategic decision to suspend its PTA

operations towards the end of 2015 which needs to be revamped to improve its cost

efficiency at par with the new plants. As the current PTA margins at its low levels, the decision

to suspend PTA operations would expect to have a positive impact in the overall margins going

forward. The Company would outsource its requirement of PTA from domestic and

international market and this will not have any impact on the production of downstream

products Fiber and Filament yarn and its revenue stream. The Company is still depending on

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.

With regard to Bank Indonesia rule No 17/3/PBI/2015, the Company has received approval

from Bank Indonesia with letter No 17/1192/DKSP dated August 11, 2015 for transacting

using US$ Dollar as currency of transaction until July 2016.

Debt Restructuring

The Company continues to pursue the secured debt restructuring with its secured creditors.

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.

ASIA PACIFIC FIBERS


Corporate

Governance

The Board of Commissioners, the Board of Directors and the professional employees are fully

committed in meeting the high standards of Good Corporate Governance (GCG). GCG

principles which cover transparency, fairness, accountability and reasonability are always the

primary factors in all business aspects and at all management levels.

The Board of Commissioners

It is represented by eminent people in the field of Finance, Economics, and Law, in addition to

the majority shareholders‟ representatives. The Board of Commissioners meet on a periodical

basis to review the operations of Board of Directors and to provide policy guidance related to

financing, loan, pledge of collaterals, insurance, setting the annual budget and business plans

and they have full access to Company‟s information. The Commissioners are ably assisted by

various Committees such as Audit Committee, Risk Management Committee and

Remuneration Committee constituted under the able guidance of Independent Commissioner.

The members of the Board of Commissioners are as follows based on the Meeting of the

Shareholders held on 16th June 2015:

The Current members of the Board of Commissioners of PT Asia Pacific Fibers Tbk (APF) are

as follows:

Name Age Principal Occupation

Robert Clive Appleby 53 President Commissioner 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 54 Commissioner 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 61 Commissioner since June 2008.

He holds a Master in Business Administration

from Yale School of Management, and a

Master‟s Degree in Medieval History from

ASIA PACIFIC FIBERS


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 71 Independent Commissioner 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

JasaMarga, Bank BRI and Bank BTN.

Ir. Agus Tjahajana Wirakusumah 61 Independent Commissioner since June 2015.

He holds a Bachelor Degree in Mechanical

Engineering from Bandung Institute of

Technology and Economics degree from

University of Indonesia. He is also holding

Master‟s Degree in Industrial System

Engineering from University of Florida, USA. He

held Senior Management position in various

private sector companies and also in the

Board of Commissioners of BUMN companies.

He had over 17 years of rich experience in the

Ministry of Trade and Industry and retired as

Director General in 2015.

During the year, the Board of Commissioners held five times BOC Meetings.

ASIA PACIFIC FIBERS


The Board of Directors

The Board of Directors as a Company organ shall function and be responsible collegially for

the management of the Company. Each member of the Board of Directors can carry out its

duty and take decisions in accordance with their respective assignments and authorities. The

Board of Directors shall formulate the values of the Company as well as the short and long

term program of the Company to be discussed and approved by the Board of Commissioners

or the GMS in accordance with the Articles of Association of the Company.

The Company‟s Board of Directors is represented by the professionals in the field of

Production, Marketing, Human Resources, Finance and General Management expertise.

The members of the Board of Directors are as follows based on the Meeting of the

Shareholders held on 16th June 2015:

Name Age Principal Occupation

V. Ravi Shankar 52 President Director 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 68 Director 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

since 1993. Prior to that he was Personnel

Director in Bata Shoes Company.

S. Jegatheesan 66 Director 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 58 Director 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,

ASIA PACIFIC FIBERS


Germany, specializing in polymer processing

and environmental technologies.

Antonius W. Sumarlin 49 Director since 2014.

He holds Master‟s degree in Economics

Development from Vanderbit University, in

Nashville, USA and also holds Phd in

Marketing from Institut Pertanian, Bogor. He

has over 18 years of experience in strategic

and financial management in various

organizations from manufacturing to

investment companies.

In 2015, the Board of Directors held five times BOD meetings.

Joint Meetings

A Joint Meeting is a meeting attended by the Commissioners and Directors. The Joint

Meetings are held to improve the coordination and smooth communication between the

Boards. A total of four times Joint Meetings were conducted in 2015.

Committees Suppporting The Board of Commissioners

To enhance the effectiveness of its functions in supervising the Board of Directors, the Board

of Commissioners have 3 supporting Committees that report directly to the Board of

Commissioners. Each of the Committee is headed by an Independent commissioner who is

well versed in the areas of operations.

These committees are Audit Committee, Risk Management Committee and Nomination &

Remuneration Committee

Audit Committee

Audit Committee Members

In line with the regulation of Bapepam LK No IX.I.5, AUDIT COMMITTEE was established on

10th August 2015 to assist the Board of Commissioners. The members of the Committee are

as follows:

Mr. Dono Iskandar Djojosubroto: Chairman of the Committee. He is an Independent

Commissioner in the Board of Commissioners of the Company

Mr. Doedy Darwin: He is an Engineer from the Institute of Technology Bandung. He has over

24 years of experience in banking sector as Head of Asset Management, Credit Division.

Mr. Deddy Sutrisno: He is a Chartered Accountant from the Institute of Indonesian

Accountants and Certified Management Accountant (CMA) from the Institute of Certified

Management Accountants, Australia. He has 25 years of rich experience in the field of

Accounting , Finance, Taxation. He is currently working as Director in a Consulting Firm.

ASIA PACIFIC FIBERS


Duties and Responsibilities

The Audit Committee provides expert professional and independent views/opinions to the

Board of Commissioners relating to financial reports, legal issues and other matters

presented by the Board of Directors. The basic responsibilities of Audit Committee are as

below:

a. Reviewing the quarterly and annual financial statements

b. Reviewing and evaluating the results of audit conducted by the internal auditor and

the status of implementation of recommendation of the internal audit report.

c. Reviwing the results of audit conducted by the external auditors

d. Reviewing and updating the Company‟s internal control proceedures

e. Reviewing the major agreements and contracts and the legal implications there of.

During the year 2015, the Audit Committee held 3 meeting for the following purposes:

1. Relating to Internal Audit:

a. To ensure that the function is executed effectively and objectively. We have

reviewed and discussed several Internal Audit Report prepared by the Internal

Auditors of the Company during the year under review.

b. To review the responses of the concerned departments to the recommendations

and its effective implementation of the recommendations.

2. Relating to Internal Control System:

a. To review and assess the effectiveness of the Management Control systems in

line with the operations of the Company.

3. Relating to Evaluation of Financial Statements:

a. To review and discuss the audited financial statement to be included in the

annual report with the Corporate Secretary, Internal auditor and Chief Financial

Officer

b. To assess the changes in accounting practices

c. To evaluate the Company‟s compliance with legal and regulatory provisions and

d. To review the significant adjustments and noted none resulting from the audit

e. To review the analysis of the quarterly Managements accounts

Number of Meetings attended

Members of the Committee

1. Mr Dono Iskandar Djojosubroto : 3 (three) times

2. Mr Doedy Darwin : 3 (three) times

3. Mr Deddy Sutrisno : 3 (three) times

The other invitees such as Internal Auditor, Corporate Secretary and Chief Financial officer

also attended the meeting whenever required by the Committee.

Risk Management Committee

The Risk Management Committee‟s function is to assist the Board of Commissioners in

carrying out the supervisory duty relating to the implementation of Risk Management in the

Company. The Committee can liaise with the Senior Management to have access to the

information to review the activities relating to the Risk Management.

This is Committee is headed by an Independent Commissioner Mr. Ir. Agus Tjahajana

Wirakusumah.

ASIA PACIFIC FIBERS


During the year 2015, the Committee reviewed the activities pertaining to placement of

Company‟s Property and All Risk Insurance, Throughput Insurance, Long term Procurement

Contracts.

Nomination and Remuneration Committee

This Committee is headed by an Independent Commissioner Mr. Ir. Agus Tjahajana

Wirakusumah and Mr. Bonar FH Sirait is the member.

The main tasks of this Committee during the year were to review the proposed wage increase,

Minimum Wages of the different regions as per the Government regulation, Employees

Retention Programme, Employees Training Programme.

Internal Audit

The Company‟s Internal Audit Department is headed by Mr. Yohanes Baptis Galuh Adjar

Pamungkas, ably assisted by experienced staff members. Internal audits on various functions

are conducted concurrently and the audit reports are being reviewed by the Independent

Commissioner and the Board of Directors periodically to ensure remedial actions.

Corporate Secretary

The Corporate Secretary is in charge as a liaison between the Company and Capital Market

authorities, shareholders, investors and other stakeholders. He holds the responsibility for

the supervision and coordination of the GMS, Public expose events and all corporate actions.

He is also responsible for the implementation of the agenda related to meetings of the Board

of Directors and Board of Commissioners.

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 complied with the various statutory requirements of Indonesian Corporate

Law, Capital Market Law, and Stock Exchange Regulations

In December 2015 the Company conducted the „PUBLIC EXPOSE‟ as per the regulation of IDX

and made known to the media, general public, shareholders regarding the operations of the

Company.

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”.

ASIA PACIFIC FIBERS


Some of the major ongoing activities and initiatives are given below:

1. 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.

2. 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.

3. 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.

4. Humanitarian Relief

b. Renovation.reconstruction of flood effected schools Mangkang Kulon, Kendal.

c. Relief assistance to disaster effected people in Megelang and Padang.

d. Remodelling House for disanvantaged familied in Sumberejo, kaliwungu, Kendal.

5. 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.

ASIA PACIFIC FIBERS


Organisation Structure

Annual General Meeting of Shareholders

Board of Commissioner

• ROBERT C. APPLEBY

• CHRISTOPHER ROBERT BOTSFORD

• ROBERT McCARTHY

• DONO ISKANDAR D.

• Ir. AGUS TJAHAJANA WIRAKUSUMAH

President DirectorV. RAVI SHANKAR

Director

BONAR F.H. SIRAIT

Director of SBU Filament Yarn

S. JEGATHEESAN

H.R. & I.R.Corporate

I.T.

Corporate

Finance

Internal

Audit

Corporate

Secretary

Performance

Fabric Division

Director of SBU Filament Yarn/Chemical & Fiber

Production Engineering Accounting

PPC/

Desp/

Material Control

R&D/

CTS/

Product Dev.

Admin./

Security/

Transport/

P.R.

Information

Technology

HRD

& LDMarketing

Director of SBU Chemical &

FiberPETER V. MERKLE

Independent Director

ANTONIUS W.

SUMARLIN

Audit Committee,Risk Management Committee,Nomination & Remuneration

Committee

ASIA PACIFIC FIBERS


Corporate

Information

Date of Incorporation February 15th, 1984

Listing on the Indonesia Stock Exchange 1. Public Offering in February 1991

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

Surabaya Stock Exchanges.

2. Company Listing in January 1992

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

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

3. Rights Issue Offering in October 1993

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

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

issued shared shares of the company totaled to 276,000,000.

4. Stock Splits in March 1995

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

5. Bonus issue and dividend shares in April 1995

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

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

of listed on both Jakarta and Surabaya Stock Exchanges amounted to 1,104,000,000.

6. Rights Issue Offering II in June 1996

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

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

shares listed on the Stock Exchange Houses.

7. Rights Issue Offering III in December 1997

The third Rights Issue Offering on 24 December 1997 launched a sum of

2,185,920,000 shares on Jakarta and Surabaya Stock Exchanges. Thus, after the

completion of rights Issue III, the Company‟s total number of listed shares is

4,393,920,000.

8. Debt to Equity Swap in September 2006

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

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

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

allotted 36,093,831,290 shares to unsecured creditors who have made their claim with

the Company. APF has also received approval from Department of Justice and Human

Right for the 40,340,241,250 shares to be issued to its secured creditors as per

Secured Debt Restructure Proposal (“SDRP”). APF has not allotted any shares so far as

of 31st December 2007.

9. Reverse Stock in February 2008.

ASIA PACIFIC FIBERS


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 2015 2,495,753,347

Capital Structure as 31 December 2015

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

ASIA PACIFIC FIBERS


Shareholders

Damiano Investment 51.65%

KYOA Investment Limited 6.20%

PT. Multikarsa Investama* 5.26%

Public 36.89%

* 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 Robert McCarthy

Commissioner Christopher Robert Botsford

Independent Commissioner Dono Iskandar Djojosubroto

Independent Commissioner Ir. Agus Tjahajana Wirakusumah Board of Directors

President Director Vasudevan Ravi Shankar

Director Bonar Firman Hasiholan Sirait

Director Seeniappa Jegatheesan

Director Peter Vinzenz Merkle

Director Antonius Widyatma Sumarlin

Company‟s Activities

Engaged in the production of PTA, Polymer, Polyester Fiber, Filament Yarn, and Synthetic

Fabrics.

Production Capacity as of 31 December 2015

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, Indonesia

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

ASIA PACIFIC FIBERS


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


Registered Public Accountant

Hendrawinata Eddy Siddhartha & Tanzil

(Indonesian Member firm of Kreston International)

Intiland Tower 18th Floor

Jl. Jend. Sudirman 32


Tel : (62-21) 5707997

Fax : (62-21) 5707996

REPRESENTATION LETTER

MEMBER OF BOARD OF COMMISSIONERS AND DIRECTORS

REGARDING

RESPONSIBILITY FOR ANNUAL REPORT 2015

PT. ASIA PACIFIC FIBERS TBK.

We, undersigned, certify that all the information in the Annual Report of PT Asia Pacific

Fibers Tbk for the year 2015, is complete and we are fully responsible for the accuracy of the

contents.

Such statement was made correctly.

Robert Clive Appleby

President Commissioner

Vasudevan Ravi Shankar

President Director

Cheong Kamun

Commissioner

Bonar Firman Hasiholan Sirait

Director

Christopher Robert Botsford

Commissioner

Seeniappa Jegatheesan

Director

Robert McCharty

Commissioner

Antonius Widyatma Sumarlin

Director

Agus Tjahajana Wirakusumah

Independent Commissioner

Peter Vinzenz Merkle

Director

Dono Iskandar Djojosubroto

Independent Commissioner

Consolidated Financial Statements and

Independent Auditor’s Report

PT Asia Pacific Fibers Tbk

And Its Subsidiaries

December 31, 2015 and 2014

CONTENTS

Board of Directors’ Statement

Independent Auditor’s Report

Page

Consolidated Financial Statements

Consolidated Statements of Financial Position 1

Consolidated Statements of Profit or Loss and Other Comprehensive Income 4

Consolidated Statements of Changes in Equity 5

Consolidated Statements of Cash Flows 6

Notes to the Consolidated Financial Statements 7– 132

Additional Financial Information 1 – 6

Financial Statements – Parent Entity Only Appendix

Statements of Financial Position 1

Statements of Profit or Loss and Other Comprehensive Income 2

Statemenst of Changes in Equity 3

Statements of Cash Flows 4

INDEPENDENT AUDITOR’S REPORT

No.: __/02/__/_/__

The Stockholders, Commissioners and Directors

PT ASIA PACIFIC FIBERSTbk

We have audited the accompanying consolidated financial statements of PT Asia Pacific Fibers Tbk (the

“Company”) and its subsidiaries, which comprise the consolidated statement of financial position as of

December 31, 2015, and theconsolidated statements of profit or loss and other comprehensive income, changes

in equity and cash flows for the year then ended, and a summary of significant accounting policies and other

explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of such consolidated financial statements

in accordance with Indonesian Financial Accounting Standards, and for such internal control as management

determines is necessary to enable the preparation of consolidated financial statements that are free from

material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on such consolidated financial statements based on our audit. We

conducted our audit in accordance with Standards on Auditing established by the Indonesian Institute of

Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether such consolidated financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud

or error. In making those risk assessments, the auditor consider internal control relevant to the entity’s

preparation and fair presentation of the consolidated financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by management, as well as evaluating the overall

presentation of the consolidated financial statements.

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

audit opinion.

Opinion

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

consolidated financial position of PT Asia Pacific Fibers Tbk and its subsidiaries as of December 31, 2015,

and their consolidated financial performance and cash flows for the year then ended, in accordance with

Indonesian Financial Accounting Standards.

Emphasis of matter

The accompanying consolidated financial statements have been prepared assuming the Company and its

Subsidiaries will continue as a going concern. As disclosed in Note 2 to the consolidated financial statements,

as of December 31, 2015, the Company and its Subsidiaries had capital deficiency of US$ 907,836,998, while

the current liabilities exceeded its total of the assets by US$ 851,869,943. The Company and its Subsidiaries’

current liabilities as of December 31, 2015 of US$ 957,675,525 or 85% of total current liabilities represent the

secured debts. On October 22, 2014, the Supreme Court has been declared the bankruptcy of PT Wismakarya

Prasetya which was producing the utility requirements of the Company. However, the Court has decided to

keep PT Wismakarya Prasetya as a going concern and accordingly the assets of PT Wismakarya Prasetya have

been taken on rental basis by the Company for the purpose of producing its electricity and steam

requirement.During the liquidation process of the curator, in early 2014, the Company and its Subsidiaries has

notified and filed the amount of other receivables amounting to US$ 34,267,327 (Note 7). In addition to that,

as of the date of this report, one of the Company’s secured creditors is PT Perusahaan Pengelola Assets (PPA)

(26%) has not yet given its approval on the restructuring plan proposed by the Company. However, Damiano

Investments BV., Netherland, majority shareholder of the Company (51.65% ownership) and majority secured

debt holder (69%) provided capital expenditure facility of US$ 22,070,000 and letter of credit facility of US$

88,250,457 for raw materials procurement. The Company’s management also continues to exert effort and

expects to obtain the resolution of the secured debt restructuring in order for the Company to obtain working

capital from banks. The consolidated financial statements do not include adjustments that might result from

the outcome of this uncertainty.

Other matter

Our audit of the accompanying consolidated financial statements of the Company and its Subsidiaries as of

December 31, 2015 and for the year then ended was performed for the purpose of forming an opinion on such

consolidated financial statements taken as a whole. The accompanying financial information of PT Asia Pacific

Fibers Tbk (parent entity only), which comprises the statement of financial position as of December 31, 2015,

and the statements of comprehensive income, changes in equity and cash flows for the year then ended

(collectively referred to as the “Parent Entity Financial Information”), which is presented as a supplementary

information to the accompanying consolidated financial statements, is presented for the purpose of additional

analysis and is not a required part of the accompanying consolidated financial statements under Indonesian

Financial Accounting Standards. The Parent Entity Financial Information is the responsibility of management

and was derived from and relates directly to the underlying accounting and other records used to prepare the

accompanying consolidated financial statements. The Parent Entity Financial Information has been subjected

to the auditing procedures applied in the audit of the accompanying consolidated financial statements in

accordance with Standards on Auditing established by the Indonesian Institute of Certified Public Accountants.

In our opinion, the Parent Entity Financial Information is fairly stated, in all material respects, in relation to

the accompanying consolidated financial statements taken as a whole.

HENDRAWINATA EDDY SIDDHARTA& TANZIL

Welly Adrianto, CPA

No. Ijin Akuntan Publik. AP. 0060

Jakarta, March 14, 2016

PT ASIA PACIFIC FIBERS Tbk

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of December 31, 2015, December 31, 2014 and January 1, 2014

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

of the consolidated financial statements

1

Notes

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$ ASSETS

CURRENT ASSETS Cash and cash equivalents 3f,g,5 2,657,148 6,184,094 5,101,421 Trade receivables, net of allowance for

impairment of US$ 15,657,945 in 2015, 2014

and 2013

Third parties 3f,h,j,6 31,567,047 41,190,159 51,867,585

Related parties 3f,h,j,6 19,479,699 21,601,483 22,046,308 Other receivables, net of allowance for

impairment of US$ 67,637,756 in 2015 and 2014,

and US$ 36,721,575 in 2013

Third parties 3f,h,j,7 2,787,973 3,426,117 33,854,362 Other current financial assets 3f,h,j,8 5,969,375 8,693,988 9,158,563 Inventories 3k,9 61,164,596 75,507,062 86,227,237 Purchase advances Third parties 10 6,076,917 2,338,194 6,862,883 Related party 10 – 56,031 54,799 Prepaid taxes 3v,27a 11,419,541 15,902,785 17,484,492 Prepaid expenses 3l,11 2,128,943 2,520,486 1,691,803

Total Current Assets 143,251,239 177,420,399 234,349,453

NON–CURRENT ASSETS Non-trade receivables from related parties, net

of allowance for impairment of

US$ 111,992,653 in 2015, 2014 and 2013 3f,h,j,12 19,552,932 23,692,655 24,836,407 Other non-current financial assets 3f,h,j,13 991,274 1,022,539 1,029,093 Property, plant and equipment, net of

accumulated depreciation of US$ 1,709,106,418

in 2015, US$ 1,703,166,009 in 2014 and

US$ 1,714,202,396 in 2013

3m,n,p,14

61,876,082

61,365,864

82,224,751

Intangible Assets 3o,p,15 113,590 119,866 12,087 Deferred tax assets 3v,27d 6,710,119 11,750,587 9,766,081

Total Non–Current Assets 89,243,997 97,951,511 117,868,419

TOTAL ASSETS 232,495,236 275,371,910 352,217,872



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)




2

Notes

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

LIABILITIES AND EQUITY

(CAPITAL DEFICIENCY)

CURRENT LIABILITIES

Trade payables

Third parties 3r,16 12,241,858 25,584,407 33,115,314

Accrued expenses 3r,17 50,446,641 49,969,699 36,967,461

Taxes payable 3v,27b 149,767 159,621 321,900

Bank Loans 3r,18 88,135,716 88,250,457 87,910,672

Secured Debts 3r,19 945,081,879 957,675,525 965,681,557

Short – term employee benefits liabilities 3u,25 366,276 433,562 –

Current portion of long-term liabilities:

Credit financing payables 3q,r,22 41,379 56,131 30,572

Other short-term financial liabilities 3r,23 5,357,542 4,716,794 6,323,597

Total Current Liabilities 1,101,821,058 1,126,846,196 1,130,351,073

NON–CURRENT LIABILITIES

Borrowing from Other Financial Institutions:

Unsecured Debts and Notes Payable 3r,20 24,032,636 23,082,193 22,624,894

Working capital loans 3r,21 22,070,000 22,070,000 17,340,000 )

Credit financing payables 3q,r,22 5,940 47,253 27,132

Deferred revenues 3t,24 212,526 225,089 237,652

Long-term employee benefits liabilities 3u,26 9,759,801 12,125,149 9,975,562

Total Non–Current Liabilities 56,080,903 57,549,684 50,205,240

Total Liabilities 1,157,901,961 1,184,395,880 1,180,556,313



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)


The accompanying notes to consolidated financial statements are an integral part


3

Notes

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

LIABILITIES AND EQUITY

(CAPITAL 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 2015, 2014 and 2013

Issued and paid up 219,696,000 Series A and

2,276,057,347 Series C in 2015, 2014 and 2013 28 635,689,316 635,689,316 635,689,316

Additional paid-in capital 3w,29 624,323,168 624,323,168 624,323,168

Retained earnings (Accumulated deficit)

Appropriated 30 2,345,301 2,345,301 2,345,301

Unappropriated (2,187,764,510 ) (2,171,381,755 ) (2,090,696,226 )

Total Capital Deficiency (925,406,725 ) (909,023,970 ) (828,338,441 )

TOTAL LIABILITIES AND

EQUITY (CAPITAL DEFICIENCY) 232,495,236 275,371,910 352,217,872



CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

For the years ended December 31, 2015 and 2014



4

Notes

2 0 1 5

2 0 1 4

(As restated)

US$ US$

REVENUES

Net sales 3x,34 387,053,770 493,567,021

Other operating revenues 3x,35 3,002,226 4,414,640

Total revenues 390,055,996 497,981,661

COST OF GOODS SOLD 3x,36 (381,902,793 ) (511,808,609 )

GROSS PROFIT (LOSS) 8,153,203 (13,826,948 )

Impairment of other receivables 3j,7 – (34,267,327 )

General and administrative expenses 3x,39 (14,399,308 ) (15,028,722 )

Finance costs 3x,40 (7,863,850 ) (14,848,320 )

Selling expenses 3x,38 (10,786,487 ) (12,325,493 )

Gain on foreign exchange transactions, net 3c 11,236,898 4,970,881

Insurance claim settlement, net 3x,33 1,703,128 3,772,855

Miscellaneous income, net 3x,41 309,069 63,134

(19,800,550 ) (67,662,992 )

LOSS BEFORE INCOME TAX (11,647,347 ) (81,489,940 )

TAX (EXPENSE) INCOME 3v

Current period 27c (1,566,830 ) –

Deferred 27d (4,572,495 ) 1,689,482

Total tax (expense) income 27e (6,139,325 ) 1,689,482

TOTAL LOSS FOR THE YEAR (17,786,672 ) (79,800,458 )

OTHER COMPREHENSIVE INCOME, NET AFTER TAX

Items that will not be reclassified to profit or loss:

Remeasurement of post employment benefit

obligations 1,871,890 (1,180,095 )

Related income tax (expense) benefit (467,973 ) 295,024

Items that will be reclassified to profit on loss – –

Total Other Comprehensive Loss, net of tax 1,403,917 (885,071 ) )

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (16,382,755 ) (80,685,529 )

Total Net Loss Attributable to the Owners of the Company (17,786,672 ) (79,800,458 )

Total Comprehensive Loss Attributable to the Owners of the Company (16,382,755 ) (80,685,529 )

EARNING (LOSS) PER SHARE: 3y

Basic 31 (0.01 ) (0.03 )

Diluted 31 (0.01 ) (0.03 )



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY




5

Retained Earnings

(Accumulated deficit)

Notes

Share Capital

Additional

paid-in capital

Appropriated

Unappropriated

Total Equity

(Capital

Deficiency)

US$ US$ US$ US$ US$

Balance as of December 31, 2013

(as previously reported)

635,689,316

624,323,168

2,345,301

(2,090,258,565

)

(827,900,780

)

Adjustment on adoption of PSAK 24

(revised 2013) 50 – – – (437,661 ) (437,661 )

Balance as of January 31, 2013

(as restated)

635,689,316

624,323,168

2,345,301

(2,090,696,226

)

(828,338,441

)

Total loss for the year – – – (79,800,458 ) (79,800,458 )

Other comprehensive income, net after tax – – – (885,071 ) (885,071 )

Balance as of December 31, 2014 635,689,316 624,323,168 2,345,301 (2,171,381,755 ) (909,023,970 )


Other comprehensive income, net after tax – – – 1,403,917 1,403,917




CONSOLIDATED STATEMENTS OF CASH FLOWS




6

Notes 2 0 1 5 2 0 1 4

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipt from customers 401,800,894 538,453,200

Payment to suppliers (288,202,470 ) (420,652,470 )

Payment of salaries (8,702,467 ) (16,024,232 )

Other operating cash payments, net (96,818,606 ) (91,616,880 )

Cash provided by operations 8,077,351 10,159,618

Interest received 7,40 22,622 23,975

Interest expense and bank charges paid 17,40 (7,221,113 ) (5,364,680 )

Cash receipt from insurance claim settlement 7,33 1,703,128 3,583,335

Payment of income tax 27 (4,475,260 ) (5,426,618 )

Refund of income tax 27 4,747,807 4,911,387

Net Cash Provided By Operating Activities 2,854,535 7,887,017

CASH FLOWS FROM INVESTING ACTIVITIES

Payment to acquire property, plant and equipment 14,22 (6,450,627 ) (11,225,409 )

Payment to acquire intangible assets 15 – (112,182 )

Net Cash Used In Investing Activities (6,450,627 ) (11,337,591 )

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt of working capital loans 21 – 4,730,000

Payment of working capital loans 21 (114,741 ) –

Payment of credit financing payables 22 (56,065 ) (68,023 )

Net Cash Provided By (Used In) Financing Activities (170,806 ) 4,661,977

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS

(3,766,898

)

1,211,403

EFFECT OF FOREIGN EXCHANGE RATE 239,952 (128,730 )

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR

5

6,184,094

5,101,421


AT END OF YEAR

5

2,657,148

6,184,094



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


7

1. GENERAL

a. Establishment and General Information

PT Asia Pacific Fibers Tbk (“the Company”) is engaged in 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, such

as in 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 of year 1968 as amended by Law No. 12 of 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 in

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 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 Company’s Articles of Association have been amended 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

decision letter No. AHU-0018443.AH.01.09.Tahun 2012 dated February 29, 2012.

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. 30 dated July 7, 2015 of

Aryanti Artisari, S.H., M.Kn., notary in Jakarta to adjust the Company’s Article of Association with

the regulation from Otoritas Jasa Keuangan. The deed of establishment was approved by the Minister

of Justice of Republic of Indonesia based on decision letter No. AHU-AH.01.03-0954603.Tahun

2015 dated July 31, 2015.

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.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


8

1. GENERAL (Continued)

a. Establishment and General 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 effectively 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 effectively 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


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

On May 20, 1996, the Company obtained the notice of effectively 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 effectively from the Chairman of

BAPEPAM, in his decision letter 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

cannot be traded for 1 (one) year. Further in October 2007, the new Company’s shares were

traded.





10



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



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). The Company has sent a letter No. 068/APF-CS/VI/2014 dated June 25,

2014 and No. 071/APF-CS/VII/2014 dated July 7, 2014 to Otoritas Jasa Keuangan (OJK)

regarding the cancelation of MESOP implementation due to the debt restructuring is not

completed so the Company’s market price is decreasing. Based on the Extraordinary General

Stockholders Meeting (RUPSLB) held on June 16, 2015 notarial deed No. 49 dated June 16,

2015 of Aryanti Artisari S.H., M.Kn, the stockholders approved the cancelation of MESOP

implementation.

c. 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 5 2 0 1 4

% 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) have

been deconsolidated.

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 additional paid-in capital in the consolidated statements of

financial position (Note 29).





12


c. Subsidiaries (Continued)

There were no transactions between the Company and Polysindo (Maurutius) Ltd and Polysindo

International Finance Company BV during 2015 and 2014. 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. Boards of Commissioners and Directors, Audit Committee and Employees

The composition of board of commissioners, directors and audit committee (key management)

of the Company as of December 31, 2015 is based on the notarial deed No. 50 dated June 16,

2015 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,

2015 and 2014 are as follows:

2 0 1 5 2 0 1 4

Board of Commissioners:

President Commissioner : Mr Robert Clive Appleby Mr. Robert Clive Appleby

Independent Commissioners : Mr. Ir. Agus Tjahajana

Wirakusumah

Mr. Dono Iskandar Djojosubroto

Mr. Dono Iskandar Djojosubroto 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

Independent Directors : Mr. Bonar Firman Hasiholan

Sirait

Mr. Bonar Firman Hasiholan

Sirait

Mr. Antonius Widyatma

Sumarlin

Mr. Antonius Widyatma

Sumarlin

Directors : Mr. Seeniappa Jegatheesan Mr. Seeniappa Jegatheesan

Mr. Peter Vinzenz Merkle Mr. Peter Vinzenz Merkle





13


d. Boards of Commissioners and Directors, Audit Committee and Employees (Continued)

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.

The members of the Company’s Audit Committee as of December 31, 2015 are as follows:

Chairman : Mr. Dono Iskandar Djojosubroto

Member : Mr. Doedy Darwin

Mr. Deddy Sutrisno

The Company’s corporate secretary as of December 31, 2015 and 2014 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, 2015, the Company had 3,062 permanent employees (2014: 3,260

permanent employees). And as at December 31, 2015 and 2014, the Subsidiaries do not have

permanent employees.

e. Approval and Authorization for Issuance of Consolidated Financial Statements

The consolidated financial statements of the Company as of December 31, 2015 and for the year

then ended was approved and authorized for issuance by the Board of Directors on March 14, 2016.

2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS

a. Going Concern

The global polyester chain continued to reel under relentless pressure created by a combination of

excess capacity throughout the chain and weaker demand growth in the key market of China. PTA

margins that started sliding in 2012 remained below cash cost levels in 2015 also. Cotton prices also

remained depressed on the back of huge global inventory, and steps taken by China to release cotton

from their strategic reserves.





14

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

a. Going Concern (Continued)

Overall growth of polyester production continues to be stagnant at 5.27% in 2015 with the operating

rates remain at 71.20% during the year. Average polymer utilization rates have also remained low at

just 74.7%. PTA witnessed a huge capacity addition, disproportionate to demand increase during

2013 – 15. During these 3 years, PTA capacity expanded by about 20 Mil MT, against a demand

expansion of only 7.8 Mil MT. During 2015, capacity increased by 8.3 MT against a demand

expansion of only 2.3 Mil MT. This mismatch brought the global PTA operating rates down from

84% in 2012 to 72% in 2015. PTA spreads dropped to less than USD 70/MT, much below cash cost

of most old capacity.

These factors impacted the performance of the polyester industry globally. Slowdown in China, key

textile market and uncertainties due to commodity price crash, and concerns in US due to withdrawal

of QE measures affected the global textile trade, dampening the demand outlook. Moreover, huge

capacity additions in PTA, Polyester Fiber and Polyester Filament led to lower worldwide operating

rates, putting further downward pressure on margins.

The Company despite the market conditions, continue to operate its plant to its near full capacity

supported by its strong customer base and the sustained demand from domestic market. Damiano

Investments BV., Netherland continue to provide the working capital facility of US$ 92 million on

Letter of Credit limit through Deutsche Bank, Hong Kong.

Paraxylene supply position has remained soft through the year with additional capacities became

operational, despite demand from Polyester chain increased marginally. The operating rates dropped

to 79.8% from 80.9% for the previous year and continued to remain relatively better performer in

the chain. Contrary to the last year assessment that PTA market would bottom out in 2015, the

surrounding environments have pulled PTA producers into a deeper trouble and prospect for 2016

is not exactly bright. Global operating rates have come down to 72.7% in 2015 as China struggled

to keep 70% operation with as much as 10 million tonnes of uneconomical capacity was idles in

China. The commodity price corrections triggered by the steep fall in crude prices and volatility have

pushed down the Polyester chain prices and margins significantly. Hence the sales revenue for the

year 2015 has dropped significantly to US$ 385 million as compared to US$ 494 million for the

previous year. Domestic market remained sluggish through out the year with downstream activities

slowed down on account of fall in retail consumption. Hence the production was curtailed in view

of lack of demand for certain type of products. Overall drop in production is 6.6% over 2014. The

drop in sales is mainly attributed to fall in selling price and volume by 6% and 17% respectively.

Due to sluggish retail market conditions, Sales of Performance Fabrics division of the Company has

marginally decreased to US$ 7.74 million as compared to US$ 8.80 million for the previous year.





15



These adverse market conditions and continuous drop in material prices driven by the sharp fall in

crude prices affected Company’s profitability significantly and also led to write down in inventory

valuation in 2015. Another major factor impacted the performance was operational loss of PTA plant

as the PTA spread hit the bottom during the year and our PTA conversion cost was high as compared

to the new plants with latest Technology. These adverse conditions and the continuous drop in FG

prices have severely affected the profitability of the Company and led to an EBITDA loss of US$

6.60 million as compared to EBITDA loss of US$ 4.86 million for the previous year. In the absence

of EBITDA earnings, cash flow position of the Company was under severe strain leading to

postponement of certain maintenance projects.

Due to the tight cash flow situation caused by the losses, the Company could not service of interest

to its unsecured creditors (New Notes) fully during the year. Interest amounts due for all the 4 (four)

quarters to unsecured creditors were capitalized as per the approval from the majority of the

creditors. Prudent working capital management and the support from its majority shareholders,

Damiano investment BV, in terms of permitting TR facility has helped the Company to tide over

tough phase and operate the plants at optimum capacity.

In view of the unsustainability of PTA operation under the current trading conditions, the Company

has taken a strategic decision to suspend the operation of its PTA plant, which needs to be revamped

to improve its cost efficiency at par with the new plants. The Company will outsource its PTA

requirement and will continue to operate its Polymer, Polyester Staple Fiber, Fleece and Polyester

Filament Yarn plants as before. Company’s customers will not be affected by this change. The

suspension of PTA plant will not have any impact on Company’s sales revenue going forward. These

actions should help Company further to strengthen its product offerings in its core product areas and

make the Company far more competitive to face the existing difficult market condition.

While the years 2015 and 2014 were indeed witnessing the bottom of the Polyester cycle, the

emerging trend and the more realistic investment profile suggests that the Polyester markets globally

are now on a slow but a sure path of recovery. Polyester continues to remain a very robust

commodity, unlike many others, despite the fluctuations in the margins.

Polyester chain margins, including PTA, are expected to stage a moderate recovery in 2016 followed

by a handsome growth beyond 2017 with the on going rationalization of PTA and Polyester

capacities in China and elsewhere, stability in Oil prices and feeds stock supply situation. The

anticipated growth in demand for textiles, apparel and significant growth in performance fabrics in

Asia will further support the growth of Polyester sector.

The Company with its newly built capabilities to increase the volume of specialty products (Colored

yarns/PBT) for automotive/ home textiles applications and its strategy to source PTA at competitive

price formula, will be able to face the competition and sustain its market share besides making entry

into new market segments. This will in turn enable the company to sustain and improve its financial

performance on a longer term.





16



The Company has submitted a revised Secured Debt Restructuring Plan (SDRP) to PT Perusahaan

Pengelola Asset (PPA) and Ministry of Finance in June 2015 updated with the current conditions of

the Company. The major terms of the revised Secured Debt Restructuring Plan (SDRP) are as

follows:

New restructured secured claims is USD 115 Million and 8,041,483,751 shares representing

72.50% of the expanded quantity.

The allocation of new secured debt is based on the principal value of debt as at March 31, 2015

(Non –US$ debts are converted into US$ at the BI exchange rates as of March 31, 2015.

Proposed restructuring date was June 2015.

All existing secured financial indebtedness of the Company held by secured creditors that sign

this SDRP is to be restructured into:

a) New 9 - Year (1% Coupon) Notes (the “New Notes”– A & B) with revised principal amounts

and terms as described herein. New Notes issued for secured claims will retain all existing

security. These will be issued to all secured creditors other than MoF.

b) New 38 - Year (Zero Coupon) Notes (the “New Notes – C”) with the principal amounts

equivalent to 100% of the original debt and terms as described herein. New Notes issued for

secured claims will retain all existing security.

Interest shall be payable on the New Notes-A 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

0.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%





17



Amortization of New Notes A and B: Principal repayments shall be made at the end of each

12-month period beginning on the Third 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% 0.0% 0.0% 5.0% 17.5% 17.5% 17.5% 20.0% 22.5%

Amortization of New Notes C: Principal repayments shall be made at the end of each 12-month

period beginning on the Third 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 1 Year

2-3

Year

4-10

Year

11-37

Year

38

0.10% 0.20% 0.50% 1.00% 69%

The Company will issue further shares of 8,596,483,751 representing 77.50% of the post diluted

shares, taking into account the MESOP shares issued by the Company in 2012.

Until March 2016, the Company is actively in negotiation and still waiting the response from PT

Perusahaan Pengelola Aset (PPA) regarding the new SDRP. Since no restructure agreement has been

reached between the Company and the secured creditors, the secured debts continue to remain

overdue. Upon completion of this restructuring, and the consequent reorganization of its 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 has entered 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 2015 showed the

following:

Total comprehensive loss amounting to US$ 16,382,755.

Negative working capital amounting to US$ 958,569,819.

Capital deficiency amounting to US$ 925,406,725.





18



In 2015, the production volumes and the capacity utilization of Company’s facilities in Karawang

and Semarang dropped due to curtailment of production owing to market conditions. PTA plant at

Karawang was shut down temporarily from November 2015 in view of the trading conditions as

explained above and its PTA requirement is outsourced externally. The over all capacity utilization

was, however, maintained around 90% in both the facilities.

Subsidiary’s Operations (PT Texmaco Jaya Tbk):

Consequent to declaration of bankruptcy of PT Texmaco Jaya by the commercial court of Jakarta on

August 19, 2011 as per the court order No. 10/PKPU/2010/PN.NIAGA.JKT.PST j.o

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 has determined US dollar

as its functional currency as predominant financial transaction such as Sales, Purchases, Pricing, are

transacted in dollar currency. Hence the Company and its Subsidiaries has chosen to prepare and

present its consolidated financial statements in US Dollar currency effective January 2012. The

consolidated financial statements for the year 2015 and 2014 was prepared in accordance with the

guidelines provided under PSAK 10 paragraph 27-34 and paragraph 61-62.

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 2014 through its Third Loan Agreement and Fourth Loan Agreement.





19


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 2014 of US$ 4,411,563,

thus the total amount is US$ 23,082,193.

The Company has also submitted restructuring proposal to the secured creditors (SDRP). In June

2015, 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

paid-in capital. 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 2015, the Company sought and got the approval of its Unsecured New Note Holders for

the extension of its maturity from February 2015 to February 2018. The details are as below:

Redemption Date

Redemption Table (Revised for PIK)

Subject to PIK Outstanding Redemption Redemption

% Request Amount Amount

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

to February 15, 2015 US$ 4,647,514.00 US$ 23,318,144.00 0.00%

February 15, 2018 US$ 22,152,237.00 (US$ 1,165,907.00) 5.00%

February 15, 2019 US$ 18,071,562.00 (US$ 4,080,675.00) 17.50%

February 15, 2020 US$ 13,990,887.00 (US$ 4,080,675.00) 17.50%

February 15, 2021 US$ 9,910,212.00 (US$ 4,080,675.00) 17.50%

February 15, 2022 US$ 5,246,583.00 (US$ 4,663,629.00) 20.00%

February 15, 2023 US$ 0.00 (US$ 5,246,583.00) 22.50%

US$ 23,318,144.00 US$ 23,318,144.00 100.00%





20


c. Economic Condition

Indonesia registered a GDP growth 4.79% in 2015, lowest in six years, amidst declining exports,

weakened consumer sentiments, unfavorable investment climate and weakening global prices of key

commodities coupled with continued global economic uncertainties. The main drag came from the

mining sector followed by the delayed spending by the Government.

Exports declined to US$ 150.25 billion in 2015, as compared to the previous year realization of US$

175.98 billion in 2014 recording an overall dip of 17.66%, primarily triggered by low prices for key

export commodities such as coal, metal minerals, rubber and crude palm oil. Following the

downward trend in exports, imports also plunged by 16.02% to US$ 142.74 billion as compared US$

178.18 billion, not only due to lower commodity prices, but also lower demand for capital goods,

raw materials and intermediary inputs, driven by slowdown in manufacturing activities. Crude oil

prices steeply fallen during the year and reached a low of US$ 35 per barrel (WTI) in December

2015 from US$ 60 per barrel in January 2015. The fall in crude prices continued up to 1st quarter of

2016 and hit a low of US$ 26/per barrel in February 2016 before recovering to US$ 37 in 2nd week

of March 2016. The high volatility in the crude oil price coupled with the economic slowdown in

China heavily impacted the global commodity prices. Polyester chain prices have also been hit badly

due to this unstability price movement in oil/commodity.

The inflation in 2015 was moderate at 3.35% well below the BI targeted rate of 4% as compared to

8.38% for the previous year. The drop in oil prices and the prices of key commodities are the primary

reason for the drop in inflation. Amid global economic slow down, stock market meltdown and

capital inflow, Indonesia was able to weather the onslaught with moderate impact on the economy

as compared to other developing countries.

Indonesia trade balance moved back into surplus in 2015 of US$ 7,510,000, after three years of

deficit, but the turnaround mostly showed how sluggish the economy has been. The current account

deficit (CAD) also narrowed down to US$ 17.50 billion in 2015, 35% improvement over 2014

deficit, which stood at US$ 27 billion.

Consequent to the devaluation of Yuan, all regional currencies weakened sharply and Indonesia

Rupiah fell below Rp 14,700 per US Dollar in September 2015. It has then recovered slowly and

hovering around Rp 13,100 per US Dollar in the 2nd week of March 2016. Indonesian currency

remained resilient despite the expectations of weakened Rupiah. This is backed by the relative

stability of the Indonesian economy and better prospects going forward. BI has reduced lowered its

key interest rate (BI Rate) twice during the period from January 1, 2015 until February 18, 2015 by

75 basis point (from 7.75% to 7.00%) in consistent with the macro-economic stability of the Country.





21


c. Economic Condition (Continued)

The economic growth momentum began in the 3rd quarter of 2015 continues in the 1st quarter of

2016 despite of high government spending. The economic outlook for Indonesia in 2016 remains

cautiously positive with lower inflation and a smaller current account deficit, which may put

Indonesia in a better position to rebound. The economic stimulus policy packages aimed at

promoting investment and domestic production is expected to boost the supply side economy. On

the demand side, household consumption is expected to rise due to lower inflation supported by the

hike in salaries; external demand is also seen improving to boost the exports. GDP growth is

expected maintain at 5.4% in 2016 on the back of the acceleration of the domestic industrial activities

and boost in exports.

Domestic manufacturing sector is expected to recover with the help of series of stimulus relief

packages announced by the government to boost the battering domestic manufacturing industries,

especially to TPT sector to improve its competitiveness. These packages are aimed at rationalizing

the energy prices, deferral of 40% of the electricity charges for on year to improve cash flow and

various other incentives to protect the domestic industries. The impact of capital injections provided

in 2015 to selected state-owned enterprises (SOEs) dealing with infrastructure development is

expected yield results in 2016. In addition, the government has introduced a number of fiscal

measures to support investment and export. Further, the restrictions imposed on fabric imports and

the government’s efforts to curb illegal import of textile goods are expected to revive the downstream

textile sector and the domestic market to a great extent.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Company and its subsidiaries adopted in preparation of the

consolidated financial statements are set below:

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”), issued by the Board of Financial Accounting standard of the Indonesia Institute

of Accountant (“DSAK – IAI”), and the regulations and guidelines for financial statement

presentation established by Financial Service Authority (“OJK” for merly BAPEPAM – LK) No.

VIII.G7 regarding “Emiten or Public Company’s Financial Statements Presentation and Disclosure

Guidelines as included in the appendix of the Decision Degree of the chairman of BAPEPAM – LK

No KEP-347/BL/2012 dated June 25, 2012.





22

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

a. Basis of Preparation of the Consolidated Financial Statements (Continued)

The consolidated financial statements for the years ended December 31, 2015 and 2014 have been

prepared in accordance with PSAK No. 1 (Revised 2013), “Presentation of Financial Statements”.

In accordance with PSAK No. 1 (Revised 2013), the consolidated statement of profit or loss and

other 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 consolidated 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

maturities 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. Refer to Note 3c for the information on the functional currency.

The Company has received approval from Bank Indonesia with letter No. 17/1192/DKSP dated

August 11, 2015 for translating using US Dollar (“US$”) as currency of transaction until July 2016

in relation to Bank Indonesia rule No. 17/3/PBI/2015.





23


b. Principles of Consolidation

(a) Subsidiaries

Subsidiaries are all entities (including structured entities) which the Company has control. The

Company controls an entity when the Company is exposed to, or has rights to, variable returns

from its involvement with the entity and has the ability to affect those returns through its power

over the entity. Subsidiaries are fully consolidated from the date on which control is transferred

to the Company. They are de-consolidated from the date on which than control ceases.

The Company applies the acquisition method to account for business combinations. The

consideration transferred for the acquisition of a subsidiary is the fair value of the assets

transferred, the liabilities incurred to the former owners of the acquireee and the equity interests

issued by the Company. The consideration transferred includes the fair value of any asset or

liability resulting from a contingent consideration arrangement. Identifiable assets acquired and

liabilities and contingent liabilities assumed in a business combination are measured initially at

their fair values at the acquisition date.

The Company recognises any non – controlling interest in the acquiree on an acquisition-by-

acquisition basis, either at fair value or at the non – controlling interest’s proportionate share of

the acquiree’s net assets. Non – controlling interest is reported as equity in the consolidated

statement of financial position, separate from the owner of the parent’s equity.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, at the acquisition date fair value of the

acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the

acquisition date through profit or loss.

Any contingent consideration to be transferred by the Company is recognized at fair value at the

acquisition date. Subsequent changes to the fair value of the contingent consideration that is

deemed to be an asset or liability is recognized in accordance with PSAK 55 (Revised 2011)

“Financial Instrument: Recognition and Measurement” in the consolidated statements of profit

or loss and other comprehensive income. Contingent consideration that is classified as equity is

not re-measured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred the amount of any non – controlling interest in the

acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over

the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of

consideration transferred, non-controlling interest recognised and previously held interest

measured is less than the fair value of the net assets of the subsidiary acquired in the case of a

bargain purchase, the difference is recognised directly in the statement of profit or loss and other

comprehensive income.





24


b. Principles of Consolidation (Continued)

(a) Subsidiaries

Inter – company transactions, balances and unrealised gains on transactions between group

companies are eliminated. Unrealised losses are also eliminated. When necessary amounts

reported by subsidiaries have been adjusted to conform to the Company’s accounting policies.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for

as equity transactions. The difference between the fair value of any consideration paid and the

relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity

and attributable to owners of the Company. Gains or losses on disposals to non-controlling

interests are also recorded in equity.

(c) Disposal of subsidiaries

When the Company ceases to have control, any retained interest in the entity is re-measured to

its fair value at the date when the control is lost, with the change in carrying amount recognized

in the consolidated statements of profit or loss and other comprehensive income. The fair value

is the initial carrying amount for the purposes of subsequently accounting for the retained interest

as an associate, joint venture or financial asset.

In addition, any amounts previously recognized in other comprehensive income in respect of

that entity are accounted for as if the Company had directly disposed of the related assets or

liabilities. This may mean that amounts previously recognized in other comprehensive income

are reclassified to consolidated profit or loss.

c. Foreign Currency Transaction and Balances

Functional and presentation currency

Items included in the consolidated 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.





25


c. Foreign Currency Transaction and Balances (Continued)

Transactions and balances

Foreign currency transactions are translated into US Dollar using the exchange rates prevailing

at the dates of the transactions. At each reporting date, monetary assets and liabilities

denominated in foreign currencies are translated into US Dollar using the closing exchange rate.

Exchange rate used as benchmark is the rate which is issued by Bank Indonesia.

Foreign exchange gains and losses resulting from the settlement of such transactions and from

the translation at period-end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognized in the consolidated statements of profit or loss and other

comprehensive income.

Foreign currency 2 0 1 5 2 0 1 4

Rp Rp

US$ 1 13,795 12,440

JPY 1 115 104

CHF 1 13,951 12,583

SGD 1 9,751 9,422

GBP 1 20,451 19,370

EUR 1 15,070 15,133

SEK 1 1,639 1,607

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.





26


d. Transactions with Related Parties (Continued)

The entity is a post-employment defined benefit plan for the benefit of employees of either

the reporting entity or an entity related to the reporting entity. If the reporting entity is itself

such a plan, the sponsoring employers are also related to the reporting entity.

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

A person identified in (i) has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).

All significant transactions and balances with related parties, whether or not conducted under normal

terms and conditions similar to those with third parties are disclosed in Note 42.

e. New and Revised Accounting Standards and Interpretations

The following new and revised accounting standards have been issued by the Indonesian Financial

Accounting Standards Board that are relevent to the Company’s financial statements for periods

beginning on or after January 1, 2015:

PSAK 1 (Revised 2013) : Presentation of Financial Statements

PSAK 24 (Revised 2013) : Employee Benefits

PSAK 46 (Revised 2014) : Income Taxes

PSAK 48 (Revised 2014) : Impairment

PSAK 50 (Revised 2014) : Financial Instrument – Presentation

PSAK 55 (Revised 2014) : Financial Instrument – Recognition and Measurement

PSAK 60 (Revised 2014) : Financial Instrument – Disclosure

PSAK 68 : Fair Value measurement

Discussed below are the provisions stated in the new and revised accounting standards:

(1) PSAK 1 (Revised 2013): “Presentation of financial statements” adopted from IAS 1

This PSAK required presentation of the comparative information and change the entity of

items presented in other comprehensive income, whereby items that can be reclassified to

profit or loss are to be presented separately from items that will never be reclassified to profit

or loss.

(2) PSAK 24 (Revised 2013): “Employee Benefit” adopted IAS 19

This PSAK removed the coridor mechanism and contingent liability disclosure and requires

only simple classifications and disclosures. This PSAK provides among others:

(1) the elimination of the “coridor approach” permitted under the previous version, and

(2) significant changes in the recognition presentation and disclosure of post employment

benefit which, among others, are as follows:

i. Actuarial gains and losses are now required to be recognized in other comprehensive

income (OCI) and excluded permanently from profit or loss.

ii. All past service costs will be recognized at the earlier of when the amendment/

curtailment occurs or when the entity recognized related restructuring or termination

costs. Unvested past service costs can no longer be defined and recognized over the

future vesting period; and





27


e. New and Revised Accounting Standards and Interpretations (Continued)

(2) PSAK 24 (Revised 2013): “Employee Benefit” adopted IAS 19 (Continued)

iii. The interest cost and expected return on plan asset is replaced with a net interest

amount that is calculated by applying the discount rate to the net defined benefit

liability (asset).

(3) PSAK 46 (Revised 2014): “Income Taxes”, adopted from IAS 12.

This PSAK provides additional discussion on deferred tax asset or deferred tax liability arising

from a non-depreciable asset measured using the revaluation model and from investment

property that is measured using the fair value model. In addition, PSAK No. 46 (2014)

removed the final tax arrangements from its scope, as well as the special arrangements related

to the recognition of tax fine contained in the Tax Assessment. As consequence, final tax

which previously presented as part of “Income Tax Expense – Net” was reclassified to become

part of “Cost of Sales and Direct Costs”.

(4) PSAK 48 (Revised 2014): “Impairment”, adopted from IAS 36.

This PSAK requires additional disclosures for each individual asset (including goodwill) or a

cash-generating unit, for which an impairment loss has been recognized or reversed during the

period.

(5) PSAK 50 (Revised 2014): “Financial Instruments: Presentation”, adopted from IAS 32.

This PSAK provides guidance on applying the criteria on legally enforceable right to set-off

recognized amounts and to settle on a net basis.

(6) PSAK 55 (Revised 2014): “Financial Instruments: Recognition and Measurement”, adopted

from IAS 39.

This PSAK discusses the criteria of non-expiration or termination of hedging instruments and

the accounting for financial instruments at the measurement date and after initial recognition.

(7) PSAK No 60 (Revised 2014): “Financial Instruments: Disclosures”, adopted from IFRS 7.

This PSAK discusses offsetting disclosures with quantitive and qualitative information, and

disclosures on transfers of financial instruments from one classification to another.

(8) PSAK No 67: “Fair Value Measurement”, adopted from IFRS 13.

This PSAK provides guidance on how to measure fair value when fair value is required or

permitted.





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e. New and Revised Accounting Standards and Interpretations (Continued)

The following new or revised accounting standards and interpretations have been issued by the Indonesian

Financial Accounting Standards Board effective for periods beginning on or after January 1, 2015. These

accounting standards are not relevant to the Company’s interim financial statements.

PSAK 4 (Revised 2013) : Separate Financial Statements

PSAK 15 (Revised 2013) : Investments in Associates and Joint Ventures

PSAK 65 : Consolidated Financial Statements

PSAK 66 : Joint Arrangements

PSAK 67 : Disclosure of Interest in Other Entities

ISAK 15 (Revised 2014) : The Limit on a Defined Benefit Asset, Minimum Finding

Requirement and their Interaction

ISAK 26 (Revised 2014) : Revaluation of Embedded Derivative

f. Financial assets

Classification

The Company and its Subsidiaries classifies its financial assets in the following categories: at fair

value through profit or loss, loans or receivables, available-for-sale, and held to maturity. The

classification depends on the purpose for which the financial assets were acquired. Management

determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A

financial asset is classified in this category if acquired principally for the purpose of selling in

the short-term. Derivatives are also categorized as held for trading unless they are designated as

hedges. Assets in this category are classified as current assets if they are expected to be settled

within 12 months; otherwise, they are classified as non-current. On 31 December 2015 and 2014,

the Company and its Subsidiaries have no financial assets at fair value through profit or loss.

(b) Loans and receivables

Loans and receivables are non-derivate financial assets with fixed or determinable payments that

are not quoted in an active market. 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. The Company and its Subsidiaries’ loans and receivables comprise “Trade Receivables,

Other Receivables, Other Current Financial Assets, Non-trade Receivables From Related Parties

and Other Non-Current Financial Assets” in the consolidated statements of financial position.





29


f. Financial assets (Continued)

Classification (Continued)

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category

or not classified in any of the other categories. They are included in non-current assets unless

the investment matures or management intends to dispose of it within 12 months of the end of

the reporting period. On December 31, 2015 and 2014, the Company and its Subsidiaries have

no available-for-sale financial assets.

(d) Held to maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable

payments and fixed maturity that the group has the positive intent and ability to hold maturity,

and which are not designated at fair value through profit or loss or available-for-sale. On

December 31, 2015 and 2014, the Company and its Subsidiaries have no held to maturity

financial assets.

Recognition and Measurement

Regular purchases and sale of financial assets are recognized on the trade date – the date on which

the Company and its Subsidiaries commits to purchase or sell the asset. Investments are initially

recognized at fair value plus the transaction costs for all financial assets nor carried at fair value

through profit or loss. Financial assets carried at fair value through profit or loss is initially

recognized at fair value, and transaction costs are expensed in the profit or loss. Financial assets are

derecognized when the rights to receive cash flows from the investments have expired or have been

transferred and the Company and its Subsidiaries have transferred substantially all risks and rewards

of ownership. Available-for-sale financial assets and financial assets at fair value through profit or

loss are subsequently carried at fair value. Loans and receivables and financial asset held to maturity

are carried at amortized cost using the effective interest method.

Net differences arising from changes in the fair value of the “financial assets at fair value through

profit or loss” category are presented in profit or loss within “finance income” in the period in which

they arise. Dividend income from financial assets at fair value through profit or loss is recognized in

the profit or loss as part of “other income” when the Company and its Subsidiaries’ right to receive

payments is established. Interest income from these financial assets is included in the “finance

income”.

Changes in the fair value of monetary and non-monetary securities classified as available for sale

are recognized in other comprehensive income.





30


f. Financial assets (Continued)

Recognition and Measurement (Continued)

When securities classified as available-for-sale are sold, the accumulated fair value adjustments

recognized in equity are included in the consolidated statements of profit or loss and other

comprehensive income as “finance income” or “finance costs”.

Interest on available-for-sale securities calculated using the effective interest method is recognized

in the consolidated statement of profit or loss and other of comprehensive income as part of “finance

income”. Dividends on available-for-sale equity instruments are recognized in the profit or loss as

part of “other income” when the Company and its Subsidiaries’ right to receive payments is

established.

Interest income on held-to-maturity financial assets is included in the consolidated statements of

profit or loss and other comprehensive income and reported as “interest income”.

g. Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short – term

highly liquid investments with original maturities of three months or less.

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.





31


h. Trade and Other Receivables (Continued)

The amount of the impairment loss is recognized in the consolidated statement of profit or loss and

other comprehensive income within “Impairment charges”. 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 statements

of profit or loss and other comprehensive income.

i. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statements

of financial position when there is a legally enforceable right to offset the recognized amounts and

there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

j. 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.

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.





32


j. Impairment of Financial Assets (Continued)

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 theconsolidated

statements of profit or loss and other 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 profit or

loss and other comprehensive income.

k. 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.

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.

l. Prepaid Expenses

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

m. 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.





33


m. Property, Plant and Equipment (Continued)

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 profit or loss and other 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 profit or loss and other comprehensive

income, unless the amount is included in the carrying amount of another asset.

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. 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.

n. Construction 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.





34


o. Intangible asset

The certain cost associated with the renewal of legal titles on the landrights are deferred and

amortized during twenty (20) years.

p. Impairment of Non-Financial Assets

At the end of each reporting period, the Company assesses whether there is an indication that an

asset may be impaired. If any such indication exists, the recoverable amount is estimated for the

individual asset.

The recoverable amount of an asset is the higher of the asset’s fair value less costs to sell and its

value in use. Where the carrying amount of the asset exceeds its recoverable amount, the assets is

considered impaired and is written down to its recoverable amount. Impairment loss of continuing

operations are recognized in the consolidated statement of profit or loss and other comprehensive

income as “Impairment Loss”.

Reversal of an impairment loss is recognized in statement of profit or loss and other comprehensive

income. After such a reversal, the depreciation charge on that asset is adjusted in future period to

allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its

remaining useful life.

q. 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 profit or loss and other 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.





35


r. 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 Payable 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.

s. 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.

t. 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.





36


t. Government Grant (Continued)

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 statements of profit or loss and other comprehensive

income, and the income approach, under which a grant is recognized in the consolidated statements of

profit or loss and other 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).

u. Employment Benefit

(i) Short-term employee benefits liabilities

The short-term employee benefits consist of salary and related remuneration, bonuses, incentives,

and other short-term employee benefits are recognized as expense and are not discounted when the

employee has provided services to the Company.

(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 Subsidiaries have further payment obligations if the benefits provided by the existing plan do not

adequately cover the obligations under Law 13/2003.

The liability recognized in the consolidated statement 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. 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.

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 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.





37


u. Employment Benefit (Continued)

(ii) Post-employment obligation (Continued)

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions charged or credited to equity in other comprehensive income in the period in which

they arise.

Past-service costs are recognised immediately in profit or loss. Gains or losses on the curtailment

or settlement of a defined benefit plan are recognised in profit or loss when the curtailment or

settlement occurs.

(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 benefits 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.

v. Income Tax

The income tax expense comprises current and deferred income tax. Tax is recognized in the

consolidated statements of profit or loss and other omprehensive income account, except to the

extent that it relates to items recognized directly to equity and other comprehensive income.





38


v. Income Tax (Continued)

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 balance sheet liability method, on temporary differences

arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated

financial statements. Deferred income tax is determined using tax rates that have been enacted or

substantially enacted as at reporting period and is expected to apply when the related deferred income

tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are

recognized only to the extent that it is probable that future taxable profit will be available against

which the temporary differences can be utilized.

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.

w. 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”.





39


x. 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.

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.

y. 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.

For purposes of calculating diluted earnings per share, the profit or loss attributable to the Company’s

ordinary equity holders will be adjusted for the after-tax effects of interest recognized during the

period on convertible bonds.

z. 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.





40


z. Segment Information (Continued)

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;

and

3. for which discrete financial information is available.

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.

a. Judgments

In the process of applying the accounting policies, management has made the following judgments,

apart from those including estimations and assumptions, which have the most significant effect on

the amounts recognized in the consolidated financial statements.

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 considers

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$).





41

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued)

a. Judgments (Continued)

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, 2015 and 2014, total allowance for impairment losses recognized on the

Company and its Subsidiaries’ receivables amounted to US$ 195,288,354, in both years (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

considers 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, 2015 and 2014, total allowance for impairment losses recognized on the

Company and its Subsidiaries’ inventories amounted to US$ 122,685 and US$ 175,732, respectively

(Note 9).

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, 2015 and 2014, there was no allowance for impairment losses recognized on

the Company’s property, plant and equipment and intangible assets (Notes14 and 15).





42


b. Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the

end of the reporting period that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial period are discussed below.

Determination Fair Value of Financial Instruments

Management uses valuation techniques, including the discounted cash flow model 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.

Estimating Allowance for Impairment Loss on Receivables

The level of a specific allowance is evaluated by management on the basis of factors that affect the

collectability of the accounts. Any collective allowance recognized is based on historical loss

experience using various factors such as historical performance of the debtors within the collective

group and judgments on the effect of deterioration in the markets in which the debtors operate and

identified structural weaknesses or deterioration in the cash flows of debtors.

Estimating Useful Lives of Property, Plant and Equipment and Intangible Assets

The Company and its Subsidiaries estimates the useful lives of its property, plant and equipment and

intangible assets based on expected asset utilization as anchored on business plans and strategies that

also consider expected future technological developments and market behavior. The estimation of

the useful lives of property, plant and equipment and intangible assets is based on the Company and

its Subsidiaries’ collective assessment of industry practice, internal technical evaluation and

experience with similar assets. The estimated useful lives are reviewed at least each financial year

and are updated if expectations differ from previous estimates due to physical wear and tear,

technical or commercial obsolescence and legal or other limitations on the use of the assets. It is

possible, however, that future results of operations could be materially affected by changes in the

estimates brought about by changes in the factors mentioned above. The amounts and timing of

recorded expenses for any period are affected by changes in these factors and circumstances. A

reduction in the estimated useful lives of the Company and its Subsidiaries’ property, plant and

equipment and intangible assets increases the recorded operating expenses and decreases non-current

assets. An extension in the estimated useful lives of the Company and its Subsidiaries’ property,

plant and equipment and intangible assets decreases the recorded operation expenses and increases

non-current assets.





43


b. Estimates and Assumptions (Continued)

Estimation of 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 considers 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 collects 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 and 26.

Realization of Deferred Tax Assets

Determining provision for corporate income tax requires significant judgment by management.

There are certain transactions and computation for which the ultimate tax determination is uncertain

during the ordinary course of business. The Company and its Subsidiaries recognizes liabilities for

expected corporate income tax issues based on estimates of whether additional corporate income tax

will be due. Where the final tax outcome of these matters is different from the 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.





44

5. CASH AND CASH EQUIVALENTS

2 0 1 5 2 0 1 4

US$ US$

Cash on hand:

Rupiah 50,337 57,299

US Dollar 26,187 33,002

Singapore Dollar 6,164 4,851

European Euro 1,428 2,806

Norwegian Krone 125 143

84,241 98,101

Cash in banks:

Third Parties:

Deutsche Bank, Jakarta

US Dollar account 843,545 5,107,055

Rupiah account 652,801 471,955

PT Bank CIMB Niaga Tbk

US Dollar account 73,786 5,878


PT Bank Central Asia Tbk



PT Bank Negara Indonesia (Persero) Tbk


2,572,907 6,085,993

Total 2,657,148 6,184,094

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.

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 48.





45

6. TRADE RECEIVABLES

This account consists of:

2 0 1 5 2 0 1 4

US$ US$

Third parties 31,567,047 41,190,159

Related parties 19,479,699 21,601,483

Total 51,046,746 62,791,642

Third parties:

2 0 1 5 2 0 1 4

US$ US$

Local debtors 29,163,733 37,796,351

Foreign debtors 2,403,314 3,393,808

Total 31,567,047 41,190,159

Less: Allowance for impairment − −

Net 31,567,047 41,190,159

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 5 2 0 1 4

US$ US$

Up to 1 month 29,326,957 30,039,810

> 1 month – 3 months 692,175 9,406,650

> 3 months – 6 months 235,543 1,390,069

> 6 months – 1 year 1,312,372 353,630

Total 31,567,047 41,190,159

There is no recent history of default of trade receivables from third parties.





46

6. TRADE RECEIVABLES (Continued)

The details of trade receivables from third parties based on currencies are as follows:

2 0 1 5 2 0 1 4

US$ US$

United States Dollar 22,678,731 41,190,159

Rupiah

(Rp 122,614,319,220 in 2015) 8,888,316

Total 31,567,047 41,190,159

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 48.

Related parties:

2 0 1 5 2 0 1 4

US$ US$

PT Multikarsa Investama 19,479,699 21,601,483

PT Texmaco Jaya Tbk (under bankruptcy) 15,657,945 15,657,945

Total 35,137,644 37,259,428

Less: Allowance for impairment (15,657,945 ) (15,657,945 )

Net 19,479,699 21,601,483

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 5 2 0 1 4

US$ US$

Up to 1 month – –

> 1 month – 3 months – –

> 3 months – 6 months – –

> 6 months – 1 year – –

> 1 year 35,137,644 37,259,428

Total 35,137,644 37,259,428





47

6. TRADE RECEIVABLES (Continued)

Changes in the allowance for impairment from related parties are as follows:

2 0 1 5 2 0 1 4

US$ US$

Beginning balance 15,657,945 15,657,945

Movement during the year:

Addition – –

Deduction – –

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

The details of trade receivables from related parties based on currencies are as follows:

2 0 1 5 2 0 1 4

US$ US$


Rupiah

(Rp 268,722,447,174 in 2015 and 2014) 19,479,699 21,601,483

Total 35,137,644 37,259,428

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.



Trade receivables amounted to US$ 45,000,000 in 2015 and 2014, respectively are used as collateral for

the Company’s bank loans that were received from Damiano Investments BV., Netherland (Note 18).





48

7. OTHER RECEIVABLES

2 0 1 5 2 0 1 4

US$ US$

Third parties:

Receivables from purchase discounts 1,182,276 1,207,397

MESOP Receivables 145,560 175,928

Insurance claims 84,336 440,280

Receivables from import clearance 57,110 93,826

Receivables from employees 36,325 55,586

Interest receivables on time deposits 1,376 1,304

Others 186,312 215,785

1,693,295 2,190,106

Other third parties:

Operational Advances to:

PT Wismakarya Prasetya (under bankruptcy) 34,267,327 34,267,327

PT Wastra Indah 15,758,847 15,772,432

PT Texmaco Perkasa Engineering Tbk 5,658,427 5,681,658

PT Wahana Perkasa Auto Jaya 5,579,991 5,579,991

PT Sumatex Subur 3,192,784 3,192,784

PT Texmaco Taman Synthetics 3,007,542 3,029,834

PT Bina Prima Perdana 409,240 453,815

PT Jaya Perkasa Engineering 310,475 344,293

PT Perkasa Heavindo Engineering 194,587 194,587

PT Raja Busana Mahameru 136,945 136,945

PT Supermitory Utama Tbk 93,407 93,407

PT Saritex Jaya Swasti 53,862 57,694

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 Bina Peranan Busana 2,336 2,336

PT Citra Indah Textile 985 985

Total 68,732,434 68,873,767


Net 1,094,678 1,236,011

Total 2,787,973 3,426,117





49

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 28). 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.

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 2016, the debt

restructuring program has not yet been completed.

The payment made by the Company to PT Wismakarya Prasetya (under bankruptcy) in excess of the

invoice amount in treated as other receivables 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 was towards payment

of old dues to PT Perusahaan Gas Negara (PGN), 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 is being discussed with the curator.

In compliance of PSAK requirement with regard to “Impairment of Receivables” in view of the fact that

PT Wismakarya Prasetya being declared as bankrupt and the liquidation process has commenced, the

Company is providing for the allowance for impairment of receivables of US$ 34,267,327 in 2015 and

in 2014. However, it will continue to pursue with the curator for the settlement of its dues from PT

Wismakarya Prasetya.

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 5 2 0 1 4

US$ US$


Movement during the year:

Addition – 34,267,327

Deduction – (3,351,146 )

Ending balance 67,637,756 67,637,756





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7. OTHER RECEIVABLES (Continued)

Deduction in allowance for impairment in 2014 was US$ 3,351,146, due to uncollectible of other

receivables from other third parties (Drapper Texmaco Inc. Co., United States of America; Norfil Ltd.,

England; Commonwealth Holdings Pte. Ltd., Singapore; PT Merauke Rayon Jaya; and PT Sarana

Daycrown Industri). The Company’s management decide to write-off based on the previously allowance

for impairment provided.

The details of other receivables based on currencies are as follows:

2 0 1 5 2 0 1 4

US$ US$

United States Dollars 35,014,616 69,726,233

Rupiah

(Rp 488,496,290,040 in 2015 and

Rp 16,640,244,635 in 2014) 35,411,113 1,337,640

Total 70,425,729 71,063,873

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.



8. OTHER CURRENT FINANCIAL ASSETS

This account consists of:

2 0 1 5 2 0 1 4

US$ US$

Time deposits:

Third party:

Deutsche Bank, Jakarta 289,960 321,543

Bank guarantees / SBLC 5,381,655 8,148,055





51

8. OTHER CURRENT FINANCIAL ASSETS (Continued)

2 0 1 5 2 0 1 4

US$ US$

Security deposits:

Third parties:

Security deposit for electricity 127,220 141,078

Security deposit for rental 153,724 78,570

Others 16,816 4,742

297,760 224,390

Total 5,969,375 8,693,988

a. Time Deposits

In 2015, time deposit with Deutsche Bank, Jakarta of Rp 2,000,000,000 (equivalent to US$ 144,980)

represents one year time deposit with interest rate of 7.00% per annum, due on December 12, 2016.


represents one year time deposit with interest rate of 8.50% per annum, due on October 3, 2016.


represents one year time deposit with interest rate of 7.00% per annum, due on October 1, 2015.


represents one year time deposit with interest rate of 7.05% per annum, due on December 10, 2015.

b. Bank Guarantees / SBLC

The Company and PT Perusahaan Gas Negara (Persero) Tbk have signed an agreement No.

011700.PK/HK.02/USH/2014 for the supply of gas to the Company. Additionally as per the

agreement, the Company should pay the past penalty of Rp 22,500,000,000 over a period of 45

months. Based on the amendment of the agreement dated October 20, 2015, both parties agreed to

amend the maximum limit for the gas consumption for the period November 1, 2015 until

March 18, 2015.

The Company should provide the bank guarantee (SBLC) for gas supplies equivalent to

approximately two months consumption value and the balance of gas through Deutsche Bank,

Jakarta for an amount equal to US$ 5,839,695 plus Rp 16,498,800,000 (equivalent to US$ 7,035,694)

in 2015 and US$ 5,839,695 plus Rp 16,498,800,000 (equivalent to 7.165.965) in 2014 representing

two (2) month’s consumption. The bank guarantees still have terms of six (6) months after the

reporting date and will due on June 30, 2016. In order to obtain the SBLC, the Company deposited

an amount equal to US$ 5.381.655 and US$ 8,148,055 as of December 31, 2015 and 2014,

respectively, in Deutsche Bank, Hong Kong as collateral through Kyoa account. The collateral

represents approximately 120% of SBLC amount for Rupiah portion.





52

8 OTHER CURRENT FINANCIAL ASSETS (Continued)

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 5 2 0 1 4

US$ US$


Rupiah

(Rp 5,941,270,183 in 2015 and 2014) 430,682 477,594

Total 5,969,375 8,693,988

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 48.

9. INVENTORIES

2 0 1 5 2 0 1 4

US$ US$

Finished goods 27,267,217 37,177,938

Work in process 5,479,938 5,345,666

Raw materials 8,335,248 11,384,096

Indirect materials 20,204,878 21,775,094

Total 61,287,281 75,682,794

Less : Allowance for impairment - net (122,685 ) (175,732 )

Net 61,164,596 75,507,062

Based on the review of the physical condition of the inventories at the end of each year, the management

believes that the impairment of inventory to net realizable value is adequate. The impairment of

inventory write-down for the years ended December 31, 2015 and 2014 were US$ Nil and US$ 41,027,

respectively, and were recorded as part of Cost of Goods Sold accounts in the consolidated statements

of profit or loss and other comprehensive income (Note 36). Total amount reversal of inventory

write-down for the year ended December 31, 2015 is amounting to US$ 53,047.

As at December 31, 2015, the inventories are covered by a throughput policy issued by PT Asuransi

Indrapura covering fire loss and other risks of inventories totaling US$ 86,500,000, which in the opinion

of the management is adequate to cover losses arising from such risks.





53

9. INVENTORIES (Continued)

The inventories amounted to US$ 60,200,000 in 2015 and 2014, respectively, are used as collateral for

the Company’s bank loans that were received from Damiano Investments BV., Netherland (Note 18).

10. PURCHASE ADVANCES

2 0 1 5 2 0 1 4

US$ US$

Third parties:

Purchase of material and operational 1,165,105 1,691,382

Purchase of property, plant and

equipments

4,911,812

367,169

Purchase of turbines’ spareparts – 279,643

6,076,917 2,338,194

Related party:

PT Texmaco Jaya Tbk (under bankruptcy) – 56,031

Total 6,076,917 2,394,225

In 2015, total purchases advance of property, plant and equipments of US$ 4,911,812 (equivalent to Rp

67,587,573,440) represents the balance in connection with the purchases of machineries and equipments

with total amounts of US$ 3,184,188 (equivalent to Rp 43,925,873,460) in filament yarn division and

the purchases of fiber machineries and equipments for expansion with total amounts of US$ 1,727,624

(equivalent to Rp 23,701,141,852). The machineries and equipments will be received in 2016.

In 2014, total purchases advance of property, plant and equipments of US$ 367,169 (equivalent to

Rp 4,376,489,001) represents the balance in connection with the purchases of machineries and equipments

with total amounts of US$ 135,208 (equivalent to Rp 1,640,214,514) in filament yarn division and the

purchases of fiber machineries and equipments for expansion with total amounts of US$ 231,961 (equivalent

to Rp 2,736,274,487). The machineries and equipments will be received in 2015.

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.





54

11. PREPAID EXPENSES

2 0 1 5 2 0 1 4

US$ US$

Prepaid insurance premium 1,963,586 2,327,959

Prepaid rent 165,357 192,527

Total 2,128,943 2,520,486

12. NON-TRADE RECEIVABLES FROM RELATED PARTIES

2 0 1 5 2 0 1 4

US$ US$

PT Texmaco Jaya Tbk (under bankruptcy) 106,408,631 106,410,712


Total 131,515,585 135,655,308


Net 19,552,932 23,692,655

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$ 3,727,539 in 2015 and US$ 4,133,553 in

2014) for the refund on the Company’s advances for the purchase of property, plant and equipment

(machinery and equipment). The remaining balance of US$ 22,426,170 and US$ 25,111,043,

respectively as of December 31, 2015 and 2014 represents advance payments for salary and other

expenses.

Changes in the allowance for impairment are as follows:

2 0 1 5 2 0 1 4

US$ US$


Movement 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 party will be done when the debt restructuring is

completed.





55

12. NON-TRADE RECEIVABLES FROM RELATED PARTIES (Continued)

The details of non-trade receivables from related parties based on currencies are as follows:

2 0 1 5 2 0 1 4

US$ US$


Rupiah

(Rp 360,790,425,393 in 2015 and

Rp 327,890,490,777 in 2014) 26,153,709 26,358,200

Total 132,562,340 135,655,308

The maximum exposure to credit risk at the reporting date is the carrying value of each class of non-

trade receivables from related parties is disclosed in Note 48.

13. OTHER NON-CURRENT FINANCIAL ASSETS

2 0 1 5 2 0 1 4

US$ US$

Restricted Cash In Banks:

IBRA (PPA):

PT Bank Dharmala


PT Bank Putera Multikarsa



PT Bank Papan Sejahtera


PT Bank Umum Nasional


PT Bank Asia Pacific

Rupiah account 40 45

Total 991,274 1,022,539





56

13. OTHER NON-CURRENT FINANCIAL ASSETS (Continued)

As the Company and its Subsidiaries are under restructuring process with the Indonesian Bank

Restructuring Agency (IBRA), the aggregate balances of cash in banks were restricted by IBRA.

The Indonesian government through the Indonesian Bank Restructuring Agency (IBRA) suspended the

bank operating licences of PT Bank Putera Multikarsa, a related party, on January 28, 2000; PT Bank

Dharmala, PT Bank Asia Pacific and PT Bank Papan Sejahtera on March 13, 1999; and PT Bank Umum

Nasional on August 21, 1998. As a result, the balance of banks as of December 31, 2015 and 2014

amounting to US$ 991,274 and US$ 1,022,539, 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.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of other

non-current financial assets is disclosed in Note 48.

14. PROPERTY, PLANT AND EQUIPMENT

The details of property, plant and equipment are as follows:

2 0 1 5 2 0 1 4

US$ US$

Direct acquisition:

Carrying cost 1,763,386,055 1,755,552,512

Accumulated depreciation (1,709,106,418 ) (1,703,166,009 )

Book value 54,279,637 52,386,503

Construction in progress 7,596,445 8,979,361

Total 61,876,082 61,365,864





57

14. PROPERTY, PLANT AND EQUIPMENT (Continued)

Direct acquisition:

2 0 1 5 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 46,405,523 73,222 – – 46,478,745

Machinery and equipment 1,685,377,311 837,017 – 6,902,854 1,693,117,182

Transportation equipment 5,337,453 14,840 – – 5,352,293

Office equipment 2,902,523 5,610 – – 2,908,133

1,755,552,512 930,689 – 6,902,854 1,763,386,055

Accumulated depreciation:

Building and improvement 43,858,059 1,641,467 – – 45,499,526

Machinery and equipment 1,651,368,901 4,184,837 – – 1,655,553,738



1,703,166,009 5,940,409 – – 1,709,106,418

Book value 52,386,503 54,279,637



US$ US$ US$ US$ US$

Carrying cost:

Land 15,529,702 – – – 15,529,702

Building and improvement 47,221,395 – (815,872 ) – 46,405,523

Machinery and equipment 1,715,355,293 9,168,220 (42,471,979 ) 3,325,777 1,685,377,311



–

1,786,149,814 9,364,772 (43,287,851 ) 3,325,777 1,755,552,512

Accumulated depreciation:

Building and improvement 42,979,802 1,694,129 (815,872 ) – 43,858,059

Machinery and equipment 1,663,413,741 30,204,486 (42,249,326 ) – 1,651,368,901



1,714,202,396 32,028,811 (43,065,198 ) – 1,703,166,009

Book value 71,947,418 52,386,503





58


Construction in progress:



US$ US$ US$ US$ US$

Carrying cost:

Machinery and equipment 8,979,361 5,519,938 – (6,902,854 ) 7,596,445



US$ US$ US$ US$ US$

Carrying cost:

Machinery and equipment 10,277,333 2,027,805 – (3,325,777 ) 8,979,361

2 0 1 5 2 0 1 4

US$ US$

Depreciation expenses is allocated to:

Direct acquisition:

Manufacturing expense (Note 37) 5,826,304 31,898,614

General and administrative expenses (Note 39) 114,105 130,197

Total 5,940,409 32,028,811

The Company own several pieces of land located in Karawang and Kendal amounted to 755,071 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 2044. In 2007, the Company has extended the ownership

certificate of the land were located in Semarang of 78,111 square meters up to November 29, 2027.

And in 2014, the Company has also extended the ownership certificate of the land were located in

Karawang of 319,755 square meters up to May 3, 2034. 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).

During the year 2015, the additions to vehicles represent cars provided to employees through “Retention

Scheme”.

In March 31, 2014, the part of Company’s building and machinery with total acquisition cost of US$

43,287,851 and total accumulated depreciation of US$ 43,065,198 were affected fully by fire accident.

The book value of the assets of US$ 222,653 was adjusted against the insurance claim settlement, net

(Note 32). As of December 31, 2015, The Company has a total claim of US$ 4,849,358 to the Insurance

Company





59


As of December 31, 2015, the construction in progress for machinery and equipment of US$ 7,596,445

consist of the remaining balance in the construction in progress for machinery and equipment in 2014

with totaling of US$ 8,979,361, the addition during the year 2015 with totaling of US$ 5,519,938, and

deduction during the year 2015 with totaling of US$ 6,902,854 are connected with the capitalization of

PTA’s machineries. Up to December 31, 2015, the total percentage of completion for this project is

approximately 80% and will be completed in 2016. Management believes that there is no impediment to

the completion of the construction in progress.

As of December 31, 2014, the construction in progress for machinery and equipment of US$ 8,979,361,

consist of the remaining balance in the construction in progress for machinery and equipment in 2013

with totaling of US$ 6,951,556 and the addition during the year 2014 with totaling of US$ 2,027,805,

are connected with the increasing of the Company’s filament yarn. Up to December 31, 2014, the total

percentage of completion for this project is approximately 80% and will be completed in 2015.

Management believes that there is no impediment to the completion of the construction in progress.

In November 2014, the Company has purchased a Gas Turbine for US$ 4,217,940 from the curator of

PT Wismakarya Prasetya on a public auction.

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.

In 2015, The fair value of land (836,457 sqm) based on NJOP (Tax Object Market Value) is

Rp 266,640,720,000 (equivalent to US$ 19,328,794) and the fair value of building (244,682 sqm) based

on NJOP is Rp 177,072,320,000 (US$ 12,835,978).

Based in the appraisal’s report of KJPP Nirboyo A., Dewi A. & Rekan dated December 24, 2014, total

market value of the Company’s property, plant and equipment were US$ 518,714,593 with the

liquidation value of US$ 337,692,667.

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

As of December 31, 2015 and 2014, total acquisition cost of fully depreciated property, plant and

equipment is amounted to US$ 33,220,848 and US$ 1,657,719,263, respectively, but the Company is

still using these assets in their operations.





60


All of the Company’s property, plant and equipment, except land were insured with PT Fairfax Insurance

Indonesia as lead Insurance Company from loss and other risks including earthquake valuing in total

US$ 609.500.000 as of December 31, 2015 (valid up to December 31, 2016) and US$ 551,500,000 as of

December 31, 2014 (valid up to December 31, 2015), respectively. The Company’s management, the

sum insured as stated above is adequate to cover possible losses arising from risks covered.

Most of Company’s land, building, machinery and equipments are used as collateral for secured bond

holders from PT Bina Prima Perdana (BPP)/PT Perusahaan Pengelola Asset (PPA) (Note 19). The

machinery and equipment under Batch Poly Project (excluding civil work), Fiber Line, and Automotive

Project with EFK machine totaling of US$ 17,700,000 in 2015 and 2014, respectively, are used as

collateral for the Third Loans from Damiano Investments BV., Netherland (Note 21).

15. INTANGIBLE ASSETS

2 0 1 5 2 0 1 4

US$ US$

Legal processing of landrights 125,428 125,429

Less: accumulated amortization (11,838 ) (5,563 )

Net 113,590 119,866

Amortization expense are allocated to:

General and administrative expenses (Note 39) 6,274 4,403

Intangible assets represent legal cost associated with the acquisition of landrights for land located at

Bandung (166 square meters) and the acquisition of landrights for land located in Karawang (319,755

square meters). These are amortized over the useful life (Hak Guna Bangunan) of 20 years.

As of December 31, 2015 and 2014, 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 5 2 0 1 4

US$ US$

Local suppliers 7,069,347 7,901,957

Foreign suppliers 5,172,511 17,682,450

Total 12,241,858 25,584,407

A summary of the aging of trade payables to third parties based on the date of invoice is as follows:

2 0 1 5 2 0 1 4

US$ US$

Up to 1 month 7,721,483 13,295,899

> 1 month – 3 months 3,280,818 11,616,987

> 3 months – 6 months 944,774 168,018

> more than 6 months 294,783 503,503

Total 12,241,858 25,584,407

The details of trade payables to third parties based on currencies are as follows:

2 0 1 5 2 0 1 4

US$ US$


Rupiah

(Rp 73,779,315,675 in 2015 and

Rp 43,682,608,557 in 2014) 5,348,265 3,511,456

European Euro

(EUR 515,773 in 2015 and

EUR 530,113 in 2014) 563,432 644,883

Japan Yen

(Yen 3,742,080.00 in 2015 and

Yen 3,730,811 in 2014) 31,066 31,265

Carried forward 12,228,950 24,815,070





62

16. TRADE PAYABLES (Continued)

2 0 1 5 2 0 1 4

US$ US$

Brought forward 12,228,950 24,815,070

Krona Swedish

(SEK 5,336,392 in 2014) 689,325

Singapore Dolar

(SGD 640 in 2015 and

SGD 74,464 in 2014) 452 56,399

Swiss Franc

(CHF 12,316 in 2015 and

CHF 23,345 in 2014) 12,456 23,613

Total 12,241,858 25,584,407

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 5 2 0 1 4

US$ US$

Interest 42,273,864 41,608,433

Electricity and gas 6,145,488 6,811,973

Insurance 735,711 –

Transportation 656,011 659,384

Professional fee 92,996 109,270

Rent 81,699 322,776

Others 460,872 457,863

Total 50,446,641 49,969,699





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17. ACCRUED EXPENSES (Continued)

The part of accrued interest amounted to Rp 380,648,007,289 (equivalent to US$ 27,593,186 in 2015

and equivalent to US$ 30,598,714 in 2014) represent the interest expenses accrued from secured debt

since the year 2001 and 2002, while all the unpaid and accrued interest up to 2000 according to the

DMOA 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 5 2 0 1 4

US$ US$

Rupiah

(Rp 479,395,011,200 in 2015 and

Rp 448,134,019,400 in 2014) 34,751,360 36,023,635


Total 50,446,641 49,969,699

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

18. BANK LOANS

2 0 1 5 2 0 1 4

US$ US$

Related Party:

Damiano Investment BV., Netherland 88,135,716 88,250,457

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, Hong Kong (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.





64

18. BANK LOANS (Continued)

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.

Based on the 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.

Further, based on recent amendment loan agreement on January 1, 2014 between the Company

(Borrower) and Damiano Investments BV., Netherland (Lender), and PT Pilot Asia Capital (formerly

known as PT Ferrier Hodgson) (Monitoring Agent), the lender agreed to change the financing fee from

15.00% per annum to 12.50% per annum. The tenure of the letter of credit facility has been extended by

2 (two) more years effective from August 2014 by means of Fourth Amendment Agreement between

Damiano Investments BV., Netherland and the Company.

The availability of facility as of December 31, 2015 and 2014 were US$ 92,003,634, respectively. And

the letter of credit is used by the Company to purchase of raw materials totaling US$ 88,135,716 in 2015

and US$ 88,250,457 in 2014, respectively. This is a revolving facility.

For the years ended December 31, 2015 and 2014, a fee on Bank Loan of 6% has been recognized in the

amount of US$ 3,645,178 and US$ 10,638,306, respectively, and is presented as part of finance costs

accounts in the consolidated statements of profit or loss and other comprehensive income (Note 40).

In 2015, the letter of credit facility is secured by fiduciary transfers of inventories and receivables valuing

US$ 60,200,000 and US$ 45,000,000, respectively (Notes 6 and 9).

Due to their short-term nature, their carrying amount of bank loans approximates their fair value.

19. SECURED DEBTS 2 0 1 5 2 0 1 4

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% Guaranteed Secured Notes 260,000,000 260,000,000

682,526,000 682,526,000





65

19. SECURED DEBTS (Continued)

2 0 1 5 2 0 1 4

US$ US$

PT Bina Prima Perdana


IDR 1,302,583,907,331 94,424,350 104,709,317


EUR 849,872 928,401 1,033,871

YEN 3,001,711,400 24,919,797 25,154,728

149,328,382 159,953,750

Ex – Banks – Billateral Loans:

Damiano Investments BV., Netherland

(Ex. PT Bank Finconesia)

EUR 7,471,539 8,161,918 9,089,133


(Ex. Union Europeene de CIC, Singapore)

EUR 5,941,395 6,490,387 7,227,712


(Ex. Credit Agricole Indosuez, Singapore) 12,117,088 12,117,088


(Ex. Bangkok Bank, Singapore) 1,303,097 1,303,097

Kyoa Investment Limited, British Virgin Island

(Ex. Bangkok Bank, Singapore) 500,000 500,000

Sverige Financing Limited, British Virgin Island


Sasando Pte. Ltd., Singapore


Sverige Netherlands B.V., Netherland


Others 490,400 −

30,072,490 31,737,030

Ministry of Finance (Ex. BNI LC):



Rupiah

(Rp 38,468,048,072 in 2015 and 2014) 2,788,549 3,092,287

83,155,007 83,458,745

Total 945,081,879 957,675,525





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On November 30, 2001, the Company entered into Definitive Memorandum of Agreement (DMOA)

with the noteholders regarding the restructuring plan of the Company. However, it has not yet been

executed by the Company and the DMOA 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 (approximately of 26% of total secured debt) has not given. Since no restructure

agreement has been reached between the Company and the secured creditors, the secured debts continue

to remain overdue.

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.

Damiano Investments BV., Netherland currently hold approximately 93% of the secured bonds and ex.

banks are willing to approve the new Secured Debt Restructure Proposal. In February 2014, the Company

has submitted a revised Secured Debt Restructuring Plan (SDRP) to PPA (Note 2a) in line with the

current business trend and the sustainability of debts. According to the Revised Proposal, the secured

debt will be converted into a retained debt of US$ 80 million and the balance converted into equity. The

new debt is repayable over 8 years. The existing equity will be diluted by 45.10% by issuance of 54.90%

of new equity which will be issued to the secured creditors for swapping the debt.

The Company has also submitted restructuring proposal to the secured creditors (SDRP) in June 2015,

the Company re-issued the SDRP Proposal to all of its secured creditors. Until March 2016, no response

has been received from its secured creditors. However, the SDRP is under active consideration of all the

secured creditors.

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.





67


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, 2015 and

2014, the Company had interest payable of Rp 380,648,007,290 (equivalent to US$ 27,593,186 in 2015

and US$ 30,598,714 in 2014) and was presented as part of accrued expenses in the consolidated

statements of financial position (Note 17).

Based on the Deed of Debt Assignment dated June 11, 2014, Damiano Investments BV., Netherland

agree to assigns rights, title and interest of Company’s secured debts to Kyoa Investment Limited,

Sverige Financing Limited, Sverige Netherland BV. and Sasando Pte. Ltd. in the proportion set out

below:

Creditors

Principal Amount

Outstanding of Debts

Purchased

Purchase Consideration

Damiano Investments BV. US$ 1,303,097.37 Seller is retained a portion

of the outstanding Debts

Kyoa Investment Limited US$ 500,000.00 US$ 50,000.00

Sverige Financing Limited US$ 500,000.00 US$ 50,000.00

Sverige Netherland BV. US$ 500,000.00 US$ 50,000.00

Sasando Pte. Ltd. US$ 500,000.00 US$ 50,000.00

Total US$ 3,303,097.37 US$ 200,000.00





68


Futher, based on the Transfer Certificate dated April 30, 2015, Sverige Financing Limited agree to

transfer the principal and interest on secured debt amounted US$ 490,400 to some people, and hold for

itself amounted US$ 9,600. Then, the proportion of Company’s secured debts are shown as below:

Creditors

Principal Amount

Outstanding of Debts

purchased

Purchase Consideration

Damiano Investments BV. US$ 1,303,097.37 Seller is retained a portion

of the outstanding Debts

Kyoa Investment Limited US$ 500,000.00 US$ 50,000.00

Sverige Netherland BV. US$ 500,000.00 US$ 50,000.00

Sasando Pte. Ltd. US$ 500,000.00 US$ 50,000.00

Sverige Financing Limited US$ 9,600.00 US$ 50,000.00

Others US$ 490,400.00

Total US$ 3,303,097.37 US$ 200,000.00

As consequently, the Company should be paid in respect of the Purchase Debt to each of the creditors

above in accordance with the proportion of the Purchase Debt owned by each creditor as stated at the

above table.

The breakdown of secured debts by currency is as follows:

2 0 1 5 2 0 1 4

US$ US$


European Euro

(EUR 14,262,806 in 2015 and 2014) 15,580,706 17,350,716

Japan Yen

(JPY 3,001,711,400 in 2015 and 2014) 24,919,797 25,154,728

Rupiah

(Rp 1,341,051,955,403 in 2015 and 2014) 97,212,898 107,801,604

Total 945,081,879 957,675,525

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





69

20. UNSECURED DEBTS AND NOTES PAYABLE

2 0 1 5 2 0 1 4

US$ US$

The Hongkong and Shanghai Banking

Corporation Limited 24,032,636 23,082,193

The Company has taking steps to implement the Composition Plan (Peace Plan) 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, 2015 and 2014, the total restructured unsecured debts and notes payable were

US$ 24,032,636 and US$ 23,082,193, respectively, which comprising of principal notes at

US$ 18,670,630 plus unpaid capitalized interest of US$ 5,362,006 in 2015 and US$ 4,411,563 in 2014.

Based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and the majority

unsecured creditors 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 Amortizations

2015 5.00%

2016 17.50%

2017 17.50%

2018 17.50%

2019 20.00%

2020 22.50%

Further, based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and the

majority unsecured creditors dated January 21, 2015, 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 Amortizations

2018 5.00%

2019 17.50%

2020 17.50%

2021 17.50%

2022 20.00%

2023 22.50%

All unsecured debts and notes payable are denominated in US Dollar.





70

20. UNSECURED DEBTS AND NOTES PAYABLE (Continued)

For the years ended December 31, 2015 and 2014, the interest charges on the unsecured debts were

US$ 971,905 and US$ 943,775, respectively, and are presented as part of finance costs accounts in the

consolidated statements of profit or loss and other comprehensive income (Note 40).

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 profit

or loss and other 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 5 2 0 1 4

US$ US$

Related Party:

Damiano Investments BV., Netherland 22,070,000 22,070,000

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.

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.

Based on the fourth amendment of third working capital loan agreement dated June 1, 2015, the

repayment date has been re-extended from 9 (nine) years to be 11 (eleven) years. The management

informed that the loan will be extended by 2 (two) more years when it expires by June 2017.





71

21. WORKING CAPITAL LOANS (Continued)

Third 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, 2015 and 2014.

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, 2015 and 2014.

This loan is denominated in US Dollar. The loan is secured by fiduciary transfer of certain assets in

Karawang and Semarang for a value of US$ 17,700,000 (Note 14).

Fourth Loan:

Based on the Fourth Loan Agreement between the Company and Damiano Investments BV., Netherland

dated November 5, 2014, Damiano Investments BV., Netherland agree to provide a loan facility for the

Company with totaling of US$ 4,750,000. The interest chargeable on this loan is 6% per annum since

the first anniversary of the first drawdown date, and shall be repayable on the earlier of 5 (five) years

from the date of this agreement. This loan is used for the purpose of purchase of Gas Turbine (ABB) on

a public auction from the curator of PT Wismakarya Prasetya.

Further based on the drawdown notice dated November 5, 2014 and November 14, 2014, the Company

has receipt the part of fourth loan facility with totaling of US$ 4,730,000. These drawdown are used for

purchasing of 1 (one) of gas turbine from PT Wismakarya Prasetya.

For the years ended December 31, 2015 and 2014, the interest charge on the working capital loans from

Damiano Investments BV., Netherland were US$ 2,938,380 and US$ 2,890,000, respectively, and are

presented as part of finance costs accounts in the consolidated statements of profit or loss and other

comprehensive income (Note 40).










72

22. CREDIT FINANCING PAYABLES

2 0 1 5 2 0 1 4

US$ US$

Credit financing payable:

PT Andalan Finance Indonesia 41,281 86,379

PT Astra Sedaya Finance 6,038 10,203

PT Toyota Astra Financial Service − 6,802

Total credit financing payables 47,319 103,384

Less: current maturity of credit financing payable:

PT Andalan Finance Indonesia (37,879 ) (39,126 )

PT Astra Sedaya Finance (3,500 ) (3,507 )

PT Toyota Astra Financial Service − (13,498 )

Total current maturity of credit financing payables (41,379 ) (56,131 )

Credit financing payables – net of current maturity 5,940 47,253

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 204,158,090 with effective

interest rate of 9.31% per annum, repayable in monthly installments from July 24, 2012 up to June 24,

2015. As of December 31, 2015 and 2014, the outstanding credit financing payable balance were Rp Nil

(equivalent to US$ Nil) and Rp 38,090,628 (equivalent to US$ 3,062), 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 249,351,975 with effective

interest rate of 9.32% per annum, repayable in monthly installments from July 24, 2012 up to June 24,

2015. As of December 31, 2015 and 2014, the outstanding credit financing payable balance were Rp Nil

(equivalent to US$ Nil) and Rp 46,523,783 (equivalent to US$ 3,740), 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 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, 2015 and 2014, the outstanding credit

financing payable balance were Rp Nil (equivalent to US$ Nil) and Rp 67,154,003 (equivalent to US$

5,398), 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 9.18% per annum, repayable in monthly installments from

December 3, 2012 up to November 3, 2015. As of December 31, 2015 and 2014, the outstanding credit

financing payable balance were Rp Nil (equivalent to US$ Nil) and Rp 53,555,010 (equivalent to US$






73

22. CREDIT FINANCING PAYABLES (Continued)

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

August 14, 2017. As of December 31, 2015 and 2014, the outstanding credit financing payable balances

was Rp 83,300,564 (equivalent to US$ 6,038) and Rp 126,928,153 (equivalent to US$ 10,203),

respectively.

Based on agreement dated January 15, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Suzuki Ertiga) amounting to Rp 124,320,000

with effective interest rate of 9.08% per annum, repayable in monthly installments from January 20,

2014 up to December 20, 2016. As of December 31, 2015 and 2014, the outstanding credit financing

payable balance were Rp 44,919,650 (equivalent to US$ 3,256), and Rp 85,953,459 (equivalent to US$



PT Andalan Finance Indonesia for purchasing of a car (Suzuki Ertiga) amounting to Rp 106,120,000






PT Andalan Finance Indonesia for purchasing of a car (Toyota Avanza) amounting to Rp 114,520,000


















PT Andalan Finance Indonesia for purchasing of a car (Toyota Rush) amounting to Rp 152,110,000 with

effective interest rate of 8.71% per annum, repayable in monthly installments from January 20, 2014 up

to December 20, 2016. As of December 31, 2015 and 2014, the outstanding credit financing payable

balance were Rp 54,787,773 (equivalent to US$ 3,972), and Rp 105,019,416 (equivalent to US$ 8,442),

respectively.





74


Based on agreement dated January 15, 2014, the Company obtained a credit financing from PT Andalan

Finance Indonesia for purchasing of a car (Toyota Etios) amounting to Rp 111,020,000 with effective

interest rate of 8.70% per annum, repayable in monthly installments from January 20, 2014 up to

December 20, 2016. As of December 31, 2015 and 2014, the outstanding credit financing payable


respectively.


PT Andalan Finance Indonesia for purchasing of a car (Kia Picanto) amounting to Rp 92,050,000 with


to December 20, 2016. As of December 31, 2015 and 2014, the outstanding credit financing payable


respectively.

Based on agreement dated February 7, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Honda Brio) amounting to Rp 87,500,000 with

effective interest rate of 9.08% per annum, repayable in monthly installments from February 15, 2014

up to January 15, 2017. As of December 31, 2015 and 2014, the outstanding credit financing payable

balance were Rp 34,123,188 (equivalent to US$ 2,474), and Rp 62,787,104 (equivalent to 5,047),

respectively.

Based on agreement dated February 7, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Toyota Rush) amounting to Rp 146,580,000 with

effective interest rate of 8.90% per annum, repayable in monthly installments from February 15, 2014

up to January 15, 2017. As of December 31, 2015 and 2014, the outstanding credit financing payable


respectively.

Based on agreement dated February 7, 2014, the Company obtained a credit financing from PT Andalan

Finance Indonesia for purchasing of a car (Honda Brio) amounting to Rp 87,500,000 with effective

interest rate of 9.08% per annum, repayable in monthly installments from February 15, 2014 up to

January 15, 2017. As of December 31, 2015 and 2014, the outstanding credit financing payable balance

were Rp 34,123,188 (equivalent to US$ 2,474), and Rp 62,787,104 (equivalent to US$ 5,047),

respectively.

Based on agreement dated February 7, 2014, the Company obtained a credit financing from PT Andalan

Finance Indonesia for purchasing of a car (Toyota Etios) amounting to Rp 113,400,000 with effective

interest rate of 8.90% per annum, repayable in monthly installments from February 15, 2014 up to

January 15, 2017. As of December 31, 2015 and 2014, the outstanding credit financing payable balance

were Rp 44,160,212 (equivalent to US$ 3,201), and Rp 81,323,047 (equivalent to US$ 6,537),

respectively.

Based on agreement dated November 25, 2014, the Company obtained a credit financing from PT

Andalan Finance Indonesia for purchasing of a car (Honda Mobilio) amounting to Rp 96,675,000 with


to December 2, 2017. As of December 31, 2015, the outstanding credit financing payable balance was

Rp 68,244,143 (equivalent to US$ 4,947).





75


The interest expenses incurred on this credit financing for the years ended December 31, 2015 and 2014

were Rp 97,763,488 (equivalent to US$ 7,326) and Rp 141,742,835 (equivalent to US$ 12,070),

respectively, and is shown as part of the finance costs accounts in theconsolidated statements of profit

or loss and other comprehensive income (Note 40).






23. OTHER SHORT-TERM FINANCIAL LIABILITIES

2 0 1 5 2 0 1 4

US$ US$

Advance receipts from customers 1,588,953 1,310,566

Freight and transportation 225,091 597,007

Insurance premium 51,621 2,272,617

Others 3,491,877 536,604

Total 5,357,542 4,716,794

The details of other short-term financial liabilities based on currencies are as follows:

2 0 1 5 2 0 1 4

US$ US$

Rupiah

(Rp 51,696,644,961 in 2015 and

Rp 10,435,804,040 in 2014) 3,752,296 838,891


European Euro

(EUR 25,018 in 2015)

27,329

–

Total 5,357,542 4,716,794

Due to their short-term nature, their carrying amount of other short-term financial liabilities

approximates their fair value.





76

24. DEFERRED REVENUE

2 0 1 5 2 0 1 4

US$ US$

Government grant 246,027 246,027

Less: accumulated amortization (33,501 ) (20,938 )

Net 212,526 225,089

Amortization income are allocated to:

Miscellaneous income, net (Note 41) 12,563 12,563

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).

25. SHORT-TERM EMPLOYEE BENEFIT LIABILITIES

Short-term employee benefit liabilities on December 31, 2015 and 2014 amounting to US$ 366,276 and

US$ 433,562, respectively, are liabilities on bonus for employee, pension, salary, medical, and other

benefit.

26. 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, 2015, 2014 and

2013 amounted of US$ 9,759,801, US$ 12,125,149 and US$ 9,975,562, respectively, are calculated by

independent actuary on a yearly basis, as set out in their reports dated March 7, 2016.





77

26. LONG-TERM EMPLOYEE BENEFITS LIABILITIES

The amounts recognized in the consolidated statements of financial position are determined as follows:

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

Present value of unfunded benefit obligations 9,759,801 12,125,149 9,979,562

Fair value of plan assets − − −

Net liability 9,759,801 12,125,149 9,979,562

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

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

Present value of defined benefit obligations

at beginning of the period 12,125,149 9,975,562 18,296,212

Current service costs 638,800 859,715 734,239

Past service costs 2,897 − −

Interest costs 901,349 855,199 862,646

Actuarial loss (gain) from experience

adjustment

(1,256,157

)

615,393

(2,301,812

)

Actuarial loss (gain) from change in financial

assumptions

(673,504

)

564,702

(3,087,904

)

Benefit paid (799,327 ) (544,148 ) (746,691 )

Foreign exchange gain – net (1,179,406 ) (201,274 ) (3,781,128 )

Present value of defined benefit obligations

at end of the period

9,759,801

12,125,149

9,975,562

As of December 31, 2015 and 2014, all of defined benefit obligation is unfunded obligation so there is

no fair value of plan assets.

The amounts recognized in the consolidated statements of profit or loss and other comprehensive income

are as follows:

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

Current service cost 638,800 859,715 734,239

Interest costs 901,349 855,199 862,646

Past service cost 2,897 − −

Total (Note 39) 1,543,046 1,714,914 1,596,885





78

26. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued)

The movements in the net liability recognized in the consolidated statements of financial position are as

follows:

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

Beginning of the year 12,125,149 9,975,562 18,296,212

Actuarial loss (gain) from experience

adjustment

(1,256,157

)

615,393

(2,301,812

)

Actuarial loss (gain) from change in

financial assumptions

(673,504

)

564,702

(3,087,904

)

Benefits paid (not plan asset) (799,327 ) (544,148 ) (746,691 )

Employee benefit expense 1,543,046 1,714,914 1,596,885

Foreign exchange gain (1,179,406 ) (201,274 ) (3,781,128)

Total 9,759,801 12,125,149 9,975,562

The cost of providing post-employment benefits is calculated by independent actuary, PT Sienco

Aktuarindo Utama using the following key assumptions:

Discount rate : 9.10% p.a. in 2015, 8.30% p.a. in 2014 and 9.00% p.a. in 2013

Salary growth rate : 8.00% p.a. in 2015, 2014 and 2013

Mortality rate : Table Mortality in Indonesia 2011

Normal retirement age : 10% in 20 years old and decline until 55 years old

Disability rate : 1% of mortality rate

Fund method : Projected Unit Credit

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.





79

26. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued)

The weighted average duration of the Company’s benefits liabilities as of December 31, 2015 is 15.36

years.

Expected maturity analysis of undiscounted pension benefits are as follows:

2 0 1 5

Less than a year 702,202

Between one and two years 539,115

Between two and five years 1,676,951

Between five and ten years 3,162,075

More than ten years 3,679,458

Net profit 9,759,801

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

8.01% 10.01%

US$ % US$ %

December 31, 2015:

Present value of defined obligation 10,582,211 8.43% 9,036,449 -7.41%

Current service cost 688,736 11.14% 561,396 -9.40

Descriptions

Discount Rate Discount Rate

8.00% 10.00%

US$ % US$ %

December 31, 2014:

Present value of defined obligation 13,257,126 9.34% 11,135,081 8.17%

Current service cost 962,400 11.94% 773,193 10.06%

Historical information of present value of experience adjustment on plan liabilities was as follows:

2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1

US$ US$ US$ US$ US$

Present value of defined benefit obligation 9,759,801 12,125,149 9,975,563 18,296,212 15,100,623

Fair value of plan assets ─ ─ ─ ─ ─

Deficit in the plan 9,759,801 12,125,149 9,975,563 18,296,212 15,100,623

Experience adjustments on plan liabilities (1,256,157) 615,393 2,301,812 1,158,683 (65,731 )

Experience adjustments on plan assets ─ ─ ─ ─ ─





80

27. TAXATION

a. Prepaid Taxes

2 0 1 5 2 0 1 4

US$ US$

Overpayment of corporate income tax

2013 − 6,314,637

2014 5,426,618 5,426,618

2015 2,908,430 −

Value added Tax 3,084,493 4,161,530

Total 11,419,541 15,902,785

b. Taxes Payable

2 0 1 5 2 0 1 4

US$ US$

Income tax article 21 88,800 99,971



Income tax article 4 (2) 264 −

Total 149,767 159,621

c. Corporate Income Tax

A reconciliation between loss before income tax as shown in the consolidated statements of profit

or loss and other comprehensive income and estimated taxable loss which was calculated by the

Company for the years ended December 31, 2015 and 2014 are as follows:

2 0 1 5 2 0 1 4

US$ US$

Loss before income tax as consolidated statements of profit or loss

and other comprehensive income (11,647,345 ) (81,670,954 )

Profit before income tax of the Subsidiaries

Loss before income tax as statements of profit or loss

and other comprehensive income of the Company (11,647,345 ) (81,670,954 )

Fiscal adjustments consisted of:

Permanent difference:

Non deductible expenses (non taxable income):

Impairment of other receivables 34,267,327

Income tax article 21 1,089,859 1,152,746

Tax expense 500,435 216,339

Entertainment and representation 91,736 104,806

Donation 116,373 9,524

Interest income (22,694 ) (24,726 )

Gain on foreign exchange rate, net (87,186,761 ) (3,717,504 )

(97,058,397 ) 32,008,512



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


81

27. TAXATION (Continued)

c. Corporate Income Tax (Continued)

2 0 1 5 2 0 1 4

US$ US$

Timing differences:

Depreciation expense of property, plant and

equipment (17,703,460 ) 5,890,199

Long-term employee benefits liabilities (493,458 ) 1,150,506

Intangible assets 7,166 4,403

Amortization of deferred revenues 12,563 12,563

Amortization of deferred charges (112,792 ) (118,728 )

(18,289,981 ) 6,938,943

Estimated taxable loss for the year before

fiscal loss carry forward (115,348,378 ) (42,723,499 )

Fiscal loss carry forward (42,731,537 ) (353,173,841 )

Total estimated accumulated taxable loss (158,079,915 ) (395,897,340 )

Estimated corporate income tax

Prepaid taxes:

Income tax article 22 (2,908,430 ) (5,426,618 )

Estimated overpayment of corporate income tax (2,908,430 ) (5,426,618 )

Adjustment on corporate income tax (1,566,830 )

The Company received and recorded its 2013 yearly corporate income tax return was US$ 4,747,807 in May

2015. Consequently, the differences between the amount receive against the estimated overpayment of

corporate income tax in the year 2013 is amounted to US$ 1,566,830 are recorded as part of current income

tax expenses in the statements of profit or loss and other comprehensive income.

A reconciliation the estimated taxable loss between the amounts computed by functional/presentation

currency and taxation purpose for the years ended December 31, 2015 and 2014 are as follows:

December 31, 2015

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$

Loss before income tax as

consolidated statements of profit

or loss and other comprehensive

income

(1,462,006,026,072

)

(11,647,345

)

(11,647,345

)

Profit before income tax of

the Subsidiaries


statements of comprehensive

income of the Company (1,462,006,026,072 ) (11,647,345 ) (11,647,345 )





82



December 31, 2015

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$



Non deductible expenses

(non taxable income):

Income tax article 21 14,626,970,743 13,421 1,089,859 1,089,859 Tax expenses 6,728,795,302 13,446 500,435 500,435 Entertainment 1,233,606,495 13,447 91,736 91,736 Donation 1,578,096,420 13,561 116,373 116,373 Interest income (305,603,945 ) 13,466 (22,694 ) (22,694 ) Gain on foreign exchange rate (87,186,761 ) (87,186,761 )

23,861,865,015 (85,411,052 ) (85,411,052 )

Timing differences:

Depreciation expense of

property, plant and

equipment (125,539,338,259 ) 7,091 (17,703,460 ) (17,703,460 )

Long-term employee benefits

liabilities (9,622,326,231 ) 19,500 (493,458 ) (493,458 )

Amortization of deferred

revenue 121,949,710 9,707 7,166 7,166

Intangible assets 84,982,118 11,859 12,563 12,563


Charges (252,971,273 ) 2,243 (112,792 ) (112,792 )

(135,207,703,935 ) (18,289,981 ) (18,289,981 )

Estimated taxable loss for the year

before fiscal loss carry forward (1,573,351,864,992 ) 13,640 (115,348,378 ) (115,503,759 )

Fiscal loss carry forward (531,623,045,717 ) 12,441 (42,731,537 ) (42,731,537 )

Total estimated accumulated

taxable loss

(2,104,974,910,709

)

(158,079,915

)

(158,079,915

)

Estimated corporate income tax

Prepaid taxes:

Income tax article 22 38,568,904,459 13,261 (2,908,430 ) (2,908,430 )

Estimated overpayment of

corporate income tax

38,568,904,459

(2,908,430

)

(2,908,430

)

Adjustment on corporate income tax 6,643,033 (1,566,830 ) (1,566,830 )





83



December 31, 2014 (As restated)

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$


consolidated statements of

other comprehensive income (952,611,648,680 ) (81,489,940 ) (81,489,940 )

Profit before income tax of

the Subsidiaries

–

–

–


statements of profit or loss and

other comprehensive income

of the Company (952,611,648,680 ) (81,489,940 ) (81,489,940 )



Non deductible expenses

(non taxable income):

Impairment of other receivable 324,487,566,111 9,469 34,267,327 34,267,327

Income tax article 21 13,698,956,128 11,883 1,152,746 1,152,746

Tax expenses 2,045,828,416 9,457 216,339 216,339

Entertainment 1,242,059,452 11,851 104,806 104,806

Donation 113,799,325 11,949 9,524 9,524

Interest income (293,205,504 ) 11,858 (24,726 ) (24,726 )

Gain on foreign exchange rate – – (3,716,643 ) (3,716,643 )

341,295,003,928 32,009,373 32,009,373

Timing differences:


property, plant and

equipment 65,334,029,913 11,092 5,890,199 5,890,199

Long-term employee benefits

liabilities 14,564,330,400 15,023 969,492 969,492


revenue 121,949,710 9,707 12,563 12,563

Intangible assets 50,296,579 11,423 4,403 4,403


Charges (266,285,551 ) 2,243 (118,728 ) (118,728 )

81,909,678,720 6,757,929 6,757,929





84



December 31, 2014 (As restated)

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$

Estimated taxable loss for the year

before fiscal loss carry forward (531,523,045,717 ) 12,441 (42,722,638 ) (42,722,638 )

Fiscal loss carry forward (3,863,216,078,466 ) 10,939 (353,173,841 ) (353,173,841 )

Total estimated accumulated

taxable loss

(4,394,739,124,183

)

(395,896,479

)

(395,896,479

)

Estimated corporate income tax – – –

Prepaid taxes:

Income tax article 22 (64,508,678,442 ) 11,887 (5,426,618 ) (5,426,618 )

Estimated overpayment of

corporate income tax

(64,508,678,442

)

(5,426,618

)

(5,426,618

)

The estimated taxable loss for the year ended December 31, 2014 as reported in the 2014 corporate income tax return

amounted to Rp 531,623,045,717 and the tax return was submitted to the tax office in May 2015.

In these consolidated financial statements, the amount of taxable loss as of December 31, 2015 amounted to

US$ 158,079,915 is based on preliminary calculations, as the Company has not yet submitted its yearly 2015

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 2015 and

2014 are as follows:

2 0 1 5

As of

December 31,

2014

Credited

(charged) to the

statement of profit

or loss and other

comprehensive

income for the

year

Credited

(charged) to

equity

As of

December 31,

2015

US$ US$ US$ US$

Deferred tax assets (liabilities):

Accumulated taxable loss 98,974,335 (59,454,357 ) – 39,519,978

Valuation allowance (98,974,335 ) 59,454,357 – (39,519,978 )


property, plant and equipment

8,034,189

(4,425,865

)

–

3,608,324

Long-term employee benefit liabilities 3,031,287 (123,364 ) (467,973 ) 2,439,950

Amortization of deferred revenues (56,272 ) 3,141 – (53,131 )

Intangible assets (1,921 ) 1,791 – (130 )

Amortization of deferred charges 743,304 (28,198 ) – 715,106

Total deferred tax assets 11,750,587 (4,572,495 ) (467,973 ) 6,710,119





85


d. Deferred Tax Assets (Liabilities) (Continued)

2 0 1 4 (As restated)

As of

December 31,

2013

Credited

(charged) to the

statement of profit

or loss and other

comprehensive

income for the

year

Credited

(charged) to

equity

As of

December 31,

2014

US$ US$ US$ US$


Accumulated taxable loss 90,978,588 7,995,747 – 98,974,335

Valuation allowance (90,978,588 ) (7,995,747 ) – (98,974,335 )



6,561,639

1,472,550

–

8,034,189

Long-term employee benefit liabilities 2,493,891 242,372 295,024 3,031,287

Amortization of deferred revenues (59,413 ) 3,141 – (56,272 )

Intangible assets (3,022 ) 1,101 – (1,921 )


Total deferred tax assets 9,766,081 1,689,482 295,024 11,750,5870

2 0 1 3 (As restated)

As of

December 31,

2012

Credited

(charged) to the

statement of profit

or loss and other

comprehensive

income for the

year

Credited

(charged) to

equity

As of

December 31,

2013

US$ US$ US$ US$


Accumulated taxable loss 49,903,636 41,074,952 – 90,978,588

Valuation allowance (49,903,636 ) (41,074,952 ) – (90,978,588 )



(153,106

)

6,714,745

–

6,561,639

Long-term employee benefit liabilities 2,568,684 (1,422,222 ) 1,347,429 2,493,891

Amortization of deferred revenues – (59,413 ) – (59,413 )

Intangible assets (3,187 ) 165 – (3,022 )


Total deferred tax assets 3,216,621 5,202,031 1,347,429 9,766,0810

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’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$ 39,558,824 and US$ 98,974,335 and as at December 31, 2015

and 2014, respectively.

The basis supporting recognition of the deferred tax assets is reviewed regularly by management.





86


d. Deferred Tax Assets (Liabilities) (Continued)

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 5

2 0 1 4

(As restated)

US$ US$

Loss before income tax as consolidated

statements of profit or loss and other comprehensive

income

(11,647,345

)

(81,489,940

)

Profit before income tax of the Subsidiaries

Loss before income tax as statement of profit or loss

and

other comprehensive income of the Company (11,647,345 ) (81,489,940 )

Tax benefit at tax rate 25% (2,911,836 ) (20,372,485 )

Taxable loss at tax rate 25% 28,837,094 10,680,659

Tax effect of non-deductible expense

(non-taxable income) (21,352,763 ) 8,002,344

Total tax income 4,572,495 (1,689,482 )

e. Tax Income (Expense)

December 31,

2 0 1 5

December 31,

2 0 1 4

(As restated)

US$ US$

Current income tax:

The Company (1,566,830 ) –

Subsidiaries – –

(1,566,830 ) –

Deferred tax income (expense):

The Company (4,572,495 ) 1,689,482

Subsidiaries – –

(4,572,495 ) 1,689,482

Total tax income (4,572,495 ) 1,689,482





87


f. Tax Assessment Letter

a. Company

On July 6, 2015, 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 2013. Based on the Indonesian Tax Authorities letter No.

00090/207/13/092/15, the Company had additional tax liability of Rp 27,836,600. The tax

liability had been compensated in December 2015.



fiscal period August 2013. Based on the Indonesian Tax Authorities letter No.





fiscal period September 2013. Based on the Indonesian Tax Authorities letter No.





fiscal period Novemberr 2013. Based on the Indonesian Tax Authorities letter No.

00089/207/13/092/15, the Company had no additional tax liability or overpayment.



fiscal period December 2013. Based on the Indonesian Tax Authorities letter No.

00046/407/13/092/15, the Company had an overpayment of Rp 16,971,279,771. The

overpayment of Value Added Tax has been received in July 2015.

On February 20, 2015, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor


fiscal period October 2013. Based on the Indonesian Tax Authorities letter No.


overpayment of Value Added Tax has been received in March 2015.

On April 28, 2015, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor

Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter

for fiscal year 2013. Based on the Indonesian Tax Authorities letter No.


overpayment of Corporate Income Tax were received on May 2015.





88


f. Tax Assessment Letter (Continued)

a. Company (Continued)

On October 27, 2015, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor

Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter



liability had been compensated in December 2015 with the overpayment of 2013 Corporate

Income Tax.






Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4 (2) assessment

letter for fiscal year 2013. Based on the Indonesian Tax Authorities letter No.


liability had been compensated in December 2015 with the overpayment of 2013 Corporate

Income Tax.





On December 11, 2014, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor


fiscal period April 2013 up to May 2013. Based on the Indonesian Tax Authorities letter No.


liability had been compensated in January 2015 with the overpayment of June 2013 Value

Added Tax.

On December 9, 2014, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor


fiscal period June 2013. Based on the Indonesian Tax Authorities letter No.


overpayment of Value Added Tax has been compensated in January 2015 with the other tax

liabilities for fiscal year 2013 with totalling amount of Rp 37,910,504. And the remaining

of its overpayment amounted to Rp 12,399,473,075 were received on January 20, 2015.





89






fiscal period March 2013. Based on the Indonesian Tax Authorities letter No.


overpayment of Value Added Tax has been received on December 4, 2014.



fiscal period January 2013. Based on the Indonesian Tax Authorities letter No.


overpayment of Value Added Tax has been received on August 12, 2014.

On May 21, 2014, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor

Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter



overpayment of Corporate Income Tax has been compensated in June 2014 with the other

tax liabilities for fiscal year 2012 with totalling amount of Rp 1,389,204,053. And the

remaining of its overpayment amounted to Rp 43,087,563,947 were received on June 23,

2014.





liability had been compensated in June 2014 with the overpayment of 2012 Corporate

Income Tax.






Income Tax.


Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4 (2) assessment

letter for fiscal year 2012. Based on the Indonesian Tax Authorities letter No.



Income Tax.





90









Income Tax.



fiscal period February 2012. Based on the Indonesian Tax Authorities letter No.

00173/507/12/092/14, the Company had no additional tax liability.



fiscal period March 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period April 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period May 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period June 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period August 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period October 2012. Based on the Indonesian Tax Authorities letter No.






91






fiscal period November 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period December 2012. Based on the Indonesian Tax Authorities letter No.




fiscal period January 2012. Based on the Indonesian Tax Authorities letter No.



Income Tax.



fiscal period January 2012 up to December 2012. Based on the Indonesian Tax Authorities

letter No. 00006/277/12/092/14, the Company had additional tax liability of Rp

168,645,104. The tax liability had been compensated in June 2014 with the overpayment of

2012 Corporate Income Tax.




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. On July 7, 2010, the Company submits the objection letter to the Indonesian

Tax Authorities. Further, based on the Tax Court’s decision No. 55436/PP/M.XIA/12/2014

dated September 22, 2014, total tax liability is Rp 1,718,859,984 and the remaining balance

of Rp 300,281,473 were received on December 4, 2014.





liability had been compensated in May 2010 with the overpayment of 2008 corporate income

tax. On July 7, 2010, the Company submits the objection letter to the Indonesian Tax

Authorities. Further, based on the Tax Court’s decision No. 55435/PP/M.XIA/10/2014 dated

September 22, 2014, the Company’s objection is denied.





92




On May 14, 2009, 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

2007. Based on the Indonesian Tax Authorities letter No. 012/204/07/092/09, the Company had

additional tax liability of Rp 20,622,616,789. The tax liability had been compensated in May 28,

2009 with the overpayment of 2007 corporate income tax of Rp 19,748,829,575, and the

remaining balance of Rp 873,787,214 was paid by cash on June 11, 2009. Further, based on the

decision letter from Indonesian Tax Court vide No. PUT.39097/PP/M.11/13/2012 dated July 26,

2012, the tax liability for 2007 was assessed at Rp 78,391,606. Accordingly, the Company

received the refund of Rp 20,544,225,183 in August 2012. Based on the Tax Court’s decision

No. 978/PK/PJK/2014 dated March 12, 2015, the petition is denied by the Supreme Court.

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 January to

December 2008. Based on the Directorate General of Tax No. 00014/204/08/092/10, the

Company had additional tax liability of Rp 5,280,764,328 and administrative penalties

amounting to Rp 1,689,844,585. The Direktorat Jenderal Pajak has filed a Review Petition (PK)

against the verdict of refund on January 8, 2015 for the decision letter No. Put.55433 / PP /

M.XIA / 13/2014. Until the date of report finished, the result has not been determined yet.





93


g. Administration

The Corporate Income Tax for year 2014 are being 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.

28. 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.





94

28. SHARE CAPITAL (Continued)

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.

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 2,196,960,000,000 625,598,841

Shares Series B 1,890,975,522 44.30 1,890,975,522,000 209,642,519

Shares 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.





95


Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on March 24, 2009 and based

on notarial deed No. 91 dated March 24, 2009 of Sutjipto, S.H., notary in Jakarta, the stockholders

approved the issuance of 118,845,397 new authorized shares series C (5% of issued and paid-up capital)

without preemptive rights in the framework of Grant Date I of stock options programme to the

Company’s management and employees (Management Employee Stock Option Programme / MESOP).

The notarial deed was approved by the Minister of Law of the Republic of Indonesia based on his

decision letter No. AHU-0052619.AH.01.09.Tahun 2009 dated August 14, 2009. Based on the

Company’s schedule that was reported to PT Bursa Efek Indonesia dated March 17, 2009, this program

will be implemented on the period below:

Period Implementation Period

I 5 (five) trading days starting from April 1, 2009

II 5 (five) trading days starting from October 1, 2009

III 5 (five) trading days starting from April 1, 2010

IV 5 (five) trading days starting from October 1, 2010

V 5 (five) trading days starting from April 1, 2011

VI 5 (five) trading days starting from October 3, 2011

VII 5 (five) trading days starting from February 1, 2012

Based on the notarial deed of Aryanti Artisari, S.H., M.Kn. No. 107 dated February 23, 2012, the

stockholders approved the exercise proce for the first stock option programme of Rp 45 per share. On

March 5, 2012, the Company issued 118,845,397 new authorized shares series C with par value of

Rp 40 each or totaling Rp 4,753,815,880 (equivalent to US$ 524,125). The deed was approved by the

Minister of Law and Human Rights in his decision letter No. AHU-0018443.AH.01.09.Tahun 2012 dated

February 29, 2012.

The composition of stockholders as of December 31, 2015, 2014 and 2013 based on the stockholder’s

list issued by the Stock Administrative Office, PT Datindo Entrycom, of listed shares of the Company is

as follows:

Numbers of Percentage of Total

Stockholders Shares Ownership Rp US$

%

Shares Series A:

PT Multikarsa Investama 131,394,719 5.26 1,313,947,195,000 374,155,125

Public (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





96


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 6,189,036,400 686,146

Others 649,611,983 26.03 25,984,479,320 2,880,763

Unsettled 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

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

The Company has sent a letter No. 068/APF-CS/VI/2014 dated June 25, 2014 and No. 071/APF-

CS/VII/2014 dated July 7, 2014 to Otoritas Jasa Keuangan (OJK) regarding the cancellation of MESOP

implementation due to the non-completion of secured debts restructuring. Further, based on the

Extraordinary General Stockholders Meeting (RUPSLB) held on June 16, 2015 notarial deed No. 49

dated June 16, 2015 of Aryanti Artisari, S.H., M.Kn, the stockholders approved the cancelation of

MESOP implementation.





97


According to notarial deed of DR. H. Teddy Anwar, S.H., Spn. No. 111 dated August 16, 2002, the part

of PT Multikarsa Investama’s shares of 2,454,081,290 (or after reverse stock 122,704,064 shares) were

sold to PT Bina Prima Perdana. However, based on the data issued by PT Datindo Entrycom, the shares

are still registered under the name of PT Multikarsa Investama.

As of December 31, 2015 and 2014, the shares owned by the public included those owned by the directors

of the Company are as follows:

2 0 1 5 2 0 1 4

Mr. Seeniappa Jegatheesan 29,713,388 29,713,388

Mr. Peter Vinzenz Merkle 2,711,000 2,711,000

Mr. Bonar Firman Hasiholan Sirait 1,359,500 1,359,500

Total 33,783,888 33,783,888

29. ADDITIONAL PAID-IN CAPITAL

2 0 1 5 2 0 1 4

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

Difference on restructuring among companies

under common control in 2001 (Note 1c)

(21,339

)

(21,339

)


conversion of debt to equity in 2006 618,017,022 618,017,022


1st MESOP in 2012 65,516 65,516

Shares issuance cost (46,612 ) (46,612 )

Subtotal 18,904 18,904

Total 624,323,168 624,323,168





98

29. ADDITIONAL PAID-IN CAPITAL (Continued)

As per the Composition Proposal (Peace Plan) 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).

Further, 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.

30. 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 2015 and 2014, the Company was exempted from reserving

additional amounts due to its accumulated deficit.

31. EARNINGS (LOSS) PER SHARE

2 0 1 5 2 0 1 4

US$ US$

Weighted average number of shares outstanding 2,495,753,347 2,495,753,347

Total comprehensive loss attributable to owners of

the Company

(16,382,755

)

(80,685,529

)

Basic loss per share attributable to the

owners of the Company

(0.01

)

(0.03

)





99

32. NON-CASH TRANSACTIONS

In 2015 and 2014, 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.

33. INSURANCE CLAIM SETTLEMENT, NET

2 0 1 5 2 0 1 4

US$ US$

Gain (loss) on fire:

Receipt from insurance claim 1,249,994 3,918,242

Book value on disposal of property, plant and

equipments (Note 14) (222,653 )

Net gain on fire 1,249,994 3,695,589

Receipt insurance claim on transit inventory loss

from damage 453,134 77,266

Total 1,703,128 3,772,855

In March 2014, a manufacturing unit compressing of building and machinery at Semarang plant were

affected by fire. The Company has received a portion of insurance settlement from the Insurance

Company.

34. NET SALES

2 0 1 5 2 0 1 4

US$ US$

Local

Fibre 140,841,365 193,052,117

Yarn 149,006,270 191,364,233

Chips 21,349,643 15,979,987

Fleece (Knitting) 7,057,056 6,893,590

Others 419,654 579,614

318,673,988 407,869,541





100

34. NET SALES (Continued)

2 0 1 5 2 0 1 4

US$ US$

Export

Yarn 49,727,283 65,108,096

Fibre 14,087,184 14,506,946

Chips 2,780,005 4,430,233

Fleece (Knitting) 686,110 1,308,326

PTA 43,000 255,780

Others 1,056,200 88,099

68,379,782 85,697,480

Total 387,053,770 493,567,021

In 2015 and 2014, net sales of fleece (knitting) were US$ 7,743,166 and US$ 8,201,916, respectively

consists of sales to third parties. The product is manufactured by PT Texmaco Jaya Tbk (under

bankruptcy) based on the tolling basis.

In 2015 and 2014, no sales were earned from sales to related parties.

In 2015 and 2014, no sales to third parties exceeded 10% of the operating revenues.

35. OTHER OPERATING REVENUES

2 0 1 5 2 0 1 4

US$ US$

Indirect materials damage 1,687,248 1,222,360

Product non-standard and others 1,314,978 3,192,280

Total 3,002,226 4,414,640

In 2015 and 2014, other operating revenues of fleece were US$ 58,346 and US$ 39,319 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 2015 and 2014, no other operating revenues were earned from related parties.

In 2015 and 2014, no sales to third parties exceeded 10% of the operating revenues.





101

36. COST OF GOODS SOLD

2 0 1 5 2 0 1 4

US$ US$

Raw materials

At beginning of year 11,384,096 22,541,882

Purchases 228,827,911 318,613,393

Available for use 240,212,007 341,155,275

At end of year (8,335,248 ) (11,384,096 )

Raw materials used 231,876,759 329,771,179

Indirect materials


Purchases 42,609,948 53,181,680

Available for use 64,385,042 76,224,448

At end of year (20,204,877 ) (21,775,094 )

Indirect materials used 44,180,165 54,449,354

Direct labor 9,098,415 9,549,595

Manufacturing expense (Note 37) 87,024,052 119,743,766

Total manufacturing cost 372,179,391 513,513,894

Work in process


At end of year (5,479,938 ) (5,345,666 )

Cost of goods manufactured 372,045,119 515,076,326

Finished goods


At end of year (27,267,217 ) (37,177,938 )

Reversal of inventory write-down (Note 9) (53,047 ) 41,027

Total 381,902,793 511,808,609

In 2015 and 2014, total raw material and indirect material used included the raw material used for fleece

(knitting) product after eliminated intercompany account were US$ 1,698,125 and US$ 1,909,943,

respectively.

In 2015 and 2014, there are no purchases from related parties.





102

36. COST OF GOODS SOLD (Continued)

In 2015 and 2014, purchases from third parties exceeded 10% of total purchases are as follows:

2 0 1 5

US$ Percentage

Kolmar Petrochemicals AG, Switzerland 64,898,476 16.25%

PT Polychem Indonesia 62,101,490 15.55%

PT Cipta Karya Persada 50,710,679 12.70%

2 0 1 4

US$ Percentage

Kolmar Petrochemicals AG, Switzerland 147,904,368 39.78%

PT Cipta Karya Persada 77,311,325 20.79%

PT Polychem Indonesia 69,839,515 18.78%

37. MANUFACTURING EXPENSES

2 0 1 5 2 0 1 4

US$ US$

Electricity and gas 62.808.892 68,670,079

Depreciation expense of property, plant and equipment (Note 14) 5,826,304 31,898,614

Freight 3,249,296 3,803,810

Processing fee (tolling) 2,710,297 2,732,887

Rental 2,578,376 3,563,824

Insurance 2,550,556 1,696,866

Repair and maintenance 1,499,058 1,459,049

Salary and allowances 1,200,486 1,194,772

Others 3,268,298 4,723,865

Total 87,024,052 119,743,766

In 2015, the processing fee (tolling) of US$ 2,710,297 represent the processing fee to PT Texmaco Jaya

Tbk (under bankruptcy) amounting to US$ 546,601 and PT Multikarsa Investama amounting to US$

2,163,696. And in 2014, the processing fee (tolling) of US$ 2,732,887 represent the processing fee to

PT Texmaco Jaya Tbk (under bankruptcy) amounting to US$ 619,631, PT Multikarsa Investama

amounting to US$ 2,113,256 and third parties amounting to US$ 18,380 (Note 42).

In 2015 and 2014, rental expenses to PT Texmaco Jaya Tbk (under bankruptcy) were US$ 140,008 and

US$ 160,568, respectively (Note 42).





103

38. SELLING EXPENSES

2 0 1 5 2 0 1 4

US$ US$

Freight 4,295,782 5,092,421

Marketing expenses 3,302,517 2,848,334

Export charges 2,711,337 3,840,014

Advertising and promotion 19,176 12,661

Others 457,675 532,063

Total 10,786,487 12,325,493

39. GENERAL AND ADMINISTRATIVE EXPENSES

2 0 1 5 2 0 1 4

US$ US$

Salaries, wages and benefits 7,434,695 7,917,700

Employees’ entitlement (Note 25) 1,543,046 1,714,914

Business traveling 988,523 1,053,327

Professional fees 927,372 893,124

Rent 732,964 824,424

Tax expense 545,832 275,650

Communication 386,788 404,277

Stationery 237,651 320,453

Donation and Corporate Social Responsibility 116,373 127,577

Depreciation expense of property, plant and

equipment (Note 14) 114,108 130,197

Entertainment and representation 101,956 109,092

Repairs and maintenance 90,481 163,931

Insurance 64,534 155,620

Electricity and water 46,555 53,710

Amortization expenses (Note 15) 6,274 4,403

Others 1,062,156 880,323

Total 14,399,308 15,028,722





104

40. FINANCE COSTS

2 0 1 5 2 0 1 4

US$ US$

Finance costs:

Interest expense from working capital loan (Note 21) (2,938,380 ) (2,890,000 )

Interest expense from unsecured debts and

notes payable (Note 20)

( 971,905

)

(943,775

)

Interest expense from credit financing payables

(Note 22)

(7,326

)

(12,070

)

Total interest expense (3,917,611 ) (3,845,845 )

Fee on Bank loans (Note 18) (3,645,045 ) (10,638,306 )

Bank charges (323,888 ) (388,895 )

Total finance costs (7,886,544 ) (14,873,046 )

Finance Income:

Interest income from current accounts and

time deposits

22,694

24,726

Total (7,863,850 ) (14,848,320 )

41. MISCELLANEOUS INCOME, NET

2 0 1 5 2 0 1 4

US$ US$

Amortization of deferred revenues (Note 24) 12,563 12,563

Payables’ written-off 4,708 37,509

Others 291,798 13,062

Total 309,069 63,134

42. 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.





105

42. 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 Loans, 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

Mr. Antonius Widyatma Sumarlin 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 5 2 0 1 4 2 0 1 5 2 0 1 4

US$ US$ % %

Trade receivables 19,479,699 21,601,483 8.20 7.86

Non-trade receivables from

related parties

20,601,768

23,692,655

8.67

8.62

Purchase Advances − 56,031 0.00 0.02

Accrued expenses 14,287,803 10,638,306 1.23 0.90

Bank loans 88,135,313 88,250,457 7.62 7.46

Secured debts 661,662,491 661,827,030 57.17 55.95

Working capital loans 22,070,000 22,070,000 1.91 1.87

Manufacturing expenses to related parties accounted for 3.28% and 0.52% for the years ended

December 31, 2015 and 2014, respectively (Note 37).





106

42. RELATED PARTY TRANSACTIONS (Continued)

The details of processing fee (tolling) and rental expenses to related parties are as follows:

2 0 1 5 2 0 1 4

US$ US$

PT Texmaco Jaya Tbk (under bankruptcy) 9 686,609 780,199


Total 2,850,305 2,893,455

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, 2015 and 2014 amounting to Rp 10,099,334,912 and Rp 9,278,271,989,

respectively. No contribution to retirement benefits, entitlement benefits and any other special

benefits were given during the year 2015 and 2014.

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.

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.





107

43. SIGNIFICANT AGREEMENTS

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 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. With effect from January 2014, the tolling fees was became at

least Rp 600,000,000 per month as per amendment agreement No. 006/APF/III/2014 dated March11,

2014.

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, July 1, 2013, January 1, 2014 and July 1, 2014, the Company

agreed to extent the warehouse rental up to December 31, 2014. In December 31, 2014, this

agreement has been extended till June 30, 2015. Further, based on the amendment agreement dated

December 31, 2015, the Company agreed to extent the warehouse rental up to June 30, 2016. As

consequently, the Company should pay the rental expenses amounted to Rp 43,200,000 per month.

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, June 1, 2013, November 29, 2013 and May 30, 2014, the

Company agreed to extent the warehouse rental up to December 31, 2014. Based on the latest

amendment agreement dated December 31, 2014, the Company agreed to extent the warehouse

rental up to May 31, 2015. Further, based on the amendment agreement dated 30 May 2015, the

Company agreed to extent the warehouse rental up to December 31, 2015. And based on the latest

amendment agreement dated December 31, 2015, the Company agreed to extent the warehouse

rental up to 31 May 2016. As consequently, the Company should pay the rental expenses amounted

to Rp 5,000,000 per month.





108

43. SIGNIFICANT AGREEMENTS (Continued)

Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Continued)

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 December 30, 2013, the Company agreed to extent the rental of the chiller machinery up to

December 31, 2014. Further, based on the latest amendment agreement dated December 30, 2014,

the Company agreed to extent the warehouse rental up to December 31, 2015. The latest amendment

agreement on December 31, 2015, the Company agreed to extent the rental of the chiller machinery

up to December 31, 2016. As consequently, the Company should pay the rental expenses amounted

to Rp 5,000,000 per month.

Based on the warehouse rental agreement dated June 12, 2014 between the Company and

PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the Suiting’s warehouse for

six (6) months from July 1, 2014 up to December 31, 2014. Further, based on the latest amendment

agreement dated December 31, 2014, the Company agreed to extent the warehouse rental up to

March 31, 2015. As consequently, the Company should pay the rental expenses amounted to Rp

12,000,000 per month.

Warehouse Agreement with PT Texmaco Taman Synthetics

Based on the rental agreement dated August 1, 2011 between the Company and PT Texmaco Taman

Synthetics, the Company agreed to rent the warehouse to put 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

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 until 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.





109

43. SIGNIFICANT AGREEMENTS (Continued)

Gas Turbine with PT Wismakarya Prasetya (Continued)

Based on the equipment rental agreement dated April 16, 2014 between the Company and PT

Wismakarya Prasetya (under bankruptcy), the Company agreed to rent the power and supply equipment

for five (5) years from January 1, 2014 up to December 31, 2018. This equipments consist of 4 (four)

power supply “Cogen Mitsubishi with capacity 12.50 MW + HRSG” and 1 (one) power supply

“ABB/Siemens with capacity 20 MW + HRSG”. As consequently, the Company should pay the rental

expenses amounted to US$ 40,800 per month. On November 5, 2014, the “ABB/Siemens Turbine with

capacity 20 MW + HRSG” has been bought by the Company on a public auction from the curator

through 4th Loan facility from Damiano Investments BV., Netherland.

Further based on the amendment agreement dated November 24, 2014 between the Company and PT

Wismakarya Prasetya (under bankruptcy), the rental expenses has been changed from US$ 40,800 to

US$ 30,600 each month towards the rental for the balance of 4 (four) turbines. This agreement is valid

for 4 (four) years from January 1, 2015 up to December 31, 2018.

Based on the amendment agreement dated December 18, 2015 between the Company and PT

Wismakarya Prasetya (under bankruptcy), the rental expenses has been changed from US$ 30,600 to

Rp 210,375,000 each month towards the rental for the balance of 3 (three) turbines. This agreement is

valid for 3 (three) years from January 1, 2016 up to December 31, 2018.

44. COMMITMENT

(a) Capital Commitments

The capital expenditure committed but not yet incurred as of December 31, 2015 is approximately

US$ 3,798,084. This is for the maintenance and upgrade of PTA equipments.

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 2016.





110

44. COMMITMENT (Continued)

(b) Operating Lease Commitments

The Company leases various warehouse under non-cancellable operating lease agreements. The

lease terms are between 1 (one) year up to thirty (30) years, and the majority of lease agreements are

renewable at the end of the lease period.

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

Counterparties Leased items Period of agreement Amount (Rp)

PT Texmaco Jaya Tbk

(under bankruptcy)

Warehouse at

Karawang

January 1, 2016 –

June 30, 2016

Rp 43,200,000

each month

Coating Warehouse

at Karawang

January 1, 2016 –

May 31, 2016

Rp 5,000,000

each month

Suiting Warehouse

at Karawang

January 1, 2015 –

March 31, 2015

Rp 5,000,000

each month

Chiller’s Machine at

Karawang

December 31, 2015–

December 31, 2016

Rp 5,000,000

each month

Land at Karawang

January 1, 2010 –

Decermber 31, 2040

Rp 100,000,000

each month

PT Wismakarya Prasetya

(under bankruptcy)

Turbine Machine

at Karawang

January 1, 2015 –

December 31, 2018

US$ 30,600

each month

PT Texmaco Taman

Synthetics

Warehouse at

Semarang

August 1, 2011 –

October 31, 2015

Rp 99,000,000

each month

November 1, 2015 –

January 31,2016

Rp 130,000,000

each month

Februari 1, 2016 –

January 31, 2018

Rp 160,000,000

each month





111

44. COMMITMENT (Continued)

(b) Operating Lease Commitments (Continued)

The future aggregate minimum lease payment under non-cancellable operating leases are as follows:

2 0 1 5 2 0 1 4

US$ US$

No later than 1 year 9 617,222 549,933

Later than 1 year and no later than 5 years 1,447,692 1,487,452

Later than 5 years 144,980 2,025,723

Total 9 2,209,894 4,063,108

45. CONTINGENCIES

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 discussion with PT Bina Prima Perdana (Note 15).





112

45. CONTINGENCIES (Continued)

In 2015, Tomoe Engineering Co. Ltd. (Tomoe) filed a lawsuit against the Company in Pengadilan

Negeri Jakarta Selatan for breach of contract and claimed an amount of JPY 470, 000,000 towards

compensation for the cancellation of order. The Company had earlier during 2010/2011 requested

for quotation for supply of spares for its PTA plant and held preliminary negotiations with the

suppliers. Company has informed the suppliers of its intention to procure the spares subject to

finalization of negotiation. Tomoe claimed to have procured the materials for the above and asked

for the compensation from the Company. Company defended this case and got a court verdict in its

favour in January 2016. The Company is awaiting the copy of the decision.

46. 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 PSAK

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.





113

46. SEGMENT INFORMATION (Continued)

Chemical Weaving

Industry and and

2 0 1 5 Synthetic fibre Knitting Others Elimination Total

US$ US$ US$ US$ US$

SEGMENT SALES:

External sales

Local 314,619,158 7,057,056 – – 321,676,214

Export

Europe 31,538,631 5,968 – – 31,544,599

America 15,684,280 – – – 15,684,280

Asia 14,769,527 680,142 – – 15,449,668

Africa 4,687,398 – – – 4,687,398

Australia 1,013,836 – – – 1,013,836

Total Export 67,693,672 686,110 – – 68,379,781

Inter segment sales 128,691,271 – – (128,691,271 ) –

Total segment sales 511,004,101 7,743,166 – (128,691,271 ) 390,055,996

Segment result 6,831,637 1,321,566 8,153,203

Unallocated expenses (19,065,566 ) (734,984 ) (19,800,550 )

Profit (loss) before income tax (12,233,929 ) 586,582 (11,647,347 )

Tax income (6,139,325 )

Total loss for the year (17,786,672 )

STATEMENT OF FINANCIAL

POSITION:

Segment assets (569,844,453 ) (3,550,521 ) (759,218,126 ) 1,099,071,109 (233,541,991 )

Segment liabilities 1,492,128,186 3,922,444 761,938,304 (1,099,040,218 ) 1,158,948,716

OTHER INFORMATION:

Capital expenditures (7,774,375 ) (59,168 ) (7,833,543 )

Depreciation expense (5,870,764 ) (69,645 ) (5,940,409 )





114


Chemical Weaving

Industry and and


US$ US$ US$ US$ US$

SEGMENT SALES:

External sales

Local 405,351,272 6,932,909 412,284,181

Export

Europe 36,559,077 17,506 36,576,583

America 21,585,719 21,585,719

Asia 13,283,602 1,267,301 14,550,903

Africa 12,263,334 23,520 12,286,854

Australia 697,421 697,421

Total Export 84,389,153 1,308,327 85,697,480

Inter segment sales 189,672,953 (189,672,953 )

Total segment sales 679,413,378 8,241,236 (189,672,953 ) 497,981,661

Segment result (16,526,795 ) 2,699,847 (13,826,948 )

Unallocated expenses (66,970,562 ) (873,444 ) (67,844,006 )

Profit (loss) before income tax (83,497,357 ) 1,826,403 (81,670,954 )

Tax income 1,734,736

Total loss for the year (79,936,218 )

Other comprehensive income,

net after tax

Total comprehensive loss for the year (79,936,218 )





115


Chemical Weaving

Industry and and


US$ US$ US$ US$ US$

SEGMENT SALES (Continued):

STATEMENT OF FINANCIAL

POSITION:

Segment assets (271,140,712 ) (3,814,965 ) (20,576 ) (274,976,253 )

Segment liabilities 1,182,111,368 626,952 74,931 1,182,813,251

OTHER INFORMATION:

Capital expenditures (11,177,502 ) (215,075 ) (11,392,577 )

Depreciation expense (31,965,513 ) (63,298 ) (32,028,811 )

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 5 2 0 1 4 2 0 1 5 2 0 1 4

US$ US$ US$ US$

Indonesia 61,989,672 61,485,730 6,450,627 11,392,577





116

47. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Company and its Subsidiaries have assets and liabilities denominated in foreign currencies as

follows:

2 0 1 5 2 0 1 4

Foreign Equivalent in Foreign Equivalent in

Currency US$ Currency US$

Assets:

Cash and cash equivalents IDR 21,729,152,865 1,575,147 9,747,601,310 783,566

EUR 1,307 1,428 2,307 2,806

SGD 8,721 6,164 6,405 4,851

SEK 1,108 125 1,108 143

Trade receivables:

Third parties IDR 122,613,897,042 8,888,315

Related parties IDR 268,722,447,174 19,479,699 268,722,447,174 21,601,483

Other receivables IDR 488,496,290,040 35,411,113 16,640,244,635 1,337,640

Other current financial assets IDR 5,941,270,183 430,682 5,941,270,183 477,594


related parties

IDR

360,790,425,393

26,153,709

327,890,490,777

26,358,200

Other non-current financial

Assets

IDR

3,959,413,310

287,018

3,959,414,637

318,282

Total assets 92,233,400 50,884,565

Liabilities:

Trade payables:

Third parties IDR 73,779,315,675 5,348,265 43,682,608,557 3,511,456

SEK 5,336,392 689,325

EUR 515,773 563,432 530,113 644,883

YEN 3,742,080 31,066 3,730,811 31,265

SGD 640 452 74,464 56,399

CHF 12,316 12,456 23,345 23,613

Carried forward 5,955,671 4,956,941





117

47. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

(Continued)

2 0 1 5 2 0 1 4

Foreign Equivalent in Foreign Equivalent in

Currency US$ Currency US$

Liabilities (Continued):

Brought forward 5,955,671 4,956,941

Accrued expenses IDR 479,395,011,200 34,751,360 448,134,019,400 36,023,635

Secured Debts IDR 1,341,051,955,403 97,212,898 1,341,051,955,403 107,801,604

EUR 14,262,805 15,580,706 14,262,806 17,350,716

YEN 3,001,711,400 24,919,797 3,001,711,400 25,154,728

Other short-term financial

liabilities IDR 51,696,644,961 3,752,296 13.568.701.433 838,891

EUR 25,018 27,329 – –

Credit financing payables IDR 652,765,605 47,319 1,286,103,046 103,384

Long-term employee benefit IDR 134,636,454,795 9,759,801 150,836,853,560 12,125,149

Total liabilities 192,007,177 204,355,048

Net liabilities (99,773,777 ) (153,470,483 )

Monetary assets and liabilities mentioned above are translated using Bank Indonesia closing rate as at

December 31, 2015 and 2014.

48. 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.





118

48. FINANCIAL RISK MANAGEMENT (Continued)

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, 2015 and 2014, without considering the effects of collaterals and other risk mitigation

techniques, is presented below:

2 0 1 5 2 0 1 4

US$ US$

Cash and cash equivalents 2,657,148 6,184,094

Trade receivables, net 51,046,746 62,791,642

Other receivables, net 2,787,973 3,426,117

Other current financial assets 5,969,375 8,693,988

Non-trade receivables from related parties, net 19,552,932 23,692,655

Other non-current financial assets 991,274 1,022,539

Total financial assets 83,005,448 105,811,035

(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:





119


a. Credit Risks (Continued)

(a) Cash and Cash Equivalents (Continued)

2 0 1 5 2 0 1 4

US$ US$

Counterparties with external credit rating:

- Fitch:

F1+ 1,496,346 5,579,010

F3 216,633 309,885

- Pefindo:

idAAA 746,281 70,583

idAA+ 113,647 126,515

2,572,907 6,085,993

Counterparties without external credit rating 84,328 98,101

Total cash and cash equivalents 2,657,148 6,184,094

(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.

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

the credit term. Moreover, 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.





120



(b) Trade Receivables (Continued)

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 5 2 0 1 4

Gross Amount Impairment Gross Amount Impairment

Counterparties without

external credit rating:

Group 1 30,254,675 – 40,836,529 –

Group 2 1,312,372 – 353,630 –

Group 3 35,137,644 15,657,945 37,259,428 15,657,945

Total 66,704,691 15,657,945 78,449,587 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.

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.





121



(c) Other receivables (Continued)

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 5 2 0 1 4

Gross Amount Impairment Gross Amount Impairment

Counterparties without

external credit rating:

Group 1 1,547,695 – 2,014,178 –

Group 2 145,600 – 175,928 –

Group 3 68,732,434 67,637,756 68,873,767 67,637,756

Total 70,425,729 67,637,756 71,063,873 67,637,756

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.

(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.





122


b. Liquidity Risk (Continued)

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, 2015:

Trade payables 12,241,858 − − −

Accrued expenses 50,446,641 − − −

Bank Loans 88,135,716 − − −

Secured Debts 945,081,879 − − −

Unsecured Debts and

Notes payable

−

−

5,526,320

18,506,316

Working Capital Loans − − 22,070,000 −

Credit Financing Payables 20,210 21,169 5,940

Other short-term

financial liabilities

5,357,542

−

−

−

Total 1,101,283,846 21,169 27,602,260 18,506,316

December 31, 2014:

Trade payables 25,584,407 Accrued expenses 49,969,699 Bank Loans 88,250,457 Secured Debts 957,675,525 Unsecured Debts and

Notes payable

5,193,493

17,888,700

Working Capital Loans 22,070,000 Credit Financing Payables 31,994 24,137 47,253 Other short-term


4,716,794

Total 1,126,228,876 24,137 27,310,746 17,888,700





123


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

interests 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,

2015 and 2014, 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 exposure in the

Company and its Subsidiaries.

(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 47).





124


c. Market Risks (Continued)

(2) Foreign Currency Risks (Continued)

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 profit or loss and other comprehensive income for the year ended December 31,

2015:

2 0 1 5

US$

IDR decreased by 2.90% 1,548,124

EUR decreased by 2.80% 428,066

YEN increased by 2.74% 789,478

SEK increased by 0.53% 1

SGD decreased by 2.65% (152 )

CHF decreased by 3.62% 451

Net profit 2,765,968

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 2.74% for Japanese Yen and 0.53% for Krona Swedish. And the estimate changes of foreign

exchange rate are decreased by 2,90% for Indonesia Rupiah, 2.80% for European Euro, 2.65%

for Singapore Dollar, and 3.62% for Swiss Franc if compared with the exchange rate on

December 31, 2015.

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, 2015, the financial liabilities denominated in foreign currencies are

in excess of financial assets denominated in foreign currencies at amount of US$ 99,746,448

due to un-restructured 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 December 31, 2015. As of December 31, 2015, the unused portion

was US$ 7,996,366.





125


Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and

measurement or for disclosure purposes.

PSAK 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.

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 are measured and recognized using the

fair value measurement of level 2 and 3.





126


Fair value estimation (Continued)

The fair values of financial assets and liabilities together with the carrying amounts are as follows:

December 31, 2015 December 31, 2014

Carrying amount Fair value Carrying amount Fair value

US$ US$ US$ US$

Financial assets:

Current Assets:

Cash and cash equivalents 2,657,148 2,657,148 6,184,094 6,184,094

Trade receivables, net 51,046,746 51,046,746 62,791,642 62,791,642

Other receivables, net 2,787,973 2,787,973 3,426,117 3,426,117

Other current financial assets 5,969,375 5,969,375 8,693,988 8,693,988

Non-current assets:


related parties 19,552,932 19,552,932 23,692,655 23,692,655


Assets 991,274 991,274 1,022,539 1,022,539

Total financial assets 83,005,448 83,005,448 105,811,035 105,811,035

Financial liabilities:

Current Liabilities:

Trade payables 12,241,858 12,241,858 25,584,407 25,584,407

Accrued expenses 50,446,641 50,446,641 49,969,699 49,969,699

Bank Loans 88,135,716 88,135,716 88,250,457 87,820,594

Secured Debts 945,081,879 945,081,879 957,675,525 957,675,525

Current portion of long-

term liabilities:

Credit financing payables 41,379 − 56,131 56,131

Other short-term


5,357,542

5,357,542

4,716,794

4,716,794

Non-current:

Unsecured Debts

and Notes Payable 24,032,636 20,900,635 23,082,193 19,536,576

Working capital loans 22,070,000 20,914,617 22,070,000 21,192,615

Credit financing payables 5,940 5,940 47,253 47,253

Total financial liabilities 1,147,413,591 1,143,084,882 1,171,452,459 1,166,599,594

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.





127



Long-term fixed-rate financial instruments with remaining maturities are over one (1) year. 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, 2015 and 2014:

December 31, 2015

Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets:

Current Assets:

Cash and cash equivalents − 2,657,148 − 2,657,148

Trade receivables, net − 51,046,746 − 51,046,746

Other receivables, net − 2,787,973 − 2,787,973

Other current financial assets − 5,969,375 − 5,969,375

Non-current assets:


related parties − − 19,552,932 19,552,932


assets − − 991,274 991,274

Total financial assets 62,461,242 20,544,206 83,005,448



Trade payables − 12,241,858 − 12,241,858

Accrued expenses − 50,446,641 − 50,446,641

Bank Loans − 88,135,716 − 88,135,716

Secured Debts − 945,081,879 − 945,081,879


term liabilities:

Credit financing payables − −

Other short-term


−

5,357,542

−

5,357,542

Non-current:

Unsecured Debts

and Notes Payable − 20,900,635 − 20,900,635

Working capital loans − 20,914,617 − 20,914,617

Credit financing payables − 5,940 − 5,940

Total financial liabilities − 1,143,084,882 − 1,143,084,828





128



December 31, 2014

Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets:

Current Assets:

Cash and cash equivalents – 6,184,094 – 6,184,094

Trade receivables, net – 62,791,642 – 62,791,642

Other receivables, net – 3,426,117 – 3,426,117

Other current financial assets – 8,693,988 – 8,693,988

Non-current assets:


related parties – – 23,692,655 23,692,655


assets – – 1,022,539 1,022,539

Total financial assets – 81,095,841 24,715,194 105,811,035



Trade payables – 25,584,407 – 25,584,407

Accrued expenses – 49,969,699 – 49,969,699

Bank Loans – 87,820,594 – 87,820,594

Secured Debts – – 957,675,525 957,675,525


term liabilities:

Credit financing payables – 56,131 – 56,131

Other short-term


–

4,716,794

–

4,716,794

Non-current:

Unsecured Debts

and Notes Payable – 19,536,576 – 19,536,576

Working capital loans – 21,192,615 – 21,192,615

Credit financing payables – 47,253 – 47,253

Total financial liabilities – 208,924,069 957,675,525 1,166,599,594

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 24,836,407 1,029,093 (965,681,557 ) (939,816,057 )

Gain (loss) on foreign

exchange, net

(504,647

)

(6,554

)

8,006,032

7,494,831

Settlement of tolling expenses (639,105 ) – – (639,105 )

Ending balance 23,692,655 1,022,539 (957,675,525 ) (932,960,331 )





129


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, 2015 and 2014 are as follows:

2 0 1 5 2 0 1 4

US$ US$

Total borrowings 1,079,320,231 1,091,181,559

Less:

Cash and cash equivalents (2,657,148 ) (6,184,094 )

Other current financial assets (5,969,375 ) (321,543 )

Other non-current financial assets (991,274 ) (1,022,539 )

Net debt 1,069,702,434 1,083,653,383

Total deficiency (925,406,725 ) (909,023,970 )

Gearing ratio (0.86 ) (0.84 )

The total borrowings include the unrestructured secured debts of US$ 957,675,525. 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.

49. EVENTS AFTER THE REPORTING PERIOD

In February 26, 2016, the Company is fully insured for its property for value of US$ 516,500,000

including business interruption of US$ 63,000,000 for the year 2016 through broking firm, Howden

Indonesia.





130

50. RESTATEMENTS OF THE PRIOR YEARS FINANCIAL STATEMENTS

Effective January 1, 2015, the Company adopted PSAK No. 24 (Revised 2013), “Employee Benefits”,

there is a difference in measurement and assumptions set forth in more detail, at the same timely requires

the direct recognition of actuarial gains or losses in Other Comprehensive Income (previously amortized

or suspended). The Company recalculated Employee Benefits Liabilities with the new method, causing

changes to some accounts. As a result of the change in method, the Statement of Financial Position as of

December 31, 2014 and January 1, 2014, and the statement of profit or loss and other comprehensive

income for the years ended December 31, 2014 have been restated.

PSAK provides among other things, (i) the abolition of the “corridor approach” that is allowed in the

previous version and (ii) provide a significant change in the recognition, presentation and disclosure of

employee benefits, among others, as follows:

Actuarial gains and losses to be recognized today as other comprehensive income and are

permanently excluded from income;

The return on plan assets are expected to no longer be recognized in the statement of profit or loss.

Returns are expected to be replaced by recognizing interest income (or expense) of assets (or

liabilities) defined benefit net in the statement of profit or loss, which is calculated using the discount

rate to measure pension liabilities;

Past service costs that have not vested can no longer be deferred and recognized over the vesting

period of the future. Instead, all past service costs will be recognized at the first time between when

the amendment / curtailment occurs or when the Company recognizes the cost of restructuring or

termination of related employment.

The changes were made so the net pension asset or liability recognized in the statement of financial

position will reflect the full value of the pension fund deficit or surplus.

The impact of the restatement is as follows:

December 31, 2014

As previously

reported

Restatement

Adjustment

As restated

US$ US$ US$

Statements of Financial Position

Deferred tax assets 11,354,930 395,657 11,750,587

Post-employment benefit obligations (10,542,520 ) (1,582,629 ) (12,125,149 )

Accumulated deficit (2,167,849,482 ) (1,186,972 ) (2,169,036,454 )

Statement of Profit or Loss and

Other Comprehensive Income

General and administrative expense 15,197,963 169,241 15,028,722

Loss (gain) on foreign exchange (4,959,108 ) 954,057 (4,005,051 )

Deferred tax income (1,734,736 ) (45,254 ) (1,779,990 )

Loss for the year (79,936,218 ) 135,760 (79,800,458 )

Remeasurement of employee benefits, net – (885,071 ) (885,071 )

Total Comprehensive loss for the year (79,936,218 ) (749,311 ) (80,685,529 )





131

50. RESTATEMENT OF THE FINANCIAL STATEMENTS (Continued)

January 1, 2014

As previously

reported Restatement

Adjustment

As restated

US$ US$ US$

Statements of Financial Position

Deferred tax assets 9,620,194 145,887 9,766,081

Post-employment benefit obligations (9,392,014 ) (583,548 ) (9,975,562 )

Accumulated deficit (2,087,913,264 ) 437,661 (2,087,475,603 )

Statement of Profit or Loss and

Other Comprehensive Income

General and administrative expense 18,004,104 7,630,996 25,635,100

Loss (gain) on foreign exchange (31,414,704 ) (1,657,732 ) (33,072,436 )

Deferred tax expense (income) (6,403,573 ) (1,493,316 ) (7,896,889 )

Loss for the year (30,061,931 ) 3,604,626 (26,457,305 )

Remeasurement of employee benefits, net – (4,042,287 ) (4,042,287 )

Total Comprehensive loss for the year (30,061,931 ) (437,661 ) (30,499,592 )

51. NEW PROSPECTIVE ACCOUNTING STANDARDS

The Indonesian Financial Accounting Standards Board has issued new or revision of the following the

Indonesian financial Accounting Standards (‘PSAK”) and Its interpretation (“ISAK”), the accounting

standards will be effective or applicable on the Company financial statements for the period or on after

January 1, 2016:

- SFAS 4 (revised 2015) : Separate Financial Statement

- SFAS 5 (revised 2015) : Operating Segment

- SFAS 7 (revised 2015) : Related Party Disclosures

- SFAS 13 (revised 2015): Investment Property

- SFAS 15 (revised 2015): Investment in Associates and Joint ventures

- SFAS 16 (revised 2015): Fixed Asset

- SFAS 19 (revised 2015): Intangible Asset

- SFAS 22 (revised 2015): Business Combination

- SFAS 24 (revised 2015): Employee Benefit

- SFAS 25 (revised 2015): Accounting Policies, Changes in Accounting Estimates and Errors

- SFAS 53 (revised 2015): Share Based Payment

- SFAS 65 (revised 2015): Consolidated Financial Statement

- SFAS 66 (revised 2015): Joint Arrangements

- SFAS 67 (revised 2015): Disclosure of Interests in Other Entities

- SFAS 68 (revised 2015): Fair Value Measurement

- IFAS 30 (revised 2015) : Collection

- IFAS 31 (revised 2015) : Interpretation of Scope SFAS 13: Investment Property





132

51. NEW PROSPECTIVE ACCOUNTING STANDARDS (Continued)

The Indonesian Financial Accounting Standards Board has issued new on revision of the following the

Indonesian financial Accounting Standards (‘PSAK”) and Its Interpretation (“ISAK”), the accounting

standards will be effective or applicable on the Company financial statement for the period or on after

January 1, 2017:

- SFAS 1 (revised 2015) : Presentation of Financial Statement

- IFAS 31 (revised 2015) : Interpretation of Scope

- SFAS 13 : Investment Property

- SFAS 69 : Agriculture (Effective January 1, 2018)

As at the authorization date of this financial statements, the Company’s management is still evaluating

the potential impact of these new and revised standards to the Company’s financial statements.

52. ACCOUNT RECLASSIFICATIONS

Certain accounts in the 2014 consolidated financial statements have been reclassified in line with the

presentation of the 2015 consolidated financial statements. The details is a follows:

Previous report As Restated Amount Descriptions

US$

Other short-term

financial liabilities Short – term employee

benefit liabilities 251,842 More appropriate presentation

Accrued expenses

Short – term employee

benefit liabilities

181,720

More appropriate presentation

53. SUPPLEMENTARY FINANCIAL INFORMATION

The Company published consolidated financial statements. The supplementary financial information of

PT Asia Pacific Fibers Tbk (Parent Entity only) in appendix 1 until appendix 6 that has been prepared in

order to analyze 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.

Appendix -1


(PARENT ENTITY ONLY)

ADDITIONAL FINANCIAL INFORMATION

STATEMENTS OF FINANCIAL POSITION

December 31, 2015, December 31, 2014 and January 1, 2014

December 31,

2 0 1 5

December 31,

2 0 1 4

(As Restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 2,636,572 6,163,518 5,080,845

Trade receivables, net after allowance for

impairment of US$ 15,657,945 in 2015, 2014

and 2013

Third parties 31,567,047 41,190,159 51,867,585

Related parties 19,479,699 21,601,483 22,046,308

Other receivables, net after allowance for

impairment of US$ 67,637,756 in 2015 and

2014, and US$ 36,721,575 in 2013

Third parties 2,787,973 3,426,117 33,854,362

Other current financial assets 5,969,375 8,693,988 9,158,563

Inventories 61,164,596 75,507,062 86,227,237

Purchase advances

Third parties 6,076,917 2,338,194 6,862,883

Related party – 56,031 54,799

Prepaid taxes 11,419,541 15,902,785 17,484,492

Prepaid expenses 2,128,943 2,520,486 1,691,803

Total Current Assets 143,230,663 177,399,823 234,328,877

NON–CURRENT ASSETS

Non-trade receivables from related parties, net

after allowance for impairment of

US$ 111,992,653 in 2015, 2014 and 2013 22,218,477 26,358,200 27,501,952

Other non-current financial assets 991,274 1,022,539 1,029,093

Property, plant and equipment, net after

accumulated depreciation of US$ 1,708,786,731

in 2015, US$ 1,703,166,009 in 2014,

and US$ 1,714,202,396 in 2013 61,876,082 61,365,864 82,224,751

Intangible Assets 113,590 119,866 12,087

Investment in subsidiaries 31,170 31,170 31,170

Deferred tax assets 6,710,119 11,750,587 9,766,081

Total Non–Current Assets 91,940,712 100,648,226 120,565,134

TOTAL ASSETS 235,171,375 278,048,049 354,894,011

Appendix -2


(PARENT ENTITY ONLY) ADDITIONAL FINANCIAL INFORMATION

STATEMENTS OF FINANCIAL POSITION (Continued)


December 31,

2 0 1 5

December 31,

2 0 1 4

(As Restated)

January 1,

2 0 1 4

(As restated)

US$ US$ US$

LIABILITIES AND EQUITY (DEFICIENCY)

CURRENT LIABILITIES

Trade payables

Third parties 12,241,858 25,584,407 33,115,314

Accrued expenses 50,446,641 49,969,699 36,967,461

Taxes payable 149,767 159,621 321,900

Bank Loans 88,135,716 88,250,457 87,910,672

Short – term employee benefit liabilities 366,276 433,562 –

Secured Debts 945,081,879 957,675,525 965,681,557

Current portion of long-term liabilities:

Credit financing payables 41,379 56,131 30,572

Other short-term financial liabilities 5,282,611 4,641,863 6,248,666

Total Current Liabilities 1,101,746,127 1,126,771,265 1,130,276,142

NON–CURRENT LIABILITIES

Borrowing from Other Financial

Institutions:

Unsecured Debts and Notes Payable 24,032,636 23,082,193 22,624,894

Working capital loans 22,070,000 22,070,000 17,340,000 )

Credit financing payables 5,940 47,253 27,132

Deferred revenues 212,526 225,089 237,652

Long-term employee benefit liabilities 9,759,801 12,125,149 9,975,562

Total Non–Current Liabilities 56,080,903 57,549,684 50,205,240

Total Liabilities 1,157,827,030 1,184,320,949 1,180,481,382

Appendix -3




STATEMENTS OF FINANCIAL POSITION (Continued)


December 31,

2 0 1 5

December 31,

2 0 1 4

(As Restated)

January 1,

2 0 1 4

(As restated)

US$ 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 2015, 2014 and 2013

Issued and paid up 219,696,000 Series A and

2,276,057,347 Series C in 2015, 2014 and 2013 635,689,316 635,689,316 635,689,316

Additional paid-in capital 624,344,507 624,344,507 624,344,507

Retained earnings (accumulated deficit)

Appropriated 2,345,301 2,345,301 2,345,301

Unappropriated (2,185,034,779 ) (2,168,652,024 ) (2,087,966,495 )

Total Deficiency (922,655,655 ) (906,272,900 ) (825,587,371 )

TOTAL LIABILITIES AND

EQUITY (DEFICIENCY) 235,171,375 278,048,049 354,894,011

Appendix -4




STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


2 0 1 5 2 0 1 4

US$ US$

REVENUES

Net sales 387,053,770 493,567,021

Other operating revenues 3,002,226 4,414,640

Total revenues 390,055,996 497,981,661

COST OF GOODS SOLD (381,902,793 ) (511,808,609 )

GROSS LOSS 8,153,203 (13,826,948 )

Impairment of other receivables – (34,267,327 )

General and administrative expenses (14,399,308 ) (15,028,722 )

Finance costs (7,863,850 ) (14,848,320 )

Selling expenses (10,786,487 ) (12,325,493 )

Gain on foreign exchange transactions, net 11,236,898 4,970,881

Insurance claim settlement, net 1,703,128 3,772,855

Miscellaneous income, net 309,069 63,134

(19,800,550 ) (67,662,992 )

LOSS BEFORE INCOME TAX (11,647,347 ) (81,489,940 )

TAX INCOME (EXPENSE)

Current period (1,566,830 ) –

Deferred (4,572,495 ) 1,689,482

Total tax income (expense) (6,139,325 ) 1,689,482

TOTAL LOSS FOR THE YEAR (17,786,672 ) (79,800,458 )

OTHER COMPREHENSIVE INCOME (EXPENSE),

NET AFTER TAX

Items that will not be reclassified to profit or loss:

Remeasurement of post employment benefit

Obligations 1,871,890 (1,180,095 )

Related income tax benefit (467,973 ) 295,024

Items that will be reclassified to profit on loss: – –

Total Other Comprehensive Loss (Income), net of tax 1,403,917 (885,071 ) )

(16,382,755 ) (80,685,529 )

Total Net Loss Attributable to the Owners of the Company (17,786,672 ) (79,800,458 )

Total Comprehensive Loss Attributable to the Owners of the Company (16,382,755 ) (80,685,529 )

EARNING (LOSS) PER SHARE:

Basic (0.01 ) (0.03 )

Diluted (0.01 ) (0.03 )

Appendix -5



STATEMENTS OF CHANGES IN EQUITY


Retained Earnings

(Accumulated deficit)

Share Capital

Additional

paid-in capital

Appropriated

Unappropriated

Total equity

(deficiency)

US$ US$ US$ US$ US$


Adjustment on adoption of PSAK 24

(revised 2013) (437,661 ) (437,661 )

balance as of January 31, 2013

(As restated)

635,689,316

624,344,507

2,345,301

(2,087,966,495

)

(825,587,371

)


Other comprehensive income, net after tax – – – (885,071 ) (885,071 )



Other comprehensive income, net after tax – – – 1,403,917 1,403,917


Appendix -6



STATEMENTS OF CASH FLOWS


DRAFT

2 0 1 5 2 0 1 4

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipt from customers 401,800,894 538,453,200

Payment to suppliers (288,202,470 ) (420,652,470 )

Payment of salaries (8,702,467 ) (16,024,232 )

Other operating cash payments, net (96,818,606 ) (91,616,880 )

Cash provided by operations 8,077,351 10,159,618

Interest received 22,622 23,975

Interest expense and bank charges paid (7,221,113 ) (5,364,680 )

Cash receipt from insurance claim settlement 1,703,128 3,583,335

Payment of income tax (4,475,260 ) (5,426,618 )

Refund of income tax 4,747,807 4,911,387

Net Cash Provided By Operating Activities 2,854,535 7,887,017

CASH FLOWS FROM INVESTING ACTIVITIES

Payment to acquire property, plant and equipment (6,450,627 ) (11,225,409 )

Payment to acquire intangible assets – (112,182 )

Net Cash Used In Investing Activities (6,450,627 ) (11,337,591 )

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt of working capital loans – 4,730,000

Payment of working capital loans (114,741 ) –

Payment of credit financing payables (56,065 ) (68,023 )

Net Cash Provided By (Used In) Financing Activities (170,806 ) 4,661,977

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS

(3,766,898

)

1,211,403

EFFECT OF FOREIGN EXCHANGE RATE 239,952 (128,730 )


AT BEGINNING OF YEAR

6,163,518

5,080,845


AT END OF YEAR

2,636,572

6,163,518

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