ken can a prospectus july 2008

Kencana Agri Limitedkencanaagri.com

3 Shenton Way#10-06 Shenton House Singapore 068805

Graha KencanaJl. Raya Perjuangan No.88GKJakarta Barat 11530 Indonesia

Kencana Agri LimitedGrowth . Excellence . Integrity

PROSPECTUS DATED 17 JULY 2008(registered by the Monetary Authority of Singapore on 17 July 2008)

This document is important. If you are in any doubt as to the action you should take, you should consult your legal, fi nancial, tax or other professional adviser.

We have applied to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in, and for quotation of, all the ordinary shares (the “Shares”) in the capital of Kencana Agri Limited (the “Company”) already issued and the new Shares (the “New Shares”) which are the subject of this Invitation (as defi ned herein) on the Main Board of the SGX-ST. Such permission will be granted when we have been admitted to the Offi cial List of the SGX-ST. The dealing in and quotation of the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in and for quotation of all our existing issued Shares and the New Shares. Monies paid in respect of any application accepted will be returned to you, at your own risk, without interest or any share of revenues or other benefi t arising therefrom if the completion of the Invitation does not occur if the said permission is not granted or for any other reason and you will not have any claim against us or DBS Bank Ltd, the Issue Manager (as defi ned herein), or DBS Bank Ltd and CIMB-GK Securities Pte. Ltd., the Joint Underwriters and Placement Agents (as defi ned herein).

The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Admission to the Offi cial List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries or our Shares, including the New Shares.

A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”) on 16 June 2008 and 17 July 2008 respectively. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”), or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the Shares, or the New Shares being offered or in respect of which the Invitation is made, for investment.

Investing in our Shares involves risks. Potential investors in our Company are advised to read the section “Risk Factors” of this Prospectus and the rest of this Prospectus carefully and to seek professional advice if in doubt. No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority.

The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and may not be offered or sold in the United States or to U.S. persons, as defi ned in Regulation S under the U.S. Securities Act (“Regulation S”) unless the Shares are registered under the U.S. Securities Act, or an exemption from the registration requirements of the U.S. Securities Act is available. The Shares are being offered outside the United States in accordance with Regulation S and may not be offered or sold within the United States or to, or for the account or benefi t of, U.S. persons, except to persons in offshore transactions in reliance on Regulation S. For a description of certain restrictions on transfer of the Shares, see the section “Transfer Restrictions” of this Prospectus.

The Shares, or the New Shares may not be offered or sold, directly or indirectly in Indonesia or to Indonesian citizen in a manner constituting a public offering under the laws and regulations of the Republic of Indonesia.

Kencana Agri Limited(Registration Number: 200717793E)

(Incorporated in the Republic of Singapore)

Invitation in respect of 200,000,000 New Shares comprising:(a) 1,000,000 Offer Shares at S$0.305 each by way of public offer; and(b) 199,000,000 Placement Shares by way of placement, comprising: (i) 186,600,000 Placement Shares at S$0.305 each for applications by way of

Placement Share application forms or such other forms of application as the Issue Manager and the Joint Underwriters and Placement Agents may, in consultation with the Company, deem appropriate;

(ii) 300,000 Internet Placement Shares at S$0.305 each for applications made through the Internet website of DBS Vickers Securities (Singapore) Pte Ltd; and

(iii) 12,100,000 Reserved Shares at S$0.305 each reserved for our employees, business associates, Independent Directors and persons who have contributed to the success of our Group,

payable in full on application.

Issue Manager

Joint Underwriters and Placement Agents

Kencana Agri Lim

ited

Growth . Excellence.Integrity

Kencana Agri Limited (“Kencana”) is a fast-growing producer of crude palm oil (“CPO”) and crude palm kernel oil (“CPKO”)

in Indonesia, with oil palm plantations strategically located in the Sumatera and Kalimantan regions, where climatic conditions are well-

suited for the planting of oil palms. We aim to be a leading palm oil producer and supplier of choice for the local Indonesian and international markets. We

have successfully grown our land bank from 9,000 hectares in 1995 to 107,782* hectares as at the Latest Practicable Date.

*Inclusive of land bank under our Plasma Programme

Our Oil Palm Plantations & Facilities

As at Latest Practicable Date Sumatera Kalimantan Total

Own Land Bank (Hectares) 14,331 81,079 95,410

Plasma Programme Land Bank (Hectares) 4,791 7,581 12,372

Our Aggregate Land Bank 19,122 88,660 107,782

Own Planted Area (Hectares) 5,587 18,762 24,349

Plasma Programme Planted Area (Hectares) 4,783 3,198 7,981

Our Aggregate Planted Area 10,370 21,960 32,330

For the Year ended 31 Dec 2007

Average Prime fresh palm fruit bunches (“FFB”) Yield (MT/Hectare) 21.9 21.7 -

Average Oil Extraction Rate: CPO (%) 20.5 22.1 -

Average Oil Extraction Rate: CPKO (%) 41.2 41.3 -

Palm Oil Mill: Production Capacity (MT/Hour) 60 60 120

Kernel Crushing Plant: Production Capacity (MT/Day) 135 300 435

Bulking Terminal: Tank Storage Capacity (MT) 19,500 - 19,500

Vessels: 2 Barges, Max. Capacity (MT) - - 4,500

Renewable Biomass Power Generation: Max. Capacity (MW) 6 - 6

Oil palm estate Oil palm estate with palm oil mill and kernel crushing plantBulking terminalBiomass power generation

stateOil palm estatlm estate with palm Oil palm

mill and kernel crushing plantoil miBulking terminalBBiomass power generation

Bangka

BelitungSouthKalimantan

Bali

Surabaya

Medan

Dumai

Ketapang Balikpapan

SoutheastSulawesi

West MalaysiaEast Malaysia

IndonesiaJakarta

Samarinda

West Kalimantan

CentralKalimantan

EastKalimantan

Bulungan

KutaiSumatera

Singapore

Our Business & Operations

Financial Highlights

0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

36.6

FY05

41.1

FY06

69.3

FY07

USD ’million

Revenue

Plantation Products Supporting BusinessesProcessing

Plantation

Crude Palm Oil

Crude Palm Kernel Oil

Biomass Powerplant

Bulking TerminalPalm Oil Mill

Kernel Crushing Plant

Our integrated plantation operations comprise plantations, palm oil mills, kernel crushing plants, bulking facilities and logistics services, as well as a renewable biomass power plant to support and complement our plantation operations.

0

10.0

-10.0

20.0

30.0

40.0

50.0

60.0

(7.0)

USD ’million

14.8

39.2

Profi t/(loss) for the year*

FY05 FY06 FY07FY05 FY06 FY07

Gross Profi t Margin

0 0.0%

5.0 5.0%

10.0 10.0%

15.0 15.0%

20.0 20.0%

25.0 25.0%

30.0

35.0

30.0%

35.0%

USD ’million(Gross Profi t) Gross Profi t Margin

05FY05

4.4

12.1%

FY06

8.5

20.7%

FY07

23.5

33.9%

Gross Profi t and Gross Profi t Margin

*Including net gains/(losses) on fair value changes in biological assets.

Logistics

Competitive Strengths

Signifi cant cultivatable land bank with new planting potential

• We intend to increase our planted area from 24,349 hectares as at the Latest Practicable Date to over 80,000 hectares in the next fi ve years

Potential benefi ts from maturing oil palms in the near future

• As at the Latest Practicable Date, approximately 50% of our planted area is immature. We expect the majority of these immature plants to mature from 2009 to 2010, thus helping to increase our FFB harvests, reduce our reliance on third party suppliers, lower our unit production cost and improve our average CPO extraction rates

Age Profi le of Planted Oil Palm Trees

Proven and recognised track record in plantation cultivation and management

• We have an experienced and committed management team led by our Chairman and CEO, Mr Henry Maknawi• Our management’s track record is demonstrated by successful cultivation of all our current

plantations from greenfi eld land• We have received recognition from the provincial governments in the Sumatera and Kalimantan

regions based on our management and administration of the Plasma Programme and social, economic and environmental considerations

Integrated value-chain resulting in operational synergies

• Our plantation operations consist of palm oil mills, kernel crushing plants, logistics services and bulking facilities, as well as renewable power generation capabilities

• We entered into an agreement with IOPRI to develop oil palm seed breeding and seed processing facilities

• Having our own bulking facilities and barges enables us to exercise better control over our logistics management and to meet customers’ delivery requirements at short notice

Immature (<3 years)

Mature Young (4-6 years)

Mature Prime (7-18 years)

4,865 Ha20%

12,072 Ha50%

Land Bank as at the Latest Practicable Date

FY2007 FY2008 FY2009 FY2011 FY2012FY2010

20,000

40,000

60,000

80,000

100,000

Hectares

0

CAGR 25.0% (estimated)

Land Bank

Total Planted

d k d

7,412 Ha30%

2007 FY2012FY2012Y2011FYFY2010FY2010FY2009FY2008FY2200

Strategy and Future Plans

Expand our oil palm plantation business

• Focus on new plantings and expanding our current planted area• Accumulate additional land bank• Acquire high-yielding mature plantations

Expand production capacity, improve effi ciency and product quality

• Build two additional palm oil mills in Kalimantan to cater for the expected increase in our future sales volume

• Increase CPO oil extraction rates by utilising the latest proven technology• Improve transportation system and existing supporting infrastructure

Develop seed production capability

• Develop own seed processing capability to control and ensure a steady supply of high quality germinated seeds

• Build the seed processing facilities close to our plantations to lower transportation costs and minimise spoilage of the germinated seeds

• Develop a core plantation of parent oil palms trees to provide seeds for our seed processing facilities

Develop our bulking and logistics services and renewable biomass power generation business

• Increase the amount of services we provide to third party customers• Add a double-hull vessel to the two barges we currently operate • Build renewable biomass power plants in Kalimantan when appropriate or commercially viable and

sell the carbon credits attributable to these future CDM projects

Industry Prospects

Driven by world population growth and increasing demand for palm oil, palm oil consumption registered the highest compound annual growth rate of 8.3% amongst the vegetable oils for the past 10 years ended 2007. Prices of palm oil have increased substantially in tandem with growing market demand.

World Consumption and Production of Palm Oil

Source: Oil world annual and monthly publications and information from its website http://www.oilworld.biz

Production(Indonesia)Production(Malaysia)Production(Other Countries)WorldConsumption

0

10

20

30

40

50

Million MT

20100

48.4

200909

45.5

20088

42.2

20066

36.1

200707

38.0

200505

33.4

ProjectionsActual Data20005

14.1

15.0

4.8

20006

33

16.1

15.9

5.2

20007

16.9

15.8

5.6

20008

18.8

17.3

6.1

20009

21.3

17.6

6.5

20110

23.6

17.9

7.0

Key factors underpinning the growth of palm oil industry

Economic advantages of palm oil

• Lower production costs and higher yield compared to other oil-yielding crops• Greater resilience against adverse weather conditions hence improving supply reliability

Rising demand for oils and fats

• Increasing demand for food per capita, especially in Asia, Central & South America• Additional demand for non-food applications

Growing popularity of palm oil

• Versatile use in the food industry as well as for non-food applications• Increased market share at the expense of other competing vegetable oils

Source: Oil world

Palm Oil Prices

Palm oil prices showed a tremendous increase from an average of US$437 in June 2006, US$583 in December 2006, US$805 in June 2007 to US$1,174 in April 2008.Source: Oil world annual and monthly publications and information from its website http://www.oilworld.biz

Corporate Social Responsibility (“CSR”)

We are committed to the welfare of the local communities through various CSR initiatives:

Educational, Medical and Social Initiatives

• Offer scholarships, provide free basic medical services to the local communities; build and repair places of worship, sponsor and participate in traditional events and social functions

Plasma Programme

• Develop surrounding small landholders’ plantations and assist in harvesting and production of FFB, such that the plantation owners benefi t socially and economically with increasing incomes and better welfare such as training and education in oil palm cultivation

Environmentally-friendly Policies

• Undertake comprehensive and participatory independent social and environmental impact assessment prior to any new plantings

• Apply “zero burning” and “zero waste management” policies

Indicative Timetable

Time and Date Event

9:00 a.m. on 18 July 2008 Commencement of Invitation

12:00 noon on 23 July 2008 Close of Application List and closing date and time for the Invitation

9:00 a.m. on 25 July 2008 Commence trading on a “ready” basis

Applications for the Shares may be made through:

• ATMs of DBS Bank (including POSB), OCBC and UOB Group,• Internet banking websites of DBS Bank and UOB Group, or• Printed application forms which form part of the Prospectus.

CORPORATE INFORMATION............................................................................................................ 4

DEFINITIONS ...................................................................................................................................... 6

GLOSSARY OF TECHNICAL TERMS................................................................................................ 14

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS .................................................... 15

TRANSFER RESTRICTIONS ............................................................................................................ 16

DETAILS OF THE INVITATION .......................................................................................................... 17

– LISTING ON THE SGX-ST ........................................................................................................ 17

– INDICATIVE TIMETABLE FOR LISTING .................................................................................... 21

PROSPECTUS SUMMARY ................................................................................................................ 22

– OVERVIEW OF OUR GROUP.................................................................................................... 22

– SUMMARY OF OUR FINANCIAL INFORMATION .................................................................... 27

THE INVITATION ................................................................................................................................ 28

RISK FACTORS .................................................................................................................................. 29

EXCHANGE RATES AND EXCHANGE CONTROLS........................................................................ 46

INVITATION STATISTICS .................................................................................................................. 49

USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED ................................ 51

MANAGEMENT, UNDERWRITING AND PLACEMENT AGREEMENTS .......................................... 53

DIVIDEND POLICY ............................................................................................................................ 56

SHARE CAPITAL................................................................................................................................ 57

PRINCIPAL SHAREHOLDERS .......................................................................................................... 66

– SHAREHOLDERS ...................................................................................................................... 66

– MORATORIUM ............................................................................................................................ 68

CAPITALISATION AND INDEBTEDNESS ........................................................................................ 69

DILUTION............................................................................................................................................ 71

RESTRUCTURING EXERCISE .......................................................................................................... 72

GROUP STRUCTURE ........................................................................................................................ 76

GENERAL INFORMATION ON OUR GROUP .................................................................................. 79

– BUSINESS .................................................................................................................................. 79

– OUR HISTORY............................................................................................................................ 80

– COMPETITIVE STRENGTHS .................................................................................................... 81

– STRATEGY AND FUTURE PLANS ............................................................................................ 84

– BUSINESS AND OPERATIONS ................................................................................................ 86

CONTENTS

1

– SEASONALITY .......................................................................................................................... 101

– CORPORATE SOCIAL RESPONSIBILITY ................................................................................ 101

– AWARDS AND CERTIFICATIONS.............................................................................................. 102

– QUALITY CONTROL .................................................................................................................. 102

– RESEARCH AND DEVELOPMENT .......................................................................................... 103

– INTELLECTUAL PROPERTY .................................................................................................... 104

– SALES AND MARKETING.......................................................................................................... 105

– CREDIT MANAGEMENT ............................................................................................................ 105

– CREDIT TERMS GRANTED BY SUPPLIERS............................................................................ 105

– INVENTORY MANAGEMENT .................................................................................................... 106

– RISK MANAGEMENT ................................................................................................................ 106

– MAJOR SUPPLIERS .................................................................................................................. 107

– MAJOR CUSTOMERS................................................................................................................ 108

– COMPETITION .......................................................................................................................... 109

– PROPERTIES AND FIXED ASSETS.......................................................................................... 109

– INSURANCE .............................................................................................................................. 113

– PROCESS OF OBTAINING HGU LAND TITLE.......................................................................... 113

– GOVERNMENT REGULATIONS ................................................................................................ 115

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS ANDFINANCIAL CONDITION .................................................................................................................... 116

– OPERATING RESULTS OF OUR GROUP ................................................................................ 116

– SELECTED OPERATING DATA.................................................................................................. 118

– OVERVIEW ................................................................................................................................ 120

– SEGMENTAL BREAKDOWN OF PAST PERFORMANCE ........................................................ 125

– REVIEW OF OVERALL PAST PERFORMANCE ...................................................................... 126

– REVIEW OF FINANCIAL POSITION.......................................................................................... 130

– LIQUIDITY AND CAPITAL RESOURCES .................................................................................. 131

– CAPITAL EXPENDITURE, COMMITMENTS AND CAPITAL DIVESTMENT ............................ 133

– COMMODITY HEDGING POLICY.............................................................................................. 135

– FOREIGN EXCHANGE EXPOSURE.......................................................................................... 135

– INFLATION .................................................................................................................................. 136

– ACCOUNTING POLICIES .......................................................................................................... 136

PROSPECTS ...................................................................................................................................... 138

– PALM OIL INDUSTRY ................................................................................................................ 138

– TREND INFORMATION .............................................................................................................. 152

– ORDER BOOK............................................................................................................................ 153

DIRECTORS, EXECUTIVE OFFICERS AND STAFF ........................................................................ 154

– MANAGEMENT REPORTING STRUCTURE ............................................................................ 154

– DIRECTORS AND EXECUTIVE OFFICERS.............................................................................. 155

CONTENTS

2

– REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS.......................................... 160

– PENSION AND RETIREMENT BENEFITS ................................................................................ 160

– SERVICE AGREEMENTS .......................................................................................................... 160

– EMPLOYEES .............................................................................................................................. 161

– STAFF TRAINING AND DEVELOPMENT .................................................................................. 162

CORPORATE GOVERNANCE .......................................................................................................... 163

INTERESTED PERSON TRANSACTIONS AND CONFLICT OF INTERESTS ................................ 165

– INTERESTED PERSON TRANSACTIONS ................................................................................ 165

– PAST INTERESTED PERSON TRANSACTIONS ...................................................................... 165

– PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS .................................. 167

– REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS .............. 170

– POTENTIAL CONFLICT OF INTERESTS .................................................................................. 171

– INTERESTS OF EXPERTS ........................................................................................................ 173

PLAN OF DISTRIBUTION .................................................................................................................. 174

CLEARANCE AND SETTLEMENT .................................................................................................... 178

GENERAL AND STATUTORY INFORMATION .................................................................................. 179

APPENDIX A – TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONSAND ACCEPTANCE ............................................................................................ A-1

APPENDIX B – TAXATION ............................................................................................................ B-1

APPENDIX C – INDONESIAN REGULATORY OVERVIEW.......................................................... C-1

APPENDIX D – SUMMARY OF THE MEMORANDUM AND ARTICLES OF ASSOCIATIONOF THE COMPANY .............................................................................................. D-1

APPENDIX E – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITED PROFORMACOMBINED FINANCIAL INFORMATION OF KENCANA AGRI LIMITEDFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007.............................. E-1

APPENDIX F – INDEPENDENT AUDITORS’ REPORT ON THE AUDITED COMBINEDFINANCIAL STATEMENTS OF KENCANA AGRI LIMITED FOR THEFINANCIAL YEARS ENDED 31 DECEMBER 2005, 2006 AND 2007 ................ F-1

APPENDIX G – AKA INDEPENDENT PUBLIC CONSULTANT APPRAISER’S REPORTMARKET RENT VALUE OF OFFICE SPACE OF PT SAWINDOKENCANA ............................................................................................................ G-1

CONTENTS

3

BOARD OF DIRECTORS : Mr. Henry Maknawi (Executive Chairman and CEO)Tengku Alwin Aziz (Vice-Chairman and Non-Executive Director)Ms. Ratna Maknawi (Deputy CEO)Mr. Kent Surya (Executive Director)Mr. Soh Yew Hock (Lead Independent Director)Mr. Leung Yew Kwong (Independent Director)

COMPANY SECRETARY : Catherine Lim Siok Ching, ACIS, LLB(Hons)(London)

COMPANY REGISTRATION NUMBER : 200717793E

REGISTERED OFFICE : 3 Shenton Way#10-06 Shenton HouseSingapore 068805

PRINCIPAL OFFICE : Graha KencanaJl. Raya Perjuangan No.88GKJakarta 11530 Indonesia

SHARE REGISTRAR AND SHARE : Boardroom Corporate & Advisory Services Pte. Ltd.TRANSFER AGENT 3 Church Street #08-01

Samsung HubSingapore 049483

ISSUE MANAGER AND RECEIVING : DBS Bank LtdBANK 6 Shenton Way

DBS Building Tower OneSingapore 068809

JOINT UNDERWRITERS AND : DBS Bank LtdPLACEMENT AGENTS 6 Shenton Way

DBS Building Tower OneSingapore 068809

CIMB-GK Securities Pte. Ltd.50 Raffles Place #19-00Singapore Land TowerSingapore 048623

REPORTING ACCOUNTANTS AND : RSM Chio LimAUDITORS 18 Cross Street #08-01

Marsh & McLennan CentreSingapore 048423

Partner in Charge: Mr. Peter Jacob(a member of the Institute of Certified Public Accountants of Singapore)

SOLICITORS TO THE INVITATION : Stamford Law CorporationAND LEGAL ADVISER TO OUR 9 Raffles Place #32-00COMPANY ON SINGAPORE LAW Republic Plaza

Singapore 048619

CORPORATE INFORMATION

4

SOLICITORS TO THE ISSUE MANAGER : Venture Law LLCAND THE JOINT UNDERWRITERS 50 Raffles Place #30-00AND PLACEMENT AGENTS Singapore Land Tower

Singapore 048623

LEGAL ADVISER TO OUR COMPANY : Ali Budiardjo, Nugroho, ReksodiputroON INDONESIAN LAW Graha Niaga, 24th Floor

Jalan Jenderal Sudirman Kav. 58Jakarta 12190, Indonesia

INDUSTRY EXPERT : ISTA Mielke GmBH (Global Research & Analyses)Langenberg 2721077 Hamburg, Germany

INDEPENDENT VALUER (PROPERTY) : PT Actual Kencana AppraisalHayam Wuruk No. 1-RL & 2EJakarta 10120, Indonesia

INDEPENDENT VALUER : PT Asian Appraisal Indonesia(BIOLOGICAL ASSETS) Jalan Musi 38

Jakarta 10150, Indonesia

PRINCIPAL BANKERS : PT Bank Mandiri (Persero) Tbk.Plaza MandiriJl. Jend. Gatot Subroto Kav. 36-38Jakarta 12190, Indonesia

PT Bank DBS IndonesiaPlaza Permata, Ground 9 & 12th FloorJl. M.H. Thamrin Kav 57Jakarta 10350, Indonesia

PT Bank Danamon Indonesia, Tbk.Menara Bank DanamonJl. Prof. Dr. Satrio Kav. E4 No. 6Mega Kuningan, Jakarta 12950, Indonesia

CORPORATE INFORMATION

5

In this Prospectus and the accompanying Application Forms, and in relation to the ElectronicApplications, the instructions appearing on the screens of ATMs of Participating Banks or the IB websitesof the relevant Participating Banks, unless the context otherwise requires, the following terms orexpressions shall have the following meanings:

Group Companies

“Company” or “Kencana Agri” : Kencana Agri Limited

“Group” or “Proforma Group” : Our Company and its subsidiaries, assuming that our groupstructure as set out in the section “Group Structure” of thisProspectus had been in place since 1 January 2005, including anentity under common control whose accounts we haveconsolidated in our Group’s financial statements but has beenliquidated prior to the Restructuring Exercise

“Group Company” : Our Company or any of its subsidiaries

Singapore

“KB” : Kencana Bio-energy Pte. Ltd.

“KL” : Kencana Logistics Pte. Ltd.

“KP” : Kencana Plantations Pte. Ltd.

“SA” : Sawindo Agri Pte. Ltd.

Indonesia

“AML” : PT Agro Mas Lestari

“AIK” : PT Agro Inti Kencanamas

“AEK” : PT Agri Eastborneo Kencana

“AKM” : PT Alamraya Kencana Mas

“ASML” : PT Agro Sawitmas Lestari

“ATK” : PT Agrojaya Tirta Kencana

“BE” : PT Belitung Energy

“BPS” : PT Bumi Permai Sentosa

“CPG” : PT Cahaya Permata Gemilang

“IDT” : PT Indotrust

“KAJ” : PT Kencana Agro Jaya

“LK” : PT Listrindo Kencana

“LNM” : PT Langgeng Nusa Makmur

“PAM” : PT Pelayaran Asia Marine

DEFINITIONS

6

“PMKS” : PT Palm Makmur Sentosa

“SPL” : PT Sawit Permai Lestari

“SKL” : PT Sawit Kaltim Lestari

“SCEM” : PT Sawindo Cemerlang

“SWK” : PT Sawindo Kencana

“WMP” : PT Wira Mas Permai

“WPM” : PT Wira Palm Mandiri

“WSM” : PT Wira Sawit Mandiri

Other Companies, Organisations and Agencies

“Authority” or “MAS” : The Monetary Authority of Singapore

“CDP” or “Depository” : The Central Depository (Pte) Limited

“CPF” : Central Provident Fund

“CIMB-GK” : CIMB-GK Securities Pte. Ltd.

“DBS Bank”, “Issue Manager” : DBS Bank Ltdor “Receiving Banker”

“IOI Group” : IOI Corporation Berhad (Plantation) and its subsidiaries

“IOPRI” : Indonesian Oil Palm Research Institute, otherwise known asPusat Penelitian Kelapa Sawit (PPKS)

“Joint Underwriters and : DBS Bank and CIMB-GKPlacement Agents”,“Joint Underwriters” or“Joint Placement Agents”

“Keck Seng Group” : Keck Seng (Malaysia) Berhad and its subsidiaries

“KH” or “Kencana Holdings” : Kencana Holdings Pte. Ltd.

“Minamas Group” : PT Minamas Gemilang and its subsidiaries

“PLN” : PT Perusahaan Listrik Negara (Persero)

“Regional Land Agency” : A part of the National Land Agency, a non-departmentalgovernment agency directly responsible to the President of theRepublic of Indonesia in charge of land affairs at national,regional or sector-related levels

“SGX-ST” : Singapore Exchange Securities Trading Limited

“Sinar Mas Group” : PT Sinar Mas Agro Resources & Technology Tbk and itssubsidiaries

“UNFCCC” : United Nations Framework Convention on Climate Change

DEFINITIONS

7

“Wilmar Group” : Wilmar International Limited and its subsidiaries

General

“Act” or “Companies Act” or : The Companies Act, (Chapter 50) of Singapore, as amended or“Singapore Companies Act” modified from time to time

“Application Forms” : The printed application forms to be used for the purpose of theInvitation and which form part of this Prospectus

“Application List” : The list of applications for subscription of the New Shares

“Articles of Association” : Articles of association of our Company, as amended,supplemented or modified from time to time

“associate” : (a) In relation to a director, chief executive officer, substantialshareholder or controlling shareholder of a corporation whois an individual, means:

(i) his immediate family;

(ii) a trustee, acting in his capacity as such trustee, ofany trust of which the individual or his immediatefamily is a beneficiary or, in the case of adiscretionary trust, is a discretionary object; and

(iii) any corporation in which he and his immediate familytogether (directly or indirectly) have an interest of notless than 30% of the aggregate of the nominalamount of all the voting shares.

(b) In relation to a corporation, means:

(i) any corporation in which the corporation or itssubsidiary has, or the corporation and its subsidiarytogether have, a direct interest of not less than 20%but not more than 50% of the aggregate of thenominal amount of all the voting shares; or

(ii) any corporation, other than a subsidiary of thecorporation or a corporation which is an associatedcompany by virtue of paragraph (a), the policies ofwhich the corporation or its subsidiary, or thecorporation together with its subsidiary, is able tocontrol or influence materially

“ATM” : Automated teller machine of a Participating Bank

“Audit Committee” : The audit committee of our Company as at the date of thisProspectus and from time to time constituted

“Board” : The board of Directors of our Company as at the date of thisProspectus and from time to time constituted

“CEO” : Chief Executive Officer

DEFINITIONS

8

“Controlling Shareholder” : A person who:

(a) holds directly or indirectly 15% or more of the nominalamount of all voting shares in a company. The SGX-ST maydetermine that a person who satisfies this paragraph is nota controlling shareholder; or

(b) in fact exercises control over a company

“Directors” : The directors of our Company as at the date of this Prospectus,except where otherwise stated or where the context requiresotherwise

“Electronic Applications” : Applications for the Offer Shares made through an ATM of one ofthe relevant Participating Banks or the IB website of one of therelevant Participating Banks, subject to and on the terms andconditions of this Prospectus

“EGM” : Extraordinary General Meeting

“EPS” : Earnings per Share

“Executive Directors” : The executive Directors of our Company as at the date of thisProspectus, except where otherwise stated or where the contextrequires otherwise

“Executive Officers” : The executive officers of our Company as at the date of thisProspectus, except where otherwise stated or where the contextrequires otherwise

“FY” : Financial year ended, or as the case may be, ending 31December

“GST” : Goods and Services Tax

“HGU” : Hak Guna Usaha, a right to utilise government-owned land forplantation, fisheries or farming with minimum area of fivehectares, for a period of up to 35 years, extendable for anadditional period of up to 25 years. HGU can be renewed for anadditional period of up to 35 years, subject to fulfillment ofrequirements under the prevailing laws and regulations

“IB” : Internet Banking

“Independent Directors” : The independent Directors of our Company as at the date of thisProspectus, except where otherwise stated or where the contextrequires otherwise

“Invitation” : The Invitation by our Company for subscription by investors forthe New Shares at the Issue Price, subject to and on the termsand conditions of this Prospectus

“Ijin Lokasi” : A permit that allows our Group to acquire the land up to the areacovered by the location permit in accordance with the prevailinglaws and regulations

Any reference in this Prospectus to “acquisition/accumulation ofland/land bank” refers to the acquisition of rights over the land

DEFINITIONS

9

“Internet Placement Shares” : The 300,000 Placement Shares for which our Company invitesapplications to be made through the Internet website of DBSVickers Securities (Singapore) Pte Ltd (“DBS Vickers”), on theterms and subject to the conditions of this Prospectus

“Issue Price” : S$0.305 per New Share

“Kadastral land” : Land that has been measured by the Panitia B to determine theactual land area for the HGU title based on the applicationsubmitted by our Group. A land map (which includes the borders)and other technical information of the relevant land will beproduced following the land measurement. Please refer to thesection “Process Of Obtaining HGU Land Title” of this Prospectusfor a summary of the process by which HGU is obtained

“KKPA” : Kredit Koperasi Primer Anggota, a plantation businesscooperative scheme under the Plasma Programme pursuant towhich plantation owners develop land owned by the localcommunity and plant and maintain the oil palm to maturity, afterwhich the land is maintained and managed by the villager or theplantation owner

“KKSR” : Kebun Kelapa Sawit Rakyat, a cooperation in local communitypalm oil plantation scheme under the Plasma Programmepursuant to which plantation owners co-operate with the regionalauthorities to provide seedlings and fertiliser to the villager whoowns the land

“land bank” : The land for which Ijin Lokasi has been allocated to our Group,Kadastral land measured and/or land for which HGU has beenobtained by our Group. Please refer to the section “Process ofobtaining HGU Land Title” of this Prospectus for a summary of theprocess by which HGU is obtained

“Latest Practicable Date” : 2 June 2008, being the latest practicable date for theascertainment of information prior to the printing of thisProspectus

“Listing Date” : The date of commencement of dealing in our Shares on the SGX-ST

“Listing Manual” : Listing Manual of the SGX-ST, as amended, modified orsupplemented from time to time

“LPS” : Loss per Share

“Market Day” : A day on which the SGX-ST is open for trading in securities

“NAV” : Net asset value

“New Shares” : The 200,000,000 new Shares for which our Company invitesapplications to subscribe for pursuant to the Invitation, subject toand on the terms and conditions of this Prospectus

“Nominating Committee” : The nominating committee of our Company as at the date of thisProspectus and from time to time constituted

DEFINITIONS

10

“Non-executive Directors” : Non-executive Directors of our Company (including IndependentDirectors) as at the date of this Prospectus, except whereotherwise stated or where the context requires otherwise

“NTA” : Net tangible assets

“Offer” : The offer by our Company of the Offer Shares to the public inSingapore for subscription at the Issue Price, on the terms andsubject to the conditions of this Prospectus

“Offer Shares” : The 1,000,000 New Shares which are the subject of the Offer

“Panitia B” : A special committee formed by the Regional Land Agency withthe duty to review, research, and analyse the technical documentssubmitted by our Group including verifying and inspecting thephysical condition of the land in the framework of the process forthe issuance of the HGU title

“Participating Banks” : DBS Bank Ltd (including POSB) (“DBS Bank”), Oversea-ChineseBanking Corporation Limited (“OCBC”) and United OverseasBank Limited and its subsidiary, Far Eastern Bank Limited (the“UOB Group”)

“period under review” : The period which comprises FY2005, FY2006 and FY2007

“PER” : Price earnings ratio

“Placement” : The placement of the Placement Shares by the Joint PlacementAgents on behalf of our Company for subscription at the IssuePrice, subject to and on the terms and conditions of thisProspectus

“Placement Shares” : The 199,000,000 New Shares which are the subject of thePlacement

“Plasma Mandiri” : An independent plasma scheme whereby the plantation owner willprovide the seedlings to the villager who owns the land, and thevillager will plant and maintain the plantation

“Remuneration Committee” : The remuneration committee of our Company as at the date ofthis Prospectus and from time to time constituted

“Reserved Shares” : The 12,100,000 Placement Shares reserved for subscription byour employees, business associates, Independent Directors andpersons who have contributed to the success of our Group

“Restructuring Exercise” : The restructuring exercise that we carried out to rationalise andstreamline our corporate structure as described in the section“Restructuring Exercise” of this Prospectus

“SBI” : Sertifikat Bank Indonesia

“Securities Account” : Securities account maintained by a Depositor with CDP, notincluding a securities sub-account

“Securities and Futures Act” : Securities and Futures Act, (Chapter 289) of Singapore, asamended or modified from time to time

DEFINITIONS

11

“Service Agreements” : The service agreements entered into between our Company andour Executive Directors as described in the section “ServiceAgreements” of this Prospectus

“Shares” : Ordinary shares in the capital of our Company

“Shareholders” : Registered shareholders of our Company

“SIBOR” : Singapore Inter-Bank Offered Rate

“Singapore Take-over Laws : The take-over laws and regulations in Singapore, comprisingand Regulations” sections 138, 139 and 140 of the Securities and Futures Act and

the Singapore Code on Take-overs and Mergers

“Sub-division” : The sub-division of ordinary shares in the capital of our Companyas defined in the section “Share Capital” of this Prospectus

“Substantial Shareholder” : A person who holds directly or indirectly 5% or more of the totalissued share capital of our Company

“US” or “USA” : United States of America, its territories and possessions and allareas subject to its jurisdiction

Currencies, Units and Others

“%” or “per cent” : Per centum or percentage

“Ha” : Hectare(s)

“MT” : Metric tonne

“KWh” : Kilowatt-hour

“MW” : Megawatt

“MWh” : Megawatt-hour

“Rp” or “Rupiah” : Indonesian Rupiah

“S$” and “cents” : Singapore dollars and cents, respectively

“sq ft” : Square feet

“sq m” : Square metres

“US$” and “US cents” : United States dollars and cents respectively

The expressions “Depositor”, “Depository Agent” and “Depository Register” shall have the meaningsascribed to them respectively in Section 130A of the Companies Act.

The terms “associated company”, “associated entity”, “controlling interest-holder”, “controllingshareholder”, “related corporation”, “related entity”, “subsidiary”, “subsidiary entity” and “substantialinterest-holder” shall have the same meanings ascribed to them respectively in the Securities and Futures(Offers of Investments) (Shares and Debentures) Regulations 2005.

Words importing the singular shall, where applicable, include the plural and vice versa and wordsimporting the masculine gender shall, where applicable, include the feminine and neuter genders andvice versa. References to persons shall include corporations.

DEFINITIONS

12

Any discrepancies in tables included herein between the amounts listed and the totals thereof are due torounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation ofthe figures which precede them.

Any reference in this Prospectus, the Application Forms or the Electronic Applications to any statute orenactment is a reference to that enactment as for the time being amended or re-enacted. Any worddefined under the Companies Act and the Securities and Futures Act or any statutory modificationthereof and used in this Prospectus, the Application Forms or the Electronic Applications shall, whereapplicable, have the meaning assigned to it under the Companies Act, the Securities and Futures Act orsuch statutory modification, as the case may be.

Any reference in this Prospectus and the Application Forms and/or Electronic Applications to Sharesbeing allotted and/or allocated to an applicant includes allotment to CDP for the account of that applicant.

Any reference to a time of day in this Prospectus, the Application Forms and the Electronic Applicationsshall be a reference to Singapore time, unless otherwise stated.

Any references to “we”, “our”, and “us” or other grammatical variations thereof in this Prospectus is areference to our Company or any member of our Company (including an entity under common controlwhose accounts we have consolidated in our Group’s financial statements) as the context requires.

All exchange rates referred to in this Prospectus are extracted from Bloomberg L.P. and Bank Indonesia.

Certain names in Bahasa Indonesia have been translated into English. Such translations are providedsolely for the convenience of Singapore-based investors. They may not be registered with the relevantIndonesian authorities and should not be construed as representations that the English names actuallyrepresent the Indonesian names.

DEFINITIONS

13

To facilitate a better understanding of the business of our Group, the following glossary provides adescription of the technical terms and abbreviations commonly found in our industry. The terms and theirassigned meanings may not correspond to standard industry meanings or usage of these terms:

“AMDAL” : Environmental Impact Assessment (locally known as Analisis MengenaiDampak Lingkungan)

“biomass” : Plant material, vegetation, or agricultural waste used as a fuel or energysource

“bulking” : Storage facilities including tank farms for palm oil products and otherliquids

“CDM” : Clean Development Mechanism is an arrangement under the KyotoProtocol allowing industrialised countries to invest in projects that reducegreenhouse gas emissions

“CPO” : Crude palm oil

“CPKO” : Crude palm kernel oil

“EFB” : Empty palm fruit bunches

“FFB” : Fresh palm fruit bunches

“Ijin Usaha : A written license from the authorised official which must mandatorily be Perkebunan” possessed by a company undertaking a plantation business activity

integrated with plantation product manufacturing in Indonesia

“nucleus” : The oil palm plantations which are owned and developed by our Company,as opposed to plantations which are owned and developed for smalllandholders under the Plasma Programme

“oleochemical” : Chemicals derived from biological oils or fats. Oleochemicals areanalogous to petrochemicals which are chemicals derived from petroleum

“PKC” : Palm kernel cake / Palm kernel meal

“Plasma Programme” : The programme initiated by the Indonesian government to encourage thedevelopment of smallholders’ plantations with the assistance of certain oilpalm plantation owners, such as our Group

GLOSSARY OF TECHNICAL TERMS

14

All statements contained in this Prospectus, statements made in press releases and oral statements thatmay be made by our Company, Directors, Executive Officers or employees acting on our behalf, that arenot statements of historical fact, constitute “forward-looking statements”. Some of these statements canbe identified by forward-looking terms such as “expect”, “believe”, “plan”, “intend”, “estimate”, “anticipate”,“may”, “will”, “would” and “could” or similar words or phases. However, these words are not the exclusivemeans of identifying forward-looking statements. All statements regarding our expected financial position,business strategies, plans and prospects, and the future prospects of our industry are forward-lookingstatements. These forward-looking statements and other matters discussed in this Prospectus regardingmatters that are not historical fact are only predictions. These forward-looking statements involve knownand unknown risks, uncertainties and other factors that may cause our actual results, performance orachievements to be materially different from any future results, performance or achievements expressedor implied by such forward-looking statements. These risk factors and uncertainties are discussed in moredetails in this Prospectus, in particular, but not limited to, discussions in the section entitled “RiskFactors”.

Given the risks and uncertainties that may cause our actual future results, performance or achievementsto be materially different from that expected, expressed or implied by the forward-looking statements inthis Prospectus, we advise you not to place undue reliance on those statements. Neither our Company,the Issue Manager, the Joint Underwriters and Placement Agents, nor any other person represents orwarrants to you that our actual future results, performance or achievements will be as discussed in thosestatements.

Our actual future results may differ materially from those anticipated in these forward-looking statementsas a result of the risks faced by us. Our Company, the Issue Manager, the Joint Underwriters andPlacement Agents disclaim any responsibility to update any of those forward-looking statements orpublicly announce any revisions to those forward-looking statements to reflect future developments,events or circumstances for any reason, even if new information becomes available or other events occurin the future. Our Company is however subject to the provisions of the Securities and Futures Act and theListing Manual regarding corporate disclosure. In particular, pursuant to Section 241 of the Securities andFutures Act, if after this Prospectus is registered but before the close of the Invitation, we become awareof (a) a false or misleading statement in this Prospectus; (b) an omission from this Prospectus of anyinformation that should have been included in it under Sections 243 of the Securities and Futures Act; or(c) a new circumstance that has arisen since this Prospectus was lodged with the Authority and wouldhave been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, ifit had arisen before this Prospectus was lodged and that is materially adverse from the point of view of aninvestor, we may lodge a supplementary or replacement prospectus with the Authority.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

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TRANSFER RESTRICTIONS

Each purchaser of Shares offered in reliance on Regulation S will be deemed to have acknowledged,represented and agreed with our Company, the Issue Manager and the Joint Underwriters and PlacementAgents as follows (terms defined in Regulation S shall have the same meaning when used in thissection):

(i) The Shares have not been and will not be registered under the U.S. Securities Act or with anysecurities regulatory authority of any state or territory of the United States and are subject tosignificant restrictions on transfer.

(ii) The purchaser (and the person, if any, for whose account it is acquiring Shares under theInvitation) is not a U.S. person and is acquiring the Shares in an offshore transaction meeting therequirements of Regulation S.

(iii) It is not an affiliate of our Company or a person acting on behalf of such affiliate; and it is not in thebusiness of buying and selling securities or, if it is in such business, it did not acquire the Sharesfrom our Company or an affiliate thereof in the initial distribution of the Shares.

(iv) Such purchaser will not, prior to the expiration of 40 days after the later of the commencement ofthe Invitation and the last closing date of the Invitation (the “Restricted Period”), offer, sell, pledgeor otherwise transfer any interest in the Shares except in an offshore transaction in accordancewith Regulation S, and in accordance with any applicable securities laws of any state or territory ofthe United States and any other jurisdiction.

Upon the expiration of the Restricted Period, the New Shares offered in reliance on Regulation S shall nolonger be subject to the restrictions set out above, if, at the time of such expiration, the offer or sale ofsuch Shares in the United States would not be restricted under the securities laws of the United States orany state of the United States.

TRANSFER RESTRICTIONS

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LISTING ON THE SGX-ST

An application has been made to the SGX-ST for permission to deal in and for quotation of, all ourShares already issued (including the New Shares). Such permission will be granted when our Companyhas been admitted to the Official List of the SGX-ST. Acceptance of applications will be conditional upon,inter alia, the SGX-ST granting permission to deal in, and for quotation of, all our existing issued Shares(including the New Shares). Monies paid in respect of any application accepted will be returned to you,subject to applicable laws, without interest or any share of revenue or other benefit arising therefrom andat your own risk, if the said permission is not granted or for any other reason and you will not have anyclaims whatsoever against our Company, the Issue Manager, or the Joint Underwriters and PlacementAgents.

No Share shall be allotted or allocated on the basis of this Prospectus later than six months after the dateof registration of this Prospectus by the Authority.

The SGX-ST assumes no responsibility for the correctness of any statements made, reports contained oropinion expressed in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken asan indication of the merits of the Invitation, our Company, our subsidiaries, our Shares or the NewShares.

A copy of this Prospectus has been lodged with and registered by the Authority on 16 June 2008 and17 July 2008, respectively. The Authority assumes no responsibility for the contents of this Prospectus.Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, or anyother legal or regulatory requirements, have been complied with. The Authority has not, in any way,considered the merits of our Shares (including the New Shares), as the case may be, being offered or inrespect of which an Invitation is made, for investment.

This Prospectus has been seen and approved by our Directors and they individually and collectivelyaccept full responsibility for the accuracy of the information given in this Prospectus and confirm, havingmade all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and theopinions expressed in this Prospectus are fair and accurate in all material respects as at the date of thisProspectus and that there are no material facts the omission of which would make any statements in thisProspectus misleading and that this Prospectus constitutes full and true disclosure of all material factsabout the Invitation and our Company.

No person has been or is authorised to give any information or to make any representation not containedin this Prospectus in connection with the Invitation and, if given or made, such information orrepresentation must not be relied upon as having been authorised by our Company, the Issue Manager,or the Joint Underwriters and Placement Agents. Neither the delivery of this Prospectus and theApplication Forms nor the Invitation shall, under any circumstances, constitute a continuingrepresentation or create any suggestion or implication that there has been no change, or developmentreasonably likely to involve a change, in our affairs, condition or prospects, or our Shares (including theNew Shares), or in the statements of fact or information contained in this Prospectus since the date ofthis Prospectus. Where such changes occur and are material or are required to be disclosed by law, wewill make an announcement of the same to the SGX-ST and the public and, if required, lodge asupplementary or replacement prospectus with the Authority pursuant to Section 241 of the Securitiesand Futures Act and other applicable provisions of the Securities and Futures Act and take immediatesteps to comply with the requirements of the Securities and Futures Act. We will also comply with allother applicable requirements of the Securities and Futures Act and/or any other requirements of theAuthority and/or SGX-ST. All applicants should take note of any such announcements, supplementary orreplacement prospectus and, upon the release of the same, shall be deemed to have notice of suchchanges. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, apromise or representation as to our future performance or policies. Neither our Company, the IssueManager, the Joint Underwriters and Placement Agents, our Directors, the experts nor any other partiesinvolved in the Invitation is making any representation to any person regarding the legality of aninvestment in our Shares by such person under any investment or other laws or regulations. No

DETAILS OF THE INVITATION

17

information in this Prospectus should be considered to be business, legal or tax advice. Investors shouldbe aware that they may be required to bear the financial risk of an investment in our Shares (including theNew Shares) for an indefinite period of time. Each prospective investor should consult his ownprofessional or other advisers for business, financial, legal or tax advice regarding an investment in ourShares (including the New Shares).

This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon byany other persons other than the applicants in connection with their application for the New Shares or forany other purpose. This Prospectus does not constitute an offer, solicitation or invitation tosubscribe for the New Shares in any jurisdiction in which such offer, or solicitation or invitation isunlawful or is not authorised or to any person to whom it is unlawful to make such offer,solicitation or invitation.

We are subject to the provisions of the Securities and Futures Act and the Listing Manual regardingcorporate disclosure. In particular, if after this Prospectus is registered but before the close of theInvitation, we become aware of:

(a) a false or misleading statement in this Prospectus;

(b) an omission from this Prospectus of any information that should have been included in it underSection 243 of the Securities and Futures Act; or

(c) a new circumstance that has arisen since this Prospectus was lodged with the Authority whichwould have been required by Section 243 of the Securities and Futures Act to be included in thisProspectus if it had arisen before this Prospectus was lodged,

that is materially adverse from the point of view of an investor, we may lodge a supplementary orreplacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act.

Where prior to the lodgement of the supplementary or replacement prospectus, applications have beenmade under this Prospectus to subscribe for the New Shares and:

(a) where the New Shares have not been issued to the applicants, our Company shall either:

(i) within two days (excluding any Saturday, Sunday or public holiday) from the date oflodgement of the supplementary or replacement prospectus, give applicants notice in writingof how to obtain, or arrange to receive, a copy of the supplementary or replacementprospectus, as the case may be, and provide applicants with an option to withdraw theirapplications, and take all reasonable steps to make available within a reasonable period thesupplementary or replacement prospectus, as the case may be, to applicants who haveindicated that they wish to obtain, or who have arranged to receive, a copy of thesupplementary or replacement prospectus; or

(ii) within seven days from the date of lodgement of the supplementary or replacementprospectus, give the applicants the supplementary or replacement prospectus, as the casemay be, and provide the applicants with an option to withdraw their applications; or

(iii) treat the applications as withdrawn and cancelled, in which case the applications shall bedeemed to have been withdrawn and cancelled, and our Company shall, within seven daysfrom the date of lodgement of the supplementary or replacement prospectus, return allmonies paid in respect of any application to, without interest or a share of revenue or benefitarising therefrom; or


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(b) where our New Shares have been issued and/or sold to the applicants, our Company shall either:

(i) within two days (excluding any Saturday, Sunday or public holiday) from the date oflodgement of the supplementary or replacement prospectus, give applicants notice in writingof how to obtain, or arrange to receive, a copy of the supplementary or replacementprospectus, as the case may be, and provide applicants with an option to withdraw theirapplications, and take all reasonable steps to make available within a reasonable period thesupplementary or replacement prospectus, as the case may be, to applicants who haveindicated that they wish to obtain, or who have arranged to receive, a copy of thesupplementary or replacement prospectus; or

(ii) within seven days from the date of lodgement of the supplementary or replacementprospectus, give the applicants the supplementary or replacement prospectus, as the casemay be, and provide the applicants with an option to return to us the New Shares, whichthey do not wish to retain title in; or

(iii) treat the issue of the New Shares as void, in which case the issue or sale shall be deemedvoid and our Company shall, within seven days from the date of lodgement of thesupplementary or replacement prospectus, return all monies paid in respect of anyapplication, without interest or a share of revenue or benefit arising therefrom.

An applicant who wishes to exercise his option under paragraph (a)(i) and (a)(ii) to withdraw hisapplication shall, within 14 days from the date of lodgement of the supplementary or replacementprospectus, notify our Company of this, whereupon our Company shall, within seven days from thereceipt of such notification, pay to him all monies paid by him on account of his application for thoseShares without interest or a share of revenue or benefit arising therefrom, at the applicant’s risk.

An applicant who wishes to exercise his option under paragraph (b)(i) and (b)(ii) to return the New Sharesissued to him shall, within 14 days from the date of lodgement of the supplementary or replacementprospectus, notify our Company of this and return all documents, if any, purporting to be evidence of titleto those New Shares, to our Company, whereupon our Company shall, within seven days from the receiptof such notification and documents, if any, pay to him all monies paid by him for those Shares, withoutinterest or a share of revenue or benefit arising thereform at the applicant’s risk and the issue of thoseShares shall be deemed to be void.

Pursuant to Section 242 of the Securities and Futures Act, the Authority may, in certain circumstancesissue a stop order (the “Stop Order”) to our Company, directing that no or no further New Shares to whichthis Prospectus relates, be allotted, issued or sold. Such circumstances will include a situation where thisProspectus (i) contains a statement, which in the opinion of the Authority is false or misleading; (ii) omitsany information that should be included in accordance with the Securities and Futures Act; (iii) does not,in the opinion of the Authority, comply with the requirements of the Securities and Futures Act; or (iv) ifthe Authority is of the opinion that it is in the public interest to do so.

In the event that the Authority issues a Stop Order and applications to subscribe for the New Shares havebeen made prior to the Stop Order, then:

(a) where the New Shares have not been issued to the applicants, the applications for the New Sharesshall be deemed to have been withdrawn and cancelled and our Company shall, within 14 daysfrom the date of the Stop Order, pay to the applicants all monies the applicants have paid onaccount of their applications for the New Shares; or

(b) where the New Shares have been issued to the applicants, the issue of the New Shares shall bedeemed to be void and our Company shall, within 14 days from the date of the Stop Order, pay tothe applicants all monies paid by them for the New Shares.


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Such monies paid in respect of the applicants’ application shall be returned to the applicants at their ownrisk, without interest or any share or revenue or other benefit arising therefrom, and the applicants will nothave any claim against our Company, the Issue Manager, or the Joint Underwriters and PlacementAgents.

Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability,during office hours from:

DBS Bank Ltd CIMB-GK Securities Pte. Ltd.6 Shenton Way #36-01 CIMB-GK Investment Centre

DBS Building Tower One 50 Raffles Place #01-01Singapore 068809 Singapore Land Tower

Singapore 048623

and from branches of DBS Bank (including POSB), members of the Association of Banks in Singapore,members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available onthe SGX-ST website at http://www.sgx.com and the Authority’s OPERA website athttp://masnet.mas.gov.sg/opera/sdrprosp.nsf

The Application List will open at 10.00 a.m. on 23 July 2008 and will remain open until 12.00 noonon the same day or for such further period or periods as our Directors may, in consultation withthe Issue Manager and the Joint Underwriters and Placement Agents decide, subject to anylimitation under all applicable laws PROVIDED ALWAYS THAT where a supplementary orreplacement prospectus has been lodged with the Authority, the Application List shall be keptopen for at least 14 days after the lodgement of the supplementary or replacement prospectus.

Details of the procedure for applications to subscribe for the New Shares are set out in Appendix A of thisProspectus.


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INDICATIVE TIMETABLE FOR LISTING

An indicative timetable for the Invitation and trading in our Shares is set out for the reference ofapplicants:

Indicative time/date Event

9.00 a.m. on 18 July 2008 Commencement of Invitation

12.00 noon on 23 July 2008 Close of Application List and closing date and time for the Invitation

24 July 2008 Balloting of applications, if necessary (in the event of over-subscription for the Offer Shares)

9.00 a.m. on 25 July 2008 Commence trading on a “ready” basis

30 July 2008 Settlement date for all trades done on a “ready” basis

The above timetable is only indicative as it assumes that the date of closing of the Application List will be23 July 2008, the date of admission of our Company to the Official List of the SGX-ST will be 25 July2008, the shareholding spread requirement will be complied with and the New Shares will be issued andfully paid-up prior to 25 July 2008. The actual date on which our Shares will commence trading on a“ready” basis will be announced when it is confirmed by the SGX-ST.

The above timetable and procedures may be subject to such modification as the SGX-ST may, in itsabsolute discretion, decide, including the decision to permit trading on a “ready” basis and thecommencement date of such trading.

Investors should consult the SGX-ST’s announcement on “ready” trading date on the Internet (at theSGX-ST internet website http://www.sgx.com) or the newspapers, or check with their brokers on the dateon which trading on a “ready” basis will commence.

In the event of any changes in the closure of the Application List or the time period during which theInvitation is open, we will publicly announce the same:

(a) through SGXNET announcement to be posted on the internet at the SGX-ST’s internet website athttp://www.sgx.com; and

(b) through a paid advertisement in a major Singapore English newspaper such as The Straits Timesor The Business Times.

We will provide details of the results of the Invitation (including the level of subscription for the NewShares and the basis of allocation of the New Shares pursuant to the Invitation), as soon as it ispracticable after the closure of the Application List through the channels in (a) and (b) above.


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The information contained in this summary is derived from and should be read in conjunction with, thefull text of this Prospectus. Because it is a summary, it does not contain all the information thatpotential investors should consider before investing in the Shares of our Company. Potential investorsshould read this entire Prospectus carefully, especially the section “Risk Factors” of this Prospectus.

OVERVIEW OF OUR GROUP

Our Company was incorporated in Singapore on 26 September 2007 under the Companies Act as aprivate limited company, under the name of “Kencana Agri Pte. Ltd.” and changed its name to “KencanaAgri Limited” upon conversion to a public company. Our Group comprises our Company and ourvarious subsidiaries. Please refer to the section “Group Structure” of this Prospectus for more details.

Business

We are a fast-growing producer of CPO and CPKO in Indonesia with oil palm plantations located in theSumatera and Kalimantan regions. From 2005 to the Latest Practicable Date, our Group’s total landbank increased from 77,374 hectares to 95,410 hectares and our total planted area increased from12,277 hectares to 24,349 hectares.

Our Group has implemented a Plasma Programme under the plantation business cooperatives scheme(KKPA), the cooperation in local community palm oil plantation scheme (KKSR), and the independentplasma scheme (Plasma Mandiri). As at the Latest Practicable Date, we have approximately 12,372hectares of plantation land under our Plasma Programme, of which approximately 7,981 hectares havebeen planted.

For the purpose of the disclosures made in respect of our land bank and planted area in thisProspectus, we have not included the land and planted area under our Plasma Programme. If we hadincluded the land and planted area under our Plasma Programme, our aggregate land bank as at theLatest Practicable Date would be 107,782 hectares and our aggregate planted area would be 32,330hectares.

Our Group has two palm oil mills and two kernel crushing plants, with one of each located on BangkaIsland in Sumatera and in South Kalimantan respectively. Our palm oil mills have a total productioncapacity of 120 MT/hour, and our kernel crushing plants have a combined production capacity of 435MT/day.

We operate a bulking terminal in Belinyu, Bangka Island consisting of three storage tanks with a totalcapacity of 19,500 MT and a nearby jetty for vessels to take delivery of our products. We also operatea jetty in East Kalimantan to facilitate the transportation of our products. In addition, we own andoperate two barges which we use primarily to transport our own products. Our bulking terminal andlogistics services primarily serve to complement and support our palm oil business by enabling us tobe self-sufficient in terms of storage and transportation.

Our Group also operates a renewable biomass power plant on Bangka Island which generateselectricity by utilising waste recycled from the CPO production process. Most of the electricitygenerated is sold to PLN, a state-owned electricity company. The balance is used for internalconsumption by our plantation located on Bangka Island.

Further details are set out in the section “General Information On Our Group – Business” of thisProspectus.

PROSPECTUS SUMMARY

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Competitive Strengths

We believe that our Group has the following competitive strengths:

Significant cultivatable land bank with new planting potential

The following table shows our land bank and planted area as at the Latest Practicable Date:

Location Land Bank (Hectares) Planted Area (Hectares)

Sumatera 14,331 5,587

Kalimantan 81,079 18,762

Total 95,410 24,349

As we intend to increase our planted area to over 80,000 hectares in the next five years (which is anestimated compounded annual growth rate of 25.0% from 2007 to 2012), we estimate future planting ofapproximately 56,000 hectares of our land bank. The graph below shows our planned expansion of ourplanted area within our existing land bank.

Taking into account our existing land bank and planting programme, we believe that we are wellpositioned to substantially increase our planted area over the next few years. We are also continuouslyseeking opportunities to increase the aggregate size of our land bank and planted area throughselective external acquisitions.

Potential benefits from maturing oil palm trees in the near future

Oil palm trees generally mature after three years of growth and reach their prime after six years, whenFFB production levels peak. As at the Latest Practicable Date, our total planted area is 24,349hectares, of which 12,277 hectares (approximately 50.4%) are mature and 12,072 hectares(approximately 49.6%) are immature. We expect the majority of these immature plants to mature from2009 to 2010. The majority of our expected increase in FFB crop will be from our Kalimantanplantations.

CAGR 25.0%

Land bank as at the Latest Practicable Date � Land Bank

� Total Planted

Hectares

PROSPECTUS SUMMARY

23

Going forward, we expect our FFB harvested from our Kalimantan plantations to increase and therebylower our reliance on third party FFB suppliers. We believe that this will significantly reduce our unitproduction cost and improve our average extraction rates as we will generally have better control overquality in terms of FFB harvested from our plantation.

In addition, we expect the utilisation rates of our palm oil mill in Kalimantan to improve as ourKalimantan plantations continue to mature and reach peak production age. We expect to benefit fromeconomies of scale as our FFB production volume increases.


Our Group has an experienced and committed management team which has successfully operated invarious challenging business conditions and is able to understand and adapt to the local culture in theregions that our Group operates.

We believe that our management’s track record is demonstrated by our successful cultivation of all ourcurrent plantations from greenfield land. The development of greenfield land into a plantation requiresdetailed planning, careful implementation of a planting programme as well as close cooperation withthe local community.

Our Group’s plantation operations have received recognition from the provincial governments in theSumatera and Kalimantan regions based on an assessment of large scale private plantations. Pleaserefer to the section “Awards and Certifications” of this Prospectus for more information.


We have integrated our plantation operations, complete with palm oil mills, kernel crushing plants,logistics services and bulking facilities. As part of our plans to improve our value-chain, we haverecently entered into an agreement with IOPRI, a reputable research institute on germinated oil palmseeds to develop seed processing facilities.

Our bulking and logistics services complement our plantation operations by allowing us to store andtransport our products in an efficient and effective manner. Our Group currently owns and operates twobarges, with a total capacity of 4,500 MT, which serve our plantations in both Sumatera andKalimantan. Having tank storage facilities for bulking and our own barges for transportation enables usto exercise better control over our logistics management and to meet customers’ delivery requirementsat short notice. The strategic location of our bulking terminal in Belinyu also provides us with directaccess from Sumatera and Kalimantan to both local and international customers.

In addition, our first renewable biomass power plant, which is located within our plantation in theSumatera region, utilises the waste products from our production facilities, such as EFB and palmkernel shells, as fuel for the generation of electricity. Most of the generated electricity is sold to PLN.We are also currently applying to the relevant authorities for our renewable biomass plant to beregistered as a Clean Development Mechanism (“CDM”) project that will in turn allow us to sell thecarbon credits attributable to this project.

Please refer to the section “General Information On Our Group – Competitive Strengths” of thisProspectus for more details.

12,277 ha

12,072 ha

Immature

Mature

PROSPECTUS SUMMARY

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Strategy and Future Plans

Our strategy and future plans are as follows:

(i) Expand our oil palm plantation business

Our key strategy is to focus on growing our oil palm plantations. We have a considerable amountof undeveloped, cultivatable land which represents a significant potential for growth. We plan tofocus on new plantings by increasing our current planted oil palm area from 24,349 hectares asat the Latest Practicable Date to over 80,000 hectares in the next five years, within our existingland bank.

We also plan to, where appropriate, accumulate additional land bank and/or acquire high-yielding mature plantations directly or indirectly through acquisitions of companies with suchinterests whenever suitable opportunities arise.

(ii) Expand production capacity and improve efficiency and product quality

To cater for the expected increase in our future sales volume, we plan to increase our annualCPO processing capacity from 120 MT/hour to 210 MT/hour by 2010, by building two more palmoil mills in the Kalimantan region. Our new palm oil mills will utilise the latest proven technologywhich we expect will improve operational efficiency and increase CPO extraction rates.

With the expansion of our plantations, we plan to improve our transportation system and existingsupporting infrastructure to increase the efficiency of our delivery of harvested FFB to ourprocessing facilities.

(iii) Develop seed production capability

We intend to develop our own seed processing capability to control and ensure a steady supplyof high quality germinated seeds, which in turn will increase our FFB yields. We plan to build theseed processing facilities close to our plantations to lower transportation costs and minimisespoilage of the germinated seeds.

We have entered into an agreement with IOPRI for them to provide technical assistance for thedevelopment of our seed processing facilities to produce high-yielding seeds (otherwise knownas “Benih-bina”). We also have plans to develop a core plantation of parent oil palm trees toprovide seeds for our seed processing facilities.

Our long-term objective is to eventually become a seed producer and develop self-sufficiency inrespect of seed supply.

(iv) Develop our bulking and logistics services and renewable biomass power generationbusiness

We currently complement our plantation business with our bulking and logistics operations andrenewable biomass power generation business.

As part of our long-term business strategy, we intend to continue developing our bulking andlogistics services in tandem with our main plantation business. We intend to add a double-hullvessel to the two barges we currently operate. We intend to increase the amount of services weprovide to third party customers.

PROSPECTUS SUMMARY

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Following the successful implementation of our first renewable biomass power plant in BangkaIsland, we have commenced construction of our second renewable biomass power plant inBelitung. Like our first renewable biomass power plant, this will enable us to sell electricity toPLN to meet the needs of local communities in power-scarce areas and serve as an additionalsource of revenue. We intend to build similar renewable biomass power plants in Kalimantanwhen appropriate or commercially viable. We also intend to sell the carbon credits attributable tothese future CDM projects and will, at the appropriate time, apply to the relevant authorities forvalidation of such projects. As at the Latest Practicable Date, our renewable power plant inBangka Island has been validated as a CDM project and is now pending registration status bythe executive board of the UNFCCC.

For more details, please refer to the section “General Information On Our Group – Strategy and FuturePlans” of this Prospectus.

Where you can find us

Our registered office is located at 3 Shenton Way, #10-06 Shenton House, Singapore 068805. Ourtelephone number is +65 6227 9122 and our facsimile number is +65 6227 9121.

PROSPECTUS SUMMARY

26

SUMMARY OF OUR FINANCIAL INFORMATION

You should read the following summary financial information in conjunction with the audited combinedfinancial statements of our Group and the related notes and the section “Management’s Discussion andAnalysis of Results of Operations and Financial Condition” of this Prospectus. Our audited combinedfinancial statements for FY2005, FY2006 and FY2007 are set out in Appendix F of this Prospectus. Ourunaudited proforma combined financial information for FY2007 is set out in Appendix E of thisProspectus.

Selected items from the combined operating results of our Group (1)

Audited

(US$’000) FY2005 FY2006 FY2007

Revenue 36,623 41,067 69,280

Gross profit 4,434 8,497 23,454

Profit / (loss) before tax (9,175) 20,317 54,556

Profit / (loss) for the year (7,037) 14,835 39,202

EPS / (LPS) (US cents)(2) (0.9) 1.9 4.9

Selected items from the combined financial position and proforma combined financial position ofour Group(3)

As at 31 December 2007

(US$’000) Audited Proforma

Non-current assets 135,041 135,041

Current assets 19,153 16,223

Current liabilities 17,304 18,304

Net current assets / (liabilities) 1,849 (2,081)

Non-current liabilities 58,313 58,313

Shareholders’ equity 78,577 74,647

NTA per Share (US cents)(4) 9.8 9.4

Notes:

(1) The audited combined operating results of our Group for FY2005, FY2006 and FY2007 have been prepared assuming thatour Group had been in existence since 1 January 2005.

(2) For comparative purposes, EPS/(LPS) for FY2005, FY2006 and FY2007 have been computed based on the profit/(loss) forthe year and our pre-Invitation share capital of 798,044,720 Shares.

(3) The audited combined financial position of our Group as at 31 December 2007 has been prepared assuming that our Grouphad been in existence as at 1 January 2005. The proforma combined financial position as at 31 December 2007 has beenprepared assuming that our Group had existed since 1 January 2005 and takes into account the intended distribution ofdividends amounting to Rp9 billion (approximately US$1 million) and changes in capital structure as a result of theRestructuring Exercise. Please refer to Appendix E “Independent Auditors’ Report of the Unaudited Proforma CombinedFinancial Information of Kencana Agri Ltd for the Financial Year Ended 31 December 2007” for a description of the proformaadjustments.

(4) For comparative purposes, the NTA per Share for the period under review has been computed based on our pre-Invitationshare capital of 798,044,720 Shares.

PROSPECTUS SUMMARY

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Issue Size : 200,000,000 New Shares comprising 1,000,000 Offer Sharesand 199,000,000 Placement Shares which, upon allotment andissue, rank pari passu with our existing issued Shares.

Issue Price : S$0.305 for each New Share.

The Offer : The Offer comprises an Invitation by our Company to the publicin Singapore to subscribe for 1,000,000 Offer Shares at theIssue Price, subject to and on the terms and conditions of thisProspectus.

The Placement : The Placement comprises a placement of 199,000,000Placement Shares (including 300,000 Internet PlacementShares) and 12,100,000 Reserved Shares at the Issue Price,subject to and on the terms and conditions of this Prospectus.

Purpose of the Invitation : Our Directors consider that the listing of our Company and thequotation of our Shares on the SGX-ST will enhance our publicimage locally and overseas and enable us to tap into the capitalmarkets for the expansion of our business operations.

The Invitation will also provide members of the public with anopportunity to participate in the equity of our Company.

Listing status : Our Shares will be quoted in Singapore dollars on theMainboard of the SGX-ST, subject to admission of our Companyto the Official List of the SGX-ST and permission for dealing in,and for quotation of, our Shares being granted by the SGX-STand the Authority not issuing a Stop Order.

THE INVITATION

28

Prospective investors should carefully consider and evaluate the following considerations and all otherinformation contained in this Prospectus before deciding to invest in our Shares. Some of the followingrisk factors relate principally to the industries in which our Group operates and the business of our Groupin general. Other considerations relate principally to general economic and political conditions and thesecurities market and ownership of our Shares, including possible future sales of Shares.

If any of the following considerations and uncertainties develop into actual events, our business, results ofoperations and financial condition could be materially and adversely affected. In such cases, the tradingprice of our Shares could decline due to any of these considerations and uncertainties, and investors maylose all or part of their investment in our Shares. To the best of our Directors’ belief and knowledge, all therisk factors that are material to investors in making an informed judgement have been set out below.

RISKS RELATING TO OUR BUSINESS AND THE INDUSTRIES IN WHICH OUR GROUP OPERATES

Risks Relating To Our Business

We may not be able to obtain HGU certification in respect of our Kadastral land and Ijin Lokasi

As at the Latest Practicable Date, we are in the final process of obtaining HGU certificates in respect of42,640 hectares of Kadastral land (representing approximately 44.7% of the total land bank held by ourGroup) and are also occupying 33,100 hectares of land under Ijin Lokasi. We intend to apply for HGUcertification in respect of the 33,100 hectares of Ijin Lokasi in due course. Please refer to the section“General Information On Our Group – Process of Obtaining HGU Land Title” of this Prospectus for asummary of the process by which HGU certification is obtained.

Prior to the issuance of the HGU certificates, such lands are considered as uncertified land. Pending theissuance of HGU certificates, our Group is allowed to physically occupy, build and plant crops on theuncertified land. However, as the administration of land laws and regulations may be subject to a certaindegree of discretion by the Indonesian government authorities, there is no assurance that the relevantauthorities would not take a different approach or view with respect to the uncertified land, its use,registration and future disposal for value.

A significant portion of our Group’s land has been allocated in the form of Kadastral land. We have beenadvised by Ali Budiardjo, Nugroho, Reksodiputro, legal advisers to our Company on Indonesian Law, thaton the basis that we have actual possession of the uncertified land and the measurement process byPanitia B having been completed, our Group would have the right to obtain HGU certification over suchland, subject to the fulfilment of the registration procedures as required under the Basic Agrarian Law of1960 (the “Agrarian Law”).

As for the land under Ijin Lokasi, such Ijin Lokasi may be revoked by the Indonesian government if we failto acquire the land within the stipulated validity period (or any extension thereof) of the said Ijin Lokasi. Insuch an event, we may lose our rights granted by the Indonesian government under the Ijin Lokasi.Presently, we are taking steps to acquire the land in respect of such Ijin Lokasi.

Please refer to the section “General Information On Our Group – Process of Obtaining HGU Land Title” ofthis Prospectus for more information. If for any reason our Group fails to fulfill the registration proceduresas required under the Agrarian Law, there is no assurance that the Regional Land Agency will proceed toissue a HGU certificate for land on which we have begun planting. In the event that HGU certification isnot obtained for whatever reason, we are required by law to clear such land on which we have startedplanting, which in turn would materially adversely affect our operations and prospects. As at the LatestPracticable Date, we have planted over 11,838 hectares (or 27.8%) of our Kadastral Land of 42,640hectares. We have not yet commenced planting on the 33,100 hectares of land under Ijin Lokasi as wehad just obtained the Ijin Lokasi for ASML on 26 March 2008, SCEM on 8 April 2008 and WSM on 27November 2007.

We need to effectively manage our expansion plans and may be adversely affected by risksrelating to the expansion of our plantations and processing operations

Our main operations are currently based in Indonesia. As disclosed in the section “Strategy and FuturePlans” of this Prospectus, our Directors intend to, among others, grow and expand our oil palmplantations, increase our production capacity by building more processing facilities and relying on new

RISK FACTORS

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technology. We are also looking into developing germinated seeds to improve our planting process. Ourexpansion plans involve various risks which include operational, construction and regulatory risks andrisks involving investment in working capital. The success of our expansion plans depends on manyfactors, some of which are not within our control.

For example, our expansion plans are subject to the following events:

� Indonesian government policies could limit our ability to obtain adequate land rights to additionalland suitable for plantations;

� we may not be able to convert all of the land bank that we hold to HGU title and therefore may notbe able to use all of this land for our planned expansion;

� we may not be able to complete our plantation and processing facilities expansion on time or withinbudget;

� our new or expanded plantations may not be able to produce FFB at expected production levels ormay require additional costs to cultivate and harvest;

� we may experience difficulties integrating our new expanded plantations with our currentplantations and processing facilities;

� we may not be able to carry out our planned expansion due to unfavourable weather conditionsand natural disasters; and

� unforeseen circumstances and problems relating to our expansion projects.

Any of these factors may affect our ability to execute our expansion plans successfully, in which event,our business, financial condition and results of operations may be adversely affected.

We are vulnerable to significant fluctuations in prices and availability of our key raw materials andgerminated seeds

Our operations depend on key raw materials which include FFB, kernels, kernel shells, fertiliser,pesticide, herbicide and diesel fuel. Approximately 75.7%, 67.7% and 78.7% of our costs of sales werefor FFB and kernels purchased from third parties in FY2005, FY2006 and FY2007 respectively. We do nothave long term supply contracts with such third parties, save for FFB supplied by villagers under ourPlasma Programme. The prices and availability of raw materials may be affected by factors such aschanges in their global demand and supply, the state of the global economy, inflationary pressure,environmental regulations, tariffs, natural disasters, forest fires, weather conditions and labour unrest.

Under Indonesian government policy, oil palm plantation companies are encouraged to develop newplantations that will be operated by local small landholders, a scheme known as the Plasma Programme.Under this programme, we are committed to purchase FFB from landholders at a formula price fixed bythe local government. All plantations in the region must purchase FFB under the Plasma Programme atthis price. There can be no assurance, however, that the formula price will continue to approximate themarket price.

As our plantations continue to expand with new plantings, the land area assigned under our PlasmaProgramme will increase accordingly. This may adversely affect our margins as we are required to buy ahigher proportion of FFB at the formula price which may be greater than market price.

In the event of a shortage of germinated seeds arising from factors such as high demand for germinatedseeds in the industry or from natural disasters, we may not achieve our new planting targets under ourexpansion plans and we may not be able to seek alternative sources of supply in a timely manner.

Between FY2005 and FY2007, we purchased a significant proportion of FFB and kernels from thirdparties. In the event that there is a disruption or significant reduction in the supply of FFB and kernelsfrom these third parties, we may not be able to achieve a comparable level of production of CPO andCPKO, and accordingly our financial performance may be affected.

RISK FACTORS

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Any significant fluctuation in the prices and availability of such materials may significantly increase ourcost of sales, which in turn may adversely affect our business, profitability and overall financialperformance.

Our financial results may fluctuate due to increases or decreases in the appraised fair value ofour biological assets

We reassess the fair value of our biological assets on our plantations at every balance sheet date. Ourannual valuations are prepared by independent valuers and the estimations are based on discountedcashflows of the underlying biological assets. In accordance with Singapore Financial ReportingStandards (“SFRS”), we recognise changes to the appraised fair value of our biological assets on ourplantations as an increase or decrease (as applicable) in our income statements. However, there is nocash flow impact arising from any fair value increase or decrease as long as the relevant plantations onwhich the biological assets are located are held by our Group. Based upon our audited combined incomestatements, we recognised fair value gains of US$16.7 million and US$41.9 million in FY2006 andFY2007 respectively and a fair value loss of US$9.0 million in FY2005. The appraised fair value of ourbiological assets may fluctuate further in the future, and our historical results should not be regarded asan indicator of the future profits of our Group. The appraised fair value of our biological assets maydecrease in the future. Any decrease in the fair value of our biological assets could have a materialadverse effect on our profitability, overall financial condition and results of operations.

We may not be able to effectively hedge the risks of price fluctuations for our products

Our Group from time to time utilises forward physical contracts in the ordinary course of business tohedge the risks of adverse price fluctuations of our products, namely CPO and CPKO. Nonetheless, aswe enter into forward physical contracts for only a portion of our products, our Group may not be able tofully hedge against the risks of future price fluctuations of our remaining products. Should the futuremarket prices of these remaining products decrease, our profitability may be adversely affected.

We may face prohibitions and constraints in our ownership and acquisition of plantation land

We currently possess land that is in different stages of the regulatory processes described therein. As atthe Latest Practicable Date, our land bank is 95,410 hectares. We have obtained HGU title in respect of19,670 hectares. We are also in the final process of obtaining HGU title for 42,640 hectares of ourKadastral land bank. The balance of 33,100 hectares is held under Ijin Lokasi.

In Indonesia, the government holds title to all land under Basic Agrarian Law of 1960. In order to obtainHGU title from the Indonesian government, an application needs to be made to the National LandAgency. HGU titles granted by the Indonesian government have a fixed duration that may be extended foradditional periods provided that the holders can fulfill certain requirements. HGU is a right to utilisegovernment-owned land for plantation, fisheries or farming with minimum area of five hectares, for aperiod of up to 35 years, extendable for an additional period of up to 25 years, provided holders can fulfillthe extension requirements. A holder of HGU title can also renew this land use right after the extendedterm expires. Only Indonesian citizens and legal entities established under Indonesian Law with domicilein Indonesia may hold HGU. The HGUs we hold expire between the years 2034 and 2042 in our SouthKalimantan plantation and between the years 2032 and 2037 in our Bangka plantation, unless furtherextended. The intermediate stages of obtaining approval for HGU include the acquisition of the land bankand the survey of the land by Panitia B, after which the Decision Letter on the Granting of HGU (SuratKeputusan Pemberian HGU) is issued followed by registration of the HGU. Please refer to “Appendix C –Indonesian Regulatory Overview” of this Prospectus for more information.

With regard to limitations on the maximum size of land allowable for plantation business, on 10 February1999, the State Minister of Agrarian Affairs / Head of the National Land Agency issued Regulation No. 2of 1999 (“Regulation No. 2/1999”), which limits the aggregate size of agricultural plantations (including oilpalm plantations) held by any person, company, group or related persons or companies. According toRegulation No. 2/1999, the maximum aggregate size for oil palm plantations for a company or a group ofcompanies under the same shareholding is 100,000 hectares nationally and 20,000 hectares for eachprovince of Indonesia, except for the province of Papua (formerly known as Irian Jaya) where themaximum area is 40,000 hectares. The above limitations are only applicable to HGU titles and do notapply to Kadastral land or land under Ijin Lokasi.

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Further on 23 May 2002, the Minister of Agriculture issued Decree No. 357/Kpts/HK.350/5/2002 onguidelines for licensing plantation business (“Decree No. 357/2002”) with the same restrictions on the sizeof land-plots for the business of plantation cultivation.

However on 11 August 2004, the Indonesian government enacted Law No. 18 of 2004 concerningPlantation (“Law No. 18/2004” or “Plantation Law”), which provides, inter-alia, that for the use of land for aplantation business, the minister in charge of and responsible for managing the plantation sector (the“Minister of Agriculture”) shall stipulate the land’s maximum and minimum area of use, while the agencyin charge of land affairs shall issue the land titles. In determining the maximum and minimum land areaspermitted to be used for the purposes of a plantation business, the Minister of Agriculture shall be guidedby the following factors: (i) the types of plants; (ii) the availability of land according to the agro-climaticconditions; (iii) capitalisation of the business; (iv) the factory’s capacity; (v) the population density of thearea; (vi) the business development pattern; (vii) the local conditions; and (viii) the respective generaltechnology development.

In addition to the above, a plantation shall be operated with the aim of: (i) improving the community’sincome; (ii) increasing the state’s revenue; (iii) increasing the state’s foreign exchange receipts;(iv) creating job opportunities; (v) increasing productivity, added value and competitiveness; and(vi) optimising the management of natural resources in a sustainable way.

Further to the implementation of Law No. 18/2004, on 29 February 2007, the Regulation of the Minister ofAgriculture No. 26/Permentan/OT.140/2/2007 (“Regulation No. 26/2007”) was issued which provides,among others, the maximum acreage of plantation area which can be granted to a plantation company asa single legal entity. The maximum acreage of the plantation area is determined based on the types ofcommodities as stated in Regulation No. 26/2007, such as oil palm and rubber, where the maximumacreage is 100,000 hectares and 25,000 hectares, respectively, except that the maximum acreage ofplantation area in the province of Papua is two times the maximum acreage of plantation area as set forthin Regulation No. 26/2007. Regulation No. 26/2007 also provides various exceptions to the sizelimitations, one of which is that the limitations do not apply to plantation companies listed in Indonesiaand in which the majority of the shares is owned by the public. The Plantation Business Licence (IjinUsaha Perkebunan – IUP) issued prior to the enactment of Regulation No. 26/2007 is still valid andserves as a business licence for the holder. Please note that based on the issuance of Regulation No.26/2007, Decree No. 357/2002 was revoked.

Even though Regulation No. 26/2007 has been effective since February 2007, Regulation No. 2/1999 hasnever been revoked. Hence, it is unclear how the National Land Agency or the provincial governments willrespond to the issuance of Regulation No. 26/2007, which allows each company to own plantations up to100,000 hectares. Although Decree No. 357/2002 has been revoked by Regulation No. 26/2007, inpractice, the National Land Agency still preserves the limitation of plantation area as stipulated in DecreeNo. 357/2002. As at the Latest Practicable Date, our Group is in compliance with both Regulation No.2/1999 and Regulation No. 26/2007. We also believe that by enacting the Law No. 18/2004 theIndonesian government has given its support to the development and expansion of plantation businessactivities.

In addition, due to the developing nature of Indonesian property law and the lack of a uniform title systemin Indonesia, disputes over our purchase of title from previous land owners could occur. In particular,rights to plantation lands that have been formed from the land of many small landholders or landsbelonging to the indigenous people may give rise to disputes with former or illegal land owners.

We have entered into various agreements with small landholders who own uncertified land pursuant towhich these individuals have relinquished their title over the land to the State so as to enable us to obtaina HGU title over the land. Following the relinquishment of title, such land is typically left vacant pending itsintended use by us. As we are only in possession of a contractual right to physical possession of the landbased on our agreements with the previous landowners, we are therefore required to apply for a HGUtitle with the Indonesian government before we are able to obtain valid title to the land. We believe that weare able to submit successful applications to obtain a HGU title over such land on the basis that there arecurrently no legal disputes over such land. However, due to the developing nature of Indonesian land law,disputes over title from previous landowners or any third parties may arise in the future. A dispute mayprevent or indefinitely postpone the granting of HGU titles in our favour, which could in turn have anadverse effect on our prospects and future plans.

RISK FACTORS

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Further, before allocating undeveloped land for plantation use, the regional government will consult otherrelated government agencies. As there are difficulties in producing accurate maps, the regionalgovernment may assign overlapping Ijin Lokasi for different uses for the same area of land. There is arisk that we may be assigned Ijin Lokasi in respect of land for which there are conflicting Ijin Lokasi oroverlapping protected areas such as woodlands. Such conflicts would prevent us from fully utilising theland and require us to seek further approvals from the authorities. There can be no assurance that suchapprovals will be granted. Failure to obtain HGU certification for our land bank and any disputes over ourland which we are involved in, could each have an adverse effect on our business, financial condition,results of operations, and prospects.

The issuance of Ijin Lokasi is subject to approval and recommendation from the relevantauthorities

As at the Latest Practicable Date, our Group is applying for additional Ijin Lokasi (outside our current totalland bank) in respect of approximately 36,700 hectares of plantation land in Indonesia allocated by theIndonesian government. The Ijin Lokasi will be issued by the Head of Regency having jurisdiction over thelocation of the plots of land in respect of which the Ijin Lokasi is being applied for. The issuance of IjinLokasi will be made by the Head of Regency in accordance with the regional spatial layout and based onthe recommendations from the regional land office and other government related agencies, such as theDepartment of Agriculture and the Department of Forestry (“Relevant Department”). There is a possibilitythat the Relevant Department may, for any reason, not issue the required recommendations in our favour,and in such circumstances, the Head of Regency may not issue the Ijin Lokasi under our name. This inturn may have a material adverse effect on our prospects and future plans.

The Ijin Lokasi (location permit) of certain of our properties may not be extended

As at the Latest Practicable Date, our Group holds Ijin Lokasi in respect of approximately 33,100 hectaresof plantation land in Indonesia allocated by the Indonesian government. The Ijin Lokasi allows our Groupto acquire rights over the land covered by the Ijin Lokasi in accordance with the prevailing laws andregulations. Upon the completion of the acquisition of such land, our Group will be entitled to begin theprocess of application for HGU certification over such land. Under Regulation No. 2/1999, Ijin Lokasi maybe extended only if the holder of the Ijin Lokasi has acquired from existing landowners more than 50% ofthe land covered under the Ijin Lokasi. The duration of Ijin Lokasi may not be extended by the Indonesiangovernment and will automatically expire if our Group fails to acquire up to 50% of the land covered in theIjin Lokasi within the stipulated validity period of the said Ijin Lokasi. In such an event, our Group maylose the rights granted by the Indonesian government under the Ijin Lokasi in respect of the remainingarea covered by the original Ijin Lokasi, which would have a material adverse effect on our prospects andfuture plans. Our Group is presently taking steps to acquire the remaining land in respect of such IjinLokasi. Please refer to “Appendix C – Indonesian Regulatory Overview” of this Prospectus for moreinformation.

We will be adversely affected by any significant or prolonged disruption to our productionfacilities

Any prolonged and/or significant disruption to our production facilities (whether occasioned by the needfor repair, maintenance or servicing or the result of industrial accidents or human error) will adverselyaffect our operations. Further, any major or sustained disruptions in the supply of utilities such as water orelectricity or any fire, flood, earthquake or other natural calamities could lead to significant disruption toour operations or result in significant damage to our production facilities or inventories. These willadversely affect our business, financial performance and prospects.

We may have insufficient insurance coverage or no insurance coverage for certain contingencies

Our operations are subject to hazards and risks inherent in agriculture and processing operations, suchas fires, storage tank leaks, mechanical failure of equipment at our processing facilities and naturaldisasters. Many of these operating and other risks may cause personal injury and loss of life, severedamage to or destruction of our properties and environmental pollution, and could result in suspension ofpart or all of our operations and the imposition of penalties.

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We face the risks of loss and damage to our properties, machinery and FFB due to fire, theft and naturaldisasters such as earthquakes and floods. Such events may cause a disruption to or cessation of ouroperations. While our insurance policies cover some losses in respect of loss and damage to ourproperties, machinery and inventories, our insurance coverage may not be sufficient to cover all of ourpotential losses. In addition, our insurance coverage may not cover all the risks which we may beexposed to, such as loss and damage to our biological assets. In the event our losses exceed ourinsurance coverage, or if we are not covered by the insurance policies we have taken up, we may beliable to cover any shortfall or losses. Our insurance premiums may also increase substantially becauseof such claims. In such circumstances, our financial results may be materially and adversely affected.

We do not insure our plantations against fire, diseases, or pests. We currently maintain insurancecoverage for industrial all risks, machinery breakdown, and earthquake of approximately US$67.7 millionin respect of our Bangka Island and Kalimantan processing facilities which includes equipment andmachineries, stocks, inventories and power plant. Our insurance coverage is also subject to certainexclusions such as war, terrorism and nuclear contamination. In the event that our processing facilitiesare damaged, such insurance coverage may be inadequate to cover the loss or damage that may beincurred as a result of such events.

In addition, the operation of our vessels is subject to risks such as losses caused by adverse weatherconditions, mechanical failures, collisions, human error, war, terrorism, piracy, labour stoppages and othercircumstances or events including spills and other environmental mishaps. In addition, transporting cargoacross international jurisdictions involves the risk of business interruptions due to political circumstancesin foreign countries, hostilities, labour strikes and boycotts, and the risk of government expropriation ofour vessels.

We may not be able to obtain adequate insurance coverage at reasonable rates for our vessels in thefuture or successfully make claims against the insurance companies. Furthermore, even if insurancecoverage is adequate to cover our losses, we may not be able to obtain a replacement ship in a timelymanner. Any significant loss or liability for which we are not adequately insured or any delay in obtaininga replacement ship could have a material adverse effect on our business, financial position and results ofoperations.

We also maintain marine hull insurance coverage of Rp19.6 billion (approximately US$2.2 million) inrespect of our vessels. Such insurance covers events such as fire, explosion, perils of the seas, piracy,accidents in loading, discharging or shifting cargo and is subject to certain exclusions including loss of lifeand personal injury, war, derelict bombs or torpedoes, nuclear fission and terrorism. The amount of suchinsurance coverage may be inadequate to cover the loss or damage that may be incurred as a result ofsuch events.

If we suffer a large uninsured loss or in the event that any insured loss suffered by us significantlyexceeds our insurance coverage, our business, financial condition, results of operations and prospectscould be materially and adversely affected.

Please refer to the section “General Information On Our Group – Insurance” of this Prospectus for moreinformation.

We are dependent on our key management team and skilled employees

The continued services of our management team and skilled employees make up one of our key successfactors. Our Group’s success is to a large extent attributable to the strategy and vision of our founder andChairman and CEO, Mr. Henry Maknawi, as well as our senior management team and operationalpersonnel who are familiar with our Group’s operations and are able to meet the needs and requirementsof our customers. As we do not have keyman insurance, the loss of the services of the aforementionedpersons would have an impact on our business and operations. There is no assurance that we will beable to retain our key management personnel. A loss of any of our key personnel without sufficientlyqualified and timely replacements may have an adverse impact on our operations and our growth,prospects and future performance.

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We rely on bank borrowings to finance our operations and may require additional funding for ourfuture growth

Certain of our Group companies currently rely on credit facilities from financial institutions. Such facilitiesinvolve restrictive covenants such as (i) limiting certain of our Group companies’ ability to pay dividends orrequiring us to seek consent from the relevant financial institutions for the payment of dividends; (ii)requiring us to maintain certain financial ratios, failing which repayment of the debt may be accelerated;(iii) restricting our ability to undertake or requiring us to obtain consents from the relevant financialinstitutions for corporate restructurings, mergers and acquisitions, additional financing or other fund-raising exercises; and/or (iv) requiring the retention of ultimate majority shareholding interest in certain ofour Group companies by members of the Maknawi family both prior to and after the Invitation. In theevent that such restrictive covenants are not discharged or such consent is not granted by the relevantfinancial institutions, our operations, future expansion and the attractiveness of our Shares as aninvestment may be adversely affected. As at the Latest Practicable Date, the aggregate amount of bankborrowings which are covered by these restrictive covenants was approximately US$39.7 million (86.7%of our total indebtedness).

Apart from internal funding resources, we also rely on finance leases and term loans to finance ouroperations. Please refer to the section “Capitalisation and Indebtedness” of this Prospectus for details ofour bank borrowings. If all or a substantial portion of our facilities are withdrawn and we are unable tosecure alternative funding on acceptable commercial terms, or if the cost of such alternative funding ishigher than our present cost of funds, our operations and financial position will be materially andadversely affected.

We may need additional financing to fund our activities in future. There is no assurance that we will beable to obtain additional financing on terms that are acceptable to us or at all. If we are unable to do so,our future plans and growth prospects may be adversely affected.

Our operations are subject to negative impact of government export taxes, import policies andtariffs and price control measures

As we export a significant portion of our products to countries outside Indonesia, we are currentlyaffected by export taxes levied by the Indonesian government. For instance, the Indonesian governmenthad on 15 June 2007 implemented a price control measure by imposing an export duty hike on CPO tolower and curb any further increase in the price of cooking oil. Tariffs and government import policies ofour Group’s export markets (such as India) will also affect the cost of materials to our foreign customers.Such taxes increase the cost of our export sales.

Based on the Regulation of the Minister of Finance No. 94/PMK.011/2007 dated 31 August 2007 (“MOFRegulation No. 94”) in conjunction with the Regulation of the Minister of Trade No. 35/M-DAG/PER/8/2007dated 31 August 2007, the Ministry of Trade will determine Export Check Price (“ECP”), also commonlyknown as Harga Patokan Export (“HPE”), on a monthly basis for certain Export Goods (“MOT RegulationNo. 35”) in order to ensure a sufficient supply of raw material for the domestic cooking oil industry and tomaintain the stability of domestic cooking oil prices. The Ministry of Trade utilises the monthly averageinternational price and/or FOB Indonesian ports to determine the ECP. The Ministry of Finance will thendetermine the percentage of export tax to be applied to the ECP every month based on the averagemonthly CIF Rotterdam (“Reference Price”). Pursuant to the Regulation of the Ministry of Finance No.72/PMK.011/2008 dated 8 May 2008, a new range of export tax rates were imposed on CPO and itsderivative products. The export tax rate imposed on CPO and CPKO could extend up to a maximum of25% depending on the Reference Price.

If the Indonesian government further increases the export tax level on our products or imposes an exportban on our products or takes other similar actions, our export sales and the prices we can charge in theIndonesian market will be adversely affected, which could adversely affect our business, financialcondition, results of operations and prospects.

Any material changes in Indonesian export policies or the import policies of our Group’s export marketssuch as an export or import ban or an increase in export or import taxes or other similar or relatedactions by the various governments would adversely affect the price competitiveness of our Group’sproducts.

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We are exposed to foreign exchange fluctuation risks

Our Company’s functional and reporting currency is the US dollar and that of our Indonesian subsidiariesis the Rupiah.

The majority of the sales of palm oil products of our Group are quoted in US dollars while our purchases(with the exception of certain key costs such as fertilisers, plant and heavy equipment) and businessoperations in Indonesia are mainly denominated in Rupiah. For FY2007, approximately 96.6% and 3.4%of our revenue were denominated in US dollars and Rupiah respectively. For the same period,approximately 5.1% and 94.9% of our total purchases were denominated in US dollars and Rupiahrespectively. As such, our Group has a net foreign exchange exposure due to a mismatch in thecurrencies of receipts and payments. To the extent of such mismatch, any significant appreciation ordepreciation in the US dollar against the Rupiah and/or arising from timing difference due to credit termsgiven by our suppliers and to our customers may cause our Group to incur foreign exchange losses or,conversely, benefit from foreign exchange gains.

In addition, our Group has significant borrowings denominated in US dollars to finance our operations inIndonesia. As such, any appreciation in the US dollar against the Rupiah may also result in our Groupincurring foreign exchange losses due to settlement or revaluation of our US dollar-denominatedborrowings. As at 31 December 2007, approximately 34.6% and 65.4% of our Group’s total borrowingswere denominated in US dollars and Rupiah respectively.

Our Group records its financial results in either Rupiah or US dollars and the accounts of our Indonesiansubsidiaries will need to be translated to US dollars for consolidation purposes. Any fluctuations incurrency exchange rates will also result in exchange translation gains or losses.

For the last three financial years ended 31 December 2005, 2006 and 2007, the net foreign exchangegains/(losses) of our Group are as follows:

FY2005 FY2006 FY2007

Net foreign exchange gains/(losses) recognised in incomestatement (US$’000) (563) 1,206 (773)

In seeking to mitigate the volatility associated with US dollar-denominated sales, our Group usuallyutilises foreign currency forward contracts. The value of such foreign currency forward contracts isequivalent to approximately 30.0% of US dollar-denominated sales. Our Group’s foreign currency hedgingpolicy aims to reduce the impact of significant fluctuations in the exchange rate between the US dollarand the Rupiah, on our financial performance. Nonetheless, any sudden and significant changes in theexchange rate between the US dollar and the Rupiah could affect the results of our operations, if theprices of our products fail to fully reflect the changes in raw material costs or if our currency position isnot properly or adequately hedged.

Our operations are subject to disruptions in transportation and volatility in freight costs

We are dependent on freight and transportation services provided in part by external parties to transportmaterials between our processing and storage facilities as well as for delivery of our products to ourcustomers. Disruption of transportation services arising from factors such as unfavourable weatherconditions, labour unrest, significant downtime arising from major and unexpected repairs or other eventscould impair our production process and affect the quality of our products and our ability to supply ourproducts to customers on time. Failure to or delay in supply of our products to customers may result incontractual claims against us and any repeated delay or failure to supply our products to customers mayin the long term, adversely affect the demand for our products, our reputation and the growth andprospects of our business as a whole.

Freight and handling expenses incurred in the transportation of our products account for a substantialportion of our Group’s distribution costs and are therefore vital factors in customers’ purchasing decisions.Increases in freight and transportation related costs, including cost increases due to an escalation of fuelprices, could increase our Group’s expenses which may in turn have a material adverse effect on ouroperating results.

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A significant portion of our revenue is attributable to a major end customer

Kuok Oils & Grains Pte. Ltd. (now part of the Wilmar Group) is our major end customer accounting forapproximately 62.7%, 52.2% and 35.2% of our revenues for FY2005, FY2006 and FY2007 respectively.Please refer to the section “General Information On Our Group – Major Customers” of this Prospectus formore information. We generally do not have any long-term supply agreements with our customers.

The strength of our relationship with our major customers in the future will depend on our ability to supplyquality products in a timely manner and at acceptable prices. Hence, there can be no assurance that theWilmar Group or any of our other major customers will continue to place orders with us at current levelsand any significant reduction or cessation in orders would have a material adverse effect on our financialresults.

We may be adversely affected by the imposition and enforcement of more stringent environmentalregulations

Our main environmental concerns relate to the discharge of effluent arising from the milling of FFB andclearance of land and forest for developing our plantations. Our main social concern relates to possibleconflicts that may arise with local communities in the areas around our plantations. Any environmentalclaims or failure to comply with any present or future regulations could result in the imposition of fines, orthe suspension or cessation of our operations.

Our plantations are subject to both scheduled and unscheduled inspections by various governmentagencies, each of whom may have different perspectives or standards from the others. These agencieshave the power to examine and control our compliance with their environmental regulations, including theimposition of fines and revocation of licenses and land rights. However, governmental agencies mayadopt additional regulations that would require us to spend additional funds on environmental matters.Please refer to “Appendix C – Indonesian Regulatory Overview” of this Prospectus for more information.

Environmental regulations and social practices in Indonesia tend to be less stringent than in developedcountries. It is possible that these regulations could become more stringent in the future and compliancewith them may involve incurring significant costs. This may consequently have an adverse effect on ouroperations. Any failure to comply with the laws and regulations could subject us to liabilities.

Our plantation operations may face disruption from environmental groups, non-governmentalorganisations and interested individuals

Environmental groups, non-governmental organisations and interested individuals may from time to timeseek to challenge or impair the ability of plantation companies to engage in plantation activities. Forinstance, groups and individuals may stage protests that disrupt harvesting or production plans and mayfile or threaten to file legal proceedings seeking to disrupt the operations of plantation companiesgenerally. Such activities may generate negative press about plantation companies in general. Any delayin or restrictions on harvesting or production activities imposed as a result of the intervention ofenvironmental groups, non-governmental organisations or such interested individuals or other action thatmay give rise to negative perceptions about plantation companies generally, may adversely affect ourreputation and disrupt our operations which in turn may cause us to suffer financial loss.

We may be adversely affected by third parties’ actions in using fire for land clearing

We adopt a strict zero burning policy for land clearing and practice fire-control measures such asmaintaining watchtowers and conducting regular patrols. However, there is a possibility that third partiesmay conduct burning in order to carry out land clearing activities near our plantation areas or commitarson or subterfuge that cause fires to occur in our plantation areas, resulting in damage to ourplantations. This may lead to legal proceedings against us in respect of fires occurring in our plantations,which may affect our reputation and disrupt our operations, which in turn may cause us to suffer financialloss.

We may make acquisitions which could place a strain on our resources and adversely affect ourfinancial performance

Going forward, we may make acquisitions to expand our existing business. The entire acquisition processinvolves, inter alia, identifying suitable targets, negotiations and due diligence investigations and couldplace a strain on our resources and may not result in the completion of successful acquisitions. Futureacquisitions could also divert our management’s attention from other business concerns and may expose

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our business to unforeseen liabilities or risks associated with entering new markets. We may also lose keyemployees while integrating new organisations. Consequently, the acquired business may not besuccessfully integrated and we may not achieve the anticipated revenues and cost benefits. Suchacquisitions could also result in, inter alia, loss of customers, potential dilutive issuance of equitysecurities or the incurrence of debt, contingent liabilities or other unanticipated events or circumstances,any of which could adversely affect our business and financial performance.

Labour activism and strikes, or failure to comply with various labour regulations or maintainsatisfactory labour relations may adversely affect our Group

Our plantations and processing plants are labour-intensive. In addition, our plantations are surrounded byplasma plantations which may affect our field maintenance and plant harvesting. Our operations have notbeen materially affected by any significant labor dispute or dispute with the villagers of the localcommunities in the past. However, we may, in the future, experience labor unrest, activism, disputes oractions involving our employees or villagers, any of which could have a material adverse effect on ourbusiness operations and, in turn, our financial performance as a whole.

Although the operations of our Group have not been materially affected by any significant labour disputein the last three financial years ended 31 December 2005, 2006 and 2007 and the period from 1 January2008 to the Latest Practicable Date, there is no assurance that we will not experience labour unrest,activism or disputes in future which may be significant and could adversely and materially affect ourbusiness and financial performance as a whole.

Our Group may be exposed to the risk of small landholders defaulting on repayment of the loansextended or guaranteed by our Group under the Plasma Programme in which we participate

The Indonesian government requires oil palm plantations to develop the surrounding local plantationareas held by small landholders when applying for land rights for oil palm plantations. This form ofassistance to local small landholders is generally known as a Plasma Programme. Under a PlasmaProgramme, a plantation developer transfers a designated land area to small landholders, who thenoperate the plasma plantation under the supervision of the plantation developer.

Our Group has implemented a Plasma Programme using the plantation business cooperatives scheme(KKPA), the cooperation in local community palm oil plantation scheme (KKSR), and the independentplasma scheme (Plasma Mandiri).

Under the KKPA scheme, the land is typically occupied by the villagers and our Group helps to developthe land (including assisting the villagers to obtain land certificates) and manage the oil palm trees tomaturity. The development costs are funded by bank loans, which are guaranteed by the land rights overthe small landholders’ oil palm plantations and by corporate guarantees from our Group. In the event thatthe small landholders default on repayment of their loans, and the banks claim on the guaranteesprovided by our Group, our Group will be entitled under Indonesian law to be subrogated in relation to thesecurity held by the banks over the debts of the small landholders.

Upon maturity of the oil palm trees, the land will be maintained and managed by the villagers or in thefuture by our Group. The harvested FFB will then be sold to our Group. The loan facilities will be repaid bythe villagers from part of the FFB sales proceeds. The banks typically charge interest at fixed and floatingrates under the government scheme or a floating rate under the company scheme for the financing ofsuch development costs. Historically, the interest rates charged ranged between 10.0% and 18.9% perannum. Repayment of interest typically starts after the fourth year of planting and repayment of theprincipal (including interest) starts between the sixth and seventh year of planting. Our Group will obtain apower of attorney to manage the account of the villagers into which the sales proceeds of FFB will bedeposited. This power of attorney allows our Group to withdraw funds from such account to pay for all thevillagers’ operating costs and expenses.

Under the KKSR scheme, the land is also typically occupied by the villagers. Our Group will provideseedlings and the regional authorities will provide fertiliser to the villagers. Post-harvest, the FFB will besold to our Group and part of the sale proceeds will be paid to our Group and the regional authorities aspayment for the seedlings and fertiliser respectively.

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Plasma Mandiri is a scheme whereby our Group will provide the seedlings to the villagers, and thevillagers will plant and maintain the plantation. Post-harvest, the FFB will be sold to our Group and part ofthe sales proceeds will be paid to our Group as payment for the seedlings provided. There is nogovernmental involvement under this scheme.

Please refer to “Appendix C – Indonesian Regulatory Overview” of this Prospectus for more informationon the above schemes under our Plasma Programme.

There is no assurance that the small landholders will not default on their obligations to sell FFB to ourGroup. As such, this may result in them defaulting on their loan repayments to the banks and our Group.In such event, the banks may call upon the guarantees which have been provided by our Group to thebanks to secure the loans of the small landholders.

Under the KKPA scheme, our Group has provided guarantees for loan facilities of up to Rp92.1 billion(approximately US$9.9 million) and approximately Rp50.0 billion (approximately US$5.4 million) of suchloans have been drawn down as at the Latest Practicable Date. In addition, under our PlasmaProgramme, our Group may provide financial aid to small landholders for the development of theirplantations, where necessary. As at the Latest Practicable Date, the receivables from small landholdersamounted to approximately Rp10.6 billion (approximately US$1.1 million). Any material default by suchsmall landholders on their obligations to the banks and/or our Group would therefore have a materialadverse impact on our Group’s business and financial performance as a whole.

Our bulking terminal is situated on leased property and such lease may be terminated and/or mayhave to be relocated at the end of the lease period

We lease the land on which our bulking terminal (including the nearby jetty for vessels to berth) issituated as well as our storage tanks from PT Timah Industri. The respective leases will expire in 2012.There is no assurance that these leases (or any future leases taken up) will not be terminated prior totheir expiry or that when an application for extension is made, that an extension for such leases will begranted, or granted on no less favourable terms. In addition, we occupy the pier in the Belinyu port areapursuant to a co-operation agreement with PT (Persero) Pelabuhan Indonesia II Pangkalbalam Branchwhich will expire at the end of 2013. If the lease or co-operation agreement is terminated or if our Groupis unable to extend the same on the expiry of their respective existing terms, we would have to relocatethe infrastructure built on the leased property and incur significant relocation costs, which in turn mayhave an adverse effect on our Group’s financial performance.

Our renewable biomass power generation business is in its early stages of development andtherefore exposed to operational risks

Our renewable biomass power generation operations are relatively new and may face operational riskstypically associated with new businesses. The technology our power plant relies on utilises renewablebiomass as a commercially viable fuel source. This technology is relatively new and may not be as stableas conventional power plant technology. In addition, we rely on third parties for the supply of over 30% ofthe raw materials, namely kernel shells and EFB, used as the fuel source for our biomass powergeneration operations. In the event that we are unable to obtain sufficient raw materials for use asbiomass or should the technology we rely on prove more unstable than conventional technology, ourpower output may fluctuate as a result. This may adversely affect the financial performance of our powergeneration business.

Our renewable biomass power generation business only supplies PLN, a state-owned electricityenterprise with whom we do not have any long term contractual agreement for the supply of our powersupply services. We currently have a one-year renewable contract with PLN for the supply of powergenerated from our renewable biomass power plant on Bangka Island in Sumatera which will expire on31 May 2009. We are in the process of negotiating for a renewal of the contract and, where possible, for alonger term power purchase contract. However, there is no assurance that PLN will continue to transactwith us at the same levels and price in the future as they have had in the past. In the event that ourcontract for our Bangka Island power plant is not renewed and we are unable to secure alternativepurchasers, our revenue and profitability from our power generation operations will be adversely affected.

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We are dependent on temporary labour for some of our production proceses

We engage temporary labour directly or through sub-contractors to carry out certain aspects of ourproduction processes including the harvesting of FFB and the upkeep of our oil palm plantations. Labourfor harvesting is generally engaged on a yearly contract basis while labour for the upkeep of ourplantations are engaged on a daily basis without any contract. There can be no assurance that we canengage sufficient temporary labour for the upkeep of our plantations or, upon the expiry of the relevantcontracts, temporary labour for the harvesting of our FFB. In the event that we are unable to securesufficient temporary labour, our ability to produce our products may be adversely affected andaccordingly, our business, results of operations and financial performance may be adversely affected.

We are subject to intense competition

We operate in an industry which is highly competitive and we face competition from other producers ofsimilar CPO and CPKO products in both the local and foreign markets. Some of these producers havesimilar capabilities and compete with us on key attributes such as quality of products, pricing, time-to-market and available production capacity. There can be no assurance that we can compete successfullyin the future and maintain or increase our market share. In the event that we are unable to competeeffectively, our business and future growth will be adversely affected.

We are affected by regional and worldwide social, political and economic conditions

Globalisation has resulted in our exposure to global, social, political and economic conditions.Uncertainties arising from war, the potential threat of terrorism and the outbreak of infectious diseasesmay cause our customers to take a cautious approach to spending and consumption of services.Adverse changes in the political and social conditions both regionally and worldwide may affectconsumers’ sentiment and result in the reduction of demand for our CPO and CPKO which will have anadverse effect on our Group’s financial performance and growth.

We are and will continue to be dependent on the economic growth, political stability as well as, socialconditions of Indonesia and any other countries in which we operate or intend to operate. Our growth andexpansion plans may also be undermined by any labour disputes, political unrest, economic or financialcrisis or disturbances occurring in any of such countries.

RISKS RELATING TO THE PALM OIL INDUSTRY

The prices of our products may fluctuate based on international prices

Our main products, CPO and CPKO, are freely-traded market commodities. As such, their internationalprices are affected by various factors that include changes in global demand for and supply of CPO andCPKO, prices and global demand for and supply of other vegetable oils, world consumption levels ofthese products and import and export tariffs. Our increase in revenue between FY2006 and FY2007 waspartially attributable to the increase in CPO and CPKO prices. Downward fluctuations in the prices forthese products could have a material adverse effect on our business, financial condition, results ofoperations and prospects.

Our products are subject to changes in consumer preferences and may face significantcompetition from other substitute products

CPO, soybean oil and rapeseed oil are some of the most consumed vegetable oils and to a certain extentare substitutable for one another. We believe worldwide consumption of palm oil has increased faster thanany other vegetable oil and its success is linked to its versatile use in the food industry as well as formany non-food applications. Any significant increase in demand for products manufactured from soybeanor rapeseed or substitution of palm oil for its competing vegetable oils in both food and non-foodoperations may have a material adverse effect on our business, results of operations and financialperformance.

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We are adversely affected by downturns in the harvesting of FFB due to adverse weatherconditions, natural disasters and other factors

The production of CPO and other palm oil derivative products are highly dependent on a sufficient supplyof FFB. Being an agricultural product, the occurrence of unfavourable weather conditions and naturaldisasters such as fires, droughts, floods, earthquakes, volcanic activity, pestilence, crop disease andannual drought in the Kalimantan regions which typically lasts for approximately three months (althoughin the past have lasted for up to five months), haze from forest fires, labour strikes or other disturbancesand delay in fertiliser application will affect the supply of FFB. In addition, the Indonesian government maytake action against us, such as suspending our land rights, if forest fires occur on our plantations. Any ofthese factors may result in FFB supply being less readily available, which in turn could have a materialadverse effect on our business, financial condition, results of operations and prospects.

We may be adversely affected by pests and diseases

Palm oil plantations are susceptible to pests and diseases. The outbreak of leaf eating insects such asnettle caterpillars and bagworms are commonly encountered, especially in plantations where only onetype of crop is grown on the land.

The outbreak of pest infestation and disease may result in a decrease in the production of FFB anddestruction of oil palm trees in some instances, which in turn may have a negative impact on ourbusiness operations and financial performance. In addition, we may have to incur additional expenditureto control or eradicate such outbreaks.

Since the commencement of our business, we have not experienced any outbreak of pests infestationand diseases that has had a significant impact on our operations or FFB production. There can be noassurance that there will be no major outbreaks of pest infestation and disease in the future that couldmaterially and adversely affect our business, financial condition, results of operations and prospects.

RISKS RELATING TO INDONESIA

Our operations may be adversely affected by political and social instability in Indonesia

All our operations are located in Indonesia. There is no assurance that Indonesia’s political landscape willnot change, giving rise to political instability, social and civil unrest and disruption of businesses and theeconomy. These could have adverse effects on our operations.

Since the change of government in 1998, Indonesia has experienced a process of democratic change,resulting in political and social events that have highlighted the unpredictable nature of Indonesia’schanging political landscape. These events have resulted in political instability, as well as general socialand civil unrest on certain occasions in the past few years.

For example, since 2000, thousands of Indonesians have participated in demonstrations in Jakarta andother Indonesian cities both for and against the government and government officials, as well as inresponse to specific issues, including fuel tariff increases, labour matters, privatisation of state assets,anti-corruption measures, decentralisation and provincial autonomy, actions of former government officialsand their family members and the US-led military campaigns in Afghanistan and Iraq. In October 2005,demonstrations affected several cities after the government mandated an increase in fuel prices.Although these demonstrations were generally peaceful, some have turned violent.

In 2004, Indonesians directly elected the President, the Vice-President and representatives of theIndonesian parliament through a proportional voting system for the first time. Although the 2004 electionswere conducted peacefully, future political campaigns and elections may bring a degree of political andsocial uncertainty to Indonesia. Political and social unrest may occur if the results of future elections aredisputed or unpopular.

Political and social developments in Indonesia have been unpredictable in the past and have causedconfidence in the Indonesian economy to remain low. Any resurgence of political instability couldadversely affect the Indonesian economy, which could adversely affect our Group’s respectivebusinesses. Social and civil disturbances could occur in the future and on a wider scale, directly orindirectly, have a material adverse effect on our business, financial condition, results of operations,prospects and on our Shares.

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Terrorist attacks in Indonesia could destabilise the country

Terrorist acts could destabilise Indonesia and increase internal divisions within the Indonesiangovernment as it evaluates responses to that instability and unrest. Violent acts arising from, and leadingto, instability and unrest have occurred in the past, and may continue to have, a material adverse effecton investment and confidence in, and the performance of, the Indonesian economy.

Such terrorist attacks or armed conflicts in Indonesia may directly impact our physical facilities or those ofthe suppliers and customers. They may also have an adverse effect on the demand for and supply of ourproducts, our production capability and our ability to deliver products to customers in a timely mannerwhich in turn may have a material adverse effect on our business, financial condition, results ofoperations and prospects.

Economic changes in Indonesia may adversely affect our business

The economic crisis which affected Southeast Asia, including Indonesia, from mid-1997 wascharacterised in Indonesia by, among other effects, currency depreciation, negative economic growth,high interest rates, high inflation, social unrest and extraordinary political developments. These conditionshad material adverse effect on Indonesian businesses.

The economic difficulties faced by Indonesia during the Asian economic crisis in 1997 resulted in amongother things, significant volatility in interest rates, which had a material adverse impact on the ability ofmany Indonesian companies to service their then existing indebtedness.

A loss of investor confidence in the financial system of emerging and other developing markets, or otherfactors, may cause increased volatility in the Indonesian financial markets and a slowdown or negativegrowth could have a material adverse effect on our business, financial condition, results of operations andprospects.

Our operations may be adversely affected by earthquakes, tsunamis, floods or other naturaldisasters

The Indonesian archipelago is one of the most active volcanic regions in the world. As it is located in theconvergence zone of three major lithospheric plates, it is subject to significant seismic activity that canlead to destructive earthquakes, tidal waves and volcanic eruptions. On 26 December 2004, anunderwater earthquake off the coast of Sumatera resulted in a tsunami that devastated coastalcommunities in Indonesia, Thailand and Sri Lanka. In March 2007, a major earthquake struck Solok inCentral Sumatera, destroying hundreds of buildings and resulting in human casualties.

In February 2007, incessant rain caused rivers to overflow across Jakarta. As a result, residential andgovernment buildings, retail malls and roads were flooded. The authorities were forced to cut off electricityand water supplies in certain areas.

There can be no assurance that future geological occurrences will not significantly impact our operations.An earthquake or other geological disturbance in any of Indonesia’s more populated cities and financialcentres could disrupt the Indonesian economy and our operations, which could have a material adverseeffect on our business, financial condition, results of operations and prospects.

Our operations may be adversely affected by an outbreak of SARS, avian influenza or otherepidemics

During the last three years, large parts of Asia experienced unprecedented outbreaks of avian flu. No fullyeffective avian flu vaccines have been developed and there is evidence that the H5N1 virus is evolving.An effective vaccine may not be discovered in time to protect against the potential avian flu pandemic. In2003, certain countries in Asia experienced an outbreak of SARS, a highly contagious form of atypicalpneumonia, which seriously interrupted the economic activities and the demand for goods plummeted inthe affected regions. An outbreak of avian flu, SARS or other contagious disease or the measures takenby the governments of affected countries against such potential outbreaks, could seriously interrupt our

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production operations or those of our suppliers and customers, which could have a material adverseeffect on our business, financial condition, results of operations and prospects. The perception that anoutbreak of avian flu, SARS or other contagious disease may occur again may also have an adverseeffect on the economic conditions of countries in Asia.

The Indonesian legal system is subject to considerable discretion and uncertainty

As Indonesia is a developing market, its legal and regulatory regime may be less certain than in moredeveloped markets and may be subject to unforeseen changes. At times, the interpretation or applicationof laws and regulations may be unclear and the content of applicable laws and regulations may not beimmediately available to the public. In particular, regional regulations are not nationally published. Undersuch circumstances, consultation with the relevant regional authority in Indonesia may be necessary toobtain better understanding or clarification of applicable laws and regulations.

Indonesia’s legal system is a civil law system based on written statutes. Judicial decisions in Indonesia, inparticular those rendered by the Supreme Court, are persuasive but they do not constitute bindingprecedent. These decisions are not as systematically and immediately published as in developedcountries. Many of Indonesia’s commercial and civil laws and rules on judicial process are based on pre-independence Dutch law and have not been revised to reflect the complexities of modern financialtransactions and instruments. Indonesian courts are often unfamiliar with sophisticated commercial orfinancial transactions, leading in practice to uncertainty in the interpretation and application of Indonesianlegal principles. The application of many Indonesian laws and regulations depends, in large part, uponsubjective criteria such as the good faith of the parties to the transaction and principles of public policy.Indonesian judges operate in an inquisitorial legal system and have very broad fact-finding powers and ahigh level of discretion in relation to the manner in which those powers are exercised. In practice,Indonesian court decisions may omit, or may not be decided upon, a legal and factual analysis of theissues presented in a case. As a result, administration and enforcement of laws and regulations byIndonesian courts and governmental agencies may be subject to uncertainty and considerable discretion.For instance, the amount we have set aside which we believe to be adequate as provision for taxes andother related charges may be insufficient based on the relevant authorities’ assessment and we may berequired to pay more as a result. Uncertainty regarding the application of various laws and regulations toour Group’s business, our entitlement to the various licenses we require to operate our Group’s business,our Group’s entitlement to various land rights or other legal or regulatory matters relating to our Group’sbusiness could have a material adverse effect on our Group’s business, financial condition, results ofoperations and prospects.

Future restrictions on foreign ownership

The Government of Indonesia recently promulgated Law No. 25/2007 dated 26 April 2007 on investment(the “New Investment Law”) and issued Government Regulation No. 77 dated 3 July 2007 on a list ofclosed and restricted business sectors for capital Investment (the “Negative List”). Under the NewInvestment Law, as long as the field activity is open for foreign investment, foreign companies andindividuals may own 100% of the shares of the foreign investment company (“PMA Company”). However,certain strategic industries, such as the port, telecommunication, airport, shipping, airline, water supply,railway, oil and gas, electricity or power plant, tourism, multimedia and plantation industries are prohibitedfrom being directly wholly-owned by foreign individuals or foreign companies.

Our Group comprises PMA Companies, namely SPL, WPM, BPS and CPG, which are presently ownedby our Singapore-incorporated subsidiaries (save for the remaining 100 shares in SPL, WPM and BPSheld by Mr. Henry Maknawi and the remaining 97 shares in CPG held by the initial shareholders of LKand BE). As our PMA Companies do not fall under the relevant restricted industries, and our remainingIndonesian subsidiaries are not deemed to be PMA Companies, our current Group structure is incompliance with the New Investment Law.

However, it is still not clear under the New Investment Law whether SA, KP, KL and KB must divest theirrespective shareholdings in SPL, WPM, BPS and CPG as required under the previous foreign investmentregulation. In addition, the New Investment Law does not specify the amount of the divestment requiredand the divestment period. BKPM officials have indicated that this is subject to the implementingregulations of the New Investment Law. The substantial portion of the implementing regulations of the

RISK FACTORS

43

New Investment Law has not been issued to date. Based on the previous foreign investment regulation,the divestment period is 15 years from the first commercial production. If our Singapore-incorporatedsubsidiaries are forced to divest a substantial portion of their shareholdings in our PMA Companies, ourbusiness, financial condition, results of operations and prospects may be adversely affected. Please referto “Appendix C – Indonesian Regulatory Overview” of this Prospectus for further information.

RISKS RELATING TO AN INVESTMENT IN OUR SHARES

Our Directors and Substantial Shareholders will retain significant control over our Company afterthe Invitation, which will allow them to influence the outcome of matters submitted toShareholders for approval

Upon the completion of the Invitation, our Directors, Substantial Shareholders and their associates andsuch Shareholders who are related to our Directors or Substantial Shareholders, will beneficially own inaggregate approximately 73.8% of our Company’s post-Invitation share capital. As a result, these personswill be able to exercise significant influence over all matters requiring shareholders’ approval, includingthe election of directors and the approval of significant corporate transactions, if they act together. Thesepersons will also have veto power, if they act together, with respect to any shareholders’ action orapproval requiring a majority vote except where they are required by the rules of the Listing Manual or theSGX-ST to abstain from voting. Such concentration of ownership may also have the effect of delaying,preventing or deterring a change in control of our Company which may not benefit our Shareholders.

Any future sales of our Shares could adversely affect our Share price

There could be downward pressure on our Share price as a result of any future sale or availability of ourShares. The sale of a significant amount of Shares in the public market after the Invitation, or theperception that such sales may occur, could adversely affect the market price of our Shares. Thesefactors could also affect our ability to sell additional equity securities. Except as otherwise described inthe section “Moratorium” of this Prospectus, there will be no restrictions imposed on our Directors,Substantial Shareholders and their associates to dispose of their shareholding.

Currency fluctuations could adversely affect the dividends of the Shares

Our Company may declare and pay dividends in US dollars, while Shareholders holding their Sharesthrough the CDP may receive their dividends in Singapore dollars. Hence, fluctuations in the exchangerates between the US dollar and the Singapore dollar may adversely affect the amount of cash dividendsreceived by such Shareholders holding their Shares are held through CDP.

There has been no prior market for our Shares

There has been no public market for our Shares, prior to the Invitation. We have applied to the SGX-STfor the listing and quotation of our Shares on the Official List of the SGX-ST. However, no assurance canbe given that an active trading market for our Shares will develop or, if developed, will be sustained, orthat the market price for our Shares will not decline below the Issue Price. The Issue Price may not beindicative of the market price for our Shares after the completion of the Invitation.

Our Share price may fluctuate following the Invitation

The market price of our Shares may fluctuate significantly and rapidly as a result of, among others, thefollowing factors, some of which are beyond our control:

� variations of our operating results;

� changes in securities analysts’ recommendation, perceptions or estimates of our financialperformance;

� changes in market valuations and share prices of companies with similar businesses to ourCompany that may be listed in Singapore;

� announcements by us of significant acquisitions or divestments, strategic alliances or jointventures;

RISK FACTORS

44

� additions or departures of key personnel;

� fluctuations in stock market prices and volume;

� involvement in litigation;

� success or failure of our management team in implementing business and growth strategies;

� announcements of technological innovations or new products;

� changes in conditions affecting our industry, the general economic conditions or stock marketsentiments or other events or factors;

� events adversely affecting the political, economic and social situation in Indonesia; and

� negative publicity involving our Company, any of our Directors, Executive Officers or SubstantialShareholders, whether or not it is justified.

New investors will incur immediate dilution and may experience further dilution

Our Issue Price of our Shares is substantially higher than the Adjusted NTA per Share based on the post-Invitation issued share capital. If we were liquidated immediately following the Invitation, each investorsubscribing to the Invitation would receive less than the price paid for his Shares. Please refer to thesection “Dilution” of this Prospectus for more information.

Additional funds raised through issue of new Shares for our future growth will diluteShareholders’ equity interests

We may in the future expand our capabilities and business through acquisition, joint venture and strategicpartnership with parties who can add value to our business. We may require additional equity fundingafter the Invitation and our Shareholders will face dilution of their shareholdings should we issue newShares to finance future acquisitions, joint ventures and strategic partnerships.

Our operating subsidiaries are incorporated or established, and their assets are located outsideSingapore, hence the rights and protection accorded to our Shareholders may not be the same asthose applicable to shareholders of a Singapore incorporated company

Our operating subsidiaries (all of which are incorporated outside Singapore) have their operations andassets located in Indonesia. The Singapore Companies Act may provide shareholders of Singaporeincorporated companies with certain rights and protection of which there may be no corresponding orsimilar provisions under the laws of Indonesia. As such, if you invest in our Shares, you may or may notbe accorded the same level of shareholder rights and protection that a shareholder of a Singaporeincorporated company would be accorded under the Singapore Companies Act. In addition, all ourExecutive Directors, as at the Latest Practicable Date, are non-residents of Singapore and their assetsare mainly located outside Singapore. As such, it may be difficult for you to commence any action asservices of process will have to be effected outside Singapore against our operating subsidiaries andthose of our Directors residing outside Singapore, or to enforce a judgement obtained in Singaporeagainst our Group or any of such Directors.

RISK FACTORS

45

EXCHANGE RATES

Our financial statements are expressed in US dollars. The exchange rates for Rp to US$ as outlined inthe table below are the foreign exchange rates for public transactions as quoted by Bank Indonesia. Thefixing rate is at 11.00 a.m. Indonesian time. These exchange rates have been presented solely forinformation only. The tables and figures below should not be construed as representations that those USdollar or Rupiah amounts could have been, could be or would be, converted or convertible into Rupiah orUS dollars at any particular rate, the rate stated below, or at all.

Bank Indonesia and Bloomberg L.P. have not consented to the inclusion of the exchange rates quotedunder this section for the purposes of Section 249 of the Securities and Futures Act and are thereby notliable for these exchange rates under Sections 253 and 254 of the Securities and Futures Act. OurCompany has included the above exchange rates in the proper form and context in this Prospectus. Theinformation has not been verified by our Company, the Issue Manager, or the Joint Underwriters andPlacement Agents.

The following table sets out the high and low exchange rates between the US dollar and Rupiah for eachof the past six months prior to the Latest Practicable Date. The table illustrates how many Rupiah it wouldtake to buy one US dollar.

Rp / US$

Bank Indonesia Bloomberg

Period Average Low High Average Low High

December 2007 9,380 9,268 9,481 9,356 9,240 9,428

January 2008 9,453 9,333 9,533 9,406 9,240 9,490

February 2008 9,227 9,096 9,315 9,182 9,045 9,265

March 2008 9,231 9,117 9,372 9,178 9,085 9,265

April 2008 9,255 9,225 9,285 9,203 9,135 9,245

May 2008 9,337 9,273 9,423 9,281 9,220 9,350

Source: Bank Indonesia and Bloomberg L.P.

The following table sets out, for the financial periods indicated, the amount of Rupiah it would take to buyone US dollar, based on the average of monthly closing exchange rates over the financial period(“Average”).

Rp / US$

Bank Indonesia Bloomberg

Average Closing Average ClosingExchange Rate Exchange Rate Exchange Rate Exchange Rate

FY2005 9,711 9,830 9,712 9,830

FY2006 9,167 9,020 9,165 8,994

FY2007 9,136 9,419 9,139 9,400

Source: Bank Indonesia and Bloomberg L.P.

As at the Latest Practicable Date, the exchange rate between the US dollar and the Rupiah was US$1:Rp9,305.

EXCHANGE RATES AND EXCHANGE CONTROLS

46

Bloomberg L.P. has not consented to the inclusion of the exchange rates quoted under this section for thepurposes of Section 249 of the Securities and Futures Act and is thereby not liable for these exchangerates under Sections 253 and 254 of the Securities and Futures Act. The Company has included theabove exchange rates in the proper form and context in this Prospectus. The information has not beenverified by our Company, the Issue Manager or the Joint Underwriters and Placement Agents.

For certain parts of this Prospectus, we have converted Singapore dollars to US dollars for theconvenience of the potential investors in our Company.

The exchange rates for S$ to US$ as outlined in the table below are extracted from published informationby Bloomberg L.P. These exchange rates have been presented solely for information only. The tables andfigures below should not be construed as representations that these US dollar amounts could have been,could be or would be, converted or convertible into Singapore dollars at any particular rate, the ratestated below, or at all.

The following table sets out the high and low exchange rates between the Singapore dollar and US dollarfor each of the past six months prior to the Latest Practicable Date. The table indicates how manySingapore dollars it would take to buy one US dollar.

S$ / US$

Period High Low

December 2007 1.4625 1.4405

January 2008 1.4500 1.4185

February 2008 1.4195 1.3930

March 2008 1.3965 1.3790

April 2008 1.3840 1.3480

May 2008 1.3835 1.3570

Source: Bloomberg L.P.

The following table sets out, for the financial periods indicated, how many Singapore dollars it would taketo buy one US dollar, based on the average of monthly closing exchange rates over the financial period(“Average Exchange Rate”).

S$ / US$

Average Exchange Rate Closing Exchange Rate

FY2005 1.7045 1.6186

FY2006 1.6583 1.5340

FY2007 1.5070 1.4405

Source: Bloomberg L.P.

As at the Latest Practicable Date, the exchange rate between the US dollar and the Singapore dollar wasUS$1: S$1.3630.

EXCHANGE CONTROLS

The following is a description of the exchange controls existing in the jurisdictions in which our Groupoperates which may affect the repatriation of capital and the remittance of profits by or to our Company.

SINGAPORE

Currently, no foreign exchange control restrictions exist in Singapore.


47

INDONESIA

The Rupiah and foreign currency have been, and in general are, freely convertible. Bank Indonesia hasintroduced regulations to prohibit the movement of Rupiah from banks within Indonesia to banks locatedoffshore, thereby limiting offshore trading to existing sources of liquidity. The movement of Rupiah toforeign parties (which include foreign citizens, foreign legal entities, foreign bodies, Indonesian citizenshaving permanent resident status in another country and not domiciled in Indonesia, offices of Indonesianbanks and Indonesian companies located offshore) within banks in Indonesia without certain underlyingtrade or investment reasons is also prohibited. In addition, there is a reporting requirement to BankIndonesia of foreign exchange transactions carried through banks or non-bank financial institutions (forexample, insurance companies, securities companies, finance companies or venture capital companies)in Indonesia. The repatriation of capital or remittance of profit may be made subject to the reportingrequirement to Bank Indonesia on the foreign exchange activities. The requirement is imposed on therelevant Indonesian banks or non-bank financial institutions that carry out the transactions. There is also areporting requirement to Bank Indonesia imposed on certain activities of Indonesian companies (withtotal assets or annual sales of not less than Rp100 billion) with regard to their offshore financial assetsand liabilities which are not carried out through the Indonesian banking system.

The Indonesian subsidiaries will repatriate profit and capital to the parent listed entity in Singapore.Therefore, the above regulations will not affect repatriation of capital and remittance of profit intoIndonesia.

Save for the regulations pertaining to the reporting of foreign exchange activities, there are no otherregulations governing profit and capital remittance into Indonesia.


48

Issue Price

NTA

NTA per Share based on the proforma balance sheet for FY2007(2) of our Group asdisclosed in this Prospectus:

(a) before adjusting for the estimated net proceeds from the issue of the NewShares and based on our pre-Invitation share capital of 798,044,720 Shares

(b) after adjusting for the estimated net proceeds from the issue of the NewShares and based on our post-Invitation share capital of 998,044,720Shares

Premium of Issue Price over the proforma NTA per Share as at FY2007:

(a) before adjusting for the estimated net proceeds from the issue of the NewShares and based on our pre-Invitation share capital of 798,044,720 Shares

(b) after adjusting for the estimated net proceeds from the issue of the NewShares and based on our post-Invitation share capital of 998,044,720Shares

Earnings

Historical EPS of our Company based on our audited results of our Group forFY2007 and our pre-Invitation share capital of 798,044,720 Shares

Historical EPS of our Company based on our audited results of our Group forFY2007 and our pre-Invitation share capital of 798,044,720 Shares had the ServiceAgreements been in effect since the beginning of FY2007

Price Earnings Ratio

Historical price earnings ratio based on the historical EPS of our Company forFY2007

Historical price earnings ratio based on the historical EPS of our Company had theService Agreements been in effect since the beginning of FY2007

Notes:

(1) Based on exchange rate as at the Latest Practicable Date of US$1: S$1.3630.

(2) Please refer to “Appendix E - Independent Auditors’ Report on the Unaudited Proforma Combined Financial Information ofKencana Agri Limited for the financial year ended 31 December 2007” of this Prospectus for more information.

INVITATION STATISTICS

49

30.5 cents(equivalent to22.4 US cents(1))

9.4 US cents

11.5 US cents

139.2 per cent

94.2 per cent

4.9 US cents

4.9 US cents

4.6 times

4.6 times

Net Operating Cash Flow(1)

Historical audited net operating cash flow per Share for FY2007 based on our pre-Invitation share capital of 798,044,720 Shares

Historical audited net operating cash flow per Share for FY2007 based on our pre-Invitation share capital of 798,044,720 Shares had the Service Agreements been inplace since the beginning of FY2007

Price to Net Operating Cash Flow Ratio

Issue Price to historical audited net operating cash flow per Share of our Companyfor FY2007 based on our pre-Invitation share capital of 798,044,720 Shares

Issue Price to historical audited net operating cash flow per Share of our Companyfor FY2007 based on our pre-Invitation share capital of 798,044,720 Shares hadthe Service Agreements been in place since the beginning of FY2007

Market Capitalisation

Market capitalisation based on our post-Invitation share capital of 998,044,720Shares and the Issue Price

Note:

(1) Net operating cash flow is defined as net profit before taxation adjusted for non-cash operating activities such as depreciation,changes in working capital and income tax paid.

INVITATION STATISTICS

50

2.2 US cents

2.2 US cents

10.1 times

10.4 times

US$223.3 million

The net proceeds from the issue of the New Shares are estimated to be approximately S$55.0 million(approximately US$40.4 million(1)). The net proceeds represent the amount that we will receive afterpayment of underwriting commissions and other transaction expenses related to the Invitation estimatedto be S$6.0 million (approximately US$4.4 million(1)).

Which we intend to use in the following manner:

Amount allocatedfor each

dollar of thegross proceeds

Estimated Estimated raised byUse of proceeds Amount Amount our Company

(US$’000) (S$’000) (%)

(a) Establishment of new planting for existing land,and acquiring rights for additional land banks of companies holding land banks or matureplantations 20,913 28,505 46.7

(b) Build new palm oil mills and maintaining and improving the infrastructure of our plantations 6,970 9,500 15.6

(c) Repayment of loans from financial institutions (please see below for more information) 12,469 16,995 27.9

Net Proceeds from the Invitation 40,352 55,000 90.2

Expenses

(a) Listing fees 55 75 0.1

(b) Professional fees and charges 2,715 3,700 6.1

(c) Underwriting commission, placement commission and brokerage 1,119 1,525 2.5

(d) Miscellaneous expenses 513 700 1.1

Gross proceeds from the Invitation 44,754 61,000 100.0

Notes:

(1) Based on exchange rate as at the Latest Practicable Date, US$1: S$1.3630.

Indebtednessto be repaid

Financial from Invitation Annualinstitutions Description of loan facility and maturity proceeds Purpose interest rate

PT Bank DBS 18 months term loan of principal amount of US$2,000,000 To refinance existing Bank’sIndonesia(1) US$2,000,000 repayable in full at the earlier facilities to SWK and cost of

of (i) the end of period in March 2009 or AKM; and refinance funds plus(ii) completion of initial public offering of the Group inter-company loans (“COF”)

between SWK, AKM 2.5% and AIK

USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED

51

Indebtednessto be repaid

Financial from Invitation Annualinstitutions Description of loan facility and maturity proceeds Purpose interest rate

PT Bank DBS 18 months long term loan of US$4,000,000 US$4,000,000 To refinance existing COF + 2.5%Indonesia(1) repayable in full at the earlier of (i) the end of facilities to SWK and

March 2009 or (ii) completion of initial AKM; and refinancepublic offering of our Group inter-company loans

between SWK, AKM and AIK

PT Bank DBS 18 months term loan of US$1,000,000 repayable US$1,000,000 To provide financing COF + 2.5%Indonesia(1) in full at the earlier of (i) March 2009 or for the Company to

(ii) completion of initial public offering purchase palm of our Group kernels, fertilizers,

and FFB

PT Bank One year term loan of US$3,850,000 US$3,818,500 To finance internal SIBOR + 3%Danamon repayable in full at the earlier of (i) end of shareholdingIndonesia, Tbk. March 2009 or (ii) completion of reorganisation

initial public offering of our Group

PT Bank One year term loan of US$1,650,000 US$1,650,000 To finance internal SIBOR + 3%Danamon repayable in full at the earlier of (i) the end shareholdingIndonesia, Tbk. of March 2009 or (ii) completion of reorganisation

initial public offering of our Group

Note:

(1) PT Bank DBS Indonesia is a subsidiary of DBS Bank.

Please refer to the section “General Information On Our Group – Strategy and Future Plans” of thisProspectus for more information on our plans above.

Pending the deployment of the net proceeds as aforesaid, the funds will be placed in short-term depositswith financial institutions, used to invest in short-term money market instruments and/or used for workingcapital requirements as our Directors may deem appropriate.

In the event that any part of our proposed uses of the net proceeds from the issue of the New Shares donot materialise or proceed as planned, our Directors will carefully monitor the situation and may re-allocate the proceeds to other purposes and/or hold such funds on short-term deposits for so long as ourDirectors deem it to be in the interest of our Company and our Shareholders, taken as a whole. Anychange in the use of the net proceeds will be subject to the listing rules of the SGX-ST and appropriateannouncements will be made by our Company on SGXNET.

As and when the funds from the Invitation are materially disbursed, our Company will make periodicannouncements via SGXNET on the use of the net proceeds and will provide a status report on the usethereof in our annual report.

In the opinion of our Directors, no minimum amount must be raised by the Invitation.

USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED

52

Pursuant to the Management and Underwriting Agreement dated 17 July 2008 (the “Management andUnderwriting Agreement”) made between our Company, DBS Bank and CIMB-GK, our Companyappointed DBS Bank to manage the Invitation and DBS Bank and CIMB-GK to underwrite thesubscription of the number of Offer Shares set forth opposite each of their respective names in thefollowing table, at the Issue Price.

Joint Underwriters Number of Offer Shares

DBS Bank 750,000CIMB-GK 250,000

DBS Bank and CIMB-GK may, at their absolute discretion, appoint one or more sub-underwriters to sub-underwrite the Offer Shares.

DBS Bank will receive a management fee, payable by our Company, for its services rendered as IssueManager in connection with the Invitation. DBS Bank and CIMB-GK will each also receive an underwritingcommission of 2.25 per cent of the Issue Price save for accepted applications for Offer Shares made onApplication Forms bearing the stamp of DBS Bank or through the ATMs or IB website of DBS Bank forwhich the commission shall be 2.0 per cent of the Issue Price. In the event that the minimum brokerage ofS$5,000 (as described below) levied by DBS Bank as one of the Participating Banks is not met, theamount of underwriting commission payable to each Joint Underwriter for accepted applications for OfferShares made on Application Forms bearing the stamp of DBS Bank or through the ATMs or IB website ofDBS Bank shall be 2.5 per cent of the Issue Price and reduced by the aforementioned minimumbrokerage fee. Payment of the commission shall be made whether or not any allotment or issue of theOffer Shares is made to each Joint Underwriter, and whether or not any part of the Offer Shares havebeen applied to satisfy excess application for Placement Shares.

Pursuant to the Placement Agreement dated 17 July 2008 (the “Placement Agreement”) made betweenour Company, DBS Bank and CIMB-GK, DBS Bank and CIMB-GK agreed to subscribe for and/or procuresubscribers for the number of Placement Shares set forth opposite each of their respective names in thefollowing table, at the Issue Price.

Joint Placement Agents Number of Placement Shares

DBS Bank 149,250,000CIMB-GK 49,750,000

DBS Bank and CIMB-GK will each receive a placement commission of 2.5 per cent of the Issue Price forthe total number of Placement Shares set out against their respective names in the table above.

DBS Bank and CIMB-GK may, at their absolute discretion, appoint sub-placement agent(s) for thePlacement Shares.

Brokerage will be paid by our Company to DBS Bank, members of the SGX-ST, Participating Banks,merchant banks and members of the Association of Banks in Singapore in respect of all acceptedapplications made on Application Forms bearing their respective stamps or to Participating Banks inrespect of successful applications made through Electronic Applications at their respective ATMs or IBwebsites, at the rate of 0.25 per cent of the Issue Price for each Offer Share, subject to any minimumbrokerage agreed with any of the Participating Banks. DBS Bank levies a brokerage of 0.5 per cent of theIssue Price or minimum brokerage of S$5,000 that will be borne by our Company.

Discretionary fees of 0.2 per cent and 0.025 per cent of the aggregate gross proceeds of the Invitationwill be payable to DBS Bank and CIMB-GK respectively at the sole discretion of our Group.

Subscribers of the Placement Shares may be required to pay a brokerage of up to 1% of the Issue Price.

MANAGEMENT, UNDERWRITING AND PLACEMENT AGREEMENTS

53

The New Shares may be re-allocated between the Offer and the Placement, at the discretion of DBSBank and CIMB-GK in consultation with our Company.

The Management and Underwriting Agreement may be terminated by the Joint Underwriters at any timeon or before 9.00 a.m. on the date of commencement of trading of the Shares on SGX-ST on theoccurrence of certain events including without limitation:

(a) if there shall come to the knowledge of the Issue Manager or the Joint Underwriters of:

(i) any breach of any obligations of our Company under the Management and UnderwritingAgreement or the Placement Agreement or that any of the warranties in the Managementand Underwriting Agreement or the Placement Agreement is untrue, inaccurate, misleadingor breached in any respect; or

(ii) any event occurring after the date of the Management and Underwriting Agreement, which ifit had occurred before the date of the Management and Underwriting Agreement would haverendered any of the warranties contained in the Management and Underwriting Agreementuntrue, inaccurate or misleading or breached in any respect; or

(iii) any material adverse change (whether or not foreseeable at the date of the Managementand Underwriting Agreement), or any development (which has occured or is likely to occur)involving a prospective material adverse change, in the business or in the condition (financialor otherwise), or prospects of our Group taken as a whole; or

(b) if there shall have been in the opinion of the Joint Underwriters, since the date of the Managementand Underwriting Agreement:

(i) any new or prospective introduction of or any change or prospective change in anylegislation, regulation, order, policy, rule, guideline or directive (including without prejudicethe generality of the foregoing in respect of any laws or regulations relating to taxation orexchange controls) in Singapore, Indonesia or elsewhere (whether or not having the force oflaw) and including, without limitation, any directive or request issued by the Authority, theSecurities Industry Council of Singapore or the SGX-ST or other authorities in Singapore orIndonesia or in the interpretation or application thereof by any court, government body,regulatory authority or other competent authority; or

(ii) any event or series of events resulting in or representing any change, or any developmentinvolving a prospective change, in local, national, regional or international financial markets(including stock market, foreign exchange markets, inter-bank markets or interest rates ormoney market), political, industrial, economic, legal or monetary conditions (including withoutlimitation, the imposition of any moratorium, suspension or material restriction on trading insecurities generally on the SGX-ST or the Indonesia Stock Exchange, any bankingmoratorium declared by any U.S. Federal, New York, United Kingdom, Indonesia, orSingapore authorities due to exceptional financial circumstances or otherwise); or

(iii) any event or series of events in the nature of force majeure (including without limitation, actsof government, strikes, lock-outs, fire, explosion, flooding, epidemic or pestilence, civilcommotion, acts of war, acts of terrorism, acts of God); or

(iv) any imminent threat or occurrence of any local, national or international outbreak orescalation of hostilities, insurrection or armed conflict (whether or not involving financialmarkets); or

(v) any other occurrence of any nature whatsoever,


54

which event or events shall in the opinion of the Joint Underwriters (1) result or be likely to result ina material adverse fluctuation or adverse conditions in the stock market in Singapore or overseas,or (2) be likely to prejudice the success of the subscription or offer of the New Shares and thedistribution of the New Shares or dealings in the Shares (whether in the primary market or inrespect of dealings in the secondary market), or (3) make it impracticable, inadvisable, inexpedientor uncommercial to proceed with any of the transactions contemplated in the Management andUnderwriting Agreement, or (4) be likely to have an adverse effect on the business, tradingposition, operations or prospects of our Company or of our Group as a whole, or (5) be such thatno reasonable underwriter would have entered into the Management and Underwriting Agreement,or (6) result or be likely to result in the issue of a Stop Order by the Authority pursuant to theSecurities and Futures Act (notwithstanding that a supplementary or replacement prospectus issubsequently registered by the Authority pursuant to section 241 of the Securities and FuturesAct), or (7) make it uncommercial or otherwise contrary to or outside the usual commercialpractices of underwriters in Singapore for the Joint Underwriters to observe or perform or beobliged to observe or perform the terms of the Management and Underwriting Agreement.

The Placement Agreement is conditional upon the Management and Underwriting Agreement not havingbeen terminated or rescinded pursuant to the provisions of the Management and UnderwritingAgreement.

In the event that the Management and Underwriting Agreement is terminated, we and the JointUnderwriters and Placement Agents reserve the right, at our absolute discretion, to cancel the Invitation.

Save for DBS Bank’s role as the Issue Manager, a Joint Underwriter and Placement Agent and theReceiving Bank in connection with the Invitation and PT Bank DBS Indonesia’s role as a PrincipalBanker, we do not have any material relationship with DBS Bank. DBS Bank may engage in furthercommercial banking and/or investment banking transactions with our Group in the future and may receivecustomary fees for such transactions. Net proceeds from the Invitation will also be used to partially repaybank loans provided by PT Bank DBS Indonesia to us. Please refer to the section “Use of Proceeds fromthe Invitation and Expenses Incurred” of this Prospectus for more information.


55

DIVIDEND POLICY

56

Save as disclosed below, no dividends have been paid or proposed by our Company or its subsidiariesfor each of FY2005, FY2006 and FY2007. In FY2007, one of our Indonesian subsidiaries had declaredand made a dividend payment of Rp18.5 billion (approximately US$2.0 million) to its shareholders prior tothe Invitation. In FY2008, one of our Indonesian subsidiaries has declared and intends to make adividend payment of Rp9.0 billion to its shareholders prior to the Invitation.

The amount of past dividends is not indicative of the amount that we will pay in the future. Furtherdividends will be paid by us as and when approved by our Shareholders and our Directors. In makingtheir recommendation, our Directors will consider, among other things, our future earnings, operations,capital requirements, cash flow and financial condition, as well as conditions in the general businessenvironment and other factors (including, but not limited to, certain limitations imposed on us inconnection with our bank borrowings) which may be considered relevant by our Directors.

There can be no assurance that dividends will be paid in the future or as to the timing of any dividendsthat are to be paid in the future.

Our Company may declare dividends by ordinary resolution of our Shareholders at a general meeting, butwe may not pay dividends in excess of the amount recommended by our Board. Our Board may, withoutthe approval of our Shareholders, also declare interim dividends.

We currently do not have a formal dividend policy. We may pay dividends in Singapore dollars or USdollars. Shareholders whose Shares are held through CDP will receive their dividends in Singaporedollars. We intend to make the necessary arrangements with CDP to convert the dividends received fromour Company in US dollars into its Singapore dollar equivalent at such foreign exchange rate as we orCDP (as the case may be) may determine for onward distribution to such shareholders entitled thereto.Neither our Company nor CDP will be liable for any loss howsoever arising from the conversion of thedividend entitlement of shareholders holding their Shares through CDP from US dollars into theirSingapore dollar equivalent.

Please refer to “Appendix B - Taxation” of this Prospectus. for information relating to taxes payable ondividends.

SHARE CAPITAL

57

Our Company was incorporated in Singapore on 26 September 2007 under the Act as a private companylimited by shares under the name “Kencana Agri Pte. Ltd.”. On 10 July 2008, our Company changed itsname to “Kencana Agri Limited” in connection with its conversion to a public company limited by shares.

As at the date of this Prospectus, our Company has only one class of shares in its share capital. Therights and privileges of our Shares are stated in our Articles of Association. There are no founder,management, deferred shares, preference or unissued shares reserved for issuance for any purpose.

Pursuant to written resolutions passed by our Shareholders on 20 June 2008, our Shareholders approvedthe following:

(a) the conversion of our Company into a public company limited by shares and the consequentialchange of name to “Kencana Agri Limited”;

(b) the adoption of our new Articles of Association;

(c) the authorisation to our Directors to allot and issue Shares and/or convertible securities (where themaximum number of Shares to be issued upon conversion can be determined at the time of issueof such convertible securities) from time to time (whether by way of rights, bonus or otherwise) andupon such terms and conditions and for such purposes and to such persons as our directors mayin their absolute discretion deem fit, provided that the aggregate number of Shares and/orconvertible securities which may be issued pursuant to such authority shall not exceed 50% of theissued shares of our Company, of which the aggregate number of Shares and/or convertiblesecurities which may be issued other than on a pro-rata basis to the existing shareholders of ourCompany shall not exceed 20% of the issued shares of our Company (the percentage of issuedshares being based on the post-Invitation issued shares of our Company after adjusting for newShares arising from the conversion or exercise of any convertible securities or employee shareoptions on issue at the time such authority is given and any subsequent consolidation or sub-division of shares) and, unless revoked or varied by our Company in general meeting, suchauthority shall continue in force until the conclusion of the next annual general meeting of ourCompany or on the date by which the next annual general meeting is required by law to be held,whichever is earlier;

(d) the issue of the Shares pursuant to the Invitation, which when fully paid, will rank pari passu in allrespects with the existing issued Shares; and

(e) the sub-division of every one ordinary share in the issued and paid up capital of our Company into40 ordinary shares.

As at the Latest Practicable Date, the issued share capital of our Company is S$19,951,118 comprising798,044,720 Shares. Upon the allotment of the New Shares which are the subject of the Invitation, theresultant issued share capital of our Company will be increased to S$74,951,118 comprising 998,044,720Shares.

SHARE CAPITAL

58

Details of the changes in our issued share capital since our incorporation and our issued share capitalimmediately after the Invitation are as follows:

Resultant Paid-upNumber of Shares Capital (S$)

Upon first and second allotment and issue of twoordinary shares 2 2

New ordinary shares issued and adjustments to share capital(1)

pursuant to the Restructuring Exercise 19,951,116 19,951,118(2)

Additional shares issued pursuant to subdivision of every one ordinary share into 40 ordinary shares 778,093,602 19,951,118

Pre-Invitation share capital 798,044,720 19,951,118

New Shares to be issued pursuant to the Invitation 200,000,000 55,000,000(3)

Post-Invitation share capital 998,044,720 74,951,118

Notes:

(1) Please refer to “Appendix E – Independent Auditors’ Report on the Unaudited Proforma Combined Financial Information ofKencana Agri Limited for the Financial Year ended 31 December 2007” of this Prospectus for details of the adjustments madeto the share capital

(2) Converted from US dollars to Singapore dollars based on historical exchange rate of US$1 to S$1.537

(3) Resultant share capital has taken into account the estimated expenses in connection with the Invitation

The shareholders’ funds of our Company (after adjustments to share capital) after the RestructuringExercise (and adjustments to the reserves) and after the Invitation are set out below. These statementsshould be read in conjunction with “Appendix E - Independent Auditors’ Report on the UnauditedProforma Combined Financial Information of Kencana Agri Limited for the Financial Year ended31 December 2007” of this Prospectus.

After the(S$) As at Incorporation Restructuring Exercise After the Invitation

Shareholders’ Equity

Issued and paid-up share capital 1 19,951,118(1) 74,951,118

Reserves – 88,860,706(2) 88,860,706(2)

Total shareholders’ equity 1 108,811,824 163,811,824

Notes:

(1) Converted from US dollars to Singapore dollars based on historical exchange rate of US$1 to S$1.537.

(2) Converted from US dollars to Singapore dollars based on a closing exchange rate of US$1 to S$1.441 as at 31 December2007.

SHARE CAPITAL

59

The changes in the issued and paid-up share capital of our Company and our subsidiaries existing at thedate hereof within the three years preceding the Latest Practicable Date are set out below:

Our Company

No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital

(S$) (S$)

26 September 2007 First allotment 1 NA(1) 1.00 1.00and issue

10 January 2008 Allotment and 1 NA(1) 1.00 2.00issue

Kencana Bio-energy Pte. Ltd.


(S$) (S$)

29 December 2006 First allotment 2 NA(1) 2.00 2.00and issue

Kencana Logistics Pte. Ltd.


(S$) (S$)


Kencana Plantations Pte. Ltd.


(S$) (S$)


Sawindo Agri Pte. Ltd.


(S$) (S$)


PT Agri Eastborneo Kencana

No. of shares Issue Price Resultant IssuedDate of Issue Event issued Par Value Per Share share capital

(Rp) (Rp) (Rp)

13 September 2007 Reclassification 25 serial ‘A’ 10,000 10,000 25,250,000of shares and shares with issue and right to appoint allotment members of the

board of directors and board of commissioners

SHARE CAPITAL

60

PT Agro Inti Kencanamas


(Rp) (Rp) (Rp)

15 February 2006 Issue and 10,880 1,000,000 1,000,000 11,000,000,000allotment

18 September 2006 Issue and 10,000 1,000,000 1,000,000 21,000,000,000allotment

23 August 2007 Issue and 7,000 1,000,000 1,000,000 28,000,000,000allotment


13 September 2007 Reclassification 300 serial ‘A’ 1,000,000 1,000,000 30,300,000,000of shares and shares carryingissue and the right toallotment appoint members

of the board of directors andboard of commissioners

PT Alamraya Kencana Mas


(Rp) (Rp) (Rp)

11 January 2006 Issue and 4,780 1,000,000 1,000,000 33,941,000,000allotment




13 September 2007 Reclassification 500 serial ‘A’ 1,000,000 1,000,000 70,500,000,000of shares and shares carrying issue and the right to allotment appoint members

of the board of directors and board of commissioners

SHARE CAPITAL

61

PT Agro Mas Lestari


(Rp) (Rp) (Rp)

31 August 2007 First allotment 250 100,000 100,000 25,000,000and issue

25 September 2007 Reclassification 2 serial ‘A’ 100,000 100,000 25,200,000of shares and shares carrying issue and the right to allotment appoint members


PT Agro Sawitmas Lestari


(Rp) (Rp) (Rp)

3 May 2005 First allotment 2,500 10,000 10,000 25,000,000and issue

PT Agrojaya Tirta Kencana


(Rp) (Rp) (Rp)

9 June 2006 Issue and 1,300 1,000,000 1,000,000 1,400,000,000allotment

13 September 2007 Reclassification 14 serial ‘A’ 1,000,000 1.000,000 1,414,000,000of shares and shares with issue and right to appointallotment members of

the board of directors and board of commissioners

PT Belitung Energy


(Rp) (Rp) (Rp)

13 September 2007 Reclassification 5 serial ‘A’ 100,000 100,000 50,500,000of shares and shares carryingissue and the right to allotment appoint members


SHARE CAPITAL

62

PT Bumi Permai Sentosa


(Rp) (Rp) (Rp)

26 July 2007 First allotment 250 100,000 100,000 25,000,000and issue

19 May 2008 Issue and 28,398 100,000 100,000 2,864,800,000 allotment

PT Cahaya Permata Gemilang


(Rp) (Rp) (Rp)


14 May 2008 Issue and 13,250 100,000 100,000 1,350,000,000allotment

PT Indotrust


(Rp) (Rp) (Rp)

17 September 2007 Reclassification 500 serial ‘A’ 10,000 10,000 505,000,000of shares and shares with issue and right to appoint allotment members of the


PT Kencana Agro Jaya


(Rp) (Rp) (Rp)

29 August 2007 Issue and 1,000,000 1,000 1,000 2,000,000,000allotment

13 September 2007 Reclassification 20,000 serial ‘A’ 1,000 1,000 2,020,000,000of shares and shares with issue and right to appointallotment members of the


PT Langgeng Nusa Makmur


(Rp) (Rp) (Rp)


SHARE CAPITAL

63

PT Listrindo Kencana


(Rp) (Rp) (Rp)

12 September 2007 Issue and 2,211,190 1,000 1,000 2,500,000,000allotment

13 September 2007 Reclassifcation 25,000 serial ‘A’ 1,000 1,000 2,525,000,000of shares and shares carryingissue and the right toallotment appoint members

of the board of directors and board ofcommissioners

PT Palm Makmur Sentosa


(Rp) (Rp) (Rp)


PT Pelayaran Asia Marine


(Rp) (Rp) (Rp)

2 August 2007 Issue and 100,000 10,000 10,000 2,000,000,000allotment

6 September 2007 Issue and 70,000 10,000 10,000 1,000,000,000allotment

17 September 2007 Reclassification 2,000 serial ‘A’ 10,000 10,000 2,020,000,000of shares and shares carryingissue and the right toallotment appoint members


PT Sawindo Cemerlang


(Rp) (Rp) (Rp)

22 August 2007 First allotment 25 1,000,000 1,000,000 25,000,000and issue

13 September 2007 Reclassification 1 serial ‘A’ 1,000,000 1,000,000 26,000,000of shares and shares carrying issue and the right to allotment appoint members


SHARE CAPITAL

64

PT Sawit Kaltim Lestari


(Rp) (Rp) (Rp)

13 September 2007 Reclassification 25 serial ‘A’ 10,000 10,000 25,250,000of shares and shares carrying issue and the right toallotment appoint members


PT Sawit Permai Lestari


(Rp) (Rp) (Rp)


16 May 2008 Issue 961,334 100,000 100,000 96,158,400,000and allotment

PT Sawindo Kencana


(Rp) (Rp) (Rp)

13 September 2007 Reclassification 500 serial ‘A’ 1,000,000 1,000,000 60,000,000,000of shares and shares carrying issue and the right toallotment appoint members


PT Wira Mas Permai


(Rp) (Rp) (Rp)


PT Wira Palm Mandiri


(Rp) (Rp) (Rp)


19 May 2008 Issue 185,097 100,000 100,000 18,534,700,000and allotment

SHARE CAPITAL

PT Wira Sawit Mandiri


(Rp) (Rp) (Rp)

16 April 2006 First allotment 250 500,000 500,000 125,000,000and issue

17 September 2007 Reclassification 2 serial ‘A’ 500,000 500,000 126,000,000of shares and shares carrying issue and the right toallotment appoint members


Note:

(1) Not applicable.

Save as disclosed above, no shares in our Company or any of our subsidiaries existing at the date hereofhad been issued as fully or partly paid for in cash or for a consideration other than cash, within the pastthree years preceding the Latest Practicable Date.

65

PRINCIPAL SHAREHOLDERS

66

SHAREHOLDERS

Our Shareholders and their respective shareholdings immediately before and after the Invitation are setout below:

Before the Invitation After the InvitationDirect Interest Deemed Interest Direct Interest Deemed Interest

Number of % Number of % Number of % Number of %Shares Shares Shares Shares

DirectorsHenry Maknawi(1) (2)(4) 35,592,880 4.5 693,580,640 86.9 35,592,880 3.6 693,580,640 69.5Ratna Maknawi(3) (4) 5,506,520 0.7 159,600 n.m 5,506,520 0.6 159,600 n.mTengku Alwin Aziz 1,675,880 0.2 – – 1,675,880 0.2 – –Kent Surya 1,037,440 0.1 – – 1,037,440 0.1 – –

Executive OfficersAlbert Maknawi(1) 2,234,520 0.3 – – 2,234,520 0.2 – –Ajis Chandra(3) 159,600 n.m 5,506,520 0.7 159,600 n.m 5,506,520 0.6

Substantial ShareholdersKencana Holdings(2) 689,829,840 86.4 – – 689,829,840 69.1 – –

Other shareholdersKarmila Maknawi(1) 1,516,280 0.2 1,516,280 0.2 – – Jeanny Maknawi(4) 8,140,040 1.0 8,140,040 0.9 – –Eddy Maknawi(4) 7,581,440 1.0 7,581,440 0.8 – –Johan Maknawi(4) 6,943,000 0.9 6,943,000 0.7 – – Bambang Pangestu Djoko 159,600 n.m 159,600 n.m – – Dick Permana 6,384,360 0.8 6,384,360 0.6 – –Drs. Soetikno 1,276,880 0.2 1,276,880 0.1 – – Edy Suroso 159,600 n.m 159,600 n.m – – Heri Dwi Basuki 239,400 n.m 239,400 n.m – –PT Intinusa Metrotama 3,750,800 0.5 3,750,800 0.4 – –J. Amin Delarosa 5,745,920 0.7 5,745,920 0.6 – –Jauhari Chandra 1,276,880 0.2 1,276,880 0.1 – –Jimmy Chandra 2,074,920 0.3 2,074,920 0.2 – –Letjen TNI (Purn.) 9,177,520 1.1 9,177,520 0.9 – –Soekarto

Lili Suryani 159,600 n.m 159,600 n.m – –Mayjen TNI (Purn.) 5,745,920 0.7 5,745,920 0.6 – –Soeprapto

Muhidin Mardjuki 1,276,880 0.2 1,276,880 0.1 – –Samsuri Samaun 239,400 n.m 239,400 n.m – –Wisely Antonius Tang 159,600 n.m 159,600 n.m – –

Public shareholders – – – – 200,000,000 20.0 – –

Total 798,044,720 100 998,044,720 100

Notes:

(1) Mr. Henry Maknawi is deemed to be interested in the Shares held by his son Mr. Albert Maknawi and his daughter Ms.Karmila Maknawi.

(2) Kencana Holdings is an investment company incorporated in Singapore on 28 November 2007. Mr. Henry Maknawi isdeemed to be interested in the Shares held by Kencana Holdings by virtue of his 43.4% shareholding interest in KencanaHoldings. Kencana Holdings became a shareholder of our Company pursuant to the Restructuring Exercise (please refer tothe section “Restructuring Exercise” of this Prospectus for further information).

(3) Ms. Ratna Maknawi is the wife of Mr. Ajis Chandra and is therefore deemed to be interested in the Shares held by Mr.Chandra. For the same reason, Mr. Chandra is likewise deemed to be interested in the Shares held by Ms. Ratna Maknawi.

(4) Mr. Henry Maknawi, Ms. Ratna Maknawi, Ms. Jeanny Maknawi, Mr. Eddy Maknawi and Mr. Johan Maknawi are siblings.

(5) “n.m” means not meaningful.

Save as disclosed in the section “Restructuring Exercise” of this Prospectus, there are no significantchanges in percentage of ownership of our Company over the last three years prior to the date of thisProspectus.

Save as disclosed above, none of our Directors and our Substantial Shareholders are related to oneanother.

Save as disclosed above, our Company is not directly or indirectly owned or controlled by anothercorporation, any government or other natural or legal person whether severally or jointly.

No option to subscribe for shares in, or debentures of, our Company or our subsidiaries has been grantedto, or was exercised by, any Director or Executive Officer within the two financial years preceding the dateof this Prospectus.

No person has been, or is entitled to be, given an option to subscribe for any shares in or debentures ofour Company or any of our subsidiaries.

The Shares held by our Directors and Substantial Shareholders do not carry different voting rights fromthe New Shares.

Our Directors are not aware of any arrangement the operation of which may, at a subsequent date, resultin a change of control of our Company.


67

MORATORIUM

To demonstrate its commitment to our Company, Kencana Holdings, our holding company, which will hold689,829,840 Shares representing approximately 69.1% of our Company’s post-Invitation issued sharecapital, has given an undertaking to DBS Bank and CIMB-GK, not to sell, realise, transfer or otherwisedispose of or transfer any part of its existing shareholding in our Company for a period of six months fromthe date of admission to the Official List of the SGX-ST.

In addition, each of the shareholders of Kencana Holdings has also undertaken to DBS Bank and CIMB-GK that each of them will not dispose of or transfer any part of their shareholdings in Kencana Holdingsfor a period of six months from the date of admission of our Company to the Official List of the SGX-ST.

Finally, each of our Shareholders immediately after the Invitation (save for Kencana Holdings and thepublic Shareholders), as set out in the section “Principal Shareholders - Shareholders” of this Prospectus,in aggregate representing approximately 10.8% of our Company’s post-Invitation issued share capital,have each undertaken to DBS Bank and CIMB-GK that they will not sell, realise, transfer or otherwisedispose of or transfer any part of their individual existing shareholding in our Company for a period of sixmonths from the date of admission to the Official List of the SGX-ST.


68

The following table shows the cash and cash equivalents as well as capitalisation and indebtedness ofour Group as at 30 April 2008 (i) on an actual basis; and (ii) as adjusted to give effect to the issuance of200,000,000 New Shares based on an Issue Price of S$0.305 per Share pursuant to the Invitation andthe application of the net proceeds of the Invitation after deducting estimated expenses incurred for theInvitation.

As at 30 April 2008(US$’000)(1) Actual Adjusted

Cash and cash equivalents(3) 2,834 30,717

Indebtedness

Short-term

� Secured and not guaranteed 21,635 9,166

Long Term

� Secured and guaranteed 4,575 4,575 (2)

� Secured and not guaranteed 11,915 11,915 (2)

� Unsecured and not guaranteed 5,000 5,000

Total indebtedness 43,125 30,656

Total proforma shareholders’ equity 76,774 117,126

Total Capitalisation & Indebtedness 119,899 147,782

Notes:

(1) Facilities borrowed in Rupiah were converted to US$ based on the exchange rate of US$1: Rp9,305 as at the LatestPracticable Date.

(2) Approximately S$17.0 million (US$12.5 million) will be used for the repayment of loans from financial institutions. Please referto the section “Use of Proceeds from the Invitation and Expenses Incurred” of this Prospectus for further information.

(3) There were no cash balances restricted in use as at 30 April 2008.

The cash and cash equivalents of our Company are mainly held in Rupiah and US dollars.

CAPITALISATION AND INDEBTEDNESS

69

As at the Latest Practicable Date, our total facilities (utilised and unutilised) are as follows:

Facilities Utilised Unutilised Interest rates Maturity profilegranted

(US$’000) (US$’000) (US$’000)

Term loans 19,843 18,652 1,191(1) 5.59% to 11.67% Monthly instalments andper annum end of period payment

expiring in one to threeyears

Working Capital 13,399 10,012 3,387 8.25% to 12.0% End of period paymentloans per annum expiring in one to two

months

Investment loans 28,675 17,116 11,559(1) 8.25% to 12.0% Monthly and quarterly per annum instalments expiring in

one to eight years

Total 61,917 45,780 16,137(1)

Note:

(1) The unutilised amount is based on the existing unutilised facilities and does not take into account repayments made.

To the best of our Directors’ knowledge, we are not in breach of any terms and conditions or covenantsassociated with any credit arrangement or bank loan which could materially affect our financial positionand results or business operations, or the investments of our Shareholders.

The above facilities are secured by mortgages over our Group’s leasehold properties and joint andseveral personal guarantees of our Chairman and CEO, Mr. Henry Maknawi and our Deputy CEO, Ms.Ratna Maknawi. Please refer to the section “Interested Person Transactions And Conflicts of Interest –Interested Person Transactions” of this Prospectus for further details of the joint and several guaranteesprovided by our Executive Directors. The guarantors intend to obtain a release and discharge of theguarantee granted in favour of PT Bank Mandiri (Persero) Tbk. after the admission of our Company to theOfficial list of the SGX-ST. In the event that PT Bank Mandiri (Persero) Tbk. does not agree to releasethe personal guarantees, the guarantors will either continue to provide the said guarantee or substitutethe same with other securities to be furnished by our Group that are acceptable to PT Bank Mandiri(Persero) Tbk. As at the Latest Practicable Date, we have obligations under finance leases amounting toUS$0.4 million. These leases are for plant and equipment which are secured by certain fixed assets ofour Group.

Contingent Liabilities

As at the Latest Practicable Date, our Group has contingent liabilities of approximately US$5.4 milliondue to corporate guarantees given by our Group under our Plasma Programme. Please refer to thesection “General Information on Our Group – Business and Operations – Plasma Programme” of thisProspectus.

Save as disclosed above, we have no other borrowings or indebtedness in the nature of borrowingsincluding bank overdrafts and liabilities under acceptances (other than normal trading credits) oracceptances credits, mortgages, charges, hire purchase commitments, guarantees or other contingentliabilities.

CAPITALISATION AND INDEBTEDNESS

70

Dilution is the amount by which the Issue Price paid by the subscribers of our Shares in the Invitationexceeds the NAV per Share after the Invitation. Our proforma NAV per Share as at 31 December 2007before adjusting for the net proceeds from the issue of the New Shares and based on our pre-Invitationshare capital of 798,044,720 Shares is 9.4 US cents.

Pursuant to the Invitation in respect of 200,000,000 New Shares at the Issue Price, our proforma NAV perShare as at 31 December 2007 after adjusting for the estimated net proceeds from the Invitation andbased on the post-Invitation share capital of 998,044,720 Shares (“Adjusted NAV”) would have been 11.5US cents. This represents an immediate increase in proforma NAV per Share of 2.1 US cents to ourexisting Shareholders and an immediate dilution in proforma NAV per Share of 10.9 US cents to our newinvestors.

The following table illustrates the dilution per Share as at 31 December 2007:

US cents

Issue Price per Share 22.4 (or 30.5

Singapore cents)

Proforma NAV per Share based on the pre-Invitation share capital of 798,044,720 Shares 9.4

Increase in proforma NAV per Share attributable to existing Shareholders 2.1

Proforma NAV per Share after the Invitation 11.5

Dilution in proforma NAV per Share to new investors 10.9

The following table summarises the total number of Shares issued by us, the total consideration paid andthe average price per Share paid by our existing Shareholders and by our new public investors in theInvitation.

Average Number of Total effective cost

Shares consideration per Share% (US$’) (US cents)

Existing Shareholders 798,044,720 80.0 14,637,650 (1) 1.8New public investors 200,000,000 20.0 44,754,219 (1) 22.4

Total 998,044,720 100.0

Note:

(1) The US$ equivalent is computed based on an exchange rate of US$1 to S$1.3630 as at the Latest Practicable Date.

DILUTION

71

Prior to the Invitation, the Restructuring Exercise was carried out to rationalise and streamline ourcorporate structure, resulting in our Company becoming the holding company of our Group.

The following steps were taken in the Restructuring Exercise:

(a) Our Company was incorporated on 26 September 2007 with one subscriber share issued to ourChairman and CEO, Mr. Henry Maknawi. The share capital of our Company was subsequentlyincreased to two shares on 10 January 2008 by the issue of an additional share to our Chairmanand CEO, Mr. Henry Maknawi. These shares were subsequently transferred to Kencana Holdings.

(b) SA, KP, KL and KB (collectively, the “Sincos” and each a “Sinco”) were incorporated in Singaporeon 29 December 2006 with an initial share capital of two shares each. The two subscriber shares ineach of SA, KP, KL and KB were transferred to our Company on 16 April 2008 and in considerationof such transfers, our Company issued eight new shares in favour of Kencana Holdings as directedby the initial shareholders of the Sincos.

SA and KP are established to be the holding companies for our plantation business, KL for ourbulking and logistics business and KB for our power generation business. The initial shareholdersof each of the Sincos are as follows:

Sinco Initial shareholders of Sincos (No. of shares held)

SA Ratna Maknawi (1 share) and Albert Maknawi (1 share)

KP Ratna Maknawi (1 share) and Albert Maknawi (1 share)

KL Ajis Chandra (1 share) and Albert Maknawi (1 share)

KB Ratna Maknawi (1 share) and Albert Maknawi (1 share)

These initial shareholders held the subscriber shares in the Sincos as nominees of the Company.

(c) SPL, WPM, BPS and CPG (collectively, the “Indocos” and each an “Indoco”) were respectivelyestablished in Indonesia on 16 February 2007, 19 February 2007, 22 February 2007 and 22February 2007 with a share capital of 250 shares each.

SPL and WPM are established to be the Indonesian holding companies for our plantationoperations, BPS for our bulking and logistics business and CPG for our power generationoperations. The initial shareholders of each of the Indocos comprised the individual shareholders ofthe Indonesian operating companies, namely, SWK, KAJ, AKM, AIK, ATK, AEK, SKL, AML, SCEM,WSM, ASML, PMKS, LNM, WMP, IDT, PAM, LK and BE (collectively, the “Operating Companies”and each an “Operating Company”). For the purposes of the rest of this Restructuring Exercisesection, the individual shareholders of the Indonesian operating companies will be collectivelyreferred to as the “Initial Shareholders”.

Each of the Initial Shareholders (other than our Chairman and CEO, Mr. Henry Maknawi) wasallocated one share in the capital of the Indocos (save for CPG) with the balance of the sharecapital of the Indocos (that is, 226 shares in SPL, 236 shares in WPM and 241 shares in BPS)allocated to Mr. Henry Maknawi. In relation to CPG, each of the Initial Shareholders (other than Mr.Henry Maknawi and the other Initial Shareholders of LK and BE) was allocated one share each inthe capital of CPG. The balance of 202 shares and 46 shares in the share capital of CPG wasallocated to Mr. Henry Maknawi and the other Initial Shareholders of LK and BE (in accordancewith their interests in LK and BE) respectively.

(Such shares of Indocos held by the Initial Shareholders are hereinafter referred to as the “InitialIndoco Shares”).

RESTRUCTURING EXERCISE

72

(d) Each of the Indocos then subscribed for Serial ‘A’ shares issued by the respective OperatingCompanies. The Serial ‘A’ shares entitle each of the Indocos to have full power to appoint themembers of the respective board of directors and board of commissioners of the OperatingCompanies.

(e) Between June and August 2007, each of the Indocos entered into various conditional sale andpurchase agreements with the Initial Shareholders to acquire :

(i) all of the shareholding interests in the Operating Companies (other than BE) (except for ourChairman and CEO, Mr. Henry Maknawi, who retained one share in each of the OperatingCompanies); and

(ii) 90.1% of shareholding interest in BE (the balance 9.9% is held by our Chairman and CEO,Mr. Henry Maknawi).

The purchase consideration for all the Operating Companies (other than PAM) was based onvaluation determined by an independent valuer. The purchase consideration for PAM was based onthe audited net asset value of PAM as at 31 December 2006.

Pursuant to these agreements and on or about 9 May 2008, the Initial Shareholders transferred allof their shareholding interests in the Operating Companies to the respective Indocos whichresulted in the following :

– SPL and WPM became the Indonesian holding companies of our plantation OperatingCompanies;

– BPS, the Indonesian holding company of our bulking and logistics Operating Companies;and

– CPG, the Indonesian holding company of our power generation Operating Companies.

In consideration for the transfer by the Initial Shareholders of their respective shareholding interestsin the respective Operating Companies to the Indocos, each of the Indocos provisionally allottednew shares in each of its share capital (“New Indoco Shares”) as detailed below to the InitialShareholders:

No. of New Indoco Shares In consideration for:

961,334 New Indoco Shares in SPL 100% (less one share(1)) of certain of our plantationOperating Companies, namely, SWK(2), AKM, and KAJ

185,097 New Indoco Shares in WPM 100% (less one share(1)) of certain of our plantationOperating Companies, namely, AIK, SKL, AEK, ATK,AML, SCEM, PMKS, WMP, LNM, ASML and WSM

28,398 New Indoco Shares in BPS 100% (less one share(1)) of each of IDT and PAM,which are our bulking and logistics OperatingCompanies

1,686 New Indoco Shares in CPG 100% (less one share(1)) of LK and 90.1% of BE,which are our power generation Operating Companies

Notes:

(1) Held by our Chairman and CEO, Mr. Henry Maknawi in order to comply with Indonesian law which requirescompanies in Indonesia to have at least two shareholders.

(2) The consideration paid for the share capital of SWK consisted of cash and New Indoco Shares in SPL. The cashconsideration paid by SPL amounted to Rp27.6 billion and the number of New Indoco Shares in SPL issued asconsideration amounted to 362,933 New Indoco Shares in SPL.


73

The Initial Shareholders then assigned their rights in the New Indoco Shares (as detailed below) tothe Sincos and these shares were issued directly to Sincos. Following the issuance of such NewIndoco Shares directly to the Sincos, SA became the Singapore holding company of SPL; KP, theSingapore holding company of WPM; KL, the Singapore holding company of BPS; and KB, theSingapore holding company of CPG.

In consideration for the assignment by the Intial Shareholders of their right to the New IndocoShares to the Sincos (as detailed below), each of the Sincos provisionally allotted new shares ineach of its share capital to the Initial Shareholders (“First Issuance of new Sinco shares”). TheInitial Shareholders then assigned their rights in the First Issuance of new Sinco shares to ourCompany and the shares were issued directly to our Company as follows:

No. of new Sinco shares provisionally allotted andAggregate no. of Indoco Shares directed to be issued to the Company

961,334 New Indoco Shares in SPL 16,293,793 new Sinco shares in the capital of SAissued to SA

185,097 New Indoco Shares in WPM 3,137,239 new Sinco shares in the capital of KPissued to KP

28,398 New Indoco Shares in BPS 481,326 new Sinco shares in the capital of KLissued to KL

1,686 New Indoco Shares in CPG(1) 28,582 new Sinco shares in the capital of KBissued to KB

Note:

(1) CPG issued 11,564 additional shares to comply with the minimum capital requirement set by the Indonesian authorityregulating foreign investment in Indonesia (Badan Koordinasi Penanaman Modal or “BKPM”). KB subscribed for10,986 shares whilst the Initial Shareholders subscribed for the remaining shares. The 1,686 New Indoco Shares inCPG together with the 153 Initial Indoco Shares of CPG (see restructuring step in paragraph (f) below) constitute95% of the share capital of CPG. The balance 5% of the share capital of CPG are held by the Initial Shareholders ofLK and BE.

(f) In October 2007, each of the Sincos entered into various conditional sale and purchaseagreements with certain Initial Shareholders to purchase 150 Initial Indoco Shares (referred to inparagraph (c) above) in each of the Indocos (save for CPG, whereby the number of sharespurchased was 153 Initial Indoco shares) based on the par value of the Initial Indoco Shares. On 9May 2008, the Initial Shareholders transferred their Initial Indoco Shares as stated below to therespective Sincos:

No. of new Sinco shares In consideration for:

2,542 new Sinco shares in SA 150 Initial Indoco Shares(1) of SPL

2,542 new Sinco shares in KP 150 Initial Indoco Shares(1) of WPM

2,542 new Sinco shares in KL 150 Initial Indoco Shares(1) of BPS

2,542 new Sinco shares in KB 153 Initial Indoco Shares(1) of CPG

Note:

(1) 100 Initial Indoco Shares in each of SPL, WPM and BPS are held by our Chairman and CEO, Mr. Henry Maknawi,and 97 Initial Indoco Shares in CPG are held by the Initial Shareholders of LK and BE, so as to comply withIndonesian law which requires companies in Indonesia to have at least two shareholders.


74

In consideration for these Initial Indoco Shares in each of the Indocos, each of the Sincosprovisionally allotted to the Initial Shareholders new shares in each of its share capital (“SecondIssuance of new Sinco Shares”).The Initial Shareholders then assigned their rights in the SecondIssuance of new Sinco shares to our Company and such new Sinco shares were accordinglyissued directly to our Company.

For the purposes of the rest of this Restructuring Exercise section, the First Issuance of new Sincoshares and the Second Issuance of new Sinco shares will be referred to as the “New SincoShares”.

(g) Pursuant to a share allotment and issuance direction agreement entered into on 19 June 2008between our Company and the Initial Shareholders (the “Allotment and Direction Agreement”), ourCompany issued in aggregate an additional 19,951,108 new shares in its capital to the InitialShareholders as consideration for the New Sinco Shares, (after taking into account the values ofthe respective shareholding interests in the Operating Companies and Indocos transferred fromeach of them to the Indocos and Sincos respectively as set out under paragraphs (e) and (f)above).

(h) To streamline our shareholding structure, some of the Initial Shareholders, who also hold shares inKencana Holdings (“Kencana Holdings Shareholders”) as described in paragraphs (a) and (b)above, directed their shares in our Company to be issued directly to Kencana Holdings therebyresulting in Kencana Holdings holding an additional 17,245,736 of our Company’s shares.

As consideration for these new Shares in our Company, Kencana Holdings issued a total of17,245,736 new ordinary shares in its capital to the Kencana Holdings Shareholders. KencanaHoldings in aggregate holds 17,245,746 of our Shares.

The following table shows the respective shareholdings of the shareholders of Kencana Holdingspursuant to the Allotment and Direction Agreement (after taking into account the values of therespective shareholding interests in the Operating Companies and Indocos transferred from eachof them to the Indocos and Sincos as set out under paragraphs (e) and (f) above and the existingshares of Kencana Holdings).

Name of Initial Shareholders % of shareholding interests inKencana Holdings

Henry Maknawi 43.4

Ratna Maknawi 7.2

Tengku Alwin Aziz 2.2

Albert Maknawi 2.9

Jimmy Chandra 2.6

Dick Permana 8.2

Jauhari Chandra 1.7

Jeanny Maknawi 10.6

Eddy Maknawi 9.9

Johan Maknawi 9.1

Karmila Maknawi 2.0

Ajis Chandra 0.2


75

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The following table sets out details of our subsidiaries as at the date of this Prospectus:

Singapore

Issued and PercentageDate and place of Principal Principal place paid-up owned by our

Name establishment business of business capital (S$) Company (%)

SA 29 December 2006, Trading and Singapore 16,296,337 100Singapore Investment

holding

KL 29 December 2006, Investment Singapore 483,870 100Singapore holding

KB 29 December 2006, Investment Singapore 31,126 100Singapore holding

KP 29 December 2006, Investment Singapore 3,139,783 100 Singapore holding

Indonesia


Name establishment business of business capital (Rp) Company (%)

AEK 9 March 2004, Agribusiness East Kalimantan 25,250,000 100(4)

Jakarta

AIK 25 March 1997, Agribusiness East Kalimantan 30,300,000,000 100(4)

Jakarta

AKM 9 December 1996, Agribusiness South Kalimantan 70,500,000,000 100(4)

Jakarta

AML 19 February 2007, Agribusiness East Kalimantan 25,200,000 100(4)

Jakarta

ASML 9 March 2004, Agribusiness Jakarta 25,000,000 100(4)

Jakarta

ATK 25 March 1997, Agribusiness East Kalimantan 1,414,000,000 100(4)

Jakarta

BE 8 August 2006, Power Belitung 50,500,000 90.1(1)

Bangka generationBelitung

BPS 22 February 2007, Wholesale of Jakarta 2,864,800,000 100(2)

Jakarta shipping-relatedproducts

CPG 22 February 2007, Wholesale of Jakarta 1,350,000,000 95(3)

Jakarta productsrelated toelectricity

IDT 13 September 2002, Bulking Bangka Island, 505,000,000 100(4)

Bangka Island Sumatera

KAJ 16 August 2002, Agribusiness Bangka Island, 2,020,000,000 100(4)

Bangka Island Sumatera

GROUP STRUCTURE

77


Name establishment business of business capital (Rp) Company (%)

LK 8 December 2003, Power Bangka Island, 2,525,000,000 100(4)

Bangka Island generation Sumatera

LNM 16 February 2007, Agribusiness Jakarta 25,000,000 100(4)

Jakarta

PAM 17 October 2003, Logistics Jakarta 2,020,000,000 100(4)

Jakarta

PMKS 19 February 2007, Agribusiness Jakarta 25,000,000 100(4)

Jakarta

SKL 9 March 2004, Agribusiness East Kalimantan 25,250,000 100(4)

Jakarta

SPL 16 February 2007, Wholesale of Jakarta 96,158,400,000(4) 100(2)

Jakarta plantation-relatedproducts

SCEM 4 September 2006, Agribusiness East Kalimantan 26,000,000 100(4)

Jakarta

SWK 16 September 1994, Agribusiness Bangka Island, 60,000,000,000 100(4)

Jakarta Sumatera

WMP 16 February 2007, Agribusiness Jakarta 25,000,000 100(4)

Jakarta

WPM 19 February 2007, Wholesale of Jakarta 18,534,700,000 100(2)

Jakarta plantation-relatedproducts

WSM 13 January 2006, Agribusiness Jakarta 126,000,000 100(4)

Jakarta

Notes:

(1) Remaining 9.9% of the share capital is held by Mr. Henry Maknawi

(2) Remaining 100 shares are held by Mr. Henry Maknawi

(3) Remaining 5.0% of the share capital is held by the initial shareholders of LK and BE

(4) Remaining one share held by Mr. Henry Maknawi

We do not have any associated companies. None of our subsidiaries are listed on any stock exchange.

GROUP STRUCTURE

78

BUSINESS

We aim to be a leading palm oil producer and supplier of choice for the local Indonesian and internationalmarkets through continuous improvement of both operational efficiencies and product quality. Our missionis to expand our plantation business, commit to the welfare of local communities where our plantationsand processing facilities are located through various corporate social responsibility programmes andimplement environmentally-friendly practices such as zero burning and zero waste management(recycling).

We are a fast-growing producer of CPO and CPKO in Indonesia with oil palm plantations located in theSumatera and Kalimantan regions, where climatic conditions are well-suited for the planting of oil palmtrees. From 2005 to the Latest Practicable Date, our Group’s total land bank increased by 23.3% from77,374 hectares to 95,410 hectares and our total planted area increased by 98.3% from 12,277 hectaresto 24,349 hectares. As at the Latest Practicable Date, 85.0% of our total land bank is in Kalimantan with aplanted area of 18,762 hectares, while our remaining land bank is situated in Sumatera, with a plantedarea of 5,587 hectares. As our planted area covers only 25.5% of our current land bank, we believe thatwe are able to significantly increase our planted area within our existing land bank.

Our Group also participates in the Plasma Programme under which the Indonesian government requiresplantation owners to develop surrounding small landholders’ plantations and purchase the FFB harvestedfrom such plantations. This is one way in which our Group contributes to the welfare of the localcommunities in the areas that our Group operates. As at the Latest Practicable Date, we haveapproximately 12,372 hectares of plantation land under our Plasma Programme of which approximately7,981 hectares have been planted.

For the purpose of the disclosures made in respect of our land bank and planted area in this Prospectus,we have not included the land and planted area under our Plasma Programme. If we had included theland and planted area under our Plasma Programme, our aggregate land bank as at the LatestPracticable Date would be 107,782 hectares and our aggregate planted area would be 32,330 hectares.

Our Group has two palm oil mills and two kernel crushing plants, with one of each located on BangkaIsland in Sumatera and in South Kalimantan respectively. Our palm oil mills have a total productioncapacity of 120 MT/hour, and our kernel crushing plants have a combined production capacity of 435MT/day.

We operate a bulking terminal in Belinyu, Bangka Island, which is conveniently situated approximately 80km from our plantation. This bulking terminal has three storage tanks with a total capacity of 19,500 MTand a nearby jetty for vessels to berth at and take delivery of our products. For our plantation operationsin South Kalimantan, we also operate a jetty approximately 50 km from the plantations to facilitate thetransportation of our products. We own and operate two barges with a total capacity of 4,500 MT whichwe use primarily for the transportation of our own products. Our bulking terminal and logistics servicesprimarily serve to complement and support our palm oil business by enabling us to be self-sufficient interms of storage and transportation.

Our Group also has a 6.0 MW renewable biomass power plant on Bangka Island, which is used togenerate electricity by utilising waste, namely EFB and kernel shells recycled from the CPO productionprocess. Most of the electricity generated is sold to PLN, a state-owned electricity company. The balanceis used for internal consumption by our plantation located on Bangka Island.

GENERAL INFORMATION ON OUR GROUP

79

OUR HISTORY

Our Company was incorporated in Singapore on 26 September 2007 as a private company with limitedliability and was converted to a public limited company on 20 June 2008. Our Company became theholding company of our Group pursuant to the Restructuring Exercise.

The history of our Group can be traced back to 1995 when our Chairman and CEO, Mr. Henry Maknawiacquired a land bank of 9,000 hectares on Bangka Island in Sumatera for the cultivation of oil palmplantations. We began our operations in the first quarter of 1995 and commenced planting in early 1996.In September 1997, our Group further acquired a land bank of approximately 15,000 hectares in SouthKalimantan and began planting in 1998. The following sets out certain milestones achieved as part of ourexpansion strategy:

(a) In March 2001, our Group began commercial production of CPO with a capacity of 30 MT/hour atour first palm oil mill located on Bangka Island. We also acquired an additional land bank of 650hectares on Bangka Island in December 2001. We upgraded our oil mill operations in 2004 byincreasing our production capacity to 60 MT/hour.

(b) In August 2002, our Group began commercial production of CPKO at our first kernel crushing planton Bangka Island with a capacity of 100 MT/day, which we increased to 135 MT/day in 2005. Tosupport our business operations, our Group then began operating a bulking terminal in Belinyu,Bangka Island in September 2002 for storage of our CPO and CPKO.

(c) In August 2003, our Group began commercial production of CPO at our second palm oil mill inSouth Kalimantan with a capacity of 45 MT/hour. Our second kernel crushing plant, situated in thesame vicinity as our second palm oil mill, commenced operations in June 2004 and had a CPKOproduction capacity of 300 MT/day. To cater for the expansion in business activities, our Group builtand operated our first oil barge in March 2004 and later acquired a self-propelled oil barge in July2006.

(d) In February 2004, as part of our Group’s strategy to build up our land bank, we acquiredapproximately another 12,000 hectares in East Kalimantan and acquired an additional 2,000hectares in April 2005, at which we began planting in 2005.

(e) In October 2005, our Group continued to build up our land bank by acquiring an additional 44,000hectares in a separate area in East Kalimantan. We began planting in this area in 2006.

(f) In line with our “zero-waste management” policy to provide “green” renewable electricity, we beganconstruction of our first biomass power plant on Bangka Island at the start of 2005 to supplementthe electricity needs of the Bangka Island’s local community as well as our energy requirements. InMay 2007, we first entered into a one-year renewable power purchase agreement with PLN tosupply PLN with electricity. We have since renewed this contract for another year up to 31 May2009. With the success of this pilot project, we were invited by the local government in BelitungIsland and PLN in 2007 to build a second renewable biomass power plant on Belitung Island inSumatera.

(g) For 2006, SWK scored the highest among 18 private plantation companies in the province ofBangka Island Belitung in an assessment of large scale private plantations by the provincialgovernment of Bangka Island Belitung classifying SWK under a plantation class of “good”. AKMwas awarded a certificate giving AKM a plantation class of “very good” by the Governor of theProvince of South Kalimantan, based on a merit point system for the classification of plantationcompanies operating in the region.

(h) In August 2007, our Group applied for the allocation of the location permit of an area of 19,600hectares in West Kalimantan which was granted in November 2007.

As at the Latest Practicable Date, our total land bank comprised approximately 95,410 hectares with atotal planted area of 24,349 hectares.


80

COMPETITIVE STRENGTHS

Our Group is well positioned to take advantage of the expected strong demand for palm oil products inthe coming years and we intend to leverage our competitive strengths to become a choice supplier ofpalm oil products.

Our Group’s core competitive strengths are as follows:

Significant cultivatable land bank with new planting potential

We set up our initial oil palm plantations in Sumatera and Kalimantan, where we began planting in 1996and 1998, respectively. Since 2005, we have been focusing on strategic acquisitions of substantial landbanks in the Kalimantan region to expand our oil palm plantations. We believe that the Kalimantan regionis well-suited for the cultivation of oil palm plantations given the conducive environment with good rainfall,suitable soil and sunshine.

From 2005 to the Latest Practicable Date, our Group’s total land bank increased by 23.3% from 77,374hectares to 95,410 hectares and our total planted area increased by 98.3% from 12,277 hectares to24,349 hectares.

The following table shows our land bank and planted area as at the Latest Practicable Date:

Location Land Bank (Hectares) Planted Area (Hectares)

Sumatera 14,331 5,587

Kalimantan 81,079 18,762

Total 95,410 24,349

We have approximately over 70,000 hectares of our land bank available for future planting. We intend toincrease our planted area to over 80,000 hectares in the next five years within our existing land bank(which is an estimated compounded annual growth rate of 25.0% from 2007 to 2012). We estimate futureplanting of approximately 56,000 hectares of our land bank. The graph below shows the plannedexpansion of our planted area within our existing land bank.

CAGR 25.0%

Land bank as at the Latest Practicable Date � Land Bank

� Total Planted

Hectares


81

Taking into account our existing land bank and planting programme, we believe that our Group is wellpositioned to substantially increase our planted area over the next few years. We are also continuouslyseeking opportunities to increase the aggregate size of our land bank and planted area through selectiveexternal acquisitions. For more information, please refer to the section “Strategy and Future Plans” of thisProspectus.

Potential benefits from maturing oil palm trees in the near future

Oil palm trees generally mature after three years of growth and reach their prime after six years, whenFFB production levels peak. As at the Latest Practicable Date, our total planted area is 24,349 hectares,of which 12,277 hectares (approximately 50.4%) are mature and 12,072 hectares (approximately 49.6%)are immature, as shown in the graph below:

We expect the majority of these immature plants to mature from 2009 to 2010. The majority of ourexpected increase in FFB crop will be from our Kalimantan plantations. As at the Latest Practicable Date,approximately 7,008 hectares (or 37.4% of our planted area in Kalimantan) have reached maturity. By2010, we expect about 17,046 hectares to reach maturity. We believe that our FFB yields will improvecorrespondingly as our trees mature.

Going forward, we expect our FFB harvested from our Kalimantan plantations to increase, therebyreducing our reliance on third party FFB suppliers. This will reduce our unit production cost and improveour average CPO extraction rates. As at the Latest Practicable Date, the average oil extraction rate isapproximately between 21.5% and 22.5% for FFB harvested from our own plantations in Kalimantancompared to between 18.0% and 20.0% for FFB purchased from third party suppliers. As at the LatestPracticable Date, about 53.6% of our total FFB requirements were sourced from our plantations with ourKalimantan plantations contributing approximately 20.0% of our total FFB requirements.

In addition, the utilisation rate of our palm oil mills in Kalimantan for FY2007 was 33.5% as the majority ofthe trees in our Kalimantan plantations were then still immature and hence produced little or no FFB.Going forward, we expect the utilisation rates of our palm oil mill in Kalimantan to improve as ourKalimantan plantations continue to mature and reach peak production age. As our FFB production andCPO production volumes increase, we expect to benefit from economies of scale which is expected tolower our unit production cost and thus enhance our profitability.


Our Group has an experienced and committed management team led by our Chairman and CEO, Mr.Henry Maknawi, who has been instrumental in the growth and success of our Group. Over the years, hehas demonstrated the ability to identify new business opportunities and with our team, achieved costssavings by improving overall operation efficiencies. Our team has shown its commitment and dynamismby successfully operating in various challenging business conditions and being able to understand andadapt to the local culture in the regions that our Group operates.

12,277 ha

12,072 ha

Immature

Mature


82

We believe that our management’s track record is demonstrated by our successful cultivation of all ourcurrent plantations from greenfield land. The development of greenfield land into a plantation requiresdetailed planning, careful implementation of a planting programme as well as close cooperation with thelocal community. Through our Plasma Programme as well as our corporate social responsibilityprogramme, our Group has successfully developed good rapport and relationships with the localcommunities and authorities in both the Sumatera and Kalimantan regions.

Our Group’s plantation operations have received recognition from the provincial governments in theSumatera and Kalimantan regions. For 2006, SWK scored the highest among 18 private plantationcompanies in the province of Bangka Island Belitung in an assessment of large scale private plantationsby the Provincial Government of Bangka Island Belitung classifying SWK under a plantation class of“good”. Scores were based on factors such as management, administration of the Plasma Programme aswell as social, economic and environmental considerations. AKM was awarded a certificate giving AKM aplantation class of “very good” by the Governor of the Province of South Kalimantan, based on a meritpoint system for classification of plantation companies operating in the region.


We have integrated our plantation operations, complete with palm oil mills, kernel crushing plants,logistics services, bulking facilities and power generation capabilities. As part of our plans to improve ourvalue-chain, we have recently entered into an agreement with IOPRI, an institute which conductsresearch on germinated oil palm seeds, to provide technical assistance to our Group to develop oil palmseed breeding and seed processing facilities. The technical assistance covers the monitoring of eachstage of our Group’s seed production process from the initial research stage through to seed production,preparation and germination.

Our bulking and logistics service supports and complements our plantation operations by allowing us tostore and transport our products in an efficient and effective manner. Our Group currently owns andoperates two barges, with a total capacity of 4,500 MT, which serve our plantations in both Sumatera andKalimantan. Having tank storage facilities for bulking and our own barges for transportation enable us toexercise better control over our logistics management and to meet customers’ delivery requirements atshort notice. The strategic location of our bulking terminal in Belinyu also provides us with direct accessfrom Sumatera and Kalimantan to both local and international customers.

In addition, our first renewable biomass power plant, which is located within our plantation in theSumatera region, utilises waste products from our production facilities, such as EFB and palm kernelshells, as fuel for the generation of electricity. Most of the generated electricity is sold to PLN. We are alsocurrently applying to the relevant authorities for our renewable biomass plant to be validated as a CleanDevelopment Mechanism (“CDM”) project that will allow us to sell the carbon credits attributable to thisproject. As at the Latest Practicable Date, our renewable power plant in Bangka Island has been validatedas a CDM project and is now pending registration by the executive board of UNFCCC.


83

STRATEGY AND FUTURE PLANS

Our key strategy is to continue to expand our oil palm plantations to take advantage of the expectedstrong demand for CPO and CPKO in the coming years. To support our growth in our plantationoperations, we also intend to develop our complementary business operations such as developing ourseed production capabilities, our bulking and logistics services and our renewable biomass powergeneration businesses.

(i) Expand our oil palm plantation business

Our key strategy is to focus on growing our oil palm plantations. We have a considerable amount ofundeveloped, cultivatable land in our existing oil palm plantations, which we believe represents asignificant potential for growth. We plan to focus on new plantings by increasing our current plantedoil palm area from 24,349 hectares as at the Latest Practicable Date to over 80,000 hectares in thenext five years within, our existing land bank. We expect to increase our planted area by between10,000 to 15,000 hectares per annum.

We also plan, where appropriate, to accumulate additional land bank and/or acquire high-yieldingmature plantations directly or indirectly through acquisitions of companies with such interestswhenever suitable opportunities arise. We intend to set aside approximately S$28.5 million(US$20.9 million) from the net proceeds of the Invitation for new planting for our existing land bankand/or acquisition of mature plantations or companies holding land banks.

(ii) Expand production capacity and improve efficiency and product quality

To cater for the expected increase in our future sales volume, we plan to increase our annual CPOprocessing capacity from 120 MT/hour to 210 MT/hour by 2010, by building two more palm oil mills(each with an initial capacity of 45 MT/hour) in the Kalimantan region. The commencement of theconstruction of the first additional palm oil mill will take place in the fourth quarter of 2008 and thesecond additional palm oil mill in 2009. Our new palm oil mills will utilise new technologies whichwe expect to improve operational efficiency and increase CPO extraction rates.

With the expansion of our plantations, we plan to improve our transportation system and theexisting supporting infrastructure to increase the efficiency of our delivery of harvested FFB to ourprocessing facilities so as to ensure that the FFB are processed within the requisite timeframe of24 hours, thereby achieving better product quality. We intend to set aside approximately S$9.5million (US$7.0 million) from the net proceeds of the Invitation to build new palm oil mills andmaintain and improve the infrastructure of our plantations.

(iii) Develop seed production capability

In line with our expansion plans, we intend to develop our own seed processing capability whichwill enable us to control and ensure a steady supply of high quality germinated seeds. High qualityseeds would increase our FFB yields. We plan to build the seed processing facilities close to ourplantations which will lower transportation costs and minimise spoilage of the germinated seeds.

We had on 27 September 2007 entered into an agreement with IOPRI to develop our seedprocessing facilities. Under this agreement, IOPRI will provide technical assistance for thedevelopment of our seed processing facilities to produce high-yielding seeds (otherwise known as“Benih-bina”). Thereafter, we also plan to develop a core plantation of parent oil palm to provideseeds for our seed processing facilities. Construction of the facility is expected to commence at theend of 2008 and to be completed by the first half of 2009. We expect to invest approximatelyUS$0.5 million towards the development of our seed processing facilities and core plantation,which will be internally funded.

Our long-term objective is to develop self-sufficiency in respect of seed supply.


84

(iv) Develop our bulking and logistics services and renewable biomass power generationbusiness

We currently complement our plantation business with our bulking and logistics operations andrenewable biomass power generation business.

As part of our long-term business strategy, we intend to continue developing our bulking andlogistics operations in tandem with our main plantation business. We intend to acquire a 3,500 MTdouble-hull vessel to add to our existing fleet of two barges. The estimated cost of this additionalvessel is approximately US$3.0 million, which we intend to finance through bank borrowings andinternal funding.

Following the successful implementation of our first renewable biomass power plant on BangkaIsland, we commenced construction of our second renewable biomass power plant of 7.5MW inBelitung following an agreement with PLN to sell electricity generated on a long-term basis. Thecompletion of our second renewable biomass power plant is expected in 2009. It is estimated thatthe Belitung power plant would cost about US$6.0 million to build. The amount expended to date isapproximately US$1.6m (Rp15.0 billion). We intend to fund the balance through bank financing andinternal funding.

We believe that the continued development of this line of business augurs well for our Group as itis an additional source of revenue while also contributing to the local communities by providingemployment opportunities for their people. We intend to build similar renewable biomass powerplants in Kalimantan as and when appropriate or commercially viable.

We also intend to sell the carbon credits attributable to these future CDM projects and will apply tothe relevant authorities for registration of such projects.


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BUSINESS AND OPERATIONS

Plantation Business

Products

Our main products are CPO and CPKO, which are derived from the FFB harvested from our plantationsor purchased from third parties (including our plantations under our Plasma Programe). We produce CPOand CPKO at our palm oil mills and kernel crushing plants respectively in the Sumatera and Kalimantanregions. PKC is a by-product of the CPKO production process and may be sold to third parties or utilisedas biomass. Please refer to the sub-section “Manufacturing Processes” below for more informationregarding the extraction of CPO and CPKO.

In general, our CPO and CPKO are sold to large trading companies and refineries and oleochemicalcompanies in Indonesia and Malaysia such as Kuok Oils & Grains Pte Ltd (now part of the WilmarGroup), the Keck Seng Group and the IOI Group.

The following tables set out the production volume, sales volume and sales revenue of our plantations inthe Sumatera and Kalimantan regions.

Please refer to the sub-section “Harvesting and FFB yield from oil palm plantations” below for moreinformation regarding the breakdown of FFB we harvested and purchased respectively.

Production Volume

Year Ended 31 December

(MT) 2005 2006 2007

Sumatera Region:CPO 44,144 45,918 39,121(1)

CPKO 9,002 7,799(2) 9,264

Kalimantan Region:CPO 23,721 26,544 25,436(1)

CPKO 12,982 13,164 19,221(3)

Notes:

(1) The decrease in CPO production levels in Sumatera and Kalimantan in FY2007 was due to a significant reduction in thesupply of FFB from our suppliers, namely PT Bumi Permai Surya Lestari, Kelompok Tani Swadaya and Pradiksi. For moreinformation, please refer to the section “Major Suppliers” of this Prospectus.

(2) The reduction in CPKO production volume in FY2006 was due to a temporary shortage of storage capacity for kernel arisingfrom an unexpected delay in customers taking delivery of PKC. In anticipation of future increase in CPKO production, we havesince increased our storage capacity.

(3) The increase in CPKO production levels in Kalimantan in FY2007 was due to an increase in kernel purchased from thirdparties.


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Sales Volume


(MT) 2005 2006 2007Sumatera Region:CPO 43,765 49,247 42,981(1)

CPKO 8,346 8,323 9,104

Kalimantan Region:CPO 23,027 27,490 23,893(1)

CPKO 13,171 14,330 18,016(2)

Notes:

(1) The decrease in CPO sales volume in FY2007 was due to a reduction in CPO production arising from the reason set out infootnote (1) to the above “Production Volume” table.

(2) The increase in CPKO sales volume in FY2007 was due to an increase in CPKO production arising from the reason set out infootnote (3) to the above “Production Volume” table.

Sales Revenue


(in US$’000) 2005 2006 2007

Sumatera Region:CPO 15,221 75.0% 18,480 77.8% 25,469 (1) 71.4%

CPKO 4,698 23.1% 4,320 18.2% 8,224 (2) 23.0%

Others 377 1.9% 950(3) 4.0% 1,986 (4) 5.6%

Sub-total 20,296 100% 23,750 100% 35,679 100%

Kalimantan Region:CPO 8,611 52.7% 10,098 58.3% 16,791 (1) 50.3%

CPKO 7,716 47.3% 7,049 40.7% 14,067 (2) 42.1%

Others – – 170 1.0% 2,537 (4) 7.6%

Sub-total 16,327 100% 17,317 100% 33,395 100%

Total 36,623 – 41,067 – 69,074 –

Notes:

(1) The increase in sales revenue of CPO in FY2007 in Sumatera and Kalimantan was mainly due to an increase in selling priceof CPO in FY2007.

(2) The increase in sales revenue of CPKO in FY2007 in Sumatera and Kalimantan was mainly due to an increase in salesvolume and selling price of CPKO in FY2007.

(3) The increase in sales revenue in FY2006 in Sumatera was due to an increase in selling price of PKC.

(4) The increase in sales revenue in FY2007 in Sumatera and Kalimantan was mainly due to an increase in sales volume andselling price of PKC.


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Our Oil Palm Plantations

Our Group’s oil palm plantations are strategically located in the Sumatera and Kalimantan regions ofIndonesia where the climatic conditions are well-suited for planting of oil palm trees. From 2005 to theLatest Practicable Date, our Group’s total land bank increased by 23.3% from 77,374 hectares to 95,410hectares and our total planted area increased by 98.3% from 12,277 hectares to 24,349 hectares. As atthe Latest Practicable Date, 85.0% of our total land bank is in Kalimantan with a planted area of 18,762hectares, while our remaining land bank is situated in Sumatera, with a planted area of 5,587 hectares.As at the Latest Practicable Date, our Group is applying for Ijin Lokasi in respect of approximately 36,700hectares of plantation land.

The following table sets out the details of our plantations in the Sumatera and Kalimantan regions as atthe Latest Practicable Date:

Location

Location Permit Land Date of Issue / Total

of (Ijin Kadastral Use Title Expiry Land Planted

Company plantation Lokasi) Land (HGU) (HGU/Ijin Lokasi) Bank(1) Area Mature Immature

Sumatera region

SWK Desa – – 7,331 10 October 1997 7,331 5,587 5,269 318 Sangku / 9 October 2032 Tempilang, (HGU No.1/Buyan Bangka –Kelumbi, 6,731Ha) Tanjung Niur and Kota 13 July 2002Waringin / 13 July 2037Kecamatan (HGU No.10/ Kelapa Bangka –Merawang 200 Ha) and Puding Besar 13 July 2002 Kabupaten / 13 July 2037 Bangka (HGU No.11/ Propinsi Bangka – Bangka 200 Ha) Belitung

13 July 2002 / 13 July 2037(HGU No.12/Bangka – 200 Ha)

SCEM Desa Kelumbi 7,000 – – 8 April 2008 7,000 – – –dan, / 8 April 2011(4)

Mengkubang, Location Permit Kecamatan No. 525.26/003/Manggar, BPT.4/KEP/IV/Kabupaten 2008–±7,000HaBelitungTimur,PropinsiBangkaBelitung

Sub-total 7,000 – 7,331 – 14,331 5,587 5,269 318for

Sumatera


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Location




Kalimantan region

AKM Desa – – 12,339 (2) 25 May 1999 12,339 6,924 6,117 807Sengayam / 12 April 2034Mangka, (HGU No.17/ Buluh Kotabaru – Kuning and 3,838 Ha) Bepara; Kecamatan 25 May 1999 pamanukan / 12 April 2034 Utara, (HGU No.18/Pamanukan Kotabaru –Barat and 8,204.5 Ha)Sungai Durian 19 April 2007Kabupaten / 20 April 2042 Kotabaru; (HGU No.65/Propinsi Kotabaru – South 42 Ha)Kalimantan

19 April 2007/ 20 April 2042 (HGU No.66/ Kotabaru – 62 Ha)

19 April 2007 / 20 April 2042 (HGU No.67/ Kotabaru – 192.5 Ha)

AIK Desa Lomu – 7,674 – – 7,674 5,197 891 4,306and Riwang; Kecamatan Batu Engau; Kabupaten Pasir; Propinsi East Kalimantan

SKL Desa – 10,009 – – 10,009 4,696 – 4,696 Sabintulung and Muarakaman Ulu;Kecamatan Muarakaman;Kabupaten KutaiKertanegara;Propinsi East Kalimantan


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Location




AEK Desa – 9,615 – – 9,615 1,451 – 1,451Sabintulung Sedulang;Kecamatan Menamang;Kabupaten Kutai Kertanegara;Propinsi East Kalimantan

ATK Desa Liang – 15,342 – – 15,342 494 – 494 Buaya, Sabin Tulung and Puan Cepak; Kecamatan Muarakaman;Kabupaten Kutai Kertenegara;Propinsi East Kalimantan

WSM Kecamatan 19,600 – – 27 November 2007 19,600 – – –Jelai Hulu / 27 Novemberand 2010(4)

Tumbung Location Permit Titi; No. 408–19,600Kebupatan Ha Ketapang;Propinsi West Kalimantan

ASML Desa Tanah 6,500 – – 26 March 2008 6,500 – – –Kuning and / 26 March 2009(4)

Mangkupadi, Location PermitKecamatan No. SK: 522.1/06/Tanjung EK/IL-X/2007 asPalas Timur, amended byKabupaten Location PermitBulungan, No, 522.1/07/EK/Propinsi East IL-III/2008Kalimantan – ±6,500Ha

Sub-total

for

Kalimantan 26,100 42,640 12,339 – 81,079 18,762 7,008 11,754

Total for

Sumatera

and

Kalimantan 33,100 42,640 19,670 – 95,410(3) 24,349(3) 12,277 12,072

Notes:

(1) Our land bank comprises Ijin Lokasi, Kadastral land and HGU title.

(2) HGU title in respect of approximately 500 hectares held by AKM has been used for the KKPA plasma scheme. This land mayat any time be transferred to the villagers through the regional authorities.


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(3) For the purpose of the disclosures made in respect of our land bank and planted area in this Prospectus, we have notincluded the land and planted area under our Plasma Programme. If we had included the land and planted area under ourPlasma Programme, our aggregate land bank as at the Latest Practicable Date would be 107,782 hectares and ouraggregate planted area would be 32,330 hectares.

(4) The validity date may be extended subject to the fulfilment of the conditions stated under the Ijin Lokasi.

On average, an oil palm tree typically has a commercial life span of approximately 25 years. Germinatedseeds are first carefully selected and purchased from reliable seed producers before being delivered toour Group’s nurseries at our plantations. After approximately 12 months, the young oil palm plants aretransferred to the fields. The young oil palm plants are generally planted approximately nine metres apart,which results in approximately 128 to 143 trees per hectare. The area surrounding each young oil palmplant is free from other vegetation which may compete for fertiliser, water and sunlight. When an oil palmtree reaches maturity at approximately three years after being planted in the field, harvesting of the FFBbegins. Yield from the oil palm tree increases as it continues to mature, generally reaching peakproduction between the 7th to 18th year of growth. The yield of an oil palm tree generally starts togradually decrease from 18 years onwards. Normally, at the end of an oil palm tree’s commercial lifespan,the land upon which it is planted will be cleared and replanted.

Plasma Programme

Plantation companies are required under Indonesian government regulations to develop a plantation areanear its plantation covering a minimum of 20% of the total plantation area which is operated by thatplantation company for the local communities. This development is achieved through the implementationof credit, grant or profit-sharing scheme and is commonly referred to as a Plasma Programme.

Plasma Programmes are mutually beneficial to both villagers in the local communities and plantationcompanies. The villagers benefit socially and economically with increasing incomes and better welfaresuch as training and education in oil palm cultivation. Plantation companies are able to enjoy a steadysupply of FFB at prices set by a price committee established by a Governor at the province where theplantation is located.

Our Plasma Programme comprises the plantation business cooperatives scheme (Kredit Koperasi PrimerAnggota or “KKPA”), the cooperation in local community palm oil plantation scheme (Kebun Kelapa SawitRakyat or “KKSR”), and the independent plasma scheme (Plasma Mandiri).

Under the KKPA scheme, the land is typically occupied by the villagers of the local communities and ourGroup helps to develop the land and manage the oil palm trees to maturity. The development costs arefunded by bank loans, which are secured by the land rights over the small landholders’ oil palm plantationas the main collateral and by corporate guarantees of our Group as well as a mortgage over HGU landowned by our Group as secondary collateral. In the event that the small landholders default on repaymentof their loans, and the banks claim on the guarantee provided by our Group, our Group will be entitledunder Indonesian law to be subrogated in relation to the security held by the banks over the debts of thesmall landowners.

Upon maturity of the oil palm trees, the land will be maintained and managed by the villagers or in thefuture, by our Group. The harvested FFB will then be sold to our Group. The loan facilities will be repaidby the villager from a portion of the sales proceeds. The banks typically charge a fixed interest rate for acertain number of years and a floating interest rate for the balance of the loan period under thegovernment scheme. Historically, the commercial interest rates charged range between 10.0% and 16.5%per annum. Repayment of interest typically starts after the fourth year of planting and repayment of theprincipal (including interest) starts between the sixth and seventh year of planting. Our Group will obtain apower of attorney to manage the account of the villager into which all the sales proceeds will bedeposited. This power of attorney allows our Group to withdraw funds from such account to pay for all thevillager’s operating costs and expenses.


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Under the KKSR scheme, our Group will co-operate with the regional authorities to provide seedlings andfertiliser to the villagers. The lands belong to the villagers. Post-harvest, the FFB will be sold to our Groupand part of the sales proceeds will be paid to our Group and the regional authorities as payment for theseedlings and fertiliser respectively.

Plasma Mandiri is a scheme whereby our Group will provide the seedlings to the villagers, and thevillager will plant and maintain the plantation. The land belongs to the villagers. Post-harvest, the FFB willbe sold to our Group and part of the sales proceeds will be paid to our Group as payment for theseedlings provided initially. There is no governmental involvement under this scheme.

For more information on the above schemes under the Plasma Programme, please refer to “Appendix C– Indonesian Regulatory Overview” of this Prospectus.

As at the Latest Practicable Date, we have approximately 12,372 hectares of plantation land under thePlasma Programme, of which approximately 7,981 hectares have been planted.

For the purposes of the disclosures made in respect of our land bank and planted area in the Prospectus,we have not included the land and planted area under our Plasma Programme. If we had included theland and planted area under our Plasma Programme, our aggregate land bank as at the LatestPracticable Date would be 107,782 hectares and our aggregate planted area would be 32,330 hectares.

Under the KKPA scheme, our Group has provided guarantees for loan facilities of an aggregate of up toRp92.1 billion (approximately US$9.9 million) and approximately Rp50.0 billion (approximately US$5.4million) of such loans have been drawn down as at the Latest Practicable Date. In addition, under ourPlasma Programme, when necessary, our Group may provide financial aid to small landholders for thedevelopment of their plantations. As at the Latest Practicable Date, the receivables from smalllandholders amounted to approximately Rp10.6 billion (approximately US$1.1 million).

If the small landholders default on the repayment of their loans, the banks may exercise their rights underthe corporate guarantees provided by our Group. Upon the full repayment by our Group, underIndonesian law, we will be entitled to claim the security previously provided by the small landholders inrespect of their loans. As at the Latest Practicable Date, no small landholders under our PlasmaPrograme have defaulted on the repayment of their loan obligations.


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The following table sets out the details of the Plasma Programme as at the Latest Practicable Date:

KKPA (Hectares) KKSR (Hectares) Plasma Mandiri

(Hectares)

Land under Land under Land underPlasma Planted Plasma Planted Plasma Planted

Programme area Programme area Programme area

Bina Tani Tempilang, 2,230 2,230 – – – –Sejahtera Pembantu(Plasma for Tempilang, SWK) Bangka Barat,

Bangka Belitung

Kebun Kelapa Puding Besar – – 1,250 1,242 – – Sawit Rakyat Kabupaten (Plasma for Bangka SWK) Induk

Plasma Tempilang- – – – – 1,311 1,311Mandiri Kelapa Kabupaten(Plasma for Bangka Barat SWK)

Bina Tani Sengayam- 2,131 2,131 – – – – Mandiri Semanggang,.(Plasma for Pamukan Barat, AKM) Kab. Kota Baru,

South Kalimantan

Bina Tani Riwang- 1,350 750 – – – –Lestari Lomu, Kec.(Plasma for Batu Engau,AIK) Kab. Pasir,

East Kalimantan

Bina Tani Sabintulung, 2,200 235 – – – – Sawit Lestari Muarakaman,(Plasma for Kutai Kertanegara,SKL) East Kalimantan

Plasma Agri Sedulang, Kec. 1,300 82 – – – – Eastborneo Muarakaman, Kab. Kencana Kutai Kertanegara,(Plasma for East Kalimantan AEK)

Plasma Puan Cepak, 600 – – – – –Agrojaya Muarakaman, Kutai Tirta Kencana Kertanegara, East(Plasma for Kalimantan ATK)

Total 9,811 5,428 1,250 1,242 1,311 1,311


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Planting Programme and Age Profile of Planted Oil Palm Trees

Additional Planting (Hectares)For the Year of

Nucleus Plasma Total

1996 1,215 – 1,215

1997 2,989 633 3,622

1998 883 547 1,430

1999 793 563 1,356

2000 1,532 53 1,585

2001 – 158 158

2002 – 66 66

2003 – 70 70

2004 997 966 1,963

2005 3,869 1,156 5,025

2006 4,513 1,316 5,829

2007 5,816 1,725 7,541

As at the Latest Practicable Date 1,742 728 2,470

Total 24,349 7,981 32,330

The following table sets out the area and age profile of the oil palm trees on our plantations in theSumatera and Kalimantan regions as at the Latest Practicable Date:

Age Profile of Planted Oil Palm Trees

Sub-Total of TotalImmature Mature Mature area

Plants Plants Plants planted

OldYoung Prime (Over

(1-3 years) (4-6 years) (7-18 years) 18 years)

Sumatera Region

Planted area (hectares) 318 169 5,100 – 5,269 5,587

Percentage of area planted 5.7% 3.0% 91.3% – 94.3% 100.0%

Kalimantan Region

Planted area (hectares) 11,754 4,696 2,312 – 7,008 18,762

Percentage of area planted 62.7% 25.0% 12.3% – 37.4% 100.0%

Total area (hectares) 12,072 4,865 7,412 – 12,277 24,349

Percentage of total area planted 49.6% 20.0% 30.4% – 50.4% 100.0%


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Age Profile of Planted Oil Palm Trees(1)

Note:

(1) As at the Latest Practicable Date.

Harvesting and FFB yield from oil palm plantations

We start FFB harvesting when an appropriate quantity of palm fruitlets become detached from the FFBas an indication of ripeness. Ripeness is a critical factor in maximising the quality and quantity of palm oilextracted. The harvested FFB are transported by truck to our processing mills located at our Group’splantations and are typically processed within 24 hours to maintain the quality of CPO.

The quantity of FFB from oil palm trees, otherwise known as FFB yield, is dependent on a variety offactors, including the quality of the oil palm seeds, soil and climatic conditions, application of fertiliser,quality of plantation management as well as the timely harvesting of FFB. As part of our efforts toincrease FFB yield, our Group also uses the effluent, EFB and solids from our oil palm mills as organicfertiliser in addition to regular fertiliser.

Generally, in the palm oil industry, mature oil palm trees in their prime (7-18 years) produce approximately18 to 25 MT of FFB per hectare per annum. The following table sets out the average yield of FFB perhectare of our mature oil palm trees on our plantations in the Sumatera and Kalimantan regions for theperiods stated:

Average Yield per Hectare


(MT / hectare) 2005 2006 2007

Sumatera Region:

Young (4 – 6 years) – (1) – (1) – (1)

Prime (7 – 18 years)(2) 19.9 19.2 21.9

Kalimantan Region:

Young (4 – 6 years) 7.4 – (1) 10.0Prime (7 – 18 years)(2) 14.6 17.0 21.7

7,412 Ha

4,865 Ha

12,072 Ha30%

20%

50%

Immature

(< 3 years)

Mature Young

(4-6 years)

Mature Prime

(7-18 years)


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Notes:

(1) There were no oil palm trees aged between four to six years old in these years.

(2) We do not have any oil palm trees aged above 18 years.

FFB Harvested and Purchased

Year Ended 31 December(MT)Sumatera Region: 2005 2006 2007

Harvested 101,592 97,977 110,972

Purchased(1) 137,146 129,936 77,719

Sub-total for Sumatera 238,738 227,913 188,691

Kalimantan Region:

Harvested 22,558 38,933 60,180

Purchased(1) 105,851 95,711 53,360

Sub-total for Kalimantan 128,409 134,644 113,540

Total FFB 367,147 362,557 302,231

Note:

(1) FFB purchased includes FFB purchased under our Plasma Programme.

Manufacturing Processes

The following flow-chart sets out the key manufacturing processes and palm oil-based products producedthrough these processes:

Fresh Palm FruitBunches (FFB)

Waste(Empty Fruit Bunches(EFB), liquid waste,

kernel shells, fibre)

Palm Kernel

CrushingPalm Kernel Cake (PKC)

Crude Palm Oil (CPO)

Milling

Crude Palm Kernel Oil(CPKO)


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(i) Processing FFB into CPO and palm kernel

The process begins with harvesting FFB of appropriate ripeness. The FFB are typicallyprocessed within 24 hours after being harvested. FFB are first transported to our palm oilmills, where they are sterilised by applying high-pressure steam to deactivate the enzymeswhich cause the palm oil fruit to break down. The fruit is then separated from the palmbunches.

After the steaming process, the palm fruitlets are crushed in a pressing machine to obtainCPO and palm kernel. A centrifuge is then used to clear and separate waste and water fromthe CPO. The cleared CPO derived from the centrifuge is sent for refining while the palmkernel nut is sent for crushing. The liquid waste arising from the process is applied asfertiliser in the plantations, while the EFB and kernel shells are used as a biomass fuelsource by our power plant.

The palm kernel extraction rate from FFB based on the industry standard generally rangesbetween 4% to 5.5% of FFB.

The following table sets out the palm kernel extraction rate from FFB on our plantations inthe Sumatera and Kalimantan regions of Indonesia for the periods stated:

Palm Kernel Extraction Rate (%)

Year Ended 31 December2005 2006 2007

Sumatera 5.0 4.8 5.0

Kalimantan 3.6 3.9 4.2

(ii) Processing palm kernel into CPKO and PKC

The palm kernel nut is fractured, which causes the palm kernel within the shell to contractfrom the shell. The shell is separated from the kernel by means of a clay bath, after which itis used as fuel in the boiler room. The palm kernel is further crushed to produce palm kerneloil and PKC.


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Manufacturing Facilities and Production Capacity

Our processing mills and kernel crushing plants in Sumatera and Kalimantan are conveniently locatedwithin our plantation estates with easy access to raw materials and also within close proximity to ourjetties.

The following tables set out certain information with respect to the manufacturing capacity and utilisationrate of our Group’s facilities.

FY2005 FY2006 FY2007

Annual Annual AnnualPalm Oil Production Actual Utilisation Production Actual Utilisation Production Actual Utilisation

Mills (MT) Capacity(1) Production Rate (%) Capacity(2) Production Rate (%) Capacity(2) Production Rate (%)

Sumatera 342,000 238,738 69.8 342,000 227,913 66.6 342,000 190,647 55.7

Kalimantan 256,500 128,410 50.1 342,000 134,645 39.4 342,000 115,129 33.7

FY2005 FY2006 FY2007

Kernel Annual Annual AnnualCrushing Production Actual Utilisation Production Actual Utilisation Production Actual UtilisationPlant (MT) Capacity(3) Production Rate (%) Capacity(3) Production Rate (%) Capacity(3) Production Rate (%)

Sumatera 33,615 21,802 64.9 33,615 18,428 54.8 33,615 22,496 66.9

Kalimantan 74,700 31,586 42.3 74,700 31,891 42.7 74,700 46,540 62.3

Notes:

(1) FFB processed is calculated based on the mill operating at 95% of 20 hours / day for 300 days a year at a capacity of 60MT/hour and 45 MT/hour in Sumatera and Kalimantan respectively.

(2) FFB processed is calculated based on the mill operating at 95% of 20 hours / day for 300 days a year at a capacity of 60MT/hour for both Sumatera and Kalimantan.

(3) Kernel processed is calculated based on the mill operating at 83% for 300 days a year at a capacity of 135 MT/day and 300MT/day in Sumatera and Kalimantan respectively.

Utilisation of palm oil mills

The utilisation rate for our palm oil mill in Sumatera decreased from 69.8% for FY2005 to 66.6% forFY2006 due to decrease in FFB harvested arising from the El Nino effect. The decrease in utilisation ratefrom 66.6% for FY2006 to 55.7% for FY2007 was due to a decrease in FFB purchased from third partysuppliers.

The decrease in utilisation rate from 50.1% for FY2005 to 39.4% in FY2006 for our palm oil mill inKalimantan was due to an increase in capacity from 45MT/hour in FY2005 to 60MT/hour in FY2006. Theutilisation rate for our palm oil mill in Kalimantan decreased from 39.4% in FY2006 to 33.7% in FY2007due to a decrease in FFB purchased from third party suppliers, which more than offset the increase inFFB harvested in Kalimantan.

Utilisation of kernel crushing plants

The utilisation rate decreased from 64.9% for FY2005 to 54.8% for FY2006 for our kernel crushing plantin Sumatera due to a decrease in kernels purchased from third party suppliers. The increase in utilisationfor our kernel crushing plant in Sumatera from 54.8% in FY2006 to 66.9% in FY2007 was due to anincrease in kernel purchased from third party suppliers. The utilisation rate increased from 42.3% forFY2005 to 42.7% for FY2006 for our kernel crushing plant in Kalimantan due to increase in purchases ofkernels from third party suppliers as well as increase in our own kernel production. The utilisation rate forour kernel crushing plant in Kalimantan increased from 42.7% in FY2006 to 62.3% in FY2007 mainly dueto an increase in kernel purchased from third party suppliers.


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Please refer to the section “General Information On Our Group – Our Oil Plam Plantation FFB Harvestedand Purchased” of this Prospectus for the breakdown between FFB purchased and FFB harvested.Please refer to the section “General Information On Our Group – Major Suppliers” of this Prospectus forinformation on the reduction in FFB and increase in kernels from major suppliers.

Oil extraction rates

Generally, our Group’s CPO extraction rate ranges between 18.5% and 22.1% and CPKO extraction rateranges between 41.1% and 42.3%. The EFB and liquid waste from the CPO production process are usedas fertiliser. In addition, some of the EFB is also used as a biomass fuel source. PKC is a by-product ofthe CPKO production process and is sold to third parties or used as a biomass fuel source.

The following table sets out the average CPO and CPKO extraction rates of our plantations in theSumatera and Kalimantan regions of Indonesia for the periods as stated:

Average Oil Extraction Rates (%)

Year Ended 31 December2005 2006 2007

Sumatera Region:

CPO (1) 18.5 20.2 20.5

CPKO (2) 41.3 42.3 41.2(3)

Kalimantan Region:

CPO (1) 18.5 19.7 22.1

CPKO (2) 41.1 41.3 41.3

Notes:

(1) CPO extraction rate is calculated based on total weight of CPO produced (MT) / total weight of FFB processed (MT)

(2) CPKO extraction rate is calculated based on total weight of CPKO produced (MT) / total weight of palm kernel processed(MT)

(3) The decrease in the average CPKO extraction rate for FY2007 was primarily due to the lower quality of palm kernels.

Save for the CPKO extraction rate in FY2007 for the Sumatera region, the average oil extraction rates ofCPO and CPKO increased steadily year on year for the last three financial years ended 31 December2005, 2006 and 2007 for both regions due to increase in FFB contribution from our own plantations asmore of our oil palm trees matured. As a result, we purchased less FFB from third parties which generallyhave lower extraction rates. The increase in the oil extraction rates was due to improvements in variousstages of our production processes such as minimising oil loss during production and employing newprocessing technology.

Bulking Terminal and Logistics Operations

As part of our integrated palm oil operations, our Group also operates a bulking terminal which we useprimarily for storing CPO and CPKO. Our bulking terminal is strategically located in Belinyu, BangkaIsland and comprises three storage tanks (6,500 MT each) with a total storage capacity of 19,500 MT. Welease the land and storage tanks from PT Timah Industri, a subsidiary of a company listed on the JakartaStock Exchange. We also have an agreement with the Indonesian Port Authority (Pelindo) to use thenearby jetty facilities for vessels to berth and have the CPO or CPKO pumped onboard through pipesextending from our storage tanks. Vessels with capacities of up to 6,000 MT are able to berth at the jetty.


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To further support and streamline our operations, our Group also owns and operates two barges with atotal capacity of 4,500 MT for transportation of our CPO and CPKO products from Sumatera andKalimantan regions. Details of our two barges and one tugboat are set out in the table below:

Name of Type of Capacity Port of Registry /vessel vessel (MT) Class Flag Encumbrance

Kencana 1 Oil barge 1,500 BKI Pangkal Balam, Indonesia Vessel is part of securitygranted in favour of PT Bank Rakyat Indonesia(Persero), Tbk(2)

WMT Satu Tugboat(1) – BKI Jakarta Vessel is part of securitygranted in favour ofPT Bank Rakyat Indonesia(Persero), Tbk(2)

Kencana 2 Self-propelled 3,000 BKI Batam, Indonesia Vessel is part of security oil barge granted in favour of

PT Bank Rakyat Indonesia(Persero), Tbk(2)

Notes:

(1) The tug boat is used to tow Kencana 1.

(2) Please refer to the section “Capitalisation and Indebtedness” of this Prospectus for more information.

The main function of our bulking terminal and barges is to support our plantation operations by providingstorage facilities and transportation for our products. Only when not required for our Group’s own use dowe lease our bulking terminal storage facilities or charter out our barges to third parties.

Power Generation

In line with our zero waste strategy, our Group embarked on a renewable energy project (renewablebiomass power generation) using the waste from the EFB and excess kernel shells to produce greenelectricity. This project also ties in with our corporate social responsibility programme to contribute to thelocal community. Please see the section “Corporate Social Responsibility” of this Prospectus for moredetails. The shortage of electricity within the vicinity has motivated our Group to work with PLN, a state-owned electricity company, in the generation and sale of green electricity, which we believe is the firstcommercialised renewable biomass project in Indonesia.

Our first renewable biomass project began construction in 2005 in Bangka Island. This renewablebiomass plant is adjacent to our palm oil mill and has a capacity of 6.0 MW. It is currently operating on atrial basis and supplying electricity to PLN under a one year renewable contract which will expire on 31May 2009. In addition to using our own EFB and palm kernel shells as biomass fuel, we also purchasebiomass from third parties if there is insufficient supply.

Following the success of the Bangka Island project, the local authorities in Belitung Island (which is nextto Bangka Island) together with PLN requested our Group to set up a similar project on Belitung Island.Construction on the new plant on Belitung Island commenced in December 2006 with the estimatedcompletion date for the first power train with a capacity of 7.5 MW in 2009. The plant will be within thevicinity of our future plantation on Belitung Island and we may decide to add a second 7.5 MW powertrain to the plant if there are sufficient sources of biomass. Even though this biomass power plant will beable to co-fire coal to generate power, we intend to purchase EFB and palm kernel shells from ourneighbouring plantations and aim to use our own produce when our plantation on Belitung Island beginsproduction. Please refer to the section “Strategy and Future Plans” of this Prospectus for moreinformation.


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The chart below sets out the key power generation processes of our biomass generation operations:

Biomass fuel is transported from biomass storage to the boiler which in turn will be combusted.

Biomass fuel is transported from the biomass storage to the boiler for combustion. The combustion of fuelin the boiler will produce steam and this steam energy is converted into kinetic energy and further intoelectrical energy in the turbine generator. The electricity is then transmitted to the provincial grid forcommercial use.

Power Purchase Agreement

Our power plant generates and supplies electric power to the Bangka Island provincial transmission grid.Electric power generated by the power plant is delivered to the power grid through 20 KV transmissionlines.

Pursuant to the power purchase agreement dated 26 May 2008 entered into between LK and PLN, LKwill generate up to 5.0 MW of electricity for transmission to the Bangka Island provincial grid for a one-year period commencing from 1 June 2008 at a rate of Rp675/KWh. As the renewable biomass powerplant is a “green” pilot project for both LK and PLN, LK will not be subject to any power discontinuitiesand energy penalties under the power purchase agreement. As at the Latest Practicable Date, we are inthe process of negotiating for a power purchase agreement for a term longer than 12 months.

SEASONALITY

Generally, the production of FFB in our Group’s oil palm plantations tends to increase in the second halfof the year, as a result of the rainfall patterns in the areas where our Group’s planted oil palm plantationsare located. The majority of our Group’s revenue from our plantation segment is normally derivedbetween July and December as 68% to 70% of our FFB are harvested and produced during this period.This results in an increase in the supply of CPO and in turn, results in an increase in sales volume of ourGroup’s palm oil products for the second half of each financial year. However, this trend may be affectedby any anomaly in weather or rainfall patterns, such as the La Nina effect.

CORPORATE SOCIAL RESPONSIBILITY

As part of our commitment to improve the social and economic welfare of the local communities in theareas where we operate, we have been implementing a corporate social responsibility programme whichincludes the provision of educational aid and healthcare, Plasma Programme and environmentally friendlypolicies. We believe that through these community development programmes, we are able to establishgood rapport with the local community which is one of the key factors in ensuring the success of ourplantation management.

Educational, Medical and Social Initiatives

Since 2000, we provided the local communities with over 500 scholarships covering elementary to tertiarylevels. The scholarship recipients comprise the top three students from local schools as well as orphansor children from single-parent households. When these students graduate, our Group will provideemployment opportunities for them. In addition, we contribute to the local schools by sponsoring thesalaries of local teachers.

We have been providing free basic medical services to the local communities since 2000. From time totime, we arrange for doctors from local clinics and hospitals to conduct basic medical check-ups andprovide medication where necessary. This has been well-received by the local communities.

BiomassBiomass fuelfuel isis transportedtransported from from biomassbiomass storagestorage toto thethe boilerboiler whicwhic h inin turnturn willwill bebe cocombustedbusted.

BIOMASSMASSSTSTORAGE E BOILER R

TURBINETURBINEGENERAGENERATOR

BoileBoiler Fueluel Steameam 20KV20KV ElectricitElectricity PROVINCIPROVINCIAL

GRIDGRID


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We also contribute to the social and cultural welfare of the local communities by helping to build andrepair places of worship such as mosques, churches and temples. To promote cultural values, we sponsorand participate in traditional events and social functions. In this way, we are able to maintain strong tieswith the local communities.

Plasma Programme

Through our Plasma Programme, over 3,500 local villagers have now become new plantation ownersinstead of being employed as plantation workers. As plantation owners, local villagers benefit socially andeconomically with increasing incomes and better welfare such as training and education in oil palmcultivation. We believe that the improvement in their income will have a multiplier effect on the economy ofthe entire local communities. For more information on the Plasma Programme, please refer to “AppendixC – Indonesian Regulatory Overview” of this Prospectus.

Environmentally-friendly Policies

Prior to embarking on any new plantings, a comprehensive and participatory independent social andenvironmental impact assessment will be undertaken to comply with prevailing governmental rules andregulations. The results will be incorporated into the planning and management of new plantings. We aremindful that some aspects of the plantation and mill management could have environmental andconservation impacts. As such, prior to any expansion of our plantation and mill operations, we willundertake an assessment to identify any potential negative impact on the environment in determiningwhether to proceed.

We adhere strictly to the “zero burning” policy in our land-clearing methods so as not to increase airpollution which is a health hazard to the local communities. In addition, we also apply a “zero wastemanagement” policy by recycling waste products such as EFB and kernel shells as renewable biomassfuel. Our first renewable biomass power plant is a “green” project as it reduces carbon emissions. Thepower generated is used to supply electricity to the local community through a joint cooperation with PLN.Many villages generally face a shortage of electricity. As such, as part of our continued commitment tocommunity development and zero waste management, our Group is keen to explore possibilities todevelop more renewable biomass projects to provide the local communities with electricity.

Besides establishing closer working ties with the local community, we believe that our corporate socialresponsibility has also been recognised by the regional authorities. Please refer to the section “Awardsand Certifications” of this Prospectus.

AWARDS AND CERTIFICATIONS

For 2006, SWK scored the highest among 18 private plantation companies in the province of BangkaIsland Belitung in an assessment of large scale private plantations by the Provincial Government ofBangka Island Belitung classifiying SWK under a plantation class of “good”. Scores were based onfactors such as management, administration of the Plasma Programme and social, economic andenvironmental consideration.

AKM was awarded a certificate giving it a plantation class of “very good” by the Governor of the Provinceof South Kalimantan, based on a merit point system for classification of plantation companies operating inthe region.

We believe that such awards are a testimony of our commitment to the quality of our operations andservices.

QUALITY CONTROL

We seek to ensure that the quality of our products meets customers’ satisfaction and have implementedquality control procedures at each stage of the production process. Quality control begins from the plantselection stage and continues through planting, harvesting, transporting the FFB to the processing mills,processing the FFB and storage of the CPO and CPKO.


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(a) Procurement of raw materials

The raw materials required by our Group in its production process comprise mainly FFB and palmkernel. In the plantations, FFB are only harvested when appropriate quantities of fruitlets becomedetached from the FFB indicating appropriate ripeness. Our harvesting procedures ensure that allloose fruitlets are collected as far as possible. We keep to strict procedures to ensure that wetransport the FFB promptly to our processing mills. The FFB are transported to the mills forprocessing within 24 hours of harvesting to minimise the build-up of fatty acids and avoidcompromising the quality of the CPO extracted. On reaching the palm oil mills, visual checks aredone on the FFBs’ ripeness and readiness for processing. We also reject and return FFB and palmkernel purchased from suppliers when they do not meet our quality criteria.

(b) Processing

The efficiency of the production process and the oil loss during the extraction process are closelymonitored. We have laboratories at each of our palm oil mills to monitor the quality of our productsusing sampling methods at each production stage so that the CPO produced will comply with theindustry standards guided by the Federation of Oils, Seeds and Fats Association Limited.

(c) Finished products

Prior to the delivery of our products, a final round of quality assurance inspections are done toensure that only products which meet the requisite quality requirements are delivered to ourcustomers.

RESEARCH AND DEVELOPMENT

Our Group does not engage in extensive research and development activities. However, we periodicallyengage qualified agronomists to evaluate the conditions of our plantations and assess how to improve ourplantations. These agronomists will analyse factors such as the general conditions of our oil palm treesand the soil. Thereafter, they will make recommendations accordingly based on their observations andresults from laboratory tests. The amount we spend on research and development activities isinsignificant.

In line with our policy to adopt best management practices, we have entered into an agreement withIOPRI for them to provide us with technical assistance for the development of seed processing facilities toproduce high-yielding seeds (otherwise known as “Benih-bina”). We also have plans to develop a coreplantation of parent oil palm trees to provide seeds for our seed processing facilities.

Our management team is constantly exploring ways in which we can further improve our marketknowledge and operational processes. Our sales and marketing team routinely carries out marketintelligence research to understand industry trends and factors driving the demand and supply in themarket. Our operational teams also keep up to date with new developments in plantation practices andprocessing technologies to further enhance our competitiveness through improvement in cultivation andprocessing capabilities.


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INTELLECTUAL PROPERTY

Currently, our business is not materially dependent on any intellectual property such as patents, patentrights, licences and processes or other intangible assets. We have not paid or received royalties for anylicence or use of any intellectual property.

Our Group has applied for registration of the following trade marks in Singapore and Indonesia as at theLatest Practicable Date:

Place of Application Date ofTrade Mark Application Class Number Application Status

Singapore 29 T0802182F 25 February 2008 Pending Registration

Singapore 31 T0802184B 25 February 2008 Pending Registration

Singapore 40 T0802185J 25 February 2008 Pending Registration

Indonesia 39 700.2008.012932 11 April 2008 Pending Registration






We may file further applications to register additional trade marks where appropriate and necessary.

To the best of our Directors’ knowledge and belief, we are not aware of any third party that is currentlyusing a trade mark similar to the above trade marks.

As at the date of this Prospectus, we have not faced any claims for any infringement of other intellectualproperty owned or held by third parties.


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SALES AND MARKETING

Our products are mainly sold to refineries, oleochemical companies, large trading companies and throughcommissioned brokers or agents. For FY2005, FY2006 and FY2007, approximately 70% of our productswere exported to India, China, Malaysia and Vietnam.

Our sales team closely monitors market prices of our products to ensure that we obtain competitiveprices for our sales transactions. In addition, our sales team is also responsible for maintaining strongworking relationships with our existing customers and developing new business opportunities to enlargeour customer base.

As part of our marketing activities, our management and staff actively attend conferences and exhibitionsboth locally and internationally such as in China, Malaysia and Singapore to meet industry players andsource for potential customers.

In line with our expansion plans, our Singapore subsidiary SA was awarded “approved status” byInternational Enterprise Singapore under its Global Trader Programme (“GTP”) on 1 February 2008. TheGTP will enable us to grow our regional and global sales network for our products whilst enjoyingconcessionary tax incentives.

CREDIT MANAGEMENT

For export sales, we typically receive payment either through prepayment, letter of credit or cash againstpresentation of documents of title. For domestic sales, we typically receive cash prepayment in full.

For new customers in relation to export sales, we evaluate the customer’s credit worthiness byconsidering the customer’s financial standing, operating track records and conducting backgroundchecks. Based on the information obtained, we will decide on the mode of payment and whether anylimits should be set. We do not set credit limits for different classes of customers as each customer isdealt with on an individual basis. As a practice, we usually require prepayment or letters of credit for suchsales.

For FY2005, FY2006 and FY2007, our Group has not provided for any doubtful receivables.

As our export sales were mainly on a cash basis, prepayments and letters of credit, there were nosignificant trade receivables’ turnover days.

CREDIT TERMS GRANTED BY SUPPLIERS

Our trade suppliers generally grant us credit terms of between 30 and 90 days. Our average tradepayables’ turnover days for FY2005, FY2006 and FY2007 are as follows:

FY2005 FY2006 FY2007

Average trade payables’ turnover days 46 50 65

Note:

(1) The average trade payables’ turnover days is calculated as the number of days in the financial year multiplied by the closingtrade payables and divided by cost of sales.

The increase in trade payables’ turnover days in FY2007 to 65 days from 50 days in FY2006 was due toan unexpectedly large supply of FFB and kernel from one of our suppliers which led to a correspondingincrease in our trade payables. Notwithstanding the increase in trade payables’ turnover days, our Group’scash flow has remained positive to date and our Group has not experienced any difficulty meeting itsshort-term obligations as and when they fall due.


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INVENTORY MANAGEMENT

Our Group’s inventory comprises mainly finished goods (CPO and CPKO) and raw materials such aspalm kernel, fertiliser, consumables and supplies. Our products (CPO and CPKO) are agriculturalcommodities which have quoted market prices, are freely traded, may be sold without significant furtherprocessing and have insignificant costs of disposal. Inventory level is determined principally by ourproduction requirements, sales forecasts and timely collection of finished goods by our customers. OurGroup generally maintains palm oil (both CPO and CPKO) inventory of approximately two weeks to twomonths of its production and holds inventory of fertiliser for up to three months. The inventory turnover foreach of FY2005, FY2006 and FY2007 are as follows:

FY2005 FY2006 FY2007

Average inventory turnover days 57 50 38

Note:

(1) The average inventory turnover days is calculated as the number of days in the financial year multiplied by the closinginventory and divided by cost of sales.

In FY2007, the inventory turnover days decreased due to the increase in the volume of sales inDecember 2007 as our customers were timely in collecting our products.

Our Group adopts the first-in-first-out method of stock (fertiliser, consumables and supplies) control. Weperform full stock counts at the end of each financial year. Discrepancies in the amount of inventoriesdetected during stock counts as well as slow moving inventories that are identified during stock-takes arewritten down to their net realisable value (“NRV”) at the end of each financial period. The adjustment toNRV was insignificant in FY2005, FY2006 and FY2007.

RISK MANAGEMENT

Our Group mainly produces CPO, CPKO and PKC and sell these products to large trading companiesand refineries and oleochemical companies in Indonesia and Malaysia where the majority of thetransactions are denominated in US dollars. As a result of our sales to global customers, we are exposedto various types of market risk, including changes in foreign currency exchange rates, agriculturalcommodity prices and interest rates.

Foreign Exchange Risk Management

The majority of our Group’s sales is denominated in US dollars. Some of our expenditure and asignificant proportion of our bank loans are also denominated in US dollars. Operating companies withinour Group which present their financial results in Rupiah would need to report US dollar sales,expenditure and bank loans in Rupiah. Any fluctuation in foreign currency exchange rates will result inforeign exchange gains and losses.

We review our working capital very closely and maximise the use of natural hedging by offsetting our US$income with our US dollar expenditure and US dollar loan repayment. We primarily enter into foreigncurrency forward contracts on a proportion of excess US dollar income to reduce our exposure to themovement of the US dollar.

Our Group’s hedging policy aims to minimise the impact of foreign currency fluctuations on our cash flowand operating results, and is not used for speculative purposes.

Our Board will review our foreign currency hedging policy periodically and new hedging policies to beimplemented by our Group must be approved by our Board. We will also prepare relevant information toassist our Board in its quarterly review. Our Group does not enter into foreign currency forward contractsfor speculative purposes.


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Commodity Price Risk Management

Our Company is exposed to commodity price risk due to certain factors, such as weather, governmentpolicy, level of demand and supply in the market and the global economic environment resulting frompopulation growth and changes in standards of living, and global production of similar and competitivecrops. To minimise our exposure to commodity price fluctuations, we enter into forward contractsperiodically to hedge the price of our CPO produced from our nucleus production line.

Our Group does not enter into forward sale contracts for speculative purposes and intends to establish adedicated sales team in order to better advise the management on its entry into forward sale contracts.

Prior to entering into any forward sale contracts, our sales team will need to seek the approval of eitherour COO or our Finance Director as well as one of our Directors.

Interest Rate Risk Management

We are exposed to fluctuations in interest rates since our debt financing generally comprises floating ratedebt. The interest rates under these floating rate debt facilities are typically based on the prevailing SBIplus a margin, the lending bank’s prime rate plus a margin or SIBOR plus a margin. For a description ofour bank facilities, please refer to the section “Capitalisation and Indebtedness” of this Prospectus. We donot typically hedge our floating rate debt interest rate exposure. We review our Group’s loan positionperiodically and endeavour to refinance or renegotiate the terms of our loans to minimise interest costs.Discussions with the banks and the loan selection process are carried out by our senior managementand reviewed by our Finance Director.

Credit Risk Management

To mitigate our credit risk, our Group has set a policy that requires the monitoring of receivable balanceson an ongoing basis. In the event of late payment and/or default, our Group will cease the supply of allproducts to the customer. Depending on our Group’s assessment, specific provisions may be made if thedebt is deemed uncollectible. As our sales were based on cash terms, prepayments and letters of creditin FY2005, FY2006 and FY2007, there were no significant trade receivables’ turnover days or bad debtsduring this period.

For FY2005, FY2006 and FY2007, our Group has not provided for any doubtful receivables.

Please refer to the section “General Information On Our Group – Credit Management” of this Prospectusfor further information.

Liquidity Risk Management

We use short term debt financing to partially fund our working capital needs. In addition, we tap long termdebt financing to fund our capital expenditure. Availability of such debt financing is dependant on liquidityconditions in the Indonesian and global financial markets.

MAJOR SUPPLIERS

The following table sets forth our Group’s suppliers which accounted for 5.0% or more of our purchases(comprising primarily purchase of FFB and kernel for our processing and crushing) for the periods asstated.

Percentage of Total Purchases (%)Type of raw

Supplier materials FY2005 FY2006 FY2007

Sinar Mas Group FFB & kernel 12.1 4.7 8.3PT Sumarco Makmur Indah FFB 9.9 9.2 6.1Minamas Group FFB & kernel 10.1 13.2 25.8KUD Bina Tani Sejahtera FFB 3.6 4.1 5.2PT Bumi Permai Surya Lestari FFB 11.0 8.5 0.3Kelompok Tani Swadaya FFB 12.9 3.3 4.8PT Sentana Adidya Pratama Fertiliser Fertiliser 4.9 6.4 1.4


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The decrease in purchases from the Sinar Mas Group from FY2005 to FY2006 was due to a reduction inthe supply of FFB made available to us by the Sinar Mas Group in FY2006 as a result of the Sinar MasGroup completing construction of their own mill. The increase from FY2006 to FY2007 was due to anincrease in the purchase of kernel from the Sinar Mas Group.

Our purchases from PT Sumarco Makmur Indah decreased from 9.2% in FY2006 to 6.1% in FY2007 dueto significant upward revision in quoted price towards the end of FY2007.

Our purchases from the Minamas Group increased from 13.2% in FY2006 to 25.8% in FY2007 as aresult of an increase in purchase of kernel which resulted in an increase in our CPKO production.

Our purchases from PT Bumi Permai Surya Lestari decreased from 8.5% in FY2006 to 0.3% in FY2007as it was acquired by another plantation company to serve its internal FFB requirements.

Our purchases from Kelompok Tani Swadaya decreased from 12.9% in FY2005 to 3.3% in FY2006 asthere was a third party mill built within close proximity to their plantation. Our purchases from KelompokTani Swadaya increased from 3.3% in FY2006 to 4.8% in FY2007 as Kelompok Tani Swadaya hadexcess FFB in FY2007.

Our purchases from PT Sentana Adidya Pratama Fertiliser decreased from 6.4% in FY2006 to 1.4% inFY2007 as we were able to source fertiliser from alternative suppliers at more competitive prices.

To the best of our Directors’ belief and knowledge, our Directors and Substantial Shareholders do nothave any interest, direct or indirect, in any of the above suppliers.

MAJOR CUSTOMERS

The following table sets forth our Group’s customers which accounted for 5.0% or more of our sales forthe periods as stated.

Percentage of Total Turnover (%)Principal

Customer Product(s) FY2005 FY2006 FY2007

Kuok Oils & Grains Pte Ltd(now part of the Wilmar Group) CPO & CPKO 62.7 52.2 35.2IOI Group CPO & CPKO – 6.3 9.3Keck Seng (Malaysia) Berhad CPKO 9.5 11.1 9.6PT Ecogreen Oleochemicals CPKO 10.8 – 4.6PT Sinar Jaya Inti Mulya CPO – – 5.0

As our products are commodities and freely tradable in the open market, the distribution of sales to ourend customers is subject to existing market forces and do not necessarily illustrate any particular salestrend.

Over the last three financial years ended 31 December 2005, 2006 and 2007, we have increased ourcustomer base for our products and in line with this, the percentage of sales to our largest customer hasdecreased during the abovementioned periods. There were no sales made to PT EcogreenOleochemicals in FY2006 as we were able to secure more favourable prices from other customers.

Our Directors and Substantial Shareholders do not have any interest, direct or indirect, in any of theabove customers.


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COMPETITION

CPO and CPKO are freely traded in the local and international commodity markets. As such, CPO andCPKO producers and plantation owners (whether in Indonesia or in the region) are potentially ourcompetitors. However, as the current demand for CPO exceeds supply, our Directors are of the view thatthere is little or no competition among the producers of CPO. As for CPKO, our Directors are of the viewthat our main competition comes from local and Malaysian CPKO producers.

The players in the Indonesian oil palm plantation industry comprise state-owned plantation companies aswell as private plantation companies. Some of the larger listed plantation companies which produce CPOproducts and which may be our potential competitors are Indofood Agri Resources Ltd., Golden–AgriResources Ltd, First Resources Limited, PT Astra Agro Lestari Tbk and PT Sampoerna Agro Tbk.

PROPERTIES AND FIXED ASSETS

As at the Latest Practicable Date, we own the following properties:

Type / Use ApproximateOwner/Location of Property Area Encumbrance Tenure

SWK

Sangku, Tempilang, Right to Cultivate 6,731.2 1st, 2nd, 3rd and 4th 35 years fromBuyan Kelumbi, (Hak Guna Usaha), hectares mortgage over this plot 10 October 1997 toTanjung Niur, land title used for of land in favour of PT 9 October 2032Kota Waringin Village; oil palm plantation Bank MandiriKelapa Merawang (Persero) TbkSubdistrict, Bangka , BangkaBelitung Province

Kota Waringin Village, Right to Cultivate 200 hectares – 35 years fromPuding Besar (Hak Guna Usaha), 13 July 2002 toSubdistrict, Bangka land title used for 13 July 2037, Bangka oil palm plantationBelitung Province

Kota Waringin Village, Right to Cultivate 200 hectares 1st rank of mortgage 35 years fromPuding Besar (Hak Guna Usaha), over this plot of land 13 July 2002 toSubdistrict, Bangka land title used for in favour of PT Bank 13 July 2037, Bangka oil palm plantation (1) Syariah Mandiri(2)

Belitung Province

Kota Waringin Village, Right to Cultivate 200 hectares – 35 years fromPuding Besar (Hak Guna Usaha), 13 July 2002 toSubdistrict, Bangka land title used for 13 July 2037, Bangka oil palm plantationBelitung Province

AKM

Sengayam Mangka Right to Cultivate 8,204.5 1st, 2nd, 3rd and 4th 35 years fromand Buluh Kuning (Hak Guna Usaha) hectares mortgage over this plot 25 May 1999 toVillage, North Land Title used of land in favour of PT 12 April 2034Pamukan and for oil palm Bank MandiriSungai Durian plantation (Persero) TbkDistrict, Kotabaru, SouthKalimantan Province

Note:

(1) Leased to KAJ and LK

(2) The mortgage is created to secure the facility given by PT Bank Syariah Mandiri to KAJ.


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Type / Use ApproximateOwner/Location of Property Area Encumbrance Tenure

Sengayam Mangka Right to Cultivate 3,838 – 35 years fromVillage, North (Hak Guna Usaha) hectares 25 May 1999 toPamukan District, Land Title used 12 April 2034Kotabaru, for oil palm South Kalimantan plantationProvince

Mangka Village, Right to Cultivate 62 hectares – 35 years fromWest Pamukan (Hak Guna Usaha) 19 April 2007 toDistrict, Kotabaru Land Title used for 20 April 2042, South oil palm plantationKalimantanProvince

Mangka and Bepara Right to Cultivate 42 hectares – 35 years fromVillage, West (Hak Guna Usaha) 19 April 2007 toPamukan District, Land Title used for 20 April 2042Kotabaru, oil palm plantationSouth KalimantanProvince

Mangka Village, Right to Cultivate 192.5 In process of 35 years fromWest Pamukan (Hak Guna Usaha) hectares mortgage in favour 19 April 2007 toDistrict, Kotabaru Land Title used for of PT Bank 20 April 2042South oil palm plantation Lippo, TbkKalimantanProvince

As at the Latest Practicable Date, we lease the following properties:

Use ofProperty / Rental / Approximate Lessor /

Title/Location Type Consideration Encumbrance Area Tenure Issuer

IDTAir Jukung Village, Bulking – 2 Rp300,000,000 – 3,850 sq m 10 years expiring PT Timah IndustriBelinyu District, storage annually with possible 30 December 2012 as lessorBangka tanks revision every

December 2004, 2006,2008, 2010 withmaximum limit of 10%from the last rent value

Air Jukung Village, Bulking – 1 Rp150,000,000 – 3,850 sq m 10 years expiring PT Timah IndustriBelinyu District, storage annually with possible 30 June 2012 as lessorBangka tank, jetty revision every

June of 2006, 2008,2010, 2012 withmaximum limit of 10%from the last rent value

Graha Kencana Office Rp35,000 per sq m – 30.43 sq m Five years expiring PT Tomang MajuBuilding, 5th floor, space per month 31 December 2009 PerkasaJl. RayaPerjuanganNo.88, BlokGK, Kebon JerukSub District,Kebon JerukDistrict, WestJakarta


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Graha Kencana Office Rp35,000 per sq m – 30.43 sq m Five years expiring PT Tomang MajuBuilding, 5th floor, space monthly 31 December 2009 Perkasa as lessorJl. RayaPerjuanganNo.88, Blok GK,Kebon Jeruk SubDistrict, KebonJeruk District,West Jakarta

SWK

Graha Kencana Office Rp45,000 per sq m – 219.92 sq m 1 January 2004 to PT Tomang MajuBuilding, 6th floor, space monthly 31 December 2009 PerkasaJl. Raya as lessorPerjuanganNo.88, Blok GK,Kebon Jeruk SubDistrict, KebonJeruk District,West Jakarta

Kencana Tower – Office Rp19,052 per sq m – 2,624.4 sq m 25 years expiring PT Graha MeruyaBusiness Park, space monthly 30 June 2033 as lessorKebon Jeruk 8th,9th and 10th floor,Jl. Raya MeruyaUtara, NorthMeruya SubDistrict,KembanganDistrict, WestJakarta

AKM

Graha Kencana Office Rp45,000 per sq m – 146.61 sq m 1 January 2004 to PT Tomang MajuBuilding, 6th floor, space per month 31 December 2009 PerkasaJl. Raya as lessorPerjuanganNo.88, Blok GK,Kebon Jeruk SubDistrict, KebonJeruk District,West Jakarta

PAM

Graha Kencana Office Rp35,000 per sq m – 90.86 sq m 1 January 2004 to PT Tomang MajuBuilding, 5th floor, space per month 31 December 2009 Perkasa as lessorJl. RayaPerjuanganNo.88, BlokGK, Kebon JerukSub District,Kebon JerukDistrict, WestJakarta


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AIK

Graha Kencana Office Rp35,000 per sq m – 67.39 sq m 2 January 2006 to PT Tomang MajuBuilding, 6th floor, space per month 1 January 2011 Perkasa as lessorJl. RayaPerjuanganNo.88, BlokGK, Kebon JerukSub District,Kebon JerukDistrict, WestJakarta

KAJ

Tempilang Village, Mill and Rp12,000,000 – 2,807 sq m Three years SWKPembantu Office per year expiringTempilang District, space 31 October 2010Bangka

ATK

Gedung Graha Office Rp27,500 per sq m – 50.69 sq m Two years PT Tomang MajuKencana 1 space per month expiring PerkasaJl. Raya 14 June 2009PerjuanganNo.88, BlokGK, Kebon JerukSub District,Kebon Jeruk District,West Jakarta

LK

Tempilang Village, Power Rp25,000,000 – 13,064 sq m Three years SWKPembantu generation per year expiringTempilang District, 31 October 2010Bangka

In addition, our Company utilises the following premises:

Approximate RegisteredTitle/Location Use of Property Consideration Area Tenure owner

IDT

Land and space CPO handling Rp5,133,433 200 sq m 10 years expiring PT (Persero)on pier, Belinyu per year 31 December 2013 PelabuhanPort Area Indonesia II

PangkalbalamBranch


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INSURANCE

Law No. 13 of 2003 on Manpower (“Labour Law”), in conjunction with Law No. 3 of 1992 concerningSocial Security for Employee, provides that any employer with ten or more employees or pays out wagesexceeding Rp1.0 million per month is obliged to register its employees in the Jamsostek programprovided by PT Jamsostek (Persero). This program covers security for employees as follows (i) workaccidental security, (ii) death security, (iii) old age security, and (iv) health maintenance security.Employers that provide a better health maintenance security for its employees are not required to registerits employees in the Health Maintenance Security program provided by Jamsostek program.

We currently maintain social welfare insurance for our full-time employees under the Jamsostek asrequired under the legislation. Our Group provides internal health maintenance security for ouremployees, which exceeds the minimum requirement under the Jamsostek program.

We have taken out insurance coverage in respect of all our operations. We currently maintain industrial allrisks, movable property, machinery breakdown, and earthquake insurances for our Bangka Island andKalimantan processing facilities which includes equipment, stocks, inventories and power plant. We alsomaintain marine hull insurances on our vessels, which provide insurance cover against fire, explosion,perils of the seas, accidents in loading, discharging or shifting cargo.

The policies cover our costs of replacement but will not cover any losses of profits we incur. We are alsonot insured for losses arising from certain risks such as plantation fires, volcanic eruption, war andterrorism.

Our Directors believe that our Group has adequate insurance coverage for the purpose of our businessoperations and we will procure the necessary insurance coverage for our assets as and when the needarises. However, significant disruption to our operations or damage to any of our properties, whether as aresult of fire and/or other causes, may still have a material adverse impact on our results of operations orfinancial condition.

PROCESS OF OBTAINING HGU LAND TITLE

Based on Regulation No. 2/1999, a location permit (Ijin Lokasi) is granted by the Head of Regency forany company to acquire land within the framework of investment and can also be relied on as a permitfor transferring land-related rights or using the land for the purpose of business investment. The processbegins with a company submitting an application to the local land office. The grant of a location permit isbased on factors such as the control of the land and their rights attached to the land concerned, theregional physical assessment, technical land use plan, the prescribed usage and capacity of the land.The Head of Regency must conduct a coordination meeting among the government officials prior to theissuance of the location permit to consider the interest of the landowners located in the area in question.

In general, an applicant for HGU certification needs to prepare or otherwise present to the Regional LandAgency certain documents including the location permit, an application letter addressed to the RegionalLand Agency and a proposal for utilisation of the land area which must be in line with the purpose of theHGU, for example for use as part of a plantation business. Normally, an applicant engages a local landnotary (Pejabat Pembuat Akta Tanah (“PPAT”)) to assist in applying for the HGU land certificate as part ofthe land processing procedure set out below.

The land processing procedure is generally divided into the following stages:

� Review of documents (Legal Aspect Review)

The land office will initially review the completeness of the application documents and thesupporting documents, including the land relinquishment documents. They may undertake a sitevisit and interview the local villagers or authority to verify that ownership of the land has indeedbeen relinquished.


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� Mapping/Land measurements (Technical Aspect Review)

The land office will undertake a land measurement to determine the actual land area that has beenrelinquished by villagers for the HGU title and to verify the technical documents submitted by theapplicant.

� Discussion by special land committee

A special land committee further evaluates the results of the legal and technical reviews andrecommends whether or not an HGU certificate in respect of the target land should be issued tothe applicant.

� Public Announcements

If the land committee recommends that an HGU certificate be issued, the land office will make apublic announcement at the land office or in the newspaper for a minimum period of 90 days fromthe date of issue.

� Results of Public Announcements

If there is an objection and/or a claim submitted within the 90-day period, the Regional LandAgency will advise the applicant to address the objection and settle the objection/claim. Until theobjection is addressed or the claim is settled, the Regional Land Agency will not issue any decreeregarding the issue of a land title certificate. If there is no objection or claim within the publicannouncement period, the Regional Land Agency will advise the applicant accordingly and instructthe applicant to pay the land registration duty (Bea Perolehan Hak Atas Tanah dan Bangunan/(“BPHTB”)).

� Payment of Land Registration Duty/BPHTB

The applicant is required to pay BPHTB to the tax office in the amount of 5% of the higher of theTax Object Selling Price of the land (Nilai Jual Objek Pajak (“NJOP”)) determined from time to timeby the tax office or the purchase price of the land.

� Issuance of Decree regarding Statement of Rights

After the BPHTB payment has been made (for which evidence of payment needs to be submittedto the Regional Land Agency), the Regional Land Agency will issue a decree regarding the issueof the land title (Surat Ketetapan Hak Atas Tanah) over the targeted land under the name of theapplicant. Following the issuance of the decree, the Regional Land Agency will register the landtitle in the name of the applicant in the General Book of Land Titles. Upon registration, the RegionalLand Agency will issue a land title certificate to the applicant.

Before a HGU certificate can be issued, the targeted land has to be measured by the Panitia B forclassification as Kadastral land first. However, an applicant seeking HGU certification is typically requiredto start planting over the land as an indication of commitment to utilise the targeted land for oil palmplantation and as opposed to engagement in land speculation. This effectively means that the plantingprocess must begin even before formal HGU certification to approve such planting is issued by theRegional Land Agency. There is no assurance that the Regional Land Agency will proceed to issue aHGU certificate for land on which we have begun planting. In the event that HGU certification is notobtained for whatever reason, we may be required to vacate such land on which we have startedplanting.

We may not be able to obtain HGU certification for the entire area under our land bank as parts of sucharea may be unsuitable for plantation or be subject to dispute with the land owners. It should be noted,however, that Article 32(2) of Government Regulation No. 24 of 1997 regarding Land Registrationprovides that a claim relating to land title is statute-barred after the expiration of five years from theissuance of the HGU certificate and no claim can be made against the holder of the HGU certificate,assuming such holder has obtained the land in good faith and has actual possession of the land.


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GOVERNMENT REGULATIONS

As Indonesia is a developing market, its legal and regulatory regime may be less certain than in moredeveloped markets and may be subject to unforeseen changes. At times, the interpretation or applicationof laws and regulations may be unclear and the content of applicable laws and regulations may not beimmediately available to the public. In particular, regional regulations are not nationally published. Undersuch circumstances, consultation with the relevant regional authority in Indonesia may be necessary toobtain better understanding or clarification of applicable laws and regulations.

However, as regional regulations are issued by taking into consideration prevailing laws and regulationswhich are nationally published, it is unlikely that the provisions of such regional regulations will contradictnational laws and regulations. A summary of the Indonesian laws and regulations relevant to our Groupis set out in Appendix C – Indonesian Regulatory Overview” of this Prospectus.

As at the Latest Practicable Date, we have obtained the following documents and licenses: (i)Environmental Management/Monitoring Effort (UKL/UPL) for the storage of palm oil on the land on whichour bulking terminal is situated; and (ii) licenses from the Indonesian Environmental Agency for the re-useof lube oil, which is a lubricant for the equipment and machineries in our Bangka Island and Kalimantanprocessing facilities.

While our Company has in the past failed to comply with certain laws and regulations, we believe thatthese past breaches have been fully rectified and we have obtained approvals for outstanding documentsand licences. The relevant government authorities in Indonesia have also confirmed that there are nolegal issues outstanding in respect of these said past breaches.

Save as disclosed above, we believe that we have obtained all the necessary material licenses andpermits and are in compliance with all laws and regulations in Indonesia, the principal jurisdiction in whichour Group operates that would materially affect our business operations.


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The following selected financial information should be read in conjunction with the full text of thisProspectus, including the “Independent Auditors’ Report on the Audited Combined Financial Statementsof Kencana Agri Limited for the Financial Years Ended 31 December 2005, 2006 and 2007” as set out inAppendix F of this Prospectus.

OPERATING RESULTS OF OUR GROUP

Audited US$’000 FY2005 FY2006 FY2007

Revenue 36,623 41,067 69,280

Cost of sales (32,189) (32,570) (45,826)

Gross profit 4,434 8,497 23,454

Gain/(loss) on fair value changes in biological assets (8,997) 16,675 41,898

Interest income 25 20 161

Financial expenses (1,181) (1,892) (2,797)

Foreign exchange transactions (loss)/gain (563) 1,206 (773)

Distribution costs (1,144) (1,406) (1,781)

Administrative expenses (2,157) (2,872) (4,561)

Other credits/(charges) 408 89 (1,045)

Profit/(loss) before income tax (9,175) 20,317 54,556(3)

Income tax credit/(expense) 2,138 (5,482) (15,354)

Profit/(loss) for the year (7,037) 14,835 39,202(3)

Attributable to:

Equity holders of the company (7,037) 14,835 39,202

Minority interests(1) – – –

(7,037) 14,835 39,202

Earnings/(loss) per Share (US cents) (2) (0.9) 1.9 4.9

Notes: -

(1) Minority interests are below US$1,000.

(2) For comparative purposes, the earnings/(loss) per Share for the period under review has been computed based on theprofit/(loss) for the year and the pre-Invitation share capital of 798,044,720 Shares assuming our Group had existed since 1January 2005.

(3) Had the Service Agreements (as set out under the section “Service Agreements” of this Prospectus) been in place with effectfrom FY2007, our profit before income tax and profit for the year for FY2007 would have been US$54.1 million and US$38.9million respectively.

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

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COMBINED FINANCIAL POSITION OF OUR GROUP

AuditedUS$’000 As at 31 December 2007

ASSETSCurrent assets:Cash and cash equivalents 5,941Trade and other receivables 8,041Inventories 5,171

Total current assets 19,153

Non-current assets:Properties, plant and equipment 19,869Biological assets 111,649Land rights 2,480Trade and other receivables 1,043

Total non-current assets 135,041

Total assets 154,194

LIABILITIES AND EQUITYCurrent liabilities:Short-term borrowings 473Trade and other payables 12,686Current tax payable 990Current portion of long-term borrowings 2,233Current portion of finance leases 245Financial liabilities 677

Total current liabilities 17,304

Non-current liabilitiesDeferred tax liabilities 26,073Estimated liabilities for employee benefits 288Long-term borrowings 31,660Finance leases 292

Total non-current liabilities 58,313

Total liabilities 75,617

EquityShare capital 19,110Translation reserves (4,328)Retained earnings 63,795

Total equity 78,577

Minority Interests(1) –

Total equity 78,577

Total liabilities and equity 154,194

NTA per Share (US cents) (2) 9.8

Notes:

(1) Minority interests are below US$1,000.

(2) The NTA per Share has been computed based on our pre-Invitation share capital of 798,044,720 Shares assuming our Grouphad existed as at 1 January 2005.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIALCONDITION

The following discussion of our results of our operations and financial condition should be read inconjunction with the “Independent Auditors’ Report on the Audited Combined Financial Statements ofKencana Agri Limited for the Financial Years ended 31 December 2005, 2006 and 2007” as set out inAppendix F of this Prospectus. This discussion contains forward-looking statements that involve risks anduncertainties. Our actual results may differ significantly from those projected in the forward-lookingstatements. Factors that might cause future results to differ significantly from those projected in theforward-looking statements include, but are not limited to, those discussed below and elsewhere in thisProspectus, particularly in the section “Risk Factors” of this Prospectus. Under no circumstances shouldthe inclusion of such forward-looking statements herein be regarded as a representation, warranty orprediction with respect to the accuracy of the underlying assumptions by our Company, the IssueManager, the Joint Underwriters and Placement Agents or any other person. Investors are cautioned notto place undue reliance on these forward-looking statements that speak only as of the date hereof.Please refer to the section “Cautionary Note on Forward-Looking Statements” of this Prospectus.

SELECTED OPERATING DATA

Revenue (US$’000) FY2005 FY2006 FY2007

Plantation Segment

Sumatera Region:CPO 15,221 75.0% 18,480 77.8% 25,469 71.4%CPKO 4,698 23.1% 4,320 18.2% 8,224 23.0%Others(1) 377 1.9% 950 4.0% 1,986 (2) 5.6%

Sub Total 20,296 100% 23,750 100% 35,679 100%

Kalimantan Region:CPO 8,611 52.7% 10,098 58.3% 16,791 50.3%CPKO 7,716 47.3% 7,049 40.7% 14,067 42.1%Others – – 170 1.0% 2,537 (2) 7.6%

Sub Total 16,327 100% 17,317 100% 33,395 100%

Plantation Segment 36,623 41,067 69,074

Biomass segment(3) – – 206

Total Revenue 36,623 41,067 69,280

Sales volume (MT) FY2005 FY2006 FY2007

CPO Sales

Sumatera region 43,765 65.5% 49,247 64.2% 42,981 64.3%Kalimantan region 23,027 34.5% 27,490 35.8% 23,893 35.7%

Sub Total 66,792 100% 76,737 100% 66,874 100%

CPKO Sales:Sumatera region 8,346 38.8% 8,323 36.7% 9,104 33.6%Kalimantan region 13,171 61.2% 14,330 63.3% 18,016 66.4%

Sub Total 21,517 100% 22,653 100% 27,120 100%

Total Sales volume 88,309 99,390 93,994

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CPO Production (MT) FY2005 FY2006 FY2007

Sumatera region 44,144 65.0% 45,918 63.4% 39,121(6) 60.6%Kalimantan region 23,721 35.0% 26,544 36.6% 25,436(6) 39.4%

Total CPO Production 67,865 100% 72,462 100% 64,557 100%

CPKO Production (MT) FY2005 FY2006 FY2007

Sumatera region 9,002 40.9% 7,799 37.2% 9,264 32.5%Kalimantan region 12,982 59.1% 13,164 62.8% 19,221 67.5%

Total CPKO Production 21,984 100% 20,963 100% 28,485 100%

Average selling price (US$/Tonne) (4) FY2005 FY2006 FY2007

CPO 357 372 653CPKO 577 502 853

FFB yield (Tonnes/Hectare) FY2005 FY2006 FY2007

Sumatera region 19.9 19.2(5) 21.9Kalimantan region(5) 9.8 17.0 18.2

Average oil extraction rates ( % ) FY2005 FY2006 FY2007

Sumatera regionCPO 18.5 20.2 20.5CPKO 41.3 42.3 41.2

Kalimantan regionCPO 18.5 19.7 22.1CPKO 41.1 41.3 41.3

Average CPO yield (MT/Ha) FY2005 FY2006 FY2007

Sumatera region 3.7 3.9 4.5Kalimantan region 1.8 3.3 4.0

Notes:

(1) Others include sale of palm kernel, PKC and management income earned from our Plasma Programme.

(2) In FY2007, our other income from Plantation segment increased approximately US$3.4 million as compared to FY2006. Thiswas mainly due to increase in our sale of kernels in the first six months of FY2007 in Kalimantan and sale of PKC byapproximately US$0.7 million and US$2.3 million respectively and the commencement of the sale of certain cooking oil forwhich we recorded approximately US$0.4 million of revenue during FY2007. The increase in our sale of kernels was mainlydue to favorable selling price and higher profit margin from sale of kernels as compared to CPKO. Hence, in the first sixmonths of FY2007, we decided to sell palm kernels of approximately 2,600 MT. The increase in PKC sales was due toincrease in demand from new customers as well as higher selling price as compared to FY2006.

During the period, we also traded Refined, Bleached & Deodorised (“RBD”) palm olein in both Sumatera and Kalimantanregions. This is to comply with the requirement of an Indonesian government regulation which took effect in May 2007 whichset a quota for every palm oil company to sell RBD palm olein at a pre-determined price to stabilise the price of cooking oil inIndonesia. In the second half of June 2007, this regulation was superceded by the imposition of export tax for palm oilproducts.

(3) Revenue from Biomass segment refers to the sale of electricity to PLN as we officially commenced our operation in 2007.

(4) The average selling price is derived by dividing the total revenue over the total sales volume of the respective products. Ouraverage selling price is primarily affected by shipment terms (i.e. FOB or CIF) and by our forward contracts arrangements.


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(5) FFB yields declined in FY2006 as compared to FY2005 mainly due to a drought in Indonesia between June and December2006. FFB yields from our Kalimantan plantations are generally lower than those of our Sumatera Plantations as ourKalimantan plantations comprise mainly young mature oil palm trees. Please refer to the section on “Age Profile of Planted OilPalm Trees” of this Prospectus.

(6) The decrease in CPO production levels in Sumatera and Kalimantan for FY2007 was due to a reduction in the supply of FFBfrom our suppliers, namely PT Bumi Permai Surya Lestari, Kelompok Tani Swadaya and Pradiksi.

OVERVIEW

We are a producer of CPO and CPKO in Indonesia with oil palm plantations located in the Sumatera andKalimantan regions, where climatic conditions are well-suited for planting of oil palm trees. From 2005 tothe Latest Practicable Date, our Group’s total land bank increased from 77,374 hectares to 95,410hectares and our total planted area increased from 12,277 hectares to 24,349 hectares. As at the LatestPracticable Date, 85.0% of our total land bank is in Kalimantan with a planted area of 18,762 hectares,while our remaining land bank is situated in Sumatera, with a planted area of 5,587 hectares. As ourplanted area covers only 25.5% of our current land bank, we believe that we are able to significantlyincrease our planted area within our existing land bank.

Our Group also participates in the Plasma Programme under which the Indonesian Government requiresplantation owners to develop surrounding small landholders’ plantations and purchase the FFB harvestedfrom such plantations. This is one way in which our Group contributes to the welfare of the localcommunities in the areas that our Group operates. As at the Latest Practicable Date, our Group has atotal area of approximately 12,372 hectares and 7,981 hectares of planted area administered under thePlasma Programme.

Our Group has two palm oil mills and two kernel crushing plants, with one located on Bangka Island inSumatera and one in South Kalimantan. Our palm oil mills have a total production capacity of 120MT/hour, and our kernel crushing plants have a combined production capacity of 435 MT/day.

We operate a bulking terminal in Belinyu, Bangka Island which is conveniently situated approximately 80km from our plantation. This bulking terminal has three storage tanks with a total capacity of 19,500 MTand a nearby jetty for vessels to berth at and take delivery of our products. For our plantation operationsin Kalimantan, we also operate a jetty approximately 50 km from the plantations to facilitate thetransportation of our products. We own and operate two barges with a total capacity of 4,500 MT whichwe use primarily for our own products. Our bulking terminal and logistics services serve primarily tocomplement and support our palm oil business by enabling us to be self-sufficient in terms of storage andtransportation.

Our Group also has a 6.0 MW renewable biomass power plant on Bangka Island, which is used togenerate electricity by utilising waste, namely EFB and kernel shells recycled from the CPO productionprocess. Most of the electricity generated is sold to PLN. The balance is used for internal consumption byour plantation located on Bangka Island.

Revenue

A significant proportion of our revenue is generated through the sale of CPO and CPKO and to a smallerextent sale of by-products such as palm kernel and PKC. In FY2007, we sold 57.9% of our CPO and49.8% of our CPKO to India, China, Malaysia and Vietnam. Such export sales are denominated in USdollars. The balance of our CPO and CPKO are sold in the domestic market. Sales in Indonesia aremainly denominated in Rupiah (save for CPKO sales which are denominated in US dollars). Revenuefrom biomass power plant is relatively insignificant as we officially commenced our operations in 2007and only supply to PLN.


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Our revenue is recognised upon delivery of products and services when significant risk and rewards ofownership are transferred to our customers. With respect to sales of CPO and CPKO, depending on theshipment terms in the sales contracts, insurance costs and freight charges may be included in our sellingprices. For example, shipment terms under CIF (cost, insurance and freight) include insurance costs andfreight charges in the selling price whereas shipment terms under FOB (free on board) exclude thesecharges. The insurance costs and freight charges, where applicable, form part of our distribution costs.

Our revenue is affected primarily by the following factors:

(a) Prices for CPO and CPKO

We derived most of our revenue from the sale of CPO and CPKO through export to internationalmarkets. As such, our selling prices are referenced to the global spot and future prices as traded inthe international commodity markets (such as the Rotterdam market, and the MalaysianCommodity Derivatives Exchange in Kuala Lumpur). The prices of CPO and CPKO are subject tointense price volatility in the global markets and are generally affected by, inter alia, weatherconditions, government policies (i.e. imposition of export and import tariffs), worldwide demand andsupply for the underlying commodity, fluctuation in crude oil prices, shifts in consumption patterns,economic developments as well as population growth and the availability and prices of substituteproducts (i.e. rapeseed oil and soybean oil). In general, the prices of our products will move intandem with the changes in the global commodity prices of CPO and CPKO which would in turnimpact our revenue. Please refer to the section “Prospects” of this Prospectus for more informationon the factors which may affect CPO and CPKO prices.

Our average selling prices per MT of our CPO for FY2005, FY2006 and FY2007 were US$357,US$372 and US$653. Our average selling price per MT of our CPKO for FY2005, FY2006 andFY2007 was US$577, US$502 and US$853.

Our average selling prices of our CPO and CPKO were generally lower than the averageinternational market prices as most of our shipping terms were under FOB. Furthermore, some ofour sales are based on forward contracts arrangements where the selling prices of CPO and CPKOare agreed in advance and as such may deviate from the average international spot prices.

As at 31 December 2007, we have entered into various forward contracts for sale of 16,500 MT ofCPO for delivery in January to December 2008. Prices for CPO range from approximately US$725to US$880. This represents 22.7% of our projected CPO production for 2008. The remaining outputwill be sold at spot prices to be determined by our Group and where appropriate, our Group mayenter into forward contracts if the terms and pricing are considered favourable by our Group.

(b) Our ability to increase volume of FFB harvested

FFB is the primary raw material used in our Group’s production of CPO and other palm oilproducts. We purchase FFB from third party producers or harvest from our plantations inSumatera and Kalimantan (including from villagers under the Plasma Programme). As at 31December 2007, 43.4% of the FFB used in the production of CPO is from third party producers.

Due to the purchase price of FFB from third party producers being significantly higher compared tothe unit cost of FFB harvested from our plantation, the lack of assurance of consistency of supplyfrom such third party producers and the possibility of such FFB having a lower oil extraction rate,we intend to utilize more internally harvested FFB in our production.

The volume of FFB harvested is affected by factors which include, inter alia, quality of the oil palmseeds, soil and climatic conditions, application of fertiliser, quality of plantation management as wellas the timely harvesting of FFB and the age profile of our existing plantations. Generally, the yieldof FFB would peak when the trees are between 7 and 18 years old. In general, matured trees canproduce 18 to 25 MT per hectare per annum. Given that the majority of our trees is either immatureor young, we expect that the FFB harvested from our plantation will increase in the near future asthese trees mature hence producing more FFB. Please refer to the section “General InformationOn Our Group – Our Oil Plam Plantation – Harvesting and FFB yield from oil palm plantations” ofthis Prospectus for more information.


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Our ability to increase the volume of FFB harvested would affect our production volume andaccordingly our revenue derived from sale of our palm oil products.

(c) Our ability to improve oil extraction rate

The production volume of our CPO and CPKO production are affected by the oil extraction rates.The extraction of CPO and CPKO is primarily dependant on the quantity and ripeness of the FFB,the quality of kernel and the processing efficiency of our mill and kernel crushing plant.

To optimise our extraction rate, FFB must be harvested when ripe and transported quickly to themills for processing. In general, harvested FFB should be processed within 24 hours to maintainthe quality of the CPO produced. Furthermore, our ability to increase the processing efficiency willdepend on the implementation of better processing techniques and our ability to control andminimize oil loss throughout the milling process. If we are successful in improving our oil extractionrates, we would expect an increase in our CPO and CPKO production which would result in anincrease in our revenue. For more information, please refer to the section “Oil extraction rates” ofthis Prospectus for additional information.

(d) Our ability to expand the planted area

We have a considerable amount of undeveloped cultivable land, which represents significantpotential for growth. Our ability to expand our planted area and cultivate our land would affect theproduction volume of FFB and hence our revenue derived from the sale of palm oil products.Factors which may affect our ability to expand include the ability to convert land rights to HGUs,government policies, unforeseen climate changes, the ability to build infrastructure and supportfrom the villagers. Please refer to the section on “Our Oil Palm Plantations” and “PlasmaProgramme” of this Prospectus for additional information.

(e) Fluctuations in foreign currency exchange rates

We have substantial sales denominated in US dollars. As the functional currency of our operatingcompanies is denominated in Rupiah, any movement in the exchange rate between US dollars andRupiah will have an impact to our revenue. Generally, our revenue recorded in Rupiah is higherwhen US dollars appreciate against Rupiah and lower when US dollars depreciate against Rupiah.

Cost of Sales

Cost of sales consists of costs relating to FFB and kernels purchased from third party suppliers,expenses directly related to the production of FFB incurred at our plantations, and cost of production ofCPO and CPKO. Our cost of sales constituted approximately 87.9%, 79.3% and 66.1% of our revenue inFY2005, FY2006 and FY2007 respectively.

(US$’000) FY2005 FY2006 FY2007

Raw materials 24,353 75.7% 22,059 67.7% 36,045 78.7%Labour 767 2.4% 905 2.8% 1,133 2.5%Overheads 5,851 18.2% 6,078 18.7% 6,840 14.9%Depreciation 1,351 4.2% 1,541 4.7% 1,784 3.9%Changes in inventory (142) (0.5)% 1,987 6.1% (447) (1.0)%Other purchases(1) 9 –% – –% 471 1.0%

Total cost of sales 32,189 100% 32,570 100% 45,826 100%

Note:

(1) In FY2007, other purchases include purchases of 750MT of cooking oil (RBD palm olein). Please refer to note 2 of the tableentitled “Selected Operating Data” under this section for more information.


Our purchases of raw materials (mainly purchase costs of FFB and kernel from third party producers)form a significant part of our cost of sales. In general, the purchase price of FFB from third partyproducers is significantly higher than the unit cost of FFB harvested from our plantation. From FY2005 toFY2006, we reduced the proportion of raw material costs from 75.7% to 67.7% of total cost of sales asthe volume of FFB harvested from our plantations increased. We expect this trend to continue as more ofour trees become mature and as a result lead to an increase in FFB produced. In FY2007, raw materialcosts constituted approximately 78.7% of the total cost of sales which was higher than that in FY2006.This was due to increase in the purchase price per MT of FFB by approximately 68.6% which more thanoffset the decrease in the volume of FFB purchased of approximately 39.4% and the increase in bothquantity and purchase price of kernel by approximately 52.7% and 82.3% respectively.

The cost of sales relating to the production of FFB consists of labour costs at our plantations andoverheads incurred for plantation upkeep and maintenance.

Labour costs accounted for approximately 2.4%, 2.8% and 2.5% of our total cost of sales in FY2005,FY2006, and FY2007, respectively. Labour costs comprised mainly of salaries and other staff-relatedcosts which are affected by factors such as the number of employees, number of hours worked,performance bonus and salary increments. The increase in labour costs in FY2007 was due to theincrease in headcount arising from the increase in harvesting activities.

Overhead costs accounted for approximately 18.2%, 18.7% and 14.9% of our total cost of sales inFY2005, FY2006 and FY2007 respectively. These overheads are related mainly to plantation upkeepexpenses such as fertilizer, harvesting, collection, repair and maintenance as well as fuel and lubricantscosts. Upkeep expenses may vary with the soil and weather conditions, harvest yields, and the age profileof the oil palm trees. The increase in overhead costs in FY2005, FY2006 and FY2007 was mainly due toincrease in price of fertilizer, fuel and repairs and maintenance cost as a result of increase in ourproduction level.

Depreciation charges relate to our properties, plant and equipment used within our plantation estates, aswell as equipment used in our bulking and logistics operation. In FY2006, the increase in depreciationwas due to the completion of an additional vessel as well as acquisitions of plantation and mill equipment.In FY2007, the increase in depreciation was due to additional depreciation expense incurred in respect ofleasehold buildings which were completed in late 2006.

Changes in inventory represent the difference between the value of opening and closing inventory levelsfor raw material and finished goods for the respective financial periods. In FY2006, there was a decreasein closing inventory of approximately US$2.0 million due to timing differences in collecting our CPO andCPKO inventory by our customers. In FY2007, there was an increase in our inventory level ofapproximately US$0.5 million, despite a significantly lower volume of inventory of CPO as at 31December 2007 as compared to closing inventory of CPO as at 31 December 2006, offset by a slightincrease in volume of closing inventory of CPKO for the same periods. This was mainly due to higher unitcost of production of closing inventory of CPO and CPKO as at 31 December 2007 arising from increasesin prices of FFB and kernel purchased from third party suppliers during FY2007.

Financial income

Our financial income relates mainly to interest income and was insignificant for the period under review.

Financial expenses

Our financial expenses amounted to approximately US$1.2 million, US$1.9 million and US$2.8 million forFY2005, FY2006 and FY2007 respectively.

The increase in financial expenses in FY2005 of US$0.2 million was mainly due to additional US dollarborrowings in the second half of the year (US$6.7 million) obtained to finance the expansion of our mill,construction of biomass power generation facilities in Bangka Island and vessel, the acquisition of heavyequipment and new planting.

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Our financial expenses increased by US$0.7 million in FY2006 as we increased our Rupiah borrowingsby US$4.9 million which charge higher interest compared to our US dollar borrowings, to financeadditional acquisition of plantation and mills equipment, new planting and to support our working capital

Our financial expenses in FY2007 increased by US$0.9 million as compared to FY2006. This was mainlydue to interest charged on new borrowings drawn down during the first nine months of 2007.Approximately US$4.2 million of these borrowings were settled during October to December 2007. Inaddition, we incurred additional interest expenses for new bridging loans of approximately US$17.5million which were taken up by our Group in September 2007 as part of the Restructuring Exercise.

Gain/(loss) on Fair Value Changes in Biological Assets

We have adopted FRS No. 41 - Agriculture, which requires biological assets (i.e. mature and immature oilpalm trees in our plantations) to be stated at their fair values less estimated point-of-sale costs at eachbalance sheet date. The fair value of these biological assets is estimated by reference to independentprofessional valuations using the discounted cash flows from the underlying biological assets. Theexpected cash flows from the whole life cycle of the oil palm plantations are determined using the marketprice and the estimated yield of FFB, net of maintenance and harvesting costs and the costs required tobring the oil palm plantations to maturity. The estimated yield of the oil palm plantations is affected by theage of the oil palm trees, the location, soil type, and infrastructure. The market price of the FFB is largelydependent on the prevailing market price of the processed products after harvest i.e. the CPO and palmkernel. Point-of-sale costs include commissions to brokers and dealers, levies by regulatory agencies andcommodity exchanges and transfer taxes and duties. The transport and other costs necessary to getassets to a market are excluded. Any resultant gain or loss arising from the change in fair value isimmediately recognised in the income statement. Based upon our combined income statements, werecognised fair value gains of US$16.7 million and US$41.9 million in FY2006 and FY2007 respectivelyand a fair value loss of US$9.0 million in FY2005. A change in fair value of these biological assets isprimarily due to changes in CPO prices, oil extraction rates and discount rates as well as the generalindustry outlook in the year under examination.

Distribution costs

Our distribution costs include freight and handling charges, export expenses such as terminal handlingcharges, transportation and other miscellaneous expenses relating to our Group’s sales and marketingactivities. Our distribution costs amounted to US$1.1 million, US$1.4 million and US$1.8 million forFY2005, FY2006 and FY2007 respectively.

Freight costs, which are generally affected by the movements in fuel price, is a major cost component ofour distribution costs, and accounted for approximately 48.9%, 77.7% and 65.0% of the total distributioncosts for FY2005, FY2006 and FY2007, respectively. Export expenses are related to our overseas salesand are affected by international sea freight rates. The increase in freight costs in FY2006 and FY2007was due to increase in price of fuel and export volume of our products.

Administrative expenses

Our administrative expenses consist mainly of remuneration and employee benefit expenses (includingremuneration of directors and administrative staff), premise-related expenses (such as land tax, rental ofpremise, utility charges), depreciation charges on office plant and equipment and other miscellaneousexpenses such as insurance premium, legal and professional fees.

Our administrative expenses amounted to US$2.2 million, US$2.9 million and US$4.6 million for FY2005,FY2006 and FY2007 respectively. Our administrative expenses is generally affected by changes inremuneration and employee benefit expenses and depreciation expenses which in aggregate accountedfor approximately 45.1%, 56.6% and 49.5% of the total administrative expenses for FY2005, FY2006 andFY2007, respectively.


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Other (charges)/credits

Other (charges)/credits comprise mainly of losses on forward sales contracts, amortisation of land rights,gains or losses on disposal of plant and equipment and other miscellaneous credits and charges. Other(charges)/credits amounted to US$0.4 million, US$0.08 million, and US$(1.0) million in FY2005, FY2006,and FY2007 respectively. The increase in other charges of US$1.0 million in FY2007 was mainly due tomark to market hedging losses arising from futures commodities contracts being marked to market. Thelosses arose due to the difference between the market value of the contracts as at 31 December 2007and the delivery price stated in the contracts. Losses on futures contracts were insignificant to our Groupin FY2005 and FY2006.

Foreign exchange transactions gain/(loss)

We incur losses and gains on foreign exchange transactions as the Rupiah fluctuates against the USdollar over a given period of time. Please refer to the section “Risk Factors” of this Prospectus forinformation relating to foreign exchange fluctuation risks for more information.

Our Group maintains our accounts in either Rupiah or US dollars. Transactions during the year involvingforeign currencies are recorded at the rates of exchange prevailing at the relevant transaction dates. Atthe balance sheet dates, monetary assets and liabilities denominated in foreign currencies are translatedinto respective functional currencies at the closing rates. Any losses are credited or charged to the profitand loss accounts for the year. In FY2005, FY2006 and FY2007 net foreign exchange gains/(losses) were(US$0.6) million, US$1.2 million and (US$0.8) million respectively.

Income tax credit/(expense)

Our effective corporate tax rate was approximately 23.3%, 27.0% and 28.1% of our profit/(loss) beforeincome tax in FY2005, FY2006 and FY2007, respectively. The corporate tax rate in Indonesia isprogressive, based on the level of income earned, and ranges from 10% to 30%.

The effective tax rates of our Group for FY2005, FY2006 and FY2007 were lower than the applicableeffective corporate tax rate in Indonesia of approximately 30%. In FY2005, the lower effective tax rate wasmainly due to uncertainty in the utilization of tax losses of certain entities in our Group as at the balancesheet date and hence our Group did not provide for deferred tax assets. In FY2006 and FY2007, thelower effective tax rate was mainly due to utilisation of brought forward losses within our Group.

SEGMENTAL BREAKDOWN OF PAST PERFORMANCE

We have segmented below our revenue, gross profit, gross profit margin, profit/(loss) before income taxand pre-tax profit/(loss) margin by business segments for the period under review.

Review of Past Performance by Business Segments

Revenue

FY2005 FY2006 FY2007US$’000 US$’000 US$’000

Plantations 36,623 100.0% 41,067 100.0% 69,074 99.7%Biomass – –% – –% 206 0.3%

Total 36,623 100% 41,067 100% 69,280 100%


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Gross Profit/(Loss) and Gross Profit Margin

FY2005 FY2006 FY2007US$’000 US$’000 US$’000

Plantations 4,434 100.0% 8,497 100.0% 23,618 100.7%Biomass – –% – –% (164) (0.7)%

Total 4,434 100% 8,497 100% 23,454 100%

Overall Gross Profit Margin (%) 12.1% 20.7% 33.9%

Profit/(loss) before Income Tax and (Loss)/Profit Margins

FY2005 FY2006 FY2007US$’000 US$’000 US$’000

Plantations (9,103) (99.2%) 20,317 100% 54,866 100.6%Biomass (72) (0.8%) – –% (310) (0.6)%

Total (9,175) (100%) 20,317 100% 54,556 100%

Overall Pre-tax Profit/(Loss) margin (%) (25.1%) 49.5% 78.7%

REVIEW OF OVERALL PAST PERFORMANCE

FY2006 vs FY2005

Revenue

Our revenue increased by approximately US$4.4 million or 12.1% from US$36.6 million in FY2005 toUS$41.1 million in FY2006. The increase was mainly attributable to increase in revenue of US$4.4million from our plantation segment. The increase in revenue from our plantation operations was mainlydue to overall increase in sales volume of CPO and CPKO of 11,081 MT or 12.5% from both ourSumatera and Kalimantan operations and higher CPO average selling price reported by approximately4.2% (from US$357 per MT to US$372 per MT). However, this increase was partially offset by a decreasein average selling price of CPKO by approximately 13.0% (from US$577 per MT to US$502 per MT).

Our sales volume of CPO in Sumatera increased by 5,482 MT or 12.5% in FY2006 which was partiallydue to sale of CPO closing inventory carried forward from FY2005. Our CPO production volume inSumatera increased marginally compared to FY2005, as we experienced a drought during the periodfrom June 2006 to December 2006 which resulted in a decrease in FFB yield from 19.9 MT per hectareto 19.2 MT per hectare. Our sales volume of CPO and CPKO from our Kalimantan operations increasedby 5,622 MT or 15.5% mainly due to higher FFB yields and oil extraction rates of CPO and CPKO asmore of our trees became mature despite the unfavourable weather conditions.

Cost of sales

Despite an increase in revenue of 12.1% in FY2006, our Group recorded a marginal increase in cost ofsales of US$0.4 million or 1.1% from US$32.2 million to US$32.6 million in FY2006. The increase in ourcost of sales was attributable to decrease in closing inventory of US$2.1 million and increase in labourexpenses of US$0.1 million, overhead expenses of US$0.2 million and depreciation expenses of US$0.2million. The increase was partially offset against reduction in purchases of raw materials by US$2.3million as we were able to increase the volume of FFB harvested from our plantation due to increasingmaturity of our oil palm trees.


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Gross Profit and Gross Profit margin

Our gross profit increased by approximately US$4.1 million or 91.6% from US$4.4 million in FY2005 toUS$8.5 million in FY2006 as our cost of sales increased marginally by 1.1% despite an increase inrevenue of 12.1%. The increase in gross profit margin by 8.6 percentage points from 12.1% in FY2005 to20.7% in FY2006 was mainly due to reduction in purchases of raw materials from third party suppliers .The purchases of FFB from third party suppliers as a proportion of our total FFB requirements decreasedfrom 66.2% in FY2005 to 62.2% in FY2006, which lowered our cost of sales accordingly. We used ahigher proportion of FFB harvested from our plantations for the production of CPO and CPKO as our oilpalm trees in our Kalimantan plantation became more mature.

Net Gains Arising from Changes in Fair Value of Biological Assets

Net gains arising from changes in fair value of biological assets was US$16.7 million in FY2006 ascompared to a net loss of approximately US$9.0 million in FY2005 as the fair value of our biologicalassets in FY2006 was higher than FY2005.

The increase in the fair value of the biological assets for FY2006 was mainly due to the following factors:

(i) average CPO prices based on CIF terms at Rotterdam port increased from US$422 per MT inFY2005 to US$478 per MT in FY2006;

(ii) oil extraction rates increased from 18.5% in FY2005 to 20.2% in FY2006;

(iii) discount rate used decreased from 22% in FY2005 to 18% in FY2006; and

(iv) a more favourable industry outlook on the CPO price trend.

Distribution costs

Our distribution costs increased by approximately US$0.3 million or 22.9% in FY2006 due to increase incosts of delivery and transportation of our products due to higher sales volume in FY2006 and increase infuel prices. Our total sales volume increased by 12.5% from 88,309 MT in FY2005 to 99,390 MT inFY2006.


Our administrative expenses increased by US$0.7 million or 33.1% due to increase in payroll cost ofUS$0.3 million and increase in depreciation and other overheads of US$0.4 million. The increase inpayroll cost resulted from additional headcount and salary adjustment. The increase in depreciation andother overhead costs was mainly due to additions in plantation equipment as a result of businessexpansion in FY2006.

Foreign exchange transactions gain/(loss)

In FY2006, we recorded net foreign exchange gain of US$1.2 million as compared to a net loss ofUS$0.6 million due to appreciation of US dollars against Rupiah.

Other credits

Other credits in FY2006 were not significant to our Group.

Interest Income

There were no significant changes in our interest income earned in FY2006.


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Financial Expenses

Our financial expenses increased by US$0.7 million as we increased our Rupiah borrowings by US$4.9million which charge higher interest compared to our US dollar borrowings, to finance additionalacquisition of plantation and mills equipment, new planting and to support our working capital.

Profit/(loss) before Income Tax

Our profit before income tax increased by approximately US$29.5 million in FY2006. The increase wasmainly due to the net gains on changes in fair value of biological assets of approximately US$16.7 millionin FY2006. The improvement in our Group’s performance in FY2006 was also attributable to higher grossprofit, gain from foreign exchange offset against higher distribution, administrative and financial expensesincurred. Excluding the changes in fair value of biological assets, our adjusted profit/(loss) before incometax for FY2005 and FY2006 is US$(0.2) million and US$3.6 million respectively.

Income Tax Credit/(Expense)

Our Group recorded an income tax expense of US$5.5 million in FY2006 as compared to an income taxbenefit of US$2.1 million in FY2005. The increase in income tax expense was due mainly to higherincome tax expenses incurred due to increase in net operating profits before tax of US$3.8 million anddeferred tax expenses of US$4.8 million arising from gains on fair value changes in biological assets. Oureffective tax rate in FY2006 was approximately 27.0%, which was lower than our statutory tax rate inIndonesia mainly due to utilisation of brought forward losses within our Group.

Net profit/(loss) attributable to Shareholders

We recorded net profit of approximately US$14.8 million in FY2006 compared to the net loss position ofUS$7.0 million in FY2005. This was mainly due to significant improvement in our gross margin, net gainfrom foreign exchange and gain in fair value of biological assets as explained above.

FY2007 vs FY2006

Revenue

Our revenue increased by approximately US$28.2 million or 68.7% from US$41.1 million in FY2006 toUS$69.3 million in FY2007. The increase was mainly attributable to the increase in revenue of US$28.0million from our Plantation business segment and US$0.2 million from our Biomass business segment.

The increase in revenue from our plantation operations of US$28.0 million was mainly due to overallincrease in average selling prices of CPO and CPKO and sales volume of CPKO. Our average sellingprice of CPO increased by approximately 75.5% (from US$372 per MT to US$653 per MT) and forCPKO, we registered a 69.9% increase in average selling price (from US$502 per MT to US$853 per MT)due to increase in prevailing international selling prices and increase in sales volume of CPKO of 4,467MT from 22,653 MT to 27,120 MT. However, this increase was partially offset by a decrease in salesvolume of CPO from 76,737 MT to 66,874 MT due mainly to significant reduction in the FFB purchasedfrom third party suppliers.

Revenue from the Biomass business segment was derived from the sale of electricity generated by ourrenewable biomass power plant which officially commenced operation in FY2007.

Cost of sales

Despite an increase in revenue of 68.6% in FY2007, our Group recorded a proportionately smallerincrease in cost of sales of US$13.2 million or 40.5% from US$32.6 million to US$45.8 million in FY2007.

The increase in our cost of sales was attributable to increase in raw materials costs of US$14.0 million,labour expenses of US$0.2 million, overhead expenses of US$0.8 million, depreciation of US$0.2 millionand other purchases of US$0.5 million, offset against an increase in closing inventory of US$2.4 million.

The increase in raw materials was due to increase in prices of kernels by approximately 81.9% and ofFFB by approximately 68.6%.


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Gross Profit and Gross Profit margin

Our gross profit increased by approximately US$15.0 million or 176.0% from US$8.5 million in FY2006 toUS$23.5 million in FY2007. Despite an increase in revenue of 68.6%, our cost of sales increased by40.5%. The increase in gross profit margin by 13.2 percentage points from 20.7% in FY2006 to 33.9% inFY2007 was mainly due to increase in average selling prices of CPO and CPKO and materially lowercost of sales as a percentage of revenue. The lower cost of sales was attributable to an increase in theproportion of harvested FFB used in production, as compared to third party FFB, as well as as a lowerproportionate increase in revenue as compared to overheads. The purchases of FFB from third partysuppliers as a proportion of our total FFB requirements decreased from 62.2% in FY2006 to 43.4% inFY2007, which lowered our cost of sales accordingly.

Gains on Fair Value Changes in Biological Assets

Gains arising from changes in fair value of biological assets was US$41.9 million in FY2007 as comparedto US$16.7 million in FY2006 as the fair value of our biological assets in FY2007 was higher thanFY2006.

The increase in the fair value of the biological assets for FY2007 was mainly due to the following factors:

(i) average CPO prices (based on CIF terms at Rotterdam port) increased from US$478 per MT inFY2006 to US$765 per MT in FY2007;

(ii) average CPKO prices (based on CIF terms at Rotterdam port) increased from US$581 per MT inFY2006 to US$925 per MT in FY2007; and

(iii) a more favourable outlook on the CPO and CPKO price trend.

Distribution costs

Despite lower sales volume of our products, our distribution cost marginally increased by approximatelyUS$0.4 million or 26.7% in FY2007 due to increase in costs of delivery and transportation costs mainlyarising from increases in fuel price.


Our administrative expenses increased by about US$1.7 million or 58.8% in FY2007 due mainly to anincrease in payroll expenses of US$0.9 million resulting from the increase in headcount and salaryadjustments, non-recurring professional fee expenses of US$0.4 million relating to the Initial PublicOffering exercise which are not allowed to be capitalised, and increased planting activities in our newplantation companies in Kalimantan.

Foreign Exchange Transactions Gain/(Loss)

In FY2007, we recorded net foreign exchange loss of approximately US$0.8 million as compared to a netgain of US$1.2 million in FY2006 due to depreciation of US dollars against Rupiah.

Interest Income

There were no significant changes in our interest income earned in FY2007.

Financial Expenses

In FY2007, our financial expenses increased by US$0.9 million as compared to the previous year. Thiswas mainly due to interest charged on new borrowings drawn down during the first nine months of 2007.Approximately US$4.2 million of these borrowings were settled during October to December 2007. Inaddition, we incurred additional interest expenses for new bridging loans of approximately US$17.5million which were taken up by our Group in September 2007 as part of the Restructuring Exercise.


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Other charges

Other charges increased by approximately US$1.1 million in FY2007 due to losses on sales hedgingactivities incurred during the year and fair value losses on forward CPO sales contracts. The fair valuelosses arose due to the difference between the market value of the contract as at 31 December 2007 andthe delivery price stated in the contract. Losses on forward sales contracts were insignificant to our Groupin FY2005 and FY2006.

Profit before Income Tax

Our profit before income tax increased by approximately US$34.2 million in FY2007. The increase wasmainly due to the net gains on changes in fair value of biological assets of approximately US$41.9 millionin FY2007. The improvement in our Group’s performance in FY2007 was also attributable to higher grossprofit, offset against net foreign exchange loss, higher administrative and financial expenses incurred.Excluding the changes in fair value of biological assets, our adjusted profit before income tax for FY2006and FY2007 is US$3.6 million and US$12.7 million respectively.

Income Tax Expense

Our Group recorded an income tax expense of US$15.4 million in FY2007 as compared to US$5.5 millionin FY2006. The increase in income tax expense was mainly due to higher income tax expenses incurreddue to increase in net operating profit before tax of US$9.0 million and US$14.7 million deferred taxexpense arising from gain in fair value of biological assets. Our effective tax rate in FY2007 wasapproximately 28.1% due to utilisation of brought forward losses within our Group.

Net profit/(loss) attributable to Shareholders

We recorded an increase in net profit for FY2007 of approximately US$24.4 million mainly due toincreased revenue, gross profit margin, as well as a significant gain on changes in fair value of biologicalassets, as explained above.

REVIEW OF FINANCIAL POSITION

Current Assets

Our current assets comprise cash and cash equivalents, trade and other receivables, and inventories.

As at 31 December 2007, current assets amounted to approximately US$19.2 million or 12.4% of ourtotal assets. Trade and other receivables which amounted to US$8.0 million accounted for 42.0% of ourcurrent assets. Our other receivables amounted to approximately US$7.2 million and it comprised mainlyprepayments, deferred public listing expenses, employee loans, tax recoverable, amounts due fromvillagers under our Plasma Programme and sundry debtors. Inventories accounted for 27.0% of ourcurrent assets. The remaining balance of our current assets comprised cash and cash equivalentsamounting to US$5.9 million.

As at 31 December 2007, all outstanding amounts due to and from Shareholders have been fully repaid.

Non-Current Assets

Our non-current assets comprise properties, plant and equipment, biological assets, land rights, andtrade and other receivables.

As at 31 December 2007, our non-current assets amounted to approximately US$135.0 million or 87.6%of our total assets, of which approximately US$19.9 million related to our properties, plant andequipment, US$111.6 million related to biological assets, US$2.5 million related to land rights for ourplantations and approximately US$1.0 million related to prepaid rent to a related party.


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Current Liabilities

Our current liabilities comprise short-term borrowings, trade and other payables, current tax payable,current portion of long-term borrowings, finance leases and financial liabilities.

As at 31 December 2007, our current liabilities amounted to approximately US$17.3 million or 22.9% ofour total liabilities. Trade and other payables amounted to approximately US$12.7 million and accountedfor 73.3% of our current liabilities. Trade and other payables related to amount due to trade creditors forthe purchases of raw materials and fertilisers, accrued operating expenses, and advance receipts fromcustomers. Short-term borrowings comprising bank loans and bank overdrafts, amounted toapproximately US$0.5 million and accounted for 2.7% of our current liabilities. Current portion of long-term borrowings of approximately US$2.2 million, which accounted for 12.9% of our current liabilities,related to the interest- bearing term loans from financial institutions to finance our capital expenditure andalso to support our working capital. Financial liabilities of approximately US$0.7 million, which accountedfor 3.9% of our current liabilities, related to provision for losses on forward sales contracts of CPO as at31 December 2007. The remaining current liabilities consists of current portion of finance leases ofapproximately US$0.2 million and current tax payable of approximately US$1.0 million.

Non-Current Liabilities

Our non-current liabilities comprise long-term borrowings, long-term portion of finance leases, deferredtax liabilities and provision for retirement benefits.

As at 31 December 2007, non-current liabilities amounted to approximately US$58.3 million or 77.1% ofour total liabilities. Long-term borrowings amounted to approximately US$31.7 million and related tointerest-bearing term loans from financial institutions to finance our capital expenditure and also tosupport our working capital. Deferred tax liabilities amounted to approximately US$26.1 million andmainly related to deferred tax charges on the temporary differences arising from the recognition ofchanges in fair value of biological assets in the income statement and other tax provisions. The remainingnon-current liabilities consists of finance leases amounting to approximately US$0.3 million and estimatedliability for employee benefits amounting to approximately US$0.3 million.

Shareholders’ Equity

As at 31 December 2007, our shareholders’ equity amounted to approximately US$78.6 million. Theincrease of approximately US$29.8 million from FY2006 was mainly due to the increase in the retainedearnings by approximately US$32.5 million.

There was a decrease in translation reserves of US$3 million due to depreciation of the Rupiah againstthe US dollar. Our translation reserves are due to foreign exchange differences arising from thetranslation of Rupiah functional currency into US dollar presentation currency.

LIQUIDITY AND CAPITAL RESOURCES

Our operations are funded by a combination of shareholders’ equity and loan, cash generated from ouroperating activities, credit extended to us by our suppliers and bank borrowings.

The principal uses of our Group’s funds are for working capital and capital expenditure purposes.

Based on our shareholders’ equity of US$48.7 million as at 31 December 2006 and US$78.6 million as at31 December 2007 and our interest-bearing borrowings of US$30.6 million as at 31 December 2006 andUS$34.4 million as at 31 December 2007, our gearing ratio (defined as total interest-bearing borrowingsdivided by shareholders’ equity) was 0.6 and 0.4 times respectively. Our working capital ratio (defined ascurrent assets divided by current liabilities) was 0.8 times as at 31 December 2006 and 1.1 times as at31 December 2007. We had been able to gradually increase our net cash flow over the periods underreview.


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Our Directors are of the opinion that, as at the Latest Practicable Date, after taking into account our cashposition, the operating conditions and the funding available under our existing bank facilities, our Grouphas adequate working capital to meet its present requirements. Please refer to the section “Capitalisationand Indebtedness” of this Prospectus for details on our banking facilities.

We set out below a summary of our combined cashflow statement for FY2005, FY2006, and FY2007. Thefollowing combined cashflow summary should be read in conjunction with the full text of this Prospectus,including the “Independent Auditor’s Report on the Audited Combined Financial Statements of KencanaAgri Limited” for the Financial Year Ended 31 December 2005, 2006 and 2007 as set out in Appendix F ofthis Prospectus:

FY2005 FY2006 FY2007US$’000 US$’000 US$’000

Net cash generated from operating activities 845 6,523 20,485Net cash used in investing activities (7,015) (10,389) (11,644) Net cash generated from (used in) financing activities 5,990 6,671 (2,621)Net effect of exchange rate changes 725 (2,257) (3,558)

Net increase in cash and cash equivalents 545 548 2,662Cash and cash equivalents at beginning of period 244 789 1,337

Cash and cash equivalents at end of period 789 1,337 3,999

FY2005

We generated net cash inflow from operating activities of approximately US$0.8 million which comprisedmainly operating profit before changes in working capital of approximately US$2.7 million and net cashused in working capital amounted to approximately US$1.9 million. Net cash used in working capital wasmainly due to increase in other receivables (mainly shareholders’ loan) of US$2.4 million and increase ininventories of approximately US$0.4 million, which was partially offset by an increase in trade and otherpayables of approximately US$0.9 million.

We reported net cash used in investing activities amounting to approximately US$7.0 million. The netcash outflow was due mainly to the acquisition of property, plant and equipment of approximately US$3.1million (including the expansion of capacity of our CPO mills from 45 MT/hour to 60MT/hour, land rightcosts and construction of a new vessel) and used mainly in new planting in Kalimantan region amountingto approximately US$3.7 million.

We generated net cash inflows from financing activities of US$6.0 million. This was due mainly to the netincrease in borrowings from financial institutions of approximately US$5.6 million, and proceeds from theissuance of shares by subsidiaries of approximately US$2.2 million offset against interest payments ofUS$1.8 million.

FY2006

We generated net cash inflows from operating activities of approximately US$6.5 million which comprisedmainly operating profit before working capital changes of approximately US$7.6 million, net cash used inworking capital amounted to approximately US$0.9 million and income tax paid of approximately US$0.2million. Net cash used in working capital was mainly due to increase in other receivables (mainlyshareholders’ loan and prepayment) of approximately US$3.8 million offset by increase in trade and otherpayables (due mainly to an increase in advance payment by a customer of approximately US$3.3 millionand decrease in shareholders’ loan payables by approximately US$1.0 million) and decrease ininventories of US$0.5 million.


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We reported net cash used in investing activities amounting to approximately US$10.4 million. This wasdue mainly to payments made for the new planting activities in Kalimantan and acquisition of property,plant and equipment (including land right costs and costs for construction of the new vessel) amountingto approximately US$6.2 million and US$3.6 million respectively.

We generated net cash inflows from financing activities amounting to approximately US$6.7 million. Thiswas due mainly to the net increase in borrowings from financial institutions of approximately US$6.2million and proceeds from the issuance of shares by subsidiaries amounting to approximately US$3.4million offset against interest payments amounting to approximately US$3.0 million. Interest payment hadincreased compared to FY2005 mainly due to the full effect of additional financial institutions borrowingsof approximately US$12.0 million over late FY2005 and FY2006 taking place in FY2006.

FY2007

We generated net cash inflows from operating activities of approximately US$20.5 million whichcomprised mainly operating profit before working capital changes of approximately US$18.1 million, netcash generated from working capital amounting to approximately US$3.2 million and income tax paid ofapproximately US$0.8 million. Net cash generated from working capital was mainly due to decrease intrade and other receivables of approximately US$3.0 million and increase in trade and other payables ofUS$2.8 million, offset by an increase in inventories of approximately US$0.6 million and cash restricted inuse of approximately US$1.9 million.

We reported net cash used in investing activities amounting to approximately US$11.6 million. This wasdue mainly to payments made for the new planting activities in Kalimantan and acquisition of property,plant and equipment (including land right costs) amounting to approximately US$7.6 million and US$3.6million respectively.

We reported net cash used in financing activities amounting to approximately US$2.6 million. This wasdue mainly to interest payments of US$4.1 million, dividend payment of US$2.0 million and decrease infinance leases of US$0.6 million, offset by the net increase in bank borrowings of approximately US$3.7million and proceeds from the issuance of shares by subsidiaries amounting to approximately US$0.3million

CAPITAL EXPENDITURE, COMMITMENTS AND CAPITAL DIVESTMENT

Capital Expenditure and Divestment

Our capital expenditure in FY2005, FY2006 and FY2007 were related to the acquisitions of land rights,property, plant and equipment as well as biological assets, as follows:

US$’000 FY2005 FY2006 FY2007

Land rights(1) 336 635 651Leasehold property(2) 94 118 167Plant, fixtures and equipment(3) 1,752 824 1,622Assets under construction(4) 1,651 2,230 2,751Vessels 1,012 539 –Biological assets(5) 4,517 7,514 9,338

9,362 11,860 14,529

Notes:

(1) Related mainly to the land rights for our plantation land.

(2) Related mainly to plantation related buildings constructed on our plantation land.

(3) Related mainly to plant and equipment for our plantation operations as well as for our administrative office.


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(4) Assets under construction comprise various infrastructures, properties, expansion of mill, kernel crushing plant and heavyequipment under construction and these assets will be reclassified to the respective fixed asset account upon completion.

(5) Related mainly to mature and immature oil palm plantations.

The above capital expenditures were financed by borrowings from banks and other financial institutionsand internally generated funds.

Our capital expenditure for FY2005, FY2006 and FY2007 were approximately US$9.4 million, US$11.9million and US$14.5 million respectively.

In FY2005, our capital expenditure on plant, fixtures, equipment and assets under construction relatedmainly to the acquisition of our kernel crushing plant and CPO mill equipment amounting toapproximately US$1.8 million, the construction of our Biomass power plant in Bangka Island ofapproximately US$0.6 million and the expansion of our Kalimantan CPO mill’s capacity from 45 MT/hourto 60 MT/hour totaling US$0.7 million. Our capital expenditure on vessel and biological assets relatedmainly to the construction of a new vessel amounted to approximately US$1.0 million and costs incurredmainly for our new planting related activities in Kalimantan region amounting to approximately US$4.5million respectively. Our capital expenditure on land rights related mainly to the payment of processingfees for the land rights in our Kalimantan region amounting to approximately US$0.3 million. We carriedout approximately 3,869 hectares of new planting during FY2005.

In FY2006, our capital expenditure on plant, fixtures, equipment and assets under construction relatedmainly to the acquisition of general plant and equipment amounting to approximately US$0.8 million andthe construction of various infrastructures and facilities for our plantations in Sumatera and Kalimantanregions amounting to approximately US$2.2 million. Our capital expenditure on vessel and biologicalassets related mainly to the remaining construction costs incurred on a new vessel amounting toapproximately US$0.5 million and costs incurred mainly for our new planting related activities inKalimantan region amounting to approximately US$7.5 million respectively. Our capital expenditure onland rights related mainly to the payment of processing fees for the land rights in our Kalimantan regionamounting to approximately US$0.6 million. We carried out approximately 4,513 hectares of new plantingduring FY2006.

In FY2007, our capital expenditure were mainly for the construction of various infrastructures and facilitiesamounting to approximately US$2.8 million, purchases of additional plants, fixtures and equipments ofUS$1.6 million in both of our plantations in the Sumatera and Kalimantan regions, and for new plantingrelated activities mainly in Kalimantan region amounting to approximately US$9.3 million. We alsoincurred land rights processing fee for our Kalimantan plantation land which amounted to approximatelyUS$0.6 million. We carried out approximately 5,816 hectares of new planting during FY2007.

There was no material divestment in the periods mentioned above.

Capital and Lease Commitments

As at 31 December 2007, we have the following outstanding capital and lease commitments:

US$’000

(a) Contracted capital commitment 1,452

(b) Lease payments under non-cancellable operating lease falling due:

� Not later than one year 597� Later than one year and not later than five years 189� Later than five years –


135

Contracted capital commitment mainly relates to land clearing and development costs and purchase ofplant and equipment. Operating lease payments represent rental payable for our bulking facilities inSumatera region and prepayment arising from a long term lease of 25 years. The lease from the owner ofthe bulking facilities is for approximately 10 years and is effective from June 2002 to December 2012.

In FY2007, one of our subsidiaries had entered into a long-term lease for 25 years with a related party.As at 31 December 2007, there had been an initial prepaid rental payment of approximately US$1.1million (Rp10.0 billion) to the related party. In addition to this, the balance of the rent amounting toUS$0.5 million (Rp5.0 billion) will be paid upon handing over the premises to our subsidiary. The leaseperiod is expected to commence in the second quarter of 2008. We intend to finance these costs mainlythrough internal funds and bank borrowings. Please refer to the section “Interested Person Transactionsand Conflict of Interests” of this Prospectus for more information on the long-term lease.

As at the Latest Practicable Date, we have outstanding capital commitments of approximately US$17.0million. These capital commitments comprise amounts relating to purchase of equipment (approximatelyUS$0.7 million), mill-related expenses (approximately US$0.7 million), new planting (approximatelyUS$8.8 million), infrastructure (US$3.7 million) and purchase of vessel (approximately US$3.0 million).We intend to finance these costs mainly through internal funds, bank borrowings, and IPO proceeds.Contracted capital commitment mainly relates to land clearing and development costs, purchase of plantand equipment, oil palm mill development cost and purchase of land.

Save as disclosed above, we do not have any other material capital or lease commitments as at theLatest Practicable Date.

COMMODITY HEDGING POLICY

The prices we receive for CPO and CPKO are based on these products’ international market prices. Inorder to moderate fluctuations in the price of our CPO and CPKO products, our Group from time to timeengages in limited hedging activities to cover our downside risk resulting from volatility in the price ofCPO and CPKO through the use of forward sale contracts.

We have an established policy, of which the Board is fully apprised, for determining the quantum of ourforward sale contracts, taking into account factors such as expectations of our production of CPO andCPKO based on our current Nucleus production, movement in the price of CPO and CPKO and overallmarket conditions.

Decisions to enter into forward sale contracts must be approved by our COO or Finance Director as wellas one other Director. Our Group intends to establish a dedicated sales team in order to better advise ourBoard on its entry into of forward sale contracts. Our Group does not enter into forward sale contracts forspeculative purposes.

FOREIGN EXCHANGE EXPOSURE

Our Company’s functional and reporting currency is US dollars and that of our Indonesian subsidiaries isthe Rupiah. The majority of the sales of palm oil products of our Group are quoted in US dollars while ourpurchases (with the exception of certain key costs such as fertilizers, plant and heavy equipment) andbusiness operations in Indonesia are mainly denominated in Rupiah. Our Group has a net foreignexchange exposure due to a mismatch in the currencies of receipts and payments. To the extent of suchmismatch, any significant appreciation or depreciation in the US dollar against the Rupiah and/or arisingfrom timing difference due to credit terms given by our suppliers and to our customers may cause ourGroup to incur foreign exchange losses or, conversely, benefit from foreign exchange gains. In addition,our Group has significant borrowings denominated in US dollars to finance our operations in Indonesia.As such, any appreciation in the US dollar against the Rupiah may also result in our Group incurringforeign exchange losses due to settlement or revaluation of the US dollar-denominated borrowings.


136

For FY2005, FY2006 and FY2007, the net foreign exchange gains/(losses) of our Group are as follows:

FY2005 FY2006 FY2007

Foreign exchange transaction gains/(losses) recognised in income statement (US$’000) (563) 1,206 (773)

In seeking to mitigate the volatility associated with US dollar denominated sales, our Group usuallyutilises foreign currency forward contracts. The value of such foreign currency forward contracts isequivalent to approximately 30% of US dollars denominated sales. Our Group’s foreign currency hedgingpolicy aims to reduce the impact of significant fluctuations in the exchange rate between the US dollarsand the Rupiah on our financial performance. Our Board will review our foreign currency hedging policyperiodically and new hedging policies to be implemented by our Group must be approved by the Board.We will also prepare relevant information to assist our Board in its quarterly review. Our Group does notenter into foreign currency forward contracts for speculative purposes. As at the Latest Practicable Date,our Group had the following outstanding foreign exchange forward contracts:

Sell US dollars for Rupiah US$’000

Contracted and due between June and October 2008 9,500

INFLATION

Inflation in Indonesia is relatively high in FY2005, FY2006 and FY2007 and the major contributing factorhas been the increase in energy prices. According to Bank Indonesia, the inflation rates for theabovementioned financial periods were 17.1%, 6.6% and 6.6% respectively. Except for the effect of highenergy costs in particular, in the fuel and fertilizer costs, we believe that inflation had no significant impactto our business operations.

ACCOUNTING POLICIES

Our consolidated financial statements (“Financial Statements”) are presented in US dollars and they aredrawn up in accordance with Singapore Financial Reporting Standards (“SFRS”). We have not made anysignificant changes in our accounting policies during FY2005, FY2006 and FY2007.

Our Group has not adopted certain new and revised SFRS that have been issued as of the balancesheet date but yet to be effective as fully described in the “Independent Auditors’ Report on the AuditedCombined Financial Statements of Kencana Agri Limited for the financial years ended 31 December2005, 2006 and 2007” as set out in Appendix F of this Prospectus. The adoption of these standards in thefuture is not expected to have significant impact to the presentation, measurement and recognition oftransactions in our financial statements. Our Group has not considered the impact arising from thestandards that were issued after the balance sheet date.

Revised SFRS 23 – “Borrowing costs” removes the option to expense borrowing costs and requires anentity to capitalize it as costs of those qualifying assets. Our Group’s current policy is consistent with thenew requirement.

New SFRS 108 – “Operating Segments” replaces SFRS 14 – “Segment Reporting”. The principalrequirement of SFRS 108 is the identification and reporting of operating segments whose operatingresults are regularly reviewed by the entity’s chief operating decision maker to make decisions aboutresources to be allocated to the segments and assess its performance. Currently, our Group operatespredominantly in Indonesia and presents its segment information principally under business segmentbasis. Upon the adoption of SFRS 108, our Group will present the segment information in respect of itsoperating segments, which will be substantially similar with the components currently disclosed in thebusiness segment.


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Please refer to “Appendix F – Independent Auditors’ Report on the Unaudited Proforma Combinedfinancial Information of Kencana Agri Limited for the Financial Year Ended 31 December 2005, 2006 and2007” of this Prospectus for a summary of our significant accounting policies and the discussion of ourcritical judgments, assumptions and estimation uncertainties made in the process of applying theaccounting policies and key sources of estimation uncertainties at the balance sheet date that may havea significant risk of causing material adjustment to the carrying values of our assets and liabilities.


138

PROSPECTS

PALM OIL INDUSTRY

ISTA Mielke Gmbh, an independent authority of global market research and analysis on worldsupply, demand and prices of oil and oil products, has been commissioned to provide anindependent overview on the palm oil industry for the purpose of inclusion in this Prospectus. Inthis section, unless otherwise specified, all statistical data or forecasts relating to the palm oilindustry have been compiled by ISTA Mielke Gmbh, extracted from its websitehttp://www.oilworld.biz and based on its publication, Oil World Annual 2007 and otherpublications.

Overview of the Palm Oil Industry

The development of palm oil has been outstanding. Within the last thirty years, world production virtuallydoubled every ten years and the rate of increase has even accelerated during the latest decade. For thepast 10 years ended 2007, palm oil consumption registered the highest compound annual growth rate of8.3% amongst the vegetable oils.

Palm oil has many economic advantages namely low production costs and very high yields hencecreating excellent profitability of palm oil cultivation. This has contributed to a very sharp increase in oilpalm cultivation primarily in Malaysia and Indonesia. Malaysian and Indonesia have a combined marketshare of approximately 90%. For the past ten years from 1998 to 2007, Malaysia is the world’s largestpalm oil exporter and but Indonesia is closely behind. In terms of production of palm oil, Indonesia hasovertaken Malaysia in 2006.

Palm oil has also benefited from growing popularity and has increased its market share at the expense ofcompeting vegetable oils (i.e. rapeseed oil, soybean oil, sunflower oil) and animal fats/oils. The success ofthe palm oil industry has been linked to its versatile use in the food industry as well as for many non-foodpurposes (for soap and detergents, lubricants, animal feed and biofuels).

Consumption of palm oil on a worldwide basis has grown faster than any other vegetable oil and morethan doubled during the past 10 years 17.7 million tonnes in 1998 to 38.0 million tonnes in 2007. Theincrease is mainly attributable to growing population and economic growth. Annual per capitaconsumption of oils and fats are still relatively low in Asia but has shown considerable increases over thepast ten years in the major consuming countries namely China, Pakistan, Indonesia and India. Given thatthe per capita consumption in most Asian countries is below the world average of 23.2 kilograms, thusindicating the potential for continued growth in this region especially if economic growth remains strong.

Palm oil is the leading edible oil in the international export trade and accounted for 51% of total worldtrade of 17 major oils and fats in 2007. Major import markets are the European Union, China, India,Pakistan, the USA, Mexico, Russia, Ukraine, Turkey, the Middle East, Japan, South Korea and severalAfrican countries.

Palm Oil and Its Uses

Crude palm oil is extracted through the process of cooking, mashing and pressing the oil palm’s fleshyfruit. During this process, seeds are separated from the fruit and upon cracking the seed’s shell the kernelinside is separated. In addition, the kernel can be further processed to produce palm kernel oil.

Unlike many other oil-yielding crops which are grown for their meal, oil palm is grown primarily for its oil,which contains antioxidants such as carotene and a relatively high content of vitamins A and E. Crudepalm oil is a versatile vegetable oil with a variety of edible and industrial applications. Over the pastdecade, the edible uses of crude palm oil have increased as a result of promotion and research in itsapplications. Crude palm oil is often further processed to produce “refined bleached and deodorized palmoil”, a major ingredient in margarines and shortenings. Crude palm oil can also be fractionated to producepalm olein and palm stearin. Palm olein, the liquid fraction, can be used as cooking oil to fry processedfoods like potato chips, instant noodles and other snack foods. Palm stearin, the solid fraction, can befurther processed to make soaps and detergents.

During the past 10 years, about 80% of crude palm oil is processed for consumption in edible productsand about 20% is used for inedible applications.

In contrast, approximately 25% of palm kernel oil derivatives are used for edible products while the other75% are used for industrial purposes. Palm kernel meal, a by-product from palm kernel processing, isgenerally used for animal feed.

Economic Advantages of Palm Oil over other Oils

The success of palm oil and the substantial expansion in plantings and production in recent years islinked to a number of advantages as compared to other oil-yielding crops. Firstly, palm oil productioncosts on a per tonne basis are considerably lower than any other vegetable oil. The production costs forsuccessful producers in Indonesia and Malaysia is between US$170-240 per tonne, which is much lowerthan the production cost of rape oil, sun oil and soya oil. A major reason for this cost advantage is thehigh productivity of palm oil production. During the past five years, the average yield for a Malaysianplantation is approximately 4.0 tonnes per hectare of palm oil and for an Indonesian plantation averageyield is approximately 3.7 tonnes per hectare. Some plantation companies have reportedly achievedannual average yields of 4.5-6.0 tonnes per hectare in the same period. As a comparison against thecompeting vegetables oil, the average yields for oil production are considerably lower.

Palm oil producers have an additional advantage over their competitors of other vegetable oils due to thegreater supply reliability. Production of vegetable oils from annual crops (like soybeans or rapeseed) aremore susceptible to weather conditions. As against this, the oil palm is a perennial crop and is generallyless affected by adverse weather conditions. First harvesting can take place approximately three yearsafter planting and it can be done until 20-25 years of age. The optimal time for replanting depends on thevariety, the land and the yield performance of the oil palm.

World Production of Oils & Fats and Rising Importance of Palm Oil

The world production of the major 17 oils & fats increased sharply from 103.1 million tonnes in 1998 to154 million tonnes in 2007, representing an average annual growth in production of approximately 4.3%.Most of the growth in world production occurred in vegetable oils with an average annual increase of4.9% during the past 10 years. Production of animal oils/fats (butter, lard as well as tallow) increasedmoderately by 1.9% per annum. Production of fish oil even declined slightly by 1.2%.

Among the 13 vegetable oils, palm oil showed the largest increase during the past 10 years by 7.9% perannum. Soya oil is in the second place with an average annual growth of 5.9% for the same period. Rapeoil production (including canola oil) increased by 4.7% per annum for the same period.

The increase in palm oil was due to several factors namely limited expansion opportunities of othervegetable oils and animal oils/fats and market price signals accelerated the growth in plantings andproduction of palm oil. Palm oil producers in Southeast Asia, primarily Indonesia, responded and this hasbeen reflected in a steep increase in new plantings of oil palm trees in many parts of Indonesia sinceabout 2001. The total area planted with oil palm trees has approached 6.7 million hectares as of end2007. Significant additional expansion in new plantings is needed in coming years to generate theadditional quantities required to satisfy prospective world consumption in the years to come.

PROSPECTS

139

World Production of Major Oils and Fats

Averageannualgrowth1998–

(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

Vegetable Oils:Palm oil 4.6 11.0 17.2 20.6 21.9 24.0 25.4 28.3 31.0 33.9 37.1 38.3 7.9%Soybean oil 13.4 16.1 24.0 24.8 25.6 27.8 29.9 31.2 30.7 33.6 35.3 37.5 5.9%Sunflower oil 5.0 7.8 8.4 9.3 9.7 8.2 7.6 8.9 9.4 9.8 11.2 10.9 1.7%Rapeseed oil 3.5 8.2 12.3 13.3 14.5 13.7 13.3 12.7 15.1 16.3 18.5 18.7 4.7%Other vegetableoils 12.9 16.7 20.2 19.8 20.8 22.3 22.2 21.9 22.8 23.8 23.9 24.3 1.7%

Total vegetableoils 39.4 59.8 82.1 87.8 92.4 95.9 98.4 103.0 109.0 117.4 126.0 129.7 4.9%

Animal fats 16.8 18.8 20.1 20.7 20.9 20.6 21.4 21.7 22.1 22.6 23.1 23.4 1.9%Fish oil 1.2 1.4 0.9 1.4 1.4 1.1 0.9 0.9 1.1 1.0 1.0 1.1 -1.2%

Total oils and fats 57.4 80.0 103.1 109.9 114.7 117.6 120.7 125.6 132.2 141.0 150.1 154.2 4.3%

Source: Oil World annual and monthly publications and information from its website http://www.oilworld.biz

Demand for Oils and Fats

The world’s consumption of the major 17 oils and fats has increased substantially during the past fouryears and is expected to continue growing very sharply in 2008 and 2009. World consumption increasedfrom 103.2 million tonnes to 154.7 million tonnes from 1998 to 2007.

The main driving factors for the ever-increasing consumption demand are as follows :

(a) Increasing demand for food per capita, primarily in those countries in Asia as well as in Central &South America where economic activity is strong and average per capita usage levels still relativelylow;

(b) Increasing population (primarily in the developing countries); and

(c) Additional demand for non-food applications i.e. (oleochemicals, compound feed and biofuels)

1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0 2 0 1 0 2 0 2 0 2 0 3 0 2 0 4 0 2 0 5 0

0

2

4

6

8

1 09 . 0 8

1 . 2 1

5 . 2 5

6 . 4 6

7 . 5 8

6 . 3 4

1 . 2 4 1 . 2 4

7 . 8 4

World and Regional Population 1950 - 2050

World

Less Developed Regions

Bill

ion

More Developed Regions

Source: United Nations, 2004 Revision (Medium Variant)

PROSPECTS

140

World Consumption by Commodity of Major Oils and Fats:


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007



Animal fats 16.7 18.7 20.1 20.8 20.8 20.7 21.3 21.7 22.1 22.7 23.2 23.4 1.9%Fish oil 1.2 1.5 0.9 1.3 1.4 1.2 0.9 1.0 1.0 1.0 1.0 1.0 -2.1%



Over the last decade, consumption of vegetable oil has increased at the expense of other oils and fats.Increasingly, food manufacturers have been using vegetable oils as a substitute for animal oils becausethey contain lower cholesterol levels. In addition, there has been some concern regarding the off-take ofsaturated fatty acids, of which animal fats contain a higher proportion than most vegetable oils.

Overall, Asia accounted for approximately 47% of worldwide oils and fats consumption in 2007. Annualper capita consumption of oils and fats is still relatively low in Asia, but has shown considerable increasesover the past ten years in the major consuming countries, primarily China, Pakistan, Indonesia and India.In 2007, per capita consumption in most Asian countries was still considerably trailing the world averageof 23.2 kilograms, thus indicating the potential for continued growth in this region. China and India are themost populous countries and in 2007 accounted for 37% of world population. The future expansion indemand of vegetable oils will be significant in Asia, owing to the rising population and increasing percapita usage, particularly if economic growth remains strong (as was the case in the latest five years).

The table illustrates per capita consumption of oils and fats in Indonesia, the United States, the EuropeanUnion and certain countries for the years 1998 and 2007 according to information provided by Oil World.It should be noted that per capita consumption includes the use of oils and fats for food and non-foodpurposes (feed, oleochemicals and for biofuels from 2006).

17 Oils and Fats: Per Capita Consumption in Indonesia, United States,the European Union and Certain Other Countries

Population as of Per Capita ConsumptionJuly 2007 (food and non-food uses)

1998 2007Countries (In millions) (kg) (kg)

China 1,305.6 12.5 22.1

India 1,169.0 10.1 12.3

European Union (27 member states) 493.2 39.2 57.8

United States 305.8 46.8 54.1

Indonesia 231.6 15.3 20.8

Pakistan 163.9 19.1 21.7

Source: Oil World Annual 2001 and 2008

PROSPECTS

141

Exports of Oils and Fats

Globally, consumers have become more dependent on palm oil during the past 10 years, as production ofother vegetable oil could not be increased sufficiently. As a result, world trade in 17 vegetable and animaloils and fats has accelerated substantially and expanded at a higher rate than output and consumption.Palm oil contributed to a large share of this development with respect to trade and consumption, as it is adominant and dynamic product among oils and fats. Approximately 75-80% of its annual output isexported, compared with 30% in the case of soybean oil or sunflower oil and only 10% in the case ofrapeseed oil.

As the bulk of world palm oil production is concentrated in only two countries (Malaysia and Indonesiaaccounted for 85% of the total in 2007), the enormous growth in output registered during the past decadewas also accompanied by a similar increase in exports. In 1998, the share of palm oil in total exports ofoils and fats was 35% and increased substantially to 51% in 2007. During that period, soybean oildeclined from 24% to 19% along with sunflower oil and rapeseed oil.

In fact, the very strong and rapidly rising world import demand has been the driving factor behind the verydynamic growth of palm oil production. Due to the rising global requirements (from the food industries aswell as from the oleochemical sector and the emerging biofuels industries), the dependence on a furtheracceleration of the annual growth of palm oil production should also increase in the future as theproduction of the competing seed oils (derived from soybeans, rapeseeds and other oilseeds) cannot beexpanded fast enough to meet world demand. The table below illustrates world exports of major oils andfats by type for the years 1980 to 2007 according to information provided by Oil World :

World Exports of Major Oils and Fats


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007



Animal fats 2.9 3.3 3.1 3.2 3.1 2.9 3.1 3.0 3.1 3.0 3.0 3.1 1.2%Fish oil 0.7 0.7 0.4 0.7 0.8 0.8 0.5 0.6 0.7 0.6 0.7 0.8 0.7%



Demand and Supply of Palm Oil

World production of palm oil has been expanding in tandem with growth in consumption thereof. Theexpansion in world palm oil production over the last decade can be attributed mainly to Indonesian andMalaysian plantations. Since world consumption is steadily increasing as a result of growing populationand economic growth, further expansion in world palm oil production through investments in new plantingareas and milling capacity is required to meet the growing demand. The table below presents data onworld consumption and supply of palm oil between the years 1980 and 2007, as provided by Oil World.

PROSPECTS

142

World Production, Export & Consumption of Palm Oil


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

Production 4.6 11.0 17.2 20.6 21.9 24.0 25.4 28.3 31.0 33.9 37.1 38.3 7.9%Export 3.7 8.4 11.4 14.1 15.1 17.8 19.4 21.9 24.2 26.5 30.1 29.9 9.2%Consumption 4.5 11.1 17.7 19.5 21.6 23.6 25.4 28.2 30.0 33.4 36.1 38.0 7.9%


Differences in production and consumption when measured at the end of marketing years are, as seen inthe table above, attributable to seasonal vacancies which balance themselves out through market forcesin the following marketing year.

Large markets for high growth of palm oil usage are countries in Asia, particularly India, Indonesia,China, Malaysia and Pakistan, and in the Middle East. The European Union is also a major consumer.

The table below shows data on consumption of palm oil for the years 1980 to 2007 in certain high growthmarket countries according to information provided by Oil World:

Consumption of Palm Oil by Country


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

India 0.6 0.7 1.8 3.0 3.6 3.6 3.6 4.2 3.4 3.3 3.1 3.8 10.5%Indonesia 0.2 1.2 2.8 3.0 3.0 2.9 3.0 3.2 3.3 3.6 3.7 4.1 3.8%EU-27 0.7 1.4 2.1 2.3 2.5 3.0 3.4 3.5 3.9 4.4 4.5 4.5 8.4%China 0.1 0.9 1.5 1.4 1.6 2.2 2.7 3.3 3.7 4.3 5.5 5.5 12.5%Malaysia 0.3 0.5 1.0 1.2 1.5 1.5 1.5 1.6 1.8 2.0 2.2 2.2 6.3%Pakistan 0.2 0.7 1.1 1.1 1.1 1.2 1.4 1.3 1.4 1.6 1.6 1.7 4.4%Other 2.4 5.7 7.4 7.5 8.3 9.2 9.8 11.1 12.5 14.2 15.5 16.2 8.0%

Total 4.5 11.1 17.7 19.5 21.6 23.6 25.4 28.2 30.1 33.4 36.1 38.0 7.9%


The pattern of global production of crude palm oil has evolved over the past three decades, with Malaysiaand Indonesia accounting for 85.4% of the world’s crude palm oil output in 2007. The ecologicalrequirements for the cultivation of oil palm exist in zones lying within ten degrees latitude to the north andsouth of the equator. The regions where oil palm is grown includes West Africa, Central America, SouthAmerica and South East Asia, including Malaysia and Indonesia.

PROSPECTS

143

The table entitled “World Output of Palm Oil by Country” below shows the world output of crude palm oilas contributed by selected countries for the years 1980 to 2007 according to information provided by OilWorld.

World Output of Palm Oil by Country Averageannualgrowth1998–

(Mn T) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

Malaysia 2.6 6.1 8.3 10.6 10.8 11.8 11.9 13.4 14.0 15.0 15.9 15.8 5.7%Indonesia 0.7 2.4 5.4 6.3 7.1 8.1 9.4 10.6 12.4 14.1 16.1 16.9 12.1%Nigeria 0.4 0.6 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 1.6%Ivory Coast 0.2 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.3 0.3 0.3 0.3 1.8%Colombia 0.1 0.2 0.4 0.5 0.5 0.6 0.5 0.5 0.6 0.7 0.7 0.7 4.8%Thailand 0.03 0.2 0.5 0.6 0.5 0.6 0.6 0.6 0.7 0.7 0.9 1.0 8.3%Ecuador 0.04 0.1 0.2 0.3 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4 7.2%Others 0.5 1.1 1.4 1.3 1.8 1.7 1.8 1.9 1.9 2.0 2.0 2.4 5.1%

Total 4.6 11.0 17.2 20.6 21.9 24.0 25.4 28.3 31.0 33.9 37.1 38.3 7.9%


Demand from downstream chemical manufacturers and food processors for palm oil is also rising. Otherthan the biodiesel industry, the traditional market for palm oil is also increasing. Palm oil is currently theleading edible oil in the international export trade. In 2007, palm oil’s export volume of 29.9 million tonnesaccounted for 51% of total world trade in 17 major oils and fats.

High oil prices have prompted manufacturers, such as Procter & Gamble, to reduce their reliance onpetrochemicals produced from crude oil by switching to surfactants made from oleochemicals producedfrom palm and coconut oils. This will further boost demand for palm oil as long as crude oil remainscostly.

The increased awareness of trans-fatty acids (commonly called trans-fat) could also result in increaseddemand for palm oil. Research suggests a correlation between diets high in trans fats and diseases likearteriosclerosis and coronary heart disease. The US National Academy of Sciences recommended in2002 that dietary intake of trans fatty acids should be minimized, but not removed completely. The U.S.Food and Drug Administration made the labeling of trans-fats on food labels compulsory as at January 1,2006. As a result, some U.S. food companies have started to use more palm oil in their food productsbecause crude palm oil is very low in trans-fatty acids, particularly in comparison to oils from animal fats.

Under its World Trade Organization obligations, China lifted its quota on vegetable oils on January 1,2006. As a result, crude palm oil was a major beneficiary in 2006 when palm oil was 20% cheaper thansoybean oil and 40% cheaper than rapeseed oil. The Chinese import policy of vegetable oils has becomemore liberal, as the Government realized the usually strong growth in domestic demand, partly linked tothe continuous very sharp increase in economic growth and disposable income. China’s total domesticconsumption of vegetable oils and palm oil has been growing at a compound annual growth rate of 7.5%and 26.5%, respectively, over the last 23 years.

Major Exporters of Palm Oil

Malaysia and Indonesia are the largest producers and in aggregate accounted for 85% of worldproduction in 2007. Malaysia was the top palm oil producer up till 2006 and has since been overtaken byIndonesia. The sharp increase in Indonesian output (average annual growth in palm oil production of5.7% in the 10 years until 2007) was mainly driven by rapidly rising mature oil palm area from itsplantation.

Taking into account the very large land reserves still available and suitable for oil palm cultivation,Indonesia has a much larger growth potential than Malaysia in the years ahead. Given the strong globaldemand and high palm oil prices, these will drive new investments into the development of new oil palmplantings.

PROSPECTS

144

The table below shows the world export of palm oil by Malaysia and Indonesia from 1980 to 2007.Despite the pronounced growth in Indonesian exports of palm oil ( average annual growth rate of 15.6%from 1998-2007), we expect Malaysia will remain as the primary exporter until approximately 2009 or2010, as the stronger growth in domestic demand of the more populous Indonesia is impeding a moreintense expansion of exports. However, Malaysia has lost market share to Indonesia during the past 10years, from 68% in 1998 to 46% in 2007.

World Exports of Palm Oil with details for Malaysia and Indonesia


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

Malaysia 2.3 5.9 7.7 9.2 9.2 10.7 10.9 12.2 12.6 13.4 14.4 13.8 5.9%Market share 62% 70% 68% 65% 61% 60% 56% 56% 52% 51% 48% 46%

Indonesia 0.5 1.2 2.3 3.3 4.1 5.0 6.5 7.4 9.0 10.4 12.5 12.7 15.6%Market share 14% 14% 20% 23% 28% 28% 34% 34% 37% 39% 42% 42%

Others 0.9 1.3 1.4 1.6 1.7 2.1 2.0 2.3 2.7 2.7 3.2 3.4 7.1%

Total 3.7 8.4 11.4 14.1 15.1 17.8 19.4 21.9 24.3 26.5 30.1 29.9 9.2%


Palm Oil Imports

During the past 16 years, the largest growth in palm oil imports was in China, India, the European Unionand Pakistan. However, USA, Russia, Turkey and several other countries (primarily in Asia) saw anincrease in the level of imports and consumption of palm oil. Please refer to the details provided in thetable below.

World Imports of Palm Oil by Country (Mn T)

(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

EU-27 0.74 1.41 2.21 2.34 2.49 3.10 3.48 3.63 4.02 4.49 4.62 4.65China 0.06 1.13 1.37 1.35 1.76 2.12 2.66 3.35 3.85 4.32 5.46 5.50India 0.53 0.67 1.67 3.26 3.65 3.49 3.46 3.98 3.45 3.32 3.20 3.69Pakistan 0.25 0.68 1.11 1.05 1.11 1.32 1.30 1.49 1.43 1.65 1.77 1.71Egypt . 0.33 0.41 0.51 0.52 0.52 0.61 0.68 0.70 0.77 0.77 0.72Russia 0.09 0.19 0.08 0.11 0.16 0.26 0.32 0.39 0.44 0.60 0.54 0.58Ukraine 0.01 0.01 0.02 0.04 0.02 0.09 0.11 0.09 0.13 0.20 0.19 0.34U.S.A 0.12 0.13 0.12 0.14 0.17 0.17 0.22 0.20 0.27 0.42 0.63 0.79Mexico . 0.12 0.10 0.10 0.14 0.17 0.18 0.20 0.28 0.28 0.34 0.30Bangladesh 0.08 0.08 0.09 0.11 0.23 0.38 0.44 0.50 0.64 0.93 0.89 0.71Iran 0.02 0.02 0.09 0.10 0.16 0.18 0.24 0.29 0.33 0.45 0.37 0.42Japan 0.15 0.28 0.36 0.36 0.37 0.39 0.42 0.43 0.47 0.48 0.50 0.53Singapore 0.72 0.88 0.33 0.40 0.37 0.33 0.33 0.36 0.35 0.33 0.35 0.37Others 0.82 2.47 3.58 4.05 3.98 5.00 5.48 6.30 7.61 8.38 9.71 9.10

Total 3.59 8.40 11.54 13.92 15.13 17.52 19.25 21.89 23.97 26.62 29.34 29.41


Indonesian Palm Oil Industry

The Indonesian oil palm plantation industry is composed of Government-owned plantation companies,private sector plantation companies and other independent companies and small landholders. Untilrecently, the Government-owned plantation companies as a group were the largest producers of crudepalm oil in Indonesia.

PROSPECTS

145

However, over the last few years, the palm oil industry in Indonesia has evolved from a primarilyGovernment-owned enterprise to one of private ownership. Since 1989, the growth of these companieshas reduced the number of Government-owned companies to about 14% of the total oil palm plantationarea in 2005, based on a policy implemented to promote private sector expansion. In 2005, theGovernment, individual smallholders and private companies made up 14%, 31% and 55%, respectively,of the reported total hectares of oil palm plantations in Indonesia.

Domestic Consumption and Export of Indonesian Palm Oil

Indonesia, with the fourth largest population in the world and an annual per capita consumption of oilsand fats of about 20.8 kilograms in 2007, accounts for approximately 11% of world consumption of palmoil. Please refer to the table below for the consumption of palm oil and palm kernel oil in Indonesia from1980 to 2007 provided by Oil World.

Consumption of Palm Oil & Palm Kernel Oil in Indonesia


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

Crude palm oil 0.2 1.2 2.8 3.0 3.0 2.9 3.0 3.2 3.3 3.6 3.7 4.1 3.8%Palm kernel oil 0.04 0.1 0.11 0.08 0.16 0.21 0.26 0.31 0.40 0.40 0.44 0.45 19.4%


Despite a substantial domestic market (approximately 4.1 million tonnes consumed in 2007), domesticconsumption of palm oil in Indonesia is well below production levels (16.9 million tonnes produced in2007), which has contributed to a significant surplus of crude or processed palm oil available for export.Given projected increase in domestic production of palm oil, Indonesian producers are expected toincrease selling crude palm oil in the international export markets and to further process crude palm oildomestically into downstream products in order to target a larger population of potential customers inboth the domestic and overseas markets. With annual production increasing by an average of 12.1% inthe past ten years and accelerating expansion in coming years, export of palm oil by Indonesian oil palmproducers is set to continue to increase rapidly.

The table below shows the staggering growth of Indonesian palm oil production for the years 1980 to2007 as well as the corresponding development of the annual export volumes:

Production and Exports of Palm Oil in Indonesia


(Million Tonnes) 1980 1990 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007

Production 0.7 2.4 5.4 6.3 7.1 8.1 9.4 10.6 12.4 14.1 16.1 16.9 12.1%Export 0.5 1.2 2.3 3.3 4.1 5.0 6.5 7.4 9.0 10.4 12.5 12.7 15.5%

Record Palm Oil Prices in early 2008

Prices of palm oil increased substantially from June 2006 until April 2008. In Rotterdam, the prices ofcrude palm oil were boosted from US$437 in June 2006 to US$805 in June 2007 and further acceleratedto US$1,174 in April 2008. A similar price increase was noted in Malaysian and Indonesian export pricesof crude and processed palm oils.

The magnitude of the price increase is obvious if one compares the situation in the second half of 2007with the average price of crude palm oil in Rotterdam of US$466 per MT in the 30 years from 1976-2005.Crude palm oil, like other commodities, has shown significant price volatility however the recent boost inprices is unprecedented.

PROSPECTS

146

The prices of crude and processed palm oils are mainly determined by the global supply and demandprospects of :

(a) palm oil,

(b) supply and demand developments of soya oil, rape oil and other competing vegetable oils; and

(c) developments in outside markets, like currency changes, crude mineral oil prices, governmentinterference (import or export taxes or any other government intervention) and other factors.

Palm oil in its crude or in any of its processed form is a commodity traded worldwide in both the cash andfutures markets. The Bursa Malaysia Derivatives is the most important futures market for palm oil.However, prices of palm oil are also impacted by changes on the Chicago Board of Trade (primarily fromsoybean and soya oil futures).

Palm oil prices showed a tremendous increase from an average of US$437 in June 2006 to US$583 inDecember 2006, to US$805 in June 2007 and to US$1,174 in April 2008. The following graph shows themonthly development of crude palm oil prices in Rotterdam from January 1996 until April 2008:

Monthly Prices from Jan 1972 until April 2008'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08

200

400

600

800

1000

1200

1400

1600in Rotterdam in US-$ / MT

Monthly soya oil prices

Monthly Prices from March 1972 until April 2008

'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '080

200

400

600

800

1000

1200

cif Rotterdam in US-$ / MT

Monthly Crude Palm Oil Prices

The average 1976-2005 is US-$ 466.

PROSPECTS

147

Palm Oil Supply and Demand Price Outlook until 2010

The world market will become increasingly dependent on palm oil in the next few years. The growth inworld production of soybeans, rapeseed and sunflower seed is partly curtailed by the prospective battlefor acreage which is likely to intensify, primarily between oilseed crops and grains in North America,Europe, China, India, Brazil, Argentina, Russia, Ukraine and other countries.

It will be necessary to accelerate the growth in palm oil plantings and production to get prepared for theforthcoming increase in world demand of all oils & fats.

According to Oil World’s current assessment and projections, world demand for palm oil will increase by3.0-3.2 million tonnes per annum in the next three years. To date, palm oil has shown the largest annualincrease and will considerably exceed the prospective expansion in soya oil, rape oil and other vegetableoils.

Total global demand of 17 major oils and fats is going to accelerate with an average annual growth ofapproximately 7.1 million tonnes in the five years ended 2010 owing to 2 factors: 1) further pronouncedgrowth in demand for food from a rising world population and 2) the prospective significant expansion ofbiofuel production (primarily biodiesel), which requires vegetable oils as a feedstock. The growth we areprojecting for the next five years ended 2010 will by far exceed the average annual growth of 5.2 milliontonnes in the five years ended 2005 and the 4.2 million tonnes in the five years ended 2000.

World Consumption of Major Oils and Fats with Forecasts until 2010

Annual(Million Tonnes) Growth (1) Projections

2010F 2009F 2008F 2007 2006 2005 2000 1995

17 Oils & Fats of which: +7.1 174.8 168.0 161.3 154.7 147.9 139.2 113.4 92.6Palm oil +3.0 48.4 45.5 42.2 38.0 36.1 33.4 21.6 14.7Soya oil +1.9 42.6 41.0 39.6 37.4 34.6 32.9 25.1 19.4Rape oil (2) +1.1 21.5 20.3 19.5 19.1 18.1 16.1 14.5 10.6Sun oil +0.3 11.2 10.8 10.2 11.2 10.9 9.6 9.4 8.4

Notes:

(1) Average annual growth in 5 years to 2010.

(2) Including canola oil.


Palm oil is best suited to accomplish the highest contribution (to meet the world demand) and will, in ourassessment, show an above-average growth in production in the next few years. Due to its much higheroil production per hectare (as compared to soya, rape and sunflowers) considerably less acreage isrequired to produce the same amount of vegetable oil. To illustrate, the production of 2.0 million tonnes ofpalm oil and palm kernel oil requires an area of 0.5 million Ha in contrast to 1.6 million Ha of rapeseedand 3.8 million Ha of soybean cultivation.

Monthly Prices from March 1972 until April 2008'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08

100

300

500

700

900

1100

1300

1500

in Rotterdam in US-$ / MT

Monthly rape oil prices

PROSPECTS

148

Given that there is sufficient area suitable for expansion of oil palm cultivation still available in Indonesia,we expect the mature area to rise from 4.54 million Ha on the average in 2007 to 5.0 million Ha in 2008and to 6.1 million Ha in 2010. In Malaysia, however, future expansion will be limited and we expect only amoderate increase in the oil palm mature area from 3.79 million Ha on the average in 2007 to 4.1 millionHa in 2010.

On a global basis, Oil World forecasts the aggregate oil palm mature area to reach 12.8 million Ha in2010, reflecting an increase of 3.6 million Ha from 2005. Details given in the table confirm theaccelerating growth in the mature area in the five years until 2010 as compared to the preceding five-yearaverages.

Mature Area in Malaysia and Indonesia

Projections Actual Data 5-year Averages2006- 2001- 1996- 1991-

(Million Hectares) 2010F 2009F 2008F 2007 2006 2005 2004 2003 2010F 2005 2000 1995

Malaysia 4.10 4.03 3.92 3.79 3.68 3.55 3.40 3.26 3.90 3.28 2.59 1.99Indonesia 6.10 5.55 5.00 4.54 4.11 3.69 3.32 3.03 5.06 3.06 1.85 1.05Oth. countries 2.62 2.56 2.37 2.22 2.08 1.99 1.90 1.79 2.37 1.80 1.44 1.29

WORLD 12.82 12.14 11.29 10.55 9.87 9.23 8.62 8.08 11.33 8.14 5.88 4.33


The growth in world palm oil production is going to accelerate, mainly driven by strong world demand forfood as well as for non-food uses. The biggest growth potential will be in Indonesia. Oil World forecastsIndonesian palm oil output to increase by approximately 6.7 million tonnes within the next 3 years to 23.6million tonnes in 2010. Higher yields and more aggressive plantings could boost production in Indonesiato higher levels.

Production of Palm Oil in Malaysia and Indonesia


(Million) 2010F 2009F 2008F 2007 2006 2005 2004 2003 2010F 2005 2000 1995

Malaysia 17.90 17.60 17.30 15.82 15.88 14.96 13.97 13.35 16.90 13.20 9.43 6.99Indonesia 23.60 21.30 18.80 16.90 16.05 14.10 12.38 10.60 19.33 10.91 5.72 3.43Oth c’tries 7.00 6.52 6.08 5.59 5.19 4.79 4.64 4.31 6.08 4.38 3.62 2.93

WORLD 48.50 45.42 42.18 38.31 37.12 33.85 30.99 28.26 42.31 28.49 18.77 13.35

But with recent very high palm oil prices, there is an increase in investments to expand oil palmplantations in various other countries outside Indonesia and Malaysia, primarily in several Africancountries, Central and South America as well as in Thailand, Papua New Guinea and other Asiancountries.

Oil World expects global palm oil production to be boosted to 42.3 million tonnes for the five years ended2010, up sharply by 13.8 million tonnes from the previous five-year period.

Indonesia will become the world’s largest exporter of palm oil from 2009 onward. Oil World forecastsIndonesian exports to reach 16.3 million tonnes in 2009 and 18.3 million tonnes in 2010. This is a sharpincrease in export from the 12.5 million tonnes in 2006. The growth in Malaysia will be more moderateand Oil World expects the country’s palm oil exports to be approximately 15.5 million tonnes in 2010. Dueto land limitations, further expansion in Malaysian palm oil production will largely dependent on increasein production per hectare.

PROSPECTS

149

World Exports of Palm Oil


(Million Tonnes) 2010F 2009F 2008F 2007 2006 2005 2004 2003 2010F 2005 2000 1995

Malaysia 15.50 15.30 15.35 13.75 14.42 13.44 12.58 12.22 14.86 11.97 8.23 6.28Indonesia 18.30 16.30 14.20 12.65 12.54 10.44 9.00 7.37 14.80 7.65 2.91 1.74Oth. countries 3.90 3.75 3.60 3.48 3.11 2.63 2.67 2.27 3.57 2.34 1.61 1.53

WORLD 37.70 35.35 33.15 29.88 30.07 26.51 24.25 21.86 33.23 21.96 12.75 9.55


World palm oil imports are seen rising significantly with big increases expected for China, the EuropeanUnion, Pakistan, India and several other countries.

World Imports of Palm Oil

(Million Tonnes)

Projections Actual Data 5-year AveragesJanuary / December January / December 2006- 2001- 1996- 1991-

Imports 2010F 2009F 2008F 2007 2006 2005 2004 2003 2010F 2005 2000 1995

China 7.00 6.60 6.40 5.50 5.46 4.32 3.85 3.35 6.19 3.26 1.54 1.31EU-27 5.80 5.50 5.10 4.65 4.62 4.49 4.02 3.63 5.13 3.74 2.22 1.67India 4.70 4.50 4.40 3.69 3.20 3.32 3.45 3.98* 4.10 3.54 2.26 0.37Pakistan 2.04 1.92 1.80 1.71 1.77 1.65 1.43 1.49 1.85 1.44 1.10 1.07Other countries 18.21 16.98 16.00 13.86 14.29 12.84 11.22 9.44 15.87 9.87 5.62 5.10

WORLD 37.75 35.50 33.70 29.41 29.34 26.62 23.97 21.89 33.14* 21.85 12.74 9.52


Price Projections

The table provides a summary of our price estimates of palm oil until 2010. All the prices shown in thetable refer to the average of January/December. It should be noted that the price forecasts shown for theyears 2008, 2009 and 2010 represent averages of our current range forecasts.

Oil World has sharply raised its price forecasts due to the huge additional world demand for energy(vegetable oils and animal fats for biodiesel as well as grains and sugar cane for ethanol) and theincreasing fight for acres between grains and oilseeds. The global production deficit of grains andoilseeds has turned out considerably greater than expected in the world crop season 2007/08. Also, thebiofuel targets of various governments has been raised to levels which will result in a significant globaldeficit of total demand relative to production in the next three years. The expectation of a widening deficithas boosted purchases of agricultural commodities by funds and speculators and therefore resulted in asharply higher than expected increase in prices during the 12 months until May 2008.

With Oil World’s price forecasts shown in the table, Oil World has assumed that biodiesel policies with beat least partly changed to the extent that the current too ambitious biodiesel consumption targets will berevised and moderated, and this for two reasons: 1) to bring them more in line with what the globalmarket can provide and 2) to reduce the competition with global food demand.

PROSPECTS

150

Prices of palm oil as well as of other vegetable oils will continue to fluctuate during 2008 and the followingyears. But this fluctuation will be at higher price levels. Thus, the price lows of the future price cycles willbe higher then in preceding years.

For calendar year 2009, Oil World expects a decline in palm oil prices on the world market and hasplaced its estimate for crude palm oil in Rotterdam at US$1,000 per metric tonne. This reflects theaverage of our current range forecast. In this forecast, we have assumed some moderate price setbackfrom the price highs reached in 2008 due to:

(1) Prospects of higher world production of oilseeds and vegetable oils, as farmers are expandingplantings in response to the attractive prices worldwide.

(2) Some cutbacks in the ambitious biofuel targets in Europe, North America and some othercountries. Governments are under increasing pressure to make some revisions in their biofueltargets due to the increasing global food crisis caused by the skyrocketing prices of manyagricultural products.

However, it is unlikely that there will be a sharp decline in prices. The downward potential will be limitedas long as energy prices in general and crude mineral oil prices in particular are ruling firm.

It should also be considered that capacity utilization of most biodiesel production units will be very lowand probably only about 30-35% (or even less) in 2008. Therefore, there is a lot of unused capacitywaiting and ready to expand production again as soon as prices of vegetable oils will have declinedsufficiently. This will limit the downward potential in prices.

The prospective sharp increase in world palm oil production in 2008 and the subsequent two years willtend to be bearish for prices. However, the bearishness will be partly offset by the prospects of still verylow world stocks of grains, oilseeds and vegetable oils in 2009 and the continuing and probablyintensifying fight for acres between oilseeds and grains in North America, Europe, South America, China,India and other countries.

Also, global demand for food will continue to rise at a rather robust range, particularly in Asia.

Oil World’s expectation of a change in biodiesel policies in Europe and worldwide is likely to result in aslowing-down of the growth in mandatory mixing is likely to have a bearish impact on vegetable oil prices.However, this is a political decision, timing and any changes are impossible to predict.

However, downward potential on prices is limited as long as crude mineral oil prices are high and aboveUS$100 per barrel. In May 2008, crude mineral oil prices reached a new record of US$136 per barrel.

2010F 2009F 2008F 2007 2006 2005 2004 2003Palm Oil 1,150 1,000 1,130 780 478 422 471 443

2006 -2010F

2001-2005

1996 -2000

1991-1995

1986 -1990

1981-1985

Palm Oil

Price Projections for Palm Oil (cif Rotterdam) until 2010 (US$per Tonne)Projections

January/DecemberActual Data

January/December

5 - Year Averages

908 403 499 453 335 550

PROSPECTS

151

From 2008 onward a lot of capacity will be available to use vegetable oils as a substitute for crudemineral oil for energy purposes. At the end of calendar year 2008 world production capacities of biodieselwill reach approximately 32-33 million tonnes, according to latest Oil World estimates. But actual biodieselproduction will be only around 10-11 million tonnes in calendar year 2008. Therefore, there is a hugeunused capacity which is just waiting for prices of palm oil, soya oil, rape oil and other vegetable oils tobecome economically feasible for biofuel usage. Only a moderate price decline in vegetable oils isnecessary to stimulate additional demand from the energy sector.

It should be considered that the vegetable oil price rally in the six months from November 2007 until April2008 rationed global vegetable oil demand for biofuels by approximately 3 million tonnes (annualised).Only a relatively moderate decline in vegetable oil prices would be sufficient to revive demand from thebiofuel industry again. New demand would show up from the unused biodiesel production capacity andwould thus bring an end to additional price declines.

Consumers worldwide will become increasingly dependent on palm oil in the years ahead. Therefore, thegrowth in palm oil output has to accelerate to cover future global requirements. The prospects ofunusually high prices – steeply above production costs — represent a significant incentive to furtherincrease investments into expanding palm oil plantings and production in Indonesia, Malaysia and othercountries.

TREND INFORMATION

Our Directors observed the following trends for FY2007:

From 1 January 2007 to 31 December 2007, our revenue increased by 68.7% as compared to thecorresponding period in 2006 due to significant increase in our CPO and CPKO average selling prices.From 2006 to 2007, international spot prices for CPO had increased by 63.2% from an average ofUS$478 per MT (CIF Rotterdam) in 2006(1) to an average of US$780 per MT (CIF Rotterdam) in 2007(1).Based on the forward contracts entered into for delivery by December 2008, our Directors are of the viewthat the average selling prices of our CPO and CPKO for FY2008 is expected to be higher than FY2007.

Our Directors believe that the current trend of high prices is mainly due to growing popularity of CPO forboth food and non-food applications (such as biodiesel). The current high crude oil prices have alsoincreased the demand for alternative fuels, such as biodiesel fuel, which have, in turn contributed to theincrease in the demand and prices of CPO.

Prices from Jan 1977 until Dec 2010

76 78 80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 '08 '10

250300350400450500550600650700750800850900950

10001050110011501200

Annual Average Palm Oil Prices in Rotterdam (US$/T)

CrudePalm Oil

PROSPECTS

152

The Indonesian government has revised the export tax rates upwards since 31 August 2007. Based onthe graduated tax structure, higher palm oil prices will attract higher taxes. As a result, should palm oilprices continue to increase and we continue our current level of export, we will expect to incur higherexport tax expenses.

Our average FFB yields for the last three financial years ended 31 December 2005, 2006 and 2007 (savefor Sumatera region in FY2006) have been increasing. Given that the majority of our trees are eitherimmature or young, we expect that the FFB harvested from our plantations to increase in the near futureas these trees mature hence producing more FFB. We expect an additional 3,869 hectares, 4,513hectares and 5,816 hectares of our planted area to mature in FY2008, FY2009 and FY2010 respectively.

The most significant component of our Group’s cost of sales relates to costs of FFB and kernel. Cost ofFFB has increased from the average price of US$70 per MT in FY2006 to US$118 per MT in FY2007. Inaddition, cost of kernel has also increased from the average price of US$181 per MT in FY2006 toUS$330 per MT in FY2007. Our Directors believe that the current trend of increasing FFB prices (and, toa certain extent, kernel prices) is largely driven by strong CPO prices and strong demand for vegetableoils in 2007 to date. The cost of FFB and kernel is likely to increase due to the projected increase in CPOprices and the continuing growth in demand for vegetable oils, in particular, palm oil. However, as ourGroup is able to produce more FFB, our Directors are of the view that there would be less reliance onFFB and kernel purchased from third party suppliers.

Note:

(1) Extracted from the Oil World Report.

Save for the above, our Directors do not expect any significant recent trends or any other known trends,uncertainties, demands, commitments or events that may have a material adverse effect on us in thecurrent financial year.

ORDER BOOK

Our order book consists of forward contracts entered into with our customers. As at the Latest PracticableDate, our order book comprises outstanding orders of an aggregate value of approximately US$17.1million, all of which are for delivery by 31 December 2008. The aggregate value of US$17.1 millioncomprises:

(a) approximately US$13.0 million in respect of 12,400 MT of CPO;

(b) approximately US$3.8 million in respect of 2,800 MT of CPKO; and

(c) approximately US$0.3 million in respect of 2,403 MT of PKC.

However, these orders may be rescheduled by mutual consent, which in turn may result in potentialdelays in delivery. Consequently, our order book as of any particular date may not be indicative of ourrevenue for the relevant period.

PROSPECTS

153

MANAGEMENT REPORTING STRUCTURE

The following chart shows our management reporting structure as at the Latest Practicable Date:

Board of Directors

Chairman and CEO Henry Maknawi

Deputy CEO Ratna Maknawi

Finance Director Kent Surya

Head of Plantations

Ooi Min Choo

Head of Bulking and Logistics Ajis Chandra

Chief Operating Officer

CS Kwang Kay

Financial Controller Lim Chin Chai

Head of Engineering and Processing Albert Maknawi

(also known as Chua)

DIRECTORS, EXECUTIVE OFFICERS AND STAFF

154

DIRECTORS AND EXECUTIVE OFFICERS

Directors

Our Board is entrusted with the responsibility for the overall management of our Company. Our Directors’particulars are set out below:

Principal Name Age Address Designation Occupation

Henry Maknawi 53 Puri Indah Raya Blok G2/1, Chairman and Chief N/AWest Jakarta, Indonesia Executive Officer

Tengku Alwin Aziz 65 Jl. Lebak Bulus Raya I/2, Vice-Chairman and Finance Director,Cilandak, South Jakarta, Indonesia Non-Executive Director PT Cakra

Petrokindo Utama

Ratna Maknawi 38 Jl. Pulau Nirwarna Raya Blok, H3/5, Deputy Chief Executive N/ATaman Permata Buana, OfficerWest Jakarta, Indonesia

Kent Surya 51 Jl. Kenanga No. 4, Jatipulo, Finance Director N/APalmerah, West Jakarta, Indonesia

Soh Yew Hock 64 100 Arthur Road Singapore 439831 Lead Independent Company director Director

Leung Yew Kwong 55 304 Upper East Coast Road, #03-01 Independent Director Partner, WongRich East Garden, Singapore 466442 Partnership LLP

Information on the areas of responsibility, the business and working experiences of our Directors are setout below:

Henry Maknawi

Mr. Henry Maknawi is the Chairman and CEO of our Group and was appointed a director of ourCompany on 1 June 2008. He is responsible for the formulation of the overall business strategies andpolicies for our Group. Mr. Henry Maknawi has developed his expertise in business operations anddevelopment based on his knowledge and experience gained in the plantation industry for the past 13years. Mr. Henry Maknawi started his career in 1976 in PT Inpama, a tissue manufacturer, as asupervisor in charge of production and technical engineering. In 1984, he served as President Director ofPT Maknawi Jaya Kencana, a major stationery manufacturing company that he established, as well as PTTomang Maju Perkasa, a property investment, leasing and management services company before settingup SWK in 1994 when he founded our Group’s plantation operations.

In November 1994, Mr. Henry Maknawi was awarded the Primaniyarta award for outstanding export from1989 to 1993 by the late President Soeharto, former President of the Republic of Indonesia. ThePrimaniyarta award is the highest award from the Indonesian Government issued by the MenteriPerdagangan Republik Indonesia (Trade Minister of the Republic of Indonesia) and the National Agencyfor Export Development given to the exporters at the national and provincial levels for their achievementsin increasing non-oil and gas exports.

Ratna Maknawi

Ms. Ratna Maknawi is the Deputy CEO of our Group and was appointed a director of our Company on1 June 2008. She is responsible for managing the daily operations of our Group. From 1993 to 1994, Ms.Ratna Maknawi was a finance manager in PT Maknawi Jaya Kencana. In 1995, she became thePresident Director of SWK, a post she currently holds. Since 1996 and 2002 she has been acting as thePresident Commissioner of AKM and KAJ, respectively. She was appointed director of PT DermagaKencana Indonesia in 2004, President Commissioner of AIK in 2005 and President Commissioner of PTBangun Inti Kencana in 2006, and has been holding these positions since.


155

Ms. Ratna Maknawi graduated cum laude from the University of Wisconsin - Whitewater, USA with aBachelor of Business Administration (Accounting Major) in 1993.

Kent Surya

Mr. Kent Surya is the Finance Director of our Group and was appointed a director of our Company on1 June 2008. As Finance Director, Mr. Kent Surya is responsible for treasury and cash flow management,corporate finance, audit and tax compliance and financial reporting of our Group. Mr. Kent Surya startedas Vice Design Manager and later as a Design Manager and Quality Controller in PT Super Progresswhich is a Developer-Real Estate in North Jakarta from 1983 to 1987. From May 1987 he served as anAccount Officer in PT Bank Danamon Indonesia Tbk. in 1987 and left in early 1999 as Deputy GeneralManager and Vice Credit Committee Head of the Corporate Banking Division. He joined Hutrindo Group,a diversified business group engaged mainly in the Forestry and Timber industry, in February 1999 asChief Operating Officer and was later the Deputy CEO in charge of finance, marketing, human resourceand operations before leaving in June 2000. From July 2000 to December 2003, he was Director ofFinance & Treasury in PT Olympindo Multi Finance where he was in charge of finance and accountingmatters. In 2001 he was appointed as a Coordinator Finance Group for Olympindo Group which hadbusiness lines in Consumer Financing (PT OMF), Car Authorized Dealer for Volvo & Audi, Insurance,and BPR (Micro Finance Bank). Since March 2004, he has been engaged by certain of our GroupCompanies, namely SWK, AKM and AIK, first as senior financial advisor and later on as Vice PresidentDirector in charge of finance and operation of the group. In August 2004, he was engaged as a PresidentDirector of PT Graha Meruya, which is a related company to our group.

Mr. Kent Surya graduated in 1983 with a degree in civil engineering from the University of Tarumanagarain Jakarta-Indonesia, and obtained his Masters in Business Administration in 1994 from the InstitutManagement Prasetya Mulya, Jakarta-Indonesia.

Tengku Alwin Aziz

Tengku Alwin Aziz is our Vice-Chairman and Non-Executive Director and was appointed to our Board on30 May 2008. He has been an Independent Commissioner of PT London Sumatra Indonesia Tbk, anIndonesian-listed company in the palm oil and rubber industry, since 2000. He was appointed by theIndonesian authorities as an interim President Director of PT Bank Umum Nasional from 1998 to 1999 tooversee the restructuring of the bank. Prior to this, he served as an executive director of Bank DagangNegara from 1992 to 1997 and as President Commissioner of various finance companies (includingsubsidiaries of Bank Dagang Negara) from 1990 to 1998 as well as holding the post of Managing Directorof Staco International Financial Ltd in Hong Kong from 1990 to 1992.

He graduated in 1968 with an Economics degree majoring in Accountancy from Universitas SumateraUtara, Medan.

Soh Yew Hock

Mr. Soh Yew Hock is our Lead Independent Director and was appointed to our Board on 30 May 2008.Mr. Soh is currently an independent director of both Asia Dekor Holdings Limited and Japan ResidentialAssets Manager Limited. Mr. Soh has extensive experience in commerce and industry and had previouslyserved as head of finance and corporate affairs of Guthrie Berhad (now known as Guthrie GTS Limited)and head of corporate affairs of WBL Corporation Limited respectively. He was CEO/Managing Director ofWearnes International (1994) Limited from 1993 to 2006. Mr. Soh was an executive director of WBLCorporation Ltd from 1993 to 2007 and a director of several of its joint ventures and subsidiaries in Asia,People’s Republic of China, Australia and the United States of America, a director of MFS Technology Ltdand Deputy Chairman of O’Connor’s Corporation Berhad (now known as OCB Berhad). Mr. Soh was alsothe past President of the Singapore division of CPA (Australia).

He holds a Bachelor of Accountancy degree from the University of Singapore and is a graduate of theChartered Institute of Marketing (UK) and the Advanced Management Program of Harvard BusinessSchool. Mr. Soh is a Fellow of the Institute of Certified Public Accountants (Singapore), CertifiedPractising Accountants (Australia), Association of Chartered Certified Accountants (UK) and theChartered Institute of Marketing (UK).


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Leung Yew Kwong

Mr. Leung Yew Kwong is our Independent Director and was appointed to our Board on 30 May 2008. Heis presently a partner in Wong Partnership LLP, specialising in tax law. He was previously with the InlandRevenue Authority of Singapore (“IRAS”) and its predecessor, the Inland Revenue Department, for 28years from 1975 to 2004. He last held the posts of Chief Legal Officer and Chief Valuer concurrentlywhilst in IRAS where he dealt with all the taxes administered by IRAS, namely income tax, GST, stampduty, property tax and estate duty. He was awarded the Public Administration Medal (Silver) when he wasin the Civil Service. Mr. Leung was admitted to the Singapore Bar in 1992. He has been in legal practicespecialising in tax since 2004.

Mr. Leung also holds professional qualifications in real estate and valuation. He received a Colombo PlanScholarship to study at the University of Auckland, New Zealand, where he obtained a Diploma in UrbanValuation in 1974. He has a Masters of Science (Urban Land Appraisal) degree from the University ofReading in the United Kingdom, a Masters of Business Administration degree from the NationalUniversity of Singapore and has attended the Executive Progamme at the University of Michigan, AnnArbor USA. Mr. Leung has authored and co-authored a number of books on various taxes. He is presentlyan Honorary Tax Adviser to the Real Estate Developers’ Association of Singapore and an Honorary LegalAdviser to the Institute of Estate Agents. He is an Adjunct Associate Professor in the Department of RealEstate at the National University of Singapore.

Executive Officers

Our Board of Directors is assisted by our team of Executive Officers whose particulars are as follows:

Name Age Address Designation

CS Kwang Kay (also 58 Lippo Sudirman Condominium, Tower C #20-A Chief Operating Officerknown as Chua) Jalan Garnisun Dalam No.8, South Jakarta,

12930 Indonesia

Ooi Min Choo 50 Lippo Sudirman Condominium, Tower C #20-A Head of PlantationsJalan Garnisun Dalam No.8, South Jakarta,12930 Indonesia

Albert Maknawi 26 Puri Indah Raya Blok G2/1,West Jakarta, Head of Engineering andIndonesia Processing

Ajis Chandra 43 Jl. Pulau Nirwarna Raya Blok, H3/5, Head of Bulking andTaman Permata Buana, LogisticsWest Jakarta, Indonesia

Lim Chin Chai 44 26 Jalan Lempeng, #07-19, Singapore 128805 Financial Controller

Information on the business and working experience of our Executive Officers is set out below:

CS Kwang Kay (also known as Chua)

Mr. CS Kwang Kay (also known as Chua) is the Chief Operating Officer of our Group and was appointedon 1 March 2008. He is responsible for overseeing our Group’s overall operational activities. From 1975 to1978, Mr. Chua was an Assistant Manager of Plantations at Harrisons & Crosfield Co, Ltd (formerlyknown as Golden Hope Plantations and now part of Sime Darby Plantations) in charge of a divisiondealing with rubber and oil palm in Kajang, Selangor and cocoa with a cocoa fermentary in Bagan Datok,Perak. From 1978 to 1982, Mr. Chua was a Manager of Plantations at Ban Len Sdn Bhd and providedadvisory services to its estates in Johor. From 1982 to 1985, Mr. Chua served as a Project Manager atAsrisan Plantations and was involved in the development and management of 15,000 hectares of


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property. From 1985 to 1987, Mr. Chua was a Group Manager at Sabah Land Development where he wasresponsible for its regional operations in Lahad Datu in the East Coast of Sabah. Subsequently, Mr. Chuajoined PBB Oil Palms Berhad (“PPBOP”) (previously owned by Kuok Group, now part of Wilmar Group)and left in 2007 as chief operating officer after having played a pioneering role in the company’s entryinto the plantation business in East Malaysia. During his tenure with Kuok Group, Mr. Chua served asboard member in various PPBOP subsidiaries and also as chairman and director of Suburmas PlantationSdn. Bhd.

Mr. Chua graduated in December 1975 from the University of Allahabad, India with a Bachelor of Sciencein Agriculture with first class honours. He is a member of the Incorporated Society of Planters, aprofessional body representing executives and professionals engaged in plantation agriculture as well asa committee member of the Palm Oil Association (East Malaysia) and the Sabah Employers ConsultativeAssociation.

Ooi Min Choo

Mr. Ooi Min Choo is our Head of Plantations and was appointed on 1 March 2008. He is responsible forthe operational management of our plantation activities. From 1977 to 1982, Mr. Ooi was a PlantationSupervisor at SOCFIN Co Bhd, Benta, Pahang, where he was in charge of mature rubber operations andthe replanting of rubber trees. From 1983 to 1986, Mr. Ooi was an Assistant Manager with Hap SengPlantation Sdn Bhd, Tawau, Sabah, where he was in charge of mature rubber, oil palm, cocoa operationsand the running of a RSS rubber factory. From 1987 to 1989, he served as an Assistant Manager withRiver Estate Sdn Bdh, Sandakan. From 1990 to 1995, Mr. Ooi was a Senior Assistant Manager withTerusan Estate, PPBOP, Sandakan, Sabah, where he was in charge of planting new oil palms in swampyland as well as water management. From 1995 to 2003, Mr. Ooi worked at PPBOP - SAPI estate,Sandakan, Sabah where he started as Manager and became Senior Manager and was responsible formature oil palm operations and oil palm replanting. From 2003 to October 2004, Mr. Ooi was a SeniorManager with PPBOP - Sabahmas Plantation, Lahad Datu, Sabah, where he was in charge of mature oilpalm rehabilitation work. From 2004 till June 2007, Mr. Ooi was a Senior and Group Manager of KencanaSawit Indonesia (a subsidiary of PPBOP), Padang Sumatera, in charge of mature oil palm operations,system and field operation rehabilitation works. Since July 2007, Mr. Ooi has been an Assistant GeneralManager overseeing PT Kerry Sawit Indonesia, PT Sarana Titian Permata and PT Prima Sawit Makmurwhich are subsidiaries of PPBOP in Sampit, Central Kalimantan, where he is responsible for large scaleoil palm planting.

Mr. Ooi is a member of the Incorporated Society of Planters (ISP), which is a professional bodyrepresenting executives and professionals related to Agricultural Plantations since 1983. From 1986 to1989, Mr. Ooi also completed ISP’s professional papers relating to tree crops and milling. Theseprofessional papers include estate book keeping, soil science, estate land survey and oil palm practices.

Albert Maknawi

Mr. Albert Maknawi is the Head of Engineering and Processing of our Group. He is in charge ofoverseeing our Group’s overall engineering operations. Mr. Albert Maknawi first joined our Group in 2004,where he was appointed as Technical Manager of SWK and was in charge of managing daily operationsand maintenance of mills and purchasing of plant and equipment. Since 2005, he has been a director ofLK and is responsible for the development and construction of our renewable biomass power plantoperations. He has also been a director of BE since 2006, where he is the founder and project leaderresponsible for the construction of our Belitung power plant.

Mr. Albert Maknawi graduated in 2004 from the University of Melbourne, Australia with a Bachelor ofEngineering (Honours) and a Bachelor of Commerce.


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Ajis Chandra

Mr. Ajis Chandra is our Head of Bulking and Logistics. He is in charge of managing the bulking andlogistics segment of our operations since 2002. Mr. Ajis Chandra was previously with the Lippo Group foralmost 11 years. From 1991 to 1992, Mr. Ajis Chandra was an Account Officer (Corporate Finance) in PTLippo Bank Tbk. where he was in charge of providing and maintaining credit facilities to selectedcorporate clients. Mr. Ajis Chandra was assigned as Representative to operate the Representative Officesof PT Lippo Bank Tbk. in Malaysia (Kuala Lumpur) from 1993 to 1994, and then Vietnam (Hanoi and HoChi Minh City) from 1994 to 1995, where he was responsible for developing banking relationships withboth local and foreign banks as well as identifying business development opportunities for the LippoGroup and its clients. From 1996 to 2002, Mr. Ajis Chandra was the Vice President for PT Lippo Life Tbk.(which changed its name to PT Lippo E Net Tbk.). Since 2002, he has been the President Director of PTIndotrust, our subsidiary in the bulking business.

Mr. Chandra obtained a Bachelor of Commerce in 1987 and two Masters Degrees in Accountancy andCommerce in 1988 and 1989 respectively, from the University of Wollongong, Australia. Following hisgraduation from university, Mr. Chandra spent over one year travelling around the world prior to beginninghis professional career with the Lippo Group.

Lim Chin Chai

Mr. Lim Chin Chai is our Financial Controller. He is responsible for our finance and accounts department.Mr. Lim has extensive experience in the preparation and consolidation of financial accounts and has 14years experience serving as a finance manager in the group companies of various public listedcompanies in Singapore and Malaysia. Mr. Lim began his career in 1990 as a senior accountant atAmsteel Mills Berhad, a subsidiary of the Lion Group, where he was responsible for the establishmentand computerisation of the finance department of a newly acquired subsidiary. Between 1993 and 1994,he served as the finance manager of OYL Electronics Sdn Bhd, a subsidiary of the Hong Leong Group.Mr. Lim was subsequently employed as the finance manager of Hubei Zhong Chang Vegetable Oils Co.,a subsidiary of Kepong Berhad, where he was responsible for the establishment of the finance andadministration department from 1994 and 1996. Between 1996 and 2001, Mr. Lim served as the financemanager of Sichuan Kerry Oil & Grains Industrial Ltd, a subsidiary of Kuok Oil and Grains Pte. Ltd. In2001, Mr. Lim was transferred to the position of finance manager for Kuok Oil and Grains Pte. Ltd. (nowpart of the Wilmar Group), a position he has occupied until joining our Group in April 2008.

Mr. Lim graduated from the University of Malaya in 1990 with a Bachelor of Accounting degree andsubsequently obtained a Master of Business Administration degree from the University of Preston in2004. He is a Chartered Accountant of Malaysia and a member of the Malaysian Institute of Accountants.

Relationships between certain of our Directors and Executive Officers

Our Deputy CEO, Ms. Ratna Maknawi is the sister of our Chairman and CEO, Mr. Henry Maknawi. OurHead of Engineering and Processing, Mr. Albert Maknawi is the son of our Chairman and CEO, Mr. HenryMaknawi. Our Head of Bulking and Logistics, Mr. Ajis Chandra is the husband of Ms. Ratna Maknawi.

Saved as disclosed above, none of our Directors and Executive Officers is related to one another or toany Substantial Shareholder of our Group and to the best of our Directors’ knowledge and belief, thereare no arrangements or understanding with any of our Substantial Shareholders, customers, suppliers, orany other person, pursuant to which any of our Directors or Executive Officers were appointed.

The list of present and past directorships held by each of our Directors and Executive Officers over thelast five years, other than directorships in our Company, is set out in the section “General and StatutoryInformation” of this Prospectus.


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REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS

The compensation paid to our Directors and our Executive Officers for services rendered to us and oursubsidiaries on an aggregate basis and in remuneration bands of S$250,000 during FY2005, FY2006,FY2007 and FY2008 (estimated), excluding bonuses and any profit sharing plan or any other profit-linkedagreement(s) which has not been paid, are as follows:

Directors FY2005 FY2006 FY2007 FY2008(estimated)

Henry Maknawi Band 1 Band 1 Band 1 Band 2Ratna Maknawi Band 1 Band 1 Band 1 Band 2Kent Surya Band 1 Band 1 Band 1 Band 2Tengku Alwin Aziz Band 1 Band 1 Band 1 Band 1Leung Yew Kwong – – – Band 1Soh Yew Hock – – – Band 1

Executive Officers FY2005 FY2006 FY2007 FY2008(estimated)

CS Kwang Kay (also known as Chua) – – – Band 2Ooi Min Choo – – – Band 1Albert Maknawi Band 1 Band 1 Band 1 Band 1Ajis Chandra Band 1 Band 1 Band 1 Band 1Lim Chin Chai – – – Band 1

Note:

Band 1 : compensation of up to S$250,000 per annum

Band 2 : compensation of between S$250,001 up to S$500,000

PENSION AND RETIREMENT BENEFITS

Our Company will provide the pension and retirement benefits to our employees as set out below.

Our Group’s plantation division has defined contribution retirement plans covering its qualified permanentemployees. Our Group contributes 3.7% of the basic pensionable income retirement funds for itsemployees. Total pension cost amounted to approximately US$62,000, US$66,000 and US$88,000 inFY2005, FY2006 and FY2007 respectively.

Further, in addition to the benefits provided under the aforesaid defined contribution retirement plans, ourGroup provides provisions for employee service entitlements in order to meet the minimum benefitrequired to be paid to qualified employees, as required under the Indonesian Labour Law No.13/2003. Asat 31 December 2005, 2006 and 2007, the balance of the related actuarial liability for employee benefitsamounted to approximately US$0.1 million (approximately Rp0.9 billion), US$0.2 million (approximatelyRp1.8 billion) and US$0.3 million (approximately Rp2.7 billion) respectively.

SERVICE AGREEMENTS

On 1 June 2008, our Company entered into separate service agreements (the “Service Agreements”)with our Executive Directors, namely, Mr. Henry Maknawi, Ms. Ratna Maknawi and Mr. Kent Surya, for aninitial term of three years commencing from the Listing Date, which will continue thereafter untilterminated by not less than six months’ notice in writing served by either party on the other, which noticeshall not expire until after the initial fixed term. Pursuant to the terms of their respective ServiceAgreements, Mr. Henry Maknawi, Ms. Ratna Maknawi and Mr. Kent Surya, are entitled to an annual basicsalary of S$0.3 million, S$0.2 million and S$0.2 million (approximately US$0.2 million, US$0.1 million andUS$0.1 million) respectively. The annual basic salaries of our Executive Directors may be subject to such


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increase as the Remuneration Committee may determine at its absolute discretion. In addition, ourExecutive Directors may be awarded such annual bonuses as determined by the RemunerationCommittee. Directors’ fees do not form part of the terms of the Service Agreements as these require theapproval of Shareholders in our Company’s annual general meeting. We may terminate their respectiveService Agreements prior to the expiry of the term by service of notice in writing if any of our ExecutiveDirectors is disqualified to act as an Executive Director under any applicable law or rules prescribed bythe SGX-ST, found guilty of dishonesty, gross misconduct or wilful neglect of duty or any continuedmaterial breach of the terms of the Service Agreement, becomes bankrupt or otherwise acts to theprejudice of our Group. None of our Executive Directors will be entitled to any benefits upon terminationof their respective Service Agreements.

All travelling and travel-related expenses, entertainment expenses and other out-of-pocket expensesreasonably incurred by our Executive Directors in the process of discharging their duties on behalf of ourGroup will be borne by our Company.

We have not entered into any service agreements with our Executive Officers but have entered intostandard labour contracts or letters of employment with them, specifying the usual terms of employment,including remuneration.

Had the Service Agreements been in place since 1 January 2007, the aggregate remuneration paid toour Executive Directors for FY2007 would have been approximately US$0.8 million instead of US$0.3million and our profit for the year would have been US$38.9 million instead of US$39.2 million.

Pursuant to their respective Service Agreements, each Executive Director shall not, at any time duringthe period of his employment with our Company (the “Employment”) and for a period of one year after theexpiry or termination of his Employment accept any office or employment or engage or be concerned orinterested, directly or indirectly, in any business or occupation or hold an investment in any companywhich is in competition, directly or indirectly, with the business carried on by our Company or any GroupCompany, provided that nothing therein contained shall prevent such Executive Director from holdingequity interest in any company the share capital of which is quoted and dealt in upon any recognisedstock exchange to the extent of the aggregate of his such holding and the holding of such shares by hisassociates does not exceed 5% of the total issued share capital, nor does he or any of his associatesparticipate nor be involved in the management of such company.

Save as disclosed above, there are no existing or proposed service contracts entered or to be enteredinto by our Directors with our Company or any of our subsidiaries which provide for benefits upontermination of employment.

There are no other existing or proposed service agreements between our Company or our subsidiariesand any of our Directors.

EMPLOYEES

As at the Latest Practicable Date, our Group had a total of 1,009 full-time employees. Our employeesinclude individuals (other than our Directors and Executive Officers) who are related to our initialShareholders, Directors and Executive Officers. These employees are namely Mr. Johan Maknawi, Mr.Mario Permana, Mr. Irfan Budisiswanto, Mr. Eddy Maknawi, Mr. J. Amin Delarosa, Ms. Yuki Tukiaty andMs. Augyawati Joe (the “Related Employees”). The aggregate remuneration of the Related Employees(other than Ms. Augyawati Joe who joined our Group in 2008) received from our Group for FY2007amounted to approximately Rp2.3 billion (the equivalent of US$0.3 million).

Our Group believes that it has established good working relationships with its employees. There have notbeen any strikes or work stoppages by our employees that have led to major production disruption orgovernment intervention for the last three financial years ended 31 December 2005, 31 December 2006and 31 December 2007 and up to the Latest Practicable Date.

As at the Latest Practicable Date, there are no arrangements with any of our Directors or employees ofour Group that involve the issue or grant of options or shares or any other securities of our Company.


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The following is a breakdown of our Group’s permanent employees by function and geographic location:

Breakdown by function

As at 31 DecemberFunction 2005 2006 2007

Management (1) 13 11 11Finance and Administration 119 160 305Operations and Production 424 532 622Marketing 5 7 8

Total 561 710 946

Note:

(1) Includes our Executive Directors and Executive Officers

Breakdown by geographic location

As at 31 December2005 2006 2007

Sumatera 276 286 360Kalimantan 270 393 558

Total 546(1) 679(1) 918(1)

Note:

(1) Excludes members of the crews operating our barges which serve both our Sumatera and Kalimantan operations, whichaccounted for 15, 31 and 28 employees as at the end of the last three financial years ended 31 December 2005, 2006 and2007 respectively.

We employ a significant number of temporary employees, who are hired to assist in harvesting andmaintaining our plantations. The average number of temporary employees for FY2007 (based on ourmonth-end numbers) was 4,908.

STAFF TRAINING AND DEVELOPMENT

As our employees are the key contributors to the growth of our Group, we seek to continuously improveupon the quality and skill set of our staff. As such, we believe that our staff should constantly upgradetheir skills in order to increase their productivity and to stay relevant in their respective areas of work.

We conduct in-house training, workshops and arrange for seminars conducted by external parties at ouroil palm plantations to improve the skills and technical expertise of our employees. Our employees alsoreceive training in oil palm plantation management and agronomics.


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Our Directors recognise the importance of corporate governance and the offering of high standards ofaccountability to our Shareholders. Our Chairman and CEO is Mr. Henry Maknawi. Where the Chairmanand the CEO is the same person, the Code of Corporate Governance 2005 recommends that companiesappoint an independent non-executive director to be the lead independent director. The lead independentdirector would be available to shareholders where they have concerns which contact through the normalchannels of the chairman, CEO or finance director has failed to resolve or for which such contact isinappropriate. Accordingly, we have appointed Mr. Soh Yew Hock as our Lead Independent Director. Wehave also established an Audit Committee, a Remuneration Committee and a Nominating Committee.

Audit Committee

Our Audit Committee is chaired by Mr. Soh Yew Hock, our Lead Independent Director, and includes ourIndependent Director, Mr. Leung Yew Kwong and our Vice Chairman and Non-Executive Director, TengkuAlwin Aziz.

Our Independent Directors do not have any existing business or professional relationship of a materialnature with our Company, other Directors or Substantial Shareholders. They are also not related to theother Directors or Substantial Shareholders.

Our Audit Committee will assist our Board of Directors in discharging their responsibility to safeguard ourassets, maintain adequate accounting records and develop and maintain effective systems of internalcontrol, with the overall objective of ensuring that our management creates and maintains an effectivecontrol environment in our Company.

Our Audit Committee will provide a channel of communication between our Board of Directors, ourmanagement and our external auditors on matters relating to audit.

Our Audit Committee shall meet periodically to perform the following functions:

(a) review the audit plans of the external auditors and our internal auditors, including the results of ourexternal and internal auditors’ review and evaluation of our system of internal controls;

(b) review the annual consolidated financial statements and the external auditors’ report on thosefinancial statements, and discuss any significant adjustments, major risk areas, changes inaccounting policies, compliance with Singapore Financial Reporting Standards, concerns andissues arising from their audits including any matters which the external auditors may wish todiscuss in the absence of management, where necessary, before submission to our Board ofDirectors for approval;

(c) review the periodic consolidated financial statements comprising the income statements and thebalance sheets and such other information required by the Listing Manual, before submission toour Board of Directors for approval;

(d) review and discuss with external and internal auditors, any suspected fraud, irregularity orinfringement of any relevant laws, rules or regulations, which has or is likely to have a materialimpact on our Company’s operating results or financial position and our management’s response;

(e) review the co-operation given by our management to our external auditors;

(f) consider the appointment and re-appointment of the external auditors and matters relating to theresignation and dismissal thereof;

(g) review any interested person transactions falling within the scope of Chapter 9 of the ListingManual;

(h) review any potential conflicts of interest;

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(i) undertake such other reviews and projects as may be requested by our Board of Directors, and willreport to our Board its findings from time to time on matters arising and requiring the attention ofour Audit Committee; and

(j) undertake generally such other functions and duties as may be required by law or the ListingManual, and by such amendments made thereto from time to time.

Apart from the duties listed above, our Audit Committee shall commission and review the findings ofinternal investigations into matters where there is any suspected fraud or irregularity, or failure of internalcontrols or infringement of any relevant laws, rules or regulations which has or is likely to have a materialimpact on our operating results and/or financial position.

Our Group currently has an in-house internal audit department for reviewing and implementingappropriate internal accounting controls. Following our listing on the SGX-ST, the in-house internal auditdepartment will report to our Audit Committee who will approve the internal audit policies plans. The in-house internal audit department’s objective, under the direction and supervision of our Audit Committee,is to perform an examination and evaluation of the internal control environment, systems and procedures(including risk management) in order to ensure efficiency in operations, compliance with prevailing rulesand regulations. Each member of our Audit Committee will abstain from voting in respect of matters inwhich he is interested.

Our Audit Committee will review the effectiveness of the internal audit function and where deemednecessary, expand or outsource the internal audit function to ensure its effectiveness within our Company.

Remuneration Committee

Our Remuneration Committee is chaired by our Lead Independent Director, Mr. Soh Yew Hock, andincludes our other Independent Director, Mr. Leung Yew Kwong and our Vice-Chairman and Non-Executive Director, Tengku Alwin Aziz. Our Remuneration Committee will recommend to our Board aframework of remuneration for our Directors and Executive Officers and determine specific remunerationpackages for each Executive Director. The recommendations of our Remuneration Committee should besubmitted for endorsement by our Board. All aspects of remuneration, including but not limited toDirectors’ fees, salaries, allowances, bonuses and benefits-in-kind shall be covered by our RemunerationCommittee. Each member of our Remuneration Committee shall abstain from voting on any resolution inrespect of his remuneration package.

Nominating Committee

Our Nominating Committee is chaired by Mr. Leung Yew Kwong, our Independent Director, and includesour Chairman and CEO, Mr. Henry Maknawi and our Lead Independent Director, Mr. Soh Yew Hock.Under our Articles of Association, at least one-third of our Directors are required to retire from office atevery Annual General Meeting of our Company. Every Director must retire from office at least once everythree years. A retiring Director is eligible and may be nominated for re-election. The NominatingCommittee has been set up to take the responsibility of the re-nomination of our Directors (includingIndependent Directors of our Company) taking into consideration each Director’s contribution andperformance. The Nominating Committee is also charged with the responsibility of determining annuallywhether a Director is independent. Each member of the Nominating Committee will not take part indetermining his own re-nomination or independence. Each member of the Nominating Committee shallabstain from voting on any resolution relating to his re-nomination as a Director.

Term of Office

Our Directors are appointed by our Shareholders at general meeting, and an election of Directors takesplace annually. One-third (or the number nearest two) of our Directors, are required to retire from office ateach annual general meeting. However, a retiring Director is eligible for re-election at the meeting atwhich he retires.

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INTERESTED PERSON TRANSACTIONS

In general, transactions between our Group and any interested persons (namely, our Directors, CEO orControlling Shareholder of our Company or the associates of such persons) are known as interestedperson transactions.

Save as disclosed below and in the section “Restructuring Exercise” of this Prospectus, our Group doesnot have any other material transactions with any of its interested persons within the last three mostrecent completed financial years ended 31 December 2005, 2006 and 2007 and for the period from 1January 2008 to the Latest Practicable Date (the “Relevant Period”). For the purpose of the disclosurebelow, transactions between entities in our Group have been eliminated on consolidation in our financialstatements, and have accordingly, not been disclosed.

PAST INTERESTED PERSON TRANSACTIONS

Advances made by/to our Group to/by our Controlling Shareholder, our Deputy CEO and theirassociates

Mr. Henry Maknawi, our Chairman and CEO, Ms. Ratna Maknawi, our Deputy CEO and some of theirassociates, provided advances to and received advances from certain of our subsidiaries from time totime during the last three most recent completed financial years ended 31 December 2005, 2006 and2007 and the Relevant Period. These advances were unsecured, interest-free and did not have any fixeddates for repayment and were not on an arm’s length basis.

The aggregate amount due to and from the abovementioned interested persons as at 31 December2005, 2006 and 2007 and as at the Latest Practicable Date are as follows:

As at 31 December As at the Latest(US$’000) 2005 2006 2007 Practicable Date

Aggregate amount due to our Group 4,884 7,643 – –

As at 31 December As at the Latest(US$’000) 2005 2006 2007 Practicable Date

Aggregate amount due from our Group 1,362 381 – –

Note:

(1) The amounts outstanding to/from our Group were fully repaid in November 2007.

The largest outstanding amount due to and from the abovementioned interested persons during the lastthree most recent completed financial years ended 31 December 2005, 2006 and 2007 was US$5.7million and during the Relevant Period was US$9.4 million. These transactions were not on an arm’slength basis as Mr. Henry Maknawi and/or Ms. Ratna Maknawi and their associates did not receive anycompensation for the loans provided in nor paid any compensation for the loans received from our Group.As at the date of this Prospectus, there were no amounts due to or from our Group by theabovementioned interested persons. We do not intend to enter into any other loan arrangements withsuch interested persons in the future.

INTERESTED PERSON TRANSACTIONS AND CONFLICTS OF INTERESTS

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Guarantees and pledge of certain of our subsidiaries’ shares by Mr. Henry Maknawi and Ms. RatnaMaknawi to secure credit investment facilities for SWK

Mr. Henry Maknawi, our Chairman and CEO, and Ms. Ratna Maknawi, our Deputy CEO have eachprovided personal guarantees and/or pledged their shares in SWK to PT Bank Mandiri (Persero) Tbk(“Bank Mandiri”) to secure working capital and credit investment facilities granted to SWK for anaggregate principal amount of US$7.0 million.

The following table shows the aggregate amount secured by the personal guarantees and/or sharepledges granted by the above interested persons in the last three most recent completed financial yearsended 31 December 2005, 2006 and 2007 and the Relevant Period:

Personalguarantees

Bank Type of facility Amount provided by Shares pledged

Bank Mandiri Working capital Up to US$337,268.12 Mr. Henry Maknawi 3,000 SWK shares ofRp1,000,000 each byMr. Henry Maknawi

Ms. Ratna Maknawi 2,036 SWK shares ofRp1,000,000 each byMs. Ratna Maknawi

Bank Mandiri Credit Investment Up to a total of Mr. Henry Maknawi 3,000 SWK shares ofUS$6,270,935.93, Rp1,000,000 each byconsisting of: Mr. Henry Maknawi

- Investment loan of up Ms. Ratna Maknawi 2,036 SWK shares ofto US$4,442,718.91 Rp1,000,000 each by

Ms. Ratna Maknawi

- Construction loan of upto US$1,828,217.02

Bank Mandiri Working capital Up to a total of Mr. Henry Maknawi 3,000 SWK shares ofRp3,700,000,000 Rp1,000,000 each by

Mr. Henry Maknawi

Ms. Ratna Maknawi 2,036 SWK shares ofRp1,000,000 each byMs. Ratna Maknawi

The interest rates charged under the above facilities ranged from 7.75% to 13% per annum. The largestaggregate outstanding amount guaranteed by Mr. Henry Maknawi and Ms. Ratna Maknawi in connectionwith the above facilities in the last three most recent completed financial years ended 31 December 2005,2006 and 2007 and the Relevant Period based on month-end balances was approximately US$3.7million.

As at the Latest Practicable Date, all personal guarantees and share pledges in respect of the abovefacilities have been discharged. These transactions were not on an arm’s length basis as Mr. HenryMaknawi and Ms. Ratna Maknawi did not receive any form of compensation for the provision of theguarantees and share pledges.


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PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS

Guarantees and pledge of certain of our subsidiaries’ shares by Mr. Henry Maknawi, Ms. RatnaMaknawi and Tengku Alwin Aziz to secure credit investment facilities and foreign exchangecontract lines for SWK and AIK

Mr. Henry Maknawi, our Chairman and CEO, Ms. Ratna Maknawi, our Deputy CEO, and Tengku AlwinAziz, our Vice Chairman and Non-Executive Director, have each provided personal guarantees and/orpledged their shares in AIK to secure credit investment facilities granted to AIK by Bank Mandiri (the“Lending Institution”) for an aggregate principal amount of Rp137.7 billion. In addition, Ms. RatnaMaknawi, our Deputy CEO, has provided a personal guarantee to Bank of Tokyo Mitsubishi UFJ CapitalCorporation (“BTMU”) to secure a foreign exchange credit line of US$15 million. Details of the abovefacilities, personal guarantees and share pledges provided in the last three most recent completedfinancial years ended 31 December 2005, 2006 and 2007 and the Relevant Period are as follows:

Personalguarantees

Bank Type of facility Amount provided by Shares pledged (1)

Bank Mandiri Credit Investment Up to a total of Mr. Henry Maknawi 10,101 AIK shares ofRp114,911,000,000 Rp1,000,000 each byConsisting of: Mr. Henry Maknawi

- Investment loan of up Ms. Ratna Maknawi 1,050 AIK shares ofto Rp84,911,000,000 Rp1,000,000 each by

Ms. Ratna Maknawi

- Construction loan of up 630 AIK shares ofto Rp30,000,000,000 Rp1,000,000 each by

Tengku Alwin Aziz

Bank Credit Investment Up to a total of Mr. Henry Maknawi 10,101 AIK shares ofMandiri (loan on behalf of Rp22,798,875,000 Rp1,000,000 each by

Plasma BTS) Consisting of: Mr. Henry Maknawi

- Investment loan of up Ms. Ratna Maknawi 1,050 AIK shares ofto Rp13,198,875,000 Rp1,000,000 each by

Ms. Ratna Maknawi

- Construction loan of up 630 AIK shares ofto Rp9,600,000,000 Rp1,000,000 each by

Tengku Alwin Aziz

BTMU Foreign Exchange - Foreign exchange Ms. Ratna Maknawi –credit line of up toUS$15,000,000 million

Note:

(1) Prior to 31 December 2007, share pledges over certain shares held in subsidiaries were also given in favour of the banks inaddition to the personal guarantees. As at 31 December 2007, all share pledges have been discharged by the LendingInstitution.

The interest rates charged under the facilities ranged from 13% to 16% per annum. The largest aggregateoutstanding amount guaranteed by Mr. Henry Maknawi and Ms. Ratna Maknawi in the last three mostrecent completed financial years ended 31 December 2005, 2006 and 2007 and the Relevant Periodbased on month-end balances was approximately US$3.5 million.


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Our Group intends to procure the release and discharge of the personal guarantees given by Mr. HenryMaknawi and Ms. Ratna Maknawi to the Lending Institution after the admission of our Company to theOfficial List of the SGX-ST by replacing the aforementioned guarantees with other securities acceptableto the said Lending Institution. Should the terms and conditions of our existing facilities be affected by thewithdrawal of these personal guarantees, or in the event the Lending Institution do not agree to therelease or discharge of such guarantees, Mr. Henry Maknawi and Ms. Ratna Maknawi will continue toprovide the relevant guarantees for the relevant credit investment facilities. These transactions are not onan arm’s length basis as Mr. Henry Maknawi and/or Ms. Ratna Maknawi did not receive any form ofcompensation for the provision of the guarantees and share pledges.

Payment of rental by our Group to PT Tomang Maju Perkasa

PT Tomang Maju Perkasa is an associate of our Chairman and CEO, Mr. Henry Maknawi and our DeputyCEO, Ms. Ratna Maknawi. Accordingly, transactions between our Group and PT Tomang Maju Perkasaare considered as interested person transactions.

In 2004, some of our subsidiaries entered into lease agreements with PT Tomang Maju Perkasa underwhich we leased from PT Tomang Maju Perkasa office spaces located at Graha Kencana at Kebon Jeruk,West Jakarta. The terms of each lease range between three to five years and can be extended foranother one year period. The rental payable under such leases is between Rp35,000 per sq m andRp45,000 per sq m. All the leases are still in existence. As at the Latest Practicable Date, our Groupleases from PT Tomang Maju Perkasa an aggregate area of approximately 555.21 sq m at the premiseslocated at Graha Kencana, Jalan Raya Pejuangan No. 88GK Jakarta 11530, Indonesia. We do not intendto renew these leases upon their expiry.

Details of the aggregate rental paid by our Group to PT Tomang Maju Perkasa in the last three mostrecent completed financial years and the Relevant Period are as follows:

(US’$000) FY2005 FY2006 FY2007 Relevant Period

Aggregate rental paid 32.2 36.4 42.4 15.7

Please refer to the section “Properties and Fixed Assets” of this Prospectus for further informationregarding the expiry dates of the respective leases.

Our Directors are of the view that the rental amounts paid for the abovementioned premises were not onan arm’s length basis as they were lower than prevailing market rates.

Long term lease of office premises by SWK from PT Graha Meruya

PT Graha Meruya (the “Lessor”) is an associate of our Chairman and CEO, Mr. Henry Maknawi and ourDeputy CEO, Ms. Ratna Maknawi. Our Executive Director, Mr. Kent Surya is also the President Director ofthe Lessor. Accordingly, transactions between our Group and the Lessor are interested persontransactions.

Pursuant to a lease agreement dated 13 November 2007 (the “SWK Lease Agreement”), SWK will leaseon a long term basis from the Lessor three levels of a building comprising an aggregate area ofapproximately 2,624.4 sq m at the premises located at Jl. Raya Meruya Ilir No. 88, Jakarta – Barat 11620,to be known as “Business Park - Kebon Jeruk”. The term of the lease is 25 years and shall commencefrom 1 July 2008 and expire on 30 June 2033. SWK will be a major tenant in the building, occupying intotal approximately 35% of the total lettable area of the building.

Under the terms of the SWK Lease Agreement, the entire amount of rent for the 25 year lease is payablein advance at the commencement of the lease. SWK has paid an initial aggregate amount of Rp10 billion(approximately US$1.1 million) to the Lessor. The balance of the rent amounting to Rp5.0 billion(approximately US$0.5 million) will be paid upon the handing over of the premises to SWK, expected tobe in the third quarter of 2008. SWK will not be able to terminate the lease except under certain limitedcircumstances. However, SWK has the right under the lease agreement to lease out the space to anothertenant with the prior written approval of the Lessor.


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Under the SWK Lease Agreement, the Lessor has provided warranties to SWK that the latter will, for theterm of the lease, enjoy quiet possession free from any interruption, disturbance or claim of any title orright of ownership, by the Lessor or any party. SWK is entitled to compensation from the Lessor,including, but not limited to, a refund of the unused portion of the rental paid in advance, for all lossesand damages incurred to or suffered by the SWK as a result of any breach of representation made by theLessor or as a result of any proceedings, actions, claims or demands relating to such claims or losses.

Based on valuation conducted (for the purpose of incorporation in this Prospectus) by an independentvaluer, PT Actual Kencana Appraisal (“AKA”), the net present value (“NPV”) of the market rent for theoffice premise at Business Park – Kebon Jeruk based on a 25-year term is approximately Rp23.1 billion(US$2.5 million). Please refer to Appendix G of this Prospectus for the computation methodology andassumptions used by AKA.

If we assume no growth in rental rates and annual payments during the term of the lease, the NPV of themarket rent would be approximately Rp17.0 billion or US$1.8 million.

If we assume no growth in rental rates and monthly payments during the term of the lease, the NPV ofthe market rent would be approximately Rp15.8 billion or US$1.7 million, which is still higher than thetotal amount of rent payable under the SWK Lease Agreement of Rp15.0 billion or US$1.6 million.

The transaction was negotiated and entered into on a willing landlord-willing tenant basis. Our Directorsare of the view that the aggregate rent of Rp15.0 billion for the abovementioned office premise was notentered into on an arm’s length basis but is not prejudicial to our Company and minority Shareholders asthe aggregate rent of Rp15.0 billion is lower than the net present value of Rp23.1 billion provided byAKA’s independent appraisal. The 25-year term is to ensure continuity of operations of our Company’shead office.

It can be concluded that the aggregate rent of Rp15.0 billion is lower than the independent valuation ofAKA which has assigned an NPV of Rp23.1 billion based on the current market rent for theaforementioned office premise. The lease agreement furthermore does not contain an escalation clauseproviding for an upward review of rent. Hence the Company is protected against inflation and any risingrent in the next 25 years. Based on the foregoing, our Audit Committee is of the opinion that thisarrangement is not prejudicial to the Company or its minority Shareholders.

None of our Group or our Directors, Executive Officers, Substantial Shareholders or any of theirassociates has an interest in AKA.

We do not consider the lease of the above premises pursuant to the SWK Lease Agreement as arecurrent interested person transaction which will be subject to a Shareholders’ general mandate underthe Listing Manual because the SWK Lease Agreement was entered into between the Lessor and ourGroup prior to listing.

Services provided by Interested Persons to our Company

Provision of trucking services to our Group

Our Chairman and CEO, Mr. Henry Maknawi, and our Deputy CEO, Ms. Ratna Maknawi and threeemployees of our Group entered into an informal arrangement among themselves to provide truckingservices to our Group. The aggregate amounts paid for these services were Rp8.0 billion (approximatelyUS$0.8 million), Rp8.0 billion (approximately US$0.9 million) Rp4.8 billion (approximately US$0.5 million)and Rp3.1 billion (approximately US$0.3 million) for FY2005, FY2006, FY2007 and the Relevant Periodrespectively. The rates charged for these services were at market rates and determined on an arm’slength basis.

Our Chairman and CEO, Mr. Henry Maknawi, and our Deputy CEO, Ms. Ratna Maknawi and threeemployees of our Group have incorporated a company limited by shares and formalised this arrangementto provide trucking services. Involvement by Mr. Henry Maknawi and/or Ms. Ratna Maknawi (whocollectively hold 58% of the said company’s shareholding) is limited to passive shareholding. We intend tocontinue to utilise such trucking services as we believe that the rates offered, reliability and quality of theservices provided are generally better than those offered by independent third parties.


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Where appropriate, the existing and future interested person transactions as disclosed above will besubject to the review procedures described in the section “Review Procedures for Future InterestedPerson Transactions” of this Prospectus.

REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS

All future transactions with interested persons shall comply with the requirements of the Listing Manual.As required by Paragraph 9(e) of Appendix 2.2 to the Listing Manual, our Company has adopted a set ofnew Articles of Association that requires a director to abstain from voting in any contract or arrangementin which he (directly or indirectly) has a material personal interest.

Our Audit Committee will review all interested person transactions to ensure that they are transacted onarm’s length basis, on normal commercial terms, and will not be prejudicial to the interest of ourCompany and our minority Shareholders. Our Audit Committee will adopt the following procedures whenreviewing interested person transactions:

(a) when purchasing items from or engaging the services of an interested person, at least two otherquotations from non-interested persons will be obtained for comparison, where available andpracticable, and the purchase price for such items or fees for such services shall not be higherthan two of the most competitive prices or fee quotes from the independent quotations to ensurethat the interests of our minority Shareholders are not disadvantaged. In determining the mostcompetitive price or fee, all pertinent factors, including but not limited to quality, delivery time andtrack record will be taken into consideration;

(b) when selling items or supplying services to an interested person, the price and terms of two othersuccessful sales of a similar nature to non-interested persons will be used for comparison, whereavailable and practicable, and the sale price for such items or fees charged for such services shallnot be higher than two of the most competitive prices or fee quotes from the independentquotations to ensure that the interests of our minority Shareholders are not disadvantaged. Indetermining the most competitive price or fee, all pertinent factors, including but not limited to sizeof transaction, credit-worthiness and track record will be taken into consideration;

(c) when renting properties or leasing facilities from or to an interested person, our Directors shall takeappropriate steps to ensure that such rental or lease rates commensurate with the prevailingmarket rates, including adopting measures such as making relevant inquiries with landlords orlessors of similar properties or facilities and obtaining suitable reports or reviews published byproperty agents (as necessary). The rent or lease payable shall be based on the most competitivemarket rental rate or lease rate of similar properties or facilities in terms of size and location, basedon the results of the relevant inquiries; and

(d) should any future interested person transactions be on less preferential terms than as determinedin paragraphs (a) to (c) above, our Board must grant prior approval.

Our Audit Committee will review all interested person transactions, if any, at least quarterly to ensure thatthey are carried out at arm’s length and in accordance with the procedures outlined above. It will take intoaccount all relevant non-quantitative factors. Our Audit Committee shall have the right to engage or seekassistance from professional advisers (including valuers) as it deems fit. In the event that a member ofour Audit Committee is interested in any interested person transaction, he will abstain from reviewing thatparticular transaction. Furthermore, if during these periodic reviews, our Audit Committee believes thatthe guidelines and procedures as stated above are not suitable or insufficient to ensure that the interestsof our Company and our minority Shareholders are not prejudiced, we will adopt new guidelines andprocedures.

We will maintain a register where all our interested person transactions and documentation, including thebases on which such transactions are entered into, the quotations which were obtained to support suchbases, the rationale behind the transactions, as well as credit terms and payment period are recorded forreview by our Audit Committee.


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In addition, our Audit Committee will include the review of interested person transactions as part of itsstandard procedures whilst examining the adequacy of our internal controls. Our Board of Directors willalso ensure that all disclosures, approvals and other requirements on interested person transactions,including those required by prevailing legislation, the Listing Manual and accounting standards, arecomplied with. Such transactions will also be subject to Shareholders’ approval if deemed necessary bythe Listing Manual.

POTENTIAL CONFLICTS OF INTERESTS

Shareholding in PT Dermaga Kencana Indonesia (“DKI”)

DKI (a private investment company of Mr. Henry Maknawi, Ms. Ratna Maknawi and their associates)currently owns a land parcel in East Kalimantan (the “DKI Land Parcel”). In the event that DKI decides tobuild and operate a bulking terminal (including storage tanks) and a jetty on the DKI Land Parcel, thiswould pose a prima facie potential conflict of interests in terms of competition for customers if we decideto lease out excess bulking facilities to third party customers. However, our Directors are of the view thatthe above does not present a real conflict of interests for the following reasons:

(a) the DKI Land Parcel is located a considerable distance from our current bulking operations inBangka Island and is also in a different time zone from Bangka Island. In the event that a bulkingterminal is built on the DKI Land Parcel, it would serve Eastern Indonesia, a different geographicmarket from Western Indonesia which our operations in Bangka Island currently serve;

(b) our current bulking and logistics services are mainly to support our plantation requirements andrevenue from third party customers is insignificant; and

(c) our Kalimantan operations are not in close proximity to the DKI Land Parcel. Should the need arise,our Company can build a jetty located nearer to our operations to facilitate transportation of ourproducts.

In the event that DKI decides to develop the DKI Land Parcel and build and operate a bulking terminal(including storage tanks) and a jetty, it will offer a right of first refusal to our Company to lease suchfacilities from DKI and such transactions will be subject to the review procedures described in the section“Review Procedures for Future Interested Person Transactions” of this Prospectus.

Non-executive Directorship in PT Bangun Inti Kencana (“BIK”)

Ms. Ratna Maknawi, our Deputy CEO, is a non-executive director of BIK, a company which operates acopra crushing plant in Sulawesi to produce coconut oil (“CNO”). CPKO and CNO can be used in bothfood and oleochemical applications and accordingly may sometimes be broadly considered as substitutesdepending on the users’ or manufacturers’ preference. Both CPO and CNO can be used in the productionof cooking oil. However due to greater supply of CPO, it is more widely used as cooking oil compared toCNO. Even though the general uses of CNO, CPKO and CPO are similar, our Directors are of the opinionthat any potential conflicts of interests arising from Ms. Ratna Maknawi’s role as a non-executive directorof BIK is minimised taking into account that Ms. Ratna Maknawi is neither a shareholder of BIK nor is sheinvolved in the day-to-day operations or management of BIK.

Following the disposal of her shareholding in BIK to an independent third party, Ms. Ratna Maknawiremained as a non-executive director in BIK at the request of the board of directors and shareholders ofBIK as they are of the view that her knowledge of the edible oil industry and good network of contactswould be beneficial to BIK.


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Independent Commissioner of PT London Sumatra Indonesia Tbk

Tengku Alwin Aziz, our Vice-Chairman and Non-Executive Director, has been an IndependentCommissioner of PT PP London Sumatra Indonesia Tbk (“LSI”), an Indonesian-listed company in thepalm oil and rubber industry, since 2000. Our Directors are of the view that Tengku Alwin Aziz is not in aposition of conflict and that his judgment and ability to act in the interest of our Group and ourShareholders will not be compromised as a result of his role as an Independent Commissioner of LSIwhich is essentially a non-executive role with the primary responsibility of supervising the board ofdirectors. He is furthermore not a shareholder of LSI and is also not involved in the day-to-daymanagement or operations of LSI.

Save as disclosed in the section “Interested Person Transactions and Conflicts of Interests” of thisProspectus:

(a) none of our Directors, Executive Officers, Substantial Shareholders or any of their associates hashad any interest, direct or indirect, in any transactions to which our Group was or is to be a party;

(b) none of our Directors, Executive Officers, Substantial Shareholders or any of their associates hasany interest, direct or indirect in any company carrying on the business or a similar trade whichcompetes materially and directly with the existing business of our Group; and

(c) none of our Directors, Executive Officers, Substantial Shareholders or any of their associates hasany interest, direct or indirect, in any company that is our customer or supplier of goods andservices.

Non-compete undertaking

Pursuant to non-compete undertakings dated 14 April 2008, each of Mr. Henry Maknawi, Ms. RatnaMaknawi and Kencana Holdings has undertaken not to do or permit any of the following for as long aseach of Mr. Henry Maknawi, Ms. Ratna Maknawi and Kencana Holdings (whether individually orcollectively, as the case may be) is an Executive Director and/or Controlling Shareholder of our Company:

(a) directly or indirectly carry on or be engaged or interested in any capacity in any other business,trade or occupation whatsoever, except, in a business, trade or occupation which does not competewith the business of our Company or any of its subsidiaries or associated companies in Indonesiaor elsewhere;

(b) either solely or jointly with or on behalf of any person, firm or corporation directly or indirectly carryon or be engaged or interested in any business competing with the business of our Company orany of its subsidiaries or associated companies in Indonesia or elsewhere;

(c) solicit the custom of any person who is or has been at any time, a customer of our Company forthe purpose of offering to such customer goods or services similar to or competing with those ofthe business of our Company or any of its subsidiaries or associated companies; or

(d) cause or permit any person, or any company directly or indirectly under his/her/its control or inwhich he/she/it, together with his/her/its associates, have a minimum aggregate beneficial interestof 30% to do any of the foregoing acts or things.


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INTERESTS OF EXPERTS

None of the experts named in this Prospectus:

(a) is employed on a contingent basis by our Company or any of our subsidiaries;

(b) has a material interest, whether direct or indirect, in our Shares or in the shares of our subsidiaries;or

(c) has a material economic interest, whether direct or indirect, in our Company, including an interestin the success of the Invitation.


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The Issue Price will be determined following a book-building process, by agreement among the IssueManager, the Joint Underwriters and Placement Agents and ourselves. Among the factors that will betaken into account in determining the Issue Price are our prospects, the expected demand for the NewShares and the prevailing conditions in the securities markets.

The New Shares may be re-allocated between the Offer and the Placement at the discretion of the JointUnderwriters and Placement Agents in consultation with our Company.

Offer Shares

The Offer Shares are made available to the members of the public in Singapore for subscription at theIssue Price. The terms and conditions and procedures for applications are described in Appendix A of thisProspectus. Pursuant to the terms and conditions contained in the Management and UnderwritingAgreement signed between our Company, DBS Bank and CIMB-GK dated 17 July 2008, DBS Bank hasagreed to manage the Invitation and DBS Bank and CIMB-GK have agreed to underwrite the subscriptionof the number of Offer Shares set forth opposite each of their respective names in the following table, atthe Issue Price.

Joint Underwriters Number of Offer Shares

DBS Bank 750,000CIMB-GK 250,000

In the event of an under-subscription for the Offer Shares as at the close of the Application List, thatnumber of Offer Shares not subscribed for shall be made available to satisfy excess applications for thePlacement Shares to the exent that there are excess applications for the Placement Shares as at theclose of the Application List.

In the event of an over-subscription for the Offer Shares as at the close of the Application List (thePlacement Shares having been fully subscribed for or there are excess applications for the PlacementShares as at the close of the Application List), the successful applications for the Offer Shares will bedetermined by ballot or otherwise as determined by our Directors, in consultation with the Issue Managerand the Joint Underwriters and Placement Agents, and approved by the SGX-ST.

Placement Shares

Applications for the Placement Shares (excluding Reserved Shares) may only be made by way ofapplication form or through the website of DBS Vickers or such other forms of application as the IssueManager and the Joint Underwriters and Placement Agents deem appropriate. The terms and conditionsand procedures for applications are described in Appendix A of this Prospectus.

Pursuant to the terms and conditions in the Placement Agreement signed between our Company andDBS Bank and CIMB-GK dated 17 July 2008, DBS Bank and CIMB-GK have agreed to subscribe forand/or procure subscriptions for the number of Placement Shares set forth opposite each of theirrespective names in the following table, at the Issue Price.

Joint Placement Agents Number of Placement Shares

DBS Bank 149,250,000CIMB-GK 49,750,000

DBS Bank and CIMB-GK may, at their absolute discretion, appoint one or more sub-placement agents forthe Placement Shares.

In the event of an under-subscription of applications for the Placement Shares as at the close of theApplication List, that number of Placement Shares not subscribed for shall be made available to satisfyapplications for the Offer Shares to the extent that there are excess applications for the Offer Shares asat the close of the Application List.

PLAN OF DISTRIBUTION

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In the event of an under-subscription of applications for the Internet Placement Shares to be subscribedfor through the Internet website of DBS Vickers as at the close of the Application List, that number ofInternet Placement Shares not subscribed for shall be made available to satisfy applications for thePlacement Shares by way of Placement Shares application forms or any other form at application as maybe deemed appropriate by the Issue Manager and the Joint Underwriters and Placement Agents to theextent that there are excess applications for such Placement Shares as at the close of the ApplicationList or to satisfy applications for the Offer Shares, to the extent that there are excess applications for theOffer Shares as at the close of the Application List. Application for Internet Placement Shares through thewebsite of DBS Vickers will be made on a first-come-first-served basis.

Subscribers of Placement Shares (including the Internet Placement Shares) may be required to paybrokerage (and if so required, such brokerage will be up to 1% of the Issue Price), as well as stampduties and any other similar charges.

Reserved Shares

We have reserved 12,100,000 Placement Shares for subscription by our employees, business associates,Independent Directors and persons who have contributed to the success of our Group at the Issue Priceto recognise their contributions to our Group. These Reserved Shares are not subject to any moratoriumand may be disposed of after admission of our Company to the Official List of the SGX-ST.

In the event that any of the Reserved Shares are not taken up, they will be made available to satisfyapplications for the Placement Shares to the extent that there is an over-subscription for the PlacementShares as at the close of the Application List or, in the event of an under-subscription for the PlacementShares as at the close of the Application List, to satisfy excess applications made by members of thepublic for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at theclose of the Application List.

Subscription for New Shares

As at the date of this Prospectus, we are not aware of any person who intends to subscribe for Shares inthe Invitation amounting to more than 5% of the New Shares.

Distribution and Selling Restrictions

No action has been taken or will be taken in any jurisdiction that would permit a public offering of theShares being offered outside Singapore, or the possession, circulation or distribution of this Prospectusor any other material relating to us or the Shares in any jurisdiction where action for the purpose isrequired. Accordingly, the Shares in the Invitation may not be sold, directly or indirectly, and neither thisProspectus nor any other offering material or advertisement in connection with the Shares may bedistributed or published, in or from any country or jurisdiction except under circumstances that will resultin compliance with any applicable rules and regulations of any such country or jurisdiction. This documentmay not be used for the purpose of an offer or invitation in any circumstances in which such offer orInvitation is not authorised.

United States

The Shares have not been and will not be registered under the U.S. Securities Act and may not beoffered or sold in the United States or to U.S. persons (as defined in Regulation S under the U.S.Securities Act) unless the Shares are registered under the U.S. Securities Act, or an exemption from theregistration requirements of the U.S. Securities Act is available.

The Shares are being offered and sold outside the United States in reliance on Regulation S under theU.S. Securities Act. In addition, until 40 days after the commencement of the offering of the Shares, anoffer or sale of the Shares within the United States by a dealer (whether or not participating in theoffering) may violate the registration requirements of the U.S. Securities Act.


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Indonesia

The offering of the Shares is not registered under the Law of the Republic of Indonesia No. 8 Year 1995on Capital Market (“Indonesian Capital Market Law”) and its implementing regulations, and is notintended to become a public offering of securities under the Indonesian Capital Market Law and itsimplementing regulations.

This document may not be distributed or passed on within Indonesia or to persons who are citizens ofIndonesia or entities or residents in Indonesia. The Shares may not be offered or sold, directly orindirectly, within Indonesia or to Indonesian citizens, entities or residents in a manner which constitutes apublic offering of the Shares under the laws or regulations of Indonesia.

Hong Kong

This Prospectus has not been approved by or registered with the Securities and Futures Commission ofHong Kong or the Registrar of Companies of Hong Kong. The New Shares may not be offered or sold inHong Kong, by means of any document other than (i) to “professional investors” as defined in theSecurities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or(ii) in other circumstances which do not result in the document being a “prospectus” as defined in theCompanies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within themeaning of that Ordinance. No advertisement, invitation or document relating to the New Shares may beissued or may be in the possession of any person for the purpose of issue whether in Hong Kong orelsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public ofHong Kong (except if permitted of any person under the securities laws of Hong Kong) other than withrespect to the New Shares which are or are intended to be disposed of only to persons outside HongKong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made under that Ordinance.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented thisProspectus Directive (each, a “Relevant Member State”) an offer to the public of any New Shares whichare the subject of the Invitation contemplated by this document may not be made in that RelevantMember State except that an offer to the public in the Relevant Member State of any New Shares may bemade at any time under the following exemptions under this Prospectus Directive, if they have beenimplemented in that Relevant Member State:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not soauthorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during thelast financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual netturnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in thisProspectus Directive); or

(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any New Shares inany Relevant Member State means the communication in any form and by any means of sufficientinformation on the terms of the offer and any New Shares to be offered so as to enable an investor todecide to purchase the New Shares, as the same may be varied in that Member State by any measureimplementing this Prospectus Directive in that Member State and the expression “Prospectus Directive”means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant MemberState.


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United Kingdom

No Invitation or inducement to engage in investment activity (within the meaning of Section 21 of theFinancial Services and Markets Act 2000 (“FSMA”)) in relation to the New Shares may be communicatedor caused to be communicated to persons in the United Kingdom, except in circumstances where section21(1) of FSMA does not apply to our Company. All applicable provisions of FSMA must be complied within respect of anything done in relation to the New Shares in, from or otherwise involving the UnitedKingdom.

United Arab Emirates

The offering of the New Shares has not been approved or licensed by the Central Bank of the UnitedArab Emirates (the “UAE”), the Securities and Commodities Authority of the UAE and/or any otherrelevant licensing authority in the UAE including any licensing authority incorporated under the laws andregulations of any of the free zones established and operating in the territory of the UAE, in particular theDubai Financial Services Authority (the “DFSA”), a regulatory authority of the Dubai InternationalFinancial Centre (the “DFIC”). The offering of the New Shares does not constitute a public offer ofsecurities in the UAE, DFIC and/or any other free zone in accordance with the Commercial CompaniesLaw, Federal Law No.8 of 1984 (as amended), DFSA Offered Securities Rules and the DubaiInternational Financial Exchange Listing Rules, accordingly or otherwise. The New Shares may not beoffered to the public in the UAE and/or any of the free zones.

The Company represents and warrants that the New Shares will not be offered, sold, transferred ordelivered to the public in the UAE or any of its free zones.


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Upon listing and quotation on SGX-ST, our Shares will be traded under the book-entry settlement systemof the CDP, and all dealings in and transactions of the Shares through SGX-ST will be effected inaccordance with the terms and conditions for the operation of securities accounts with the CDP, asamended from time to time.

Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf ofpersons who maintain, either directly or through depository agents, securities accounts with CDP. Personsnamed as direct securities account holders and depository agents in the depository register maintainedby the CDP, rather than CDP itself, will be treated, under our Articles of Association and the Act, asmembers of our Company in respect of the number of Shares credited to their respective securitiesaccounts.

Persons holding our Shares in securities account with CDP may withdraw the number of Shares they ownfrom the book-entry settlement system in the form of physical share certificate(s). Such share certificateswill, however, not be valid for delivery pursuant to trades transacted on SGX-ST, although they will beprima facie evidence of title and may be transferred in accordance with our Articles of Association. A feeof $10.00 for each withdrawal of 1,000 Shares or less and a fee of $25.00 for each withdrawal of morethan 1,000 Shares is payable upon withdrawing our Shares from the book-entry settlement system andobtaining physical share certificates. In addition, a fee of $2.00 or such other amount as our Directorsmay decide, is payable to the Share Registrar for each share certificate issued and a stamp duty of$10.00 is also payable where our Shares are withdrawn in the name of the person withdrawing ourShares or $0.20 per $100.00 or part thereof of the last-transacted price where it is withdrawn in the nameof a third party. Persons holding physical share certificates who wish to trade on SGX-ST must depositwith CDP their share certificates together with the duly executed and stamped instruments of transfer infavour of CDP, and have their respective securities accounts credited with the number of Sharesdeposited before they can effect the desired trades. A fee of $10.00 is payable upon the deposit of eachinstrument of transfer with CDP.

Transactions in our Shares under the book-entry settlement system will be reflected by the seller’ssecurities account being debited with the number of Shares sold and the buyer’s securities account beingcredited with the number of Shares acquired. No transfer of stamp duty is currently payable for theShares that are settled on a book-entry basis.

A Singapore clearing fee for trades in our Shares on the SGX-ST is payable at the rate of 0.04% of thetransaction value subject to a maximum of $600 per transaction. The clearing fee, instrument of transferdeposit fee and share withdrawal fee may be subject to Singapore Goods and Services Tax at theprevailing rate of 7.0%.

Dealings of our Shares will be carried out in Singapore dollars and will be effected for settlement on CDPon a scripless basis. Settlement of trades on a normal “ready” basis on the SGX-ST generally takes placeon the third Market Day following the transaction date, and payment for the securities is generally settledon the following business day. CDP holds securities on behalf of investors in securities accounts. Aninvestor may open a direct account with CDP or a sub-account with a CDP agent. The CDP agent may bea member company of the SGX-ST, bank, merchant bank or trust company.

CLEARANCE AND SETTLEMENT

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INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. The present and past directorships (held in the five years preceding the date of this Prospectus) ofeach of our Directors, other than those held in our Company, are set out below (note that forIndonesia-incorporated companies, directorships include positions held on the board of directors aswell as the board of commissioners):

Name Present Directorships Past Directorships

Henry Maknawi Group companies Group companies

PT Sawit Permai Lestari –PT Wira Palm MandiriPT Agro Mas LestariPT Wira Mas PermaiPT Palm Makmur SentosaPT Langgeng Nusa MakmurPT Agro Sawitmas LestariPT IndotrustPT Listrindo Kencana

Other companies Other companies

Kencana Holdings Pte. Ltd. PT IndocareMcnawie Pty Ltd, AustraliaPT Kaltim Bulking TerminalPT Maknawi Jaya KencanaPT Maknawi PencilPT Tomang Maju PerkasaPT Mitra Usaha MakmurPT Mega Investindo

Ratna Maknawi Group companies Group companies

Kencana Plantations Pte Ltd PT Agrojaya Tirta KencanaKencana Bio-Energy Pte LtdPT Sawindo KencanaPT Alamraya Kencana MasPT Kencana Agro JayaPT Agro Inti KencanamasPT Sawit Permai LestariPT Bumi Permai SentosaPT Cahaya Permata GemilangPT Agro Mas LestariPT Wira Sawit MandiriPT Wira Mas PermaiPT Palm Makmur SentosaPT Agro Sawitmas LestariPT Langgeng Nusa Makmur


PT Dermaga Kencana Indonesia –PT Bangun Inti KencanaPT Tomang Maju PerkasaPT Aldo Tekindo

GENERAL AND STATUTORY INFORMATION

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Kent Surya Group companies Group companies

PT Sawindo Kencana –PT Alamraya Kencana Mas PT Argo Inti Kencanamas


PT Graha Meruya PT Olympindo Multi Finance

Tengku Alwin Aziz Group companies Group companies

PT Alamraya Kencana Mas –PT Agro Inti Kencanamas


PT PP. London Sumatra Indonesia Tbk PT. Akbar Indo Makmur StimecPT Daya Sakti Unggul Corpora TbkPT Cakra Petrokindo UtamaEnduring Capital Resources (Ltd),Singapore

Leung Yew Kwong Group companies Group companies

– –


– –

Soh Yew Hock Group companies Group companies

– –


Asia Dekor Holdings Ltd WBL Corporation LimitedJapan Residential Assets Manager Ltd O’Connors Holding Pte Ltd

SM Motors Private LimitedEPD Pureionics Pte LtdStarsauto Pte LtdMFS Technology LtdWearne Brothers Services(Private) Limited

Associated Motor Industries(Private) Limited

O’Connors Singapore Pte LtdWearnes Investment Pte LtdWearnes Gas (Private) LimitedWearnes Automotive & EquipmentPte Ltd

Wearnes International (1994) LimitedWearnes Environmental Pte LtdGentron (Pte) LtdOCM Communications Pte LtdWearnes Construction (2001) Pte LtdWearnes Development(Private) Limited

Wearnes Equipment & MachineryPte Ltd


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Wearnes Far East Pte LtdWellmate Pte LtdWearnes Biotech & Medicals (1998)Pte Ltd

Far East Motors Malaysia SendirianBerhad

Kumpulan O’Connor’s (Malaysia)Sdn Bhd

Rank-Maju Sdn BhdWearne Brothers (1983) Sdn BhdWearnes Gas Sdn BhdGentron Trading Sdn BhdO’Connor’s Engineering Sdn BhdO’Connor’s Trading Sdn BhdO’Connor’s Enterprise Sdn BhdWealco Malaysia Sendirian BerhadWearnes Brothers Services MalaysiaSdn Bhd

Wearnes Gas Sdn BhdWearnes Technology Sdn BhdJohan Kekal Sdn BhdPermata Alasan Sdn BhdRenown Heritage Sdn BhdSukatan Garisan Sdn BhdWilmington Sdn BhdWearnes Gas Sdn Bhd

Suzhou Wearnes Environmental &Technology Co Ltd

Suzhou Future Agriworld Co LtdCentral China International LeasingCo Ltd

Pacific Silica Pty LtdPolytek Catering Equipment Pty LtdPolytek Industrial Equipment Pty LtdPolytek Wearnes Pty LtdRank P T O’Connor’s Co LtdJaguar Cars (Thailand) Co LtdEPD Wearnes (USA) IncMedicineNet, IncWearnes Motors (HK) Ltd

2. The present and past directorships (held in the five years preceding the date of this Prospectus) ofeach of our Executive Officers, other than those held in our Company, are set out below:


Albert Maknawi Group companies Group companies

PT Listrindo Kencana –PT Belitung EnergySawindo Agri Pte Ltd PT Wira Palm MandiriPT Sawindo Cemerlang PT Pelayaran Asia Marine


– –


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Ajis Chandra Group companies Group companies

Kencana Logistics Pte. Ltd. –PT Agri East Borneo Kencana PT Pelayaran Asia Marine PT Indotrust


PT Kaltim Bulking Terminal –PT Global Positiong Solutions PT GPS IndonesiaPT Graha Meruya

CS Kwang Kay Group companies Group companies(also known – –as Chua)


– Clonal Palms Sdn BhdSapi Plantations Sdn BhdReka Halus Sdn BhdSaremas Sdn BhdRibubonus Sdn BhdHibumas Sdn BhdSri Kamusan Sdn BhdSabahmas Plantations Sdn BhdSekar Imej Sdn BhdPenumilek Sdn BhdCeramilek Sdn BhdJebawang Sdn BhdSuburmas Plantations Sdn BhdSuburmas Palm Oil Mill Sdn Bhd

Ooi Min Choo Group companies Group companies

– –


– –

Lim Chin Chai Group companies Group companies

– –


– Orisatin Sdn Bhd

3. Saved as disclosed below, none of our Directors, Executive Officers or Controlling Shareholder:

(a) has at any time during the last ten years, had an application or a petition under anybankruptcy laws of any jurisdiction filed against him or against a partnership of which he wasa partner at the time when he was a partner or at any time within two years from the date heceased to be a partner;

(b) has at any time during the last ten years, had an application or a petition under any law ofany jurisdiction filed against an entity (not being a partnership) of which he was a director oran equivalent person or a key executive, at the time when he was a director or an equivalentperson or a key executive of that entity or at any time within two years from the date heceased to be a director or an equivalent person or a key executive of that entity, for thewinding up or dissolution of that entity or, where that entity is the trustee of a business trust,that business trust, on the ground of insolvency;


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(c) has any unsatisfied judgement against him;

(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud ordishonesty punishable with imprisonment or has been the subject of any criminalproceedings (including any pending criminal proceedings of which he is aware of) for suchpurpose;

(e) has been convicted of any offence, in Singapore or elsewhere, involving a breach of any lawor regulatory requirement that relates to the securities or futures industry in Singapore orelsewhere, or has been the subject of any criminal proceedings (including pending criminalproceedings of which he is aware) for such breach;

(f) has at any time during the last ten years, had judgement entered against him in any civilproceedings in Singapore or elsewhere involving the breach of any law or regulatoryrequirement that relates to the securities or futures industry in Singapore or elsewhere, or afinding of fraud, misrepresentation or dishonesty on his part, or been the subject of any civilproceedings (including any pending civil proceedings of which he is aware) involving anallegation of fraud, misrepresentation or dishonesty on his part;

(g) has been convicted in Singapore or elsewhere of any offence in connection with theformation or management of any entity or business trust;

(h) has been disqualified from acting as a director or an equivalent person of any entity(including the trustee of a business trust), or from taking part in any way directly or indirectlyin the management of any entity or business trust;

(i) has been the subject of any order, judgement or ruling of any court, tribunal or governmentalbody permanently or temporarily enjoining him from engaging in any type of businesspractice or activity;

(j) has ever, to his knowledge, been concerned with the management or conduct, in Singaporeor elsewhere, of affairs of:

(i) any corporation which has been investigated for a breach of any law or regulatoryrequirement governing corporations in Singapore or elsewhere;

(ii) any entity (not being a corporation) which has been investigated for a breach of anylaw or regulatory requirement governing such entities in Singapore or elsewhere;

(iii) any business trust which has been investigated for a breach of any law or regulatoryrequirement governing business trusts in Singapore or elsewhere; or

(iv) any entity or business trust which has been investigated for a breach of any law orregulatory requirement that relates to the securities or futures industry in Singapore orelsewhere,

in connection with any matter occurring or arising during the period when he was soconcerned with the entity or business trust; or

(k) has been the subject of any current or past investigation or disciplinary proceedings, or hasbeen reprimanded or issued any warning, by the Authority or any other regulatory authority,exchange, professional body or governmental agency, whether in Singapore or elsewhere.


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4. Mr. Henry Maknawi was a former director and indirect shareholder of PT Indra Maju Lestari, anIndonesian property development company which was declared insolvent in 1998 as a result ofdeterioration of the Indonesian economy arising from the May 1998 riots in Indonesia. Mr. HenryMaknawi had disposed of his indirect shareholding interests and resigned as director in April 1998prior to its insolvency.

5. Mr. Soh Yew Hock was appointed as a non-executive director of Effort Holdings Pte Ltd on 23 Aug1994 and resigned on 1 April 1999. Effort Holdings Pte Ltd was wound up under a court order on 1December 2000. Mr. Soh Yew Hock was the representative of Wearnes International Ltd on theboard of Effort Holdings Pte Ltd. Wearnes International Ltd had a minority stake of 12.85% equityinterest in EH.

SHARE CAPITAL

6. As at the Latest Practicable Date, to the best of the knowledge of our Directors, our Directors arenot aware of any arrangements, the operation of which may at a subsequent date result in thechange of control of our Company.

MATERIAL CONTRACTS

7. The following contracts, not being contracts entered into in the ordinary course of business, havebeen entered into by our Company and our subsidiaries within the two years preceding the date oflodgement of this Prospectus and are or may be material:

(a) The Management and Underwriting Agreement dated 17 July 2008 made between ourCompany, DBS Bank and CIMB-GK referred to in the section “Management, Underwritingand Placement Arrangements” of this Prospectus;

(b) The Placement Agreement dated 17 July 2008 made between our Company, DBS Bank andCIMB-GK referred to in the section “Management, Underwriting and PlacementArrangements” of this Prospectus;

(c) The Depository Agreement dated 17 July 2008 made between our Company and CDPpursuant to which CDP agreed to act as central depository for our securities for trades in thesecurities of the Company through the SGX-ST;

(d) The various Conditional Sale and Purchase Agreements dated 22 October 2007 (asamended by supplemental agreements dated 19 November 2007 and 19 March 2008)entered into between the Initial Shareholders as vendor and the Sincos as purchaser,whereby the Initial Shareholders transferred their Initial Indoco Shares in consideration forthe allotment of new ordinary shares in the capital of the Sincos in the manner described inthe section “Restructuring Exercise” of this Prospectus; and

(e) The various Conditional Sale and Purchase Agreements and their initial supplementalagreements dated 22 June 2007, 26 June 2007, 23 August 2007 and 31 August 2007 (asamended by subsequent supplemental agreements dated 27 February 2008) entered intobetween the Initial Shareholders as vendor and the Indocos as purchaser, whereby the InitialShareholders transferred all of their shareholding interests in the Operating Companies tothe Indocos (save for our Chairman and CEO, Mr. Henry Maknawi who retained one (1)share in each operating company) in consideration for Indocos allotment of new ordinaryshares in the capital of the Indocos in the manner described in the section “RestructuringExercise” of this Prospectus.

LITIGATION

8. Neither our Company nor any of our subsidiaries is engaged in any legal or arbitration proceedingsas plaintiff or defendant, including those which are pending or known to be contemplated, whichmay have or which have had in the 12 months immediately preceding the date of lodgement of thisProspectus, a material effect on the financial position or the profitability of our Group.


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MISCELLANEOUS

9. There have been no public takeover offers by third parties in respect of our Shares or by us inrespect of other companies’ shares or units of a business trust which have occurred between 1January 2007 and the Latest Practicable Date.

10. Application monies received by our Company in respect of successful applications (includingsuccessful applications which are subsequently rejected) will be placed in a separate non-interestbearing account with DBS Bank (the “Receiving Bank”). In the ordinary course of business, theReceiving Bank will deploy these monies in the interbank money market. All profits derived fromthe deployment of such monies will accrue to the Receiving Bank. Any refund of all or part of theapplication monies to unsuccessful or partially successful applicants will be made without anyinterest or any share of revenues or any other benefit arising therefrom.

11. Save as disclosed in this Prospectus, our Directors are not aware of any relevant materialinformation including trading factors or risks which are unlikely to be known or anticipated by thegeneral public and which could materially affect the profits of our Company and our subsidiaries.

12. Save as disclosed under the sections, “Risk Factors”, “Capitalisation and Indebtedness”,“Management’s Discussion and Analysis of Financial Position and Results of Operations”, “GeneralInformation on our Group – Prospects” and “General Information on our Group – Strategy andFuture Plans” of this Prospectus, the financial condition and operations of our Group are not likelyto be affected by any of the following:

(a) known trends or demands, commitments, events or uncertainties that will result in or arereasonably likely to result in our Group’s liquidity increasing or decreasing in any materialway;

(b) material commitments for capital expenditure;

(c) unusual or infrequent events or transactions or any significant economic changes thatmaterially affected the amount of reported income from operations; and

(d) known trends or uncertainties that have had or that we reasonably expect will have amaterial favourable or unfavourable impact on revenues or operating income.

13. We currently have no intention of changing our auditors after the listing of our Company on theSGX-ST.

14. Save as disclosed under “Significant Events” in Appendix F on the audited combined financialstatements of our Group, our Directors are not aware of any event which has occurred since 1January 2008 which may have a material effect on the combined financial information of our Groupset out in this Prospectus.

15. No expert is employed on a contingent basis by our Company or any of our subsidiaries, or has amaterial interest, whether direct or indirect, in our Shares, the shares of our subsidiaries or has amaterial economic interest whether direct or indirect, in our Company, including an interest in thesuccess of the Invitation.

16. No option to subscribe for Shares in, or debentures of, our Company or our subsidiaries has beengranted to, or was exercised by, any Director or Executive Officer within the two financial yearspreceding the date of this Prospectus.

17. No person has been, or has the right to be, given an option to subscribe for or purchase anysecurities of our Company or any of our subsidiaries.


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CONSENTS

18. The Auditors and Reporting Accountants have given and have not withdrawn their written consentto the issue of this Prospectus with the inclusion herein of the Audited Combined FinancialStatements and the Unaudited Proforma Combined Financial Information of our Company in theform and context in which they are included and references to their name in the form and context inwhich it appears in this Prospectus and to act in such capacity in relation to this Prospectus.

19. Each of the Solicitors to the Invitation and to our Company on Singapore law, the Solicitors to theIssue Manager and the Joint Underwriters and Placement Agents, the Share Registrar and ShareTransfer Agent, the Principal Bankers and the Receiving Banker do not make or purport to makeany statement in this Prospectus or any statement upon which a statement in this Prospectus isbased and each of them makes no representation regarding any statement in this Prospectus andto the maximum extent permitted by law, expressly disclaim and takes no responsibility for anyliability to any person which is based on, or arises out of, any statement, information or opinions in,or omission from, this Prospectus.

20. DBS Bank has given and has not withdrawn its written consent to being named in this Prospectusas the Issue Manager.

21. DBS Bank and CIMB-GK have each given and have not withdrawn their written consent to beingnamed in this Prospectus as the Joint Underwriters and Placement Agents.

22. ABNR has given and has not withdrawn its written consent to the issue of this Prospectus with theinclusion of its name and references thereto, the statements on page 29 under the section “RiskFactors” of this Prospectus in the form and context in which it appears in this Prospectus and to actin the capacity of Legal Advisers to our Company on Indonesian law in respect of this Prospectus.

23. PT Actual Kencana Appraisal has given and has not withdrawn its written consent to the issue ofthis Prospectus with the inclusion therein of the information in the “Interested Person Transactionsand Conflicts of Interests – Present and Ongoing Interested Person Transactions” section of thisProspectus in the form and context in which they are included and to being named in thisProspectus as the independent valuer to the Company.

24. PT Asian Appraisal Indonesia has given and has not withdrawn its written consent to being namedin this Prospectus as the valuer of the biological assets.

25. ISTA Mielke GmBH (Global Research & Analyses) has given and has not withdrawn its writtenconsent to the issue of this Prospectus with the inclusion therein of the information in the“Prospects” section of this Prospectus in the form and context in which they are included andreferences to its name in the form and context in which it appears in this Prospectus and to act insuch capacity in relation to this Prospectus.

RESPONSIBILITY STATEMENT BY OUR DIRECTORS

26. This Prospectus has been seen and approved by our Directors and they individually andcollectively accept full responsibility for the accuracy of the information given herein and confirm,having made all reasonable enquiries, that to the best of their knowledge and belief, the factsstated and the opinions expressed herein are fair and accurate in all material respects as of thedate hereof and there are no material facts the omission of which would make any statements inthis Prospectus misleading and that this Prospectus constitutes full and true disclosure of allmaterial facts about the Invitation and our Group.


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DOCUMENTS AVAILABLE FOR INSPECTION

26. The following documents or copies thereof may be inspected at our registered office at 3 ShentonWay, #10-06 Shenton House, Singapore 068805 during normal business hours for a period of sixmonths from the date of registration by the Authority of this Prospectus:

(a) the Memorandum and Articles of Association of our Company;

(b) the Independent Auditors Reports on the Audited Combined Financial Statements of ourGroup for the financial years ended 31 December 2005, 2006 and 2007;

(c) the Independent Auditors’ Report on the Unaudited Proforma Combined FinancialInformation of our Group for the financial year ended 31 December 2007;

(d) the material contracts referred to in paragraph 7 above;

(e) the letters of consent referred to in paragraphs 18, 20, 21, 22, 23, 24 and 25 above;

(f) the Service Agreements;

(g) the report dated 2 June 2008 issued by ISTA Mielke GMBH (Global Research & Analyses)and reproduced in the section “Prospects” of this Prospectus;

(h) the rental valuation report by PT Actual Kencana Appraisal referred to in the “InterestedPerson Transactions and Conflicts of Interests - Present and Ongoing Interested PersonsTransactions - Long term lease of office premises by SWK from PT Graha Meruya” sectionof this Prospectus; and

(i) the audited financial statements of our subsidiaries (where available) for the financial yearsended 31 December 2005, 2006 and 2007.


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Applications are invited for the subscription of the New Shares at the Issue Price, subject to the followingterms and conditions:–

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES OR INTEGRALMULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARESWILL BE REJECTED.

2. Your application for the Offer Shares may be made by way of the printed WHITE Offer SharesApplication Forms or through Automated Teller Machines (“ATMs”) belonging to the ParticipatingBanks (“ATM Electronic Application”) or through the Internet banking (“IB”) websites of the relevantParticipating Banks (“Internet Electronic Application”).

Application for Internet Placement Shares (also referred to as “Internet Electronic Application”) mayonly be made by way of an Internet Electronic Application through the Internet website of DBSVickers Securities (Singapore) Pte Ltd (“DBS Vickers”) at “www.dbsvonline.com” if you have aninternet trading account with DBS Vickers. Internet Electronic Applications, both through the IBwebsites of the relevant Participating Banks and the Internet website of DBS Vickers, shall togetherwith ATM Electronic Applications, be referred to as “Electronic Applications”.

Applications for Placement Shares (other than Internet Placement Shares and Reserved Shares)may only be made by way of the printed BLUE Placement Shares Application Forms or in suchother forms of application as the Issue Manager and the Joint Underwriters and Placement Agentsdeem appropriate.

Application for Reserved Shares may only be made by way of the printed PINK Reserved SharesApplication Forms or in such other forms of application as the Issue Manager and the JointUnderwriters and Placement Agents deem appropriate.

YOU MAY NOT USE YOUR CPF FUNDS TO APPLY FOR THE NEW SHARES.

3. You (being other than an approved nominee company) are allowed to submit ONLY oneapplication in your own name for:–

(a) the Offer Shares by any one of the following:–

�� Offer Shares Application Form;�� ATM Electronic Application; or�� Internet Electronic Application; or

(b) the Placement Shares by any one of the following:–

�� Placement Shares Application Form; or�� Internet Electronic Application; or�� In such other forms of application as the Issue Manager and the Joint

Underwriters and Placement Agents deem appropriate.

Only one application may be made for the benefit of one person for the Offer Shares in his ownname. Multiple applications for the Offer Shares will be rejected, except in cases of applications byapproved nominee companies where each application is made on behalf of a different beneficiary.

You may not submit multiple applications for the Offer Shares via the Application Form, ATMElectronic Application or Internet Electronic Application. A person who is submitting an applicationfor the Offer Shares by way of the Offer Shares Application Form may not submit anotherapplication for the Offer Shares by way of an ATM Electronic Application or Internet ElectronicApplication and vice versa.

APPENDIX A – TERMS, CONDITIONS AND PROCEDURES FOR APPLICATIONS AND ACCEPTANCE

A-1

A person, other than an approved nominee company, who is submitting an application for the OfferShares in his own name should not submit any other application for the Offer Shares, whether onan Application Form or through an ATM Electronic Application or Internet Electronic Application, forany other person. Such separate applications will be deemed to be multiple applications and shallbe rejected.

Joint or multiple applications for the Offer Shares shall be rejected. Persons submitting or procuringsubmissions of multiple applications for the Offer Shares may be deemed to have committed anoffence under the Penal Code, Chapter 224 of Singapore, and the Securities and Futures Act,Chapter 289 of Singapore, and such applications may be referred to the relevant authorities forinvestigation. Multiple applications or those appearing to be or suspected of being multipleapplications (other than as provided herein) will be liable to be rejected at the Company’sdiscretion.

You may make one or more applications for the Placement Shares under the Placement and/ormake a single application for Offer Shares under the Offer and/or, if eligible, make one or moreapplications for Reserved Shares.

4. We will not accept applications from any person under the age of 21 years, undischargedbankrupts, sole-proprietorships, partnerships, non-corporate bodies, joint Securities Accountholders of CDP and applicants whose addresses (furnished in their printed Application Forms or inany other form of application as may be deemed appropriate by the Issue Manager and the JointUnderwriters and Placement Agents or, in the case of Electronic Applications, contained in therecords of the relevant Participating Banks or DBS Vickers, as the case may be) bear post officebox numbers. No persons acting or purporting to act on behalf of a deceased person is allowed toapply under the Securities Account with CDP in the deceased name at the time of application.

In addition, applicants who wish to subscribe for the Placement Shares through the website of DBSVickers:

(a) must not be corporations, sole-proprietorships, partnerships, or any other business entity;(b) must be at least 21 years old;(c) must not be undischarged bankrupts;(d) must apply for the Placement Shares in Singapore;(e) must have a mailing address in Singapore; and(f) must be customers who maintain trading accounts with DBS Vickers.

5. We will not recognise the existence of a trust. Any application by a trustee or trustees must bemade in his/their own name(s) and without qualification or, where the application is made by way ofa printed Application Form by a nominee, in the name(s) of an approved nominee company orapproved nominee companies, in each case, in compliance with paragraph 6 below.

6. WE WILL ONLY ACCEPT NOMINEE APPLICATIONS FROM APPROVED NOMINEECOMPANIES. Approved nominee companies are defined as banks, merchant banks, financecompanies, insurance companies, licensed securities dealers in Singapore and nomineecompanies controlled by them. Applications made by nominees other than approved nomineecompanies will be rejected.

7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIESACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you donot have an existing Securities Account with CDP in your own name at the time of application, yourapplication will be rejected (if you apply by way of an Application Form), or you will not be able tocomplete your Electronic Application (if you apply by way of an Electronic Application). If you havean existing Securities Account but fail to provide your Securities Account number or provide anincorrect Securities Account number in Section B of the Application Form in any other form ofapplication as may be deemed appropriate by the Issue Manager and the Joint Underwriters andPlacement Agents or in your Electronic Application, as the case may be, your application is liable


A-2

to be rejected. Subject to paragraph 8 below, your application may be rejected if your particularssuch as name, NRIC/passport number, nationality, permanent residence status and CDP SecuritiesAccount number provided in your Application Form, or in the case of an Electronic Application,contained in the records of the relevant Participating Bank or DBS Vickers at the time of yourElectronic Application, as the case may be, differ from those particulars in your Securities Accountas maintained by CDP. If you have more than one individual direct Securities Account with CDP,your application shall be rejected.

8. If your address as stated in the Application Form or, in the case of an ElectronicApplication, contained in the records of the relevant Participating Bank or DBS Vickers, asthe case may be, is different from the address registered with CDP, you must inform CDP ofyour updated address promptly, failing which the notification letter on successful allotmentwill be sent to your address last registered with CDP.

9. Our Company reserves the right to reject any application which does not conform strictly to theinstructions set out in the Application Forms and this Prospectus or which does not comply with theinstructions for Electronic Applications or with the terms and conditions of this Prospectus or in thecase of an application by way of an Application Form, which is illegible, incomplete, incorrectlycompleted or which is accompanied by an improperly drawn up or improper form of remittance. OurCompany further reserves the right to treat as valid any applications not completed or submitted oreffected in all respects in accordance with the instructions set out in the Application Forms or theinstructions for the Electronic Applications or the terms and conditions of this Prospectus, and alsoto present for payment or other processes all remittances at any time after receipt and to have fullaccess to all information relating to, or deriving from, such remittances or the processing thereof.

10. Our Company reserves the right to reject or to accept, in whole or in part, or to scale down or toballot any application, without assigning any reason therefor, and we will not entertain any enquiryand/or correspondence on the decision of our Company except in respect of applications whichhave been balloted but subsequently rejected where the reasons for such rejection will be providedto the Applicant. This right applies to applications made by way of Application Forms or in any otherform of application as may be deemed appropriate by the Issue Manager and the JointUnderwriters and Placement Agents and by way of Electronic Applications. In deciding the basis ofallotment, our Company will give due consideration to the desirability of alloting New Shares to areasonable number of applicants with a view to establishing an adequate market for the Shares.

11. Share certificates will be registered in the name of CDP or its nominee and will be forwarded onlyto CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after theclose of the Application List, a statement of account stating that your Securities Account has beencredited with the number of New Shares allotted to you. This will be the only acknowledgment ofapplication monies received and is not an acknowledgment by our Company. You irrevocablyauthorise CDP to complete and sign on your behalf as transferee or renouncee any instrument oftransfer and/or other documents required for the issue or transfer of the New Shares allotted toyou. This authorisation applies to applications made by way of printed Application Forms or in anyother form of application as may be deemed appropriate by the Issue Manager and the JointUnderwriters and Placement Agents and by way of Electronic Applications.

12. In the event that our Company lodges a supplementary or replacement prospectus (“RelevantDocument”) pursuant to the Securities and Futures Act or any applicable legislation in force fromtime to time prior to the close of the Invitation, and the New Shares have not been issued, we will(as required by law) at our sole and absolute discretion either:–

(a) within two days (excluding any Saturday, Sunday or public holiday) from the date of thelodgement of the Relevant Document, give you notice in writing of how to obtain, or arrangeto receive, a copy of the same and provide you with an option to withdraw your applicationand take all reasonable steps to make available within a reasonable period the RelevantDocument to you if you have indicated that you wish to obtain, or have arranged to receive, acopy of the Relevant Document; or


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(b) within seven days of the lodgement of the Relevant Document give you a copy of theRelevant Document and provide you with an option to withdraw your application; or

(c) deem your application as withdrawn and cancelled and refund your application monies(without interest or any share of revenue or other benefit arising therefrom) to you withinseven days from the lodgement of the Relevant Document.

Any applicant who wishes to exercise his option under paragraphs 12(a) and (b) above to withdrawhis application shall, within 14 days from the date of lodgement of the Relevant Document, notifyus whereupon we shall, within seven days from the receipt of such notification, return all monies inrespect of such application (without interest or any share of revenue or other benefit arisingtherefrom).

In the event that the New Shares have already been issued at the time of the lodgement of theRelevant Document but trading has not commenced, we will (as required by law) either:–

(i) within two days (excluding Saturday, Sunday or public holiday) from the date of thelodgement of the Relevant Document, give you notice in writing of how to obtain, or arrangeto receive, a copy of the same and provide you with an option to return to us the NewShares which you do not wish to retain title in and take all reasonable steps to makeavailable within a reasonable period the Relevant Document to you if you have indicated thatyou wish to obtain, or have arranged to receive, a copy of the Relevant Document; or

(ii) within seven days from the lodgement of the Relevant Document give you a copy of theRelevant Document and provide you with an option to return the New Shares which you donot wish to retain title in; or

(iii) deem the issue as void and refund your payment for the New Shares (without interest or anyshare of revenue or other benefit arising therefrom) within seven days from the lodgement ofthe Relevant Document.

Any applicant who wishes to exercise his option under paragraphs 12(i) and (ii) above to return theNew Shares issued to him shall, within 14 days from the date of lodgement of the RelevantDocument, notify us of this and return all documents, if any, purporting to be evidence of title ofthose New Shares, whereupon we shall, within seven days from the receipt of such notification anddocuments, pay to him all monies paid by him for the New Shares without interest or any share ofrevenue or other benefit arising therefrom and at his own risk, and the New Shares issued to himshall be deemed to be void.

Additional terms and instructions applicable upon the lodgement of the supplementary orreplacement prospectus, including instructions on how you can exercise the option to withdraw,may be found in such supplementary or replacement prospectus.

13. In the event of an under-subscription for Offer Shares as at the close of the Application List, thatnumber of Offer Shares not subscribed for shall be made available to satisfy excess applicationsfor Placement Shares to the extent there is an over-subscription for Placement Shares as at theclose of the Application List.

In the event of an under-subscription for Placement Shares as at the close of the Application List,that number of Placement Shares not subscribed for shall be made available to satisfy excessapplications for Offer Shares to the extent that there is an over-subscription for Offer Shares as atthe close of the Application List.


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In the event of an under-subscription for the Reserved Shares as at the close of the ApplicationList, the number of Reserved Shares under-subscribed shall be made available to satisfyapplications for Placement Shares by way of Placement Shares Application Forms or in any otherform of application as may be deemed appropriate by the Issue Manager and the JointUnderwriters and Placement Agents to the extent that there is an over-subscription for suchPlacement Shares as at the close of the Application List or to satisfy excess applications for OfferShares, to the extent that there is an over-subscription for Offer Shares as at the close of theApplication List.

In the event of an under-subscription for Internet Placement Shares to be applied for through thewebsite of DBS Vickers as at the close of the Application List, that number of Internet PlacementShares not subscribed for shall be made available to satisfy applications for Placement Shares byway of Placement Shares Application Forms or in any other form of application as may be deemedappropriate by the Issue Manager and the Joint Underwriters and Placement Agents to the extentthat there is an over-subscription for such Placement Shares as at the close of the Application Listor to satisfy excess applications for Offer Shares, to the extent that there is an over-subscription forOffer Shares as at the close of the Application List.

In the event of an over-subscription for Offer Shares as at the close of the Application List and/orPlacement Shares (including Internet Placement Shares) are fully subscribed or over-subscribedas at the close of the Application List, the successful applications for Offer Shares will bedetermined by ballot or otherwise as determined by our Directors, in consultation with the IssueManager and the Joint Underwriters and Placement Agents, and approved by the SGX-ST.

14. You irrevocably authorise CDP to disclose the outcome of your application, including the number ofNew Shares allotted to you pursuant to your application, to the Company, the Issue Manager, theJoint Underwriters and Placement Agents, DBS Vickers and any other parties so authorised by theforegoing persons.

15. Any reference to “you” or the “Applicant” in this section shall include an individual, a corporation, anapproved nominee company and trustee applying for Offer Shares by way of an Offer SharesApplication Form or by way of an Electronic Application, a person applying for Placement Shares(including Internet Placement Shares) by way of Placement Shares Application Form or in suchother forms of application as the Issue Manager and Joint Underwriters and Placement Agentsdeem appropriate and a person applying for the Reserved Shares by way of a Reserved SharesApplication Form or in such other forms of application as the Issue Manager and Joint Underwritersand Placement Agents deem appropriate.

16. By completing and delivering an Application Form and, in the case of an ATM ElectronicApplication, by pressing the “Enter” or “OK” or “Confirm” or “Yes” key or any other relevant key onthe ATM or in the case of an Internet Electronic Application, by clicking “Submit” or “Continue” or“Yes” or “Confirm” or any other button on the IB website of the relevant Participating Bank or thewebsite of DBS Vickers in accordance with the provisions herein, you:–

(a) irrevocably offer, agree and undertake to subscribe for the number of New Shares specifiedin your application (or such smaller number for which the application is accepted) at theIssue Price for each New Share and agree that you will accept such New Shares as may beallotted to you, in each case on the terms of, and subject to the conditions set out in, thisProspectus and the Memorandum and Articles of Association of the Company;

(b) agree that in the event of any inconsistency between the terms and conditions for applicationset out in this Prospectus and those set out in the website of DBS Vickers, or the IBwebsites or ATMs of the relevant Participating Banks, the terms and conditions set out in thisProspectus shall prevail;

(c) agree that the aggregate Issue Price for the New Shares applied for is due and payable tothe Company upon application;


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(d) warrant the truth and accuracy of the information contained, and representations anddeclarations made, in your application, and acknowledge and agree that such information,representations and declarations will be relied on by our Company in determining whether toaccept your application and/or whether to allot any New Shares to you; and

(e) agree and warrant that if the laws of any jurisdictions outside Singapore are applicable toyour application, you have complied with all such laws and none of our Company, the IssueManager or the Joint Underwriters and Placement Agents will infringe any such laws as aresult of the acceptance of your application.

17. Our acceptance of applications will be conditional upon, inter alia, our Company being satisfiedthat:–

(a) permission has been granted by the SGX-ST to deal in, and for quotation of, all our existingShares and the New Shares, on the Official List of the SGX-ST;

(b) the Management and Underwriting Agreement, and the Placement Agreement referred to inthe section entitled “Management, Underwriting and Placement Agreements” of thisProspectus have become unconditional and have not been terminated; and

(c) the Monetary Authority of Singapore (the “Authority”) has not served a stop order whichdirects that no or no further shares to which this Prospectus relates be allotted or issued(“Stop Order”).

18. In the event that a Stop Order in respect of the New Shares is served by the Authority or othercompetent authority, and:–

(a) the New Shares have not been issued, we will (as required by law) deem all applications tobe withdrawn and cancelled and our Company shall refund the application monies (withoutinterest or any share of revenue or other benefit arising therefrom) to you within 14 days ofthe date of the Stop Order; or

(b) if the New Shares have already been issued but trading has not commenced, the issue will(as required by law) be deemed void and we will refund your payment for the New Shares(without interest or any share of revenue or other benefit arising therefrom) to you within 14days from the date of the Stop Order.

This shall not apply where only an interim Stop Order has been served.

19. In the event that an interim Stop Order in respect of the New Shares is served by the Authority orother competent authority, no Invitation Shares shall be issued to you until the Authority revokesthe interim Stop Order.

20. The Authority is not able to serve a Stop Order in respect of the New Shares if the New Shareshave been issued and listed on the SGX-ST and trading in them has commenced.

21. We will not hold any application in reserve.

22. We will not allot or allocate any Shares on the basis of this Prospectus later than six months afterthe date of registration of this Prospectus by the Authority.

23. Additional terms and conditions for applications by way of printed Application Forms are set out inthe section entitled “Additional Terms and Conditions for Applications Using Printed ApplicationForms” on pages A7 and A11 of this Prospectus.

24. Additional terms and conditions for applications by way of Electronic Applications are set out in thesection entitled “Additional Terms and Conditions For Electronic Applications” on pages A11 andA16 of this Prospectus.


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ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATIONFORMS

Applications by way of Application Forms shall be made on and subject to the terms andconditions of this Prospectus, including but not limited to the terms and conditions appearingbelow as well as those set out under the section entitled “TERMS, CONDITIONS ANDPROCEDURES FOR APPLICATION AND ACCEPTANCE” on pages A1 to A6 of this Prospectus, aswell as the Memorandum and Articles of Association of our Company.

1. Your application for Offer Shares must be made using the WHITE Offer Shares Application Formsand WHITE official envelopes “A” and “B”, accompanying and forming part of this Prospectus.

Application for Placement Shares (other than Internet Placement Shares) by way of ApplicationForms must be made using the BLUE Placement Shares Application Forms, accompanying andforming part of this Prospectus or in any other form of application as may be deemed appropriateby the Issue Manager and the Joint Underwriters and Placement Agents. Application for ReservedShares must be made using the PINK Reserved Shares Application Forms or in such other formsof application as the Issue Manager and the Joint Underwriters and Placement Agents deemappropriate.

Without prejudice to the rights of the Company, the Issue Manager and the Joint Underwriters andPlacement Agents have been authorised to accept, for and on behalf of the Company, such otherforms of applications, as the Issue Manager and the Joint Underwriters and Placement Agents may(in consultation with the Company) deem appropriate.

We draw your attention to the detailed instructions contained in the respective Application Formsand this Prospectus for the completion of the Application Forms which must be carefully followed.Our Company reserves the right to reject applications which do not conform strictly to theinstructions set out in the Application Forms and this Prospectus or to the terms andconditions of this Prospectus or which are illegible, incomplete, incorrectly completed orwhich are accompanied by improperly drawn remittances.

2. Your Application Form must be completed in English. Please type or write clearly in ink usingBLOCK LETTERS.

3. You must complete all spaces in the Application Form except those under the heading “FOROFFICIAL USE ONLY” and you must write the words “NOT APPLICABLE” or “N.A.” in any spacethat is not applicable.

4. Individuals, corporations, approved nominee companies and trustees must give their names in full.If you are an individual, you must make your application using your full name as it appears in youridentity card (if you have such an identification document) or in your passport and, in the case ofcorporations, in your full names as registered with a competent authority. If you are not anindividual, you must complete the Application Form under the hand of an official who must statethe name and capacity in which he signs the Application Form. If you are a corporation completingthe Application Form, you are required to affix your Common Seal (if any) in accordance with yourMemorandum and Articles of Association or equivalent constitutive documents. If you are acorporate Applicant and your application is successful, a copy of your Memorandum and Articles ofAssociation or equivalent constitutive documents must be lodged with our Company’s ShareRegistrar and Share Transfer Agent. Our Company reserves the right to require you to producedocumentary proof of identification for verification purposes.

5. (a) You must complete Sections A and B and sign page 1 of the Application Form.

(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form.Where paragraph 7(a) is deleted, you must also complete Section C of the Application Formwith particulars of the beneficial owner(s).

(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, onpage 1 of the Application Form, your application is liable to be rejected.


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6. You (whether an individual or corporate Applicant, whether incorporated or unincorporated andwherever incorporated or constituted) will be required to declare whether you are a citizen or apermanent resident of Singapore or a corporation in which citizens or permanent residents ofSingapore or any body corporate constituted under any statute of Singapore have an interest in theaggregate of more than 50 per cent. of the issued share capital of or interests in such corporations.If you are an approved nominee company, you are required to declare whether the beneficial ownerof the New Shares is a citizen or permanent resident of Singapore or a corporation, whetherincorporated or unincorporated and wherever incorporated or constituted, in which citizens orpermanent residents of Singapore or any body corporate, whether incorporated or unincorporatedand wherever incorporated or constituted under any statute of Singapore, have an interest in theaggregate of more than 50 per cent. of the issued share capital of or interests in such corporation.

7. You may apply for New Shares using only cash. Each application must be accompanied by a cashremittance in Singapore currency for the full amount payable, in respect of the number of NewShares applied for, in the form of a BANKER’S DRAFT or CASHIER’S ORDER drawn on a bank inSingapore, made out in favour of “KENCANA SHARE ISSUE ACCOUNT” crossed “A/C PAYEEONLY” with your name and address written clearly on the reverse side. APPLICATIONS NOTACCOMPANIED BY ANY PAYMENT OR ACCOMPANIED BY ANY OTHER FORM OF PAYMENTWILL NOT BE ACCEPTED. REMITTANCES BEARING “NOT TRANSFERABLE” OR “NONTRANSFERABLE” CROSSINGS WILL BE REJECTED.

8. No acknowledgment of receipt will be issued by our Company, the Issue Manager or the JointUnderwriters and Placement Agents for applications or application monies received.

9. Monies paid in respect of unsuccessful applications are expected to be returned (without interest orany share of revenue or other benefit arising therefrom) to you within 24 hours of the balloting atyour own risk. Where your application is rejected or accepted in part only, the full amount or thebalance of the application monies, as the case may be, will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to you by ordinary post at your own risk within14 Market Days after the close of the Application List, provided that the remittance accompanyingsuch application which has been presented for payment or other processes has been honouredand the application monies have been received in the designated share issue account.

9. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear themeanings assigned to them in this Prospectus.

10. By completing and delivering the Application Form, you agree that:–

(a) in consideration of our Company having distributed the Application Form to you and agreeingto close the Application List at 12.00 noon on 23 July 2008 or such other time or date as ourDirectors may, in consultation with the Issue Manager, decide and by completing anddelivering this Application Form:–

(i) your application is irrevocable; and

(ii) your remittance will be honoured on first presentation and that any monies returnablemay be held pending clearance of your payment without interest or any share ofrevenue or other benefit arising therefrom;

(b) all applications, acceptances or contracts resulting therefrom under the Invitation shall begoverned by and construed in accordance with the laws of Singapore and that youirrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(c) in respect of the New Shares for which your application has been received and not rejected,acceptance of your application shall be constituted by written notification by or on behalf ofour Company and not otherwise, notwithstanding any remittance being presented forpayment by or on behalf of our Company;


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(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application;

(e) reliance is placed solely on the information contained in this Prospectus and none of ourCompany, the Issue Manager, the Joint Underwriters and Placement Agents or any otherperson involved in the Invitation shall have any liability for any information not so contained;

(f) you consent to the disclosure of your name, NRIC/passport number, address, nationality,permanent resident status, CDP Securities Account number, and share application amountto our Share Registrar, SGX-ST, CDP, SCCS, our Company, the Issue Manager and theJoint Underwriters and Placement Agents;

(g) you irrevocably agree and undertake to subscribe for the number of New Shares applied foras stated in the Application Form or any smaller number of such New Shares that may beallotted to you in respect of your application. In the event that our Company decides to allotany smaller number of New Shares or not to allot any New Shares to you, you agree toaccept such decision as final; and

(h) you irrevocably authorise CDP to complete and sign on your behalf as transferee orrenouncee any instrument of transfer and/or other documents required for the issue ortransfer of the New Shares that may be allotted to you.

Applications for Offer Shares

1. Your application for Offer Shares MUST be made using the WHITE Offer Shares Application Formsand WHITE official envelopes “A” and “B”.

2. You must:–

(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together withyour correct remittance in accordance with the terms and conditions of this Prospectus, inthe WHITE official envelope “A” provided;

(b) in appropriate spaces on the WHITE official envelope “A”:–

(i) write your name and address;

(ii) state the number of Offer Shares applied for;

(iii) tick the relevant box to indicate the form of payment; and

(iv) (where the application is despatched by ordinary post) affix adequate Singaporepostage;

(c) SEAL THE WHITE OFFICIAL ENVELOPE “A”;

(d) write, in the special box provided on the larger WHITE official envelope “B” addressed toDBS Bank Ltd, 6 Shenton Way, #36-01 DBS Building Tower One, Singapore 068809, thenumber of Offer Shares you have applied for; and (e) insert WHITE official envelope “A” intoWHITE official envelope “B”, seal WHITE official envelope “B”, affix adequate Singaporepostage on WHITE official envelope “B” (if despatching by ordinary post) and thereafterDESPATCH BY ORDINARY POST OR DELIVER BY HAND the documents at your own riskto DBS Bank Ltd, 6 Shenton Way, #36-01 DBS Building Tower One, Singapore 068809,so as to arrive by 12:00 noon on 23 July 2008 or such other time or date as our Directorsmay, in consultation with the Issue Manager, decide. Courier services, local urgent mail orregistered post must NOT be used.


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3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or which are not honoured upon their first presentation are liable to be rejected.

4. ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgment of receiptwill be issued for any application or remittance received.

Applications for Placement Shares (other than Internet Placement Shares)

1. Your application for Placement Shares (other than Internet Placement Shares) must be made usingthe BLUE Placement Shares Application Forms or in any other form of application as may bedeemed appropriate by the Issue Manager and the Joint Underwriters and Placement Agents.

2. The completed and signed BLUE Placement Shares Application Form and your remittance, inaccordance with the terms and conditions of this Prospectus, for the full amount payable in respectof the number of Placement Shares applied for with your name, CDP Securities Account numberand address written clearly on the reverse side, must be enclosed and sealed in an envelope to beprovided by you. You must affix adequate Singapore postage on the envelope (if dispatching byordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POSTOR DELIVERED BY HAND at your own risk to DBS Bank Ltd, 6 Shenton Way, #36-01 DBSBuilding Tower One, Singapore 068809, for the attention of Equity Capital Markets, to arrive by12:00 noon on 23 July 2008 or such other time or date as our Directors may, in consultation withthe Issue Manager, decide. Courier services, local urgent mail or registered post must NOT beused. No acknowledgment receipt will be issued for any application or remittance received.

3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or which are not honoured upon their first presentation may be rejected.


5. Alternatively, you may remit your application monies by electronic transfer to the account of DBSBank Ltd, Shenton Way Branch, Current Account Number 003-710359-4 in favour of“KENCANA SHARE ISSUE ACCOUNT” for the number of Placement Shares applied for by 12:00noon on 23 July 2008. Applicants who remit their application monies via electronic transfer shouldsend a copy of the telegraphic transfer advice slip to DBS Bank Ltd, 6 Shenton Way, #36-01 DBSBuilding Tower One, Singapore 068809, for the attention of Equity Capital Markets, to arrive by12:00 noon on 23 July 2008, or such other time or date as our Directors may, in consultation withthe Issue Manager, decide.

Applications for Reserved Shares

1. Your application for Reserved Shares must be made using the PINK Reserved Shares ApplicationForms.

The completed and signed PINK Reserved Shares Application Form and your remittance, inaccordance with the terms and conditions of this Prospectus, for the full amount payable in respectof the number of Placement Shares applied for with your name, CDP Securities Account numberand address written clearly on the reverse side, must be enclosed and sealed in an envelope to beprovided by you. You must affix adequate Singapore postage on the envelope (if despatching byordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POSTOR DELIVERED BY HAND at your own risk to our registered office at 3 Shenton Way #10-06,Shenton House, Singapore 068805, to arrive by 12:00 noon on 23 July 2008 or such other timeor date as our Directors may, in consultation with the Issue Manager, decide. Courier services,local urgent mail or registered post must NOT be used. No acknowledgment receipt will beissued for any application or remittance received.


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2. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or which are not honoured upon their first presentation may be rejected.


ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS

The procedures for Electronic Applications are set out on the ATM screens (in the case of ATM ElectronicApplications) and in the case of Internet Electronic Applications on the IB website screens of the relevantParticipating Banks and the website screens of DBS Vickers (the “Steps”). Currently, DBS Bank and UOBGroup are the only Participating Banks through which the Internet Electronic Applications may be made.

For illustration purposes, the procedures for Electronic Applications for Offer Shares through ATMs andthe IB website of DBS Bank are set out in the “Steps for ATM Electronic Applications for Offer Sharesthrough ATMs of DBS Bank (including POSB)” and the “Steps for Internet Electronic Applications for OfferShares through the IB website of DBS Bank” beginning on page A16 of this Prospectus. The proceduresfor Electronic Applications for Placement Shares through the website of DBS Vickers are set out in the“Steps for Internet Electronic Applications for Placement Shares through the website of DBS Vickers” onpages A19 and A20 of this Prospectus. Please read carefully the terms and conditions of this Prospectus,the Steps and the terms and conditions for Electronic Applications set out below carefully before makingan Electronic Application. Any reference to “you” or the “Applicant” in these Additional Terms andConditions for Electronic Applications and the Steps shall refer to you making an application for OfferShares through an ATM or the IB website of a relevant Participating Bank, or an application for PlacementShares through the website of DBS Vickers.

The steps set out the actions that you must take at ATMs or the IB website of DBS Bank or the website ofDBS Vickers to complete an Electronic Application. The actions that you must take at the ATMs or the IBwebsites of the other Participating Banks are set out on the ATM screens or the IB website screens of therelevant Participating Banks.

If you are making an ATM Electronic Application, you must have an existing bank account with and be anATM cardholder of one of the Participating Banks before you can make an Electronic Application at theATMs of the relevant Participating Banks. An ATM card issued by one Participating Bank cannot be usedto apply for the New Shares at an ATM belonging to other Participating Banks. Upon the completion ofyour ATM Electronic Application transaction, you will receive an ATM transaction slip (“TransactionRecord”), confirming the details of your ATM Electronic Application. The Transaction Record is for yourretention and should not be submitted with any printed Application Form.

You must ensure that you enter your own CDP Securities Account number when using the ATMcard issued to you in your own name. If you fail to use your own ATM card or do not key in yourown CDP Securities Account number, your application will be rejected. If you operate a joint bankaccount with any of the Participating Banks, you must ensure that you enter your own CDPSecurities Account number when using the ATM card issued to you in your own name. Using yourown CDP Securities Account number with an ATM card which is not issued to you in your ownname will render your Electronic Application liable to be rejected.

If you are making an Internet Electronic Application, you must have an existing bank account with and/ora User Identification (“User ID”) and a Personal Identification Number (“PIN”) given by the relevantparticipating Bank or DBS Vickers, in the case of you applying for Placement Shares through the websiteof DBS Vickers.


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If you are making an Internet Electronic Application, you must ensure that the mailing address of youraccount selected for the application is in Singapore and you must declare that the application is beingmade in Singapore. In this connection, you will be asked to declare that you are in Singapore at the timewhen you make the application. Otherwise, your application is liable to be rejected. Upon completion ofyour Internet Electronic Application through the IB website of DBS Bank, there will be an on-screenconfirmation (“Confirmation Screen”) of the application which can be printed by you for your record. Thisprinted record of the Confirmation Screen is for your retention and should not be submitted with anyprinted Application Form.

Your Electronic Application shall be made on the terms and subject to the conditions of this Prospectus,including but not limited to, the terms and conditions appearing below and those set out under the sectionentitled “TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE” onpages A1 and A6 of this Prospectus, as well as the Memorandum and Articles of Association of ourCompany.

1. In connection with your Electronic Application for the Offer Shares or Internet Placement Shares inthe case of you applying for Internet Placement Shares through the website of DBS Vickers, youare required to confirm statements to the following effect in the course of activating the ElectronicApplication:–

(a) that you have received a copy of this Prospectus (in the case of ATM Electronic Applicationsonly) and have read, understood and agreed to all the terms and conditions of application forthe Offer Shares or Placement Shares and this Prospectus prior to effecting the ElectronicApplication and agree to be bound by the same;

(b) that you consent to the disclosure of your name, NRIC/passport number, address, nationality,permanent resident status, CDP Securities Account number, and share application amount(the “Relevant Particulars”) from your account with the relevant Participating Bank or DBSVickers, as the case may be, to our Share Registrar, SGX-ST, CDP, SCCS, our Company,the Issue Manager and the Joint Underwriters and Placement Agents (the “RelevantParties”); and

(c) that this is your only application for the Offer Shares or Placement Shares (including InternetPlacement Shares), as the case may be, and it is made in your name and at your own risk.

Your application will not be successfully completed and cannot be recorded as a completedtransaction unless you press the “Enter” or “OK” or “Confirm” or “Yes” or any other relevant key inthe ATM or click “Confirm” or “OK” or “Submit” or “Continue” or “Yes” or any other relevant button onthe Internet screen. By doing so, you shall be treated as signifying your confirmation of each of theabove three statements. In respect of statement 1(b) above, your confirmation, by pressing the“Enter” or “OK” or “Confirm” or “Yes” or any other relevant key or by clicking ‘’Confirm” or “OK” or“Submit” or “Continue” or “Yes” or any other relevant button, shall signify and shall be treated asyour written permission, given in accordance with the relevant laws of Singapore, including Section47(2) of the Banking Act (Chapter 19) of Singapore, to the disclosure by that Participating Bank orDBS Vickers, as the case may be, of the Relevant Particulars of your account(s) with thatParticipating Bank or DBS Vickers to the Relevant Parties.

2. By making an Electronic Application you confirm that you are not applying for Offer Sharesor Placement Shares as a nominee of any other person and that any Electronic Applicationthat you make is the only application made by you as the beneficial owner. You shall makeonly one Electronic Application and shall not make any other application for Offer Shareswhether at the ATMs of any Participating Bank or the IB websites of the relevantParticipating Banks or on the Application Forms.


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3. You must have sufficient funds in your bank account with your Participating Bank at the time youmake your Electronic Application at the ATM or IB website of the relevant Participating Bank, failingwhich such Electronic Application will not be completed. Any Electronic Application made at theATM or IB website of the relevant Participating Bank which does not conform strictly to theinstructions set out in this Prospectus or on the screens of the ATM or IB website of the relevantParticipating Bank through which your Electronic Application is being made shall be rejected.

For Offer Shares, you may make an ATM Electronic Application at the ATM of anyParticipating Bank or an Internet Electronic Application at the IB website of the relevantParticipating Bank for Offer Shares, using only cash by authorising such Participating Bankto deduct the full amount payable from your account with such Participating Bank. If youmake an application to subscribe for Internet Placement Shares through the website of DBSVickers, you must have sufficient funds in your nominated Automatic Payment account withan Automatic Payment Facility (direct debit/credit authorisation or “GIRO”) with DBSVickers. Your application will be rejected if there are insufficient funds in your account forDBS Vickers to deduct the full amount payable from your account for your application.

4. You irrevocably agree and undertake to subscribe for and to accept the number of Offer Shares orPlacement Shares, as the case may be, applied for as stated on the Transaction Record or theConfirmation Screen or any lesser number of such Offer Shares or Placement Shares that may beallotted to you in respect of your Electronic Application. In the event that our Company decides toallot any lesser number of such Offer Shares or Placement Shares or not to allot any Offer Sharesor Placement Shares to you, you agree to accept such decision as final. If your ElectronicApplication is successful, your confirmation (by your action of pressing the “Enter” or “OK” or‘’Confirm” or “Yes” or any other relevant key on the ATM or clicking “Confirm” or “OK” or “Submit” or“Continue” or “Yes” or any other relevant button on the Internet screen) of the number of OfferShares or Placement Shares applied for shall signify and shall be treated as your acceptance ofthe number of Offer Shares or Placement Shares that may be allotted to you and your agreementto be bound by the Memorandum and Articles of Association of our Company. You also irrevocablyauthorize CDP to complete and sign on your behalf as transferee or renouncee any instrument oftransfer and/or other documents required for the issue or transfer of the New Shares that may beallotted to you.

5. We will not keep any application in reserve. Where your Electronic Application is unsuccessful, thefull amount of the application monies will be refunded (without interest or any share of revenue orother benefit arising therefrom) to you by being automatically credited to your account with yourParticipating Bank or if you have applied for the Internet Placement Shares through DBS Vickers,by ordinary post or such other means as DBS Vickers may agree with you, at your risk within 24hours of the balloting provided that the remittance in respect of such application which has notbeen presented for payment or other processes has been honoured and the application monieshave been received in the designated share issue account. Trading on a “when issued” basis, ifapplicable, is expected to commence after such refund has been made.

Where your Electronic Application is rejected or accepted in part only, the full amount or thebalance of the application monies, as the case may be, will be refunded (without interest orany share of revenue or other benefit arising therefrom) to you by being automaticallycredited to your account with your Participating Bank or if you have applied for the InternetPlacement Shares through DBS Vickers, by ordinary post or such other means as DBSVickers may agree with you, at your own risk, within 14 Market Days after the close of theApplication List provided that the remittance in respect of such application which has beenpresented for payment or other processes has been honoured and the application monieshave been received in the designated share issue account.


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Responsibility for timely refund of application monies from unsuccessful or partially successfulElectronic Applications lies solely with the respective Participating Banks and with DBS Vickers (asthe case may be). Therefore, you are strongly advised to consult your Participating Bank or DBSVickers as to the status of your Electronic Application and/or the refund of any money to you fromyour unsuccessful or partially successful Electronic Application, to determine the exact number ofShares allotted to you before trading the Shares on the SGX-ST. None of the SGX-ST, the CDP,the SCCS, the Participating Banks, DBS Vickers, our Company, the Issue Manager or the JointUnderwriters and Placement Agents assumes any responsibility for any loss that may be incurredas a result of you having to cover any net sell positions or from buy-in procedures activated by theSGX-ST.

If your Electronic Application is unsuccessful, no notification will be sent by the relevantParticipating Bank or DBS Vickers.

It is expected that successful applicants who applied for Internet Placement Shares through thewebsite of DBS Vickers will be notified of the results of their applications through the website ofDBS Vickers no later than the evening of the day immediately prior to the commencement oftrading of the Shares on the SGX-ST.

6. Applicants who make ATM Electronic Applications for Offer Shares through the ATMs of thefollowing banks may check the provisional results of their ATM Electronic Applications as follows:–

Bank Telephone Other Channels Operating Hours Service expectedfrom

DBS Bank 1800-339 6666 Internet Banking 24 hours a day Evening of the(for POSB www.dbs.com(1) balloting dayaccount holders)1800-111 1111(for DBS accountholders)

OCBC 1800-363 3333 ATM/Internet Banking/ 24 hours a day Evening of thePhone Banking(2) balloting day

UOB Group 1800-222 2121 ATM (Other Transactions – 24 hours a day Evening of the“IPO Enquiry”) balloting daywww.uobgroup.com(1),(3)

Notes:

(1) Applicants who have made Internet Electronic Applications through the IB websites of DBS Bank or UOB Group maycheck the results of their applications through the same channels listed in the table above in relation to ATMElectronic Applications made at the ATM of DBS Bank or UOB Group.

(2) Applicants who have made Electronic Applications through the ATMs of OCBC Bank may check the result of theirapplications through OCBC Personal Internet Banking, OCBC ATMs or OCBC Phone Banking services.

(3) Applicants who have made Electronic Application through the ATMs or the IB website of the UOB Group may checkthe results of their applications through UOB Personal Internet Banking, UOB ATMs or UOB Phone Banking services.

7. Electronic Applications shall close at 12:00 noon on 23 July 2008 or such other time anddate as our Directors may, in consultation with the Issue Manager, decide. All InternetElectronic Applications must be received by 12:00 noon on 23 July 2008. Subject toparagraph 9 below, an Internet Electronic Application is deemed to be received when it enters thedesignated information system of the relevant Participating Bank or DBS Vickers, as the case maybe.


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8. You are deemed to have irrevocably requested and authorised our Company to:–

(a) register the Offer Shares or Placement Shares, as the case may be, allotted to you in thename of CDP for deposit into your Securities Account;

(b) send the relevant Share certificate(s) to CDP;

(c) return or refund (without interest or any share of revenue earned or other benefit arisingtherefrom) the application monies, should your Electronic Application be unsuccessful, byautomatically crediting your bank account with your Participating Bank or if you have appliedfor the Internet Placement Shares through DBS Vickers, by ordinary post or such othermeans as DBS Vickers may agree with you, at your risk, within 24 hours of the ballotingPROVIDED THAT the remittance in respect of such application which has been presented forpayment or such other processes has been honoured and application monies received in thedesignated share issue account; and

(d) return or refund (without interest or any share of revenue or other benefit arising therefrom)the balance of the application monies, should your Electronic Application be accepted in partonly, by automatically crediting your bank account with your Participating Bank or if you haveapplied for the Internet Placement Shares through DBS Vickers, by ordinary post or suchother means as DBS Vickers may agree with you, at your risk, within 14 Market Days afterthe close of the Application List PROVIDED THAT the remittance in respect of suchapplication which has been presented for payment or such other processes has beenhonoured and application monies received in the designated share issue account

9. You irrevocably agree and acknowledge that your Electronic Application is subject to risks ofelectrical, electronic, technical and computer-related faults and breakdown, fires, acts of God andother events beyond the control of the Participating Banks, DBS Vickers, our Company, the IssueManager and the Joint Underwriters and Placement Agents, and if in any such event our Company,the Issue Manager, the Joint Underwriters and Placement Agents, DBS Vickers and/or the relevantParticipating Bank and/or CDP do not receive your Electronic Application, or data relating to yourElectronic Application or the tape or any other devices containing such data is lost, corrupted or nototherwise accessible, whether wholly or partially for whatever reason, you shall be deemed not tohave made an Electronic Application and you shall have no claim whatsoever against ourCompany, the Issue Manager, the Joint Underwriters and Placement Agents, DBS Vickers and/orthe relevant Participating Bank and/or CDP for Offer Shares or Placement Shares, as the case maybe, applied for or for any compensation, loss or damage.

10. We do not recognise the existence of a trust. Any Electronic Application by a trustee must be madein his own name and without qualification. Our Company will reject any application by any personacting as nominee (other than approved nominee companies).

11. All your particulars in the records of your Participating Bank or DBS Vickers at the time you makeyour Electronic Application shall be deemed to be true and correct and your Participating Bank,DBS Vickers and any other Relevant Parties shall be entitled to rely on the accuracy thereof. Ifthere has been any change in your particulars after making your Electronic Application, you shallpromptly notify your Participating Bank or DBS Vickers (as the case may be).

12. You should ensure that your personal particulars as recorded by both CDP and the relevantParticipating Bank or DBS Vickers (as the case may be) are correct and identical, otherwise, yourElectronic Application is liable to be rejected. You should promptly inform CDP of any change inaddress, failing which the notification letter on successful allotment will be sent to your address lastregistered with CDP.


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13. By making and completing an Electronic Application, you are deemed to have agreed that:–

(a) in consideration of our Company making available the Electronic Application facility, throughthe Participating Banks and DBS Vickers acting as agents of our Company, at the ATMs andthe IB websites of the relevant Participating Banks and at the website of DBS Vickers:–

(i) your Electronic Application is irrevocable; and

(ii) your Electronic Application, the acceptance by our Company and the contract resultingtherefrom under the Invitation shall be governed by and construed in accordance withthe laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction ofthe Singapore courts;

(b) none of our Company, the Issue Manager, the Joint Underwriters and Placement Agents,CDP, the Participating Banks or DBS Vickers shall be liable for any delays, failures orinaccuracies in the recording, storage or in the transmission or delivery of data relating toyour Electronic Application due to breakdowns or failure of transmission, delivery orcommunication facilities or any risks referred to in paragraph 9 above or to any causebeyond their respective controls;

(c) in respect of the Offer Shares or the Placement Shares, as the case may be, for which yourElectronic Application has been successfully completed and not rejected, acceptance of yourElectronic Application shall be constituted by written notification by or on behalf of ourCompany and not otherwise, notwithstanding any payment received by or on behalf of ourCompany;

(d) you will not be entitled to exercise any remedy for rescission for misrepresentation at anytime after acceptance of your application; and

(e) reliance is placed solely on information contained in this Prospectus and that none of ourCompany, the Issue Manager, the Joint Underwriters and Placement Agents or any otherperson involved in the Invitation shall have any liability for any information not so contained.

Steps for ATM Electronic Applications for Offer Shares through ATMs of DBS Bank (includingPOSB)

Instructions for ATM Electronic Applications will appear on the ATM screens of the Participating Bank. Forillustration purposes, the steps for making an ATM Electronic Application through a DBS Bank or POSBATM are shown below. Certain words appearing on the screen are in abbreviated form (“A/c”, “amt”,“appln”, “&”, “I/C”, “SGX” and “No.” refer to “Account”, “amount”, “application”, “and”, “NRIC”, “SGX-ST”and “Number” respectively). Instructions for ATM Electronic Applications on the ATM screens ofParticipating Banks (other than DBS Bank (including POSB)), may differ slightly from those representedbelow.

Steps

1. Insert your personal DBS Bank or POSB ATM card.

2. Enter your Personal Identification Number.

3. Select “CASHCARD AND MORE SERVICES”.

4. Select “ESA-IPO SHARE/INVESTMENTS”.

5. Select “ELECTRONIC SECURITY APPLN (IPOS/BOND/ST-NOTES/SECURITIES)”.


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6. Read and understand the following statements which will appear on the screen:–

� (IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUSREGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) THE OFFER OFSECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, OR ACCOMPANIED BY, ACOPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AND IFAPPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR PROFILESTATEMENT) WHICH CAN BE OBTAINED FROM ANY DBS/POSB BRANCH INSINGAPORE AND, WHERE APPLICABLE, THE VARIOUS PARTICIPATING BANKSDURING BANKING HOURS, SUBJECT TO AVAILABILITY.

� (IN THE CASE OF SECURITIES OFERING THAT IS SUBJECT TO APROSPECTUS/DOCUMENT REGISTERD WITH THE MONETARY AUTHORITY OFSINGAPORE) ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OFSECURITIES) SHOULD READ THE PROSPECTUS/DOCUMENT OR PROFILESTATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE) BEFORESUBMITTING HIS APPLICATION WHICH WILL NEED TO BE MADE IN THE MANNER SETOUT IN THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (ASSUPPLEMENTED OR REPLACED, IF APPLICABLE). A COPY OF THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE, A COPYOF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT ORPROFILE STATEMENT HAS BEEN LODGED WITH AND REGISTERED BY THEMONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NO RESPONSIBILITY FORITS OR THEIR CONTENTS.

� Press the “ENTER” key to confirm that you have read and understood.

7. Select “KENCANA” to display details.

8. Press the “ENTER” key to acknowledge:–

� YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL THE TERMS OF APPLICATIONAND (WHERE APPLICABLE) THE PROSPECTUS, OFFER INFORMATION STATEMENT,DOCUMENT, PROFILE STATEMENT, REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR PROFILESTATEMENT, NOTICE AND/OR CIRCULAR.

� YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NUMBER, ADDRESS,NATIONALITY, CDP SECURITIES A/C NO, CPF INVESTMENT A/C NO AND SECURITYAPPLN AMOUNT FROM YOUR BANK A/C(S) TO SHARE REGISTRARS, SGX, SCCS,CDP, CPF ISSUER/VENDOR(S).

� FOR FIXED AND MAX PRICE SECURITIES APPLICATION, THIS IS YOUR ONLYAPPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK.

� THE MAXIMUM PRICE FOR EACH SECURITY IS PAYABLE IN FULL ON APPLICATIONAND SUBJECT TO REFUND IF THE FINAL PRICE IS LOWER.

� FOR TENDER SECURITIES APPLICATION, THIS IS YOUR ONLY APPLICATION AT THESELECTED TENDER PRICE AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWNRISK.

� YOU ARE NOT A US PERSON AS REFERRED TO IN (WHERE APPLICABLE) THEPROSPECTUS, DOCUMENT, PROFILE STATEMENT, REPLACEMENT ORSUPPLEMENTARY PROSPECTUS/DOCUMENT/PROFILE STATEMENT, NOTICE AND/ORCIRCULAR.


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THERE MAY BE A LIMIT ON THE MAXIMUM NUMBER OF SECURITIES THAT YOU CANAPPLY FOR. SUBJECT TO AVAILABILITY, YOU MAY BE ALLOCATED A SMALLERNUMBER OF SECURITIES THAN YOU APPLIED FOR OR (IN) THE CASE OF ANEARLIER CLOSURE UPON FULL SUBSCRIPTION YOUR APPLICATION MAY BEREJECTED IF ALL THE AVAILABLE SECURITIES HAVE BEEN FULLY ALLOCATED TOEARLIER APPLICANTS.

9. Select your nationality.

10 Select your payment method.

11. Select the DBS Bank account (AutoSave/Current/Savings/Savings Plus) or the POSB account(current/savings) from which to debit your application monies.

12. Enter the number of securities you wish to apply for using cash.

13. Enter or confirm (if your CDP Securities Account number has already been stored in the DBSBank’s records) your own 12-digit CDP Securities Account number. (Note: This step will be omittedautomatically if your CDP Securities Account Number has already been stored in DBS Bank’srecord.)

14. Check the details of your securities application, your CDP Securities Account number, number ofsecurities and application amount on the screen and press the “ENTER” key to confirm yourapplication.

15. Remove the Transaction Record for your reference and retention only.

Steps for Internet Electronic Applications for Offer Shares through the IB website of DBS Bank

For illustrative purposes, the steps for making an Internet Electronic Application through the DBS Bank IBwebsite is shown below. Certain words appearing on the screen are in abbreviated form (“A/C”, “amt”, “&”,“I/C”, “SGX” and “No.” refer to “Account”, “amount”, “and”, “NRIC”, “SGX-ST” and “Number” respectively).

Steps

1. Click on to DBS Bank website (www.dbs.com)

2. Login to Internet banking.

3. Enter your User ID and PIN.

4. Select “Electronic Security Application (ESA)”.

5. Click “Yes” to proceed and to warrant, inter alia, that you are currently in Singapore, you haveobserved and complied with all applicable laws and regulations and that your mailing address forDBS Internet Banking is in Singapore and that you are not a U.S. person (as such term is definedin Regulation S under the United Securities Act of 1933, amended).

6. Select your country of residence and click “I confirm”.

7. Click on “KENCANA” and click “Submit”.

8. Click “I Confirm” to confirm, inter alia,:

(a) You have read, understood and agreed to all terms of this application and the Prospectus/Document or Profile Statement and if applicable, the Supplementary or ReplacementProspectus/Document or Profile Statement.


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(b) You consent to disclose your name, I/C or Passport number, address, nationality, CDPSecurities Account number, CPF Investment Account number (if applicable) and securitiesapplication amount from your DBS/POSB Account(s) to registrars of securities, SGX, SCCS,CDP, CPF Board and issuer/vendor(s).

(c) You are not a US Person (as such term is defined in Regulation S under the United StatesSecurities Act of 1933, as amended).

(d) You understand that the securities mentioned herein have not been and will not beregistered under the U.S. Securities Act of 1933 as amended (the “U.S. Securities Act”) orthe securities laws of any State of the United States and may not be offered or sold in theUnited States or to, or for the account or benefit of any “U.S. person” (as defined inRegulation S under the U.S. Securities Act) except pursuant to an exemption from or in atransaction subject to, the registration requirements of the U.S. Securities Act and applicablestate security laws. There will be no public offer of the securities mentioned herein in theUnited States. Any failure to comply with this restriction may constitute a violation of theUnited States securities laws.

(e) This application is made in your own name and at your own risk.

(f) For FIXED/MAX price securities application, this is your only application. For TENDER pricesecurities application, this is your only application at the selected tender price.

(g) FOR FOREIGN CURRENCY Securities, subject to the terms of the issue, please note thefollowing: the application monies will be debited from your bank account in S$, based on theBank’s prevailing board rates at time of application. Any refund monies will be credited in S$based on the Bank’s prevailing board rates at the time of refund. The different prevailingboard rates at the time of application and the time of refund of application monies may resultin either a foreign exchange profit or loss or application monies may be debited and refundscredited in S$ at the same exchange rate.

FOR 1ST-COME-1ST-SERVE securities, the number of securities applied for may bereduced, subject to availability at the point of application.

9. Fill in details for share application and click “Submit”.

10. Check the details of your securities application, your NRIC or passport number and click “OK” toconfirm your application.

11. Print Confirmation Screen (optional) for your reference & retention only.

Steps for Internet Electronic Applications for Placement Shares through the website of DBSVickers

For illustrative purposes, the steps for making an application through the website of DBS Vickers is shownbelow:–

Steps

1. Access the website at www.dbsvonline.com.

2. Login with user ID and password.

3. Click on IPO Centre hyperlink to go to the IPO Section.

4. Click on the IPO issue hyperlink.


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5. Click “Yes” to represent and warrant that, inter alia, that you are in Singapore, you have observedand complied with all applicable laws and regulations, you have a mailing address in Singapore,you have read, understood and agreed to the “APPLICATION TERMS AND CONDITIONS” and the“GENERAL TERMS AND DISCLAIMERS” and you are not a U.S. Person (as such term is definedin Regulation S under the United States Securities Act of 1933, as amended).

6. Confirm the IPO applying for and its details by clicking on the “Next” button.

7. Click “Yes, I have read the above terms and conditions and wish to subscribe” and click “Submit” toconfirm, inter alia:–

(a) You have read, and agreed to the terms and conditions set out in the Prospectus/Documentor Profile Statement including the notes and instructions for the completion of thisApplication Form and that this application has been made in accordance with theProspectus/Document or Profile Statement and such notes and instructions.

(b) You have read and understood the disclaimers.

(c) You have read, understood and agreed to the “APPLICATION TERMS AND CONDITIONS”and the “GENERAL TERMS AND DISCLAIMERS”.

(d) You consent to the disclosure of your name, NRIC or passport number, address, nationalityand permanent resident status, CDP Securities Account number, CPF Investment Accountnumber (as applicable) and share application amount from your account with DBS Vickersto the Share Registrar, SCCS, SGX-ST, CDP, CPF (if applicable), Issuer and the IssueManager.

(e) This application is your only application for the Shares and it is made in your own name andat your own risk.

(f) This application is made in Singapore.

(g) You understand that these are not deposits or other obligations of or guaranteed or insuredby DBS Vickers and are subject to investment risks, including the possible loss of theprincipal amount invested.

(h) You declare that (a) you are not under 21 years of age, (b) you are not a corporation, soleproprietorship, partnership, or any other business entity, (c) you are not an undisclosedbankrupt, (d) you are in Singapore, (e) you have a mailing address in Singapore and (f) youare not a US Person (within the meaning of Regulation S under the United States SecuritiesAct of 1933, as amended).

8. Fill in amount of share applied for and preferred payment mode, then click “Submit”.

9. Check and verify details of your share application and your personal particulars on the screen.

10. Enter your password and click “Submit” to continue.

11. Click on “Application Status” to check your IPO application details.

12. Print page for your reference and retention only.


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SINGAPORE TAXATION

The following discussion describes the material Singapore income tax, capital gains tax, stamp duty andGoods and Services Tax (“GST”) consequences of the subscription, ownership and disposal of ourShares.

Income Tax

General

Income accruing in or derived from Singapore or received or deemed received in Singapore are subjectto tax in Singapore subject to certain exceptions.

Foreign-sourced income in the form of dividends, branch profit and service income remitted or deemedremitted to Singapore by Singapore tax resident companies on or after 1 June 2003 are tax exempt if theincome has been subjected to tax in the foreign jurisdiction and the headline tax rate of the foreignjurisdiction is at least 15%.

All foreign-sourced income received by individuals in Singapore from 1 January 2004 are exempt fromtax, except those received through a partnership in Singapore.

Certain Singapore-sourced investment income derived by individuals on or after 1 January 2004 are alsoexempt from income tax.

A corporate entity is regarded as a tax resident in Singapore if its business is controlled and managed inSingapore (for example, if the board of directors meets and our company conducts its business inSingapore). An individual is regarded as a tax resident in Singapore if the individual is physically presentin Singapore or exercises an employment in Singapore (other than as a director of a company) for 183days or more in a calendar year, or if the individual resides in Singapore.

The corporate tax rate in Singapore for year of assessment 2008 (i.e. for income relating to companies’financial year ending in 2007) is 18%. The effective tax rate is lower due to the following partial taxexemption on companies’ first $300,000 income chargeable to tax at 18% (excluding Singapore frankeddividend):

a) First 3 years of assessment of tax resident Singapore incorporated companies with no more than20 individual shareholders(1)

– 100% of first $100,000 chargeable income– 50% of next $200,000 chargeable income

b) All other cases

– 75% of first $10,000– 50% of next $290,000

Personal income tax rates for a tax resident individual vary according to the individual’s circumstances,but is subject to a maximum rate of 20% for the year of assessment 2008 (i.e. for income relating to thecalendar year 2007).

Note:

(1) With effect from year of assessment 2009, tax resident Singapore incorporated companies with no more than 20shareholders of which at least one is an individual holding at least 10% of total number of issued ordinary shares throughoutthe basis period relating to the YA of claim will also qualify for this tax exemption

APPENDIX B – TAXATION

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Dividend Distributions

Singapore introduced the one-tier corporate tax system on 1 January 2003. The five-year transitionalperiod ceased on 31 December 2007, and by 1 January 2008, all companies have moved to the one-tiercorporate system. Under the one-tier corporate tax system, the tax payable on normal chargeable incomeby Singapore companies, whether tax resident in Singapore or not, would constitute a final tax. Dividendspayable by companies on the one-tier corporate tax system would be tax exempt in the hands of itsshareholders. Such dividends are referred to as tax exempt (one-tier) dividends.

There is no withholding tax on dividends paid to non-Singapore tax resident shareholders. Shareholdersare advised to consult their own tax advisors in respect of tax laws of their respective countries ofresidence and the applicability of any double taxation agreement that their country of residence may havewith Singapore.

Gains on Disposal of our Shares

Singapore does not impose tax on capital gains. However, there are no specific laws or regulations whichdeal with the characterisation of capital gains, hence, gains may be construed to be of an income natureand subject to tax especially if they arise from activities which the Inland Revenue Authority of Singapore(“IRAS”) regards as the carrying on of a trade in Singapore.

Any profits from the disposal of our Shares are not taxable in Singapore unless the seller is regarded ashaving derived these gains of an income nature, in which case, the disposal profits would be taxable.

Stamp Duty

There is no stamp duty payable on the subscription of our Shares.

In the event that a register of Shares is kept in Singapore and where an instrument of transfer is executedin respect of Shares registered in such register, stamp duty is payable on such instrument of transfer atthe rate of S$2.00 for every S$1,000 market value of the Shares registered in Singapore.

The subscriber is liable for stamp duty, unless there is an agreement to the contrary. No stamp duty ispayable if no instrument of transfer is executed or the instrument of transfer is executed outsideSingapore. However, stamp duty is payable if the instrument of transfer which is executed outsideSingapore is received in Singapore. The above stamp duty is not applicable to electronic transfers of ourShares through the CDP.

GST

The sale of shares to Singapore investors or through SGX-ST is exempt from GST. However, thisexemption does not apply to related share transaction costs such as brokerage commissions and clearingfees. Brokerage commissions charged by a GST registered broker and clearing fees arising from sharestraded through SGX-ST will be subject to 7.0% GST in respect of transactions undertaken by Singaporeinvestors and is subject to 0% GST in respect of transactions undertaken by overseas investors.

TAXATION IN INDONESIA

On July 17, 2007 the Indonesian Parliament had approved the latest amendment of Tax Law Number28/2007 on General Provision and Tax Procedures which had became effective on January 1, 2008.

At present, the Indonesian parliament and the Directorate of General Taxation are planning to amend thecurrent Tax Law on Income Tax and Value Added Tax. However, as at the Latest Practicable Date, thedraft of amendment has not been approved by the Indonesian parliament.

Our discussion below is based on the current Tax Law Number 17 /2000 on Income Tax and Tax LawNumber 18/2000 on Value Added Tax. Any changes based on the draft of Tax Law on Income Taxes thatare most likely to be implemented are noted below.


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The following discussion is limited to a general description of certain taxation in Indonesia applicable tothe members of the Target Group in Indonesia.

Corporate tax

(a) Tax residency

A corporation is classified as “resident” or “non-resident” for tax purposes under Indonesian lawaccording to the country of incorporation of the corporation.

In Indonesia, resident corporations are taxed on their worldwide income; however, tax credits areallowed for income that is taxed outside the country. Non-residents are taxed only on incomederived from Indonesian sources, subject to any relief available under double taxation agreements.However, a non-resident entity with a permanent establishment in Indonesia (“PE”) (such as abranch office) is taxed on (i) the PE’s income from its business activities; (ii) the income officearising from business activities, or sales of goods and services in Indonesia of the same type asthose sold by the PE in Indonesia; and (iii) all other income, either received or accrued by the headoffice such as dividends, interest, royalties, rent and other income connected with the use ofproperty, fees for services, etc., provided that the property or activities producing the income iseffectively connected with the PE in Indonesia. In Indonesia, a PE is generally defined as anoperation in which a non-resident establishes a fixed place of business in Indonesia. This wouldinclude a management location, a branch office and an office building. A PE may also beestablished as a result of the non-resident entity’s employees providing services in Indonesia formore than 60 days in any 12-month period. Under the double tax agreement between Indonesiaand Singapore, the time test to qualify as PE is 90 days in any 12-month period.

(b) Income subject to tax

Taxable income is defined as any increase in economic prosperity received or accrued by ataxpayer, whether originating from within or outside Indonesia that may be used for consumption orto increase the recipient’s wealth in whatever name and form. It includes any remuneration inconnection with work and services, business profits (for this purpose, there is no distinctionbetween operating and capital income), dividends, interest, rent, royalties and other income relatedto the use of property.

Dividend withholding tax must be deducted by a corporation declaring a dividend. Such dividendwithholding tax has to be paid by the corporation to the State Treasury not later than the 10th of themonth following the declaration of the dividend by the shareholders of the corporation or in thecase of a public company, the 10th of the month following the record date of the dividend at theshareholders’ meeting. The applicable tax rate for dividends paid to resident taxpayers is 15%.However dividends received from Indonesian corporations by limited liability corporationsincorporated in Indonesia, co-operatives and state or region-owned entities are exempt from tax if:

(i) the dividends are paid out of retained earnings;

(ii) the shareholder holds at least 25% of the corporations’s paid-up capital; and

(iii) the shareholder has other active businesses aside from the share ownership.

In the draft of amendment of Income Tax Law, (iii) above is proposed to be eliminated.

The applicable tax rate for non-resident shareholders is 20% (or the relevant tax rate applicableunder any tax treaty which may be in force between Indonesia and the relevant jurisdiction). Inorder to apply the treaty tax rate, the dividend recipient should provide its original Certificate ofResidence to the corporation which is paying the dividend.


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(c) Corporate tax rates

In accordance with Tax Law Number 17/2000, the corporate tax rates are as follows:

Amount of taxable income for the tax year Tax rate (%)

Up to Rp50,000,000 10Between Rp50,000,000 to Rp100,000,000 15Above Rp100,000,000 30

In the draft of amendment of Income Tax Law, the corporate tax rates are proposed to be reducedand changed to a single rate of 28 % for fiscal year 2009 and 25% for fiscal year 2010.

Tax Incentives

Based on Government Regulation No. 1/2007, investors of certain business sector and / or area will begranted income tax incentives as follows:

� Taxable income reduction as much as 30 % of the realized investment spread in 6 years (5% foreach year).

� Accelerated depreciation and amortization.

� A 10 % income tax on dividends, possibly lower if stipulated in the provisions of a particular taxtreaty.

� A loss carried forward facility for a period of more than 5 years, at a maximum of 10 years.

Withholding tax

Indonesia has two types of withholding tax, namely, prepayment tax and final tax. Expenses incurred inderiving income subject to final tax are not deductible.

Payments made to resident taxpayers and permanent establishments by resident corporate taxpayers,government bodies, activity organizers, permanent establishments, representative offices and certainappointed individuals are subject to withholding tax at the rates specified in the following table:

Tax rate (%) Transaction

10 Land and building rental payments to individuals, companies and permanent establishments(final tax)

20 Interest on time or saving deposits and Bank Indonesia Certificates other than that payable tobanks operating in Indonesia and Government-approved pension funds (final tax)

20 Interest on bonds sold on Indonesian stock exchanges other than that payable to banksoperating in Indonesia and Government-approved pension funds, and mutual fund companiesregistered with the Capital Market Supervisory Board (BAPEPAM) for 5 years from theirestablishment (final tax)

Tax rate (%) Transaction

3 Rental and other payments for the use of property other than land and buildings

4,5 Compensation related to management services, and technical services

4,5 Compensation related to professional services, including legal and tax services

15 Dividends payable to individuals and companies

15 Interest, including premiums, discounts and guarantee fees

15 Royalties


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In the draft of amendment of Income Tax Law, the withholding tax rate on dividend paid to individuals isproposed to be imposed as final income tax.

The draft of amendment of Income Tax Law also proposed to charge a higher tax rate (20% - 100%) onthe existing withholding tax rate for unregistered Indonesian Taxpayers (taxpayers with no Indonesian TaxIdentification Number).

On the other hand, the following payments made by a government body, resident taxpayer, activityorganizer, permanent establishment and representative office to a non-resident taxpayer are subject towithholding tax at 20% (or applicable reduced treaty rate) of the gross amount:

� Dividends.

� Interests including premiums, discounts, guarantee fees and interest rate swap premiums.

� Royalties, rent and other income with respect to the use of property.

� Compensation for technical, management and other services.

� Prizes and awards.

� Pensions and any other periodic payments.

� After-tax profits of a branch or permanent establishments.

� Insurance premiums (withholding on estimated net income).

� Income derived from the disposal of assets (withholding on estimated net income).

Individuals and organizations resident in Indonesia that derive income from the following business linesare subject to withholding tax at the rates listed below:

For small businesses Others (Individuals and (final tax) other businesses)

Construction Services 2% 2%Planning Construction services 4% 4%Supervisory Construction services 4% 4%

As at the Latest Practicable Date, the businesses of our various Group Companies in Indonesia do notinclude the above business lines.

In order to satisfy the definition of small business, one will have to meet certain income requirements andobtain a certificate issued by the authorized government agency.

Value added tax (VAT) and Sales Tax on luxury goods

(a) General on VAT

VAT is imposed on most goods and services at a rate of 10%. Government regulations can adjustthe rate to as low as 5% and as high as 15%. The tax is generally collected by “VAT-able firms”(entities which deliver taxable goods or services). These firms are required to submit monthly VATreturns. Certain goods and services, however, are exempt from VAT, and as at GovernmentRegulation Number 144/2000 include, for example:

� Food and beverages served at a hotel, restaurant, food stall or like premises

� Healthcare services


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� Banking, insurance and financial leasing

� Education services

� Public transportation services

� Manpower services

� Hotels

Hotels and food and beverages served at hotels, restaurants, food stalls are subject to 10%development tax.

Aside from the above, primary production companies and small businesses (corporations orindividuals) with annual sales of less than Rp600,000,000 for goods and services have the optionto be exempted from imposing VAT. Exported goods are subject to 0% of VAT. Exporters can claima refund of the input tax (VAT incurred in producing goods for export).

The local purchaser of imported goods and services, including intangible goods, is responsible forall payments of VAT on goods and services and customs duty on goods. VAT and customs duty arecollected at the port of entry for imported goods. A self-assessed VAT payment mechanism isapplied in connection with the following:

(i) the utilization of intangible VAT-able goods obtained from outside the Indonesian customsarea and utilized within the Indonesian customs area; and

(ii) the utilization of VAT-able services obtained from outside the Indonesian customs area andutilized within the Indonesian customs area.

(b) VAT relief

Under Government Regulation Number 12/2001 as most recently amended with GovernmentRegulation Number 31/2007, the Indonesian Government provides VAT relief in the form of VATexemption on importation or acquisition of certain strategic goods, i.e., capital goods used forproducing VAT-able goods and agriculture products such as palm oil FFB.

(c) Sales Tax on luxury goods

Government Regulation No. 145/2000 as most recently amended with Government Regulation No.12/2006 details various goods subject to Sales Tax at rates ranging from 10% to 75%. In addition,the rate applicable to many types of goods has been increased.

The maximum rate of Sales Tax has increased to 75%. Examples of goods subject to thismaximum rate are:

� Sedans/ station wagons/ vans with spark or compression ignition internal combustionreciprocating piston engines exceeding 3,000 cc with seating capacity of less than tenpersons

� Certain types of liquor and wine

Indonesia has no rules for insubstantial (minor) imports of goods and services. VAT and customsduty will be imposed on all goods irrespective of their value. Likewise VAT will be imposed on theimportation of services irrespective value. No changes are foreseen in this area despite the factthat the availability of e-commerce transactions will lead to an increase in low value cross-bordertrade.


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Indirect tax on land and buildings

Tax is imposed on individuals, companies or organizations that have certain rights to or obtain benefitsfrom land, or possess, control or obtain benefits from ownership of land and buildings.

The tax is based on the sales value of the land and buildings as determined by the Ministry of Finance.Land value is reassessed every three years in most areas and every year in rapidly developing areas.The current effective tax rate on land and buildings is 0.1% of the sales value. One exception is individualhousing worth more than Rp1,000,000,000, which incurs a rate of 0.2%. Buildings with assessed salesvalue of not more than Rp12,000,000 are tax-exempt.

Tax treaty between Indonesia and Singapore

Indonesia has concluded tax treaties with certain countries, including Singapore. Under the Indonesia-Singapore tax treaty, the rates of withholding tax applicable to payments to recipients in Singapore are asfollows:

Withholding tax rate (%)

Dividends

Portfolio Substantial Interest Royalties Branch Profit taxholdings

Singapore 15 10 10/0* 15 15

Note:

(1) The applicable withholding tax rate is 0% of interest payments if such interest payments were made in respect of bonds (orother similar instruments) issued by the Indonesian Government.


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APPENDIX C – INDONESIAN REGULATORY OVERVIEW

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INDONESIAN REGULATORY OVERVIEW

Indonesian laws as well as regional laws significantly affect the ownership of our Group’s land andoperation of our Group’s plantations. In this section, we discuss the regulatory framework of the plantationand environmental sectors, particularly the provisions that significantly affect our Group’s palm oilplantation and electricity business activities.

Plantation

Introduction

Law No. 18/2004 has been enacted by the Indonesian legislature in order to serve as a foundation for thedevelopment of plantations in Indonesia. As the implementation regulation of Law No. 18/2004,Regulation No. 26/2007 was issued, which contains the regulations for the implementation of PlantationLaw. The Plantation Law and Regulation No. 26/2007 are the two main regulations that govern plantationbusiness activities in Indonesia.

The Plantation Law defines plantations as activity designed to grow specific plants on plots of lands orother media in the appropriate ecosystem, and to process and market the goods and services related tothose plant products, with assistance from science and technology, capital and management, for thepurpose of promoting wealth for plantation business players and the public. Plantation business covers allbusinesses that produce plantation goods and/or services.

Plantation Businesses

The Plantation Law provides that a plantation business can be conducted in Indonesia either by a farmer(pekebun) (any Indonesian citizen that operates a plantation business that does not reach a specificscale) or a plantation company (any Indonesian citizens or legal entity established under Indonesian lawsand domiciled in Indonesia that operates plantation businesses on a specific scale).

A foreign legal entity or a foreign individual may enter into the plantation business in Indonesia byestablishing an Indonesian joint venture company. The maximum foreign ownership in that joint venturecompany is 95%.

Licensing

There are three types of plantation business license:

� Plantation Business License (Ijin Usaha Perkebunan or “IUP”), which is granted to plantationcompanies that own a plant cultivation business with an area of 25 hectares or more and own aplantation product processing unit with the same or greater capacity than the minimum processingcapacity stipulated in Regulation No. 26/2007. Particularly for crude palm oil processing units, theminimum processing capacity is 5 MT of FFB per hour;

� Plantation Business License for Cultivation (Ijin Usaha Perkebunan untuk Budidaya or “IUP-B”),which is granted to plantation companies that own a plant cultivation business with an area of 25hectares or more up to the limit stipulated in Regulation No. 26/2007 and does not own plantationproduct processing units with capacity exceeding the minimum processing capacity stipulated inRegulation No. 26/2007. Particularly for crude palm oil processing units, the minimum processingcapacity is 5 MT of FFB per hour; and

� Plantation Business License for Processing (Ijin Usaha Perkebunan untuk Pengolahan or “IUP-P”),which is granted to plantation companies that own a plantation product processing unit with thesame or greater capacity than the minimum processing capacity stipulated in Regulation No.26/2007. Particularly for crude palm oil processing units, the minimum processing capacity is 5 MTof FFB per hour


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The IUP, IUP-B and IUP-P are issued by the Head of Regency or Mayor, if the plantation areas arelocated in a regency or city, respectively. These licenses are issued by the Governor, if the plantationareas are located within more than one regency or city (acknowledging the recommendation from theHead of Province or Mayor in relation to the spatial plan of the regency or city, respectively).

According to Regulation No. 26/2007, any plantation company that has obtained IUP or IUP-P and wishesto expand its production capacity must obtain prior approval from the Governor/Regent/Mayor. Thisapproval is compulsory if the increase is more than 30% of the approved production capacity. Theapplication for approval must be submitted to the relevant authorities by plantation companies that haveobtained IUP or IUP-P, together with a report in physical progress, and report of the financial situation ofthe plantation company.

Sanction

Violations to certain provisions of Regulation No. 26/2007 may be subject to initial sanction of warningletters. Failing to comply with the requirements under the warning letters may result in the revocation ofIUP, IUP-B or IUP-P, and may also lead to the revocation of HGU by the relevant authorities, asrecommended by the Minister of Agriculture.

Any plantation companies which will conduct a land clearing activity must clear the land without burningand to manage the natural resources sustainably. Violations to this provision may result in the revocationof IUP, IUP-B, or IUP-P and may also lead to the revocation of HGU by the relevant authorities, asrecommended by the Minister of Agriculture.

Obligation to Provide Plantation Area to the Nearby Communities or known as Plasma Programme

The holder of IUP or IUP-B is required to construct a plantation area for local communities near itsplantation area with a minimum area of 20% of the total plantation area operated by the holder of IUP orIUP-B. This can be realized through the implementation of credit, grant, and profit sharing scheme. In anyevent, any plantation company must carry out a mutual partnership program. The mutual partnershipprogramme or locally known as Plasma Programme must be formulated in a Cooperation Agreementwhich shall be acknowledged by the Regent/Mayor.

The purpose of Plasma Programme is to ensure the supply of raw materials, normal market price, andimplementation of increase in added value for local villagers, with the aim of empowering them. ThePlasma Programme is carried out between a plantation company and villagers, employees and localcommunities by, among others, supplying or investing in production infrastructure, production cooperation,processing, marketing, transportation, operational cooperation and share ownership.

Our Group has implemented the Plasma Programme using plantation business cooperatives scheme(Kredit Koperasi Primer Anggota or “KKPA”), cooperation in local community palm oil plantation scheme(Kebun Kelapa Sawit Rakyat or “KKSR”), and independent plasma scheme (Plasma Mandiri).

Under the KKPA scheme, our Group will develop the land and plant and maintain the palm oil trees tomaturity pursuant to bank financing. The financing is guaranteed by our Group. Upon maturity of the palmoil trees, the land will be maintained and managed by the villager or in the future by our Group. Theharvested FFB will then be sold to our Group. The loan facilities will be repaid by the villager from aportion of the FFB sale price. Under this scheme, our Group will obtain a power of attorney to managethe account of the villager into which all monies from the sale of FFB will be deposited. This power ofattorney allows our Group to withdraw funds from such account to pay for all the villager’s operating costsand expenses.

The KKSR scheme is a scheme under which our Group will co-operate with the regional authorities toprovide seedlings and fertiliser to the villager respectively. The land belongs to the villager. Post harvest,the FFB will be sold to our Group and part of the sale proceeds will be paid to our Group and the regionalauthorities as payment for the seedlings and fertiliser respectively.


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Plasma Mandiri is a scheme whereby our Group will provide the seedlings to the villager, and the villagerwill plant and maintain the plantation. The land belongs to the villager. Post harvest, the FFB will be soldto our Group and part of the sale proceeds will be paid to our Group as payment for the seedlingsprovided. There is no Governmental involvement under this scheme.

Maximum Land Area for Palm Oil Plantation

Previously, the ownership of land area for Palm Oil Plantation by a group of companies is limited to amaximum area of 20,000 hectares in one province and 100,000 hectares throughout Indonesia. However,this limitation is no longer applicable since based on Regulation No. 26/2007 each company is allowed tohave a plantation area for palm oil plantation of maximum 100,000 hectares thoughout Indonesia,regardless of whether the company is in one group of companies with other companies which carry outthe same business.

Seed Nurseries

Seed nurseries are regulated under Government Regulation No. 44 of 1995 (“GR No. 44/1995”). UnderGR No. 44/1995, a seed nursery is defined as anything that relates to the procurement, cultivation anddistribution of “plant seeds”.

A “plant seed” is a plant or a part of a plant that is used for reproducing and breeding plants. There aremany types of plant seeds, one of which is called Benih-bina. Benih-bina is a seed from a prime variety ofplants (varietas unggul), that may be released, produced and distributed under the supervision of theGovernment.

The Government requires individuals or legal entities to obtain a license from the Minister of Agricultureto produce Benih-bina and the type of license issued depends upon the scale of the individual or legalentities business. The issuance of a license to produce Benih-bina is stipulated under the Minister forAgriculture Regulation No. 39/Permentan/OT.140/8/2006 on Production, Certification and Disseminationof Benih-bina (“PMP No. 39/2006”). PMP No. 39/2006 states that the production of Benih-bina can beconducted by individuals, legal entities or government institutions (“Permitted Parties”). However, PMPNo. 39/2006 does not clearly set out the permitted amount of foreign investment in Indonesian legalentities that may conduct Benih-bina production business activities. However, under the New InvestmentLaw, foreign investors may own a maximum of 95% of Benih-bina entities.

To produce the Benih-bina, the Permitted Parties must have sufficient processing facilities, appropriatesupport facilities for the seed type, and human resources with relevant knowledge in the seed nurserysector. The Permitted Parties only need to register their activities with the relevant government institutionif they do not fulfil the requirements for Benih-bina licensing. The requirements are as follows:

� employing at least 10 permanent employees;

� having assets, excluding land and buildings, the value of which at least Rp.500,000,000; and

� obtained revenue from sales of Benih-bina at least Rp.5,000,000,000 per year.

A registration certificate or the license for Benih-bina production is issued by the Head of Regency orMayor through the relevant bureau for the seed nursery. Permitted Parties are also obliged to obtain acertificate with respect to the quality of the Benih-bina, which can be in the form of certification covering:

� plant supervision and laboratory testing;

� quality management system; and

� the particular seed or its product.

If a Permitted Party violates the terms of the Benih-bina production license under PMP No. 39/2006, itslicense can be revoked.


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Environmental Management

In 1997, the Government introduced Law No. 23 of 1997 on Environmental Management (the “Environ-mental Law”) to uphold environmental protection in Indonesia and to create sustainable development withregard to environmental issues. Environmental protection in Indonesia is also governed by various laws,regulations and decrees including Government Regulation No. 27 of 1999 on Environmental ImpactAnalysis (“AMDAL”) (“GR No. 27/1999”) and the Regulation of the State Minister for the Environment No.11 of 2006 on Businesses and/or Action Plans Which Must Be Completed With AMDAL (“Regulation No.11/2006”).

Environmental Impact Analysis (AMDAL) and Environmental Management/Monitoring Effort(UKL/UPL)

Any activity having a major or significant impact on the environment must be analyzed to determine theenvironmental impact of the development. The process is known as an “AMDAL”, which consists of an“RKL” Environmental Management Plan (‘RKL”) and an Environmental Monitoring Plan (“RPL”).

GR No. 27/1999 stipulates general provisions for those activities which require an AMDAL, and themechanism for preparing, evaluating and approving an AMDAL.

The State Minister for the Environment decides which development activities require a full AMDAL, basedon the following business activities that, among others:

(i) could change the type of field and landscape;

(ii) exploit natural resources which are renewable or non-renewable;

(iii) potentially could result in waste, pollution and environmental damage, including decrease of naturalresources in its utilization;

(iv) could adversely affect the natural environment, manmade environment, and social and culturalenvironment;

(v) could adversely affect the sustainability of natural resources conservation zone, and/or the naturalpreservation; and

(vi) introduce new types of plantation, animal, and microorganism.

Those activities that do not require an AMDAL are required to undertake an Environmental ManagementEffort (“UKL”) and an Environmental Monitoring Effort (“UPL”).

In accordance with Regulation No. 11/2006, any plantation areas (not including food or horticultureplantations) with an aggregate land of 3,000 hectares or more, outside forestry plantation, are obliged toobtain an AMDAL.

AMDAL or UKL/UPL is required to obtain the IUP, IUP-B or IUP-P and must be implemented by theplantation companies. Failure by the holder of IUP, IUP-B or IUP-P to implement the AMDAL or UKL/UPLmay may results in the revocation of IUP, IUP-B, or IUP-P and may also leads to the revocation of HGUby the relevant authorities, as recommended by the Minister of Agriculture.

Water Quality Management and Water Pollution Control

The Government has addressed water quality and water pollution by issuing Government Regulation No.82 of 2001 on Water Quality Management and Pollution Control. Under this regulation, any businessactivities which will use waste water for application to the soil are obliged to obtain a permit from theHead of Regency or Mayor. The permit will be based on the result of AMDAL or UKL and UPLassessment. Any company who disposes of waste water to water or water sources has an obligation toprevent and manage water pollution by way of cleaning up the waste before it is discharged to the wateror water sources.


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Research Technical Guidelines for Usage of Waste Water of Palm Oil Industry on the Soil of OilPalm Plantation Area and Guidelines on the Terms and Procedures of Licensing of the Usage ofOil Palm Industry Waste Water

Every activity that intends to use or utilize waste water on the soil of a plantation area must obtain permitfrom the Head of Regency or Mayor. The application to obtain such permit must attach the result of theassessment on AMDAL or UKL and UPL. The assessment must cover at least:

(i) The impact towards breeding of fisheries, animals, and farms;

(ii) The impact on the ground water and soil quality; and

(iii) The impact towards public health.

The Head of Regency or Mayor will issue the permit at the latest 90 working days after the application isreceived.

Guidelines on the Terms and Procedures for Licensing and Research Guidelines of Waste WaterDisposal to Water or Water Sources

In 2003, the State Minister for the Environment issued Decree No. 111 of 2003 on Guidelines on theTerms and Procedures for Licensing and Research Guidelines of Waste Water Disposal to Water or WaterSources. The decree requires any business activity which will dispose waste water to water or watersources is required to obtain prior approval from the Head of Regency/Mayor.

Under the above decree, The Head of Regency or Mayor is not permitted to issue the waste waterdisposal permit to any business which may violate the water quality standard and cause water pollution.

PROPER

PROPER - Program Penilaian Peringkat Kinerja Perusahaan dalam Pengelolaan Lingkungan Hidup(Rating on Company’s Performance in Environmental Management Program) is a programme initiated bythe State Minister for the Environment to encourage companies to manage environmental control inaccordance with the prevailing laws and regulations. The implementation of PROPER is also to promotetransparency and to invite community involvement in the management of environmental control inIndonesia. PROPER is regulated under the Decree of the State Minister for the Environment No. 127 of2002 (“Decree No. 127/2002”).

Under Decree No. 127/2002, PROPER rates companies within five categories:

� gold, for companies which have succeeded in managing the environmental controls and/or haveimplemented environmental management with outstanding results;

� green, for companies which have succeeded in managing environmental controls and/or haveimplemented environmental management with the results exceeding the requirements as set forthby the prevailing laws and regulations;

� blue, for companies which have performed environmental controls and/or have implementedenvironmental management according to the minimum requirements as set forth by the prevailinglaws and regulations;

� red, for companies which have performed environmental controls but have not achieved allminimum requirements as set forth by the prevailing laws and regulations; and

� black, for companies which have not performed environmental controls and may have causedpollution and/or environmental destruction.

Those companies with gold and green categories obtain reputation incentives in the form of a certificateof achievement. There is no sanction for those companies included in red or black categories underDecree No. 127/2002.

As at the Latest Practicable Date, it is not compulsory to participate and our Group does not participate inPROPER.

New Investment Law

On 26 April 2007, the Indonesian Government enacted Law No. 25 of 2007 on Capital Investment (the“New Investment Law”), which revokes the previous Foreign and Domestic Investment Law.

The main aim of the New Investment Law is to promote foreign and domestic investment in Indonesia bygranting several incentives to investors. The incentives include among others:

� offering land title for longer periods such that eligible investors may hold HGU in the form of a grantand an advance acceleration of land title for a period of 60 years, with the possibility of renewingthis title for a further 35 years;

� providing tax and financial incentives, including import duty waivers and income tax reductions;

� offering immigration facilities for foreign workers; and

� assisting with licensing for imports.

The New Investment Law further provides that the President can establish a list detailing industries thatare not permitted to receive foreign and/or domestic investment on the basis of certain criteria linked tohealth, morality, culture, the environment, national defense and security, and other national interests.

Although the New Investment Law has already been enacted and became effective, the implementingregulations have not yet been issued, except for implementing regulation which deals with certainbusiness sectors which are closed or restricted for foreign investment as stipulated in PresidentialRegulation No. 77 of 2007 as amended by Presidential Regulation No. 111 of 2007 on List of Closed andRestricted Business Activities for Investment (“Regulation No. 77/2007”).

Under Regulation No. 77/2007, foreign investment in integrated palm oil plantation (including crude palmkernel oil plantation) with the area of 25 hectares or more is restricted to maximum 95%.

Under the New Investment Law, foreign investment enjoys the same facilities as domestic investment inIndonesia. In addition, the New Investment Law mentions an undertaking from the Government that it willnot carry out nationalization or takeover of ownership title of the investors unless otherwise regulated bylaw.

Foreign investors that wish to invest in Indonesia must secure an investment approval before they set upa foreign investment company (“PT PMA”) in Indonesia. Under the New Investment Law, the process ofthe foreign investment license is still under the supervision of Capital Investment Coordinating Board(“BKPM”).

There are certain key issues and features associated with the foreign ownerships in a PT PMA, amongother things is the divestment requirement under which foreign investor must divest its shareholding. TheNew Investment Law does not specify clearly the requirement for foreign investor to divest its shares in aPT PMA. Therefore, the provisions of the Government Regulation No. 20 year 1994, as amended, onOwnership of Shares of Companies Established in the Framework of Foreign Investment (“GR No.20/1994”), are still applicable.


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Under GR No. 20/1994, a wholly foreign-owned PMA company will be required within 15 years after thedate the PMA company commenced the commercial productions to divest its shares. The regulation doesnot specify the numbers of shares that must be divested. BKPM officials have verbally indicated that it isup to the parties involved. The Regulation No. 77/2007 further stipulates that no divestment will berequired if the foreign investor establishes a joint venture PT PMA company with at least 5% Indonesianownership. This suggests that a 5% divestment would satisfy the requirement to divest a 100% foreignowned PT PMA. By using this analogy, a 95% foreign owned PT PMA will not be required to comply withthis divestment requirement, as 5% of its shares are Indonesian owned.

Our Group comprises PT PMA Companies which are presently owned by our Singapore-incorporatedsubsidiaries. WPM, CPG and SPL are wholly-owned by our Singapore-incorporated subsidiaries (save forone share held by Mr. Henry Maknawi), while 95% of BPS is held by KL. As our PMA Companies, namelyWPM, CPG, SPL and BPS, do not fall under the relevant restricted industries, our remaining Indonesiansubsidiaries are not deemed to be PMA Companies.

However, it is still not clear under the New Investment Law, whether SA, KP, KL and KB must divest theirshareholdings in WPM, CPG, SPL and BPS as in the previous foreign investment regulation. Based onthe previous foreign investment regulation, the divestment period is 15 years from the first commercialproduction. If our Singapore-incorporated subsidiaries are forced to divest a substantial portion of theirshareholdings in our PMA Companies, our business, financial condition, results of operations andprospects may be adversely affected.

Land Ownership Title in Indonesia

Pursuant to Law No. 5 of 1960 regarding Basic Agrarian Provisions (“Land Law”) and its implementingregulations, the following are the basic land titles that are recognized in Indonesia:

(i) Right of Ownership/Hak Milik;

(ii) Right to Cultivate/Hak Guna Usaha;

(iii) Right to Build/Hak Guna Bangunan;

(iv) Right to Use/Hak Pakai;

(iv) Right to Lease/Hak Sewa;

(v) Right to Manage/Hak Pengelolaan.

Right of Ownership/Hak Milik (“HM”)

HM is the strongest and fullest hereditary right that can be held by an Indonesian individual on land. Inprinciple, a HM does not have any time limit period. However, please note that all land titles in Indonesiahave a social function in which the use of the land must comply with the restriction applicable at thelocation of the land and nature of the right and thereby benefiting the owner, the community, and thecountry.

HM can be held only by Indonesian individuals and some Indonesia corporate entities as determined bythe Government (e.g. social and religious institutions). Other Indonesian corporate entities and foreignnationals (individuals and corporate entities) are not permitted to own land with HM title.

HM can be given as collateral to secure financing obligations in the form of Security Interest (HakTanggungan).


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Right to Cultivate / Hak Guna Usaha (“HGU”)

HGU is the right to cultivate land which is administered by the State. This title is normally granted overland to be used for cultivation/plantation businesses. HGU can be granted for a period of up to 35 years,extendable for an additional period of up to 25 years. HGU can be renewed for an additional period of upto 35 years, subject to fulfillment of requirements under the prevailing laws and regulations. The minimumarea of Land for HGU is 5 hectares, and the maximum is 25 hectares (for individuals). For corporateentities, the area will be determined by the Land Office.

HGU may only be granted to Indonesian citizens and Indonesian corporate entities which are domiciled inIndonesia (including PT PMA companies).

HGU can be given as collateral to secure financing obligations in the form of Security Interest (HakTanggungan).

Right to Build/Hak Guna Bangunan (“HGB”)

HGB is basically the right granted by the State to establish and construct (buildings). HGB can be grantedfor a period of up to 30 years, extendable for an additional period of up to 20 years. HGB right can berenewed for an additional period of up to 30 years, subject to fulfillment of requirements under theprevailing laws and regulations.

HGB may be granted to Indonesian citizens and Indonesian corporate entities which are domiciled inIndonesia (including PT PMA).

HGB can be acquired by transferring the existing HGB from the holder of the HGB title (e.g. by way ofsale and purchase of land) or creating or granting a HGB title on top of land that already has a title, i.e.HM land, HPL land, or State land.

HGB can be given as collateral to secure financing obligations in the form of Security Interest (HakTanggungan).

Right to Use/Hak Pakai (“HP”)

The Land Law defines HP as the right to use and/or collect the products from the land directlyadministered by the State. The land on which HP title can be granted includes State land, HM land andHPL land. This means that HP title can be created on top of these land titles and is not an independenttitle in the land itself.

HP can be granted for a period of up to 25 years, extendable for an additional period of up to 20 years.HP can be renewed for an additional period of up to 25 years, subject to fulfillment of requirements underthe prevailing laws and regulations HP can also be renewed based on a new agreement between theholder of the HM and the holder of the HP. The agreement must be made before the Land RegistrationOfficer (Pejabat Pembuat Akta Tanah) and the HP must be registered at the Land Office.

The Land Office in Jakarta will usually consider the purpose of the land before it determines the period oftime for HP title. For other areas outside of Jakarta, each land office will have its own policy in grantingHP title (time period). In theory, HP can also be granted for an unlimited period of time, to be used asGovernment offices, international organization offices or foreign embassies.

HP may be owned by:

(a) Indonesian individuals;

(b) Foreigners residing in Indonesia;

(c) Corporate bodies established based on Indonesian law and domiciled in Indonesia (including PTPMA companies);


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(d) Foreign corporate bodies with representatives in Indonesia;

(e) Departments, non-department government bodies and regional government;

(f) Representatives of foreign countries and international organizations;

(g) Religious and social institutions.

HP can be given as collateral to secure financing obligations in the form of Security Interest (HakTanggungan).

Right to Lease/Hak Sewa (“Hak Sewa”)

Article 16 of the Agrarian Law stipulates Hak Sewa or Right to Lease as one of the “titles” for land. Article44 of the Agrarian Law further provides that Hak Sewa is a land title that gives its holder a right toconstruct a building on another person’s land, upon payment of rent. While HP is a primary land title as itis granted by the State and constructed on State land, Hak Sewa is a secondary or derivative title grantedby an owner of land.

Hak Sewa is not registrable and the terms and conditions thereof depend on the mutual agreement of thecontracting parties. Hak Sewa is commonly based on a lease agreement between the land owner and thelessee. A Hak Sewa can be granted to:

(a) Indonesian individuals;

(b) Foreigners residing in Indonesia;

(c) Corporate bodies established based on Indonesian law and domiciled in Indonesia (including PMAcompanies);

(d) Foreign corporate bodies with representatives in Indonesia;

Right to Manage/Hak Pengelolaan ( “HPL”)

HPL title is granted only to State-Owned companies and government agencies and is normally grantedfor an unlimited period of time. The land itself normally originates from land administered by the State andis allocated for government agencies. Theoretically, other land titles, i.e. HGB and HP can be granted ontop of HPL land.

Electricity Regulatory Framework

The electricity sector in Indonesia is under the supervision of the Minister of Energy and MineralResources and the State Owned Enterprise namely Perusahaan Listrik Negara (“PLN”). However, inorder to meet the wide demand for electricity and to increase the State’s ability to supply electricity to thepublic, an opportunity should be given to the private sector to supply electricity pursuant to an electricitybusiness license for public interest (“IUKU”), or an electricity business license for self interest (“IUKS”).

Electricity Supply Business for Public Interest

Regionally owned enterprises, Indonesian legal entities, non-governmental entities, or individuals mayparticipate in the business of supplying electricity for the public interest by obtaining an IUKU.

Restrictions on the Involvement of the Private Sector in the Business of Supplying Electricity for PublicInterest

There are certain restrictions on the ability of the private sector to get involved in the business ofsupplying electricity for the public interest.


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Decree of Minister of Energy and Mineral Resouces No. 10 of 2005 on the Licensing Procedure of Inter-Provincial Electrical Business and National Grid Connected (“Decree No. 10/2005”), the business ofsupplying electricity for public interest must be carried out within specified business areas.

The current regulations do not specify any restrictions on the issue of IUKUs for the supply of electricity inareas that are not connected to the national grid. It remains within the discretion of the Regent or theGovernor of an area to pass regional regulations allowing the issuance of IUKUs at their discretionprovided such issuances are not detrimental to the interests of the State and are in line with the NationalElectricity Plan.

Validity Period of IUKUs

Pursuant to Decree No. 10/2005, IUKUs shall be granted for a maximum term of thirty years, with thepossibility of extensions. Pursuant to the Minister of Energy and Mineral Resources’ Decree No.1455/40/MEN/2000, which sets out the principles which guide regional government when issuingelectricity business licenses to non-national grid connected electricity businesses, IUKUs shall be grantedfor a maximum term of 15 years, with the possibility of extensions.

Rights of IUKU holders to Directly Sell Electricity to the Public

The Electricity Law and its implementing regulations do not expressly provide that an IUKU holder candirectly sell electricity to the public. However, there are no provisions that restrict such sales and, in fact,certain provisions of the regulations suggest that an IUKU holder can sell electricity to the public.

Article 11 paragraph (3) of government Regulation No. 3 of 2005 (“GR No. 3/2005”) states that PLN andholders of IUKUs, in carrying out the business of supplying electricity supply for the public interest, canpurchase and/or lease electricity from cooperatives, regionally-owned enterprises, Indonesian entities,non-governmental entities (swadaya masyarakat) and individuals, subject to the approval of the Ministerof Energy and Mineral Resources or the relevant Governor or Bupati/Mayor. This suggests that holders ofan electricity business license (i.e. IUKUs or IUKS) can sell their electricity supply to other holders ofIUKUs or PLN.

Article 32 paragraph (3) of the GR No. 3/2005 states that the price of electricity that is supplied toconsumers by holders of IUKUs shall be determined by the Minister of Energy and Mineral Resources orthe relevant Governor or Bupati/Mayor. This also suggests that holders of IUKUs can sell electricity to thepublic.

Decree No. 10/2005, which only applies to inter-provincial and grid-connected projects, expressly givesIUKU holders the power to sell electricity (as part of an isolated integrated system) to the public in areaswhich are not serviced by PLN or another integrated IUKU holder.

Our Group is currently holding IUKU to operate our power plant located on Bangka Island in Sumatera.The electricity produced from this power plant merely will be sold to PLN under power purchaseagreement date 8 May 2007, for a one year period commencing from June 2007, and extendable basedon agreement of both parties. As at the Latest Practicable Date, we are in the process of negotiating fora renewal of the power purchase agreement, and if possible for a term longer than 12 months.

SHIPPING INDUSTRY

Maritime Shipping

Maritime shipping can only be conducted by Indonesian legal entity, state owned entity, regional ownedentity and cooperatives which were specifically established for shipping business.

To carry out the maritime shipping business, the relevant companies must obtain the Maritime ShippingBusiness Permit (“SIUPAL”) issued by the Minister of Transportation (“MOT”).To obtain such permit theapplicant must possess among others a seaworthy Indonesian flagged ship with gross tonnage of 175tonnes.

SIUPAL is valid so long as the holder conducts its shipping business activities. The SIUPAL can berevoked, in the occurrence of the following events:

a. The permit holder carried out activities which endanger the security of the state;

b. Endanger human beings and the environment;

c. The permit holder obtained the SIUPAL illegally; or

d. The holder requested revocation.

Under the current regulation, failure to obtain SIUPAL may be imposed by a maximum 3 monthsimprisonment or fine at maximum amount of Rp.6,000,000.

Based on Minister of Transporation Decree No. 33 of 2001 on Shipping Business (“Decree No. 33/2001”),shipping companies must submit the following:

a, General report regarding the arrival and departure of ship (LK3) to port administrator/head of localport office at any time the ship arrives and departs from the port;

b. Monthly report regarding ship arrival activities to the port administrator/local port office, not laterthan 14 days of the following month, which is construed as a recapitulation of the arrival anddeparture report;

c. Voyage report to the authority issuing license for ships with permanent and regular route (linear),not later than 14 days after the ship has completed 1 round voyage, while voyage report for shipswith non permanent and irregular route (tramper) shall be submitted monthly;

d. Annual report of company’s activities to the authority issuing the license, not later than March 31 ofthe current year, which is construed as a recapitulation of the voyage reports.

Based on the current regulation, failure to submit the above reports may be imposed with administrativesanctions, among others by revocation of the license.

Domestic Maritime Shipping

Domestic maritime shipping is any shipping carried out inter island within Indonesian waters operated byIndonesian shipping companies by using Indonesian flagged ships. Domestic maritime shipping maytransport all goods including oil and gas, general cargo (e.g. textile and textile products, pulp and paperproducts), coal, timber and primary processed timber, rice, palm oil, fertilizer, cement, mine and quarry(type C mining materials, metals and non metals), other grains (e.g. cocoa grains, wheat grain and coffeegrains), liquid materials and other chemical materials, agricultural grains, fresh products (e.g. vegetables,fruit and fish) and supporting materials of upstream and downstream oil and gas business activities.

Overseas Maritime Shipping

According to Decree No. 33/2001, overseas maritime shipping is any maritime shipping which is carriedout from Indonesia’s port to overseas port carried out by national or foreign shipping entities by usingIndonesian or foreign flagged ships from Indonesia’s ports, which are open for international trade toforeign ports or from foreign ports to Indonesia’s ports which are open for international trading.


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APPENDIX D – SUMMARY OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY

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The discussion below provides a summary of the principal objects of our Company as set out in ourMemorandum of Association and certain provisions of our Articles of Association and the laws ofSingapore. This discussion is only a summary and is qualified by reference to Singapore law and ourMemorandum and Articles of Association.

Memorandum of Association and Registration Number

We are registered in Singapore with the Registrar of Companies and Businesses. Our companyregistration number is 200717793E. Our Memorandum of Association sets out the objects for which ourCompany was formed, including carrying on business as, inter alia, an investment holding company.

Summary of our Articles of Association

1. Directors

(a) Ability of interested directors to vote

A director shall not vote in respect of any contract, proposed contract or arrangement or anyother proposal in which he has any personal material interest, and he shall not be counted inthe quorum present at the meeting.

(b) Remuneration

Fees payable to non-executive Directors shall be a fixed sum (not being a commission on ora percentage of profits or turnover of the Company) as shall from time to time be determinedby the Company in general meeting. Fees payable to Directors shall not be increased exceptat a general meeting convened by a notice specifying the intention to propose such increase.

Any Director who holds any executive office, or who serves on any committee of theDirectors, or who performs services outside the ordinary duties of a Director, may be paidextra remuneration by way of salary, commission or otherwise, as the Directors maydetermine.

The remuneration of a Managing Director shall be fixed by the Directors and may be by wayof salary or commission or participation in profits or by any or all of these modes but shallnot be by a commission on or a percentage of turnover.

The Directors shall have power to pay pensions or other retirement, superannuation, deathor disability benefits to (or to any person in respect of) any Director for the time being holdingany executive office and for the purpose of providing any such pensions or other benefits, tocontribute to any scheme or fund or to pay premiums.

The Directors shall not vote in respect of any contract or proposed contract or arrangementor any other proposal whatsoever in which he has any personal material interest, directly orindirectly. A Director shall also not be counted in the quorum at a meeting in relation to anyresolution on which he is debarred from voting.

(c) Borrowing

Our Directors may exercise all the powers of our Company to raise or borrow money, tomortgage or charge its undertaking, property and uncalled capital, and to secure any debt,liability or obligation of our Company.

(d) Retirement Age Limit

There is no retirement age limit for Directors under our Articles of Association. Section153(1) of the Act however, provides that no person of or over the age of 70 years shall beappointed a director of a public company, unless he is appointed or re-appointed as adirector of the Company or authorised to continue in office as a director of the Company byway of an ordinary resolution passed at an annual general meeting of the Company.

(e) Shareholding Qualification

There is no shareholding qualification for Directors in the Memorandum and Articles ofAssociation of the Company.

2. Share rights and restrictions

Our Company currently has one class of shares, namely, ordinary shares. Only persons who areregistered on our register of shareholders and in cases in which the person so registered is CDP,the persons named as the depositors in the depository register maintained by CDP for the ordinaryshares, are recognised as our shareholders.

(a) Dividends and distribution

We may, by ordinary resolution of our shareholders, declare dividends at a general meeting,but we may not pay dividends in excess of the amount recommended by our Board ofDirectors. We must pay all dividends out of our profits; however, we may capitalise any sumstanding to the credit of any of our Company’s reserve accounts or other distributablereserve or any sum standing to the credit of profit and loss account and apply it to paydividends, if such dividends are satisfied by the issue of shares to our shareholders. Alldividends are paid pro-rata amongst our shareholders in proportion to the amount paid up oneach shareholder’s ordinary shares, unless the rights attaching to an issue of any ordinaryshare provide otherwise. Unless otherwise directed, dividends are paid by cheque or warrantsent through the post to each shareholder at his registered address. Notwithstanding theforegoing, the payment by us to CDP of any dividend payable to a shareholder whose nameis entered in the depository register shall, to the extent of payment made to CDP, dischargeus from any liability to that shareholder in respect of that payment.

The payment by the Directors of any unclaimed dividends or other moneys payable on or inrespect of a share into a separate account shall not constitute the Company a trustee inrespect thereof. All dividends unclaimed after being declared may be invested or otherwisemade use of by the Directors for the benefit of the Company. Any dividend unclaimed after aperiod of six (6) years after having been declared may be forfeited and shall revert to theCompany but the Directors may thereafter at their discretion annul any such forfeiture andpay the dividend so forfeited to the person entitled thereto prior to the forfeiture.

The Directors may retain any dividends or other moneys payable on or in respect of a shareon which our Company has a lien, and may apply the same in or towards satisfaction of thedebts, liabilities or engagements in respect of which the lien exists.

(b) Voting rights

A holder of our ordinary shares is entitled to attend, speak and vote at any general meeting,in person or by proxy. Proxies need not be a shareholder. A person who holds ordinaryshares through the SGX-ST book-entry settlement system will only be entitled to vote at ageneral meeting as a shareholder if his name appears on the depository register maintainedby CDP 48 hours before the general meeting. Except as otherwise provided in our Articlesof Association, two or more shareholders must be present in person or by proxy to constitutea quorum at any general meeting. Under our Articles of Association, on a show of hands,every shareholder present in person and by proxy shall have one vote(provided that in thecase of a Member who is represented by two proxies, only one of the two proxies asdetermined by that Member or, failing such determination, by the Chairman of the Meeting(or by a person authorised by him) in his sole discretion shall be entitled to vote on a showof hands), and on a poll, every shareholder present in person or by proxy shall have one


D-2

vote for each ordinary share which he holds or represents. A poll may be demanded incertain circumstances, including by the Chairman of the meeting or by any shareholderpresent in person or by proxy and representing not less than 10 per cent. of the total votingrights of all shareholders having the right to attend and vote at the meeting or by any twoshareholders present in person or by proxy and entitled to vote. In the case of a tie vote,whether on a show of hands or a poll, the Chairman of the meeting shall be entitled to acasting vote.

3. Change in capital

Changes in the capital structure of our Company (for example, an increase, consolidation,cancellation, sub-division or conversion of our share capital) require shareholders to pass anordinary resolution. Ordinary resolutions generally require at least 14 days’ notice in writing. Thenotice must be given to each of our shareholders who have supplied us with an address inSingapore for the giving of notices and must set forth the place, the day and the hour of themeeting. However, we are required to obtain our shareholders’ approval by way of a specialresolution for any reduction of our share capital or other undistributable reserve, subject to theconditions prescribed by law.

4. Variation of rights of existing shares or classes of shares

Subject to the Act, whenever the share capital of the Company is divided into different classes ofshares, the special rights attached to any class may be varied or abrogated either with the consentin writing of the holders of three-quarters of the total voting rights of the issued shares of the classor with the sanction of a special resolution passed at a separate general meeting of the holders ofthe shares of the class. To every such separate general meeting the provisions of our Articles ofAssociation relating to general meetings of the Company and to the proceedings thereat shallmutatis mutandis apply, except that the necessary quorum shall be two persons at least holding orrepresenting by proxy at least one-third of the total voting rights of the issued shares of the class,and that any holder of shares of the class present in person or by proxy may demand a poll andthat every such holder shall on a poll have one vote for every share of the class held by him,provided always that where the necessary majority for such a special resolution is not obtained atsuch general meeting, consent in writing if obtained from the holders of three-quarters of the totalvoting rights of the issued shares of the class concerned within two months of such generalmeeting shall be as valid and effectual as a special resolution carried at such general meeting.These provisions shall apply to the variation or abrogation of the special rights attached to someonly of the shares of any class as if each group of shares of the class differently treated formed aseparate class the special rights whereof are to be varied or abrogated.

The relevant Article does not impose more significant conditions than the Act in this regard.

5. Limitations on foreign or non-resident shareholders

There are no limitations imposed by Singapore law or by our Articles of Association on the rights ofour shareholders who are regarded as non-residents of Singapore, to hold or vote their shares.


D-3

17 July 2008

The Board of DirectorsKencana Agri Limited3 Shenton Way#10-06, Shenton House,Singapore 068805

Dear Sirs

This report has been prepared for inclusion in the Prospectus (the “Prospectus”) of Kencana Agri Limited(the “Company”) in connection with the invitation of 200,000,000 New Shares. The unaudited proformacombined financial information comprises the proforma combined balance sheet as at 31 December2007, the proforma combined income statement and the proforma combined cash flow statement of theCompany and its subsidiaries (the “Proforma Group” or “Group”) for the year ended 31 December 2007.

We report on the unaudited proforma combined financial information of the Proforma Group for the yearended 31 December 2007 set out on pages E-3 to E-7 which has been prepared for illustrative purposesonly and based on certain assumptions after making certain adjustments to show what:

(a) the financial position of the Proforma Group as at 31 December 2007 would have been if theSignificant Events as stated in the Explanatory Notes to the unaudited proforma combined financialinformation had occurred on that date;

(b) the financial results of the Proforma Group for the year ended 31 December 2007 would have beenif the Significant Events had occurred since the beginning of the year being reported on; and

(c) the cash flows of the Proforma Group for the year ended 31 December 2007 would have been ifthe Significant Events had occurred since the beginning of the year reported on.

The unaudited proforma combined financial information has been prepared for illustrative purposes onlyand, because of their nature, may not give a true picture of the Proforma Group’s actual financial position,results or cash flows.

The unaudited proforma combined financial information is the responsibility of the Directors of theCompany. Our responsibility is to express an opinion on the unaudited proforma combined financialinformation based on our work.

We carried out procedures in accordance with Singapore Statement of Auditing Practice 24: Auditors andPublic Offering Documents. Our work, which involved no independent examination of the unauditedproforma combined financial information, consisted primarily of comparing the unaudited proformacombined financial information to the audited combined financial statements of the Group for the yearended 31 December 2007, considering the evidence supporting the adjustments and discussing theunaudited proforma combined financial information with the directors of the Company.

APPENDIX E – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITEDPROFORMA COMBINED FINANCIAL INFORMATION OF KENCANA AGRI LIMITED

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007

E-1

In our opinion:

(a) the unaudited proforma combined financial information for the year ended 31 December 2007 hasbeen properly prepared:

(i) from the audited combined financial statements of the Group (or where information is notavailable in the financial statements, from accounting records of the Group), which wereprepared in accordance with Singapore Financial Reporting Standards;

(ii) in a manner consistent with the accounting policies of the Group; and

(iii) on the basis stated in Explanatory Note 3 of the unaudited proforma combined financialinformation; and

(b) each material adjustment made to the information used in the preparation of the unauditedproforma combined financial information is appropriate for the purpose of preparing such financialinformation.

Yours faithfully

RSM CHIO LIM Certified Public AccountantsSingapore

Peter JacobPartner-in-chargeA member of the Institute of Certified Public Accountants of Singapore



E-2

UNAUDITED PROFORMA COMBINED BALANCE SHEET31 December 2007

Unaudited Audited proforma

combined Proforma combinedbalance sheet adjustments balance sheet

US$’000 US$’000 US$’000

ASSETSCurrent assets:Cash and cash equivalents 5,941 (2,930) (iii) 3,011Trade and other receivables 8,041 8,041Inventories 5,171 5,171

Total current assets 19,153 16,223

Non-current assets:Property, plant and equipment 19,869 19,869Biological assets 111,649 111,649Land rights 2,480 2,480Trade and other receivables 1,043 1,043

Total non-current assets 135,041 135,041

Total assets 154,194 151,264

LIABILITIES AND EQUITYCurrent liabilities:Short-term borrowings 473 473Trade and other payables 12,686 1,000 (i) 13,686Current tax payable 990 990Current portion of long-term borrowings 2,233 2,233Current portion of finance leases 245 245Financial liabilities 677 677

Total current liabilities 17,304 18,304

Non-current liabilities:Deferred tax liabilities 26,073 26,073Estimated liability for employee benefits 288 288Long-term borrowings 31,660 31,660Finance leases 292 292

Total non-current liabilities 58,313 58,313

Total liabilities 75,617 76,617

Equity:Share capital 19,110 (6,129) (ii) (iii) 12,981Translation reserves (4,328) 826 (ii) (3,502)Other reserve – 2,373 (ii) 2,373Retained earnings 63,795 (1,000) (i) 62,795

Total equity 78,577 74,647

Total liabilities and equity 154,194 151,264

See accompanying explanatory notes.



E-3

UNAUDITED PROFORMA COMBINED INCOME STATEMENTYear ended

UnauditedAudited proforma

combined combined income Proforma income

statement adjustments(1) statement31.12.2007 31.12.2007

US$’000 US$’000 US$’000

Revenue 69,280 69,280

Cost of sales (45,826) (45,826)

Gross profit 23,454 23,454

Gain on fair value changes in biological assets 41,898 41,898

Interest income 161 161

Financial expense (2,797) (2,797)

Foreign exchange transactions loss (773) (773)

Distribution costs (1,781) (1,781)

Administrative expenses (4,561) (4,561)

Other charges (1,045) (1,045)

Profit before income tax 54,556 54,556

Income tax expense (15,354) (15,354)

Profit for the year 39,202 39,202

Note:

(1) There are no proforma adjustments to the income statement of the Group.

See accompanying explanatory notes.



E-4

UNAUDITED PROFORMA COMBINED CASH FLOW STATEMENTYear ended

Unaudited Audited proforma

combined combined cash flow Proforma cash flow statement adjustments statement

31.12.2007 31.12.2007

US$’000 US$’000 US$’000

Cash flows from operating activities:Profit before tax 54,556 54,556Adjustments for :Depreciation expense 1,945 1,945Amortisation of land rights 55 55Interest income (161) (161)Interest expense 2,797 2,797Gain on fair value changes in biological assets (41,898) (41,898)Loss on futures contracts 677 677Post-employment benefits 88 88

Operating profit before working capital changes 18,059 18,059Trade and other receivables 2,967 2,967Inventories (634) (634)Cash restricted in use (1,899) (1,899)Trade and other payables 2,812 2,812

Cash generated from operations 21,305 21,305Income tax paid (820) (820)

Net cash from operating activities 20,485 20,485

Cash flows from investing activities :Purchase of property, plant and equipment (3,595) (3,595)Additions to biological assets (7,559) (7,559)Purchase of land rights (651) (651)Interest received 161 161

Net cash used in investing activities (11,644) (11,644)

Cash flows from financing activities :Payment to shareholders arising from restructuring exercise – (2,930) (iii) (2,930)

Proceeds from issue of shares 355 355Increase in borrowings 3,714 3,714Decrease in finance leases (596) (596)Dividend paid (2,025) (2,025)Interest paid (4,069) (4,069)

Net cash used in financing activities (2,621) (5,551)

Net effect of exchange rate changes in consolidating entities (3,558) (3,558)

Net increase / (decrease) in cash 2,662 (268)Cash at beginning of year 1,337 1,337

Cash at end of year 3,999 1,069

See accompanying explanatory notes



E-5

EXPLANATORY NOTES TO UNAUDITED PROFORMA COMBINED FINANCIAL INFORMATION 31 December 2007

1. GENERAL INFORMATION

The unaudited proforma combined financial information, which comprises the proforma combinedbalance sheet, income statement and cash flow statement, has been prepared for illustrativepurposes only to show what the financial position of the Proforma Group as at 31 December 2007and the financial results and cash flows for the year ended 31 December 2007 would have beenbased on certain assumptions and after making certain adjustments as stated in the Note 3 below.Save as disclosed in Notes 2 and 3 below, the Directors of the Company, for the purpose ofpreparing this set of proforma combined financial information, have not considered the effects ofother events.

The unaudited proforma combined financial information for the year ended 31 December 2007 hasbeen prepared for inclusion in the Prospectus in connection with the invitation of shares ofKencana Agri Limited and should be read in conjunction with the audited combined financialstatements of the Group for the financial years ended 31 December 2005, 2006 and 2007(Appendix F). The unaudited proforma combined financial information, because of their nature, maynot give a true picture of the Proforma Group’s actual financial position, results and cash flows.

2. SIGNIFICANT EVENTS

Save for the significant events in Note 3 below, the Directors, as at the date of this report, are notaware of any significant acquisitions/disposals of assets and any significant changes made to thecapital structure of the Company subsequent to 31 December 2007.

3. BASIS OF PREPARATION OF THE UNAUDITED PROFORMA COMBINED FINANCIALINFORMATION

The unaudited proforma combined financial information has been prepared based on the auditedcombined financial statements of the Group for the year ended 31 December 2007 (Appendix F),prepared in accordance with Singapore Financial Reporting Standards by the Directors andaudited by RSM Chio Lim, in accordance with Singapore Standards on Auditing. The auditors’report on these financial statements was not qualified.

The unaudited proforma combined financial information is presented in US$ and all values arerounded to the nearest thousand (US$’000) except when otherwise indicated.

The Proforma Group has applied the same accounting policies and methods of computation in theunaudited proforma combined financial information of the Proforma Group as those of the mostrecently audited combined financial statements for the year ended 31 December 2007.

The unaudited proforma combined financial information for the year ended 31 December 2007 hasbeen prepared for illustrative purposes only. These are prepared based on certain assumptions andafter making certain adjustments to show what:

(i) the financial position of the Proforma Group as at 31 December 2007 would have been if theSignificant Events had occurred at the end of the year; and

(ii) the financial results and cash flows of the Proforma Group for the year ended 31 December2007 would have been if the Significant Events had occurred since the beginning of the yearbeing reported on.



E-6

3. BASIS OF PREPARATION OF THE UNAUDITED PROFORMA COMBINED FINANCIALINFORMATION (Cont’d)

Based on the assumptions discussed above, the following material adjustments have been made tothe financial statements of the Group in arriving at the unaudited proforma combined financialinformation included herein.

(i) One of the Indonesian subsidiaries in the Group intends to declare and make a dividendpayment of US$1,000,000 to its shareholders prior to the Invitation.

(ii) As a result of the Restructuring Exercise carried out, certain changes were made to thecapital structure of the Group and the Company. The changes resulted in adjustments ofUS$3,199,000, US$826,000 and US$2,373,000 to share capital, translation and otherreserves respectively. Details of the Restructuring Exercise are set out in the auditedcombined financial statements of the Group for the years ended 31 December 2005, 2006and 2007 (Appendix F).

(iii) As part of the Restructuring Exercise, the consideration paid for the share capital of one ofthe Indonesian subsidiaries comprises cash and new shares. The cash consideration paidamounted to US$2,930,000 (IDR 27,600,000,000). Details of the Restructuring Exercise areset out in the audited combined financial statements of the Group for the years ended 31December 2005, 2006 and 2007 (Appendix F).

The unaudited proforma combined financial information, because of their nature, is not necessarilyindicative of the results of the operations, cash flows or the related effects on the financial positionthat would have been attained had the Significant Events actually occurred earlier. Save asdisclosed in the Explanatory Notes, the Directors of the Company, for the purposes of preparingthis set of proforma combined financial information, have not considered the effects of other events.



E-7

17 July 2008

The Board of DirectorsKencana Agri Limited3 Shenton Way#10-06, Shenton House,Singapore 068805

Dear Sirs,

This report has been prepared in accordance with the Singapore Securities and Futures (Offers ofInvestments) (Shares and Debentures) Regulations 2005 for inclusion in the Prospectus of Kencana AgriLimited (the “Company”) dated 17 July 2008 in connection with the invitation of 200,000,000 New Shares.

We have audited the accompanying combined financial statements of the Company and its subsidiaries(collectively the “Group”), as set out on pages F-3 to F-59, comprising the combined balance sheets as at31 December 2005, 2006 and 2007, and the related combined statements of income, changes in equityand cash flows for each of the financial years ended 31 December 2005, 2006 and 2007, and a summaryof significant accounting policies and other explanatory notes.

Directors’ Responsibility for the Combined Financial Statements

The Company’s directors are responsible for the preparation and fair presentation of these combinedfinancial statements in accordance with Singapore Financial Reporting Standards. This responsibilityincludes: designing, implementing and maintaining internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror; selecting and applying appropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.

As is more fully described in note 1 of the notes to the combined financial statements, the combinedfinancial statements for the financial years ended 31 December 2005, 2006 and 2007 have beenpresented in a manner similar to the “pooling-of-interests” method to give retrospective application totransactions involving entities under common control.

Independent Auditor’s Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audit.We conducted our audit in accordance with Singapore Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by directors, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

APPENDIX F – INDEPENDENT AUDITORS' REPORT ON THE AUDITEDCOMBINED FINANCIAL STATEMENTS OF KENCANA AGRI LIMITED

FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2005, 2006 AND 2007

F-1

Opinion

In our opinion, the accompanying combined financial statements of the Group are properly drawn up inaccordance with Singapore Financial Reporting Standards so as to give a true and fair view of the stateof affairs of the Group as at 31 December 2005, 2006 and 2007 and the Group’s combined results ofoperations, combined changes in equity and combined cash flows for each of the financial years ended31 December 2005, 2006 and 2007.

Yours faithfully,

RSM Chio Lim Certified Public AccountantsSingapore

Partner-in-charge of audit: Peter JacobA member of the Institute of Certified Public Accountants of Singapore



F-2

COMBINED BALANCE SHEETSAs at 31 December

Notes 2005 2006 2007US$’000 US$’000 US$’000

ASSETSCurrent assets:Cash and cash equivalents 4 801 1,351 5,941Trade and other receivables 5 8,256 12,051 8,041Inventories 6 5,083 4,537 5,171

Total current assets 14,140 17,939 19,153

Non-current assets:Property, plant and equipment 7 15,620 18,508 19,869Biological assets 8 36,684 64,461 111,649Land rights 9 1,274 1,965 2,480Other assets 2 – –Trade and other receivables 5 – – 1,043

Total non-current assets 53,580 84,934 135,041

Total assets 67,720 102,873 154,194

LIABILITIES AND EQUITYCurrent liabilities:Short-term borrowings 10 7,082 9,418 473Trade and other payables 11 7,090 9,475 12,686Current tax payable 351 818 990Current portion of long-term borrowings 12 2,907 2,522 2,233Current portion of finance leases 13 498 456 245Financial liabilities 25 – – 677

Total current liabilities 17,928 22,689 17,304

Non-current liabilities:Deferred tax liabilities 19 6,940 12,410 26,073Estimated liability for employee benefits 14 134 213 288Long-term borrowings 12 13,985 18,683 31,660Finance leases 13 509 130 292

Total non-current liabilities 21,568 31,436 58,313

Total liabilities 39,496 54,125 75,617

Equity:Share capital 15 15,322 18,755 19,110Translation reserves (3,545) (1,289) (4,328)Retained earnings 16,447 31,282 63,795

Total equity 28,224 48,748 78,577

Total liabilities and equity 67,720 102,873 154,194

See accompanying notes to combined financial statements.



F-3

COMBINED INCOME STATEMENTSYears ended 31 December

Notes 2005 2006 2007US$’000 US$’000 US$’000

Revenue 16 36,623 41,067 69,280Cost of sales (32,189) (32,570) (45,826)

Gross profit 4,434 8,497 23,454(Loss) / gain on fair value changes inbiological assets 8 (8,997) 16,675 41,898

Interest income 25 20 161Financial expense 17 (1,181) (1,892) (2,797)Foreign exchange transactions (loss) / gain (563) 1,206 (773)Distribution costs (1,144) (1,406) (1,781)Administrative expenses (2,157) (2,872) (4,561)Other credits / (charges) 18 408 89 (1,045)

(Loss) / profit before income tax (9,175) 20,317 54,556Income tax credit / (expense) 19 2,138 (5,482) (15,354)

(Loss) / profit for the year (7,037) 14,835 39,202

(Loss) / earnings per share for (loss) /profit attributable to the equity holdersof the Group during the year(expressed in US cents per share) 21 (0.9) 1.9 4.9




F-4

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F-5



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COMBINED CASH FLOW STATEMENTSYears ended 31 December

2005 2006 2007US$’000 US$’000 US$’000

Cash flows from operating activities:(Loss) / profit before tax (9,175) 20,317 54,556Adjustments for:Depreciation expense 1,643 1,937 1,945Amortisation of land rights 32 57 55Interest income (25) (20) (161)Interest expense 1,172 1,892 2,797Gain on disposal of plant and equipment – (13) –Loss / (gain) on fair value changes in biological assets 8,997 (16,675) (41,898)Loss on futures contracts – – 677Receivables written off 9 – –Post-employment benefits 62 66 88

Operating profit before working capital changes 2,715 7,561 18,059Trade and other receivables (2,448) (3,795) 2,967Inventories (407) 546 (634)Cash restricted in use 3 (2) (1,899)Trade and other payables 966 2,385 2,812

Cash generated from operations 829 6,695 21,305Income tax refunded / (paid) 16 (172) (820)

Net cash from operating activities 845 6,523 20,485

Cash flows from investing activities:Purchase of property, plant and equipment (3,063) (3,633) (3,595)Proceeds from disposal of property, plant and equipment 64 25 –Additions to biological assets (3,705) (6,166) (7,559)Purchase of land rights (336) (635) (651)Interest received 25 20 161

Net cash used in investing activities (7,015) (10,389) (11,644)

Cash flows from financing activities:Proceeds from issue of shares (Note 15) 1,112 1,186 355Share application money received (Note 15) 1,119 2,247 –Increase in borrowings 6,504 6,649 3,714Decrease in finance leases (907) (461) (596)Dividend paid – – (2,025)Interest paid (1,838) (2,950) (4,069)

Net cash generated from / (used in) financing activities 5,990 6,671 (2,621)

Net effect of exchange rate changes in consolidating entities 725 (2,257) (3,558)

Net increase in cash 545 548 2,662Cash at beginning of year 244 789 1,337

Cash at end of year (Note 4) 789 1,337 3,999




F-7

NOTES TO COMBINED FINANCIAL STATEMENTS31 December 2005, 2006 and 2007

1. GENERAL INFORMATION AND RESTRUCTURING EXERCISE

The Company is incorporated in Singapore with limited liability. The combined financial statementsare presented in United States dollars (US$) and all values are rounded to the nearest thousand(US$’000) except when otherwise indicated. They are drawn up in accordance with the SingaporeFinancial Reporting Standards (“FRS”).

The principal activities of the Company are those of investment holding. The principal activities andthe details of the subsidiaries are described below.

The registered office address is: 3 Shenton Way, #10-06 Shenton House, Singapore 068805. TheCompany is domiciled in Singapore.

The subsidiaries held by the Company as of the date of this report are listed below:

Name of subsidiaries, country of incorporation, Percentage of equityplace of operations and principal activities held by Group (a)

2005 2006 2007% % %

PT Sawindo Kencana (“SWK”) (b)

(Incorporated on 16 September 1994)IndonesiaAgribusiness 100 100 100

PT Alamraya Kencana Mas (“AKM”) (b)

(Incorporated on 9 December 1996)IndonesiaAgribusiness 100 100 100

PT Kencana Agro Jaya (“KAJ”) (b)

(Incorporated on 16 August 2002)IndonesiaAgribusiness 100 100 100

PT Agro Inti Kencanamas (“AIK”) (b)

(Incorporated on 25 March 1997)IndonesiaAgribusiness 100 100 100

PT Agri Eastborneo Kencana (“AEK”) (b)


PT Sawit Kaltim Lestari (“SKL”) (b)

(Incorporated on 9 March 2004) IndonesiaAgribusiness 100 100 100



F-8

1. GENERAL INFORMATION AND RESTRUCTURING EXERCISE (Cont’d)


2005 2006 2007% % %

PT Agrojaya Tirta Kencana (“ATK”) (b)


PT Listrindo Kencana (“LK”) (b)

(Incorporated on 8 December 2003)IndonesiaPower generation 100 100 100

PT Belitung Energy (“BE”) (d)

(Incorporated on 8 August 2006) (c)

IndonesiaPower generation — 90 (f) 90 (f)

PT Pelayaran Asia Marine (“PAM”) (b)

(Incorporated on 17 October 2003) IndonesiaLogistics 100 100 100

PT Indotrust (“IDT”) (b)

(Incorporated on 13 September 2002)IndonesiaBulking 100 100 100

Kencana Bio-energy Pte. Ltd. (“KB”) (h)

(Incorporated on 29 December 2006) (c)

SingaporeInvestment holding — 100 100

Kencana Logistics Pte. Ltd. (“KL”) (h)



Kencana Plantations Pte. Ltd. (“KP”) (h)



Sawindo Agri Pte. Ltd. (“SA”) (h)


SingaporeTrading and investment holding — 100 100

PT Agro Mas Lestari (“AML”) (d)

(Incorporated on 19 February 2007) (c)

IndonesiaAgribusiness — — 100



F-9



2005 2006 2007% % %

PT Agro Sawit Mas Lestari (“ASML”) (d)

(Incorporated on 9 March 2004) IndonesiaAgribusiness 100 100 100

PT Bumi Permai Sentosa (“BPS”) (d)


IndonesiaWholesaler of shipping-related products — — 100 (e)

PT Cahaya Permata Gemilang (“CPG”) (d)


IndonesiaWholesaler of electricity-related products — — 95 (g)

PT Langgeng Nusa Makmur (“LNM”) (d)



PT Palm Makmur Sentosa (“PMKS”) (d)



PT Sawit Permai Lestari (“SPL”) (d)


IndonesiaWholesaler of plantation-related products — — 100 (e)

PT Sawindo Cemerlang (“SCEM”) (d)

(Incorporated on 4 September 2006) (c)

IndonesiaAgribusiness — 100 100

PT Wira Mas Permai (“WMP”) (d)



PT Wira Palm Mandiri (“WPM”) (d)


IndonesiaWholesaler of plantation-related products — — 100 (e)

PT Wira Sawit Mandiri (“WSM”) (d)

(Incorporated on 13 January 2006) (c)

IndonesiaAgribusiness — 100 100



F-10


(a) On the basis the Group had existed since 1 January 2005.

(b) Audited by member firm of RSM International of which RSM Chio Lim, Singapore is amember. The name of the member firm is RSM AAJ Associates, Jakarta.

(c) Included in combined financial statements from date of incorporation.

(d) Unaudited as it is immaterial.

(e) Remaining 100 shares held by Mr. Henry Maknawi.

(f) Remaining shares held by Mr. Henry Maknawi.

(g) Remaining shares held by initial shareholders of LK and BE.

(h) Audited by RSM Chio Lim, a member of RSM International.

Restructuring Exercise

Prior to the Invitation, the Restructuring Exercise was carried out to rationalise and streamline thecorporate structure, resulting in the Company becoming the holding company of the Group.

The following steps were taken as part of the Restructuring Exercise:

(a) The Company was incorporated on 26 September 2007 with the first two shares in thecapital of the Company issued to Mr. Henry Maknawi. These shares were subsequentlytransferred to Kencana Holdings Pte Ltd (“Kencana Holdings”).

(b) SA, KP, KL and KB (collectively, the “Sincos” and each a “Sinco”) were incorporated inSingapore on 29 December 2006 as the holding companies with an initial share capital oftwo shares each. The two initial shares in each of the Sincos were transferred to theCompany on 16 April 2008 and in consideration of such transfers, the Company issued 8new shares in favour of Kencana Holdings as directed by the initial shareholders of theSincos.

SA and KP are established to be the holding companies for the plantation business, KL forthe bulking and logistics business and KB for the power generation business. The initialshareholders of each of the Sincos are as follows:

Sinco Initial shareholders of Sincos (No. of shares held)

SA Ratna Maknawi (1 share) and Albert Maknawi (1 share)

KP Ratna Maknawi (1 share) and Albert Maknawi (1 share)

KL Ajis Chandra (1 share) and Albert Maknawi (1 share)

KB Ratna Maknawi (1 share) and Albert Maknawi (1 share)

These initial shareholders held the shares in the Sincos as nominees of the Company.

(c) SPL, WPM, BPS and CPG (collectively, the “Indocos” and each an “Indoco”) wererespectively established in Indonesia on 16 February 2007, 19 February 2007, 22 February2007 and 22 February 2007 as the Indonesian holding companies with a share capital of250 shares each.



F-11


Restructuring Exercise (Cont’d)

SPL and WPM are established as the Indonesian holding companies for the plantationoperations, BPS for the bulking and logistics business and CPG for the power generationoperations of the Group. The initial shareholders of each of the Indocos comprised theindividual shareholders of the Indonesian operating companies, namely, SWK, KAJ, AKM,AIK, ATK, AEK, SKL, AML, SCEM, WSM, ASML, PMKS, LNM, WMP, IDT, PAM, LK and BE(collectively, the “Operating Companies” and each an “Operating Company”). For thepurposes of the rest of this Restructuring Exercise section, the individual shareholders of theIndonesian operating companies will collectively be referred to as the “Initial Shareholders”.

Each of the Initial Shareholders (other than the Chairman and CEO, Mr. Henry Maknawi)was allocated one share of the Indocos (save for CPG) with the remaining balance (that is,226 shares in SPL, 236 shares in WPM and 241 shares in BPS) allocated to Mr. HenryMaknawi. In relation to CPG, each of the Initial Shareholders (other than Mr. Henry Maknawiand the other Initial Shareholders of LK and BE) was allocated one share each of CPG. Theremaining balance of 202 shares and 46 shares in CPG was allocated to Mr. Henry Maknawiand the other Initial Shareholders of LK and BE (in accordance with their interests in LK andBE) respectively.

(Such shares of Indocos held by the Initial Shareholders hereinafter referred to as the “InitialIndoco Shares”).

(d) As part of the Restructuring Exercise to enable the Operating Companies to be consideredas part of the Group, each of the Indocos subscribed for the serial ‘A’ shares issued by therespective Operating Companies. The serial ‘A’ shares entitle each of the Indocos to have fullpower to appoint the members of the respective board of directors and board ofcommissioners of the Operating Companies.

(e) Between June and August 2007, each of the Indocos have entered into various conditionalsale and purchase agreements with the Initial Shareholders to acquire:

(i) all of the shareholding interests in the Operating Companies (other than BE) (exceptfor the Chairman and CEO, Mr. Henry Maknawi, who retained 1 share in each of theOperating Companies); and

(ii) 90.1% of shareholding interest in BE (the balance 9.9% is held by the Chairman andCEO, Mr. Henry Maknawi).

The purchase consideration for all the Operating Companies (other than PAM) was based onvaluation determined by an independent valuer. The purchase consideration for PAM wasbased on the audited net asset value of PAM as at 31 December 2006.

Pursuant to these agreements and on or about 9 May 2008, the Initial Shareholderstransferred all of their shareholding interests in the Operating Companies to the respectiveIndocos which resulted in the following:

– SPL and WPM became the Indonesian holding companies of the plantation OperatingCompanies;

– BPS, the Indonesian holding company of the bulking and logistics OperatingCompanies; and

– CPG, the Indonesian holding company of the power generation Operating Companies.



F-12



In consideration for the shareholding interests in the respective Operating Companies, eachof the Indocos provisionally allotted new shares in each of its share capital (“New IndocoShares”) as detailed below to the Initial Shareholders:

No. of New Indoco Shares In consideration for:

961,334 New Indoco Shares in SPL 100% (less 1 share1) of SWK2, AKM, and KAJwhich are the plantation Operating Companies

185,097 New Indoco Shares in WPM 100% (less 1 share1) of AIK, SKL, AEK, ATK, AML,SCEM, PMKS, WMP, LNM, ASML and WSM whichare the plantation Operating Companies

28,398 New Indoco Shares in BPS 100% (less 1 share1) of IDT and PAM which are thebulking and logistics Operating Companies

1,686 New Indoco Shares in CPG 100% (less 1 share1) of LK and 90.1% of BE, whichare the power generation Operating Companies

Notes:

(1) Held by the Chairman and CEO, Mr. Henry Maknawi in order to comply with Indonesian law which requirescompanies in Indonesia to have at least two shareholders.

(2) The consideration paid for the share capital of SWK consisted of cash and New Indoco Shares in SPL. Thecash consideration paid by SPL amounted to Rp27.6 billion and the number of New Indoco Shares in SPLissued as consideration amounted to 362,933 New Indoco Shares in SPL.

The Initial Shareholders then assigned their rights in the New Indoco Shares to Sincos andthese shares were issued directly to Sincos. Following the issuance of such New IndocoShares directly to the Sincos, SA became the Singapore holding company of SPL; KP, theSingapore holding company of WPM; KL, the Singapore holding company of BPS; and KB,the Singapore holding company of CPG.

In consideration for the New Indoco Shares (as detailed below), each of the Sincosprovisionally allotted new shares in each of its share capital to the Initial Shareholders (“FirstIssuance of new Sinco shares”). The Initial Shareholders then assigned their rights in theFirst Issuance of new Sinco shares to the Company and the shares were issued directly tothe Company as follows:

Aggregate no. of Indoco Shares No. of new Sinco shares provisionally allotted anddirected to be issued to the Company

961,334 New Indoco Shares in SPL 16,293,793 new Sinco shares in the capital of SAissued to SA

185,097 New Indoco Shares in WPM 3,137,239 new Sinco shares in the capital of KPissued to KP

28,398 New Indoco Shares in BPS 481,326 new Sinco shares in the capital of KLissued to KL

1,686 New Indoco Shares in CPG1 28,582 new Sinco shares in the capital of KBissued to KB



F-13



Note:

(1) CPG issued 11,564 additional shares to comply with the minimum capital requirement set by the Indonesianauthority regulating foreign investment in Indonesia (Badan Koordinasi Penanaman Modal or “BKPM”). KBsubscribed for 10,986 shares whilst the Initial Shareholders subscribed for these remaining shares.The 1,686New Indoco Shares in CPG together with the 153 Initial Indoco Shares of CPG (see restructuring step inparagraph (f) below) constitute 95% of the share capital of CPG. The balance 5% of the share capital of CPGare held by the Initial Shareholders of LK and BE.

(f) In October 2007, each of the Sincos entered into various conditional sale and purchaseagreements with certain Initial Shareholders to purchase 150 Initial Indoco Shares (referredto in paragraph (c) above) in each of the Indocos (save for CPG, whereby the number ofshares purchased were 153 Initial Indoco shares) based on the par value of the Initial IndocoShares. On 9 May 2008, the Initial Shareholders transferred their Initial Indoco Shares asstated below to the respective Sincos:

No. of new Sinco shares In consideration for:

2,542 new Sinco shares in SA 150 Initial Indoco Shares1 of SPL

2,542 new Sinco shares in KP 150 Initial Indoco Shares1 of WPM

2,542 new Sinco shares in KL 150 Initial Indoco Shares1 of BPS

2,542 new Sinco shares in KB 153 Initial Indoco Shares1 of CPG

Note:

(1) 100 Initial Indoco Shares in each of SPL, WPM and BPS are held by the Chairman and CEO, Mr. HenryMaknawi, and 97 Initial Indoco Shares in CPG are held by the Initial Shareholders of LK and BE, so as tocomply with Indonesian law which requires companies in Indonesia to have at least two shareholders.

In consideration for these Initial Indocos Shares in each of the Indocos, each of the Sincosprovisionally allotted to the Initial Shareholders new shares in each of its share capital(“Second Issuance of new Sinco shares”).The Initial Shareholders then assigned their rightsin the Second Issuance of new Sinco Shares to the Company and such new Sinco shareswere issued directly to the Company accordingly.

For the purposes of the rest of this Restructuring Exercise section, the First Issuance of newSinco shares and the Second Issuance of new Sinco shares will be referred to as the “NewSinco Shares”.

(g) In consideration for the New Sinco Shares, pursuant to an agreement reached (after takinginto account the values of the respective shareholding interests in the Operating Companiesand Indocos transferred from each of them to the Indocos and Sincos respectively as set outunder paragraphs (e) and (f) above), the Company issued in aggregate an additional19,951,108 new shares in its capital to the Initial Shareholders.

(h) To streamline the shareholding structure, some of the Initial Shareholders, who also holdshares in Kencana Holdings (“Kencana Holdings Shareholders”) as described in paragraphs(a) and (b) above, directed their shares in the Company to be issued directly to KencanaHoldings thereby resulting in Kencana Holdings holding an additional 17,245,736 of theCompany’s shares.



F-14



In consideration for these new shares in the Company, Kencana Holdings issued a total of17,245,736 new ordinary shares in its capital to the Kencana Holdings Shareholders.Kencana Holdings in aggregate holds 17,245,746 of the Company’s shares.

Pursuant to an agreement reached (after taking into account the values of the respectiveshareholding interests in the Operating Companies and Indocos transferred from each ofthem to the Indocos and Sincos as set out under paragraphs (e) and (f) above and theexisting shares of Kencana Holdings), the following table shows the respective shareholdingsof the Kencana Holdings shareholders.

% of shareholding interestsName of Initial Shareholders in Kencana Holdings

Henry Maknawi 43.4

Ratna Maknawi 7.2

Tengku Alwin Aziz 2.2

Albert Maknawi 2.9

Jimmy Chandra 2.6

Dick Permana 8.2

Jauhari Chandra 1.7

Jeanny Maknawi 10.6

Eddy Maknawi 9.9

Johan Maknawi 9.1

Karmila Maknawi 2.0

Ajis Chandra 0.2

Basis of preparation

The Restructuring Exercise involves companies under common control. The combined financialstatements have been prepared using the “pooling-of-interests” method. Such manner ofpresentation reflects the economic substance of the combining entities as a single economicenterprise, although the legal parent-subsidiary relationship was not established until after thebalance sheet date. Accordingly, the Group’s combined financial statements for the financial yearsended 31 December 2005, 2006 and 2007 have been prepared as if the Group had been inexistence prior to the Restructuring Exercise. The assets and liabilities are brought into thecombined balance sheets at the existing carrying amounts. The figures of the Group for thefinancial years ended 31 December 2005, 2006 and 2007 represent the combined results, state ofaffairs, changes in equity and cash flows as if the Group had existed since 1 January 2005.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING CONVENTION

The financial statements have been prepared in accordance with the Singapore FinancialReporting Standards (“FRS”) as issued by the Singapore Accounting Standards Council as well asall related Interpretations to FRS (“INT FRS”). The financial statements are prepared on a goingconcern basis under the historical cost convention except where an FRS requires an alternativetreatment (such as fair values) as disclosed where appropriate in these financial statements.



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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

BASIS OF PRESENTATION

The combined financial statements for the years ended 31 December 2005, 2006 and 2007 havebeen presented in accordance with Singapore Financial Reporting Standards for the first time. Thefinancial statements have been prepared for inclusion in the Prospectus of the Company inconnection with the invitation of certain shares in the Company. As described above, the combinedfinancial statements have been presented in a manner similar to the “pooling-of-interests” methodto give retrospective application to transactions involving entities under common control.

The consolidation accounting method is used for the combined financial statements which includethe financial statements made up to the balance sheet date for the years ended 31 December2005, 2006 and 2007 of the Company and of those companies it controls. Control is the power togovern the financial and operating policies of an entity so as to obtain benefits from its activitiesaccompanying a shareholding of more than one half of the voting rights or the ability to appoint orremove the majority of the members of the board of directors or to cast the majority of votes atmeetings of the board of directors. The existence and effect of potential voting rights that arecurrently exercisable or convertible are considered when assessing whether the Group controlsanother entity. Subsidiaries include unincorporated and special purpose entities. The combinedfinancial statements are the financial statements of the Group presented as those of a singleeconomic entity. The combined financial statements are prepared using uniform accounting policiesfor like transactions and other events in similar circumstances. All significant intragroup balancesand transactions, including income, expenses and dividends, are eliminated in full on consolidation.The results of the entities acquired or disposed of or controlled during the years ended 31December 2005, 2006 and 2007 are combined from the respective dates of acquisition or controlup to the dates of disposal including entities that were subsequently liquidated. On disposal theattributable amount of goodwill, if any, is included in the determination of the gain or loss ondisposal.

BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted accounting principlesrequires the management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates. The estimates and assumptions are reviewed onan ongoing basis. Apart from those involving estimations, management has made judgements inthe process of applying the entity’s accounting policies. The areas requiring management’s mostdifficult, subjective or complex judgements, or areas where assumptions and estimates aresignificant to the financial statements, are disclosed at the end of this footnote, where applicable.

BUSINESS COMBINATIONS

The business combination involved entities or businesses under common control that is, a businesscombination in which all of the combining entities or businesses are ultimately controlled by thesame party or parties both before and after the business combination, and that control is nottransitory. The business combination in such situation is accounted for under the pooling-of-interests or merger method.

Under the pooling-of-interests method, the combined assets, liabilities and reserves of the pooledenterprises are recorded at their existing carrying amounts at the date of amalgamation. Theexcess or deficiency of amount recorded as share capital issued (plus any additional considerationin the form of cash or other assets) over the amount recorded for the share capital acquired is tobe adjusted to the merger reserve.



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BUSINESS COMBINATIONS (Cont’d)

For entities not under common control, business combinations are accounted for by applying thepurchase method. The cost of a business combination includes the fair values, at the date ofexchange, of assets given, liabilities incurred or assumed, and equity instruments issued by theacquirer, in exchange for control of the acquiree; plus any costs directly attributable to the businesscombination. Any excess of the cost over the acquirer’s interest in the net fair value of theidentifiable assets, liabilities and contingent liabilities so recognised is accounted for as goodwill.The excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities andcontingent liabilities over cost is accounted for as “negative goodwill”. The acquiree’s identifiableassets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103are recognised at their fair values at the acquisition date, except for non-current assets (or disposalgroups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Heldfor Sale and Discontinued Operations, which are recognised and measured at fair value less coststo sell. After initial recognition, goodwill is measured at cost less any accumulated impairmentlosses. Goodwill is not amortised but is tested for impairment annually or more frequently if eventsor changes in circumstances indicate that it might be impaired. An impairment loss in respect ofgoodwill is not reversed. There was no negative goodwill. There were no acquisitions during theyears 2005 to 2007 that had to be accounted for under FRS103.

Minority Interest – Any minority interest in the acquiree (subsidiary) is initially measured at theminority’s proportion of the net fair value of the assets, liabilities and contingent liabilitiesrecognised.

FINANCIAL ASSETS

Initial recognition and measurement:

A financial asset is recognised on the balance sheet when, and only when, the entity becomes aparty to the contractual provisions of the instrument. The initial recognition of financial assets is atfair value normally represented by the transaction price. The transaction price for financial asset notclassified at fair value through profit or loss includes the transaction costs that are directlyattributable to the acquisition or issue of the financial asset. Transaction costs incurred on theacquisition or issue of financial assets classified at fair value through profit or loss are expensedimmediately. The transactions are recorded at the trade date.

Subsequent measurement based on the classification of the financial assets in one of the followingfour categories under FRS 39 is as follows:

#1. Financial assets at fair value through profit or loss: As at year end date there were nofinancial assets classified in this category.

#2. Loans and receivables: Loans and receivables are non-derivative financial assets with fixedor determinable payments that are not quoted in an active market. Assets that are for saleimmediately or in the near term are not classified in this category. These assets are carried atamortised costs using the effective interest method (except that short-duration receivables with nostated interest rate are normally measured at original invoice amount unless the effect of imputinginterest would be significant) minus any reduction (directly or through the use of an allowanceaccount) for impairment or uncollectibility. Impairment charges are provided only when there isobjective evidence that an impairment loss has been incurred as a result of one or more eventsthat occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events)has an impact on the estimated future cash flows of the financial asset or group of financial assetsthat can be reliably estimated. Losses expected as a result of future events, no matter how likely,are not recognised. For impairment, the carrying amount of the asset is reduced through use of anallowance account. The amount of the loss is recognised in the income statement. The trade andother receivables are classified in this category.



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FINANCIAL ASSETS (Cont’d)

#3. Held-to-maturity financial assets: As at year end date there were no financial assetsclassified in this category.

#4. Available for sale financial assets: As at year end date there were no financial assetsclassified in this category.

Derecognition of financial assets:

Irrespective of the legal form of the transactions performed, financial assets are derecognisedwhen they pass the “substance over form” based derecognition test prescribed by FRS 39 relatingto the transfer of risks and rewards of ownership and the transfer of control.

Cash and cash equivalents:

Cash and cash equivalents include bank and cash balances, on demand deposits and any highlyliquid debt instruments purchased with an original maturity of three months or less. For the cashflow statement the item includes cash and cash equivalents less cash subject to restriction andbank overdrafts payable on demand that form an integral part of cash management.

INVENTORIES

Inventories are measured at the lower of cost (weighted average method) and net realisable value.Net realisable value is the estimated selling price in the ordinary course of business less theestimated costs of completion and the estimated costs necessary to make the sale. A write downon cost is made for where the cost is not recoverable or if the selling prices have declined. Costincludes all costs of purchase, costs of conversion and other costs incurred in bringing theinventories to their present location and condition.

DERIVATIVES

All derivatives are initially recognised and subsequently carried at fair value. The policy is to usederivatives only for non-speculative purposes. Derivatives are entered into in order to hedge sometransactions. Where all the strict hedging criteria prescribed by FRS 39 are not met, even thoughthe transaction has its economic and business rationale, hedge accounting cannot be applied. As aresult, changes in the fair value of those derivatives are recognised directly in the incomestatement and the hedged item follows normal accounting policies.

The Group has committed sales contracts for crude palm oil and palm kernel cake that are enteredinto as part of its processing and sale activities. The price and physical delivery of the sales arefixed in the contracts and these contracts are not recognised in the combined financial statementsuntil physical deliveries take place.

The Group enters into futures contracts for its crude palm oil to hedge fluctuations in commodityprices. Prices on commodity exchanges are quoted up to 3 to 5 months forward. The gains orlosses arising from matched non-physical delivery futures contracts of crude palm oil arerecognised immediately in the income statements.

Outstanding forward and future contracts of crude palm oil are valued at their fair values at thebalance sheet date. Where available, quoted market prices are used as a measure of fair values forthe outstanding contracts. Where the quoted market prices are not available, fair values are basedon management’s best estimate and are arrived at by reference to the market prices of othercontracts that are substantially similar. Unrealised losses arising from the valuation are set offagainst unrealised gains on an aggregate basis.



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PROPERTY, PLANT AND EQUIPMENT

Depreciation is provided on a straight-line basis to allocate the gross carrying amounts less theirresidual values over their estimated useful lives of each part of an item of property, plant andequipment. The annual rates of depreciation are as follows:

Freehold land – Depreciation is not provided

Leasehold buildings – 5% to 6.25%

Plant, fixtures and equipment – 25%

Vessels – 6.25%

Assets under construction – Depreciation is not provided until the asset is available for use.

An asset is depreciated when it is available for use until it is derecognised even if during thatperiod the item is idle. Fully depreciated assets still in use are retained in the financial statements.

Property, plant and equipment are carried at cost on initial recognition and after initial recognition atcost less any accumulated depreciation and any accumulated impairment losses. The gain or lossarising from the derecognition of an item of property, plant and equipment is determined as thedifference between the net disposal proceeds, if any, and the carrying amount of the item and isrecognised in the income statement. The residual value and the useful life of an asset is reviewedat least at each financial year-end and, if expectations differ from previous estimates, the changesare accounted for as a change in an accounting estimate, and the depreciation charge for thecurrent and future periods are adjusted.

Cost also includes acquisition cost, any cost directly attributable to bringing the asset to thelocation and condition necessary for it to be capable of operating in the manner intended bymanagement. Subsequent cost are recognised as an asset only when it is probable that futureeconomic benefits associated with the item will flow to the entity and the cost of the item can bemeasured reliably. All other repairs and maintenance are charged to the income statement whenthey are incurred.

LAND RIGHTS

Land rights that have a limited useful life are depreciated in a manner that reflects the benefits tobe derived from these rights. Costs associated with the legal transfer or renewal for titles of landrights, such as legal fees, land survey and re-measurement fees, taxes and other relatedexpenses, are deferred and amortised using the straight-line method over the legal terms of therelated land rights of thirty-five years.

ADVANCES / GUARANTEES UNDER THE PLASMA PROGRAMME

The Indonesian Government requires oil palm plantations to develop the surrounding localplantation areas held by small landholders when applying for land rights for oil palm plantations.This form of assistance to local small landholders is generally known as the Plasma Programme.Under the Plasma Programme, a plantation developer transfers a designated land area to the smalllandholders, who then operate the plasma plantation under the supervision of the plantationdeveloper.

Certain subsidiaries of the Group have implemented the Plasma Programme using plantationbusiness cooperatives scheme (Kredit Koperasi Primer Anggota or “KKPA”), cooperation in localcommunity palm oil plantation scheme (Kebun Kelapa Sawit Rakyat or “KKSR”), and independentplasma scheme (Plasma Mandiri).



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ADVANCES / GUARANTEES UNDER THE PLASMA PROGRAMME (Cont’d)

Under the KKPA scheme, the villagers typically occupy the land and the Group helps to developthe land and manage the oil palms to maturity. The development costs are funded by bank loans,which are guaranteed by the Group using the aforementioned land certificates and/or otherappropriate forms of security as collateral. Upon maturity of the oil palms, the land will bemaintained and managed by the villagers or in the future by the Group. The harvested fresh fruitbunches (“FFB”) will then be sold to the Group. The villagers will repay the loan facilities from aportion of the FFB sale price. The Group obtains a power of attorney to manage the accounts ofthe villagers into which all monies from the sale of FFB will be deposited. This power of attorneyallows the Group to withdraw funds from such accounts to pay for all the villagers operating costsand expenses. Under the KKSR scheme, the villagers also typically occupy the land. The Groupwill provide seedlings and the regional authorities will provide fertiliser to the villagers. Post-harvest,the FFB will be sold to the Group and part of the sale proceeds will be paid to the Group and theregional authorities as payment for the seedlings and fertiliser respectively. Plasma Mandiri is ascheme whereby the Group will provide the seedlings to the villagers, and the villagers will plantand maintain the plantations. Post-harvest, the FFB will be sold to the Group and part of the saleproceeds will be paid to the Group as payment for the seedlings provided. There is nogovernmental involvement under this scheme.

Costs incurred during development up to conversion of the oil palm plantations and temporaryfunding to the villagers for working capital purposes are included in other receivables in thebalance sheets. The funds received from the designated banks on behalf of villagers for thedevelopment and operations of the plantations are included in other payables in the balancesheets.

BIOLOGICAL ASSETS

Biological assets are stated at fair values less estimated point-of-sale costs. These include matureand immature oil palm plantations. Oil palm trees have an average life that ranges from 23 to 25years, with the first three years as immature and the remaining years as mature. In general, an oilpalm plantation takes about 3 (three) years to reach maturity from the time seedlings are planted.

As market determined prices or values are not readily available for plantations in their presentcondition, the Group uses the present value of expected net future cash flows (excluding any futurecash flows for financing the assets, taxation, or re-establishing plantations after harvest) from theasset, discounted at a current market determined pre-tax rate in determining the fair values. Thefair value of the oil palm plantations is estimated by reference to independent professionalvaluations using the discounted cash flows of the underlying biological assets. The expected cashflows from the whole life cycle of the oil palm plantations is determined using the market price ofthe estimated yield of the agriculture produce, being fresh palm fruit bunches (“FFB”), net ofmaintenance and harvesting costs and any costs required to bring the oil palm plantations tomaturity. The estimated yield of the oil palm plantations is affected by the age of the oil palm trees,the location, soil type and infrastructure. The market price of the fresh palm fruit bunches is largelydependent on the projected market price of the processed products after harvest, being crude palmoil (“CPO”) and crude palm kernel oil (“CPKO”). Point-of-sale costs include all costs that would benecessary to sell the assets.

Gains or losses arising on initial recognition of plantations at fair value less estimated point-of-salecosts and from the change in fair value less estimated point-of-sale costs of plantations at eachreporting date are included in the income statement for the period in which they arise.



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IMPAIRMENT OF NON-FINANCIAL ASSETS

The carrying amount of such assets (other than (i) intangible assets not yet available for use, (ii)goodwill and other indefinite life intangible assets) is reviewed at each reporting date for indicationsof impairment and where impairment is found, the asset is written down through the incomestatement to its estimated recoverable amount. Irrespective of whether there is any indication ofimpairment, an annual impairment test is performed at the same time every year on an intangibleasset with an indefinite useful life or an intangible asset not yet available for use.

The impairment loss is the excess of the carrying amount over the recoverable amount and isrecognised in the income statement. The recoverable amount of an asset or a cash-generating unitis the higher of its fair value less costs to sell and its value in use. In assessing value in use, theestimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset.For the purposes of assessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash flows (cash-generating units). At each reporting date non-financialassets other than goodwill with impairment loss recognised in prior periods are assessed forpossible reversal of the impairment. An impairment loss is reversed only to the extent that theasset’s carrying amount does not exceed the carrying amount that would have been determined,net of depreciation or amortisation, if no impairment loss had been recognised.

FINANCIAL LIABILITIES

Initial recognition and measurement:

A financial liability is recognised on the balance sheet when, and only when, the entity becomes aparty to the contractual provisions of the instrument. The initial recognition of financial liability is atfair value normally represented by the transaction price. The transaction price for financial liabilitynot classified at fair value through profit or loss includes the transaction costs that are directlyattributable to the acquisition or issue of the financial liability. Transaction costs incurred on theacquisition or issue of financial liability classified at fair value through profit or loss are expensedimmediately. The transactions are recorded at the trade date. Financial liabilities including bankand other borrowings are classified as current liabilities unless there is an unconditional right todefer settlement of the liability for at least 12 months after the balance sheet date.

Subsequent measurement:

Subsequent measurement based on the classification of the financial liabilities in one of thefollowing two categories under FRS 39 is as follows:

#1. Liabilities at fair value through profit or loss: Liabilities are classified in this category whenthey are incurred principally for the purpose of selling or repurchasing in the near term (tradingliabilities) or are derivatives (except for a derivative that is a designated and effective hedginginstrument) or have been classified in this category because the conditions are met to use the “fairvalue option” and it is used. All changes in fair value relating to liabilities at fair value through profitor loss are charged to the income statement as incurred.

#2. Other financial liabilities: All liabilities, which have not been classified as in the previouscategory fall into this residual category. These liabilities are carried at amortised cost using theeffective interest method. Trade and other payables and borrowings are classified in this category.Items classified within current trade and other payables are not usually re-measured, as theobligation is usually known with a high degree of certainty and settlement is short-term.



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PROVISIONS

A liability or provision is recognised when there is a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. Provisions are made using best estimates of the amount required in settlement andwhere the effect of the time value of money is material, the amount recognised is the present valueof the expenditures expected to be required to settle the obligation using a pre-tax rate that reflectscurrent market assessments of the time value of money and the risks specific to the obligation. Theincrease in the provision due to passage of time is recognised as interest expense. Changes inestimates are reflected in the income statement in the period they occur.

LEASED ASSETS

Leases are classified as finance leases if substantially all the risks and rewards of ownership aretransferred to the lessee. All other leases are classified as operating leases. A finance lease is alease that transfers substantially all the risks and rewards incidental to ownership of an asset. Atthe commencement of the lease term, a finance lease is recognised as an asset and as liability inthe balance sheet at amounts equal to the fair value of the leased asset or, if lower, the presentvalue of the minimum lease payments, each determined at the inception of the lease. The discountrate used in calculating the present value of the minimum lease payments is the interest rateimplicit in the lease, if this is practicable to determine; if not, the lessee’s incremental borrowingrate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset.The excess of the lease payments over the recorded lease liability are treated as finance chargeswhich are allocated to each period during the lease term so as to produce a constant periodic rateof interest on the remaining balance of the liability. Contingent rents are charged as expenses inthe periods in which they are incurred. The assets are depreciated as owned depreciable assets.Leases where the lessor effectively retains substantially all the risks and benefits of ownership ofthe leased assets are classified as operating leases. For operating leases, lease payments arerecognised as an expense in the income statement on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the user’sbenefit, even if the payments are not on that basis. Lease incentives received are recognised in theincome statement as an integral part of the total lease expense.

FINANCIAL GUARANTEES

A financial guarantee contract requires that the issuer makes specified payments to reimburse theholder for a loss when a specified debtor fails to make payment when due. Financial guaranteecontracts are initially recognised at fair value and are subsequently measured at the greater of (a)the amount determined in accordance with FRS 37 and (b) the amount initially recognised less,where appropriate, cumulative amortisation recognised in accordance with FRS 18.

EQUITY

Equity instruments are contracts that give a residual interest in the net assets of the company.Ordinary shares are classified as equity. Equity instruments are recognised at the amount ofproceeds received net of incremental costs directly attributable to the transaction. The shares haveno par value. Dividends on equity are recognised as liabilities when they are declared. Interimdividends are recognised when paid.



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FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of current financial assets and financial liabilities including cash, accountsreceivable, short-term borrowings, accounts payable approximate their fair values due to the short-term maturity of these instruments. The fair values of non-current financial instruments may not bedisclosed unless there are significant items at the end of the year and in the event the fair valuesare disclosed in the relevant notes. Disclosures of fair value are not made when the carryingamount is a reasonable approximation of fair value. The maximum exposure to credit risk is the fairvalue of the financial instruments at the balance sheet date. The fair value of a financial instrumentis derived from an active market. The appropriate quoted market price for an asset held or liabilityto be issued is usually the current bid price without any deduction for transaction costs that may beincurred on sale or other disposal and, for an asset to be acquired or liability held, the asking price.

REVENUE RECOGNITION

The revenue amount is the fair value of the consideration received or receivable from the grossinflow of economic benefits during the period arising from the course of the ordinary activities ofthe entity and it is shown net of related tax, estimated returns, discounts and volume rebates.Revenue from sale of goods is recognised when significant risks and rewards of ownership aretransferred to the buyer, there is neither continuing managerial involvement to the degree usuallyassociated with ownership nor effective control over the goods sold, the amount of revenue and thecosts incurred or to be incurred in respect of the transaction can be measured reliably. Revenuefrom rendering of services that are of short duration is recognised when the services arecompleted. Interest revenue is recognised on a time-proportion basis using the effective interestrate that takes into account the effective yield on the asset. Rental revenue is recognised on a time-proportion basis that takes into account the effective yield on the asset.

FOREIGN CURRENCY TRANSACTIONS

The functional currency is the Indonesian Rupiah (“IDR”) as it reflects the primary economicenvironment in which the Group operates. Transactions in foreign currencies are recorded in thefunctional currency at the rates ruling at the dates of the transactions. At each balance sheet date,recorded monetary balances and balances measured at fair value that are denominated in foreigncurrencies are reported at the rates ruling at the balance sheet and fair value dates respectively.All realised and unrealised exchange adjustment gains and losses are dealt with in the incomestatement. The presentation currency is the United States dollar as the financial statements aremeant primarily for international users. For the United States dollar financial statements assets andliabilities are translated at year end rates of exchange and the income and expense items aretranslated at average rates of exchange for the year. The resulting translation adjustments (if any)are accumulated in a separate component of shareholders’ equity. The translation of IDR amountsinto US$ amounts for the years ended is included solely for the convenience of readers and hasbeen made at the rates of US$1 to IDR9,830, US$1 to IDR9,020 and US$1 to IDR9,419 for 2005,2006 and 2007 respectively, the approximate rates of exchange at the end of each year. Theaverage rates used were US$1 to IDR9,711, US$1 to IDR9,167 and US$1 to IDR9,136 for 2005,2006 and 2007 respectively. Such translation should not be construed as a representation that theUS$ amounts could be converted into IDR at the above rates or other rate.

TRANSLATION OF FINANCIAL STATEMENTS OF FOREIGN ENTITIES

The foreign entities determine the appropriate functional currency as it reflects the primaryeconomic environment in which the entities operate. In translating the financial statements of aforeign entity for incorporation in the consolidated financial statements the assets and liabilitiesdenominated in currencies other than the functional currency of the company are translated at yearend rates of exchange and the income and expense items are translated at average rates ofexchange for the year. The components of shareholders’ equity are stated at historical value. Theresulting translation adjustments (if any) are accumulated in a separate component of equity untilthe disposal of the foreign entity.



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BORROWING COSTS

All borrowing costs that are interest and other costs incurred in connection with the borrowing offunds are recognised as an expense in the period in which they are incurred except for borrowingcosts that are directly attributable to the acquisition, construction or production of a qualifying assetthat necessarily take a substantial period of time to get ready for their intended use or sale arecapitalised as part of the cost of that asset until substantially all the activities necessary to preparethe qualifying asset for its intended use or sale are complete. The interest expense is calculatedusing the effective interest method.

INCOME TAX

The income taxes are accounted using the asset and liability method that requires the recognitionof taxes payable or refundable for the current year and deferred tax liabilities and assets for thefuture tax consequence of events that have been recognised in the financial statements or taxreturns. The measurements of current and deferred tax liabilities and assets are based onprovisions of the enacted or substantially enacted tax laws; the effects of future changes in tax lawsor rates are not anticipated. Income tax expense represents the sum of the tax currently payableand deferred tax. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same income tax authority. The carrying amount of deferred tax assets is reviewed ateach balance sheet date and is reduced, if necessary, by the amount of any tax benefits that,based on available evidence, are not expected to be realised. A deferred tax amount is recognisedfor all temporary differences, unless the deferred tax amount arises from (a) goodwill for whichamortisation is not deductible for tax purposes; or (b) the initial recognition of an asset or liability ina transaction which (i) is not a business combination; and (ii) at the time of the transaction, affectsneither accounting profit nor taxable profit (tax loss). A deferred tax liability is not recognised for alltaxable temporary differences associated with investments in subsidiaries, branches andassociates, and interests in joint ventures because (a) the company is able to control the timing ofthe reversal of the temporary difference; and (b) it is probable that the temporary difference will notreverse in the foreseeable future.

EMPLOYEE BENEFITS

Short-term employee benefits are recognised at an undiscounted amount where employees haverendered their services to the Group during the accounting periods.

Contributions to defined contribution retirement benefit plans are recorded as an expense as andwhen they fall due. The entity’s legal or constructive obligation is limited to the amount that itagrees to contribute to the fund.

Post employment benefits are recognised at discounted amounts when the employees haverendered their services to the Group during the accounting periods. Liabilities and expenses aremeasured using actuarial techniques which include constructive obligations that arise from theGroup’s common practices. In calculating the liabilities, the benefits are discounted by using theprojected unit credit method. Termination benefits are recognised when, and only when, the Groupis committed to either; (a) terminate the employment of an employee or group of employees beforethe normal retirement date; or (b) provide termination benefits as a result of an offer made in orderto encourage voluntary redundancy.

For employee leave entitlement the expected cost of short-term employee benefits in the form ofcompensated absences is recognised in the case of accumulating compensated absences, whenthe employees render service that increases their entitlement to future compensated absences;and in the case of non-accumulating compensated absences, when the absences occur.



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SEGMENT REPORTING

A business segment is a distinguishable component of an enterprise that is engaged in providingan individual product or service or a group of related products or services and that is subject torisks and returns that are different from those of other business segments. A geographicalsegment is a distinguishable component of an enterprise that is engaged in providing products orservices within a particular economic environment and that is subject to risks and returns that aredifferent from those of components operating in other economic environments.

CRITICAL JUDGEMENTS, ASSUMPTIONS AND ESTIMATION UNCERTAINTIES

In addition to those disclosed elsewhere in the notes, the critical judgements made in the processof applying the accounting policies that have the most significant effect on the amounts recognisedin the financial statements and the key assumptions concerning the future, and other key sourcesof estimation uncertainty at the balance sheet date, that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within the next financial yearare discussed below. These estimates and assumptions are periodically monitored to make surethey incorporate all relevant information available at the date when financial statements areprepared. However, this does not prevent actual figures differing from estimates.

BIOLOGICAL ASSETS – The Group carries its oil palm plantations at fair value less estimatedpoint-of-sale costs, which require extensive use of accounting estimates and assumptions.Significant components of fair value measurement were determined using assumptions andestimates including determination of future cash flows expected to be generated from thecontinued use of such assets, average lives of plantations, period of being immature and matureplantations, yield per hectare and annual discount rates (see Note 8). The amount of the changesin fair values would differ if there are changes to the assumptions and estimates used. Anychanges in fair values of these plantations would affect the Group’s balance sheet, incomestatement and equity. The carrying amounts of the Group’s biological assets as at 31 December2005, 2006 and 2007 were US$36,684,000, US$64,461,000 and US$111,649,000 respectively.

PROPERTY, PLANT AND EQUIPMENT – The Group has property, plant and equipment stated atcarrying values of US$15,620,000, US$18,508,000 and US$19,869,000 as at 31 December 2005,2006 and 2007 respectively. An assessment is made at each reporting date whether there is anyindication that the asset may be impaired. If any such indication exists, an estimate is made of therecoverable amount of the asset. The recoverable amounts of cash-generating units have beendetermined based on value-in-use calculations. These calculations require the use of estimates. Itis impracticable to disclose the extent of the possible effects. It is reasonably possible, based onexisting knowledge, that outcomes within the next financial year that are different from assumptionscould require a material adjustment to the carrying amount of the balances affected.

USEFUL LIVES OF PLANT AND EQUIPMENT – The estimates for the useful lives and relateddepreciation charges for plant and equipment is based on commercial and production factors whichcould change significantly as a result of technical innovations and competitor actions in response tosevere market conditions. The depreciation charge is increased where useful lives are less thanpreviously estimated lives, or the carrying amounts written off or written down for technicallyobsolete or non-strategic assets that have been abandoned or sold. The carrying amounts of thespecific assets affected by this assumption were US$13,507,000, US$16,450,000 andUS$16,221,000 respectively as at 31 December 2005, 2006 and 2007.



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CRITICAL JUDGEMENTS, ASSUMPTIONS AND ESTIMATION UNCERTAINTIES (Cont’d)

LAND RIGHTS — The Group holds location permits or Ijin Lokasi in respect of plantation land inIndonesia allocated by the Indonesian Government. Upon the completion of the acquisition of suchland, the Group will be entitled to begin the process of application for Business Usage Rights (“HakGuna Usaha” or “HGU”) certificates over such land. The Ijin Lokasi may not be extended by theIndonesian Government and will automatically expire if the Group fails to acquire the land coveredin the Ijin Lokasi within the stipulated validity period of the said Ijin Lokasi. In such an event, theGroup may lose their rights granted by the Indonesian Government under the Ijin Lokasi in respectof the remaining area covered by the original Ijin Lokasi.

At the date of this report, the Group is in the final process of obtaining HGU certificates forconversion in respect of 42,640 hectares of Kadastral land. Kadastral land is land that is measuredto determine the actual land area for the HGU title based on the application submitted by theGroup. The Group is also in the process of acquiring and clearing land held under their land bankprior to the issuance of Kadastral for such land. Prior to the issuance of the HGU certificates, suchland is considered as uncertified land. Pending the issue of HGU certificates, the Group ispermitted to physically occupy and build on the uncertified land and to plant and harvest crops.However, as the administration of land laws and regulations may be subject to a certain degree ofdiscretion by the Indonesian government authorities, there is no assurance with certainty that therelevant authorities would not take a different approach or view as regard the uncertified land, itsuse, registration and future disposal for value. Should the relevant authorities take a differentapproach or view as regards the same and the Group is unable to convert the uncertified land toHGU certified land, the Group’s interest in the uncertified land as well as the use of such land maybe adversely affected. At 31 December 2007, the uncertified land amounted to 42,640 hectares.

INCOME TAXES – The Group has exposure to income taxes in mainly 2 jurisdictions, Indonesiaand Singapore. Significant judgement is involved in determining the group-wide provision forincome taxes. There are certain transactions and computations for which the ultimate determinationis uncertain during the ordinary course of business. The Group recognises liabilities for expectedtax issues based on estimates of whether additional taxes will be due. Where the final tax outcomeof these matters is different from the amounts that were initially recognised, such differences willhave an impact on the income tax and deferred tax provisions in the period in which suchdetermination is made. The carrying amounts of the Group’s current and deferred tax liabilities asat 31 December 2007 were US$990,000 and US$26,073,000 respectively.

DEFERRED INCOME TAXES – Management judgment is required in determining the provision forincome taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can berecognised. A deferred tax asset is recognised if it is probable that sufficient taxable income will beavailable in the future against which the temporary differences and unused tax losses can beutilised. Management also considers future taxable income and tax planning strategies inassessing whether deferred tax assets should be recognised.

PENSION AND EMPLOYEE BENEFITS – The determination of the Group’s obligations and costfor pension and employee benefits liability is dependent on its selection of certain assumptionsused by independent actuaries in calculating such amounts. Those assumptions include amongothers, discount rates, future annual salary increase, annual employee turnover rate, disability rate,retirement age and mortality rate. Actual results that differ from the assumptions are recognisedimmediately in the income statements as and when they occur. While the Group believes that itsassumptions are reasonable and appropriate, significant differences in the Group’s actualexperience or significant changes in the assumptions may materially affect its estimated liabilitiesfor pensionable and employee benefits and net employee benefits expense. The carrying amountsof the estimated liabilities for employee benefits as at 31 December 2005, 2006 and 2007 wereUS$134,000, US$213,000 and US$288,000 respectively.



F-26


ENVIRONMENTAL REGULATIONS – The main environmental concerns relate to the discharge ofeffluent arising from the milling of FFB and clearance of land and forest for developing the Group’splantations. The main social concern relates to possible conflicts that may arise with localcommunities in the areas around the plantations. Any environmental claims or failure to complywith any present or future regulations could result in the imposition of fines, the suspension or acessation of the Group’s operations.

The Group’s plantations are subject to both scheduled and unscheduled inspections by variousIndonesian government agencies, each of whom may have differing perspectives or standards fromthe others. These agencies have the power to examine and control the Group’s compliances withtheir environmental regulations, including the imposition of fines and revocation of licenses andland rights. However, governmental agencies may adopt additional regulations that would requirethe Group to spend additional funds on environmental matters.

Environmental regulations and social practices in Indonesia tend to be less stringent than indeveloped countries. It is possible that these regulations could become more stringent in the futureand compliance with them may involve incurring significant costs. This may consequently have anadverse effect on the Group’s operations. Any failure to comply with the laws and regulations couldsubject the Group to further liabilities.

It is impracticable to disclose the extent of the possible effects of the above matters on thecombined financial statements of the Group.

ADVANCES/GUARANTEES UNDER THE PLASMA PROGRAMME – The Group has providedguarantees in respect of loans granted by banks to villagers under the Plasma Programme. Thevillagers will repay the bank loans from the sale proceeds of FFB. In the event the villagers defaulton their obligations to repay the bank loans, the banks may call upon the guarantees, which havebeen provided by the Group to the banks to secure the loans of the villagers. Details of the bankguarantees provided are disclosed in Note 24 to these financial statements.

3. RELATED PARTY TRANSACTIONS

A related party is an entity or person that directly or indirectly through one or more intermediariescontrols, is controlled by, or is under common or joint control with, the entity in governing thefinancial and operating policies, or that has an interest in the entity that gives it significant influenceover the entity in financial and operating decisions. It also includes members of the keymanagement personnel or close members of the family of any individual referred to herein andothers who have the ability to control, jointly control or significantly influence by or for whichsignificant voting power in such entity resides with, directly or indirectly, any such individual. Thisincludes parents, subsidiaries, fellow subsidiaries, associates, joint ventures and post-employmentbenefit plans, if any.

3.1. Related parties:

There are transactions and arrangements between the Company and related parties and theeffects of these on the basis determined between the parties are reflected in these financialstatements. The current related party balances are unsecured, without fixed repayment terms andinterest unless stated otherwise. For non-current balances, an interest is imputed based on theprevailing market interest rate for similar debt less the interest rate if any provided in the agreementfor the balance. The guarantees are provided by the guarantor without charge but for the financialstatements for 2005, 2006 and 2007 fair values were imputed and considered to be not significant.



F-27

3. RELATED PARTY TRANSACTIONS (Cont’d)

Significant related party transactions:

In addition to the transactions and balances disclosed elsewhere in the notes to the financialstatements, this item includes the following: -

2005 2006 2007US$’000 US$’000 US$’000

Lease related services (46) (49) (37)Receiving of services expense (827) (870) (526)

Related party refers to a partnership that is under common control by some of the directors of theCompany.

Intragroup transactions and balances that have been eliminated in these combined financialstatements are not disclosed as related party transactions and balances below.

3.2. Key management compensation:

2005 2006 2007US$’000 US$’000 US$’000

Salaries and other short-term employee benefits 128 173 424

The above amounts are included under employee benefits expense. Included in the aboveamounts are the following items:

2005 2006 2007US$’000 US$’000 US$’000

Remuneration of directors of the subsidiaries 128 173 424

Key management personnel are directors and those persons having authority and responsibility forplanning, directing and controlling the activities of the Group, directly or indirectly. The aboveamounts for key management compensation are for all the directors of the Company.

3.3. Other receivables from and other payables to related parties:

The trade transactions and the trade receivables and payables balances arising from sales andpurchases of goods and services are disclosed elsewhere in the notes to the financial statements.

The movements in other receivables from and other payables to related parties are as follows:



F-28

3. RELATED PARTY TRANSACTIONS (Cont’d)

Shareholders

2005 2006 2007US$’000 US$’000 US$’000

Other receivables:

Balance at beginning of year 1,827 4,884 7,643Amounts paid out during the year 4,040 3,863 –Amounts paid in during the year (975) (1,117) (2,834)Capital distribution to shareholders arisingfrom the liquidation of an entity – – (4,664)

Foreign currency alignment (8) 13 (145)

Balance at end of year – debit 4,884 7,643 –

Other related parties

2005 2006 2007US$’000 US$’000 US$’000

Other receivables:

Balance at beginning of year – – –Amounts paid out during the year – – 4Amounts paid in during the year – – –Foreign currency alignment – – –

Balance at end of year – debit – – 4

Shareholders

2005 2006 2007US$’000 US$’000 US$’000

Other payables:

Balance at beginning of year 2,270 1,362 381Amounts paid out during the year (3,567) (1,244) (374)Amounts paid in during the year 2,688 155 –Foreign currency alignment (29) 108 (7)

Balance at end of year – credit 1,362 381 –

Other related party

2005 2006 2007US$’000 US$’000 US$’000

Other payables:

Balance at beginning of year – – –Amounts paid out during the year – – –Amounts paid in during the year – – 1Foreign currency alignment – – –

Balance at end of year – credit – – 1



F-29

4. CASH AND CASH EQUIVALENTS

2005 2006 2007US$’000 US$’000 US$’000

Not restricted in use 789 1,337 4,028Restricted in use (a) 12 14 1,913

801 1,351 5,941

Interest earning balances –* –* 4,699

* The interest earnings balances for 2005 and 2006 were insignificant.

The rates of interest for the cash on interest earning balances were as follows:

2005 2006 2007

Interest rates 4.15% to 6.5% to 3.0% to7.0% 7.6% 4.0%

(a) This is for bank balances held by bankers to cover bank facilities provided. See Notes 10 and12.

The carrying amounts are assumed to be a reasonable approximation of fair values.

Cash and cash equivalents in the cash flow statement:

2005 2006 2007US$’000 US$’000 US$’000

As shown above 801 1,351 5,941Cash restricted in use over 3 months (12) (14) (1,913)Bank overdrafts (Note 10) – – (29)

Cash at end of year 789 1,337 3,999

NON-CASH TRANSACTIONS – Additions to property, plant and equipment for 2005, 2006 and2007 amounting to US$928,000, US$40,000 and US$547,000 respectively were financed by newfinance leases.

5. TRADE AND OTHER RECEIVABLES

2005 2006 2007US$’000 US$’000 US$’000

Trade receivables:Outside parties 77 149 1,878

Other receivables (including prepayments):Other related parties (Note 3) – – 4Deposits to secure services 4 1 –Staff advances 87 100 94VAT receivable 1,638 1,866 923Advances under Plasma Programme (Note 24) 1,080 906 1,523Other receivables 188 216 69Shareholders (Note 3) 4,884 7,643 –Deferred listing expenses – – 1,416Prepayments 298 1,170 3,177

Total trade and other receivables 8,256 12,051 9,084



F-30

5. TRADE AND OTHER RECEIVABLES (Cont’d)

2005 2006 2007US$’000 US$’000 US$’000

Trade and other receivables:Current 8,256 12,051 8,041Non-current – – 1,043

8,256 12,051 9,084

Included in prepayments are the following:

2005 2006 2007US$’000 US$’000 US$’000

Prepaid rent to a related party (Note 23) – – 1,097Advance payments made for the purchase of kernel – – 378Others 298 1,170 1,702

298 1,170 3,177

Deferred listing expenses represent expenditures, stated at cost, incurred in relation to theCompany’s public listing. These expenditures will be set off against share capital and / or expensedin the following year.

Staff advances are unsecured, without interest and are on fixed equal monthly repayment terms.

Current receivables with a short duration are not discounted and the carrying amounts areassumed to be reasonable approximation of fair values.

The trade receivables have been pledged as security for the bank facilities (see Notes 10 and 12).

6. INVENTORIES

2005 2006 2007US$’000 US$’000 US$’000

Raw materials, consumables and supplies 1,134 2,575 2,762Finished goods and goods for resale (CPO and CPKO) 3,949 1,962 2,409

5,083 4,537 5,171

Changes in inventories of finished goods (increase) / decrease (130) 1,987 (447)Raw materials and consumables used included in cost of sales 24,353 22,224 36,045

Inventories are pledged as security for the bank facilities (see Notes 10 and 12).



F-31

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F-32

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F-33

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F-34

7. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

Assets under construction represent partial payment for the construction of the following assets:

2005 2006 2007US$’000 US$’000 US$’000

Leasehold properties 452 740 524Plant and equipment 1,653 1,310 3,116

2,105 2,050 3,640

The depreciation expenses are partly capitalised under biological assets (Note 8) and partlycharged to income statement as follows:

Cost of Administrativesales expenses Total

US$’000 US$’000 US$’000

Year 2005 1,351 292 1,643Year 2006 1,541 396 1,937Year 2007 1,784 161 1,945

Certain property, plant and equipment have been pledged as security for the bank facilities (seeNotes 10 and 12).

Certain items are under finance lease agreements (see Note 13)

Borrowing costs capitalised amounted to US$107,000 and US$19,000 for the financial years ended31 December 2005 and 2006 respectively. Accumulated borrowing costs capitalised included aboveamounted to US$107,000 and US$126,000 as at 31 December 2005 and 2006 respectively. Theborrowing costs capitalised represent the actual interest incurred on the bank borrowings to financethe construction of property, plant and equipment.

8. BIOLOGICAL ASSETS

2005 2006 2007US$’000 US$’000 US$’000

At beginning of year 43,452 36,684 64,461Additions 3,705 6,166 7,559Capitalisation of depreciation (Note 7) 253 309 507Capitalisation of interest 559 1,039 1,272Increase / (decrease) in fair value less estimatedpoint-of-sale costs (8,997) 16,675 41,898

Foreign currency alignment (2,288) 3,588 (4,048)

At end of year 36,684 64,461 111,649



F-35

8. BIOLOGICAL ASSETS (Cont’d)

Mature oil palm trees produce Fresh Fruit Bunches (“FFB”), which are used to produce CPO andCPKO. The fair value of the biological assets was determined by PT Asian Appraisal Indonesia, afirm of independent professional valuers on 8 November 2007 and 18 February 2008 using thediscounted future cash flows of the underlying plantations. The expected future cash flows of the oilpalm plantations are determined using the forecast market price of FFB, which is largely dependenton the projected selling prices of CPO and CPKO in the market. The significant assumptions madein determining the fair values of the oil palm plantations are as follows:

(i) Oil palm trees have an average life that ranges from 23 to 25 years, with the first three yearsas immature and the remaining years as mature;

(ii) Yield per hectare of oil palm trees is based on the guidelines issued by the Indonesian OilPalm Research Institute (Pusat Penelitian Kelapa Sawit), which varies with the average ageof oil palm trees;

(iii) The discount rates used in 2005, 2006 and 2007 are 22%, 18% and 18% per annum,respectively, (such discount rates represent the asset specific rate for the Group’s plantationoperations which are applied in the discounted future cash flows calculations); and

(iv) The projected selling prices of CPO and CPKO from 2005 to 2007 are based on RotterdamCIF prices.

(a) Analysis of biological assets:

At the end of the financial year, biological assets comprise oil palm trees as follows:

2005 2006 2007

Planted area:- mature (US$’000) 27,653 46,902 92,164- immature (US$’000) 9,031 17,559 19,485

36,684 64,461 111,649

Planted area:- mature (hectares) 7,412 7,412 8,409- immature (hectares) 4,866 9,379 14,199

12,278 16,791 22,608

(b) Analysis of palm oil production:

During the financial years 2005, 2006 and 2007, the Group harvested approximately124,000, 137,000 and 171,000 tonnes of FFB respectively, which had fair values lessestimated point-of-sale costs of US$9,293,000, US$11,074,000 and US$19,857,000respectively.

(c) At the balance sheet dates at 31 December 2005, 2006 and 2007, the fair values ofbiological assets of the Group mortgaged as security for bank borrowings amounted toUS$11,908,000 US$17,702,000 and US$71,251,000 respectively.

(d) The interest capitalised is the actual interest incurred on the bank borrowings tofinance the development of oil palm plantations.



F-36

9. LAND RIGHTS

2005 2006 2007US$’000 US$’000 US$’000

Cost:

At beginning of year 1 January 1,120 1,395 2,155Additions 336 635 651Foreign currency alignment (61) 125 (91)

At end of year 31 December 1,395 2,155 2,715

Accumulated depreciation:At beginning of year 1 January 94 121 190Amortisation for the year 32 57 55Foreign currency alignment (5) 12 (10)

At end of year 31 December 121 190 235

Net book value:

At end of year 31 December 1,274 1,965 2,480

The amortisation expenses are charged to income statement and included in administrativeexpenses.

The land rights have been pledged as security for the bank facilities (see Notes 10 and 12).

As at 31 December 2007, the Group’s land rights covering a total land area of 62,310 hectares,represent Business Usage Rights (“Hak Guna Usaha” or “HGU”) that have been applied for. Out ofthese land rights, the certificates for 19,670 hectares were obtained before 31 December 2007while the land rights certificates covering the remaining area of 42,640 hectares are still in theprogress of preparation as at the date of this report. The Group has been given a permit to arrangefor land clearing for oil palm plantation purposes. The land rights will be amortised once the titlesare issued to the Group.

The legal terms of the Group’s existing certified land rights expire in various years. The details areas follows:

Land rights Expire in years

19,374 hectares 2032 – 2037

296 hectares 2037 – 2042

42,640 hectares Certificates have yet to be received as of the date of this report



F-37

10. SHORT-TERM BORROWINGS

2005 2006 2007US$’000 US$’000 US$’000

Bank loans – secured 3,369 1,602 328Bank loans – unsecured 3,713 7,816 116Bank overdrafts – secured – – 29

Total short-term borrowings 7,082 9,418 473

All the short-term borrowings are interest bearing. The carrying values are assumed to be areasonable approximation of fair values.

The range of floating interest rates which approximate the weighted effective interest rates paidwere as follows:

2005 2006 2007

Bank loans and bank overdrafts 8.0% to 8.0% to Sibor+4% and16.5% 16.5% 16.5%

The bank overdrafts and other banking facilities are covered by way of:

(a) joint and several personal guarantees of directors and shareholders; or

(b) corporate guarantees from a related party and negative pledges on certain fixed deposits,inventories, trade receivables, land rights, properties, vessels, plant and equipment of theGroup.

The exposure of the short-term borrowings to interest rate changes and the contractual repricingdates at the balance sheet dates are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Below 6 months 3,541 4,709 236Within 6 to 12 months 3,541 4,709 237

Total short-term borrowings 7,082 9,418 473



F-38

11. TRADE AND OTHER PAYABLES

2005 2006 2007US$’000 US$’000 US$’000

Trade payables:

Outside parties and accrued liabilities 4,184 4,357 9,379

Other payables:

Other related party (Note 3) – – 1Shareholders (Note 3) 1,362 381 – Advances from customers 592 3,865 1,168Advances under Plasma Programme (Note 24) – 328 – Provision for listing expenses – – 1,276Other payables 952 544 862

Total trade and other payables 7,090 9,475 12,686

Included in the other payables is US$304,000 and US$331,000 representing amounts payable tosuppliers for the acquisition of plant and equipment at 31 December 2005 and 2007 respectivelyand US$67,000 representing amounts payable to suppliers for construction of properties at 31December 2007.

12. LONG-TERM BORROWINGS

2005 2006 2007US$’000 US$’000 US$’000

Investment loan A (Effective) – secured 2,059 972 907Investment loan B (Effective) – secured 6,869 9,135 7,764Investment loan C (Effective) – secured – 1,377 3,273Investment loan D (Interest during construction) – secured 20 78 82Investment loan E (Interest during construction) – secured 1,099 1,728 1,602Investment loan F (Interest during construction) – secured – 11 248Investment loan G – secured – 974 541Bank loan – secured 474 333 693Term loan I – secured 767 597 266Term loan II – unsecured 2,000 2,000 – Term loan III – unsecured 3,604 4,000 – Term loan IV – secured – – 1,062Term loan V – unsecured – – 2,000Term loan VI – unsecured – – 3,000Term loan VII – secured – – 2,000Term loan VIII – secured – – 4,000Term loan IX – secured – – 1,000Term loan X – secured – – 3,819Term loan XI – secured – – 1,636

16,892 21,205 33,893



F-39

12. LONG-TERM BORROWINGS (Cont’d)

2005 2006 2007US$’000 US$’000 US$’000

The borrowings are repayable as follows:

Amounts due within a year 2,907 2,522 2,233

Total current portion 2,907 2,522 2,233

Non-current portion 13,985 18,683 31,660

The non-current portion is payable as follows:

Due within 2 to 5 years 13,369 18,683 28,479After 5 years 616 – 3,181

Total non-current portion 13,985 18,683 31,660

The range of floating interest rates which approximate the weighted effective interest rates paidwere as follows:

Investment loan A (Effective) – secured 7.75% to 16.50% 13.50% to 16.50% 13.00% to 15.00%Investment loan B (Effective) – secured 13.00% to 16.50% 16.00% to 16.50% 13.50% to 16.00%Investment loan C (Effective) – secured – 16.00% 13.00% to 16.00%Investment loan D (Interest duringconstruction) – secured 7.75% to 16.50% 13.50% to 16.50% 13.00% to 15.00%

Investment loan E (Interest duringconstruction) – secured 13.00% to 16.50% 16.00% to 16.50% 13.50% to 16.00%

Investment loan F (Interest duringconstruction) – secured – 16.00% 13.00% to 16.00%

Investment loan G – secured – 8.00% 8.00%Bank loan – secured 15.00% 15.43% to 15.74% 7.84% to 15.74%Term loan I – secured 7.50% 7.50% Sibor+4%Term loan II – unsecured 9.75% to 9.76% 9.36% to 9.76% –Term loan III – unsecured 9.75% 9.78% –Term loan IV – secured – – 13.80%Term loan V – unsecured – – Sibor+3.50%Term loan VI – unsecured – – Sibor+3.50%Term loan VII – secured – – 7.84% to 9.75%Term loan VIII – secured – – 7.84% to 9.75%Term loan IX – secured – – 7.84% to 9.75%Term loan X – secured – – Sibor+3.00%Term loan XI – secured – – Sibor+3.00%

The exposure of the long-term borrowings to interest rate changes and the contractual repricingdates at the balance sheet dates are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Below 6 months 1,454 1,261 1,116Within 6 to 12 months 1,453 1,261 1,117Within 2 to 5 years 13,369 18,683 28,479Over 5 years 616 – 3,181

Total long-term borrowings 16,892 21,205 33,893



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All the borrowings are interest bearing. The carrying value of long-term borrowings approximatesthe fair value.

The investment loans A and D are covered by personal guarantees from directors andshareholders and by negative pledges on fixed deposits, certain inventories, trade receivables, landrights, and property, plant and equipment. In 2007, the personal guarantees from directors andshareholders were discharged. The investment loans are repayable by quarterly instalmentsaccording to the loan repayment schedules from banks. The investment loans will be fully repaid byyear 2010.

(i) Investment loan A (Effective)

The purpose of the loan is to finance the construction of a CPO mill inclusive of all therelated facilities such as building construction, vehicles and heavy duty equipment.

The funds are drawn down quarterly in accordance with progress payments for the first 5years.

The payment of interest expenses is conducted in 2 ways:

1. During the construction period which is 4.5 years in accordance with the loanagreement, the interest rates are 7.75% to 16.50%, 13.50% to 16.50% and 13.00% to15.00% per annum for 2005, 2006 and 2007 respectively and charged quarterly.During this period, 65% of the interest charged is capitalised with the investment loan(See investment loan D - Interest during construction), and the remaining 35% ispayable in the current period.

2. After the construction period, the floating interest rates are 7.75% to 16.50%, 13.50%to 16.50% and 13.00% to 15.00% per annum for 2005, 2006 and 2007 respectivelyand no interest charged is capitalised with the investment loan (See investment loan D- Interest during construction).

(ii) Investment loan D (Interest during construction)

The investment loan (Interest during construction) credit facility is the accumulated interestcharges capitalised during the construction period. As stated above, the payment obligationfor 65% of the total interest charges is postponed until the end of the construction periodwhich is up to the end of the 4.5 year period limit.

The investment loans B and E are covered by negative pledges on certain inventories, tradereceivables, land rights, and properties, plant and equipment. The investment loans are repayableby quarterly instalments according to the loan repayment schedules from banks. The investmentloans will be fully repaid by year 2011.

(i) Investment loan B (Effective)





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The payment of interest expenses is conducted in 2 ways:

1. During the construction period which is 4.5 years in accordance with the loanagreement, the interest rates are 13.00% to 16.50%, 16.00% to 16.50% and 13.50%to 16.00% per annum for 2005, 2006 and 2007 respectively and charged quarterly.During this period, 65% of the interest charged is capitalised with the investment loan(See investment loan E - Interest during construction), and the remaining 35% ispayable in the current period.

2. After the construction period, the floating interest rates are 13.00% to 16.50%, 16.00%to 16.50% and 13.50% to 16.00% per annum for 2005, 2006 and 2007 respectivelyand no interest charged is capitalised with the investment loan (See investment loan E- Interest during construction).

(ii) Investment loan E (Interest during construction)

The investment loan (Interest during construction) credit facility is the accumulated interestcharges capitalised during the construction period. As stated above, the payment obligationfor 65% of the total interest charges is postponed until the end of the construction periodwhich is up to the end of the 4.5 year period limit.

The investment loans C and F are covered by personal guarantees from shareholders anddirectors and by negative pledges on biological assets and land rights. The investment loans arerepayable by quarterly instalments according to the loan repayment schedules from banks. Theinvestment loans repayment will commence in year 2011 and will be fully repaid by year 2016.

(i) Investment loan C (Effective)



The payment of interest charges is conducted in 2 ways:

1. During the construction period which is 4.5 years in accordance with the loanagreement, the floating interest rate is 16.00% and 13.00% to 16.00% per annum for2006 and 2007 respectively and charged quarterly. During this period, 65% of theinterest charged is capitalised with the investment loan (See investment loan F -Interest during construction), and the remaining 35% is payable in the current period.

2. After the construction period, the floating interest rate is 16% and 13.00% to 16.00%per annum for 2006 and 2007 respectively and no interest charged is capitalised withthe investment loan (Interest during construction).

(ii) Investment loan F (Interest during construction)

The investment loan (Interest during construction) credit facility is the accumulated interestcharges capitalised during the construction period. As stated above, the payment obligationfor 65% of the total interest charges is postponed until the end of the construction periodwhich is up to the end of 4.5 year period limit.

The investment loan G is secured by the vessels of the Group. The loan is repayable by quarterlyinstalments over 3 years from February 2006.



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The bank loan is covered by negative pledges on certain of the Group’s land rights, inventories andplant and equipment. The loans are used for working capital purposes and are repayable within 3years from May 2005.

The term loan I is fully repayable by year 2008 while the term loans II and III were fully repaid inSeptember 2007. Term loan I is secured by plant and equipment and vessels of the Group.

The term loan IV is repayable by monthly instalments over 5 years from January 2009 and issecured by land and buildings of the Group.

The term loans V and VI are fully repayable by September 2010.

The term loans VII, VIII and IX are fully repayable by 2009 and are secured by the receivables andinventories of the Group.

Term loans X and XI are fully repayable by June 2009 or via IPO proceeds, whichever is sooner,and are secured by a corporate guarantee and letter of comfort by PT Sawindo Kencana.

13. OBLIGATIONS UNDER FINANCE LEASES

2005 Minimum Finance Presentpayments charges valueUS$’000 US$’000 US$’000

Minimum lease payments payable:

Due within one year 591 (93) 498Due within 2 to 5 years 544 (35) 509

Total 1,135 (128) 1,007

Net book value of plant and equipment under finance leases 2,816

Analysis of above amount denominated innon-functional currency:

United States dollars 333




Total 638 (52) 586






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13. OBLIGATIONS UNDER FINANCE LEASES (Cont’d)




Total 624 (87) 537




It is the Group’s policy to lease certain of its plant and equipment under finance leases. Theaverage lease term is 3 to 4 years. The range of interest rates for certain of the finance leases arefixed at 7.60% to 17.12% per annum. The range of interest rates for certain of the finance leasesare fixed at 14.50% to 17.00% for the first 6 to 12 months and then at floating rates based on costof funds + 3.75% to + 4.15% per annum for the remaining period. There is an exposure to fair valueinterest risk because the interest rates are fixed at the contract date. All leases are on a fixedrepayment basis and no arrangements have been entered into for contingent rental payments. Alllease obligations are denominated in Indonesian Rupiah and United States dollars. The obligationsunder finance leases are secured by the lessor’s charge over the leased assets and joint andseveral personal guarantees of certain directors of the Group.

The fair value of the lease liabilities approximates the carrying amounts.

14. ESTIMATED LIABILITY FOR EMPLOYEE BENEFITS

Besides the benefits provided under the defined contribution retirement plans (see Note 20), theGroup has recorded additional provisions for employee service entitlements in order to meet theminimum benefits required to be paid to the qualified employees, as required under existingmanpower regulations in Indonesia. The amounts of such additional provisions were determinedbased on actuarial computations prepared by an independent firm of actuaries, PT Rileos Pratama,using the “Projected Unit Credit” method which is covered in their reports dated 1 October 2007and 12 February 2008. As at 31 December 2005, 2006 and 2007, the balance of the relatedactuarial liability for employee benefits amounted to US$134,000, US$213,000 and US$288,000respectively, which is presented as “Estimated Liability for Employee Benefits” in the balancesheets. They are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Present value of employee benefits obligation in addition to the defined contribution scheme 139 219 342

Unrecognised net actuarial loss (4) (9) (45)Foreign currency alignment (1) 3 (9)

134 213 288



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14. ESTIMATED LIABILITY FOR EMPLOYEE BENEFITS (Cont’d)

Changes in the present value of the defined benefits obligation are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Benefits obligation at beginning of year 77 134 213Current service costs 54 46 62Interest costs on benefits obligation 8 15 24Past services costs – vested – 5 2Foreign currency alignment (5) 13 (13)

Benefits obligation at end of year 134 213 288

The following table summarises the component of net employee benefits expense recognised inthe income statements:

2005 2006 2007US$’000 US$’000 US$’000

Current service costs 54 46 62Interest costs on benefits obligation 8 15 24Past services costs – vested – 5 2

Net employee benefits expense (Note 20) 62 66 88

The principal assumptions used in determining post-employment obligations for the plan are asfollows:

Annual discount rate : 10% in 2005, 10% in 2006 and 10% in 2007

Future annual salary increase : 6% in 2005, 6% in 2006 and 6% in 2007

Annual employee turnover rate : 10% in 2005 and 2006, and 5% in 2007 for employeesunder 40 years old and decreasing linearly until 0% at theage of 55 years

Disability rate : 10% per year from mortality rate for office staff20% per year from mortality rate for plantation staff

Retirement age : 55 years of age

Mortality rate : Indonesian mortality table 2



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15. SHARE CAPITAL

Number Issuedof shares share capital

‘000 US$’000Ordinary shares:Balance at beginning of year 1 January 2005 1,457 13,091Issue of shares 38 1,112Share application money – 1,119

Balance at end of 31 December 2005 1,495 15,322Issue of shares 191 1,186Share application money – 2,247

Balance at end of year 31 December 2006 1,686 18,755Issue of shares 2,279 355

Balance at end of year 31 December 2007 (a)

3,965 19,110

(a) The share capital represents the combined share capital of the subsidiaries prior to theRestructuring Exercise.

The ordinary shares carry no right to fixed income. The Company is not subject to any externallyimposed capital requirements.

As set out in Note 1, the Company completed a Restructuring Exercise on 19 June 2008. Theissued share capital of the Company on completion of the Restructuring Exercise wasUS$12,981,000.

The financial effects on the combined financial statements had the Restructuring Exercise beeneffective as at 31 December 2007, are illustrated in the unaudited proforma combined financialinformation of the Group (Appendix E).

The objectives when managing capital are: to safeguard the Company’s ability to continue as agoing concern, so that it can continue to provide returns for shareholders and benefits for otherstakeholders, and to provide an adequate return to shareholders by pricing products and servicescommensurately with the level of risk. The Company sets the amount of capital in proportion to risk.The management manages the capital structure and makes adjustments to it in the light ofchanges in economic conditions and the risk characteristics of the underlying assets. In order tomaintain or adjust the capital structure, the management may adjust the amount of dividends paidto shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

The company has significant external borrowings but an equity base. The debt-to-adjusted capitalratio may not provide a meaningful indicator of the risk of borrowings.

16. REVENUE

2005 2006 2007US$’000 US$’000 US$’000

Sale of goods 36,297 40,643 68,511Rendering of services 181 309 664Rental income 136 106 105Management fee income 9 9 –

Total 36,623 41,067 69,280



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17. FINANCIAL EXPENSE

2005 2006 2007US$’000 US$’000 US$’000

Bad debts written off – other receivables (9) – – Interest expense (1,172) (1,892) (2,797)

(1,181) (1,892) (2,797)

18. OTHER CREDITS/ (CHARGES)

2005 2006 2007US$’000 US$’000 US$’000

Gain on disposal of plant and equipment – 13 – Unrealised loss on futures contracts (Note 25) – – (677)Loss on non-physical delivery futures contracts – – (439)Assets written down – (2) – Compensation from outside parties 242 5 101Other income 95 5 9Others 71 68 (39)

408 89 (1,045)

19. INCOME TAX

2005 2006 2007US$’000 US$’000 US$’000

Current (96) (639) (648)Deferred 2,234 (4,843) (14,706)

Total tax (expense) / credit 2,138 (5,482) (15,354)

The income tax (expense)/credit varied from the amount of income tax (expense) / benefit determined byapplying the applicable Indonesian income tax rates to profit / (loss) before income tax as a result of thefollowing differences:

2005 2006 2007US$’000 US$’000 US$’000

(Loss) / profit before tax (9,175) 20,317 54,556

Income tax (expense) / benefit at thestatutory rates* 2,753 (6,095) (16,367)Non-(allowable) / taxable items (173) 254 139Tax exemptions 2 2 –Deferred tax assets valuation allowance (144) 73 (191)Prior years tax loss carryforwards utilised – – 1,518Other items less than 3% each (300) 284 (453)

Total tax credit / (expense) 2,138 (5,482) (15,354)

* Companies in Indonesia are generally subject to progressive tax rates up to a maximum of 30%.



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19. INCOME TAX (Cont’d)

The deferred tax amounts are as follows:

Balance sheet Net change in income statement

2005 2006 2007 2005 2006 2007US$ US$ US$ US$ US$ US$’000 ’000 ’000 ’000 ’000 ’000

Deferred tax liabilities:Excess of net book value ofplant and equipment (535) (418) (927) (292) 117 (509)Fair value changes in biologicalassets and others (8,874) (13,961) (26,449) 2,451 (5,087) (12,488)

(9,409) (14,379) (27,376) 2,159 (4,970) (12,997)Foreign currency alignmentincluded in equity 976 203 1,283 – – –

Total deferred tax liabilities (8,433) (14,176) (26,093) 2,159 (4,970) (12,997)

Deferred tax assets:Tax loss carryforwards 1,844 1,898 380 219 54 (1,518)Deferred tax assets valuationallowance (234) (161) (352) (144) 73 (191)

1,610 1,737 28 75 127 (1,709)Foreign currency alignmentincluded in equity (117) 29 (8) – – –

Total deferred tax assets 1,493 1,766 20 75 127 (1,709)

Net total of deferred taxassets/(liabilities) (6,940) (12,410) (26,073) 2,234 (4,843) (14,706)

It is impracticable to estimate the amount expected to be settled or used within one year.

20. EMPLOYEE BENEFITS EXPENSE

2005 2006 2007US$’000 US$’000 US$’000

Employee benefits expense 1,295 1,634 2,845Contribution to defined contribution retirement plans 27 38 39Other post-employment benefits (Note 14) 62 66 88Other employee benefits 59 17 62

Total employee benefits expense 1,443 1,755 3,034



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21. EARNINGS / (LOSS) PER SHARE

The earnings per share for the years ended 31 December 2005, 2006 and 2007 are calculated bydividing the Group’s (loss) / profit for the year of (US$7,037,000), US$14,835,000 andUS$39,202,000 respectively by the number of the pre-invitation ordinary shares of 798,044,720.

Both basic and diluted earnings per share are the same as there are no dilutive ordinary shareequivalents outstanding during the years ended 31 December 2005, 2006 and 2007.

22. DERIVATIVE FINANCIAL INSTRUMENTS

The following are the principal derivative financial instruments.

Currency derivatives:

Currency derivatives are utilised to eliminate or reduce the exposure of foreign currencydenominated assets and liabilities, and to hedge future transactions and cash flows. The Group is aparty to a variety of foreign currency forward contracts in the management of its exchange rateexposures. The instruments purchased are primarily denominated in the currencies of the Group’sprincipal markets. As a matter of principle, the Group does not enter into derivative contracts forspeculative purposes.

At the balance sheet dates, the Group had contracted to sell and purchase the following amountsunder forward contracts.

2005 2006 2007US$’000 US$’000 US$’000

Purchase United States dollars for Indonesian Rupiah:

Contractual amount – 3,330 3,000

Estimated fair value – 3,189 2,993

Sell United States dollars for Indonesian Rupiah:

Contractual amount – 500 –Estimated fair value – 521 –

Maturity period – 2006 January to April 2007

Maturity period – 2007 January to March 2008

The fair value of the currency derivatives is estimated above based on market values of equivalentinstruments at the balance sheet date. It is based on the difference between the contractualexchange rate and the market rate at the balance sheet date.

Fair value adjustments of the above derivatives were not made in the income statements in 2006and 2007 as the amounts were not significant.



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23. OPERATING LEASE PAYMENTS COMMITMENTS

At the balance sheet date the total of future minimum lease payments under non-cancellableoperating leases are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Not later than one year 46 50 597Later than one year and not later than five years 221 241 189

Rental expense for the year 46 49 57

Operating lease payments represent rentals payable for certain office and warehousing premises.The leases from the owners are for 10 years from 30 June 2002 to 30 December 2012 and 25years from 1 July 2008 to 30 June 2033 respectively. The lease rental terms are negotiatedannually and rentals are subject to an escalation clause but the amount of the rent increase is notto exceed a certain percentage. Such increases are not included in the above amounts.

On 13 November 2007, one of the subsidiaries has entered into a long term lease agreement for25 years with a related party. As at 31 December 2007, the subsidiary has prepaid an initialaggregate amount of US$1,097,000 (IDR 10 billion) to the related party. In addition, the balance ofthe rent amounting to US$500,000 (IDR 5 billion) which is included above will be paid upon thehanding over of the premises to the subsidiary in accordance with the agreement. This is expectedto take place in the second quarter of 2008.

24. CONTINGENT LIABILITIES

Corporate guarantees given by the Group under the Plasma Programme

Certain subsidiaries of the Group have implemented the Plasma Programme using KKPA, KKSRand Plasma Mandiri. The development of plantations is financed by credit investment facilitiesgranted by designated banks to the villagers through local cooperatives as the representatives ofthe villagers. The loan facilities are secured against the land certificates held by the villagers andcorporate guarantees from the Group. The credit facility amounts and the outstanding balances ofthe bank loans granted by the banks to the villagers as at 31 December 2005, 2006 and 2007 areas follows:

2005 2006 2007US$’000 US$’000 US$’000

Facility amounts 7,045 7,678 9,773Outstanding balances 2,793 3,991 3,775



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24. CONTINGENT LIABILITIES (Cont’d)

Corporate guarantees given by the Group under the Plasma Programme (Cont’d)

Upon maturity of the oil palms, the land will be maintained and managed by the villagers or in thefuture by the Group. The harvested fresh fruit bunches (“FFB”) will then be sold to the Group. Thevillagers will repay the loan facilities from a portion of the FFB sale price. In addition to the scheme,the Group provided temporary funding to the local cooperative for working capital purposes. Thecost of development of plantations, funds received from the designated banks on behalf of localcooperatives and temporary funding provided to local cooperatives as at 31 December 2005, 2006and 2007 are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Cost of development of plantations 1,071 813 – Funds received on behalf – (328) – Advances provided to cooperatives 9 93 1,523

Total 1,080 578 1,523

Presented as:

- Other receivables (Note 5) 1,080 906 1,523- Other payables (Note11) – (328) –

Total 1,080 578 1,523

25. COMMITMENTS

a. Capital commitments

Estimated amounts committed at the balance sheet date for future capital expenditure butnot recognised in the financial statements are as follows:

2005 2006 2007US$’000 US$’000 US$’000

Commitments for land clearing and development 3,060 2,291 452Commitments to purchase plant and equipment 71 826 1,000Commitments to construct leasehold buildingsand jetty facilities – 998 –



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25. COMMITMENTS (Cont’d)

b. Commitments for sales

The Group has the following committed sales contracts for crude palm oil and palm kernelcake at 31 December 2007.

The contractual or underlying principal amounts of the committed contracts with fixed pricingterms that were outstanding at the balance sheet date were as follows:

2007US$’000

Sale of crude palm oil and palm kernel cake 10,417

Year end fair values:- Positive fair value 211- Negative fair value (1,277)

Net fair value (1,066)

Maturity period January to May 2008

The losses arising from these contracts are not recognised in the combined financialstatements until physical deliveries take place.

c. Futures commodity contracts

Futures commodity contracts are entered into to manage the fluctuations in prices of crudepalm oil. The futures contracts are not designated as hedges for accounting purposes. Thecontractual or underlying principal amounts of the futures contracts with fixed pricing termsthat were outstanding at 31 December 2007 were as follows:

2007US$’000

Sale of crude palm oil 3,473

Year end fair values:- Positive fair value –- Negative fair value (677)

Net fair value (677)

Maturity period April to December 2008

The unrealised losses from these futures contracts have been recognised in the incomestatement in 2007.



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26. FINANCIAL INFORMATION BY SEGMENTS

The Group operates predominantly in only one business segment, which is the plantation and palmoil segment. Accordingly, no segmental information is prepared based on business segment as it isnot meaningful.

The Group operates primarily in Indonesia with sales made to the Indonesian market. Accordingly,an analysis of assets and profits of the Group by geographical distribution has not been includedfor the purposes of presentation under secondary segment.

27. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS

27A. Financial risk management

The main purpose of the financial instruments is to raise finance for the entity’s operations. Themain risks arising from the entity’s financial instruments are credit risk, interest risk, liquidity risk,foreign currency risk and market price risk comprising interest rate and currency risk exposures.The financial instruments comprise some cash and liquid resources, receivables, payables andborrowings. There are also derivative instruments. Credit risk on cash balances and derivativefinancial instruments is limited because the counter-parties are banks with high credit ratings. Anongoing credit evaluation is performed of the debtors’ financial condition and a loss fromimpairment is recognised in the income statement. There is no significant concentration of creditrisk, as the exposure is spread over a large number of counter-parties and customers unlessotherwise disclosed in the notes to the financial statements. There are arrangements to reducecurrency risk exposure through derivatives.

The entity has certain strategies for the management of financial risks. These guidelines set up theshort and long term objectives and action to be taken in order to manage the financial risks. Themajor guidelines are the following:

1. Minimise interest rate, currency, credit and market risk for all kinds of transactions.

2. Maximise the use of “natural hedge”: favouring as much as possible the natural off-setting ofsales and costs and payables and receivables denominated in the same currency andtherefore put in place hedging strategies only for the excess balance. The same strategy ispursued with regard to interest rate risk.

3. Enter into derivatives or any other similar instruments solely for hedging purposes.

4. All financial risk management activities are carried out and monitored by senior managementstaff.

5. All financial risk management activities are carried out following good market practices.

6. The entity may consider investing in shares or similar instruments only in the case oftemporary excess of liquidity and such transactions have to be authorised by the board ofdirectors.



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27. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (Cont’d)

27B. Carrying amount of financial assets and liabilities

The following table summarises the carrying amount of financial assets and liabilities recorded atthe end of the year by FRS 39 categories:

2005 2006 2007US$’000 US$’000 $’000

Financial assets:

Cash and cash equivalents 801 1,351 5,941Trade and other receivables 6,316 9,014 3,568

At end of year 7,117 10,365 9,509

Financial liabilities:

Financial liabilities at fair value through profit or loss designated as such upon initial recognition:- Futures commodity contracts – – 677Measured at amortised cost:- Borrowings 23,974 30,623 34,366- Finance leases 1,007 586 537- Trade and other payables 6,498 5,282 11,518

At end of year 31,479 36,491 47,098

27C. Credit risk on financial assets

Financial assets that are potentially subject to concentrations of credit risk and failures bycounterparties to discharge their obligations consist principally of cash, cash equivalents, trade andother accounts receivable. Credit risk on cash balances and derivative financial instruments islimited because the counter-parties are banks with high credit ratings. The exposure to credit riskis controlled by setting limits on the exposure to individual customers and these are disseminatedto the relevant persons concerned and compliance is monitored by management. As part of theprocess of setting customer credit limits, different external credit reference agencies are used,according to the country of the customer.

Cash and cash equivalents balances represent short-term deposits with less than 30 days maturityexcept for cash restricted in use (Note 4).

The average credit period generally granted to non-related trade receivable debtors is 30 days for2005, 2006 and 2007. Some debtors take a longer period to settle the amounts.

The table below illustrates the trade receivables ageing analysis:

2005 2006 2007US$’000 US$’000 US$’000

Trade receivables:

Less than 30 days 77 149 1,878

At end of year 77 149 1,878



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27C. Credit risk on financial assets (Cont’d)

Concentration of trade receivable customers:

2005 2006 2007US$’000 US$’000 US$’000

Concentration of trade receivables customers:Top 1 customer 18 20 1,536Top 2 customers 18 20 1,690

Other receivables are normally with no fixed terms and therefore there is no maturity.

27D. Liquidity risk

The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities.

The following table analyses financial liabilities by remaining contractual maturity (contractual andundiscounted cash flows):

2005 2006 2007US$’000 US$’000 US$’000

Borrowings:

Less than 1 year 9,989 11,940 2,7061 – 3 years 8,947 961 27,4173 – 5 years 4,422 17,722 1,062Over 5 years 616 – 3,181

At end of year 23,974 30,623 34,366

The average credit period taken to settle non-related trade payables is about 30 to 60 days for2005, 2006 and 2007. The other payables are with short-term durations. The carrying amounts areassumed to be a reasonable approximation of fair values.

See Note 13 for details of the maturity of finance leases.

It is expected that all the liabilities will be paid at their contractual maturity. In order to meet suchcash commitments the operating activity is expected to generate sufficient cash inflows.

Bank facilities:

2005 2006 2007US$’000 US$’000 US$’000

Undrawn borrowing facilities 4,459 12,797 8,737

The undrawn borrowing facilities are available for operating activities and to settle othercommitments. Borrowing facilities are maintained to ensure funds are available for budgetedoperations. A monthly schedule showing the maturity of financial liabilities and unused borrowingfacilities is provided to management to assist them in monitoring the liquidity risk.



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27E. Interest rate risk

The interest rate risk exposure mainly concerns financial liabilities and financial assets. Thesefinancial instruments are both at fixed and floating rates. The interest rate risk on financial assets isnot significant. The following table analyses the breakdown of the financial liabilities by type ofinterest rate:

2005 2006 2007US$’000 US$’000 US$’000

Financial liabilities:

Floating rate 24,981 31,209 34,903Non-interest bearing 6,498 5,282 12,195

At end of year 31,479 36,491 47,098

Sensitivity analysis:

2005 2006 2007US$’000 US$’000 US$’000

A hypothetical increase in interest rates by 50 basis points would have an adverse effect on profit before tax of (68) (92) (134)

A hypothetical increase in interest rates by 100 basis pointswould have an adverse effect on profit before tax of (136) (187) (268)



The analysis has been performed for floating interest rate financial liabilities. The impact of achange in interest rates on floating interest rate financial instruments has been assessed in termsof changing of their cash flows and therefore in terms of the impact on net expenses. Also seeNotes 10 and 12 for interest rates.

27F. Foreign currency risks

The Group operates in several countries and as a result, is exposed to foreign currency risk as partof its normal business. Other than sales to third party customers within Indonesia, the Group hassignificant exposure to US$ currency risk due to the large value of sales made in United Statesdollars while its purchases and business operations in Indonesia are mainly denominated in IDR.

The Group reports its financial results in US$. Any fluctuation in exchange rates will also result inforeign currency exchange gains or losses arising from transactions carried out in the foreigncurrencies as well as translations of foreign currency monetary assets and liabilities as at thebalance sheet dates. In this respect, foreign currency contracts are entered into on a rollover basisfor the purpose of hedging the excess of anticipated sales in US$ over purchases in US$. Note 22illustrates the foreign currency hedging activities in place at the end of each year.



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27F. Foreign currency risks

Foreign exchange forward contracts are used to limit exposure to losses on account receivablesand payables and anticipated transactions denominated in foreign currencies resulting fromchanges in foreign currency exchange rates. Foreign exchange forward contracts which aredesignated and effective as hedges of such currency exchange rate risk on existing assets andliabilities are marked to market and included as an offset to foreign exchange losses/gainsrecorded on the existing assets and liabilities. Such contracts on anticipated transactions, which donot qualify as hedges for accounting purposes, are marked to market with changes in valuerecognised in foreign exchange gains / losses in the income statement.

The board of directors will review the foreign currency hedging policy periodically and new hedgingpolicies to be implemented by the Group must be approved by the board. The Company will alsoprepare relevant information to assist the board in its quarterly review. The Group does not enterinto foreign currency forward contracts for speculative purposes.

Analysis of above amount denominated in non-functional currency:

Cash and cash

Financial assets: equivalents Receivables TotalUS$’000 US$’000 US$’000

At 31 December 2005:US dollars 354 77 431

At 31 December 2006:US dollars 332 149 481

At 31 December 2007:US dollars 3,593 147 3,740

FinanceFinancial liabilities: Borrowings leases Total

US$’000 US$’000 US$’000






F-57


27F. Foreign currency risks (Cont’d)

Sensitivity analysis:

2005 2006 2007US$’000 US$’000 US$’000

A hypothetical 10% increase in the exchange rate of the functional currency against the US$ would have an adverse effect on profit before tax of (1,064) (947) (1,100)

The analysis above has been carried out on the basis that there are no hedged transactions.

In management’s opinion, the above sensitivity analysis is unrepresentative of the inherent foreignexchange risk as the year end exposures do not reflect the exposures during the year.

27G. Price risk

The Group is exposed to commodity price risk due to certain factors, such as weather, governmentpolicy, level of demand and supply in the market and the global economic environment resultingfrom population growth and changes in standards of living, and global production of similar andcompetitive crops. During its ordinary course of business, the value of its open sales and purchasecommitments and inventory of raw material changes continuously in line with movements in theprices of the underlying commodity. To the extent that its open sales and purchase commitments donot match at the end of each business day, the Group will be subject to price fluctuations in thecommodities market. Consequently, it is the Group’s policy to minimise the risks arising from thefluctuations in the commodity prices by being partly self-sufficient in CPO and CPKO as thisprovides a hedge against such cost fluctuations. To the extent it is unable to do so, the Group mayminimise such risks through direct purchases of the similar commodity or through forward salescontracts. As such, it may also be exposed to commodity price risk as changes in fair value offuture commodity contracts are recognised directly in the income statements.

Decisions to enter into forward sales contracts must be approved by at least two directors and arecurrently under the purview of the Group’s Executive Chairman and CEO, Mr. Henry Maknawi, andthe Group’s Deputy CEO, Ms. Ratna Maknawi. The Group does not enter into forward salescontracts for speculative purposes.

28. FUTURE CHANGES IN ACCOUNTING STANDARDS

The following new or revised Singapore Financial Reporting Standards that have been issued willbe effective in future. The transfer to the new or revised standards from the effective dates is notexpected to have a material impact on the financial statements.

Effective datefor periods

beginning onFRS No. Title or after

FRS 23 Borrowing Costs 1.1.2009FRS 108 Operating Segments 1.1.2009INT FRS 111 FRS102 - Group and Treasury Share Transactions 1.3.2007INT FRS 112 Service Concessions Arrangements 1.1.2008



F-58

29. DIVIDENDS

2005 2006 2007US$’000 US$’000 US$’000

Interim exempt dividend paid of 2.54 cents per share – – 2,025

In respect of the current year, the directors propose that a second interim exempt dividend of 1.25cents per share totalling $1,000,000 be paid to shareholders after the annual general meeting.There are no income tax consequences. This dividend is subject to approval by shareholders at thenext annual general meeting and has not been included as a liability in these financial statements.The proposed dividend for 2007 is payable in respect of all ordinary shares in issue in SWK at thebalance sheet date and including the new qualifying shares issued up to the date the dividendbecomes payable.

30. SUBSEQUENT EVENTS

On 3 January 2008, one of the subsidiaries of the Company had entered into an agreement with avessel supplier for the purpose of constructing and purchasing a vessel called Kencana 3. Thepurchase price of the vessel is approximately US$2,034,000.

In addition to the events described in these combined financial statements and the unauditedproforma combined financial information for the year ended 31 December 2007 (Appendix E), noother significant events took place subsequent to the year ended 31 December 2007.

31. MANAGEMENT’S RESPONSIBILITY FOR THE COMBINED FINANCIAL STATEMENTS

The management of the Group is responsible for the preparation of the combined financialstatements. The combined financial statements were approved and authorised for issue by theboard of Directors of the Company on the date of the Prospectus.



F-59

AKA

INDEPENDENT PUBLIC CONSULTANT

APPRAISER’S REPORT

MARKET RENT VALUE OF

OFFICE SPACE

FORPT SAWINDO KENCANA

LOCATION:

Business Park BuildingJalan Meruya Ilir,

Kelurahan Meruya UtaraKecamatan Kebon Jeruk

West Jakarta Special Region of Capital Jakarta

APPENDIX G – AKA INDEPENDENT PUBLIC CONSULTANT APPRAISER’S REPORT MARKET RENT VALUE OF OFFICE SPACE OF

PT SAWINDO KENCANA

G-1

C.C/AKHW/07-07-097.1

Jakarta, November 26, 2007

To:

The Board of Directors of PT SAWINDO KENCANAGraha KencanaJl. Perjuangan No. 88KJakarta 11530

Subject: Appraiser’s Report on Market Rent Value of Office Space

Dear Sir,

Satisfying your request, hereby we offer you our report on Market Rent Value of Office Space of theBusiness Park Building, Jl. Meruya Ilir, Kelurahan Meruya Utara, Kecamatan Kebon Jeruk, KecamatanKebon Jeruk, Jakarta Barat, DKI (“Subject”). This Report is an addendum to our previous report No.AKA.C.C/AKHW/07-07-097 dated October 01, 2007.

This appraisal is the results of review and analysis conducted to find out the market rent value and long-term rent market value used for the long-term lease transaction of office space for a term of 25 years.

Grounded on our market review, analysis and fulfilled conditions, the following conclusions may be made:

a. Market rent value of the Subject office space is Rp. 76,909 / m2

per month

b. Long term market rent value of the Subject is Rp. 29,365 / m2

per month.

Thank you for your attention and cooperation.

Respectfully


PT SAWINDO KENCANA

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STATEMENT OF APPRAISER

Within the limitation of our ability and confidence as an appraiser, we hereby state that:

The statements in this report which are the basis of the analysis, opinion andconclusion set out in it are true and correct based on the actual examination andinvestigation against the appraised property as shown at the time of inspection by theEmployer.

Further, this report details all assumptions and limiting conditions affecting the analysis, opinion andconclusion set out in this Report.

We hereby confirm that we shall not take any advantage, in present and future, from the appraisedproperty nor from the result of the appraisal being reported.

This report is prepared pursuant and subject to the regulations in Indonesian Appraisal Standards of2002 (SPI 2002).

No. Name Signature

1. Consultant’s Head of Division

Restu Ananda SE

1. Real Property Supervisor

Ir. Bambang Trim Mulyono

MAPPI No. P-01584

2. Real Property Appraiser

Taofik Hidayat


PT SAWINDO KENCANA

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ASSUMPTIONS AND LIMITING CONDITIONS

1. All statements and data set out in this report are correct and within the knowledge and good faithof the Appraiser.

2. All current claim, suits, dispute and hypothec, when so exist, are ignored and the appraisedproperty is assumed ‘clean’ under the control of the Employer.

3. The Appraiser had made some direct inspections and physical investigation against the appraisedproperty, the amounts and location based on the designation by the Employer.

4. The fee for this appraisal is independent from the value of the property concluded or set out in thisReport.

5. The value is expressed in Indonesian Rupiah.

6. The Appraiser did not conduct any legal investigation since the Appraiser is not a legal consultant,therefore we hereby assume that the land certificate as well as the other documents related to thisproperty are in good, negotiable, rentable conditions and free from any dispute or other charges.

7. The Appraiser did not conduct any investigation against and it is not a responsibility of theAppraiser should there be any issues related to the ownership or debts / losses with respect to theappraised property.

8. PT Actual Kencana Appraisal that conducted the appraisal, is under no obligation to testify orappear before a court or any other agency in connection with the appraised property, unlessotherwise has been agreed in advance.

9. The report is invalid if neither signed by the company’s director nor sealed with PT Actual KencanaAppraisal’s seal.

10. Dissemination this statement or report of appraisal totally, partially or as a reference of the valueset out in it as well as the name and affiliation of the expert of the Appraiser without expresswritten consent of the Appraiser shall be restricted from the form and context aspects of thepublication (SPI 0.5.26.2).


PT SAWINDO KENCANA

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BACKGROUND

PT Sawindo Kencana, hereinafter referred to as the “Company” is a private company engaged inPlantation, particularly oil palm plantation and oil palm processing industry. The Company is a part ofKencana Business Group. In undertaking its businesses, the Company intends to long term lease theoffice space in a building office. Therefore, the Company intends to find out the market rent value of theoffice space and the market rent value that may be used as a reference in the office space leasetransaction by the Company.

The Company appointed PT Actual Kencana Appraisal (“AKA”) for such purpose pursuant to theagreement set out in the approval for the Quotation No. Pr. 07.762 dated August 30, 2007. The appraisalis conducted to assess the Market Rent Value and Long Term Market Rent Value of the PropertyBusiness Park Building Office Space (“Subject”) located at Jalan Meruya Ilir, Kelurahan Meruya Utara,Kecamatan Kebon Jeruk, Jakarta Barat, DKI.

The property inspection in the location and the survey of primary data for the appraisal were conductedon September 16, 2007.

We have submitted the study report on Market Rent Value of Office Space by our report No.AKA.C.C/AKHW/07-07-097 dated October 01, 2007.

This report is an addendum to our previous report to obtain the Long-term Rent Value for 25 years withrespect to the same Subject. Therefore, all assumptions and approaches are similar to the previousreport. This report is an addendum being integral part of our previous report No. AKA.C.C/AKHW/07-07-097 dated October 01, 2007.

SITE AND LOCATION ANALYSIS

The Subject is located at southern part of Meruya Ilir street, Kebon Jeruk district, being an areadesignated as a commercial area. The buildings erected in this area in general are dwelling houses,shops and offices. Public facilities such as electricity, tap water and telephone lines have been madeavailable in this area while public transportation passes Jalan Panjang (Panjang Street).

The subject may be accessed via Jalan Panjang, Jalan Pesanggrahan or Jalan Perjuangan from KebonJeruk toll gate. From Kebayoran Baru dan Palmerah, the Subject may be reached via Jalan Panjangthrough Jalan Kebun Jeruk Raya atau Jalan Lapangan Bola. While from Joglo, the Subject may beaccessed via Jalan Srengseng. The traffic condition in front of the Subject is fairly dense and tends toturn into congestion.

MACRO ECONOMIC REVIEW

According to the statistic figures issued by the Government, the macro economic conditions are still wellmaintained from the previous years as reflected from the stable economic growth; the main source of thegrowth has been the export; the main driver sector is the processing and trading-hotel-restaurant sector.However, such activities are not accompanied with establishment of physical investment and fixed capital,as reflected from the portion of application of the Gross Domestic Product for domestic consumptions andgovernment is still high; while only minor part of the GDP has been used for the establishment of physicalinvestment and fixed capital.

Business trend index records that the business condition at the first semester of 2007 has been evaluatedby business doers as not better than the previous year. However, at the second quarter, the businessclimate will be more conducive.


PT SAWINDO KENCANA

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OFFICE SPACE MARKET IN JAKARTA

Average growth rate of absorption of office space and supply of office space after the monetary crisisdemonstrates positively better condition when compared with the condition during the crisis. Theimprovement occurs not only in Central Business District area but also outside the CBD.

Occupancy rate of office space, in general is better than the rate during the crisis. Occupancy rate ofoffice space beyond the CBD has been higher than the occupancy rate of the CBD. Abundant supply andlimited demand (lower absorption growth) has caused occupancy rate of office space in CBD stagnant.

Following the monetary, the rents tend to rise. The stimulant, in addition to the national economic growth,has been triggered by fuel and electric power increases. The two commodities have been the importantcomponent in maintenance of office building.

Puncak Puncak

Turun awal Naik lanjutan

* Eceran

* Kantor dan JASa

Turun lanjutan Naik awal * Apartemen sewaan

* Bintang 3

Dasar * Hotel bintang 4

* Hotel bintang 5


PT SAWINDO KENCANA

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OFFICE SPACE MARKET AND RENTS AROUND THE SUBJECT LOCATION

Analysis of office space rent around the Subject location is made based on the profile and rentsinformation offered by some office space provider around the Subject location. The rents offered (and thetransaction) by the office space providers are depending from the location, accessibility, exposure to themain streets, management service, building quality, building facilities and market demand.

Office Buildings Around Subject Location

Office Space Providers Location

1 Wisma AKF Jl. Panjang

2 Ged. Sastra Graha Jl. Perjuangan

3 Ged. Graha Kencana Jl. Perjuangan

4 Wisma RMK Jl. Puri Kencana

5 Plaza Kelapa dua Jl. Panjang

6 Graha handaya Jl. Perjuangan

7 Gd. Kantor Jl. Lap. Bola

8 Show Room Jl. Panjang


10 Shop House Jl. Pesanggrahan

11 Shop House Jl. Perjuangan

12 Show room Jl. Meruya Ilir

13 Shop House Puri Niaga I Jl. Puri Kencana

14 Gd. Kantor Jl. Iskandarsyah

15 Permata Regency Jl.. Pos Pengumben

16 Gd. Kantor Jl. Panjang


18 Gd. Dana Pensiun BTN Jl. Kesehatan Jak Pus

19 Gd. Lisaco Jl. Raya Jati Baru Jak Pus

Office Space Providers around the location are classified as being in the center of commercial / businessarea and not while the others are classified into good and fair location when viewed from their location.


PT SAWINDO KENCANA

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Fairly Good Office Buildings around the Subject Location


1 Ged, Graha Kencana Jl. Perjuangan

2 Ged. Sasrta Graha Jl. Perjuangan

3 Office Building Jl. Iskandarsyah

4 Gd. Lisaco Jl. Raya Jati Baru Jakpus

5 Graham Handaya Jl. Perjuangan


7 Puri Niaga I Shop House Jl. Puri Kencana

8 Show room Jl. Panjang



Accessibility factors play important role in shaping the market demand and establishment of rent of eachproperty, particularly the properly easily accessible from the main road / toll road.

Fairly Accessible Office Space around the Subject Location




3 Office Building Jl. Panjang

4 Gd. Lisaco Jl. Raya Jati Baru Jakpus

5 Graham Handaya Jl. Perjuangan





10 Shop House Puri Niaga I Jl. Puri Kencana


The proximity of office space providers to main road is one of consideration in assessing the rents. Mainroad proximate to the Subject is Jalan Panjang. The closer to the main road, the more attractive the officespace will be so that the bargaining position in establishment of rents rate for the relevant office spaceprovider will be relatively strong.


PT SAWINDO KENCANA

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Exposure of Office Buildings to Subject Location


1 Office Building Jl. Lap. Bola


3 Gd. Kantor Jl. Iskandarsyah



6 Plaza Kelapa Dua Jl. Panjang



The facilities provided by office spare provider in the forms of parking space, elevator, lifts, air conditioner,perimeters and security are very influencing the determination of the rents. The more complete thefacilities, the stronger will be the bargaining position of the office space provider in determining the rents.

Building quality in general is one of the factors considered in shaping the rents. This factor includes area,building materials and interior.

Good Quality of Office Building around the Subject Location




3 Gedung dana Pensiun BTN Jl. Kesehatan Jak Pus



The facilities made available in an office building that may satisfy the day-to-day needs or requirements ofthe tenants. The facilities may be in the forms of bank, ATM, restaurants, food courts, mini markets, cake& coffee shop and laundry. The more complete the facilities, the higher the rents will be considered.


PT SAWINDO KENCANA

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Complete Building Facilities around the Subject Location








7 Gd. Lisaco Jl. Raya Jati Baru Jak Pus

8 Permata Regency Jl. Pos Pengumben


Complete Building Services around the Subject Location







Market demand in the form of absorption of office space may be considered as reflection of the rentsacceptable to market. Market demand in this appraisal is indicated by the tenancy rate of the officebuilding. The higher the tenancy rate, the more stable the offered rents. The following table shows someoffice space providers that have high tenancy rate, while the others have been low and moderate.

High Tenancy Rate of Office Building around the Subject Location










PT SAWINDO KENCANA

G-10

The rents offered by office space providers around the Subject location varies fairly, from Rp. 23,750/m2

to Rp. 109,250/m2 per month. While the average has been Rp. 55,372/m2 per month. In general, the rentsinclude service charges. Minimum lease is 1 to 2 years under cooperation contract.Offered Rents of Office Buildings around the Subject Location

Office Space Provider Location Rents *) (Rp.)

1 Show room Jl. Meruya Ilir 23,750

2 Shop House Jl. Pesanggrahan 29,700

3 Shop House Jl. Perjuangan 29,700

4 Office Building Jl. Lap. Bola 40,500

5 Office Building Jl. Lap. Bola 46,750

6 Show room Jl. Panjang 48,076

7 Shop House Puri Niaga I Jl. Puri Kencana 28,500

8 Office Building Jl. Iskandarsyah 42,750

9 Graham Handaya Jl. Perjuangan 47,500

10 Permata Regency Jl. Pos Pengumben 42,750

11 Office Building Jl. Panjang 38,000

12 Office Building Jl. Panjang 42,750

13 Gd. Dana Pensiun BTN Jl. Kesehatan Jak Pus 61,750

14 Gd. Lisaco Jl. Raya Jati Baru Jakpus 69,350

15 Plaza Kelapa dua Jl. Panjang 72,000

16 Ged. Sastra Graha Jl. Perjuangan 90,000

17 Ged. Graha Kencana Jl. Perjuangan 90,000

18 Wisma RMK Jl. Puri Kencana 99,000

19 Wisma AKF Jl. Panjang 109,250

* Include Service Charge


PT SAWINDO KENCANA

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MARKET RENT VALUE ANALYSIS OF SUBJECT OFFICE SPACE

The Subject is a new office building and is a new supply to the office space market. This appraisal ismade based on the comparison of the profile data of the office space providers in proximity to the Subjectlocation, from the aspects of location, accessibility, exposure, building quality, building facility and marketdemand as well as offered rents to obtain market rents value of the Subject

Assumption of Subject Profiles

Determinants Grade

1 Location Fair

2 Accessibility Fair

3 Exposure Good

4 Building Service Good

5 Building Quality Good

6 Facility Complete

7 Tenancy Rate Good

The assumptions of subject profile compared to the office space provider around the subject location maybe seen in the following table

Attributes scores and Rents of Office Space Providers in proximity to the Subject Location

Office Space Providers Score Rents

1 Show room 1.96 23,750

2 Shop House 2.10 29,700

3 Shop House 2.37 29,700

4 Office Building 2.37 40,500


6 Show room 2.42 48,076

7 Shop House Puri Niaga I 2.50 28,500


9 Graham Handaya 3.06 47,500

10 Permata Regency 3.37 42,750



13 Gd. Dana Pensiun BTN 3.92 61,750

14 Gd. Lisaco 3.95 69,350

15 Plaza Kelapa dua 4.37 72,000


PT SAWINDO KENCANA

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Office Space Providers Score Rents

16 Ged. Sastra Graha 4.68 90,000

17 Ged. Graha Kencana 4.68 90,000

18 Wisma RMK 4.68 99,000

19 Wisma AKF 4.73 109,250

20 Subject 3.55 ?

Based on the profiles of the office space providers in proximity to the Subject location, the attributes arequantified by using a 1 - 5 scale expressing weak - strong or easy - difficult or proximate - distant or poor- good or complete - incomplete or low-high and correlated with the offered rents.

Total score of the each factor with percentage of the factor correlation merit points shows the grade of therelevant office building. The calculations are as follows:

Grounded on the table above, the market rents value has been modeled based on the following simplelinear equation:

y = -21,124.68 + 22,669.67 x R2 = 76%

where y= market rents value and x = value of each office space provider.

Based on the regressive equation, the market rents value of the Subjects based on the values of theattributes should be Rp. 76,909/m2 per month.

LONG-TERM MARKET RENT VALUE OF THE SUBJECT

The Company has planned to lease the office spaces of the Subject under the following scheme:

� Total leased area of a floor: 874.8 m2

� Total leased floors: 3 floors;

� Total leased area: 2,624 m2;

� Lease term: 25 years

Based on the scheme, the long-term rents value of the Subject adopt the following assumptions:

� Market rents value used as the basis of long-term market rents value is Rp. 76,909

� Annual rents value increase : 5%;

� Annual discount rate: 16.21%

� Discount rate is calculated based on: loan interest 13.50%, and equity costs of 21.25% withportions of 65% and 35% respectively.

Based on the aforesaid assumptions, the long-term market rents value of the Subject for 25 years shouldbe Rp. 23,119,542,000.- or Rp. 29,365 / m2 / month (including service charge).


PT SAWINDO KENCANA

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CONCLUSION

Based on the review that considers the office space market condition in proximity to the Subject and theassumptions of the Subject condition

a. the market rent value of the Subject is Rp. 76,909 / m2 per month

b. the long-term market rents value that may be used in lease agreement with the scheme andassumptions is Rp. 29,3665 / m2 / month.


PT SAWINDO KENCANA

G-14

Kencana Agri Limitedkencanaagri.com

3 Shenton Way#10-06 Shenton House Singapore 068805

Graha KencanaJl. Raya Perjuangan No.88GKJakarta Barat 11530 Indonesia

Kencana Agri LimitedGrowth . Excellence . Integrity

PROSPECTUS DATED 17 JULY 2008(registered by the Monetary Authority of Singapore on 17 July 2008)

This document is important. If you are in any doubt as to the action you should take, you should consult your legal, fi nancial, tax or other professional adviser.

We have applied to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in, and for quotation of, all the ordinary shares (the “Shares”) in the capital of Kencana Agri Limited (the “Company”) already issued and the new Shares (the “New Shares”) which are the subject of this Invitation (as defi ned herein) on the Main Board of the SGX-ST. Such permission will be granted when we have been admitted to the Offi cial List of the SGX-ST. The dealing in and quotation of the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in and for quotation of all our existing issued Shares and the New Shares. Monies paid in respect of any application accepted will be returned to you, at your own risk, without interest or any share of revenues or other benefi t arising therefrom if the completion of the Invitation does not occur if the said permission is not granted or for any other reason and you will not have any claim against us or DBS Bank Ltd, the Issue Manager (as defi ned herein), or DBS Bank Ltd and CIMB-GK Securities Pte. Ltd., the Joint Underwriters and Placement Agents (as defi ned herein).

The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Admission to the Offi cial List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries or our Shares, including the New Shares.

A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”) on 16 June 2008 and 17 July 2008 respectively. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”), or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the Shares, or the New Shares being offered or in respect of which the Invitation is made, for investment.

Investing in our Shares involves risks. Potential investors in our Company are advised to read the section “Risk Factors” of this Prospectus and the rest of this Prospectus carefully and to seek professional advice if in doubt. No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority.

The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and may not be offered or sold in the United States or to U.S. persons, as defi ned in Regulation S under the U.S. Securities Act (“Regulation S”) unless the Shares are registered under the U.S. Securities Act, or an exemption from the registration requirements of the U.S. Securities Act is available. The Shares are being offered outside the United States in accordance with Regulation S and may not be offered or sold within the United States or to, or for the account or benefi t of, U.S. persons, except to persons in offshore transactions in reliance on Regulation S. For a description of certain restrictions on transfer of the Shares, see the section “Transfer Restrictions” of this Prospectus.

The Shares, or the New Shares may not be offered or sold, directly or indirectly in Indonesia or to Indonesian citizen in a manner constituting a public offering under the laws and regulations of the Republic of Indonesia.

Kencana Agri Limited(Registration Number: 200717793E)

(Incorporated in the Republic of Singapore)

Invitation in respect of 200,000,000 New Shares comprising:(a) 1,000,000 Offer Shares at S$0.305 each by way of public offer; and(b) 199,000,000 Placement Shares by way of placement, comprising: (i) 186,600,000 Placement Shares at S$0.305 each for applications by way of

Placement Share application forms or such other forms of application as the Issue Manager and the Joint Underwriters and Placement Agents may, in consultation with the Company, deem appropriate;

(ii) 300,000 Internet Placement Shares at S$0.305 each for applications made through the Internet website of DBS Vickers Securities (Singapore) Pte Ltd; and

(iii) 12,100,000 Reserved Shares at S$0.305 each reserved for our employees, business associates, Independent Directors and persons who have contributed to the success of our Group,

payable in full on application.

Issue Manager

Joint Underwriters and Placement Agents

Kencana Agri Lim

ited