CREATING SUSTAINABLE GROWTHindofoodagri.listedcompany.com/misc/ar2008.pdfThe story was much the same with rubber prices, which experienced heightened volatility in 2008. Rubber fetched

CREATINGSUSTAINABLE

GROWTH

INDOFOOD AGRI RESOURCES LTD.Annual Report 2008

CONTENTS

1 Vision, Mission and Values

2 Location Map

5 Key Events

7 Chairman’s Statement

8 CEO’s Statement

10 Business Overview

12 Financial Highlights

13 Operational Highlights

14 Operations Review

Plantation

Cooking Oil & Fats

Commodities

22 Environment and Corporate Social Responsibility

25 Manufacturing Processes

26 Board of Directors

31 Corporate Governance

38 Corporate Structure

39 Corporate Information

41 Financial Statements

118 Interested Person Transactions

119 Estates Location

121 Statistics of Shareholdings

123 Notice of Annual General Meeting

Vision

To Become a Leading Integrated Agribusiness, and one of the world-class agricultural research and seed breeding Companies.

Mission

1. To be a low-cost producer, through high

yields and cost-effective and efficient

operations

2. To continuously improve our people,

processes and technology

3. Exceed our customers’ expectations, whilst

ensuring the highest standards of quality

4. Recognise our role as responsible and

engaged corporate citizens in all our

business operations, including sustainable

environmental and social practices

5. To continuously increase stakeholders’ value

Values

1. Consistent

2. Our Success Rests On Satisfying Customers’ Needs

3. Innovation Is Our Key To Future Growth

4. Reliable Staff Is Our Biggest Asset

5. Excellence Is Our Way Of Life

6. Teamwork Makes A Winning Team

INDOFOOD AGRI RESOURCES LTD. ANNUAL REPORT 2008 | 1

LOCATION MAP

Our plantations, mills and refineries are strategically located across the Indonesian archipelago.

SUMATRA

MALAYSIA

JAVA

SINGAPORE

Medan

Palembang

Jakarta

Pekanbaru

Pontianak

2

SULAWESI

NORTHMALUKU

KALIMANTAN

Surabaya

Makassar

Samarinda

Muotong

BitungTobelo

Town / City

Oil Palm

Sugar Cane

Rubber

Cocoa

Tea

Refinery

Copra Mill

LEGEND


Leading market share in the Indonesia branded cooking oil

and margarine markets.

4

KEY EVENTS

Adding sugar cane into agribusiness model, expansion of land bank and plantations planted area, R&D achieved major breakthrough.

Year 2008

24 March PT SIMP, our 90%-owned subsidiary, signs a non-binding Memorandum of

Understanding with PT Bangun Sriwijaya Sentosa to explore the possibility of

participating as a shareholder of PT Lajuperdana Indah (PT LPI). PT LPI’s principal

business activity is sugar cane cultivation and it intends to construct a new sugar cane

processing facility by 2010.

13 May IndoAgri’s Indonesia listed subsidiary, PT PP London Sumatra Indonesia Tbk

(Lonsum), enters into a joint venture agreement with Ghanaian Council for Scientifi c

and Industrial Research (CSIR) to create a joint venture company in Ghana to develop

and realise the genetic potential of oil palm for commercial exploitation. CSIR has

the Ghanaian Oil Palm Research Institute under its mandate which has a diverse

range of palm oil species, germ plasm and breeding populations.

28 July IndoAgri diversifi es its agribusiness activities into sugar cane cultivation and

processing following the subscription of a 60%-stake in PT LPI through PT SIMP.

PT LPI has a total of 37,500 hectares land bank in Komering Ulu, South Sumatra, of

which 4,174 hectares is planted with sugar cane as of 31 December 2008. We plan

to expand our sugar cane planted area to 18,600 hectares and to operate 2 sugar

processing factories by end-2011.

07 October Lonsum announces a breakthrough in the oil palm breeding, achieving the world’s

fi rst patent to produce F1 oil palm hybrids. The process, which involved no genetic

modifi cation, will enable the company to produce F1 oil palm hybrids that are expected

to signifi cantly improve oil palm yield. Lonsum expects to commercialise the production

of F1 oil palm hybrids by 2018.

20 November Lonsum enters into conditional Share Purchase Agreements to acquire 99.9% stake

in PT Tani Musi Persada (TMP), 99.9% in PT Sumatra Agri Sejahtera (SAS) and 90%

in PT Tani Andalas Sejahtera (TAS). TMP, SAS and TAS hold location permits for

over 46,000 hectares of land in South Sumatra. This acquisition was completed on

22 December 2008.

22 November PT SIMP enters into conditional Sale & Purchase Agreement to acquire 100% issued

share of PT Cakra Alam Makmur (CAM), PT Hijaupertiwi Indah Plantation (HPIP), and PT

Cangkul Bumisubur and its subsidiary, PT Pelangi Inti Pertiwi (collectively “CBS”). HPIP

and CBS hold 36,300 hectares of land bank in South Sumatra and Central Kalimantan.

CAM owns and operates a bulking facility at the Dumai port with 7,500 tonnes of crude

palm oil storage capacity. This acquisition was completed on 24 December 2008.

Separately, SIMP proposes to acquire the remaining 30% minority interest in PT Mitra

Inti Sejati Plantation (Mitra) and 29.98% interest in PT Sarana Inti Pratama (SAIN). Mitra

owns over 12,000 hectares of land in West Kalimantan. SAIN principle activities are

research and development, oil palm seed breeding and ownership of three plantation

companies with 67,000 hectares of land bank in West Kalimantan. These acquisitions

were completed on 17 Februaury 2009.


A leading integrated Agribusiness group with strong R&D and seed breeding operations.

Our Group has done relatively well

in a challenging macro-economic

environment in 2008. Despite a plunge

in the price of crude palm oil (CPO), we

managed to end the year with positive

results. Net profit to equity holders was

Rp795 billion (S$123 million). A strong

balance sheet reflected our Group’s net

assets at Rp 11 trillion (S$1.4 billion) while

our cash position stood at Rp 2.4 trillion

(S$316 million).

We enjoyed broad-based growth across all three divisions with higher profi ts. Beyond the fi nancial fi gures, our Group possesses competitive strengths and is a key player in the market place. Our vertically-integrated agribusiness spans the spectrum from the development of highly-productive seeds and the harvesting of oil palm to the manufacturing of cooking oil and margarine.

The completion of our Medan refi nery in early 2009, and the new refi nery in Jakarta with 420,000 tonnes a year capacity due for completion in early 2010 will further enhance our strength as an integrated agribusiness player.

We have valuable assets in the form of both talented staff and a big land bank (total of 539,016 hectares with a planted area of 213,328 hectares). In the fi eld of research & development (R&D), we have made signifi cant progress. We achieved the world’s fi rst patent to produce F1 oil palm hybrids which have the potential to achieve higher yields without genetic modifi cation. For our downstream branded products, Bimoli and Simas Palmia continue to be the leader in the Indonesian branded cooking oils and margarine segments. Our cooking oil sales volume recorded a 14% growth which is testimonial to our brand recognition.

We continue to tap on our integrated agribusiness model with low-cost production, higher yields and more effi cient operations. This will position us well to weather through the low CPO price environment. We are committed to grow our plantation business which contributed about 90% of our Group’s operating profi ts in 2008. In particular, the young age profi le of our planted palm oil area - 39% of the area is under 7 years of age – spells strong growth potential.

CPO prices are still signifi cantly above our cost of production refl ecting our Group’s relatively low cost structure. We will continue to focus on prudent cash-fl ow management while investing in our 58,944 hectares of immature plantations and ongoing refi nery and infrastructure works.

We expect CPO prices to continue to remain volatile in 2009. Nonetheless, palm oil, being the most widely consumed and cheapest amongst all other edible oils such as soybean and rapeseed oils, will continue to enjoy steady demand as a food staple. Currently, more than 85% of CPO ends up being consumed through food products with demand increasing from both China and India. Bolstered by the underlying strong demand for CPO, we remain positive on long term CPO prices.

We will continue to maintain the highest standards of corporate governance. We must and will focus on managing our cash-fl ow and balance sheet prudently as we navigate through the economic storm. We are confi dent that our operational strengths and commitment to R&D with a strong seed breeding operations will enable us to consistently improve upon the best practices for the long-term sustainable development of our plantation business.

I would like to thank the Board of Directors, management and staff for their dedication and hard work, and all our shareholders for their unwavering support.

CHAIRMAN’S STATEMENT

Mr Edward LeeCHAIRMAN

tices for f our

s,deir

Dear Shareholders,


Last year, I reported that we would

continue to build and grow our business

in 2008. We delivered on that promise via

various strategic acquisitions, expansion

of our planted area and refinery

capacities, and even achieving a patent

for a breakthrough in oil palm seed

breeding. However, we also encountered

the extraordinary events that unfolded

in the financial sector, and I’d be

among the first to admit that we were

surprised at how turbulent the global

financial sector became and its effect on

commodity prices as the global credit

crisis unfolded.

In my many years in the plantation business, I have not encountered a swing as wild as that which CPO prices traded in 2008: They touched US$1,249 a tonne in March and fell to a low of US$488 in November, an incredible range of US$761 a tonne (see CPO price chart on page 14). At the same time, prices of raw materials, especially fertiliser and diesel, soared in line with an increase in crude oil prices.

We were relieved in the later part of 2008 when there was some respite in the prices of raw materials. As the year ended, CPO traded at a discount of over US$200 a tonne to soya oil, a discount that should stimulate demand for palm oil, which is used in the making of a wide range of food products, including margarine and cooking oil.

The story was much the same with rubber prices, which experienced heightened volatility in 2008. Rubber fetched as much as US$3.28 a kilogram in June but only US$1.34 in November (see Rubber Price chart on page 14).

Overall, our Group enjoyed strong sales growth and strengthened our business model in 2008. I am pleased to report that our Group ended the year with:

• Rp11,8 trillion (S$1,8 billion) in revenue, up 82% from the previous year

• Rp3,1 trillion (S$479 million) in earnings before interest and tax expense, depreciation and amortisation (EBITDA), up 102%

• Rp795 billion (S$123 million) in net profit to equity holders.

The higher revenue came from not only higher palm oil prices in the fi rst half of 2008 but also increased sales volume of palm oil. The volume increase was 369,000 tonnes, or 102%, compared to the previous year, chiefl y as a result of the contribution from Lonsum in which we acquired a 64.4% per cent stake in late 2007. The volume of our cooking oil sales in 2008 grew by a strong 14% to 424,000 tonnes, driven by increased demand for consumer-pack cooking oil in Indonesia, our successful product branding and our effective marketing campaigns. I believe it can be said that this is excellent growth considering the diffi cult market conditions.

Against the largely positive operating results, we encountered a negative piece of news with the downward revision of the fair values of our biological assets. Though it was a non-cash and non-operating loss in fair value, of Rp 663 billion after tax, this unfortunately led to a 11% decline in our FY08 net profi t. Without this non-cash adjustment, our net profi t to equity holders was Rp1,240 billion (S$193 mllion), an increase of 72% from 2007.

CEO’S STATEMENT

Mr Mark WakefordCHIEF EXECUTIVE OFFICER

Dear Shareholders,

8

ENHANCING OUR AGRIBUSINESS MODELIn 2008, we continued to pursue a vertically-integrated agribusiness model. We acquired a 60% stake in PT LPI for S$56 million. PT LPI owns a 37,500-hectare land bank in South Sumatra, of which, 4,174 hectares are planted with sugar cane as of 31 December 2008. There is a shortfall in the supply of sugar in Indonesia as demand rises with population growth, development of the processed food and beverage industries, and the expansion of other sugar-based industries. Our initial plans are to expand the sugar plantation to approximately 18,600 hectares and build an 8,000 tonnes cane a day sugar factory, which is due to be completed in 2010.

Our investment in the sugar business extends the Group’s stable of commodities. Oil palm, of course, remains the key contributor to the Group’s revenue and will continue to be so for many years to come, followed by rubber.

Last year was the fi rst full year of including Lonsum in our Group, a key result of which was a jump in the supply of palm oil to our refi neries through our purchase of 92,000 tonnes of CPO from Lonsum. We continue to work closely with the management team at Lonsum to align our business practices, and enhance the profi tability of Lonsum. As part of our long-term ambition to expand our CPO supply, we added 132,497 hectares of land bank through several acquisitions – mainly in South Sumatra. We increased our oil palm planted area by 21,657 hectares in 2008. Our immature oil palm plantations stand at 58,944 hectares as at end 2008. We can expect an annual increase in our CPO production as our immature plantings come on stream and also as we continue to expand our hectarage.

ADDITIONAL NOTEWORTHY ACHIEVEMENTSWorld fi rsts do not often happen in the plantation business, which is usually associated with stable and organic growth. That’s why I am particularly pleased to report that Sumatra Bioscience (our seed breeding unit) has achieved the world’s fi rst patent to produce F1

oil palm hybrids, using a naturally occurring selection process, without any genetic modifi cation. This clearly demonstrates the world-class research and development taking place in our seed breeding business, enabling us to produce high yielding oil palm seeds, and maintain our competitive edge.

There was also much happening elsewhere in our Group that I would like to draw your attention to as they will positively impact our bottom-line results in due course. We expanded our Medan palm oil refi nery’s capacity by 120,000 tonnes a year. The expansion was completed in early 2009, and will enable us to expand our product offering in North Sumatra. We are also in the process of building a new 420,000 tonnes a year palm oil refi nery in Jakarta, which is planned to commence production in early 2010. With the expansion of the refi nery capacity, our Group’s downstream business will be well positioned to capture the growth opportunities in Indonesia, as well

as expand our export market. We will continue to invest in the packaging and branding of our margarine and cooking oil products to expand our sales.

SUSTAINABLE PRODUCTIONBeing an established business with a long-term commitment to the environment and its people, IndoAgri is implementing the principles and criteria of the Roundtable on Sustainable Palm Oil (RSPO). These principles and criteria underpin the sustainable production and use of palm oil. They span a wide range of technical, environmental, social, legal, and safety issues.

2008 was the fi rst year in which external accredited expert companies could audit plantation companies for adherence to these principles and criteria. Lonsum has recently been audited and hopes to achieve Certifi ed Sustainable Palm Oil production in early 2009.

OUR PLANSI expect 2009 to continue to be a volatile year for commodity prices, and the fi nancial crisis and its impact on the world’s economies will contribute to make 2009 a very challenging year. Given this outlook, we will continue to manage our balance sheet and cash fl ow prudently, and invest in our future growth.

We expect edible oils demand to remain resilient in 2009 despite the challenging economic climate. Oil World projects that the world’s total edible oil consumption will increase by 6.9 million tonnes to 165 million tonnes (+4.4%) for 2009. Palm oil demand, on the other hand, is projected to increase by 8.4% to 44 million tonnes.

The strength of our integrated agribusiness model, and the growth of our plantation business together with our low cost of production position us well to face the challenges ahead. Our strength and commitment to research and development, and our world-class seed breeding operations, will enable us to continually implement and improve best practices for sustainable development of our plantations. We enjoy leading market shares in Indonesia’s branded cooking oil and margarine markets, and we will continue to leverage on this success as we seek further growth, and move towards self-suffi ciency.

On behalf of the Board, I would like to thank our management and employees for their dedication, hard work and commitment demonstrated throughout the year. I would also like to thank our suppliers, stakeholders and, most importantly, our customers who have demonstrated their loyalty and faith in IndoAgri.

Finally I would to thank our shareholders who have stayed with us, or who have recently come on board, for their faith, trust and support. We remain committed to continue to grow our business and enhance shareholder value. If you have some free time, I’d be pleased to meet you soon at our Annual General Meeting.


Listed on the Singapore Exchange and

headquartered in Jakarta, Indofood

Agri Resources Ltd (“IndoAgri” or the

Group) is an integrated agribusiness

group. We are one of the largest palm oil

producers in Indonesia which, in turn,

was the world’s largest CPO producing

nation in 2008.

Our integrated agribusiness activities span from R&D

in the seeds breeding and cultivation of oil palms, to

plantation, to milling of palm oil and copra (coconut fl esh)

and production of branded cooking oil and margarine.

We also engage in bottling, packaging and distribution

of our consumer products. To diversify risks associated

with CPO price cycles, the Group also engages in the

cultivation of other crops such as rubber, sugar cane,

cocoa and tea.

2008 was a volatile year for the commodity sector, which

saw CPO prices hit historical high in Mar 08 to US$1,249 a

tonne before declining abruptly in 2nd half of the year to

US$503 a tonne as at end of December 2008.

Revenues grew 82% to Rp11.8 trillion (S$1.8 billion)

on volume growth across all divisions, higher prices of

commodity and edible oil products, as well as full year

consolidation of Lonsum contributions. EBITDA doubled

to Rp3.1 trillion (S$479 million) on higher palm oil prices

and sales volume. FY08 net profi t to equity holders came

in 11% lower at Rp795 billion (S$123 million) mainly due to

non-cash and non-operating losses arising from changes

in fair value of biological assets. Excluding net effect of

fair value gains or losses on biological assets, our 2008

net profi t to equity holders would have been 72% higher

than last year at Rp1.2 trillion (S$193 million).

Oil palm remains our dominant crop at 183,113 hectares

or 86% of planted area. In 2008, our plantation division

produced 714,000 tonnes of CPO compared to 384,000

tonnes in 2007.

REVENUE PROFIT FROM OPER ATIONS

BUSINESS OVERVIEW

0

7.0

12.0

11.0

6.0

10.0

5.0

9.0

4.0

8.0

3.0

2.0

1.0

11.8

6.5

4.13.6

4.0

Rp trillion

04 05 06 07 08

1.8

2.0

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0

1.9

1.6

0.9

1.2

0.9

Rp trillion

04 05 06 07 08

10

NET PROFIT TO EQUITY HOLDERS

EPS

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

0.80

0.57

Rp trillion

0.0.

04 05 06 07 08

0.54

0.65

700

600

500

400

300

200

100

0

Rp

550

04 05 06 07 08

Throughout 2008, we continued to work towards our

vision to become a leading integrated agribusiness, and

one of the world-class agricultural research and breeding

group. The group’s strategy are threefold:

• Achieve economies of scale through large

plantations operations;

• Maximise margin through vertical integration in

agribusiness; and

• Improve crop yield through R&D and proven

plantation management.

This strategy enables us to achieve a low cost of

production, ensuring a highly competitive business

model.

LAND BANK INCREASEThe Group is one of the largest plantation land bank

owners in Indonesia with 539,016 hectares of land bank,

of which 213,328 hectares are planted. We intend to

continue expanding our oil palm plantations. In 2008,

our oil palm planted area increased by 21,657 hectares

oil palm and we added 132,497 hectares of land bank

through acquisitions during the year.

DOWNSTREAM EXPANSIONWe completed our Medan refi nery expansion in early

2009, increasing its palm oil refi ning capacity from 52,500

tonnes a year to 172,500 tonnes a year. We are also on

track to complete the construction of our new 420,000

tonnes a year Jakarta refi nery in early 2010.

R&D BREAKTHROUGHIn 2008, we achieved a major scientifi c breakthrough in our

R & D and seeds breeding business. Sumatra Bioscience,

a subsidiary of Lonsum, has achieved the world’s fi rst

patent to produce F1 oil palm hybrids, which is expected

to signifi cantly improve palm oil yields without genetic

modifi cation.

Separately, Sumatra Bioscience has formed a joint

venture company with Ghanaian Council for Scientifi c

and Industrial Research (CSIR) to develop oil palm seeds

for commercial use.

671648

564536

0.89


2005 2006 2007 2008

Net Sales 3,590 4,089 6,506 11,840

Gross Profit 1,079 1,009 2,013 4,129(Loss)/Gain arising from changes in

fair values of biological assets 100 488 202 (947)

Operating Income 877 1,178 1,579 1,864

Net Profit 608 740 994 1,067

Net Profit to Equity Holders 543 647 889 795

EPS (in Rupiah) 536 648 671 550

Current Asset 1,490 1,778 3,880 4,411

Fixed Assets 2,714 3,494 11,454 12,496

Other Assets 414 315 3,477 3,956

Total Assets 4,619 5,586 18,812 20,863

Current Liabilities 1,259 1,023 5,924 3,826

Non-Current Liabilities 736 1,102 3,067 6,061

Total Liabilities 1,996 2,125 8,991 9,887

Shareholders' Equity 2,121 2,794 7,156 7,922

Total Equity 2,623 3,461 9,821 10,976

Net Working Capital 231 755 (2,044) 585

Sales Growth (11.0%) 13.9% 59.1% 82.0%

Gross Profit Margin 30.1% 24.6% 30.9% 34.9%

Operating Profit Margin 24.4% 28.7% 24.6% 15.7%

Net Profit Margin 16.9% 18.1% 15.3% 9.0%

Net Profit to Equity Holders Margin 15.1% 15.8% 13.7% 6.7%

Return on Assets 1 19.0% 21.0% 8.4% 8.9%

Return on Equity 2 25.6% 23.1% 12.4% 10.0%

Current Ratio (Times) 1.2 1.7 0.7 1.2

Net Debt to Equity Ratio (times) 3 0.05 0.28 0.51 0.49

Total Debts to Total Assets Ratio (times) 0.08 0.20 0.28 0.30

In bi l l ion Rupiah (unless otherwise stated)

FINANCIAL HIGHLIGHTS

1 Profi t from operations divided by total assets 2 Net profi t to equity holders divided by shareholders’ equity 3 Net debt divided by shareholders’ equity

12

In Hectares(unless otherwise stated)

OPERATIONAL HIGHLIGHTS

2005 2006 2007 2008

Planted Area - NucleusOil Palm 61,408 66,900 161,457 183,113

Mature 56,939 60,817 118,030 124,169Immature 4,469 6,083 43,427 58,944

Rubber 5,015 5,015 22,003 22,410Mature 5,015 5,015 18,956 17,873Immature - - 3,048 4,537

Sugar - - - 4,174Mature - - - 4,174

Others - - 3,522 3,631Mature - - 2,800 2,870Immature - - 722 761

Plasma 25,000 25,000 61,000 76,472

Age Maturity of Oil Palm TreesImmature 3,744 5,604 43,427 58,9444 - 6 years 6,231 5,365 9,331 12,3327 - 20 years 51,734 47,072 90,628 82,008Above 20 years 99 8,859 18,070 29,829Total 61,408 66,900 161,457 183,113

Distribution of Planted Areas-Nucleus

Riau 56,009 56,610 57,003 57,003North Sumatra - - 40,535 40,506South Sumatra - - 43,692 61,254West Kalimantan 5,399 10,290 18,632 21,758East Kalimantan 5,015 5,015 19,030 24,478Java - - 2,555 2,795Sulawesi - - 5,535 5,534Total 66,423 71,915 186,982 213,328

Production Volume (‘000 Tonnes)Nucleus Fresh Fruit Bunch (FFB) 1,295 1,324 1,506 2,496Processed FFB 1,294 1,320 1,708 3,160Crude Palm Oil (CPO) 299 300 384 714Palm Kernel 61 63 85 166Oil Palm Seed ('000) - 800 5,550 24,839Rubber - 4 8 28

Sales Volume (‘000 Tonnes)Crude Palm Oil (CPO) 297 305 361 730Palm Kernel 59 64 82 161Rubber 1 3 7 26Cooking Oil 322 371 371 424

Magarine 177 178 183 161

Copra Based Products 115 148 155 170


OVERVIEWIndoAgri is one of the largest plantation owners in Indonesia with total land bank of 539,016 hectares, of which 213,328 hectares was planted as at December 2008.

Oil palm remains our dominant crop with 183,113 hectares of planted area, followed by rubber 22,410 hectares. Other crops include sugar cane, cocoa and tea with a combined planted area of 7,805 hectares.

We currently operate 18 palm oil mills in various locations across Sumatra and Kalimantan, with a total capacity of approximately 3.8 million tonnes of fresh fruit bunches (FFB) per year.

We also operate four crumb rubber factories, three sheet rubber factories, one cocoa factory, one tea factory and one sugar factory.

2008 REVIEW2008 was an eventful year for oil palm plantation owners. CPO prices started the year strongly and stayed high through the fi rst half of 2008 at above US$1,000 a tonne. Subsequently, prices fell in the second half of 2008 as the global fi nancial crisis triggered a major correction in commodities prices, including CPO (see chart 1).

Exacerbated by high palm oil inventories, CPO prices fell to US$503 a tonne as at year-end. Rubber prices followed a similar pattern, RSS3 rubber fetching as much as US$3.28 a kilogram in June but only US$1.38 a kilogram in December (see chart 2).

Chart 2: Rubber price (RSS 3 SICOM)

Chart 1: CPO price (CIF N.W. Europe)

0

1,400

1,200

1,000

800

600

400

200

US$/tonne

OPERATIONS REVIEW – PLANTATION

0

3.50

3.00

2.50

2.00

1.50

1.00

0.50

US$/kg

14

Overall, for the full year, our plantation division increased

its sales by 154% against 2007 to reach Rp6.8 trillion

(S$ 1.1 billion). This was due to volume growth,

favorable CPO prices in the first half and positive

contribution from Lonsum.

The full year plantation division’s segment profi t (excluding

fair value gain or loss on biological assets), rose 98% to

Rp2.9 trillion. Profi t margin however, edged down from 54%

to 42% due to higher plasma fruit purchases which give

lower margin, higher fertiliser costs and increased transport

costs. Moving forward, we expect the production cost to

ease from the 2008 level on lower fertiliser and fuel prices.

For the fi nancial year under review, the Group harvested

2.5 million tonnes of nucleus fresh fruit bunches (FFB),

up 66% from last year. The substantial increase in FFB

harvested was mainly due to the maiden full-year

contribution from Lonsum of 1.02 million tonnes.

The Group’s 2008 FFB production per hectare (FFB yield)

came in at 20.1 tonnes a hectare, slightly lower than

20.3 tonnes a hectare of 2007. The decline is attributable

to a higher proportion of young oil palm trees as well as

lower production in Lonsum’s North Sumatra estates.

CPO production increased 86% to 714,000 tonnes on

the back of higher nucleus FFB production and higher

FFB purchased from plasma and third party farmers. Oil

extraction rate (OER) was relatively unchanged at 22.6%,

compared to 22.5% in 2007.

Palm kernel production increased 95% to 166,000 tonnes

in line with higher FFB processed. 2008 kernel extraction

rate (KER) of 5.3% was higher than 5.0% of 2007.

For the rubber production, the Group more than tripled

its 2008 rubber output, from 7,903 tonnes in 2007 to 28,100

tonnes. The increase was due to full year consolidation of

Lonsum’s rubber production. Our acquisition of Lonsum

has more than tripled the Group’s mature rubber crop

and quadrupled the rubber plantation area.

In 2008, our planted oil palm area increased by 21,657

hectares. We also added 132,497 hectares of land bank

through acquisitions during the year.

As an integrated agribusiness group, our plantation

estates are supported by strong R&D. We produced

25 million high quality and high yielding seed material

for commercial sales and our new plantings in 2008.

We ensure that our new plantings are planted with the

highest yielding seed material.

With the goal of becoming a world-class agricultural

research & seeds breeding company in mind, we will

continue to invest in R&D. To this end, Sumatra Bioscience

entered into a joint venture company with Ghanaian

Council for Scientifi c and Industrial Research (CSIR) to

develop oil palm seeds for commercial use and our

recent patent for the world’s fi rst F1 hybrid oil palm marks

a signifi cant milestone in yield improvement science.

operations review – plantation


2009 OUTLOOKThe sharp global economic downturn, led by the US

fi nancial crisis has been on an unprecedented scale.

Given the uncertainty over the full extent of the fi nancial

crisis, it is too early to predict the full effects on the global

economy in the next 12 months. However it is likely that

CPO prices will remain soft in the next 12 months, as

compared to 2008.

Nonetheless, the long term outlook for palm oil demand

remains positive given that currently:

• More than 85% of CPO is consumed for food, and

there is increasing demand from China and India;

• Approximately 10% is for oleochemical

production; and

• Biodiesel demand remains low at approximately

5%, but has the potential to grow given that

CPO is a cheaper feedstock than competing

vegetable oils.

We will continue to expand our oil palm plantations. In

addition, we also plan to expand our sugar cane plantation

to 18,600 hectares and operate two sugar-processing

factories by end 2011.

Further, we will continue to improve our agronomy

practices such as in

• Good estate management and optimal

application of fertiliser to increase effi ciencies and

production;

• Increasing usage of palm oil mill effl uent as

fertiliser to mitigate rising fertiliser costs; and

• Improving crop yield and enhancing palm oil

extraction rate.

Our practices for promoting agricultural sustainability,

fi eld safety and enhancing production yields are as a

result of our comprehensive plantation management

expertise and long track record in oil palm plantation

management.

Finally, we can expect an annual increase in our CPO

production as our immature plantings come on stream

and also as we continue to expand our hectarage. Our

immature oil palm plantations stand at 58,944 hectares as

at end 2008. (see chart 3).

Chart 3: Oil Palm Plantation Age Profile

Immature 58,944

4 - 6 years 12,332

7 - 20 years 82,008

Above 20 years 29,829

Total 183,113

32%

7%

45%

16%


16

DIVERSIFICATION OF AGRIBUSINESS – SUGAR BUSINESS The Group recognises sugar is an attractive industry

in Indonesia, a net importer whose demand for this

commodity is projected to continue rising with the growth

of its population and its processed food and beverage

industry, among other factors.

The Group diversifi ed into the sugar industry by

subscribing, through its 90%-owned subsidiary, PT SIMP,

for 60% of the enlarged share capital of PT LPI in July

2008 for a cash consideration of S$56 million.

PT LPI has a total of 37,500 hectares land bank in

South Sumatra. The Group intends to signifi cantly expand

the sugar cane plantation from 4,174 hectares as at end-

Dec 2008 to 18,600 hectares by end-2011.

To meet the higher sugar processing needs arising from

our to-be-expanded plantation, we are constructing a

8,000 tonnes cane a day (TCD) sugar processing mill in

South Sumatra, to be completed in 2010.

As a start-up business division, the sugar cane division

incurred minor losses in 2008.

By the end of 2008, we had achieved planted area of 4,174

hectares, on track to our target planted area of 18,600

hectares by end-2011, or four times the planted area as of

end-Dec 2008. We produced 986 tonnes of sugar cane in

2008 which was sold to third parties pending completion

of our own sugar mill.

Rehabilitation program for PT LPI’s 3,000 TCD Java sugar

mill is ongoing and due to start operation in the 2009’s

sugar cane harvesting season.

During 2009, the main focus of the sugar division is

to continue to build up the scale of the business in

preparation for full operation in 2010. We will continue

to expand new planting, build housing, road and offi ce

infrastructure, and construct our sugar processing mill, for

completion in 2010.

We expect our sugar division to start notable

contribution in 2011, when we would have achieved

our targeted planted area of 18,600 hectares and

completed the construction of our sugar processing

mill in South Sumatra.



OVERVIEW The Group’s R&D capabilities received a boost with the 64.4% acquisition in late 2007 of Lonsum, which owns an advanced agricultural research centre, Sumatra Bioscience (formerly known as Bah Lias Research Station).

Sumatra Bioscience (SumBio), established since 1983, has comprehensive research facilities for the analysis of soil, plant tissue, oil palm and latex. It has tissue culture, biotechnology, pathology and entomological laboratories. SumBio’s advanced palm oil seed-breeding programme is capable of producing up to 25 million superior oil palm seeds per annum.

In addition, the Group’s Riau research and seed breeding facilities is currently capable of producing up to 8 million seeds per annum.

Our seed breeding and R&D division strives to increase yields through plant breeding and best-practice agronomy and crop protection, and spearheads the Group’s efforts at maximising per-hectare productivity and profi tability.

The Group’s R&D focuses in four major areas:

• agronomy, in search of optimal crop management;

• breeding, which includes seed germination to produce superior planting materials;

• crop protection, to seek the best way to protect plants against pests and diseases, and

• data analysis, to store and analyse all data for future reference.

2008 REVIEWIn 2008, SumBio and our seed breeding centre in Riau produced a total of 25 million palm oil seedlings, a signifi cant increase from 6 million in 2007 which included only 2 month production of SumBio.

In May 2008, the Group entered into a joint venture agreement with the Ghanaian Council for Scientifi c and Industrial Research (“CSIR”) to create a joint venture company in Ghana to develop and realise the genetic potential of oil palm for the mutual benefi t of both parties.

Separately, SumBio announced in 2008 a breakthrough: achieving the world’s fi rst patent to produce F1 oil palm hybrids. An F1 oil palm seed is a fi rst generation offspring of two distinctly different genetically uniform oil palms, each with two identical sets of chromosomes. The process is expected to signifi cantly improve yields without genetic modifi cation, based on historic yields from other F1 hybrid crops. The Group expect to commercialise production by 2018.

OUTLOOK 2009In line with its commercialisation plans, the Group will increase the R&D budget and invest US$5 million to expand its existing R&D facilities. The expansion will increase R&D activities at SumBio by up to 10 times and bring about expanded capabilities in genomics, and tissue culture research to support the breeding work in progress.

SumBio will continue to invest in its agronomy and crop protection divisions to ensure robust systems are developed for its customers to realise the genetic potential of its seeds.

We believe that intensifying our investment R&D will bring substantial long-term benefi ts not only for the Group but also the industry.

Ultimately, it will also benefi t the environment in Indonesia, as improved yields lead to reduced pressure for land clearing. This would be a vital contribution to the sustainability of Indonesia’s forests and biodiversity.

operations review – plantation r & d

18

OVERVIEW Our Cooking Oil and Fats (COF) Division manufactures

and markets leading brands of cooking oil, margarine and

shortening for both the Indonesia and export markets.

A number of our edible oil products are household

names in both Indonesia consumer and industrial

markets, having been in the market since the 1990s.

Our leading cooking oil brand, Bimoli was introduced

back in 1978. Taking into account our other brands,

Happy Salad Oil and Delima, we have a leading market

share in the Indonesian branded cooking oil market.

Aside from cooking oil, the Group’s margarine and

shortening products, branded under Simas, Palmia and

Amanda, command a strong present in Indonesia consumer

and industrial margarine and shortening markets.

In August 2008, we co-branded Simas (introduced in

1979) and Palmia (introduced in 1990) as Simas Palmia to

strengthen the image of our consumer margarine.

Our success in selling cooking oil and margarine and

shortening products is underpinned by a comprehensive

distribution network of 120 distributors serving 230,000

retail outlets throughout the Indonesian archipelago.

In 2008, approximately 88% of the Group’s cooking oil,

margarine and shortening sales volume was derived from

the domestic Indonesian market.

As a vertically integrated agribusiness, we operate four

refi neries located at the major cities across the Indonesia

archipelago- in Jakarta, Surabaya, Bitung and Medan – to

produce cooking oil, margarine and shortening products.

The refi neries have a total processing capacity of one

million tonnes a year.

The expansion of our Medan refi nery was completed in

early 2009, more than tripling its capacity from 52,500

tonnes a year to 172,500 tonnes year. The construction

of our 420,000 tonnes a year refi nery in Tanjung Priok,

Jakarta is targeted to be completed in early 2010.

2008 REVIEW 2008 was a commendable year for our cooking oil &

fats division. Despite the diffi cult market conditions, our

cooking oil sales volume grew by a strong 14% to 424,000

tonnes, driven by increased demand for consumer pack

cooking oil in Indonesia, our successful product branding

and effective marketing campaigns.

Our margarine business, on the other hand, came in

weaker than expected. Sales volume shrunk by 12% to

161,000 tonnes compared to 183,000 tonnes in 2007,

this was in line with overall shrinkage in the domestic

margarine market.

Despite the lower margarine sales volume, 2008 cooking

oil and fats sales increased by 49% from Rp4.4 trillion

to Rp6.5 trillion, as a result of 14% volume growth in

cooking oil sales and higher average selling prices.

OPERATIONS REVIEW – COOKING OIL & FATS


Cooking Oil & Fats segment profi t increased by 132% to

Rp240 billion on higher revenue and margin expansion,

as a result of our products pricing strategy and lower

unit cost of production given the higher utilisation of

our refi neries.

OUTLOOK 2009We expect CPO prices to stay soft in 2009, which will lead

to lower production costs of our cooking oil, margarine

and shortening products. Given the fi nancial crisis, we

expect 2009 to be a very challenging year. However, with

dominant market shares and strong brands, we are well

positioned for the challenges ahead.

Our key strategies and focus in 2009 will be:

• Strengthen brand identity and brand loyalty

through enhanced product packaging and

quality;

• Strengthen brand image of new co-brand Simas

Palmia and core brand of Bimoli;

• Focus advertising and promotion support to raise

awareness and brand image;

• Deeper penetration of distribution to increase

product visibility as well improved after sales

services;

• Focus on High Class Outlets (HCO) in line with

HCO rapid growth, driven by the growth in

supermarkets and hypermarkets in Indonesia.

operations review – cooking oil & fats

20

OVERVIEW The principal activity of the Commodity Division is the

manufacture of crude coconut oil (CNO) from copra,

the meaty inner lining of the coconut, for export to the

Europe, United States and Asia.

Our customers are manufacturing plants which produce

oleochemicals such as fatty acids and glycerine.

The oleochemicals are used in the production of

detergents, personal care products, lubricants, solvents,

and bioplastics.

By-products from our manufacture of crude coconut oil,

such as copra pellets, are sold to the animal feeds industry

in overseas markets.

The Group has three copra crushing plants, located at

Bitung in North Sulawesi; Moutong in Central Sulawesi

and Tobelo, on the island of Halmahera in North Maluku

province with a combined production capacity of 270,000

tonnes a year.

2008 REVIEW2008 was a volatile year for prices of the world’s

commodities. Prices were high in the first half but

weakened signifi cantly in the second half. Despite the

volatility, our commodity division remained profi table

in 2008.

Revenue increased 42% versus the same period last

year, and this was largely attributable to the increase

in the average selling price of copra-based and palm

oil-based products.

The commodity segment’s profi t also came in higher at

Rp51 billion (+204%) versus Rp17 billion in 2007.

OUTLOOK 2009Given the uncertainties in the outlook for the global

commodity market, we will retain our strategy, which is

to secure back-to-back contracts from both our suppliers

and customers to shelter us from price volatility whilst

giving us a favourable margin.

Our key initiatives include increasing the capacity

utilisation of our copra crushing plants; explore new

export opportunities by increasing our understanding of

potential markets; and increase the level of marketing in

those markets.

OPERATIONS REVIEW – COMMODITIES


IndoAgri considers environmental

compliance and protection to be an

integral and critical part of its business

operations. We are committed to high

standards of environmental and social

ethics, and we are ever mindful of the

need to use sustainable methods in the

production of our plantation crops and

downstream products.

RSPO AND OTHER CERTIFICATIONBoth of our main operating subsidiaries, PT SIMP and

Lonsum, are members of the Roundtable on Sustainable

Palm Oil (RSPO), an association formally established in

2004 to promote the use of sustainable palm oil through

co-operation among the stakeholders within the supply

chain and through open dialogue with the stakeholders.

The seat of the association is in Zurich, Switzerland while

its secretariat is in Kuala Lumpur.

The Group practises the RSPO Principles and Criteria

(P&C) that underpin the sustainable production and use

of palm oil. The P&C embrace a wide range of technical,

environmental, social, legal, and safety issues.

PT SIMP recently set up a Sustainable Committee to

educate and disseminate relevant RSPO information and

knowledge to our operation personnel at all levels. The

team will assist our operation units in implementing the

P&C within two years.

Most of the tasks would involve documenting and

complementing existing practices, as we believe our

practises mainly comply with that of RSPO.

Our Indonesia listed subsidiary, Lonsum, has drawn up

comprehensive policies and guidelines to ensure that all

its estates and mills are benchmarked against each of the

RSPO P&C.

2008 was the fi rst year in which external accredited expert

companies can audit for adherence to these P&C. In

September/October, after two years of efforts, Lonsum’s

North Sumatra oil palm estates & mills were audited (by

an accredited external body) for Certifi able Sustainable

Palm Oil (CSPO). Lonsum hopes to achieve Certifi ed

Sustainable Palm Oil production in this fi rst year.

Earlier in the year, Lonsum achieved a sought-after

certifi cation. On 9 January 2008, certifi cation body (TUV

Nord Indonesia) issued an ISO 14001:2004 certifi cate for

all of Lonsum’s oil palm, rubber, cocoa and tea estates

and factories, agriculture research stations and CPO

bulking stations.

The Group has also adopted the High Conservation Value

(HCV) standards for land classifi cation. The Group has

been working with World Wide Fund for Nature (WWF)

to identify areas of HCV in the Group’s development

areas in South Sumatra and East Kalimantan. WWF

advised a team of independent auditors who conducted

HCV assessments of potentially high conservation value

in all these areas. Once identifi ed as HCV, these areas

are left untouched. Approximately 13,600ha of land was

classifi ed as HCV as at end-2008.

ENVIRONMENT & CORPORATE SOCIAL RESPONSIBILITY

22

SUSTAINABLE AGRICULTURAL PRACTICESWe implement long-term sustainable agricultural

practices across our plantation estates and processing

plants. Some of our ongoing practices and new

initiatives include:

• A policy of zero burning for clearing our plantation

land. We adopt fully mechanical methods to fell

trees at replanting and land clearing, and stack

them to create planting rows.

• We recycle all solid and liquid palm oil mills by-

products (empty fruit bunch, decanter solid,

effl uent) in the fi eld as mulch, irrigation water and

fertiliser substitutes. As such, we reduce the use of

inorganic fertilisers.

• We use barn owls to combat the prevalence of rats

in oil palm plantations. This averts the introduction

of large amounts of harmful chemicals into the

ecosystem by traditional pest control methods

involving anti-coagulant rodenticides, herbicides

and insecticides.

MAXIMISING PRODUCTION YIELDS TO PROMOTE SUSTAINABILITYIn our commitment towards sustainability in all aspects

of plantation operations, we place special emphasis on

maximising plantation yields in order to increase the

productivity of our land bank and resources.

We also focus on plantation R&D. Our Sumatra Bioscience

Research Centre has developed the world’s fi rst and

only process to produce F1 hybrid oil palm seed, which

is expected to achieve higher yields without genetic

modifi cation. We expect commercial production by 2018,

and with higher yielding seeds, there will be less pressure

on expansion of plantings to satisfy demand.

We will invest US$5 million to expand our existing R&D

facilities. The expansion will increase R&D activities at

Sumatra Bioscience by up to 10 times. We are fi rmly

committed to F1 hybrid oil palm as it is more economically

viable and environmentally sustainable.


REACHING OUT TO THE COMMUNITYIndoAgri strives to be a good corporate citizen,

conducting our business in ways that do no harm to the

environment and the community, as well as contributing

part of our gains back to society.

Plantations can have a strong social role in the community.

We recognise the importance of a mutually benefi cial

relationship as part of a sustainable business model. We

aim to grow and develop together with the community.

Our community development efforts are wide-ranging,

and include:

• Education: We encourage education through

establishing schools and providing scholarships.

We have rehabilitated public schools, donated

computers to schools to promote computer

literacy and established teacher-training

programmes.

• Health: We provide public health infrastructure by

building medical clinics and emergency care units

that also extend their services to the community.

We also organise blood donation campaigns,

promote immunisation and carry out fogging to

destroy mosquito-breeding areas.

• Infrastructure/public facilities: We build and

repair roads/bridges to improve accessibility for

the community. We also facilitate the construction

of power supply, telephone network and water

installation by building and drilling wells.

• Religious: We provide and repair religious

infrastructures such as mosques and churches,

provide religious teachers and distribute Lebaran

and Christmas packages to disadvantaged

families.

• Sports & Youth, Arts & Culture: We provide sports

facilities, organising and/or sponsoring local sport

tournaments, musical concerts, and cultural and

religious events for the community.

• Local business development: We promote the

development of small businesses such as goat-

breeding program, pallet production and local

tailor development program.

ENVIRONMENT & CORPORATE SOCIAL RESPONSIBILITY

24

Fresh palm fruit bunches

Empty Fruit Bunches and By Products

Milling

Crude Palm Oil

Nitrogen gas

Water & Salt

Flavouring &Vitamins

Palm Kernel

Palm Kernel Meal

Crude Palm Kernel OilRBD Palm Oil Palm Fatty Acid Distillate

RBD Palm Stearin RBD Palm OleinLauric Oil

Cooking Oil

Shortening Margarine

Fractionating & Filtration

Refining Crushing

Blending

Margarine Plant

Packaging

Mixing Tank

Chilling

Packaging

Blending

Mixing Tank

Chilling

Packaging

MANUFACTURING PROCESSES

Margarine


From left to right:

Mr Lee Kwong Foo Edward

Mr Mark Wakeford

Mr Moleonoto Tjang

Mr Gunadi

Mr Suaimi Suriady

Mr Tjhie Tje Fie

Mr Axton Salim

Mr Lim Hock San

Mr Goh Kian Chee

Mr Hendra Susanto

Mr Lee Kwong Foo Edward Chairman and Lead Independent Director

Mr Lee spent 36 years in the Singapore Administrative

Service (Foreign Service Branch), during which time

he has served as Singapore’s High Commissioner in

Brunei Darussalem (1984 to 1990), Ambassador to the

Philippines (1990 to 1993) and Ambassador to Indonesia

(1994 to June 2006).

Mr Lee was awarded the Public Administration Medal

(Silver) in 1996, the Long Service Medal in 1997, the Public

Administration Medal (Gold) in 1998 and the Meritorious

Service Medal in 2006 by the Singapore Government. He

was also awarded the Order of Sikatuna, Rank of Datu

(Grand Cross) by the Philippine government in 1993.

In 2007, the Indonesian Government awarded him the

highest civilian honour, the Bintang Jasa Utama (First

Class Order of Services).

Mr Lee holds a Masters of Arts from Cornell University

and is the Chief Executive of PT Ekalumintas, an

investment consultancy fi rm in Jakarta.

Mr Mark WakefordChief Executive Offi cer and Executive Director

Mr Wakeford is currently the President Director of PT

Salim Ivomas Pratama and a director of PT Perusahaan

Perkebunan London Sumatra Indonesia Tbk (Lonsum).

He started his career with Kingston Smith & Co, a

fi rm of Chartered Accountants in London, England.

Mr. Wakeford has been in the plantation industry since

1993, working with plantation companies in Indonesia,

Papua New Guinea, Soloman Islands and Thailand.

He started his plantation career as the Finance

Director of Lonsum in 1993, based in Indonesia,

before moving to Pacifi c Rim Plantations Limited

(PROPL) as the CFO from 1995 to 1999, based in

Papua New Guinea. In 1999, Mr. Wakeford became

CEO and Executive Director of PROPL. PROPL was

sold to Cargill in 2005, and Mr. Wakeford spent one

year with Cargill, prior to joining the Company in

January 2007.

Mr. Wakeford trained and qualifi ed as a Chartered

Accountant in London, England. He also attended

the Senior Executive Program at the London

Business School.

Mr Moleonoto Tjang Executive Director and Head of Finance and Corporate Services

Mr Tjang is currently a Vice President Director of PT

Salim Ivomas Pratama and a director of PT Perusahaan

Perkebunan London Sumatra Indonesia Tbk. He started

his career in 1984 with Drs Hans Kartikahadi & Co.,

a public accounting fi rm in Jakarta. In 1990, he joined

the Salim Plantations Group as Manager and became

Assistant Vice President (Commercial and Accounting)

in 1993. In 1996, he was appointed as Vice President

(Finance) of the Salim Plantations Group. He was made

CFO of the PT ISM Group’s Plantations Division in

2001 and subsequently the Deputy Head of Corporate

Treasury of the PT ISM Group in 2003.

He has a Bachelor of Accountancy degree from the

University of Tarumanagara, a degree in Bachelor

of Management and a Master of Science in

Administration & Business Policy from the University

of Indonesia. Mr Tjang is also a registered accountant

in Indonesia.

BOARD OF DIRECTORS


Mr Gunadi Executive Director and Head of Plantation Operations

Mr Gunadi is currently a director PT Salim Ivomas

Pratama. Mr Gunadi started his career in 1977 with

Drs Hans Kartikahadi & Co. , a public accounting fi rm in

Jakarta. He was with PT Besuki Indah Electric Industry

(Luxor), Jakarta in 1979 as Finance Manager before

joining PT Lippo Mulia Jakarta in 1980 as Finance and

Administration Manager.

From 1981 to 1991, Mr Gunadi was with PT Broco,

Jakarta, as Group Finance Director. In 1991, Mr

Gunadi joined the Salim Plantations Group (which

was subsequently acquired by PT ISM) as Senior Vice

President (Finance). In 2004, he was appointed to

the position of Chief Operating Offi cer of PT SIMP.

Mr Gunadi has a Bachelor of Accountancy degree from

University of Indonesia.

Mr Suaimi SuriadyExecutive Director and Head of Refi nery and Commodity Division

Mr Suriady started his career with an automotive battery

distributor, PT Menara Alam Teknik of Astra group and

moved on to consumer goods manufacturer, Konica

Film and Paper, in 1991. He joined PT Indofood Fritolay

Makmur, a JV between Indofood group and Pepsi

International, as National Sales Manager in 1994 and

was promoted to Sales and Marketing Manager in

1997. Before his appointment as President Director in

PT Indofood Fritolay Makmur in 2002, he worked as the

Branch Manager of the Noodle Division of PT Indofood

Sukses Makmur Tbk from Jan 2000 to April 2002.

Mr Suaimi has a MBA degree from De Montfort

University, United Kingdom.

Mr Tjhie Tje Fie Non-executive Director

Mr Tjhie is currently a director of PT Indofood Sukses

Makmur Tbk and heads its Treasury Division. In addition,

he is currently a Commissioner of PT Salim Ivomas

Pratama and a director of PT Perusahaan Perkebunan

London Sumatra Indonesia Tbk. Previously, he was

director of PT Indomiwon Citra Inti and senior executive

of PT Kitadin Coal Mining.

Mr Tjhie was awarded a Bachelor’s degree in

Accountancy from the Perbanas School of Economics.

Mr Axton SalimNon-Executive Director

Mr Axton joined PT Indofood Fritolay Makmur as

Marketing Manager from 2004 to 2006. He moved on

to become the Assistant to CEO of PT Indofood Sukses

Makmur Tbk in 2007.

Mr Axton has a Degree in Bachelor of Science, Business

Administration from University of Colorado.

BOARD OF DIRECTORS

28

Mr Lim Hock San Independent Director

Mr Lim is presently the President and CEO of United

Industrial Corporation Limited and Singapore Land

Limited. He is also the Non-executive Chairman and

Independent Director of Gallant Venture Ltd. Mr Lim

started his career in 1966 with the then Inland Revenue

Department of Singapore. He became an Accountant

at Mobil Oil Malaya Sdn Bhd in 1967 before joining

the Port of Singapore Authority in 1968, where he

served in various management positions. From 1975

to 1992, he was with the Civil Aviation Authority of

Singapore and fi nally promoted to the position of the

Director-General.

He has a Bachelor of Accountancy degree from the

then University of Singapore, a Master of Science

(Management) degree from the Massachusetts Institute

of Technology and attended the Advanced Management

Program at Harvard Business School. He is a Fellow of

The Chartered Institute of Management Accountants

(UK) and a Fellow and past President of the Institute of

Certifi ed Public Accountants of Singapore. He is also

a recipient of the Singapore Government Meritorious

Service Medal, the Public Administration Medal (Gold)

and the Public Service Medal.

Mr Goh Kian Chee Independent Director

Mr Goh is presently the CFO of National University of Singapore, Centre For The Arts (NUS). He is also an independent director of AsiaMedic Limited, in which the Salim Group has a shareholding interest. Mr Goh started his career in 1979 as an audit trainee with Goldblatt & Co (UK). He joined American International Assurance Pte Ltd in 1981 as an Accounting Supervisor. In 1982, he became a Regional Internal Auditor in Mobil Oil Singapore Pte Ltd and rose to the position of Regional Credit and Insurance Manager in 1987. In 1990, he

joined Mobil Petrochemicals International Ltd where he served as Regional Accounting Manager and later, as the Financial Controller of the Asia Pacifi c region. Before his present position in NUS, Mr Goh was the Regional Vice President & Controller as well as an Executive Director of John Hancock International Pte Ltd.

Mr Goh has a Bachelor of Arts (Hons) degree in Accounting and Economics from Middlesex University (London, United Kingdom).

Mr Hendra Susanto Independent Director

Mr Susanto began his career with the Standard Chartered Bank as an Account Relationship Manager of the Corporate Banking division in 1990. He joined PT BNP Lippo Leasing in 1993 as the Head of the Corporate Marketing division. In 1996, he joined PT ING Indonesia Bank as Vice President in the Project and Structured Finance division and was subsequently promoted to Director in the Wholesale Banking division of the bank. Mr Susanto also acted as the Chief Representative of ING Bank N.V. in Indonesia until 2005.

Mr Susanto has a Bachelor of Computer Science degree and a Master of Commerce degree from the University of New South Wales, Australia.

BOARD OF DIRECTORS


CORPORATE GOVERNANCE

The Board and Management of Indofood Agri Resources Ltd. (“the Company”) are committed

to continually enhancing the standard of corporate governance principles and processes

in managing the business and affairs, so as to improve the performance, accountability, and

transparency of the Company.

This Corporate Governance Report sets out the Company’s corporate governance framework and practices, with specific reference to the principles and guidelines of the Code of Corporate Governance issued by the Ministry of Finance in July 2005 (“the Code”).

BOARD MATTERS

The Board’s Conduct of its Affairs (Principle 1)

The Board comprises directors with a wide range of skills and experience in the fields of operationsmanagement, finance and accounting. Each member of the Board will hold office pursuant to the provisions of the Articles and thereafter, shall be eligible for re-election unless disqualified from holding office.

The Board has overall responsibility for the corporate governance of the Company. Apart from its statutory responsibilities, the Board is responsible for:-

(1) reviewing the fi nancial performance and condition of the Group;

(2) approving the Group’s strategic plans, key operational initiatives, major investment and funding decisions;

(3) identifying principal risks of the Group’s business and implementing systems to manage the risks; and set the Company’s values and standards, continually to make them exemplary and the highest, and ensure that obligations to shareholders and others are understood and met.

Board Composition (Principle 2)

On 10 March 2009, Mr Benny Setiawan Santoso resigned as a non-executive director of the Company. Consequent to his resignation, Mr Benny Setiawan Santoso will also cease to be the Vice Chairman of the Board and as a member of the Nominating Committee.

As of 31 March 2009, the Board comprises of ten Directors, of whom four are Executive Directors, two are Non-Executives and four are Independent Directors.

Name

Board of DirectorsExecutive

CommitteeAudit

CommitteeNominating Committee

Remuneration CommitteeStatus Position

Lee Kwong Foo, Edward Lead Independent Chairman Chairman

Mark Wakeford Executive Member Chairman

Moleonoto Tjang Executive Member Member

Gunadi Executive Member Member

Suaimi Suriady Executive Member Member

Tjhie Tje Fie Non-executive Member Member Member Member

Axton Salim Non-executive Member

Lim Hock San Independent Member Member Member Chairman

Goh Kian Chee Independent Member Chairman Member

Hendra Susanto Independent Member Member Member


The Board is assisted by an Executive Committee and a Nominating Committee in addition to the Audit Committee and the Remuneration Committee.

The Executive Committee (“Exco”) comprises Mr Mark Wakeford, Mr Tjhie Tje Fie, Mr Suaimi Suriady, Mr Gunadi and Mr Moleonoto Tjang. Mr Wakeford is the Chairman of the Exco. The Board delegates the Exco certain discretionary limits and authority for business development, investment/divestment activities, capital expenditure, fi nance/treasury, budgeting and human resource management, drawing up the Group’s annual budget and business plan for Board approval, supervising the implementation of business strategies as approved in the annual budget and business plan, implementing appropriate systems of internal accounting and other controls, instituting a risk management framework and monitoring for compliance, adopting suitably competitive human resource practices and compensation policies, and ensuring that the Group operates within budget.

Regular meetings are held to deliberate the strategic policies of the Company including signifi cant acquisitions and disposals, review and approve annual budgets, review the performance of the business and approve the release to the public of periodic fi nancial results. In the event Directors are unable to attend Board meetings because of overseas commitments, they may still participate via telephone or any other forms of communication facilities.

The number of meetings and attendance by Board members are set out in the table below:

Board Audit Committee Nominating Committee Remuneration Committee

Number of meetings held during the financial year ended 31 December 2008 12 6 1 2

Directors’ Attendance

Lee Kwong Foo, Edward 12/12 n/a 1/1 n/a

Benny Setiawan Santoso1 5/12 n/a 1/1 n/a

Mark Wakeford 12/12 n/a n/a n/a

Moleonoto Tjang 12/12 n/a n/a n/a

Gunadi 9/12 n/a n/a n/a

Suaimi Suriady 8/12 n/a n/a n/a

Tjhie Tje Fie 8/12 n/a 1/1 2/2

Axton Salim 12/12 n/a n/a n/a

Lim Hock San 9/12 6/6 1/1 2/2

Goh Kian Chee 11/12 6/6 n/a 2/2

Hendra Susanto 9/12 6/6 1/1 n/a

1 Mr Benny Setiawan Santoso resigned as a non-executive director of the Company on 10 March 2009.

Chairman

n/a Not applicable

Chairman and Chief Executive Officer (Principle 3)

The roles of the Chairman and Chief Executive Offi cer (“CEO”) are separate persons with their own areas of responsibilities and accountabilities. The offi ce of the Chairman of the Company is assumed by Mr Lee Kwong Foo Edward. As the Chairman, Mr Lee bears responsibility for the working of the Board and reviewing the effectiveness of the governance process of the Board. He is responsible for representing the Board to Shareholders. Mr Lee is also the Lead Independent Director.

The offi ce of CEO is assumed by Mr Mark Wakeford. As the CEO, Mr Wakeford’s responsibilities include the charting and reviewing of corporate directions and strategies, which cover areas of marketing and strategic alliances. He is responsible for providing the Company with strong leadership and vision.


Cha

n/a Not

32


Board Membership and Performance (Principles 4 and 5)

The Nominating Committee (“NC”) of the Company is chaired by Mr Lee Kwong Foo Edward, the Chairman of the Board

and the Lead Independent Director, with Mr Tjhie Tje Fie, Mr Hendra Susanto and Mr Lim Hock San as members.

The NC terms and reference were adopted from the Code and include the following duties and functions:-

(1) make recommendations to the Board on all board appointments and re-nomination having regard to the director’s contribution and performance;

(2) ensure that all directors submit themselves for re-nomination and re-election at regular intervals and at least once in every three years;

(3) determine annually whether a Director is independent, guided by guidelines in the Code;

(4) decide if a director is able and has adequately carried out his duties as a director of the Company where he has multiple board representations; and

(5) decide how the Board’s performance may be evaluated and propose objective performance criteria.

Each year, the Directors are requested to complete appraisal forms to access the overall effectiveness of the Board. The

Board evaluation process focused on factors such as Board composition and size, Board processes, access to information,

Board and committee effectiveness, managing company performance and Board compensation. The results of the

evaluation, including comments and recommendations from the Board members, will be presented by the NC Chairman

to the Board with a view to enhance the effectiveness of the Board as a whole.

Access to Information (Principle 6)

Prior to each Board meeting, Management provides the Board with timely and complete information to enable them to

be fully cognizant of the decisions and actions of the Company’s executive management and to discharge their duties

effectively.

The directors have separate and independent access to the Company Secretaries. The Company Secretaries attend the

Board and committee meetings to ensure that Board procedures are followed and applicable rules and regulations are

complied with.

Senior members of the management are available to provide briefi ngs to the directors or presentation at the Board

Meetings, or by external consultants engaged on specifi c projects.

REMUNERATION MATTERS (Principles 7, 8 and 9)

Procedures in Developing Remuneration Policies

The Remuneration Committee (“RC”) of the Company is chaired by Mr Lim Hock San, an Independent Director, with

Mr Tjhie Tje Fie and Mr Goh Kian Chee as members.

The role of the RC is to review and approve the remuneration package and terms of employment of the Company’s

directors and key executives who are connected and deemed to be Substantial Shareholders of the Company.

In its review and approval of the recommendations on remuneration policies and packages for the Company directors, the

RC will cover all aspects of remuneration including but not limited to directors’ fees, salaries, allowances, bonuses, share

options and benefi ts-in-kind. The RC’s recommendations will be made in consultation with the CEO and submitted for

endorsement by the entire Board. Payments of directors’ fees are subject to Shareholders’ approval at the AGM.


RC members will abstain from deliberations in respect of their own remuneration and the RC are also empowered to review

human resource management policies of the Group.

The remuneration policy of the Group will seek, inter alia, to align the interests of employees with the Group, to reward and

encourage performance based on its core values and to ensure that remuneration is commercially competitive to attract

and retain talent. Proposed directors’ fees will be submitted as a lump sum for shareholders’ approval in general meeting

and the sum is divided amongst the directors with those having additional responsibilities as chairman or members of

board committees receiving a higher portion of the approved sum.

Disclosure on Remunerations

The remunerations of the Directors and Key Executives, in the bands of S$250,000, for the fi nancial year ended

31 December 2008 are set out in the tables below. The remunerations of the Executive Director and the Key Executive

contain a component that is performance related and linked to the consolidated results of the Group.

Name of Directors/Key Executives and Remuneration Bands

Base/Fixed Salary

%

Bonus/ Benefits

%

DirectorsFee%

Share Options

%

DIRECTORS OF THE COMPANY

S$750,000 to S$1,000,000

Mark Wakeford 86 14 - -

S$500,000 to S$750,000

Moleonoto Tjang 26 74 - -

Gunadi 28 72 - -

Below S$250,000

Lee Kwong Foo, Edward - - 100 -

Benny Setiawan Santoso (1)(3) - - - -

Lim Hock San - - 100 -

Goh Kian Chee - - 100 -

Hendra Susanto - - 100 -

Tjhie Tje Fie (1) - - - -

Axton Salim (1) - - - -

Suaimi Suriady (1) - - - -

KEY EXECUTIVES

Between S$500,000 to S$750,000

Wilihar Tamba(Chief Operating Offi cer - Plantation)

30 70 - -

Between S$250,000 to S$500,000

Darjono K (2)

(Senior Vice President Government Relations)31 69 - -

C.Y.O. Sorongan (2)

(Senior Technical Advisor Engineering)35 65 - -

Below S$250,000

Mak Mei Yook(Chief Financial Offi cer)

78 22 - -

Tan Agustinus Dermawan(Group Controller) 31 69 - -

Rolly B Mendoza(Vice President Controller) 52 48 - -

Leong Wee Kuan (2)

(Vice President Engineering) 26 74 - -

(1) Remunerations were paid by the parent company, PT Indofood Sukses Makmur or other group of companies(2) These three key executives are on service agreement, which cover the terms of employment, salaries and other benefi ts. (3) Mr Benny Setiawan Santoso resigned as a non-executive director of the Company on 10 March 2009.


34

There was no employee in the Group who was an immediate family member of a Director and/or a Substantial

Shareholder whose remuneration exceeded S$150,000 during financial year ended 31 December 2008.

Other Remuneration Matters

The Company’s Share Option Scheme 2002 was approved by the former Board and shareholders of the Company

at an Extraordinary General Meeting held on 19 June 2002. No option was granted during the financial year

ended 31 December 2008. The Board will be looking into whether a new ESOS should be implemented.

ACCOUNTABILITY AND AUDIT PRINCIPLES 10, 11, 12 AND 13

Accountability

The Board is accountable to the shareholders and is mindful of its obligations to furnish timely information and to ensure

full disclosure of material information to shareholders in compliance with statutory requirements and the Listing Manual

of the SGX-ST.

Audit Committee (“AC”)

The AC of the Company comprises three independent Directors, including the Chairman. The AC is chaired by Mr Goh

Kian Chee with Mr Lim Hock San and Mr Hendra Susanto as members.

The AC has the following functions:-

(1) review with the external auditors the audit plan, their evaluation of the system of internal accounting

controls, their audit report, their management letter and the management’s response;

(2) review the quarterly, half-yearly and annual fi nancial statements before submission to the Board for approval,

focusing on changes in accounting policies and practices, major risk areas, signifi cant adjustments resulting from

the audit, the going concern statement, compliance with applicable accounting standards and stock exchange and

statutory/ regulatory requirements;

(3) review the internal control and procedures and co-ordination between the external auditors and the management,

review the assistance given by management to the auditors and discuss problems and concerns, if any, arising from

the interim and fi nal audits, and any matters which the auditors may wish to discuss (in the absence of management

where necessary);

(4) review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any

relevant laws, rules or regulations, which has or is likely to have a material impact on the Company’s operating results

or fi nancial position, and the management’s response;

(5) consider the appointment or re-appointment of the external auditors, the audit fee, and matters relating to the

resignation or dismissal of the auditors;

(6) review Interested Person Transactions;

(7) undertake such other reviews and projects as may be requested by the Board and report to the Board its fi ndings from

time to time on matters arising and requiring the attention of the AC; and

(8) generally undertake such other functions and duties as may be required by statute or the Listing Manual, and by such

amendments made thereto from time to time.



External Auditors

The external auditor assists the AC in driving risk management activities and the Board in fulfi lling its overall responsibilities

relating to compliance risk concerns and systems of internal controls.

The AC reviews the scope and results of audit work carried out by external auditors and independence of the external

auditors annually. The AC met with the external auditors 4 times a year including once without the presence of management.

The AC, having reviewed the range and value of the non-audit services performed during the fi nancial year by the external

auditors, Ernst & Young LLP, was satisfi ed that the independence of the external auditors has not been impaired by the

provision of those services. The AC recommended that Ernst & Young LLP be nominated for re-appointment as the

external auditors at the forthcoming AGM.

Internal Audit

The Group has an Internal Audit Department (IAD) that is independent of the activities it audits. The IAD plans its internal

audit schedules in consultation with Management and submits its plan to the AC for approval. The Head of Internal Audit

reports directly to the Chairman of the AC on the internal audit matters.

The duties and responsibilities of the IAD with regard to risk management and internal controls are summarized below:

(1) review the risk profi le of the Company;

(2) identify and make recommendations to eliminate or control risks to improve the risk profi le;

(3) recommend risk parameters within which the Company should operate;

(4) review risk mitigation efforts and its cost;

(5) monitor the implementation of the mitigation efforts and risk parameters

(6) establish and maintain a risk reporting and risk monitoring framework

The Group also engages Deloitte Touche Tohmatsu (Deloitte), from time to time, on an assignment basis to perform the

internal controls system review. Deloitte has a direct reporting line to the Audit Committee.

The AC, with the assistance of internal audit, reviews the adequacy and effectiveness of the system of internal controls of

the Group on an on-going basis.

COMMUNICATION WITH SHAREHOLDERS (Principles 14 and 15)

The Company is committed to the regular and timely disclosure of information pertinent to shareholders. Announcements

are made on a timely basis, and within the prescribed periods, through the SGXNET as well as through press releases to

the relevant media, if necessary.

The Company supports the Code’s principle to encourage the participation of shareholders at the General Meetings. All

shareholders are given the opportunity to attend and vote at General Meetings. They can vote in person or by proxy if they

are unable to attend the Meetings in person.

The Directors of the Company, as well as the external auditors are in attendance at the General Meetings to address any

queries from shareholders.


36

Dealings in the Company’s Securities

The Group has adopted an Internal Code with regard to dealings in the securities of the Company by its offi cers. The

Company restricts its offi cers to trade in the securities of the Company while in possession of price-sensitive information

and during the period two weeks before the announcement of Group’s quarterly and half yearly fi nancial results and one

month before the announcement of Group’s full year fi nancial results.

Directors and employees are expected to observe the insider trading laws at all times even when dealing in securities

within permitted trading period.



CORPORATE STRUCTURE

57.4%57.4%

90.0%90.0%

PT SALIM IVOMAS PRATAMA

100.0%100.0%

INDOFOOD OIL & FATS PTE LTD

PT INDOFOOD SUKSES MAKMUR TBK

83.8%

INDOFOOD SINGAPOREHOLDINGS PTE LTD

6.8%6.8%

MR SARIAATMADJA PUBLIC

69.4% 23.8%

8.4%

8.2%

38

EXECUTIVE COMMITTEEMark Wakeford (Chairman)

Tjhie Tje Fie

Moleonoto Tjang

Gunadi

Suaimi Suriady

AUDIT COMMITTEEGoh Kian Chee (Chairman)

Lim Hock San

Hendra Susanto

NOMINATING COMMITTEELee Kwong Foo Edward (Chairman)

Benny Setiawan Santoso (resigned on 10 March 2009)

Tjhie Tje Fie

Lim Hock San

Hendra Susanto

REMUNERATION COMMITTEELim Hock San (Chairman)

Tjhie Tje Fie

Goh Kian Chee

REGISTRARBoardroom Corporate &

Advisory Services Pte. Ltd.

3 Church Street

#08-01 Samsung Hub

Singapore 049483

REGISTERED OFFICE8 Eu Tong Sen Street

#16-96/97 The Central

Singapore 059818

COMPANY SECRETARIESLee Siew Jee, Jennifer

Mak Mei Yook

AUDITORSErnst & Young

One Raffl es Quay

North Tower, Level 18

Singapore 048583

AUDIT PARTNERVincent Toong Weng Sum(appointed 20 April 2007)

DIRECTORS

Chairman and Lead Independent Director Lee Kwong Foo Edward

Vice Chairman and Non-executive Director Benny Setiawan Santoso (resigned on 10 March 2009)

Chief Executive Offi cer and Executive Director Mark Wakeford

Executive Director and Head of Finance and Corporate Services Moleonoto Tjang

Executive Director and Head of Plantation Operations Gunadi

Executive Director and Head of Refi nery and Commodity Suaimi Suriady

Non-Executive Director Tjhie Tje Fie

Non-Executive Director Axton Salim

Independent Director Lim Hock San

Independent Director Goh Kian Chee

Independent Director Hendra Susanto

CORPORATE INFORMATION


42 Directors’ Report

44 Statement by Directors

45 Independent Auditors’ Report

46 Consolidated Income Statement

47 Balance Sheets

48 Consolidated Statement of Changes in Equity

49 Consolidated Cash Flow Statement

51 Notes to the Financial Statements

INDOFOOD AGRI RESOURCES LTD. & ITS SUBSIDIARIES FINANCIAL STATEMENTS

The directors are pleased to present their report to the members together with the audited consolidated fi nancial statements

of Indofood Agri Resources Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) and the balance sheet of the

Company for the fi nancial year ended 31 December 2008.

Directors

The directors of the Company in offi ce at the date of this report are:

Lee Kwong Foo Edward

Benny Setiawan Santoso

Mark Julian Wakeford

Moleonoto Tjang

Gunadi

Suaimi Suriady

Tjhie Tje Fie

Axton Salim

Lim Hock San

Goh Kian Chee

Hendra Susanto

In accordance with Article 117 of the Company’s Articles of Association, Mark Julian Wakeford, Gunadi, Lee Kwong Foo Edward

and Lim Hock San retire and, being eligible, offer themselves for re-election.

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose objects are,

or one of whose objects is, to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares or

debentures of the Company or any other body corporate.

Directors’ interests in shares and debentures

The following director, who held offi ce at the end of the fi nancial year had, according to the register of directors’ shareholdings

required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the

Company and related corporations (other than wholly-owned subsidiaries) as stated below:

Direct interest Deemed interest

Name of director

At beginning of

the year

At end

of the year

At beginning of

the year

At end

of the year

Ordinary shares of the Company

Mark Julian Wakeford – 300,000 200,000 200,000

There was no change in any of the above-mentioned interests between the end of the fi nancial year and 21 January 2009.

Except as disclosed in this report, no director who held offi ce at the end of the fi nancial year had interests in shares, share options,

warrants or debentures of the Company, or of related corporations, either at the beginning of the fi nancial year, or date of

appointment if later, or at the end of the fi nancial year.

DIRECTORS' REPORT

42 | INDOFOOD AGRI RESOURCES LTD. ANNUAL REPORT 2008

Directors’ contractual benefi ts

Except as disclosed in the fi nancial statements, since the end of the previous fi nancial year, no director of the Company has

received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with

the director, or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial

interest.

Options

No option to take up unissued shares of the company or its subsidiaries was granted during the year.

There were no shares issued during the year by virtue of the exercise of options to take up unissued shares of the Company or its

subsidiaries whether granted before or during the year.

There were no unissued shares of the Company or its subsidiaries under option as at the end of the year.

Audit Committee

The audit committee performed the functions specifi ed in the Act. The functions performed are detailed in the Report on

Corporate Governance.

Auditors

Ernst & Young LLP have expressed their willingness to accept reappointment as auditors.

On behalf of the Board of Directors,


Director

Moleonoto Tjang

Director

Singapore

6 March 2009

DIRECTORS’ REPORT


We, Mark Julian Wakeford and Moleonoto Tjang, being two of the Directors of Indofood Agri Resources Ltd., do hereby state

that, in the opinion of the directors:

(i) the accompanying balance sheets, consolidated income statement, consolidated statement of changes in equity and

consolidated cash fl ow statement together with notes thereto are drawn up so as to give a true and fair view of the state

of affairs of the Group and of the Company as at 31 December 2008 and the results of the business, changes in equity and

cash fl ows of the Group for the year ended on that date, and

(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and

when they fall due.

On behalf of the Board of Directors,


Director

Moleonoto Tjang

Director

Singapore

6 March 2009

STATEMENT BY DIRECTORS


We have audited the accompanying fi nancial statements of Indofood Agri Resources Ltd. (the “Company”) and its subsidiaries

(collectively the “Group”), set out on pages 46 to 117, which comprise the balance sheets of the Group and the Company as at 31

December 2008, the consolidated statement of changes in equity, the income statement and cash fl ow statement of the Group

for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

Management’s responsibility for the fi nancial statements

Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with the

provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility

includes devising and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that

assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that

they are recorded as necessary to permit the preparation of true and fair profi t and loss account and balance sheet and to

maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that

are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance

with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform

the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements.

The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of

the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion,

(i) the consolidated fi nancial statements of the Group and the balance sheet of the Company are properly drawn up in

accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of

the state of affairs of the Group and of the Company as at 31 December 2008 and the results, changes in equity and cash

fl ows of the Group for the year ended on that date; and

(ii) the accounting and other records required by the Act to be kept by the Company and by the subsidiary company incorporated

in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLP

Public Accountants and Certifi ed Public Accountants

Singapore

6 March 2009

INDEPENDENT AUDITORS’ REPORT To the Members of Indofood Agri Resources Ltd.


Note 2008 2007

Rp’ million Rp’ million

Revenue 5 11,840,499 6,505,642

Cost of sales 6 (7,711,395) (4,492,431)

Gross profi t 4,129,104 2,013,211

(Loss)/gain arising from changes in fair value of biological assets 14 (947,226) 201,675

Other operating income 7 55,187 65,139

Selling and distribution costs (383,102) (204,466)

General and administrative expenses (659,934) (298,082)

Other operating expenses 8 (330,320) (198,179)

Profi t from operations 9 1,863,709 1,579,298

Impairment of goodwill 2, 17 (4,833) (76,337)

Financial income 10 82,411 75,500

Financial expenses 11 (422,212) (89,240)

Profi t before taxation 1,519,075 1,489,221

Tax expense 12 (452,358) (495,204)

Profi t for the year 1,066,717 994,017

Attributable to :

Equity holders of the Company 795,284 889,094

Minority interests 271,433 104,923

1,066,717 994,017

Earnings per share (in Rupiah) 13

- basic 550 671

- diluted 550 671

CONSOLIDATED INCOME STATEMENT for the fi nancial year ended 31 December 2008

The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.


Group CompanyNote 2008 2007 2008 2007

Rp’ million Rp’ million Rp’ million Rp’ million

Non-current assets

Biological assets 14 8,152,865 8,302,497 – – Property, plant and equipment 15 2,963,688 1,945,837 74,272 306

Prepaid land premiums and deferred land rights acquisition costs 16 1,379,286 1,205,772 – –

Goodwill 17 2,994,523 2,957,293 – – Claims for income tax refund 18 58,953 47,018 – – Deferred tax assets 19 239,314 126,539 – – Investment in subsidiary companies 20 – – 8,487,971 8,487,971Loans to a subsidiary company 21 – – 2,259,501 2,259,501Other non-current assets 22 663,430 346,565 863 342

Total non-current assets 16,452,059 14,931,521 10,822,607 10,748,120

Current assets

Inventories 23 910,542 1,175,645 – – Trade and other receivables 24 969,160 851,180 33,790 81,848Prepaid taxes 122,624 151,763 – – Cash and cash equivalents 25 2,408,266 1,701,512 186,243 91,688

Total current assets 4,410,592 3,880,100 220,033 173,536

Total assets 20,862,651 18,811,621 11,042,640 10,921,656

Current liabilities

Trade and other payables and accruals 26 1,042,469 907,690 15,616 29,753 Interest-bearing loans and borrowings 27 2,379,649 4,664,044 – – Income taxes payable 403,852 352,260 130 130

Total current liabilities 3,825,970 5,923,994 15,746 29,883

Non-current liabilities

Interest-bearing loans and borrowings 27 3,876,936 678,727 – – Other payables 28 239,278 70,174 – – Estimated liabilities for employee benefi ts 29 355,372 292,454 – – Deferred tax liabilities 19 1,589,593 2,025,173 – –

Total non-current liabilities 6,061,179 3,066,528 – –

Total liabilities 9,887,149 8,990,522 15,746 29,883

Net assets 10,975,502 9,821,099 11,026,894 10,891,773

Attributable to equity holders of the Company

Share capital 30 3,584,279 3,584,279 10,912,411 10,912,411Treasury shares 30 (29,283) – (29,283) – Reserves 31 4,366,689 3,571,405 143,766 (20,638)

7,921,685 7,155,684 11,026,894 10,891,773 Minority interests 3,053,817 2,665,415 – –

Total equity 10,975,502 9,821,099 11,026,894 10,891,773

BALANCE SHEETS as at 31 December 2008



Attributable to equity holders of the Company

Sharecapital

Treasury shares

Otherreserves

Revenue reserve

Total reserves

Minorityinterests

Totalequity

Rp’ million Rp’ million Rp’ million Rp’ million Rp’ million Rp’ million Rp’ million

At 1 January 2007 26,285 – 94,091 2,674,044 2,768,135 666,867 3,461,287

Realised gain on changes in fair value of available-for-sale investments – – (82,132) – (82,132) (10,120) (92,252)

Foreign currency translation movement – – (3,692) – (3,692) – (3,692)

Net loss recognised directly in equity – – (85,824) – (85,824) (10,120) (95,944)

Net profi t for the fi nancial year – – – 889,094 889,094 104,923 994,017

Total recognised income/(expense) for the fi nancial year – – (85,824) 889,094 803,270 94,803 898,073

Issue of shares pursuant to the reverse acquisition 74,077 – – – – – 74,077

Issue of shares pursuant to share placement 2,487,055 – – – – – 2,487,055

Issue of shares pursuant to Lonsum acquisition 1,092,280 – – – – – 1,092,280

Share issue expenses (95,418) – – – – – (95,418)

Minority interests of acquired subsidiaries – – – – – 1,903,745 1,903,745

Balance at 31 December 2007 3,584,279 – 8,267 3,563,138 3,571,405 2,665,415 9,821,099

Net profi t and total recognised income for the fi nancial year – – – 795,284 795,284 271,433 1,066,717

Purchase of treasury shares – (29,283) – – – (67,913) (97,196)

Dividend payment by subsidiaries – – – – – (40,410) (40,410)

Minority interests of acquired subsidiaries – – – – – 225,292 225,292

Balance at 31 December 2008 3,584,279 (29,283) 8,267 4,358,422 4,366,689 3,053,817 10,975,502

Other reserves comprise capital reserves of subsidiary companies, unrealised gains/losses on investments in available-for-

sale securities and foreign currency translation differences. As at 31 December 2008, there was no unrealised gain/loss from

available-for-sale investments and foreign currency translation.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the fi nancial year ended 31 December 2008


Note 2008 2007


Cash fl ows from operating activities

Profi t before taxation 1,519,075 1,489,221

Adjustments:

Depreciation and amortisation 9 276,781 151,586

Unrealised foreign exchange losses 438,705 80,912

Changes in fair value of long-term receivables – (946)

Gain on disposal of biological assets 7 (1,610) –

Loss arising from changes in fair value of plasma receivables 8, 33(a) 13,344 22,746

Provision for uncollectible plasma receivables 8, 33(a) 23,951 –

Write-off of property, plant and equipment 8 1,468 11,117

Loss/(gain) on disposal of property and equipment 7, 8 1,972 (4,118)

Gain on disposal of available-for-sale investments 7 – (39,315)

Write-off of biological assets 8, 14 387 –

Provision for decline in market value of inventories and obsolescence of inventories 8, 23 24,766 4,212

Write-off of plasma receivables 8, 33(a) 14,451 42,500

Loss/(gain) arising from changes in fair value of biological assets 14 947,226 (201,675)

Changes in provision for asset dismantling costs 28 (2,416) (1,646)

Changes in estimated liability for employee benefi ts 62,822 26,669

Impairment of goodwill 2, 17 4,833 76,337

Financial income 10 (82,411) (75,500)

Financial expenses 11 422,212 89,240

Operating cash fl ow before working capital changes 3,665,556 1,671,340

Changes in working capital

(Increase)/decrease in other non-current assets (24,794) 41,917

Decrease/(increase) in inventories 245,244 (394,566)

Increase in receivables (43,515) (225,558)

Decrease in prepaid taxes 45,933 19,411

Increase in payables 57,266 191,593

Cash fl ows generated from operations 3,945,690 1,304,137

Interest received 82,411 75,500

Interest paid (407,616) (87,691)

Income tax paid (988,411) (301,922)

Net cash fl ows generated from operating activities 2,632,074 990,024

CONSOLIDATED CASH FLOW STATEMENT for the fi nancial year ended 31 December 2008


Note 2008 2007


Cash fl ows from investing activities

Additions to property, plant and equipment 15 (858,859) (270,901)

Acquisition of subsidiaries, net of cash acquired 32 (109,769) (4,788,677)

Proceeds from investments in repurchase contracts 140,685 –

Proceeds from sale of available-for-sale investments – 190,669

Placements in repurchase contracts (143,701) –

Additions to biological assets 14 (742,052) (334,846)

Increase/(decrease) in advances for purchases of equipment 3,226 (261)

Increase in plasma receivables 33(a) (253,338) (109,459)

Proceeds from disposal of property and equipment 916 6,833

Proceeds from disposal of biological assets 8,117 –

Additions to prepaid land premiums and deferred land rights acquisition costs 16 (31,281) (33,496)

Advances for long-term investments 33(h) (141,748) –

Net cash fl ows used in investing activities (2,127,804) (5,340,138)

Cash fl ows from fi nancing activities

Proceeds from interest-bearing loans and borrowings 3,069,304 4,673,202

Repayment of interest-bearing loans and borrowings (2,771,080) (1,332,569)

Net proceeds/(payments) of amounts due to related parties 19,476 (2,981)

Dividend payments by subsidiaries to minority shareholders (40,410) –

Purchase of treasury shares (74,806) –

Proceeds arising from increase in share capital – 2,391,637

Net cash fl ows generated from fi nancing activities 202,484 5,729,289

Net increase in cash and cash equivalents 706,754 1,379,175

Cash and cash equivalents at the beginning of the fi nancial year 1,701,512 322,337

Cash and cash equivalents at the end of the fi nancial year 25 2,408,266 1,701,512


CONSOLIDATED CASH FLOW STATEMENT for the fi nancial year ended 31 December 2008


NOTES TO THE FINANCIAL STATEMENTS 31 December 2008

1. General

Indofood Agri Resources Ltd. (the “Company”) is a public limited liability company incorporated and domiciled in Singapore. With effect from 23 January 2007, the Company changed its name from CityAxis Holdings Limited to Indofood Agri Resources Ltd.. The registered offi ce and principal place of business of the Company is located at 8 Eu Tong Sen Street, #16-96/97 The Central, Singapore 059818.

The Group is a vertically-integrated agribusiness group, with its principal activities comprising oil palm seed breeding, cultivation of oil palm plantations, production and refi ning of crude palm oil (“CPO”) and crude coconut oil (“CNO”), cultivation of rubber plantations and marketing and selling these end products. The Group is also involved in managing and cultivating small portions of sugar cane, cocoa, coconut and tea plantations, and marketing and selling the related products.

PT Indofood Sukses Makmur Tbk (“PT ISM”), incorporated in Indonesia, and First Pacifi c Company Limited, incorporated in Hong Kong, are the penultimate and ultimate parent company of the Group, respectively. The immediate holding company is Indofood Singapore Holdings Pte Ltd, incorporated in Singapore.

The signifi cant transaction that changed the Group’s structure and the Company’s shareholding structure is described in Note 2.

2. Basis of presentation of the consolidated fi nancial statements

In January 2007, the Company completed the acquisition of the entire share capital of Indofood Oil & Fats Pte. Ltd. (“IOFPL”), a company incorporated and domiciled in Singapore pursuant to the sale and purchase agreement dated 23 August 2006. The purchase consideration of S$392,691,880 was satisfi ed by the allotment and issue of 9,982,000,000 new shares in the capital of the Company at S$0.03934 per share.

The acquisition of IOFPL has been accounted for in the consolidated fi nancial statements of the Company as a reverse acquisition, as described in FRS103-Business Combinations. Hence, for accounting purposes, IOFPL is deemed to be the “acquirer” and the Company as the “legal parent”.

In the reverse acquisition, the cost of the business combination is deemed to have been incurred by IOFPL in the form of equity instruments issued to the owners of the Company. Accordingly, the deemed cost of acquisition has been determined at Rp99.8 billion using the fair value of S$1.25 per share on the 13,500,000 issued consolidated shares of the Company before the acquisition. The resulting goodwill of Rp76.3 billion, being the difference between the deemed cost of acquisition and fair value of the Company’s net assets at the reverse acquisition date, has been impaired in full and included in the income statement as there are no future economic benefi ts attached to the goodwill.

The consolidated fi nancial statements of the Company for the year ended 31 December 2008 and 2007 have been prepared and presented as a continuation of the business of IOFPL and its subsidiary companies. As such:

(a) the assets and liabilities of the IOFPL group have been recognised and measured in the consolidated fi nancial statements at their pre-combination carrying amounts;

(b) the retained earnings and other equity balances recognised in the consolidated fi nancial statements are the retained earnings and other equity balances of IOFPL group immediately before the business combination;

(c) the amount recognised as issued equity instruments in the consolidated fi nancial statements has been determined by adding the deemed cost of the reverse acquisition to the issued equity of IOFPL immediately before the business combination. However, the equity structure appearing in the consolidated fi nancial statements (i.e. the number and type of equity instruments issued) is the equity structure of the Company.

As the Company ceased its existing businesses and disposed all its subsidiary companies prior to the reverse acquisition date, the Company (being the deemed acquiree) did not have any signifi cant contribution to the results of the Group for the fi nancial year ended 31 December 2007.



3. Summary of signifi cant accounting policies

3.1 Basis of preparation

The consolidated fi nancial statements of the Group and the balance sheet of the Company has been prepared in accordance

with Singapore Financial Reporting Standards (“FRS”).

The fi nancial statements have been prepared on the historical cost basis, except for (a) biological assets and available-for-

sale investments which are stated at fair values; and (b) receivables and payables arising from future commodity contracts

transactions which are determined based on the quoted market prices of the commodities.

The fi nancial statements are presented in Indonesian Rupiah (“Rp”) and all values are rounded to the nearest million (Rp’

million) except when otherwise indicated.

The accounting policies have been consistently applied by the Company and the Group and are consistent with those used

in the previous fi nancial year, except for the changes stated in Note 3.2.

3.2 Changes in accounting policies

(i) Adoption of new and revised FRS

With effect from 1 January 2008, the Group has adopted all the new and revised FRS and INT FRS that are mandatory

for fi nancial years beginning on or after 1 January 2008. The adoption of these FRS and INT FRS has no signifi cant

impact to the Group.

(ii) Future changes in accounting policies

The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:

Effective forannual periods

beginning on or after

FRS 1 : Presentation of Financial Statements– Revised presentation– Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation

1 January 2009

FRS 23 : Borrowing Costs 1 January 2009

FRS 27 : Consolidation and Separate Financial Statements – Amendments Relating to Cost of an Investment in a Subsidiary, Jointly-controlled Entity or Associate

1 January 2009

FRS 32 : Financial Instruments: Presentation – Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation

1 January 2009

FRS 39 : Financial Instruments: Recognition and Measurement – Amendments relating to eligible hedged items

1 July 2009

FRS 101 : First-time Adoption of Financial Reporting Standards – Amendments Relating to Cost of an Investment in a Subsidiary, Jointly-controlled Entity or Associate

1 January 2009

FRS 102 : Share-based payment – Vesting conditions and cancellations 1 January 2009

FRS 108 : Operating Segments 1 January 2009

INT FRS 113 : Customer Loyalty Programmes 1 July 2008

INT FRS 116 : Hedges of a Net Investment in a Foreign Operation 1 October 2008INT FRS 117 Distribution of Non-cash Assets to Owners 1 July 2009



3. Summary of signifi cant accounting policies (cont’d)

3.2 Changes in accounting policies (cont’d)

(ii) Future changes in accounting policies (cont’d)

The Group expects that the adoption of the above pronouncements will not have a signifi cant impact on the fi nancial statements in the period of initial application, except for FRS 1 and FRS 108 as indicated below:

FRS 1 Presentation of Financial Statements – Revised presentation

The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profi t or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt.

FRS 108 Operating Segments

FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the fi nancial position or fi nancial performance of the Group when implemented in 2009.

3.3 Functional and foreign currency

On completion of the reverse acquisition, management has determined the currency of the primary economic environment in which the Company operates, that is its functional currency, to be Indonesian Rupiah as the Company’s revenue and major expenses are largely infl uenced by Indonesian Rupiah. Accordingly, the Company changed its functional currency from Singapore dollars to Indonesian Rupiah post the reverse acquisition in January 2007. The change in the functional currency did not result in material impact on the fi nancial position or fi nancial result of the Company on the date of the change.

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in equity as foreign currency translation reservein the consolidated balance sheet and recognised in the consolidated income statement on disposal of the subsidiary.

The assets and liabilities of foreign operations are translated into Indonesian Rupiah at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity as foreign currency translation reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing

rate at the balance sheet date.




3.4 Basis of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the

balance sheet date. The fi nancial statements of the subsidiaries used in the preparation of the consolidated fi nancial

statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like

transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses, and profi ts and losses resulting from intra-group transactions

are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue

to be consolidated until the date that such control ceases.

Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the

fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus

costs directly attributable to the acquisition. Identifi able assets acquired and liabilities and contingent liabilities assumed

in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any

minority interest.

Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets,

liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting

policy for goodwill stated below.

Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the

cost of business combination is recognised in the consolidated income statement on the date of acquisition.

Minority interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group. They are

presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are

separately disclosed in the consolidated income statement.

3.5 Transaction with minority shareholders

Minority interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group and are

presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately

from parent shareholders’ equity. Transactions with minority interests are accounted for using the entity concept method,

whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority

interests, the difference between the consideration and book value of the share of the net assets acquired is refl ected as

being a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interests is

recognised directly in equity.

3.6 Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain

benefi ts from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the

issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

In the Company’s separate fi nancial statements, investments in subsidiaries are accounted for at cost less impairment

losses.




3.7 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Subsequent to initial recognition, property, plant

and equipment are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises

its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Such

cost also includes the initial estimation of costs of dismantling and removing the item and restoring the sites of plants on

which they are located, and the cost of replacing part of such property, plant and equipment when that cost is incurred.

Depreciation of an asset begins when it is available for use and is computed on a straight-line method over the estimated

useful lives of the asset as follows:

• Buildings and improvements – 5 to 25 years

• Furniture, fi xtures and offi ce equipment – 4 to 10 years

• Heavy equipment and transportation equipment – 3 to 10 years

• Plant and machinery – 4 to 20 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances

indicate that the carrying value may not be recoverable.

The carrying amount of an item of property, plant and equipment is derecognised upon disposal or when no future economic

benefi ts are expected from its use or disposal. Any gain or loss arising from the derecognition of the asset is included in the

consolidated income statement in the year the asset is derecognised.

The residual values, useful life and depreciation method are reviewed at each fi nancial period to ensure that the amount,

method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the

future economic benefi ts embodied in the items of property, plant and equipment.

The cost of construction-in-progress represents all costs incurred on the construction of the assets. The accumulated costs

will be reclassifi ed to the appropriate property, plant and equipment account when the construction is completed. No

depreciation is provided on construction-in-progress.

Interest on borrowings to fi nance the construction of property, plant and equipment is capitalised during the period of time

that is required to complete and prepare each asset for its intended use.

Repair and maintenance costs are taken to the consolidated income statement during the period in which they are incurred.

The cost of major renovation and restoration is included in the carrying amount of the asset when it is probable that future

economic benefi ts in excess of the originally assessed standard of performance of the existing asset will fl ow to the Group,

and is depreciated over the remaining useful life of the asset.

Assets under fi nance lease are recognised at the lower of the present value of the minimum lease payments and the fair

value of the asset.

3.8 Biological assets

Biological assets, which primarily comprise oil palm and rubber plantations, are stated at fair value less estimated point-

of-sale costs. Gain or loss arising on initial recognition of plantations at fair value less estimated point-of-sale costs and

from the change in fair value less estimated point-of-sale costs of plantations at each reporting date are included in the

consolidated income statement for the period in which they arise.




3.8 Biological assets (cont’d)

The fair value of the plantations is estimated by reference to independent professional valuations using the discounted cash fl ows of the underlying biological assets. The expected cash fl ows from the whole life cycle of the oil palm and rubber plantations is determined using the market prices of the estimated yields of the fresh fruit bunches (“FFB”) and cup lump, respectively, net of maintenance and harvesting costs, and any costs required to bring the oil palm and rubber plantations to maturity. The estimated yields of the oil palm and rubber plantations are dependent on the age of the oil palm and rubber trees, the location of the plantations, soil type and infrastructure. The market price of the FFB is largely dependent on the prevailing market price of the crude palm oil and palm kernel oil.

Oil palm trees have an average life that ranges from 20 to 25 years; with the fi rst 3 to 4 years as immature and the remaining years as mature.

Rubber trees have an average life that ranges from 20 to 25 years with fi rst 5 to 6 years as immature and the remaining years as mature.

3.9 Plasma receivables

Plasma receivables represent mainly the accumulated costs to develop plasma plantations which are currently being fi nanced by banks and self-fi nanced by certain subsidiaries. Upon obtaining fi nancing from the bank, the said advances will be offset against the corresponding funds received from rural cooperatives unit (Koperasi Unit Desa or the “KUD”). For certain plasma plantations, the loans obtained from the bank is under the related subsidiaries’ (acting as nucleus companies) credit facility. When the development of plasma plantation is substantially completed and ready to be transferred or handed-over to plasma farmers, the corresponding investment credit from the bank is also transferred to the plasma farmers. Gain or loss resulting from the difference between the carrying value of the plasma receivables and the corresponding investment credit transferred to the plasma farmers is refl ected in the consolidated income statement for the year.

An allowance for uncollectible plasma receivables is also provided based on the excess of accumulated development costs over the bank or Group’s funding or amounts agreed by the KUD.

3.10 Intangible assets

(a) Goodwill

Goodwill acquired in a business combination is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment testing of goodwill as at 31 December.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (“CGUs”), or groups of CGUs, that are expected to benefi t from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

(i) Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

(ii) Is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format.

A CGU (or group of CGUs) to which goodwill has been allocated are tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. Where the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount, an impairment loss is recognised. Impairment losses recognised for goodwill are not reversed in subsequent periods.




3.10 Intangible assets (cont’d)

(a) Goodwill (cont’d)

Where goodwill forms part of a CGU (or group of CGUs) and part of the operation within that unit is disposed of,

the goodwill associated with the operation disposed of is included in the carrying amount of the operation when

determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured

based on the relative values of the operation disposed of and the portion of the CGU retained.

(b) Negative goodwill

Negative goodwill arising on acquisition represents the excess of the acquirer’s interest in the net fair values of the

identifi able assets, liabilities and contingent liabilities over the cost of acquisition. Any negative goodwill arising on

acquisition is reassessed and the negative goodwill in excess of the net fair value of the identifi able assets, liabilities and

contingent liabilities is recognised immediately in the consolidated income statement on the date of acquisition.

(c) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired

in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible

assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives

of intangible assets are assessed to be either fi nite or indefi nite.

Intangible assets with fi nite lives are amortised on a straight-line basis over the estimated economic useful lives and

assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation

period and the amortisation method are reviewed at least at each fi nancial year-end. The amortisation expense

on intangible assets with fi nite lives is recognised in the consolidated income statement through each line item

according to the function.

Intangible assets with indefi nite useful lives are tested for impairment annually or more frequently if the events or

changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating

unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefi nite life is

reviewed annually to determine whether the useful life assessment continues to be supportable.

(d) Research and development costs

Research costs are expensed as incurred.

An intangible asset arising from development expenditure on an individual project is recognised only when the Group

can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale,

its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefi ts,

the availability of resources to complete and the ability to measure reliably the expenditure during the development.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more

frequently when an indication of impairment arises during the reporting year. Upon completion, the development

costs is amortised over the estimated useful life of the related intangible asset and assessed for impairment whenever

there is an indication that the intangible asset may be impaired.

Gain or loss arising from derecognition of an intangible asset is measured as the difference between the net disposal

proceeds and the carrying amount of the asset and is recognised in the consolidated income statement when the

asset is derecognised.




3.11 Impairment of non-fi nancial assets

The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any

such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefi nite useful life,

an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes

an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in

use and is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent

of those from other assets or groups of assets. In assessing value in use, the estimated future cash fl ows are discounted to

their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the

risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered

impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the

consolidated income statement as “impairment losses”.

An assessment is made at each annual reporting period as to whether there is any indication that previously recognised

impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication

exists, the recoverable amount is estimated. A previously recognised impairment loss for an asset other than goodwill is

reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the

last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable

amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation,

had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the

consolidated income statement. After such a reversal, the depreciation charge is adjusted in future periods to allocate the

asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

The Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.

3.12 Financial assets/liabilities

Financial assets within the scope of FRS 39 are classifi ed as either fi nancial assets at fair value through profi t or loss, loans

and receivables, held-to-maturity investments, or available-for-sale fi nancial assets, as appropriate. Financial assets are

recognised on the consolidated balance sheet when, and only when, the Group becomes a party to the contractual

provisions of the fi nancial instrument.

When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at fair

value through profi t or loss, directly attributable transaction costs. The Group determines the classifi cation of its fi nancial

assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each fi nancial year-

end.

All regular way purchases and sales of fi nancial assets are recognised on the trade date i.e. the date that the Group commits

to purchase the asset. Regular way purchases or sales are purchases or sales of fi nancial assets that require delivery of assets

within the period generally established by regulation or convention in the marketplace concerned.

(a) Financial assets at fair value through profi t or loss

Financial assets classifi ed as held for trading are included in the category “fi nancial assets at fair value through profi t

or loss”. Financial assets are classifi ed as held for trading if they are acquired for the purpose of selling in the near

term. Derivative fi nancial instruments are also classifi ed as held for trading unless they are designated as effective

hedging instruments or a fi nancial guarantee contract. Gains or losses on investments held for trading are recognised

in the consolidated income statement.




3.12 Financial assets/liabilities (cont’d)

(a) Financial assets at fair value through profi t or loss (cont’d)

Financial assets may be designated at initial recognition as at fair value through profi t or loss if the following criteria

are met :

(i) the designation eliminates or signifi cantly reduces the inconsistent treatment that would otherwise arise from

measuring the assets or recognising gains or losses on them on a different basis; or

(ii) the assets are part of a group of fi nancial assets which are managed and their performance is evaluated on a fair

value basis, in accordance with a documented risk management strategy; or

(iii) the fi nancial asset contains an embedded derivative that would need to be separately recorded.

(b) Loans and receivables

Non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market are

classifi ed as loans and receivables. Such assets are carried at amortised cost using the effective interest method. Gains

and losses are recognised in the consolidated income statement when the loans and receivables are derecognised or

impaired, as well as through the amortisation process.

(c) Available-for-sale investments

Available-for-sale investments are those non-derivative fi nancial assets that are designated as available-for-sale or are

not classifi ed in any of the three preceding categories. After initial recognition, available-for sale fi nancial assets are

measured at fair value with gains or losses being recognised in Other Reserves until the investment is derecognised

or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in

equity is included in the consolidated income statement.

Interest earned on the investments is reported as interest income using the effective interest rate. Dividends earned on

investments are recognised in the consolidated income statement when the right of payment has been established.

The fair value of investments that are actively traded in organised fi nancial markets is determined by reference to the

relevant quoted market bid prices at the close of business on the balance sheet date. For investments where there

is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s

length market transactions; reference to the current market value of another instrument, which is substantially the

same; discounted cash fl ow analysis and option pricing models.

Investments in equity and debt instruments and the related advances for the said investments that do not have

quoted market prices in an active market are carried at cost as either (i) carrying amounts approximate their fair values;

or, (ii) their fair values cannot be reliably measured.

(d) Financial liabilities

The Group recognises a fi nancial liability on its consolidated balance sheet when, and only when, it becomes a party

to the contractual provisions of the instrument. Such a fi nancial liability is initially recognised at its fair value plus

directly attributable transaction cost.

After initial recognition, fi nancial liabilities are carried at costs or notional amounts as either (1) their carrying amounts approximate their fair values; or, (2) they are re-priced frequently, except for trade payables arising from future commodity contract transactions which are determined based on quoted market prices of the commodities.




3.12 Financial assets/liabilities (cont’d)

(d) Financial liabilities (cont’d)

Financial liabilities may be designated at initial recognition as at fair value through profi t or loss if the following criteria

are met :

(i) the designation eliminates or signifi cantly reduces the inconsistent treatment that would otherwise arise from

measuring the liabilities or recognising gains or losses on them on a different basis;

(ii) the liabilities are part of a group of fi nancial liabilities which are managed and their performance is evaluated

on a fair value basis in accordance with a documented risk management strategy; or

(iii) the fi nancial liability contains an embedded derivative that would need to be separately recorded.

3.13 Derivative fi nancial instruments

Future commodity contracts

The Group applies the provisions of FRS 39, “Financial Instruments: Recognition and Measurement”. FRS 39 requires that

all of the following conditions to be met for a hedging relationship to qualify as hedge accounting: (a) at the inception of

the hedge there is formal designation and documentation of the hedging relationship and the Group’s risk management

objective and strategy for undertaking the hedge; (b) the hedge is expected to be highly effective in achieving offsetting

changes in fair value or cash fl ows attributable to the hedged risk; (c) for cash fl ow hedges, a forecast transaction that is

the subject of the hedge must be highly probable and must present an exposure to variations in cash fl ows that could

ultimately affect profi t or loss; (d) the effectiveness of the hedge can be reliably measured; and (e) the hedge is assessed

on an ongoing basis and determined actually to have been highly effective throughout the fi nancial reporting periods for

which the hedge was designated.

The related receivables and payables arising from the above transaction are presented in the consolidated balance sheet as

regular fi nancial instruments and are carried at fair values based on the quoted market prices of the related commodity.

3.14 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and in banks, and short term deposits with an original maturity of 3

months or less at the time of placements and not restricted as to use.

Cash and cash equivalents carried in the consolidated balance sheet are classifi ed and accounted for as loans and receivables

under FRS 39. The accounting policy for this category of fi nancial assets is stated in Note 3.12.

3.15 Trade and other receivables

Trade and other receivables are classifi ed and accounted for as loans and receivables under FRS 39. The accounting policy

for this category of fi nancial assets is stated in Note 3.12.

An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect

the debt. Bad debts are written off when identifi ed. Further details on the accounting policy for impairment of fi nancial

assets are stated in Note 3.16.




3.16 Impairment of fi nancial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset or group of

fi nancial assets is impaired.

(a) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried

at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the

asset’s carrying amount and the present value of estimated future cash fl ows (excluding future credit losses that have

not been incurred) discounted at the fi nancial asset’s original effective interest rate (that is the effective interest rate

computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of

an allowance account. The amount of the loss is recognised in the consolidated income statement.

In relation to trade receivables, impairment loss is recognised when there is objective evidence (such as the probability

of insolvency or signifi cant fi nancial diffi culties of the debtor) that the Group will not be able to collect all the amounts

due under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of

an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively

to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.

Any subsequent reversal of an impairment loss is recognised in the consolidated income statement, to the extent that

the carrying value of the asset does not exceed its amortised cost at the reversal date.

(b) Financial assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair

value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled

by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the

difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at

the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent

periods.

(c) Available-for-sale investments

When changes in the fair value of an available-for-sale investments have been recognised directly in equity, and there

is objective evidence that the asset is impaired, the accumulated losses that had been recognised directly in equity

are removed from equity and recognised in the consolidated income statement even though the fi nancial asset has

not been derecognised. Impairment losses recognised in the consolidated income statement for an investment in an

equity instrument classifi ed as available-for-sale are not reversed through the consolidated income statement.

When, in a subsequent period, the fair value of a debt instrument classifi ed as available-for-sale increases, and such

increase can be objectively related to an event occurring after the impairment loss was recognised in the consolidated

income statement, the impairment loss is reversed, with the amount of the reversal recognised in the consolidated

income statement. Reversals in respect of equity instruments classifi ed as available-for-sale are not recognised in the

consolidated income statement.




3.17 Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is calculated using weighted-average method.

Cost incurred in bringing each product to its present location and condition is accounted for as follows:

Raw materials, goods in transit, spare parts and factory supplies

– purchase cost; and

Finished goods and work in progress

– cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and

the estimated costs necessary to make the sale.

3.18 Trade and other payables

Liabilities for trade and other amounts payable are initially recognised at fair value and subsequently measured at amortised

cost using the effective interest method.

Gains and losses are recognised in the consolidated income statement when the liabilities are derecognised as well as

through the amortisation process.

3.19 Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable

transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised

cost using the effective interest method. Gains and losses are recognised in the consolidated income statement when the

liabilities are derecognised as well as through the amortisation process.

3.20 Borrowing costs

Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly attributable to

the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the

activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are

being incurred. Borrowing costs are capitalised until the assets are ready for their intended use. If the resulting carrying

amount of the asset exceeds its recoverable amount, an impairment loss is recorded.

3.21 Derecognition of fi nancial assets and liabilities

(a) Financial assets

A fi nancial asset (or, where applicable a part of a fi nancial asset or part of a group of similar fi nancial assets) is

derecognised when:

• The contractual rights to receive cash fl ows from the asset have expired;

• The Group retains the contractual rights to receive cash fl ows from the asset, but has assumed an obligation to

pay them in full without material delay to a third party under a “pass-through” arrangement; or

• The Group has transferred its rights to receive cash fl ows from the asset and either (a) has transferred substantially

all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and

rewards of the asset, but has transferred control of the asset.




3.21 Derecognition of fi nancial assets and liabilities (cont’d)

(a) Financial assets (cont’d)

Where the Group has transferred its rights to receive cash fl ows from an asset and has neither transferred nor retained

substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the

extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee

over the transferred asset is measured at the lower of the original carrying amount of the assets and the maximum

amount of consideration that the Group could be required to repay.

On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of (i) the

consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain

or loss that has been recognised directly in equity is recognised in the consolidated income statement.

(b) Financial liabilities

A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the

terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition

of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is

recognised in the consolidated income statement.

3.22 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event,

it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a

reliable estimate can be made of the amount of the obligation.

Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. The provision is

released if it is no longer probable that an outfl ow of resources embodying economic benefi ts will be required to settle the

obligation.

3.23 Employee benefi ts

(a) Defi ned contribution plans

The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has

operations. Contributions to national pension schemes are recognised as an expense in the period in which the

related service is performed.

Certain subsidiaries in the Group have defi ned contribution retirement plans covering all of its qualifi ed permanent

employees. The Group’s contributions to the funds are computed at 10.0% and 7.0% of the basic pensionable income

for staff and non-staff employees, respectively. The related liability arising from the difference between the cumulative

funding since the establishment of the program and the cumulative pension costs charged to the consolidated income

statement during the same period is recognised as estimated liabilities for employee benefi ts in the consolidated

balance sheet.




3.23 Employee benefi ts (cont’d)

(b) Defi ned benefi t plans (cont’d)

The Group also provides additional provisions for employee service entitlements in order to meet the minimum benefi ts required to be paid to qualifi ed employees, as required under the Indonesian Labour Law No.13/2003 (the “Labour Law”). The said additional provisions, which are unfunded, are estimated using actuarial calculations based on the report prepared by an independent fi rm of actuaries.

Actuarial gains or losses are recognised in the consolidated income statement when the net cumulative unrecognised actuarial gains or losses at the end of the previous reporting year exceed 10.0% of the defi ned benefi t obligation at that date. Such gains or losses in excess of the 10.0% corridor are amortised on a straight-line method over the expected average remaining service years of the covered employees.

Past service cost is recognised as an expense on a straight-line basis over the average period until the benefi t becomes vested. To the extent that the benefi t is already vested immediately following the introduction of, or changes to, the employee benefi t program, the Group recognises past service cost immediately.

The related estimated liability for employee benefi ts is the aggregate of the present value of the defi ned benefi t obligations at balance sheet date and unrecognised actuarial gains and losses, less unrecognised past service cost.

3.24 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfi lment of the arrangement is dependent on the use of a specifi c asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies :

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;(b) A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included

in the lease term;(c) There is a change in the determination of whether fulfi lment is dependent on a specifi ed asset; or(d) There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and at the date of renewal or extension period for scenario (b).

(i) As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the consolidated income statement.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Any excess of sales proceeds over the carrying amount of an asset in a sale-and-leaseback transaction is deferred and amortised over the lease term.




3.24 Leases (cont’d)

(i) As lessee (cont’d)

Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(ii) As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classifi ed as

operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of

the leased asset and recognised over the lease term on the same bases as rental income.

(iii) Prepaid land premiums and land use rights

Prepaid land premiums for land lease payments under operating leases are initially stated at cost and subsequently

recognised as an expense in the consolidated income statements on a straight-line basis over the lease terms.

Land right that has a limited useful life and which represent prepaid land premiums is depreciated in a manner that

refl ects the benefi ts to be derived from it, and is presented as Prepaid Land Premiums and Deferred Land Rights

Acquisition Costs in the consolidated balance sheet. Costs associated with the legal transfer or renewal of land

title, such as legal fees, land survey and re-measurement fees, taxes and other related expenses, are deferred and

amortised using the straight-line method over the legal terms of the related land rights.

3.25 Revenue

Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue

can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised:

(a) Sale of goods

Revenue from sales arising from physical delivery of palm based products, copra-based products, edible oils and

other agricultural products is recognised when signifi cant risks and rewards of ownership of goods are transferred to

the buyer, which generally coincide with their delivery and acceptance.

(b) Interest income

Interest income is recognised using the effective interest method, unless collectibility is in doubt.

(c) Rental and storage income

Rental and storage income is recognised on a straight-line basis over the lease terms.

(d) Dividend income

Dividend income is recognised when the right to receive payment is established.




3.26 Taxes

(a) Current tax

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable

is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the consolidated income

statement because it excludes items of income or expense that are taxable or deductible in other years and it further

excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates

that have been enacted or substantively enacted the balance sheet date.

(b) Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the fi nancial

statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for using the

balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences

and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against

which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary

difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets

and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except

where the Group is able to control the reversal of the temporary difference and it is probable that the temporary

difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it

is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that

future taxable income will allow the deferred tax assets to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the

asset realised. Deferred tax is charged or credited to profi t or loss, except when it relates to items charged or credited

directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets

against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the

Group intends to settle its current tax assets and liabilities on a net basis.

(c) Sales tax

Revenues, expenses and assets are recognised net of the amount of Value-Added Tax (“VAT”) except:

• Where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in

which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as

applicable; and

• Receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or

payables in the consolidated balance sheet.




3.27 Related parties

A party is considered to be related to the Group if it possesses the ability (directly or indirectly) to control or exercise

signifi cant infl uence over the operating and fi nancial decisions of the Group or vice-versa and/or subject to common control

or common signifi cant infl uence.

3.28 Segment reporting

A segment is a distinguishable component of the Group that is engaged in providing certain products, or in providing

products within a particular economic environment, which is subject to risks and rewards that are different from those of

other segments.

Segment information is presented in respect of the Group’s business and geographical segments. The primary format,

business segment, is based on the Group’s management and internal reporting structure. Inter-segment pricing, if any, is

determined on an arm’s length basis. Segment revenue, expenses, results, and assets and liabilities include items directly

attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. They are determined

before intra-group balances and intra-group transactions are eliminated. Segment capital expenditure is the total cost

incurred during the period to acquire segment assets that are expected to be used for more than one period.

3.29 Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable

to the issuance of ordinary shares are deducted against share capital.

3.30 Treasury shares

When shares recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity.

Reacquired shares are classifi ed as treasury shares and presented as a deduction from total equity. No gain or loss is

recognised in the income statement on the purchase, sale, issue or cancellation of treasury shares.

3.31 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be

confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the

Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group.

4 Signifi cant accounting estimates and judgements

The preparation of the Group’s fi nancial statements requires management to make judgements, estimates and assumptions

that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities

at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could

require a material adjustment to the carrying amount of the asset or liability affected in the future.

4.1 Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from

those involving estimations, which has the most signifi cant effect on the amounts recognised in the fi nancial statements:



4 Signifi cant accounting estimates and judgements (cont’d)

4.1 Judgements made in applying accounting policies (cont’d)

(a) Classifi cation of fi nancial assets and fi nancial liabilities

The Group determines the classifi cation of certain of assets and liabilities as fi nancial assets and fi nancial liabilities

by judging if they meet the defi nition set out in FRS 32. Accordingly, the fi nancial assets and fi nancial liabilities are

accounted for in accordance with the Group’s accounting policies set out in Note 3.12.

(b) Purchase price allocation and goodwill impairment

Purchase accounting requires extensive use of accounting estimates to allocate the purchase price to the fair market values of the assets and liabilities purchased, including intangible assets and contingent liabilities. Certain business acquisitions of the Group have resulted in goodwill. Under FRS 103, such goodwill is not amortised and is subject to a periodic impairment testing. The carrying amount of the Group’s goodwill as at 31 December 2008 is Rp2,994.5 billion (2007: Rp2,957.3 billion). Further details are disclosed in Note 17.

In determining the fair values of biological assets at the date of business combination, which require the determination of future cash fl ows expected to be generated from the continued use and ultimate disposition of such assets, requires the Group to make estimates and assumptions that can materially affect its consolidated fi nancial information. Future events could cause the Group to conclude that biological assets are impaired. The preparation of estimated future cash fl ows involves signifi cant estimations. While the Group believes that its assumptions are appropriate and reasonable, signifi cant changes in its assumptions may materially affect its assessment of recoverable values and may lead to impairment charge in the future.

Impairment review is performed when certain impairment indication is present. In the case of goodwill, such assets are subject to annual impairment test and whenever there is an indication that such asset may be impaired. Management has to use its judgement in estimating the recoverable value and determining if there is any indication of impairment.

(c) Allowance for doubtful debts

The Group evaluates specifi c accounts where it has information that certain customers are unable to meet their fi nancial obligations. In these cases, the Group uses judgement, based on the best available facts and circumstances, including but not limited to, the length of its relationship with the customer and the customer’s current credit status based on third party credit reports and known market factors, to record specifi c allowance against amount due from such customers to reduce its receivable to the amount the Group expects to collect. These specifi c allowances are re-evaluated and adjusted as additional information received affects the amounts of allowance for doubtful debts. The carrying amount of the Group’s trade receivables before allowance for doubtful debts as at 31 December 2008 is Rp568.0 billion (2007: Rp607.2 billion). Further details are disclosed in Note 24.

(d) Allowance for uncollectible plasma receivables

The Group evaluates the excess of accumulated development costs over the bank’s and Group’s funding on the amount agreed by the plasma farmers. In these cases, the Group uses judgement, based on available facts and circumstances, to record allowance for uncollectible plasma receivables. These provisions are re-evaluated and adjusted as additional information received. The net carrying amount of the Group’s plasma receivables as of 31 December 2008 and 2007 is Rp359.0 billion and Rp207.3 billion, respectively. Further details are disclosed in Note 33(a).

(e) Allowance for unrecoverable advances for purchase of land

The Group evaluates the suffi ciency of allowance for advances for purchase of land based on its assessment over the plot of land rights that the related titles of ownership cannot be transferred to the Group. The net carrying amount of the Group’s advance for purchase of land as of 31 December 2008 is Rp135.2 billion (2007: Rp135.2 billion).




4.2 Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.

(a) Pension and employee benefi ts

The determination of the Group’s obligations and cost for pension and employee benefi ts liability is dependent on its selection of certain assumptions used by independent actuaries in calculating such amounts. Those assumptions include among others, discount rates, future annual salary increase, annual employee turn-over rate, disability rate, retirement age and mortality rate. Actual results that differ from the Group’s assumptions are recognised immediately in the consolidated income statement as and when they occur. While the Group believes that its assumptions are reasonable and appropriate, signifi cant differences in the Group’s actual experience or signifi cant changes in the Group’s assumptions may materially affect its estimated liabilities for pension and employee benefi ts and net employee benefi ts expense. The carrying amount of the Group’s estimated liabilities for employee benefi ts as at 31 December 2008 is Rp355.4 billion (2007: Rp292.5 billion). Further details are given in Note 29.

(b) Depreciation of property, plant and equipment

The cost of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment to be within 3 to 25 years. These are common life expectancies applied in the oil palm, copra and their respective derivatives industries. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The net carrying amount of the Group’s property, plant and equipment as at 31 December 2008 is Rp2,963.7 billion (2007: Rp1,945.8 billion). Further details are disclosed in Note 15.

(c) Biological assets

The Group carries its oil palm and rubber plantations at fair value less estimated point-of-sale costs, which require extensive use of accounting estimates. Signifi cant components of fair value measurement were determined using assumptions including average lives of plantations, period of being immature and mature plantations, yield per hectare and annual discount rates. The amount of changes in fair values would differ if there are changes to the assumptions used. Any changes in fair values of these plantations would affect the Group’s consolidated income statement and equity. The carrying amount of the Group’s biological assets as at 31 December 2008 is Rp8,152.9 billion (2007: Rp8,302.5 billion). Further details are disclosed in Note 14.

(d) Financial assets and liabilities

The Group carries certain fi nancial assets and liabilities at fair values, which requires extensive use of accounting estimates. While signifi cant components of fair value measurement were determined using verifi able objective evidences, the amount of changes in fair values would differ if the Group utilised a different valuation methodology. Any change in fair values of these fi nancial assets and liabilities would affect directly the Group’s consolidated income statement. The carrying amount of receivables under future commodity contracts carried at fair values as at 31 December 2008 is Rp128.6 billion (2007: Rp28.3 billion). The carrying amount of payables under future commodity contracts carried at fair values as at 31 December 2008 is Rp124.7 billion (2007: Rp52.8 billion). Refer to Note 33(b).

(e) Income taxes

Signifi cant judgment is involved in determining provision for income taxes. There are certain transactions and computation for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due.




4.2 Key sources of estimation uncertainty (Cont’d)

(e) Income taxes (Cont’d)

Where the fi nal income tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred income tax in the year in which such decision is made by the taxation authority. The carrying amount of the Group’s tax payables as at 31 December 2008 is Rp403.9 billion (2007:

Rp352.3 billion).

(f) Allowance for inventories

Allowance for inventories is estimated based on the best available facts and circumstances, including but not limited

to, the inventories’ own physical conditions, their market selling prices, estimated costs of completion and estimated

costs to be incurred for their sales. The provisions are re-evaluated and adjusted as additional information received

affects the amount estimated. The carrying amount of the Group’s inventories as at 31 December 2008 is Rp910.5

billion (2007: Rp1,175.6 billion). Refer to Note 23.

5. Revenue

Group

2008 2007


Sale of palm oil based products, edible oils, oil palm seeds and other agricultural products 11,840,499 6,505,642

6. Cost of sales

Group

2008 2007


Raw materials used 4,672,062 3,225,122

Overheads 2,649,413 1,273,419

Depreciation and amortisation 217,496 124,631

Changes in work-in-process and fi nished goods inventories 172,424 (130,741)

7,711,395 4,492,431



7. Other operating income

Group

2008 2007


Sundry sales of oil palm seedlings 16,768 –

Changes in provision for assets dismantling costs (Note 28) 2,416 1,646

Gain on disposal of biological assets 1,610 –

Gain on disposal of available-for-sale investments – 39,315

Gain on disposal of property and equipment – 4,118

Others 34,393 20,060

Total 55,187 65,139

8. Other operating expenses

Group

2008 2007


Net loss on foreign exchange 228,666 71,490

Provision for uncollectible plasma receivables (Note 33(a)) 23,951 –

Changes in fair value of plasma receivables (Note 33(a)) 13,344 22,746

Provision for decline in market value of inventories and obsolescence of inventories (Note 23) 24,766 4,212

Loss on write-off of property, plant and equipment 1,468 11,117

Loss on write-off of biological assets (Note 14) 387 –

Loss on write-off of plasma receivables (Note 33(a)) 14,451 42,500

Loss on future commodity contract transactions 3,158 29,902

Loss on disposal of property and equipment 1,972 –

Others 18,157 16,212

330,320 198,179



9. Profi t from operations

Group

2008 2007


(i) The following items have been included in arriving at profi t from operations:

Charging/(crediting):

Depreciation and amortisation

- Depreciation of property, plant and equipment (Note 15) 225,398 133,652

- Amortisation of prepaid land premiums and deferred land rights acquisition costs (Note 16) 50,817 17,271

- Amortisation of other non-current assets 566 663

Non-audit fees to the auditors of the Company 322 1,891

Research and development costs 29,914 4,601

Operating lease rentals 17,716 5,581

Allowance for doubtful debts (Note 24) 422 2,500

(ii) Employee benefi ts during the fi nancial year included :

- Wages and salaries 700,946 296,535

- Other post-employment benefi ts (Note 29) 109,044 42,986

- Contribution to defi ned contribution pension plan 12,161 12,581

- Training and education costs 23,964 19,040

846,115 371,142

10. Financial income

Group

2008 2007


Interest income :

- Current accounts and time deposits with fi nancial institutions 61,884 68,436

- Plasma receivables 10,648 6,870

- Repurchase contracts 7,749 –

- Other receivables from a majority shareholder 302 –

- Others 1,828 194

Total 82,411 75,500



11. Financial expenses

Group

2008 2007


Interest expense :

- Bank loans 411,199 87,431

- Bank charges 10,120 601

- Finance leases 596 214

- Due to parent company – 832

- Others 297 162

Total 422,212 89,240

12. Income tax

The major components of income tax expense for the years ended 31 December 2008 and 2007 are as follows:

Group

2008 2007


Income tax in respect of profi t for the year:

- current income tax 1,040,002 487,247

- deferred income tax (614,334) 1,281

425,668 488,528

Underprovision in respect of prior years:

- current income tax 5,459 1,585

- deferred income tax 21,231 5,091

Tax expense recognised in the income statement 452,358 495,204



12. Income tax (cont’d)

A reconciliation between the profi t before taxation multiplied by the applicable tax rate and the tax expense is as follows:

Group

2008 2007


Profi t before taxation as per consolidated income statement 1,519,075 1,489,221

Tax expense at the applicable tax rates 456,084 469,031

Non-taxable income (7,374) (35,860)

Non-deductible expenses 210,705 55,357

Effect of tax rate reduction (233,747) –

Underprovision in respect of prior years 26,690 6,676

Tax expense recognised in the income statement 452,358 495,204

Companies in Indonesia and Singapore are generally subject to progressive tax rates up to a maximum of 30.0% and 18%

(2007 : 30% and 18%) respectively.

13. Earnings per share

Basic earnings per share amounts are calculated by dividing profi t for the year attributable to shareholders of the Company

by the weighted average number of ordinary shares outstanding during the year.

The following refl ects the profi t attributable to the shareholders of the Company and share data used in the basic and

diluted earnings per share computation:

Group

2008 2007


Profi t attributable to the equity holders of the Company 795,284 889,094

Group

2008 2007

Number of shares Number of shares

Weighted average number of ordinary shares 1,446,733,515 1,324,264,301

There were no dilutive potential ordinary shares as at 31 December 2008 and 2007.



14. Biological assets

Biological assets comprise primarily oil palm and rubber plantations with the following movements in their carrying value:

Group

2008 2007


At fair value

At 1 January 8,302,497 2,480,752

Additions 742,052 334,846

Additions from acquired subsidiaries (Note 32) 53,530 5,282,888

Write-off of biological assets (387) –

Disposal of biological assets (6,507) –

Reclassifi cation from property, plant and equipment and other non-current assets 8,906 2,336

9,100,091 8,100,822

(Loss)/gain arising from changes in fair value less estimated point-of-sale costs (947,226) 201,675

At 31 December 8,152,865 8,302,497

Mature oil palm trees produce Fresh Fruit Bunches (“FFB”), which are used to produce Crude Palm Oil (“CPO”) and Palm

Kernel. The fair values of oil palm plantations are determined by an independent valuer using the discounted future cash

fl ows of the underlying plantations. The expected future cash fl ows of the oil palm plantations are determined using the

forecast market price of FFB which is largely dependent on the projected selling prices of CPO and Palm Kennel Oil (“PKO”)

in the market.

Signifi cant assumptions made in determining the fair values of the oil palm plantations are as follows:

(a) oil palm trees have an average life that ranges from 20 to 25 years, with the fi rst 3 to 4 years as immature and the

remaining years as mature;

(b) yield per hectare of oil palm trees is based on a guideline issued by the Indonesian Oil Palm Research Institute (“Pusat

Penelitian Kelapa Sawit”), which varies with the average age of oil palm trees, as well as internal standards and result

of internal assessment of other relevant factors;

(c) the discount rate used in 2008 is 19.33% (2007: 18.10%) per annum (such a discount rate represent the asset specifi c

rates for the Group’s oil palm plantation operations which is applied in the discounted future cash fl ows calculation);

and,

(e) the projected selling price of CPO over the projection period is based on the consensus of reputable independent

forecasting service fi rms for the short-term and on the studies on historical actual CPO price for the last 20 years and

World Bank forecast for the remaining projected period.



14. Biological assets (cont’d)

Mature rubber trees produce “cup lump”. The fair values of rubber plantations are determined using the discounted future

cash fl ows of the underlying plantations. The expected future cash fl ows of the rubber plantations are determined using

the forecast market price of cup lump which are based on the projected selling price of Rubber Smoke Sheet 1 (“RSS1”).

Signifi cant assumptions in determining the fair values of the rubber plantations are as follows:

(a) rubber trees have an average life that ranges from 20 to 25 years, with the fi rst 5 to 6 years as immature and the

remaining years as mature;

(b) discount rate used in 2008 is 18.21% (2007: 17.74%) per annum, (such discount rates represent the asset specifi c rates

for the Group’s rubber plantations operations which is applied in the discounted future cash fl ows calculation); and,

(c) the projected selling price of RSS1 over the projected period is based on the reference issued by the World Bank and

historical selling prices of the Group.

During 2008, the Group’s oil palm plantations produced approximately 2.5 million tonnes (2007 : 1.5 million tonnes) of FFB.

The selling prices for those FFBs ranged between Rp0.5 million/Mt to Rp2.0 million/Mt (2007 : Rp0.8 million/Mt to Rp1.5

million/Mt).

During 2008, the Group’s rubber plantations produced about 28.1 thousand tonnes (2007 : 7.9 thousand tonnes) of cup lump.

The selling prices ranged between Rp7.0 million/Mt to Rp14.3 million/Mt (2007 : Rp7.5 million/Mt to Rp10.1 million/Mt).

An analysis for the areas of mature and immature plantations of each group of biological assets is as follows:

2008 2007

Mature (Ha) Immature (Ha) Mature (Ha) Immature (Ha)

Oil palm 124,169 58,944 118,029 43,427

Rubber 17,873 4,537 18,956 3,048

Others 7,044 761 2,800 722

Capitalisation of borrowing costs

During the year ended 31 December 2008, borrowing costs capitalised to biological assets of the Group in the course

of construction amounted to Rp65.1 billion (2007 : Rp11.5 billion) based on the specifi c identifi cation of the related

borrowings.

Assets pledged as security

Biological assets with a carrying value of Rp4,615.9 billion (2007 : Rp5,144.2 billion) as at 31 December 2008 were used as

collateral for bank facilities granted to the Group (Note 27).



15. Property, plant and equipment

Buildings and improvements

Plant and machinery

Heavyequipmentand trans-portation

equipment

Furniture, fi xtures

and offi ce equipment Total

Rp’ million Rp’ million Rp’ million Rp’ million Rp’ million

Group

Cost

At 1 January 2007 394,556 860,175 185,757 57,001 1,497,489

Additions 132,178 90,462 39,560 8,701 270,901

Additions from acquired

subsidiaries (Note 32) 482,461 367,407 102,708 42,356 994,932

Reclassifi cation (818) (1,790) – 1,819 (789)

Disposals and write-off (3,735) (19,334) (14,355) (871) (38,295)

At 31 December 2007 and 1 January 2008 1,004,642 1,296,920 313,670 109,006 2,724,238

Additions 355,109 411,857 67,686 24,207 858,859

Additions from acquired

subsidiaries (Note 32) 159,262 211,983 20,240 2,579 394,064

Reclassifi cation 1,251 – – – 1,251

Disposals and write-off (10,127) (10,406) (4,905) (3,997) (29,435)

At 31 December 2008 1,510,137 1,910,354 396,691 131,795 3,948,977

Accumulated depreciation

At 1 January 2007 112,545 399,444 111,272 43,615 666,876

Depreciation charge for the year 28,270 64,964 32,991 7,427 133,652

Reclassifi cation 573 – 1,213 550 2,336

Disposals and write-off (1,533) (9,337) (12,825) (768) (24,463)

At 31 December 2007 and 1 January 2008 139,855 455,071 132,651 50,824 778,401

Depreciation charge for the year 52,259 102,289 54,912 15,938 225,398

Reclassifi cation 1,496 2,826 1,281 966 6,569

Disposals and write-off (8,012) (9,688) (4,206) (3,173) (25,079)

At 31 December 2008 185,598 550,498 184,638 64,555 985,289

Net carrying amount

At 31 December 2007 864,787 841,849 181,019 58,182 1,945,837

At 31 December 2008 1,324,539 1,359,856 212,053 67,240 2,963,688



15. Property, plant and equipment (cont’d)

Buildings and improvements

Furniture, fi xtures

and offi ce equipment Total

Rp’ million Rp’ million Rp’ million

Company

Cost

At 1 January 2007 – – –

Additions 193 244 437

At 31 December 2007 and 1 January 2008 193 244 437

Additions 74,049 71 74,120

At 31 December 2008 74,242 315 74,557

Accumulated depreciation

At 1 January 2007 – – –

Additions 68 63 131

At 31 December 2007 and 1 January 2008 68 63 131

Additions 64 90 154

At 31 December 2008 132 153 285

Net carrying amount

At 31 December 2007 125 181 306

At 31 December 2008 74,110 162 74,272

Assets under construction

Property, plant and equipment of the Group at 31 December 2008 include expenditure for building and machinery in the

course of construction amounting to Rp732.8 billion (2007: Rp150.5 billion).

Capitalisation of borrowing costs

During the year ended 31 December 2008, borrowing costs capitalised to property, plant and equipment of the Group

in the course of construction amounted to Rp1.0 billion (2007 : Rp1.2 billion) based on the specifi c identifi cation of the

related borrowings.

Assets pledged as security

Property, plant and equipment with a net book value of Rp1,983.2 billion (2007 : Rp1,149.0 billion) are pledged to secure the

borrowings of the Group as at 31 December 2008 (Note 27).

Assets held under fi nance lease

As of 31 December 2008, the carrying amount of property, plant, and equipment held under fi nance lease is Rp24.5 billion

(2007: Rp8.6 billion).



16. Prepaid land premiums and deferred land right acquisition costs

2008 2007


At 1 January 1,237,383 187,316

Addition from acquired subsidiaries (Note 32) 196,273 1,033,053

Addition during the year 31,281 33,496

Amortisation charge during the year (Note 9) (50,817) (17,271)

Reclassifi cation (1,379) 789

Total 1,412,741 1,237,383

Less : Current portion (presented as part of “Trade and other receivables” account (Note 24)) (33,455) (31,611)

At 31 December 1,379,286 1,205,772

Prepaid land premiums and deferred land rights acquisition costs are in respect of:

(a) Prepaid land premiums representing the cost of land rights owned by the Group which has limited useful lives/terms

ranging from 12 to 43 years and amortized on a straight-line basis.

(b) Deferred land rights acquisition costs representing the cost associated with the legal transfer or renewal for titles of

land rights. Such costs are being deferred and amortised on a straight-line basis over the legal terms of the related

land rights ranging from 10 to 44 years.

17. Goodwill

Group

2008 2007


At 1 January 2,957,293 36,852

Acquisition of new subsidiaries (Note 32) 42,063 2,920,441

Impairment of goodwill (4,833) –

At 31 December 2,994,523 2,957,293

Goodwill arising from business combination was allocated to the following cash-generating units for impairment testing:

Plantation estates of Lonsum 2,909,757 2,909,757

Plantation estates of PT GS 8,055 8,055

Plantation estates of PT MPI 2,395 2,395

Plantation estates of PT SBN 234 234

Plantation estates of PT KGP 29,140 29,140

Plantation estates of PT CNIS 7,712 7,712

Plantation estates of PT LPI 37,230 –

Total 2,994,523 2,957,293



17. Goodwill (cont’d)

For impairment testing purposes, the recoverable value of the goodwill of all plantation estates as at 31 December 2008

was determined based on fair value less cost to sell (FVLCTS) for all the following plantation estates, with the exception of

“Plantation estates of Lonsum”, where the value-in-use calculation was used, based on the following key assumptions:

Cash generating units Goodwill as at 31 December 2008

Discount rate(pre-tax)

Terminal growth rate

Rp’ million

Plantation estates of Lonsum 2,909,757 20.60% 5.00%

Plantation estates of PT GS 8,055 20.60% 5.00%

Plantation estates of PT MPI 2,395 20.60% 5.00%

Plantation estates of PT SBN 234 20.60% 5.00%

Plantation estates of PT KGP 29,140 20.60% 5.00%

Plantation estates of PT CNIS 7,712 20.60% 5.00%

Plantation estates of PT LPI 37,230 20.00% 5.00%

Total 2,994,523

The recoverable value calculation of the above cash generating units applied a discounted cash fl ow model using cash fl ow

projections covering a period of 10 years for plantation estates. The projected price of the CPO is based on the consensus

of reputable forecast service fi rms for the short-term period and the World Bank forecast for the remaining projection

period, while the projected sugar price is determined based on the average retail sales of sugar price in Indonesia for

the past 5 years. The cash fl ows beyond the projected periods are extrapolated using the estimated terminal growth rate

indicated above. The discount rate applied to the cash fl ow projections is derived from the weighted average cost of capital

of the respective cash-generating unit. The terminal growth rate used does not exceed the long term average growth rate

of the industry and country in which the entities operate.

Changes to the assumptions used by the management to determine the recoverable value, in particular the discount and

terminal growth rate, can have signifi cant impact on the results of the assessment. Management is of the opinion that no

reasonably possible change in any of the key assumptions stated above would cause the carrying amount of the goodwill

for each of the cash generating units to materially exceed their recoverable value.

In 2008, Rp4.8 billion goodwill arising from Lonsum’s acquisitions of PT TMP, PT SAS and PT TAS was impaired in full as there

are no future economic benefi ts attached to the goodwill. No impairment loss was required for the fi nancial year ended 31

December 2008 (2007 : Nil) as the recoverable values of the goodwill were in excess of their respective carrying values.

18. Claims for income tax refund

Claims for income tax refund represent advance tax payments made by the Group which can be credited against the

Group’s future corporate income tax payable.



19. Deferred taxation

Consolidated balance sheet Consolidated income statement

as at 31 December year ended 31 December

2008 2007 2008 2007


Deferred tax assets

Property, plant and equipment 26,276 10,694 1,222 (1,707)

Biological assets 21,663 – 4,441 –

Prepaid land premiums and deferred land rights acquisition costs (3,480) (3,435) (597) (347)

Estimated liabilities for employee benefi ts 33,125 30,592 8,648 6,206

Allowance for uncollectible plasma receivables 13,876 5,899 10,750 5,899

Long-term loans to employees 387 444 17 (284)

Deferred gains on sale-and-leaseback transactions 6 (3) 3 – Allowance for decline in market value and obsolescence of inventories 8,234 915 5,596 715

Allowance for doubtful accounts 14 – – (145)

Finance lease (2,810) (299) (1,754) (244)

Accrued employees’ benefi ts 6,887 7,490 (256) 2,399

Deferred inter-company profi ts 43,684 22,815 23,989 21,444

Tax loss carry forward 91,564 51,427 38,983 19,641

Others (112) – – –

Net deferred tax assets reported in the consolidated balance sheet 239,314 126,539

Deferred tax liabilities

Property, plant and equipment (950,574) (956,650) (19,290) 4,553

Biological assets (631,258) (1,049,630) 247,311 (73,163)

Prepaid land premiums and deferred land rights acquisition costs (126,910) (138,494) 21,406 1,501

Plasma receivables 8,057 8,150 (93) 925

Allowance for unrecoverable advance for purchase of land 11,000 13,200 – –

Allowance for decline in market value and obsolescence of inventories

364 663 2,411 129

Allowance for doubtful accounts 1,228 3,192 (639) (59)

Finance lease – – – 13

Accrued employees’ benefi ts 40,567 33,047 10,562 7,481

Estimated liabilities for employee benefi ts 56,647 58,672 9,798 4,872

Tax loss carry forward 906 2,697 (1,668) (6,201)

Others 380 (20) (1,484) –

Net deferred tax liabilities reported in the consolidated balance sheet (1,589,593) (2,025,173)

Effect of tax rate reduction 233,747 –

Deferred income tax expense 593,103 (6,372)



19. Deferred taxation (cont’d)

For purposes of presentation in the consolidated balance sheet, the asset or liability classifi cation of the deferred tax effect

of each of the above temporary difference is determined based on the net deferred tax position (assets or liabilities) on a

per entity basis.

Deferred tax assets and liabilities cover the future tax consequences attributable to differences between the fi nancial and

tax reporting bases of assets and liabilities and the benefi ts of tax loss carryforwards.

At the balance sheet date, the Group has tax losses of approximately Rp447.8 billion (2007: Rp202.7 billion) that are available

for offset against future taxable profi ts. The related deferred tax assets of Rp28.1 billion (2007: Rp9.6 billion) attributable to

such tax losses was not recognized as the recoverability was considered not probable.

The effect of tax rate reduction is due to the reduction in Indonesia tax rates from 30% to 28%.

A deferred tax liability of approximately Rp305.5 billion (2007 : Rp228.2 billion) that could arise upon the distribution of

profi ts of certain subsidiary companies has not been provided for as at 31 December 2008 as the distribution of the profi ts

is controlled and there is currently no intention for the profi ts to be remitted into Singapore.

20. Investment in subsidiary companies

Company

2008 2007


Unquoted equity shares, at cost 8,487,971 8,487,971

Details of acquisition of subsidiaries are included in Note 32.

The subsidiary companies as at 31 December 2008 are:

Name of subsidiariesCountry of

incorporationPercentage of

equity held Principal activities

%

Name (Abbreviated name) Denotes 2008 2007

Held by the Company

Indofood Oil & Fats Pte Ltd (IOFPL)

Singapore 100.00 100.00 Investment holding

PT PP London Sumatra Indonesia Tbk (Lonsum)

Indonesia 8.17 8.03 Business of breeding, planting, milling and selling of oil palm products, rubber and other crops

Held by Indofood Oil & Fats Pte Ltd

PT Salim Ivomas Pratama (PT SIMP)

Indonesia 90.00 90.00 Ownership of oil palm plantations, mills and production of cooking oil, margarine, fats, and other related products



20. Investment in subsidiary companies (cont’d)




%Name (Abbreviated name) Denotes 2008 2007

Held by PT Salim Ivomas Pratama

PT Indoagri Inti Plantation (PT IIP)

Indonesia 89.10 89.10 Investment holding, management services and transportation

Silveron Investments Limited (SIL)

Mauritius 90.00 90.00 Investment holding

PT Kebun Mandiri Sejahtera (PT KMS)

Indonesia 84.10 84.10 Ownership of rubber and oil palm plantations

PT Manggala Batama Perdana (PT MBP) *

Indonesia 90.00 90.00 Non-operating

PT Sarana Inti Pratama (PT SAIN)

Indonesia 63.02 63.02 Investment, research and management and technical services, oil palm seed breeding, and ownership of oil palm plantations

PT Mentari Subur Abadi (PT MSA)

Indonesia 54.00 54.00 Investment and ownership of oil palm plantations

PT Mega Citra Perdana (PT MCP)

Indonesia 54.00 54.00 Investment holding

PT Swadaya Bhakti Negaramas (PT SBN)

Indonesia 54.00 54.00 Ownership of oil palm plantations

PT Mitra Inti Sejati Plantation (PT MISP)

Indonesia 63.00 63.00 Ownership of oil palm plantations and mill

PT PP London Sumatra Indonesia Tbk (Lonsum)

Indonesia 51.66 50.76 Business of breeding, planting, milling and selling of oil palm products, rubber and other crops

PT Lajuperdana Indah (PT LPI)

Indonesia 54.00 – Ownership of sugar cane plantations and sugar production factory

PT Cakra Alam Makmur (PT CAM)

Indonesia 90.00 – Ownership of bulking facilities

PT Hijaupertiwi Indah Plantations (PT HPIP)

Indonesia 90.00 – Ownership of oil palm plantations

PT Cangkul Bumisubur (PT CBS)


Held by PT Indoagri Inti Plantation

PT Gunung Mas Raya (PT GMR)


PT Indriplant (PT IP)









Held by PT Indoagri Inti Plantation

PT Serikat Putra (PT SP)


PT Cibaliung Tunggal Plantations (PT CTP)


Held by Silveron Investments Limited

Asian Synergies Limited (ASL)

British Virgin Islands

90.00 90.00 Investment holding

PT Kebun Ganda Prima (PT KGP)


Held by Asian Synergies Limited

PT Citranusa Intisawit (PT CNIS)


Held by PT Sarana Inti Pratama

PT Riau Agrotama Plantation (PT RAP)


PT Citra Kalbar Sarana (PT CKS)


PT Jake Sarana (PT JS)


Held by PT Mentari Subur Abadi

PT Agro Subur Permai (PT ASP)


Held by PT Mega Citra Perdana

PT Gunta Samba (PT GS)


PT Multi Pacifi c International (PT MPI)


Held by PT Cangkul Bumisubur

PT Pelangi Inti Pertiwi (PT PIP)









Held by PT PP London Sumatra Indonesia Tbk.

PT Multi Agro Kencana Prima (PT MAKP)

Indonesia 47.86 47.03 Rubber mill and trading

Lonsum Singapore Pte. Ltd. (LSP)

Singapore 59.83 58.79 Trading and marketing

PT Tani Musi Persada (PT TMP)


PT Sumatra Agri Sejahtera (PT SAS)


PT Tani Andalas Sejahtera (PT TAS)


Held by Lonsum Singapore Pte. Ltd.

Sumatra Bioscience Pte. Ltd. (SBPL) (formerly Sumatra Investment Corporation Pte. Ltd.) *

Singapore 59.83 58.79 Trading and marketing

* Unaudited management accounts have been used for the preparation of the consolidated fi nancial statements of the Group.

Audited by :Ernst & Young LLP, SingaporePurwantono, Sarwoko & Sandjaja, Indonesia (member fi rm of Ernst & Young Global)Eddy Prakarsa Permana & Siddharta, IndonesiaHendrawinata Gani & Hidayat, Indonesia (member fi rm of Grant Thornton International)Johan Malonda Astika & Rekan, Indonesia (member fi rm of Baker Tilly International)Saw Meng Tee & Co, SingaporeAria & Jonnardi, Indonesia

Acquisition of minority interests

In 2008, the Group’s subsidiary, Lonsum, redeemed from its minority interests 1.76% of its issued shares for a cash consideration of approximately Rp45.5 billion and presented them in its equity as treasury shares. As a result, the Group’s equity interest in Lonsum increased by 1.04% from 58.79% to 59.83%.



21. Loans to a subsidiary company

Company

2008 2007


Loans 2,259,501 2,259,501

The loans to a subsidiary company are unsecured, interest-free and repayable on demand. The amount forms part of the

Company’s net investment in the subsidiary company and is not expected to be settled in the next twelve months.

22. Other non-current assets

Group Company

2008 2007 2008 2007


Advances and deposits 254,906 99,583 863 342

Loans to employees 20,366 14,991 – –

Long-term prepayments 4,078 4,626 – –

Long-term receivables 3,350 2,128 – –

Investments in unquoted shares 1,313 1,313 – –

Plasma receivables (Note 33(a)) 358,993 207,285 – –

Others 20,424 16,639 – –

Total 663,430 346,565 863 342

Advances and deposits

Advances and deposits mainly relate to utility and rental deposits, advance payments for land and minority interest

acquisition, and advance payments made to suppliers and contractors in relation to the purchases of capital equipment,

raw materials and services.

Loans to employees

The Group provides non-interest bearing loans to offi cers and employees subject to certain terms and criteria. Such loans,

which are being collected through monthly salary deductions over fi ve years, from the date of the loan, are carried at

amortised cost using the effective interest method at the discount rate of 11.73% (2007: 9.19%) per annum.



23. Inventories

Group

2008 2007


Raw materials 145,750 433,558

Work in progress 4,599 13,200

Finished goods 330,724 488,996

Spare parts, factory supplies and others 429,469 239,891

Total inventories at the lower of cost and net realisable value 910,542 1,175,645

The amount of provision for decline in market value of inventories and obsolescence of inventories recognised as an expense 24,766 4,212

Inventories of the Group amounting to approximately Rp102.2 billion as at 31 December 2008 (2007 : Rp42.8 billion) has

been pledged as security against the bank borrowings of the Group (Note 27).

24. Trade and other receivables

Group Company

2008 2007 2008 2007


Trade receivables from third parties 474,994 485,069 – –

Trade receivables from related parties 92,957 122,094 – –

Receivables from subsidiary companies – – 19,437 72,822

Receivables under future commodity contracts (Note 33(b)) 128,605 28,281 – –

Repurchase transaction 10,765 – – –

Loans to employee 5,857 4,926 – –

Other receivables from related parties 317 – – –

Others 73,847 35,284 4 11

Less allowance for doubtful debts:

Trade receivables from third parties (422) (2,500) – –

Prepayments 13,378 10,911 284 81

Prepaid land premiums (current portion) (Note 16) 33,455 31,611 – –

Claims for tax refund from tax authority 26,652 21,397 14,065 8,934

Advances to suppliers 108,755 114,107 – –

Total trade and other receivables 969,160 851,180 33,790 81,848



24. Trade and other receivables (cont’d)

The Group determines concentrations of credit risk by monitoring the business sector and country profi le of its trade

receivables. As the Group’s trade receivables relate to a large number of diversifi ed customers, there is no concentration of

credit risk. Trade receivables are non-interest bearing and are generally on 7 day to 45 day terms for credit payments.

The Group’s trade receivables amounting to Rp3.2 billion (2007 : NIL) were used as collateral to secure their investment and

export credit facilities.

Receivables from subsidiary companies are unsecured, interest-free, repayable on demand.

Receivables from future commodity contracts are carried at their respective quoted market prices. Future commodity

contract transactions are further discussed in Note 33(b).

Trade and other receivables are denominated in the following currencies:

Group Company

2008 2007 2008 2007


Indonesian Rupiah 529,346 561,460 – –

US Dollars 397,634 279,882 – –

Singapore Dollars 40,420 9,034 33,790 81,848

Euro 1,757 804 – –

Others 3 – – –

969,160 851,180 33,790 81,848

An analysis of the trade receivables (third parties and related parties) aging schedule is as follows:

Group Company

2008 2007 2008 2007


Current and not impaired 457,590 464,945 – –

Overdue

1 - 30 days 73,958 95,226 – –

31 - 60 days 15,514 16,747 – –

61 - 90 days 11,397 14,204 – –

More than 90 days 9,492 16,041 – –

567,951 607,163 – –

As at 31 December 2008, trade receivables amounting to Rp 422 million (2007 : Rp 2,500 million) were individually impaired

and fully provided for.

Trade receivables that are determined to be impaired at the balance sheet date relate to debtors that are in fi nancial

diffi culties and have defaulted on payments.



24. Trade and other receivables (cont’d)

Advances to suppliers

Advances to suppliers represent advance payments to suppliers and contractors in relation to the following purchases :

Group

2008 2007


Raw materials 26,532 49,960

Factory supplies, spare parts and others 82,223 64,147

108,755 114,107

Advances to suppliers are unsecured, interest-free and obligations of the suppliers are expected to be fulfi lled within the

next twelve months.

25. Cash and cash equivalents

Group Company

2008 2007 2008 2007


Cash at bank and in hand 903,835 435,456 3,181 1,178

Short term deposits 1,504,431 1,266,056 183,062 90,510

Cash and cash equivalents 2,408,266 1,701,512 186,243 91,688



25. Cash and cash equivalents (cont’d)

Cash and cash equivalents are denominated in the following currencies:

Group Company

2008 2007 2008 2007


Indonesian Rupiah 1,052,421 1,171,060 – –

US Dollars 1,166,783 437,296 32 456


2,408,266 1,701,512 186,243 91,688

Cash at bank balances earn interest at fl oating annual interest rates based on daily bank deposit rates. Time deposits are

made for varying periods ranging from one day to three months, depending on the immediate cash requirements of the

Group, and earn interest at effective rates ranging from 0.05% to 14.0% (2007: 0.6% to 11.0%) per annum.

26. Trade and other payables and accruals

Group Company

2008 2007 2008 2007


Trade payables to third parties 386,977 237,601 – –

Trade payables to related parties 4,052 3,139 – –

Other payables to third parties 67,900 65,708 – 18,580

Payables under future commodity contracts (Note 33(b)) 124,716 52,847 – –

Taxes payable 25,793 28,239 – –

Due to minority shareholder of a subsidiary 10,500 69,710 – –

Due to parent company 1,024 1,903 – –

Other payables to related parties 1,188 – – –

Accrued expenses 340,762 341,722 15,616 11,173

Advances from customers 79,557 106,821 – –

1,042,469 907,690 15,616 29,753

Trade payables are normally settled on 7 day to 60 day credit payment terms. The carrying amounts of the Group’s trade

payables, other payables and accruals approximate their fair values. Payables incurred on future commodity contract

transactions are carried at their respective quoted market prices.



26. Trade and other payables and accruals (cont’d)

Trade payables to related parties are non-interest bearing, unsecured and normally settled on 14 day to 60 day terms. Payables to a parent company and minority shareholder of a subsidiary company are unsecured, interest-free and repayable on demand. Other payables to related parties are unsecured and non-interest bearing.

Advances from customers represent advance payments relating to the sale of fi nished goods, are trade in nature, unsecured, interest-free, and the obligations to the customers are expected to be fulfi lled within the next twelve months.

Trade and other payables are denominated in the following currencies :

Group Company2008 2007 2008 2007


Indonesian Rupiah 822,981 718,971 – –

US Dollars 201,719 138,596 – –

Euro 1,174 1,077 – –


Others 808 301 – –

Total payables and accruals 1,042,469 907,690 15,616 29,753

An analysis of the trade payables (third parties and related parties) aging schedule is as follows:

Group Company2008 2007 2008 2007


Current 235,598 165,799 – –

Overdue:

1 - 30 days 66,015 49,578 – –

31 - 60 days 81,574 10,018 – –

61 - 90 days 3,480 8,630 – –

More than 90 days 4,362 6,715 – –

Total 391,029 240,740 – –



27. Interest-bearing loans and borrowings

Group

2008 2007 2008 2007

Effective interest rates Effective interest rates Rp’ million Rp’ million

Current

US Dollar loans 3.4% to 7.6% 5.8% to 8.3% 930,630 1,975,552

Indonesian Rupiah loans 8.9% to 16.3% 2.0% to 14.5% 1,440,412 2,685,219

Finance leases 6.1% to 18.5% 5.3% to 18.5% 8,607 3,273

2,379,649 4,664,044

Non-current

US Dollar loans 3.4% to 7.6% 7.2% to 8.3% 2,177,725 537,258

Indonesian Rupiah loans 5.0% to 14.0% 5.0% to 14.5% 1,692,319 138,035

Finance leases 6.1% to 18.5% 5.3% to 18.5% 6,892 3,434

3,876,936 678,727

Total interest-bearing loans and borrowings 6,256,585 5,342,771

The interest-bearing loans and borrowings refer to credit facilities, short term advances and loans obtained by the subsidiary companies for working capital purposes and acquisition of subsidiary companies.

Finance leases are secured against the respective transportation equipment acquired through the leases.

In respect of the 1-year bridging loans obtained to fi nance the acquisition of Lonsum and are repayable in full in several dates falling in August 2008, these loans were restructured prior to the maturity dates as follows:

(a) several short-term facilities which are secured by corporate guarantees from the Company in accordance with its equity ownership in PT SIMP of 90%, where these facilities will be rolled over or repaid upon maturity in 2009; and

(b) several long-term facilities (Rp1.0 trillion investment loan and US$160.0 million syndicated loan), which are secured by corporate guarantees from the Company in accordance with its equity ownership in PT SIMP of 90% and are repayable through progressive quarterly instalments from 2009 to 2013.

Included in the current portion of the loans as at 31 December 2008 are Indonesian Rupiah loans amounting to Rp690.0 billion (2007 : Rp1,600.0 billion) and US Dollar loans amounting to Rp610.6 billion (2007 : Rp1,785.0 billion), while the non-current portion of the loans are Indonesian Rupiah loans amounting to Rp900.0 billion and US Dollar loans amounting to Rp1,568.2 billion obtained to fi nance the acquisition of a subsidiary in 2007.

Included in the US Dollar loans as at 31 December 2008 are current and non-current loans amounting to Rp320.1 billion (2007 : Rp251.9 billion) and Rp609.5 billion (2007 : Rp537.3 billion) respectively, which was obtained by a subsidiary company in connection with the restructuring of its loans in 2006 on the following terms:

(a) refi nancing facility with maximum credit limit of approximately US$54 million (Tranche A) repayable on each semester through 10 instalments commencing February 2007 until August 2011;

(b) capital reimbursement facility with maximum credit limit of approximately US$81 million (Tranche B) and is repayable on each semester through 7 instalments commencing August 2008 until August 2011; and

(c) working capital facility with maximum credit facility of US$15 million (Tranche C) and is repayable in full in February 2009.



27. Interest-bearing loans and borrowings (cont’d)

Except for Indonesian Rupiah loans amounting to Rp717.5. billion (2007 : Rp565.8 billion) and US Dollar loans amounting to RpNil billion (2007 : Rp28.3 billion), the remaining loans as at 31 December 2008 are secured against corporate guarantees from the Company and a subsidiary company, and against the property, plant and equipment, biological assets, inventories, trade receivables, cash, and land rights certifi cate of certain subsidiary companies in Indonesia.

28. Other payables

Group

2008 2007


Provision for asset dismantling costs 12,916 15,332

Deferred income 376 452

Due to related parties 199,237 54,390

Others 26,749 –

239,278 70,174

The amounts due to related parties are unsecured, interest-free, not expected to be repaid in the next twelve months.

Provision for asset dismantling costs

Provision for asset dismantling costs represents estimated liability of costs to dismantle, remove and restore the sites of

refi nery and margarine plants located in Indonesia. Changes in provision for asset dismantling costs are presented as part

of “Other operating income” in the consolidated income statement as shown in Note 7. The resulting outfl ows of economic

benefi ts of this provision are expected to take place in 2016.

The movement in provision for asset dismantling costs is:

Group

2008 2007


Balance at 1 January 15,332 16,978

Movement for the year (Note 7) (2,416) (1,646)

Balance at 31 December 12,916 15,332



29. Employee benefi ts

The Plantations Division and certain subsidiaries of the Group have defi ned contribution retirement plans covering

substantially all of their qualifi ed permanent employees.

The Group’s contributions to the funds are computed at 10.0% and 7.0% of the basic pensionable income for staff and non-

staff employees, respectively. Total pension cost charged to operations in 2008 is Rp12.2 billion (2007: Rp12.6 billion).

On top of the benefi ts provided under the abovementioned defi ned contribution retirement plans, the Group has also

recorded additional provisions for employee service entitlements in order to meet the minimum benefi ts required to be paid

to the qualifi ed employees, as required under the Labour Law. The amounts of such additional provisions were determined

based on actuarial computations prepared by an independent fi rm of actuaries using the “Projected Unit Credit” method.

As at 31 December 2008, the balance of the related actuarial liability for employee benefi ts amounted to Rp355.4 billion

(2007: Rp292.5 billion), which is presented as “Estimated Liabilities for Employee Benefi ts” in the consolidated balance

sheet.

Group2008 2007

Rp' million Rp' million

Estimated liabilities for employee benefi ts

Present value of employee benefi ts obligation in addition to the defi ned

contribution scheme 483,823 525,936Unrecognised net actuarial losses (103,616) (205,880)Unrecognised past service cost (24,835) (27,602)

Post employment benefi ts liability 355,372 292,454

Changes in the present value of the defi ned benefi t obligation are as follows:

Benefi t obligation at 1 January 292,454 85,460

Current service cost 41,219 15,700

Interest cost on benefi t obligation 51,837 17,894

Amortisation of past service cost 2,768 1,989

Net actuarial loss recognised during the year 13,220 7,403

Addition from acquired subsidiaries (Note 32) 96 180,325

Benefi ts paid (46,222) (16,317)

Benefi t obligation at 31 December 355,372 292,454



29. Employee benefi ts (cont’d)

The principal assumptions used in determining post-employment obligations for the Group’s plan are as follows:

Annual discount rate : 12.0% (2007 : 10.0%)Future annual salary increase : 9.0% (2007 : 9.0%)Retirement age : 55 years (2007 : 55 years) Expected annual return on plan assets : 8.0% (2007 : 8.0%)

The following tables summarise the component of net employee benefi ts expense recognised in the consolidated income

statement:

Group2008 2007


Current service cost 41,219 15,700Interest cost on benefi t obligation 51,837 17,894Net actuarial loss recognised during the year 13,220 7,403Amortisation of past service cost 2,768 1,989

Net employee benefi t expense (Note 9) 109,044 42,986

30. Share capital and treasury shares

Share capital(a)

Group 2008 2007

No. of shares Rp' million No. of shares Rp' million

Balance as at 1 January 1,447,782,830 3,584,279 13,500,000 26,285Issue of shares pursuant to the

reverse acquisition – – 998,200,000 74,077Issue of shares pursuant to share

placement – – 338,000,000 2,487,055Issue of shares pursuant to Lonsum

acquisition – – 98,082,830 1,092,280Share issue expenses – – – (95,418)

Balance as at 31 December 1,447,782,830 3,584,279 1,447,782,830 3,584,279



30. Share capital and treasury shares (cont’d)

(a) Share capital (cont’d)

The movement in the share capital of the Company is as follows:

Company 2008 2007


Balance as at 1 January 1,447,782,830 10,912,411 13,500,000 90,153Capital reduction – – – (39,912)Effect of change in the functional

currency – – – 519Issue of share pursuant to the reverse

acquisition – – 998,200,000 7,377,734Issue of share pursuant to share

placement – – 338,000,000 2,487,055Issue of share pursuant to Lonsum

acquisition – – 98,082,830 1,092,280Share issue expenses – – – (95,418)

Balance as at 31 December 1,447,782,830 10,912,411 1,447,782,830 10,912,411

No professional fees included in the share issue expenses in 2008 (2007 : Rp1.5 billion) paid to the auditors of the

Company.

The holders of ordinary shares are entitled (except treasury shares) to receive dividends as and when declared by the

Company. Each ordinary share carries one vote per share without restriction.

(b) Treasury shares

Group and Company 2008 2007


Balance as at 1 January – – – – Acquired during the fi nancial year 9,000,000 29,283 – –

Balance as at 31 December 9,000,000 29,283 – –



31. Reserves

Company2008 2007


Retained earnings :

Balance at 1 January (20,638) (21,696)Effect of changes in function currency – (125)Profi t for the year 164,404 1,183

Balance at 31 December 143,766 (20,638)

Movement in the reserves of the Group are shown in the Consolidated Statement of Changes in Equity.

There are no dividends declared, proposed or paid in 2007 and 2008.

32. Acquisition of subsidiaries and minority interests

(a) Acquisition of PT Lajuperdana Indah (”PT LPI”)

Pursuant to the Circular dated 20 June 2008, PT SIMP completed the subscription of 187,500 new shares representing

60% of PT LPI’s “enlarged capital” for a cash consideration of Rp375 billion.

(b) Acquisition of PT CAM, PT HPIP and PT CBS and its subsidiary from PT Abadi Cemerlang Sejahtera (“PT ACS”)

On 24 December 2008, PT SIMP completed the acquisition of 100% shareholding interest from PT ACS in PT CAM,

PT HPIP and PT CBS and its subsidiary, PT PIP for a cash consideration of Rp11.7 billion; and in addition, PT SIMP also

settled the outstanding loans of Rp44.6 billion that have been extended by PT ACS to PT CAM, PT HPIP and PT CBS

and its subsidiary until the date of completion.

(c) Acquisition by Lonsum of PT TMP, PT SAS and PT TAS (collectively “PT TST”) from Mr. Agus Suherman

On 22 December 2008, Lonsum completed the acquisition from Mr. Agus Suherman of (i) 99.9% shareholding interest

in PT TMP and PT SAS; and (ii) 90% shareholding interest in PT TAS for cash considerations of Rp8.0 billion; and in

addition, Lonsum also extended Rp40.0 billion loans to PT TMP, PT SAS and PT TAS.



32. Acquisition of subsidiaries (cont’d)

The fair value of the identifi able assets and liabilities at the date of acquisitions were:

Acquisitions in Year 2008 Acquisitions in Year 2007PT LPI,

Hijau Group & PT TST

Rascal Companies (i.e. PT SBN, PT MSA

& PT MCP), PT MISP & LonsumCarrying value Fair value Carrying value Fair value

Rp' million Rp' million Rp' million Rp' million

Property, plant and equipment 330,512 394,064 730,857 994,932Biological assets 56,223 53,530 5,180,806 5,282,888Prepaid land premium and deferred

land rights acquisition costs 40,769 196,273 452,129 1,033,053Deferred tax assets 19,731 798 1,616 1,616Inventories 4,908 4,908 182,478 182,478Trade and other receivables 40,402 40,402 245,159 245,159Cash and cash equivalents 329,528 329,528 482,892 482,892Other assets 48,560 48,560 131,102 131,102

Total identifi able assets 870,633 1,068,063 7,407,039 8,354,120

Interest-bearing loans and borrowings 193,568 193,568 828,183 828,183Deferred tax liabilities – 45,351 1,032,753 1,316,874Other non-current liabilities 195,065 195,065 79,408 79,408Trade and other payables 11,457 11,457 608,076 608,076Employee benefi ts liability 96 96 180,325 180,325

Total identifi able liabilities 400,186 445,537 2,728,745 3,012,866

Minority interests 168,205 225,292 1,667,877 1,903,745

Net assets 302,242 397,234 3,010,417 3,437,509

Goodwill arising from acquisition

(Note 17) 42,063 2,920,441

Total cost of business combination 439,297 6,357,950



32. Acquisition of subsidiaries (cont’d)

Cash outfl ows on acquisition of subsidiaries are as follows:

2008 2007Rp' million Rp' million

Cost of business combination 439,297 6,357,950Less: Shares issued pursuant to Lonsum acquisition – (1,092,280)

Cash paid for the acquisition of subsidiaries 439,297 5,265,670Incidental acquisition costs – 5,899Less: Net cash of the acquired subsidiaries (329,528) (482,892)

Total cash outfl ow 109,769 4,788,677

The aggregate amount of net losses after tax of the Subsidiaries acquired in 2008 since the acquisition dates included in the

Group’s consolidated income statement was Rp39.6 billion (2007: Rp14.2 billion).

It is not practicable to disclose the revenue and profi t before taxation of the Group, as though the acquisitions have taken

place at the beginning of the year, as the information on fair value of biological assets at the beginning of the year was not

available to management.

33. Commitments and contingencies

(a) Plasma Receivables

The Indonesian government requires oil palm plantation companies to develop new plantations together with the

local small landholders. This form of assistance to local small landholders is generally known as the “Plasma Scheme”.

Once developed, the plasma plantations are transferred to the small landholders who then operate the plasma

plantations under the supervision of the developer. In line with this requirement, certain subsidiary companies of the

Group have commitments to develop plantations under the Plasma Scheme. The funding for the development of the

plantations under the Plasma Scheme is provided by the designated banks and/or by the subsidiary companies. This

includes the subsidiary companies providing corporate guarantees for the loans advanced by the banks.

When the plasma plantations start to mature, the plasma farmers are obliged to sell all their harvests to the subsidiary

companies and a portion of the resulting proceeds will be used to repay the loans from the banks or the subsidiary

companies. In situations where the sales proceeds are insuffi cient to meet the repayment obligations to the banks,

the subsidiary companies also provide temporary funding to the plasma farmers to meet the instalment and interest

payments to the banks. The plasma farmers will repay the temporary funding to the subsidiary companies once the

plantations have positive cash fl ows.

The loans advanced by the banks under the Plasma Scheme are secured by the sales proceeds of FFB of the respective

plasma plantations and corporate guarantees from certain subsidiary companies for a maximum amount of Rp588.3

billion (2007: Rp691.0 billion) as at 31 December 2008.

During the fi nancial year, the Group recorded a write-off of plasma receivables of Rp14.5 billion (2007: Rp42.5 billion)

because the recoverable value is lower than the related development cost. In addition, the Group also recorded

an allowance for uncollectible plasma receivables in its consolidated balance sheet amounting to Rp42.0 billion

(2007: Rp18.0 billion) in 2008. Based on a review of the plasma receivables of each project as at 31 December 2008,

management believes that the above-mentioned allowance for uncollectible plasma receivables is suffi cient to cover

possible losses arising from the uncollectible plasma receivables.



33. Commitments and contingencies (cont’d)

(a) Plasma Receivables (cont’d)

The accumulated development costs net of funds received are presented as Plasma receivables in the consolidated

balance sheet and in the Plantations segment. An analysis of the movement in the plasma receivables is as follows:


Balance at 1 January 207,285 72,633 Additions from acquired subsidiaries – 90,439 Loss on write-off of plasma receivables (14,451) (42,500)Changes in fair value of plasma receivables (13,344) (22,746)Provision for uncollectible plasma receivables (23,951) – Conversion to plasma farmers and nucleus (49,884) – Additional net investment 253,338 109,459

Balance at 31 December (Note 22) 358,993 207,285

(b) Future commodity contracts transactions

The Group entered into future commodity contracts with several foreign entities, which are primarily intended to

hedge the exposures on risks of losses arising from the fl uctuations in prices of the commodities sold by a subsidiary

company. These contracts do not qualify and therefore are not designated as hedges for accounting purposes.

The fair values of the related receivables and payables arising from the future commodity contracts determined based

on the relevant quoted market prices at the balance sheet dates are as follows:


Financial assetsNet receivables (Note 24) 128,605 28,281

Financial liabilitiesNet payables (Note 26) 124,716 52,847

There were no contractual amounts to be received and paid from the outstanding contracts as at 31 December 2008

arising from sales of crude coconut oil (2007: Rp183.1 billion).

(c) Commitments to acquire property and equipment

As of 31 December 2008, the Group has several contracts totalling Rp156.8 billion, US$110.1 million and

JP¥15.6 million (2007: Rp270.0 billion) to acquire property and equipment.




(d) Litigation against a subsidiary company

Land at Bitung, North Sulawesi

In February 2001, several individuals fi led a civil claim against a subsidiary company at the District Court of Bitung,

North Sulawesi. The plaintiffs alleged that the subsidiary company was unlawfully controlling land of an area of

approximately 1.2 hectares located in Bitung, North Sulawesi Province, which the individuals claimed to own. The land

has a carrying value of Rp150.0 million as at 31 December 2005. In October 2001, the District Court of Bitung rejected

the plaintiffs’ claim and the plaintiffs appealed against this decision to the High Court of Manado. On appeal, the

High Court of Manado reaffi rmed the decision of the District Court of Bitung. The plaintiffs fi led their appeal against

this decision to the Indonesian Supreme Court in October 2002, which was rejected by the latter’s decision letter

dated 12 April 2005. The copy of the decision letter was received by the subsidiary company on 14 March 2007.

Land at Manado, North Sulawesi

In September 2004, several individuals fi led a civil claim against, inter alia, a subsidiary company at the District Court

of Manado. The individuals alleged that the subsidiary company unlawfully controlled a plot of land of approximately

2,200 square metres located in Manado, North Sulawesi province, which the individuals claimed to own. The plaintiffs’

claim was for compensation of Rp4.7 billion. In July 2006, the District Court of Manado rejected the plaintiffs’ claim. The

plaintiffs appealed against this decision to the High Court of Manado. The High Court rejected the said appeal from

the plaintiffs through its decision letter dated December 14, 2007, the copy of which was received by the subsidiary

company on August 20, 2008.

(e) Operating lease commitments

As Lessee

The Group has entered into commercial leases to lease land and buildings. These non-cancellable operating leases

have remaining lease terms from 1 to 3 years.

Future minimum lease payments under non-cancellable operating leases are as follows:


Within one year 14,134 3,602After one year but not more than fi ve years 4,283 1,328

Net cash outfl ow 18,417 4,930

As Lessor

The Group has entered into a short-term commercial lease on its tanks. Operating lease income recognised in the

consolidated income statement for the fi nancial year ended 31 December 2008 amounted to Rp8.2 billion (2007:

Rp6.9 billion).

(f) Contingent liability

The Company has provided corporate guarantees to banks for certain long term and short term credit facilities

amounting to Rp3,402.0 billion (2007: Rp3,316.9 billion) obtained by a subsidiary company.




(g) Sales commitments

As at 31 December 2008, Lonsum (a subsidiary acquired in 2007) has sales commitments to deliver the following

products to local and overseas customers:

2008 2007(Tonnes) (Tonnes)

Rubber 2,370 1,633Cocoa 933 563Crude palm oil 34,778 72,660Palm kernel 2,907 4,806

Total 40,988 79,662

(h) Commitments for long term investments

Acquisition of minority interests in PT SAIN(i)

Pursuant to the Conditional Sales and Assignment Agreement with Lyminton Pte. Ltd.(“LMT”) (the “LMT

Agreement”) dated 22 November 2008, PT SIMP (a subsidiary of the Group) will acquire the 15,499 shares

representing 29.98% of the total issued share capital of PT SAIN through the acquisition of the exchangeable

bond issued by PT Usahatama Karya Mandiri (“UKM”) which is currently held by LMT, a third party, for a cash

consideration of US$16.4 million.

As agreed in LMT Agreement, 60% of the above cash consideration was paid by PT SIMP to LMT on 28 November

2008 amounting to Rp119.6 billion (equivalent to US$9.8 million), and the remaining 40% will be paid on the

date of completion. On 17 February 2009, the said transaction has been completed, and accordingly, PT SIMP

has increased its shareholding interest in PT SAIN from 70.02% to 100.00%.




(h) Commitments for long term investments (cont’d)

(ii) Acquisition of minority interests in PT MISP

Pursuant to the Conditional Sale and Purchase Agreement with PT Mulia Abadi Lestari (“MAL”) (the “MAL

Agreement”) dated 22 November 2008, PT SIMP will acquire from MAL 28,499,999 shares representing 30% of

the total issued share capital of PT MISP, for a cash considerations of Rp28.5 billion.

In accordance with the MAL Agreement, 60% of the above cash consideration amounting to Rp17.1 billion was

paid by PT SIMP to MAL on 28 November 2008 and the remaining 40% shall be paid on the date of completion.

On 17 February 2009, the said transaction has been completed, and accordingly PT SIMP has increased its

shareholding interest in PT MISP from 70% to 100%.

(iii) Joint venture agreement with Ghanaian Council for Scientifi c and Industrial Research (“CSIR”)

In May 2008, Lonsum entered into a joint venture agreement with CSIR to create a joint venture company

in Ghana, which is to be known as Ghana Sumatra Limited and shall be owned by CSIR and Lonsum at the

respective equity ownership of 55% and 45%. Lonsum has paid advances for such investment amounting to

Rp5.1 billion in the same year.

(i) Construction of a sugar refi nery plant

In 2008, PT LPI entered into Supply Agreement with China CAMC Engineering Co. Ltd., whereby the latter is to supply

machinery and equipment for a sugar refi nery plant with daily processing capacity of 8,000 metric tonnes sugar cane

located at the province of South Sumatra for a total contract value of US$84.3 million and shall be completed no later

than 30 April 2010. PT LPI also entered into Construction Agreement with CAMCE-MPS JO, whereby the latter is to

construct and erect a sugar refi nery plant with total contract value of US$33.7 million and shall be completed no later

than 30 April 2010.



34. Related party disclosures

In addition to those related party information provided elsewhere in the relevant notes to the consolidated fi nancial

information, the following are the signifi cant transactions between the Group and related parties (who are not members of

the Group) that took place during the fi nancial year ended 31 December 2008 and 2007 at the terms agreed between the

parties:

Nature of transactions Year

A

Shareholder

(PT ISM)

Related

companies

Other related

partiesRp' million Rp' million Rp' million

Sales of goods 2008 1,352,947 1,056,377 5,0912007 1,155,713 700,825 10,373

Purchases of merchandise and packaging 2008 5 13,282 – 2007 – 8,550 –

Purchases of services, vehicles and spareparts 2008 – 4 4,210

Pump services 2008 – – 4,1152007 – – 2,872

Interest income 2008 221 – – 2007 – 12,352 –

Interest expense 2008 – – – 2007 370 – –

Rental 2008 565 – 9,9942007 565 – 6,631

Freight expenses 2008 – 47,242 – 2007 – 71,493 –

Insurance 2008 – – 8,3852007 – – 4,104

Since 1996, a related party has granted the Group the right to use a parcel of land located at North Jakarta with an aggregate

area of approximately 19,875 square metres under a lease agreement dated 1 June 1996. The Group made a one-time

payment amounting to Rp11.0 billion in 1996 as prepaid rental for the lease period from June 1996 to June 2016 with no

requirement for further rental payment. The Group amortises the prepaid lease rental over 20 years on a straight line basis

and the annual amortisation charge amounts to Rp550.0 million.



34. Related party disclosures (cont’d)

Compensation of key management personnel of the Group


Salaries and short-term employee benefi ts 49,568 57,343Termination benefi ts 1,518 11,184Post-employment benefi ts 16,423 17,306

Total compensation paid to the key management personnel 67,509 85,833

Comprise amounts paid to :- Directors of the Group 27,992 32,388- Other key management personnel 39,517 53,445

67,509 85,833

35. Financial risk management objectives and policies

The Group’s principal fi nancial instruments, other than derivatives, comprise bank loans and other interest-bearing loans,

and cash and short-term time deposits. The main purpose of these fi nancial instruments is to raise funds for the Group’s

operations. The Group has various other fi nancial assets and liabilities such as trade receivables and trade payables, which

arise directly from its operations.

It is and has been the Group’s policy that no trading in fi nancial instruments shall be undertaken.

The main risks arising from the Group’s fi nancial instruments are interest rate risk, market risk (including currency risk and

commodity price risk), credit risk and liquidity risk. The directors review and agree policies for managing each of these risks,

which are described in more details as follows:

(a) Interest rate risk

The value of the Company’s and the Group’s investments in fi xed rate debentures/debt securities fl uctuate as a result

of changes in market interest rates and the changes in their values are recognised in equity. The Group’s interest rate

risk mainly arises from loans and borrowings for working capital. Borrowings at variable rates expose the Group to fair

value interest rate risk. There are no loans and borrowings of the Group at fi xed interest rates.

For working capital borrowings, the Group may seek to mitigate its interest rate risk by passing it on to its

customers.

Sensitivity analysis for interest rate risk

As at 31 December 2008, based on a sensible simulation, had the interest rates of the loans and borrowings been

50 basis points higher/lower (2007: 50 basis points), ceteris paribus, profi t before taxation for the year ended 31

December 2008 would have been Rp1,701.0 million (2007 : Rp562.0 million) higher/lower accordingly, mainly as a

result of higher/lower interest charge on the loans and borrowings with fl oating interest rates.



35. Financial risk management objectives and policies (cont’d)

(b) Foreign currency risk

The Group’s reporting currency is the Indonesian Rupiah. The Group faces foreign exchange risk as its borrowings,

export sales and the costs of certain key purchases which are either denominated in the United States Dollars or

whose price is signifi cantly infl uenced by their benchmark price movements in foreign currencies (mainly United

States Dollars) as quoted on international markets. To the extent that the revenue and purchases of the Group are

denominated in currencies other than Indonesian Rupiah, and are not evenly matched in terms of quantum and/or

timing, the Group has exposure to foreign currency risk.

The Group does not have any formal hedging policy for foreign exchange exposure. However, in relation to the

matters discussed in the preceding paragraph, the fl uctuations in the exchange rates between Indonesian Rupiah and

United States Dollar provide some degree of natural hedge for the Group’s foreign exchange exposure.

As at 31 December 2008, had the exchange rate of Rupiah against US Dollar depreciated/appreciated by 10%,

ceteris paribus, profi t before taxation for the year ended 31 December 2008 would have been Rp176.6 billion (2007 :

Rp194.8 billion) higher/lower, mainly as a result of foreign exchanges gains/losses on the translation of cash and cash

equivalents, trade receivables, interest-bearing borrowings and trade payables denominated in US Dollar.

(c) Commodity price risk

The Group is exposed to commodity price risk due to certain factors, such as weather, government policy, level

of demand and supply in the market and the global economic environment. Such exposure mainly arises from its

purchase of CPO where the profi t margin on sale of its fi nished products may be affected if the cost of CPO (which

is the main raw material used in the refi nery plants to manufacture cooking oils and fats products) increases and the

Group is unable to pass such cost increases to its customers. In addition, the Group is also subject to fl uctuations

in the selling price of its manufactured CNO and the purchase price of copra (being the raw material used in the

manufacture of CNO).

The Group’s policy is to minimise the risks arising from the fl uctuations in the commodity prices by increasing

self-suffi ciency in CPO for the refi nery operations (through the purchase of CPO from the Group’s own plantations. To

the extent it is unable to do so, the Group may minimise such risks through forward contracts. As such, it may also be

exposed to commodity price risk as changes in fair value of future commodity contracts are recognised directly in the

consolidated income statement.

At 31 December 2008 and 2007, had the commodity prices been 10% higher/lower, ceteris paribus, profi t before tax

in 2008 would have been RpNil billion (2007 : Rp19.7 billion) higher/lower, mainly as a result of higher/lower quoted

market prices of the open position future commodity contracts. There were no future commodity contracts in open

positions as at 31 December 2008.



35. Financial risk management objectives and policies (cont’d)

(d) Credit risk

The Group is exposed to credit risk arising from the credit granted to its customers. To mitigate this risk, it has

policies in place to ensure that sales of products are made only to creditworthy customers with proven track record or

good credit history. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit

verifi cation procedures. For export sales, the Group requires cash against the presentation of documents of title. For

domestic sales, the Group may grant its customers credit terms up to 45 days from the issuance of invoice. The Group

has policies that limit the amount of credit exposure to any particular customer, such as, requiring sub-distributors to

provide bank guarantees. In addition, receivable balances are monitored on an ongoing basis to reduce the Group’s

exposure to bad debts.

When a customer fails to make payment within the credit terms granted, the Group will contact the customer to act

on the overdue receivables. If the customer does not settle the overdue receivable within a reasonable time, the

Group will proceed to commence legal proceedings. Depending on the Group’s assessment, specifi c provisions may

be made if the debt is deemed uncollectible. To mitigate credit risk, the Group will cease the supply of all products

to customers in the event of late payment and/or default.

The Group has no concentration of credit risk. At the balance sheet date, the Group’s maximum exposure to credit

risk is represented by the carrying amount of each class of fi nancial asset in the balance sheet.

(e) Liquidity risk

The Group manages its liquidity profi le to be able to fi nance its capital expenditure and service its maturing debts by

maintaining suffi cient cash and marketable securities, and the availability of funding through an adequate amount of

committed credit facilities.

The Group regularly evaluates its projected and actual cash fl ow information and continuously assesses conditions in

the fi nancial markets for opportunities to pursue fund-raising initiatives. These initiatives may include bank loans and

borrowings and equity market issues.

The table below analyses the maturity profi le of the Group’s fi nancial liabilities based on contractual maturity dates.

The Group TotalWithin1 year

Within1 to 5 years

More than5 years

Rp' million Rp' million Rp' million Rp' million

As at 31 December 2008Long-term interest-bearing loans and

borrowings 3,876,936 – 3,671,629 205,307

Other payables (non-current) 239,278 – 239,278 –Trade and other payables and accruals 1,016,676 1,016,676 – –Short-term interest-bearing loans and

borrowings 2,379,649 2,379,649 – –

As at 31 December 2007Long-term interest-bearing loans and

borrowings 678,727 – 647,001 31,726Other payables (non-current) 70,174 – 70,174 – Trade and other payables and accruals 879,451 879,451 – – Short-term interest-bearing loans and

borrowings 4,664,044 4,664,044 – –



35. Financial risk management objectives and policies (cont'd)

The Company Total

Within

1 year

Within

1 to 5 years

More than

5 yearsRp' million Rp' million Rp' million Rp' million

As at 31 December 2008Trade and other payables and accruals 15,616 15,616 – –

As at 31 December 2007Trade and other payables and accruals 29,753 29,753 – –

36. Fair value of fi nancial instruments

Fair value is defi ned as the amount at which the instrument could be exchanged in a current transaction between

knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are

obtained from quoted market prices, discounted cash fl ow models and option pricing models as appropriate.

The following methods and assumptions are used to estimate the fair value of each class of fi nancial instruments:

(a) Financial instruments carried at fair value or amortised cost

The fair values of the quoted shares are based on their respective market prices. Net receivables and payables arising

from future commodity contracts are stated based on their quoted market prices.

Long-term loans to employees are carried at amortised cost using the effective interest method and the discount

rates used are the current market incremental lending rate for similar types of lending.

(b) Financial instruments with carrying amounts that approximate their fair values

The fair value of cash and cash equivalents, current trade and other receivables, current trade and other payables,

current bank loans and accrued expenses approximate their carrying values due to their short-term nature. The fair

value of non-current borrowings (namely long-term loans and amount due to a related party) approximates their

carrying value as they bear fl oating interest rates and are re-priced frequently.

(c) Financial instruments carried at amounts other than fair values

Investments in other unquoted ordinary shares representing ownership interest of below 20.0% equity ownership are

carried at cost as their fair value cannot be reliably measured.

The non-current loan to a subsidiary company is carried at cost in the Company’s balance sheet as the loan is not

expected to be repaid until the cash fl ow of the subsidiary company permits. Therefore, it is impractical to determine

the fair value of this loan as the timing of future cash fl ow cannot be estimated reliably.



36. Fair value of fi nancial instruments (cont’d)

Set out below is a comparison by category of carrying amounts of all the Group’s and Company’s fi nancial instruments that

are carried in the fi nancial statements:

Classifi cation of fi nancial instruments

The Group

Loans

and receivables

Fair value

through profi t

and loss

Liabilities at

amortised cost

Non-fi nancial

assets/ liabilities TotalRp' million Rp' million Rp' million Rp' million Rp' million

31.12.2008

AssetsBiological assets – – – 8,152,865 8,152,865 Property, plant and equipment – – – 2,963,688 2,963,688Prepaid land premiums

and deferred land rights

acquisition costs – – – 1,379,286 1,379,286Goodwill – – – 2,994,523 2,994,523 Claims for income tax refund – – – 58,953 58,953Deferred tax assets – – – 239,314 239,314Other non-current assets 663,430 – – – 663,430Inventories – – – 910,542 910,542Trade and other receivables 786,920 – – 182,240 969,160Prepaid taxes – – – 122,624 122,624Cash and cash equivalents 2,408,266 – – – 2,408,266

3,858,616 – – 17,004,035 20,862,651

LiabilitiesTrade and other payables and

accruals – – 1,016,676 25,793 1,042,469Interest-bearing loans and

borrowings – – 6,256,585 – 6,256,585 Income tax payable – – – 403,852 403,852Other payables – – 239,278 – 239,278Estimated liabilities for

employee benefi ts – – – 355,372 355,372Deferred tax liabilities – – – 1,589,593 1,589,593

– – 7,512,539 2,374,610 9,887,149





The Group

Loans

and receivables

Fair value

through profi t

and loss

Liabilities at

amortised cost

Non-fi nancial


31.12.2007

AssetsBiological assets – – – 8,302,497 8,302,497 Property, plant and equipment – – – 1,945,837 1,945,837Prepaid land premiums

and deferred land rights

acquisition costs – – – 1,205,772 1,205,772Goodwill – – – 2,957,293 2,957,293 Claims for income tax refund – – – 47,018 47,018Deferred tax assets – – – 126,539 126,539Other non-current assets 346,565 – – – 346,565Inventories – – – 1,175,645 1,175,645Trade and other receivables 673,154 – – 178,026 851,180Prepaid taxes – – – 151,763 151,763Cash and cash equivalents 1,701,512 – – – 1,701,512

2,721,231 – – 16,090,390 18,811,621


accruals – – 879,451 28,239 907,690Interest-bearing loans and

borrowings – – 5,342,771 – 5,342,771 Income tax payable – – – 352,260 352,260Other payables – – 70,174 – 70,174Estimated liabilities for

employee benefi ts – – – 292,454 292,454Deferred tax liabilities – – – 2,025,173 2,025,173

– – 6,292,396 2,698,126 8,990,522





The Company

Loans

and receivables

Fair value

through profi t

and loss

Liabilities at

amortised cost

Non-fi nancial


31.12.2008

AssetsProperty, plant and equipment – – – 74,272 74,272 Investment in subsidiary

companies – – – 8,487,971 8,487,971 Loan to a subsidiary company 2,259,501 – – – 2,259,501Other non-current assets 863 – – – 863Trade and other receivables 19,441 – – 14,349 33,790Cash and cash equivalents 186,243 – – – 186,243

2,466,048 – – 8,576,592 11,042,640

LiabilitiesTrade and other payables and accruals – – 15,616 – 15,616 Income tax payable – – 130 – 130

– – 15,746 – 15,746

The Company

Loans

and receivables

Fair value

through profi t

and loss

Liabilities at

amortised cost

Non-fi nancial


31.12.2007AssetsProperty, plant and equipment – – – 306 306Investment in subsidiary

companies – – – 8,487,971 8,487,971Loan to a subsidiary company 2,259,501 – – – 2,259,501Other non-current assets 342 – – – 342Trade and other receivables 72,833 – – 9,015 81,848Cash and cash equivalents 91,688 – – – 91,688

2,424,364 – – 8,497,292 10.921,656


accruals – – 29,753 – 29,753 Income tax payable – – 130 – 130

– – 29,883 – 29,883



37. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to

support its business and maximize shareholder value.

Certain subsidiary companies are required to comply with loan covenants imposed by their lenders, such as maintaining

the level of existing share capital. This externally imposed requirement has been complied with by the relevant subsidiary

companies for the fi nancial year ended 31 December 2008 and 2007. Additionally, certain subsidiary companies in Indonesia

are required by the new Corporate Law, effective from August 2007, to maintain a non-distributable reserve until it reaches

20% of the issued and paid share capital. This externally imposed capital requirement will be complied by the relevant

subsidiary companies by their next annual general meeting.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To

maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to

shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended

31 December 2008 and 2007.

The Group monitors capital using gearing ratios, by dividing net debt with total equity. The Group’s policy is to keep the

gearing ratio within the range of gearing ratios of leading companies in similar industry in Indonesia in order to secure

access to fi nance at a reasonable cost.


Long-term interest-bearing loans and borrowings 3,876,936 678,727Short-term interest-bearing loans and borrowings 2,379,649 4,664,044

6,256,585 5,342,771Less : Cash and cash equivalents (2,408,266) (1,701,512)

Net debts 3,848,319 3,641,259

Total equity 10,975,502 9,821,099

Gearing ratio 35% 37%



38. Segment information

The primary segment reporting format is determined to be business segments as the Group’s risk and rates of return are

affected predominantly by differences in the products produced. The secondary segment is determined to be geographical

segment based on the geographical location of the Group’s customers. The operating businesses are organised and

managed separately according to the nature of the products provided, with each segment representing a strategic business

unit that offers different products, and serves different markets.

Plantations segment

Plantations segment mainly involves the development and maintenance of oil palm and rubber plantations and other

business activities relating to palm oil and rubber processing, marketing and selling. This segment also involves the

development and maintenance of sugar, cocoa, coconut and tea plantations.

Cooking oil and fats segment

Cooking oil and fats segment mainly involves the production, marketing and selling of cooking oil, margarine, fats and other

related products.

Commodities segment

Commodities segment engages in the trading of CPO and its derivative products and the production, marketing and selling

of CNO and CPO and their derivative products.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third

parties. Segment revenues, segment expenses and segment results include transfers between business segments. Those

transfers are eliminated for purposes of consolidation.

The following table presents revenue and profi t and certain asset and liability information regarding the Group’s business

segments:



38. Segment information (cont’d)

Business segments

Plantations

Cooking oil

and fats Commodity

Others /

eliminations TotalRp' million Rp' million Rp' million Rp' million Rp' million

Year ended 31 December 2008

RevenueSales to external customers 3,751,376 6,545,490 1,543,633 – 11,840,499Inter-segment sales 3,056,216 104 119,167 (3,175,487) –

Total sales 6,807,592 6,545,594 1,662,800 (3,175,487) 11,840,499

Segment results 1,935,183 240,041 50,645 (138,327) 2,087,542

Net fi nance costs (339,801)Net foreign exchange loss (228,666)

Profi t before taxation 1,519,075Tax expense (452,358)

Profi t for the year 1,066,717

Assets and liabilitiesSegment assets 16,090,370 1,770,674 704,408 (995,591) 17,569,861Goodwill 2,994,523 – – – 2,994,523

Deferred tax assets 239,314Claims for income tax refund 58,953

Total assets 20,862,651

Segment liabilities 1,244,205 648,381 762,094 (1,017,561) 1,637,119

Unallocated liabilities 6,256,585Deferred tax liabilities 1,589,593Income taxes payable 403,852

Total liabilities 9,887,149

Other segment informationCapital expenditure 1,466,700 49,761 10,330 74,120 1,600,911Depreciation and amortisation 226,692 36,737 13,198 154 276,781Loss from changes in fair value of

biological assets (947,226) – – – (947,226)Loss on write-off of plasma

receivables 14,451 – – – 14,451Provision for employee benefi ts 93,092 12,762 3,190 – 109,044




Business segments (cont’d)

Plantations

Cooking oil

and fats Commodity

Others/

eliminations TotalRp' million Rp' million Rp' million Rp' million Rp' million


RevenueSales to external customers 947,719 4,402,844 1,155,079 – 6,505,642Inter-segment sales 1,730,138 – 20,109 (1,750,247) –

Total sales 2,677,857 4,402,844 1,175,188 (1,750,247) 6,505,642

Segment results 1,659,917 103,334 16,639 (205,439) 1,574,451

Net fi nance costs (13,740)Net foreign exchange loss (71,490)

Profi t before taxation 1,489,221Tax expense (495,204)

Profi t for the year 994,017

Assets and liabilitiesSegment assets 14,436,320 1,572,605 726,020 (1,054,174) 15,680,771Goodwill 2,957,293 – – – 2,957,293

Deferred tax assets 126,539Claims for income tax refund 47,018

Total assets 18,811,621

Segment liabilities 998,603 835,503 493,604 (1,057,392) 1,270,318

Unallocated liabilities 5,342,771Deferred tax liabilities 2,025,173Income taxes payable 352,260

Total liabilities 8,990,522

Other segment informationCapital expenditure 519,626 65,752 20,162 207 605,747Depreciation and amortisation 101,420 36,509 13,533 124 151,586Gains from changes in fair value of

biological assets 201,675 – – – 201,675Loss on write-off of plasma

receivables 42,500 – – – 42,500Provision for employee benefi ts 27,746 11,839 3,401 – 42,986




Geographical segments

The following table presents sales to customers based on the geographical location of the customers:

Region Revenue Eliminations TotalRp' million Rp' million Rp' million


Domestic - Indonesia 10,926,665 (3,175,487) 7,751,178Export- Asia 2,069,272 – 2,069,272- America 1,026,275 – 1,026,275- Europe 667,200 – 667,200- Africa, Middle East and Oceania 326,574 – 326,574

Segment revenue 15,015,986 (3,175,487) 11,840,499


Domestic - Indonesia 6,427,443 (1,750,247) 4,677,196Export- Asia 701,037 – 701,037- America 223,237 – 223,237- Europe 751,391 – 751,391- Africa, Middle East and Oceania 152,781 – 152,781

Segment revenue 8,255,889 (1,750,247) 6,505,642

The Group’s capital expenditure and segment assets are primarily incurred and located in Indonesia.

39. Comparative fi gures

As part of the harmonization of Lonsum’s accounting policies with its immediate holding company, PT SIMP, with effect

from 2008, Lonsum reclassifi ed its indirect costs from cost of sales to selling and distribution costs, and general and

administrative expenses.

Comparative fi gures of the Group in the fi nancial statements of 2007 have been reclassifi ed to conform to the presentation

of indirect costs in 2008.

The Group2007 2007

As reclassifi ed

As previously

reportedIncome Statement Rp' million Rp' million

Cost of sales 4,492,431 4,541,422 Selling and distribution costs 204,466 203,755 General and administrative expenses 298,082 249,802



40. Events occurring after the balance sheet date

(a) Acquisition of minority interests in PT SAIN (Note 33(h)(i))

This acquisition has been completed on 17 February 2009, PT SIMP increased its shareholding interest in PT SAIN

from 70.02% to 100%.

(b) Acquisition of minority interests in PT MISP (Note 33(h)(ii))

This acquisition has been completed on 17 February 2009, PT SIMP increased its shareholding interest in PT MISP

from 70% to 100%.

41. Authorisation of fi nancial statements for issue

The fi nancial statements for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of

the directors on 6 March 2009.


Interested person transactions (“IPT”) carried out during the fi nancial year ended 31 December 2008 pursuant to the Shareholders’

Mandate obtained under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited by the Group

are as follows:

Aggregate value of all

transactions excluding

IPT conducted under

a shareholders’

mandate pursuant to

Rule 920

Aggregate value of all

IPT conducted under a

shareholders’ mandate

pursuant to Rule 920

(excluding transactions less

than S$100,000)

Name of Interested Person Rp ’billion Rp ’billion USD ’million

PT ISM Group

1. Rental of storage tanks - 0.6 -

2. Sales of cooking oil & margarine - 2,409.3 -

3. Purchase of goods and services - 60.5 -

4. Maximum loan outstanding (inclusive of principle and interest) due from PT ISM during the year

- - 7.0

5. Corporate guarantee in favour of a bank in respect of loan facilities extended to a subsidiary of the Company

• Principal amount outstanding in respect of the bank loan facilities at of end year - - -

• Maximum loan outstanding (inclusive of principal and interest) during the year - - 16.0

Salim Group

1. Sales of crude palm oil (“CPO”) - 5.1 -

2. Sales of seeds - 7.8 -

3. Management Fee - 0.9 -

4. Purchases of services, vehicles and spare parts - 26.2 -

5. Rental of land - 0.5 -

6. Non-interest bearing loans from Salim Group - 199.2 -

7. Interest bearing loans to subsidiaries, which Salim Group has a 40% shareholding interest

• Principal amount outstanding in respect of the interest bearing loans as of end year - 290.9 -

• Maximum loan outstanding (inclusive of principal and interest) during the year - 293.3 -

8. Corporate guarantee, in proportion to the Group’s shareholdings, in favour of banks in respect of loan facilities extended to certain subsidiaries of the Company which Salim Group has a 40% shareholding interest

• Principal amount outstanding in respect of the bank loan facilities at of end year - 314.3 -

• Maximum loan outstanding (inclusive of principal and interest) during the year - 316.9 -

9. Subscription of new shares, representing 60% stake in PT Lajuperdana Indah (approval obtained from the shareholders of the Company at the EGM held on 7 July 2008) 375.0 - -

INTERESTED PERSON TRANSACTIONS


ESTATES LOCATION

No Estate name District Province Description

1 Dolok Batu Bara North Sumatra Oil Palm Estate

2 Gunung Malayu Asahan North Sumatra Oil Palm Estate

3 Begerpang Deli Serdang North Sumatra Oil Palm Estate

4 Sei Merah Deli Serdang North Sumatra Oil Palm Estate

5 Rambong Sialang Serdang Bedagai North Sumatra Oil Palm Estate

6 Sibulan Serdang Bedagai North Sumatra Oil Palm & Rubber Estate

7 Bungara Langkat North Sumatra Oil Palm Estate

8 Turangie Langkat North Sumatra Oil Palm Estate

9 Pulo Rambong Langkat North Sumatra Oil Palm Estate

10 Sei Rumbiya Labuhan Batu North Sumatra Oil Palm & Rubber Estate

11 Bah Bulian Simalungun North Sumatra Oil Palm Estate

12 Bah Lias Simalungun North Sumatra Oil Palm, Cocoa & Coconut Estate

13 Kayangan Rokan Hilir Riau Oil Palm Estate

14 Kencana Rokan Hilir Riau Oil Palm Estate

15 Sungai Dua Rokan Hilir Riau Oil Palm Estate

16 Balam Rokan Hilir Riau Oil Palm Estate

17 Cibaliung Rokan Hilir Riau Oil Palm Estate

18 Sungai Rumbia 1 Rokan Hilir Riau Oil Palm Estate

19 Sungai Rumbia 2 Rokan Hilir Riau Oil Palm Estate

20 Sungai Bangko 1 Rokan Hilir Riau Oil Palm Estate

21 Sungai Bangko 2 Rokan Hilir Riau Oil Palm Estate

22 Lindai Kampar Riau Oil Palm Estate

23 Napal Indragiri Hulu Riau Oil Palm Estate

24 Lubuk Raja Pelalawan Riau Oil Palm Estate

25 Bukit Raja Pelalawan Riau Oil Palm Estate

26 Bukit Hijau Musi Rawas South Sumatra Oil Palm Estate

27 Belani Elok Musi Rawas South Sumatra Oil Palm Estate

28 Batu Cemerlang Musi Rawas South Sumatra Oil Palm Estate

29 Ketapat Bening Musi Rawas South Sumatra Oil Palm Estate

30 Sei Kepayang Musi Rawas South Sumatra Oil Palm Estate

31 Gunung Bais Musi Rawas South Sumatra Oil Palm Estate

32 Riam Indah Musi Rawas South Sumatra Oil Palm Estate

33 Sei Lakitan Musi Rawas South Sumatra Oil Palm Estate

34 Sei Gemang Musi Rawas South Sumatra Oil Palm Estate

35 Terawas Indah Musi Rawas South Sumatra Oil Palm Estate

36 Tulung Gelam Ogan Komering Ilir South Sumatra Rubber Estate

37 Kubu Pakaran Ogan Komering Ilir South Sumatra Rubber Estate

38 Bebah Permata Ogan Komering Ilir South Sumatra Rubber Estate

39 Komering Ogan Komering Ulu Timur South Sumatra Sugar Cane Estate

40 Muara Merang Musi Banyuasin South Sumatra Oil Palm Estate

41 Mangsang Musi Banyuasin South Sumatra Oil Palm Estate

42 Karang Agung Musi Banyuasin South Sumatra Oil Palm Estate

43 Hulu Merang Musi Banyuasin South Sumatra Oil Palm Estate

44 Pulai Gading Musi Banyuasin South Sumatra Oil Palm Estate

45 Bumi Subur Musi Banyuasin South Sumatra Oil Palm Estate

46 Mancang Musi Banyuasin South Sumatra Oil Palm Estate

47 Tirta Agung Musi Banyuasin South Sumatra Oil Palm Estate

48 Budi Tirta Musi Banyuasin South Sumatra Oil Palm Estate

49 Suka Damai Musi Banyuasin South Sumatra Oil Palm Estate


No Estate name District Province Description

50 Sei Punjung Musi Banyuasin South Sumatra Oil Palm Estate

51 Arta Kencana Lahat South Sumatra Oil Palm Estate

52 Kencana Sari Lahat South Sumatra Oil Palm Estate

53 Kertasarie Bandung West Java Tea Estate

54 Treblasala Banyuwangi East Java Cocoa & Coconut Estate

55 Isuy Makmur Kutai Barat East Kalimantan Oil Palm Estate

56 Pahu Makmur Kutai Barat East Kalimantan Oil Palm Estate

57 Mariango Pasir Utara East Kalimantan Oil Palm Estate

58 Penajam Pasir Utara East Kalimantan Rubber Estate

59 Ampanas Kutai Timur East Kalimantan Oil Palm Estate

60 Pengadan Kutai Timur East Kalimantan Oil Palm Estate

61 Elang Kutai Timur East Kalimantan Oil Palm Estate

62 Peridan Kutai Timur East Kalimantan Oil Palm Estate

63 Kerayaan Kutai Timur East Kalimantan Oil Palm Estate

64 Cipta Graha Kutai Timur East Kalimantan Oil Palm Estate

65 Muara Bulan Kutai Timur East Kalimantan Oil Palm Estate

66 Baay Kutai Timur East Kalimantan Oil Palm Estate

67 Manis Kapuas Central Kalimantan Oil Palm Estate

68 Lupak Dalam Kapuas Central Kalimantan Oil Palm Estate

69 Bunga Tanjung Kapuas Central Kalimantan Oil Palm Estate

70 Kedukul Sanggau West Kalimantan Oil Palm Estate

71 Kembayan Sanggau West Kalimantan Oil Palm Estate

72 Nanga Silat Kapuas Hulu West Kalimantan Oil Palm Estate

73 Sepauk Sintang West Kalimantan Oil Palm Estate

74 Sekubang Sintang West Kalimantan Oil Palm Estate

75 Bengkayang Sambas West Kalimantan Oil Palm Estate

76 Balombissie Bulukumba South Sulawesi Rubber Estate

77 Palang Isang Bulukumba South Sulawesi Rubber Estate

78 Pungkol Minahasa North Sulawesi Cocoa & Coconut Estate

ESTATES LOCATION


DISTRIBUTION OF SHAREHOLDINGS

No. of

Size of shareholdings shareholders % No. of shares* %

1 - 999 428 8.34 127,170 0.01

1,000 - 10,000 3,098 60.38 17,134,916 1.19

10,001 - 1,000,000 1,588 30.95 75,527,035 5.25

1,000,001 and above 17 0.33 1,345,993,709 93.55

Total 5,131 100.00 1,438,782,830 100.00

* Based on total number of issued shares, excluding 9,000,000 shares held in treasury.

TWENTY LARGEST SHAREHOLDERS

No. Name No. of shares % **

1 Kim Eng Securities Pte. Ltd. 1,001,941,000 69.64

2 HSBC (Singapore) Nominees Pte Ltd 153,834,472 10.69

3 DBS Nominees Pte Ltd 49,926,726 3.47

4 United Overseas Bank Nominees Pte Ltd 40,260,250 2.80

5 Citibank Nominees Singapore Pte Ltd 34,996,969 2.43

6 Raffl es Nominees Pte Ltd 28,395,331 1.97

7 DB Nominees (S) Pte Ltd 7,320,344 0.51

8 UOB Kay Hian Pte Ltd 5,688,900 0.40

9 Meryani 5,661,000 0.39

10 OCBC Securities Private Ltd 4,623,300 0.32

11 Oversea-Chinese Bank Nominees Pte Ltd 4,112,000 0.29

12 Phillip Securities Pte Ltd 3,567,500 0.25

13 DBS Vickers Securities (S) Pte Ltd 3,079,750 0.21

14 G K Goh Strategic Holdings Pte Ltd 2,250,000 0.16

15 DBSN Services Pte Ltd 2,118,657 0.15

16 Merrill Lynch (Singapore) Pte Ltd 1,524,492 0.11

17 Alpha Securities Pte Ltd 1,440,000 0.10

18 Teo Chuan Keng Sdn Bhd 1,200,000 0.08

19 Irawaty 950,000 0.07

20 Hong Leong Finance Nominees Pte Ltd 881,000 0.06

Total 1,353,771,691 94.10

** Percentage is calculated based on total number of issued shares, excluding 9,000,000 shares held in treasury,

of the Company.

STATISTICS OF SHAREHOLDINGSas at 13 March 2009


Name of substantial shareholder

Direct Interest Deemed InterestNumber of

shares held

Shareholding

%**

Number of

shares held

Shareholding

%**

Indofood Singapore Holdings Pte. Ltd. (“ISHPL”) 998,200,000 69.38% - -

PT Indofood Sukses Makmur Tbk (“PT ISM”) (1) - - 998,200,000 69.38%

Lapu-Lapu Holdings Limited (“Lapu-Lapu”) (2) - - 998,200,000 69.38%

CAB Holdings Limited (“CAB”) (2) - - 998,200,000 69.38%

First Pacifi c Company Limited (“First Pacifi c”) (3) - - 998,200,000 69.38%

First Pacifi c Investments Limited (“FPIL”) (4) 1,125,344 0.08% 998,200,000 69.38%

First Pacifi c Investments (B.V.I.) Limited (“FPIL BVI”) (4) 882,444 0.06% 998,200,000 69.38%

Salerni International Limited (“Salerni”) (5) - - 1,000,207,788 69.52%

Anthoni Salim (6) - - 1,000,207,788 69.52%

Eddy Kusnadi Sariaatmadja (“ES”) (7) 98,082,830 6.82% - -

Notes:

** Percentage is calculated based on total number of issued shares, excluding 9,000,000 shares held in treasury,

of the Company.

(1) PT ISM is a holding company of ISHPL with an interest of approximately 83.84% of the total number of issued shares in

ISHPL. Accordingly, PT ISM is deemed to be interested in the Shares held by ISHPL.

(2) Lapu-Lapu, together with its associate, CAB, collectively own not less than 20% of the issued share capital of PT ISM.

Accordingly, Lapu-Lapu and CAB are deemed to be interested in the Shares held by ISHPL.

(3) First Pacifi c owns 100% of the issued share capital of CAB and Lapu-Lapu respectively. Accordingly, First Pacifi c is deemed

to be interested in the Shares held by ISHPL.

(4) FPIL, together with FPIL BVI, collectively own not less than 20% of the issued share capital of First Pacifi c. Accordingly, FPIL

and FPIL BVI are deemed to be interested in the Shares held by ISHPL.

(5) Salerni owns more than 50% of the issued share capital of FPIL BVI. Accordingly, Salerni is deemed to be interested in the

Shares held by ISHPL, FPIL and FPIL BVI.

(6) Mr Anthoni Salim owns 100% of the issued share capital of Salerni. Accordingly, Mr Anthoni Salim is deemed interested in

the Shares held by ISHPL, FPIL and FPIL BVI.

(7) ES is deemed interested in the Shares held by Palm Capital Pte. Ltd..

PUBLIC FLOAT

Based on the information available to the Company as at 13 March 2009, approximately 23.63% of the issued ordinary shares of

the Company is held by the public and, therefore, the public fl oat requirement under Rule 723 of the Listing Manual issued by the

Singapore Exchange Securities Trading Limited is complied with.

STATISTICS OF SHAREHOLDINGSas at 13 March 2009

LIST OF SUBSTANTIAL SHAREHOLDERS’ INTERESTS


NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at Swissôtel Merchant Court Singapore,

Merchant Court Ballroom, Section B, 20 Merchant Road, Singapore 058281 on Tuesday, 28 April 2009 at 4.00 p.m, to transact the

following business:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Accounts for the year ended 31 December 2008 and the Auditors’ Report

thereon. [Resolution 1]

2. To approve the Directors’ Fees of S$285,000 (2007: S$217,000) for the year ended 31 December 2008. [Resolution 2]

3. To re-elect the following Directors, who retire under Article 117 of the Company’s Articles of Association:-

(a) Mr Mark Julian Wakeford [Resolution 3a]

(b) Mr Gunadi [Resolution 3b]

(c) Mr Lee Kwong Foo Edward [Resolution 3c]

(d) Mr Lim Hock San [Resolution 3d]

4. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fi x their

remuneration. [Resolution 4]

AS SPECIAL BUSINESS

To consider and, if thought fi t, pass the following Resolutions Nos. 5 to 8 as Ordinary Resolutions:

5. That authority be and is hereby given to the directors of the Company to:

(i) (aa) issue shares in the Company (“Shares”) whether by way of rights, bonus or otherwise; and/or

(bb) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to

be issued during the continuance of this authority or thereafter, including but not limited to the creation and

issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the directors may, in

their absolute discretion, deem fi t; and

(ii) issue Shares in pursuance of any Instrument made or granted by the directors while such authority was in force

(notwithstanding that such issue of Shares pursuant to the Instruments may occur after the expiration of the authority

contained in this resolution),

Provided that:

(iii) the aggregate number of the Shares to be issued pursuant to such authority (including the Shares to be issued in

pursuance of Instruments made or granted pursuant to such authority), does not exceed 50% (unless paragraph (v)

below applies) of the total number of issued Shares (as calculated in accordance with paragraph (iv) below), and provided

further that where shareholders of the Company (“Shareholders”) are not given the opportunity to participate in the

same on a pro-rata basis (“non pro-rata basis”), then the Shares to be issued under such circumstances (including the

Shares to be issued in pursuance of Instruments made or granted pursuant to such authority) shall not exceed 20% of

the total number of issued Shares (as calculated in accordance with paragraph (iv) below);

NOTICE OF ANNUAL GENERAL MEETING


(iv) (subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited

(the “SGX-ST”)) for the purpose of determining the aggregate number of the Shares that may be issued under

paragraph (iii) above, the total number of issued Shares shall be based on the total number of issued Shares of the

Company (excluding treasury shares) at the time such authority was conferred, after adjusting for:

(aa) new Shares arising from the conversion or exercise of any convertible securities;

(bb) new Shares arising from exercising share options or the vesting of share awards which are outstanding or

subsisting at the time such authority was conferred; and

(cc) any subsequent bonus issue, consolidation or subdivision of the Shares;

and, in relation to an Instrument, the number of Shares shall be taken to be that number as would have been issued

had the rights therein been fully exercised or effected on the date of the making or granting of the Instrument;

(v) the 50% limit in paragraph (iii) above may be increased to 100% for issues of Shares and/or Instruments by way of a

renounceable rights issue where Shareholders are given the opportunity to participate in the same on a pro-rata basis;

and

(vi) (unless revoked or varied by the Company in general meeting), the authority so conferred shall continue in force until

the conclusion of the next annual general meeting of the Company or the date by which the next annual general

meeting of the Company is required by law to be held, whichever is the earlier.

[Resolution 5]

6. That subject to and pursuant to the share issue mandate in Resolution 5 being obtained, authority be and is hereby given

to the directors of the Company to issue Shares on a non pro-rata basis at a discount of not more than 20% to the weighted

average price of the Shares for trades done on the SGX-ST (calculated in the manner as may be prescribed by the SGX-ST).

[Resolution 6]

7. The proposed renewal of the shareholders’ mandate on Interested Persons Transactions

“That approval be and is hereby given, for the purposes of Chapter 9 of the Listing Manual of the SGX-ST, for the Company,

its subsidiaries and associated companies (if any) that are entities at risk (as the term is used in Chapter 9), or any of them,

to enter into any of the transactions falling within the types of Interested Person Transactions set out in the Company’s

Addendum to Shareholders dated 9 April 2009 (being an addendum to the Annual Report of the Company for the fi nancial

year ended 31 December 2008) (the “Addendum”) with any party who is of the class of Interested Persons described in the

Addendum provided that such transactions are made at arm’s length, on normal commercial terms and are not prejudicial

to the interests of the Company and its minority Shareholders and in accordance with the review procedures for such

Interested Person Transactions as set out in the Addendum (the “Shareholders’ Mandate”).

That the Shareholders’ Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until

the next annual general meeting of the Company is held or is required by law to be held, whichever is the earlier; and

That the Audit Committee of the Company be and is hereby authorized to take such action as it deems proper in respect of

procedures and/or to modify or implement such procedures as may be necessary to take into consideration any amendment

to Chapter 9 of the Listing Manual of the SGX-ST which may be prescribed by the SGX-ST from time to time; and

That the directors of the Company be and are hereby authorised to complete and do all such acts and things (including

executing all such documents as may be required) as they may consider expedient or necessary or in the interests of the

Company to give effect to the Shareholders’ Mandate and / or this Resolution.”

[Resolution 7]



8. The proposed renewal of the Share Purchase Mandate

That:

(a) for the purposes of Sections 76C and 76E of the Companies Act, Chapter 50 (“the Companies Act”), the exercise by

the directors of the Company of all the powers of the Company to purchase or otherwise acquire issued and fully paid

ordinary shares in the Company (the “Shares”) not exceeding in aggregate the Prescribed Limit (as hereinafter defi ned),

at such price or prices as may be determined by the directors of the Company from time to time up to the Maximum Price

(as hereinafter defi ned), whether by way of:

(i) market purchases (each a “Market Purchase”) on the Singapore Exchange Securities Trading Limited (“SGX-

ST”); and/or

(ii) off-market purchases (each an “Off-Market Purchase”) effected otherwise than on the SGX-ST in accordance

with any equal access scheme(s) as may be determined or formulated by the directors of the Company as they

consider fi t, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with all other laws, regulations and rules of the SGX-ST as may for the time being

be applicable, be and is hereby authorised and approved generally and unconditionally (the “Share Purchase

Mandate”);

(b) unless varied or revoked by the Company in general meeting, the authority conferred on the directors of the Company

pursuant to the Share Purchase Mandate in paragraph (a) of this Resolution may be exercised by the directors of the

Company at any time and from time to time during the period commencing from the date of the passing of this

Resolution and expiring on the earlier of:

(i) the date on which the next annual general meeting of the Company is held;

(ii) the date by which the next annual general meeting of the Company is required by law to be held; or

(iii) the date on which purchases or acquisitions of Shares are carried out to the full extent mandated;

(c) in this Resolution:

“Prescribed Limit” means, subject to the Companies Act, 10% of the total number of issued Shares of the

Company (excluding any Shares which are held as treasury shares) as at the date of the passing of this Resolution;

and

“Maximum Price”, in relation to a Share to be purchased, means an amount (excluding brokerage, stamp duties,

applicable goods and services tax and other related expenses) not exceeding:

(i) in the case of a Market Purchase, 105% of the Average Closing Price (as defi ned hereinafter); and

(ii) in the case of an Off-Market Purchase, 110% of the Average Closing Price (as defi ned hereinafter),



where:

“Average Closing Price” means the average of the Closing Market Prices of the Shares over the last fi ve Market

Days on the SGX-ST, on which transactions in the Shares were recorded, immediately preceding the day of

the Market Purchase or, as the case may be, the date of the making of the offer pursuant to the Off-Market

Purchase, and deemed to be adjusted for any corporate action that occurs after such fi ve-Market Day period;

“Closing Market Price” means the last dealt price for a Share transacted through the SGX-ST’s Quest-ST system as

shown in any publication of the SGX-ST or other sources;

“Date of the making of the offer” means the day on which the Company announces its intention to make an offer for

the purchase or acquisition of Shares from shareholders of the Company, stating the purchase price (which shall not

be more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the

equal access scheme for effecting the Off-Market Purchase; and

“Market Day” means a day on which the SGX-ST is open for trading in securities; and

(d) the directors of the Company be and are hereby authorised to complete and do all such acts and things (including

executing such documents as may be required) as they may consider expedient or necessary to give effect to the

transactions contemplated by this Resolution.

[Resolution 8]

9. To transact any other business.

By Order of the Board

MAK MEI YOOK

LEE SIEW JEE, JENNIFER

Company Secretaries

Singapore

Date: 9 April 2009



Note:

A member is entitled to appoint a proxy to attend and vote in his place. A proxy need not be a Member of the Company. Members

wishing to vote by proxy at the Meeting may use the proxy form enclosed. To be valid, the completed proxy form must be lodged

at the registered offi ce of the Company at 8 Eu Tong Sen Street, #16-96/97 The Central, Singapore 059818 not less than 48 hours

before the Meeting.

EXPLANATORY NOTE TO RESOLUTION 3a:

Mr Mark Julian Wakeford is the Chief Executive Offi cer of the Company and the Chairman of the Executive Committee. He will, upon

re-election, continue to serve as the Chief Executive Offi cer of the Company and as Chairman of the Executive Committee.

EXPLANATORY NOTE TO RESOLUTION 3b:

Mr Gunadi is an Executive Director of the Company and a member of the Executive Committee. He will, upon re-election,

continue to serve as a member of the Executive Committee.

EXPLANATORY NOTE TO RESOLUTION 3c:

Mr Lee Kwong Foo Edward is an Independent Director. He is both the Chairman of the Board and the Nominating Committee. He

will, upon re-election, continue to serve as Chairman of the Board and as Chairman of the Nominating Committee.

EXPLANATORY NOTE TO RESOLUTION 3d:

Mr Lim Hock San is an Independent Director. He is the Chairman of the Remuneration Committee and is also members of the

Nominating and Audit Committees. He will, upon re-election, continue to serve as the Chairman of the Remuneration Committee

and as members of the Nominating and Audit Committees.

EXPLANATORY NOTES ON SPECIAL BUSINESS TO BE TRANSACTED:

The ordinary resolution proposed in item (5) above if passed will empower the directors of the Company from the date of the

above Meeting until the next Annual General Meeting, to issue shares and convertible securities in the Company up to an amount

not exceeding in total 50 per centum of the total number of issued shares in the capital of the Company calculated on the basis

set out in the said resolution. The 50% limit may be increased to 100% for the Company to undertake pro-rata renounceable

rights issues of shares and convertible securities. For issues of shares and convertible securities other than on a pro rata basis to

all Shareholders, the aggregate number of shares and convertible securities to be issued shall not exceed 20 per centum of the

total number of issued shares in the capital of the Company calculated on the basis set out in the said resolution. This authority

will, unless previously revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company.

Shareholders should note that presently, the controlling shareholders of the Company include First Pacifi c Company Limited and

PT Indofood Sukses Makmur Tbk, which are listed on the Hong Kong Stock Exchange Limited and the Indonesia Stock Exchange

(Bursa Efek Indonesia), respectively. Prior to any exercise of the authority conferred upon them by the ordinary resolution in item

(5) above, the Directors of the Company intend to take into account, inter alia, any approval that may be required from any such

controlling shareholders and/or their respective shareholders and/or from such stock exchanges.

For practical reasons and in order to avoid any violation of the securities legislation applicable in countries other than Singapore,

the offering documents for the issue of shares and Instruments pursuant to such authority may NOT be despatched to Shareholders

with registered addresses outside Singapore as at the applicable books closure date and who have not, by the stipulated period

prior to the book closure date, provided to The Central Depository (Pte) Limited or the Share Registrar, as the case may be, with

addresses in Singapore for the service of notices and documents.



The ordinary resolution proposed in item (6) above if passed will empower the directors of the Company to issue Shares on a

non pro-rata basis at a discount of not more than 20% to the weighted average price of the Shares for trades done on the SGX-

ST (calculated in the manner as may be prescribed by the SGX-ST). Shareholders should note that presently, the controlling

shareholders of the Company include First Pacifi c Company Limited and PT Indofood Sukses Makmur Tbk, which are listed on the

Hong Kong Stock Exchange Limited and the Indonesia Stock Exchange (Bursa Efek Indonesia), respectively. Prior to any exercise

of the authority conferred upon them by the ordinary resolution in item (6) above, the Directors of the Company intend to take into

account, inter alia, any approval that may be required from any such controlling shareholders and/or their respective shareholders

and/or from such stock exchanges.

The ordinary resolution proposed in item (7) above if passed will empower the directors of the Company to enter into Interested

Person Transactions approved by the Shareholders’ Mandate. The Mandate shall be renewed and approved at every Annual

General Meeting, if necessary, unless being revoked or varied at a General Meeting.

The ordinary resolution proposed in item (8) above if passed will empower the directors of the Company to make purchases

(whether by way of market purchases or off-market purchases on an equal access scheme) from time to time up to 10 per centum

of the total number of issued Shares as at the date of the above Meeting at the price up to but not exceeding the Maximum

Price (as defi ned in the Resolution). The rationale for the Share Purchase Mandate, the source of funds to be used for the Share

Purchase Mandate, the impact of the Share Purchase Mandate on the Company’s fi nancial position, the implications arising as a

result of the Share Purchase Mandate under The Singapore Code on Take-overs and Mergers and on the listing of the Company’s

Shares on the SGX-ST, as well as the number of Shares purchased by the Company in the previous twelve months are set out in

the Addendum.



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PROXY FORM

INDOFOOD AGRI RESOURCES LTD.(Company Registration No. 200106551G)

(Incorporated in the Republic of Singapore)

IMPORTANT

For investors who have used their CPF moneys to buy shares of Indofood Agri Resources Ltd.’s shares, this Annual Report is forwarded to them at the 1.

request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.2.

CPF Investors who wish to vote should contact their CPF Approved Nominees.3.

I/We

of

being a *member/members of Indofood Agri Resources Ltd., hereby appoint

Name Address NRIC/Passport

Number

Proportion of

shareholdings (%)

and/or (delete as appropriate)

or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General

Meeting of the Company to be held on Tuesday, 28 April 2009 at 4 p.m., and at any adjournment thereof.

The proxy is required to vote as indicated with an “X” on the resolutions set out in the Notice of Meeting and summarised below.

If no specifi c direction as to voting is given, the proxy/proxies may vote or abstain at his discretion.

No. Resolution For Against

1. To receive and adopt the Directors’ Report and Accounts for the year ended 31 December 2008.

2. To approve the Directors’ Fees of S$285,000 (2007: S$217,000/-) for the year ended 31 December 2008.

3a. To re-elect Mr Mark Julian Wakeford as Director, who retire under Article 117 of the Company’s Articles of Association.

3b. To re-elect Mr Gunadi as Director, who retire under Article 117 of the Company’s Articles of Association.

3c. To re-elect Mr Lee Kwong Foo Edward as Director, who retire under Article 117 of the Company’s Articles of Association.

3d. To re-elect Mr Lim Hock San as Director, who retire under Article 117 of the Company’s Articles of Association.

4. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fi x their remuneration.

5. To approve the general mandate for issues of shares.

6. To increase the discount limit for share placements

7. To renew the Shareholders’ Mandate on Interested Person Transactions.

8. To renew the Share Purchase Mandate.

Signed this day of 2009

Signature(s) of Member(s)/Common Seal

Notes:

a) Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion (expressed as

a percentage of the whole) of his shareholding to be represented by each proxy.

b) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in

writing or if such appointor is a corporation under its common seal or under the hand of its attorney.

c) An instrument appointing a proxy must be deposited at the registered offi ce of the Company, 8 Eu Tong Sen Street, #16-

96/97 The Central, Singapore 059818 not less than 48 hours before the time appointed for holding the meeting.

d) The Company shall be entitled to reject a Proxy Form which is incomplete, improperly completed, illegible or where the

true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed on the Proxy Form.

In addition, in the case of shares entered in the Depository Register, the Company may reject a Proxy Form if the member,

being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before

the time appointed for holding the Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.

8 Eu Tong Sen Street, #16-96/97 The Central, Singapore 059818

Company Reg. No. 200106551G

a subsidiary of:

Documents

CREATING SUSTAINABLE GROWTHindofoodagri.listedcompany.com/misc/ar2008.pdfThe story was much the same with rubber prices, which experienced heightened volatility in 2008. Rubber fetched