Basis of preparation of consolidated financial statements Basis of consolidation

PT SAMPOERNA AGRO Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended June 30, 2007 and 2006 Expressed in thousands of Rupiah, unless otherwise stated 11

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies adopted by the Group conform to generally accepted accounting principles in Indonesia. The significant accounting principles applied consistently in the preparation of the consolidated financial statements for the six months period ended June 30, 2007 and 2006 are as follows:

a. Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with accounting and practices generally accepted in Indonesia, which includes Statements of Financial Accounting Standards PSAK issued by the Indonesian Institute of Accountants and Regulations and Guidelines on Financial Statements Presentation set out by the Capital Market Supervisory Agency BAPEPAM. The consolidated financial statements, presented in thousands of Rupiah unless otherwise stated, have been prepared on accrual basis, except for statements of cash flows, and using historical costs, except for inventories that are valued at the lower of cost or net realizable values and certain items of fixed assets and mature plantations which were revalued on April 30, 2003. The consolidated statements of cash flows present cash receipts and payments classified into operating, investing and financing activities, and are presented using the direct method. The reporting currency used in the preparation of the consolidated financial statements is in Rupiah, except for PAL, which has adopted the US Dollar as its fuctional, reporting and recording currency since January 1, 2007. For consolidation purposes, the accounts of PAL are translated into Rupiah amounts on the following basis: Balance sheet accounts : Prevailing rate of exchange as published by Bank Indonesia at the last banking day as of June 30, 2007 amounting to Rp9,054 full amount per US1. Income statement accounts : The exchange rates prevailing at the date of transactions. Gains or losses arising from translation of balance sheet and income statements accounts are presented as “Difference in Foreign Currency Translation” in the equity section of the consolidated balance sheet.

b. Basis of consolidation

The consolidated financial statements include the Company’s financial statements and all subsidiaries financial statements that are controlled by the Company. Control is presumed to exist where more than 50, directly or indirectly of a subsidiarys voting power, is controlled by the Company; or where the Company is able to govern the financial and operating policies of a subsidiary; or control the removal or appointment of a majority of a subsidiarys board of directors. Significant inter-company balances and transactions, including unrealized profit loss, have been eliminated to present the financial position and results of operations of the Company and subsidiaries as a single economic entity. PT SAMPOERNA AGRO Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended June 30, 2007 and 2006 Expressed in thousands of Rupiah, unless otherwise stated 12

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued b. Basis of consolidation continued