Segment Information Changes of Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

o. Taxation

Under PSAK No.46, current tax expenses will be determined based on profit subject to tax for the current period and calculated using the currently applying tax rates. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carry-forward of unused tax losses, are also recognized to the extent that realization of such benefits is probable. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the statements of financial position date. Amendments to tax obligations are recorded when an assessments is received or, if appealed against by the Entity, when the result of the appeal is determined. Indonesian tax regulations do not apply a concept of consolidated tax returns. Therefore, the tax balances in the consolidated financial statements represent the combination of the Entity’s and its Subsidiaries tax position.

p. Employee Benefit Liabilities

The Entity recognizes an unfunded employee benefit liability in accordance with Labor Law No. 132003 dated March 25, 2003 “the Law”. Before January 1, 2005, the Entity recognized employee benefits obligations based on the actuary assessment under PSAK No.24 Cost Benefit Pension Accounting published in 1994. Under PSAK No. 24 Revised 2004, Employee Benefit, the cost of providing employee benefit under the Law is determined using the projected unit credit actuarial valuation method based on projected unit credit. Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses for each individual plan at the end of the previous reporting year exceeded 10 of the defined benefit obligation and 10 of the fair value of plan assets. These gains or losses are recognized on a straight-line method of the expected average remaining working lives of the employees. Further, past-service costs arising from the introduction of a defined benefit plan or changes in the benefit payable of an existing plan are required to be amortized over the period until the benefits concerned become vested.

q. Discontinuing Operation

The discontinuing of operation for an unknown period of time and unknown management plan for the future to continue its operation in textile industry since its inability to compete in international or local market, the increase of transportation costs, increase of world oil prices and raw material cotton, where the Entitys division activities can be separated operationally and the purpose of financial statement reporting in the Entity and its Subsidiaries as a whole, have to be calculated in accordance with PSAK No.58 Revised 2009 on Non-Current Assets, Held for Sale and Discontinued Operations. PSAK No.58 Revised 2009 obligate the financial statements prepared in the period where required the financial statements prepared in the period in which there are plans to discontinue actions preliminary disclosure must be included in the information related to discontinued operation. In order to disclose asset valuation, liabilities, income, expenses, gains, losses and cash flows of discontinued operation in accordance with PSAK revealed that those elements of financial statement can be directly attributed to the discontinued operation, if those elements will be sold, left out, expended or eliminated by the time the discontinuing process of operation has finished. In reverse, foresaid elements considered being used continually after the discontinuing process cannot be included in the discontinued operation classification. Comparative information on the prior year should be presented to distinguish between continued and discontinued operation.

r. Basic Earnings Per Share

In accordance with PSAK No. 56, Earning Per Share, net income loss from normal operations per share and net income loss per share are computed by dividing the respective income loss with the weighted average number of shares outstanding during the year. Earnings per share calculations are based on 118,267,864 shares and 98,236,000 shares for the year ended December 31, 2011 and December 31, 2010. 02

s. Segment Information

In accordance with PSAK No. 5 Revised 2009,Operating Segments, business segments provide information of products or services that are subjected to risks and returns that are different from those of other business segments. Geographical segments provide information of products or services within a particular economic environment that are subject to risks and returns that are different from those of components operating in other economic environments. Revenue, expense, assets and liabilities segments are determined before intra-group balances and transactions within the group are eliminated as part of the consolidation process.

t. Changes of Accounting Policies

The followings are amendments of accounting standards, changes and interpretations, which become effective starting January 1, 2011 and relevant to Entity and its Subsidiary: - PSAK No. 1 Revised 2009, Presentation of Financial Statements. - PSAK No. 2 Revised 2009, Statement of Cash Flows. - PSAK No. 3 Revised 2010, Interim Financial Statements. - PSAK No. 4 Revised 2009, Consolidated and Separate Financial Statements. - PSAK No. 5 Revised 2009, Operating Segments. - PSAK No. 7 Revised 2010, Related Party Disclosures. - PSAK No. 8 Revised 2010, Subsequent Events After Reporting Period. - PSAK No. 19 Revised 2010, Intangible Assets. - PSAK No. 23 Revised 2010, Revenue. - PSAK No. 25 Revised 2009, Accounting Policies, Changes in Accounting Estimates and Errors. - PSAK No. 48 Revised 2009, Declining in Value of Assets. - PSAK No. 58 Revised 2009, Non-Current Assets, Held for Sale and Discontinued Operations. - ISAK No. 14 Revised 2010, Intangible Assets. - ISAK No. 17 , Interim Financial Statements and Declining in Value. Effect of the accounting policies changes in Entity and its Subsidiaries in respect of whether the implementation of the above new accounting standards are insignificant, except for this area: Presentation of Financial Statements Entity and its subsidiaries implemented PSAK No 1 Revised 2009, Presentation of Financial Statements, which effective started January 1, 2011. Significant changes of accounting standards to Entity and its Subsidiaries are as follows: - The consolidated financial statements comprise of consolidated statements of financial position, consolidated statements of comprehensive income, consolidated statements of changes in equity capital deficiency, consolidated statements of cash flows and notes to consolidated financial statements. Whilst, previously, the consolidated financial statements comprise of consolidated balance sheets, consolidated statement of income, consolidated statement of changes in equity capital deficiency, consolidated statement of cash flows and notes to consolidated financial statements. - Non-controlling interest is presented within equity, previously minority interest is presented separately between the liabilities and equities. 02 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 115 114 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 03 SOURCE OF ESTIMATION UNCERTAINTY Judgments The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset and liability affected in future periods. The following judgments are made by management in the process of applying the accounting policies that have the most significant effects on the amounts recognized in the financial statements. Classification of financial assets and financial liabilities The Entity determines the classifications of certain assets and liabilities as financial assets and financial liabilities by judging if they meet the definition set forth in PSAK No. 55 Revised 2006. Accordingly, the financial assets and financial liabilities are accounted for in accordance with the Entitys accounting policies disclosed in Note 2.g. Income tax Significant judgment is involved in determining the provision for corporate income tax. There are certain transactions and computation for which the ultimate tax determination is uncertain during the ordinary course of business. The Entity recognizes liabilities for expected corporate income tax issues based on estimates of whether additional corporate income tax will be due. Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial periodyear are disclosed below. The Entity based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Entity. Such changes are reflected in the assumptions when they occur. Pension and employees benefits The determination of the Entitys obligations and cost for pension and employee benefits liabilities is dependent on its selection of certain assumptions used by the independent actuaries in calculating such amounts. Those assumptions include among others, discount rates, future annual salary increase, annual employee turnover rate, disability rate, retirement age and mortality rate. Actual results that differ from the Entitys assumptions are recognized immediately in the profit or loss as and when they occurred. While the Entity believes that its assumptions are reasonable and appropriate, significant differences in the Entitys actual experiences or significant changes in the Entitys in the Entitys assumptions may materially affect its estimated liabilities for pension and employees benefits and net employee benefits expenses. The carrying amount of the Entitys estimated liabilities for employee benefits as of December 31, 2011 amounted to Rp 10,893,257, December 31, 2010 amounted to Rp 10,755,350 and January 1, 2010 amounted to Rp 10,194,583. Note 22. Depreciation of fixed assets The costs of fixed assets are depreciated on a straight-line method over their estimated useful lives. Management estimates the useful lives of these fixed assets to be within 10 to 25 years. These are common life expectancies applied in the industries where the Entity conducts its businesses. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, and therefore future depreciation charges could be revised. The net carrying amount of the Entitys fixed assets as of December 31, 2011 amounted to Rp 33,638,279, December 31, 2010 amounted to Rp 31,628,427 and January 1, 2010 amounted to Rp 34,330,004.Note 12. Financial instrument The Entity and its Subsidiaries carry certain financial assets and liabilities at fair value, which requires the use of accounting estimates. While significant components of fair value measurement were determined using verifiable objective evidences, the amount of changes in fair value would differ if the Entity and its Subsidiaries utilized a different valuation methodology. Any changes in a fair value of these financial assets and liabilities would directly affect the Entitys comprehensive profit or loss. The carrying amount of financial liability carried at fair value in the consolidated statement of financial position as of December 31, 2011 amounted to US 7.000 or equivalent to Rp 63,476,000, Desember 31, 2010 and January 1, 2010 amounted to nil Note 19. Based on Circular Resolutions in Lieu of Board of Commissioners Meeting of PT Eratex Djaja Tbk on July 14, 2008, the Entitys President Director gained authority to discontinue the operation of textile division and announce that discontinuing. The textile division operation has been stopped for unlimited period of time, in terms of decreasing economic stability, prospect of the current business and the loss occurred in effect of the whole Entitys performance. The operation of textile division was officially discontinued in August 2008. The main classifications of assets and liabilities of the discontinued operations are listed below: 04 DISCONTINUING OPERATION ASSETS Trade receivables - third parties, net Note 6 - - - - Other receivables - third parties, net Note 7 - 25,440 - 3 Inventories, net Note 8 157,632 157,632 17 18 Deferred tax assets Note 21d 103,668 104,011 11 12 Fixed assets, net Note 12 7,022,795 7,022,795 775 781 Intangible assets, net Note 13 - 279 - Guarantee deposits 250,000 250,000 27 27 Total 7,584,095 7,560,157 831 841 LIABILITIES Trade payables - third parties Note 15 - 191,793 - 21 Other payables - third parties Note 16 - 13,636 - 2 Total - 205,429 - 23 REVENUE Operating expenses Notes 30 - 26,401 - 3 Operating loss - 26,401 - 3 OTHER INCOME EXPENSES Interest income - 477 - Foreign exchange gain, net 6,709 5,121 1 1 Gain on disposal of fixed assets - 55,900 - 6 Provision for declining in receivables value 25,440 8,155 3 1 Others, net - 20,000 - 2 Total other expenses, net 18,731 33,343 2 4 Income before corporate income tax 18,731 6,941 2 1 Income tax expense - 218,811 - 24 Rp Rp US US Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 NET INCOME LOSS 211,869 2 24 18,731 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 117 116 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated CASH AND CASH EQUIVALENTS 04 05 CONTINUING OPERATION Cash on hand 91,675 149,662 10 17 Cash in banks: Rupiah: The Hongkong and Shanghai Banking Corporation Ltd 1,914,336 149,277 211 17 PT Bank Mandiri Persero Tbk 17,925 47,601 2 5 PT Bank Tabungan Pensiunan Nasional Tbk 10,370 - 1 - PT Bank Central Asia Tbk 676 10,960 1 US Dollar: The Hongkong and Shanghai Banking Corporation Ltd 12,160 12,396 1 1 PT Bank Mandiri Persero Tbk 7,236 464,760 1 52 Others 107 - - PT Bank DBS Indonesia - 11,947 - 1 Euro: The Hongkong and Shanghai Banking Corporation Ltd 2,403 105,239 12 HK Dollar: The Hongkong and Shanghai Banking Corporation Ltd 290,175 - 32 - Total cash equivalents 2,255,388 802,180 249 89 Total cash and cash equivalents 2,347,063 951,842 259 106 There is no balance of cash and cash equivalents to related parties. Rp Rp US US Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 TRADE RECEIVABLES - THIRD PARTIES This account consists of: 06 CONTINUING OPERATION Export sales 42,583,191 17,140,303 4,696 1,906 Local sales 201,689 277,984 22 31 Total trade receivables - third parties 42,784,880 17,418,287 4,718 1,937 Less: Provision for declining in value - - - - Total trade receivables - third parties, net 42,784,880 17,418,287 4,718 1,937 DISCONTINUING OPERATION Local sales 615,107 615,107 68 68 Total trade receivables - third parties 615,107 615,107 68 68 Less: Provision for declining in value 615,107 615,107 68 68 Total trade receivables - third parties, net Note 4 - - - - Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US TRADE RECEIVABLES - THIRD PARTIES continued Details of trade receivables from third parties are as follows: Aging analysis of trade receivables from third parties since issuance of invoices are as follows: 06 CONTINUING OPERATION Export customers 42,138,534 17,140,303 4,647 1,906 PT Dwi Putra Sakti 201,689 224,605 22 25 Other customers below Rp 500,000 each 444,657 53,379 49 6 Total DISCONTINUING OPERATION Mr. Deddy 606,952 606,952 67 67 Other customers below Rp 500,000 each 8,155 8,155 1 1 Total Note 4 615,107 615,107 68 68 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 42,784,880 17,418,287 4,718 1,937 CONTINUING OPERATION Less than 1 month 30,405,166 12,135,134 3,353 1,350 1 - less than 3 months 12,379,714 4,743,309 1,365 528 3 - less than 6 months - 539,844 - 60 More than 12 months - - - - Total DISCONTINUING OPERATION 1 - less than 3 months - - - - 3 - less than 6 months - - - - More than 12 months 615,107 615,107 68 68 Total Note 4 615,107 615,107 68 68 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 42,784,880 17,418,287 4,718 1,937 Details of trade receivables from third parties based on currency are as follows: CONTINUING OPERATION Rupiah 201,690 277,984 22 31 Foreign currencies 42,583,190 17,140,303 4,696 1,906 Total DISCONTINUING OPERATION Rupiah 615,107 615,107 68 68 Total Note 4 615,107 615,107 68 68 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 42,784,880 17,418,287 4,718 1,937 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 119 118 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated TRADE RECEIVABLES - THIRD PARTIES continued Movement in provision for declining in value is as follows: In 2011, these receivables are not pledged as collateral for any loan. Whereas on December 31, 2010, receivables used as collateral for bank loan Note 19. Management believes that the provision for declining in value on trade receivables is adequate to cover possible losses on uncollectible accounts. 06 DISCONTINUING OPERATION Balance at beginning of the year 615,107 606,952 68 67 Add: Provision during the year - 8,155 - 1 Less: Receivables payment - - - - Balance at end of the year Note 4 615,107 615,107 68 68 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US OTHER RECEIVABLES - THIRD PARTIES This account consists of: 07 CONTINUING OPERATION Temporary advances 123,965 473,293 14 52 Others 610,718 442,440 67 49 Total other receivables - third parties 734,683 915,733 81 101 Less: Provision for declining in value Balance at beginning of the year 335,401 320,505 37 35 Add: Provision during the year 52,349 28,797 6 2 Add less: Foreign exchange revaluation 2,617 13,902 1 Balance at end of year 390,367 335,400 43 36 Total other receivables - third parties, net 344,316 580,333 38 65 DISCONTINUING OPERATION Others 25,440 25,440 3 3 Total other receivables - third parties 25,440 25,440 3 3 Balance at beginning of the year - - - - Add: Provision during the year 25,440 - 3 - Less: Write off receivables - - - - Balance at end of year 25,440 - 3 - Total other receivables - third parties Note 4 - 25,440 - 3 Management believes that the provision for declining in value on other receivables is adequate to cover possible losses on uncollectible accounts. Rp Rp US US Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 INVENTORIES This account consist of: 08 CONTINUING OPERATION Finished goods 21,724,580 10,756,124 2,396 1,196 Goods in process 15,746,340 5,401,156 1,736 601 Raw materials 31,307,079 19,869,451 3,452 2,210 Sundry stores 10,493,412 8,099,231 1,157 901 Inventory in transit 3,090,413 10,829,496 341 1,205 Total inventories 82,361,824 54,955,458 9,083 6,113 Less: Provision for declining in value 3,927,511 4,491,308 433 500 Total inventories, net 78,434,313 50,464,150 8,650 5,613 DISCONTINUING OPERATION Sundry stores 297,232 297,232 33 33 Total inventories 297,232 297,232 33 33 Less: Provision for declining in value 139,600 139,600 15 16 Total inventories, net Note 4 157,632 157,632 17 18 D Rp Rp US US ec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Movements in provision for declining in value of inventories are as follows: Details of provision for the declining in value of inventories as of statements of financial position dates are as follows: CONTINUING OPERATION Raw materials 1,944,546 2,556,866 214 285 Finished goods 1,982,965 1,934,442 219 215 Total provision for declining in value 3,927,511 4,491,308 433 500 DISCONTINUING OPERATION Sundry stores 139,600 139,600 15 16 Total provision for declining in value Note 4 139,600 139,600 15 16 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US CONTINUING OPERATION Balance at beginning of the year 4,491,308 203,356 495 23 Add: Provision during the year 768,308 4,287,952 85 477 Less: Utilization of provision during the year 1,332,105 - 147 - Balance at end of the year 3,927,511 4,491,308 433 500 DISCONTINUING OPERATION Balance at beginning of the year 139,600 139,600 15 16 Add: Provision during the year - - - - Less: Utilization of provision during the year - - - - Balance at end of the year Note 4 139,600 139,600 15 16 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 121 120 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated INVENTORIES continued Inventories as of December 31, 2011 have been insured for fire and other risks for a total coverage of Rp 38 Billion full Rupiah amount for 2011 and Rp 35 Billion full Rupiah amount for 2010. Management believes that this insurance is adequate to cover the possibility of losses. As on December 31, 2011, these inventories are not pledged as collateral for any loan. Whereas as on December 31, 2010, inventories used as collateral for bank loan Note 19. Management believes that the provision for declining in value is adequate to cover the possible losses due to decrease in value of inventory. 08 ADVANCE PAYMENTS This account consists of: 09 CONTINUING OPERATION Raw materials and sundry stores 1,823,739 114,642 201 13 Machinery 1,068,942 - 118 - Others 631,414 552,209 70 61 Total advance payments 3,524,095 666,851 389 74 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US PREPAID EXPENSES This account consist of: 10 CONTINUING OPERATION Insurance 82,368 48,565 9 5 Others 837,580 940,223 92 104 Total prepaid expenses 919,948 988,788 101 109 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US LONG-TERM INVESTMENTS The balances of long-term investments as of December 31, 2011 and 2010 are as follows: 11 Investment in associates at cost: PT Pasifik Marketama less than 20 277,500 277,500 31 31 Less: Provision for declining in value of investment 277,500 277,500 31 31 Total long-term investments - - - - The Entity has also invested shares in PT Pasifik Marketama, which is engaged in the marketing of garment products. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US FIXED ASSETS 12 CONTINUING OPERATION 2011 MOVEMENTS ACQUISITION COST: Direct ownership: Land leasehold 8,857 - - - 8,857 Buildings and structures 8,508,164 126,000 - - 8,634,164 Machineries and equipment 38,752,829 4,554,325 - - 43,307,154 Vehicles 2,825,729 - 108,500 - 2,717,229 Furniture and fixtures 7,903,224 344,384 - - 8,247,608 Sub-total 57,998,803 5,024,709 108,500 - 62,915,012 Total acquisition cost 57,998,803 5,024,709 108,500 - 62,915,012 ACCUMULATED DEPRECIATION: Direct ownership: Land leasehold 3,834 - - - 3,834 Buildings and structures 3,358,982 340,747 - - 3,699,729 Machineries and equipment 15,028,668 2,077,263 - - 17,105,932 Vehicles 1,978,087 157,129 108,500 - 2,026,715 Furniture and fixtures 6,000,805 439,718 - - 6,440,523 Total accumulated depreciation 26,370,376 3,014,857 108,500 - 29,276,733 NET BOOK VALUE 31,628,427 33,638,279 EQUIVALENT US 3,518 3,710 DISCONTINUING OPERATION 2011 MOVEMENTS AT COST OR REVALUATION: Land leasehold 47,663 - - - 47,663 Buildings and structures 10,557,306 - - - 10,557,306 Machineries and equipment 7,625,470 - - - 7,625,470 Vehicles 1,292,986 - - - 1,292,986 Furniture and fixtures 1,144,663 - - - 1,144,663 Sub-total 20,668,088 - - - 20,668,088 Total acquisition cost 20,668,088 - - - 20,668,088 ACCUMULATED DEPRECIATION: Land leasehold 20,633 - - - 20,633 Buildings and structures 5,182,642 - - - 5,182,642 Machineries and equipment 6,185,970 - - - 6,185,970 Vehicles 1,155,340 - - - 1,155,340 Furniture and fixture 1,100,708 - - - 1,100,708 Total accumulated depreciation 13,645,293 - - - 13,645,293 NET BOOK VALUE Note 4 7,022,795 7,022,795 EQUIVALENT US 781 774 Balance Reclassification Balance Jan 1, 2011 Additions Disposals correction Dec 31, 2011 Balance Reclassification Balance Jan 1, 2011 Additions Disposals correction Dec 31, 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 123 122 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated FIXED ASSETS continued 12 CONTINUING OPERATION 2010 MOVEMENTS ACQUISITION COST: Direct ownership: Land leasehold 289,068 - 280,211 - 8,857 Buildings and structures 9,373,468 29,050 894,354 - 8,508,164 Machineries and equipment 38,157,144 595,685 - - 38,752,829 Vehicles 2,829,069 - 3,340 - 2,825,729 Furniture and fixtures 7,904,358 110,826 111,960 - 7,903,224 Sub-total 58,553,107 735,561 1,289,865 - 57,998,803 Total acquisition cost 58,553,107 735,561 1,289,865 - 57,998,803 ACCUMULATED DEPRECIATION: Direct ownership: Land leasehold 111,642 - 107,808 - 3,834 Buildings and structures 3,722,995 354,361 718,374 - 3,358,982 Machineries and equipment 13,038,692 1,989,976 - - 15,028,668 Vehicles 1,798,465 182,962 3,340 - 1,978,087 Furniture and fixtures 5,551,309 558,292 108,796 - 6,000,805 Total accumulated depreciation 24,223,103 3,085,591 938,318 - 26,370,376 NET BOOK VALUE 34,330,004 31,628,427 EQUIVALENT US 3,652 3,518 DISCONTINUING OPERATION 2010 MOVEMENTS AT COST OR REVALUATION: ACQUISITION COST: Land leasehold 47,663 - - - 47,663 Buildings and structures 10,557,306 - - - 10,557,306 Machineries and equipment 7,625,470 - - - 7,625,470 Vehicles 1,409,823 - 116,837 - 1,292,986 Furniture and fixtures 1,144,663 - - - 1,144,663 Sub-total 20,784,925 - 116,837 - 20,668,088 Total acquisition cost 20,784,925 - 116,837 - 20,668,088 ACCUMULATED DEPRECIATION: Land leasehold 20,633 - - - 20,633 Buildings and structures 5,182,642 - - - 5,182,642 Machineries and equipment 6,185,970 - - - 6,185,970 Vehicles 1,270,577 - 115,237 - 1,155,340 Furniture and fixture 1,100,708 - - - 1,100,708 Total accumulated depreciation 13,760,530 - 115,237 - 13,645,292 NET BOOK VALUE Note 4 7,024,395 7,022,795 EQUIVALENT US 747 781 Balance Reclassification Balance Jan 1, 2010 Additions Disposals correction Dec 31, 2010 Balance Reclassification Balance Jan 1, 2010 Additions Disposals correction Dec 31, 2010 FIXED ASSETS continued 12 Disposal represent sales of fixed assets, which can be summarized as follows: Depreciation expenses for the years ended December 31, 2011 and 2010 are Rp 3,014,857 and Rp 3,085,591, respectively, with the following allocations: INTANGIBLE ASSETS This account consists of: 13 CONTINUING OPERATION ACQUISITION COST: Software 1,820,959 1,820,959 201 203 Land-rights 113,140 112,861 13 13 Total acquisition cost 1,934,099 1,933,820 214 216 ACCUMULATED AMORTIZATION: Software 742,976 617,485 82 69 Land-rights 31,065 25,407 3 3 Total accumulated amortization 774,041 642,892 86 72 BOOK VALUE 1,160,058 1,290,928 128 144 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US CONTINUING OPERATION Net book value of disposals - 351,547 - 39 Sales price 37,500 12,729,973 4 1,416 Gain on disposals of fixed assets 37,500 12,378,426 4 1,377 DISCONTINUING OPERATION Net book value of disposals - 1,600 - Sales price - 57,500 - 6 Loss on disposals of fixed assets Note 4 - 55,900 - 6 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US CONTINUING OPERATION Cost of revenue 2,555,776 2,500,614 282 278 General and administration expenses 459,081 584,977 51 65 Total 3,014,857 3,085,591 332 343 Fixed assets as of December 31, 2011 and 2010 have been insured for fire and other risks for a total coverage of Rp 75 Billion full Rupiah amount for the year 2011 and Rp 84 Billion full Rupiah amount for the year 2010. Management believes that this insurance is adequate to cover the possibility of losses. Fixed assets land and building are pledged as collateral for long-term loan from related party Note 20. PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 125 124 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated INTANGIBLE ASSETS continued This account consists of: 13 DISCONTINUING OPERATION ACQUISITION COST: Land-rights 22,382 22,661 2 2 Total acquisition cost 22,382 22,661 2 2 ACCUMULATED AMORTIZATION: Land-rights 22,382 22,382 2 2 Total accumulated amortization 22,382 22,382 2 2 BOOK VALUE Note 4 - 279 - Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US SHORT-TERM LOANS This account consists of: The Hongkong and Shanghai Banking Corporation Limited The Hongkong and Shanghai Banking Corporation Limited, Jakarta Branch HSBC provided trade and working capital financing facilities which have been restructured on June 25, 2010. This restructuring credit facility has been extended with Amendment to Corporate Facility Agreement No: JAK110197U110223 which effective until May 31, 2011. In the Amendment of restructuring credit facilities No: JAK110197U110223, the Entity obtained a short-term loan facilities as follows: • Overdraft I with a limit of US 600 with best lending rate minus 7.75 per annum; • Overdraft III with a limit of US 700 with best lending rate minus 5 per annum; • Combined Limit CBL I with a limit of US 8,400 with best lending rate minus 5 per annum; • Exposure Risk Limit with a limit of US 400; • Irregular Installment Loan 4 with a limit of US 1,800 with best lending rate minus 5 per annum. 14 CONTINUING OPERATION The Hongkong and Shanghai Banking Corp Ltd 62,383,824 95,657,136 6,880 10,639 Gillespie International Limited 27,204,000 - 3,000 - PT Bank DBS Indonesia - 23,972,564 - 2,666 Total short-term loans 89,587,824 119,629,700 9,880 13,305 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US PT Bank DBS Indonesia In 2006, PT Bank DBS Indonesia provided facilities for trade finance with a limit of US 6,000, outstanding balances as of December 31, 2010 amounted to US 2,316 or equivalent to Rp 20,826,961. Entity also obtain revolving loan facility from PT Bank DBS Indonesia with a limit of US 3,000, outstanding balances as of December 31, 2010 amounted to US 349 or equivalent to Rp 3,145,603. Interest rate was charged 8 per annum. On June 28, 2011, PT Bank DBS Indonesia has transferred the entire loan, including all rights, interests, and any benefits arising to The Hongkong and Shanghai Banking Corporation Limited in the principal amount outstanding of US 2,666 and interest expense amount outstanding of US 783, so the total amount of the transferred loans was US 3,449. SHORT-TERM LOANS continued 14 The Hongkong and Shanghai Banking Corporation Limited continued Based on Transfer Notice Letter dated November 14, 2011, The Hongkong and Shanghai Banking Corporation Limited has transferred the entire loan amounted to US 24,427 and US 3,449 which taken over from PT Bank DBS Indonesia, including all rights, interests, and any benefits arising to Gillespie International Limited. The Entity still obtain credit facility from The Hongkong and Shanghai Banking Corporation Limited which all of it is guaranteed by PT Ungaran Sari Garments related party according to Guarantee and Indemnity Agreement Limited Amount dated June 20, 2011. Based on Agreement above, The Hongkong and Shanghai Banking Corporation Limited give credit facility to the entity with a limit of US 5,000. Based on Credit Facility Agreement No JAK110288U101216 of The Hongkong and Shanghai Banking Corporation Limited, PT Citra Abadi Sejati and PT Ungaran Sari Garments requesting to temporarily allocate the Combined Limit facility with a limit of US 3,500 to Entity. The use of this facility by the Entity is also guaranteed by the Guarantee and Indemnity Agreement mentioned above. Interest rate of the new credit facility is best lending rate minus 5. Gillespie International Limited Based on loan transferred from The Hongkong and Shanghai Banking Corporation Limited with a total value of US 27,876, Gillespie International Limited made a Major Debt Restructuring Agreement with the Entity that signed on November 24, 2011. In Major Debt Restructuring Agreement, Entity obtain facilities as follows: • Gillespie International Limited forgives loan amounted to US 9,876. • Tranche A loan amounted to US 8,000 with interest rate LIBOR+3. Term of this loan is six years and will be due on November 30, 2017. Collateral for Tranche A Loan are as follows: a. Mortgage over land and building factory at Jl. Soekarno Hatta No 23 Probolinggo, East Java - Indonesia, under land certificate HGB no 1 Curahgrinting and HGB no 1 Kanigaran for the amount of US 15,000 registered under the name of PT Eratex Djaja Tbk. b. Fiduciary transfer of ownership over machineries and equipments listed in borrowers fixed asset list as per the Audited Financial Report of the Borrowers as of December 31, 2010 for the amount of US 5,000. • Tranche B convertible loan amounted to US 3,000, non interest bearing. Term of this loan is one year and will be due on November 20, 2012. • Tranche C convertible loan amounted to US 7,000, non interest bearing. Term of this loan is five years and will be due on November 20, 2016 Note 19. Outstanding short term loan of Gillespie International Limited as of December 31, 2011 and 2010 amounted to US 3,000 or equivalent to Rp 27,204,000 and nil. On December 14, 2011 Gillesspie International Limited made a Sale and Purchase Agreement related to Tranche A loan of the Entity with PT Ungaran Sari Garments Note 20. No collateral is pledged for Tranche B and Tranche C loans. PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 127 126 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated TRADE PAYABLES - THIRD PARTIES continued TRADE PAYABLES - THIRD PARTIES This account represents payables for the purchase of raw and other materials as follows: Details of trade payables - third parties based on currency: 15 CONTINUING OPERATION Winnitex Investment Co Ltd 6,002,531 428,203 662 48 Sierradale Pte Ltd 5,179,813 - 571 - Far East 3,598,237 - 397 - Lai Tak 1,246,745 - 137 - YKK Zipper Indonesia 1,146,705 654,691 126 73 Coats Rejo Indonesia 1,088,597 555,573 120 62 China Dyeing 372,415 681,391 41 76 CV. Surya Jaya 160,204 577,711 18 64 Avery Dennisson 20,773 2,336,169 2 260 SML Jakarta 16,678 651,493 2 72 Perfecta HK Ltd - 2,433,373 - 271 Brothers Machine - 1,006,101 - 112 Duerkopp China - 660,839 - 74 MS Abadi etc - 579,453 - 64 Surya Sinar Indah - 569,926 - 63 Suntex Co Ltd - 567,519 - 63 Other suppliers below Rp 500,000 each 5,661,681 17,070,586 624 1,899 Total 24,494,379 28,773,028 2,700 3,200 DISCONTINUING OPERATION Other suppliers below Rp 500,000 each - 191,793 - 21 Total Note 4 - 191,793 - 21 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US CONTINUING OPERATION Post dated cheque 799,360 5,735,179 88 638 Local suppliers 5,813,902 4,810,420 641 535 Foreign suppliers 17,881,117 18,227,429 1,972 2,027 Total trade payables - third parties 24,494,379 28,773,028 2,701 3,200 DISCONTINUING OPERATION Local suppliers - 191,793 - 21 Total trade payables - third parties Note 4 - 191,793 - 21 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 15 Detail of trade payable - third parties based on currency are as follows: No collateral is pledge for trade payables to third parties. OTHER PAYABLES - THIRD PARTIES 16 17 ACCRUED EXPENSES CONTINUING OPERATION Temporary receipts 254,658 17,110 28 2 Dividend 178,694 178,693 20 20 Others - 1,862,450 - 207 Total other payables - third parties 433,352 2,058,253 48 229 DISCONTINUING OPERATION Others - 13,636 - 2 Total other payables - third parties Note 4 - 13,636 - 2 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US CONTINUING OPERATION Rupiah 3,258,215 6,313,426 359 702 Foreign currencies 21,236,164 22,459,602 2,342 2,498 Total 24,494,379 28,773,028 2,701 3,200 DISCONTINUING OPERATION Rupiah - 191,793 - 21 Total Note 4 - 191,793 - 21 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US CONTINUING OPERATION Wages and allowances 4,067,121 2,122,163 449 236 Interest expenses 874,810 12,343,042 96 1,373 Processing charges 162,835 775,581 18 86 Sales commission 174,762 163,804 19 18 Others 1,156,494 1,559,512 128 173 Total accrued expenses 6,436,022 16,964,102 710 1,887 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 129 128 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated This account consists of: This account consists of: CONSUMER FINANCE PAYABLE LONG-TERM LOANS 18 Total financing 205,590 19,316 23 2 Less : interest expenses 29,587 3,253 3 Current financing value 176,003 16,063 19 2 Current maturities portion 64,001 16,063 7 2 Total long-term portion, net 112,002 - 12 - The Entity obtained loans from PT Astra Sedaya Finance to purchase vehicle amounted of Rp 205,590 with interest rates 5.6 per annum. This financing will be due in September 2014. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 19 Gillespie International Limited Carrying amount US 7,000 63,476,000 - 7,000 - Less: unamortised discount expense US 962 8,721,961 - 962 - Fair value US 6,038 54,754,039 - 6,038 - The Hongkong and Shanghai Banking Corp Ltd - 113,950,909 - 12,674 Total loans 54,754,039 113,950,909 6,038 12,674 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US The Hong Kong and Shanghai Banking Corporation Limited The Entity entered into a credit agreement with The Hongkong and Shanghai Banking Corporation Limited, Jakarta Branch. In 2006, the Entity entered into a new agreement with The Hongkong and Shanghai Banking Corporation Limited, Jakarta Branch HSBC to reschedule the repayment of Club Deal Loan to HSBC and to include PT Eratex Garment, Subsidiary as a new borrower. On June 25, 2010 the Entity obtained approval for credit facility restructuring from HSBC and it has been extended with Amendment to Corporate Facility Agreement No: JAK110197U110223 with total amount to US 12,027. The entire loan has been transferred to Gillespie International Limited on November 12, 2011. Outstanding balance HSBC as of December 31, 2011 and 2010 amounted to nil and US 12, 673 or equivalent to Rp 113, 950, 909, respectively. Gillespie International Limited In Gillespie International Limited Agreement, the Entity obtain long term loan Tranche C amounted to US 7,000 which will due in November 20, 2016. Based on payment schedule, Tranche C loan payment will be starting on November 20, 2014 amounted to US 1,000, so theres no current maturity portion of long term loan and non interest bearing loan. The next four payment will be paid on semi annual basis amounted to US 1,500, respectively. Outstanding long term loan of Gillespie International Limited as of December 31, 2011 and 2010 amounted to US 6,038 or amounted to Rp 54,754,038 after less by unamortized discount expense and nil. Assumption of discount rate is LIBOR +3 which is based on interest rate on a similar loan Tranche A Loan taken over by PT. Ungaran Sari Garments. No collateral is pledged for Tranche C loan. 20 PAYABLES TO RELATED PARTIES SHORT TERM LOAN: PT Buana Indah Garments 6,347,600 - 700 - Sub total 6,347,600 - 700 - LONG TERM LOAN: PT Ungaran Sari Garments 72,544,000 - 8,000 - PT Buana Indah Garments 1,800,000 - 199 - Eastern Cotton Mills Ltd - 8,991,000 - 1,000 Genaire Enterprises Inc - 16,331,530 - 1,816 Director - 1,785,949 - 199 Sub total 74,344,000 27,108,479 8,199 3,015 Total loan 80,691,600 27,108,479 8,899 3,015 On 2010, the entity has a loan from the shareholders, which are Eastern Cotton Mills Ltd and Genaire Enterprise Inc. which total to US 1,000 and US 1,816 each. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 131 130 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated Eastern Cotton Mills Ltd dan Genaire Enterprises Inc transferred their loan to Radmet Concept Investment Limited based on Sale and Purchase and Assignment Agreement dated June 15, 2011. The loan that transferred to Radmet Concept Investment Limited consist of: • Eastern Cotton Mills Ltd loan amounted to US 1,000 • Genaire Enterprises Inc loan amounted to US 1,816 Based on Deed no 107 dated Agust 23, 2011 the general meeting of entity’s shareholders approved loan conversion of Radmet Concept Investment Limited amounted to US 2,816 or equivalent to Rp 24,083,237 to share capital Note 24. PT Ungaran Sari Garments On December 14, 2011, PT Ungaran Sari Garments took over Entity’s Tranche A loan from Gillespie International Limited. Upon the loan transferred, Entity signed Credit Facility Agreement with PT Ungaran Sari Garments dated December 27, 2011. In the Agreement, the Entity obtained loan amounted to US 8,000 with interest rate LIBOR+3. Term of this loan is six years and will be due on November 30, 2017. Based on payment schedule, installment will be paid each year and payment start on November 30, 2013 amounted to US 1,600. Collateral for this loan are as follows: • Mortgage over land and building factory at Jl. Soekarno Hatta No 23 Probolinggo, East Java - Indonesia, under land certificate HGB no 1 Curahgrinting and HGB no 1 Kanigaran for the amount of US 15,000 registered under the name of PT Eratex Djaja Tbk. Outstanding of PT Ungaran Sari Garments long term loan as of December 31, 2011 and 2010 amounted to US 8,000 or equivalent to Rp 72,544,000 and nil, respectively. PT Buana Indah Garments Short term loan: The Entity obtained loan at December 21, 2011 from PT Buana Indah Garments amounted to US 700 with interest rate 4.5. Term of this loan will be due in February 20, 2012. Outstanding short term loan of PT Buana Indah Garments as of December 31, 2011 and 2010 amounted to US 700 or equivalent to Rp 6,347,600 and nil, respectively. TAXATION continued PAYABLES TO RELATED PARTIES continued 20 21

c. CORPORATE INCOME TAX