NET EMPLOYEE BENEFITS EXPENSE EMPLOYEE BENEFIT LIABILITIES

TAXATION continued 21

d. DEFERRED TAX ASSETS LIABILITIES

CONTINUING OPERATION DEFERRED TAX ASSETS - THE ENTITY: Employee benefit liabilities 2,723,314 2,688,838 300 299 Provision for declining in value of receivables 103,952 83,850 11 9 Provision for investment 69,375 69,375 8 8 Provision for declining in value of inventories 981,878 1,122,827 108 125 Total deferred tax assets 3,878,519 3,964,890 428 441 DEFERRED TAX LIABILITIES - THE ENTITY: Fixed assets 1,196,393 1,158,860 132 129 Intangible assets 275,103 302,812 30 34 Financial liability which measure a fair value 2,180,490 - 240 - Net deferred tax assets 226,533 2,503,218 25 278 DISCONTINUING OPERATION Total deferred tax assets, net Note 4 103,668 104,011 11 12 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US

e. TAXES RECEIVABLE

The balances of taxes receivable as of December 31, 2011 and 2010 are as follows: Overpayment of corporate income tax year 2009 - 338,283 - 38 year 2011 163,091 - 18 - Total Entity taxes receivable 163,091 338,283 18 38 Total taxes receivable, Subsidiary - 79,896 - 9 Total consolidated taxes receivable 163,091 418,179 18 47 f. TAX ASSESSMENTS In 2011, the Entity received Underpayment Tax Assessment SKPKB on value added tax, income tax article 21 and income tax article 23 with overall amounted to Rp 185,755. Otherwise, the Entity also received Overpayment Tax Assessment SKPLB for income tax dated June 16, 2011 and stated overpayment for the year 2009 amounted to Rp 338,283. For the SKPLB, the Entity applied for overbooking SKPKB above and the rest amounted to Rp 152,527 has received by Entity on August 5, 2011. In 2010, PT Asiatex Garmindo, Subsidiary received several tax assessments, including Underpayment Tax Assessment SKPKB dated August 29, 2010 for the year 2007 on value added tax amounted to Rp 16,593; Underpayment Tax Assessment SKPKB dated August 29, 2010 for the year 2007 on Income Tax article 23 amounted to Rp 545,855; as well as Underpayment Tax Assessment SKPKB dated August 29, 2010 for the year 2007 on Income Tax article 26 amounted to Rp 205,336. In 2011, PT Asiatex Garmindo, Subsidiary received several tax assessment, including Underpayment Tax Assessment SKPKB on income tax article 23 dated March 16, 2011 and stated underpayment on income tax article 23 for the year 2009 amounted to Rp 75,140 and Underpayment Tax Assessment SKPKB on value added tax dated March 16, 2011 and stated underpayment for the year 2009 amounted to Rp 549,377. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US EMPLOYEE BENEFIT LIABILITIES The Entity provide benefits for their employees who achieve the retirement age at 55 based on the provisions of Labor Law No. 132003 dated March 25, 2003 with Projected Unit Credit Method. The benefits are unfunded. The following tables summarize the components of net employee benefits expense recognized in the consolidated statements of income and amounts recognized in the consolidated statements of financial position for the employee benefit liability as determined by an independent actuary, PT Bumi Dharma Aktuaria, in their reports dated January 13, 2012.

a. NET EMPLOYEE BENEFITS EXPENSE

Current service cost 1,106,215 958,198 126 106 Interest cost 920,699 895,826 105 100 Actuarial gain losses 779,843 615,153 89 68 Net employee benefits expense 1,247,071 1,238,871 142 138 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 22 NON-CONTROLLING INTERESTS

b. EMPLOYEE BENEFIT LIABILITIES

Present value of employee benefits obligation-vested 14,152,048 11,863,805 1,561 1,320 Unrecognized actuarial gain loss 3,258,790 1,108,455 360 124 Total employee benefit liabilities 10,893,257 10,755,350 1,201 1,196 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US Movement of provision for employee benefit liabilities during the years ended December 31, 2011 and 2010 are as follows: Balance at beginning of the year 10,755,350 10,194,583 1,186 1,134 Add: Net employee benefits expense during the year 1,247,071 1,238,871 138 138 Less: Utilization during the year 1,109,163 678,104 123 76 Balance at end of the year 10,893,257 10,755,350 1,201 1,196 The principal assumptions used in determining the employee benefit liabilities are as follows: Normal retirement age 55 55 Rate of interest per annum 7 9.5 Salary increases per annum 5 8 Mortality table TMI-2000 TMI-2000 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 2011 2010 23 The account represents non-controlling interest due to investment in Subsidiaries, which is PT Asiatex Garmindo and PT Eratex Garment are as follows: Share capital 3,222,260 3,222,260 355 358 Accumulated losses 3,013,418 3,222,260 332 358 Total non-controlling interest in Subsidiaries net assets 208,842 - 23 - 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 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 135 134 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 SHARE CAPITAL Based on notarial deed No. 79 dated June 15, 2004 prepared by Sutjipto, S.H., Public Notary in Jakarta, the Entitys authorized capital was increased to Rp 196,472,000 consisting of 392,944,000 shares with nominal value of Rp 500 full Rupiah amount per shares. Based in notarial deed No. 107 dated Agust 23, 2011 prepared by Sutjipto, S.H.,M.Kn., Public Notary in Jakarta, General Meeting of Shareholders to convert Entitys loan to Radmet Concept Investment Limited amounted to US 2,816 or equivalent to Rp 24,038,237 into share capital. For the changes, issued and fully paid-up shares has been increased to Rp 73,156,237 consist of 146,312,474 shares with nominal value of Rp 500 full Rupiah amount per shares. In 2010, issued and fully paid-up shares amounted to Rp 49,118,000 consist of 98,236,000 shares with nominal value of Rp 500 full Rupiah amount per shares. 24 ADDITIONAL PAID-IN CAPITAL, NET Additional paid-in capital consists of premium on share capital which was received over the nominal value from sale of shares to the public, net of the amount transferred to share capital in 1994 of Rp 24,559,000. REVENUE Akun ini terdiri dari: The composition of the Entitys shareholders as of December 31, 2011 are as follows: Radmet Concept Investment Limited 48,076,474 32.86 24,038,237 2,651 PT Buana Indah Garments 31,012,000 21.20 15,506,000 1,710 South Indonesian Holdings Ltd 22,103,100 15.11 11,051,550 1,219 PT Wakala Korpora Indonesia 10,500,000 7.18 5,250,000 579 Public holders 34,620,900 23.66 17,310,450 1,909 Total 146,312,474 100.00 73,156,237 8,068 The composition of the Entitys shareholders as of December 31, 2010 are as follows: Eastern Cotton Mills Ltd 24,559,000 25.00 12,279,500 1,366 South Indonesian Holdings Ltd 22,103,100 22.50 11,051,550 1,229 PT Wakala Korpora Indonesia 10,500,000 10.69 5,245,800 583 Public holders 41,073,900 41.81 20,541,150 2,285 Total 98,236,000 100.00 49,118,000 5,463 Number of Issued and Issued and shares issued Percentage paid-up capital paid-up capital Shareholders and paid of ownership amount Rp amount US Number of Issued and Issued and shares issued Percentage paid-up capital paid-up capital Shareholders and paid of ownership amount Rp amount US Third parties: Export 250,386,027 229,559,554 28,541 25,532 Local 8,984,927 3,550,706 1,024 395 Total revenue 259,370,954 233,110,260 29,565 25,927 In 2011, sales transaction that exceeded 10 of the total net sales amounted to Rp 107,167,867 was made to Ann Taylor, amounted to Rp 40,088,084 was made to Polo Ralph Laurent and amounted to Rp 26,459,856 was made to VF Europe. In 2010, sales transaction that more than 10 from the total net sales amounted to Rp 68,291,509 was made to Ann Taylor, Rp 59,761,540 was made to Esprit Europe and Rp 34,386,029 was made to Philips Van Heusen. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 25 26 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 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 COST OF REVENUE 27 Raw materials used 157,930,340 141,509,321 18,002 15,739 Direct labor 56,881,223 68,564,888 6,484 7,627 Manufacturing expenses Note 28 33,307,044 30,587,912 3,797 3,402 Goods in process inventory: At beginning of the year 5,401,156 4,561,261 616 507 At end of the year 15,746,340 5,401,156 1,795 601 Cost of goods manufactured 237,773,423 239,822,226 27,103 26,674 Finished goods inventory: At beginning of the year 10,756,124 17,335,436 1,206 1,928 At end of the year 21,724,580 10,756,124 2,476 1,196 Provision for declining in value - 56,906 - 6 Others - 104,810 - 12 Total cost of revenue 226,804,967 246,353,633 25,853 27,400 In 2011 and 2010, the Entity do not have any purchase transactions that exceeded 10 of the total net purchase. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US MANUFACTURING EXPENSES 28 Salary 5,867,345 5,826,075 669 648 Water and electricity 4,685,576 5,073,052 534 564 Handling charges 4,039,536 3,616,960 460 402 Power and coal 3,259,849 3,151,370 372 351 Depreciation and amortization 2,599,972 2,544,683 296 283 Repair and maintenance 2,040,618 1,531,871 233 170 Transportation 1,502,398 1,792,113 171 199 Processing charges 1,371,495 52,642 156 6 Machine parts 577,080 659,426 66 73 Factory supplies 863,678 1,044,096 98 116 Others 6,499,498 5,295,624 741 590 Total manufacturing expenses 33,307,044 30,587,912 3,797 3,402 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US SELLING EXPENSES 29 29 Freight 7,003,443 3,176,480 798 353 Handling charges 3,943,544 4,260,100 450 474 Transportation 1,098,685 1,070,270 125 119 Bank charges 681,950 1,231,558 78 137 Others 638,189 436,006 73 48 Total selling expenses 13,365,811 10,174,414 1,524 1,131 2011 2010 2011 2010 Rp Rp US US 137 136 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 BALANCE AND TRANSACTIONS WITH RELATED PARTIES GENERAL AND ADMINISTRATION EXPENSES 30 CONTINUING OPERATION Salaries and wages 10,578,385 11,297,881 1,206 1,257 Professional fees 2,409,500 3,454,694 275 384 Employee benefit 1,247,071 1,238,871 142 138 Communication 618,716 754,308 71 84 Depreciation and amortization 546,033 671,529 62 75 Rental 469,668 429,623 54 48 Travel 369,970 523,715 42 58 Insurance 320,985 465,349 37 52 Bank charges 266,402 326,111 30 36 Others 3,465,515 4,939,462 395 549 Total general and administration expenses 20,292,245 24,101,543 2,313 2,681 DISCONTINUING OPERATION Amortizations - 1,133 - Others - 25,268 - 3 Total general and administration expenses Note 4 - 26,401 - 3 Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US 31 The Entity, in the ordinary course of business, has various trade transactions with related parties including sales and purchases, which are conducted in the normal course of business and on normal terms and conditions. The nature of the relationship with the related parties is generally that of Entities under common control and associated Entities. The nature of relationships with related parties were as follows: Transactions with related parties used pricing policies and terms of the transaction as agreed by the parties. Material related party balances are as follows: Short term loan: PT Buana Indah Garments 6,347,600 - 700 - Long term loan: PT Ungaran Sari Garments 72,544,000 - 8,000 - PT Buana Indah Garments 1,800,000 - 199 - Total 80,691,600 - 8,899 - Percentage of total liabilities 29.93 For the year ended December 31, 2011 and 2010, there were no sales and purchase transaction to related parties. Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US PT Buana Indah Garments PT Ungaran Sari Garments Shareholders and the same key management personnel as the Entity The same key management personnel as the Entity Related Parties Relationships 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 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 ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 32 As of December 31, 2011, the Entity and its Subsidiaries had monetary assets and liabilities in foreign currencies as follows: CONTINUING OPERATION ASSETS: Cash and cash equivalents US 2 19,504 EURO 2,403 HKD 251 293,209 Trade receivables - third parties US 4,688 42,513,645 SGD 10 69,545 Other receivables - third parties US 77 700,220 Advance payments US 329 2,983,429 EURO 3,275 Prepaid expenses US 28 250,321 HKD 4 4,823 Guarantee deposits HKD 38 44,587 Total assets 46,884,964 Foreign currencies in thousand Rupiah LIABILITIES: Short-term loans US 9,880 89,587,824 Trade payables - third parties US 2,323 21,066,889 EURO 272 HKD 145 169,003 Other payables US 28 254,658 Accrued expenses US 174 1,577,245 Long-term loans US 6,038 54,754,039 Payable from related parties US 8,700 78,891,600 Total liabilities 246,301,530 Liabilities over assets, net 199,416,566 As of December 31, 2010, the Entity and its Subsidiaries had monetary assets and liabilities in foreign currencies as follows: CONTINUING OPERATION ASSETS: Cash and cash equivalents US 54 489,102 EURO 9 105,239 HKD 51 59,142 Trade receivables - third parties US 1,634 14,688,917 EURO 187 2,238,935 SGD 30 212,451 Other receivables - third parties US 62 557,434 EURO 984 Advance payments US 33 298,666 EURO 693 Tax receivables HKD 4 5,026 Prepaid expenses US 28 249,338 Guarantee deposits HKD 34 39,516 Total assets 18,945,443 Foreign currencies in thousand Rupiah 139 138 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 ASSETS AND LIABILITIES IN FOREIGN CURRENCIES continued 32 CONTINUING OPERATION LIABILITIES: Short-term bank borrowings US 12,981 116,712,796 EURO 206 2,466,195 HKD 390 450,709 Trade payables - third parties US 2,290 20,591,246 EURO 1 14,611 HKD 1,604 1,853,744 Other payables US 99 889,363 Accrued expenses US 74 663,870 HKD 29 33,407 Payable from related parties US 2,816 25,322,530 Long-term loans US 12,674 113,950,909 Total liabilities 282,949,380 Liabilities over assets, net 264,003,937 Foreign currencies in thousand Rupiah INFORMATION ON THE BUSINESS SEGMENT Field of operations: PT Eratex Djaja Tbk as the Parent Entity, operates in the integrated garment manufacturing, including garment making and other garment processing. PT Asiatex Garmindo and PT Eratex Garment are the Subsidiaries which has no activities during 2011 and 2010. PT Eratex Hongkong Ltd, as a Subsidiary which operating in general trading. ASA Partners Holdings Ltd, as a Subsidiary which has stated dissolved at December 14, 2011 Note 1.c. 33 REVENUE - INFORMATION BASED ON ENTITY: CONTINUING OPERATION PT Eratex Djaja Tbk 248,851,168 226,499,577 28,366 25,192 PT Eratex Hongkong Ltd 10,519,786 6,610,683 1,199 735 Total 259,370,954 233,110,260 29,565 25,927 Elimination - - - - Total 259,370,954 233,110,260 29,565 25,927 DISCONTINUING OPERATION PT Eratex Djaja Tbk - - - - Total - - - - 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 141 140 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 INFORMATION ON THE BUSINESS SEGMENT continued 33 REVENUE - INFORMATION BASED ON GEOGRAPHICAL TERRITORY: CONTINUING OPERATION Export 250,386,027 229,559,554 28,541 25,532 Local 8,984,927 3,550,706 1,024 395 Total 259,370,954 233,110,260 29,565 25,927 Elimination - - - - Total 259,370,954 233,110,260 29,565 25,927 DISCONTINUING OPERATION Local - - - - Total - - - - REVENUE - INFORMATION BASED ON PRODUCTS: CONTINUING OPERATION Garments 248,851,168 226,499,577 28,366 25,192 Others 10,519,786 6,610,683 1,199 735 Total 259,370,954 233,110,260 29,565 25,927 Elimination - - - - Total 259,370,954 233,110,260 29,565 25,927 DISCONTINUING OPERATION Textiles - - - - Total - - - - Dec 31, 2011 Dec 31, 2010 Dec 31, 2011 Dec 31, 2010 Rp Rp US US OPERATING INCOME LOSS - INFORMATION BASED ON ENTITY: CONTINUING OPERATION PT Eratex Djaja Tbk 5,955,329 48,191,715 697 5,360 PT Asiatex Garmindo 686,452 884,684 79 98 PT Eratex Hongkong Ltd 5,786,040 1,793,397 660 199 Total 855,741 47,283,002 98 5,259 Elimination 236,328 236,328 27 26 Total 1,092,068 47,519,330 125 5,285 DISCONTINUING OPERATION PT Eratex Djaja Tbk - 26,401 - 3 Total - 26,401 - 3 INFORMATION ON THE BUSINESS SEGMENT continued 33 OPERATING INCOME LOSS - INFORMATION BASED ON PRODUCTS: CONTINUING OPERATION Garments 6,641,781 49,076,399 758 5,458 Others 5,786,040 1,793,397 660 199 Total 844,741 47,283,002 98 5,259 Elimination 236,328 236,328 27 26 Total 1,092,068 47,519,330 125 5,285 DISCONTINUING OPERATION Textiles - 26,401 - 3 Total - 26,401 - 3 NET INCOME LOSS - INFORMATION BASED ON ENTITY: CONTINUING OPERATION PT Eratex Djaja Tbk 85,709,004 82,905,949 9,770 9,221 PT Asiatex Garmindo 623,591 34,293,167 71 3,814 PT Eratex Hongkong Ltd 811,003 590,812 92 66 PT Eratex Garment 7,511 39,898 1 4 Total 85,903,927 48,061,868 9,792 5,346 Elimination 1,298,888 227,068 150 25 Total 84,605,139 48,288,936 9,642 5,371 DISCONTINUING OPERATION PT Eratex Djaja Tbk 18,731 211,869 2 24 Total 18,731 211,869 2 24 NET INCOME LOSS - INFORMATION BASED ON PRODUCTS: CONTINUING OPERATION Garments 85,085,413 48,612,782 9,699 5,407 Others 818,514 550,914 93 61 Total 85,903,927 48,061,868 9,792 5,346 Elimination 1,298,888 227,068 150 25 Total 84,605,039 48,288,936 9,642 5,371 DISCONTINUING OPERATION Textiles 18,731 211,869 2 24 Total 18,731 211,869 2 24 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 143 142 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 MANAGEMENT RISK The main financial risk encountered by the Entity are interest rate risk, liquidity risk, currency risk, and interest rate risk. The Entity try to minimize the potential negatif impact of the risks by using risk management.

a. Interest rate risk