Establishment and General Information

The consolidated financial statements presented in US Dollars are solely for the convenience of the reader and translated from financial statements in Rupiah using exchange rates as set out in Note 1d. See accompanying notes to consolidated financial statements which form an integral part of these consolidated financial statements CONTINUED OPERATION CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers 233,055,791 216,983,460 25,701 24,133 Cash paid to suppliers 181,001,314 174,931,989 19,960 19,456 Cash paid to employees 79,420,987 86,359,908 8,758 9,605 Cash paid for operating expenses 26,890,829 20,475,902 2,965 2,277 Cash generated used operationing 54,257,340 64,784,339 5,982 7,205 Income tax payment 44,832 2,829,144 5 315 Cash received from paid to others 642,684 896,210 71 100 Net cash used for operating activities 54,855,192 61,058,985 6,048 6,791 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of fixed assets 4,864,769 817,022 536 91 Interest received 104,804 7,552 12 1 Proceeds from sale of fixed assets 37,500 12,729,972 4 1,416 Payment of fixed assets sales advance - 571,017 - 64 Received from other assets - 56,021 - 7 Net cash provided by used for investing activities 4,722,465 11,405,506 520 1,269 CASH FLOWS FROM FINANCING ACTIVITIES: Proceed from short-term and long-term bank loans 64,021,058 50,839,968 7,060 5,655 Interest paid 7,705,113 10,952,695 850 1,218 Proceed from payable to related parties 4,862,361 8,870,186 536 986 Net cash provided by used for financing activities 61,178,306 48,757,459 6,746 5,423 NET INCREASE DECREASE IN CASH AND CASH EQUIVALENTS CONTINUING OPERATION 1,600,650 896,020 177 99 DISCONTINUING OPERATION Net cash used in operating activities 205,429 427,083 23 48 Net cash provided by investing activities - 104,209 - 12 Net cash used in financing activities - - - - NET INCREASE DECREASE IN CASH AND CASH EQUIVALENTS FROM DISCONTINUING OPERATION 205,429 322,874 23 36 NET INCREASE DECREASE IN CASH AND CASH EQUIVALENTS FROM ALL OPERATION 1,395,221 1,218,894 154 135 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5 951,842 2,170,736 105 241 CASH AND CASH EQUIVALENTS AT END OF YEAR 5 2,347,063 951,842 259 106 ACTIVITIES NOT AFFECTING CASH FLOWS: Loan waiver 90,568,616 - 9,988 - Issuance new shares 24,038,237 - 2,651 - Effect of implementation PSAK 5055 Revised 2006 8,920,589 - 984 - Notes 2011 2010 2011 2010 Rp Rp US US 01 GENERAL

a. Establishment and General Information

P Notarial Deed No.7 dated October 12, 1972 based on Deed prepared by Koerniatini Karim, Public Notary in Jakarta. The Entitys Articles of Association have been amended several times, made on June 15, 2004 by Notarial Deed No. 79 prepared by Sutjipto, S.H., Public Notary in Jakarta concerning the change of the Entitys name from PT Eratex Djaja Ltd Tbk to PT Eratex Djaja Tbk and an increase in the authorized capital to Rp 196,472,000. This amendment was approved by the Minister of Justice and Human Rights of the Republic of Indonesia under decision letter No. C-21010 HT.01.04.TH.2004 dated August 20, 2004; and the latest amendment was made on August 23, 2011, by Notarial Deed No.107 prepared by Aulia Taufani, S.H., Notary in Jakarta concerning the change of notarial deed of Entitys amendment due to increasing issued and fully paid-up shares from 98,236,000 shares to 146,312,474 shares. On September 15, 2011, the notarial deed has been approved by the Minister of Justice and Human Rights with decision letter number AHU-AH.01.10-29187. The activities of the Entity are integrated textile manufacturing, including spinning, weaving, finishing, garment making and sells its products in both local and export markets. The Entity commenced its commercial operations in 1974. The Entitys factory is located at Jl. Soekarno-Hatta No.23, Probolinggo, East Java. As of December 31, 2011 and 2010, the Entity had 2,404 employees and 2,485 employees un-audited, respectively. The Entitys registered office is in Jakarta with an executive office in Surabaya, and a branch in Hongkong opened in 1990. On August 21, 1990, the Entity registered its shares on the Stock Exchange of Indonesia in accordance with approval of the Minister of Finance of the Republic of Indonesia no. SI-125SHMMK.101990 dated July 14, 1990. Since 2000, all shares have been registered on the Indonesia Stock Exchange.

b. Board of Commissioners, Board of Directors and Independent Audit Committee