Convenient Translation of Financial Statements in Rupiah to United States Dollars Currency Principles of Consolidation continued

GENERAL continued

c. Subsidiaries Companies

The consolidated Subsidiaries and the percentage of equity held as of December 31, 2011 are as follows: PT Asiatex Garmindo PT Eratex Hongkong Ltd PT Eratex Garment Jakarta Hongkong Jakarta Integrated garment manufacturing General trading Integrated garment manufacturing 95.15 100 99 1999 2005 Pre-operating Subsidiaries Domicile Nature of business Percentage of ownership Year commencing of operation 01 PT Asiatex Garmindo ASA Partners Holdings Ltd PT Eratex Hongkong Ltd PT Eratex Garment Jakarta British Virgin Islands Hongkong Jakarta Integrated garment manufacturing Sub-holding company General trading Integrated garment manufacturing 93.55 100 100 99 1999 2000 2005 Pre-operating The consolidated Subsidiaries and the percentage of December 31, 2010 as follows: Subsidiaries Domicile Nature of business Percentage of ownership Year commencing of operation SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting principles applied consistently in the preparation of the consolidated financial statements for the years ended December 31, 2011 and 2010 are as follows:

a. Basis of Preparation of Consolidated Financial Statements

The consolidated financial statements have been prepared in accordance with Indonesian Financial Accounting Standards in Indonesia “SAK” comprising of the Statements of Financial Accounting Standards PSAK and Interpretation Financial Accounting Standards ISAK issued by the Board of Financial Accounting Standards of the Indonesian Institute of Accountants and rules established by the Capital Market Supervisory Agency BAPEPAM-LK. As disclosed further in the relevant succeeding notes, several amended and published accounting standards were adopted effective January 1, 2011. Basic preparation of consolidated financial statements, except for the consolidated statement of cash flow is the accrual basis. The consolidated financial statements, presented in thousands of Rupiah and the translation in thousands of United States dollars, unless otherwise stated, have been prepared on the accrual basis using the historical costs, except for certain accounts which are measured on the basis described in accounting policies of the related accounts. The consolidated statements of cash flows have been prepared using the direct method in accordance with the decision letter No. Kep-06PM2000 dated March 13, 2000 of the Capital Market Supervisory Board.

b. Principles of Consolidation

The consolidated financial statements, include the Entity’s financial statements and the financial statements of all Subsidiaries. From January 1, 2011 Effective January 1, 2011, the Entity and its Subsidiaries retrospectively adopted PSAK No. 4 Revised 2009, “Consolidated and Separate Financial Statements”, except for the following items that were applied prospectively: - Losses of a Subsidiary that result in a deficit balance to non-controlling interests “NCI”; - Loss of control over a Subsidiary; - Change in the ownership interest in a Subsidiary that does not result in a loss of control; - Potential voting rights in determining the existence of control; - Consolidation of a Subsidiary that is subject to long term restriction. PSAK No. 4 Revised 2009 regulate the preparation and presentation of consolidated financial statements of a group of entities which are under the control of a parent entity, and accounting for investments in subsidiaries, jointly controlled entities and associates when an entity separate financial statements are presented as additional information. As described herein, the adoption of PSAK No. 4 Revised 2009 has insignificant impact on the financial reporting, including the related disclosures in the consolidated financial statements. All significant interentity accounts and transactions have been eliminated. Subsidiaries are fully consolidated from the date of acquisitions, being the date on which the Entity obtained control, and continue to be consolidated until the date such control ceases. Control is presumed to exist if the Entity owns, directly or indirectly through Subsidiaries, more than half of the voting power of an entity. Control also exists when the parent owns half of less of the voting power of an entity when there is: - Power over more than half of the voting rights by virtue of an agreement with other investors; - Power to govern the financial and operating policies of the entity under a statute or an agreement; - Power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or; - Power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body. Losses of a non-wholly owned Subsidiary are attributed to the NCI even if that results in a deficit balance. 02 Total assets of Subsidiaries as at December 31, 2011 and 2010 are as follows: Dec 31, 2011 Dec 31, 2010 2011 2010 Rp Rp US US PT Asiatex Garmindo 2,426,693 521,327 268 58 ASA Partners Holdings Ltd - 1,880 - PT Eratex Hongkong Ltd 4,687,692 6,049,655 517 673 PT Eratex Garment 682,948 675,437 75 75 PT Asiatex Garmindo and PT Eratex Garment currently do not have any activities. Based on amendment of Notarial deed no 145 dated November 29, 2011 which contains decision of changes in statute of PT Asiatex Garmindo Subsidiary general meeting of shareholders has approved has conversion of subsidiary’s loan to PT Eratex Djaja Tbk Entity amounted to Rp 16,494,672 to share capital. For above changes, issued and fully-paid shares has been increased to Rp 66,294,672 comprise of 132,589,344 shares with nominal value of Rp 500 full Rupiah amount per share. In 2010, issued and fully-paid shares amounted to Rp 49,800,000 comprise of 99,600,000 shares with nominal value of Rp 500 full Rupiah amount per share. Based on Certificate of Dissolution section 208 dated December 14, 2011 ASA Partners Holdings Ltd Subsidiary was stated dissolved. Upon the dissolution, Entity recorded gain from disposal of investment amounted to Rp 13,643,639 and writen off Subsidiariess receivable amounted to Rp 12,685,794.

d. Convenient Translation of Financial Statements in Rupiah to United States Dollars Currency

The English version of the consolidated financial statements of the Entity and its Subsidiaries, solely for the convenience of readers, have been translated into United States Dollars at the rate of Rp 9,068 for Consolidated Statements of Financial Position Consolidated Statement of Changes in Equity Capital Deficiency and Consolidated Statement of Cash Flow in December 31, 2001; otherwise Consolidated Statements of Comprehensive Income translated into United States Dollars at the rate of Rp 8,773 for 2011. While in December 31, 2010 consolidated financial statements have been translated into United States Dollars at the rate of Rp 8,991 to US 1.00, which being the middle rate of Bank Indonesia on those current date. The translation should not be construed as a representation that any or all of the amounts shown could be converted into United States Dollars at this or any other exchange rates. 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 107 106 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 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued 02 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

b. Principles of Consolidation continued

In case of loss of control over a Subsidiary, the Group: - Derecognizes the assets including goodwill and liabilities of the Subsidiary; - Derecognizes the carrying amount of any NCI; - Derecognizes the cummulative translation differences, recorded in equity, if any; - Recognizes the fair value of the consideration received; - Recognizes the fair value of any investment retained; - Recognizes any surplus or deficit in profit or loss; and - Reclassifies the parents share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate. NCI represents the portion of the profit or loss and net assets of the Subsidiaries not attributable, directly or indirectly, to the Entity, which are presented in consolidated statements of comprehensive income and under the equity section of the consolidated statements of financial position, respectively, separately from the corresponding portion attributable to the equity holders of the parent entity. Prior to January 1, 2011 The proportionate share of the minority shareholders in net assets and net income or loss of the consolidated Subsidiaries were previously presented as minority interests in net assets of Subsidiaries in the consolidated statements of financial position and as minority interests in net loss income of Subsidiaries in the consolidated statements of comprehensive income. The losses applicable to the minority interests in a Subsidiary may have exceeded the minority interests in the equity of the Subsidiary. The excess and any further losses applicable to the minority interest were absorbed by the Entity as the majority shareholder, except to the extent that the minority interests had other long-term interest in the related Subsidiary or had binding obligations for, and were able to make good of, the losses. If the Subsidiary subsequently reported profits, all such profits were allocated to the majority interest holder, in this case, the Entity, until the minority interests share of losses previously absorbed by the Entity were recovered.

c. Foreign Currency Translation