Furniture Export and Import Large manufacturers targeting export markets

162 In Indonesia, inventories manufactured in 2014 and 2015 had been cleared out in 2016 by Indonesian retailers and exporters. Euromonitor therefore projected a turnaround in manufacturing activities from 2017 onwards driven by growing domestic and export demand for wooden furniture products which are expected to lead to an increase in the wooden furniture manufacture value to IDR 24,860 billion in 2021. This represents a CAGR of 5.6 between 2017 and 2021. Table 5: Competitive Intelligence of Wooden Furniture Manufacturers in Indonesia, 2016 Manufacturers Ranking Wooden Furniture Market Share The Group 1 5.2 Company B 2 2.6 Company C 3 1.6 Company D 4 1.5 Company E 5 0.7 Source: Euromonitor analysis from trade interviews Top five local wooden furniture manufacturers making a mark The Group is the largest manufacturer of wooden furniture in Indonesia with a market share of 5.2 in 2016. The Group had maintained its top position in terms of wooden furniture market share during the historical review period. The Group is among the few vertically integrated manufacturers of wooden furniture with three factories in Indonesia. The company owns two forest concessions, fully equipped manufacturing facilities and a retail store located in Surabaya. The company is fully certified to the various domestic and foreign export requirements including FSC certification and Indonesian Timber Legality Assurance System and implements sustainable overall recycling practices at every step of the process.

D. Furniture Export and Import Large manufacturers targeting export markets

It is conceivable that larger wooden furniture manufacturers including those in Indonesia would aim to expand beyond their domestic markets and export their products to other markets, especially the US and European countries. As countries such as the US and Britain prepare to implement new trade policies, anti-dumping practices and import tax readjustments, smaller exporting countries like Indonesia, Vietnam and Malaysia are expected to be beneficiaries. The reliance on importing a large volume of furniture from any one country is against best practices of sourcing. Customers in importing countries increasingly use multiple vendors from multiple countries to obtain best prices and quality and also to lower risk of shortages or reliance on a single source. According to trade sources, Indonesian manufacturers have received increased trade inquiries from foreign buyers especially those from the US and Britain. Wooden furniture imports into US have seen a rise in the past three years especially with respect to wooden office and kitchen items. 163 D.1. Import of Wooden Furniture Items into the US Table 6: Wooden Furniture Imports into US, 2013-2016 Furniture Imports AS Trade Value USD mn CIF [Historic 2013 - 2016] HS Code Items 2013 2014 2015 2016 940330 Wooden office furniture 864 902 964 1,040 940350 Wooden bedroom furniture 3,345 3,513 3,815 3,699 940340 Wooden kitchen furniture 1,018 1,192 1,453 1,648 940360 Other wooden furniture 5,142 5,528 5,965 5,956 Source: Contrade US furniture imports subject to currency fluctuations Total imports of wooden furniture into US have increased from 2014 through 2016, with total import value amounting to USD 12.3 billion in 2016 representing a CAGR of 5.3 over the three year historical review period. The People’s Republic of China was the largest exporter of wooden furniture to US, accounting for approximately one-third USD 4.6 billion of total wooden furniture imports into US as of 2016. Vietnam, Canada, Malaysia, Mexico, Italy and Indonesia were the next few largest exporters of wooden furniture in terms of export value. Imports of wooden furniture from Indonesia to US fell by 10.2 in 2016, even as overall US imports of wooden furniture marginally increased by 1.2 in the same year. US imports of wooden furniture from neighboring Asian countries, namely the People’s Republic of China and Vietnam marginally increased by 0.3 and 2.1 in 2016 respectively, partly owing to the currency depreciation of these countries against the US dollar, as opposed to the marginal appreciation of the Indonesian Rupiah of 0.7 in 2016, as well as higher intensity of promotional activities from these top exporting countries in 2016. D.2. Export of Wooden Furniture Items Table 7: Wooden Furniture Exports fromIndonesia, 2013-2016 Wooden Furniture Export Trade Value USD mn FOB Historic 2013 - 2015 Kode HS Items 2013 2014 2015 940330 Wooden office furniture 34.88 36.69 28.90 940350 Wooden bedroom furniture 163.49 150.76 158.88 940340 Wooden kitchen furniture 41.06 38.22 37.18 940360 Other wooden furniture 780.19 824.68 822.66 Source: Contrade Indonesian wooden bedroom furniture exports outperforming within segments Overall exports of wooden furniture from Indonesia marginally declined by 0.3 in 2015 due to declines in demand from Japan and France which were the second and the third largest export markets for Indonesian wooden furniture in 2015. Indonesian wooden furniture exports to Japan and France declined by 20.4 and 10.6 in 2015 respectively. The marginal depreciation of the US dollar against the Indonesian Rupiah also in part contributed to the dip in exports of wooden furniture to the US in 2016. Exports of wooden bedroom furniture from Indonesia however increased by 5.4 in 2015, outperforming exports of other segments of the wooden furniture markets. 164 X. EQUITY The following sets out the Company’s equity positions derived from andor calculated based on the Company’s consolidated financial statements as of December 31, 2016, 2015, and 2014, and for the years ended on those dates, which were audited by Teramihardja, Pradhono and Chandra Rödl Partner, Registered Public Accountants. The auditor’s report dated April 28, 2017, which was unmodified and signed by Agustina Felisa, and with an emphasis of matter in relation to the change in the functional currency of the Company and certain Subsidiaries from USD to IDR. In Rupiah Description December 31 2014 2015 2016 EQUITY Equity attributable to the equity holders of the parent company Share capital - par value of Rp100 per share in 2016, and Rp1,000,000 per share in 2015 and 2014 Authorized capital - 20,000,000,000 shares in 2016, 250,000 shares in 2015 and 2014 Issued and fully paid-in capital - 5,000,000,000 shares in 2016, 195,000 shares in 2015, and 100,000 shares in 2014 100,000,000,000 195,000,000,000 500,000,000,000 Additional paid-in capital 119,045,697,456 24,045,697,456 25,093,405,789 Exchange difference due to translation of financial statements 105,769,457,388 141,425,224,187 141,425,224,187 Revaluation surplus of fixed assets - net 155,811,192,447 139,866,947,544 640,440,950,720 Differences equity transactions with non-controlling interest 510,692,166 510,692,166 1,763,749,431 Retained earnings 95,450,012,909 165,264,491,867 95,685,208,599 Sub-total 576,587,052,366 666,113,053,220 1,404,408,538,726 Non-controlling interests 19,771,319,807 40,870,174,662 25,624,443,100 TOTAL EQUITY 596,358,372,173 706,983,227,882 1,430,032,981,826 The Company plans to conduct an Initial Public Offering of 1,250,000,000 Offering Shares or 20.0 of the issued and fully paid-in capital after the Initial Public Offering with a nominal value of Rp100 per share and offering price of Rp260 per share. The following sets out the Company’s pro forma equity position as of December 31, 2016, after taking into account the impact of the Initial Public Offering: TABLE OF PRO FORMA EQUITY AS OF DECEMBER 31, 2016 In Rupiah Description Share Capital Additional Paid- in Capital Issuance Costs Translation Adjustment –Gain on Revaluation of Fixed Assets Effect of Changes in Equity Transaction of Subsidiaries Retained Earnings Non- Controlling Interest Total Equity Equity based on the financial statements as of December 31, 2016 500,000,000,000 25,093,405,789 - 141,425,224,187 640,440,950,720 1,763,749,431 95,685,208,599 25,624,443,100 1,430,032,981,826 Initial Public Offering of 1,250,000,000 shares, having a nominal value of Rp100 per share, which shall be offered at Rp260 per share. 125,000,000,000 200,000,000,000 12,628,815,000 - - - - - 312,371,185,000 Pro forma equity position as of December 31, 2016, subsequent to the Initial Public Offering 625,000,000,000 225,093,405,789 12,628,815,000 141,425,224,187 640,440,950,720 1,763,749,431 95,685,208,599 25,624,443,100 1,742,404,166,826 165 XI. DIVIDEND POLICY All issued and fully paid ordinary registered shares, including the Offering Shares offered in this Public Offering, shall have the same and equal rights, including the rights to receive dividend distributions. The Company plans to distribute cash dividends at least once every year. The amount of dividend is linked to the Company’s profit for the relevant fiscal year, with due consideration given to the Company’s financial soundness and without prejudice to the rights of shareholders in a GMS to determine otherwise in accordance with the provisions of the Company’s Articles of Association. Pursuant to the laws of the Republic of Indonesia, any announcement of dividend distribution shall be made based on the resolution of shareholders in the Annual GMS based on recommendation from the Directors. The Company may distribute cash dividends in a year where the Company records positive retained earnings. Any proposal, amount and payment of dividends shall be authorized by the Board of Commissioners and Directors of the Company and shall be subject to the approval of GMS. The amount of dividends is subject to a number of factors, including but not limited to, net profit, reserve availability, capital expenditure requirements, operating results and cash balance. The above factors will ultimately depend on a number of conditions, including but not limited to, the successful implementation of business and financial strategies, which are in turn affected by competition and regulation, general economic conditions and other conditions that are specific to the Company or the Company’s business. Most of the above factors referred to above are beyond the Company’s control. Taking into consideration the above factors, the Company’s management intends to propose to the Annual GMS to resolve that the payout ratio of cash dividends to total net profit be set at a maximum of 35.0, effective from the fiscal year of 2017. Dividends received by the shareholders, whether Indonesian or foreign shareholders, shall be subject to income tax on dividends based on the prevailing articles of Indonesian Income Tax Law, namely Law No. 36 of 2008 concerning the Fourth Amendment to Law No. 7 of 1983 on Income Tax, or in accordance with the applicable terms and conditions of prevailing tax agreements between Indonesia and each country. The Company has obtained the approval to conduct an Initial Public Offering from all of the Company’s Shareholders as set out in the Deed No. 172017. Pursuant to the negative covenants related to the Company’s plan to conduct the Initial Public Offering, which are imposed by the Company’s credit agreements entered into by the Company and its Creditors, the Group has obtained the necessary waivers in relation to the negative covenants on dividend distributions and the implementation of the Initial Public Offering as stated in i BNI Letter No. LMC22.5286R dated April 3, 2017 regarding Approval and Support of Initial Public Offering of PT Integra Indocabinet; Ii BNI Letter No. LMC22.5354R dated April 25, 2017 regarding Approval and Support of Initial Public Offering of PT Integra Indocabinet and iii Exim Letter No. BS.0090PBS042017 dated April 28, 2017 regarding the Agreement on the Amendment of Terms and Conditions. 166 XII. TAXATION

A. Tax Applicable to Shareholders