Sampoerna Agro Tbk.

Consolidated Financial Statements

Nine Months Ended September 30, 2007 and 2006

PT SAMPOERNA AGRO Tbk

AND SUBSIDIARIES SEPTEMBER 30, 2007 AND 2006

Table of Contents

Page

Consolidated Balance Sheets ………. 1-3

Consolidated Statements of Income ……….. 4

Consolidated Statements of Changes in Equity ..……….… 5 Consolidated Statements of Cash Flows ……….. 6-7 Notes to the Consolidated Financial Statements ………. 8-47

Notes 2 0 0 7 2 0 0 6

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ASSETS

CURRENT ASSETS

Cash and cash equivalents 2e,4 364,618,699 71,496,895

Trade receivables - third parties 5 - 2,788,971

Other receivables : 6

Third parties 15,643,661 1,109,915

Related parties 2p,6,25 177,278,970 -

Inventories 2f,7 93,631,201 40,902,165

Prepaid taxes 14a 6,839,613 481,423

Prepayments, advances and

other current assets 2g 3,011,537 1,364,535

TOTAL CURRENT ASSETS 661,019,681 118,143,904

NON-CURRENT ASSETS

Advances for Plasma plantations, net 2k,8 51,399,055 34,739,643

Deferred tax assets, net 14f 17,203,231 3,158,999

Plantation assets: 2h,2j

Mature plantations,

(net of accumulated amortization of Rp124,998,402 in 2007 and

Rp57,704,979 in 2006) 9a 464,373,173 124,187,820

Immature plantations 9b 112,663,696 17,431,628

Fixed assets 2i,2j

(net of accumulated depreciation of Rp260,170,960 and impairment of Rp7,442,177 in 2007, accumulated

depreciation Rp190,078,156 in 2006) 10 407,880,736 307,053,322

Deferred land right cost 2m 19,657,060 13,231,116

Goodwill 3 7,877,679 -

Claim for tax refund 2n,14d 800,823 3,616,037

Deferred charges 2m 5,524,612 -

Guarantee deposits 4 166,247,500 6,679,500

Nursery 2l 8,222,343 8,196,584

TOTAL NON-CURRENT ASSETS 1,261,849,908 518,294,649

TOTAL ASSETS 1,922,869,589 636,438,553

Notes 2 0 0 7 2 0 0 6

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LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES

Short term bank loan 11 150,000,000 -

Trade payables 12 143,530,385 48,855,457

Taxes payable 2n,14b 22,290,459 34,170,099

Sales advances 13 35,113,098 6,685,018

Accrued expenses 15 18,390,111 10,042,263

Due to related parties 2p,25a 6,708,337 -

Current portion of bank loan 16 - 28,250,000

TOTAL CURRENT LIABILITIES 376,032,390 128,002,837

LONG-TERM LIABILITIES

Long term bank loan - net of current portion 16 192,000,000 90,606,175

Provision for employee service

entitlements 2o,17 1,192,473 9,087,296

Other long-term liabilities 2p - 17,797

TOTAL LONG-TERM LIABILITIES 193,192,473 99,711,268

TOTAL LIABILITIES 569,224,863 227,714,105

MINORITY INTERESTS IN NET

ASSETS OF SUBSIDIARIES 2b,26a 17,945,108 3,572,429

(Expressed in thousands of Rupiah, unless otherwise stated)

Notes 2 0 0 7 2 0 0 6

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SHAREHOLDERS’ EQUITY Share capital

Authorized – 5,500,000,000

shares at par value per share of Rp200 (full amount) each in 2007 and 2,200,000,000 shares at par

value per share of Rp500 (full amount) each in 2006

Issued and fully paid – 1,890,000,000 shares

in 2007 and 517,660,000 shares in 2006 18 378,000,000 258,830,000

Additional paid in capital 24 931,582,638 -

Difference in the value of

entities under common control 2r,3,31 (275,971,501) (126,693,758)

Assets revaluation increment 2i,2j,10 75,746 26,975,746

Difference in foreign currency

translation 2a 221,768 -

Retained earnings 301,790,967 246,040,031

SHAREHOLDERS’ EQUITY, NET 1,335,699,618 405,152,019

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY 1,922,869,589 636,438,553

(Expressed in thousands of Rupiah, unless otherwise stated)

Notes 2 0 0 7 2 0 0 6

SALES 2d,19 856,203,303 788,922,837

COST OF SALES 20 579,783,468 566,541,890

GROSS PROFIT 276,419,835 222,380,947

OPERATING EXPENSES 2d,21 (62,397,639) (38,198,944)

OPERATING INCOME 214,022,196 184,182,003

OTHER INCOME (EXPENSES): 2d

Additional severance pay 17 (37,719,064) -

Interest expenses 22 (60,800,230) (27,202,333)

Loss on impairment of assets 2j,10 (7,442,177) (2,015,941)

Gain on foreign exchange 2c 11,521,521 377,915

Interest income 23 13,727,169 3,220,008

Others, net (19,669,613) (2,603,253)

Other expenses, net (100,382,394) (28,223,604)

INCOME BEFORE CORPORATE

INCOME TAX 113,639,802 155,958,399

CORPORATE INCOME

TAX BENEFIT (EXPENSE) 2n,14c

Current period (46,048,974) (45,419,377)

Deferred 13,207,271 (528,269)

CORPORATE INCOME

TAX BENEFIT (EXPENSE), NET (32,841,703) (45,947,646)

INCOME BEFORE MINORITY INTERESTS IN NET INCOME/LOSS

OF SUBSIDIARIES 80,798,099 110,010,753

MINORITY INTERESTS IN NET INCOME OF

SUBSIDIARIES 2b,26b (741,842) (954,812)

NET INCOME 80,056,257 109,055,941

The accompanying notes form an integral part of these consolidated financial statements.

Difference in the

value of

restructuring Retained

Additional transactions of Assets Difference in earnings Total

paid in entities under revaluation foreign currency (Accumulated shareholders’

Notes Share capital capital common control increment translation deficit) equity, net

Balance as of December 31, 2005 258,830,000 - (126,693,758) 26,975,746 - 136,984,090 296,096,078

Net income for 2006 (nine months) - - - 109,055,941 109,055,941

Balance as of September 30, 2006 258,830,000 - (126,693,758) 26,975,746 - 246,040,031 405,152,019

Balance as of December 31, 2006 285,730,000 - (126,693,758) 75,746 - 249,134,710 408,246,698

Issuance of new shares 18,24 92,270,000 987,289,000 - - - - 1,079,559,000

Initial public offering charges 24 - (55,706,362) - - - - (55,706,362)

Difference in the purchase price of Palma Agro compared to its

net book value 3 - - (275,971,501) - - - (275,971,501)

Reversal in difference in the value of restructuring transaction of entities under common control due to change of common

control / shareholders 2r,31 - - 126,693,758 - - (27,400,000) 99,293,758

Difference in foreign currency

translation 2a - - - - 221,768 - 221,768

Net income for September 2007

(nine months) - - - 80,056,257 80,056,257

Balance as of September 30, 2007 378,000,000 931,582,638 (275,971,501) 75,746 221,768 301,790,968 1,335,699,618

(Expressed in thousands of Rupiah, unless otherwise stated)

Notes 2 0 0 7 2 0 0 6

CASH FLOWS FROM

OPERATING ACTIVITIES:

Cash received from customers 885,900,766 778,686,144

Cash paid to suppliers and employees,

and for other operating expenses (657,406,267) (457,730,401)

Cash generated from operations 228,494,499 320,955,743

Severance pay 17 (47,769,887) -

Claim for tax refund, net 3,284,782 -

Taxes paid (66,728,886) (82,785,460)

Net cash provided by (used in)

operating activities 117,280,508 238,170,283

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets 10 (51,884,669) (11,085,914)

Additions to plantation assets -

immature plantations 9b (37,410,668) (2,671,390)

Payment for acquisition of

subsidiaries after deducting cash

balances from acquisition date 3 (3,465,217) -

Additions to advances for

Plasma plantations 8 (5,671,549) (6,702,500)

Additions to nursery (3,297,015) (4,516,122)

Proceeds from sale of fixed assets 10 918,500 -

Payment for land right certificates (4,029,325) -

Cash received from acquisition of

subsidiaries 3 12,970,290 -

Interest income received 10,491,665 3,220,008

Net cash used in investing activities (81,377,988) (21,755,918)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of new shares 1,079,559,000 -

Payment of IPO charges (49,830,422) -

Payments of bank loans (908,400,000) (139,761,970)

Additions in guarantee deposits (164,969,000) -

Interest paid (60,422,105) (27,202,333)

Refund of investment credit

CASH FLOWS FROM FINANCING

ACTIVITIES (continued):

Additions in deferred charges 9,660 -

Proceeds from bank loans 360,335,145 -

Withdrawal of guarantee deposit 15,800,977 1,701,000

Net cash provided by (used in)

financing activities 264,474,596 (168,064,552)

NET INCREASE IN

CASH AND CASH EQUIVALENTS 300,377,116 48,349,813

CASH AND CASH EQUIVALENTS

AT BEGINNING OF PERIOD 64,237,583 23,146,082

CASH AND CASH EQUIVALENTS

AT END OF PERIOD 4 364,614,699 71,495,895

Supplemental information on cashflows Non-cash activities

Bank facility fees deducted

from proceeds of bank loan 16 15,961,750 -

Acquisition of Subsidiaries

financed by bank loan 3 538,139,000 -

Lending to a related party

financed by bank loan 16 159,943,185 -

1. GENERAL

a. PT Sampoerna Agro Tbk (“the Company”)

The Company is a limited liability company established in Indonesia on June 7, 1993, based on Notarial Deed of Tina Chandra Gerung, S.H No. 8. The Articles of Association were approved by the Ministry of Justice and Human Rights under Letter No. C2-1840.HT.01.01.TH.94 dated February 4, 1994, and published in the State Gazette No. 60, Supplement No. 4842 dated July 29, 1994.

Based on Notarial Deed Sutjipto, S.H., M.Kn. No. 52 dated February 16, 2007, the Company changed its name from PT Selapan Jaya to PT Sampoerna Agro. The amendment was approved by the Ministry of Justice and Human Rights under Letter No. W7-02335 HT.01.04-TH.2007 dated March 9, 2007.

The Articles of Association have been amended from time to time, the latest amendment of which was made under Notarial Deed No. 87 of Sutjipto, S.H., M.Kn., dated April 11, 2007 concerning about initial public offering plan, change in the share’s par value by stock split, increase in paid up share capital and changes to comply with Indonesian capital market law, including the change in the Company’s name from PT Sampoerna Agro to PT Sampoerna Agro Tbk.

The Company was approved as a Domestic Capital Investment Company (“PMDN”) based on the approval of the Capital Investment Coordinating Board (“BKPM”) through Letter No. 336/I/PMDN/1994 dated June 3,1994.

On January 9, 2007, the Company amended its Articles of Association which were covered by Notarial Deed of Linda Herawati S.H., No. 16 concerning about the change in the Company’s status from Domestic Capital Investment to Foreign Capital Investment.

Based on various letters and permits secured by the Company from local, regional and national government agencies, the Company may develop 25,700 hectares of oil palm plantations in Ogan Komering Ilir, South Sumatera, consisting of 7,200 hectares of its own plantations (referred to as the Nucleus or “Inti”) and 18,500 hectares of Plasma plantations with milling capacity of up to 360 tonnes of fresh fruit bunches per hour. The land right certificate (“Hak Guna Usaha”) for 3,243 hectares of Inti plantations will expire in 2037 but can be renewed up to 2097.

The Company commenced its commercial operations in November 1998 and its head office is located at Jalan Basuki Rahmat No. 788, Palembang, South Sumatera.

On June 7, 2007, the Company received the effective statement from Chairman of the Capital Market Supervisory Agency (BAPEPAM) to perform Initial Public Offering (IPO) based on the BAPEPAM’s letter No S-2707/BL/2007. On June 18, 2007, the Company’s shares were listed on Jakarta Stock Exchange (JSX).

b. Subsidiaries

On January 26, 2007, the Company acquired 100% shares of Palma Agro Ltd. (PAL), whereas PAL owned 93.6% shares in PT Sungai Rangit.

On March 30, 2007, the Company acquired 99% shares of PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai, PT Usaha Agro Indonesia and PT Pertiwi Lenggara Agromas. On September 30, 2007, those Companies are still in development stage.

1. GENERAL (continued) b. Subsidiaries (continued)

The Company’s investment in Subsidiaries after above mentioned acquisitions consists of the following:

Total assets

Percentage of ownership (before elimination) interest (in million Rp)

Comercial

Subsidiaries Operations 2007 2006 2007 2006

PT Telaga Hikmah ("Telaga Hikmah”) 1998 99.45% 99.45% 175,502 203,840

PT Aek Tarum ("Aek Tarum”) 1992 99.00% 99.00% 145,923 157,316

PT Gunung Tua Abadi ("Gunung Tua Abadi”) 1999 98.97% 98.97% 13,031 41,737 PT Mutiara Bunda Jaya ("Mutiara Bunda Jaya”) 2001 99.01% 99.01% 188,148 142,885

PT Binasawit Makmur (“Binasawit Makmur”) 1999 99.00% 99.00% 63,426 48,233

PT Sawit Selatan (‘Sawit Selatan”)* 99.00% - 214 -

PT Sungai Menang (“Sungai Menang”)* 99.00% - 229 -

PT Tania Binatama (“Tania Binatama”)* 99.00% - 204 -

PT Selatanjaya Permai (“Selatanjaya Permai”)* 99.00% - 200 -

PT Usaha Agro Indonesia (“Usaha Agro Indonesia”)* 99.00% - 793 -

PT Pertiwi Lenggara Agromas

(“Pertiwi Lenggara Agromas”)* 99.00% - 690 -

Palma Agro Limited, Republic of Seychelles

(“Palma Agro”) 100.00% - 512,732 -

Palma Agro directly owns shares In the following subsidiary: PT Sungai Rangit

(“Sungai Rangit”) 1997 93.60% - 483,321 -

*) _{Company still in development stage}

Summary of operational activities in Subsidiaries:

Maximum capacity of palm oil mill (tonnes of fresh fruit

Subsidiaries Activities bunches per hour)

Aek Tarum Oil palm and rubber plantations and

palm oil mill operations 60

Mutiara Bunda Jaya Oil palm plantations and palm oil mill operations 80

Telaga Hikmah Oil palm plantations and palm oil mill operations 60

Sungai Rangit Oil palm plantations and palm oil mill operations 30

Gunung Tua Abadi Oil palm plantations -

Binasawit Makmur Oil palm plantations and oil palm seedling -

Palma Agro Holding company and management services -

Rubber plantations and oil palm seedlings production are located in South Sumatera, while oil palm plantations and palm oil mills are located in South Sumatera and Central Kalimantan.

1. GENERAL (continued) b. Subsidiaries (continued)

The details of subsidiaries land right areas, totaling 49,069.09 hectares, are as follows :

Subsidiaries Hectares Valid until

Aek Tarum 2,189.70 August 16, 2096 *

2,579.90 August 22, 2096 *

825.70 July 6, 2040 0.75 January 24, 2020 Mutiara Bunda Jaya 552.24 May 14, 2097 *

1,268.50 September 17, 2098 * 102.00 November 23, 2039 * 2,790.00 July 6, 2040 73.21 August 6, 2031

Telaga Hikmah 2,668.50 December 31, 2082 *

7,175.60 January 12, 2099 126.00 November 23, 2039 6,034.20 July 6, 2040 Gunung Tua Abadi 3,390.00 April 30, 2098 *

1,642.00 November 23, 2039

Binasawit Makmur 588.97 September 21, 2097 *

Sungai Rangit 13,118.00 September 29, 2036

0.32 September 24, 2030

903.45 March 8, 2036

469.01 September 18, 2038

435.23 September 24, 2038

2,135.81 September 24, 2039

*) Already obtained approval for an extention of 25 years and a renewal for another 35 years.

Company and Subsidiaries will be defined as “Group”.

c. Employees, directors and commissioners

Based on Circular Resolution of Shareholders as covered by Notarial Deed of Sutjipto, S.H. M.Kn. No. 235 dated May 25, 2007, the composition of commissioners and directors of the Company is as follows:

Board of Commissioners: Board of Directors:

Michael Joseph Sampoerna - President Commissioner Goh Cheng Beng - President Director

Ekadharmajanto Kasih - Commissioner Ali Gunawan Budiman - Director

Sugiarta Gandasaputra - Commissioner Yasin Chandra - Director

Phang Cheow Hock - Independent Commisioner Chang Poh Sang - Director Arief Tarunakarya

Surowidjojo - Independent Commisioner Sie Eddy Kurniawan - Director

On September 30, 2007 and 2006 the Group had 4,055 and 2,277 permanent employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies adopted by the Group conform to generally accepted accounting principles in Indonesia. The significant accounting principles applied consistentlyinthepreparationof theconsolidatedfinancialstatementsforthe nine months period ended September 30, 2007 and2006 are as follows:

a. Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with accounting and practices generally accepted in Indonesia, which includes Statements of Financial Accounting Standards (PSAK) issued by the Indonesian Institute of Accountants and Regulations and Guidelines on Financial Statements Presentation set out by the Capital Market Supervisory Agency (BAPEPAM).

The consolidated financial statements, presented in thousands of Rupiah unless otherwise stated, have been prepared on accrual basis, except for statements of cash flows, and using historical costs, except for inventories that are valued at the lower of cost or net realizable values and certain items of fixed assets and mature plantations which were revalued on April 30, 2003.

The consolidated statements of cash flows present cash receipts and payments classified into operating, investing and financing activities, and are presented using the direct method.

The reporting currency used in the preparation of the consolidated financial statements is in Rupiah, except for PAL, which has adopted the US Dollar as its fuctional, reporting and recording currency since January 1, 2007. For consolidation purposes, the accounts of PAL are translated into Rupiah amounts on the following basis:

Balance sheet accounts : Prevailing rate of exchange as published by Bank Indonesia at the last banking day as of September 30, 2007 amounting to Rp9,137 (full amount) per US$1.

Income statement accounts : The exchange rates prevailing at the date of transactions.

Gains or losses arising from translation of balance sheet and income statements accounts are presented as “Difference in Foreign Currency Translation” in the equity section of the consolidated balance sheet.

b. Basis of consolidation

The consolidated financial statements include the Company’s financial statements and all subsidiaries' financial statements that are controlled by the Company. Control is presumed to exist where more than 50%, directly or indirectly of a subsidiary's voting power, is controlled by the Company; or where the Company is able to govern the financial and operating policies of a subsidiary; or control the removal or appointment of a majority of a subsidiary's board of directors. Significant inter-company balances and transactions, including unrealized profit (loss), have been eliminated to present the financial position and results of operations of the Company and subsidiaries as a single economic entity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) b. Basis of consolidation (continued)

The proportionate share of the minority shareholders in the equity of the subsidiaries is presented in “Minority Interest in Net Assets of Subsidiaries” in the consolidated balance sheets. When cumulative losses applicable to minority interest exceed the minority shareholders’ interest in the subsidiaries’ equity, the excess is charged against the majority shareholders’ interest, except in rare cases when minority shareholders have a binding obligation to make good on such losses and minority shareholders able to cover those losses. Subsequent profits earned by Subsidiaries under such circumstances that are applicable to the minority interest shall be allocated to the majority interest to the extent minority losses previously absorbed have been fully recovered.

c. Foreign currency transactions and balances

Transactions in currencies other than Rupiah are recorded at the prevailing exchange rates in effect on the date of the transactions.

As of the balance sheet dates, all foreign currency monetary assets and liabilities are translated at the middle exchange rates quoted by Bank Indonesia on those dates. The resulting net foreign exchange gains or losses are recognized in the current period’s statement of income.

The exchange rates used as of September 30, 2007 and 2006, Rp9,137, and Rp9,235 per US$1 (full amount), respectively.

d. Revenue and expense recognition

Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have been passed to the buyer.

Expenses are recognized when these are incurred (accrual basis) .

e. Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and in bank, and short-term deposits with maturities within three (3) months or less and not pledged as collateral.

f. Inventories

Inventories are stated at the lower of cost or net realizable value.

Cost is determined using the weighted average method and comprises all costs of purchase, costs of conversion and appropriate overheads incurred in bringing the inventory to its present location and condition.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated cost necessary to make the sale.

The Group determines allowance for inventory obsolescence based on a review of the status of individual inventories at the end of the period.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) g. Prepaid expenses

Prepaid expenses are charged to operations over the periods benefited using straight-line method of amortization.

h. Plantation assets

Plantation assets are classified as immature plantations and mature plantations. Immature plantation

All costs relating to the development of the oil palm and rubber plantations for the Group’s own operations (Inti plantations) together with a portion of indirect overheads, including general and administrative expenses incurred, and also interest expenses from loan used in developing immature plantation are capitalized until commercial production is achieved. These costs will be transferred to mature plantations and amortized over the estimated 20 years productive lives of the oil palm and rubber plantations, starting from the commencement of commercial production. Mature plantation

In general, oil palm plantations are considered mature four years after planting and rubber plantations are considered mature five to six years after planting. Actual time to maturity is dependent upon vegetative growth and is assessed by management.

Mature plantations are stated at cost, except for certain mature plantations which are stated at revalued amounts, less accumulated amortization.

i. Fixed assets

Fixed assets are stated at cost, except for certain fixed assets which are stated at revalued amounts, less accumulated depreciation.

Fixed assets, except land, are depreciated using the straight-line method over their estimated useful lives as follows:

Years

Buildings 20

Infrastructures 20

Storage tanks 16

Machinery and equipments 12

Vehicles and heavy equipments 4-8

Office equipments 4-8

Since January 1, 2004, the Group, except Sungai Rangit, changed its depreciation method from the double-declining balance method to the straight-line method for vehicles and heavy equipment and office equipment. The revision to the depreciation method and estimated useful lives was based on a review of the future economic lives of such assets in connection with the revaluation of certain fixed assets of the Company and management’s opinion that the revised depreciation approach more appropriately reflects the utilization of such assets over their estimated economic lives.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) i. Fixed assets (continued)

The cost of repairs and maintenance is charged to expense as incurred; significant renewals or betterments are capitalized. Interest expenses incurred in relation with loan used in constructing the assets are capitalized. When assets are retired or otherwise disposed of, their carrying value and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the current period’s statements of income.

Construction in progress represents the accumulated cost of materials and other costs related to the asset under construction until it is ready to be used. When the asset is complete and ready for its intended use, these costs are transferred to the relevant accounts.

j. Impairment of assets

The recoverable amount of an asset is estimated whenever events or changes in circumstances indicate that its carrying amount may not be fully recoverable. Impairment in asset value, if any, recognized as loss in the current year’s statement of income, unless assets are carried at revalued amounts. Impairment losses on revalued assets are recognized directly against the “Assets Revaluation Increment” for the related assets to the extent that the impairment losses do not exceed the amounts recognized in the assets revaluation increment attributable to such assets. The amount of an impairment loss for a revalued asset which exceeds the amount of the “Assets Revaluation Increment” attributable to such asset is recognized in the current period’s statements of income.

k. Advances (investment credit) for Plasma plantations

Plasma plantations is an Indonesian Government policy to develop the plantations on mutual agreements with smallholders or cooperatives. Group (referred to as “Inti”) can acquire land rights to develop plantations only if they develop plantations for smallholders (Plasma participants) in addition to their own plantations. Inti are required to assist and supervise smallholders in technical matters relating to the plantation and to purchase the fresh fruit bunch (FFB) produced by Plasma plantations at prices determined by the Indonesian Government.

Once developed, the Plasma plantations are transferred to the smallholders at a conversion rate determined by the Government, and where the conversion price might be lower than the carrying value of the Plasma plantation transferred. Therefore, Group determine the allowance for loss on conversion based on a periodic review of the estimated difference between the carrying value of the Plasma plantation and the conversion value. The Plasma farmers are required to sell the fresh fruit bunch to Inti.

Advances for Plasma plantations represent accumulated costs incurred including borrowing costs and indirect overhead costs to develop Plasma areas deducted mainly by the investment credit obtained from the bank. When a Plasma plantation is complete and ready to be transferred or turned-over to the Plasma farmers, the corresponding investment credit from the bank is also transferred to the farmers. The difference between the carrying value of the Plasma plantation and the related investment credit transferred is recognized as gain or loss and is reflected in current period’s statements of income.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) l. Nursery

Cost incurred in the preparation of the nursery, purchase of seedlings and their maintenance are stated at cost. The accumulated cost are transferred to “Immature Plantations” account at the time of planting.

m. Deferred land right cost and Deferred charges

Costs incurred in relation to obtain land rights in the form of “Hak Guna Usaha” (HGU) and “Hak Guna Bangunan” (HGB) are recorded as “Deferred land right cost”, which are amortized on a straight-line basis over the term of the related land rights.

Fees incurred in obtaining long-term loan facilities are deferred as part of “Deferred charges”, which are amortized on a straight-line basis over the term of the related facilities. If the Company effectively in a technical or payment default position, which has the consequences that the principle amount of the debt together with accrued interest will become due and payable, the related deferred long-term bank loan administration costs are charged to current operations.

n. Corporate income tax

Current tax expense is provided based on the estimated taxable income for the year. 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. This method also requires the recognition of future tax benefits, such as the carry-forward of unused tax losses, 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 balance sheet date.

Amendments to tax obligations are recorded when an assessment is received or, if appealed against by the Group, when the result of the appeal is determined.

o. Provision for employee service entitlements

The Group has applied Statement of Financial Accounting Standards (SFAS) No. 24 (Revised 2004), “Employees’ Benefits” to recognize employee benefits liabilities in accordance with Labor Law No. 13/2003 dated March 25, 2003 (the Law). This statement requires the Company to provide all employee benefits under formal and informal plans or agreements, under legislative requirements or through industry arrangements, including post-employment benefits, short-term and other long-term employee benefits, termination benefits and equity compensation benefits. The calculation of liability of employees benefits based on the Law is determined using the “Projected Unit Credit” actuarial method. Actuarial gains or losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting year exceeded 10% of the defined benefit obligation at that date. These gains or losses are recognized on a straight-line basis over the expected average remaining working lives of the employees.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) p. Transactions with related parties

The Group have transactions with entities which are regarded as having a special relationship as defined under SFAS No. 7, “Related Party Disclosure”. Significant transactions with related parties, whether or not conducted under normal terms and conditions similar to those with non-related parties are disclosed in the notes to consolidated financial statements.

q. Use of estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimations and assumptions that affect amounts reported therein. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates.

r. Restructuring under common control

Restructuring transactions of entities under common control are accounted for in accordance with PSAK No. 38, “Accounting for Restructuring of Entities under Common Control”. Under this standard, transactions between entities under common control are carried out within the framework of reorganizing entities under the same group and does not constitute a change of ownership based on the economic substance of such transactions, thus, no gain or loss is recognized in the group or to the individual entity within the same group. The underlying object of the restructuring transaction must be recorded at its book value and such transaction is accounted for as a business combination using the pooling-of-interests method. Under the pooling-of-interest method, the financial statements of the restructured company is presented as if the acquired entity had been combined at the beginning of the earliest period presented.

The difference between the par value of issued share capital or cash payment made by the Company to acquire the Subsidiaries with the Company’s interests in the net assets of such Subsidiaries is recognized as “Difference in the Value of Restructuring Transactions of Entities Under Common Control”, a component of shareholders’ equity. The difference in value of restructuring transactions of entities under common control resulting from past acquisition of Subisidiaries is realized to the related accounts in accordance with SFAS No. 22 “Accounting for Business Combination” when the transacting parties are no longer under common control.

s. Troubled debt restructuring

Troubled debt restructuring is recorded in accordance with SFAS No. 54, “Accounting for Troubled Debt Restructuring”. Net gain arising from trouble debt restructuring is presented as the “Extraordinary Item”, net of the related income tax effect.

t. Segment information

The primary segment information of the Company and Subsidiaries is presented based business segments since the financial information used by management in evaluating the performance and determining the allocation of resources is based on the segment information relating to CPO, PK and other by-products. These segments are considered by management to have significant effects on the Group’s risks and rates of return. In relation to the acquisition of Palma Agro, there is secondary segment information. Sungai Rangit, the operating subsidiary of Palma Agro, has the business operations in Central Kalimantan, while the Company’s and other Subsidiaries have the business operations in South Sumatera.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Basic net earnings (loss) per share

Basic net earnings (loss) per share is computed by dividing net income with the number of shares outstanding during the year, after considering retroactive effect of a stock split which took place on April 13, 2007 and a distribution of shares bonus from “Asset Revaluation Increment" on September 18, 2006 (Note 17), amounting to 1,890,000,000 in 2007 and 1,428,650,000 shares in 2006. The Company does not have securities with potential dilutive effects. Therefore, fully diluted earnings per share is not computed.

3. ACQUISITION OF SUBSIDIARIES Acquisition of Palma Agro Ltd. (PAL)

On January 26, 2007, the Company acquired 100% ownership interest in PAL from Carlton Services Limited and Mayfair Trust Group with a purchase price amounting to US$59,000,000 or equivalent to Rp538,139,000. PAL is a holding company, established in Republic of Seychelles, and owns 93.6% shares of Sungai Rangit, another company engaged in oil palm plantation in Central Kalimantan. The Company, Carlton Services Limited and Mayfair Trust Group were considered as entities under common control. Accordingly, this transaction has been accounted for in accordance with PSAK No. 38 “Accounting for Restructuring of Entities under Common Control” as described in Note 2r. The difference between PAL’s book value (after taking up the carrying value of its investment in Sungai Rangit) with the purchase price amounting to Rp275,971,501, was presented as part of equity in the 2007 consolidated balance sheet as part of the account “Difference in the value of restructuring transactions of entities under common control”

The details arising from the acquisition of PAL is computed as follows:

Net book value of assets acquired 262,167,499

Difference in the value of restructuring

transactions of entities under common control 275,971,501

Purchase price 538,139,000

Cash balance received from the acquisition 12,970,290

The audited accounts of PAL and Sungai Rangit as of December 31, 2006 were used as the basis to determine the net book value of their assets for the above calculation. The accounts of PAL and Sungai Rangit in 2006 and prior periods were not retroactively consolidated to the acounts of the Company since PAL and Sungai Rangit, together with the Company, were not under common control during those periods.

Acquisition of PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai, PT Pertiwi Lenggara Agromas and PT Usaha Agro Indonesia

On March 30, 2007, the Company acquired 99% ownership interest in six (6) non-operating companies (hereafter named Subsidiaries), which own land permits to develop plantation, as follows:

a. PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai were acquired from PT Nitiagro Lestari, a Company’s shareholder, with the purchase price amounting to Rp3,465,000.

b. PT Pertiwi Lenggara Agromas was acquired from PT Wahana Sekar Agro and PT Berkah Sawitri Nusantara with purchase price amounting to Rp4,950.

c. PT Usaha Agro Indonesia was acquired from Hendra Prasetya and Aris Budiraharjo with purchase price amounting to Rp4,950.

3. ACQUISITION OF SUBSIDIARIES (continued)

Acquisition of PT Sawit Selatan, PT Tania Binatama, PT Sungai Menang, PT Selatanjaya Permai, PT Pertiwi Lenggara Agromas and PT Usaha Agro Indonesia (continued)

Prior to the acquisition by the Company, those companies except for PT Usaha Agro Indonesia (UAI) were under common control of Sampoerna Strategic Group. Accordingly, these transactions have been accounted for in accordance with PSAK No. 38 “Accounting for Restructuring of Entities under Common Control” as described in Note 2r. There is no difference between purchase price and the carrying value of the investment of Sampoerna Strategic Group in these Subsidiaries. The goodwill totaling to Rp9,267,695, which resulted from the initial acquisition of these companies (except UAI) by Sampoerna Strategic Group, were transferred to the Company at their respective carrying values and will be amortized over 5 years.

Purchase of UAI was accounted for using purchase method, which resulted to goodwill amounting to Rp162, that will be amortized over 5 years.

Cash flows from the acquisition of those companies are as follows:

Pertiwi Usaha

Sawit Tania Sungai Selatanjaya Lenggara Agro

Selatan Binatama Menang Permai Agromas Indonesia Total

Total assets 200,000 204,000 228,600 200,025 4,871 4,787 842,283

Liabilities (6,635,241) - - - - - (6,635,241)

Net book value of assets

acquired (6,435,241) 204,000 228,600 200,025 4,871 4,787 (5,792,958)

Goodwill at the beginning of acquisition by Sampoerna Strategic Group and

goodwill of UAI 8,415,241 786,000 18,900 47,475 79 163 9,267,858

Purchase price 1,980,000 990,000 247,500 247,500 4,950 4,950 3,474,900 Less: cash balance received

from the acquisition - - - (25 ) (4,871 ) (4,787 ) (9,683)

Payment for acquisition after deducting cash balance received

from the acquisition 1,980,000 990,000 247,500 247,475 79 163 3,465,217

The audited accounts of those newly acquired subsidiaries as of December 31, 2006 were used as the basis to determine net book value of their assets for the above calculation.

The accounts of six Subsidiaries mentioned above in 2006 and prior periods were not retroactively consolidated to the accounts of the Company since these Subsidiaries together with the Company were not under common control during those periods.

4. CASH AND CASH EQUIVALENTS

2 0 0 7 2 0 0 6

Cash on hand 522,036 463,373

Cash in banks: Rupiah

PT Bank Mandiri (Persero) Tbk 64,887,456 15,780,665

PT Bank Rakyat Indonesia (Persero) Tbk 807,009 2,795,718

PT Bank Central Asia Tbk 2,152,311 -

PT Bank Negara Indonesia (Persero) Tbk 203,302 4,496

PT Bank Danamon Indonesia Tbk 81,612 1,720

PT Bank UOB Buana Tbk (formerly

PT Bank Buana Indonesia Tbk) 769,179 25,348,555

PT Bank ABN AMRO 3,088,160 -

PT Bank ANZ Panin Bank 83,673 -

PT Bank International Indonesia 123,265 -

PT Bank Lippo 18,472,705 -

PT Bank Permata 35,245 -

PT Bank Pembangunan Daerah 29,704 -

US Dollar

PT Bank Mandiri (Persero) Tbk 2,754,596 1,801,618

PT Bank UOB Buana Tbk (formerly

PT Bank Buana Indonesia Tbk) 392,069 9,040,567

PT Bank ABN AMRO 1,960,395 -

PT ANZ Panin Bank 17,382 -

PT Bank Permata 17,724 -

PT Bank Central Asia Tbk 216,876 -

Time deposits: Rupiah

PT Bank Permata 100,000,000 -

PT Bank Lippo 100,000,000 -

PT Bank International Indonesia 68,000,000 -

PT Bank UOB Buana Tbk (formerly

PT Bank Buana Indonesia Tbk) - 16,260,183

Total 364,614,699 71,496,895

The restricted time deposits, which were recorded as part of “Guarantee Deposits” on September 30, 2007 and 2006 consolidated balance sheets, mainly consist of cash placed to guarantee bank loans of the Company. The details of restricted time deposits are as follows:

2 0 0 7 2 0 0 6

The Company 150,000,000 1,970,000

Mutiara Bunda Jaya 9,684,000 40,000

Telaga Hikmah 6,563,500 1,138,500

Aek Tarum - 3,281,000

Gunung Tua Abadi - 250,000

Total 166,247,500 6,679,500

The average interest rates for time deposits in Rupiah are 8.0% for 2007 and 10.6% for 2006, while in US Dollar are 5.3% and 3.7% for 2007 and 2006, respectively.

5, TRADE RECEIVABLES

2 0 0 7 2 0 0 6

PT Sinar Alam Permai - 1,621,633

PT Asianagro Agung Jaya - 1,167,338

Total - 2,788,971

6. OTHER RECEIVABLES

2 0 0 7 2 0 0 6

Third parties :

Loan to employees 3,717,539 447,879

Due from plasma participants 167,066 298,511

Cooperative receivable 838,629 306,519

Contractor receivable 425,435 -

Interest receivable 3,238,504 -

Others 7,256,488 57,006

Total 15,643,661 1,109,915

Related parties :

Venture Max Resources Pte., Ltd.,

Singapore (Notes 16 dan 25b) 159,943,185 -

PT Sampoerna Bio Energi (Note 25c) 17,335,785 -

Total 177,278,970 -

Management believes that all other receivables are fully collectible, and no provision for losses is necessary.

7. INVENTORIES

2 0 0 7 2 0 0 6

Finished goods:

Crude palm oil (CPO) 45,237,089 11,838,742

Palm kernel (PK) 7,726,920 4,012,214

Finished goods of CPO and PK

(Note 20) 52,964,009 15,850,956

Fertilizers, spare parts and maintenance supplies 31,374,368 18,558,821

Germinated seeds (Note 20) 7,927,264 5,318,261

Fresh fruit bunches (FFB) (Note 20) 1,284,915 947,219

Rubber slabs and clumps 80,645 226,908

Total 93,631,201 40,902,165

Inventories owned by Mutiara Bunda Jaya, Aek Tarum and Gunung Tua Abadi were pledged as collateral for bank loans (Note 16).

As of September 30, 2007, all inventories were covered by insurance against losses from fire and other risks under blanket policies with insurance coverage totalling Rp114,782,073, which in the management’s opinion is adequate to cover possible losses from such risks.

Management believes that inventories are realizable, hence no provision for inventory obsolescence is necessary.

8. ADVANCES FOR PLASMA PLANTATIONS – NET

2 0 0 7 2 0 0 6

Advances for Plasma plantations

Beginning balance 47,715,493 40,804,323

Additions:

Development cost 5,671,549 6,702,500

Capitalized expenses (Note 22) 89,843 1,028,904

Deductions:

Plasma plantations transferred to Plasma participants at

the conversion price - (2,639,606)

Ending balance 53,476,885 45,896,121

Provision for Plasma plantations 2,077,830 2,077,830

Advances, net after provision 51,399,055 43,818,291

2 0 0 7 2 0 0 6

Investment credit

Begiinning balance 7,518,816 13,490,600

Addition: Capitalized interest (Note 22) 89,843 1,028,904

Refund to the bank - (2,801,249)

Assigned to Plasma participants (7,608,659) (2,639,607)

Ending balance - 9,078,648

Net 51,399,055 34,739,643

Advances for Plasma plantations

Management believes that the provision for Plasma plantations is adequate to cover possible losses arising from unrecoverable Plasma plantations.

The Company is developing Plasma plantations under an “Anak Angkat Bapak Angkat” (AABA) scheme and financed in the form of “Kredit Usaha Kecil” (KUK) and “Kredit Koperasi Primer untuk Anggota” (KKPA).

Aek Tarum and Mutiara Bunda Jaya are or have been involved in Plasma schemes implemented under Indonesian Government guidelines whereby companies assume responsibility for developing plantations to the productive stage for transfer to Plasma participants under a PIR-Trans (“Perkebunan Inti Rakyat - Transmigrasi”) scheme.

Telaga Hikmah has been developing Plasma plantation under KKPA scheme.

Once the plantation areas reach the production stage, these areas will be transferred to Plasma participants who will receive two hectares each.

The Company

The Plasma plantations costs as of September 30, 2007, represent the cost of development of 1,316 hectares of Plasma areas, for approximately 658 Plasma participants. The Company, on behalf of Plasma participants, is in the process of obtaining bank financing for the new Plasma areas through the

8. ADVANCES FOR PLASMA PLANTATIONS – NET (continued)

Mutiara Bunda Jaya

Mutiara Bunda Jaya is involved in developing 8,296 hectares of Plasma oil palm plantations for 4,273 farmers in the vicinity of the Inti plantation area. Following approval from PT Bank Rakyat Indonesia (Persero) Tbk (BRI), the Company has transferred Plasma loan facility to Plasma participants amounting to Rp5,517,088 for 560 hectares to 280 Plasma participants in 2005 and amounting to Rp20,449,576 for 2,308 hectares to 1,154 Plasma participants in 2004. .

Telaga Hikmah

Advances for Plasma plantations in which Telaga Hikmah represent expenditures related to the development of Plasma oil palm plantations still in the development stage. Based on the restructuring agreement between the Telaga Hikmah and Bank Rakyat Indonesia (Persero) Tbk (BRI) No. R.479-MEN/DPB/AKH/08/2000 dated August 21, 2000, Telaga Hikmah’s commitment to develop Plasma areas was reduced from 15,000 hectares to 5,000 hectares. As of September 30, 2007, Telaga Hikmah had planted 3,684 hectares for 1,842 Plasma participants.

Following approval from BRI, the Company has transferred Plasma loan facility to Plasma participants amounting to Rp4,483,716 for 248 hectares to 124 Plasma participants in 2006 and amounting to Rp8,135,775 for 450 hectares to 225 Plasma participants in 2005.

Investment credit

PT Bank Rakyat Indonesia (Persero) Tbk (BRI)

On November 1, 1989 and May 28, 1996, Mutiara Bunda Jaya and Telaga Hikmah obtained Plasma loans from BRI for the development of 8,238 hectares and 15,000 hectares of Plasma oil palm plantations, respectively. The maximum Plasma loan facilities for Mutiara Bunda Jaya and Telaga Hikmah were Rp72,673,158 (including interest during the four years grace period amounting to Rp25,650,000) and Rp112,068,000 (including interest during construction of Rp40,955,400), respectively. Mutiara Bunda Jaya’s Plasma loan is to be repaid through 2001 and the loan facility for Telaga Hikmah is to be repaid within 16 years through December 31, 2012, including a grace period of seven years through March 31, 2003.

Mutiara Bunda Jaya

On January 29, 2003, BRI through Letter No. R.063-ADK/DKR/01/2003, approved a restructuring program for its Plasma loan to Mutiara Bunda Jaya. Under this restructuring program, the conversion of Plasma areas of 8,238 hectares of Plasma oil palm plantations to 4,273 smallholders is due to be fully made by December 31, 2003. As of December 31, 2005, Mutiara Bunda Jaya has not converted Plasma area of 310 hectares. In this regard, BRI asked MBJ to repay the corresponding Plasma loan amounting to Rp2,801,249 which was fully settled in March 2006.

As of September 30, 2007, Mutiara Bunda Jaya is still in the process of negotiation with Plasma participants to convert the area by using local government assistance as mediator.

In 2005 and 2004, Mutiara Bunda Jaya had transferred Plasma loan to Plasma participants amounting to Rp5,517,088 and Rp20,449,576, respectively. As of September 30, 2007, total Plasma loan had been transferred to plasma participants amounting to Rp69,871,909.

8. ADVANCES FOR PLASMA PLANTATIONS – NET (continued)

Telaga Hikmah

On August 21, 2000, BRI through Letter No. R.479-MEN/DPB/AKH/08/2000, approved a restructuring program for its Plasma loan in Telaga Hikmah. Under the restructuring arrangement, the maximum facilities were changed from Rp112,068,000 to Rp101,646,000 which consists of principal of Rp53,796,000 and interest during construction of Rp47,850,000. The commitment for Plasma development under the loan was reduced from 15,000 hectares to 5,000 hectares. Under this restructuring program, the conversion of Plasma areas to smallholders is due to be made by December 31, 2004.

The loan is to be repaid by Plasma participants on a quarterly basis within five years, commencing in the first quarter of 2007. The Plasma Loan bears floating interest rates ranging from 12% to 14% in 2006.

In 2006, Telaga Hikmah has transferred Plasma loan facility to Plasma participants amounting to Rp4,483,716. As of September 30, 2007, total Plasma loan had been transferred to plasma participants amounting to Rp94,127,184.

On January 29, 2007, Telaga Hikmah has fully settled its outstanding investment credit which related to Plasma plantation not yet converted amounting to Rp7,518,815.

9. PLANTATION ASSETS

Plantation assets are classified as immature and mature plantations.

a. Mature plantations

2 0 0 7

Beginning Ending

balance Addition Deduction balance

At cost:

Oil palm plantations 186,665,552 401,683,464 - 588,349,016

Rubber plantations 1,022,560 - - 1,022,560

Total 187,688,112 401,683,464 - 589,371,576

Accumulated amortization:

Oil palm plantations 59,739,021 64,914,267 - 124,653,288

Rubber plantations 306,768 38,346 - 345,114

Total 60,045,789 64,952,613 - 124,998,402

Net book value 127,642,323 464,373,173

9. PLANTATION ASSETS (continued) a. Mature plantations (continued)

2 0 0 6

Beginning Ending

balance Addition Deduction balance

At costs:

Oil palm plantations 180,870,239 - 180,870,239

Rubber plantations 1,022,560 - - 1,022,560

Total 181,892,799 - 181,892,799

Accumulated amortization:

Oil palm plantations 50,426,912 6,984,081 - 57,410,993

Rubber plantations 255,640 38,346 - 293,986

Total 50,682,552 7,022,427 - 57,704,979

Net book value 131,210,247 124,187,820

Additions to mature plantations in 2007 included Palma Agro’s acquisition cost of Sungai Rangit’s mature plantations which were consolidated starting in 2007 and the additions to this balance of Rp13,305,714 and its related amortization of Rp665,286 resulting from Palma Agro’s acquisition of Sungai Rangit, as follows:

Cost 275,074,607

Accumulated amortization (39,902,712)

Net book value 235,171,895

Additions to mature plantation in 2007, included the realization of the difference in value of restructuring transactions of entities under common control amounting to Rp99,293,758 due to changes in controlling shareholders (Note 2r and 31).

Sungai Rangit has Partnership plantation with carrying value of Rp47,351,090 (1,809 ha) as of September 30, 2007 (Note 27e).

b. Immature plantations

The immature plantations represents costs incurred relating to the development of the Group’s oil palm plantations (Inti plantations) such as land clearing, planting, fertilizing and other maintenance activities until the oil palm areas are considered mature (Note 2h).

The movement of immature plantations is as follows:

2 0 0 7 2 0 0 6

Beginning balance 15,139,360 10,567,271

Development costs 88,479,384 2,671,390

Transferrred to mature plantations - -

Transfer from nursery 9,044,953 4,192,967

Ending balance 112,663,697 17,431,628

9. PLANTATION ASSETS (continued) b. Immature plantations (continued)

Plantation assets from Mutiara Bunda Jaya, Telaga Hikmah, Aek Tarum and Gunung Tua Abadi were pledged as collateral for bank loans facilities (Note 16).

10. FIXED ASSETS

20 0 7

Beginning Ending

balance Addition Deduction Reclassification Balance

At cost

Land 51,256,906 13,011,736 - (3,594,036) 60,674,606

Buildings 86,740,082 49,078,812 3,912 120,070 135,935,052

Infrastructures 32,112,635 346,423 196,928 786,177 33,048,307

Machineries and equipments 248,064,990 58,726,512 - 1,934,762 308,726,264

Storage tanks 10,754,298 - - 21,526 10,775,824

Vehicle and heavy equipments 55,901,871 23,578,818 4,394,774 - 75,085,915

Office equipments 9,827,677 4,234,484 4,108 41,841 14,099,894

Construction in progress 4,628,558 35,423,829 - (2,904,376) 37,148,011

Total 499,287,017 184,400,614 4,599,722 (3,594,036) 675,493,873

Accumulated depreciation:

Land - 563,011 - (563,011) -

Buildings 19,563,074 14,606,401 2,446 - 34,167,029

Infrastructures 7,832,462 1,283,965 22,975 - 9,093,452

Machineries and equipments 121,476,055 32,632,845 - - 154,108,900

Storage tanks 6,432,013 420,109 - - 6,852,122

Vehicle and heavy equipments 36,328,807 14,036,801 2,089,514 - 48,276,094

Office equipments 5,117,984 2,556,502 1,123 - 7,673,363

Total 196,750,395 66,099,634 2,116,058 (563,011) 260,170,960

Book value 302,536,622 415,322,913

Allowance for impairment of

fixed assets - 7,442,177

Net book value 302,536,622 407,880,736

2 0 0 6

Beginning Ending

balance Addition Deduction Reclassification Balance

At cost

Land 51,256,906 - - - 51,256,906

Buildings 86,275,469 93,092 3,312,176 2,322,087 85,378,472

Infrastructures 30,155,588 151,930 30,085 319,646 30,597,079

Machineries and equipments 242,961,289 1,021,077 39,307 3,158,190 247,101,249

Storage tanks 10,397,038 111,245 41,400 287,416 10,754,299

Vehicle and heavy

equipments 53,601,633 4,139,719 636,996 - 57,104,356

Office equipments 6,683,158 693,145 59,063 1,396,378 8,713,618

Construction in progress 8,833,510 4,875,706 - (7,483,717) 6,225,499

Total 490,164,591 11,085,914 4,119,027 - 497,131,478

10. FIXED ASSETS (continued)

Beginning Ending

balance Addition Deduction Reclassification Balance

Accumulated depreciation:

Buildings 17,309,261 3,354,367 1,374,665 - 19,288,963

Infrastuctures 6,247,066 1,186,717 14,165 - 7,419,618

Machineries and equipments 100,293,253 16,212,487 28,842 (464,730) 116,012,168

Storage tanks 5,902,803 67,606 26,738 464,730 6,408,401

Vehicle and heavy

equipments 32,911,164 3,828,446 636,996 - 36,102,614

Office equipments 4,167,064 701,008 21,680 - 4,846,392

Total 166,830,611 25,350,631 2,103,086 - 190,078,156

Net Book Value 323,333,980 307,053,322

As of September 30, 2007, detail of percentage of completion and estimation of completion dated were as follow:

Estimated

Estimated % Carrying completion

of completion value date

South Sumatera

Buildings 85% - 90% 6,989,124 November 2007

Machineries and equipments 70% - 90% 1,306,655 December 2007

Infrastructures 70% - 80% 5,394,469 December 2007

Vehicles, heavy equipments and

office equipments 1,169,386 November 2007

Central Kalimantan

Machineries and equipments 60% - 70% 22,288,377 February 2008

Total 37,148,011

Starting January 1, 2004, the Company and its Subsidiaries, except Sungai Rangit, changed their depreciation method for storage tanks, vehicles and heavy equipments, and office equipments from the double-declining balance method to the straight-line method (Note 2i). The difference in balance of accumulated depreciation, computed based on the double-declining balance method and the straight-line method, as of January 1, 2004 amounting to Rp2,144,395 was recorded as part of “Other Income/(Expenses) - Others, net” in the 2004 consolidated statements of income.

10. FIXED ASSETS (continued)

On April 30, 2003, fixed assets in the Company were revalued by PT Fiera Admiratiara, an independent appraisal, using the market value approach. The difference resulting from the revaluation of the Company’s fixed assets of Rp26,975,746 net of the related tax effect was recorded as “Assets Revaluation Increment” under shareholders’ equity in the consolidated balance sheets.

Fixed assets from Mutiara Bunda Jaya, Telaga Hikmah, Aek Tarum and Gunung Tua Abadi were pledged as collateral for bank loans facilities (Note 16).

Additions to fixed assets in 2007, included beginning balances of fixed assets from Sungai Rangit which was consolidated starting from January 1, 2007 as follows:

Cost 128,826,907

Accumulated depreciation (28,863,404)

Net book value 99,963,503

Deductions in fixed assets represent the sales and write-off of fixed assets with details as follows:

2 0 0 7 2 0 0 6

Net book value 2,483,661 166,622

Selling price (918,500) -

Loss on sale and write-off of fixed assets 1,565,161 166,622

Depreciation of fixed assets and amortization of mature plantations were as follows:

2 0 0 7 2 0 0 6

Depreciation of fixed assets 36,578,219 25,350,626

Amortization of mature plantations (Note 9a) 25,049,901 7,022,427

Total 61,628,120 32,373,053

Depreciation of fixed assets and amortization of mature plantations were charged to the following accounts:

2 0 0 7 2 0 0 6

Cost of sales 60,717,552 31,511,500

Operating expense 910,568 861,553

Total 61,628,120 32,373,053

As of September 30, 2007 and September 30, 2006, buildings, machineries, vehicles and office equipments were covered by insurance against losses from fire and other risks under blanket policies with insurance coverage totaling Rp501,136,716 and Rp491,178,147,respectively, which in the management’s opinion, is adequate to cover possible losses from such risk.

11. SHORT TERM BANK LOAN

2 0 0 7 2 0 0 6

PT. Bank Lippo Tbk:

- The Company 150,000,000 -

Total 150,000,000 -

PT Bank Lippo Tbk

The Company

On July 18, 2007, the Company obtained a loan from PT Bank Lippo Tbk amounting to maximum of US$35,000,000 or equivalent amount in Rupiah. The loan is for 12 (twelve) month period and will due on July 18, 2008. The loan bears interest rate at (i) when collateralized/secured by time-deposit, the interest rate is 1 (one) month time deposit interest rate + 1% for US Dollar or Rupiah amount (ii) when collateralized/secured by land and buildings and fiduciary guarantee, the interest rate is SIBOR + 1.5% (for loan in US dollar) and SBI + 2% (for loan in Rupiah). According to its agreement, this loan is used for Company’s working capital purpose.

The loan contains certain restrictions on the Company, which are (i) to enter into a merger (ii) transfer, grant, and/or provide guarantee on assets to other parties or act as a guarantor for other loans (iii) obtain new loan from other parties (iv) conduct general shareholder’s meeting to change Company’s article of association (v) involve in uncommon business practices (vi) change in business or corporate status or liquidate the Company (vii) enter into new investment (viii) transfer all or partial rights or obligations to other parties. The loan requires the Company to follow its terms and conditions. The company is also required to maintain certain financial ratios as mentioned in the agreement.

On July 19, 2007, the Company has withdrawn the loan amounting to Rp150,000,000 with interest rate at 1 (one) month time-deposit + 1% and collateralized with time-deposit amounting to Rp150,000,000 (Note 4).

12. TRADE PAYABLES

2 0 0 7 2 0 0 6

Third parties:

Farmers – in Rupiah 99,395,417 46,274,767

Suppliers

In Rupiah 9,885,703 2,580,690

In US Dollar 34,249,265 -

Total 143,530,385 48,855,457

Trade payables to farmers represent payables from FFB purchases to Plasma farmers, while trade payables to suppliers mostly represent payables from the purchase of fertilizers and spare parts.

An aging analysis of trade payables was as follows: 2 0 0 7 2 0 0 6

Due within 1 - 30 days 112,605,217 47,307,903

Due between 31 - 60 days 23,426,725 121,900

Due between 61 - 90 days 7,312,596 1,368,885

Due after 90 days 185,847 56,769

Total 145,530,385 48,855,457

13. SALES ADVANCES

Sales advances represent advances received from the following in relation to sales of crude palm oil, palm kernel and germinated seeds:

_{2 0 0 7 2 0 0 6}

PT Sinar Alam Permai 24,029,497 1,457,362

PT Indokarya Internusa 68,512 43,712

PT Sari Dumai Sejati - 1,357,657

PT Asianagro Agung Jaya - 212,220

PT Mega Surya Mas 5,834,031 -

PT Sinar Jaya Inti Mulia 601,124 1,773,317

PT Cahaya Kalbar 286,969 -

CV Agung Lestari 88,830 -

CV Gunung Sugih 9,794 -

Others (below Rp 500,000 each) 4,194,341 1,840,750

Total 35,113,098 6,685,018

14. TAXATION

a) Prepaid taxes

2 0 0 7 2 0 0 6

Value added tax- in 2,877,487 -

Income tax – article 22 19,291 2,822

Income tax – article 25 3,933,835 477,601

Fiscal 9,000 1,000

Total 6,839,613 481,423

b) Taxes payable

2 0 0 7 2 0 0 6

Income taxes:

Article 21 601,262 464,924

Article 25 4,091,421 -

Article 23/26 70,893 44,202

Article 29 17,526,883 30,584,216

Value added tax (VAT) – out - 3,076,757

Total 22,290,459 34,170,099

c) Components of corporate income tax expense (benefit)

2 0 0 7 2 0 0 6

Current period:

The Company - 6,003,142

Subsidiaries 46,048,974 39,416,235

Sub-total 46,048,974 45,419,377

Deferred:

The Company (11,668,704) -

Subsidiaries (1,538,567) 528,269

Sub-total (13,207,271) 528,269

Total 32,841,703 45,947,646

42

26. MINORITY INTERESTS (continued)

b) Minority interests in net income (loss) of Subsidiaries are as follows:

2 0 0 7 2 0 0 6

Sungai Rangit (111,335) -

Aek Tarum 318,687 412,566

Mutiara Bunda Jaya 125,361 147,023

Telaga Hikmah 257,097 280,909

Binasawit Makmur 166,817 101,143

Gunung Tua Abadi (14,785) 13,171

Total minority interests in net

Income (loss) of Subsidiaries 741,842 954,812

27. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES

a. Under the Plasma loan agreement with PT Bank Mandiri (Persero) Tbk (Mandiri) (Note 8), the Company is required to act as the guarantor (avalist) for the Plasma farmers’ loan repayments. For that purpose, the Company will collect the loan repayments from a portion of the proceeds of fresh fruit bunches (FFB) produced from the farmers’ Plasma areas. If sales of FFB can not fulfill the required installment, then the Company, as guarantor, will guarantee the insufficiency of the installment amount. The Company is required to purchase all Plasma FFB production until all of the Plasma loans are settled. All Plasma plantations have been fully developed and transferred to the farmers in 2001.

As of September 30, 2007, total Plasma loan that must be settled by 91 Plasma farmers (representing 182 hectares Plasma plantation area) amounted to Rp231,000.

b. In accordance with several restructured loan agreements with PT Bank Rakyat Indonesia (Persero) Tbk, Telaga Hikmah is committed to develop 11,704 hectares, consisting of 5,000 hectares of Plasma plantation and 6,704 hectares of Inti plantations, which are all located in Ogan Komering Ilir, South Sumatera. As of September 30, 2007, Telaga Hikmah had develop 3,684 hectares of Plasma plantations.

c. In accordance with the Plasma loan agreement with PT Bank Rakyat Indonesia (Persero) Tbk., in 2000, Telaga Hikmah (TH) is required to act as the guarantor (avalist) for the repayment of Plasma loan in the agreed schedule and installment, after the loans have been converted to Plasma participants. For that purpose, Telaga Hikmah will collect the loan repayment from a portion of the sales proceeds of fresh fruit bunches (FFB) produced from farmers’ Plasma areas. If such proceeds are insufficient for the installment payment, Telaga Hikmah, as the guarantor, has to cover the difference.

Under the loan agreement with BRI, Mutiara Bunda Jaya (MBJ) is required to act as guarantor for the Plasma loans (under PIR Trans Program) until the respective loan amounts are assigned to the related Plasma participants, while TH is required to act as guarantor for the Plasma loan. After all the Plasma areas are converted and turned over to smallholders, the collateral for the Plasma loan under the MBJ’s and TH’s loan agreements with BRI shall be the related land right certificates of the Plasma participants. Repayments are to be made out of a portion of the proceeds from the sale of fresh fruit bunches (FFB) produced from the farmers’ Plasma areas. MBJ and TH are required to

27. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)

In 2007, MBJ and TH placed deposit to BRI amounting to Rp14,969,000 to guarantee the outstanding loans of their Plasma participants to BRI. Total amount of Plasma loan that must be settled by 903 and 349 Plasma farmers (representing 1,806 hectares and 698 hectares Plasma plantation area) of MBJ and TH, amounted to Rp10,573,836 and Rp9,808,256, respectively. As of September 30, 2007, the development of Plasma plantation has not been completed yet (Note 8). d. On March 31, 2007, the Company and Sungai Rangit entered into a rental agreement with

PT Buana Sakti to rent office located at Sampoerna Strategic Square 24th floor (Note 25d). The

rental term based on this agreement will start from April 1, 2007 through December 31, 2009. The details of the rental payments commitment are as follows:

Total

2007 US$ 53,968

2008 US$ 80,424

2009 US$ 88,889

Total US$ 223,281

e. Sungai Rangit has an agreement to develop Partnership Plantation (Tanaman Kemitraan) with local

farmers whereas Sungai Rangit financed all the development cost which incurred until the plantation is mature (Note 9a). Such development cost will be capitalized. For eleven years since the plantation is mature Sungai Rangit has an obligation to manage the plantation, to buy the harvest with agreed purchase price and 15% of sales proceeds are contributed to farmers while the rest is returned to Sungai Rangit for maintenance cost. Partnership Plantation will be transferred to farmers after the twelveth year since the plantation is mature.

f. On September 30, 2007, the Company and Subsidiaries have contractual construction and supply commitments which has to be settled until end of 2007 amounted to Rp1.4 billion and Rp5.5 billion, respectively.

44

28. OTHER RELEVANT INFORMATIONS

An analysis of the current utilization of the Group’s plantation is as follows:

In 2007 (In hectares)

Plasma Inti

Oil palm Rubber

Planted area:

Mature 37,599 30,051 183

Immature 2,364 5,429 -

39,963 35,480 183

Transferred to Plasma participants (35,346) - -

Not yet planted - 13,342 -

Roads, building sites, etc. - 3,612 -

Total 4,617 52,434 183

In 2006 (In hectares)

Plasma Inti

Oil palm Rubber

Planted area:

Mature 37,515 17,362 183

Immature 2,444 2,678 -

39,959 20,040 183

Transferred to Plasma participants (35,346) - -

Not yet planted - 13,718 -

Roads, building sites, etc. - 1,429 -

Total 4,613 35,187 183

29. SEGMENT INFORMATION

Primary segment information

Details of business segment of the Company are as follows:

2007

CPO and PK Others Consolidated

Sales 815,231,808 40,971,495 856,203,303

Cost of sales 569,483,171 10,300,297 579,783,468

Segment result 245,748,637 30,671,198 276,419,835

Unallocated operating expenses 62,397,639

Operating income 214,022,196

Additional severance pay (37,719,064 )

Interest expense (60,800,230 )

Loss on impairment of fixed assets (7,442,177 )

Foreign exchange loss 11,521,521

Interest income 13,727,169

Others, net (19,669,613 )

Corporate income tax benefit, net (32,841,703)

Minority interest in net income of

subsidiaries (741,842)

Net income 80,056,257

Segment assets 1,898,025,922 24,843,667 1,922,869,589

Segment liabilities 546,934,404 22,290,459 569,224,863

Other information:

46

29. SEGMENT INFORMATION (continued)

Primary segment information (continued)

2006

CPO and PK Others Consolidated

Sales 766,427,191 22,495,646 788,922,837

Cost of sales 561,642,934 4,898,956 566,541,890

Segment result 204,784,257 17,596,690 222,380,947

Unallocated operating expenses 38,198,944

Operating income 184,182,003

Interest expense (27,202,333 )

Foreign exchange gain 377,915

Interest income 3,220,008

Others, net (4,619,194 )

Corporate income tax expenses, net (45,947,646 )

Minority interest in net income of

subsidiaries (954,812 )

Net income 109,055,941

Segment assets 592,173,888 44,264,665 636,438,553

Segment liabilities 218,960,543 8,753,562 227,714,105

Other information:

Capital expenditure 9,724,523 1,361,391 11,085,914

Secondary segment information

Details of geographical segment of the Company are as follows:

2007

Sumatera Kalimantan Consolidated

Sales 754,511,266 101,692,037 856,203,303

Segment assets 1,410,220,669 512,648,920 1,922,869,589

Capital expenditure 46,590,094 55,703,131 102,293,225

30. ECONOMIC CONDITIONS

The operations of the Group may be affected by future economic conditions in Indonesia that may contribute to volatility in currency values and negatively impact economic growth. Economic improvements and sustained recovery are dependent upon several factors, such as fiscal and monetary action being undertaken by the Government and others, actions that are beyond the control of the Group.

31. RESTRUCTURING UNDER COMMON CONTROL TRANSACTION

On July 29, 2003, the Company acquired 99% ownership interests in Aek Tarum (AT), Mutiara Bunda Jaya (MBJ), Telaga Hikmah (TH) and Gunung Tua Abadi (GTA), which are all entities under common control (Notes 1 and 2r) by issuing 16,153 shares of the Company to the shareholders of AT, MBJ, TH and GTA at nominal value. The difference amounting to Rp87,266,274 between the nominal value of issued share capital of the Company of Rp161,530,000 and the Company’s interest in the net assets of such companies of Rp74,263,726, was recognized as “Difference in the Value of Restructuring Transactions of Entities Under Common Control”, under shareholders’ equity in consolidated balance sheets.

On October 27, 2004, the Company acquired 99% ownership interest in Binasawit Makmur (BSM) with a cash payment of Rp59,400,002 (Note 1 and 2r). The difference amounting to Rp39,427,484 between the cash payment made by the Company of Rp59,400,002 and the Company’s interest in the net asset of BSM of Rp19,972,518, was recognized as “Difference in the Value of Restructuring Transactions of Entities Under Common Control”, under shareholders’ equity in consolidated balance sheets.

As a consequence of the change in the common control of the Company in January 2007 (Note 18), the aforementioned transactions have been re-accounted for using purchase method, whereas assets and liabilities of the aforementioned Subsidiaries were revalued at their fair values when the transfer of ownership occurred in accordance with SFAS No. 22, “Accounting for Business Combination”. Accordingly, the “Difference in the Value of Restructuring Transactions of Entities Under Common Control” which was previously incurred from the aforementioned restructuring transactions have been adjusted to become part of the value of the mature plantations of the Company (Note 9a). The related amortization of Rp27,400,000 have been adjusted to retained earnings.

32. SUBSEQUENT EVENTS

On October 19, 2007, the Company has repaid part of the working capital loan facility to PT Bank Lippo Tbk amounting to Rp80,000,000, hence reduced the outstanding loan balance amount to Rp70,000,000.

33. COMPLETION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Group’s consolidated financial statements were prepared by Board of Directors and were completed on October 26, 2007.