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INDOFOOD AGRI RESOURCES LTD. Annual Report 2010

Increasing Our Diversity Enhancing Our Growth

At a Glance Indofood Agri Resources Ltd (“IndoAgri”) is a

vertically integrated agribusiness group with

activities spanning the entire supply chain from

research and development, seed breeding, oil palm

cultivation and milling; as well as the production and

marketing of cooking oil, shortening and margarine.

Headquartered in Jakarta, we are among the largest

palm oil producers in Indonesia. Our branded cooking

oil, shortening and margarine products together

garner a leading share in the domestic market.

As a diversified agribusiness group, IndoAgri also

engages in the cultivation of sugar cane, rubber and

other crops.

02 Milestones

04 Key Events in 2010

05 Corporate Structure

06 Location Map

10 Chairman’s Statement

11 CEO’s Statement

14 Business Overview

16 Financial Highlights

17 Operational Highlights

20 Operations Review

30 Manufacturing Process for Edible Oils & Fats

31 Environment & CSR

36 Board of Directors

40 Corporate Information

41 Corporate Governance

50 Financial Statements

133 Interested Person Transactions

134 Estates Location

136 Statistics of Shareholdings

138 Notice of Annual General Meeting

CONTENTS

Diversification of sugar with strategic fit advantage

One of the largest plantation owners in Indonesia

Leading market position in Indonesia with renowned brands of cooking oil and margarine

To become a leading integrated agribusiness, and one of the world-class agricultural research and seed breeding companies.

Vision

1. To be a low-cost producer, through high yields and cost-effective and efficient operations

2. To continuously improve our people, processes and technology

3. Exceed our customers’ expectations, whilst ensuring the highest standards of quality

4. Recognise our role as responsible and engaged corporate citizens in all our business operations, including sustainable environmental and social practices

5. To continuously increase stakeholders’ value

Mission1. CONSISTENT

2. Our Success Rests On Satisfying CUSTOMERS’ Needs

3. INNOVATION Is Our Key To Future Growth

4. Reliable STAFF Is Our Biggest Asset

5. EXCELLENCE Is Our Way Of Life

6. TEAMWORK Makes A Winning Team

Values

INDOFOOD AGRI RESOURCES LTD. Annual Report 2010 1

Completed a reverse takeover of CityAxis Holdings Limited and changed name to Indofood Agri Resources Ltd.

Listed on the main board of the SGX-ST on 14 February and raised S$420 million proceeds from placement of 338 million new shares.

Acquired plantation land bank of 98,491 hectares in South Sumatra and Kalimantan.

Acquired a 58.8% effective interest in Lonsum, becoming one of the largest plantation companies in Indonesia with land bank doubling to over 400,000 hectares.

Diversified into sugar business via the subscription of 60%-stake in PT Laju Perdana Indah.

Entered into a joint venture with Ghanian Council for Scientific and Industrial Research to develop and realize the genetic potential of oil palm for commercial production.

Achieved the world’s first patent to produce F1 oil palm hybrid seeds.

Acquired plantation land bank of 82,300 hectares in South Sumatra and Central Kalimantan, Indonesia.

Acquired a bulking facility at the Dumai port, Indonesia.

2007 milestonesThroughout its journey of growth and expansion, IndoAgri achieved respectable growth in its planted area and production volume. The group also diversified into sugar cultivation and production.

2008

Increasing Our Diversity, Enhancing Our Growth2

2009

2010

Carried out an internal restructuring to consolidate all joint ventures with the Salim Group (a controlling shareholder of IndoAgri) under a Singapore incorporated entity, IGER.

Sold 9 million treasury shares through open market for S$25 million.

IndoAgri divested 8% or 109,521,000 shares in Lonsum for a cash consideration of Rp1.3 trillion. Of which, 3.1% was sold to PT SIMP and 4.9% was sold to the public.

Acquired plantation land bank of 10,000 hectares in South Sumatra, Indonesia.

Incorporated a new subsidiary to own barges, tugboats and operation of shipping logistics business.

Achieved the Roundtable on Sustainable Palm Oil certification for its North Sumatra estates and factories.

Raised Rp730 billion or approximately US$78 million from 5-year Indonesian Rupiah Bonds and Islamic Lease-based Bonds.


KEy EVEnts In 2010

15 May

11NOV

IndoAgri divested 8% or 109,521,000 shares in Lonsum for a cash consideration of Rp1.3 trillion. Of which, 3.1% was sold to PT SIMP (a 90% owned subsidiary of IndoAgri) and 4.9% was sold via a private placement to certain external investors.

Following IndoAgri’s sale to the external investors, the Group’s shareholding interest in Lonsum has reduced from approximately 64.4% to 59.5%. This has resulted in an increase in Lonsum’s public float from approximately 35.6% to 40.5%. The increase in liquidity of the Lonsum shares on the Indonesian Stock Exchange will enable Lonsum to enjoy a lower corporate tax rate of 20% instead of the standard rate of 25% based on the prevailing tax regulation in Indonesia.

08DEC

PT SIMP entered into an agreement with certain members of the Salim Group so as to consolidate all its joint ventures with the Salim Group under a single investment holding company, IndoInternational Green Energy Resources Pte. Ltd. (“IGER”). Following this internal restructuring, the effective shareholding interests of PT SIMP and the Salim Group in the joint ventures remain the same.

Following this, IGER is positioned to be an agribusiness group with oil palm plantations and sugar business to explore potential business opportunities that may arise in the future, if any.

IndoAgri sold 9 million treasury shares through open market for approximately S$25 million.


InDOfOOD sInGapOrE HOlDInGs ptE. ltD.

InDOfOOD OIl & fats ptE. ltD.

pt salIM IVOMas prataMa

pUBlIC

COrpOratE strUCtUrE

83.84%

8.38%

68.95%

100.00%

90.00%

59.48%

31.05%


lOCatIOn Map

S U M A T R A

S I N G A P O R E

M A L A Y S I A

J A V A

Medan

Palembang

Jakarta

Pekanbaru Pontianak

L E G E N D

Oil Palm

Sugar Cane

Rubber

Cocoa

Tea

Refinery

Sugar Mill

Copra Mill

Town / City


Surabaya

K A L I M A N T A N

S U L A W E S I

NORTHMALUKU

Samarinda

Tobelo

Makassar

Muotong

Bitung

OUR PLANTATIONS AND REFINERIES

IndoAgri owns strategically located plantations and production facilities across the Indonesia archipelago. Our land bank is largely located in Sumatra and Kalimantan, of which over 240,000 hectares are planted. Oil palm is our dominant crop, followed by rubber, sugar cane, cocoa and tea. On the downstream, our refineries are strategically located at major cities in Jakarta, Surabaya, Medan and Bitung.


Our strategy

CHaIrMan’s statEMEnt

Dear shareholders,

On behalf of the Board, I am pleased to present IndoAgri’s Annual Report for the year ended 31st December 2010.

Amidst global uncertainties particularly in Europe and America, IndoAgri has risen to the challenges of 2010. At the heart of this fundamental resilience is our sound business strategy and sustainable practices. We were boosted by continued strong economic growth among emerging economies in Asia. The performance of China, India and Indonesia were outstanding. Indonesia, our major market and where our plantations are located, registered a robust GDP growth of 6.1% in 2010.

As the world’s largest producer of palm oil, Indonesia is well positioned for continued economic growth. Rising confidence has been backed by political and macro-economic stability. Domestic consumption is driven by population growth and expanding income expenditure, particularly among middle-income households. Indonesia has a population of 233 million, with approximately 50% aged 25 years old or below. Demand for our downstream products such as cooking oil and margarine has been supported by a flourishing food and beverage industry. The outlook is bright.

MEETING THE cHALLENGEOur resolve to expand capacities, pursue strategic opportunities and improve plantation yields were strengthened by some major themes dominating the commodities market in 2010:

• Global CPO shortage, aggravated by adverseweather andconsequently slower new plantings, is likely to keep short-term palm oil prices supported.

• Globaldemandofpalmoilisexpectedtobewellsupportedwith consumption growth accounting for 7.8% vs production growth at 7.6% over the past 10 years.

• The increasing appetite for agricultural commodities inemerging Asian markets, such as India and China, is expected to continue.

STRENGTHENING OUR FUNDAMENTALSOur unwavering business fundamentals were a major source of strength in weathering the challenges of the economic recession. Strong corporate governance, efficiency and productivity are some of the hallmarks of our business practices. The maintenance of low-cost production buttressed by higher yielding crops, better resource utilisation and smarter work processes provided a firm platform for our growth and success. The sugar business made headway in the third year of operations with new plantings and the first full year of operations for our Java factory. This segment will continue to contribute to our future growth.

As an integrated agribusiness group, our future lies in R&D and an absolute commitment to sustainable farming practices. The cultivation of high-yielding seed varieties and production of approximately 170,000 tonnes of sustainable palm oil certified to the principles of the Roundtable of Sustainable Palm Oil (RSPO) are testimonies to these efforts. We believe that these accomplishments are interlinked, as better crop yields will allow us to fulfill growing demand with less acreage. We are focused on increasing our sustainable palm oil production in the near future as the second phase of RSPO audits take place at our Sumatra estates in 2011.

ENGAGING OUR cOMMUNITIESCorporate Social Responsibility remains a top priority for the Group. Through ongoing community services and agricultural extension programmes, we continue to help our neighbouring farmers and smallholders prosper and achieve their fullest potential across the Indonesian archipelago.

While the future is challenging, our opportunities are greater than ever. With a strong pipeline for organic expansion, IndoAgri is well positioned as a leading integrated agribusiness with products that will enrich people’s lives. Your continued support has given us, and will give us the wind beneath our wings.

Mr Edward leecHAIRMAN


CEO’s statEMEnt

Dear shareholders,

The market for commodities has been fairly resilient despite one of the toughest recessions since the Great Depression. Rising population and income growth, particularly in developing countries, have fuelled demand for edible oils, putting pressure on global supplies already tightened by adverse weather, competition for acreage and biofuel mandates.

Rising at a rate of 80 million annually, world population is expected to reach 7 billion in 2011 (from 2 billion in 1930) and cross the 9 billion-mark by 2045. This, combined with urbanisation and rising incomes, is expected to underpin the demand growth for vegetable oils. As the most productive vegetable oil, palm oil accounts for 45.5 million tonnes or 31% of global vegetable oil production.

In Q4 2010, the average price of CPO soared to US$1,108 per tonne on the back of economic upswings and the rise of Asian powerhouses like China and India. As regional growth outpaces the rest of the world, the weakened US dollar has made commodity purchases even more attractive to buyers in Asia.

Although biodiesel usage remains discretionary and mandate-driven, prices of vegetable oil and crude oil remain closely linked. Speculation on demand for vegetable oils as biofuel feedstock has led to volatility in CPO prices, intensifying the annual contest between corn, wheat and other oilseed crops for planting acreage.

ANTIcIPATING MARKET OPPORTUNITIESIndonesia’s status as the world’s largest palm oil producer is further supported by strong domestic consumption due to rising incomes, growing affluence and changing dietary patterns. Buttressed by similar socio-economic trends in major markets around the world, CPO prices (CIF Rotterdam) rallied strongly from US$683 per tonne in 2009 to a high of US$1,108 in Q4 2010, averaging at US$901 per tonne in 2010.

With tight global stocks and sustained volatility in prices, current prices factor in a risk premium, which we believe is supported by strong fundamentals. We will continue to expand our palm plantations given this positive long-term scenario.

Meanwhile, deficits in sugar supplies caused by droughts in Brazil and lower-than-expected exports from India, the world’s No. 2 producer, continue to support the price of sugar. Global sugar prices rose from an average of US$486 per tonne in 2009 to US$616 per tonne in 2010. Global stockpiles were reduced to low levels amidst concerns that India’s sugar exports may not be enough to offset declining outputs in Brazil.

At the same time, spiralling demand in net-importing countries like Indonesia, where a thriving food and beverage industry is taking root, have driven the rate of sugar consumption. According to Dewan Gula Indonesia, sugar consumption increased from 3.3 million tonnes in 2004 to 5.4 million tonnes in 2010, with domestic production lagging at 2.2 million tonnes per annum.

In 2010, rubber prices also staged a triumphant comeback with higher demand by recuperating automotive industries in developing countries, especially China. According to the Rubber Association of Indonesia, demand for car tyres could give a boost in rubber shipments to India.

a leading integrated agribusiness group with strong r&D and seed breeding operations


CEO’s statEMEnt

DELIVERING STEADY RESULTSThanks to our fiscal strength and prudent approach, IndoAgri has emerged from the economic crisis with greater confidence and resolve. Despite our challenges, we remained profitable and vigilant in our focus.

For the year in review, the Group’s final consolidated revenue was up 5% to Rp9.5 trillion with the Plantation Division recording a good year from higher average selling prices of crude palm oil, palm kernel and rubber as well as higher sales volume of palm seeds and contribution from sugar sales.

Our gross profit grew 16% in FY2010 with the Plantation Division offsetting lower profit contribution from Edible Oils and Fats Division due to stiff price competition in the market.

Net profit attributable to owners declined 8% to Rp1.4 trillion due to lower profit from operations as a result of substantially lower biological assets gain and lower net foreign exchange gains.

POSITIONING FOR SUSTAINAbLE GROWTHDriving our strong financials is the strategic focus on sustainable profits through low-cost production. Our vertically integrated agribusiness model gives us flexibility to harness operational synergies across the entire supply chain while establishing a domestic platform for sourcing and working with our parent, PT ISM, to supplement our distribution capabilities.

That IndoAgri was able to maintain its profitability and production levels despite the challenges demonstrates the strategy in action. To secure our footing in the coming years and beyond, we will continue to measure ourselves against international benchmarks, strengthen our vertical integration and improve our competitiveness at all points of the price cycle. We will also focus on expanding production capacities and enhancing crop yields.

DRIVING FUTURE TRANSFORMATIONAs a Group, our achievements depend on a variety of performance drivers including people, processes, operational capacities, innovation and corporate governance.

PlantationDuring the year, our sugar business ramped up with the operation of our 3,000 TCD sugar factory in Central Java. The facility has the capacity to process up to 540,000 tonnes of sugar cane per annum, buying from approximately 600 smallholders and farmers.

In 2011, the completion of our 8,000 TCD sugar factory in South Sumatra is expected to add additional capacity of 1.5 million tonnes of sugar cane per year, which will be supplied from our own plantation as we expand.

With our capacities and expertise in place, we are poised for an increase in output, and will ensure that our plantation operations remain focused and manageable. Together with our groundwork in 2010, we hope to fulfill our planting targets and improve production outputs as we position to become a leader in Indonesia’s sugar industry.

Additionally, our core oil palm plantations were expanded to 205,064 hectares, of which 49,664 hectares or 24% are immature trees that will increase our production when they reach maturity in the next 2 to 3 years. To handle the growth in FFB production, we are in the process of building two new palm oil mills.

Edible Oils and FatsTo reinforce our domestic market leadership for branded cooking oil, margarine and shortening, we have enlarged our production capacity in North Jakarta with the completion of a 420,000-tonne refinery, increasing the Group’s refining capacity to 1.4 million tonnes of CPO each year. We expect to complete the bottling and margarine production lines and broaden our range of cooking oil and speciality fat products in the market in 2011.

The new refinery offers storage and capabilities for the production of consumer and industrial cooking oil. We believe it will create long-term business value and a much-needed capacity to boost our production of industrial cooking oil. Over time, these enhancements will strengthen our outputs of high quality cooking oil and fortify our brand in local and export markets.

bALANcING bUSINESS WITH ENVIRONMENTAL STEWARDSHIPAs a plantation business, responsible farming practices and sustainable production methods are integral to our philosophy. We have not forgotten the social and environmental impact of our operations, and are deeply committed as responsible corporate citizens in our community.

This year, we pursued new benchmarks to further our CSR efforts. This included staff seminars on the Awareness, Interpretation and Development of Environmental Management Systems, as well as training programmes on Occupational and Safety Management Systems. Respectively, these activities underscore our compliance with ISO14001:2004 and OHSAS18001:2007 standards, reinforcing the importance of sustainable practices in the workplace.


As a follow up to the RSPO-certification of our North Sumatra facilities, some of our Riau estates will undergo RSPO audits in 2011. An RSPO accreditation represents the highest environmental compliance and protection standards in the global palm oil industry. As we strive to increase sustainable palm oil output, we will progressively increase the number of RSPO-certified estates in the coming years.

NURTURING INNOVATIONWith stricter regulations on new plantings, our future depends on our ability to optimise productivity and improve crop yields. That is why we have placed premiums on research and development in plant breeding, agronomy, crop protection and data analytics. With innovation in these areas, the Group is focusing on lower production costs, maximising long-term profits and improved environmental sustainability.

Through our research centres, PT SAIN and Sumatra Bioscience, we will also invest in applied research and collaborate with leading institutions to increase the yield potential of our palm seed material, as well as focus on agronomy and improved crop protection.

ADVANcING bEST PRAcTIcESAs part of corporate governance, our Enterprise Risk Management programme was implemented Group-wide this year to ensure that day-to-day risks are uniformly tracked and controlled. We also aligned our Internal Audit function in 2010, establishing a consistent framework for best business practices and other corporate governance measures.

To improve decision-making and business execution, the SAP enterprise resource planning system implemented at our refinery operations in 2009 was successfully piloted in our Riau plantations and will be rolled-out to our plantations starting in 2011.

To sharpen our operational competencies, we intensified the deployment of Geographic Information Systems, which map and monitor our estates through colour-coded graphical interfaces. The system will enable us to identify and respond to potential threats with greater speed and efficiency.

LOOKING AHEADIn 2011, we will continue to exploit our experience and expertise in primary production, focussing on all levels in our supply chain to remain a low-cost producer. We will also enhance our integration of upstream operations, and improve the range and quality of our downstream products. We have introduced sugar into our product range this year, and are focused on improving sales volumes in 2011 and beyond.

Our achievements are nothing without people. We value teamwork among employees, synergistic relationships with partners and suppliers, and a work environment that allows us to achieve our full potential. We have the talents and resources to succeed in today’s dynamic operating environment, and will continue to foster a culture where people are enabled to contribute their best.

IN APPREcIATIONAs always, my heartfelt appreciation goes to our Board of Directors for steering the Group’s strategy and direction. I also take this opportunity to thank our customers, suppliers and business partners for their steadfast support.

Last but not least, special thanks to our family of over 31,000 employees across Indonesia. Without their loyalty and hard work, IndoAgri would not be what it is today.

Mr Mark WakefordcHIEF EXEcUTIVE OFFIcER


BUsInEss OVErVIEW

IndoAgri Group is a vertically integrated agribusiness group with business activities in

research and development, seed breeding, oil palm cultivation, plantation management,

milling, production, as well as marketing and distribution of branded cooking oil

and margarine. Headquartered in Jakarta, the Group operates 20 palm oil mills and

5 refineries across Indonesia. As a diversified group, we are also engaged in the

cultivation of sugar cane, rubber and other crops.

IndoAgri was listed on the Singapore Exchange in 2007, and is one of the largest palm oil producers in Indonesia today. Our branded cooking oil, together with shortening and margarine products enjoy leading shares in the Indonesian domestic oils and fats market. Our operations are grouped under the Plantation and Edible Oils & Fats Divisions.

FINANcIAL HIGHLIGHTSFor the year in review, the Group reported consolidated revenues of Rp9.5 trillion, a 5% increase against last year’s Rp9.0 trillion as a result of higher average selling prices of crude palm oil, palm kernel and rubber as well as higher sales volume of palm seeds and contribution from sugar sales.

Full year gross profit improved 16% from Rp3.2 trillion in FY2009 to Rp3.8 trillion in FY2010. Strong gross profit recorded by the Plantation Division contributed to the improved results.

The Group’s net attributable profit to owners for the year of Rp1.4 trillion came in 8% lower compared to the same period last year due to lower biological assets gain, lower net foreign exchange gains and higher operating expenses. The Group recognised a biological assets gain of Rp309 billion in FY2010 versus Rp623 billion in FY2009 due mainly to lower projected CPO prices in Rupiah terms resulting from a stronger projected Rupiah against the US dollar.

ENSURING SUSTAINAbLE GROWTHIndoAgri remains one of Indonesia’s largest plantation owners with a planted acreage of 242,107 hectares. In 2010, we planted an additional 15,041 hectares for oil palm and 2,630 hectares for sugar cane respectively.

PLANTATION

Oil Palm

• Oil palm remains our dominant crop, occupying 85% or205,064 hectares of total planted area. This includes 49,664 hectares of immature oil palms, ensuring growth in our FFB production as young trees approach their productive age.

• The Group harvested an FFB output of 2,564,206 tonnesin FY2010, a 2% decrease over 2,613,028 tonnes achieved last year.

• CPO production declined 3% from 762,570 tonnes to739,885 tonnes in FY2010 as a result of lower plasma purchases and nucleus production.

• Weexpect domestic consumption for palmoil products toremain supported in the short to medium term by demand from the food and beverage industry and population growth.

• We are in the process of building two additional palm oilmills in order to process the FFB outputs derived from newly matured areas.

Sugar

• Through its estates in South Sumatra, theGroup’s plantedarea for sugar cane increased from 8,672 hectares in FY2009 to 11,302 hectares in FY2010. The expansion is a positive step towards achieving the Group’s targeted planted area.

• Welookforwardtothecompletionofan8,000TCDsugarfactory in South Sumatra in 2011. This will augment our production capacities as we consolidate our capabilities for full-scale operation and growth.

• From Pati, we have a 3,000 TCD sugar factory where wereceived 397,444 tonnes from smallholders, and together with 9,981 tonnes of imported raw sugar, we produced 35,014 tonnes of sugar (of which 15,960 tonnes represent farmers’ share).


Edible Oils & Fats

• Tostrengthenitspositioninthedomesticmarketforbrandedcooking oil, the Group supplemented its processing capacities and commissioned a new 420,000-tonne per year refinery in Tanjung Priok this year.

• Withtheadditionalcapacity,theGrouphasatotalprocessingcapacity of 1.4 million tonnes per year.

Through its RSPO-certified estates in North Sumatra, the Group produced approximately 170,000 tonnes of sustainable palm oil in FY2010, which meets the stringent criteria of the Roundtable on Sustainable Palm Oil.

To raise productivity and improve crop yields, the Group engages in a spectrum of research and development programmes, and leverages advance technologies to achieve its operational goals.

REVENUE

Rp trillion

14.0

0

12.0

10.0

8.0

6.0

4.0

2.0

6.5

ACTUAL

07

11.8

ACTUAL

08

9.0

ACTUAL

09

9.5

ACTUAL

10

PROFIT FROM OPERATIONS

Rp trillion

0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

1.6

ACTUAL

07

1.9

ACTUAL

08

3.3

ACTUAL

09

3.0

ACTUAL

10

NET PROFIT TO EQUITY HOLDERS

Rp trillion

1.8

1.6

1.4

1.2

0.8

1.0

0.6

0.4

0.2

0

ACTUAL

07

0.9

ACTUAL

08

0.8

ACTUAL

09

1.5

ACTUAL

10

1.4

NAV PER SHARE

Rp

0

7,000

8,000

6,000

5,000

4,000

3,000

2,000

1,000

ACTUAL

07

4,943

ACTUAL

08

5,506

ACTUAL

09

6,567

ACTUAL

10

7,605


fInanCIal HIGHlIGHts

2007 2008 2009 2010

In billion Rupiah (unless otherwise stated) Actual Actual Actual Actual

Revenue 6,506 11,840 9,040 9,484

Gross Profit 2,013 4,129 3,225 3,750

Gain/(Loss) arising from changes in fair values of biological assets 202 (947) 623 309

Operating Income 1,579 1,864 3,264 2,993

Net Profit 994 1,067 2,053 1,906

Net Profit to owners of the parent 889 795 1,527 1,402

EPS (in Rupiah) 671 550 1,061 974

Current Assets 3,880 4,294 3,837 6,118

Fixed Assets 11,454 12,529 15,183 17,244

Other Assets 3,477 4,040 4,628 4,826

Total Assets 18,812 20,863 23,648 28,189

Current Liabilities 5,924 3,826 2,926 4,126

Non-Current Liabilities 3,067 6,061 7,743 8,363

Total Liabilities 8,991 9,887 10,669 12,488

Shareholders' Equity 7,156 7,922 9,449 11,010

Total Equity 9,821 10,976 12,979 15,700

Net Working Capital (2,044) 468 912 1,992

Sales Growth 59.1% 82.0% (23.6%) 4.9%

Gross Profit Margin 30.9% 34.9% 35.7% 39.5%

Operating Profit Margin 24.6% 15.7% 36.1% 31.6%

Net Profit Margin 15.3% 9.0% 22.7% 20.1%

Net Profit to owners of the parent 13.7% 6.7% 16.9% 14.8%

Return on Assets 1 8.4% 8.9% 13.8% 10.6%

Return on Equity 2 12.4% 10.0% 16.2% 12.7%

Current Ratio (times) 0.7 1.1 1.3 1.5

Net Debt to Equity Ratio (times) 3 0.37 0.35 0.40 0.30

Total Debt to Total Assets Ratio (times) 0.28 0.30 0.29 0.30

1 Profit from operations divided by total assets2 Net profit to equity holders divided by shareholders' equity3 Net debt divided by total equity


OpEratIOnal HIGHlIGHts

2007 2008 2009 2010

In Hectares (unless otherwise stated) Actual Actual Actual Actual

Planted Area - Nucleus

Oil Palm 161,457 183,113 193,613 205,064

Mature 118,030 124,169 132,560 155,400

Immature 43,427 58,944 61,053 49,664

Rubber 22,003 22,410 21,738 22,028

Mature 18,956 17,873 17,263 17,556

Immature 3,048 4,537 4,475 4,472

Sugar – 4,174 8,672 11,302

Mature – 2,567 4,024 8,785

Immature – 1,607 4,648 2,517

Others 3,522 3,631 3,698 3,713

Mature 2,800 2,870 2,971 3,198

Immature 722 761 727 515

Plasma 61,000 76,472 76,851 81,500

Age Maturity of Oil Palm Trees

Immature 43,427 58,944 61,053 49,664

4 - 6 years 9,331 12,332 19,559 39,010

7 - 20 years 90,628 82,008 73,262 71,443

Above 20 years 18,070 29,829 39,739 44,947

Total 161,457 183,113 193,613 205,064

Distribution of Planted Areas-Nucleus

Riau 57,003 57,003 56,782 57,025

North Sumatra 40,535 40,506 40,463 40,502

South Sumatra 43,692 61,254 71,385 77,380

West Kalimantan 18,632 21,758 21,878 24,900

East Kalimantan 19,030 24,478 28,120 32,880

Central Kalimantan – – 725 1,007

Java 2,555 2,795 2,860 2,861

Sulawesi 5,535 5,534 5,508 5,552

Total 186,982 213,328 227,721 242,107

Production Volume (‘000 Tonnes)Nuclues Fresh Fruit Bunch (FFB) 1,506 2,496 2,613 2,564

Processed Fresh Fruit Bunch 1,708 3,160 3,346 3,313

Crude Palm Oil (CPO) 384 714 763 740

Palm Kernel 85 166 181 175

Sales Volume (‘000 Tonnes)Crude Palm Oil (CPO)* 361 730 759 728

Palm Kernel 82 161 179 173

Rubber 7 26 25 22

Cooking oil, Margarine, Shortening & CNO 663 693 642 683

* Sales to external and internal


RESEaRCH & DEVELOPMENT

PaLM OIL MILLS

OIL PaLM SEED BREEDING

PLaNTaTIONS

OUr IntEGratEDaGrIBUsInEss MODEl

REFINERIES

DISTRIBUTION

FINISHED PRODUCTS

plantatIOn rEVIEW - palM OIl

Constant emphasis on operational streamlining underscores our commitment in optimising long-term efficiency while keeping production costs low. For example, the purchase of additional trucks has provided the division with a cheaper and more reliable alternative to third-party outsourcing. Our in-house transportation fleet has translated into greater savings and better control over logistics management. Ongoing road works at our estates in South Sumatra have improved the transportation of crops and fertilisers during rainy seasons. At the same time, a six-year programme to develop permanent housing will raise productivity levels and reduce the deployment of contract workers in South Sumatra. We expect to do more to boost competency in the coming years.

The division systematically monitors and adjusts the nutrient and fertiliser levels across its estates with a view towards optimising FFB yields. To fine-tune our administration and control, we are extending a block management control system progressively to track our plantations in specific and smaller parcels of 25-30 hectares. The SAP enterprise resource planning system that was piloted at our refineries will be progressively rolled out to all plantations starting in 2011.

IndoAgri remains one

of Indonesia’s largest

plantation owners with

planted oil palm acreage of

over 205,000 hectares.

OVERVIEW The Plantation Division plays a pivotal role in managing and developing IndoAgri’s vast estates across Indonesia. Our estates are dominated by oil palm, which occupy 205,064 hectares or 85% of total planted area, followed by rubber at 9% and sugar cane at 5%. With 49,664 hectares or 24% of our planted oil palm estates demarcated by young or immature trees under the age of seven years, the Group expects to benefit from steady FFB supplies as these trees approach their productive years.

Building on a heritage that brings together 130 years of plantation management experience from our subsidiaries PT SIMP and Lonsum combined, the division deploys advanced R&D programmes, including the latest breeding and oil palm cultivation techniques. Continued focus on research and biotechnology has made us among the most productive plantation companies in Indonesia.

The division has a total processing capacity of 4.5 million tonnes of FFB per annum spread across its 20 palm oil mills in Sumatra and Kalimantan. We also operate four crumb rubber processing facilities, three sheet rubber processing facilities, a cocoa factory, a tea factory and a sugar mill.

Our estates and processing mills in North Sumatra are certified to the stringent standards set by the Roundtable of Sustainable Palm Oil, producing approximately 170,000 tonnes of sustainable crude palm oil each year.

The Group’s diversification into sugar offers both strategic fit and the ability to cater to strong domestic demand for sugar in Indonesia.


2010 REVIEW The economic upturn in 2010 provided a global impetus for stronger market demands and higher commodity prices. CPO prices (CIF Rotterdam) rebounded strongly from US$683 per tonne in 2009 to US$901 per tonne in 2010, while crude oil prices averaged around US$79 per barrel in FY2010. The recovery in CPO prices was supported by:

• IncreasedimportsandconsumptionofvegetableoilsinChinaand India

• Tighter supplies from major producers such as Malaysia and Indonesia

• Consistent demand due to price competitiveness and thedrawdown of stocks

• Reducedproductionyieldsduetoadverseweatherconditionsexacerbated by El Nino in 2009 and La Nina in 2010

Rubber prices staged a similar rebound due to lower global production and higher global demand prompted by a recovering automotive industry. Exports, mostly to the US, accounted for most of the division’s rubber sales, with crumb (low-grade rubber) and rubber sheets (high-grade rubber) constituting 71% and 29% respectively.

In 2010, the plantation division recorded total sales of Rp7.0 trillion, a 16% increase over 2009 due to higher average selling prices of CPO, PK and rubber, as well as higher sales volume of palm seeds. EBITDA margins, excluding biological assets gain, improved from 41% in 2009 to 44% in 2010 as a result of the price increments.

0.00

6.00

5.00

3.00

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Rubber Price (RSS 3 SIcOM)

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Higher rainfall over our estates during the first half of the year affected the division’s harvest of nucleus FFB, which fell by 2% to 2,564,206 tonnes over the previous year.

As a result, CPO production decreased 3% to 739,885 tonnes on the back of lower nucleus FFB output and lower purchases from plasma and third-party farmers. Oil extraction rates remained stable at 22.3% versus 22.8% in 2009. At the same time, CPO sales volume to the Edible Oils and Fats division increased from 60% to 80% this year.

Dry rubber production declined 2% from 25,720 tonnes in 2009 to 25,139 tonnes this year resulting from wet weather that affected morning tapping operations.

As at 31 December 2010, the division’s oil palm planted area stood at 205,064 hectares, with new plantings occupying 15,041 hectares. Mature oil palm estates constituted 155,400 hectares, a 22,840 hectare increase over 2009 as our young trees reached maturity and started to bear fruit. At the end of 2010, immature estates occupied 49,664 hectares (or 24% of our planted oil palm area) and are expected to be productive in the next 2 to 3 years.

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cPO production

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FEb production (nucleus)

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740

bio-diesel driven by government mandates from Europe, Brazil and Argentina. This may result in an intensified fight for acreage in 2011, keeping prices well supported.

Looking ahead, our fundamentals for CPO production remain positive as 43% of our planted area have not reached peak maturity yields. We will continue to build scale by expanding our oil palm acreage and increasing our output. Our production capacities will be enhanced with the construction of two 45 FFB-per-hour palm oil mills in Kalimantan and South Sumatra. Our focus on R&D and emphasis on sustainable agricultural practices will create added advantages as we gear up for future expansion.

2011 OUTLOOKThe price of global vegetable oil, including CPO, is influenced by a complexity of factors ranging from demand for bio-diesel and petroleum prices, to global food consumption patterns and the strength of the US dollar.

We expect the domestic demand for palm oil products to remain supported in the short to medium term by an expanding food and beverage industry and population growth. In addition, the importance of vegetable oil and palm oil supply is expected to be supported by an improving economic climate underpinned by robust consumption growth from India, China and other emerging markets, and coupled with stronger demand for

plantatIOn rEVIEW - palM OIl

Domestic demand for palm products is

expected to be well suported; and IndoAgri

remains committed to expand our planted

area and output.


plantatIOn rEVIEW - sUGar

OVERVIEW For the second consecutive year, the sugar industry was caught in the widening gap between world consumption and global production. Sugar prices rose on expectations that countries, including Indonesia, are still struggling to attract the import levels required to meet domestic demand. Tightening world supplies have triggered rapid increases in white sugar prices on the London International Financial Futures and Options Exchange (LIFFE), with prices increasing by 27% from an average of US$486 per tonne in FY2009 to US$616 per tonne in FY2010.

Limited stocks and persistent dry weather have led to deficits in Brazil, the world’s largest sugar producer, where pressure and mounting requirements from China and India are driving import demand for raw sugar. In India, the government’s consent to sugar exports, even though it is building a domestic stockpile, remains fluid and will add to price volatility.

According to Dewan Gula Indonesia, Indonesia consumed 5.4 million tonnes of sugar, of which 3.2 million tonnes or 59% were imported in 2010. As a net sugar importer, the situation is unlikely to change in the foreseeable future. In line with these factors, average domestic sugar prices in Indonesia have risen 28% to Rp10,502/kg in 2010 compared to a year ago. The current government floor price of Rp6,350/kg ensures a minimum selling price for domestic sugar.

The cultivation and production of sugar in Indonesia is driven by strong consumer demand, rising population growth and the development of processed F&B industries. To protect and support its domestic sugar producers, the government imposes a floor price mechanism on sugar prices and import quotas.

The favourable locations of our estates and the vertical integration of our agribusinesses combine to give IndoAgri several competitive advantages:

• On theupstream,weareable toachievebetter yieldsandlower costs through economies of scale

• Ourexperienceinlarge-scaleplantationmanagementallowsus to tap into specific expertise on agronomical conditions in Indonesia

• Ouraffiliationtoourparentcompany,PT ISM,allowsustoleverage on their wide distribution networks, ensuring a more efficient distribution of our end products to customers in the industrial and retail sectors

Upon completion in 2011, our 8,000 TCD sugar factory in South Sumatra will ramp-up our sugar production capacity enabling us to process the cane from our own plantation.

IndoAgri’s sugar division to

make notable contributions

when targetted plantings are

achieved and milling facilities

are fully operational this year.

US $/Ton

Sugar Price (LIFFE)

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2010 REVIEWFor the year in review, the division made steady progress in new plantings, and continues to oversee the construction of its new sugar factory in South Sumatra. Total nucleus planted area for sugar cane increased 30% or 2,630 hectares from 8,672 hectares in 2009 to 11,302 hectares in 2010. Our harvested area of 5,444 hectares yielded 79 tonnes of sugar cane per hectare, producing 429,828 tonnes of sugar cane in 2010.

Our Central Java factory, which began operations in 2009, has the capacity to process more than 540,000 tonnes of sugar cane each year. From our local smallholders, the factory received 397,444 tonnes of sugar cane supplies and together with 9,981 tonnes of imported raw sugar, we produced 35,014 tonnes of sugar (of which 15,960 tonnes represent farmers’ share).

As part of our agriculture extension services to farmers and smallholders in Java, we provided cash advances for new plantings and fertiliser. We also offered agronomic advice on fertiliser application, seed and cane varieties to increase their awareness of optimal harvesting times and fertiliser usage. These efforts have strengthened sugar cane yields among our smallholders, improving the supplies we receive from 4,000 hectares of sugar estates under their charge. In total, the Java factory supported 600 local farmers.

Sugar revenue were Rp273 billion in 2010 compared to Rp146 billion last year. Construction of our 8,000 tonnes of canes per day (“TCD”) sugar factory in South Sumatra is expected to be on target for completion in 2011. We expect the contribution to improve when the new sugar mill is commissioned and production levels increase in 2011.

2011 OUTLOOKIn the year ahead, market sentiments are likely to depend on, among other factors, government policies and how they influence the movement of sugar prices around the world. For instance, sugar exports from India, the world’s second biggest sugar producer but the largest consumer, will depend on the country’s output and the government’s willingness to build stock.

In Indonesia, sugar cane harvests have been marred by higher rainfall in 2010, and this is likely to increase Indonesia’s dependence on imports in 2011. To meet demand, the government has granted licenses for the import of raw sugar and plans to import white sugar for the first part of the year before the 2011/12 harvest begins.

While market uncertainties remain, the division will continue to focus on its sugar cane planting programme, expansion of cane supply from local smallholders in Central Java and the completion of its South Sumatra sugar mill in 2011. We hope to achieve a targeted planted area of up to 16,000 hectares in South Sumatra by the end of 2011.

Although domestic sugar production should improve through better yields and agronomy over the next three to five years, growing population numbers and domestic demand is expected to sustain Indonesia’s status as one of the world’s largest sugar importers.

Against these factors, we expect to start making notable contributions when our milling facilities are fully operational, and when we achieve our targeted planted area in 2011.

plantatIOn rEVIEW - sUGar


BoilerJuice Clarification & Evaporation

Sugar Drying & Handling

End Customers

Sugar Boiling & Curing

Filter Cake

Bagasse

Final Molasses

Manufacturing Process for sugar

Cane Handling & Milling

Finished Sugar Product


R&D remains the key engine

in our efforts to build

sustainable growth, and our

research centre ensures the

application of best practices

across our estates.

OVERVIEWIndoAgri’s commitment and investments in R&D continue to yield numerous benefits and innovations across its operations and supply chain. These range from improvements in plant breeding, agronomy, plant nutrition, plant protection and fertiliser usage, to the development of new products tailored for different needs in the industrial and consumer segments.

Sumatra Bioscience (“SumBio”), our research centre in North Sumatra, offers comprehensive facilities for the analysis of soil, plant tissue, fertiliser, palm oil and latex. Besides 20 years of scientific experience, the centre also provides expertise in plant tissue culture, biotechnology, pathology and entomological research. Its advanced seed-breeding programmes produce up to 25 million superior oil palm seeds each year. The Group also operates research and seed-breeding facilities in Riau, which produces up to 8 million high-quality and high-yielding seeds per annum.

Moreover, our research centres are actively engaged in the management of our plantations, extending applied R&D to maximise the productivity and efficiency of our seed breeding and cultivation programmes. Together, these centres provide a methodological framework for our farming operations, ensuring the application of best practices in plantation management across our estates.

plantatIOn rEVIEW - r&D

The Group’s R&D activities are focused in the following areas:

• Plantbreeding

To augment traditional breeding methods, we invest in the production of top-quality seeds and planting materials, leveraging a diverse germ-plasm base, latest biotechnology and years of field trials across different environments. These processes ensure the genetic consistency of our seed products, preserving our status as the biggest producer of premium oil palm seeds in Indonesia.

• Agronomy

Detailed and accurate databases and analyses on soil management and crop cultivation techniques enable us to reliably forecast crop yields, evaluate oil extraction rates and recommend optimal planting densities and fertiliser usage to ensure the highest productivity across our estates.

• Cropprotection

Our crop protection efforts are focused on the development of biocontrol methods besides integrated pest management systems to minimise crop losses, and to monitor for potential pest and disease outbreaks.

• Datamanagementanalysis

Our cumulative database, enhanced by years of estate data and genomic analyses, provides accurate and evidence-based interpretation of estate performance, cultivation trends and field-trial results.

Additionally, R&D will spearhead our efforts to lower labour and production costs, develop agronomical best practices and enhance crop protection while improving environmental sustainability and profitability in the long run.


2010 REVIEWSales volumes soared 239% from 5.4 million oil palm seeds in FY2009 to 18.2 million in FY2010, due to the pick up in new plantings following a slow down triggered by the global economic condition last year.

In line with our R&D thrust, we have intensified the deployment of aerial photography and satellite technology through Geographic Information Systems, which monitors and maps the health of our estates through user-friendly graphical interfaces. The system marks out specific areas of concern in coloured codes, flagging out potential issues with greater operational efficiency.

The Group is also evaluating the establishment of a new Genetics Research and Development Centre at Bah Lias in North Sumatra. The extension will complement our existing facilities and drive the commercialisation of our research in genomics and biotechnology to a higher level.

2011 OUTLOOKThe Group aims to improve its competitiveness and enhance its seed breeding programmes in 2011. We will continue to integrate the disciplines of genomics, cytology and tissue culture to expedite our initiatives in biotechnology and seed cultivation.

In 2011, we expect demand for oil palm seeds to remain supported as a result of global food shortage and improved economic conditions. Major oil palm plantation companies have resumed their expansion programmes during the second half of 2010.

We will continue to invest in applied bioscience to raise our yield potential and sustain our commercial, environmental and societal competitive advantages. We will also focus on agronomy, crop protection methods using biological agents and the development of robust systems to realise the genetic potential of our seeds across our different breeding environments.

We seek to exploit the latest information technology for the management of our expanding database generated from field trials and commercial plantings. Together, we believe these efforts will enhance the value of our seed products, and reiterate our brand promise of producing seeds with the highest possible genetic quality.

All said, the dedication to R&D garners substantial benefits for the Group and its communities at large. Improvements in crop yields will lower production costs, increase supplies and reduce the pressure for new land clearings. In the longer term, these benefits could alleviate global food shortage and contribute to the sustainability of Indonesia’s forests, peat-swamps and natural biodiversity.


EDIBlE OIls & fats rEVIEW

IndoAgri commands a

leading market share in

Indonesia for cooking oil,

together with margarine

and shortening products.

OVERVIEW The Edible Oils & Fats Division manufactures and markets IndoAgri’s downstream products. These include cooking oil, margarine, shortening, crude coconut oil (“CNO”) and other by-products derived from palm refinery, fractionation and crushed copra.

Our range of cooking oil command leading market shares in Indonesia. Bimoli, the Group’s best-selling brand, has garnered a loyal following in the domestic market since 1978. Together with Happy Salad Oil and Delima, the division offers a variety of high quality cooking oil catering to different culinary needs.

Our margarine and shortenings also enjoy a strong presence in Indonesia, where they are sold under the Simas Palmia, Palmia Amanda and Malinda brands, which are among the leading brands. Domestic consumption accounts for approximately 75% of total margarine and shortening sales, with the bulk of it coming from industrial pack margarine and shortening supplied to bakeries, snacks and biscuits manufacturers.

Our CNO and their derivative products are mainly exported to the US, Europe and Asia. They are used in the production of detergents, personal care products, lubricants, solvents and bioplastics, while copra-extraction pellets are sold as animal feeds.

As a Group, we enjoy economies of scale from leveraging the distribution channels of our parent company to reinforce our own market penetration efforts. Together, we have a comprehensive network of 120 distributors and direct sales channels serving some 291,000 retail outlets across Indonesia.

The division operates five refineries located in Jakarta, Surabaya, Medan and Bitung. Among them, Phase 1 of the Tanjung Priok refinery in North Jakarta, which was completed in end-2010, has added 420,000 tonnes to our processing capacity this year. Collectively, the division has a total processing capacity of 1.4 million tonnes of CPO per year. In 2010, the division refined 635,036 tonnes of CPO of which 91% were supplied from the Group’s plantations.


IndoAgri will continue to improve

brand visibility and reinforce our

distribution channels.

2010 REVIEW The division recorded revenues of Rp6.6 trillion in FY2010, which is 12% higher compared to the Rp5.9 trillion achieved in FY2009. This was the result of higher average selling prices and sales volume from cooking oil and margarine, EBITDA fell from Rp124 billion in FY2009 to Rp93 billion in FY2010 due largely to keener competition.

2011 OUTLOOKWe expect the domestic demand for palm oil products to remain supported in the short to medium term by Indonesia’s expanding food and beverage industry and population growth. With our strong branding, comprehensive distribution networks and robust marketing strategies, we are well positioned to face the challenges ahead. We will continue our efforts to retain our loyal customer base to help preserve our position in the domestic market.

The new 420,000-tonne per year refinery at Tanjung Priok, complete with advanced machinery and storage facilities, will allow us to meet growing consumer and industrial demand with greater efficiency and higher processing capacities. Completion of the bottling and margarine plants in 2011 will enable us to better meet the demand within the domestic market.

In the year ahead, we will continue to focus on the following business strategies:

• Strengthen our market competitiveness through lowerproduction costs and increased efficiencies through our supply chain management

• Maintain awareness and improve brand visibility throughselective and focussed marketing strategies

• Reinforcedistributionchannelsinordertoopennewmarketsand penetrate into rural and suburban areas


ManUfaCtUrInG prOCEss fOr EDIBlE OIls & fats

Blending

Mixing Tank

Chilling Chilling

Packaging Packaging

Mixing Tank

Blending

Fractionating & Filtration

RBD Palm Stearin Lauric Oil RBD Palm Olein Packaging

Milling

Refining

RBD Palm Oil Palm Fatty Acid Distillate Crude Palm Kernel Oil

Palm Kernel Meal Crushing

Empty Fruit Bunches and By Products

Crude Palm Oil

Nitrogen gas

Water & Salt

Flavouring &Vitamins

Palm Kernel

Margarine Plant

Fresh Palm Fruit Bunches

Cooking Oil

MargarineShortening


EnVIrOnMEnt & Csr

Principle Number of criteria

Indonesian National Interpretation indicators

Major Minor

1. Commitment to transparency 2 5 0

2. Compliance with applicable laws and regulations 3 8 4

3. Commitment to long-term economic and financial viability 1 1 1

4. Use of appropriate best practices by growers and millers 8 13 25

5. Environmental responsibility and conservation of natural resources and biodiversity

6 12 10

6. Responsible consideration of employees and of individuals and communities affected by growers and mills

11 13 23

7. Responsible development of new plantings 7 12 10

8. Commitment to continuous improvement in key areas of activity 1 1 1

Total 39 65 74

SUMMARY OF THE RSPO PRINcIPLES & cRITERIA (P&c)

ENVIRONMENT AND cORPORATE SOcIAL RESPONSIbILITYAs an agribusiness, IndoAgri’s day-to-day operations are closely linked with the environment, ecosystems and communities. We are deeply conscious of our social impact and responsibilities towards our surroundings, and remain committed to the highest standards of sustainable farming and production.

SUSTAINAbLE PRODUcTION AND AGRIcULTURAL PRAcTIcESThe certification of our North Sumatran estates by the Roundtable on Sustainable Palm Oil (“RSPO”) has accelerated our momentum for the pursuit of sustainable agriculture and production processes. The RSPO certification represents the toughest environmental and community standards in the palm oil industry. Out of 739,885 tonnes of palm oil produced by the Group this year, approximately 170,000 tonnes were certified sustainable under RSPO’s stringent criteria.

Maintaining our certified status requires the satisfaction of 39 criteria and 139 objective indicators grouped under 8 overriding principles covering transparency, compliance to laws and regulations, long-term economic and financial viability, best practices, environmental and community responsibility, responsible development of new plantings and continuous improvements.

Our Riau estates are next in line for RSPO audit in 2011, and processes relating to the identification and analysis of High Conservation Value (“HCV”) estates and Corporate Social Responsibility (“CSR”) will be assessed. We will continue to uphold the RSPO’s rigorous standards, and strive to increase our sustainable palm oil output in the near future. A self-assessment study will be conducted by Tuv-Nord, the RSPO certification body, in February/March 2011 prior to the actual audit.

This year, we conducted seminars on the Awareness, Interpretation and Development of Environmental Management Systems as part of our ISO14001:2004 obligations. We also carried out staff training programmes on Occupational and Safety Management Systems (“OHSAS”) under the guidelines of OHSAS 18001:2007. These efforts reinforced the seriousness of our sustainability message to employees Group-wide.

Through our subsidiaries PT SIMP and Lonsum, the Group is a member and an active advocate of the RSPO, which promotes the growth and use of sustainable oil palm products through regular interactions with stakeholders. Under the auspices of the Indonesian National Interpretation Working Group (“INA-NIWG”), we are also involved in the formulation and interpretation of RSPO’s Principles and Criteria within the laws and context of Indonesia.


EnVIrOnMEnt & Csr

OUR ENVIRONMENTAL STEWARDSHIPAside from sustainable production and agricultural standards, the Group believes in active environmental stewardship and implements a diversity of sustainable agricultural practices across its plantation estates and processing plants.

Zero Burning PolicyWe have a zero burning policy on the clearing of plantation estates. Fully mechanised methods are deployed for the felling and stacking of trees during replanting and land clearing.

Recycling of Mill Effluent and Other By-ProductsSolid and liquid by-products such as empty fruit bunches, decanter cakes and effluent from our palm oil mills are recycled in the field as mulch and irrigation water. The high potassium content found in these by-products offers an effective substitute for chemical fertilisers. As such, we have reduced our reliance on inorganic fertilisers, saving up to 14% in fertiliser costs each year. We will heighten the use of such by-products, and find ways to improve their benefits and ease of application.

Natural Solutions for Pest Management The use of barn owls to combat the prevalence of rats in oil palm plantations has proven to be highly effective at IndoAgri. By creating a natural environment that favours the predatory instincts of barn owls, we have minimised the use of anti-coagulant rodenticides, herbicides and insecticides, thereby sparing the ecosystem from large amounts of harmful chemicals. Since its inception in 1995, our barn owl programme has been so successful that an estimated 4,200 owls in 2,334 nest boxes can be found across the 57,000 hectares of our Riau estates, making us the only plantation company using barn owls for pest control on such a large scale.

Protection of High Conservation Value ForestsThe protection and management of estates with high conservation value remain key priorities for the Group. During our plantation development process, special care is taken to identify and map these areas, monitoring them for signs of erosion. We also run training programmes to educate our personnel in the identification and preservation of flora and fauna. These activities comply with the RSPO’s Principles and Criteria.

ADVANcING TEcHNOLOGY TO PROMOTE SUSTAINAbILITY Building on past achievements, we are developing strategies for precision agriculture by constructing detailed yield maps on a per-hectare basis to identify optimal conditions for FFB harvest. This endeavour will help us to achieve higher crop yields with lower fertiliser input. In addition, the maps can be prepared for a wide variety of analysis including soil type, rainfall and moisture and fertiliser application.

Each year, we subject the work processes at our plantations and factories to thorough reviews. These efforts have streamlined operations and lowered business costs while improving efficiency at different levels of the production process. Where appropriate, we have introduced mechanised methods of production to support our sustainability framework.


STRONG PARTNERSHIPS WITH OUR cOMMUNITIESThe size and scope of our plantations come with a responsibility to the communities where we operate. That is why mutually beneficial relationships underscore our partnerships with local farmers and their families, and are important to the long-term success of our sustainable business model. The Group continues to engage its local stakeholders through the following community development initiatives:

EmploymentThe Group provides direct and indirect employment opportunities for local residents and the plasma community through a wide range of jobs each year. As at 31 December 2010, we have a workforce of 31,162 deployed in administrative, operational and supervisory roles, as well as in middle and senior management positions.

No1 Position Total

1 Senior Management 74

2 Management 271

3 Supervisors 818

4 Administrative and operation staff 29,999

Total 31,162

EducationWe encourage learning among the younger generation, and continue to promote literacy through schools and scholarships. As at 31 December 2010, the Group sponsored 11 elementary schools, 4 junior high schools and 3 senior high schools, providing free or highly subsidised education for 7,461 of its employees’ children.

Description No. of schools

No. of students

Elementary schools 11 5,094

Junior High Schools 4 1,627

Senior High Schools 3 740

We also provide a variety of learning aids including textbooks, school furniture, science labs and computers, as well salaries paid to teachers and administrative staff.

HealthOur contributions to public health infrastructure extend from new medical clinics and emergency care units, to community activities promoting blood donation and immunization programmes. We also carry out regular fogging to curb mosquito breeding.

Infrastructure/Public FacilitiesEach year, we improve transportation access by building and repairing roads and bridges. We maintain public installations for power and water supplies, and expand telephone networks to improve communication.

ReligiousWe support the building of places of worship, and continue to distribute food packages to underprivileged families during the Lebaran and Christmas festive seasons.

Sports & Youth, Arts & CultureWe forge community bonds through the provision of sports facilities and sponsorship of sports tournaments, musical concerts, cultural activities and religious events.

Local Business DevelopmentWe encourage local entrepreneurship through incentives for small businesses such as goat breeding and pallet production amongst others.

As a socially responsible business, the Group believes in symbiotic relationships with its communities and the environment. As we expand our operations, sustainable agribusiness practices and a firm commitment to corporate social responsibility will differentiate us from our competitors and position us for future growth.


Our Management

BOarD Of DIrECtOrs

1 2

1. Mr lee Kwong foo Edward chairman and Lead Independent Director

Mr Lee spent 36 years in the Singapore Administrative Service (Foreign Service Branch), during which time he served as Singapore’s High Commissioner in Brunei Darussalem (1984 to 1990), Ambassador to the Philippines (1990 to 1993) and Ambassador to Indonesia (1994 to 2006).

Mr Lee was awarded the Public Administration Medal (Silver) in 1996, the Long Service Medal in 1997, the Public Administration Medal (Gold) in 1998 and the Meritorious Service Medal in 2006 by the Singapore Government. In 1993, the Philippines Government bestowed on him the Order of Sikatuna, Rank of Datu (Grand Cross).

In 2007, the Indonesian Government awarded him the highest civilian honour, the Bintang Jasa Utama (First Class). Currently, Mr Lee is the Chief Executive of PT Ekalumintas, an investment consultancy firm in Jakarta. He is also a member of the National University of Singapore’s President’s Philantrhropic Advisory Council.

Mr Lee holds a Masters of Arts from Cornell University.

2. Mr lim Hock san Vice chairman and Independent Director

Mr Lim is presently the President and CEO of United Industrial Corporation Limited and Singapore Land Limited. He is also the Non-executive Chairman and Independent Director of Gallant Venture Ltd. Mr Lim started his career in 1966 with the then Inland Revenue Department of Singapore. He became an Accountant at Mobil Oil Malaya Sdn Bhd in 1967 before joining the Port of Singapore Authority in 1968, where he served in various management positions. From 1975 to 1992, he was with the Civil Aviation Authority of Singapore and finally promoted to the position of the Director-General.

He has a Bachelor of Accountancy degree from the then University of Singapore, a Master of Science (Management) degree from the Massachusetts Institute of Technology and attended the Advanced Management Program at Harvard Business School. He is a Fellow of The Chartered Institute of Management Accountants (UK) and a Fellow and past President of the Institute of Certified Public Accountants of Singapore. He is also a recipient of the Singapore Government Meritorious Service Medal, the Public Administration Medal (Gold) and the

Public Service Medal.


3 4

3. Mr Mark Wakefordchief Executive Officer and Executive Director

Mr Wakeford is currently the President Director of PT Salim Ivomas Pratama, and President Director of PT Lajuperdana Indah, and a director of PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Lonsum). He started his career with Kingston Smith & Co, a firm of Chartered Accountants in London, England.

Mr Wakeford has been in the plantation industry since 1993, working with plantation companies in Indonesia, Papua New Guinea, Soloman Islands and Thailand. He started his plantation career as the Finance Director of Lonsum in 1993, based in Indonesia, before moving to Pacific Rim Plantations Limited (PROPL) as the CFO from 1995 to 1999, based in Papua New Guinea. In 1999, Mr Wakeford became CEO and Executive Director of PROPL. PROPL was sold to Cargill in 2005, and Mr Wakeford spent one year with Cargill, prior to joining the Company in January 2007. Mr Wakeford became CEO of the Company in August 2007.

Mr Wakeford trained and qualified as a Chartered Accountant in London, England. He also attended the Senior Executive Program

at the London Business School.

4. Mr Moleonoto tjangExecutive Director and Head of Finance and corporate Services

Mr Tjang is currently a Director of PT Indofood Sukses Makmur Tbk, and PT Perusahaan Perkebunan London Sumatra Indonesia Tbk, Vice President Director of PT Salim Ivomas Pratama and Commissioner of PT Indofood CBP Sukses Makmur Tbk. He started his career in 1984 with Drs. Hans Kartikahadi & Associates, a public accounting firm in Jakarta. Before joining the Plantation Division of the ISM Group as CFO in 2001, he had held various management positions in the Salim Plantations Group since 1990.

He was awarded a Bachelor of Accountancy degree from the University of Tarumanagara in 1987, a Bachelor’s degree in Management from the University of Indonesia in 1990 and a Master of Science degree in Administration & Business Policy from the University of Indonesia in 2002. He is also a registered accountant in Indonesia.


BOarD Of DIrECtOrs

765

5. Mr Gunadi Executive Director and Head of Plantation Operations

Mr Gunadi is currently a Director PT Salim Ivomas Pratama and Vice President Director of PT Perusahaan Perkebunan London Sumatra Indonesia Tbk. Mr Gunadi started his career in 1977 with Drs Hans Kartikahadi & Co., a public accounting firm in Jakarta. He was with PT Besuki Indah Electric Industry (Luxor), Jakarta in 1979 as Finance Manager before joining PT Lippo Mulia Jakarta in 1980 as Finance and Administration Manager.

From 1981 to 1991, Mr Gunadi was with PT Broco, Jakarta, as Group Finance Director. In 1991, Mr Gunadi joined the Salim Plantations Group (which was subsequently acquired by PT ISM) as Senior Vice President (Finance). In 2004, he was appointed to the position of Chief Operating Officer of PT SIMP.

Mr Gunadi has a Bachelor of Accountancy degree from University of Indonesia.

6. Mr suaimi suriadyExecutive Director and Head of Refinery and commodity Division

Mr Suriady is currently a Director of PT Indofood CBP Sukses Makmur Tbk since 2009 and PT Salim Ivomas Pratama since 2007. He has also served as President Director of PT Indofood Fritolay Makmur since 2002. He began his career working for an automotive battery distributor, PT Menara Alam Teknik of Astra

Group and moved on to join consumer goods manufacturer, Konica Film and Paper, in 1991. In 1994, he joined PT Indofood Fritolay Makmur as National Sales and Promotion Manager. In 2000-2002, he worked as Branch Manager for the Noodle Division of ISM.

He was awarded a Master of Business Administration from De Montfort University in Jakarta (affiliate United Kingdom)

in 2000.

7. Mr tjhie tje fie Non-executive Director

Mr Tjhie was appointed as President Commissioner of PT Salim Ivomas Pratama in 2009 and Director of PT Perusahaan Perkebunan London Sumatra Tbk. He has been a Director of PT Indofood CBP Sukses Makmur Tbk since 2009, a Director of PT Indofood Sukses Makmur Tbk (ISM) from 2004, President Commissioner of PT Indofood Fritolay Makmur from 2009, a Vice President Commissioner of PT Indolakto from 2009 and concurrently heads ISM’s Treasury Division. He previously served as a Director of PT Indomiwon Citra Inti and as Senior Executive of PT Kitadin Coal Mining.

Mr Tjhie was awarded a Bachelor’s degree in Accounting from the Perbanas Banking Institute in Jakarta in 1991.


8 9 10

8. Mr axton salimNon-Executive Director

Mr Axton Salim has been a Director of PT Indofood CBP Sukses Makmur Tbk, PT Indofood Sukses Makmur Tbk and PT Indolakto since 2009. He is also the director of Pacsari Pte Ltd since 2007. In addition, he is a Commissioner of PT Salim Ivomas Pratama since 2007, PT Nestlé Indofood Citarasa Indonesia from April 2010 and PT Perusahaan Perkebunan London Sumatra Indonesia Tbk since 2009. He began his career with Credit Suisse Singapore in the Investment Banking Division.

He was awarded a Bachelor of Science in Business Administration from the University of Colorado in 2002.

9. Mr Goh Kian Chee Independent Director

Mr Goh is presently the CFO of National University of Singapore, Centre For The Arts (NUS). He is also an Independent Director of AsiaMedic Limited. Mr Goh started his career in 1979 as an audit trainee with Goldblatt & Co (UK). He joined American International Assurance Pte Ltd in 1981 as an Accounting Supervisor. In 1982, he became a Regional Internal Auditor in Mobil Oil Singapore Pte Ltd and rose to the position of Regional Credit and Insurance Manager in 1987. In 1990, he was transferred to Mobil Petrochemicals International Ltd where he served as Regional Accounting Manager and later, as the

Controller of the Asia Pacific region. Before his present position in NUS, Mr Goh was the Regional Vice President & Controller as well as an Executive Director of John Hancock International Pte Ltd.

Mr Goh has a Bachelor of Arts (Hons) degree in Accounting and Economics from Middlesex University (London, United Kingdom).

10. Mr Hendra susanto Independent Director

Mr Susanto was appointed as Commissioner in PT Salim Ivomas Pratama since 2009 and began his career with the Standard Chartered Bank as an Account Relationship Manager of the Corporate Banking division in 1990. He joined PT BNP Lippo Leasing in 1993 as the Head of the Corporate Marketing division. In 1996, he joined PT ING Indonesia Bank as Vice President in the Project and Structured Finance division and was subsequently promoted to Director in the Wholesale Banking division of the bank. Mr Susanto also acted as the Chief Representative of ING Bank N.V. in Indonesia until 2005.

Mr Susanto has a Bachelor of Computer Science degree and a Master of Commerce degree from the University of New South Wales, Australia.


COrpOratE InfOrMatIOn

EXECUtIVE COMMIttEEMark Wakeford (Chairman) Tjhie Tje Fie Moleonoto Tjang Gunadi Suaimi Suriady

aUDIt COMMIttEEGoh Kian Chee (Chairman) Lim Hock San Hendra Susanto

nOMInatInG COMMIttEELee Kwong Foo Edward (Chairman) Tjhie Tje Fie Lim Hock San Hendra Susanto

rEMUnEratIOn COMMIttEELim Hock San (Chairman) Tjhie Tje Fie Goh Kian Chee

Chairman and Lead Independent Director Lee Kwong Foo Edward

Vice Chairman and Independent Director Lim Hock San

Chief Executive Officer and Executive Director Mark Wakeford

Executive Director and Head of Finance and Corporate Services Moleonoto Tjang

Executive Director and Head of Plantation Operations Gunadi

Executive Director and Head of Refinery and Commodity Suaimi Suriady

Non-Executive Director Tjhie Tje Fie

Non-Executive Director Axton Salim

Independent Director Goh Kian Chee

Independent Director Hendra Susanto

DIrECtOrs

rEGIstrarBoardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles PlaceSingapore Land Tower #32-01,Singapore 048623

rEGIstErED OffICE8 Eu Tong Sen Street#16-96/97 The CentralSingapore 059818

COMpany sECrEtarIEsLee Siew Jee, Jennifer Mak Mei Yook

aUDItOrsErnst & Young LLPOne Raffles QuayNorth Tower, Level 18Singapore 048583

aUDIt partnErVincent Toong Weng Sum (appointed 20 April 2007)


Remuneration Committee

Nominating Committee

Shareholders

Board of Directors

Executive Committee (“EXCO”)

Enterprise Risk Managment

Audit Committee

Internal Audit

Corporate GovernanCe

ThE BOARD AND MANAgEMENT Of INDOfOOD AgRI RESOuRCES LTD. (ThE “COMpANy”) ARE COMMITTED TO CONTINuALLy ENhANCINg ThE STANDARD Of CORpORATE gOvERNANCE pRINCIpLES AND pROCESSES IN MANAgINg ThE BuSINESS AND AffAIRS, SO AS TO IMpROvE ThE pERfORMANCE, ACCOuNTABILITy, AND TRANSpARENCy Of ThE COMpANy.

This Corporate Governance Report sets out the Company’s corporate governance framework and practices, with specific reference to

the principles and guidelines of the Code of Corporate Governance issued by the Ministry of Finance in July 2005 (the “Code”).

BOARD MATTERS

The Board’s Conduct of its Affairs (principle 1)

The Board comprises Directors with a wide range of skills and experience in the fields of operations management, banking, finance,

accounting, industry knowledge and knowledge of risk management. The Board considers that its Directors posses the necessary

competencies to lead and govern the Company effectively. Each member of the Board will hold office pursuant to the provisions of the

Articles and thereafter, shall be eligible for re-election unless disqualified from holding office.

The Board has overall responsibility for the corporate governance of the Company. Apart from its statutory responsibilities, the Board

is responsible for:-

(1) reviewing the financial performance and condition of the Group;

(2) approving the Group’s strategic plans, key operational initiatives, major investment and funding decisions;

(3) identifying principal risks of the Group’s business and implementing systems to manage the risks; and

set the Company’s values and standards, continually to make them exemplary and the highest, and ensure

that obligations to shareholders and other stakeholder are understood and met.

All Directors exercise independent judgement and make decisions objectively in the best interest of the Company.

The Board is assisted by various Board Committees, including Executive Committee, Audit Committee, Nominating Committee

and the Remuneration Committee with clearly defined terms of reference. The term of reference set out the duties, authority and

accountabilities of each committee.

The Corporate Governance Structure is as follows:



Board Composition (principle 2)

As of 31 March 2011, the Board comprises of ten Directors, of whom four are Executive Directors, two are Non-executives and four

are Independent Directors.

Name Board of Directors Executive Committee

Audit Committee

Nominating Committee

Remuneration CommitteeStatus position

Lee Kwong Foo, Edward Lead Independent Chairman Chairman

Lim Hock San Independent Vice

Chairman

Member Member Chairman

Mark Wakeford Executive Member Chairman

Moleonoto Tjang Executive Member Member

Gunadi Executive Member Member

Suaimi Suriady Executive Member Member

Tjhie Tje Fie Non-executive Member Member Member Member

Axton Salim Non-executive Member

Goh Kian Chee Independent Member Chairman Member

Hendra Susanto Independent Member Member Member

The Executive Committee (“Exco”) comprises Mr Mark Wakeford, Mr Tjhie Tje Fie, Mr Suaimi Suriady, Mr Gunadi and Mr Moleonoto

Tjang. Mr Wakeford is the Chairman of the Exco. The Board delegates the Exco certain discretionary limits and authority for business

development, investment/divestment activities, capital expenditure, finance/treasury, budgeting and human resource management,

drawing up the Group’s annual budget and business plan for the Board’s approval, supervising the implementation of business

strategies as approved in the annual budget and business plan, implementing appropriate systems of internal accounting and other

controls, instituting a risk management framework and monitoring for compliance, adopting suitably competitive human resource

practices and compensation policies, and ensuring that the Group operates within budget.

Regular meetings are held to deliberate the strategic policies of the Group including significant acquisitions and disposals, review and

approve annual budgets, review the performance of the business and approve the release to the public of periodic financial results. In

the event Directors are unable to attend Board meetings because of overseas commitments, they may still participate via telephone or

any other forms of communication facilities.

The number of meetings and attendance by Board members during the financial year are set out in the table below:

BoardAudit

CommitteeNominating Committee

Remuneration Committee

Number of meetings held during the financial year ended 31 December 2010

5 8 1 2

Lee Kwong Foo, Edward 5/5 n/a 1/1 n/a

Lim Hock San 5/5 7/8 1/1 2/2

Mark Wakeford 5/5 n/a n/a n/a

Moleonoto Tjang 5/5 n/a n/a n/a

Gunadi 4/5 n/a n/a n/a

Suaimi Suriady 4/5 n/a n/a n/a

Tjhie Tje Fie 3/5 n/a 1/1 2/2

Axton Salim 2/5 n/a n/a n/a

Goh Kian Chee 5/5 8/8 n/a 2/2

Hendra Susanto 5/5 8/8 1/1 n/a

Chairman

n/a – “not applicable”

Increasing our Diversity, enhancing our Growth42

Chairman and Chief Executive Officer (principle 3)

The roles of the Chairman and Chief Executive Officer (“CEO”) are separate persons with their own areas of responsibilities and

accountabilities to ensure an appropriate balance of power and independency. The office of the Chairman of the Company is assumed

by Mr Edward Lee, who is also the Lead Independent Director. As the Chairman, Mr Edward Lee bears responsibility for the working of

the Board and reviewing the effectiveness of the governance process of the Board. The Chairman plays an important role in fostering

constructive dialogue between shareholders, the Board and management at the AGM and other shareholder meetings.

The office of CEO is assumed by Mr Mark Wakeford. As the CEO, Mr Wakeford’s responsibilities include the charting and reviewing

of corporate directions and strategies, which cover areas of marketing and strategic alliances. He is responsible for providing the

Company with strong leadership and vision. The CEO and the Exco are responsible for day-to-day operation and management of the

business.

Board Membership and performance (principles 4 and 5)

The Nominating Committee (“NC”) of the Company is chaired by Mr Edward Lee, the Chairman of the Board and the Lead Independent

Director, with Mr Tjhie Tje Fie, Mr Hendra Susanto and Mr Lim Hock San as members.

The NC terms and reference were adopted from the Code and include the following duties and functions:-

(1) make recommendations to the Board on all board appointments and re-nomination having regard to the Director’s contribution

and performance;

(2) ensure that all Directors submit themselves for re-nomination and re-election at regular intervals and at least once in every

three years;

(3) determine annually whether a Director is independent, guided by guidelines in the Code;

(4) decide if a Director is able and has adequately carried out his duties as a Director of the Company where he has multiple board

representations; and

(5) decide how the Board’s performance may be evaluated and propose objective performance criteria.

Each year, the Directors are requested to complete appraisal forms to access the overall effectiveness of the Board. The NC will assess

and discuss the performance of the Board as a whole and will ascertain key areas for improvement and requires follow-up actions. The

results of the evaluation, including comments and recommendations from the Board members, will be presented by the NC Chairman

to the Board with a view to enhance the effectiveness of the Board as a whole.

Access to Information (principle 6)

Prior to each Board meeting, Management provides the Board with timely and complete information to enable them to be fully

cognizant of the decisions and actions of the Company’s executive management and to discharge their duties effectively.

The Directors have separate and independent access to the Company Secretaries. The Company Secretaries attend the Board and

committee meetings to ensure that Board procedures are followed and applicable rules and regulations are complied with.

Senior members of the management are available to provide briefings to the Directors or presentation at the Board Meetings, or by

external consultants engaged on specific projects.


Corporate GovernanCeCorporate GovernanCe

REMuNERATION MATTERS (principles 7, 8 and 9)

procedures in Developing Remuneration policies

The Remuneration Committee (“RC”) of the Company is chaired by Mr Lim Hock San, an Independent Director, with Mr Tjhie Tje Fie

and Mr Goh Kian Chee as members.

The role of the RC is to review and approve the remuneration package and terms of employment of the Company’s Directors and key

executives who are connected and deemed to be Substantial Shareholders of the Company.

In its review and approval of the recommendations on remuneration policies and packages for the Company Directors, the RC will

cover all aspects of remuneration including but not limited to Directors’ fees, salaries, allowances, bonuses, share options and benefits-

in-kind. The RC’s recommendations will be made in consultation with the CEO and submitted for endorsement by the entire Board.

Payments of Directors’ fees are subject to shareholders’ approval at the AGM.

RC members will abstain from deliberations in respect of their own remuneration and the RC is also empowered to review human

resource management policies of the Group.

The remuneration policy of the Group will seek, inter alia, to align the interests of employees with the Group, to reward and encourage

performance based on its core values and to ensure that remuneration is commercially competitive to attract and retain talent.

Proposed Directors’ fees will be submitted as a lump sum for shareholders’ approval in general meeting and the sum is divided amongst

the Directors with those having additional responsibilities as chairman or members of Board Committees receiving a higher portion of

the approved sum.

Disclosure on Remunerations

The remunerations of the Directors and Key Executives, in the bands of S$250,000, for the financial year ended 31 December 2010

are set out in the table below. The remunerations of the Executive Directors and the Key Executives contain a component that is

performance related and linked to the consolidated results of the Group.

Name of Directors/Key Executives and Remuneration Bands

Base/fixedSalary

%

Bonus/ Benefits%

Directors fee %

Share Options%

Directors of the Company

S$1,000,000 to S$1,250,000

Mark Wakeford 78 22 – –

Moleonoto Tjang 31 69 – –

S$500,000 to 750,000

Gunadi 34 66 – –

Below S$250,000

Lee Kwong Foo, Edward – – 100 –

Lim Hock San – – 100 –

Goh Kian Chee – – 100 –

Hendra Susanto – – 100 –

Tjhie Tje Fie (1) – – – –

Axton Salim (1) – – – –

Suaimi Suriady (1) – – – –


Name of Directors/Key Executives and Remuneration Bands

Base/fixedSalary

%

Bonus/ Benefits%

Directors fee%

Share Options%

Key Executives of the group

S$500,000 to S$750,000

Wilihar Tamba

(Chief Operating Officer - Plantation)

39 61 – –

S$250,000 to S$500,000

C.Y.O. Sorongan

Senior Technical Advisor Engineering

44 56 – –

Rolly B Mendoza

Vice President Controller

44 56 – –

Below S$250,000

Mak Mei Yook

Chief Financial Officer

79 21 – –

Tan Agustinus Dermawan

Group Controller

39 61 – –

(1) Remunerations were paid by the parent company, PT Indofood Sukses Makmur Tbk or other group of companies.

There was no employee in the Group who was an immediate family member of a Director and/or a Substantial Shareholder whose

remuneration exceeded S$150,000 during financial year ended 31 December 2010.

Other Remuneration Matters

The Company’s Share Option Scheme 2002 was approved by the former Board and shareholders of the Company at an Extraordinary

General Meeting held on 19 June 2002. No option was granted during the financial year ended 31 December 2010. The Board will be

looking into whether a new ESOS should be implemented.



ACCOuNTABILITy AND AuDIT (principles 10, 11, 12 and 13)

Accountability

The Board is accountable to the shareholders and is mindful of its obligations to furnish timely information and to ensure full disclosure

of material information to shareholders in compliance with statutory requirements and the Listing Manual of the SGX-ST.

Audit Committee (“AC”)

The AC of the Company comprises three independent Directors, including the Chairman. The AC is chaired by Mr Goh Kian Chee with

Mr Lim Hock San and Mr Hendra Susanto as members. A majority of the AC members, including the AC Chairman, have expertise or

experience in financial management and are qualified to discharge the AC’s responsibilities.

The AC has the following functions:-

(1) review with the external auditors the audit plan, their evaluation of the system of internal accounting controls, their audit

report, their management letter and the management’s response;

(2) review the quarterly, half-yearly and annual financial statements before submission to the Board for approval, focusing on

changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern

statement, compliance with applicable accounting standards and stock exchange and statutory/ regulatory requirements;

(3) review the effectiveness and adequacy of the Group’s internal financial controls, operational and compliance controls and

procedures, risk management policies and systems and co-ordination between the external auditors and the management,

review the assistance given by management to the auditors and discuss problems and concerns, if any, arising from the interim

and final audits, and any matters which the auditors may wish to discuss (in the absence of management where necessary);

(4) review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant

laws, rules or regulations, which has or is likely to have a material impact on the Company’s operating results or financial

position, and the management’s response;

(5) consider the appointment or re-appointment of the external auditors, the audit fee, and matters relating to the resignation or

dismissal of the auditors;

(6) review Interested Person Transactions;

(7) review the whistle-blower arrangements instituted by the group through which staff may in confidence, raise concerns and

possible improprieties in matters of financial or other matters.

(8) review the Group’s ERM reports.

(9) undertake such other reviews and projects as may be requested by the Board and report to the Board its findings from time to

time on matters arising and requiring the attention of the AC; and

(10) generally undertake such other functions and duties as may be required by statute or the Listing Manual, and by such

amendments made thereto from time to time.

External Auditors

The external auditor assists the AC in driving internal controls and risk management activities and the Board in fulfilling its overall

responsibilities relating to compliance risk concerns and systems of internal controls.

The AC recommends to the Board the appointment, re-appointment and removal of the external auditors, and approves the

remuneration and terms of engagement of the external auditors.

The AC reviews the scope and results of audit work carried out by external auditors and independence of the external auditors

annually. The AC met with the external auditors 4 times a year including once without the presence of management.

The AC, having reviewed the range and value of the non-audit services performed during the financial year by the external

auditors, Ernst & Young LLP, was satisfied that the independence of the external auditors has not been impaired by the provision

of those services. The AC recommended that Ernst & Young LLP be nominated for re-appointment as the external auditors at the

forthcoming AGM.


Internal Audit

The Group has an Internal Audit Department (IAD) that is independent of the activities it audits. The IAD plans its internal audit

schedules in consultation with Management and submits its plan to the AC for approval. The Head of Internal Audit reports directly

to the Chairman of the Audit Committee on the internal audit matters. The AC met with the internal auditor 4 times a year including

once without the presence of Management.

The duties and responsibilities of the IAD with regard to risk management and internal controls are summarized below:

(1) review the risk profile of the Company;

(2) identify and make recommendations to eliminate or control risks to improve the risk profile;

(3) recommend risk parameters within which the Company should operate;

(4) review risk mitigation efforts and its cost;

(5) monitor the implementation of the mitigation efforts and risk parameters

(6) establish and maintain a risk reporting and risk monitoring framework

IAD operates within the framework set out in the Internal Audit Charter and Code of Ethics which is approved by the Management

and the AC. It implements a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, controls

and governance processes. The IA work plan is established independent of management which is also approved by the AC.

The Audit Committee, with the assistance of internal audit, reviews the adequacy and effectiveness of the system of internal controls

of the Group on an on-going basis.

The Group also engages Deloitte Touche Tohmatsu (Deloitte), from time to time, on an assignment basis to perform the internal

controls system review. Deloitte has a direct reporting line to the Audit Committee.

Enterprise Risk Management (“ERM”)

Risk management is an integral part and is at the forefront of the Group’s overall effort to promoting good corporate governance

across all its businesses and operations, enabling it to be more proactive and prepared in dealing and addressing the various

challenges and uncertainties it faces in a tough and competitive business environment, and in the process, transforming them into

business opportunities.

Standardized Risk Management Framework

Since its inception in 2009, the Group’s ERM Team, which is now fully integrated and coordinated, has consolidated all of the Group’s

risk management activities, initiatives and processes, and transforming them into a group-wide Standardized ERM Framework. The

ERM Framework, which now enables the Group to manage existing, recurring and new/potential business risks and opportunities more

effectively, involves an on-going process of identifying, evaluating, monitoring, managing and reporting significant risks affecting the

Group. This provides the Group’s Executive Committee and its management team with a tool to anticipate and effectively manage

both the existing and potential risk(s), taking into consideration the changing risk profiles, as dictated and influenced by ever-changing/

evolving business and regulatory environments and the necessary strategies formulated to deal with them, as well as changes in the

functional activities throughout the year. Risk management reporting is done on a regular periodic basis whereby all critical and relevant

risks and opportunities are prioritized in terms of their impact to the Group’s operations and the likelihood of their occurrence.



Continuously Enhancing Risk Management Culture and Operational Preparedness

In order to sustain the momentum brought about by its initial risk management activities and initiatives, the ERM Unit will continue to

focus on emphasizing the importance of prudent risk management and promoting awareness through the continuous conduct of ERM

socialization sessions and trainings to key employees within the Group in 2011.

Simultaneously, the ERM Department will initiate the creation/development of a formal Business Continuity Plan (BCP) in consultation

with the Board of Directors/Senior Management and in close coordination with the Information System Division and all other departments

directly related to the BCP development. BCP, which is an integral part of the Company’s overall Operational Risk Management, is of

critical importance to continuity of business operations and services to maintain public trust and confidence in the events of disaster

or disruption. The BCP will include the necessary policies (such as the roles and responsibilities, identified critical functions, timing of

implementation); identified teams (such as emergency response, damage assessment, recovery team) designated handling the BCP;

procedures to implement BCP; and needed infrastructure (such as alternate site, back-up server).

As part of the implementation of a better and more effective risk management program across the Group, the ERM Unit will also work

and coordinate closely with the Internal Audit Department to focus on high risks areas, ensure accuracy of risk assessment reports, and

check/verify the proper and full implementation of the risk mitigation strategies and controls

As part of the IA audit plan, IA will perform independent reviews of the risks and controls identified by the ERM to provide reasonable

assurance to management and the Audit Committee in order that the key risks and controls will be adequately addressed, monitored

and centralized.

Whistle Blowing policy

The Group has put in place a whistle blowing policy and procedures (“Policy”). This Policy provides employees with clearly defined

processes through which they may raise their concerns in good faith and in strict confidence with respect to suspected fraud, corruption,

dishonest practices or other similar matters which do not comply with the Groups standard operating procedures to the Head of IA,

Exco and AC.

The Policy aims to encourage the reporting of such matters in good faith, with the confidence that employees making such reports will

be treated fairly and, to the extent possible, protected from reprisal.

The AC reviewed and approved the Policy and was satisfied that arrangements are in place for independent investigation of such

matters and for appropriate follow-up actions.


COMMuNICATION WITh ShAREhOLDERS (principles 14 and 15)

The Company is committed to regular and timely disclosure of information pertinent to shareholders. Announcements are made

on a timely basis, and within the prescribed periods, through the SGXNET as well as through press releases to the relevant media,

if necessary.

The Company holds analysts briefings for quarterly and full year results with the presence of the CEO, CFO and senior management to

answer relevant questions which the analysts may have.

The Company supports the Code’s principle to encourage the participation of shareholders at the General Meetings. All shareholders

are given the opportunity to attend and vote at General Meetings. They can vote in person or by proxy if they are unable to attend

the Meetings in person.

The Directors of the Company, as well as the external auditors are in attendance at the General Meetings to address any queries

from shareholders.

Dealings in the Company’s Securities

The Group has adopted an Internal Code with regard to dealings in the securities of the Company by its officers. The Company restricts

its officers to trade in the securities of the Company while in possession of price-sensitive information and during the period two weeks

before the announcement of Group’s quarterly and half yearly financial results and one month before the announcement of Group’s

full year financial results.

Directors and employees are expected to observe the insider trading laws at all times even when dealing in securities within permitted

trading period.


51 Directors’ Report

53 Statement by Directors

54 Independent Auditors’ Report

56 Consolidated Statement of Comprehensive Income

57 Balance Sheets

58 Consolidated Statement of Changes in Equity

59 Consolidated Cash Flow Statement

61 Notes to the Financial Statements

InDofooD aGrI resourCes LtD. & Its subsIDIarIesfInanCIaL statements

The directors are pleased to present their report to the members together with the audited consolidated financial statements of

Indofood Agri Resources Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) and the balance sheet of the Company

for the financial year ended 31 December 2010.

Directors

The directors of the Company in office at the date of this report are:

Lee Kwong Foo Edward

Lim Hock San

Mark Julian Wakeford

Moleonoto Tjang

Gunadi

Suaimi Suriady

Tjhie Tje Fie

Axton Salim

Goh Kian Chee

Hendra Susanto

In accordance with Article 117 of the Company’s Articles of Association, Tjhie Tje Fie, Moleonoto Tjang, Gunadi and Lee Kwong Foo

Edward retire and, being eligible, offer themselves for re-election.

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one

of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of

the Company or any other body corporate.

Directors’ interests in shares and debentures

The following director, who held office at the end of the financial year had, according to the register of directors’ shareholdings

required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the

Company and related corporations (other than wholly-owned subsidiaries) as stated below:

Direct interest Deemed interest

Name of director At beginning

of the yearAt end

of the yearAt beginning

of the yearAt end

of the year

Ordinary shares of the Company

Mark Julian Wakeford 300,000 300,000 200,000 200,000

There was no change in any of the above-mentioned interests between the end of the financial year and 21 January 2011.

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options,

warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment

if later, or at the end of the financial year.

DIreCtors’ report


Directors’ contractual benefits

Except as disclosed in the financial statements, since the end of the previous financial year, no director of the Company has received or

become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with

a firm of which the director is a member, or with a company in which the director has a substantial financial interest.

Options

No option to take up unissued shares of the company or its subsidiaries was granted during the year.

There were no shares issued during the year by virtue of the exercise of options to take up unissued shares of the Company or its

subsidiaries whether granted before or during the year.

There were no unissued shares of the Company or its subsidiaries under option as at the end of the year.

Audit Committee

The audit committee performed the functions specified in the Act. The functions performed are detailed in the Report on

Corporate Governance.

Auditors

Ernst & Young LLP have expressed their willingness to accept reappointment as auditors.

On behalf of the Board of Directors,


Director

Moleonoto Tjang

Director

Singapore

8 March 2011

DIreCtors’ report


We, Mark Julian Wakeford and Moleonoto Tjang, being two of the directors of Indofood Agri Resources Ltd., do hereby state that, in

the opinion of the directors:

(i) the accompanying balance sheets, consolidated statement of comprehensive income, consolidated statement of changes in

equity and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the

state of affairs of the Group and of the Company as at 31 December 2010 and the results of the business, changes in equity and

cash flows of the Group for the year ended on that date, and

(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when

they fall due.

On behalf of the Board of Directors,


Director

Moleonoto Tjang

Director

Singapore

8 March 2011

statement by DIreCtors


To the Members of Indofood Agri Resources Ltd.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Indofood Agri Resources Ltd. (the “Company”) and

its subsidiaries (collectively the “Group”), set out on pages 56 to 132, which comprise the balance sheets of the Group and the

Company as at 31 December 2010, the consolidated statement of changes in equity, the statement of comprehensive income

and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other

explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with

the provisions of the Singapore Companies Act, Cap.50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and

maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against

loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit

the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit

in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan

and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement

of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal

control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

InDepenDent auDItors’ reportFor the financial year ended 31 December 2010


Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the

Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to

give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and the results, changes in

equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date.

Report on other legal and regulatory requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated

in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLP

Public Accountants and

Certified Public Accountants

Singapore

8 March 2011

InDepenDent auDItors’ reportFor the financial year ended 31 December 2010


Note 2010 2009Rp million Rp million

Revenue 5 9,484,281 9,040,325Cost of sales 6 (5,733,805) (5,814,962)

Gross profit 3,750,476 3,225,363

Selling and distribution costs (297,839) (300,989)General and administrative expenses (729,158) (645,915)Foreign exchange gains 60,925 303,984Other operating income 7 33,966 147,172Other operating expenses 8 (134,196) (87,984)Gain arising from changes in fair value of biological assets 14 309,269 622,570

Profit from operations 9 2,993,443 3,264,201

Financial income 10 61,904 66,630Financial expenses 11 (400,464) (443,271)

Profit before tax 2,654,883 2,887,560Income tax expense 12 (748,728) (834,298)

Net profit for the year 1,906,155 2,053,262

Other comprehensive income:Gain on sale of treasury shares 144,152 –Changes arising from disposal of shares in a subsidiary company (13,600) –

Other comprehensive income for the year, net of tax 130,552 –

Total comprehensive income for the year 2,036,707 2,053,262

Profit for the year attributable to:

Owners of the parent 1,402,013 1,526,829Non-controlling interests 504,142 526,433

1,906,155 2,053,262

Total comprehensive income attributable to:

Owners of the parent 1,532,565 1,526,829Non-controlling interests 504,142 526,433

Total comprehensive income for the year 2,036,707 2,053,262

Earnings per share (in Rupiah) 13- basic 974 1,061- diluted 974 1,061

ConsoLIDateD statement of ComprehensIve InComeFor the financial year ended 31 December 2010

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


Group CompanyNote 31.12.10 31.12.09 1.1.09 31.12.10 31.12.09

Rp million Rp million Rp million Rp million Rp million(Restated) (Restated)

Non-current assetsBiological assets 14 10,453,082 9,486,096 8,152,865 – –

Property, plant and equipment 15 6,791,435 5,696,726 4,376,429 65,844 70,001

Goodwill 16 3,155,786 3,155,786 2,994,523 – –

Claims for tax refund 17 400,241 328,844 58,953 – –

Deferred tax assets 18 363,149 294,327 239,314 – –

Investment in subsidiary companies 19 – – – 7,383,633 8,487,971

Loans to a subsidiary company 20 – – – 2,259,501 2,259,501

Other non-current assets 21 906,907 848,691 746,694 22 24Total non-current assets 22,070,600 19,810,470 16,568,778 9,709,000 10,817,497

Current assetsInventories 22 1,321,248 1,082,557 910,542 – –

Trade and other receivables 23 940,366 839,656 852,441 20,943 17,626

Prepaid taxes 60,581 112,779 122,624 – –

Cash and cash equivalents 24 3,795,993 1,802,345 2,408,266 1,621,112 183,450Total current assets 6,118,188 3,837,337 4,293,873 1,642,055 201,076Total assets 28,188,788 23,647,807 20,862,651 11,351,055 11,018,573

Current liabilitiesTrade and other payables and accruals 25 1,207,871 1,072,802 1,042,469 8,572 11,257

Interest-bearing loans and borrowings 26 2,815,520 1,746,464 2,379,649 – –

Income tax payable 102,417 106,182 403,852 130 130Total current liabilities 4,125,808 2,925,448 3,825,970 8,702 11,387

Non-current liabilitiesInterest-bearing loans and borrowings 26 4,955,185 4,491,213 3,876,936 – –

Bonds and Sukuk Ijarah payables 26 723,109 721,802 – – –

Other payables 27 284,832 323,096 239,278 – –

Employee benefits liabilities 28 574,034 442,960 355,372 – –

Deferred tax liabilities 18 1,825,524 1,763,993 1,589,593 – – Total non-current liabilities 8,362,684 7,743,064 6,061,179 – – Total liabilities 12,488,492 10,668,512 9,887,149 8,702 11,387

Net assets 15,700,296 12,979,295 10,975,502 11,342,353 11,007,186

Attributable to owners of the parentShare capital 29 3,584,279 3,584,279 3,584,279 10,912,411 10,912,411

Treasury shares 29 – (29,283) (29,283) – (29,283)

Revenue reserves 30 7,287,264 5,885,251 4,358,422 285,790 124,058

Other reserves 31 138,819 8,267 8,267 144,152 – 11,010,362 9,448,514 7,921,685 11,342,353 11,007,186

Non-controlling interests 4,689,934 3,530,781 3,053,817 – – Total equity 15,700,296 12,979,295 10,975,502 11,342,353 11,007,186

baLanCe sheetsAs at 31 December 2010



Attributable to owners of the parent

Non-controlling

interestsTotal

equity

Sharecapital

Treasuryshares

Otherreserves

Revenuereserve

Total reserves

Rp million Rp million Rp million Rp million Rp million Rp million Rp million

At 1 January 2009 3,584,279 (29,283) 8,267 4,358,422 4,366,689 3,053,817 10,975,502

Profit for the year – – – 1,526,829 1,526,829 526,433 2,053,262

Total comprehensive income for the year – – – 1,526,829 1,526,829 526,433 2,053,262

Purchase of treasury shares – – – – – 131,951 131,951

Dividend payment by subsidiaries – – – – – (108,234) (108,234)

Non-controlling interests of acquired subsidiaries – – – – – (73,186) (73,186)

Balance at 31 December 2009 and 1 January 2010 3,584,279 (29,283) 8,267 5,885,251 5,893,518 3,530,781 12,979,295

Profit for the year – – – 1,402,013 1,402,013 504,142 1,906,155

Other comprehensive income:- Gain on sale of treasury shares – – 144,152 – 144,152 – 144,152

- Changes arising from disposal of shares in a subsidiary company – – (13,600) – (13,600) – (13,600)

Other comprehensive income for the year, net of tax – – 130,552 – 130,552 – 130,552

Total comprehensive income for the year – – 130,552 1,402,013 1,532,565 504,142 2,036,707

Contributions by and distributions to owners:

- Sale of treasury shares – 29,283 – – – – 29,283

Total contributions by and distributions to owners – 29,283 – – – – 29,283

Changes in non-controlling interests due to disposal of shares in a subsidiary company – – – – – 777,854 777,854

Capital contribution from non-controlling interests – – – – – 29,774 29,774

Dividend payments by subsidiary companies – – – – – (111,117) (111,117)

Non-controlling interests of acquired subsidiary companies – – – – – (41,500) (41,500)

Total transactions with owners in their capacity as owners – 29,283 – – – 655,011 684,294

Balance at 31 December 2010 3,584,279 – 138,819 7,287,264 7,426,083 4,689,934 15,700,296

ConsoLIDateD statement of ChanGes In equItyFor the financial year ended 31 December 2010




Cash flows from operating activities

Profit before tax 2,654,883 2,887,560Adjustments:

Depreciation and amortisation 9 421,318 343,005Unrealised foreign exchange gains (97,836) (386,179)Loss on disposal of biological assets 8 1,579 5,146Loss /(gain) arising from changes in fair value of plasma receivables 8,33(a) 5,854 (886)Provision for uncollectible plasma receivables 8,33(a) 24,599 25,269Write-off of property and equipment 8 2,177 1,667(Gain) /loss on disposal of property and equipment 8 (1,100) 918Net changes in provision for decline in market value and obsolescence

of inventories 7,22 (7,988) (10,343)Write-off of plasma receivables 8,33(a) 26,459 26,602Allowance /(write-back) of doubtful debts 9,23 304 (165)Gain from dilution of shareholding in a subsidiary company 7 – (56,286)Gain arising from changes in fair value of biological assets 14 (309,269) (622,570)Changes in provision for asset dismantling costs 8,27 2,347 3,219Changes in employee benefits liabilities 131,074 87,588Changes in fair value of long-term receivables 3,334 – Financial income 10 (61,904) (66,630)Financial expenses 11 400,464 443,271

Operating cash flow before working capital changes 3,196,295 2,681,186

Changes in working capital

Increase in other non-current assets (47,162) (319,290)Increase in inventories (230,703) (161,672)(Increase) /decrease in trade and other receivables (170,477) 60,610Decrease /(increase) in advances to suppliers 59,490 (13,270)Decrease in prepaid taxes 52,197 9,845Increase in trade and other payables 119,974 3,246Increase in advances from customers 5,353 13,334

Cash flows generated from operations 2,984,967 2,273,989

Interest received 61,904 67,418Interest paid (388,226) (441,092)Income tax paid (759,782) (1,012,558)

Net cash flows generated from operating activities 1,898,863 887,757

ConsoLIDateD Cash fLow statementFor the financial year ended 31 December 2010




Cash flows from investing activities

Additions to property, plant and equipment (1,022,188) (1,544,691)Acquisition of a subsidiary company, net of cash acquired 32(i) – (8,432)Acquisition of non-controlling interests in subsidiary companies 19,32(ii) (41,500) (89,464)Proceeds from investments in repurchase receivables – 10,953Additions to biological assets 14 (687,064) (742,363)Increase in plasma receivables 33(a) (128,025) (138,407)Proceeds from disposal of property and equipment 2,049 3,223Proceeds from disposal of biological assets 1,261 1,381Advances for projects and purchase of fixed assets (464,991) (239,807)Investment in unquoted shares (11,867) – Proceeds from divestment of interest in a subsidiary company 764,254 –

Net cash flows used in investing activities (1,588,071) (2,747,607)

Cash flows from financing activitiesProceeds from interest-bearing loans and borrowings 4,226,803 4,063,016Repayment of interest-bearing loans and borrowings (2,577,630) (3,641,342)Net (payments) /proceeds from amount due to related parties (27,152) 81,863Dividend payments by subsidiaries to non-controlling interests (111,117) (108,234)Proceeds from dilution of shareholdings in a subsidiary company – 187,766Proceeds from issuance of Bonds and Sukuk Ijarah – 721,699Proceeds from sale of treasury shares 29(b) 173,435 – Increase in issued share capital in a subsidiary company 14,917 –

Net cash flows generated from financing activities 1,699,256 1,304,768

Net increase/ (decrease) in cash and cash equivalents 2,010,048 (555,082)Effect of changes in exchange rates on cash and cash equivalents (16,400) (50,839)Cash and cash equivalents at the beginning of the financial year 1,802,345 2,408,266

Cash and cash equivalents at the end of the financial year 24 3,795,993 1,802,345

ConsoLIDateD Cash fLow statementFor the financial year ended 31 December 2010



1. general

Indofood Agri Resources Ltd. (the “Company”) is a public limited liability company incorporated and domiciled in Singapore

and is listed on the Singapore Exchange Securities Trading Limited (SGX-ST). With effect from 23 January 2007, the Company

changed its name from CityAxis Holdings Limited to Indofood Agri Resources Ltd.. The registered office and principal place of

business of the Company is located at 8 Eu Tong Sen Street, #16-96/97 The Central, Singapore 059818.

The Group is a vertically-integrated agribusiness group, with its principal activities comprising oil palm seed breeding, cultivation

of oil palm plantations, production and refining of crude palm oil (“CPO”) and crude coconut oil (“CNO”), cultivation of

rubber and sugar canes plantations and marketing and selling these end products. The Group is also involved in managing and

cultivating small portions of cocoa, coconut and tea plantations, and marketing and selling the related products.

PT Indofood Sukses Makmur Tbk (“PT ISM”), incorporated in Indonesia, and First Pacific Company Limited, incorporated in Hong

Kong, are the penultimate and ultimate parent company of the Group, respectively. The immediate holding company is Indofood

Singapore Holdings Pte Ltd, incorporated in Singapore.

2. Basis of presentation of the consolidated financial statements

In January 2007, the Company completed the acquisition of the entire share capital of Indofood Oil & Fats Pte. Ltd. (“IOFPL”),

a company incorporated and domiciled in Singapore pursuant to the sale and purchase agreement dated 23 August 2006. The

purchase consideration of S$392,691,880 was satisfied by the allotment and issue of 9,982,000,000 new shares in the capital

of the Company at S$0.03934 per share.

The acquisition of IOFPL has been accounted for in the consolidated financial statements of the Company as a reverse acquisition,

as described in FRS103-Business Combinations. Hence, for accounting purposes, IOFPL is deemed to be the “acquirer” and the

Company as the “legal parent”.

In the reverse acquisition, the cost of the business combination is deemed to have been incurred by IOFPL in the form of

equity instruments issued to the owners of the Company. Accordingly, the deemed cost of acquisition has been determined at

Rp99.8 billion using the fair value of S$1.25 per share on the 13,500,000 issued consolidated shares of the Company before

the acquisition. The resulting goodwill of Rp76.3 billion, being the difference between the deemed cost of acquisition and fair

value of the Company’s net assets at the reverse acquisition date, has been impaired in full and included in the statement of

comprehensive income in Year 2007 as there are no future economic benefits attached to the goodwill.

The consolidated financial statements of the Company for the year ended 31 December 2010 and 2009 have been prepared and

presented as a continuation of the business of IOFPL and its subsidiary companies. As such:

(a) the assets and liabilities of the IOFPL group have been recognised and measured in the consolidated financial statements

at their pre-combination carrying amounts;

(b) the retained earnings and other equity balances recognised in the consolidated financial statements are the retained

earnings and other equity balances of IOFPL group immediately before the business combination;

(c) the amount recognised as issued equity instruments in the consolidated financial statements has been determined

by adding the deemed cost of the reverse acquisition to the issued equity of IOFPL immediately before the business

combination. However, the equity structure appearing in the consolidated financial statements (i.e. the number and type

of equity instruments issued) is the equity structure of the Company.

notes to the fInanCIaL statements31 December 2010



3. Summary of significant accounting policies

3.1 Basis of preparation

The consolidated financial statements of the Group and the balance sheet of the Company has been prepared in accordance

with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on the historical cost basis, except for (a) biological assets and available-for-sale

investments which are stated at fair values; and (b) receivables and payables arising from future commodity contracts transactions

which are determined based on the quoted market prices of the commodities.

The financial statements are presented in Indonesian Rupiah (“Rp”) and all values are rounded to the nearest million (Rp million)

except when otherwise indicated.

The accounting policies have been consistently applied by the Company and the Group and are consistent with those used in

the previous financial year, except for the changes stated in Note 3.2.

3.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the

Group has adopted all the new and revised standards and Interpretations of FRS (INT FRS) that are effective for annual periods

beginning on or after 1 January 2010. The adoption of these standards and interpretations did not have any effect on the

financial performance or position of the Group and the Company except as disclosed below:

FRS 103 Business Combinations (revised) and FRS 27 Consolidated and Separate Financial Statements (revised)

The revised FRS 103 Business Combinations and FRS 27 Consolidated and Separate Financial Statements are applicable for

annual periods beginning on or after 1 July 2009. As of 1 January 2010, the Group adopted both revised standards at the same

time in accordance with their transitional provisions.

FRS 103 Business Combinations (revised)

The revised FRS 103 introduces a number of changes to the accounting for business combinations that will impact the amount

of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. Changes in

significant accounting policies resulting from the adoption of the revised FRS 103 include:

– Transaction costs would no longer be capitalised as part of the cost of acquisition but will be expensed immediately;

– Consideration contingent on future events are recognised at fair value on the acquisition date and any changes in the

amount of consideration to be paid will no longer be adjusted against goodwill but recognised in the consolidated

statement of comprehensive income;

– The Group elects for each acquisition of a business, to measure non-controlling interest at fair value, or at the non-

controlling interest’s proportionate share of the acquiree’s identifiable net assets, and this impacts the amount of goodwill

recognised; and

– When a business is acquired in stages, the previously held equity interests in the acquiree is remeasured to fair value at the

acquisition date with any corresponding gain or loss recognised in the consolidated statement of comprehensive income,

and this impacts the amount of goodwill recognised.

According to its transitional provisions, the revised FRS 103 has been applied prospectively. Assets and liabilities that arose from

business combinations whose acquisition dates are before 1 January 2010 are not adjusted.



3. Summary of significant accounting policies (cont’d)

3.2 Changes in accounting policies (cont’d)

FRS 27 Consolidated and Separate Financial Statements (revised)

Changes in significant accounting policies resulting from the adoption of the revised FRS 27 include:

– A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity

transaction. Therefore, such a change will have no impact on goodwill, nor will it give rise to a gain or loss recognised in

the consolidated statement of comprehensive income;

– Losses incurred by a subsidiary are allocated to the non-controlling interest even if the losses exceed the non-controlling

interest in the subsidiary’s equity; and

– When control over a subsidiary is lost, any interest retained is measured at fair value with the corresponding gain or loss

recognised in the consolidated statement of comprehensive income.

According to its transitional provisions, the revised FRS 27 has been applied prospectively, and does not impact the Group’s

consolidated financial statements in respect of transactions with non-controlling interests, attribution of losses to non-

controlling interests and disposal of subsidiaries before 1 January 2010. The changes will affect future transactions with

non-controlling interests.

3.3 Standards issued but not yet effective

The Group has not adopted the following standards and interpretations that have been issued but not yet effective:

Description

Effective for annual periods beginning

on or after

Amendment to FRS 32 Financial Instruments: Presentation - Classification of Rights Issues 1 February 2010INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010Revised FRS 24 Related Party Disclosures 1 January 2011Amendments to INT FRS 114 Prepayments of a Minimum Funding Requirement 1 January 2011INT FRS 115 Agreements for the Construction of Real Estate 1 January 2011Amendments to FRS 107 Disclosures – Transfers of Financial Assets 1 July 2011Amendments to FRS 12 Deferred Tax – Recovery of Underlying Assets 1 January 2012Improvements to FRSs 2010 1 January 2011, unless

otherwise stated

Except for the revised FRS 24, the directors expect that the adoption of the other standards and interpretations above will have

no material impact on the financial statements in the period of initial application. The nature of the impending changes in

accounting policy on adoption of the revised FRS 24 is described below.

Revised FRS 24 Related Party Disclosures

The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate

inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as

related to each other whenever a person (or a close member of that person’s family) or a third party has control or joint control

over the entity, or has significant influence over the entity. The revised standard also introduces a partial exemption of disclosure

requirements for government-related entities. The Group is currently determining the impact of the changes to the definition of

a related party has on the disclosure of related party transaction. As this is a disclosure standard, it will have no impact on the

financial position or financial performance of the Group when implemented in 2011.




3.4 functional and foreign currency

Management has determined the currency of the primary economic environment in which the Company operates, that is

its functional currency, to be Indonesian Rupiah as the Company’s revenue and major expenses are largely influenced by

Indonesian Rupiah.

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and

are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction

dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end

of reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using

the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency

are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting

period are recognised in the statement of comprehensive income except for exchange differences arising on monetary items

that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in equity as foreign currency

translation reserve in the consolidated balance sheet and recognised in the consolidated statement of comprehensive income

on disposal of the subsidiary.

The assets and liabilities of foreign operations are translated into Indonesian Rupiah at the rate of exchange ruling at the end of

reporting period and their statement of comprehensive incomes are translated at the weighted average exchange rates for the

year. The exchange differences arising on the translation are taken directly to a separate component of equity as foreign currency

translation reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that

particular foreign operation is recognised in the statement of comprehensive income.

3.5 Basis of consolidation

Business combinations from 1 January 2010

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the

reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements

are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and

events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are

eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to

be consolidated until the date that such control ceases.

Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed

in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised

as expenses in the periods in which the costs are incurred and the services are received.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and

designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition

date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent

changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in

accordance with FRS 39 either in statement of comprehensive income or as change to other comprehensive income. If the

contingent consideration is classified as equity, it is not to be remeasured until it is finally settled within equity.




3.5 Basis of consolidation (cont’d)

Business combinations from 1 January 2010 (cont’d)

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the

acquisition date and any corresponding gain or loss is recognised in statement of comprehensive income.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is

recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree

identifiable net assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-

controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if

any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for

goodwill is set out in Note 3.11(a). In instances where the latter amount exceeds the former, the excess is recognised as gain on

bargain purchase in statement of comprehensive income on the acquisition date.

Business combinations before 1 January 2010

In comparison to the above mentioned requirements, the following differences applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the

acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured

at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to

previously held interests are treated as a revaluation and recognised in equity.

When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree are not reassessed

on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the

cash flows that would otherwise be required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was

more likely than not and a reliable estimate was determinable. Subsequent measurements to the contingent consideration

affected goodwill.

3.6 Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company,

and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated

balance sheet, separately from equity attributable to owners of the Company.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as

equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to

reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling

interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to

owners of the parent.




3.7 Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain

benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued

share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

3.8 property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is

recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group

and the cost of the item can be measured reliably. Subsequent to initial recognition, property, plant and equipment are stated at

cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly

attributable costs of bringing the asset to working condition for its intended use. Such cost also includes the initial estimation of

costs of dismantling and removing the item and restoring the sites of plants on which they are located, and the cost of replacing

part of such property, plant and equipment when that cost is incurred.

Depreciation of an asset begins when it is available for use and is computed on a straight-line method over the estimated useful

lives of the asset as follows:

• Buildings and improvements – 5 to 25 years• Plant and machinery – 4 to 20 years• Heavy equipment and transportation equipment – 3 to 10 years• Furniture, fixtures and office equipment – 4 to 10 years• Vessels – 20 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances

indicate that the carrying value may not be recoverable.

The carrying amount of an item of property, plant and equipment is derecognised upon disposal or when no future economic

benefits are expected from its use or disposal. Any gain or loss arising from the derecognition of the asset is included in the

consolidated statement of comprehensive income in the year the asset is derecognised.

The residual values, useful life and depreciation method are reviewed at each financial period to ensure that the amount, method

and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future

economic benefits embodied in the items of property, plant and equipment.

The cost of construction-in-progress represents all costs incurred on the construction of the assets. The accumulated costs will

be reclassified to the appropriate property, plant and equipment account when the construction is completed. No depreciation

is provided on construction-in-progress.

Interest on borrowings to finance the construction of property, plant and equipment is capitalised during the period of time that

is required to complete and prepare each asset for its intended use.

Repair and maintenance costs are taken to the consolidated statement of comprehensive income during the period in which they

are incurred. The cost of major renovation and restoration is included in the carrying amount of the asset when it is probable

that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the

Group, and is depreciated over the remaining useful life of the asset.

Assets under finance lease are recognised at the lower of the present value of the minimum lease payments and the fair value

of the asset.




3.9 Biological assets

Biological assets, which primarily comprise oil palm, rubber and sugar cane plantations, are stated at fair value less estimated

point-of-sale costs. Gain or loss arising on initial recognition of plantations at fair value less estimated point-of-sale costs and from

the change in fair value less estimated point-of-sale costs of plantations at each reporting date are included in the consolidated

statement of comprehensive income for the period in which they arise.

The fair value of the plantations is estimated by reference to independent professional valuations using the discounted cash

flows of the underlying biological assets, mainly oil palm, rubber and sugar cane. The expected cash flows from the whole life

cycle of the oil palm, rubber and sugar cane plantations are determined using the market prices of the estimated yields of the

fresh fruit bunches (“FFB”), cup lump and sugar cane, respectively, net of maintenance and harvesting costs, and any costs

required to bring the oil palm, rubber and sugar cane plantations to maturity. The estimated yields of the oil palm, rubber and

sugar cane plantations are dependent on the age of the oil palm, rubber and sugar cane trees, the location of the plantations,

soil type and infrastructure. The market price of the FFB is largely dependent on the prevailing market price of the crude palm

oil and palm kernel oil.

Oil palm trees have an average life that ranges from 20 to 25 years; with the first 3 to 4 years as immature and the remaining

years as mature.

Rubber trees have an average life that ranges from 20 to 25 years with first 5 to 6 years as immature and the remaining years

as mature.

Sugar cane is ready for harvest in 12 months and can be harvested for an average of 4 years.

3.10 plasma receivables

Plasma receivables represent mainly the accumulated costs to develop plasma plantations which are currently being financed

by banks and self-financed by certain subsidiaries. Upon obtaining financing from the bank, the said advances will be offset

against the corresponding funds received from rural cooperatives unit (Koperasi Unit Desa or the “KUD”). For certain plasma

plantations, the loans obtained from the bank are under the related subsidiaries’ (acting as nucleus companies) credit facility.

When the development of plasma plantation is substantially completed and ready to be transferred or handed-over to plasma

farmers, the corresponding investment credit from the bank is also transferred to the plasma farmers. Gain or loss resulting from

the difference between the carrying value of the plasma receivables and the corresponding investment credit transferred to the

plasma farmers is reflected in the consolidated statement of comprehensive income for the year.

An allowance for uncollectible plasma receivables is also provided based on the excess of accumulated development costs over

the bank or Group’s funding or amounts agreed by the KUD.

3.11 Intangible assets

(a) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated

impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated

to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective

of whether other assets or liabilities of the acquire are assigned to those units.




3.11 Intangible assets (cont’d)

(a) Goodwill (cont’d)

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there

is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the

recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where

the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised

in the consolidated statement of comprehensive income. Impairment losses recognised for goodwill are not reversed in

subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed

of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when

determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on

the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated

as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and

translated in accordance with the accounting policy set out in Note 3.4.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed

to be assets and liabilities of the Company and are recorded in Rupiah at the rates prevailing at the date of acquisition.

(b) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in

a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are

carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible

assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and

assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation

period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life

or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing

the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation

expense on intangible assets with finite lives is recognised in the consolidated statement of comprehensive income in the

expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually or more frequently if the events or changes

in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level.

Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to

determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite

to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal

proceeds and the carrying amount of the asset and are recognised in the consolidated statement of comprehensive

income when the asset is derecognised.




3.11 Intangible assets (cont’d)

(c) Research and development costs

Research costs are expensed as incurred.

An intangible asset arising from development expenditure on an individual project is recognised only when the Group

can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its

intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the

availability of resources to complete and the ability to measure reliably the expenditure during the development.

Following initial recognition of the development costs as an intangible asset, it is carried at cost less accumulated

amortisation and any accumulated losses. Amortisation of the intangible asset begins when development is complete and

the asset is available for use. Development costs have a finite useful life and are amortised over the period of expected

sales from the related project on a straight line basis.

3.12 Impairment of non-financial assets

The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any such

indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s

recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use

and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those

from other assets or group of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable

amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated

future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less

costs to sell, an appropriate valuation model is used.

An assessment is made at each annual reporting period as to whether there is any indication that previously recognised impairment

losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the Group

estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss for an asset other

than goodwill is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount

since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable

amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation,

had no impairment loss been recognised for the asset in previously. Such reversal is recognised in the consolidated statement of

comprehensive income.

3.13 financial assets

Financial assets are recognised on the consolidated balance sheet when, and only when, the Group becomes a party to the

contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value

through profit or loss, directly attributable transaction costs.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated

upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are

acquired for the purpose of selling or repurchasing in the near term.




3.13 financial assets (cont’d)

(a) Financial assets at fair value through profit or loss (cont’d)

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any

gains or losses arising from changes in fair value of the financial assets are recognised in the consolidated statement of

comprehensive income. Net gains or net losses on financial assets at fair value through profit or loss include exchange

differences, interest and dividend income.

(b) Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified

as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the

effective interest method. Gains and losses are recognised in the consolidated statement of comprehensive income when

the loans and receivables are derecognised or impaired, as well as through the amortisation process.

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On

derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the

consideration received and any cumulative gain or loss that had been recognised previously, will be recognised in the

consolidated statement of comprehensive income.

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e. the

date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of

financial assets that require delivery of assets within the period generally established by regulation or convention in the

marketplace concerned.

3.14 Derivative financial instruments

Future commodity contracts

The Group applies the provisions of FRS 39, “Financial Instruments: Recognition and Measurement”. FRS 39 requires that all of

the following conditions to be met for a hedging relationship to qualify as hedge accounting: (a) at the inception of the hedge

there is formal designation and documentation of the hedging relationship and the Group’s risk management objective and

strategy for undertaking the hedge; (b) the hedge is expected to be highly effective in achieving offsetting changes in fair value

or cash flows attributable to the hedged risk; (c) for cash flow hedges, a forecast transaction that is the subject of the hedge

must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss; (d)

the effectiveness of the hedge can be reliably measured; and (e) the hedge is assessed on an ongoing basis and determined

actually to have been highly effective throughout the financial reporting periods for which the hedge was designated.

The related receivables and payables arising from the above transaction are presented in the consolidated balance sheet as

regular financial instruments and are carried at fair values based on the quoted market prices of the related commodity.

3.15 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and in banks, and short term deposits with an original maturity of 3 months

or less at the time of placements and not restricted as to use.

Cash and cash equivalents carried in the consolidated balance sheet are classified and accounted for as loans and receivables

under FRS 39. The accounting policy for this category of financial assets is stated in Note 3.13.




3.16 Trade and other receivables

Trade and other receivables are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this

category of financial assets is stated in Note 3.13.

An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect the

debt. Bad debts are written off when identified. Further details on the accounting policy for impairment of financial assets are

stated in Note 3.17.

3.17 Impairment of financial assets

The Group assesses at each end of the reporting period whether there is any objective evidence that a financial asset or group

of financial assets is impaired.

(a) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the

amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated

future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original

effective interest rate (that is the effective interest rate computed at initial recognition). The carrying amount of the

asset is reduced either directly or through the use of an allowance account. The amount of the loss is recognised in the

consolidated statement of comprehensive income.

In relation to trade receivables, impairment loss is recognised when there is objective evidence (such as the probability of

insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all the amounts due

under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of an allowance

account. Impaired debts are derecognised when they are assessed as uncollectible.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an

event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent

that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is

recognised in the consolidated statement of comprehensive income.

(b) Financial assets carried at cost

If there is objective evidence that an impairment loss on financial assets carried at cost has been incurred, the amount of

the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash

flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed

in subsequent periods.

3.18 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using weighted-average method.

Cost incurred in bringing each product to its present location and condition is accounted for as follows:

Raw materials, goods in transit, spare parts and factory supplies – purchase cost; and

Finished goods and work in progress – cost of direct materials and labour and a proportion of

manufacturing overheads based on normal operating

capacity but excluding borrowing costs.




3.18 Inventories (cont’d)

Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories

to the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the

estimated costs necessary to make the sale.

3.19 financial liabilities

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual

provisions of the financial instrument.

Financial liabilities are recognised initially at fair value and in the case of financial liabilities other than derivatives, directly

attributable transaction costs.

Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated

upon initial recognition as at fair value. Financial liabilities are classified as held for trading if they are acquired for the purpose

of selling in the near term.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any

gains or losses arising from changes in fair value of the financial liabilities are recognised in the consolidated statement of

comprehensive income.

Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses

are recognised in the consolidated statement of comprehensive income when the liabilities are derecognised, and through the

amortisation process.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an

existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing

liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the

recognition of a new liability, and the difference in the respective carrying amounts is recognised in the consolidated statement

of comprehensive income.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial

liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability

are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and

the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the consolidated

statement of comprehensive income.

3.20 provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it

is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. The provision

is released if it is no longer probable that an outflow of resources embodying economic benefits will be required to settle

the obligation.




3.21 Trade and other payables

Liabilities for trade and other amounts payable are initially recognised at fair value and subsequently measured at amortised cost

using the effective interest method.

Gains and losses are recognised in the consolidated statement of comprehensive income when the liabilities are derecognised as

well as through the amortisation process.

3.22 Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction

costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the

effective interest method. Gains and losses are recognised in the consolidated statement of comprehensive income when the

liabilities are derecognised as well as through the amortisation process.

3.23 Borrowing costs

Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset.

Capitalisation of borrowing costs commences when the activities to prepare the qualifying asset for its intended use or sale are in

progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially

completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs

consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3.24 financial guarantee

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss

it incurs because a specified debtor fails to make payment when due.

Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable

to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in the

consolidated statement of comprehensive income over the period of the guarantee. If it is probable that the liability will be

higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference

charged to the consolidated statement of comprehensive income.

3.25 Employee benefits

(a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations.

Contributions to national pension schemes are recognised as an expense in the period in which the related service is

performed.

Certain subsidiaries in the Group have defined contribution retirement plans covering all of its qualified permanent

employees. The Group’s contributions to the funds are computed at 10.0% and 7.0% of the basic pensionable income

for staff and non-staff employees, respectively. The related liability arising from the difference between the cumulative

funding since the establishment of the program and the cumulative pension costs charged to the consolidated statement

of comprehensive income during the same period is recognised as employee benefits liabilities in the consolidated

balance sheet.




3.25 Employee benefits (cont’d)

(b) Defined benefit plans

The Group also provides additional provisions for employee service entitlements in order to meet the minimum benefits

required to be paid to qualified employees, as required under the Indonesian Labour Law No.13/2003 (the “Labour

Law”). The said additional provisions, which are unfunded, are estimated using actuarial calculations based on the report

prepared by an independent firm of actuaries.

Actuarial gains or losses are recognised in the consolidated statement of comprehensive income when the net cumulative

unrecognised actuarial gains or losses at the end of the previous reporting year exceed 10.0% of the defined benefit

obligation at that date. Such gains or losses in excess of the 10.0% corridor are amortised on a straight-line method over

the expected average remaining service years of the covered employees.

Past service cost is recognised as an expense on a straight-line basis over the average period until the benefit becomes

vested. To the extent that the benefit is already vested immediately following the introduction of, or changes to, the

employee benefit program, the Group recognises past service cost immediately.

The related estimated liability for employee benefits is the aggregate of the present value of the defined benefit obligations

at each reporting period and unrecognised actuarial gains and losses, less unrecognised past service cost.

3.26 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception

date: whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a

right to use the asset. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January

2005 in accordance with the transitional requirements of INT FRS 104.

(a) As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased

item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value

of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are

apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest

on the remaining balance of the liability. Finance charges are charged to the consolidated statement of comprehensive

income. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if

there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the consolidated statement of comprehensive income on

a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a

reduction of rental expense over the lease term on a straight-line basis.

(b) As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating

leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset

and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out

in Note 3.27(c).




3.26 Leases (cont’d)

(c) Prepaid land premiums and land use rights

From 1 January 2010

Land leases are considered finance leases since the arrangements transfer the substantial risks and rewards incidental to

ownership of the land. As such, land leases are presented as part of property, plant and equipment.

Included as part of the land leases are the costs associated with the legal transfer or renewal of land right title, such as

legal fees, land survey and re-measurement fees, taxes and other related expenses.

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less

accumulated amortisation. The land use rights are amortised on a straight-line basis.

Before 1 January 2010

Land leases are considered operating leases since the land has limited useful life. These land leases are presented as prepaid

land premiums and deferred land right acquisition costs, which are amortized in a manner that reflects the benefits to be

derived from them.

3.27 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can

be reliably measured. Revenue is measured at the fair value of consideration received or receivable, excluding discounts, rebates,

and sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognised:

(a) Sale of goods

Revenue from sales arising from physical delivery of palm based products, copra-based products, edible oils and other

agricultural products is recognised when significant risks and rewards of ownership of goods are transferred to the buyer,

which generally coincide with their delivery and acceptance.

(b) Interest income

Interest income is recognised using the effective interest method, unless collectability is in doubt.

(c) Rental and storage income

Rental and storage income is recognised on a straight-line basis over the lease terms.

(d) Dividend income

Dividend income is recognised when the right to receive payment is established.




3.28 Taxes

(a) Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be

recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that

are enacted or substantively enacted by the end of the reporting period.

Current income taxes are recognised in the consolidated statement of comprehensive income except to the extent that

the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax

regulations are subject to interpretation and establishes provisions where appropriate.

(b) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between

the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

– where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the accounting

profit nor taxable profit or loss; and

– in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in

joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable

that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused

tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary

differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

– where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an

asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither

the accounting profit nor taxable profit or loss; and

– in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests

in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary

differences will reverse in the foreseeable future and taxable profit will be available against which the temporary

differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that

it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be

utilised. Unrecognised deferred tax assets are reassessed at end of each reporting report and are recognised to the extent

that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is

realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the

end of each reporting period.




3.28 Taxes (cont’d)

(b) Deferred tax (cont’d)

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are

recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and

deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax

assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same

taxation authority.

(c) Value-added tax (“VAT”)

Revenues, expenses and assets are recognised net of the amount of VAT except:

– where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in

which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as

applicable; and

– receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables

in the consolidated balance sheet.

3.29 Related parties

A party is considered to be related to the Group if:

(a) The party, directly or indirectly through one or more intermediaries,

(i) controls, is controlled by, or is under common control with, the Group;

(ii) has an interest in the Group that gives it significant influence over the Group; or

(iii) has joint control over the Group;

(b) The party is an associate;

(c) The party is a jointly-controlled entity;

(d) The party is a member of the key management personnel of the Group or its parent;

(e) The party is a close member of the family of any individual referred to in (a) or (d); or

(f) The party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting

power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

(g) The party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a

related party of the Group.




3.30 Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are

independently managed by the respective segment managers responsible for the performance of the respective segments under

their charge. The segment managers report directly to the management of the Company who regularly review the segment

results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each

of these segments are shown in Note 38, including the factors used to identify the reportable segments and the measurement

basis of segment information.

3.31 Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the

issuance of ordinary shares are deducted against share capital.

3.32 Treasury shares

The Group’s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No

gain or loss is recognised in the consolidated statement of comprehensive income on the purchase, sale, issue or cancellation

of the Group’s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration

received is recognised directly in equity.

3.33 Contingencies

A contingent liability is:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-

occurrence of one or more uncertain future events not wholly within the control of the Group; or

(b) a present obligation that arises from past events but is not recognised because:

(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the

obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence

or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed

in a business combination that are present obligations and which the fair values can be reliably determined.

4. Significant accounting estimates and judgements

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and

assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent

liabilities at the end of each reporting date. However, uncertainty about these assumptions and estimates could result in outcomes

that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.



4. Significant accounting estimates and judgements (cont’d)

4.1 Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those

involving estimations, which has the most significant effect on the amounts recognised in the consolidated financial statements:

(a) Classification of financial assets and financial liabilities

The Group determines the classification of certain of assets and liabilities as financial assets and financial liabilities by

judging if they meet the definition set out in FRS 32. Accordingly, the financial assets and financial liabilities are accounted

for in accordance with the Group’s accounting policies set out in Note 3.13 and Note 3.19 respectively.

(b) Purchase price allocation and goodwill impairment

Purchase accounting requires extensive use of accounting estimates to allocate the purchase price to the fair market

values of the assets and liabilities purchased, including intangible assets and contingent liabilities. Certain business

acquisitions of the Group have resulted in goodwill. Under FRS 103, such goodwill is not amortised and is subject to a

periodic impairment testing. The carrying amount of the Group’s goodwill as at 31 December 2010 is Rp3,155.8 billion

(2009: Rp3,155.8 billion). Further details are disclosed in Note 16.

In determining the fair values of biological assets at the date of business combination, which require the determination of

future cash flows expected to be generated from the continued use and ultimate disposition of such assets, requires the

Group to make estimates and assumptions that can materially affect its consolidated financial information. Future events

could cause the Group to conclude that biological assets are impaired. The preparation of estimated future cash flows

involves significant estimations. While the Group believes that its assumptions are appropriate and reasonable, significant

changes in its assumptions may materially affect its assessment of recoverable values and may lead to impairment charge

in the future.

Impairment review is performed when certain impairment indication is present. In the case of goodwill, such assets are

subject to annual impairment test and whenever there is an indication that such asset may be impaired. Management has

to use its judgement in estimating the recoverable value and determining if there is any indication of impairment.

(c) Allowance for doubtful debts

The Group evaluates specific accounts where it has information that certain customers are unable to meet their financial

obligations. In these cases, the Group uses judgement, based on the best available facts and circumstances, including but

not limited to, the length of its relationship with the customer and the customer’s current credit status based on third party

credit reports and known market factors, to record specific allowance against amount due from such customers to reduce

its receivable to the amount the Group expects to collect. These specific allowances are re-evaluated and adjusted as

additional information received affects the amounts of allowance for doubtful debts. The carrying amount of the Group’s

trade receivables before allowance for doubtful debts as at 31 December 2010 is Rp741.9 billion (2009: Rp553.3 billion).

Further details are disclosed in Note 23.

(d) Allowance for uncollectible plasma receivables

The Group evaluates the excess of accumulated development costs over the bank’s and Group’s funding on the amount

agreed by the plasma farmers. In these cases, the Group uses judgement, based on available facts and circumstances,

to record allowance for uncollectible plasma receivables. These provisions are re-evaluated and adjusted as additional

information received. The net carrying amount of the Group’s plasma receivables as of 31 December 2010 and 2009 is

Rp600.7 billion and Rp456.8 billion, respectively. Further details are disclosed in Note 33(a).




4.1 Judgements made in applying accounting policies (cont’d)

(e) Allowance for unrecoverable advances for purchase of land

The Group evaluates the sufficiency of allowance for advances for purchase of land based on its assessment over the plot

of land rights that the related titles of ownership cannot be transferred to the Group. The net carrying amount of the

Group’s advance for purchase of land as of 31 December 2010 is Rp107.0 billion (2009: Rp158.5 billion).

4.2 Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period,

that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next

financial year are discussed below.

(a) Pension and employee benefits

The determination of the Group’s obligations and cost for pension and employee benefits liabilities is dependent on its

selection of certain assumptions used by independent actuaries in calculating such amounts. Those assumptions include

among others, discount rates, future annual salary increase, annual employee turnover rate, disability rate, retirement age

and mortality rate. Actual results that differ from the Group’s assumptions are recognised immediately in the consolidated

statement of comprehensive income as and when they occur. While the Group believes that its assumptions are reasonable

and appropriate, significant differences in the Group’s actual experiences or significant changes in the Group’s assumptions

may materially affect its estimated liabilities for pension and employee benefits and net employee benefits expense. The

carrying amount of the Group’s employee benefits liabilities as at 31 December 2010 is Rp574.0 billion (2009: Rp443.0

billion). Further details are given in Note 28.

(b) Depreciation of property, plant and equipment

The cost of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives.

Management estimates the useful lives of these property, plant and equipment to be within 3 to 25 years. These

are common life expectancies applied in the industries where the Group conducts its businesses. Changes in the

expected level of usage and technological development could impact the economic useful lives and the residual values

of these assets, and therefore future depreciation charges could be revised. The net carrying amount of the Group’s

property, plant and equipment as at 31 December 2010 is Rp6,791.4 billion (2009: Rp5,696.7 billion). Further details

are disclosed in Note 15.

(c) Biological assets

The Group carries its oil palm, rubber and sugar cane plantations and other smaller plantations at fair value less

estimated point-of-sale costs, which require extensive use of accounting estimates. Significant components of fair value

measurement were determined using assumptions including average lives of plantations, period of being immature and

mature plantations, yield per hectare and annual discount rates. The amount of changes in fair values would differ if

there are changes to the assumptions used. Any changes in fair values of these plantations would affect the Group’s

consolidated statement of comprehensive income and equity. The carrying amount of the Group’s biological assets as at

31 December 2010 is Rp10,453.1 billion (2009: Rp9,486.1 billion). Further details are disclosed in Note 14.




4.2 Key sources of estimation uncertainty (cont’d)

(d) Financial instruments

The Group carries certain financial assets and liabilities at fair values, which requires extensive use of accounting estimates.

While significant components of fair value measurement were determined using verifiable objective evidences, the amount

of changes in fair values would differ if the Group utilised a different valuation methodology. Any change in fair values of

these financial assets and liabilities would directly affect the Group’s consolidated statement of comprehensive income.

The carrying amount of net receivables under future commodity contracts carried at fair values as at 31 December 2010 is

Rp85.2 billion (2009: Rp104.6 billion). The carrying amount of net payables under future commodity contracts carried at

fair values as at 31 December 2010 is Rp85.0 billion (2009: Rp104.9 billion). Further details are disclosed in Note 33(b).

(e) Income tax

Significant judgment is involved in determining provision for income tax. There are certain transactions and computation

for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises

liabilities for expected income tax issues based on estimates of whether additional income taxes will be due. Where the

final income tax outcome of these matters is different from the amounts that were initially recognised, such differences

will impact the income tax and deferred income tax in the year in which such decision is made by the taxation authority.

The carrying amount of the Group’s tax payables as at 31 December 2010 is Rp102.4 billion (2009: Rp106.2 billion).

(f) Allowance for decline in market value of inventories and obsolescence of inventories

Allowance for decline in market value of inventories and obsolescence of inventories is estimated based on the best

available facts and circumstances, including but not limited to, the inventories’ own physical conditions, their market

selling prices, estimated costs of completion and estimated costs to be incurred for their sales. The provisions are re-

evaluated and adjusted as additional information received affects the amount estimated. The carrying amount of the

Group’s inventories as at 31 December 2010 is Rp1,321.2 billion (2009: Rp1,082.6 billion). Further details are disclosed in

Note 22.

(g) Deferred tax assets

Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will

be available against which the losses can be utilized. Significant management estimates are required to determine the

amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits

together with future tax planning strategies. The carrying amount of the Group’s deferred tax assets as at 31 December

2010 is Rp363.1 billion (2009: Rp294.3 billion).

5. Revenue

Revenue comprise of net sales of palm oil based products, edible oils, oil palm seeds and other agricultural products.

During the year ended 31 December 2010, revenue from sales of edible oils and fats products to PT Indofood Sukses Makmur

Tbk and its subsidiaries amounting to Rp1,399.5 billion or 14.76% of total consolidated revenue (2009 : Rp1,217.8 billion

or 13.47%).



6. Cost of sales

Group2010 2009

Rp million Rp million

Raw materials used 2,432,628 2,839,744Harvesting, upkeep and cultivation cost 1,294,167 1,197,926Manufacturing and other overhead expenses 2,070,618 1,792,611Changes in work in-process and finished goods inventories (63,608) (15,319)

5,733,805 5,814,962

During the years ended 31 December, 2010 and 2009, there were no purchases made from any single supplier with a cumulative

amount exceeding 10% of the consolidated revenue.

7. Other operating income

GroupNote 2010 2009


Sundry sales of oil palm seedlings 12,381 9,490Net changes in provision for decline in market value and obsolescence

of inventories 22 7,988 10,343Gains from dilution of shareholding in a subsidiary - 56,286Others 13,597 71,053

Total 33,966 147,172

8. Other operating expenses

GroupNote 2010 2009


Provision for uncollectible plasma receivables 33(a) 24,599 25,269Loss /(gain) arising from changes in fair value of plasma receivables 33(a) 5,854 (886)Write-off of property and equipment 2,177 1,667Write-off of plasma receivables 33(a) 26,459 26,602Loss on future commodity contract transactions 268 1,137(Gain)/loss on disposal of property and equipment (1,100) 918Amortisation of deferred charges 11,467 – Changes in provision for asset dismantling costs 27 2,347 3,219Loss on disposal of biological assets 1,579 5,146 Others 60,546 24,912

134,196 87,984



9. profit from operations

GroupNote 2010 2009


(i) The following items have been included in arriving at profit

from operations:

Depreciation and amortisation- Depreciation of property, plant and equipment 15 408,087 342,009- Amortisation of other non-current assets 13,231 996Research and development costs 35,499 32,118Operating lease rentals 12,397 14,726Allowance / (write-back) of doubtful debts 23 304 (165)

(ii) Employee benefits during the financial year included:

- Wages and salaries 775,181 707,507- Provision for employee benefits 28 174,077 119,266- Contribution to defined contribution pension plan 13,053 13,016- Training and education 25,862 21,556

988,173 861,345

10. financial income

Group2010 2009


Interest income:- Current accounts and short term deposits 44,566 46,384- Plasma receivables 17,337 19,639- Repurchase receivables – 324- Others 1 283

Total 61,904 66,630

11. financial expenses

Group2010 2009


Interest expense:- Bank loans 319,502 418,231- Bank charges 20,550 17,843- Bonds payable 53,457 4,366- Finance leases 568 1,645- Others 6,387 1,186

Total 400,464 443,271



12. Income tax expense

The major components of income tax expense for the years ended 31 December 2010 and 2009 are as follows:

GroupNote 2010 2009


Statement of comprehensive income:Current income tax- Current income taxation 756,017 714,634- Under provision in respect of previous years – 255

756,017 714,889Deferred income tax movements:Property, plant and equipment (18,722) (13,248)Biological assets 114,151 234,201Allowance for impairment and fair value adjustments of plasma receivables (7,613) (6,847)Employee benefits liability (31,879) (23,917)Deferred inter-company profits (30,890) 346Tax loss carry forward (32,273) (71,499)Effect of tax rate changes – (5,103)Others (63) 5,476Net deferred tax (benefit) /expense reported in the consolidated statement of

comprehensive income (7,289) 119,409

Income tax expense recognised in the statement of

comprehensive income 748,728 834,298

A reconciliation between the profit before tax multiplied by the applicable corporate tax rate and the income tax expense is as

follows:

GroupNote 2010 2009


Profit before tax as per consolidated statement of comprehensive income 2,654,883 2,887,560

Tax expense at the applicable tax rates 656,174 800,849Non-taxable income (52,889) (118,042)Non-deductible expenses 117,750 138,104Effect of tax rate changes – (5,103)Underprovision in respect of prior years 27,693 18,490

Income tax expense recognised in the statement of comprehensive income 748,728 834,298

Companies in Indonesia and Singapore are generally subject to progressive tax rates up to a maximum of 25% and 17% (2009:

28% and 17%) respectively.

The effect of tax rate changes is due to the reduction in Indonesia tax rates from 30% in 2008 to 28% in 2009, and 25% for

2010 onwards.



13. Earnings per share

Basic earnings per share are calculated by dividing profit for the year attributable to owners of the parent by the weighted

average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing profit for the year that is attributable to owners of the parent by

the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary

shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the profit and share data used in the computation of basic and diluted earnings per share for the years

ended 31 December:

Group2010 2009


Profit attributable to owners of the parent 1,402,013 1,526,829

No. of shares No. of shares

Weighted average number of ordinary shares* 1,440,065,022 1,438,782,830

There were no dilutive potential ordinary shares as at 31 December 2010 and 2009.

* The weighted average number of shares takes into account the weighted average effect of changes in treasury shares

transactions during the year.

14. Biological assets

Biological assets primarily comprise oil palm, rubber and sugar cane plantations. The following shows the movement in their

carrying value:

GroupNote 2010 2009


At fair value

At 1 January 9,486,096 8,152,865Additions 687,064 742,363Additions from acquired subsidiaries 32(i) – 612Disposal of biological assets (2,840) (6,527)Reclassification from property, plant and equipment and other non-current

assets (26,507) (25,787)10,143,813 8,863,526

Gain arising from changes in fair value of biological assets 309,269 622,570

At 31 December 10,453,082 9,486,096

The fair value of biological assets are determined by an independent valuer using the discounted future cash flows of the

underlying plantations.

Mature oil palm trees produce Fresh Fruit Bunches (“FFB”), which are used to produce CPO and Palm Kernel. The expected future

cash flows of the oil palm plantations are determined using the forecast market price of FFB, which is largely dependent on the

projected selling prices of CPO and Palm Kernel Oil (“PKO”) in the market.



14. Biological assets (cont’d)

Significant assumptions made in determining the fair values of the oil palm plantations are as follows:

(a) oil palm trees have an average life that ranges from 20 to 25 years, with the first 3 to 4 years as immature and the

remaining years as mature;

(b) yield per hectare of oil palm trees is determined by reference to guidelines issued by the Indonesian Oil Palm Research

Institute (“Pusat Penelitian Kelapa Sawit”) in Indonesia, which varies with the average age of oil palm trees, as well as

internal standards and results of internal assessments of other relevant factors;

(c) the discount rate used in 2010 is 18.24% (2009: 19.22%). Such a discount rate represents the asset specific rate for the

Group’s oil palm plantation operations which is applied in the discounted future cash flows calculation; and

(d) the projected selling price of CPO over the projection period is based on consensus of reputable independent

forecasting service firms for the short-term period and World Bank forecasts for the remaining projection period

(2009: World Bank forecasts).

Mature rubber trees produce cup lump. The expected future cash flows of the rubber plantations are determined using the

forecast market price of cup lump which are based on the projected selling price of Rubber Smoke Sheet 1 (“RSS1”) and other

rubber products of the Group.

Significant assumptions made in determining the fair values of the rubber plantations are as follows:

(a) rubber trees have an average life that ranges from 20 to 25 years, with the first 5 to 6 years as immature and the remaining

years as mature;

(b) discount rate used in 2010 is 17.68% (2009: 18.59%). Such a discount rate represents the asset specific rate for the Group’s

rubber plantations operations which is applied in the discounted future cash flows calculation; and

(c) the projected selling price of RSS1 and other rubber products of the Group for 2010 and 2009 over the projection period

is based on actual historical selling prices of the Group and World Bank forecasts.

The expected future cash flows of the sugar cane plantations are determined using the forecast market price of sugar cane which

are based on the projected selling price of sugar (2009: sugar cane) in 2010.

Significant assumptions made in determining the fair values of the sugar cane plantations are as follows:

(a) sugar cane is ready for harvest in 12 months and can be harvested for an average for 4 years;

(b) discount rate used in 2010 is 11.72% (2009: 14.23%). Such discount rate represent the asset specific rate for the Group’s

sugar cane plantations operation which are applied in the discounted future cash flows calculation; and

(c) the projected selling price of sugar (2009: sugar cane) in 2010 and 2009 over the projection period is based on actual

historical selling prices of the Group and World Bank forecasts.

During 2010, the Group’s oil palm plantations produced approximately 2.6 million tonnes (2009: 2.6 million tonnes) of FFB. The

selling prices per tonne for those FFB ranged between Rp1.2 million to Rp2.0 million (2009: Rp0.6 million to Rp1.6 million).

During 2010, the Group’s rubber plantations produced about 25.1 thousand tonnes (2009: 25.7 thousand tonnes) of cup lump.

The selling prices per tonne ranged between Rp13.5 million to Rp 21.0 million (2009: Rp7.0 million to Rp14.5 million).

During 2010, the Group’s sugar cane plantations produced about 429.8 thousand tonnes (2009: 295.9 thousand tonnes) of

sugar cane. The selling prices per tonne was approximately Rp0.4 million (2009: Rp0.4 million).



14. Biological assets (cont’d)

An analysis for the areas of mature and immature plantations of each group of biological assets is as follows:

2010 2009Mature (Ha) Immature (Ha) Mature (Ha) Immature (Ha)

Oil palm 155,400 49,664 132,560 61,053Rubber 17,556 4,472 17,263 4,475Others 11,983 3,032 6,995 5,375

Capitalisation of borrowing costs

During the year ended 31 December 2010, borrowing costs capitalised to biological assets of the Group in the course of

construction amounted to Rp64.0 billion (2009: Rp77.2 billion) based on the specific identification of the related borrowings.

Assets pledged as security

Biological assets with a carrying value of Rp474.7 billion (2009: Rp557.2 billion) as at 31 December 2010 were used as collateral

for bank facilities granted to the Group (Note 26).

15. property, plant and equipment

Land userights

Buildingsand

improve-ments

Plant andmachinery

Heavyequipmentand trans-portation

equipment

Furniture,fixtures

and officeequipment Total

Rp million Rp million Rp million Rp million Rp million Rp million

group

CostAt 31 December 2008 and

1 January 2009:- as previously reported – 1,510,137 1,910,354 396,691 131,795 3,948,977

- effect of adoption of FRS 17 1,603,053 – – – – 1,603,053- as restated 1,603,053 1,510,137 1,910,354 396,691 131,795 5,552,030

Additions 53,378 243,044 1,158,780 131,081 28,634 1,614,917

Additions from acquired subsidiaries 324 – – – – 324

Reclassification 71,048 19,955 (24,731) 794 198 67,264

Disposals and write-off – (3,286) (11,440) (9,106) (3,982) (27,814)At 31 December 2009 and

1 January 2010- as previously reported – 1,769,850 3,032,963 519,460 156,645 5,478,918


Additions 57,804 670,926 455,772 314,700 24,962 1,524,164

Reclassification - (62,786) 58,136 1,959 175 (2,516)

Disposals and write-off - (1,098) (8,612) (1,667) (1,002) (12,379)At 31 December 2010 1,785,607 2,376,892 3,538,259 834,452 180,780 8,715,990



15. property, plant and equipment (cont’d)

Land userights

Buildingsand

improve-ments

Plant andmachinery

Heavyequipmentand trans-portation

equipment

Furniture,fixtures


Rp million Rp million Rp million Rp million Rp million Rp million

group

Accumulated depreciationAt 31 December 2008 and

1 January 2009- as previously reported – 185,598 550,498 184,638 64,555 985,289

- effect of adoption of FRS 17 190,312 – – – – 190,312- as restated 190,312 185,598 550,498 184,638 64,555 1,175,601

Depreciation charge for the year 62,633 64,571 129,955 64,958 19,892 342,009

Reclassification 1,589 3,439 3,796 4,231 1,336 14,391

Disposals and write-off – (1,440) (10,132) (7,590) (2,844) (22,006)At 31 December 2009 and

1 January 2010:- as previously reported – 252,168 674,117 246,237 82,939 1,255,461

- effect of adoption of FRS 17 254,534 – – – – 254,534- as restated 254,534 252,168 674,117 246,237 82,939 1,509,995

Depreciation charge for the year 57,321 75,154 153,951 96,844 24,817 408,087

Reclassification 1,931 7,401 9,967 (3,095) (478) 15,726

Disposals and write-off – (316) (6,601) (1,593) (743) (9,253)

At 31 December 2010 313,786 334,407 831,434 338,393 106,535 1,924,555

Net carrying amountAt 31 December 2008:- as previously reported – 1,324,539 1,359,856 212,053 67,240 2,963,688


At 31 December 2009:- as previously reported – 1,517,682 2,358,846 273,223 73,706 4,223,457


At 31 December 2010 1,471,821 2,042,485 2,706,825 496,059 74,245 6,791,435




Buildings andimprovements

Furniture,fixtures


Rp million Rp million Rp million

Company

CostAt 1 January 2009 74,242 315 74,557Additions – 21 21Disposals and write-off (193) (32) (225)At 31 December 2009 and 1 January 2010 74,049 304 74,353Additions – 20 20Disposals and write-off – – –

At 31 December 2010 74,049 324 74,373

Accumulated depreciationAt 1 January 2009 132 153 285Additions 4,137 103 4,240Disposals and write-off (149) (24) (173)At 31 December 2009 and 1 January 2010 4,120 232 4,352Additions 4,120 57 4,177Disposals and write-off – – –

At 31 December 2010 8,240 289 8,529

Net carrying amountAt 31 December 2009 69,929 72 70,001

At 31 December 2010 65,809 35 65,844

Assets under construction

Property, plant and equipment of the Group at 31 December 2010 include expenditure for building and machinery in the course

of construction amounting to Rp2,052.2 billion (2009: Rp1,626.9 billion).

Capitalisation of borrowing costs

During the year ended 31 December 2010, borrowing costs capitalised to property, plant and equipment of the Group in the

course of construction amounted to Rp119.0 billion (2009: Rp75.0 billion) based on the specific identification of the related

borrowings.

Assets pledged as security

Property, plant and equipment with a net book value of Rp156.8 billion (2009: Rp378.7 billion) are pledged to secure the

borrowings of the Group as at 31 December 2010 (Note 26).




Assets held under finance leases

Land Use Rights

The Group has land use rights with terms ranging from 10 to 44 years. Under the lease terms, management evaluated that the

risk and rewards of the land were substantially transferred to the Group and therefore such lease arrangements were considered

as finance leases and depreciated in a manner that reflects the benefits to be derived from them.

Transportation Equipment

As of 31 December 2010, the carrying amount of transportation equipment held under finance lease is Rp8.1 billion (2009:

Rp19.9 billion).

16. goodwill

GroupNote 2010 2009


At 1 January 3,155,786 2,994,523Acquisition of new subsidiaries 32(i) – 8,319Acquisition of non-controlling interests in subsidiaries 32(ii) – 152,944

At 31 December 3,155,786 3,155,786

Goodwill arising from business combination was allocated to the following cash-generating units for impairment testing:

Plantation estates of Lonsum 2,909,757 2,909,757Plantation estates of PT GS 8,055 8,055Plantation estates of PT MPI 2,395 2,395Plantation estates of PT SBN 234 234Plantation estates of PT KGP 29,140 29,140Plantation estates of PT CNIS 7,712 7,712Plantation estates of PT LPI 37,230 37,230Plantation estates of PT SAIN 113,936 113,936Plantation estates of PT RAP 3,388 3,388Plantation estates of PT JS 1,533 1,533Plantation estates of PT MISP 34,087 34,087Plantation estates of PT IBP 8,319 8,319

Total 3,155,786 3,155,786



16. goodwill (cont’d)

No other impairment loss was recognised for the year ended 31 December 2010 and 2009 as the recoverable amounts of the

goodwill stated above were in excess of their respective carrying values. The summary of impairment testing on the above-

mentioned goodwill is as follows:

Except for goodwill allocated to the plantation estates of Lonsum, the recoverable value of the goodwill of all other plantation

estates as at 31 December 2010 was determined based on fair value less costs to sell (“FVLCTS”), using discounted cash flow

method. The recoverable value of the goodwill allocated to the plantation estates of Lonsum had been determined based on

value-in-use calculations. The following key assumptions had been used:

Cash generating unitsGoodwill as at

31 December 2010Discount rate

(pre-tax)Terminal

growth rateRp million

Plantation estates of Lonsum 2,909,757 16.66% 6.50%Plantation estates of PT GS 8,055 16.38% 6.50%Plantation estates of PT MPI 2,395 16.38% 6.50%Plantation estates of PT SBN 234 16.38% 6.50%Plantation estates of PT KGP 29,140 16.38% 6.50%Plantation estates of PT CNIS 7,712 16.38% 6.50%Plantation estates of PT LPI 37,230 15.35% 6.50%Plantation estates of PT SAIN 113,936 16.38% 6.50%Plantation estates of PT RAP 3,388 16.38% 6.50%Plantation estates of PT JS 1,533 16.38% 6.50%Plantation estates of PT MISP 34,087 16.38% 6.50%Plantation estates of PT IBP 8,319 16.38% 6.50%

Total 3,155,786

The recoverable value calculation of the above CGU applied a discounted cash flow model using cash flow projections covering

a period of 10 years for plantation estates. The projected price of the CPO is based on the consensus of reputable independent

forecasting service firms for the short-term period and the World Bank forecasts for the remaining projection period (2009: the

World Bank forecasts); the projected selling price of rubber (RSS1 and other rubber products of the Group) over the projection

period is based on actual historical selling prices of the Group and World Bank forecasts (2009: actual historical selling prices of

the Group and World Bank forecasts); and, the sugar price used in the projection is based on actual historical selling prices of

the Group and World Bank forecasts (2009: actual historical selling prices of the Group). The cash flows beyond the projected

periods are extrapolated using the estimated terminal growth rate indicated above. The discount rate applied to the cash flow

projections is derived from the weighted average cost of capital of the respective CGUs. The terminal growth rate used does not

exceed the long-term average growth rate of the industry and country in which the entities operate.

Changes to the assumptions used by the management to determine the recoverable value, in particular the discount and

terminal growth rate, can have significant impact on the results of the assessment. Management is of the opinion that no

reasonably possible change in any of the key assumptions stated above would cause the carrying amount of the goodwill for

each of the CGU to materially exceed their recoverable value.

17. Claims for tax refund

Claims for tax refund represent (a) advance tax payment made by each entity within the Group which is creditable against their

respective corporate income tax payable; and (b) tax assessments being appealed to the taxation authorities.



18. Deferred taxation

Consolidated balance sheetNote 2010 2009


Deferred tax assetsProperty, plant and equipment (24,731) (23,296)Biological assets 46,978 53,847Allowance for impairment and fair value adjustments of plasma receivables 26,709 20,131Allowance for employees benefit expenses 8,366 7,161Allowance for decline in market values and obsolescence of inventories 2,602 5,062Employee benefits liabilities 53,975 41,956Deferred inter-company profits 65,015 38,695Tax loss carry forward 187,571 155,367Others (3,336) (4,596)

Net deferred tax assets reported in the consolidated balance sheet 363,149 294,327

Deferred tax liabilitiesProperty, plant and equipment (382,575) (401,923)Biological assets (1,593,226) (1,485,943)Allowance for impairment and fair value adjustments of plasma receivables 8,033 7,897Allowance for employees benefit expenses 38,838 36,839Allowance for unrecoverable advances for purchases of land 11,000 11,000Employee benefits liabilities 87,756 67,896Deferred inter-company profitsTax loss carry forwardOthers 4,650 241

Net deferred tax liabilities reported in the consolidated balance sheet (1,825,524) (1,763,993)

For purposes of presentation in the consolidated balance sheet, the asset or liability classification of the deferred tax effect of

each of the above temporary differences is determined based on the net deferred tax position (assets or liabilities) on a per

entity basis.

Deferred tax assets and liabilities cover the future tax consequences attributable to differences between the financial and tax

reporting bases of assets and liabilities and the benefits of tax loss carry forwards.

At the end of reporting period, the Group has tax losses of approximately Rp995.5 billion (2009: Rp749.0 billion) that are available

for offset against future taxable profits. The related deferred tax assets of Rp61.3 billion (2009: Rp32.0 billion) attributable to

such tax losses was not recognised as the recoverability was considered not probable.

A deferred tax liability of approximately Rp481.2 billion (2009: Rp396.3 billion) that could arise upon the distribution of profits

of certain subsidiary companies has not been provided for as at 31 December 2010 as the distribution of the profits is controlled

and there is currently no intention for the profits to be remitted into Singapore.



19. Investment in subsidiary companies

Company2010 2009


Unquoted equity shares, at cost 7,383,633 8,487,971

Details of acquisition of subsidiaries are included in Note 32.

The subsidiary companies as at 31 December are:

Name of subsidiariesCountry of

incorporationPercentage of

equity held Principal activities %

2010 2009

Name (Abbreviated name) Denotes

Held by the Company

Indofood Oil & Fats Pte Ltd

(IOFPL) ①

Singapore 100.00 100.00 Investment holding

PT PP London Sumatra Indonesia Tbk

(Lonsum) ②

Indonesia – 8.03 Business of breeding, planting, milling

and selling of oil palm products, rubber

and other crops

Held by Indofood Oil & Fats Pte Ltd

PT Salim Ivomas Pratama

(PT SIMP) ②

Indonesia 90.00 90.00 Ownership of oil palm plantations,

mills and production of cooking oil,

margarine, fats, and other related

products

Held by PT Salim Ivomas Pratama

IndoInternational Green Energy

Resources Pte. Ltd.

(IGER) ①

Singapore 54.00 – Investment holding

PT Indoagri Inti Plantation

(PT IIP) ②

Indonesia 89.10 89.10 Investment holding, management

services and transportation

Silveron Investments Limited

(SIL) ③

Mauritius 90.00 90.00 Investment holding

PT Kebun Mandiri Sejahtera

(PT KMS) ③

Indonesia 84.10 84.10 Ownership of rubber and oil palm

plantations

PT Manggala Batama Perdana

(PT MBP) *

Indonesia 90.00 90.00 Non-operating



19. Investment in subsidiary companies (cont’d)




2010 2009

Held by PT Salim Ivomas Pratama (cont’d)

PT Sarana Inti Pratama

(PT SAIN) ③

Indonesia 90.00 90.00 Investment, research and management

and technical services, oil palm seed

breeding, and ownership of oil palm

plantations

PT Mentari Subur Abadi

(PT MSA) ③

Indonesia 26.80 54.00 Investment and ownership of oil palm

plantations

PT Mega Citra Perdana

(PT MCP) ④

Indonesia 26.74 54.00 Investment holding

PT Swadaya Bhakti Negaramas

(PT SBN) ③

Indonesia 26.85 54.00 Ownership of oil palm plantations

PT Lajuperdana Indah

(PT LPI) ②

Indonesia 26.65 54.00 Ownership of sugar cane plantations and

sugar production factory

PT Mitra Inti Sejati Plantation

(PT MISP) ③

Indonesia 90.00 90.00 Ownership of oil palm plantations and

mill

PT PP London Sumatra Indonesia Tbk

(Lonsum) ②

Indonesia 53.53 50.76 Business of breeding, planting, milling

and selling of oil palm products, rubber

and other crops

PT Cakra Alam Makmur

(PT CAM) ③

Indonesia 90.00 90.00 Ownership of bulking facilities

PT Hijaupertiwi Indah Plantations

(PT HPIP) ③


PT Cangkul Bumisubur

(PT CBS) ③


PT Samudera Sejahtera Pratama

(PT SSP) ③

Indonesia 90.00 90.00 Transportation service

Held by IndoInternational Green Energy Resources Pte. Ltd.

PT Mentari Subur Abadi

(PT MSA) ③

Indonesia 27.20 – Investment and ownership of oil palm

plantations

PT Mega Citra Perdana

(PT MCP) ④

Indonesia 27.26 – Investment holding







2010 2009

Held by IndoInternational Green Energy Resources Pte. Ltd. (cont’d)

PT Swadaya Bhakti Negaramas

(PT SBN) ③

Indonesia 27.15 – Ownership of oil palm plantations

PT Lajuperdana Indah

(PT LPI) ②

Indonesia 27.35 – Ownership of sugar cane plantations and

sugar production factory

Held by PT Indoagri Inti Plantation

PT Gunung Mas Raya

(PT GMR) ②


mill

PT Indriplant

(PT IP) ②


mill

PT Serikat Putra

(PT SP) ②


mill

PT Cibaliung Tunggal Plantations

(PT CTP) ②


Held by PT Serikat Putra

PT Intimegah Bestari Pertiwi

(PT IBP) ③


Held by Silveron Investments Limited

Asian Synergies Limited

(ASL) ③

British Virgin

Islands

90.00 90.00 Investment holding

PT Kebun Ganda Prima

(PT KGP) ③


Held by Asian Synergies Limited

PT Citranusa Intisawit

(PT CNIS) ③


mill

Held by PT Sarana Inti Pratama

PT Riau Agrotama Plantation

(PT RAP) ③


PT Citra Kalbar Sarana

(PT CKS) ③








2010 2009

Held by PT Sarana Inti Pratama (cont’d)

PT Jake Sarana

(PT JS) ③


Held by PT Mentari Subur Abadi

PT Agro Subur Permai

(PT ASP) ③


Held by PT Mega Citra Perdana

PT Gunta Samba

(PT GS) ④


PT Multi Pacific International

(PT MPI) ④


Held by PT Cangkul Bumisubur

PT Pelangi Inti Pertiwi

(PT PIP) ③


Held by PT PP London Sumatra Indonesia Tbk

PT Multi Agro Kencana Prima

(PT MAKP) ⑤

Indonesia 42.83 47.03 Rubber mill and trading

Lonsum Singapore Pte. Ltd.

(LSP) ⑥

Singapore 53.53 58.79 Trading and marketing

PT Tani Musi Persada

(PT TMP) ⑤


PT Sumatra Agri Sejahtera

(PT SAS) ⑤


PT Tani Andalas Sejahtera

(PT TAS) ⑤


Held by Lonsum Singapore Pte. Ltd.

Sumatra Bioscience Pte. Ltd. (SBPL) * Singapore 53.53 58.79 Trading and marketing




* Unaudited management accounts have been used for the preparation of the consolidated financial statements of the Group.

Audited by:

① Ernst & Young LLP, Singapore

② Purwantono, Suherman & Surja, Indonesia (member firm of Ernst & Young Global)

③ Eddy Siddharta & Rekan, Indonesia

④ Hendrawinata Gani & Hidayat, Indonesia (member firm of Grant Thornton International)

⑤ Jamaludin, Aria, Sukimto & Rekan (JAS&Rekan)

⑥ Saw Meng Tee & Partners PAC, Singapore

In accordance to Rule 716 of the Singapore Exchange Securities Trading Limited’s Listing Manual, the Audit Committee and

Board of Directors of the Company confirmed that they are satisfied that the appointment of different auditors for its subsidiaries

and associated companies would not compromise the standard and effectiveness of the audit of the Company.

Establishment of a new subsidiary

In connection with the Group’s internal restructuring of the shareholding structure of certain entities within the Group so as to

consolidate all the joint ventures with the Salim Group (a controlling shareholder of the Company) under a single investment

holding company, the Company had on 14 May 2010 incorporated a subsidiary in Singapore known as IndoInternational Green

Energy Resources Pte. Ltd. (“IgER”). IGER has an issued share capital of S$5,600,000, of which 60% is owned by PT SIMP and

40% is held by a member of the Salim Group, Indogreen Energy Resources Pte. Ltd. (“IER”).

IGER subscribed for new shares in PT MCP , PT MSA, PT SBN and PT LPI (the “Relevant Entities”), as well as acquired 40,000

and 41,500 existing shares in PT LPI from PT SIMP and the Salim Group respectively for an aggregate cash consideration of

approximately Rp362.0 billion.

Following the internal restructuring, the effective shareholding interests of PT SIMP and the Salim Group in the Relevant Entities

remain unchanged.

Divestment of interest in a subsidiary company

In December 2010, the Company divested 8.03% or 109,521,000 shares in Lonsum for a cash consideration of approximately

Rp1.3 trillion. Of which, 3.1% was sold to PT SIMP and 4.9% was sold via a private placement to certain external investors.

Following the Company’s sale to the external investors, the Group’s effective interest in Lonsum has reduced from 58.79% to

53.53%. The net proceeds to the Group were Rp764.3 billion with no gain or loss recognised in the statement of comprehensive

income. The Group had accounted for the above divestment in Lonsum as an equity transaction with appropriate adjustments

to non-controlling interests to reflect the Group’s reduced equity interest in Lonsum. The difference amounting to Rp13.6 billion

between the carrying amount relating to the disposal of Lonsum shares to external parties and the consideration received was

recognised directly in other reserves.

20. Loans to a subsidiary company

Company2010 2009


Loans 2,259,501 2,259,501

The loans to a subsidiary company are unsecured and interest-free. The amount forms part of the Company’s net investment in

the subsidiary company and is not expected to be settled in the next twelve months.



21. Other non-current assets

GroupNote 31.12.10 31.12.09 1.1.09

Rp million Rp million Rp million(Restated) (Restated)

Advances and deposits 213,090 294,706 338,170Loans to employees 32,182 19,193 20,366Long-term prepayments 28,992 6,619 7,428Plasma receivables 33(a) 600,656 456,845 358,993Others 31,987 71,328 21,737

Total 906,907 848,691 746,694

Company31.12.10 31.12.09


Advances and deposits 22 24

Advances and deposits

Advances and deposits mainly relate to utility and rental deposits, advance payments for land and non-controlling interest

acquisition, and advance payments made to suppliers and contractors in relation to the purchases of capital equipment, raw

materials and services.

Loans to employees

The Group provides non-interest bearing loans to officers and employees subject to certain terms and criteria. Such loans, which

are being collected through monthly salary deductions over five years, from the date of the loan, are carried at amortised cost

using effective interest method, with discount rate of 6.82% in 2010 (2009: 8.98%).

22. Inventories

GroupNote 2010 2009


Balance sheet:Raw materials 497,071 321,372Work in progress 20,455 11,510Finished goods 431,476 365,239Spare parts 372,246 384,436

Total inventories at the lower of cost or net realisable value 1,321,248 1,082,557

Statement of comprehensive income:Net changes in provision for decline in market value and obsolescence of

inventories recognised as an expense 7 7,988 10,343

Inventories of the Group amounting to approximately Rp33.8 billion as at 31 December 2010 (2009: Rp37.9 billion) has been

pledged as security against the bank borrowings of the Group (Note 26).



23. Trade and other receivables

GroupNote 31.12.10 31.12.09 1.1.09


Trade receivables –Third parties 449,916 351,056 474,994Related parties 291,938 202,215 92,957

Less: Allowance for doubtful third party trade receivables (561) (257) (422)Other receivables –

Future commodity contracts 33(b) 85,175 104,643 128,605Plasma receivables 18,079 17,321 12,129Advances to suppliers 42,332 112,554 59,352Repurchase transaction – – 10,765Loans to employees 9,707 7,265 5,857Related parties 881 2,180 317Prepayments 24,301 13,420 13,378Claims for tax refund 2,095 8,649 26,652Others 16,503 20,610 27,857

Total trade and other receivables 940,366 839,656 852,441

Company31.12.10 31.12.09


Other receivables –Subsidiary companies 17,216 16,911Related party 202 84Prepayments 221 369 Claims for tax refund 1,099 254 Others 2,205 8

Total trade and other receivables 20,943 17,626

Trade receivables are non-interest bearing and are generally on 7 to 45 days term of payments. They are recognised at their

original invoice amounts which represent their fair values on initial recognition. The Group’s trade receivables relate to a large

number of diversified customers, there is no concentration of credit risk. Receivables from future commodity contracts are carried

at their respective quoted market prices. Future commodity contract transactions are further discussed in Note 33(b).

Trade and non-trade receivables from related parties, and receivables from subsidiary companies are unsecured, interest-free and

are repayable on demand.

Trade and other receivables are denominated in the following currencies:

GroupNote 31.12.10 31.12.09 1.1.09


Indonesian Rupiah 582,527 566,388 412,627US Dollars 354,188 267,708 397,634Singapore Dollars 1,395 726 40,420Euro 1,868 4,834 1,757Others 388 – 3

940,366 839,656 852,441



23. Trade and other receivables (cont’d)

Trade and other receivables are denominated in the following currencies:

Company31.12.10 31.12.09


Indonesian Rupiah 2,153 – US Dollars 1 – Singapore Dollars 18,789 17,626

20,943 17,626

Receivables that are past due but not impaired

The Group has trade receivables amounting to Rp105.0 billion (2009: Rp154.4 billion) that are past due at the end of the

reporting period but not impaired. The analysis of their aging at the end of the reporting period is as follows:

GroupNote 31.12.10 31.12.09 1.1.09


Overdue but not impaired:1 - 30 days 98,494 87,124 73,95831 - 60 days 860 24,600 15,51461 - 90 days 2,105 4,479 11,397More than 90 days 3,561 38,198 9,070

105,020 154,401 109,939

Receivables that are impaired

As at 31 December 2010, trade receivables amounting to Rp561.0 million (2009: Rp257.0 million) were individually impaired

and fully provided for. Trade receivables that are determined to be impaired at the end of the reporting period relate to debtors

that are in financial difficulties and have defaulted on payments.

Movement in allowance for doubtful debts account:

GroupNote 31.12.10 31.12.09 1.1.09


At 1 January 257 422 2,500Charge for the year 9 304 – 50Write-back 9 – (165) (2,128)

At 31 December 561 257 422



23. Trade and other receivables (cont’d)

Advances to suppliers

Advances to suppliers represent advance payments to suppliers and contractors in relation to the following purchases:

Group31.12.10 31.12.09 1.1.09


Raw materials 3,935 18,177 14,403Factory supplies, spare parts and others 38,397 94,377 44,949

42,332 112,554 59,352

Advances to suppliers are unsecured, interest-free and obligations of the suppliers are expected to be fulfilled within the next

twelve months.

24. Cash and cash equivalents

Group Company2010 2009 2010 2009

Rp million Rp million Rp million Rp million

Cash at bank and in hand 1,292,890 738,349 178,580 5,660Short term deposits 2,503,103 1,063,996 1,442,532 177,790

Cash and cash equivalents 3,795,993 1,802,345 1,621,112 183,450

Cash and cash equivalents are denominated in the following currencies:

Indonesian Rupiah 2,076,576 910,529 876,929 –US Dollars 1,009,293 724,363 35,967 18,040Singapore Dollars 710,124 167,453 708,216 165,410

3,795,993 1,802,345 1,621,112 183,450

Cash at bank balances earn interest at floating annual interest rates based on daily bank deposit rates. Short term deposits are

made for varying periods ranging from one day to three months, depending on the immediate cash requirements of the Group,

and earn interest at the respective short term deposit rates.

Cash of a subsidiary is used as collateral to secure the term loan and uncommitted account payables financing and uncommitted

revolving credit facilities. As of 31 December 2010, the amount of the said subsidiary’s cash collateralized for the said loans but

not restricted for use was Rpnil (2009: Rp12.5 million).



25. Trade and other payables and accruals

GroupNote 31.12.10 31.12.09 1.1.09


Trade payables – Third parties 314,783 290,195 335,468Related parties 8,562 5,521 4,052

Other payables –Third parties 204,740 120,218 119,409Future commodity contracts 33(b) 85,003 104,943 124,716

Advances from customers 98,244 92,891 79,557Due to parent company 17,036 22,055 1,024Related parties 27 83 1,188Due to non-controlling interest of a subsidiary company – – 10,500Accrued operating expenses 435,924 395,298 340,762Taxes payable 43,552 41,598 25,793

1,207,871 1,072,802 1,042,469

Company31.12.10 31.12.09


Other payables –Third parties 4 4,227 Related parties 527 505 Accrued operating expenses 8,041 6,525

8,572 11,257

Trade payables are normally settled on 7 to 60 days credit payment terms. The carrying amounts of the Group’s trade payables,

other payables and accruals approximate their fair values. Payables incurred on future commodity contract transactions are

carried at their respective quoted market prices.

Trade payables to related parties are non-interest bearing, unsecured and normally settled on 14 to 60 days terms. Payables

to a parent company and non-controlling shareholder of a subsidiary company are unsecured, interest-free and repayable on

demand. Other payables to related parties are unsecured and non-interest bearing.

Advances from customers represent advance payments relating to the sale of finished goods. These advances are trade in nature,

unsecured, interest-free, and the obligations to the customers are expected to be fulfilled within the next twelve months.



25. Trade and other payables and accruals (cont’d)

Trade and other payables and accruals are denominated in the following currencies:

GroupNote 31.12.10 31.12.09 1.1.09


Indonesian Rupiah 938,379 923,357 865,461US Dollars 133,178 135,310 160,190Euro 26,765 2,643 611Singapore Dollars 106,947 11,397 15,781Others 2,602 95 426

Total trade and other payables and accruals 1,207,871 1,072,802 1,042,469

Company31.12.10 31.12.09


Singapore Dollars 8,572 11,257

26. Interest-bearing loans and borrowings

GroupEffective interest rate (%) Maturities 2010 2009


Current

Indonesian Rupiah loans

Working capital credit facilities 8.92 to 12.74

(2009:9.50 to 15.27)

2011 1,875,122 1,086,802

Current maturities of long-term loans and borrowings:Loans to refinance credit facilities

used to acquire majority equity

ownership in Lonsum

9.00 to 9.50

(2009: 9.50 to 11.77)

2011 200,000 130,000

Investment loans 5.00 to 13.00

(2009: 7.00 to 14.00)

2011 303,257 46,116

Obligations under finance lease 5.05 to 18.50

(2009: 5.05 to 18.50)

2011 1,071 5,854

Subtotal 2,379,450 1,268,772

US Dollar loans

Current maturities of long-term loans and borrowings:Loans to refinance credit facilities


ownership in Lonsum

1.50 to 1.89

(2009: 1.50 to 3.53)

2011 285,065 197,685

Uncommitted term loans 2.55 to 4.28 2011 123,626 82,250(2009: 2.99 to 4.03)

Investment loans 3.29 to 4.22 2011 27,379 197,757(2009: 3.97 to 4.23)

Subtotal 436,070 477,692

Total current interest- bearing loans and borrowings 2,815,520 1,746,464



26. Interest-bearing loans and borrowings (cont’d)

GroupEffective interest rate (%) Maturities 2010 2009


Non-current

Indonesian Rupiah bonds

Bonds and Sukuk Ijarah payablesSalim Ivomas Pratama

Bonds I Year 2009 11.95 2014 447,788 446,989Salim Ivomas Pratama

Sukuk Ijarah I Year 2009 *) 2014 275,321 274,813

Total non-current bonds and Sukuk Ijarah payables 723,109 721,802

Indonesian Rupiah loans

Loans to refinance credit facilities


ownership in Lonsum

9.00 to 9.50

(2009: 9.50 to 11.77)

2013 570,000 770,000

Investment and term loans 5.00 to 13.00

(2009: 5.00 to 15.27)

2012 - 2019 2,430,874 1,938,465

Obligations under finance lease 5.05 to 18.50

(2009: 5.05 to 18.50)

2012 50 1,140

Subtotal 3,000,924 2,709,605

US Dollar loans

Loans to refinance credit facilities


ownership in Lonsum

1.50 to 1.89

(2009: 1.50 to 3.53)

2013 812,066 1,147,311

Uncommitted term loans 2.29 to 4.28 2012 - 2018 723,776 603,950(2009: 2.99 to 4.03)

Investment and term loan 3.29 to 4.22 2015 418,419 30,347(2009: 3.97 to 4.16)

Subtotal 1,954,261 1,781,608

Total non-current interest- bearing loans and borrowings 4,955,185 4,491,213

*) – The Sukuk Ijarah has a fixed Sukuk Ijarah return of Rp32.3 billion per annum. For accounting and reporting purposes, the

Sukuk Ijarah is carried and presented in the consolidated balance sheets at amortised cost using effective interest rate of 11.96%

per annum.




Bonds and Sukuk Ijarah payables

In December 2009, PT SIMP, a subsidiary of the Company issued 5-year Indonesian Rupiah Bonds and Islamic Leased-based

bonds. The details are as follows:

a. Salim Ivomas Pratama I Bonds Year 2009 (“Bonds”) issued on 1 December 2009 with face value of Rp452.0 billion and

will be due within five years on 1 December 2014; and

b. Sukuk Ijarah Salim Ivomas Pratama I Year 2009 (“Sukuk Ijarah”) issued on 1 December 2009 with face value of Rp278.0

billion and will be due within five years on 1 December 2014.

The Bonds and Sukuk Ijarah are not secured by any specific assets of PT SIMP. However all PT SIMP’s assets, except for those

already used to secure liabilities to other creditors, were used to secure on pari-passu basis to the other liabilities, including the

Bonds and Sukuk Ijarah.

The Company may at anytime to buy or sell back all or portion of Bonds and Sukuk Ijarah at the open market. Buy back of Bonds

and Sukuk Ijarah will be undertaken in accordance with the prevailing laws and regulation.

Loans Used to Acquire Majority Equity Ownership in Lonsum

Several long-term facilities (Rp1,000.0 billion) investment loan from PT Bank Central Asia Tbk (“BCA”) and US$160.0 million

syndicated loan), which are secured by corporate guarantees from the Company in proportion to its equity ownership in PT SIMP

of 90%.

Working Capital Credit Facilities

a. an unsecured working capital loan from PT Bank Mandiri (Persero) Tbk with a maximum credit limit of Rp1,000.0 billion

(2009: Rp1,000.0 billion). PT SIMP has drawdown Rp850.0 billion as of 31 December 2010;

b. a time loan revolving from BCA in 2010 with a maximum credit limit of Rp300.0 billion. PT SIMP has fully drawdown this

loan facility;

c. an uncommitted revolving credit facility from PT Bank DBS Indonesia (“DBS”) with a maximum credit limit of Rp250.0

billion (2009: Rp250.0 billion). PT SIMP has fully drawdown this loan facility;

d. uncommitted short-term advance facilities and committed revolving working capital facilities from PT Bank Rabobank

International Indonesia (“Rabobank”), each for PT LPI, PT MSA, PT SBN and PT GS, with maximum credit limits US$21.0

million, US$8.5 million, US$3.5 million and US$4.0 million respectively, (2009: US$37.0 million), which can be drawdown

in Rupiah currency. In addition, PT LPI obtained a committed revolving working capital from Rabobank with a maximum

credit limit of Rp50.0 billion in 2010. These entities have drawdown a total of Rp207.6 billion of the said facilities as of

31 December 2010.

e. time loan revolving obtained by PT LPI and PT GS from BCA amounting to Rp95.0 billion and Rp13.0 billion with maximum

credit limits of Rp200.0 billion and Rp13.0 billion (2009: Rp13.0 billion) respectively; and

f. revolving credit facilities obtained by PT LPI from The Hongkong and Shanghai Banking Corporation Limited, Jakarta

branch (“HSBC”) and DBS, amounting to Rp100.0 billion and Rp59.5 billion respectively, with maximum credit limits of

Rp100.0 billion and Rp300.0 billion (2009: Rp130.0 billion) respectively.




The above loans in (b) to (c) were guaranteed by the Company in proportion to its equity ownership in PT SIMP of 90%.

The above loans in (d) to (f) were guaranteed by PT SIMP in proportion to its equity ownership in each of the subsidiary.

In 2009, the loan obtained by PT LPI from DBS was secured by PT LPI’s cash, receivables, inventories, property, plant and

equipment.

Investment and Term Loans

Included in these loans are:

a. investment loans of Rp80.0 billion and Rp220.0 billion obtained by PT SIMP from PT Bank CIMB Niaga Tbk (“CIMB Niaga”)

respectively, with total maximum credit limits of Rp300.0 billion (2009: Rp300.0 billion);

b. term loan facility obtained by PT SIMP from DBS with a maximum credit limit of Rp250.0 billion (2009: Rp250.0 billion);

c. investment loans from BCA with total credit limits of Rp1,067.4 billion (2009: Rp647.4 billion) obtained by PT MISP, PT

SBN, PT MSA, PT ASP, PT GS, PT MPI, PT CNIS and PT KGP;

d. various term loans and investment loans obtained by PT LPI from several creditors with total credit limits of Rp943.0 billion

and US$50.0 million. These loans were used by PT LPI for working capital and refinancing its Rp942.5 billion investment

loan facility obtained from PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”);

e. term loan and investment loans obtained by PT GS from HSBC and BRI with total credit limits of Rp37.5 billion (2009:

Rp428.3 billion);

f. term loan facilities from PT Bank Permata Tbk obtained by PT CNIS and PT KGP with total credit limits of Rp37.5 million

(2009: Rp37.5 million);

g. an uncommitted revolving credit facility obtained by PT SIMP from DBS Bank Ltd., Singapore (“DBS Singapore”) with a

maximum credit limit of US$48.0 million (2009: US$48.0 million);

h. revolving credit facility obtained by PT SIMP from Sumitomo Mitsui Banking Corporation, Singapore branch (“SMBC”)

with a maximum credit limit of US$50.0 million; and

i. term loan facility obtained by PT SIMP from ING Bank N.V., Singapore branch (“ING Singapore”) with a maximum credit

limit of US$25.0 million (2009: US$25.0 million).

The above loans in (a) to (b) and (g) to (i) above were guaranteed by the Company in proportion to its equity ownership in PT

SIMP of 90%.

The above loans in (c) to (f) were guaranteed by PT SIMP in proportion with its equity ownership in each of the subsidiary, except

for the investment loans of PT GS which are secured by inventories, biological assets, land rights, buildings and improvements,

and machinery of PT GS, and specifically for the loan under the nucleus and plasma scheme, secured by land rights under the

name of the plasma farmers.

As of 31 December 2010 and 2009, the Group has complied with all of the covenants of the loans and borrowings as disclosed

in this Note or obtained the necessary waiver as required.



27. Other payables

GroupNote 2010 2009


Provision for asset dismantling costs 18,482 16,135Deferred income 226 302Due to related parties 260,169 279,911Others 5,955 26,748

284,832 323,096

The amounts due to related parties represents loans provided to the subsidiaries from their non-controlling shareholders, which

are not expected to be repaid within 3 years, unsecured and subject to interest at commercial rates.

provision for asset dismantling costs

Provision for asset dismantling costs represents estimated liabilities for the costs to dismantle, remove and restore the sites of

refinery, fractionation and margarine plants located in Jakarta, Indonesia. Changes in provision for asset dismantling costs are

presented as part of “Other operating expenses” in the consolidated statement of comprehensive income as shown in Note 8.

The resulting outflows of economic benefits of this provision are expected to take place in 2016.

The movement in provision for asset dismantling costs is:

Balance at 1 January 16,135 12,916Movement for the year 8 2,347 3,219

Balance at 31 December 18,482 16,135

28. Employee benefits

The Plantations division and certain subsidiaries of the Group have defined contribution retirement plans covering substantially

all of their qualified permanent employees.

The Group’s contributions to the funds are computed at 10.0% and 7.0% of the basic pensionable income for staff and non-

staff employees, respectively. Total pension cost charged to operations in 2010 is Rp13.0 billion (2009: Rp13.0 billion).

On top of the benefits provided under the above-mentioned defined contribution retirement plans, the Group has also recorded

additional provisions for employee service entitlements in order to meet the minimum benefits required to be paid to the

qualified employees, as required under the Labour Law. The amounts of such additional provisions were determined based

on actuarial computations prepared by an independent firm of actuaries using the “Projected Unit Credit” method. As at 31

December 2010, the balance of the related actuarial liability for employee benefits is presented as “Employee benefits liabilities”

in the consolidated balance sheet.



28. Employee benefits (cont’d)

Changes in the present value of the defined benefit obligation are as follows:


Benefit obligation at 1 January 442,960 355,372Current service cost 69,733 55,641Interest cost on benefit obligation 80,801 58,098Amortisation of past service cost 4,380 2,581Net actuarial losses recognised during the year 19,163 13,511Benefits paid (43,003) (31,678) Gains on curtailments and settlements – (10,565)

Benefit obligation at 31 December 574,034 442,960

provision for employee benefits

The principal assumptions used in determining post-employment obligations for the Group’s plan are as follows:

Annual discount rate : 9.0% (2009: 11.0%)Future annual salary increase : 9.0% (2009: 10.0%)Annual employee turnover rate : 6.0% for employees under 30 years old and linearly decrease until

0% at the age of 52 yearsDisability rate : 10% from mortality rateMortality rate reference : Indonesian Mortality Table 1999Retirement age : 55 years (2009: 55 years) Expected annual return on plan assets : 8.0% (2009: 9.0%)

The following table summarise the component of net employee benefits expense recognised in the consolidated statement of

comprehensive income:

GroupNote 2010 2009


Current service cost 69,733 55,641Interest cost on benefit obligations 80,801 58,098Net actuarial losses recognised during the year 19,163 13,511Amortisation of past service cost 4,380 2,581Gains on curtailments and settlements – (10,565)

Net employee benefit expense 9 174,077 119,266



29. Share capital and treasury shares

(a) Share capital

Group2010 2009

No. of shares Rp million No. of shares Rp million

Balance as at 1 January/ 31 December 1,447,782,830 3,584,279 1,447,782,830 3,584,279

The movement in the share capital of the Company is as follows:

Company2010 2009


Balance as at 1 January / 31 December 1,447,782,830 10,912,411 1,447,782,830 10,912,411

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the

Company. Each ordinary share carries one vote per share without restriction. The ordinary share has no par value.

(b) Treasury shares

Group and Company2010 2009


Balance as at 1 January / 31 December – – 9,000,000 29,283

On 11 November 2010, the Company disposed 9,000,000 treasury shares for a net proceeds of Rp173.4 billion.

30. Revenue reserves

Company2010 2009


Retained earnings :

Balance at 1 January 124,058 143,766Profit/ (loss) for the year 161,732 (19,708)

Balance at 31 December 285,790 124,058

Movement in the reserves of the Group are shown in the Consolidated Statement of Changes in Equity. There are no dividends

declared, proposed or paid in 2010 and 2009.



31. Other reserves

The movement in other reserves is due to the following:

(a) gain on sale of treasury shares of Rp144.2 billion

This represents the gain arising from sale of treasury shares. No dividend may be paid, and no other distribution (whether

in cash or otherwise) of the Company’s assets (including any distribution of assets to members on a winding up) may be

made in respect of this reserve.

(b) Changes arising from disposal of shares in a subsidiary company of Rp13.6 billion

This represents the changes in ownership interest of a subsidiary that does not result in a loss of control.

32. Acquisition of subsidiaries and non-controlling interests

The following business combinations took place in 2009:

(a) Acquisition of a subsidiary, pT IBp

On 14 August 2009, PT SSP and PT IIP entered into Conditional Sale and Purchase Agreement with Mr. Agus Sjafrudin

(“AS”) and PT Karyahasta Bhumi Sriwijaya (“KBS”), the respective owners of 150 shares and 100 shares in PT IBP. In

accordance with the said agreement, AS and KBS shall sell their respective shares in PT IBP to PT SP and PT IIP for a total

consideration of Rp8.5 billion.

The said acquisition transaction was completed in October 2009. Accordingly, PT IBP has since become a 100%-owned

subsidiary of the Group.

(b) Acquisition of additional interests in pT SAIN and its subsidiaries

In accordance with the Conditional Sale and Assignment of the Exchangeable Bond Agreement with Lyminton Pte.

Ltd., Singapore (“LMT”) (the “LMT Agreement”), PT SIMP acquired a bond that was exchangeable into 15,499 shares

representing 29.98% of PT SAIN’s total issued share capital, for a cash consideration of US$16.4 million.

The transaction was completed in February 2009. Accordingly, PT SIMP has since increased its equity interest in PT SAIN

from 70.02% to 100%.

(c) Acquisition of additional interests in pT MISp

Pursuant to the Conditional Shares Sale and Purchase Agreement with PT Mulia Abadi Lestari (“MAL”) (the “MAL

Agreement”), PT SIMP and PT IIP acquired from MAL 28,499,999 shares, representing 30% of the total issued share

capital of PT MISP for a total cash consideration of Rp28.5 billion.

The transaction was completed in February 2009. Accordingly, PT SIMP has since increased its equity interest in PT MISP

from 70% to 100%.



32. Acquisition of subsidiaries and non-controlling interests (cont’d)

(i) Acquisition of a subsidiary

The fair value of the identifiable assets and liabilities of the acquired subsidiary at the acquisition were:

Acquisition in Year 2010 Acquisition in Year 2009PT IBP

Carrying value Fair value Carrying value Fair valueRp million Rp million Rp million Rp million

Property, plant and equipment – – 324 324Biological assets – – 612 612Deferred tax assets – – 23 23Trade and other receivables – – 9 9Advances and prepayments – – 1,000 1,000Cash and cash equivalents – – 68 68Other non-current assets – – 9,000 9,000Total identifiable assets – – 11,036 11,036

Interest-bearing loans and borrowings – – 10,450 10,450Trade and other payables – – 405 405 Total identifiable liabilities – – 10,855 10,855

Net assets – 181

Goodwill arising from acquisition

(Note 16) – 8,319

Total cost of business combination – 8,500

Cash outflows on acquisition of the subsidiary is as follows:

2010 2009Rp million Rp million

Cost of business combination – 8,500Less: Net cash of the acquired subsidiary – (68)

Total cash outflow – 8,432

(ii) Acquisition of non-controlling interests in pT SAIN and pT MISp

Acquisitions in Year 2010 Acquisitions in Year 2009PT SAIN and PT MISP

Carrying value Fair value Carrying value Fair valueRp million Rp million Rp million Rp million

Non-controlling interests – 73,186 73,186

Net assets – 73,186

Goodwill arising from acquisition

(Note 16) – 152,944

Total cost of business combination – 226,130



32. Acquisition of subsidiaries and non-controlling interests (cont’d)

Cash outflows on acquisition of non-controlling interests in subsidiaries are as follows:


Cost of business combination – 226,130Less: Advances paid in prior year – (136,666)

Total cash outflow – 89,464

The aggregate amount of net losses after tax of the subsidiaries acquired since the acquisition dates included in the Group’s

consolidated statement of comprehensive income was RpNil (2009: Rp0.01 billion).

It is not practicable to disclose the revenue and profit before tax of the Group had the acquisitions took place at the

beginning of the years, as the information on fair values of biological assets at the beginning of each year was not available

to management.

33. Commitments and contingencies

(a) plasma receivables

The Indonesian government requires oil palm plantation companies to develop new plantations together with the local

small landholders. This form of assistance to local small landholders is generally known as the “Plasma Scheme”. Once

developed, the plasma plantations are transferred to the small landholders who then operate the plasma plantations

under the supervision of the developer. In line with this requirement, certain subsidiary companies of the Group have

commitments to develop plantations under the Plasma Scheme. The funding for the development of the plantations under

the Plasma Scheme is provided by the designated banks and/or by the subsidiary companies. This includes the subsidiary

companies providing corporate guarantees for the loans advanced by the banks.

When the plasma plantations start to mature, the plasma farmers are obliged to sell all their harvests to the subsidiary

companies and a portion of the resulting proceeds will be used to repay the loans from the banks or the subsidiary

companies. In situations where the sales proceeds are insufficient to meet the repayment obligations to the banks, the

subsidiary companies also provide temporary funding to the plasma farmers to develop the plasma plantations and to

repay the instalment and interest payments to the banks. The plasma farmers will repay the temporary funding to the

subsidiary companies once the plantations have positive cash flows.

The loans advanced by the banks under the Plasma Scheme are secured by the sales proceeds of FFB of the respective

plasma plantations and corporate guarantees from certain subsidiary companies for a maximum amount of Rp617.0

billion (2009: Rp575.1 billion) as at 31 December 2010.

During the financial year, the Group wrote-off of plasma receivables of Rp26.5 billion (2009: Rp26.6 billion) as the

recoverable value was lower than the related development cost. In addition, the Group also recorded an allowance for

uncollectible plasma receivables in its consolidated balance sheet amounting to Rp91.8 billion (2009: Rp67.2 billion) in

2010. Based on a review of the plasma receivables of each project as at 31 December 2010, management believes that

the above-mentioned allowance for uncollectible plasma receivables is sufficient to cover possible losses arising from the

uncollectible plasma receivables.



33. Commitments and contingencies (cont’d)

(a) plasma receivables (cont’d)

The accumulated development costs net of funds received are presented as Plasma receivables in the consolidated balance

sheet and in the Plantations segment. An analysis of the movement in the plasma receivables is as follows:


Balance at 1 January 456,845 358,993Write-off of plasma receivables 8 (26,459) (26,602)Loss/ (gain) arising from changes in fair value of plasma receivables 8 (5,854) 886Provision for uncollectible plasma receivables 8 (24,599) (25,269)Conversion from plasma farmers and nucleus 72,698 10,430Additional net investment 128,025 138,407

Balance at 31 December 21 600,656 456,845

(b) future commodity contracts transactions

The Group entered into future commodity contracts with several foreign entities, which are primarily intended to hedge

the exposures on risks of losses arising from the fluctuations in prices of the commodities sold by a subsidiary company.

These contracts do not qualify and therefore are not designated as hedges for accounting purposes.

The fair values of the related receivables and payables arising from the future commodity contracts determined based on

the relevant quoted market prices at the balance sheet dates are as follows:


Financial assetsNet receivables 23 85,175 104,643

Financial liabilitiesNet payables 25 85,003 104,943

There were no outstanding future commodity contracts as at 31 December 2010.




(c) Operating lease commitments

As Lessee

The Group has entered into commercial leases to lease land and buildings, equipment and transportation equipment. These

non-cancellable operating leases have remaining lease terms from 1 to 3 years. Operating lease payments recognized in

the statement of comprehensive income in 2010 amounted to Rp12.4 billion (2009: Rp14.7 billion).

Future minimum lease payments under non-cancellable operating leases at the end of the reporting period are as follows:


Within one year 10,308 6,852After one year but not more than five years 16,369 4,990

26,677 11,842

As Lessor

The Group has entered into a short-term commercial lease on its storage tanks. Operating lease income recognised in the

consolidated statement of comprehensive income for the financial year ended 31 December 2010 amounted to Rp3.0

billion (2009: Rp6.7 billion).

(d) Contingent liability

The Company has provided corporate guarantees to banks for certain long-term and short-term credit facilities amounting

to Rp3,355.4 billion (2009: Rp4,011.3 billion) obtained by its subsidiary companies.

(e) Sales commitments

As at 31 December 2010, Lonsum has sales commitments to deliver the following products to local and overseas customers

within the next three months:

2010 2009(Tonnes) (Tonnes)

Crude palm oil 26,033 23,705Palm kernel 3,578 5,179Rubber 907 1,875Cocoa – 60

Total 30,518 30,819




(f) Commitments for long term investments

(i) Construction of a palm oil mill

In 2009 and 2010, each PT RAP and PT MSA separately entered into a construction agreement with PT Mindo-Tech,

whereby the latter is committed to construct palm oil mills each with processing capacity of 40 metric tonnes of FFB

per hour (which can be increased into 80 metric tonnes of FFB per hour), located at the province of West Kalimantan

and South Sumatra, respectively, for contract value of Rp31.2 billion and US$4.7 million, and Rp55.1 billion and

US$4.9 million, respectively.

(ii) Construction of a sugar refinery plant

PT LPI has a supply agreement with China CAMC Engineering Co. Ltd., whereby the latter is to supply machinery

and equipment for a sugar refinery plant with daily processing capacity of 8,000 metric tonnes of sugar cane

located at the province of South Sumatra for a total contract value of US$84.3 million. PT LPI also entered into a

construction agreement with CAMCE-MPS JO, whereby the latter is to construct and erect a sugar refinery plant

with total contract value of US$33.7 million.

(iii) Construction of a CPO refinery plant

PT SIMP’s Edible Oils and Fats Division engaged with Lipico Technologies Pte. Ltd., Singapore for the supply of

machinery and equipment and construction of a CPO refinery plant at Tanjung Priok, province of Jakarta, with

processing capacity of 1,400 metric tonnes per day for physical refining plant and 720 metric tonnes per day for dry

fractionation plant; as well as for the factionation plant in Surabaya with processing capacity of 600 metric tonnes

per day. Total contract value for the said construction was SGD16.6 million.

(iv) Commitments to acquire property and equipment

As of 31 December 2010, the Group has several contracts totalling Rp199.9 billion and US$9.5 million (2009:

Rp334.6 billion and US$22.1 million), inclusive of the capital expenditure commitments relating to the construction

contracts to acquire property and equipment.

(v) SAP Program Implementation

In 2010, PT SIMP and PT Deloitte Consulting (“DC”) entered into a Statement of Work General Section for SAP

Agri Business Program, covering PT SIMP, Lonsum, PT GS and PT LPI (“SoW”) with total contract of US$5.6 million.

This SoW is made based on Master Consulting Agreement between PT ISM and DC on September 2008 which was

extended on 25 January 2011 till 10 June 2011.




(f) Commitments for long term investments (cont’d)

(vi) Decision from the Business Competition Supervisory Commission

In May 2010, the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or “KPPU”)

has issued a decision on case No. 24/KPPU-I/2009, whereby PT SIMP and several other edible oil producers (together,

the “Edible Oil Producers”), were judged for violation of Articles 4, 5 and 11 of Law No. 5, Year 1999 regarding

prohibition of monopolistic practices and unfair business competition, and ordered penalties to each of the Edible

Oil Producers. The penalty which was ordered to PT SIMP amounting to Rp25.0 billion. In June 2010, the Edible

Oil Producers, including PT SIMP, filed objections against the said KPPU decision to the each domicile District Court

(Pengadilan Negeri). On 13 August 2010, the Supreme Court issued a decree that appointed the Central Jakarta

District Court to examine and decide on the objections filed by the Edible Oil Producers against the above-mentioned

KPPU decision. Until February 2011, the Central Jakarta District Court has not issued a decision for the objections

from the Edible Oil Producers.

(vii) Dispute of PT LPI’s HGU certificate

In 2008, certain individuals of Mulya Jaya village, Ogan Komering Ulu Timur District (“OKUT”) (collectively, the

“Plaintiffs”), sued the Head of Land Office of OKUT via State Administrative Court (Pengadilan Tata Usaha Negara

or the “PTUN”) of Palembang in connection with their claim of land ownership title under PT LPI’s Business Usage

Rights (“ Hak Guna Usaha” or “HGU”) No. 03. PT LPI’s land under the said HGU Certificate is approximately 21,502

hectares. In September 2008, PT LPI filed an Application Letter to intervene the above case and therefore became

an Intervening Defendant (Head of Land Office of OKUT and PT LPI collectively, the “Defendant”). In March 2009,

the PTUN of Palembang concluded nullified and ordered revocation of HGU No. 03 and reprocess the certificate

of HGU under PT LPI’s name after deducting the land area of the Plaintiffs. In response to the appeal filed by the

Defendant in connection with the above-mentioned decision, on 1 June 2009, the State Administrative High Court

(Pengadilan Tinggi Tata Usaha Negara or the “PT TUN”) Medan accepted the Defendant’s appeal and rescinded the

above-mentioned PTUN decision. The said decision from PT TUN Medan was subsequently upheld by the Supreme

Court through its decision dated 29 September 2009, which was final and binding. In June 2010, the Plaintiffs

submitted a Memorandum for Civil Review as an extraordinary legal course against the above mentioned Supreme

Court decision. Until February 2011, the Supreme Court has not made any decision on the said extra-ordinary legal

course from the Plaintiffs.



34. Related party transactions

In addition to those related party information disclosed elsewhere in the relevant notes to the consolidated financial information,

the following are the significant transactions between the Group and related parties (who are not members of the Group) that

took place during the financial year ended 31 December 2010 and 2009 at the terms agreed between the parties:

Nature of transactions Year

AShareholder

(Group)Related

companiesOther related

partiesRp million Rp million Rp million

Sales of goods 2010 – 2,484,749 17,2002009 1,206,404 1,062,420 –

Purchases of merchandise and packaging 2010 – 19,865 – 2009 4 20,194 –

Purchases of services, transportation equipment

and spare parts 2010 3,266 578 67,8472009 – 3 59,674

Pump services 2010 – – 4,5092009 – – 4,209

Interest expense 2009 866 – –

Rental 2010 2,155 – 6,200 2009 – – 8,689

Freight expenses 2010 – 37,230 – 2009 – 41,366 –

Insurance 2010 – – 12,094 2009 – – 8,780

Since 1996, a related party has granted the Group the right to use a parcel of land located at North Jakarta with an aggregate

area of approximately 19,875 square metres under a lease agreement dated 1 June 1996. The Group made a one-time payment

amounting to Rp11.0 billion in 1996 as prepaid rental for the lease period from June 1996 to June 2016 with no requirement

for further rental payment. The Group amortises the prepaid lease rental over 20 years on a straight line basis and the annual

amortisation charge amounts to Rp550.0 million.

Compensation of key management personnel of the group


Salaries and short-term employee benefits 56,396 51,703Termination benefits - 3,514Post-employment benefits 28,059 17,206

Total compensation paid to the key management personnel 84,455 72,423

Comprise amounts paid to :- Directors of the Group 28,474 27,904- Other key management personnel 55,981 44,519

84,455 72,423



35. financial risk management objectives and policies

The Group is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks

include interest rate risk, market risk (including currency risk and commodity price risk), credit risk and liquidity risk The board of

directors reviews and agrees policies and procedures for the management of these risks.

The Group’s principal financial instruments comprise interest-bearing loans and borrowings, and cash and short-term deposits.

The main purpose of these financial instruments is to raise funds for the Group’s operations. The Group has various other

financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is and has been the Group’s policy that no trading in financial instruments shall be undertaken.

The following sections provide details regarding the Group and Company’s exposure to the above mentioned financial risks and

the objectives, policies and processes for the management of these risks.

There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures

the risks.

(a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate

because of changes in market interest rates. The Group’s interest rate risk mainly arises from loans and borrowings for

working capital and investment purposes. Borrowings at variable rates expose the Group to fair value interest rate risk.

There are no loans and borrowings of the Group at fixed interest rates.

For working capital and investment loans and borrowings, the Group may seek to mitigate its interest rate risk by passing

it on to its customers.

Sensitivity analysis for interest rate risk

As at 31 December 2010, had the interest rates of the loans and borrowings been 50 basis points higher/lower (2009: 50

basis points) with all other variables held constant, profit before tax for the year ended 31 December 2010 would have

been Rp2.9 billion (2009: Rp1.9 billion) lower/higher accordingly, mainly as a result of higher/lower interest charge on the

loans and borrowings with floating interest rates.

(b) foreign currency risk

The Group’s reporting currency is the Indonesian Rupiah. The Group faces foreign exchange risk as its borrowings, export

sales and the costs of certain key purchases which are either denominated in the United States dollars or whose price

is significantly influenced by their benchmark price movements in foreign currencies (mainly US Dollar) as quoted on

international markets. To the extent that the revenue and purchases of the Group are denominated in currencies other

than Indonesian Rupiah, and are not evenly matched in terms of quantum and/or timing, the Group has exposure to

foreign currency risk.

The Group does not have any formal hedging policy for foreign exchange exposure. However, in relation to the matters

discussed in the preceding paragraph, the fluctuations in the exchange rates between Indonesian Rupiah and United

States Dollar provide some degree of natural hedge for the Group’s foreign exchange exposure.

As at 31 December 2010, had the exchange rate of Rupiah against US Dollar depreciated/appreciated by 10% with all

other variables held constant, profit before tax for the year ended 31 December 2010 would have been Rp132.7 billion

(2009: Rp148.0 billion) lower/higher, mainly as a result of foreign exchanges gains/losses on the translation of cash and cash

equivalents, trade receivables, interest-bearing loans and borrowings and trade payables denominated in US Dollar.



35. financial risk management objectives and policies (cont’d)

(c) Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows of the Group’s financial instrument will fluctuate

because of changes in market prices. The Group is exposed to commodity price risk due to certain factors, such as

weather, government policy, level of demand and supply in the market and the global economic environment. Such

exposure mainly arises from its purchase of CPO where the profit margin on sale of its finished products may be affected if

the cost of CPO (which is the main raw material used in the refinery plants to manufacture cooking oils and fats products)

increases and the Group is unable to pass such cost increases to its customers. In addition, the Group is also subject to

fluctuations in the selling price of its manufactured CNO and the purchase price of copra (being the raw material used in

the manufacture of CNO).

The Group’s policy is to minimise the risks arising from the fluctuations in the commodity prices by increasing self-

sufficiency in CPO for the refinery operations (through the purchase of CPO from the Group’s own plantations). To the

extent it is unable to do so, the Group may minimise such risks through forward contracts. As such, it may also be exposed

to commodity price risk as changes in fair value of future commodity contracts are recognised directly in the consolidated

statement of comprehensive income.

At 31 December 2010 and 2009, had the commodity prices been 10% higher/lower with all other variables held constant,

profit before tax in 2010 would have been RpNil (2009: Rp0.73 billion) higher/lower, mainly as a result of higher/lower

quoted market prices of the open position future commodity contracts.

(d) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its

obligations. The Group is exposed to credit risk arising from the credit granted to its customers. To mitigate this risk, it

has policies in place to ensure that sales of products are made only to creditworthy customers with proven track record

or good credit history. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit

verification procedures. For export sales, the Group requires cash against the presentation of documents of title. For

domestic sales, the Group may grant its customers credit terms up to 45 days from the issuance of invoice. The Group has

policies that limit the amount of credit exposure to any particular customer, such as, requiring sub-distributors to provide

bank guarantees. In addition, receivable balances are monitored on an ongoing basis to reduce the Group’s exposure to

bad debts.

When a customer fails to make payment within the credit terms granted, the Group will contact the customer to act on

the overdue receivables. If the customer does not settle the overdue receivable within a reasonable time, the Group will

proceed to commence legal proceedings. Depending on the Group’s assessment, specific provisions may be made if the

debt is deemed uncollectible. To mitigate credit risk, the Group will cease the supply of all products to customers in the

event of late payment and/or default.

The Group has no concentration of credit risk.

As disclosed in Notes 3.10 and 33(a), plasma receivables represent costs incurred for plasma plantation development

which include costs for plasma plantations funded by the banks and temporarily self funded by the subsidiaries awaiting

banks’ funding.

Plasma receivables also include advances to plasma farmers for topping up loan installments to the banks, advances for

fertilizers and other agriculture supplies. These advances shall be reimbursed by the plasma farmers and the collateral

in form of titles of ownership of the plasma plantations will be handed over to the plasma farmers once the plasma

receivables have been fully repaid.




(d) Credit risk (cont’d)

The Group through partnership scheme also provides technical assistance to the plasma farmers to maintain the productivity

of plasma plantations as part of the Group’s strategy to strengthen relationship with plasma farmers which is expected to

improve the repayments of plasma receivables.

Exposure to credit risk

At the end of the reporting period, the Group’s maximum exposure to credit risk is represented by the carrying amount of

each class of financial assets recognised in the balance sheets.

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are with creditworthy debtors with good payment

record with the Group. Cash and cash equivalents, are placed with or entered into with financial institutions or companies

with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Note 23 (Trade receivables and

other receivables).

(e) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of

funds. The Group exposure to liquidity risk arises primarily from mismatches of maturities financial assets and liabilities.

The Group manages its liquidity profile to be able to finance its capital expenditure and service its maturing debts by

maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of

committed credit facilities.

The Group regularly evaluates its projected and actual cash flow information and continuously assesses conditions in

the financial markets for opportunities to pursue fund-raising initiatives. These initiatives may include bank loans and

borrowings and equity market issues.




(e) Liquidity risk (cont’d)

The table below summarises the maturity profile of the Group’s financial assets and liabilities at the end of reporting period

based on contractual undiscounted repayment obligations:

TotalWithin1 year

Within1 to 5 years

More than5 years


Group

As at 31 December 2010Financial liabilities:

Non-current interest-bearing loans

and borrowings 6,757,519 – 6,243,661 513,858Other payables (non-current) 284,832 – 284,832 –Trade and other payables and accruals 1,164,319 1,164,319 – –Current interest-bearing loans

and borrowings 3,287,780 3,287,780 – –

Total undiscounted financial liabilities 11,494,450 4,452,099 6,528,493 513,858


Non-current interest-bearing loans

and borrowings 6,791,884 – 6,240,554 551,330Other payables (non-current) 323,096 – 323,096 –Trade and other payables and accruals 1,031,204 1,031,204 – –Current interest-bearing loans

and borrowings 1,848,130 1,848,130 – –

Total undiscounted financial liabilities 9,994,314 2,879,334 6,563,650 551,330

Undiscounted loans and borrowings with floating rates had been determined with reference to the applicable rates as at

balance sheet dates.

TotalWithin1 year

Within1 to 5 years

More than5 years


Company


Trade and other payables and accruals 8,572 8,572 – –

As at 31 December 2009

Financial liabilities:Trade and other payables and accruals 11,257 11,257 – –




(e) Liquidity risk (cont’d)

The table below shows the contractual expiry by maturity of the Group’s and the Company’s contingent liabilities and

commitments. The maximum amount of the financial guarantee contracts are allocated to the earliest period in which the

guarantee could be called.

TotalWithin1 year

Within1 to 5 years

More than5 years


As at 31 December 2010GroupFinancial guarantees 5,415,045 1,564,788 3,571,951 278,306

Company Financial guarantees 3,355,353 1,192,004 2,017,695 145,654

As at 31 December 2009GroupFinancial guarantees 5,062,880 1,406,238 3,450,412 206,230

Company Financial guarantees 4,011,279 1,274,511 2,584,488 152,280

36. fair value of financial instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable

willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted

market prices, discounted cash flow models and option pricing models as appropriate.

Financial instruments presented in the consolidated balance sheet are carried at the fair value, otherwise, they are presented at

carrying amounts as either these are reasonable approximation of fair values or their fair values cannot be reliably measured. The

following methods and assumptions are used to estimate the fair value of each class of financial instruments:

(a) financial instruments carried at fair value or amortised cost

Net receivables and payables arising from future commodity contracts are stated based on their quoted market prices.

Plasma receivables and long-term loans to employees are carried at amortised cost using the effective interest method and

the discount rates used are the current market incremental lending rate for similar types of lending.

Interest bearing Bonds and Sukuk Ijarah payables are carried at amortised cost using the effective interest method.

(b) financial instruments with carrying amounts that approximate their fair values

The fair value of cash and cash equivalents, current trade and other receivables, current trade and other payables, current

bank loans and accrued expenses approximate their carrying values due to their short-term nature. The carrying amounts of

long-term loans and borrowings with floating interest rates approximate their fair values as they are re-priced frequently.



36. fair value of financial instruments (cont’d)

(c) financial instruments carried at amounts other than fair values

Investments in other unquoted ordinary shares representing ownership interest of below 20.0% equity ownership are

carried at cost as their fair value cannot be reliably measured.

The non-current loan to a subsidiary company is carried at cost in the Company’s balance sheet as the loan is not expected

to be repaid until the cash flow of the subsidiary company permits. Therefore, it is impractical to determine the fair value

of this loan as the timing of future cash flow cannot be estimated reliably.

Set out below is a comparison by category of carrying amounts of all the Group’s and Company’s financial instruments

that are carried in the financial statements:

Classification of financial instruments

The Group

Loans and

receivables

Fair valuethrough profit

and loss

Liabilities atamortised

cost

Non-financialassets/

liabilities TotalRp million Rp million Rp million Rp million Rp million

31 December 2010

AssetsBiological assets – – – 10,453,082 10,453,082Property, plant and equipment – – – 6,791,435 6,791,435Goodwill – – – 3,155,786 3,155,786Claims for tax refund – – – 400,241 400,241Deferred tax assets – – – 363,149 363,149Other non-current assets 877,915 – – 28,992 906,907Inventories – – – 1,321,248 1,321,248Trade and other receivables 871,638 – – 68,728 940,366Prepaid taxes – – – 60,581 60,581Cash and cash equivalents 3,795,993 – – – 3,795,993

5,545,546 – – 22,643,242 28,188,788

LiabilitiesTrade and other payables

and accruals – – 1,164,319 43,552 1,207,871Interest-bearing loans

and borrowings – – 8,493,814 – 8,493,814Income tax payable – – – 102,417 102,417 Other payables – – 284,832 – 284,832Employee benefits liabilities – – – 574,034 574,034Deferred tax liabilities – – – 1,825,524 1,825,524

– – 9,942,965 2,545,527 12,488,492




Classification of financial instruments (cont’d)

The Group

Loans and

receivables


and loss


cost



31 December 2009

AssetsBiological assets – – – 9,486,096 9,486,096Property, plant and equipment – – – 5,696,726 5,696,726Goodwill – – – 3,155,786 3,155,786Claims for tax refund – – – 328,844 328,844Deferred tax assets – – – 294,327 294,327Other non-current assets 842,072 – – 6,619 848,691Inventories – – – 1,082,557 1,082,557Trade and other receivables 705,033 – – 134,623 839,656Prepaid taxes – – – 112,779 112,779Cash and cash equivalents 1,802,345 – – – 1,802,345

3,349,450 – – 20,298,357 23,647,807

LiabilitiesTrade and other payables and accruals – – 1,031,204 41,598 1,072,802Interest-bearing loans and borrowings – – 6,959,479 – 6,959,479Income tax payable – – – 106,182 106,182 Other payables – – 323,096 – 323,096Employee benefits liabilities – – – 442,960 442,960Deferred tax liabilities – – – 1,763,993 1,763,993

– – 8,313,779 2,354,733 10,668,512




Classification of financial instruments (cont’d)

The Company

Loans and

receivables


and loss


cost



31 December 2010

AssetsProperty, plant and equipment – – – 65,844 65,844Investment in subsidiary companies – – – 7,383,633 7,383,633Loan to a subsidiary company 2,259,501 – – – 2,259,501Other non-current assets 22 – – – 22Trade and other receivables 19,623 – – 1,320 20,943Cash and cash equivalents 1,621,112 – – – 1,621,112

3,900,258 – – 7,450,797 11,351,055

LiabilitiesTrade and other payables and accruals – – 8,572 – 8,572Income tax payable – – – 130 130

– – 8,572 130 8,702

31 December 2009

AssetsProperty, plant and equipment – – – 70,001 70,001Investment in subsidiary companies – – – 8,487,971 8,487,971Loan to a subsidiary company 2,259,501 – – – 2,259,501Other non-current assets 24 – – – 24Trade and other receivables 17,003 – – 623 17,626Cash and cash equivalents 183,450 – – – 183,450

2,459,978 – – 8,558,595 11,018,573

LiabilitiesTrade and other payables and accruals – – 11,257 – 11,257Income tax payable – – – 130 130

– – 11,257 130 11,387



37. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support

its business and maximize shareholder value.

Certain subsidiary companies are required to comply with loan covenants imposed by their lenders, such as maintaining the level

of existing share capital. This externally imposed requirement has been complied with by the relevant subsidiary companies for

the financial year ended 31 December 2010 and 2009. Additionally, certain subsidiary companies in Indonesia are required by

the new Corporate Law, effective from August 2007, to maintain a non-distributable reserve until it reaches 20% of the issued

and paid share capital. This externally imposed capital requirement will be complied by the relevant subsidiary companies by their

next annual general meeting.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain

or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or

issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2010

and 2009.

The Group monitors capital using gearing ratios, by dividing net debt with total equity. The Group’s policy is to keep the gearing

ratio within the range of gearing ratios of leading companies in similar industry in Indonesia in order to secure access to finance

at a reasonable cost.


Non-current interest-bearing loans and borrowings and

bonds and Sukuk Ijarah payables 5,678,294 5,213,015Current interest-bearing loans and borrowings 2,815,520 1,746,464

8,493,814 6,959,479Less :Cash and cash equivalents (3,795,993) (1,802,345)

Net debts 4,697,821 5,157,134

Total equity 15,700,296 12,979,295

Gearing ratio 30% 40%

38. Segment information

For management purposes, the Group is organized into business units based on their products and services and has two

reportable operating segments as follows:

Plantations segment

Plantations segment is mainly involved in the development and maintenance of oil palm, rubber and sugar cane plantations

and other business activities relating to palm oil, rubber and sugar cane processing, marketing and selling. This segment is also

involved in the development and maintenance of cocoa, coconut, tea and coffee.



38. Segment information (cont’d)

Edible oils and fats segment

Edible oils and fats segment produces, markets and sells edible oil, margarine, fats and other related products and CNO and its

derivative products.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource

allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured

consistently with operating profit or loss in the consolidated financial statements. However, Group financing (including finance

costs and finance income) and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties.

Segment revenues, segment expenses and segment results include transfers between business segments. Those transfers are

eliminated for purposes of consolidation.

The following table presents revenue and profit and certain asset and liability information regarding the Group’s business

segments:

Business segments

Plantations Edible Oils and Fats Others/ eliminations TotalRp million Rp million Rp million Rp million

Year ended 31 December 2010

RevenueSales to external customers 2,867,105 6,617,176 – 9,484,281Inter-segment sales 4,113,440 – (4,113,440) –

Total sales 6,980,545 6,617,176 (4,113,440) 9,484,281

Segment results 2,987,042 33,141 (87,665) 2,932,518

Net finance costs (338,560)Foreign exchange gain 60,925

Profit before tax 2,654,883Income tax expense (748,728)

Net profit for the year 1,906,155




Business segments (cont’d)



Assets and liabilitiesSegment assets 21,771,446 3,405,732 (907,566) 24,269,612Goodwill 3,155,786 – – 3,155,786

Deferred tax assets 363,149Claims for tax refund 400,241

Total assets 28,188,788

Segment liabilities 1,417,134 2,707,327 (2,317,893) 1,806,568

Unallocated liabilities 8,753,983Deferred tax liabilities 1,825,524Income tax payable 102,417

Total liabilities 12,488,492

Other segment informationCapital expenditure 1,676,273 534,935 20 2,211,228Depreciation and amortisation 358,335 58,806 4,177 421,318Gain from changes in fair value of

biological assets 309,269 – – 309,269Write-off of plasma receivables 26,459 – – 26,459Provision for employee benefits 144,864 29,213 – 174,077


RevenueSales to external customers 3,121,227 5,919,098 – 9,040,325Inter-segment sales 2,925,137 – (2,925,137) –

Total sales 6,046,364 5,919,098 (2,925,137) 9,040,325

Segment results 2,876,768 (38,639) 122,088 2,960,217

Net finance costs (376,641)Foreign exchange gain 303,984

Profit before tax 2,887,560Income tax expense (834,298)

Net profit for the year 2,053,262




Business segments (cont’d)



Assets and liabilitiesSegment assets 18,663,930 2,202,475 (997,555) 19,868,850Goodwill 3,155,786 – – 3,155,786

Deferred tax assets 294,327Claims for tax refund 328,844

Total assets 23,647,807

Segment liabilities 1,409,753 1,465,711 (1,036,606) 1,838,858

Unallocated liabilities 6,959,479Deferred tax liabilities 1,763,993Income tax payable 106,182

Total liabilities 10,668,512

Other segment informationCapital expenditure 2,285,257 72,002 21 2,357,280Depreciation and amortisation 286,799 51,966 4,240 343,005Gain from changes in fair value of

biological assets 622,570 – – 622,570Write-off of plasma receivables 26,602 – – 26,602Provision for employee benefits 99,569 19,697 – 119,266




geographical segments

The following table presents sales to customers based on the geographical location of the customers:

Region Revenue Eliminations TotalRp million Rp million Rp million


Indonesia 11,426,053 (4,113,440) 7,312,613United States of America 572,820 – 572,820China 562,239 – 562,239Singapore 306,467 – 306,467India 103,127 – 103,127Netherlands 80,390 – 80,390Malaysia 39,481 – 39,481Others 507,144 – 507,144

Segment revenue 13,597,721 (4,113,440) 9,484,281


Indonesia 9,926,079 (2,925,137) 7,000,942Singapore 475,581 – 475,581Netherlands 428,705 – 428,705United States of America 286,013 – 286,013China 236,034 – 236,034Malaysia 139,262 – 139,262India 32,495 – 32,495Others 441,293 – 441,293

Segment revenue 11,965,462 (2,925,137) 9,040,325

The Group’s capital expenditure and segment assets are primarily incurred and located in Indonesia.



39. Events occurring after the reporting period

(a) On 3 January 2011, the Group has entered into agreements with related parties, among others:

(i) PT LPI and PT ISM entered into a raw materials supply agreement in connection with the supply of sugar, including

molasses, which is valid until 31 December 2013. As provided in the said agreement, PT LPI is required to supply PT

ISM with sugar and molasses subject to certain specifications as prescribed by PT ISM, at the price determined based

on mutually agreed market selling price.

(ii) Based on the amendment of the communication services agreement (VSAT facilities) with PT Primacom Interbuana

(“PI”), this agreement has been extended until 31 December 2013, PI will also provide services relating to network

improvements and installation of communication systems to the Group.

(iii) PT SIMP and PT Fast Food Indonesia Tbk (“FFI”) entered into supply of raw materials agreement, whereby PT SIMP

agreed to supply cooking oil subject to certain specifications as stipulated in the agreement by FFI. This agreement

is valid from 1 January 2011 until 31 December 2013, and can be extended upon mutual agreement.

(b) On 6 January 2011, PT SIMP has fully repaid its loan from ING Singapore amounting to US$21.3 million.

(c) Based on the latest amendment to the credit agreement dated 26 January 2011, the maximum credit limit of the term

loan facility obtained by PT LPI from DBS was reduced from Rp43.0 billion to become Rp35.5 billion, and the uncommitted

revolving credit facilities obtained from the same bank have been extended until 4 January 2012.

(d) On 28 January 2011, a subsidiary of the Company, Lonsum, held an Extraordinary General Meeting of Shareholders,

whereby its shareholders approved the stock split from the nominal value of Rp500 to become Rp100 per share, and the

related increase in the number of Lonsum’s issued and fully paid shares from 1,364,572,793 shares to 6,822,863,965

shares and has been approved by the Indonesia Stock Exchange on 16 February 2011.

(e) Based on a distribution agreement between PT SIMP and Shanghai Resources International Trading Co. Ltd., China (“SRIT”)

dated 14 February 2011, the latter was appointed as a distributor for the edible oil and fat products of the Company in

the People’s Republic of China at the selling price based on the product price list to be determined from time to time by

PT SIMP by taking into account relevant market price developments. This agreement is valid until 31 December 2011 and

can be extended automatically for one year, but not exceeding 31 December 2013.


40. Comparative figures

a) The Amendments to FRS 17 requires the entity to assess the classification of a lease which includes both land and buildings

element as a finance or an operating lease separately. The Group has previously identified the leases as operating lease.

Upon adoption of the Amendments to FRS 17, the prepaid land premiums and deferred land rights acquisition costs is

reclassified to property, plant and equipment. The comparative figures in respect of the previous year have been adjusted

to reflect the reclassification.

Group

As restated2009

As previouslyreported

2009As restated

2008


2008Rp million Rp million Rp million Rp million

Balance sheetProperty, plant and equipment 5,696,726 4,223,457 4,376,429 2,963,688Prepaid land premiums and deferred land

rights acquisition costs – 1,430,347 – 1,379,286

b) Comparative figures have been restated and reclassified to conform to current year’s presentation.

Group

As restated2009


2009As restated

2008


2008Rp million Rp million Rp million Rp million

Balance sheetOther non-current assets 848,691 817,811 746,694 709,420Trade and other receivables 839,656 913,458 852,441 923,170

Statement of comprehensive incomeOther operating income 147,172 128,464Other operating expenses (87,984) (69,276)

41. Authorisation of financial statements for issue

The financial statements for the year ended 31 December 2010 were authorised for issue in accordance with a resolution of the

directors on 8 March 2011.



InteresteD person transaCtIons

Interested person Transactions

Interested Person Transactions (“IPT’) carried out during the financial year ended 31 December 2010 pursuant to the Shareholders’

Mandate obtained under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited by the Group are

as follows:

Aggregate value of all IPT conducted under a shareholders' mandate pursuant to Rule 920

(excluding transactions less than S$100,000

Name of Interested Person

Rp ’billion USD ’million

pT ISM group

• Sales of cooking oil & margarine 2,501.9 –• Purchase of goods and services 57.1 –

Salim group

• Sales of seeds 30.2 –• Management Fee 1.1 –• Purchases of services 22.6 –• Interest bearing loans from Salim Group to subsidiaries in which Salim Group

has a 40% shareholding interest 130.5 14.4• Interest bearing loans to subsidiaries which Salim Group has a 40%

shareholding interesto Principal amount outstanding in respect of the interest bearing loans

at end of year 202.1 21.6o Maximum loan outstanding (inclusive of principal and interest) during

the year 372.6 21.7• Corporate guarantees extended in favor of banks in respect of loan facilities

extended to certain subsidiaries, which Salim Group has a 40% shareholding

interesto Principal amount outstanding in respect of the bank loan facilities at

end of year 2,295.3 50.0o Maximum loan outstanding (inclusive of principal and interest) during

the year 2,383.4 50.3• Rental of land 0.5 –


estate LoCatIon

No Company Estate Name District Province Description

1 Salim Ivomas Pratama Kayangan Rokan Hilir North Riau Oil Palm Estate

Kencana Rokan Hilir North Riau Oil Palm Estate

Sungai Dua Rokan Hilir North Riau Oil Palm Estate

Balam Rokan Hilir North Riau Oil Palm Estate

2 Cibaliung Tunggal Plantation Cibaliung Rokan Hilir North Riau Oil Palm Estate

3 Gunung Mas Raya Sungai Rumbia 1 Rokan Hilir North Riau Oil Palm Estate

Sungai Rumbia 2 Rokan Hilir North Riau Oil Palm Estate

Sungai Bangko 1 Rokan Hilir North Riau Oil Palm Estate

Sungai Bangko 2 Rokan Hilir North Riau Oil Palm Estate

4 Indriplant Napal Indragiri Hulu South Riau Oil Palm Estate

5 Serikat Putra Lubuk Raja Pelalawan South Riau Oil Palm Estate

Bukit Raja Pelalawan South Riau Oil Palm Estate

6 Mentari Subur Abadi Muara Merang Musi Banyuasin South Sumatra Oil Palm Estate

Mangsang Musi Banyuasin South Sumatra Oil Palm Estate

Karang Agung Musi Banyuasin South Sumatra Oil Palm Estate

Hulu Merang Musi Banyuasin South Sumatra Oil Palm Estate

7 Swadaya Bhakti Negaramas Pulai Gading Musi Banyuasin South Sumatra Oil Palm Estate

8 Sarana Inti Pratama Lindai Kampar North Riau Oil Palm Estate

9 Citranusa Intiwsawit Kedukul Sanggau West Kalimantan Oil Palm Estate

10 Kebun Ganda Prima Kembayan Sanggau West Kalimantan Oil Palm Estate

11 Riau Agrotama Plantation Nanga Silat Kapuas Hulu West Kalimantan Oil Palm Estate

Kapuas Kapuas Hulu West Kalimantan Oil Palm Estate

12 Citra Kalbar Sarana Sepauk Sintang West Kalimantan Oil Palm Estate

13 Jake Sarana Sekubang Sintang West Kalimantan Oil Palm Estate

14 Agro Subur Permai Manis Kapuas Central Kalimantan Oil Palm Estate

15 Kebun Mandiri Sejahtera Mariango Pasir Utara East Kalimantan Oil Palm Estate

Penajam Pasir Utara East Kalimantan Rubber Estate

16 Gunta Samba Ampanas Kutai Timur East Kalimantan Oil Palm Estate

Pengadan Kutai Timur East Kalimantan Oil Palm Estate

Elang Kutai Timur East Kalimantan Oil Palm Estate

17 Multi Pacific International Peridan Kutai Timur East Kalimantan Oil Palm Estate

Kerayaan Kutai Timur East Kalimantan Oil Palm Estate

Cipta Graha Kutai Timur East Kalimantan Oil Palm Estate

Muara Bulan Kutai Timur East Kalimantan Oil Palm Estate

Baay Kutai Timur East Kalimantan Oil Palm Estate

18 Mitra Inti Sejati Plantation Bengkayang Sambas West Kalimantan Oil Palm Estate

19 Hijau Pertiwi Indah Plantation Lupak Dalam Kapuas Hulu Central Kalimantan Oil Palm Estate

Bunga Tanjung Kapuas Hulu Central Kalimantan Oil Palm Estate

20 Cangkul Bumi Subur Bumi Subur Musi Banyuasin South Sumatra Oil Palm Estate

Bukit Indah Musi Banyuasin South Sumatra Oil Palm Estate

21 Pelangi Inti Pertiwi Mancang Musi Banyuasin South Sumatra Oil Palm Estate

22 Inti Megah Bestari Pertiwi Sungai Ampalau Musi Banyuasin South Sumatra Oil Palm Estate

Megah Abadi Musi Banyuasin South Sumatra Oil Palm Estate


estate LoCatIon

No Company Estate Name District Province Description

23 Lonsum Dolok Batu Bara North Sumatra Oil Palm Estate

Gunung Malayu Asahan North Sumatra Oil Palm Estate

Begerpang Deli Serdang North Sumatra Oil Palm Estate

Sei Merah Deli Serdang North Sumatra Oil Palm Estate

Rambong Sialang Serdang Bedagai North Sumatra Oil Palm Estate

Sibulan Serdang Bedagai North Sumatra Oil Palm & Rubber Estate

Bungara Langkat North Sumatra Oil Palm Estate

Turangie Langkat North Sumatra Oil Palm Estate

Pulo Rambong Langkat North Sumatra Oil Palm Estate

Sei Rumbiya Labuhan Batu Selatan North Sumatra Oil Palm & Rubber Estate

Bah Bulian Simalungun North Sumatra Oil Palm Estate

Bah Lias Simalungun North Sumatra Oil Palm, Cocoa & Coconut Estate

Bukit Hijau Musi Rawas South Sumatra Oil Palm Estate

Belani Elok Musi Rawas South Sumatra Oil Palm Estate

Batu Cemerlang Musi Rawas South Sumatra Oil Palm Estate

Ketapat Bening Musi Rawas South Sumatra Oil Palm Estate

Sei Kepayang Musi Rawas South Sumatra Oil Palm Estate

Gunung Bais Musi Rawas South Sumatra Oil Palm Estate

Riam Indah Musi Rawas South Sumatra Oil Palm Estate

Sei Lakitan Musi Rawas South Sumatra Oil Palm Estate

Sei Gemang Musi Rawas South Sumatra Oil Palm Estate

Terawas Indah Musi Rawas South Sumatra Oil Palm Estate

Tulung Gelam Ogan Komering Ilir South Sumatra Rubber Estate

Kubu Pakaran Ogan Komering Ilir South Sumatra Rubber Estate

Bebah Permata Ogan Komering Ilir South Sumatra Rubber Estate

Tirta Agung Musi Banyuasin South Sumatra Oil Palm Estate

Budi Tirta Musi Banyuasin South Sumatra Oil Palm Estate

Suka Damai Musi Banyuasin South Sumatra Oil Palm Estate

Sei Punjung Musi Banyuasin South Sumatra Oil Palm Estate

Arta Kencana Lahat South Sumatra Oil Palm Estate

Kencana Sari Lahat South Sumatra Oil Palm Estate

Kertasarie Bandung West Java Tea Estate

Treblasala Banyuwangi East Java Cocoa & Coconut Estate

Isuy Makmur Kutai Barat East Kalimantan Oil Palm Estate

Pahu Makmur Kutai Barat East Kalimantan Oil Palm Estate

Balombissie Bulukumba South Sulawesi Rubber Estate

Palang Isang Bulukumba South Sulawesi Rubber Estate

Pungkol Minahasa North Sulawesi Cocoa & Coconut Estate

24 Lajuperdana Indah Komering Sugar Ogan Komering Ulu Timur South Sumatra Sugar Cane


statIstICs of sharehoLDInGsAs at 15 March 2011

Distribution Of Shareholdings

Number ofSize Of Shareholdings Shareholders % Number of Shares* %

1 - 999 377 6.71 109,067 0.011,000 - 10,000 4,117 73.23 20,127,333 1.3910,001 - 1,000,000 1,111 19.76 49,869,318 3.441,000,001 And Above 17 0.30 1,377,677,112 95.16

Total 5,622 100.00 1,447,782,830 100.00 * Based on total number of issued shares. No treasury shares were held.

Twenty Largest Shareholders

No. Name Number of Shares %**

1 Kim Eng Securities Pte. Ltd. 1,000,601,000 69.112 Citibank Nominees Singapore Pte Ltd 95,815,014 6.623 HSBC (Singapore) Nominees Pte Ltd 83,327,144 5.764 DBS Nominees Pte Ltd 64,808,257 4.485 DBSN Services Pte Ltd 39,890,313 2.766 United Overseas Bank Nominees Pte Ltd 30,695,510 2.127 Raffles Nominees (Pte) Ltd 29,680,187 2.058 UOB Kay Hian Pte Ltd 8,464,400 0.589 OCBC Securities Private Ltd 4,640,315 0.3210 Morgan Stanley Asia (Singapore) Securities Pte Ltd 4,497,883 0.3111 BNP Paribas Securities Services Singapore 2,719,000 0.1912 Phillip Securities Pte Ltd 2,389,605 0.1713 DBS Vickers Securities (S) Pte Ltd 2,361,750 0.1614 DB Nominees (S) Pte Ltd 2,277,734 0.1615 Royal Bank Of Canada (Asia) Ltd 2,219,000 0.1516 CIMB Securities (Singapore) Pte Ltd 1,850,000 0.1317 Capital Intelligence Limited 1,440,000 0.1018 Primevest Holdings Pte Ltd 1,000,000 0.0719 Merrill Lynch (Singapore) Pte Ltd 955,072 0.0720 Meryani 900,000 0.06

Total 1,380,532,184 95.37

** Percentage is calculated based on total number of issued shares. No treasury shares were held.


statIstICs of sharehoLDInGsAs at 15 March 2011

List Of Substantial Shareholders’ Interests

Direct Interest Deemed Interest

Name of Substantial ShareholderNumber ofshares held

Shareholding% **

Number of shares held

Shareholding% **

Indofood Singapore Holdings Pte. Ltd. (“IShpL”) 998,200,000 68.95% – –PT Indofood Sukses Makmur Tbk (“pT ISM”)(1) – – 998,200,000 68.95%Lapu-Lapu Holdings Limited (“Lapu-Lapu”)(2) – – 998,200,000 68.95%CAB Holdings Limited (“CAB”)(2) – – 998,200,000 68.95%First Pacific Company Limited (“first pacific”)(3) – – 998,200,000 68.95%First Pacific Investments Limited (“fpIL”)(4) 1,125,344 0.08% 998,200,000 68.95%First Pacific Investments (B.V.I.) Limited (“fpIL BvI”)(4) 882,444 0.06% 998,200,000 68.95%Salerni International Limited (“Salerni”)(5) – – 1,000,207,788 69.09%Anthoni Salim(6) – – 1,000,207,788 69.09%

Notes:

** Percentage is calculated based on total number of issued shares. No treasury shares were held by the Company.

(1) PT ISM is a holding company of ISHPL with an interest of approximately 83.84% of the total number of issued shares in ISHPL. Accordingly, PT ISM is deemed to be interested in the Shares held by ISHPL.

(2) Lapu-Lapu, together with its associate, CAB, collectively own not less than 20% of the issued share capital of PT ISM. Accordingly, Lapu-Lapu and CAB are deemed to be interested in the Shares held by ISHPL.

(3) First Pacific owns 100% of the issued share capital of CAB and Lapu-Lapu respectively. Accordingly, First Pacific is deemed to be interested in the Shares held by ISHPL.

(4) FPIL, together with FPIL BVI, collectively own not less than 20% of the issued share capital of First Pacific. Accordingly, FPIL and FPIL BVI are deemed to be interested in the Shares held by ISHPL.

(5) Salerni owns more than 50% of the issued share capital of FPIL BVI. Accordingly, Salerni is deemed to be interested in the Shares held by ISHPL, FPIL and FPIL BVI.

(6) Mr Anthoni Salim owns 100% of the issued share capital of Salerni. Accordingly, Mr Anthoni Salim is deemed interested in the Shares held by ISHPL, FPIL and FPIL BVI.

puBLIC fLOAT

Based on the information available to the Company as at 15 March 2011, approximately 30.9% of the issued ordinary shares of the

Company is held by the public. Therefore, the public float requirement under Rule 723 of the Listing Manual issued by the Singapore

Exchange Securities Trading Limited is complied with.


NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at Swissôtel Merchant Court Singapore,

Merchant Court Ballroom, Section A, 20 Merchant Road, Singapore 058281 on Thursday, 28 April 2011 at 4.00 p.m., to transact

the following business:

AS ORDINARy BuSINESS

1. To receive and adopt the Directors’ Report and Accounts for the year ended 31 December 2010 and the Auditors' Report

thereon. [Resolution 1]

2. To approve the Directors’ Fees of S$325,000 (2009: S$285,000) for the year ended 31 December 2010. [Resolution 2]

3. To re-elect the following Directors, who retire under Article 117 of the Company’s Articles of Association:-

a) Mr Tjhie Tje Fie [Resolution 3a]

b) Mr Moleonoto Tjang [Resolution 3b]

c) Mr Gunadi [Resolution 3c]

d) Mr Lee Kwong Foo Edward [Resolution 3d]

4. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their

remuneration. [Resolution 4]

AS SpECIAL BuSINESS

To consider and, if thought fit, pass the following Resolutions Nos. 5 to 8 as Ordinary Resolutions:

5. That authority be and is hereby given to the directors of the Company to:

(i) (aa) issue shares in the Company (“Shares”) whether by way of rights, bonus or otherwise; and/or

(bb) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be

issued during the continuance of this authority or thereafter, including but not limited to the creation and issue of

(as well as adjustments to) warrants, debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the directors may, in their

absolute discretion, deem fit; and

(ii) issue Shares in pursuance of any Instrument made or granted by the directors while such authority was in force

(notwithstanding that such issue of Shares pursuant to the Instruments may occur after the expiration of the authority

contained in this resolution),

Provided that:

(iii) the aggregate number of the Shares to be issued pursuant to such authority (including the Shares to be issued in pursuance

of Instruments made or granted pursuant to such authority), does not exceed 50% of the total number of issued Shares

(as calculated in accordance with paragraph (iv) below), and provided further that where shareholders of the Company

(“Shareholders”) are not given the opportunity to participate in the same on a pro-rata basis (“non pro-rata basis”),

then the Shares to be issued under such circumstances (including the Shares to be issued in pursuance of Instruments

made or granted pursuant to such authority) shall not exceed 20% of the total number of issued Shares (as calculated in

accordance with paragraph (iv) below);

notICe of annuaL GeneraL meetInG



(iv) (subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited (the

“SGX-ST”)) for the purpose of determining the aggregate number of the Shares that may be issued under paragraph (iii)

above, the total number of issued Shares shall be based on the total number of issued Shares of the Company (excluding

treasury shares) at the time such authority was conferred, after adjusting for:

(aa) new Shares arising from the conversion or exercise of any convertible securities;

(bb) new Shares arising from exercising share options or the vesting of share awards which are outstanding or subsisting

at the time such authority was conferred; and

(cc) any subsequent bonus issue, consolidation or subdivision of the Shares;

and, in relation to an Instrument, the number of Shares shall be taken to be that number as would have been issued had

the rights therein been fully exercised or effected on the date of the making or granting of the Instrument; and

(v) (unless revoked or varied by the Company in general meeting), the authority so conferred shall continue in force

until the conclusion of the next annual general meeting of the Company or the date by which the next annual

general meeting of the Company is required by law to be held, whichever is the earlier. [Resolution 5]

6. The proposed renewal of the shareholders’ mandate on Interested Person Transactions

“That approval be and is hereby given, for the purposes of Chapter 9 of the Listing Manual of the SGX-ST, for the Company,

its subsidiaries and associated companies (if any) that are entities at risk (as the term is used in Chapter 9), or any of them, to

enter into any of the transactions falling within the types of Interested Person Transactions set out in the Company’s Addendum

to Shareholders dated 5 April 2011 (being an addendum to the Annual Report of the Company for the financial year ended

31 December 2010) (the “Addendum”) with any party who is of the class of Interested Persons described in the Addendum

provided that such transactions are made at arm’s length, on normal commercial terms and are not prejudicial to the interests

of the Company and its minority Shareholders and are in accordance with the review procedures for such Interested Person

Transactions as set out in the Addendum (the “Shareholders’ Mandate”);

That the Shareholders’ Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the

next annual general meeting of the Company is held or is required by law to be held, whichever is the earlier;

That the Audit Committee of the Company be and is hereby authorized to take such action as it deems proper in respect of

procedures and/or to modify or implement such procedures as may be necessary to take into consideration any amendment to

Chapter 9 of the Listing Manual of the SGX-ST which may be prescribed by the SGX-ST from time to time; and

That the directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing

all such documents as may be required) as they may consider expedient or necessary or in the interests of the Company to give

effect to the Shareholders’ Mandate and / or this Resolution.” [Resolution 6]

7. The proposed renewal of the Share Purchase Mandate

That:

(a) for the purposes of Sections 76C and 76E of the Companies Act, Chapter 50 (the Companies Act”), the exercise by the

directors of the Company of all the powers of the Company to purchase or otherwise acquire issued and fully paid ordinary

shares in the Company (the “Shares”) not exceeding in aggregate the Prescribed Limit (as hereinafter defined), at such

price or prices as may be determined by the directors of the Company from time to time up to the Maximum Price (as

hereinafter defined), whether by way of:

(i) market purchases (each a “Market purchase”) on the Singapore Exchange Securities Trading Limited (“SgX-ST”);

and/or


(ii) off-market purchases (each an “Off-Market purchase”) effected otherwise than on the SGX-ST in accordance with

any equal access scheme(s) as may be determined or formulated by the directors of the Company as they consider fit,

which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with all other laws, regulations and listing rules of the SGX-ST as may for the time being be

applicable, be and is hereby authorised and approved generally and unconditionally (the “Share purchase Mandate”);

(b) unless varied or revoked by the Company in general meeting, the authority conferred on the directors of the Company

pursuant to the Share Purchase Mandate in paragraph (a) of this Resolution may be exercised by the directors of the

Company at any time and from time to time during the period commencing from the date of the passing of this Resolution

and expiring on the earliest of:

(i) the date on which the next annual general meeting of the Company is held; or

(ii) the date by which the next annual general meeting of the Company is required by law to be held; or

(iii) the date on which purchases or acquisitions of Shares are carried out to the full extent mandated;

(c) in this Resolution:

“prescribed Limit” means, subject to the Companies Act, 10% of the total number of issued Shares of the Company

(excluding any Shares which are held as treasury shares) as at the date of the passing of this Resolution; and

“Maximum price”, in relation to a Share to be purchased, means an amount (excluding brokerage, stamp duties,

applicable goods and services tax and other related expenses) not exceeding:

(i) in the case of a Market Purchase, 105% of the Average Closing Price (as defined hereinafter); and

(ii) in the case of an Off-Market Purchase, 110% of the Average Closing Price (as defined hereinafter),

where:

“Average Closing price” means the average of the Closing Market Prices of the Shares over the last five Market Days on

the SGX-ST, on which transactions in the Shares were recorded, immediately preceding the day of the Market Purchase or,

as the case may be, the date of the making of the offer pursuant to the Off-Market Purchase, and deemed to be adjusted

for any corporate action that occurs after such five-Market Day period;

“Closing Market price” means the last dealt price for a Share transacted through the SGX-ST’s Quest-ST system as

shown in any publication of the SGX-ST or other sources;

“date of the making of the offer” means the day on which the Company announces its intention to make an offer for

the purchase or acquisition of Shares from shareholders of the Company, stating the purchase price (which shall not be

more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the equal access

scheme for effecting the Off-Market Purchase; and

“Market Day” means a day on which the SGX-ST is open for trading in securities; and




(d) the directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing

such documents as may be required) as they may consider expedient or necessary to give effect to the transactions

contemplated by this Resolution. [Resolution 7]

8. To transact any other business.

By Order of the Board

MAK MEI YOOK

LEE SIEW JEE, JENNIFER

Company Secretaries

Singapore

Date: 5 April 2011


Note:A member is entitled to appoint not more than two proxies to attend and vote in his place. A proxy need not be a Member of the

Company. Members wishing to vote by proxy at the Meeting may use the proxy form enclosed. To be valid, the completed proxy form

must be lodged at the registered office of the Company at 8 Eu Tong Sen Street, #16-96/97 The Central, Singapore 059818 not less than

48 hours before the time appointed for holding the Meeting.

EXPLANATORY NOTE TO RESOLUTION 3a:Mr Tjhie Tje Fie is a Non-Executive Director of the Company. He is a member of the Remuneration Committee and Nominating Committee.

He will, upon re-election, continue to serve as a member of each of the Remuneration and Nominating Committees.

EXPLANATORY NOTE TO RESOLUTION 3b:Mr Moleonoto Tjang is an Executive Director of the Company. He will, upon re-election, continue to serve as a member of the Board.

EXPLANATORY NOTE TO RESOLUTION 3c:Mr Gunadi is an Executive Director of the Company. He will, upon re-election, continue to serve as a member of the Board.

EXPLANATORY NOTE TO RESOLUTION 3d:Mr Lee Kwong Foo Edward is an Independent Director. He is also the Chairman of the Board and the Chairman of the Nominating

Committee of the Company. He will, upon re-election, continue to serve as the Chairman of the Board and the Chairman of the

Nominating Committee.

EXPLANATORY NOTES ON SPECIAL BUSINESS TO BE TRANSACTED:The ordinary resolution proposed in item (5) above if passed will empower the directors of the Company from the date of the above

Meeting until the next Annual General Meeting, to issue shares and convertible securities in the Company up to an amount not exceeding

in total 50 per centum of the total number of issued shares in the capital of the Company calculated on the basis set out in the said

resolution. For issues of shares and convertible securities other than on a pro rata basis to all Shareholders, the aggregate number of shares

and convertible securities to be issued shall not exceed 20 per centum of the total number of issued shares in the capital of the Company

calculated on the basis set out in the said resolution. This authority will, unless previously revoked or varied at a general meeting, expire

at the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required

by law to be held, whichever is the earlier .

Shareholders should note that presently, the controlling shareholders of the Company include First Pacific Company Limited and PT

Indofood Sukses Makmur Tbk, which are listed on the Hong Kong Stock Exchange Limited and the Indonesia Stock Exchange (Bursa

Efek Indonesia), respectively. Prior to any exercise of the authority conferred upon them by the ordinary resolution in item (5) above, the

directors of the Company intend to take into account, inter alia, any approval that may be required from any such controlling shareholders

and/or their respective shareholders and/or from such stock exchanges.

For practical reasons and in order to avoid any violation of the securities legislation applicable in countries other than Singapore, the

offering documents for the issue of shares and Instruments pursuant to such authority may NOT be despatched to Shareholders with

registered addresses outside Singapore as at the applicable books closure date and who have not, by the stipulated period prior to

the books closure date, provided to The Central Depository (Pte) Limited or the Share Registrar, as the case may be, with addresses in

Singapore for the service of notices and documents.

The ordinary resolution proposed in item (6) above if passed will empower the directors of the Company to enter into Interested

Person Transactions approved by the Shareholders’ Mandate. Such authority will, unless revoked or varied by the Company in general

meeting, continue in force until the next Annual General Meeting of the Company and Shareholders’ approval will be sought for its

renewal at every Annual General Meeting of the Company.

The ordinary resolution proposed in item (7) above if passed will empower the directors of the Company to make purchases (whether

by way of market purchases or off-market purchases on an equal access scheme) from time to time of up to 10 per centum of the total

number of issued Shares as at the date of the above Meeting at the price up to but not exceeding the Maximum Price (as defined in

the Resolution). The rationale for the Share Purchase Mandate, the source of funds to be used for the Share Purchase Mandate, the

impact of the Share Purchase Mandate on the Company’s financial position, the implications arising as a result of the Share Purchase

Mandate under The Singapore Code on Take-overs and Mergers and on the listing of the Company’s Shares on the SGX-ST, as well as

the number of Shares purchased by the Company in the previous twelve months are set out in the Addendum.



proXy form

I/We

of

being a *member/members of Indofood Agri Resources Ltd., hereby appoint

Name AddressNRIC/Passport

NumberProportion of

shareholdings (%)

and/or (delete as appropriate)

failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General

Meeting of the Company to be held on Thursday, 28 April 2011 at 4.00 p.m., and at any adjournment thereof.

The proxy is required to vote as indicated with an "X" on the resolutions set out in the Notice of Meeting and summarised below.

If no specific direction as to voting is given, the proxy/proxies may vote or abstain at his discretion.

No. Resolution For Against

1. To receive and adopt the Directors' Report and Accounts for the year ended 31 December 2010.

2. To approve the Directors’ Fees of S$325,000 (2009: S$285,000/-) for the year ended 31 December 2010.

3a. To re-elect Mr Tjhie Tje Fie as Director, who retires under Article 117 of the Company’s Articles of Association.

3b. To re-elect Mr Moleonoto Tjang as Director, who retires under Article 117 of the Company’s Articles

of Association.

3c. To re-elect Mr Gunadi as Director, who retires under Article 117 of the Company’s Articles of Association.

3d. To re-elect Mr Lee Kwong Foo Edward as Director, who retires under Article 117 of the Company’s Articles

of Association.

4. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their

remuneration.

5. To approve the general mandate for issues of shares.

6. To renew the Shareholders’ Mandate on Interested Person Transactions.

7. To renew the Share Purchase Mandate.

Signed this day of 2011

Signature(s) of Member(s)/Common Seal

INDOfOOD AgRI RESOuRCES LTD.(Company Registration No. 200106551G)(Incorporated in the Republic of Singapore)

IMpORTANT

1. For investors who have used their CPF moneys to buy shares of Indofood Agri Resources Ltd., this Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF Investors who wish to vote should contact their CPF Approved Nominees.

Notes:

a) Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion (expressed as a

percentage of the whole) of his shareholding to be represented by each proxy.

b) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in

writing or, if such appointor is a corporation, under its common seal or under the hand of its attorney.

c) An instrument appointing a proxy must be deposited at the registered office of the Company at 8 Eu Tong Sen Street, #16-96/97

The Central, Singapore 059818 not less than 48 hours before the time appointed for holding the meeting.

d) The Company shall be entitled to reject a Proxy Form which is incomplete, improperly completed, illegible or where the true

intentions of the appointor are not ascertainable from the instructions of the appointor specified on the Proxy Form. In addition,

in the case of shares entered in the Depository Register, the Company may reject a Proxy Form if the member, being the

appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time

appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

This annual report is printed on Enviro Wove, an environmentally friendly paper made up of

100% recycled post-consumer waste. The paper’s production and quality management

system has also been accredited with ISO9001 and ISO14001 certifications.

8 Eu Tong Sen Street, #16-96/97 The Central, Singapore 059818Company Reg. No. 200106551G

a subsidiary of:

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