PT FAJAR SURYA WISESA Tbk

Transcription

1 ABRIDGED PROSPECTUS THE FINANCIAL SERVICES AUTHORITY (OTORITAS JASA KEUANGAN OR OJK ) NEITHER GIVES ITS APPROVAL OR DISAPPROVAL ON THE SECURITIES, NOR DOES THE FSA CONFIRM THE ACCURACY OR COMPLETENESS OF THE CONTENT OF THIS SUPPLEMENTARY INFORMATION. ANY STATEMENT CONTRARY TO BE THE ABOVE SHALL BE AGAINST THE LAW. THIS PROSPECTUS IS IMPORTANT AND REQUIRES IMMEDIATE ATTENTION. SHOULD THERE BE ANY DOUBT CONCERNING THE PROPER ACTIONS TO BE TAKEN, IT IS ADVISED TO CONSULT WITH THE COMPETENT PARTIES. PT FAJAR SURYA WISESA Tbk. (THE COMPANY ) IS FULLY RESPONSIBLE FOR THE ACCURACY OF ALL MATERIAL INFORMATION, FACTS, DATA, OR REPORTS AND THE TRUTHFULLNES OF OPINIONS PRESENTED IN THIS PROSPECTUS. PT FAJAR SURYA WISESA Tbk Main Business Activities: Engaged in Industy and Packaging Paper Manufacture Company Domiciled in Central Jakarta, Indonesia Head Office Factory Jl. Abdul Muis No. 30 Jalan Kampung Gardu Sawah, RT.001/1-1, Jakarta Desa Kalijaya, West Cikarang, Bekasi Telp : Telp : Fax : Fax : website: ir@fajarpaper.com RIGHTS ISSUE TO RAISE ADDITIONAL CAPITAL WITH PREEMPTIVE RIGHTS I ( RIGHTS ISSUE I ) The Company shall offer a maximum of (four hundred ninety five million five hundred seventy seven thousand seven hundred fifty seven) New Shares, having a nominal value of Rp500 (five hundred Rupiah) per share or equal to 16.67% (sixteen point sixty seven percent) of the Company s issued and fully paid-up capital subsequent to the Rights Issue I. Each holder of 5 (five) existing share whose name is registered in the Company s Share Register as of 30 November 2018, at Western Indonesian Time shall be entitled to 1 (one) Preemptive Rights, where every 1 (one) Preemptive Right shall provide the holders with the right to subscribe to 1 (one) New Share at an exercise price of Rp ( Rupiah), which shall be paid in full upon submission of the share purchase order. The new shares, being offered in the Rights Issue I and coming out of Preemptive Rights, are entirely new shares issued from the Company s shares portfolio with nominal value of Rp500 (five hundred Rupiah) per share. Shares that will be issued in this Rights Issue I will be listed on the Indonesia Stock Exchange ("IDX"). The Preemptive Rights are Tradable in and outside of IDX for a period of no less Than 8 (eight) Exchange Days starting from the 4th up to the 7th of December 2018 and from the 10th up to the 13th of December New Shares from the exercise of Preemptive Rights shall be listed on the IDX on 4 December The last day to exercise the Preemptive Rights shall be on 13th December 2018, any Preemptive Rights that are exercised beyond such date shall be no longer valid. Any Preemptive Right in fraction shall be rounded down. Pursuant to the provisions of the FSA Regulation No. 32/POJK.04/2015, in the event that shareholders own Preemptive Rights in the form of a fraction, the rights over such fraction of securities must be sold by the Company, and the proceeds of such sales shall be deposited to the Company's account. Shares issued pursuant to the Rights Issue I shall have identical rights and rank equally, in all respect, with the Company s Existing Paid-up Shares, including but not limited to, voting rights, dividends rights, and rights to receive liquidation proceeds, Preemptive Rights, and bonus shares. PT Intercipta Sempana ("ICS"), PT Intratata Usaha Mandiri ("IUM"), PT Garama Dhananjaya ("GD"), Vilia Sulistyo and Wina rko Sulistyo will not exercise Preemptive Rights which are their rights in Rights Issue I, which is as much as 470,130,060 (four hundred seventy million one hundred thirty thousand sixty) Preemptive Rights, where the Preemptive Rights shall be transferred to the recipient of the transfer of Preemptive Rights. Some or all of the Preemptive Rights will be converted into New Shares by the assignee as long as the New Shares can be offered to domestic or foreign investors through a limited offer. This limited offer is conducted to fulfill the provisions in which the number of shares owned by the public is 7.5% (seven point five percent) of the issued and fully paid up capital of the Company In the event that the Preemptive Rights Shares offered in this Rights Issue I are not entirely subscribed by the public holders of Preemptive Rights, the remaining shall be allocated to other Preemptive Right holders, subscribing more than their rights, as stated in the Preemptive Rights Certificate or the Additional Shares Subscription Form, proportionally based on the exercised rights. In the event that upon the allocation of additional share orders, the maximum amount of the remaining shares, of 25,447,697 (twenty five million four hundred forty seven thousand six hundred ninety seven), coming out of public shareholders' Preemptive Rights, shall be purchased by Standby-Buyer, to be appointed later, and in accordance with the implementation price. THE COMPANY S MAIN RISK EXPOSURE IS A COMPANY'S BUSINESS ACTIVITIES IS DEPENDING ON THE COMPANY'S MANUFACTURING FACILITIES AND THE LOSS OR SHUTDOWN OF OPERATION OF THE MANUFACTURING FACILITIES COULD ADVERSELY AFFECT THE COMPANY BUSINESS OR THE RESULTS OF THE COMPANY'S OPERATIONS. THE COMPLETE RISK EXPOSURE CAN BE FOUND IN THE COMPLETED PROSPECTUS AT CHAPTER VI. IMPORTANT NOTICE TO SHAREHOLDERS IN THE EVENT THAT THE MINORITY SHAREHOLDERS DO NOT EXERCISE THEIR RIGHTS TO SUBSCIBE TO THE RIGHT SHARES OFFERED IN THIS RIGHTS ISSUE I IN ACCORDANCE WITH THEIR RESPECTIVE PREEMPTIVE RIGHTS, THE PERCENTAGE OF SHARE OWNERSHIP OF SUCH MINORITY SHAREHOLDERS SHALL BE DILUTED BY A MAXIMUM OF 16,67%. THE RIGHTS ISSUE I SHALL BE EFFECTIVE UPON APPROVAL OF THE COMPANY S EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS ( EGMS ), WHICH HAD CONVENED ON 29 NOVEMBER 2017, AND UPON RECEIPT OF EFFECTIVE STATEMENT FROM THE OJK. IN THE EVALUATION OF EFFECTIVE NOTES, THEN THE ACTIVITIES AND / OR OTHER ACTIONS THAT HAVE BEEN IMPLEMENTED BY THE COMPANY IN THE FRAMEWORK OF ISSUING THE PREEMPTIVE RIGHTS ACCORDING TO THE SCHEDULE OF INFORMATION ON THIS RIGHTS ISSUES I OR OTHER DOCUMENTS ASSOCIATED WITH RIGHTS ISSUES I IS NOT VALID. THE COMPANY HAS DISCLOSED ALL INFORMATION THAT IS REQUIRED TO BE KNOWN TO PUBLIC AND THERE IS NO OTHER INFORMATION THAT HAVE NOT BEEN DISCLOSED WHICH MAY OTHERWISE MISLEAD THE PUBLIC. 1

2 This Abridged Prospectus is published at Jakarta on 12 October 2018 INDICATIVE SCHEDULE Date of Extraordinary General Meeting of Shareholders (EGMS) : 29 November 2017 Effective Statement : 19 November 2018 Cum Rights Trading Dates - Regular Market and Negotiated Market - Cash Market Ex-Rights Trading Dates - Regular Market and Negotiated Market - Cash Market : : 27 November November 2018 : : 28 November December 2018 Recording Date to Obtain the Rights : 30 November 2018 Distribution of Preemptive Right Certificate : 3 December 2018 Share Listing Date on the IDX : 4 December 2018 Preemptive Rights Trading Period : 4-7 and December 2018 Preemptive Rights Registration, Payment and Exercise Period : 4-7 and December 2018 Right Shares Distribution Period : 5-7 and December 2018 The Last Payment Date of Additional Share Subscription : 14 December 2018 Allotment Date : 17 December 2018 Date of Full Payment by Stand-By Buyers : 18 December 2018 Date of Subscription Money Refund : 18 December 2018 RIGHTS ISSUE I Pursuant to the Share Register issued by PT Datindo Entrycom as the Securities Administration Bureau (" Registrar") appointed by the Company, as of September 30, 2018 is as follows: Description Number of Shares Total Nominal per share (Rp) % Authorized Capital 5,000,000,000 2,500,000,000,000 Issued and Paid-up Capital: ICS 1,275,604, ,802,300, IUM 721,342, ,671,349, GD 144,312,500 72,156,250, Vilia Sulistyo (Director) 106,690,166 53,345,083, Winarko Sulistyo (Commissioner) 102,700,333 51,350,166, Others* 127,238,489 63,619,244, Total Issued and Paid-up Capital 2,477,888,787 1,238,944,393, Shares in Portfolio 2,522,111,213 1,261,055,606,500 Note: * Others - each with an ownership of less than 5% The shares resulting from the exercise of Preemptive Rights offered through Rights Issue I are all New Shares, having a nominal value of Rp500 where each share is issued from the Company's portfolio and will be listed on the IDX. Should (i) all Pre -emptive Rights owned by ICS, IUM, GD, Vilia Sulistyo and Winarko Sulistyo are converted into New Shares and all New Shares are offered to domestic and foreign investors through a limited offerring, and (ii) public shareholders exercise their Preemptive Rights in this Rights Issue I, the capital structure and composition of the Company's shareholders prior and subsequensts of Rights Issue I proforma are as follows: Description Number of Shares Prior to Rights Issue I Total Nominal per share (Rp) % Number of Shares Subsequent to Rights Issue I Total Nominal per share (Rp) Authorized Capital 5,000,000,000 2,500,000,000,000 5,000,000,000 2,500,000,000,000 Issued and Paid-up Capital ICS , ,802,300, IUM , ,671,349, GD , ,156,250, Vilia Sulistyo (Director) , ,345,083, Winarko Sulistyo 4,14 (Commissioner) ,350,166, Others* , ,343,093, New Shareholders ,065,030, Total Issued and Paid-up Capital ,00 2,973,466,544 1,486,733,272, Shares in Portfolio ,026,533,456 1,013,266,728,000 Note: * Others - each with an ownership of less than 5% % 2

3 Should (i) all Pre -emptive Rights owned by ICS, IUM, GD, Vilia Sulistyo and Winarko Sulistyo are converted into New Shares and all New Shares are offered to domestic and foreign investors through a limited offerring, and (ii) public shareholders do not exercise their Preemptive Rights and Standby-Buyer purchases all the remaining shares in this Rights Issue I, then the capital structure and composition of the Company's shareholders prior and subsequensts of Rights Issue I proforma are as follows: Description Prior to Rights Issue I Total Nominal Number of Shares per share (Rp) % Subsequent to Rights Issue I Total Nominal Number of Value per share (Rp) Authorized Capital 5,000,000,000 2,500,000,000,000 5,000,000,000 2,500,000,000,000 Issued and Paid-up Capital ICS , ,802,300, IUM , ,671,349, GD , ,156,250, Vilia Sulistyo (Director) , ,345,083, Winarko Sulistyo 4,14 (Commissioner) ,350,166, Others* , ,28 New Shareholders ,81 Standby Buyer ,86 Total Issued and Paid-up Capital , ,00 Shares in Portfolio Note: * Others - each with an ownership of less than 5% The percentage of share ownership of existing shareholders who do not exercise their rights to subscribe to the new shares offered in this Rights Issue I in accordance with their respective preemptive rights shall be diluted by a maximum of 16.67% (sixteen point sixty seven percent). USE OF PROCEEDS All proceeds from the Rights Issue I, net of issuance cost, shall be utilized as follows: 1. Approximately 28,4% ( twenty eight point four percent) to finance partial repayment of the Company's debts as follows: % Details Facilty Agreement Party Description Amendment Deed dated on 20 June 2018 relating to Facility Syndicated 2013 Facility Agreement dated 2 September 2013 Debitor: The Company Creditor: Oversea-Chinese Banking Corporation Limited Standard Chartered Bank, Singapore Branch PT Bank OCBC NISP Tbk. PT Bank Central Asia Tbk. PT Bank UOB Indonesia PT Bank Maybank Indonesia Tbk. Type of Facilities i. Facility A: US$ Term Loan Facility (with green shoe option of up to USD50,000,000) ii. Facility B: US$ term loan facility; and iii. Facility C: US$ term loan facility. Based on Statement Letter from Oversea-Chinese Banking Corporation Limited, acting as agent, on 5 September 2018, Facility C has been paid in full on 4 September Interest Rate LIBOR plus 3,00% - 3,75% Maturity i. Facility A: 2 March 2021 ii. Facility B: 23 October 2020 Loan Oustanding Total Principal Loan Outstanding as of 30 September 2018 is US$ , as follows: i. Facility A : US$ ; and ii. Facility B: US$ Purposes i. Facility A for use toward funding a new Paper Machine (PM8) and supporting facilities; ii. Facility B for use toward refinancing the previous syndicated loan (Club Deal); and 3

4 iii. Facility C for use toward other general expenditures. Voluntary Prepayment 1. The Company gives the Facility Agent not less than 30 days' prior notice before the prepayment. The minimum prepayment amount is US$3,000,000 with a higher integral multiples of US$1,000, Any notification of cancellation given by each Party cannot be canceled; 3. Any early payment, will be made together with the interest that must be paid for the amount of the initial payment; 4. If the Facility Agent receives a payment notification, it will immediately forward a copy of the notification whether to the Company or to the Creditors. Affiliated Relationship None 2. Approximately 10.6% shall be used to partially finance Company s expansion, through its Subsidiary, PT Dayasa Aria Prima ( DAP ), in an assets acquisition, of land, buildings and machinery, with the following details: Details Facility Agreement Description Sale and Purchase Agreement dated 9 August 2018 between (i) DAP and PT Surabaya Agung Industri Pulp & Kertas Tbk ("SAIPK") and (ii) DAP and PT Capital Management Indonesia (" CMI"), signed on stamp duty and unnotarial. Parties i. DAP as a buyer; ii. SAIPK as a seller; and iii. CMI as a seller. Object Transaction SAIPK Assets that will be transferred: i. 9 (nine) parcels of land with a total area of 332,545 m2 that located in Gresik Regency, East Java are used for the factories and supporting operations for SAIPK, all of which are have certified for Building Use Rights ("HGB") and registered under the name SAIPK; ii. Land that are covering 46,220 m2, located in Gresik Regency, East Java, that are controllerd by SAIPK; iii. Buildings established on land owned and / or controlled by SAIPK; and iv. Machinery, Turbine power plants, paper production equipment that are owned and / or controlled by SAIPK. CMI Assets that will be transferred: Land and factory, with Building Use Rights Certificate ("SHGB") No / Sumput issued on July 30, 2013 with Measurement Certificate No. 829/2013 covering an area of 27,090 m2 Transaction Value SAIPK s Asset Value: Rp727,000,000,000. on 24 Agustus 2018, DAP made a down payment of Rp27,2 Billion. CMI s Asset Value: Rp15,500,000,000 Reasons and Considerations Background Paper mills are a capital intensive industry and require several other criterias. One of the criterias is a sizeable land, and close to water resources and strategic transportation routes. The object to be purchased has met all those criteria Consideration of the selection of objects purchased The Company's production utilization capacity for the first six-month period ended 30 June 2018 is approximately 103%, or 672 thousand tons, compared to the first six-month period ended 30 June 2017, which was approximately 78%, or 450 thousand tons, therefore the Company needs to carry out an inorganic growth to meet the additional demand from domestic market, around 4% per year, with demand for packaging paper of around 3 million tons per year Building a greenfield paper mill requires a long period of time, process, and costly. The Company has the option to execute the Proposed Transaction in the form of (a) buying both of SAIPK shares and CMI, owned by each SAIPK and CMI shareholder, or (b) only buying the assets in the form of land, buildings and machinery, owned by SAIPK and CMI. However, after conducting a due diligence of SAIPK and CMI, as well as assets owned by SAIPK and CMI, the Company has considered that the best option is to purchase of the assets alone, as the transaction is more straight forward and the risks are more clear. Affiliated Parties Winarko Sulistyo the Company s Commissioner and Shareholder, is the uncle of each of Rasmachahjana Sulistyo, who is the President Director of SAIPK, and Zhang Hui Han Sindu, who is a Director of SAIPK Vilia Sulistyo the Company s Director and controlling Shareholder, is the cousin of each of Rasmachahjana Sulistyo, who is the President Director of SAIPK, and Zhang Hui Han Sindu, who is a Director of SAIPK In connection with the planned sale of SAIPK Assets to be transferred, SAIPK has obtained approval 4

5 from independent shareholders based on the SAIPK Extraordinary General Meeting of Shareholders dated 19 September 2018 based on Letter of Notary Report No.10 / Not / IX / 2018 dated 19 September 2018 made by Anita Anggawidjaja, SH, Notary in Surabaya The distribution of funds to the DAP by the Company is carried out in the form of capital participation and / or debt from shareholders in the Subsidiary Company with due observance of the prevailing laws and regulations, including the Law of the Republic of Indonesia No. 40 of 2007 concerning Limited Liability Companies (" Company Law") and the Law of the Republic of Indonesia Number 8 of 1995 concerning the Capital Market ("Capital Market Law"). Transactions made by DAP are Affiliated Transactions but are not conflict of interest transactions as referred to in Bapepam-LK Regulation No. IX.E.1, Attachment to the Decision of the Chairman of Bapepam-LK No. Kep-412 / BL / 2009 concerning Affiliated Transactions and Conflict of Interest in Certain Transactions ("Regulation IX.E.1") and is a Material Transaction as referred to in Bapepam-LK Regulation No. IX.E.2, Attachment to the Decision of the Chairman of Bapepam-LK No. Kep-614 / BL / 2011 concerning Material Transactions and Changes to Main Business Activities (" Regulation IX.E.2") whose implementation will be carried out in accordance with the provisions of Regulation IX.E.1 and Regulation No. IX.E.2 As referred to the above, the plan for the use of proceeds is to replace the funds, owned by the Company and in the amount of Rp195.0 billion, which have been used for additional equity participation in DAP, and subsequently to be used by DAP to pay a portion of the acquisition price, between DAP, SAIPK, and CMI. 3. Approximately 24.4% will be used for capital expenditures of Subsidiary, namely DAP, in connection with refurbishment and modification to buildings and machinery in point 2. The fund distribution to DAP will be carried out in the form of equity injection, and / or shareholder loan, to Subsidiary, in accordance to the prevailing laws and regulations, including Company Law and the Capital Market Law. 4. Approximately 17.9% will be used for the working capital of the Subsidiary, namely DAP, among others to finance DAP s operations and raw materials, as well as spare parts, purchases, from domestic and import. The fund distribution to DAP will be carried out in the form of equity injection, and / or shareholder loan, to Subsidiary, in accordance to the prevailing laws and regulations, including CompanyLaw and the Capital Market Law. 5. The remaining, approximately 18.7% will be used for the Company's working capital, among others to finance Company s operations and raw materials, as well as spare parts, purchases, from domestic and import. If the distribution of funds from Rights Issue I is carried out in the form of providing shareholder s loan to the Subsidiary Company, and subsequently the loan is repaid, then the fund will be used for the Company's working capital, among others to finance DAP s operations and raw materials, as well as spare parts, purchases, from domestic and import. In addition, the Company has the option to convert the loan, provided to the Subsidiary, into additional equity injection to Subsidiary, in accordance to the provisions in the Company Law and the Capital Market Law. Shareholder s loan to DAP is governed by Regulation No. IX.E.1, as it is excluded from affiliated transaction, and the Company is only required to report to OJK, no later than the end of the second business day following the transaction. 1. FINANCIAL ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS ANALYSIS OF STATEMENTS OF INCOME LOSS AND OTHER CONSOLIDATED COMPREHENSIVE INCOME Six month period ended 30 June 2018, compared to six month period ended 30 June Net Sales : Net sales of the company for the six month period ended 30 June 2018 was Rp4,672.0 billion, increased Rp1,786.7 billion or 61,9% compared with the six month period ended 30 June 2017 of RP 2,888.3 billion. Primarily due to the increased sales volume resulting from increased production due to commencement of operations of PM8 in June 2017 and increased pricing for both domestic sales and, to a lesser extent, export sales. Exports increased significantly to 26.2% of our net sales for the six month period ended 30 June 2018, compared with only 3.1% of our net sales for the six month period ended 30 June Cost of goods sold. Cost of goods sold for six month period ended 30 June 2018 was Rp.3,343.7 billion, an increase of Rp979.4 billion, or 41.4%, compared to the six month period ended 30 June 2017, of Rp.2,364.3 billion. Primarily due to increased sales volumes resulting from our increased capacity, as our PM8 paper machine commenced operations in June 2017, offset by an increase in production. 5

6 Gross profit. Gross profit for six month period ended 30 June 2018 was Rp1,328.4 billion, an increase of Rp807.4 billion, or 155.0%, compared with the six month period ended 30 June 2017, of Rp billion. The increase was primarily due to an increase in the Company's net sales in the six month peroid ended 30 June Selling expenses. Selling expenses for the six month period ended 30 June 2018 was Rp130.0 billion, an increase of Rp70.1 billion, or 117.0%, compared to the six month period ended 30 June 2017 of Rp59.9 billion. The increase primarily due to the increase in transportation expenses along with the increase in sales volume, especially export sales which increased to 28.4% from 4.0% for the same period in General and administrative expenses. The Company's general and administrative expenses for six months ended 30 June 2018 is Rp.83.9 billion, increased of Rp.30.5 billion or 57.1% compared to the six months ended 30 June 2017 of Rp billion. The increase primarily due to annual increases in employee salaries and benefits and the number of new employees for PM8 operations. Profit (loss) foreign exchange rates - net. The Company's foreign exchange - net foreign exchange losses for the six month period ended 30 June, 2018 was Rp258.2 billion, decreased by Rp billion, or 990.3%, compared to the profit for the six month period ended 30 June 2017, amounting to Rp29.0 billion. The decrease was primarily due to the depreciation of the Rupiah against the US Dollar in the six month period ended 30 June 2018, thereby increasing the Company's liabilities reported in Rupiah from loans in US Dollars. Gain (loss) on derivative financial instruments - net. The net gain on derivative financial instruments of the Company for the six month peroid ended 30 June 2018, amounting to a positive Rp16.1 billion, an increase of Rp.46.8 billion, or 152.4%, compared to the loss for the six month period ended 30 June 2017, of Rp billion. This increase was primarily due to the depreciation of the Rupiah against the US Dollar in the six month period ended 30 June Others - net. Others - net for the six month period ended 30 June 2018 was negative Rp.4.5 billion, decreased by Rp.2.3 billion, or 104.5%, compared to the six month period ended 30 June 2017, amounting to Rp2,2 billion. The decline was primarily due to the servicing fee for BRI's Working Capital Loans, the new administrative costs of leasing. Tax expense - net. The Company's net tax expense for the six month period ended 30 June 2018, amounting to Rp253.6 billion, an increase of Rp billion, or 197.7%, compared to the six month period ended 30 June 2017, of Rp.85.2 billion. The increase was mainly due to increased net income before tax as a result of increased sales volume and rising domestic and export selling prices Re-measurement of the post-employment benefits program, after tax effects. Re-measurement of the post-employment benefit plan, after the effect of the Company's tax for the six month period ended 30 June 2018, amounting to Rp.36.3 billion, an increase of Rp.24.1 billion, or 197.5%, compared to the six-month period ended on 30 June 2017 amounting to Rp.12.2 billion. The increase was primarily due to an increase in changes in financial assumptions and adjustments and an increase in the number of employees. Advantages of fixed asset revaluation. The profit from revaluation of the Company's fixed assets for the six month period ended 30 June 2018, amounting to Rp.4.2 billion, an increase of Rp.4.2 billion, or 100.0%, compared to the six month period ended 30 June 2017, of Rp.0 billion. The increase was primarily due to an increase in fair value of land Total comprehensive income for the current period. The total comprehensive income for the period of the Company for the six month period ended 30 June 2018, amounting to Rp billion, an increase of Rp billion, or 140.4%, compared to the six month period ended 30 June 2017, of Rp billion. The increase was primarily due to the increase in net income for the current period. For the year ended 31 December 2017 compared to the year ended 31 December 2016 Net sales. The Company's net sales for the year ended 31 December 2017 to Rp7,337.2 billion, an increase of Rp1,462.5 billion or 24.9% compared to the year ended 31 December 2016 of Rp.5,874.7 billion. The increase was primarily due to an increase in sales volume and prices for local sales and exports. Export sales increased significantly by 15.4% from our net sales in 2017 compared to 1.5% of our net sales for 2016, as our PM8 paper machine commenced operations in June 2017 and our increased capacity exceeds local demand for the Company's products. Cost of goods sold. The Company's cost of goods sold for the year ended 31 December 2017 is Rp.5,924.0 billion, an increase of Rp1,227.8 billion or 26.1% compared to the year ended 31 December 2016 of Rp.4,696.2 billion. The increase was primarily due to an increase in sales volume resulting from our increased capacity, as our PM8 paper machine commenced operations in June 2017, in addition to a substantial increase in the price of used paper in early mid Gross profit. The Company's gross profit for the year ended 31 December 2017 is Rp1,413.2 billion, an increase of Rp billion or 19.9% compared to the year ended 31 December 2016 of Rp1,178.6 billion. This increase was primarily due to an increase in the our Company's net sales in

7 Financial costs. The Company's financial costs for the year ended 31 December 2017 is Rp billion, an increase of Rp.96.2 billion or 48.8% compared to the year ended 31 December 2016 of Rp billion. The increase was primarily due to drawdowns under our syndicated loan facility with a principal amount of up to US$290.0 million arranged by HSBC in 2013, in connection with the construction and operation of PM8 and Cogen3 and increased sales. Profit (loss) foreign exchange rates - net. The Company's foreign exchange - net foreign exchange losses for the year ended 31 December 2017 is Rp.49.2 billion, a decrease of Rp150.2 billion or 148.7% compared to the foreign exchange rate - net of the year ended 31 December 2016 amounting to Rp101.0 billion. The decline was primarily due to the depreciation of the Rupiah against the US Dollar in 2017, thereby increasing the Company's liabilities reported in Rupiah from loans in US Dollars. Others - net. Others - the Company's net for the year ended 31 December 2017 to a positive Rp40.4 billion, an increase of Rp.44.3 billion or 1,135.9% compared to the year ended 31 December 2016 of negative Rp.3.9 billion. The increase was primariy due to the acquisition of insurance claims for Cogen2 technical damage which caused the cogen2 operation to be stopped for about one month. Tax expense - net. The Company's net tax expense for the year ended 31 December 2017 to Rp billion, an increase of Rp180.0 billion or 369.6% compared to the year ended 31 December 2016 of Rp.48.7 billion. The increase was primarily due to the previous year's fiscal loss the impact of the Company's losses in 2015 as a deduction from the 2016 tax expense. Re-measurement of the post-employment benefits program, after tax effects. Re-measurement of the post-employment benefit plan, after the influence of the Company's tax for the year ended on 31 December 2017 is Rp.17.0 billion, an increase of Rp.6.9 billion or 68.3% compared to the year ended 31 December 2016 of Rp.10.1 billion. The increase was primarily due to increased changes in financial assumptions and adjustments, also due to the increase in the number of employees. Advantages of fixed asset revaluation. The profit from the revaluation of the Company's fixed assets for the year ended 31 December 2017 is Rp1.9 billion, decreased by Rp.2.7 billion or 58.7% compared to the year ended 31 December 2016 of Rp.4.6 billion. The decrease primarily due to the fair value of land determined by valuation services that followed market prices. Total comprehensive income for the current period. Total comprehensive income for the period of the Company for the year ended 31 December 2017 is Rp billion, decreased by Rp billion or 24.8% compared to the year ended 31 December, 2016 amounting to Rp772.6 billion. The decrease was primarily due to an increase in tax expense of Rp180.0 billion ANALYSIS OF ASSET GROWTH, LIABILITY AND EQUITY Asset Six month period ended 30 June 2018 compared to the year ended 31 December 2017 Asset. The Company's assets as of 30 June 2018 amounted to Rp.10,117.9 billion, an increase of Rp748.0 billion or 8.0% compared to the position on 31 December 2017 of Rp9,369.9 billion. The increase was primarily due to an increase in trade receivables and inventories, as a result of increased sales volume and production volume. Current assets. The Company's current assets as of 30 June 2018 amounted to Rp.3,540.4 billion, an increase of Rp billion or 27.2% compared to the position on 31 December 2017 of Rp.2,784.0 billion. The increase was primarily due to an increase in trade receivables and inventories, as a result of increased sales volume and production volume. Trade receivables - Related parties. Trade Receivables - Related Parties as of June 30, 2018 were Rp billion, an increase of Rp billion or 246.6% compared to the position on December 31, 2017 of Rp billion. The increase was primarily due to the increase in the Company's overall sales volume, including sales volume to related parties which began in mid Trade Receivables - Third Parties. Trade Receivables - Third Parties as of June 30, 2018 amounted to Rp1,381.4 billion, an increase of Rp.65.5 billion or 5.0% compared to the position on December 31, 2017 of Rp1,315.9 billion. The increase was primarily due to an increase in sales volume to third parties. Other receivables - Related parties. Other receivables from related parties as of 30 June 2018 amounted to Rp297.9 billion, an increase of Rp297.9 billion or 100.0% compared to the position on 31 December 2017 of Rp0. This receivable was due to the purchase of receivables (cessie) rights by DAP on behalf of PT Capital Management Indonesia (re lated party) from PT Bank Artha Graha Indonesia Tbk on 26 January

8 Other receivables - Third parties. Other receivables from third parties as of 30 June 2018 amounted to Rp. 0.2 billion, decreased by Rp. 3.1 billion or 93.9% compared to the position on 31 December 2017 of Rp. 3.3 billion. The decrease was primarily due to receivables from insurance claims paid during the current period. Stock. Inventories as of 30 June 2018 amounted to Rp1,398.4 billion, an increase of Rp billion or 27.8% compared to the position on 31 December 2017 of Rp.1,093.9 billion. This increase was primarily due to an increase in inventories of raw materials and finished goods due to additional production capacity from PM8. Down payment. Advances as of 30 June 2018 were Rp billion, an increase of Rp billion or 75.4% compared to the position on 31 December 2017 of Rp billion. This increase was primarily due to an increase in advances for the purchase of imported spare parts. Prepaid taxes. The prepaid tax as of 30 June 2018 amounted to Rp0, decreased by Rp.7.2 billion or 100.0% compared to the position on 31 December 2017 amounting to Rp.7.2 billion. The decline was primarily due to a decrease in value added tax from purchases. Prepaid expenses. Prepaid expenses as of 30 June 2018 amounted to Rp.48.8 billion, an increase of Rp.19.0 billion or 63.8% compared to the position on 31 December 2017 amounting to Rp.29.8 billion. The increase was primarily due to additional warehouse rental fees paid in advance to related parties. Derivative financial instruments. Derivative financial instruments as of 30 June 2018 amounted to Rp.14.7 billion, an increase of Rp.13.7 billion or 1,370.0% compared to the position on 31 December 2017 of Rp.1.0 billion. The increase was primarily due to profit from hedging transactions in the six months period ended 30 June Non-Current Assets. The non-current assets of the Company as of 30 June 2018 amounted to Rp.6,577.5 billion, a decrease of Rp.8.4 billion or 0.1% compared to the position on 31 December, 2017 of Rp.6,585.9 billion. The decrease was primarily due to a decrease in advances for purchases of fixed assets and depreciation of non-current assets. Advance for purchase of fixed assets. Advances for the purchase of the Company's property and equipment as of 30 June 2018 amounted to Rp26.3 billion, a decrease of Rp.12.0 billion or 31.3% compared to the position on 31 December 2017 of Rp.38.3 billion. The decrease was primarily due to the realization of the advances into fixed assets. For the year ended 31 December 2017 compared to the year ended 31 December 2016 Asset. The Company's assets as of 31 December 2017 is Rp9,369.9 billion, an increase of Rp786.7 billion or 9.2% compared to the position on 31 December 2016 of Rp.8,583.2 billion. The increase was primarily due to an increase in trade receivables, inventories and fixed assets.aset Lancar. Current assets as of 31 December 2017 is Rp.2,784.0 billion, an increase of Rp billion or 28.5% compared to the position on 31 December 2016 of Rp2,167.0 billion. The increase was primarily due to an increase in trade receivables and inventories. Trade receivables - Related parties. Trade receivables - Related parties as of 31 December 2017 is Rp.27.9 billion, an increase of Rp.27.9 billion or 100.0% when compared to the position on 31 December 31 of Rp.0. The increase was primarily due to sales to related parties starting in Other receivables - Third parties. Other receivables from third parties as of 31 December 2017 is Rp.3.3 billion, an increase of Rp.2.8 billion or 560.0% compared to the position on 31 December 2016 of Rp. 0.5 billion. The increase was primarily due to insurance claims for Cogen 2 amounting to Rp3.0 billion which will be received in Inventories. Inventories as of 31 December 2017 is Rp1,093.9 billion, an increase of Rp billion or 42.4% when compared to the position on 31 December 2016 of Rp This increase was primarily due to increased inventories of raw materials to offset the increase in sales of the Company's products. Prepaid taxes. The prepaid tax as of 31 December 2017 is Rp.7.2 billion, a decrease of Rp.7.4 billion or 50.7% compared to the position on 31 December 2016 of Rp.14.6 billion. The decrease was primarily due to the receipt of tax refunds for the 2015 Overpayment of Corporate Income Tax Assessment Letter in Prepaid expenses. Prepaid expenses as of 31 December 2017 is Rp29.8 billion, an increase of Rp.9.8 billion or 49.0% compared to the position on 31 December 2016 is Rp20.0 billion. The increase was primarily due to additional warehouse rental fees paid in advance to related parties. Derivative financial instruments. Derivative financial instruments as of 31 December 2017 is Rp1.0 billion, a decrease of Rp billion or 92.6% compared to the position on 31 December 2016 of Rp billion. The decline was primarily due to a decrease in the need for hedging in

9 Non-Current Assets. Non-current assets of the Company as of 31 December 2017 is Rp. 6,585.9 billion, an increase of Rp billion or 2.6% compared to the position on 31 December 2016 of Rp. 6,416.2 billion. The increase was primarily due to the addition of finance leased assets in Time deposits are restricted for use. Time deposits restricted as of 31 December 2017 is Rp0, decreased by Rp14.0 billion or 100.0% compared to the position on 31 December 2016 is Rp14.0 billion. The decrease was primarily due to the withdrawal of deposits in connection with the Proparco loan that was repaid in Intangible assets. Intangible assets as of 31 December 2017 is Rp1.6 billion, a decrease of Rp.3.7 billion or 69.8% compared to the position on 31 December 2016 of Rp.5.3 billion. The decrease was primarily due to the amortization costs in Liability Six month period ended 30 June 2018 compared to the year ended 31 December 2017 Liability. The Company's liabilities as of 30 June 2018 is Rp. 6,575.9 billion, an increase of Rp billion or 8.1% compared to the position on 31 December 2017 of Rp. 6,081.6 billion. The increase was primarily due to the disbursement of working capital facilities and finance lease debt. Short-term liabilities. The Company's short-term liabilities as of 30 June 2018 is Rp3,065.3 billion, a decrease of Rp687.8 billion or 18.3% compared to the position on 31 December 2017 of Rp.3,753.1 billion. The decline was primarily due to a decline in bank debt that will mature in one year on the report as of 30 June 2018 Trade payables - Related parties. Trade payables - The Company's related parties as of 30 June 2018 is Rp1.5 billion, an increase of Rp. 0.8 billion or 114.3% compared to the position on 31 December 2017 of Rp. 0.7 billion. The increase was primarily due to the purchase transaction of used paper with related parties which began in mid Other debts. The Company's other debts as of 30 June 2018 is Rp72.8 billion, an increase of Rp.31.0 billion or 74.2% compared to the position on 31 December 2017 of Rp.41.8 billion. The increase was primarily due to an increase in export sales advances. Accrued cost. The accrued expenses of the Company as of 30 June 2018 is Rp billion, an increase of Rp.67.7 billion or 33.5% compared to the position on 31 December 2017 of Rp billion. The increase primarily due to the cost of extending the long-term bank loan repayments for the 2013 syndication, namely facilities A and B. Derivative financial instruments. The Company's derivative financial instruments as of 30 June 2018 is Rp0, decreased by Rp1.8 billion or 100.0% compared to the position on 31 December 2017 amounting to Rp1.8 billion. The decrease primarily due to the depreciation of the Rupiah against foreign currencies which resulted in the market value of derivative financial instruments as of 30 June 2018, which had a profit, which was recorded in the current assets section Long-term debt maturing in one year - Banks and financial institutions. Long-term debt with a maturity of one year - the Bank and the Company's financial institutions as of 30 June 2018 is Rp billion, decreased by Rp billion or 69.9% when compared to the position on 31 December 2017 of Rp billion. The decrease primarily due to the extension of the long-term bank loan repayment period for the 2013 syndication of facilities A and B and resulted in bank loans maturing in one year for the facility to decline. Long-term debt which is due in one year - Lease financing. Long-term debt with a maturity of one year - The Company's finance lease as of 30 June 2018 is Rp.41.4 billion, an increase of Rp.24.4 billion or 143.5% compared to the position on 31 December 2017 of Rp.17.0 billion. The increase was primarily due to new finance lease transactions that occurred in Long-term liabilities. The Company's long-term liabilities as of 30 June 2018 is to Rp.3,510.5 billion, an increase of Rp1,182.0 billion or 50.8% compared to the position on 31 December 2017 of Rp.2,328.5 billion. This increase was primarily due to the extension of the 2013 syndicated long-term bank loan repayment facilities A and B. Deferred tax liabilities. Deferred tax liabilities as of 30 June 2018 is Rp billion, an increase of Rp140.2 billion or 46.5% compared to the position on 31 December 2017 of Rp billion. The increase was primarily due to temporary differences in depreciation of fixed assets and finance leases. Long-term debt - after deducting the part due in one year - Banks and financial institutions. Long-term debt - net of part which is due in one year - Banks and financial institutions as of 30 June 2018 is Rp.2,735.5 billion, an increase of Rp billion or 51.8% compared to the position on 31 December 2017 amounting to Rp1,801.5 billion. This increase was primarily due to the extension of the 2013 syndicated long-term bank loan repayment facilities A and B. 9

10 Long-term debt - after deducting the part due in one year - Lease financing. Long-term debt - net of part which has a maturity in one year - Finance lease as of 30 June 2018 is Rp72.7 billion, increased by Rp50.2 billion or 223.1% compared to the position on 31 December 2017 is Rp22 5 billion. The increase primarily due to new finance lease transactions that occurred in For the year ended 31 December 2017 compared to the year ended 31 December 2016 Liability. The Company's liabilities as of 31 December 2017 amounted to Rp. 6,081.6 billion, an increase of Rp billion or 12.1% compared to the position on 31 December 2016 of Rp. 5,424.8 billion. The increase primarily due to the disbursement of A's synosure and syndicated loan facilities managed by HSBC in 2013 amounting to US $ 29.2 million and US $ 15.0 million, disbursement of working capital facilities, in connection with the construction and operation of PM8 and Cogen3 paper machines and increased sales. Short-term liabilities. The Company's short-term liabilities as of 31 December 2017 amounted to Rp3,753.1 billion, an increase of Rp1,737.5 billion or 86.2% compared to the position on 31 December 2016 of Rp.2,015.6 billion. The increase was primarily due to the increase in bank debt which will mature in one year and increase in trade debt in Bank debt. The Company's bank debts as of 31 December 2017 amounted to Rp1,029.6 billion, an increase of Rp billion or 37.5% compared to the position on 31 December, 2016 of Rp749.0 billion. The increase was primarily due to the acquisition of new loan facilities with PT Bank Central Asia Tbk and there were additional loans from Standard Chartered Bank. Trade payables - Related parties. Trade payables - Related parties The Company as of 31 December 2017 amounted to Rp. 0.7 billion, an increase of Rp. 0.7 billion or 100.0% compared to the position on 31 December 2016 of Rp. The increase was primarily due to waste paper purchase transactions with related parties that only occurred in Trade debt - Third party. Trade payables - The Company's third parties as of 31 December 2017 amounted to Rp1,080.5 billion, an increase of Rp billion or 39.2% compared to the position on 31 December 2016 of Rp billion. This increase was primarily due to an increase in purchases of raw materials to offset the increase in sales in Other debts. Other debts of the Company as of 31 December 2017 amounted to Rp41.8 billion, decreased by Rp80.4 billion or 65.8% compared to the position on 31 December 2016 amounting to Rp billion. The decline was primarily due to a decrease in debt on the purchase of imported spare parts. Tax debt. The Company's tax payable as of 31 December 2017 amounted to Rp62.0 billion, an increase of Rp.46.4 billion or 297.4% compared to the position on 31 December 2016 of Rp.15.6 billion. The increase was primarily due to 2017 tax increase compared to 2016, where in 2016 there was a fiscal loss in the previous year which reduced the Company's fiscal profit. Accrued cost. The accrued expenses of the Company as of 31 December 2017 amounted to Rp billion, an increase of Rp billion or 112.6% compared to the position on 31 December 2016 of Rp.95.0 billion. The increase was primarily due to the increase in gas and transportation costs that still have to be paid. Derivative financial instruments. The Company's derivative financial instruments as of 31 December 2017 amounted to Rp1.8 billion, a decrease of Rp.2.7 billion or 60.0% compared to the position on 31 December 2016 of Rp.4.5 billion. The decrease was primarily due to the reduced need for hedging of the Company in connection with the increase in trade receivables and cash balances in banks in US Dollars. Long-term debt maturing in one year - Banks and financial institutions. Long-term debt with a maturity of one year - The Bank and the Company's financial institutions as of 31 December 2017 amounted to Rp1,317.8 billion, an increase of Rp1,064.4 billion or 420.0% compared to the position on 31 December 2016 amounting to Rp253.4 billion. The increase was primarily due to the increase in syndicated debt which will mature in October Long-term debt that is due in one year - Lease financing. Long-term debt with a maturity of one year - The finance lease of the Company as of 31 December 2017 amounted to Rp.17.0 billion, an increase of Rp.17.0 billion or 100.0% compared to the position on 31 December 2016 of Rp. The increase was mainly due to new financing lease transactions occurring in Long-term liabilities. The Company's long-term liabilities as of 31 December 2017 amounted to Rp.2,328.5 billion, a decrease of Rp1,080.7 billion or 31.7% compared to the position on 31 December 2016 of Rp.3,409.2 billion. The decrease primarily due to syndicated debt which will mature in 1 year and has been reclassified to short-term liabilities. Deferred tax liabilities. Deferred tax liabilities as of 31 December 2017 amounted to Rp301.4 billion, an increase of Rp.79.4 billion or 35.8% compared to the position on 31 December 2016 of Rp billion. The increase was primarily due to temporary differences in depreciation of fixed assets and finance leases. 10

11 Long-term debt - after deducting the part due in one year - Banks and financial institutions. Long-term debt - after deducting the maturity in one year - Bank and financial institutions as of 31 December 2017 amounted to Rp1,801.5 billion, decreased by Rp1,218.6 billion or 40.3% when compared to the position in as of 31 December 2016 amounting to Rp3,020.1 billion. The decrease was primarily due to syndicated debt which will mature in 1 year. Long-term debt - after deducting the part due in one year - Lease financing. Long-term debt - after deducting the maturity in one year - Finance lease as of 31 December 2017 amounted to Rp22.5 billion, increased by Rp22.5 billion or 100.0% when compared to the position on 31 December 2016 amounting to Rp0. The increase was primarily due to new financing lease transactions occurring in Equity Six month period ended 30 June 2018 compared to the year ended 31 December 2017 The Company's equity as of 30 June 2018 amounted to Rp.3,542.0 billion, an increase of Rp billion or 7.7% compared to the position on 30 June 2017 of Rp.3,288.3 billion. The increase was mainly due to the comprehensive income obtained by the Company reduced by dividend distribution in For the year ended 31 December 2017 compared to the year ended 31 December 2016 The Company's equity as of 31 December 2017 amounted to Rp3,288.3 billion, an increase of Rp billion or 4.1% compared to the position on 31 December 2016 of Rp.3,158.4 billion. The increase was mainly due to the comprehensive income obtained by the Company reduced by dividend distribution in CONSOLIDATED CASH FLOW REPORT Net Cash Received from Operating Activities Net cash obtained from operating activities for the six months period ended 30 June 2018 amounted to Rp billion. Cash flows from operating activities were mainly derived from revenues from customers amounting to Rp.4,537.8 billion. While cash flows used for operating activities are mainly used for payments to suppliers and for other operating expenses amounting to Rp3,535.0 billion. Net cash earned from operating activities for the six months period ended 30 June 2017 amounted to Rp billion. Cash flows from these operating activities primarily originate from customers' receipts of Rp.3,301.0 billion. While cash flows used for operating activities are mainly used for payments to suppliers and for other operating expenses amounting to Rp.2,367.8 billion. Net cash earned from operating activities for the year ended 31 December 2017 amounted to Rp1,113.4 billion. Cash flows from these operating activities primarily originate from customers' receipts of Rp.7,106.1 billion. While cash flows used for operating activities are mainly used for payments to suppliers and for other operating expenses amounting to Rp.5,280.5 billion. Net cash earned from operating activities for the year ended 31 December 2016 amounted to Rp.2,206.9 billion. Cash flows from these operating activities mainly originate from revenues from customers amounting to Rp.5,436.3 billion. While the cash flows used for operating activities are mainly used for payments to suppliers and for other operating expenses amounting to Rp2,664.6 billion. Net Cash Used for Investment Activities Net cash is used for investing activities for the six-month period ending on 30 June 2018 amounted to Rp billion. Cash flows used in investing activities are mainly used for the acquisition of fixed assets amounting to Rp.66.6 billion, other receivables to related parties amounting to Rp billion and advances for purchase of fixed assets of Rp.5.4 billion. Net cash is used for investing activities for the six-month period ending on 30 June 2017 amounted to Rp billion. Cash flows used in investing activities are mainly used for the acquisition of fixed assets of Rp billion and advances for the purchase of fixed assets of Rp billion. Net cash is used for investment activities for the year ending on 31 December 2017 amounted to Rp billion. Cash flows used in investing activities are mainly used for the acquisition of fixed assets amounting to Rp327.9 billion. While cash flows obtained from disbursement of restricted time deposits amounted to Rp billion. Net cash used in investing activities for the year ended 31 December 2016 amounted to Rp1,285.0 billion. Cash flows from investing activities were mainly derived from disbursement of security deposits amounting to Rp. 0.2 billion and proceeds from the sale of property and equipment of Rp. 0.4 billion. While the cash flows used for investing activities are mainly used for the acquisition of fixed assets amounting to Rp1,251.1 billion. 11