Increasing Our Diversity Enhancing Our Growth. INDOFOOD AGRI RESOURCES LTD. Annual Report 2010

Transcription

1 Increasing Our Diversity Enhancing Our Growth INDOFOOD AGRI RESOURCES LTD. Annual Report 2010

2 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. One of the largest plantation owners in Indonesia Diversification of sugar with strategic fit advantage Leading market position in Indonesia with renowned brands of cooking oil and margarine CONTENTS 02 Milestones 04 Key Events in 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

3 INDOFOOD AGRI RESOURCES LTD. Annual Report Vision To become a leading integrated agribusiness, and one of the world-class agricultural research and seed breeding companies. Mission 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 Values 1. 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 5. To continuously increase stakeholders value

4 2 Increasing Our Diversity, Enhancing Our Growth 2007 milestones 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. Throughout 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. 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. 2008

5 INDOFOOD AGRI RESOURCES LTD. Annual Report 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. 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. 2010

6 4 Increasing Our Diversity, Enhancing Our Growth Key Events in May 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. 11 NOV IndoAgri sold 9 million treasury shares through open market for approximately S$25 million. 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. 08 DEC 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.

7 INDOFOOD AGRI RESOURCES LTD. Annual Report Corporate Structure 83.84% Indofood Singapore Holdings Pte. Ltd. PUBLIC 68.95% 31.05% % Indofood Oil & Fats Pte. Ltd. 8.38% 90.00% PT Salim Ivomas Pratama 59.48%

8 6 Increasing Our Diversity, Enhancing Our Growth Location Map Medan MALAYSIA SINGAPORE SUMATRA Pekanbaru Pontianak Palembang LEGEND Oil Palm Sugar Cane Refinery Sugar Mill Jakarta Rubber Cocoa Copra Mill Town / City JAVA Tea

9 INDOFOOD AGRI RESOURCES LTD. Annual Report Muotong Bitung Tobelo NORTH MALUKU KALIMANTAN Samarinda SULAWESI Makassar Surabaya 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.

10

11 Our Strategy

12 10 Increasing Our Diversity, Enhancing Our Growth chairman s statement Meeting the challenge Our resolve to expand capacities, pursue strategic opportunities and improve plantation yields were strengthened by some major themes dominating the commodities market in 2010: Dear Shareholders, On behalf of the Board, I am pleased to present IndoAgri s Annual Report for the year ended 31st December Amidst global uncertainties particularly in Europe and America, IndoAgri has risen to the challenges of 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 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 middleincome 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. Global CPO shortage, aggravated by adverse weather and consequently slower new plantings, is likely to keep shortterm palm oil prices supported. Global demand of palm oil is expected to be well supported with consumption growth accounting for 7.8% vs production growth at 7.6% over the past 10 years. The increasing appetite for agricultural commodities in emerging Asian markets, such as India and China, is expected to continue. Strengthening our fundamentals Our 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 Engaging our communities Corporate 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 Lee CHAIRMAN

13 INDOFOOD AGRI RESOURCES LTD. Annual Report CEO S statement A leading integrated Agribusiness group with strong R&D and seed breeding operations 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 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 mandatedriven, 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 opportunities Indonesia 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 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 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.

14 12 Increasing Our Diversity, Enhancing Our Growth CEO S statement Delivering steady results Thanks 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 growth Driving 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 transformation As a Group, our achievements depend on a variety of performance drivers including people, processes, operational capacities, innovation and corporate governance. Plantation During 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 Fats To 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 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 stewardship As 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.

15 INDOFOOD AGRI RESOURCES LTD. Annual Report As a follow up to the RSPO-certification of our North Sumatra facilities, some of our Riau estates will undergo RSPO audits in 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 RSPOcertified estates in the coming years. Nurturing innovation With 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 practices As 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. 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 appreciation As 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 Wakeford CHIEF EXECUTIVE OFFICER 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 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 ahead In 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.

16 14 Increasing Our Diversity, Enhancing Our Growth 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 HIGHLIGHTS For 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 growth IndoAgri 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% or 205,064 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 tonnes in FY2010, a 2% decrease over 2,613,028 tonnes achieved last year. CPO production declined 3% from 762,570 tonnes to 739,885 tonnes in FY2010 as a result of lower plasma purchases and nucleus production. We expect domestic consumption for palm oil products to remain 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 oil mills in order to process the FFB outputs derived from newly matured areas. Sugar Through its estates in South Sumatra, the Group s planted area 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. We look forward to the completion of an 8,000 TCD sugar factory in South Sumatra in 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 we received 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).

17 INDOFOOD AGRI RESOURCES LTD. Annual Report REVENUE Rp trillion PROFIT FROM OPERATIONS Rp trillion ACTUAL 08 ACTUAL 09 ACTUAL 10 ACTUAL 0 07 ACTUAL 08 ACTUAL 09 ACTUAL 10 ACTUAL NET PROFIT TO EQUITY HOLDERS Rp trillion NAV PER SHARE Rp 1.8 8,000 7, ,000 6,000 5,000 4,000 3,000 2,000 1,000 4,943 5,506 6, ACTUAL 08 ACTUAL 09 ACTUAL 10 ACTUAL 0 07 ACTUAL 08 ACTUAL 09 ACTUAL 10 ACTUAL Edible Oils & Fats To strengthen its position in the domestic market for branded cooking oil, the Group supplemented its processing capacities and commissioned a new 420,000-tonne per year refinery in Tanjung Priok this year. With the additional capacity, the Group has a total processing capacity 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.

18 16 Increasing Our Diversity, Enhancing Our Growth Financial Highlights 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) 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 ,527 1,402 EPS (in Rupiah) , 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) ,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 % 10.0% 16.2% 12.7% Current Ratio (times) Net Debt to Equity Ratio (times) Total Debt to Total Assets Ratio (times) Profit from operations divided by total assets 2 Net profit to equity holders divided by shareholders' equity 3 Net debt divided by total equity

19 INDOFOOD AGRI RESOURCES LTD. Annual Report Operational Highlights In Hectares (unless otherwise stated) Actual Actual Actual Actual Planted Area - Nucleus Oil Palm 161, , , ,064 Mature 118, , , ,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 Plasma 61,000 76,472 76,851 81,500 Age Maturity of Oil Palm Trees Immature 43,427 58,944 61,053 49, years 9,331 12,332 19,559 39, years 90,628 82,008 73,262 71,443 Above 20 years 18,070 29,829 39,739 44,947 Total 161, , , ,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, , , ,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) Palm Kernel Sales Volume ( 000 Tonnes) Crude Palm Oil (CPO) * Palm Kernel Rubber Cooking oil, Margarine, Shortening & CNO * Sales to external and internal

20 RESEARCH & DEVELOPMENT PLANTATIONS OIL PALM SEED BREEDING PALM OIL MILLS

21 OUR INTEGRATED AGRIBUSINESS MODEL FINISHED PRODUCTS DISTRIBUTION REFINERIES

22 20 Increasing Our Diversity, Enhancing Our Growth Plantation REVIEW - Palm Oil 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. 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 hectares. The SAP enterprise resource planning system that was piloted at our refineries will be progressively rolled out to all plantations starting in 2011.

23 INDOFOOD AGRI RESOURCES LTD. Annual Report CPO Price (CIF N.W.Europe) US$/tonne Rubber Price (RSS 3 SICOM) US$/KG Dec- 05 Jun- 06 Dec- 06 Jun-07 Dec- 07 Jun-08 Dec- 08 Jun-09 Dec-09 Jun-10 Dec- 10 Dec- 05 Jun- 06 Dec- 06 Jun-07 Dec- 07 Jun-08 Dec- 08 Jun-09 Dec-09 Jun-10 Dec 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: Increased imports and consumption of vegetable oils in China and India Tighter supplies from major producers such as Malaysia and Indonesia Consistent demand due to price competitiveness and the drawdown of stocks Reduced production yields due to adverse weather conditions exacerbated 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. 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 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, 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. 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.

24 22 Increasing Our Diversity, Enhancing Our Growth Plantation REVIEW - palm oil Oil palm plantation age profile Above 20 Years 22% Immature 22% 7-20 Years 35% 4-6 Years 21% Domestic demand for palm products is expected to be well suported; and IndoAgri remains committed to expand our planted area and output Outlook The 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 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 FFBper-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. FEB production (nucleus) 000 mt CPO production 000 mt 3,000 2,500 2,000 2,496 2,613 2, ,500 1, , ACTUAL 08 ACTUAL 09 ACTUAL 10 ACTUAL 0 07 ACTUAL 08 ACTUAL 09 ACTUAL 10 ACTUAL

25 INDOFOOD AGRI RESOURCES LTD. Annual Report 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. IndoAgri s sugar division to make notable contributions when targetted plantings are achieved and milling facilities are fully operational this year. According to Dewan Gula Indonesia, Indonesia consumed 5.4 million tonnes of sugar, of which 3.2 million tonnes or 59% were imported in 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: Sugar Price (LIFFE) US $/Ton On the upstream, we are able to achieve better yields and lower costs through economies of scale Our experience in large-scale plantation management allows us to tap into specific expertise on agronomical conditions in Indonesia Our affiliation to our parent company, PT ISM, allows us to leverage 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. Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10

26 24 Increasing Our Diversity, Enhancing Our Growth Plantation REVIEW - Sugar 2010 Review For 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 Our harvested area of 5,444 hectares yielded 79 tonnes of sugar cane per hectare, producing 429,828 tonnes of sugar cane in 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 We expect the contribution to improve when the new sugar mill is commissioned and production levels increase in Outlook In 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 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 We hope to achieve a targeted planted area of up to 16,000 hectares in South Sumatra by the end of 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.

27 INDOFOOD AGRI RESOURCES LTD. Annual Report Manufacturing Process for sugar Cane Handling & Milling Bagasse Filter Cake Juice Clarification & Evaporation Boiler Sugar Boiling & Curing Final Molasses Sugar Drying & Handling Finished Sugar Product End Customers

28 26 Increasing Our Diversity, Enhancing Our Growth Plantation REVIEW - R&D 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. Overview IndoAgri 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. The Group s R&D activities are focused in the following areas: Plant breeding 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. Crop protection 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. Data management analysis 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.

29 INDOFOOD AGRI RESOURCES LTD. Annual Report Review Sales 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 Outlook The Group aims to improve its competitiveness and enhance its seed breeding programmes in We will continue to integrate the disciplines of genomics, cytology and tissue culture to expedite our initiatives in biotechnology and seed cultivation. 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. 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.

30 28 Increasing Our Diversity, Enhancing Our Growth 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 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.

31 INDOFOOD AGRI RESOURCES LTD. Annual Report IndoAgri will continue to improve brand visibility and reinforce our distribution channels 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 Outlook We 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 lower production costs and increased efficiencies through our supply chain management Maintain awareness and improve brand visibility through selective and focussed marketing strategies Reinforce distribution channels in order to open new markets and penetrate into rural and suburban areas

32 30 Increasing Our Diversity, Enhancing Our Growth Manufacturing Process FOR Edible oils & Fats Fresh Palm Fruit Bunches Milling Empty Fruit Bunches and By Products Crude Palm Oil Palm Kernel Refining Palm Kernel Meal Crushing RBD Palm Oil Palm Fatty Acid Distillate Crude Palm Kernel Oil Fractionating & Filtration RBD Palm Stearin Lauric Oil RBD Palm Olein Packaging Margarine Plant Cooking Oil Blending Flavouring & Vitamins Blending Mixing Tank Chilling Water & Salt Nitrogen gas Mixing Tank Chilling Packaging Packaging Shortening Margarine

33 INDOFOOD AGRI RESOURCES LTD. Annual Report Environment & CSR Environment and Corporate Social Responsibility As 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 Practices The 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. Summary of the RSPO Principles & Criteria (P&C) Principle Number of Criteria Indonesian National Interpretation indicators 1. Commitment to transparency Compliance with applicable laws and regulations Commitment to long-term economic and financial viability Use of appropriate best practices by growers and millers Environmental responsibility and conservation of natural resources and biodiversity 6. Responsible consideration of employees and of individuals and communities affected by growers and mills Major Minor Responsible development of new plantings Commitment to continuous improvement in key areas of activity Total

34 32 Increasing Our Diversity, Enhancing Our Growth Environment & CSR Our Environmental Stewardship Aside 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 Policy We 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-Products Solid 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 anticoagulant 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 Forests The 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.

35 INDOFOOD AGRI RESOURCES LTD. Annual Report Strong Partnerships With Our Communities The 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: Employment The Group provides direct and indirect employment opportunities for local residents and the plasma community through a wide range of jobs each year. As at, we have a workforce of 31,162 deployed in administrative, operational and supervisory roles, as well as in middle and senior management positions. No 1 Position Total 1 Senior Management 74 2 Management Supervisors Administrative and operation staff 29,999 Total 31,162 Education We encourage learning among the younger generation, and continue to promote literacy through schools and scholarships. As at, 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. Health Our 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 Facilities Each 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. Religious We 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 & Culture We forge community bonds through the provision of sports facilities and sponsorship of sports tournaments, musical concerts, cultural activities and religious events. Local Business Development We 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. Description No. of schools No. of students Elementary schools 11 5,094 Junior High Schools 4 1,627 Senior High Schools 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.

36 Our Management

37

38 36 Increasing Our Diversity, Enhancing Our Growth board of directors 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.

39 INDOFOOD AGRI RESOURCES LTD. Annual Report Mr Mark Wakeford Chief 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 Mr Wakeford became CEO of the Company in August Mr Moleonoto Tjang Executive 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 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 He is also a registered accountant in Indonesia. Mr Wakeford trained and qualified as a Chartered Accountant in London, England. He also attended the Senior Executive Program at the London Business School.

40 38 Increasing Our Diversity, Enhancing Our Growth board of directors 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 Suriady Executive 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 He has also served as President Director of PT Indofood Fritolay Makmur since 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 In 1994, he joined PT Indofood Fritolay Makmur as National Sales and Promotion Manager. In , 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 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.

41 INDOFOOD AGRI RESOURCES LTD. Annual Report Mr Axton Salim Non-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 He is also the director of Pacsari Pte Ltd since 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 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 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 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 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 Mr Susanto has a Bachelor of Computer Science degree and a Master of Commerce degree from the University of New South Wales, Australia.