REGULATION. Coal Mining Regulations

Transcription

1 REGULATION Coal Mining Regulations Pursuant to Article 33 of the Indonesian 1945 Constitution, as amended, as well as general mining laws which were enacted after Indonesia became independent in 1945, all mineral resources are deemed to be national assets and are therefore controlled by the state for the best interests of the nation and the prosperity of the people. As of 1967, general mining activities were governed by Law No. 11 of 1967 on Principle Provisions on Mining ( Old Mining Law ) and its implementing regulations, Government Regulation No. 32 of 1969 concerning the Implementation of Mining Law, as amended by Government Regulation No. 79 of 1992 and Government Regulation No. 75 of 2001 Decree of the MEMR No of 2004 on the Guidelines for Processing Applications of Contracts of Work and Coal Cooperation Agreement in the framework of Foreign Investment ( Decree 1614 ). General mining activities in Indonesia are now governed by the New Mining Law which came into effect on January 12, 2009 which revoked the Old Mining Law. One of the purposes of the New Mining Law is to provide equal treatment to foreign and domestic investors under the Investment Law (as defined below) of 2007 and includes, among other things, (a) the abolishment of the contract of work system; (b) the introduction of a license based system equally applicable to both foreign and domestic investors; (c) the allowance of foreign investment while also requiring divestment; (d) the authorization of the Government to designate mining areas (Wilayah Pertambangan) within Indonesia; (e) the requirement of a tender process for the granting of new coal mining concessions; (f) the regulation of larger mining areas and reduction terms for production; (g) the requirement to comply with onshore processing obligations; and (h) the regulation of mining services contractors. Under the New Mining Law, new licensing classifications are being introduced, abolishing the previous licensing system which provided for mining authorizations (Kuasa Pertambangan, or KP ) and the Coal Contract of Work (Perjanjian Karya Pengusahaan Pertambangan Batubara, or PKP2B ). The new licenses are classified as follows: Mining Business License (Izin Usaha Pertambangan, an IUP), which is valid for mining operations of coal, rock, metal mineral and non-metal mineral, within an IUP operational area (Wilayah IUP, a WIUP ), which shall be located within a mining operational area (Wilayah Usaha Pertambangan WUP ). WUP is stipulated by the Government, upon being determined by the regional government and submission in writing to the House of Representatives (Dewan Perwakilan Rakyat, the DPR ). An IUP will only be granted to a business entity, individual, or cooperatives (koperasi). An IUP may be obtained by submitting an application to the regent/mayor (for non-foreign investment company only), governor or MEMR, respectively, based on their authority over the WUP and/or by attending an auction process of the mining operational area (except for rock mining). Special Mining Business License (Izin Usaha Pertambangan Khusus, an IUPK) is granted for coal and metal mineral mining, where the mining area is located within a special mining operation area (Wilayah Usaha Pertambangan Khusus, the WUPK ), being a conversion from a state reserved area (Wilayah Pencadangan Negara, a WPN ) as approved by the DPR for mining operations. Further, an IUPK will only be granted to a legal entity established in one of the following forms: a state-owned enterprise (Badan Usaha Milik Negara, a BUMN ), a regional government-owned enterprise (Badan Usaha Milik Daerah, a BUMD ) or a national entity. Although a BUMN and a BUMD have priority to obtain an IUPK, a national business entity may obtain an IUPK by participating in an auction or by submitting an application to MEMR specifically for PKP2B holder which PKP2B s tenure is expiring. 210

2 People s Mining License (Ijin Pertambangan Rakyat, an IPR ) is granted either for individuals, community groups, or cooperatives within a people s mining area (Wilayah Pertambangan Rakyat, a WPR ). A WPR is determined by the regent or mayor in consultation with the DPR. An IPR is available for the mining of coal, rock, metal mineral and non-metal mineral within a limited mining operational area. Further details of each license are as follows: No. Type Mineral Type Validity Area 1. IUP (Mining Business License) Exploration Mining License ( Exploration IUP ) is a mining business license that is granted in order that general surveys, explorations and feasibility studies can be undertaken. Production-Operation Mining License ( Production Operation IUP ) is a mining business license that is granted upon the completion of the exploration activities under the respective Exploration IUP to commence the construction, mining, processing and refining, transportation and sales activities. 2. IUPK (Special Mining Business License) Exploration Special Mining Business License ( IUPK Eksplorasi ) is a special mining business license that is granted in order that general surveys, explorations and feasibility studies in a WUPK can be undertaken. Production-Operation Special Mining License ( IUPK Operasi-Produksi ) is a special mining business license that is granted upon completion of an exploration mining license stage in order that production in a WUPK can be undertaken. (a) (b) (c) Metal Mineral Mining Non-Metal Mineral Mining Certain types of Non-Metal Mineral Mining Maximum 8 years Maximum 3 years Maximum 7 years Up to 100,000 hectares ,000 hectares ,000 hectares (d) Rock Mining Maximum 3 years 5 5,000 hectares (e) Coal Mining Maximum 7 years 5,000 50,000 hectares (a) (b) (c) Metal Mineral Mining Non-Metal Mineral Mining Certain types of Non-Metal Mineral Mining Maximum 20 years, which can be extended twice, each for a period of 10 years Maximum 10 years, which can be extended twice, each for a period of 5 years Maximum 20 years, which can be extended twice, each for a period of 10 years (d) Rock Mining Maximum 5 years, which can be extended twice, each for a period of 5 years (e) Coal Mining Maximum 20 years, which can be extended twice, each for a period of 10 years Maximum 25,000 hectares Maximum 5,000 hectares Maximum 5,000 hectares Maximum 1,000 hectares Maximum 15,000 hectares (a) Mineral Mining Maximum 8 years Maximum 100,000 hectares (b) Coal Mining Maximum 7 years Maximum 50,000 hectares (a) Mineral Mining Maximum 20 years, which can be extended twice, each for a period of 10 years (b) Coal Mining Maximum 20 years, which can be extended twice, each for a period of 10 years Maximum 25,000 hectares Maximum 15,000 hectares 211

3 No. Type Mineral Type Validity Area 3. IPR (Peoples Mining License) is a license to conduct mining within a small-scale mining area with a limited area size and investment. (a) (b) Metal Mineral Mining Non-Metal Mineral Mining Maximum 5 years which is extendable One IPR is required in respect of: (a) Individuals: up to 1 hectare; (c) Rock Mining (b) Community groups: up to 5 hectares; and (d) Coal Mining (c) Cooperatives: up to 10 hectares Existing PKP2Bs will remain valid for the remainder of their respective terms of contract, but are subject to amendments of certain terms (not including taxes and levies) and may be converted to the appropriate licenses upon their expiration. Furthermore, the enactment of the New Mining Law demonstrates the Government s attempt to protect and promote national and local mining companies in the Indonesian mining sector. This is reflected, for example, by the obligation of IUP or IUPK holders to engage local mining services companies and/or national mining service company. The holders of an IUP or an IUPK are only allowed to engage foreign investment companies, upon performing publication in nation or local wide mass media with regards the mining service procurement, and there are no such local entities and/or national mining services companies which meet the qualification and classification required by the holders of an IUP or an IUPK. Meanwhile, mining services companies have a similar obligation to prioritize both local contractors and human resources in supporting their businesses. A holder of an IUP or an IUPK is also prohibited from engaging its subsidiaries and/or affiliated mining services companies in its mining operational area, unless a permit has been obtained from the MEMR in respect of such engagement and when there are no similar mining services companies in the area or no qualified companies for the required mining services. The Mining Service Regulation states that any subsidiary and/or affiliate which has a direct equity interest in an IUP or IUPK holder is prohibited from engaging as a contractor in the mining operation of such IUP and IUPK. This prohibition affirms the relevant provision in the New Mining Law. In addition, the Mining Service Regulation requires the holders of an Operation Production IUP or IUPK to conduct their own coal mining, processing and refining activities. Regulation 34 (as defined below) allows the holder of a Production-Operation IUP and IUPK to hire mining services companies to conduct only overburden stripping (excavation, loading, and hauling of overburden material (with or without blasting activities)). The Mining Service Regulation provides PKP2B holders that engage mining services companies a three-year period in which to comply with the terms of the regulation. In 2010, the Government issued four implementing regulations to implement the New Mining Law through the enactment of Government Regulation No. 22 of 2010 on Mining Areas ( GR 22 ), Government Regulation No. 23 of 2010 on the Implementation of Mineral and Coal Mining Business Activities, as lastly amended by Regulation No. 1 of 2017 ( GR 23 ), Government Regulation No. 55 of 2010 on Guidance and Supervision of Mining Business Activities ( GR 55 ), and Government Regulation No. 78 of 2010 on Reclamation and Post-Mining ( GR 78 ). The most recent implementing regulation of the New Mining Law, MEMR Regulation No. 34 of 2017 on Licensing in the Fields of Mineral and Coal Mining, was issued by the MEMR on May 5, 2017 and entered into force on May 9, 2017 ( Regulation 34 ). Regulation 34 sets out several new provisions, among others mandatory assignment from governor to MEMR for all IUP held by public companies. GR 22 regulates the procedures to determine the WUPs, the WUPKs, and the WPRs. The determination of these mining areas lies on the sole discretion of the Government, and in respect of a WUPK, prior approval from the DPR is required. Under GR 23, foreign shareholders in a company holding an IUP must divest their shares gradually to Indonesian party(ies). Such foreign shareholders will have to begin divesting its shares to the Indonesian party(ies) at the fifth year of production and 212

4 as a result, the Indonesian party(ies) will have no less than 20.0% shares by the end of the sixth year, a 30.0% shares by the end of the seventh year, a 37.0% stake by the end of the eighth year, an aggregate 44.0% shares by the end of the ninth year, and a 51.0% shares by the end of the tenth year. If the capital of the foreign-owned companies is increased, then the aggregate amount of shares ownership of such Indonesian party(ies) cannot be diluted and always subject to the aforementioned amount. The divestment requirements as set forth in GR 23 apply to IUP and/or IUPK granted both prior and subsequent to the issuance of such regulation. The divestment to an Indonesian entity is to be made pursuant to the following procedure: initially, the shares must be offered to the central government; who will have 90 days to evaluate and negotiate such offer, and additional 30 days to determine whether to accept such offer or not. If they are not willing to buy, the shares are to be offered to provincial or regent/municipal governments. If those parties are unwilling to purchase the shares, the shares are tendered to both state and regional-owned enterprises. In each case, parties are given 30 days from the date of offering to declare their interest. If no state or regional owned enterprise is willing to purchase the shares, they can be tendered to local companies (which shares are wholly owned by local investor) which are given 30 days to declare their interest after the initial offering date. Under GR 55, the supervision of licensed mining activities is generally conducted by the MEMR, governors, regents, or mayors. Those who fall under the scope of regulatory supervision are holders of an IUP, an IPR or and IUPK. GR 55 also regulates the supervision of mining activities and the supervision of: finances, mineral and coal processing data, conservation of mineral and coal, operational safety, environmental impacts, land reclamation, post-mining management, technical training of laborers, as well as a host of production data of the types, quality, and total amount of extracted minerals. Supervision will be carried out by mining inspectors, with endorsement from the MEMR, although the MEMR, governors, regents and mayors may also send authorized representatives into mining facilities. Nevertheless, only a mining inspector is equipped with the authority to recommend that the chief mining inspector: (i) temporarily suspends mining activities in part or entirely, or (ii) that certain mining activities permanently cease operations. Under GR 78, mining companies are obliged to carry out reclamation and post-mining related activities. Reclamation is required in both the exploration and production operation stages. Prior to commencing each aforesaid stage, mining companies must prepare a reclamation plan which requires the approval of the relevant governmental institutions (the MEMR or governor,). Specifically before the production operation stage, mining companies must also prepare a post-mining activities plan, in addition to the reclamation plan. GR 78 also includes an obligation on the mining companies to place guarantee funds in a bank designated by the Government for the following matters: (i) reclamation in the exploration stage; (ii) reclamation in the production-operation stage; and (iii) post-mining activities. Domestic Market Obligation GR 23 also provides that the holders of a Production-Operation IUP and an IUPK must prioritize domestic needs for coal. The holder of Production Operation IUPs and IUPKs may export their coal only after the domestic needs of coal have been fulfilled. Further details on the procedures of prioritization coal for domestic needs are regulated in a Ministerial regulation. Prior to the issuance of GR 23, MEMR issued MEMR Regulation No.34 of 2009 on the Prioritization of Mineral and Coal Supply for Domestic Market ( MEMR Regulation 34/2009 ). This MEMR Regulation 34/2009 requires producers of coal and minerals in Indonesia to allocate a portion of their annual production output to the domestic Indonesian market. Tonnage The annual production output required for the domestic Indonesian market will be set by the MEMR based on the estimate of annual demand proposed by potential domestic buyers in the previous year. It is not, however, specified how a company s domestic market obligation ( DMO ) tonnage is to be calculated (as opposed to how the 213

5 national DMO requirement is calculated). On April 27, 2015, the MEMR issued Decree No K/30/MEM/2015 stating that all mining companies specified therein, (TIA, BEL and MIFA were not specified), have an obligation to sell a combined % of their total annual production in 2015 to domestic consumers. Price The price of the purchase of coal allocated for the domestic market will be set by the MEMR and will be based on the coal price index (details of which are yet to be introduced). As such, it appears that coal allocated for domestic production will not be undervalued. Annual Work Programme and Budget Each coal company must include in its Annual Work Programme and Budget the minimum percentage of its production proposed to be made available for DMO sales. These details must be submitted annually in November. Buy in Coal producers may buy in coal from other sources to satisfy their DMOs. Other supply commitments Importantly for global coal suppliers, situations where coal producers have contractual arrangements (including penalties) to supply coal to their existing customers are not dealt with. If coal producers sell a percentage of their coal to the Indonesian domestic market, they may not be able to meet the demands of their other coal sales agreements, and may, therefore, face penalties. On-selling prohibition MEMR Regulation 34/2009 prohibits domestic purchasers from on-selling DMO coal. Instead the coal must be used as a raw material, fuel or via other direct means. According to MEMR Regulation 34/2009, failure to fulfill the DMO will potentially subject a company to administrative sanctions which could lead to a reduction in mineral or coal production of a maximum of 50% from its production for the following year. See Risk Factors Risks Relating to Indonesia Regional autonomy may adversely affect our business through imposition of local restrictions, taxes and levies. Mining Services Regulation General mining services are regulated by the New Mining Law and the Regulation 34. Regulation 34 revoked the MEMR Regulation No. 28 of 2009 on Mineral and Coal Mining Services Business, and its amendment, MEMR Regulation No. 24 of Based on the Regulation 34, a company intending to provide mining services (a mining services company ) must first obtain a business license (Izin Usaha Jasa Pertambangan) from the MEMR, the relevant governor, regent or mayor, as applicable. These licenses are generally issued for a five-year period and are thereafter extendable upon application, for a three-years period per extension. Mining services companies may be engaged or appointed to perform mining business activities for concession holders (comprising holders who were granted concessions under previous mining regulations and are IUP or IUPK holders under the New Mining Law). The New Mining Law imposes certain restrictions on concession holders and mining services companies. Mining services companies are required under the New Mining Law to give preference to the usage of local contractors and laborers. 214

6 The New Mining Law stipulate the obligation of IUP or IUPK holders to engage local mining services companies and/or national mining services companies. Should there are no services companies and/or national mining services companies, IUP or IUPK holders may engage other mining services companies which form is Indonesian legal entity In addition, a mining services company has the obligation to prioritize both local contractors and human resources in supporting their activities. A holder of an IUP or an IUPK is also prohibited from engaging its subsidiaries and/or affiliated mining services companies in its mining operational area, unless a permit has been obtained from the MEMR. The New Mining Law stipulates the type of mining services such contractors may perform, including: a. consultation, planning, implementation and equipment testing in the following sectors: general surveying; exploration; feasibility studies; construction; transportation; environmental; post-mining/reclamation; and/or health and safety. b. consultation, planning and equipment testing in the following sectors: mines; or processing and purification. On May 10, 2010, the DGM issued Regulation No. 376.K/30/DJB/2010 of 2010, which requires an IUP holder or IUPK holder to obtain MEMR approval in order to engage their subsidiaries and/or affiliates to provide it with mining services. In issuing Regulation 376/2010, the DGM, on behalf of the MEMR, provided guidelines for holders of a Mining License and a Special Mining License as to how their subsidiaries and/or affiliates should provide such mining services. Under Regulation 376/2010, a subsidiary or an affiliate is defined as a business entity directly owned by the holder of a Mining License or a Special Mining License. Direct ownership means: the IUP or IUPK holder is a direct shareholder owning at least 20% of the shares in its subsidiary or affiliate; the IUP or IUPK holder is a direct shareholder and owns more than 50% of the voting rights in the subsidiary or affiliate, based on an agreement to directly control the financial policy and operations of such subsidiary or affiliate; or the IUP or IUPK holder has the authority to appoint and dismiss the financial director and operational director (or their equivalent) of its subsidiary or affiliate. 215

7 Regulation 376/2010 provides that the appointment of a subsidiary or an affiliate to provide mining services may be made after the IUP or IUPK holder, as applicable, has carried out an open tender process (which includes making two announcements of the tender process in an Indonesian newspaper) and has failed to find a successful mining services provider. Such appointment is subject to the approval of the MEMR and the DGM. We expect that we will be able to comply with this regulation without any material adverse effect on us and our mining operations. See Risk Factors Risks Relating to Indonesia Regional autonomy may adversely affect our business through composition of local restrictions, taxes and levies. Coal Sales Price Controls On January 11, 2017, MEMR Regulation No. 7/2017 stipulates that the coal price arrangement between the IUP, IUPK, or PKP2B holders and coal purchaser (including their affiliated parties) should be no less than the Coal Benchmark Price (Harga Patokan Batubara) that is determined each month by the DGM ( Government Benchmark Price ). The Government Benchmark will be determined based on market mechanisms and/or in accordance with general pricing within the international market. Further, the pricing of Government Benchmark Price may be calculated in Rupiah or in USD. Should the price is calculated in USD, then the equalization of Rupiah and USD shall be made in accordance with the median currency exchange rate determined by Bank Indonesia on the date of or during the period agreed between seller and buyer of coal. IUP, IUPK, or PKP2B holders are allowed to sell the following type of coal below the Government Benchmark Price: fine coal, rejected coal, and coal with certain impurities, provided that such sale is made for the following purpose: (i) coal which utilized by the license holder for its own consumption, (ii) coal utilized by the license holder to increase the added value of coal from mine-mouth mining activities, and (iii) coal utilized for development of undeveloped area around the mining area.regional Government Law Regional Government Law Indonesia is divided into provinces which are further subdivided into regencies and municipalities. The regencies and municipalities within a province are autonomous in most of their activities and, therefore, are not subservient to the province. On 2 October 2014, the Government enacted Law No. 23 of 2014 concerning the Regional Government ( Law 24 ) which has revoked the previous Law No. 32 of 2004 concerning the Regional Government ( Law 32 ), which substantially changed the legal and regulatory framework of the mining industry in Indonesia. Law 24 divides the governmental affairs into (i) absolute governmental affairs; (ii) concurrent governmental affairs; and (iii) general governmental affairs. Mining business activities are categorized as concurrent governmental affairs, which require the distribution of authority between the Government and other regional governments when discharging their governmental affairs. The distribution of authority will mainly be assessed based on the location, the customer, the impact and the efficiency of the natural resources utilization. To date, the Government has issued a number of amendments towards Law 24 including Government Regulation as Substitute of Law No. 2 of 2014 and Law No. 9 of 2015 as the second amendment to the Law 24. Although the Law 32 has been revoked, the transitional provision under Law 24 stipulates that the implementing regulations from Law 32 shall still apply as long as it does not contradict with Law

8 Forestry Regulation Law No. 41 of 1999 on Forestry, as amended by Law No. 19 of 2004, which ratifies Government Regulation in Lieu of Law No. 1 of 2004 ( Forestry Law ) provides that open-pit mining operations cannot be conducted within protected forests. Notwithstanding this general prohibition, a number of licenses and contracts for open-pit mining in forest areas that existed prior to the enactment of Forestry Law remain valid until their expiration. Significant areas of Indonesia have been classified as protected forests. Based on the Forestry Law, the use of forest areas for mining purposes is required to be conducted based on a Borrow-Use Permit (Izin Pinjam Pakai) issued by the Minister of Forestry. Pursuant to Forestry Law, the use of forests for mining purposes must be conducted with a Borrow-Use License (Izin Pinjam Pakai) issued by the Minister of Forestry. Further, under Regulation of the Minister of Forestry No. P.50/Menlhk/Setjen/Kum.1/6/2016 regarding the Guidelines on Borrow and Use of Forest Area ( Regulation 50 of 2016 ), a company applying for a Borrow-Use Permit may deliver non-forest land as compensation or pay compensation for the use of forest area in the form of a non-tax state income. It also stipulates that a Borrow-Use License is valid for the same period as the applicable operational license, such as the mining licenses (IUP or IUPK). Pursuant to the Forestry Law, to make any changes on the utilization of the forest, due to its strategic value, the Minister of Forestry must obtain the approval of the DPR. Pursuant to Forestry Law, to make any changes on the utilization of the forest, due to its strategic value, the Minister of Forestry must obtain the approval of the House of Representatives. On February 1, 2010, the Government issued Government Regulation No. 24 of 2010 on Use of Forest Areas, as lastly amended by Government Regulation No. 105 of 2015 ( Government Regulation 24 ). Government Regulation 24 only provides general provisions on borrow-use permits. It introduces several new provisions in relation to borrow-use permits, including the introduction of administrative and technical requirements for borrow-use permit applications, borrow-use permit requirements, and the borrow-use permit application process in which the applicant is required to pay Non-Tax State Revenues (Penerimaan Negara Bukan Pajak or PNBP ), conduct the rehabilitation of the planting of water shed, conduct re-vegetation over the compensated land, conduct the forest protection and other obligations determined by the Minister of Forestry. Under Government Regulation 24, a borrow-use permit will be granted with the same term as the relevant industry permit or license issued by the authorized agency. In relation to the mining industry, any grant of a borrow-use permit made after the issuance of Government Regulation 24 will be for the period of the validity of the relevant business license. Pursuant to the Decree of the Minister of Forestry No. P.04/Menhut-II/2011 dated January 14, 2011 on Guidelines for Forest Reclamation, a mining and energy company which is granted a borrow-use permit must prepare forest reclamation plan which consist of a five-years plan and yearly plan. Such plan shall be approved by the relevant authority (MEMR, governor, or regent/mayor) and shall be made in accordance with the location which being damaged by the mining activities. Further, the mining company shall perform the reclamation in accordance with the approved plan, within a the determined period, and at its own expense. Over the forest area to which such permit relates, at its own expense, within a maximum period of six months after mining activities have been completed. These reclamation and rehabilitation activities must be consolidated in a reclamation plan to be evaluated and approved by the Centre for Land Rehabilitation and Soil Conservatory (Balai Rehabilitasi Lahan dan Konservasi Tanah) orthe Land Rehabilitation and Soil Conservatory Unit (Unit Rehabilitasi Lahan dan Konservasi Tanah) for Class A and B minerals or the Level II Regional Forestry Service Office (Dinas Kehutanan Daerah Tingkat II) for Class C minerals. The mining company is required to submit quarterly reports on the progress of the reclamation and rehabilitation activities to those Government agencies. 217

9 Environmental Regulation Environmental protection in Indonesia is governed by various laws, regulations and decrees, including: Law No. 32 of 2009 on Environmental Protection and Management ( Environmental Law ) which was enacted on October 3, 2009 to replace Law No. 23 of 1997 on Environmental Management; Government Regulation No. 27 of 2012 on Environmental Permit ( GR 27/2012 ); Minister of Environment Regulation No. 5 of 2012 on Businesses and/or Action Plans which must be completed with Environmental Impact Study ( Regulation 5/2012 ); Decree of the Minister of Energy No. 1453K/29/MEM/2000 dated November 3, 2000 on the Technical Guidelines with respect to the Organization or the Government Duty in the Field of General Mining ( Decree 1453 ); and Decree of the Minister of Energy No K/28/MEM/2000 dated November 3, 2000 on Technical Guidelines for Environmental Management in the Field of Mines and Energy ( Decree 1457 ). The Environmental Law, which was enacted to replace the previous Law No. 23 of 1997, introduces several materials provisions including: the Environmental Permit (Izin Lingkungan) is now mandatory for a company which is required to obtain an AMDAL or a UKL/UPL. The environmental permit would be a prerequisite to obtain the relevant business licenses and if the environmental permit is revoked, the business license would terminate as well. The Environmental Law requires all existing environmental permits to be integrated into environmental permit within one year as of the enactment of Environmental Law; an environmental audit is now required for (i) businesses that have obtained relevant business licenses but have not prepared an AMDAL, (ii) businesses in high-risk sectors or (iii) companies that do not appear to comply with environmental laws and regulations; all holders of environmental permit must provide an environmental guarantee to be placed in designated state owned-banks in order to ensure recovery of environmental functions; any business which potentially has important impact to the environment must conduct environmental risk analysis; all waste disposals require licensing and may only be conducted in specified locations determined by the Minister of Environmental Affairs; the imposition of remedial and preventative measures and sanctions (such as the obligation to rehabilitate tailings areas, the imposition of substantial criminal penalties and fines and the cancellation of approvals) to remedy or prevent pollution caused by operations; and the sanctions imposed range from one to 15 years of imprisonment applicable to any person who caused environmental pollution or environmental damage and/or fines ranging from Rp.500 million to Rp.15 billion. The imprisonment and the amount of fine will be increased by one-third if the criminal offense is conducted on behalf of a company. A monetary penalty may be imposed in lieu of performance of an obligation to rehabilitate damaged areas. 218

10 These laws generally provide, among others, that mining companies must have the facilities and bear the costs and expenses of reclamation and rehabilitation of concession areas, and shall prevent and minimize environmental pollution and destruction resulting from mining activities. Mining companies whose operations have a significant environmental or social impact must create and maintain an AMDAL document, which consists of the following documents: an analysis known as Terms of Reference on Environmental Impact Analysis (Kerangka Acuan Analisis Dampak Lingkungan or KA-ANDAL); an Environmental impact analysis (Analisis Dampak Lingkungan or ANDAL); an environmental management plan (Rencana Pengelolaan Lingkungan or RKL); and an environmental monitoring plan (Rencana Permantauan Lingkungan or RPL). Regulation 5/2012 and Decree 1457 stipulate, among other matters, that mining companies whose operations have a significant environmental or social impact must make and maintain an AMDAL document, which consists of Terms of Reference on Environmental Impact Analysis (Kerangka Acuan Analisis Dampak Lingkungan or Ka ANDAL ), an Environmental Impact Analysis (Analisis Dampak Lingkungan or ANDAL ), an RKL and an RPL. Under Regulation 5/2012, a mining company with the total licensed area equal to or wider than 200 hectares or with the total open pit mining areas equal to or wider than 50 hectares must have an AMDAL document. Based on the Environmental Law, remedial and preventative measures and sanctions (such as the obligation to rehabilitate tailings areas, the imposition of substantial criminal penalties and fines and the cancellation of approvals) may also be imposed to remedy or prevent pollution caused by operations. Environmental Law also requires licensing of all waste disposals. Waste disposal may only be conducted in specified locations determined by the Minister of Environmental Affairs. Waste water disposal is further regulated by Government Regulation No. 82 of 2001 concerning Water Quality Management and Water Pollution Control ( Government Regulation 82 ). Government Regulation 82 requires responsible parties, including mining companies, to submit reports regarding their disposal of waste water detailing their compliance with the relevant regulations. Such reports are to be submitted to the relevant mayor or regent, with a copy provided to the Minister of Environmental Affairs, on a quarterly basis. The Decision of the Minister of Environmental Affairs No. 113 of 2003 concerning Waste Water Standard Quality for Coal Mining Business and/or Activities ( Decision 113 ) further regulates mining companies treatment of waste water. Decision 113 obliges mining companies to (i) process their waste water from mining activities and processing/washing activities in accordance with mandated quality standards stipulated in Decision 113; (ii) manage water that is affected by mining activities by way of sedimentation pools; and (iii) examine the location for the point of compliance of the waste water from mining activities where the waste water from the sedimentation pools and/or the waste water treatment facilities is discharged into the surface water. Under Decision 113, mining companies must comply with requirements stipulated in their respective licenses regarding disposal of waste water and submit an analysis of the waste water and daily flow rate to the regent or mayor, with copies to the governor and the Minister of Environmental Affairs on a quarterly basis. Mining companies must also comply with other regulations, including Government Regulation 101 of 2014 on Management of Hazardous and Toxic Waste Materials (Pengelolaan Limbah Bahan Berbahaya dan Beracun) and Government Regulation No. 74 of 2001 regarding Management of Hazardous or Toxic Materials (Pengelolaan Bahan Berbahaya dan Beracun), all of which regulates the management of certain stipulated materials and waste. Flammable, poisonous or infectious waste from mining operations is subject to these regulations unless it can be proven scientifically by the applicant 219

11 that it falls outside the categories set forth in such regulations. These regulations require a company using the specified materials, or which produces waste which is specified in the regulations, to obtain a license in order to store, collect, utilize, process and accumulate such waste. This license may be revoked and the license-holder may be required to cease operations in the event of violation. The activities of storing and collecting used lubricant oil is further regulated by the Decree of the Head of Regional Environmental Impact Controlling Agency (Badan Pengendalian Dampak Lingkungan Daerah) No. 255 of 1996 concerning the Procedure on the Storing and Collecting of Used Lubricant Oil ( Decree 255 ) which provides, among other things, that an entity which collects used oil for further use or processing must comply with certain requirements, as regulated by Decree 255, including obtaining a license, meeting certain specifications with regard to the buildings where used oil is to be stored, setting up a standard procedure on collection and distribution of used oil and submitting quarterly periodic reports with regard to these activities. Decree 1457 provides technical guidelines for the preparation of the AMDAL, RKL and RPL documents. Decree 1457 states that regional governments are responsible for the monitoring the implementation of regulation of environmental matters and issuance of the approval of AMDAL. Pursuant to Decree 1453, holders of KP, KK, PKP2B and IUP are required to provide to the relevant regional government an Annual Environmental Management and Monitoring Plan (Rencana Tahunan Pengelolaan dan Pemantauan Lingkungan or RTKPL ) at the beginning of the exploitation or production stage. From that time on, holders are also required to provide an Annual Environmental Management Plan (Rencana Tahunan Pengelolaan Lingkungan or RTKL ), and provide a reclamation guarantee to be deposited with the government bank or foreign exchange bank (bank devisa). Guidelines for the preparation of the RTKPL and RTKL and procedures for the deposit of a reclamation guarantee are contained in Decree Under Regulation of the MEMR No. 7 of 2014 on Implementation of Mining Reclamation and Closure for Mineral and Coal Mining Business Activities, IUP Eksplorasi holders are required to prepare reclamation plans (to be provided every five years) and mining closure plan for their production operation phase, which shall be submitted along with the application of IUP production operation to the relevant authority. Mining companies are also required to provide a reclamation guarantee in the form of either a joint account, time deposit held in the name of the relevant government authority, bank guarantee, insurance bond or, where the mining company has a paid up capital of US$50,000,000 or more, by way of an accounting reserve. Sanctions for non-compliance consist of written warnings, suspension of all or part of the mining activities and/or revocation of the mining license. On top or the reclamation guarantee, mining companies is also required to provide mining closure guarantee, which amount will be determined by DGM or governor. Such guarantee shall be deposited in government bank held in the name of relevant government authority and the respective mining company. Other Regulations Related to Mining Operations Other relevant regulations applicable to our mining operations include regulations regarding the use of groundwater and technical guidelines to control air pollution from immovable sources. Companies that propose to explore, drill and acquire groundwater for their operations are required to comply with the provisions of Decree of MEMR No. 1451K/10/MEM/2000, which includes, among other things, requirements to obtain licenses to explore, drill and acquire groundwater. Failure to comply can lead to the suspension or revocation of the relevant licenses or permits. Our operations are also subject to Government regulations concerning following: usage and operation of a harbor for internal use; power generation for internal use; radio concessions for telecommunications for internal use; 220

12 storage and usage of explosive materials; and ground water for household use. Government Regulation No. 61 of 2009 dated October 20, 2009 on Port as lastly amended by Government Regulation No. 64 of 2015 dated August 19, 2015 ( Regulation No. 61 (as amended) ) generally reformulates the structure of port management in Indonesia and introduces new terms, including, among other things, a dedicated terminal (terminal untuk kepentingan sendiri), which is currently known as a special port, which further regulated under Regulation of the Minister of Transportation No. PM 20 of 2017 on Special Terminals and Dedicated Terminals ( Regulation PM 20 ). Regulation PM 20 stipulates that in order to operate a special terminal to support applicable business activities, a legal entity needs to obtain the following licenses from Minister of Transportation: (i) stipulation of a special terminal location and (ii) a special terminal construction and operating license. In addition, the legal entity is required to obtain a recommendation from the nearest port operator, prior to operating the special terminal. Once the special terminal construction and operating license has been obtained, the licensee has two years to commence the construction of the special terminal. Such construction must be completed within five years of the date of issuance of the license. The port construction and operational license is valid for ten years may be extended. Corporate Social and Environmental Responsibility In respect of limited liability companies, Law No. 40 of 2007 sets out an additional obligation imposed on companies operating in the natural resources industry, including coal mining companies. Such companies have to undertake corporate, social and environmental responsibility. The purpose of this obligation is to create a sustainable relationship with the environment, and to enhance the norms, values and culture of the local community. Such obligation is required to be budgeted and calculated as an expense of the company and it must be implemented in reasonable measures. Any non-compliance will be sanctioned in accordance with applicable laws. Measures that satisfy this obligation will be stipulated in a Government Regulation which is yet to be issued. The New Mining Law also requires the holders of an IUP or an IUPK to organize community development programs, which will be stipulated in a Government Regulation yet to be issued. Foreign Investment Limitations Direct foreign investments in Indonesia are generally governed by Law No. 25 of 2007 dated April 26, 2007 (the Investment Law ), and its implementing regulations. All matters relating to direct investments are under the supervision of the BKPM. BKPM has issued implementing regulations for the Investment Law pertaining to guidelines and procedures for filing applications for foreign investment and the approval of foreign investment ( Guidelines on Foreign Investment ). Not all foreign investment, however, is governed by the Investment Law or is under the authority of BKPM. A number of sectors, including forestry, mining, and oil and gas, are wholly or partly subject to separate regulatory regimes. An important feature of the Investment Law is the Government s guarantee that it will not nationalize a foreign investment or revoke rights to control a foreign investment, except where it is declared by law. In case the Government nationalizes or revokes the foreign investment, it must pay compensation in an amount determined in accordance with the market price of the investment. This guaranty is accompanied by assurances that the foreign investor will have the authority to appoint the management of the foreign investment company and the right to transfer and repatriate in foreign currency, profit, bank interest, dividend and other incomes. 221

13 Except for certain sectors specifically determined by Presidential Regulation No. 44 of 2016, regarding list of Negative Investment most business sectors including mining, are open to foreign direct investment with certain limitations. In Indonesia, a foreign investor has to undertake its investment through an Indonesian legal entity under the Investment Law in the form of a foreign investment company ( PMA ). PMAs established to undertake mining activities require foreign investment licenses issued by BKPM in coordination with the DGM. Currency Laws Indonesian currency is regulated under Law No. 7 of 2011 regarding Currency ( Currency Law ), several substantive subjects on the Currency Law, among others, are the usage of Indonesian Currency (Rupiah) and the criminal sanction provisions. Under the Currency Law, Rupiah must be used in (a) any transaction which has the purpose of payment, (b) settlement of other obligations which must be settled with money, and/or (c) other financial transactions, in each case if conducted in Indonesia. The Currency Law stipulates that the above obligation is not applicable to certain transactions within the framework of implementation of state budget and expenditures, receipt or granting of grant from or to abroad, international trading transactions, foreign currency savings at banks or international financing transactions. The cross border (international) transaction, including offshore loan agreements are not intended to be caught since it appears that the Currency Law is intended to cover the manner of payments made within Indonesia. The Currency Law provides that anyone who violates the requirement to use Rupiah or to accept payment in Rupiah is subject to imprisonment for a maximum of one year and a maximum penalty of Rp.200,000,000. This applies to individuals and company alike. To implement the Currency Law, on March 31, 2015 Bank Indonesia issued Bank Indonesia Regulation No. 17/3/PBI/2015 on the Mandatory use of Rupiah in the territory of the Republic of Indonesia. Freight Forwarding Regulation Freight forwarding in Indonesia is regulated in Minister of Transportation Regulation No. PM 74 of 2015 on Performance and Implementation of Freight Forwarding Business, as lastly amended by Minister of Transportation Regulation No. PM 130 of 2016 ( Regulation PM 74 ) Freight forwarding is a business intended to act on behalf of the interest of the owner of goods to conduct all activities required to complete delivery and acceptance by train, ground, sea, or air transportation which includes: delivery acceptance; loading and unloading; storage; classification; packaging; tagging; measurement; weighing; management of document completion; 222

14 issuance of transportation document; booking of transportation space; distribution management; and calculation of transportation costs, claims, insurance, or delivery of goods and invoice settlement and other costs, provision of information and communication system, and logistic services. Business License for Freight Forwarding A company which will conduct freight forwarding activity has to have a Business License for Freight Forwarding (Ijin Usaha Jasa Pengurusan Transportasi or IUJPT ). To obtain that license, a company must satisfy administrative and technical requirement, among others: possess a deed of establishment; possess tax payer Identification Number; have authorized capital in the amount of Rp.2,000,000,000 (for PMA the authorized capital is at least US$4,000,000), 25% of which, shall be paid up capital; own and/or rent an office; possess a Principle License (Izin Prinsip) issued by BKPM. (PMA Only) IUJPTs are issued by the Governor or BKPM. An IUJPT is valid for as long as the company conducts its business and fulfills the requirements set out in the related license. An IUJPT is valid for all branches of the IUJPT holder in Indonesia. All freight forwarding companies which operate based on the preceding freight forwarding decree still can perform their activities, but have to adjust the license in line with the Regulation PM 74 within three years after the enactment of Regulation PM 74. For certain matters, the Minister of Transportation can request reports from the companies that hold IUJPTs. If a company which holds an IUJPT is proven to infringe the regulation on IUJPT and/or implementing regulations, the BKPM or Governor could impose administration sanction which ranging from written warning to IUJPT revocation. Shipping Regulation The Cabotage Principle The Cabotage Principle originated from the conception that domestic marine transport activities is a part of and a strategic force in maintaining state sovereignty in Indonesia. The primary goal of the Cabotage Principle is for Indonesian and foreign shipping entrepreneurs who register their vessels in Indonesia to invest and conduct business in Indonesia by partnering with local operators and to utilize insurance and banking services to create employment in Indonesia. 223

15 One of the effects of the Cabotage Principle is the structuring of transportation of goods and cargos between domestic seaports served entirely by Indonesian-flagged vessels. As of January 1, 2010, the national shipping business has been successful in implementing the Cabotage Principle and providing for a fleet of Indonesian-flagged vessels for the transportation of 14 commodities in accordance with Minister of Transport Regulation No. KM 71 of 2005 on Inter-Seaport Transport of Goods/Freights Inter-Domestic Sea Port ( MoT. 71/2005 ), namely oil and gas, general cargo, coal, timber, rice, crude palm oil, fertilizer, cement, minerals, grains, liquid and chemical cargo, agricultural products, as well as fresh product. During 2010, Indonesian National Shipowners Association worked to provide a fleet of Indonesian-flagged vessels to support offshore activities. MoT. 71/2005 was revoked and replaced by Minister of Transport Regulation No. KM 22 of 2010 ( MoT. 22/2010 ) as amended by MoT. No. 73 of Since the enactment of MoT. 22/2010 in conjunction with the MoT. No. 73 of 2010, all domestic transportation of commodities should be served by the Indonesian-flagged vessels, and foreign-flagged vessels engaged in transportation activities supporting domestic upstream and downstream oil and gas business could only be able to continue their activities until May 7, Implementation of Cabotage Principle The implementation of Cabotage Principle has increased the number of national merchant vessels during the last five years. In March 2005, the number of national merchant vessels were approximately 6,000 units. Since the implementation of Cabotage Principle, an additional 3,129 units were added and the number increased to 9,170 units in December In March 2010, the number increased to 9,309 units. The success of increasing Indonesian-flagged vessels was mostly in connection with the sectors of non-oil and offshore activities. The national shipping fleet continues to expand its oil and gas vessels in anticipation of growth in demand from Pertamina. As such, we believe the need for Indonesian-flagged vessels in the oil and gas sectors will continue to grow. Minister of Transport Regulation No. KM. 22 of 2010 on Goods/Cargo Transportation Inter-Domestic Sea Ports This MoT. 22/2010 revoked MoT. 71/2005. The MoT. 22/2010 regulates that the goods transportation inter-domestic sea ports should be conducted by national shipping companies using Indonesian flagged vessels and employing Indonesian nationality crew. Under Article 4 of MoT 22/2010, if no Indonesian-flagged vessels are available to transport goods between domestic sea ports, the government has provided an exemption to use foreign vessels. However, the operation of foreign vessels is limited for those foreign vessels which already have contracts before May 7, 2008, and still carry out activities until January 7, Minister of Transport Regulation No. PM. 73 of 2010 on amendment to Minister of Transport 22 of 2010 on Goods/Cargo Transportation Inter-Domestic Sea Ports On November 19, 2010, Minister of Transport Regulation No. PM. 73/2010 amended Article 4 of the MoT. 22/2010 and stated that the foreign vessels which engage in transportation activities supporting domestic upstream and downstream oil and gas were allowed to continue their activities until May 7, Law No. 17 of 2008 on Shipping In 1992 the Indonesian Government issued Law No. 21 of 1992 on Shipping. In May 7, 2008, the Law No. 21 of 1992 had been revoked with Law No. 17 of 2008 on Shipping (the Shipping Law ) to foster the development of the maritime industry in Indonesia. The Shipping Law covers, among other matters, the implementation of the Cabotage Principle, minimum navigation requirements, good port governance, port tariffs and port status (e.g. designation of ports for international seaborne trade), ship registration, standard requirements for crew members and maritime management and environmental safety requirements. 224

16 Government Regulation No. 20 of 2010 on Water Transportation The Shipping Law s implementing regulation, Government Regulation No. 20 of 2010 ( GR 20/2010 ) on Water Transportation, was issued in February 1, GR 20/2010 implementing the water transportation by carried Cabotage Principle consistently for marine transport companies to host in their own country. GR 20/2010 also stated that sea transportation in the domestic area should be conducted by national shipping companies using Indonesian-flagged vessels and employing Indonesian nationality crew. The GR 20/2010 was issued to (i) implement the Cabotage Principle for protecting the sovereignty of national archipelago implementation and (ii) provide opportunities for domestic sea transportation to gain market share. Government Regulation No. 22 of 2011 on the Amendment to GR 20/2010 on Water Transportation ( GR22/2011 ) GR 22/2011 was issued on April 4, 2011 to allow certain types of foreign vessels to operate in Indonesia as long as they fulfill the following conditions: they do not transport passengers and/or goods; Indonesian-flagged vessels are not or not sufficiently available; and they have obtained licenses from the Minister of Transportation. Activities which are defined as not transporting passengers and/or goods are: oil and gas survey; drilling; offshore construction; offshore operational support (including anchor handling tug supply vessel bigger than 5,000 BHP with dynamic position (DP2/DP3), platform supply vessels (PSV) and diving support vessels (DSV)); dredging; and salvage and underwater works. Although this regulation is applicable beginning April 4, 2011, the terms and conditions for granting the operation licenses of foreign-flagged vessels is regulated by the Minister of Transportation. Presidential Instruction No. 5 of 2005 on the Empowerment of the National Shipping Industry The President of Indonesia issued Presidential Instruction No. 5 of 2005 on The Empowerment of The National Shipping Industry (the Presidential Instruction 5/2005 ) to thirteen ministers, as well as governors, regents and mayors in Indonesia in March 28,

17 These government officials were instructed to implement the Cabotage Principle (which prohibits foreign-flagged vessels from providing domestic shipping services within Indonesia) and to formulate policies in accordance with the Presidential Instruction 5/2005, in order to foster the development of the shipping industry in Indonesia. The key proposals contained in the Presidential Instruction included (a) fully implementing the Cabotage Principle, allowing domestic seaborne transportation to be carried out by Indonesian-flagged vessels operated by Indonesian shipping companies; (b) encouraging banks to be actively involved in the development of the national shipping industry and developing non-bank financial institutions to provide financing for national shipping companies; (c) expediting the ratification of the 1993 International Convention on Maritime Liens and Mortgages and preparing a draft law on maritime liens and mortgages and expediting the ratification of the 1999 International Convention on Arrest of Ships and preparing a draft law on arrest of ships in accordance with national practices; (d) developing a national shipbuilding industry through various incentives; and (e) encouraging municipal governments and the private sector to develop training and education centers for seamen which comply with IMO standards. Ratification of 1993 International Convention on Maritime Liens and Mortgages Pursuant to Presidential Regulation No. 44 of 2005 dated July 8, 2005, the Republic of Indonesia ratified the 1993 International Convention on Maritime Liens and Mortgages. The Department of Communication has submitted to the Department of Law and Human Rights a draft of a new law concerning maritime liens and ship mortgages to amend the relevant provisions of Indonesia s domestic laws following the ratification of the Convention by the Republic of Indonesia but there is currently no timeframe for the promulgation of the new law. Foreign Investment in Indonesian Shipping Industry The Indonesian Government periodically issues what is known as the Negative List of Investments with the latest President Regulation No. 44 of 2016 on List of Business Fields Closed to Investment and Business Fields Open, With Conditions, to Investment (commonly referred to in Indonesian as the DNI ). The DNI lists those areas in which foreign and domestic investments are prohibited or restricted and, in principle, any area not listed in the DNI is open for foreign and domestic investments. The current DNI provides that Pelayaran Rakyat (or Small-Scale Shipping Industries i.e. companies engaged in cabotage using traditional local vessels) are closed for foreign investments. Other shipping companies are, generally, open for foreign investments. Pursuant to the current DNI, foreigners may not own more than 49% of a foreign investment in shipping related business, among others: (i) sea-transportation (regional or international), (ii) international sea-transportation for passenger (CPC 7211), and (iii) international sea-transportation for goods (CPC 7212.) Minister of Transportation Regulation No. KM. 26 of 2006 on Simplification of the System and Procedures For Procurement of Ships and The Use/Replacement of Ship Flag On May 30, 2006, the Minister of Transportation issued Regulation No. KM.26 of 2006 on Simplification of System and Procedures for Procurement of Vessels and Use/Change of Vessel Flag ( MoT 26/2006 ). MoT 26/2006 revokes Minister of Transportation Decree No. KM.14 of 1996 on Simplification of Procedures for Procurement and Registration of Vessels as subsequently amended. Pursuant to MoT 26/2006, vessels which may be registered under Indonesian flag are those (i) having a volume of GT 7 or more and (ii) whose shares are owned by Indonesian nationals or legal entities. The application for registration may be made through the Directorate General of Sea Communication or through the office of the harbor master at certain seaports throughout Indonesia including Jakarta, Surabaya and Batam. 226

18 Minister of Energy and Mineral Resources Regulation No. 26 of 2006 on Oil Supply In the Framework of Empowerment of National Shipping Industry Minister of Energy and Mineral Resources Regulation No. 26 of 2006 on Oil Supply In the Framework of Empowerment of National Shipping Industry ( MoEMR 26/2006 ) was regulation issued as the implementation of Presidential Instruction 5/2005. Article 2 of this MoEMR 26/2006 stipulates that the Minister shall guarantee oil fuel supply in the framework of empowerment of national shipping industry. Article 4 of the MoEMR 26/2006 further stipulates that any sea transportation business entity should use Indonesian-flagged vessels operated by national sea transportation companies pursuant to the applicable laws. Safety and Security requirements under Indonesian Law Any seagoing vessel operating within Indonesian waters shall be subject to Indonesian safety regulations. Pursuant to Article 117 of the Shipping Law the marine safety and security is a fulfilment of conditions of ship sea-worthiness and navigation. The sea-worthiness conditions consisting of (i) vessel safety; (ii) prevention of pollution form vessel; (iii) vessel manning; (iv) vessel load line and loading; (v) crew prosperity and passengers health; (vi) vessel nationality; (vii) management of safety and prevention of pollution from ships; and (viii) management of ships security. While the navigation conditions (i) vessels navigation aid means; (ii) vessel telecommunications; (iii) hydrograph and meteorology; (iv) lanes and crossings; (v) dredging and reclamation; (vi) scouting; (vii) handling of vessel bodies and (viii) salvage and underwater works. In connection with the enforcement of safety and maintenance requirements, Indonesian marine inspectors are authorized to carry out the necessary surveys or inspections on board vessels, including the following: initial surveys are carried out for a new vessel built at a shipyard or for the reflagging of a foreign-flagged vessel to an Indonesian-flagged vessel; annual surveys; renewal surveys are conducted once every five years; interim surveys are conducted annually to every five years; outside the regular surveys, there are on the spot inspections; and surveys due to vessel damage or repair. Indonesia is a signatory to numerous international Conventions including the International Convention for the Prevention of Pollution from Ships ( MARPOL ) and the International Convention for the Safety for Life at Sea ( SOLAS ). The requirements set out in the relevant international Conventions are also applicable to seagoing vessels operating within Indonesian waters. Applicable Environmental Laws Indonesia has, by virtue of Presidential Decree No. 46 of 1986, ratified MARPOL and has, by virtue of Presidential Decree No. 52 of 1999, ratified the Protocol of 1992 to amend International Convention on Civil Liability for Oil Pollution Damage, 1969 Protocol. By way of further implementing regulations for the Conventions, the Minister of Transportation has issued Regulations No. PM 29 of 2014 on the Prevention of Maritime Environment-Pollution. In addition, there are numerous other relevant environmental regulations issued by the Minister of the Environment including the following: Law No. 32 of 2009 on Environmental Protection and Management; 227

19 Law No. 27 of 2007 on Management of Costal Area and Isles, as amended by Law No. 1 of 2014; Government Regulation No. 21 of 2010 on The Protection of Marine Environment; Government Regulation No. 19 of 1999 on Control Over Marine Contamination and/or Damage; Minister Maritime Affairs and Fisheries Regulation No. Per 02/Men/2009 on Determination Procedure of Water Conservation; Minister Maritime Affairs and Fisheries Regulation No. Per 17/Men/2008 Conservation Area on Costal Area and Isles; Decree of the Minister of the Environment No. 45/MENLH/11/1996 on the Program to Sustain Beaches; Decree of the Minister of the Environment No. 04 of 2001 on the Criteria of the Quality Standard of the Damage on the Coral Reef; Decree of the Chairman of the Environmental Controlling Agency No. 47 of 2001 on the Guidelines on Measurements of Conditions of Coral Reef; Decree of the Minister of the Environment No. 51 of 2004 on the Criteria of the Quality Standard of Sea Water as amended by Decree of the Minister of the Environment No. 179 of 2004; Decree of the Minister of Environment No. 200 of 2004 on the Criteria of the Quality Standard of Environmental Damage and on the Guidelines on Measurements of Seagrass Status; and Decree of the Minister of the Environment No. 201 of 2004 on the Criteria of the Quality Standard and the Guidelines to Determine Damage on Mangroves. Regulation of the Indonesian Electricity Sector The Indonesian electricity industry is regulated under Law No. 30 of 2009 (the Electricity Law ) and its implementing regulations, among other things, Government Regulation No.14 of 2012 as amended by Government Regulation No. 23 of 2014 on Electricity Supply Business Activities ( GR on the Electricity Supply Business Activities ). The Electricity Law defines Electric Power as anything that relates to the supply and utilization of electric power and an electric power support business. In accordance with the principle of regional autonomy, the electric power business is controlled by the Government and regional government and carried out by state owned companies and regional government-owned companies. In addition, private enterprises, cooperatives, and self-supporting public institutions may also participate in the electric power business. Under the Electricity Law, the Government has the authority to determine the General National Power Plan ( RUKN ), which is prepared based on the national policy on energy following due consultation with the House of Representatives. RUKN is a plan to develop an electric power supply system for Indonesia and relates to electric power plants and the transmission and distribution of electric power which is required for fulfilling Indonesia s electric power needs. For 2009, RUKN is contained in the Ministerial Decree No.2682 K/21/MEM/

20 Pursuant to the Electricity Law, the electric power business is divided into (i) the electric power supply businesses; and (ii) the electric power supporting businesses. Industry Framework Under the Electricity Law, electricity supply in Indonesia is no longer executed by the state and carried out by the holder of the Electricity Business Proxy ( PKUK ). Instead, the electricity supply is controlled by the state and conducted by the central Government and the regional governments through state-owned enterprises, and regional-owned enterprises. The Electricity Law also allows private business enterprises, cooperatives and non-governmental enterprises to participate in the electricity supply business. However, under the Electricity Law, state-owned enterprises, have the first priority to decide whether to be the electricity supplier for the public needs of a specified area before such right can be awarded to anyone else. If we decline the offer to undertake a public electricity supply business for the specified area, the central Government or the regional governments, in accordance with their respective authority, may offer the right to maintain the public electricity supply business to regional-owned enterprises, private enterprises or cooperatives. Furthermore, if there are no regional-owned companies, private enterprises or cooperatives that elect to supply electricity in an area, the central Government is obliged by the Electricity Law to instruct state-owned enterprises to supply electricity in such area. 229

21 MANAGEMENT In accordance with Indonesian law, we have a Board of Commissioners and a Board of Directors. Our management and day-to-day operations are carried out by our Board of Directors under the supervision of our Board of Commissioners, the members of which are elected through a general meeting of shareholders. The two boards are separate and no individual may be a member of both boards. Each of our Board of Commissioners and Board of Directors is currently composed of three members. Our commissioners and directors are elected for a term commencing on the date of appointment by the general shareholders meeting and terminating at the close of the third annual general shareholders meeting, without prejudice to the rights of the general meeting of shareholders to dismiss a commissioner or director during his or her term of office or to reappoint a commissioner or director whose term of office has expired. Our officers serve at the discretion of our Board of Directors. The following table sets out certain information concerning our commissioners and directors: Name Position Age Date of Appointment Commissioners: Rachmat Mulyana Hamami.... President Commissioner 52 December 14, 2010 Mivida Hamami... Commissioner 55 November 6, 2009 Arief Tarunakarya Surowidjojo.... Independent Commissioner 63 May 18, 2015 Directors: Achmad Ananda Djajanegara... President Director 50 December 14, 2010 Syahnan Poerba... Independent Director 56 November 6, 2009 Adrian Erlangga.... Director 52 May 19, 2014 The rights and obligations of each member of our Board of Commissioners and Board of Directors are regulated by our articles of association, the decisions of general meetings of our shareholders, the Company Law and after our listing on the IDX, OJK regulations and IDX regulations. The President Director is authorized to represent our Board of Directors for and on behalf of our Company and has the authority to bind our Company. In the event of the absence or disability of the President Director due to any reason, any one of the directors is authorized to represent our Board of Directors for and on behalf of our Company and he or she will have the authority to bind our Company. Board of Commissioners The principal functions of our Board of Commissioners are to give advice and recommendations to, and supervise the policies of, our Board of Directors. A public company must have at least two members in its Board of Commissioners. Under our articles of association, our Board of Commissioners must consist of at least two members, one of whom is the President Commissioner. Each commissioner serves a term commencing on the date of appointment by the general shareholders meeting and terminate at the close of the third annual general shareholders meeting. Shareholders at a general meeting of shareholders have the power to nominate, elect and remove members of our Board of Commissioners by means of a shareholder resolution. 230

22 Certain information with respect to our commissioners is set out below: Mr. Rachmat Mulyana Hamami is our President Commissioner. He obtained his Bachelor s degree in Business from the Brighton University, Sussex, United Kingdom in He has worked in various positions within the PT Tiara Marga Trakindo group for more than 19 years. He is currently the President Director of PT Tiara Marga Trakindo. In 2005, he was appointed the Secretary General of the China Committee of the Indonesian Chamber of Commerce and Industry. He is the son of Mr. Ahmad Hadiat Hamami and the brother of Ms. Mivida Mamami. Ms. Mivida Hamami is our Commissioner. She obtained her Master of Business Administration in Accountancy from New Hampshire College (currently South New Hampshire College), Manchester, United States in 1992 and Bachelor s degree in Social and Political Sciences from the University of Indonesia in She has worked in various positions within the Tiara Marga Trakindo group for more than 16 years. She is currently a director of PT Tiara Marga Trakindo, a commissioner of PT Mitra Solusi Telematika and PT Chitra Paratama, the President Commissions of PT Triyasa Propertindo and the President Director in PT Mahadana Dasha Utama (MDU). She is the daughter of Mr. Ahmad Hadiat Hamami and the sister of Mr. Rachmat Mulyana Hamami. Mr. Arief Tarunakarya Surowidjojo is our Independent Commissioner. He obtained his Bachelor s degree in Law from the University of Indonesia Faculty of Law in 1977 and earned the title of Masters of Law (LLM) from the University of Washington in Seattle in He is one of the founders of Lubis Ganie Surowidjojo. He is currently an Independent Commissioner, Vice President Commissioner of PT Vale Indonesia Tbk and was previously Independent Commissioner and Vice President Commissioner at PT Holcim Indonesia Tbk and an Independent Commission of PT Sampoerna Agro Tbk. Mr. Arief Tarunakarya Surowidjojo is also the founder, executive, supervisor or patron in a number of non-governmental organizations such as: WWF Indonesia, Transparency International Indonesia, Masyarakat Transparansi Indonesia (The Indonesian Transparency Society), Cahaya Guru Foundation, Putera Sampoerna Foundation, Pusat Studi Hukum dan Kebijakan (The Centre for Legal and Policy Studies), and the Indonesian Center for Corporate Governance. Board of Directors We are managed on a day-to-day basis by our Board of Directors. The Board of Directors is authorized and directly represents our Company in and outside the court in all matters and has the authority to bind our Company to any third party. Under our articles of association, our Board of Directors must consist of at least two members, one of whom is the President Director. Members of our Board of Directors are nominated, elected and removed by shareholders resolutions in a general meeting of shareholders. Each director serves for a term commencing on the date of appointment by the general shareholders meeting and terminate at the close of the third annual general shareholders meeting. Certain information with respect to our directors is set out below: Mr. Achmad Ananda Djajanegara is our President Director. He obtained his Master s Degree in Business Administration from the Rotterdam School of Management, Erasmus University in He has been our President Director since Prior to this, he worked as the Managing Director/Strategic Banker at Standard Chartered Bank, Jakarta, a partner in the corporate finance/advisory department of Fund Asia, Jakarta, managing director of Absacus Capital, Jakarta and senior vice president of at Bank of America, Nationals Association, Jakarta. Mr. Syahnan Poerba is our Independent Director. He obtained a Master s Degree in Economics from Macquarie University, Sydney, Australia in He has been our Corporate Support Service Director since Prior to this, he worked as a country manager at PT D&B (Dun & Bradstreet) Indonesia (a joint venture company between Phillip Group Singapore and D&B International), the director of operations at PT AXA Mandiri Financial Services, a life insurance company which is part of the AXA Group. He is a certified financial planner with certification from several organizations. 231

23 Mr. Adrian Erlangga is our Director. He obtained his Master s Degree in Business Administration from the Golden Gate University, San Francisco in He became our Finance Director in Prior to that, he worked as President Director of TIA, a Director of Reswara, a Director of PT Trada Maritime Tbk., Vice President of PT Pasifik Satelit Nusantara and member of the board and chief advisor of AceS International Ltd. Senior Management The members of our senior management are as follows: Name Position Age Irfan Setiaputra... President Director of PT Reswara Minergi Hartama 52 Feriwan Sinatra... President Director of PT Cipta Kridatama 50 Yovie Priadi.... President Director of PT Sumberdaya Sewatama 47 Iman Sjafei... President Director of PT Cipta Krida Bahari 45 Johan Budisusetija... President Director of PT Sanggar Sarana Baja 47 Certain information with respect to our senior management is set out below: Mr. Irfan Setiaputra is the President Director of Reswara. He obtained his Bachelor s Degree in information technology from Bandung Institute of Technology in He became President Director of Reswara in Prior to this he worked as a senior executive at PT Titan Mining, PT Industri Telekomunikasi Indonesia and PT Cisco Systems Indonesia. Mr. Feriwan Sinatra is the President Director of CK. He obtained his mining engineering degree from Bandung Institute of Technology in He became President Director of CK in Prior to this he served as President Director of TIA and in various roles at PT Kaltim Prima Coal, including as its manager of mining operations. Mr. Yovie Priadi is the President Director of SS. He obtained his Bachelor s Degree in engineering from Trisakti University in 1991 and a Masters of Business Administration from San Francisco State University in He became President Director of SS in Prior to this he worked as a senior executive in the Medco Energi Group for over ten years. Mr. Iman Sjafei is the President Director of CKB. He obtained his Bachelor s Degree in industrial and operations engineering from the University of Michigan in 1994 and his Master s Degree in engineering from the University of Michigan in He became President Director of CKB in Prior to this he worked at Unilever Indonesia for over 15 years. Mr. Johan Budisusetija is the President Director of SSB. He obtained his Bachelor s Degree in engineering from the Sepuluh November Institute of Technology in He became a Director of SSB in Prior to this he worked as a senior manager at Alstom Indonesia for over 12 years. Compensation The total remuneration (salary and discretionary bonus) paid to our commissioners amounted to US$0.7 million, US$0.8 million, US$0.6 million and US$0.1 million for the years ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017, respectively. The total remuneration (salary and discretionary bonus) paid to our directors amounted to US$4.7 million, US$4.5 million, US$4.3 million and US$0.8 million for the years ended December 31, 2014, 2015 and 2016 and the three months ended March 31, 2017, respectively. 232

24 Internal Audit In accordance with OJK Regulation No. 56 /POJK.04/2015 on the Formation and Guidelines on Drafting the Charter of Internal Audit Unit, dated December 29, 2015 ( OJK Regulation 56/2015 ), and IDX Listing Regulation No. I-A, for the purpose of implementing good corporate governance, an issuer or a public company is required to establish an internal audit unit, which is a working unit within the issuer or the public company that performs the internal auditing function. The internal audit unit must consist of at least one internal auditor. Where the internal audit unit consists of one internal auditor, he or she must also act as the chief of the internal audit unit. The main duties and responsibilities of the internal audit unit must include: preparing and implementing the annual internal audit plan; examining and evaluating the effectiveness of the internal control and risk management system in accordance with company policy; conducting audits and assessments on the efficiency and effectiveness of such company functions as finance, accounting, operations, human resources, marketing, and information technology; providing objective advice and information on audited operations at all management levels; reporting audit findings and furnishing such reports to the Audit Committee, President Director and Board of Commissioners; monitoring, analyzing and reporting on the progress achieved based on recommendations made by the internal audit division; cooperate with the Audit Committee; developing programs to evaluate the quality of the internal audit actions performed by the internal audit division; and conducting special audits, where necessary. We have formed an Internal Audit Unit pursuant to Decree of the Board of Directors No. ABM-BOD/092/BOD/09/2011 dated September 21, Further, we have prepared an Internal Audit Charter in accordance with OJK Regulation 56/2015, and have appointed Mr. Budi Triastomo as the Head of Internal Audit Unit pursuant to Decree of the Board of Directors No. 008/ABM-RES-DIRUT/V/2015 dated May 13, Audit Committee In accordance with IDX Listing Regulation No. I-A and OJK Regulation No. 55 /POJK.04/2015 on the Formation and Working Guidelines of Audit Committees, dated December 29, 2015 ( OJK Regulation 55/2015 ), a public company is required to have an audit committee for the purpose of implementing good corporate governance. The audit committee oversees all matters relating to the integrity of financial statements. It also manages operational risks and internal and external audit, and ensures compliance with legal and regulatory requirements. The audit committee and its members are established, appointed and removed by the Board of Commissioners and shall comprise at least three members consisting of one Independent Commissioner and two independent external parties. All audit committee members must be financially literate and at least one member shall have accounting and/or related financial management expertise. Our audit committee is currently composed of Mr. Arief Tarunakarya Surowidjojo, Mr. Andradiet I. J. Alis and Setiawan Kriswanto. Mr. Arief Tarunakarya Surowidjojo is the chairman of the audit committee. 233

25 Nomination and Remuneration Committee Under OJK Regulation No. 34/POJK.04/2014 on Nomination and Remuneration Committee of the Issuer or Public Company, dated December 8, 2014, for the purposes of implementing good corporate governance, an issuer or a public company is required to have the function of nomination and remuneration conducted by the board of commissioners. The board of commissioners may form a nomination and remuneration committee consisting of at least three members, with an independent commissioner acting as the head of the committee, while the other members may be: (i) members of the board of commissioners; (ii) outside the relevant issuer or public company; or (iii) serving managerial positions under the board of directors in charge of human resources. We have formed a Nomination and Remuneration Committee and appointed Mr. Arief Tarunakarya Surowidjojo as the chairperson, and Mr. Rachmat Mulyana Hamami, Ms. Mivida Hamami and Mr. Daris Rahman as the other members, pursuant to Decree of the Board of Commissioners No. 028/ABM-RES-BOC/VI/2015 dated June 18, Further, we have prepared Guidelines on the Nomination and Remuneration Committee pursuant to Decree of the Board of Commissioners No. 033/ABM-RES-BOC/VIII/2015 dated August 19, Corporate Secretary Our Corporate Secretary is Adrian Erlangga. The duties and responsibilities of the Corporate Secretary include, among others, monitoring the developments in the capital markets, particularly with regard to prevailing regulations, providing investor information to the public, providing input to the Board of Directors regarding regulatory requirements, organizing the general meeting of shareholders, implementing decisions of the board of directors and other related tasks. We established the position of Corporate Secretary in accordance with OJK Rule No. 35/POJK.04/2014, which requires that a public company appoint a Corporate Secretary who is responsible for communication between ABM and its stakeholders, and Regulation of Indonesia Stock Exchange No. I-A. 234

26 PRINCIPAL SHAREHOLDERS The following table sets forth information regarding beneficial ownership of our ordinary shares as of March 31, 2017, held by: (i) each person who is known to us to have more than 5.0% beneficial share ownership; and (ii) each of our commissioners and directors. Name Number of Shares Held Percentage of Total Outstanding Shares 5% or Greater Beneficial Share Owner: Valle Verde Pte Ltd (1)... 1,514,240, % PT Tiara Marga Trakindo (2) ,366, % Asia Momentum Fund (SPC) Ltd ,916, % Each of our commissioners and directors: Mr. Rachmat Mulyana Hamami.... 6,120, % Ms. Mivida Hamami , % Mr. Achmad Ananda Djajanegara , % Mr. Syahnan Poerba , % (1) Valle Verde Pte. Ltd. is beneficially owned by Mr. Ahmad Hadiat Hamami, Mr. Rachmat Mulyana Hamami, one of our commissioners, and Mr. Rachmat Sobari Hamami. (2) PT Tiara Marga Trakindo is beneficially owned by Mr. Ahmad Hadiat Hamami. The shares held by persons described above are ordinary shares that do not have any interests or carry any voting rights different from our other ordinary shares and are of the same class. Except as disclosed above, our Company is not directly or indirectly owned or controlled by another corporation, any government or other natural or legal person, whether severally or jointly. There is no known arrangement, the operation of which may, at subsequent date, result in a change in control of our Company. 235

27 RELATED PARTY TRANSACTIONS The following is a summary of material transactions we have engaged in with our direct and indirect shareholders, affiliates of our shareholders and other related parties, including those in which we or our management have a significant equity interest. We believe each of these arrangements as described below have been entered into on arm s length terms or on terms that we believe have been at least as favorable to us as similar transactions with non-related parties. For a further discussion of related party transactions, see Note 30 to our consolidated financial statements included elsewhere in this Offering Memorandum. Under the OJK regulations, any conflict of interest transaction by an equity issuer or a public company must be approved by a majority of the shareholders who have no conflict of interest with such transaction and/or are not affiliates of the director, commissioner or principal shareholder who has a conflict of interest. A conflict of interest is defined under OJK regulations to mean a conflict between the economic interests of the company, on the one hand, and the personal economic interests of any member of the board of commissioners, board of directors or principal shareholders (a holder of 20% of the issued shares, directly or indirectly, of a public company) in a transaction which can be detrimental to an equity issuer or a public company due to the unfair price determination. OJK has the power to enforce this rule. Payment Arrangements with Trakindo On December 31, 2015, CK entered into a memorandum of understanding with Trakindo, which is beneficially owned by our controlling shareholders, where CK acknowledged its trade payables to Trakindo as at December 31, 2015 in the amounts of US$187,570, and Rp.272,970,135,381. Under the terms of the memorandum of understanding, CK shall make payment to Trakindo to settle its trade payables in a minimum amount of US$7,500,000 per quarter until its trade payables to Trakindo are settled. Interest is payable on outstanding trade payables at a rate of 4.5% per annum with respect to U.S. dollar denominated trade payables and at a rate of 8.0% per annum with respect to Rupiah denominated trade payables. CK may otherwise prepay its trade payables upon by notifying Trakindo at least one month before prepayment. Under the terms of the memorandum of understanding, payment for CK s trade payables to Trakindo shall be prioritized and may not be subordinated and assigned in whole or in part, without prior written consent from Trakindo. The ownership rights over the equipment sold to CK by Trakindo will be transferred to CK upon settlement of its trade payables, unless agreed otherwise in writing. As of March 31, 2017, CK had US$39.3 million in outstanding current trade payables and US$109.4 million in outstanding non-current trade payables. On December 21, 2015, SS entered into a memorandum of understanding with Trakindo, which is beneficially owned by our controlling shareholders, that permitted SS to make payment for the purchase of machines and/or generator sets, as well as invoices on generator sets service and maintenance costs, over a period of 60 days upon receipt of invoice. Interest is payable on outstanding trade payables at a rate of 4.5% per annum with respect to U.S. dollar denominated trade payables and at a rate of 8.0% per annum with respect to Rupiah denominated trade payables. Under this memorandum of understanding, payment for Trakindo s invoices shall be prioritized and may not be subordinated and assigned in whole or in part, without prior written consent from Trakindo. The ownership rights over the equipment will be transferred to SS upon fulfilment of its payment obligation, unless agreed otherwise in writing. As of March 31, 2017, SS had US$84.1 million in outstanding current trade payables. Transactions with Trakindo Our businesses regularly purchase heavy equipment, generators, spare parts and maintenance services from Trakindo, who serves as the sole dealer for Caterpillar equipment in Indonesia. These 236

28 acquisitions are done on the basis of purchase orders, which specify the equipment or services to be acquired, the payment terms for the acquisition and delivery date for the same. The terms of payment under purchase orders for heavy equipment typically provide for payment within 60 days and do not accrue interest. Trakindo and SSB have entered into a master service agreement dated December 31, 2012, pursuant to which SSB is appointed to provide welding, machine fabrication, and technical support services. Services under the contract are to be provided from January 1, 2013 and shall continue while Trakindo continues to provide services to PT Freeport Indonesia or by termination by the parties. Trakindo may make payments to SSB on a monthly basis or the parties may at any time terminate the agreement by giving 90 days prior written notice or in the event of occurrences of any events of default and the defaulting party fails to rectify the breach within 14 days of the notice of default. On August 1, 2015, Trakindo engaged SSB as its subcontractor to perform welding, machining, salvaging, line boring, fabrication & nondestructive services for work area located in Sorowako, Luwu Timur Indonesia. Services under the contract are to be provided from August 1, 2015 shall continue whilst Trakindo continues to provide services to PT Vale or by termination by the parties. Trakindo may terminate the agreement by giving 90 days prior written notice or in the event of substantial breach of the agreement. The labor rate is set at Rp.215,000/hour, (normal rate) and IDR 14,000/hour (Standby rate) and applicable material price is Rp.68,500/kg (high strength steel/wear resistance steel) and IDR43,200/kg (Mild steel). The rates are fixed for 12 months and will be reviewed annually. Shareholder Loan from Valle Verde Pte. Ltd. One of our shareholders, Valle Verde Pte. Ltd., has provided us with loan facilities under which US$30.0 million was outstanding as of March 31, See Description of Material Indebtedness ABM Valle Verde Pte. Ltd. Facilities ( Long Term Loan from Shareholder ). We intend to repay all amounts outstanding under these loans using cash on hand following the issuance of the Notes. See Use of Proceeds. Loan from PT Chandra Sakti Utama Leasing A subsidiary of AJN, PT Andara Candria Energi ( ACE ), has entered into three financing agreements with PT Chandra Sakti Utama Leasing, ( CSUL ), which is beneficially owned by our controlling shareholders. Under the financing agreements, ACE must make monthly installments, which may be adjusted periodically. The proceeds of the loan were used to fund construction activities at this subsidiary. Additional details of such lease agreements are as follows: Based on the financing agreement dated January 1, 2017, CSUL provides financing in an amount of US$1,853, for ACE to purchase a MAN Generator Set 34 MW which bears interest of 7.75% per annum. The loan will be repaid in 68 monthly installments, with last installment due on September 18, Based on the financing agreement dated January 18, 2017, CSUL provides financing in an amount of US$2,660, for ACE to finance an EPC works for PLTD HFO 34 MW which bears interest of 7.75% per annum. The loan will be repaid in 68 monthly installments, with last installment due on September 18, Based on the financing agreement dated January 18, 2017, CSUL provides financing in an amount of US$5,486, for ACE to purchase Generator Sets and to pay for EPC services which bears interest of 7.75% per annum. The loan will be repaid in 68 monthly installments, with last installment due on September 18, As of March 31, 2017, US$9.9 million was outstanding under this loan. 237

29 Sale and lease back transactions with CSUL ATR has entered into five sale and lease back transaction with CSUL. Under the terms of the finance leases, ATR must make monthly installments, which may be adjusted periodically. leased equipment is in the form of tug boats and barges, motor boats and landing craft. Additional details of such finance lease agreements are as follows: Based on the offer to lease and acceptance dated May 25, 2012, as amended by amendment to the offer to lease and acceptance dated March 22, 2017, CSUL provides a finance lease in the form of sale and lease back in amount of US$1,390, with a lease rental reference rate of 7.25% per annum and margin of 0.7% per annum above the lease rental reference rate. The lease commenced on May 29, 2012 for a period of 84 months. The lease will be paid in 27 monthly installments, with the last installment due on May 27, Based on the offer to lease and acceptance dated July 12, 2012, as amended by amendment to the offer to lease and acceptance dated March 22, 2017, CSUL provides a finance lease in the form of sale and lease back in amount of US$2,297, with a lease rental reference rate of 7.25% per annum and margin of 0.7% per annum above the lease rental reference rate. The lease commenced on July 13, 2012 for a period of 84 months. The lease will be paid in 29 monthly installments, with the last installment due on July 27, Based on the offer to lease and acceptance dated June 20, 2012, as amended by amendment to the offer to lease and acceptance dated March 22,2017, CSUL provides a finance lease in the form of sale and lease back in amount of US$2,908, with a lease rental reference rate of 7.25% per annum and margin of 0.7% per annum above the lease rental reference rate. The lease commenced on June 25, 2012 for a period of 84 months. The lease will be paid in 28 monthly installments, with the last installment due on June 27, Based on the offer to lease and acceptance dated July 27, 2012, as amended by amendment to the offer to lease and acceptance dated March 22, 2017, CSUL provides a finance lease in the form of sale and lease back in amount of US$2,506, with lease rental reference rate of 7.25% per annum and margin of 0.7% per annum above the lease rental reference rate. The lease commenced on July 30, 2012 for a period of 84 months. The lease will be paid in 29 monthly installments, with the last installment due on July 27, Based on the offer to lease and acceptance dated March 11, 2013 as amended by amendment to the offer to lease and acceptance dated March 22,2017, CSUL provides finance lease in the form of sale and lease back transaction in amount of US$2,782, with lease rental reference rate of 7.25% per annum and margin of 1% per annum above the lease rental reference rate. The lease commenced on March 19, 2013 for a period of 84 months. The lease will be paid in 37 monthly installments, with the last installment due on March 27, Lease transactions with PT Tiara Marga Trakindo CKB has entered into a lease agreement with PT Tiara Marga Trakindo dated December 9, 2016 for the lease of warehouse and office, located in Medan and South Sulawesi, respectively. Under the lease agreement, CKB (i) must pay a monthly rent and (ii) must pay the applicable land and building tax. CKB leases both premises from January 1, 2017 to December 31, 2019 for the combined monthly rent amount of Rp.35,700,

30 The Group has entered into a number of operating lease agreements with PT Tiara Marga Trakindo for the use of office space, under which the Company, RWA, CK, TIA, MIFA and CKB (i) must pay a monthly rent and (ii) may terminate the lease after the second year of lease by providing a six months prior written notice and a six months gross rent payment to PT Tiara Marga Trakindo. Additional details of such lease agreements are as follows: ABM entered into a terms of lease with PT Tiara Marga Trakindo dated December 8, 2016, pursuant to which ABM leases an office space of approximately 1, square meters in the TMT Building from January 1, 2017 to December 31, 2019 for the monthly rent amount of Rp.189,000 per square meter. CKB entered into a terms of lease with PT Tiara Marga Trakindo dated December 8, 2016, pursuant to which CKB leases an office space of approximately 1, square meters in the TMT Building from January 1, 2017 to December 31, 2019 for the monthly rent amount of Rp.189,000 per square meter. RWA entered into a term of lease with PT Tiara Marga Trakindo dated December 8, 2016, pursuant to which RWA leases an office space of square meters in the TMT building from January 1, 2017 to December 31, 2019 for the monthly rent amount of Rp per square meter. CK entered into a term of lease with PT Tiara Marga Trakindo dated December 8, 2016, pursuant to which CK leases an office space of approximately 1, square meters in the TMT building from January 1, 2017 to December 31, 2019 for the monthly rent amount of Rp per square meter. TIA entered into a term of lease with PT Tiara Marga Trakindo dated December 8, 2016, pursuant to which TIA leases an office space of square meters in the TMT building from January 1, 2017 to December 31, 2019 for the monthly rent amount of Rp per square meter. MIFA entered into a term of lease with PT Tiara Marga Trakindo dated December 8, 2016, pursuant to which MIFA leases an office space of approximately square meters in the TMT building from January 1, 2017 to December 31, 2019 for the monthly rent amount of Rp per square meter. 239

31 Parts Supply and Consignment Agreement CK has entered into several parts supply agreements and a supply and consignment agreement with Trakindo, pursuant to which Trakindo will supply parts of certain Caterpillar and/or non-caterpillar heavy equipment which is operated by CK s work location located in (i) CK Site DMP, Lahat, Sumatera Selatan, (ii) CK Site ABN, Balikpapan, Kalimantan Timur, (iii) CK Site KJB, Berau, Kalimantan Timur, (iv) CK Site Rinjani, Kutai Kartanegara, Kalimantan Timur, (iv) CK Site TIA, Tanah Bumbu, Kalimantan Selatan, (v) CK Site MBA, Malinau, Kalimantan Utara, and (vi) CK Site TMU. Most of the parts supply agreements expires December 31, 2017, while the supply and consignment agreement expires on November 30, Equipment Rental Agreement In April and May 2016, CK entered into several equipment rental agreements with Trakindo, pursuant to which Trakindo will rent equipment to CK. Such equipment is being operated in the following sites: (i) PT Adidaya Tangguh s mining area in Taliabu, Maluku Utara, (ii) PT Kaltim Jaya Bara s mining area in Berau, Kalimantan Utara, and (iii) TIA s mining site. Each of agreement has a term of rent of 24 months from the issuance date of delivery acceptance certificate. Maintenance and Repair Contract On January 1, 2016, CK has entered into a maintenance and repair contract with Trakindo, pursuant to which Trakindo will provide maintenance and repair service for 10 heavy equipment fleets located in CK s work sites. This contract shall expired within 60 days after the service meter unit of the last operated heavy equipment fleet ends. The contract provides a service meter unit of 22,950 for each heavy equipment fleet. Transaction with PT Mitra Solusi Telematika DDE has entered into subscription agreement with PT Mitra Solusi Telematika on October 1, 2016 for the use of information technology services, such as office management services and connectivity services. DDE must pay monthly services fee in an amount of Rp.9,400,000 and may terminate subscription by providing 90 days prior written notice and make payment for remaining services monthly fee to PT Mitra Solusi Telematika. The subscription services ends on September 30, Other Related Party Transactions In addition to the above, we enter into other transactions with other members of the PT Tiara Marga Trakindo group in the ordinary course of business. For example, we lease the space for our head office in Jakarta from PT Triyasa Propertindo and receive group information technology services from PT Mitra Solusi Telematika. Our integrated logistics business receives financing to acquire vessels from PT Chandra Sakti Utama Leasing, who has also provided heavy equipment acquisition financing to our mining contract services business. We also acquire Iveco trucks from PT Chakra Jawara and Michelin branded tires from PT Chitra Paratama. 240

32 DESCRIPTION OF MATERIAL INDEBTEDNESS As of March 31, 2017, we had contractual outstanding principal indebtedness totaling US$508.0 million. The following is a summary of the material terms of certain financing arrangements to which we are a party. The following summaries are not complete and are subject to the full text of the documents described below. ABM Oversea-Chinese Banking Corporation Limited, Singapore Club Facility ( Club Facility ) On October 13, 2016, the Company entered into a facility agreement with Oversea-Chinese Banking Corporation Limited ( OCBC ), PT Bank OCBC NISP Tbk ( OCBC NISP ), DBS Bank Ltd. ( DBS ), PT Bank ANZ Indonesia ( ANZ ) and PT Bank Mandiri (Persero) Tbk ( Mandiri ), where OCBC is acting as Agent and OCBC NISP is acting as Security Agent, for a term loan facility for an aggregate principal amount of US$358,113,600. The term loan facility bears interest at a rate of LIBOR plus an applicable margin per annum, ranging from 3.35% to 3.85% prior to January 22, 2019 and 3.85% to 4.35% on and after January 22, The term loan facility is repayable in 18 quarterly installment commencing October 2016 and will expire on January 22, The term loan facility is secured by, among others, the shares of certain subsidiaries, trade receivables, inventories and fixed assets of certain subsidiaries. Under the terms of the agreement, the Group (excluding SS) is required to comply with certain restrictive covenants related to the Group s nature of business, corporate actions and others and to maintain certain financial ratios such as consolidated net debt to EBITDA ratio and consolidated net debt to equity ratio. As of March 31, 2017, US$303.0 million was outstanding under this facility, net of unamortized transaction costs amounting to US$8.3 million. The Company intends to use a portion of the proceeds from the Offering to repay this facility in full. See Use of Proceeds. Oversea-Chinese Banking Corporation Limited Specific Advance Facility ( Specific Advance Facility ) On December 12, 2014, the Company entered into a facility agreement with OCBC, for a Specific Advance Facility for an aggregate principal amount of US$20.0 million. The Specific Advance Facility bears interest at a rate of LIBOR plus 4.25% per annum. Under the terms of the agreement, the Company is required to comply with certain financial ratios such as consolidated net debt to EBITDA ratio and consolidated net debt to equity ratio. As of March 31, 2017, the Company had not drawn down on this facility. Valle Verde Pte. Ltd. Facilities ( Long Term Loan from Shareholder ) On June 27, 2014, the Company entered into a facility agreement with Valle Verde Pte. Ltd., a shareholder of the Company, for a subordinated term loan for an aggregate principal amount of US$30.0 million. The loan bears interest at a rate of LIBOR plus 3.35% per annum. The term loan facility is repayable on the earlier of the fifth anniversary of the drawdown date or upon full repayment of the Club Facility. As of March 31, 2017, US$30.0 million was outstanding under this facility. The Company intends to repay this facility in full following the issuance of the Notes. See Use of Proceeds. 241

33 On October 18, 2016, the Company entered into a second facility agreement with Valle Verde Pte. Ltd, for a subordinated term loan for an aggregate principal amount of US$10.0 million. This loan shall be used to remedy any potential breach of the provisions of the Club Facility. The loan bears interest at a rate of LIBOR plus 3.35% per annum. As of March 31, 2017, the Company had not drawn down on this facility. PT Mandiri (Persero) Tbk ( Mandiri ) On March 25, 2014, the Company and Mandiri entered into a non cash loan facility agreement where Mandiri has agreed to provide the Company a non-cash loan for the issuance of, among others, letter of credit, bank guarantee, and standby letter of credit required for the Company s operations, with a combined maximum limit not to exceed US$20.0 million. The maximum limit also includes a trust receipt facility with a sublimit of US$1.0 million. As long as there is an outstanding amount by the Company under the agreement, the Company is required to obtain written approval from Mandiri prior to, among others, (i) becoming a guarantor in favor of any third party, (ii) any capital participations or financings of other companies, or (iii) repayment of any shareholders loans. There is currently no outstanding amount under this agreement. Under the terms of the agreement, the Company is also required to maintain certain financial ratios such as net debt to EBITDA ratio and consolidated net debt to equity ratio. The non-cash loan facility agreement will terminate on April 24, SS Mandiri Special Transaction Loan III ( PTK III ) On November 8, 2013, SS entered into a special transaction loan facility with Mandiri ( PTK IV ) with a maximum credit limit of Rp billion, which expires on November 7, 2018 and carries an interest rate of 10.5% per annum. Based on the PTK IV loan agreement, SS is required to comply with certain restrictive covenants related to the nature of SS s business, certain corporate actions, and others, and to maintain certain financial ratios such as debt to equity ratio and debt service ratio below 300% and 100%, respectively. The PTK IV loan agreement also requires consent from Mandiri for SS to change the controlling ownership and distribute dividends, subject to certain exceptions. PT Bank DBS Indonesia ( DBS ) and PT Bank ICBC Indonesia ( ICBC ) On June 15, 2012, SS entered into an agreement with DBS and ICBC for two credit facilities ( Facility A and Facility B ). Facility A is a term loan with a maximum credit amount of Rp billion, which expires on June 15, Facility B was a revolving loan with a maximum credit limit of Rp billion, which expired on June 15, As of March 31, 2017, total amounts outstanding under Facility A amounted to Rp billion. Facility A bears interest on a floating exchange rate. Under the facility agreement, SS is required to comply with certain restrictive covenants related to the nature of SS s business, certain corporate actions and others and to maintain certain financial ratios such as debt to EBITDA ratio, total debt to consolidated net worth ratio and EBITDA to debt service ratio of at least 400%, 300% and 100%, respectively. Under the agreement, SS is also prohibited from paying dividends of any kind. As of March 31, 2017, SS was not in compliance with all of its financial covenants under the Facility A loan agreement. Sukuk Ijarah Sumberdaya Sewatama I Tahun 2012 (the Sukuk Ijarah ) On November 30, 2012, SS issued an unsecured Sukuk Ijarah of Rp.200 billion, which matures on November 30, Under the Sukuk Ijarah, SS is required to meet certain financial ratios and to comply with certain restrictive covenants. As of March 31, 2017, SS was not in compliance with all of its financial covenants under the Sukuk Ijarah. 242

34 Bonds On November 30, 2012, SS issued two sets unsecured of bonds ( Series A Bonds and Series B Bonds ). Series A Bonds were issued in the amount of Rp.219 billion, had an interest rate of 8.6% per annum and matured on November 30, Series B Bonds were issued in the amount of Rp.581 billion, have an interest rate of 9.6% and mature on November 30, Under the terms of the Series B Bonds, SS is required to comply with certain restrictive covenants and to maintain certain financial ratios. As of March 31, 2017, SS was not in compliance with all of its financial covenants under the Series B Bonds. Restructuring The terms of SS s debt were amended and restated as part of its restructuring exercise that was finalized in June See Business Power Solutions Debt Restructuring. Finance Lease Payables We have entered into various lease commitments covering office furniture, fixtures and equipment, vehicles, vessels and machinery and equipment. As of March 31, 2017, we had total outstanding finance lease payables of US$44.4 million. AJN Loan from PT Chandra Sakti Utama Leasing A subsidiary of AJN, PT Andara Candria Energi, has entered into three financing agreements with PT Chandra Sakti Utama Leasing, which is beneficially owned by our controlling shareholders. For further details, see Related Party Transactions Loan from PT Chandra Sakti Utama Leasing. Sale and lease back transactions with PT Chandra Sakti Utama Leasing ATR has entered into five sale and lease back transaction with PT Chandra Sakti Utama Leasing. For further details, see Related Party Transactions Sale and lease back transactions with CSUL. 243

35 DESCRIPTION OF THE NOTES For purposes of this Description of the Notes, the term Company refers only to PT ABM Investama Tbk, a company incorporated with limited liability under the laws of Indonesia, and not to any of its Subsidiaries. Each Subsidiary of the Company that guarantees the Notes is referred to as a Subsidiary Guarantor, and each such guarantee is referred to as a Subsidiary Guarantee. The Notes are to be issued under an indenture (the Indenture ), to be dated as of the Original Issue Date, among the Company, the Initial Subsidiary Guarantors and The Bank of New York Mellon as trustee (the Trustee ) and as collateral agent (the Collateral Agent ). The Indenture will not be qualified under the U.S. Trust Indenture Act of 1939, as amended. The following is a summary of certain provisions of the Indenture, the Notes, the Subsidiary Guarantees and the Security Documents. This summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the Indenture, the Notes, the Subsidiary Guarantees and the Security Documents. It does not restate those agreements in their entirety. Whenever particular sections or defined terms of the Indenture not otherwise defined herein are referred to, such sections or defined terms are incorporated herein by reference. Copies of the Indenture will be available for inspection on or after the Original Issue Date during normal office hours at the Corporate Trust Office of the Trustee at 101 Barclay Street, New York, New York 10286, United States of America. Brief Description of the Notes The Notes will: be general obligations of the Company; be senior in right of payment to any obligations of the Company expressly subordinated in right of payment to the Notes; rank at least pari passu in right of payment with all unsecured, unsubordinated Indebtedness of the Company (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law); be guaranteed by the Subsidiary Guarantors on an unsubordinated basis, subject to the limitations described below under the caption Subsidiary Guarantees and in Risk Factors Risks Relating to the Notes, the Subsidiary Guarantees and the Collateral ; be effectively subordinated to the secured obligations of the Company and the Subsidiary Guarantors, to the extent of the value of the assets serving as security therefor (other than the Collateral, to the extent applicable); be effectively subordinated to all existing and future obligations of any Subsidiaries other than the Subsidiary Guarantors; and be secured by the Collateral (subject to Permitted Liens) as described below under Security. The Notes will mature on August 1, 2022 unless earlier redeemed pursuant to the terms thereof and the Indenture. The Indenture will allow additional Notes to be issued from time to time (the Additional Notes ), subject to certain limitations described under Further Issues. Unless the context requires otherwise, references to the Notes for all purposes of the Indenture and this 244

36 Description of the Notes include any Additional Notes that are actually issued. The Notes will bear interest at 7.125% per annum from the Original Issue Date or from the most recent interest payment date to which interest has been paid or duly provided for, payable semi-annually in arrears on February 1 and August 1 of each year (each an Interest Payment Date ), commencing February 1, Interest on the Notes will be paid on the Interest Payment Date to Holders of record at the close of business on January 17 or July 17 immediately preceding an Interest Payment Date (each a Record Date ), notwithstanding any transfer, exchange or cancellation thereof after a Record Date and prior to the immediately following Interest Payment Date. Interest on the Notes will be calculated on the basis of a 360 day year comprised of twelve 30-day months. Except as otherwise provided in the Indenture, the Notes may not be redeemed prior to maturity. In any case in which the date of the payment of principal of, premium (if any) or interest on the Notes (including any payment to be made on any date fixed for redemption or purchase of any Note) is not a Business Day in the relevant place of payment or in the place of business of the Paying Agent, then payment of principal, premium (if any) or interest need not be made in such place on such date but may be made on the next succeeding Business Day in such place. Any payment made on such Business Day will have the same force and effect as if made on the date on which such payment is due, and no interest on the Notes will accrue for the period after such date. The Notes will be issued only in fully registered form, without coupons, in minimum denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. See Book-Entry; Delivery and Form. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. All payments on the Notes will be made in U.S. dollars in immediately available funds by the Company at the office or agency of the Company maintained for that purpose (which initially will be the specified office of the Paying Agent located at 101 Barclay Street, New York, New York 10286, United States of America), and the Notes may be presented for registration of transfer or exchange at such office or agency; provided that, at the option of the Company, payment of interest may be made by wire transfer (at the expense of the Company) to the Holders. Interest payable on the Notes held through DTC will be available to DTC participants (as defined herein) on the Business Day following payment thereof. Subsidiary Guarantees On the Original Issue Date, all of the Company s Subsidiaries, other than PT Sumberdaya Sewatama ( SS ) and its Subsidiaries and PT Anzara Janitra Nusantara ( AJN ) and its Subsidiaries, will be Restricted Subsidiaries. SS and its Subsidiaries existing on the Original Issue Date and AJN and its Subsidiaries existing on the Original Issue Date will be Unrestricted Subsidiaries. However, under the circumstances described below under the caption Certain Covenants Designation of Restricted and Unrestricted Subsidiaries, the Company will be permitted to designate certain of its other Subsidiaries as Unrestricted Subsidiaries. The Company s Unrestricted Subsidiaries will generally not be subject to the restrictive covenants in the Indenture and will not guarantee the Notes. On the Original Issue Date, all of the Restricted Subsidiaries of the Company on the Original Issue Date (other than PT Media Djaya Bersama ( MDB ) and its Subsidiaries) will provide a Subsidiary Guarantee. The Initial Subsidiary Guarantors will be PT Reswara Minergi Hartama ( Reswara ), PT Tunas Inti Abadi ( TIA ), PT Pelabuhan Buana Reja ( PBR ), PT Cipta Kridatama ( CK ), PT Cipta Krida Bahari ( CKB ), PT Sanggar Sarana Baja ( SSB ), PT Alfa Trans Raya ( ATR ), PT Baruna Dirga Dharma ( BDD ), PT Dianta Daya Embara ( DDE ) and PT Prima Wiguna Parama ( PWP ) (each an Initial Subsidiary Guarantor and collectively, the Initial Subsidiary Guarantors ). MDB and its Subsidiaries existing on the Original Issue Date will not provide Subsidiary Guarantees on the Original Issue Date or at any time in the future. 245

37 The Company will agree that if the Company or any of its Restricted Subsidiaries acquires or creates another Subsidiary after the Original Issue Date, then such Subsidiary will become a Restricted Subsidiary and the Company will, within 30 days of the date on which such Subsidiary is acquired or created, (1) procure that such Subsidiary execute and deliver to the Trustee a supplemental indenture to the Indenture pursuant to which such Subsidiary will guarantee the payment of the Notes as a Subsidiary Guarantor on an unsubordinated basis and (2) deliver to the Trustee an Opinion of Counsel with respect to such supplemental indenture satisfactory to the Trustee; provided, however, that clauses (1) and (2) shall not apply to (i) any such Restricted Subsidiary if the guarantee by such Restricted Subsidiary of the payment of the Notes could reasonably be expected to give rise to or result in any conflict with or violation of applicable law (or risk of criminal liability for the officers, directors, commissioners, managers or shareholders of such Restricted Subsidiary) and such conflict, violation or criminal liability cannot be avoided or otherwise prevented through measures reasonably available to the Company, (ii) any Finance Subsidiary for so long as it is and remains a Finance Subsidiary and any FS Subsidiary so long as it is and remains a FS Subsidiary or (iii) any such Restricted Subsidiary if the Company and its Restricted Subsidiaries own less than 95.0% of the outstanding Capital Stock of such Restricted Subsidiary provided that after giving pro forma effect to the designation of such Subsidiary as a Non-Guarantor Subsidiary on the date such Subsidiary is created or acquired (the Designation Date ), the Company and any Restricted Subsidiary could Incur at least US$1.00 of Priority Indebtedness under the proviso in paragraph (a) of the covenant described under Limitation on Indebtedness. The Subsidiary Guarantee of each Subsidiary Guarantor will: be a general obligation of such Subsidiary Guarantor; be senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to such Subsidiary Guarantee; rank at least pari passu in right of payment with all other unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsecured, unsubordinated Indebtedness pursuant to applicable law); and be effectively subordinated to secured obligations of such Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor (other than the Collateral, to the extent applicable). Under the Indenture, and any supplemental indenture to the Indenture, as applicable, each of the Subsidiary Guarantors will jointly and severally guarantee the due and punctual payment of the principal of, premium (if any) and interest on, and all other amounts payable under, the Notes and the Indenture, subject to the limitations set forth herein. The Subsidiary Guarantors will (1) agree that their obligations under the Subsidiary Guarantees will be enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Indenture and (2) waive their right to require the Trustee to pursue or exhaust its legal or equitable remedies against the Company prior to exercising its rights under the Subsidiary Guarantees. Moreover, if at any time any amount paid under a Note or the Indenture is rescinded or must otherwise be repaid, the rights of the Holders under the Subsidiary Guarantees will be reinstated with respect to such payments as though such payment had not been made. All payments under the Subsidiary Guarantees are required to be made in U.S. dollars. Concurrently with the execution of a Subsidiary Guarantee, each Subsidiary Guarantor incorporated in the Republic of Indonesia will enter into a Deed of Guarantee governed by the laws of Indonesia which will provide for such Subsidiary Guarantor s guarantee of the due and punctual payment of the principal of, premium (if any) and interest on, and all other amounts payable under, the Notes and the Indenture under the laws of Indonesia. 246

38 Under the Indenture, and any supplemental indenture to the Indenture, as applicable, each Subsidiary Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance, fraudulent transfer, financial assistance, corporate benefit, capital maintenance or similar laws affecting the rights of creditors generally. By virtue of these limitations, a Subsidiary Guarantor s obligations under its Subsidiary Guarantee could be significantly less than amounts payable with respect to the Notes, or a Subsidiary Guarantor may effectively have no obligation under its Subsidiary Guarantee. If a Subsidiary Guarantee were to be rendered voidable, it could be subordinated by a court to all other Indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such Indebtedness, a Subsidiary Guarantor s liability on its Subsidiary Guarantee could be reduced to zero. The obligations of the Subsidiary Guarantors may be limited, or possibly invalidated, under applicable law. See Risk Factors Risks Relating to the Notes, the Subsidiary Guarantees and the Collateral The Subsidiary Guarantees may be challenged under applicable bankruptcy, insolvency, fraudulent transfer, financial assistance, unfair preference or similar laws, which could impair the enforceability of the Subsidiary Guarantees. As of March 31, 2017: (a) (b) the Company and its consolidated subsidiaries had US$508.0 million of consolidated indebtedness outstanding; and the Company s Unrestricted Subsidiaries had total assets of US$248.5 million and total indebtedness of US$132.7 million. For the year ended December 31, 2016 and the three months ended March 31, 2017, the Company s Unrestricted Subsidiaries had US$95.1 million and US$20.0 million, respectively, of revenue and US$27.0 million and US$5.0 million, respectively, of EBITDA. See Summary Financial Information and Selected Financial Information. Release of the Subsidiary Guarantees A Subsidiary Guarantee given by a Subsidiary Guarantor may be released in certain circumstances, including: upon repayment in full of the Notes; upon a defeasance or satisfaction and discharge as described under Defeasance Defeasance and Discharge or Satisfaction and Discharge ; upon the designation by the Company of such Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with the terms of the Indenture or; upon the sale or other disposition (including by way of merger or consolidation) of the Capital Stock of such Subsidiary Guarantor in compliance with the terms of the Indenture (including the covenants described under the captions Certain Covenants Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries, Certain Covenants Limitation on Asset Sales and Consolidation, Merger and Sale of Assets ) resulting in such Subsidiary Guarantor no longer being a Restricted Subsidiary. 247

39 No release of a Subsidiary Guarantor from its Subsidiary Guarantee shall be effective against the Trustee or the Holders until the Company has delivered to the Trustee an Officer s Certificate stating that all requirements relating to such release have been complied with and that such release is authorized and permitted by the Indenture. Security The obligations of the Company under the Notes will be secured by a Lien on the Collateral which shall initially consist of a pledge over all of the Company s rights in the Debt Service Accrual Account (as defined below) (the Collateral ). Except for certain Permitted Liens, the Collateral will not be shared with any other creditors of the Company or any Subsidiary Guarantors. The agreements evidencing the Liens to secure the Notes on the Collateral are referred to as the Security Documents. Debt Service Accrual Account On or prior to the Original Issue Date, the Company will establish an account (the Debt Service Accrual Account ) in New York with The Bank of New York Mellon (the Debt Service Accrual Account Bank ). Pursuant to the Indenture, the Company shall be required to deposit into the Debt Service Accrual Account, on or prior to the 25th day of each calendar month, commencing on August 25, 2017 an amount equal to one-sixth (1/6) of each interest payment (together with any Additional Amounts related thereto) due on the next succeeding Interest Payment Date, so that prior to such Interest Payment Date there are sufficient funds available on deposit in the Debt Service Accrual Account to pay the interest (together with Additional Amounts) due on such Interest Payment Date. Prior to each Interest Payment Date, the Company will instruct the Debt Service Accrual Account Bank to withdraw funds from the Debt Service Accrual Account on such Interest Payment Date in an amount equal to the interest (together with Additional Amounts) due under the Indenture on such Interest Payment Date and apply such funds to the payment of interest (together with Additional Amounts) on the Notes. Funds deposited in the Debt Service Accrual Account will be maintained in U.S. dollars. On the Original Issue Date, as security for the payment and performance by the Company of its obligations under the Notes, the Subsidiary Guarantors under the Subsidiary Guarantees and each of the Company and the Subsidiary Guarantors under the Indenture, the Company will grant the Collateral Agent, for the benefit of the Holders and the Trustee, a first priority Lien (subject to Permitted Liens) over the Debt Service Accrual Account and all rights, title and interest in and to all amounts on deposit in the Debt Service Accrual Account at any time. If the Notes become due and payable following the occurrence of an Event of Default under the Notes, the funds remaining on deposit in the Debt Service Accrual Account shall be paid solely to the order of the Trustee for the benefit of the Holders and the Debt Service Accrual Account Bank shall release such funds in the Debt Service Accrual Account at the direction of the Trustee, which shall apply such funds in accordance with the provisions of the Indenture and the Security Documents in and towards payment of the amounts due under the Notes and the Indenture. Funds remaining on deposit in the Debt Service Accrual Account on the maturity date of the Notes will be applied to the payment of interest and Additional Amounts, if any, on the Notes, and any remaining balance shall be applied to the payment of principal and premium, if any, due on the Notes. 248

40 Enforcement of Security The first-priority Liens (subject to any Permitted Lien) over the Collateral will be granted to the Collateral Agent. The Bank of New York Mellon will act as the initial Collateral Agent under the Security Documents entered into on the Original Issue Date. The Collateral Agent will hold such Liens over the Collateral granted pursuant to the Security Documents with sole authority as directed by the Trustee or the written instructions of the Holders to exercise remedies under the Security Documents. The Collateral Agent has agreed to act as secured party under the applicable Security Documents on behalf of the Holders, to follow the instructions provided to it under the Indenture and the Security Documents, and to carry out certain other duties. The Trustee will give instructions to the Collateral Agent by itself or in accordance with instructions it receives from the Holders under the Indenture (subject to it being indemnified and/or secured and/or pre-funded to its satisfaction). The Indenture and/or the Security Documents principally provide that, at any time while the Notes are outstanding, the Collateral Agent has the right to perform and enforce the terms of the Security Documents relating to the Collateral and to exercise and enforce all privileges, rights and remedies thereunder according to its direction, including to take or retake control or possession of such Collateral and to hold, prepare for sale, process, lease, dispose of or liquidate such Collateral, including, without limitation, following the occurrence of an Event of Default under the Indenture. All payments received and all amounts held by the Collateral Agent in respect of the Collateral under the Security Documents will be applied as follows: first, to the Trustee, the Collateral Agent, the Agents (as defined below) to the extent necessary to reimburse the Trustee, the Collateral Agent, the Agents and any such representative and their respective agents, delegates and any receivers for any fees and expenses (including legal fees and expenses) incurred in connection with the collection or distribution of such amounts held or realized or in connection with fees and expenses (including legal fees and expenses) incurred in enforcing all available remedies under the Security Documents and preserving the Collateral and all amounts for which the Trustee, the Collateral Agent, the Agents, any such representative and their respective agents, delegates and any receivers are entitled to indemnification under the Indenture and the Security Documents; second, to the Trustee for the benefit of the Holders; and third, any surplus remaining after such payments will be paid to the Company or to whomever may be lawfully entitled thereto. The Collateral Agent may decline to foreclose on the Collateral or exercise remedies available if it does not receive indemnification and/or security and/or pre-funding to its satisfaction. In addition, the Collateral Agent s ability to foreclose on the Collateral may be subject to lack of perfection, the consent of third parties and practical problems associated with the realization of the Collateral Agent s Liens on the Collateral. Neither the Trustee, the Collateral Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral securing the Notes, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, continuation, priority, sufficiency or protection of any of the Liens, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens or Security Documents or any delay in doing so. The Collateral Agent will not be required to expend its own funds under any circumstances. 249

41 The Security Documents provide that the Company and the Subsidiary Guarantors will indemnify the Collateral Agent and the Trustee for all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind imposed against the Collateral Agent arising out of the Security Documents except to the extent that any of the foregoing are finally judicially determined to have resulted from the gross negligence or willful misconduct of the Collateral Agent or the Trustee, as applicable. Release of Collateral The security created in respect of the Collateral granted under the Security Documents may be released in certain circumstances, including: upon repayment in full of the Notes; and upon a defeasance or satisfaction and discharge as described under Defeasance Defeasance and Discharge or Satisfaction and Discharge. Further Issues Subject to the covenants described below and in accordance with the terms of the Indenture, the Company may, from time to time, without notice to or the consent of the Holders, create and issue Additional Notes having the same terms and conditions as the Notes (including the benefit of the Subsidiary Guarantees and the Collateral) in all respects (or in all respects except for the issue date, issue price and the date of the first payment of interest on them and, to the extent necessary, certain temporary securities law transfer restrictions) so that such Additional Notes may be consolidated and form a single class with the previously outstanding Notes and vote together as one class on all matters with respect to the Notes; provided that (a) the issuance of any such Additional Notes shall then be permitted under the covenant described under the caption Certain Covenants Limitation on Indebtedness and the other provisions of the Indenture and (b) the Additional Notes will not be issued under the same CUSIP, ISIN or Common Code as the Notes unless such Additional Notes are fungible with the Notes for U.S. federal income tax purposes. In addition, the issuance of any Additional Notes by the Company will be subject to the following conditions: (1) all obligations with respect to the Additional Notes shall be secured and guaranteed under the Indenture, the Notes and the Subsidiary Guarantees to the same extent and on the same basis as the Notes outstanding on the date the Additional Notes are issued; (2) the Company has delivered to the Trustee an Officer s Certificate, in form and substance satisfactory to the Trustee, confirming, among other things, that the issuance of the Additional Notes complies with the Indenture and is permitted by the Indenture; and (3) the Company has delivered to the Trustee one or more Opinions of Counsel, in form and substance satisfactory to the Trustee, confirming, among other things, that the issuance of the Additional Notes does not conflict with applicable law. 250

42 Optional Redemption At any time and from time to time on or after August 1, 2020, the Company may at its option redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, on the Notes redeemed, to (but not including) the redemption date, if redeemed during the 12-month period commencing on August 1 of any year set forth below: Period Redemption Price At any time and from time to time prior to August 1, 2020, the Company may at its option redeem up to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price of % of the principal amount of the Notes, plus accrued and unpaid interest, if any, on the Notes redeemed, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes issued on the Original Issue Date (excluding Notes held by the Company and its Restricted Subsidiaries) remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering. Notice of any redemption upon any Equity Offering may be given prior to the completion of such Equity Offering, and any such redemption or notice may, at the Company s discretion, be conditioned on the completion of the related Equity Offering. At any time and from time to time prior to August 1, 2020, the Company may at its option redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, on the Notes redeemed, to (but not including) the redemption date. The Company will give not less than 30 days nor more than 60 days notice of any redemption. If less than all of the Notes are to be redeemed, the Notes for redemption will be selected as follows: if the Notes are listed on any securities exchange or are held through any clearing system, in compliance with the requirements of the principal securities exchange on which the Notes are then traded or the clearing system through which the Notes are held; or if the Notes are not listed on any securities exchange and are not held through the clearing systems, on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate in its sole discretion or otherwise in accordance with applicable law. However, no Note of US$200,000 in principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption. Repurchase of Notes Upon a Change of Control Not later than 30 days following a Change of Control, the Company will make an Offer to Purchase all outstanding Notes (a Change of Control Offer ) at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date. 251

43 The Company has agreed in the Indenture that they will timely repay all Indebtedness or obtain consents as necessary under, or terminate, agreements or instruments that would otherwise prohibit a Change of Control Offer required to be made pursuant to the Indenture. Notwithstanding this agreement of the Company, it is important to note that if the Company is unable to repay (or cause to be repaid) all of the Indebtedness, if any, that would prohibit repurchase of the Notes or is unable to obtain the requisite consents of the holders of such Indebtedness, or terminate any agreements or instruments that would otherwise prohibit a Change of Control Offer, it would continue to be prohibited from purchasing the Notes. In that case, the failure by the Company to purchase tendered Notes would constitute an Event of Default under the Indenture. Certain of the events constituting a Change of Control under the Notes may also constitute an event of default, or trigger the rights of lenders to require prepayment, under certain other debt instruments. Future debt of the Company may also (i) prohibit the Company from purchasing Notes in the event of a Change of Control, (ii) provide that a Change of Control is a default or (iii) require repurchase or repayment of such debt upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to purchase the Notes could cause a default under such other Indebtedness, even if the Change of Control itself does not, due to the financial effect of the purchase on the Company. The ability of the Company to pay cash to the Holders following the occurrence of a Change of Control may be limited by the Company s then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make the required purchase of the Notes. See Risk Factors Risks Relating to the Notes, the Subsidiary Guarantees and the Collateral We may not have the ability to raise the funds necessary to finance an offer to repurchase the Notes upon the occurrence of certain events constituting a Change of Control as required by the Indenture.. The definition of Change of Control includes a phrase all or substantially all, as used with respect to the assets of the Company. No precise definition of the phrase has been established under applicable law, and the phrase will likely be interpreted under applicable law of the relevant jurisdictions based on particular facts and circumstances. Accordingly, there may be a degree of uncertainty as to the ability of a Holder of Notes to require the Company to repurchase such Holder s Notes as a result of a sale of all or substantially all the assets of the Company to another person or group. Notwithstanding anything to the contrary contained herein, an Offer to Purchase may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described hereunder by virtue of its compliance with such laws and regulations. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders to require that the Company purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Company will not be required to make an Offer to Purchase if (1) a third party makes such Offer to Purchase in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to such Offer to Purchase and such third party purchases all Notes 252

44 validly tendered and not withdrawn under such Offer to Purchase or (2) notice of redemption for all outstanding Notes has been given pursuant to the Indenture as described above under the caption Optional Redemption, unless and until there is a default in payment of the applicable redemption price. Mandatory Redemption; Sinking Fund There will be no mandatory redemption or sinking fund payments for the Notes. Open Market Purchases The Company and any Restricted Subsidiary may purchase Notes by means other than a redemption, whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws and regulations, so long as such acquisition does not otherwise violate the terms of the Indenture or the Security Documents. The Company will notify the Trustee in writing at the completion of any such open market purchases. Any Notes acquired by the Company or any Restricted Subsidiary will be cancelled. Additional Amounts All payments of principal of and premium (if any) and interest on the Notes and all payments under the Subsidiary Guarantees will be made by or on behalf of the Company or any Subsidiary Guarantor without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company or a Surviving Person is organized or resident for tax purposes (as defined under the caption Consolidation, Merger and Sale of Assets ) (each, as applicable, a Relevant Tax Jurisdiction ) or any jurisdiction in which any Subsidiary Guarantor is organized or resident for tax purposes or from or through which payment is made (or any political subdivision or taxing authority thereof or therein) (together with the Relevant Tax Jurisdictions, the Relevant Jurisdictions ), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company, a Surviving Person or the applicable Subsidiary Guarantor, as the case may be, will make such deduction or withholding, make payment of the amount so withheld to the appropriate governmental authority and will pay such additional amounts ( Additional Amounts ) as will result in receipt by the Holder of each Note of such amounts payable under the Notes or the Subsidiary Guarantees as would have been received by such Holder had no such withholding or deduction been required, except that no Additional Amounts will be payable: (a) for or on account of: (i) any tax, duty, assessment or other governmental charge that would not have been imposed but for: (A) (B) the existence of any present or former connection between the Holder or beneficial owner of such Note or Subsidiary Guarantee, as the case may be, and the Relevant Jurisdiction other than merely holding such Note or the receipt of payments thereunder or under a Subsidiary Guarantee, including such Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein; the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the principal of, 253

45 premium, if any, or interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the Holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period; (C) (D) the failure of the Holder or beneficial owner to comply with a timely request of the Company, a Surviving Person or any Subsidiary Guarantor addressed to the Holder or beneficial owner, as the case may be, to provide information concerning such Holder s or beneficial owner s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request would have reduced or eliminated any withholding or deduction as to which Additional Amounts would have otherwise been payable to such Holder or beneficial owner; or the presentation of such Note (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere; (ii) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge; (iii) any tax, duty, assessment or other governmental charge that is payable other than by deduction or withholding from payments made on or with respect to any Note; (iv) (v) any withholding or deduction imposed on or in respect of any Note pursuant to the Foreign Account Tax Compliance Act provisions of the Hiring Incentives to Restore Employment Act ( FATCA ), the laws of any Relevant Jurisdiction implementing FATCA, or any agreement between the Company or any Subsidiary Guarantor and the United States or any authority thereof entered into for FATCA purposes; any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (i), (ii), (iii) and (iv); or (b) to a Holder that is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included for tax purposes in the income under the laws of a Relevant Jurisdiction, of a beneficiary or settlor with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, or beneficial owner been the Holder thereof. As a result of these provisions, there are circumstances in which taxes could be withheld or deducted but Additional Amounts would not be payable to some or all beneficial owners of Notes. At least 30 days prior to each date on which any payment under or with respect to the Notes is due and payable, if the Company, a Surviving Person or any Subsidiary Guarantor will be obligated to pay Additional Amounts with respect to such payment, the Company will deliver to the Trustee an Officer s Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Paying Agent to pay such Additional Amounts to the Holders on such payment date. Notwithstanding the foregoing, the limitations on the obligations of the Company, a Surviving Person or a Subsidiary Guarantor, as applicable, to pay Additional Amounts set forth in clause (a)(i)(c) above will not apply if the provision of any certification, identification, information, documentation or other reporting requirement described in such clause would be materially more onerous, in form, in procedure or in the substance of information disclosed, to a Holder or beneficial 254

46 owner of a Note than comparable information or other reporting requirements imposed under U.S. tax law, regulations and administrative practice (such as Internal Revenue Service Forms W-8 and W-9). For the avoidance of doubt, no Holder or beneficial owner of a Note shall have any obligation to establish eligibility for a reduced withholding tax rate under any income tax treaty. Whenever there is mentioned in any context the payment of principal, premium or interest in respect of any Note or any Subsidiary Guarantee, such mention will be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. Redemption for Taxation Reasons The Notes may be redeemed, at the option of the Company or a Surviving Person, as a whole but not in part, upon giving not less than 30 days nor more than 60 days notice to the Holders and the Trustee (which notice will be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Company or the Surviving Person, as the case may be, for redemption (the Tax Redemption Date ) if, as a result of: (1) any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Tax Jurisdiction affecting taxation; or (2) any change in, or amendment to, an official position of a Relevant Tax Jurisdiction regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction), which change or amendment is announced and becomes effective on or after the Original Issue Date with respect to any payment due or to become due under the Notes or the Indenture (or, in the case of a Surviving Person, the date such Person became a Surviving Person), the Company or the Surviving Person, as the case may be, is, or on the next Interest Payment Date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the taking of reasonable measures by the Company or the Surviving Person, as the case may be; provided that changing the jurisdiction of the Company or the Surviving Person is not a reasonable measure for the purposes of this section; provided further that no such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Company or the Surviving Person, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due. Prior to the mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company or Surviving Person, as the case may be, will deliver to the Trustee at least 30 days but not more than 60 days before the Tax Redemption Date: (1) an Officer s Certificate stating that such change or amendment referred to in the prior paragraph has occurred, describing the facts related thereto and stating that such requirement cannot be avoided by the Company or such Surviving Person, as the case may be, by taking reasonable measures available to it; and (2) an Opinion of Counsel of recognized standing, or an opinion of a tax consultant of international recognized standing, with respect to tax matters of the Relevant Tax Jurisdiction, stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph. The Trustee shall be entitled to accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it will be conclusive and binding on the Holders. Any Notes that are redeemed will be cancelled. 255

47 Certain Covenants Set forth below are summaries of certain covenants contained in the Indenture. Limitation on Indebtedness (a) (b) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness (including Acquired Indebtedness); provided that the Company and any Restricted Subsidiary may Incur Indebtedness (including Acquired Indebtedness) if, after giving effect to the Incurrence of such Indebtedness and the receipt and the application of the proceeds therefrom, (w) no Default has occurred and is continuing, (x) the Fixed Charge Coverage Ratio would be not less than 3.00 to 1.00, (y) the Consolidated Debt to EBITDA Ratio would not be greater than 3.50 to 1.00 and (z) in the case of the Incurrence of Priority Indebtedness by the Company, any Subsidiary Guarantor or any other Restricted Subsidiary, the aggregate principal amount of all Priority Indebtedness would not exceed 10% of Total Assets. Notwithstanding the foregoing, the Company will not permit any Restricted Subsidiary to Incur any Disqualified Stock (other than Disqualified Stock held by the Company or a Subsidiary Guarantor so long as it is so held). Notwithstanding the foregoing, the Company, any Subsidiary Guarantor or any other Restricted Subsidiary, may Incur each and all of the following ( Permitted Indebtedness ) to the extent provided below: (1) Indebtedness under the Notes to be issued on the Original Issue Date and the Subsidiary Guarantees thereof; (2) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Original Issue Date after giving effect to the application of the proceeds from the sale of the Notes, excluding Indebtedness permitted under clause (b)(1) or (3) of this covenant; (3) Indebtedness of the Company or any Restricted Subsidiary owed to the Company or any Restricted Subsidiary; provided that (x) any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or any Restricted Subsidiary) will be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (b)(3), (y) if the Company is the obligor on such Indebtedness, such Indebtedness must be unsecured and expressly be subordinated in right of payment to the Notes and (z) if a Subsidiary Guarantor is the obligor on such Indebtedness and a Restricted Subsidiary that is not a Subsidiary Guarantor is the obligee, such Indebtedness must be unsecured and expressly subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor; (4) Indebtedness of the Company or any Restricted Subsidiary ( Permitted Refinancing Indebtedness ) issued in exchange for, or the net proceeds of which are used to refinance or refund, replace, exchange, renew, repay, defease, discharge or extend (collectively, refinance and refinances and refinanced shall have a correlative meaning), then-outstanding Indebtedness (or Indebtedness repaid substantially concurrently with the Incurrence of such Permitted Refinancing Indebtedness) Incurred under paragraph (a) or clause (b)(1), (b)(2), (b)(3), (b)(4) or (b)(10) of this covenant and any refinancings thereof; provided that (A) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes or a Subsidiary Guarantee will only be permitted under this clause (b)(4) if (x) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or a Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made 256

48 pari passu with the remaining Notes or such Subsidiary Guarantee, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or a Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or such Subsidiary Guarantee at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or such Subsidiary Guarantee, (B) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded, (C) such new Indebtedness has an aggregate principal amount, or if Incurred with original issue discount, an aggregate issue price, that is equal to or less than the aggregate principal amount, or if Incurred with original issue discount, the aggregate accreted value, then outstanding (plus premiums, accrued interest, underwriting discounts, costs (including any defeasance costs), fees and expenses) under the Indebtedness being refinanced and (D) in no event may Indebtedness of the Company or any Subsidiary Guarantor be refinanced pursuant to this clause by means of any Indebtedness of any Restricted Subsidiary (other than any Finance Subsidiary) that is not a Subsidiary Guarantor; (5) Indebtedness Incurred by the Company or any Restricted Subsidiary (other than any FS Subsidiary) pursuant to Hedging Obligations for the purpose of protecting the Company or any Restricted Subsidiary from fluctuations in interest rates, currencies or commodity prices and not for speculation; (6) Indebtedness of the Company or any Restricted Subsidiary (other than any FS Subsidiary) arising from agreements providing for indemnification, adjustment of purchase price, earn out or other similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Company or any Restricted Subsidiary pursuant to such agreements, in any case, Incurred in connection with the acquisition or disposition of any business, assets or Capital Stock of a Restricted Subsidiary, other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Capital Stock of a Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness incurred in connection with a disposition shall at no time exceed the gross proceeds actually received by the Company or any Restricted Subsidiary from the disposition of such business, assets or Capital Stock of a Restricted Subsidiary; (7) Indebtedness Incurred by the Company or any Restricted Subsidiary arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of Incurrence; (8) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to workers compensation claims or claims arising under similar legislation, or in connection with self-insurance obligations or bid, performance or surety bonds, including guarantees or obligations of the Company or any Restricted Subsidiary thereof with respect to letters of credit supporting such bid, performance or surety bonds, in each case other than for an obligation for borrowed money; (9) Indebtedness of and letters of credit issued by the Company or any Subsidiary Guarantor under Credit Facilities (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and the Subsidiary Guarantors thereunder) in an aggregate principal amount at any time 257

49 outstanding (together with refinancings thereof) plus the aggregate principal amount outstanding of Indebtedness permitted under clause (b)(10) below (together with refinancings thereof) not to exceed US$60.0 million (or the Dollar Equivalent thereof); (10) Indebtedness Incurred by the Company, any Subsidiary Guarantor or any Finance Subsidiary, including Indebtedness represented by Capitalized Lease Obligations, mortgage financings or purchase money obligations, to finance all or any part of the purchase price (including adjustment of purchase price or similar obligations) or cost of construction, development, leasing, installation, improvement or expansion of property (real or personal), assets, machinery, plant or equipment (including through the acquisition of Capital Stock of any Person that owns such property (real or personal), assets, machinery, plant or equipment which will, upon such acquisition, become a Restricted Subsidiary) to be used in the Permitted Business; provided that (i) such Indebtedness shall be Incurred no later than 180 days after the acquisition, construction, development, leasing, installation, improvement or expansion of such property (real or personal), assets, machinery, plant or equipment and (ii) on the date of Incurrence of such Indebtedness and after giving effect thereto, the aggregate principal amount of Indebtedness Incurred pursuant to this clause (b)(10) at any time outstanding (together with refinancings thereof) plus the aggregate principal amount outstanding of Indebtedness permitted under clause (b)(9) above (together with refinancings thereof) shall not exceed US$60.0 million (or the Dollar Equivalent thereof); (11) guarantees by the Company or any Subsidiary Guarantor of Indebtedness of any Subsidiary Guarantor, the Company or a Finance Subsidiary that was permitted to be Incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes or a Subsidiary Guarantee, then the guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed; (12) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit, trade guarantees or similar instruments performance and surety bonds, bankers acceptances or survey or appeal bonds issued in the ordinary course of business to the extent that such letters of credit or trade guarantees or performance and surety bonds are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the 30 days following receipt by the Company or such Restricted Subsidiary of a demand for reimbursement; and (13) Indebtedness of a Finance Subsidiary that is guaranteed by the Company or any Subsidiary Guarantor to the extent the Company or such Subsidiary Guarantor was permitted to incur such Indebtedness under this covenant (other than under clause (b)(11) of this covenant). (c) For purposes of determining compliance with this Limitation on Indebtedness covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, including under the proviso in the first sentence of paragraph (a) of this covenant, the Company, in its sole discretion, will classify and from time to time may reclassify, such item of Indebtedness and only be required to include the amount of such Indebtedness as one of such types and may apportion an item of Indebtedness among several such types. 258

50 (d) The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of Preferred Stock as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an Incurrence of Indebtedness; provided, in each such case, that the amount of any such accrual, accretion or payment is included in the Consolidated Fixed Charges of the Company as accrued. (e) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values. For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred (or first committed, in the case of revolving credit debt); provided, that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced (plus premiums, accrued interest, underwriting discounts, costs (including any defeasance costs), fees and expenses). The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing. Anti-Layering The Company will not, and will not permit any Subsidiary Guarantor to, Incur any Indebtedness if such Indebtedness is contractually subordinated in right of payment to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be, unless such Indebtedness is also contractually subordinated in right of payment to the Notes or the applicable Subsidiary Guarantee, on substantially identical terms; provided that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company or any Subsidiary Guarantor solely by virtue of being unsecured or by virtue of being secured on a junior priority basis. Limitation on Restricted Payments The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments or any other actions described in clauses (1) through (4) below being collectively referred to as Restricted Payments ): (1) declare or pay any dividend or make any distribution on or with respect to the Company s or any Restricted Subsidiary s Capital Stock (other than dividends or distributions payable or paid solely in shares of the Company s Capital Stock or by a Restricted Subsidiary in its Capital Stock (in each case, other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Company or any Restricted Subsidiary; (2) purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock (or options, warrants or other rights to acquire such shares of Capital Stock) of the Company, any Subsidiary Guarantor or any direct or indirect parent of the Company held by any Persons other than the Company or any Restricted Subsidiary; 259

51 (3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is subordinated in right of payment to the Notes or any Subsidiary Guarantee (excluding any intercompany Indebtedness between or among the Company and any Restricted Subsidiary or among Restricted Subsidiaries); or (4) make any Investment, other than a Permitted Investment, if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) (B) (C) a Default has occurred and is continuing or would occur as a result of such Restricted Payment; the Company could not Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of paragraph (a) of the covenant described under the caption Limitation on Indebtedness ; or such Restricted Payment, together with the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries after the Original Issue Date would exceed the sum (without duplication) of: (i) (ii) 50% of the aggregate amount of the Consolidated Net Income of the Company (or, if the Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter in which the Original Issue Date occurs and ending on the last day of the Company s most recently ended fiscal quarter for which consolidated financial statements of the Company (which may be internal financial statements) are available and have been provided to the Trustee at the time of such Restricted Payment; plus 100% of the aggregate Net Cash Proceeds received by the Company after the Original Issue Date as a capital contribution to its common equity or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including any such Net Cash Proceeds received upon (x) the conversion of any Indebtedness (other than Subordinated Indebtedness) of the Company or any Restricted Subsidiary into Capital Stock (other than Disqualified Stock) of the Company, or (y) the exercise by a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (other than Disqualified Stock), in each case after deducting the amount of any such Net Cash Proceeds used to redeem, repurchase, defease or otherwise acquire or retire for value any Subordinated Indebtedness or Capital Stock of the Company; plus (iii) the amount by which Indebtedness of the Company or any Restricted Subsidiary is reduced on the Company s statement of financial position upon conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Original Issue Date of any Indebtedness of the Company or any Restricted Subsidiary into Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the Fair Market Value of any other property, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); plus (iv) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) that were made after the Original Issue Date in any Person resulting from (a) payments of interest on Indebtedness, dividends or repayments of loans or advances by such Person, in each case to the Company or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are 260

52 included in the calculation of Consolidated Net Income), (b) the unconditional release of a guarantee provided by the Company or any Restricted Subsidiary after the Original Issue Date of an obligation of another Person, (c) the Net Cash Proceeds from the sale of any such Investment (except to the extent such Net Cash Proceeds are included in the calculation of Consolidated Net Income) or (d) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Investments made by the Company or a Restricted Subsidiary after the Original Issue Date in any such Person. The foregoing provision will not be violated by reason of: (1) the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with the preceding paragraph; (2) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any Subsidiary Guarantor with the Net Cash Proceeds of, or in exchange for, a substantially concurrent Incurrence of Permitted Refinancing Indebtedness; (3) any Restricted Payment made in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution to or sale (other than to a Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (C)(ii) of the preceding paragraph; (4) (x) the payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary to, or (y) the redemption, repurchase, defeasance or other acquisition by a Restricted Subsidiary of any shares of its Capital Stock (including options, warrants or other rights to acquire such shares of Capital Stock) from, all holders of any class of Capital Stock of such Restricted Subsidiary, a majority of which is held, directly or indirectly through Restricted Subsidiaries, by the Company, in each case on a pro rata basis or on a basis more favorable to the Company; (5) repurchases of Capital Stock deemed to occur upon the exercise of stock options, warrants or other rights to acquire Capital Stock to the extent such Capital Stock represents a portion of the exercise price thereof; (6) cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible or exchangeable for Capital Stock of the Company; provided that any such cash payment shall not be for the purpose of evading the limitations of this covenant; (7) any Restricted Payment made as described under the section entitled Use of Proceeds in the Offering Memorandum; or (8) the making of any other Restricted Payment (other than an Investment in SS or any of its Subsidiaries from time to time) in an aggregate amount, together with all other Restricted Payments made under this clause (8), not exceeding US$15.0 million (or the Dollar Equivalent thereof), provided that in the case of clause (2) or (8) above, no Default will have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein. 261

53 Each Restricted Payment permitted pursuant to clauses (1) and (4) (but only to the extent that dividends are paid to Persons other than the Company or a Restricted Subsidiary) of the preceding paragraph made after the Original Issue Date will be included in calculating whether the conditions of clause (C) of the first paragraph of this Limitation on Restricted Payments covenant have been met with respect to any subsequent Restricted Payments. Each Restricted Payment made pursuant to clauses (2), (3), (5), (6), (7) and (8) of the preceding paragraph will be excluded in calculating whether the conditions of clause (C) of the first paragraph of this Limitation on Restricted Payments covenant have been met with respect to any subsequent Restricted Payments. The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The value of any assets or securities that are required to be valued by this covenant will be the Fair Market Value. The Board of Directors determination of the Fair Market Value of a Restricted Payment or any such assets or securities must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of recognized standing if the Fair Market Value exceeds US$10.0 million (or the Dollar Equivalent thereof). Not later than the date of making any Restricted Payment in excess of US$10.0 million (or the Dollar Equivalent thereof), the Company will deliver to the Trustee an Officer s Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Limitation on Restricted Payments covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries (a) Except as provided below, the Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on any Capital Stock of such Restricted Subsidiary owned by the Company or any Restricted Subsidiary; (2) pay any Indebtedness or other obligation owed to the Company or any Restricted Subsidiary; (3) make loans or advances to the Company or any Restricted Subsidiary; or (4) sell, lease or transfer any of its property or assets to the Company or any Restricted Subsidiary; provided that it being understood that (i) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on Common Stock; (ii) the subordination of loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness Incurred by the Company or any Restricted Subsidiary; and (iii) the provisions contained in documentation governing Indebtedness requiring transactions between or among the Company and any Restricted Subsidiary or between or among any Restricted Subsidiary to be on fair and reasonable terms or on an arm s length basis, in each case, shall not be deemed to constitute such an encumbrance or restriction. 262

54 (b) The provisions of paragraph (a) will not apply to any encumbrances or restrictions: (1) existing in agreements as in effect on the Original Issue Date, or in the Notes, the Subsidiary Guarantees, the Indenture, the Security Documents and any extensions, refinancings, renewals, supplements, amendments or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal, supplement, amendment or replacement are not materially more restrictive, taken as a whole, than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed, supplemented, amended or replaced; (2) existing under or by reason of applicable law, rule, regulation, license, concession, approval, decree or order issued by any government or any agency thereof; (3) with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancings, renewals, supplements, amendments or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal, supplement, amendment or replacement are not materially more restrictive, taken as a whole, than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed, supplemented, amended or replaced; (4) that otherwise would be prohibited by the provision described in paragraph (a) of this covenant if they arise, or are agreed to in the ordinary course of business and (x) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or license or similar instrument, (y) exist by virtue of any Lien on, or agreement to transfer, option or similar right with respect to, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture or (z) do not relate to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; (5) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by the Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries, Limitation on Indebtedness and Limitation on Asset Sales covenants; (6) with respect to any Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (7) with respect to any Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the Incurrence of Indebtedness permitted to be Incurred under the covenant described under the caption Limitation on Indebtedness if, as determined by the Board of Directors in good faith, the encumbrances or restrictions are (i) customary for such types of agreements and (ii) would not, at the time agreed to, be expected to materially or adversely affect the ability of the Company to make required payments on the Notes; 263

55 (8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (9) existing with respect to any Unrestricted Subsidiary or the property or assets of such Unrestricted Subsidiary that is designated as a Restricted Subsidiary in accordance with the terms of the Indenture at the time of such designation and not incurred in contemplation of such designation, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Subsidiary or its subsidiaries or the property or assets of such Subsidiary or its subsidiaries, and any extensions, refinancings, renewals, supplements or amendments or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal, supplement, amendment or replacement, taken as a whole, are no more restrictive in any material respect than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed, supplemented, amended or replaced; or (10) arising from provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business if, as determined by the Board of Directors in good faith, the encumbrances or restrictions are (i) customary for such types of agreements and (ii) would not, at the time agreed to, be expected to materially or adversely affect the ability of the Company to make required payments on the Notes. Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (or options, warrants or other rights to purchase shares of such Capital Stock) except: (a) (b) (c) (d) to the Company or a Restricted Subsidiary; to the extent such Capital Stock represents director s qualifying shares or is required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary; the issuance or sale of the shares of Capital Stock of a Restricted Subsidiary if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any remaining Investment in such Person would have been permitted to be made under the Limitation on Restricted Payments covenant if made on the date of such issuance or sale and if permitted under, and made in accordance with, the Limitation on Asset Sales covenant; and the issuance or sale of Capital Stock of a Restricted Subsidiary which remains a Restricted Subsidiary after any such issuance or sale; provided that the Company or such Restricted Subsidiary applies the Net Cash Proceeds of such issuance or sale in accordance with the Limitation on Asset Sales covenant. Notwithstanding the foregoing, a Restricted Subsidiary may issue Common Stock to its shareholders on a pro rata basis or on a basis more favorable to the Company or its other Restricted Subsidiaries. Limitation on Issuances of Guarantees by Restricted Subsidiaries The Company will not permit any Restricted Subsidiary which is not a Subsidiary Guarantor, directly or indirectly, to provide any guarantee for any Indebtedness ( Guaranteed Indebtedness ) of the Company or any Subsidiary Guarantor, unless (a) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for an unsubordinated 264

56 Subsidiary Guarantee of payment of the Notes by such Restricted Subsidiary and (b) such Restricted Subsidiary waives and will not in any manner whatsoever claim, or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any Subsidiary Guarantor as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee until the Notes have been paid in full. If the Guaranteed Indebtedness (A) ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee, then the guarantee of such Guaranteed Indebtedness shall rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or (B) is subordinated in right of payment to the Notes or any Subsidiary Guarantee, then the guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes or the Subsidiary Guarantee. Additional Subsidiary Guarantors The Company will agree that if the Company or any of its Restricted Subsidiaries acquires or creates another Subsidiary after the Original Issue Date, then such Subsidiary will become a Restricted Subsidiary and the Company will, within 30 days of the date on which such Subsidiary is acquired or created, (1) procure that such Subsidiary execute and deliver to the Trustee a supplemental indenture to the Indenture pursuant to which such Subsidiary will guarantee the payment of the Notes as a Subsidiary Guarantor on an unsubordinated basis and (2) deliver to the Trustee an Opinion of Counsel with respect to such supplemental indenture satisfactory to the Trustee; provided, however, that clauses (1) and (2) shall not apply to (i) any such Restricted Subsidiary if the guarantee by such Restricted Subsidiary of the payment of the Notes could reasonably be expected to give rise to or result in any conflict with or violation of applicable law (or risk of criminal liability for the officers, directors, commissioners, managers or shareholders of such Restricted Subsidiary) and such conflict, violation or criminal liability cannot be avoided or otherwise prevented through measures reasonably available to the Company, (ii) any Finance Subsidiary for so long as it is and remains a Finance Subsidiary and any FS Subsidiary so long as it is and remains a FS Subsidiary or (iii) any such Restricted Subsidiary if the Company and its Restricted Subsidiaries own less than 95.0% of the outstanding Capital Stock of such Restricted Subsidiary provided that after giving pro forma effect to the designation of such Subsidiary as a Non-Guarantor Subsidiary on the date such Subsidiary is created or acquired (the Designation Date ), the Company and any Restricted Subsidiary could Incur at least US$1.00 of Priority Indebtedness under the proviso in paragraph (a) of the covenant described under Limitation on Indebtedness. Limitation on Transactions with Shareholders and Affiliates The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (a) any holder (or any Affiliate of such holder) of 10% or more of any class of Capital Stock of the Company or (b) any Affiliate of the Company (each an Affiliate Transaction ), unless: (1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm s-length transaction by the Company or the relevant Restricted Subsidiary with a Person that is not such a holder or an Affiliate of the Company or such Restricted Subsidiary; and (2) the Company delivers to the Trustee: (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$5.0 million (or the Dollar 265

57 Equivalent thereof), a Board Resolution set forth in an Officer s Certificate certifying that such Affiliate Transaction complies with this covenant and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$10.0 million (or the Dollar Equivalent thereof), in addition to the Board Resolution required in clause (2)(A) above, an opinion issued by an accounting, appraisal or investment banking firm of recognized standing stating either (i) that such Affiliate Transaction is, or series of related Affiliate Transactions are, fair to the Company or such Restricted Subsidiary from a financial point of view or (ii) that the terms of such Affiliate Transaction is, or series of related Affiliate Transactions are, not materially less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm s length transaction by the Company or such Restricted Subsidiary with a Person that is not such a holder or an Affiliate of the Company or such Restricted Subsidiary. The foregoing limitation does not limit, and will not apply to: (1) the payment of reasonable and customary regular fees to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary; (2) transactions or payments pursuant to any employment, compensation or benefit plan or agreement (whether based in cash or securities), officer or director indemnification agreement, severance or termination agreement or any similar arrangement entered into by the Company or any Restricted Subsidiary with their respective officers, directors or employees and payments pursuant thereto, including the payment of reasonable fees and reimbursement of expenses, in each case in the ordinary course of business; (3) transactions between or among the Company and any of its Wholly Owned Restricted Subsidiaries or between or among Wholly Owned Restricted Subsidiaries; (4) any Restricted Payment permitted by the covenant described under the caption Limitation on Restricted Payments ; (5) transactions or payments pursuant to any employee, officer, commissioner or director compensation or benefit plans or arrangements entered into in the ordinary course of business, approved by the Board of Directors and in compliance with the listing rules of the Indonesian Stock Exchange; (6) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company, directly or indirectly, owns Capital Stock in, or controls, such Person or solely because the Company or one of its Subsidiaries has the right to designate one or more members of the Board of Directors or similar governing body of such Person; (7) any agreement between any Person (other than a Person that is an Affiliate of the Company or acquired from an Affiliate of the Company) that is acquired by or merged into the Company or any of its Restricted Subsidiaries and an Affiliate of the Company existing at the time of such acquisition or merger; provided that such agreement was not entered into in contemplation of such acquisition or merger; (8) transactions with clients, contractors, purchasers or suppliers of goods or services or lessors or lessees, in each case in the ordinary course of business and that are fair or on terms at least as favorable as arm s length as determined in good faith by the Board of Directors; 266

58 (9) any sale of Capital Stock (other than Disqualified Stock) of the Company; and (10) loans or advances to, or guarantees of obligations of, directors, commissioners, officers or employees of the Company or a Restricted Subsidiary in the ordinary course of business not to exceed US$2.0 million (or the Dollar Equivalent thereof) in the aggregate at any one time outstanding. In addition, the requirements of clause (2) of the first paragraph of this covenant will not apply to (i) transactions pursuant to agreements in effect on the Original Issue Date, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date, (ii) any transaction between or among any of the Company or a Wholly Owned Restricted Subsidiary and any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary or between or among Restricted Subsidiaries that are not Wholly Owned Restricted Subsidiaries; provided that in the case of clause (ii), (a) such transaction is entered into in the ordinary course of business and (b) none of the minority shareholders or minority partners (if any) of or in such Restricted Subsidiary is a Person described in clauses (a) or (b) of the first paragraph of this covenant (other than by reason of such minority shareholder or minority partner being an officer or director of such Restricted Subsidiary) or (iii) any Permitted Investment (other than a Permitted Investment of the type described in clause (1)(b) of the definition of Permitted Investment ). Limitation on Liens The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur, assume or permit to exist any Lien of any nature whatsoever on the Collateral (other than Permitted Liens). The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur, assume or permit to exist any Lien of any nature whatsoever on any of its assets or properties of any kind, whether owned at the Original Issue Date or thereafter acquired, except Permitted Liens, unless the Notes are secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes or any Subsidiary Guarantee, senior in priority to) the obligation or liability so secured for so long as such obligation or liability is so secured by such Lien. Limitation on Sale and Leaseback Transactions The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction; provided that the Company or any Subsidiary Guarantor may enter into a Sale and Leaseback Transaction if: (a) (b) (c) the Company or such Subsidiary Guarantor could have (1) Incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale and Leaseback Transaction under the covenant described under the caption Limitation on Indebtedness and (2) incurred a Lien to secure such Indebtedness pursuant to the covenant described under the caption Limitation on Liens, in which case, the corresponding Indebtedness and Lien will be deemed incurred pursuant to those provisions; the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of such Sale and Leaseback Transaction; and the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company applies, to the extent required, the proceeds of such transaction in compliance with, the covenant described under the caption Limitation on Asset Sales. 267

59 Limitation on Asset Sales The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless: (a) (b) (c) the consideration received by the Company or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of; in the case of an Asset Sale that constitutes an Asset Disposition, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of paragraph (a) of the covenant described under the caption Limitation on Indebtedness after giving pro forma effect to such Asset Disposition; at least 75% of the consideration received consists of cash, Temporary Cash Investments or Replacement Assets; provided that in the case of an Asset Sale in which the Company or such Restricted Subsidiary receives Replacement Assets involving aggregate consideration in excess of US$10.0 million (or the Dollar Equivalent thereof), the Company shall deliver to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an accounting, appraisal or investment banking firm of recognized standing. For purposes of this provision, each of the following will be deemed to be cash: (A) (B) any liabilities, as shown on the Company s most recent consolidated statement of financial position, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that irrevocably and unconditionally releases the Company or such Restricted Subsidiary from further liability; and any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are promptly, but in any event within 30 days of closing, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion. Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company (or any Restricted Subsidiary) may apply an amount equal to such Net Cash Proceeds to: (1) repay Senior Indebtedness (and, if such Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) of the Company and the Restricted Subsidiaries (in each case other than Indebtedness owed to the Company or an Affiliate of the Company); or (2) acquire Replacement Assets. Pending application of such Net Cash Proceeds as set forth in the preceding paragraph, the Company (or applicable Restricted Subsidiary) may use such Net Cash Proceeds to make an Investment in cash or Temporary Cash Investments or to temporarily reduce revolving credit Indebtedness. The amount of such Net Cash Proceeds from Asset Sales required to be applied during such 360-day period as set forth in the second preceding paragraph and not applied as so required by the end of such period shall constitute Excess Proceeds. Within 10 days after the aggregate amount of Excess Proceeds totals at least US$10.0 million (or the Dollar Equivalent thereof), the Company must 268

60 commence and thereafter consummate an Offer to Purchase from the Holders and holders of Senior Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase with the proceeds of sales of assets, the maximum principal amount of Notes and such Senior Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any such Offer to Purchase will be equal to 100% of the principal amount (or accreted value, if applicable) of the Notes and such Senior Indebtedness plus accrued and unpaid interest, if any, to the date of purchase, subject to the rights of Holders of Notes on the relevant record date to receive interest on the relevant interest payment date, and will be payable in cash. If the aggregate principal amount of Notes and Senior Indebtedness tendered into such Offer to Purchase exceeds the amount of Excess Proceeds, the Notes and such Senior Indebtedness will be purchased on a pro rata basis based on the principal amount tendered. To the extent that any Excess Proceeds remain after consummation of an Offer to Purchase pursuant to this Limitation on Asset Sales covenant, the Company or any Restricted Subsidiary may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture, and those Excess Proceeds shall no longer constitute Excess Proceeds. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described hereunder by virtue of its compliance with such laws and regulations. Limitation on the Company s Business Activities The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than a Permitted Business; provided, that the Company or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary, joint venture or other Person that is engaged in a business other than a Permitted Business as long as any Investment therein was not prohibited when made by the covenant described under the caption Limitation on Restricted Payments. Maintenance of Insurance The Company will, and will cause each Restricted Subsidiary, to maintain insurance with reputable and financially sound carriers against such risks and in such amounts as is customarily carried by similar companies engaged in a similar business to the Permitted Business in the jurisdictions in which the Company or such Restricted Subsidiary conducts its businesses. Designation of Restricted and Unrestricted Subsidiaries The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided that (a) no Default shall have occurred and be continuing at the time of or after giving effect to such designation; (b) neither the Company nor any Restricted Subsidiary guarantees the Indebtedness or other liabilities of such Restricted Subsidiary; (c) such Restricted Subsidiary has no outstanding Indebtedness that could trigger a cross-default to the Indebtedness of the Company or any other Restricted Subsidiary; (d) such Restricted Subsidiary does not own any Disqualified Stock of the Company or Disqualified Stock or Preferred Stock of another Restricted Subsidiary or hold any Indebtedness of, or any Lien on any property of, the Company or any Restricted Subsidiary, if such Disqualified Stock or Preferred Stock or Indebtedness could not be Incurred under the covenant described under Limitation on Indebtedness or such Lien would violate the covenant described under Limitation of Liens ; (e) such Restricted Subsidiary does not own any Voting Stock of another Restricted Subsidiary, and all of its Subsidiaries are Unrestricted Subsidiaries or are being 269

61 concurrently designated as Unrestricted Subsidiaries in accordance with this paragraph; (f) the Investment deemed to have been made thereby in such newly-designated Unrestricted Subsidiary and each other newly-designated Unrestricted Subsidiary being concurrently redesignated would be permitted to be made by the covenant described under the caption Limitation on Restricted Payments and (g) in no event will any license, authorization or concession that is material to the operation of the Permitted Business of the Company and its Restricted Subsidiaries be transferred to or held by an Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (a) no Default shall have occurred and be continuing at the time of or after giving effect to such designation; (b) any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which will be deemed to have been Incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be Incurred by the covenant described under the caption Limitation on Indebtedness ; (c) any Lien on the property of such Unrestricted Subsidiary at the time of such designation, which will be deemed to have been Incurred by such newly-designated Restricted Subsidiary as a result of such designation, would be permitted to be Incurred by the covenant described under the caption Limitation on Liens ; (d) such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary); and (e) such Restricted Subsidiary, if required to guarantee the Notes under the covenant described under Additional Subsidiary Guarantors or Limitation on Issuances of Guarantees by Restricted Subsidiaries, will upon such designation execute and deliver to the Trustee a supplemental indenture to the Indenture by which such Restricted Subsidiary will become a Subsidiary Guarantor. All designations must be evidenced by a Board Resolution and an Officer s Certificate delivered to the Trustee certifying compliance with the preceding provisions. Use of Proceeds The Company will not, and will not permit any Restricted Subsidiary to, use the net proceeds from the sale of the Notes, in any amount, for any purpose other than (a) in the approximate amounts and for the purposes specified under the caption Use of Proceeds in this Offering Memorandum and (b) pending application of all of such net proceeds in such manner, to invest the portion of such net proceeds not yet so applied in cash or Temporary Cash Investments or to temporarily reduce revolving credit Indebtedness. Government Approvals and Licenses; Compliance with Law The Company will, and will cause each Restricted Subsidiary to, (a) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses as are necessary to engage in the Permitted Business, (b) preserve and maintain good and valid title to its properties and assets free and clear of any Liens other than Permitted Liens and (c) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure so to obtain, maintain, preserve and comply would not reasonably be expected to have a material adverse effect on (1) the business, results of operations or prospects of the Company and its Restricted Subsidiaries, taken as a whole, or (2) the ability of the Company or any Subsidiary Guarantor to perform their obligations under the Notes, the relevant Subsidiary Guarantee or the Indenture. Suspension of Certain Covenants If on any date following the date of the Indenture, the Notes have a rating of Investment Grade from two of the Rating Agencies and no Default or Event of Default has occurred and is continuing (a Suspension Event ), then, beginning on that day and continuing until such time, if any, at which the Notes cease to have a rating of Investment Grade from two of the Rating Agencies, the provisions of the Indenture summarized under the following captions will be suspended: (1) Certain Covenants Limitation on Indebtedness; 270

62 (2) Certain Covenants Limitation on Restricted Payments; (3) Certain Covenants Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries; (4) Certain Covenants Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries; (5) Certain Covenants Limitation on Issuances of Guarantees by Restricted Subsidiaries; (6) clauses (a)(1), (b) and (c) of the covenant described under the caption Certain Covenants Limitation on Sale and Leaseback Transactions; (7) Certain Covenants Limitation on Asset Sales; (8) clause (c) and (d) of the first paragraph and clause (C) and (D) of the second paragraph of the covenant described under the caption Consolidation, Merger and Sale of Assets; (9) Certain Covenants Maintenance of Insurance; (10) Certain Covenants Anti-Layering; (11) Certain Covenants Limitation on the Company s Business Activities; and (12) the requirement to maintain the Debt Service Accrual Account in accordance with the provisions described under the caption Debt Service Accrual Account. During any period that the foregoing covenants have been suspended, the Board of Directors may not designate any Restricted Subsidiary as an Unrestricted Subsidiary pursuant to the covenant described under the caption Certain Covenants Designation of Restricted and Unrestricted Subsidiaries or the definition of Unrestricted Subsidiary. Such covenants will be reinstated and apply according to their terms as of and from the first day on which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with regard to actions of the Company or any Restricted Subsidiary properly taken in compliance with the provisions of the Indenture during the continuance of the Suspension Event, and following reinstatement the calculations under the covenant described under the caption Certain Covenants Limitation on Restricted Payments will be made as if such covenant had been in effect since the date of the Indenture except that no Default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended. There can be no assurance that the Notes will ever achieve an Investment Grade Rating or that, if achieved, any such rating will be maintained. Provision of Financial Statements and Reports (a) So long as any of the Notes remain outstanding, the Company will file with the Trustee and furnish to the Holders upon request, as soon as they are available but in any event not more than 10 calendar days after they are filed with the Indonesia Stock Exchange or any other national stock exchange on which the Company s Common Stock is at any time listed for trading, true and correct copies of any financial or other report in the English language (and an English translation of any financial or other report in any other language) filed with such exchange; provided that, if at any time the Common Stock of the Company ceases to be 271

63 listed for trading on the Indonesia Stock Exchange or any other national stock exchange, the Company will file with the Trustee (and furnish to the Holders upon request) in the English language (or accompanied by an English translation thereof): (1) as soon as they are available, but in any event within 90 calendar days after the end of each fiscal year of the Company, annual reports containing, and in a level of detail that is comparable in all material respects to that included in this Offering Memorandum, the following information: (i) audited consolidated statements of financial position of the Company as of the end of the two most recent fiscal years and audited consolidated statements of profit or loss and other comprehensive income and statements of cash flows of the Company for the two most recent fiscal years, including complete footnotes to such financial statements and the audit report of a member firm of an internationally recognized firm of independent accountants on the financial statements; (ii) an operating and financial review of the audited financial statements, including a discussion of the results of operations, financial condition, EBITDA and liquidity and capital resources of the Company, and a discussion of material recent developments and material commitments and contingencies and critical accounting policies; and (iii) description of the business, management and shareholders of the Company (on a consolidated basis); (2) as soon as they are available, but in any event within 60 calendar days after the end of the first semi-annual fiscal period of the Company, semi-annual reports of the Company containing the following information: (i) an unaudited condensed consolidated statement of financial position as of the end of such semi-annual fiscal period and unaudited condensed consolidated statements of profit or loss and other comprehensive income and statements of cash flows of the Company for the most recent semi-annual fiscal period ending on the unaudited condensed consolidated statement of financial position date, and the comparable prior year period, reviewed by a member firm of an internationally-recognized firm of independent accountants, together with a certificate signed by the person then authorized to sign financial statements on behalf of the Company to the effect that such financial statements present fairly the financial position of the Company as at the end of, and the results of its operations for, such semi-annual fiscal period and (ii) an operating and financial review of the unaudited financial statements, including a discussion of the results of operations, financial condition, EBITDA and liquidity and capital resources of the Company, and a discussion of material recent developments and material commitments and contingencies and critical accounting policies since the most recent annual report; and (3) as soon as they are available, but in any event within 45 calendar days after the end of each of the first and third fiscal quarters of the Company, quarterly reports of the Company containing an unaudited condensed consolidated statement of financial position as of the end of such fiscal quarter and unaudited condensed consolidated statements of profit or loss and other comprehensive income and statements of cash flows of the Company for the most recent fiscal quarter ending on the unaudited condensed consolidated statement of financial position date, and the comparable prior year period, prepared on a basis consistent with the audited financial statements of the Company, together with a certificate signed by the person then authorized to sign financial statements on behalf of the Company to the effect that such financial statements present fairly the financial position of the Company as at the end of, and the results of its operations for, the relevant quarterly period. (b) In addition, so long as any of the Notes remain outstanding, the Company will provide to the Trustee (1) within 90 days after the close of each fiscal year, an Officer s Certificate stating (i) the Fixed Charge Coverage Ratio and the Consolidated Debt to EBITDA Ratio with respect to the four most recent fiscal quarters and showing in reasonable detail the 272

64 calculation of the Fixed Charge Coverage Ratio and the Consolidated Debt to EBITDA ratio, including the arithmetic computations of each component of the Fixed Charge Coverage Ratio and the Consolidated Debt to EBITDA Ratio and (ii) that a review has been conducted of the activities of the Company and the Restricted Subsidiaries and their performance under the Indenture, the Security Documents and the Notes, and that the Company has fulfilled all obligations thereunder or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof; and (2) promptly after the Company becomes aware of the occurrence of a Default and/or an Event of Default (and also within 14 days of any request in writing by the Trustee), an Officer s Certificate of the Company setting forth the details thereof and the action the Company is taking or proposes to take with respect thereto. At any time that any of the Company s Subsidiaries are Unrestricted Subsidiaries and any such Unrestricted Subsidiary or group of Unrestricted Subsidiaries, if taken together as one Subsidiary, constitutes a Significant Subsidiary of the Company, then within 10 days of the release of financial reports to the Indonesia Stock Exchange or any other national stock exchange on which the Company s Common Stock is at any time listed for trading or the publication of the annual, semi-annual and quarterly financial information required by clauses (a)(1), (a)(2) and (a)(3) above, as applicable, the Company will file with the Trustee and furnish to the Holders upon request the revenue, gross profit, finance cost, profit (loss) for the year, total debt, total assets, cash and cash equivalents, EBITDA, EBITDA margin, net debt and capital expenditures of the Company and its Restricted Subsidiaries on a consolidated basis. Furthermore, the Company has agreed that, for so long as any Notes are restricted securities within the meaning of Rule 144(a)(3) under the Securities Act, during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act ), nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the Company will supply to (i) any Holder or beneficial owner of a Note or (ii) a prospective purchaser of a Note or a beneficial interest therein designated by such Holder or beneficial owner, the information specified in, and meeting the requirements of Rule 144A(d)(4) under the Securities Act upon the request of any Holder or beneficial owner of a Note. Events of Default The following events will be defined as Events of Default in the Indenture: (a) (b) (c) (d) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 consecutive days; (x) the Company or any Restricted Subsidiary defaults in the performance or breach of the provisions of the covenants described under the captions Consolidation, Merger and Sale of Assets, (y) the Company fails to make or consummate an Offer to Purchase in the manner described under the captions Repurchase of Notes upon a Change of Control or Certain Covenants Limitation on Asset Sales or (z) the Company fails to create a first priority Lien on the Collateral (subject to any Permitted Liens) in accordance with the provisions described under Security ; the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes then outstanding; 273

65 (e) (f) (g) (h) (i) (j) there occurs with respect to any Indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$10.0 million (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or will hereafter be created, (1) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (2) a failure to pay principal of, or interest or premium (subject to the applicable grace period in the relevant documents) on, such Indebtedness when the same becomes due; one or more final judgments or orders for the payment of money are rendered against the Company or any Restricted Subsidiary and are not paid or discharged, and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed US$10.0 million (or the Dollar Equivalent thereof) (in excess of amounts that reputable insurance carriers have agreed in writing to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect; an involuntary case or other proceeding is commenced against the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) with respect to it or its debts under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) or for any substantial part of the property and assets of the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) under any applicable bankruptcy, insolvency or other similar law as now or hereafter in effect; the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) (1) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (2) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) or for all or substantially all of the property and assets of the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) or (3) effects any general assignment for the benefit of creditors; any Subsidiary Guarantor denies or disaffirms in writing its obligations under its Subsidiary Guarantee or any Subsidiary Guarantee is finally determined in any judicial proceeding by a court of competent jurisdiction to be unenforceable or invalid or will for any reason cease to be in full force and effect, or the Company or any Subsidiary Guarantor repudiates the Indenture, the Notes or any Subsidiary Guarantee in writing, except as permitted by the Indenture; a moratorium is agreed or declared in respect of any Indebtedness of the Company or any Subsidiary Guarantor or any governmental authority shall take any action to condemn, seize, nationalize or appropriate all or a substantial part of the assets of the Company and its Restricted Subsidiaries; 274

66 (k) (l) (m) (n) (o) the capital and/or currency exchange controls in place in the Republic of Indonesia on the Original Issue Date shall be modified or amended in a manner that prevents the Company or any Subsidiary Guarantor from performing its payment obligations under the Indenture, the Notes or any Subsidiary Guarantee; it becomes unlawful for the Company or any Subsidiary Guarantor to perform or comply with any of its obligations under or in respect of the Indenture, the Notes or any Subsidiary Guarantee in any material respect; any failure by the Company to maintain the Debt Service Accrual Account as required in accordance with the provisions described under Security Debt Service Accrual Account other than in accordance with the provisions described under the caption Suspension of Certain Covenants ; any default by the Company in the performance of any of its obligations under the Security Documents that adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or that adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; (i) the Company denies or disaffirms in writing its obligations under any Security Document or (ii) other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Collateral Agent ceases to have a first-priority Lien over the Collateral (subject to any Permitted Liens); or (p) the revocation, termination, suspension or other cessation of effectiveness of the Company s IUPs, which results in the cessation or suspension of substantially all of the Company s coal-mining operations for a period of more than 90 consecutive days. If an Event of Default (other than an Event of Default specified in clause (g) or (h) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes, then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the written request of such Holders will (subject to it being indemnified and/or secured and/or pre-funded to its satisfaction), declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest will be immediately due and payable. If an Event of Default specified in clause (g) or (h) above occurs, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding will automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may on behalf of all Holders waive all past defaults and rescind and annul a declaration of acceleration and its consequences if: (x) (y) all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived; and the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Upon such waiver, the Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon. 275

67 If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes, the Indenture or the Security Documents. The Trustee or the Collateral Agent may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. In addition, if an Event of Default occurs and is continuing, the Trustee may, and shall upon written direction of the Holders of at least 25% in aggregate principal amount of outstanding Notes (subject to it being indemnified and/or secured and/or pre-funded to its satisfaction), (i) give the Collateral Agent a written notice of the occurrence of such continuing Event of Default and (ii) instruct the Collateral Agent in accordance with the terms of the Indenture and the Security Documents to foreclose on the Collateral in accordance with the terms of the Indenture and the Security Documents and take such further action on behalf of the Holders with respect to the Collateral as the Trustee deems appropriate. See Security. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or the Collateral Agent or exercising any trust or power conferred on the Trustee. However, the Trustee or the Collateral Agent may refuse to follow any direction that conflicts with law, the Indenture or the Security Documents that may involve the Trustee or the Collateral Agent in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any Holders unless such Holders have instructed the Trustee in writing and have provided to the Trustee security and/or indemnity and/or pre-funding to its satisfaction (which, in the case of a direction to enforce the Deeds of Guarantee, or any other document governed under the laws of the Republic of Indonesia against the Subsidiary Guarantors or any other Person, shall be subject to the provisions of the Indenture) against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Amounts when due, no Holder may pursue any remedy with respect to the Indenture or the Notes, unless: (1) the Holder has previously given the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders provide the Trustee indemnity and/or security and/or pre-funding satisfactory to the Trustee against any fees, costs, liability or expense to be incurred in compliance with such written request; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the indemnity and/or security and/or pre-funding; and (5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a written direction that is inconsistent with the request. Notwithstanding anything to the contrary in the Indenture, the Deeds of Guarantee or any other document relating to the Notes and the Security Documents, in the event the Trustee shall receive instructions from two or more groups of Holders, each holding at least 25% in aggregate principal 276

68 amount of the then outstanding Notes, and the Trustee believes (in its sole discretion and subject to such legal or other advice as it may deem appropriate) that such instructions are conflicting, the Trustee may, in its sole discretion, exercise any one or more of the following options: (i) (ii) refrain from acting on any such conflicting instructions: take the action requested by the Holders of the highest percentage of the aggregate principal amount of the then outstanding Notes, notwithstanding any other provisions of this Indenture; and (iii) petition a court of competent jurisdiction for further instructions. In all such instances where the Trustee has acted or refrained from acting as outlined above, the Trustee shall not be responsible or liable for any losses or liability of any nature whatsoever to any party. However, such limitations do not apply to the contractual right of any Holder to receive payment of the principal of, premium, if any, or interest, and Additional Amounts, if any, on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which contractual right will not be impaired or affected without the consent of the Holder. An officer of the Company must certify to the Trustee in writing, on or before a date not more than 90 days after the end of each fiscal year and within 14 days of demand by the Trustee, that a review has been conducted of the activities of the Company and its Restricted Subsidiaries and the Company s and its Restricted Subsidiaries performance under the Indenture, the Security Documents and the Notes and that the Company has fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. The Company will also be obligated to promptly notify the Trustee in writing of any default or defaults in the performance of any covenants or agreements under the Indenture after the Company becomes aware of the occurrence of such default (and also within 14 days of any request in writing by the Trustee). See Provision of Financial Statements and Reports. None of the Trustee or any Agent shall be deemed to have knowledge of a Default or Event of Default unless and until it obtains actual knowledge of such Default or Event of Default through written notification of such Default or Event of Default and setting forth the details thereof. Consolidation, Merger and Sale of Assets The Company will not consolidate with, or merge with or into, another Person, permit any Person to merge with or into it or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless: (a) (b) the Company will be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets (the Surviving Person ) will be a corporation organized and validly existing under the laws of Indonesia and will expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of the Company under the Indenture, the Notes and the Security Documents, as the case may be, and the Indenture, the Notes and the Security Documents, as the case may be, will remain in full force and effect; immediately after giving effect to such transaction on a pro forma basis, no Default will have occurred and be continuing; 277

69 (c) (d) (e) (f) (g) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of paragraph (a) of the covenant described under the caption Certain Covenants Limitation on Indebtedness ; immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, will have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; the Company delivers to the Trustee (1) an Officer s Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (c) and (d) of this paragraph) and (2) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with; each Subsidiary Guarantor, unless such Subsidiary Guarantor is the Person with which the Company has entered into a transaction described under this covenant, shall execute and deliver a supplemental indenture to the Indenture confirming that its Subsidiary Guarantee shall apply to the obligations of the Company or the Surviving Person in accordance with the Notes and the Indenture; and no Rating Decline will have occurred. No Subsidiary Guarantor will consolidate with, merge with or into, another Person, permit any Person to merge with or into it or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Company or another Subsidiary Guarantor), unless: (A) (B) (C) (D) such Subsidiary Guarantor will be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets will be the Company or another Subsidiary Guarantor or will become a Subsidiary Guarantor concurrently with the transaction, and such Person shall expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of such Subsidiary Guarantor under the Indenture, the Notes and the Subsidiary Guarantee, as the case may be, including the obligation to pay Additional Amounts, and the Indenture, the Notes and the Subsidiary Guarantee, as the case may be, shall remain in full force and effect; immediately after giving effect to such transaction on a pro forma basis, no Default will have occurred and be continuing; immediately after giving effect to such transaction on a pro forma basis, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of paragraph (a) of the covenant described under the caption Certain Covenants Limitation on Indebtedness ; immediately after giving effect to such transaction on a pro forma basis, the Company will have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; 278

70 (E) (F) the Company delivers to the Trustee (1) an Officer s Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (C) and (D) of this paragraph) and (2) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with; and no Rating Decline will have occurred, provided that this paragraph will not apply to (a) any sale or other disposition that complies with the Certain Covenants Limitation on Asset Sales covenant or any Subsidiary Guarantor whose Subsidiary Guarantee is unconditionally released in accordance with the provisions of the Indenture and (b) a consolidation or merger of any Subsidiary Guarantor with and into the Company or any other Subsidiary Guarantor, so long as the Company or such Subsidiary Guarantor survives such consolidation or merger. Upon any consolidation or merger, or any sale, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company or a Subsidiary Guarantor in a transaction that is subject to, and that complies with the provisions of, this Consolidation, Merger and Sale of Assets covenant, the successor Person (to the Company or the relevant Subsidiary Guarantor, as the case may be) shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, conveyance, transfer, lease or other disposition, the provisions of this Indenture referring to Company or Subsidiary Guarantor (as the case may be) shall refer instead to the successor Person and not to the predecessor Company or the relevant predecessor Subsidiary Guarantor (as the case may be) and the predecessor Company or the relevant predecessor Subsidiary Guarantor shall be relieved from the obligation to pay the principal of, premium on, if any, and interest on, the Notes under the Indenture, the Notes or the applicable Subsidiary Guarantee), and may exercise every right and power of, the Company or the relevant Subsidiary Guarantor (as the case may be) under the Indenture with the same effect as if such successor Person had been named as the Company or a Subsidiary Guarantor (as the case may be) in the Indenture; provided, however, that the predecessor Company or the predecessor Subsidiary Guarantor (as the case may be) shall not be relieved from the obligation to pay the principal of, premium on, if any, and interest on, the Notes under the Indenture, the Notes or the applicable Subsidiary Guarantee in the case of a lease of all or substantially all of its properties and assets. Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve all or substantially all of the property or assets of a Person. The foregoing provisions would not necessarily afford Holders protection in the event of highly-leveraged or other transactions involving the Company that may adversely affect Holders. No Payments for Consents The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes, unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend such term or provision within the time period set forth in the solicitation documents relating to such consent, waiver or amendment. 279

71 Notwithstanding the foregoing, in any offer or payment of consideration for, or as an inducement to, any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes, the Company and any of its Restricted Subsidiaries may exclude (a) in connection with an exchange offer, holders or beneficial owners of the Notes that are not qualified institutional buyers as defined in Rule 144A under the Securities Act, and (b) in connection with any consent, waiver or amendment, holders or beneficial owners of the Notes in any jurisdiction where the inclusion of such holders or beneficial owners would require the Company or any of its Restricted Subsidiaries to (i) file a registration statement, prospectus or similar document or subject the Company or any of its Restricted Subsidiaries to ongoing periodic reporting or similar requirements under any securities laws (including but not limited to, the United States federal securities laws and the laws of the European Union or its member states), (ii) qualify as a foreign corporation or other entity as a dealer in securities in such jurisdiction if it is not otherwise required to so qualify, (iii) generally consent to service of process in any such jurisdiction or (iv) subject the Company or any of its Restricted Subsidiaries to taxation in any such jurisdiction if it is not otherwise so subject, or the solicitation of such consent, waiver or amendment from, or the granting of such consent or waiver, or the approval of such amendment by, holders or beneficial owners in such jurisdiction would be unlawful, in each case as determined by the Company in its sole discretion. Defeasance Defeasance and Discharge The Indenture will provide that the Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 183rd day after the deposit referred to below, and the provisions of the Indenture and the Security Documents will no longer be in effect with respect to the Notes (except for, among other matters, certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold monies for payment in trust) if, among other things: (a) (b) the Company has (1) deposited with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose), in trust, money and/or U.S. Government Obligations or a combination thereof that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes and (2) delivered to the Trustee an Opinion of Counsel or a certificate of an internationally recognized firm of independent accountants to the effect that the amount deposited by the Company is sufficient to provide payment for the principal of, premium, if any, and accrued interest on, the Notes on the Stated Maturity of such payment in accordance with the terms of the Indenture and the Notes and an Opinion of Counsel to the effect that the Holders have a valid, perfected, exclusive security in the trust; the Company has delivered to the Trustee (1) either (x) an Opinion of Counsel of recognized international standing with respect to U.S. federal tax laws which is based on a change in applicable U.S. federal income tax law occurring after the Original Issue Date to the effect that beneficial owners will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the Company s exercise of its option under this Defeasance and Discharge provision and will be subject to U.S. federal income tax on the same amounts and in the same manner and at the same time as would have been the case if such deposit, defeasance and discharge had not occurred or (y) a ruling directed to the Trustee received from the U.S. Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (2) an Opinion of Counsel of recognized international standing to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 183 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; 280

72 (c) (d) (e) the Company shall have delivered to the Trustee an Officer s Certificate stating that the deposit was not made by it with the intent of preferring the Holders over any other of its creditors or with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others; immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, will have occurred and be continuing on the date of such deposit or during the period ending on the 183rd day after the date of such deposit, and such defeasance will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any Restricted Subsidiary is a party or by which the Company or any Restricted Subsidiary is bound; and the Company must deliver to the Trustee an Officer s Certificate acceptable to the Trustee and an Opinion of Counsel, each stating that all conditions precedent relating to such defeasance have been complied with. In case of either discharge or defeasance of the Notes, the Subsidiary Guarantees will terminate. Defeasance of Certain Covenants The Indenture will further provide that the provisions of the Indenture will no longer be in effect with respect to clauses (c), (d), (e)(1) and (g) under the first paragraph and clauses (C), (D), (E)(1) and (F) under the second paragraph under Consolidation, Merger and Sale of Assets and all the covenants described herein under Certain Covenants other than as described under Certain Covenants Anti-Layering, clause (c) under Events of Default with respect to such clauses (c), (d), (e)(1) and (g) under the first paragraph and clauses (C), (D), (E)(1) and (F) under the second paragraph under Consolidation, Merger and Sale of Assets and with respect to the other events set forth in such clause, clause (d) under Events of Default with respect to such other covenants and clauses (e) and (f) under Events of Default will be deemed not to be Events of Default upon, among other things, the deposit with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose), in trust, of money, U.S. Government Obligations or a combination thereof that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, Additional Amounts, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes, the satisfaction of the provisions described in clause (b)(2), (c) and (e) under Defeasance and Discharge above and the delivery by the Company to the Trustee of an Opinion of Counsel of recognized international standing with respect to U.S. federal income tax matters to the effect that beneficial owners will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to U.S. federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. Defeasance and Certain Other Events of Default If in the event the Company exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Notes as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. Government Obligations on deposit with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose) will be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, the Company and the Subsidiary Guarantors under the Indenture will remain liable for such payments. 281

73 Amendments and Waiver Amendments Without Consent of Holders The Indenture, the Notes, the Subsidiary Guarantees, the Deeds of Guarantee and the Security Documents may be amended, without the consent of any Holder, to: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) cure any ambiguity, defect, omission or inconsistency in the Indenture, the Notes, the Subsidiary Guarantees, the Deeds of Guarantee or the Security Documents; comply with the provisions described under Consolidation, Merger and Sale of Assets ; evidence and provide for the acceptance of appointment by a successor Trustee or Collateral Agent; add any Subsidiary Guarantor or any Subsidiary Guarantee or release any Subsidiary Guarantor from any Subsidiary Guarantee as provided or permitted by the terms of the Indenture; add additional collateral to secure the Notes or the Subsidiary Guarantees; provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture; in any other case where a supplemental indenture to the Indenture is required or permitted to be entered into pursuant to the provisions of the Indenture without the consent of any Holder; effect any changes to the Indenture in a manner necessary to comply with the procedures of any relevant clearing system; make any other change that, in the good faith opinion of the Board of Directors, does not materially and adversely affect the rights of any Holder of Notes; or conform the text of the Indenture, the Notes, the Subsidiary Guarantees, the Deeds of Guarantee or the Security Documents to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of the Indenture, the Notes, the Subsidiary Guarantees or the Security Documents. In connection with the matters indicated above, the Trustee shall be entitled to rely absolutely on an opinion of counsel and an Officer s Certificate to the effect that the entry into such amendment, supplement or waiver is authorized or permitted. Amendments With Consent of Holders Amendments of the Indenture, the Notes, the Subsidiary Guarantees, the Deeds of Guarantee or any Security Document may be made by the Company, the Subsidiary Guarantors and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes, and the holders of a majority in principal amount of the outstanding Notes may waive future compliance by the Company or the Subsidiary Guarantors with any provision of the Indenture, the Notes, the Subsidiary Guarantees, the Deeds of Guarantee or the Security Documents; provided that no such modification, amendment or waiver may, without the consent of each Holder: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Note; 282

74 (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) reduce the principal amount of, or premium, if any, or interest on, any Note; change the currency, time or place of payment of principal of, or premium, if any, or interest on, any Note; impair the contractual right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note or any Subsidiary Guarantee; reduce the above stated percentage of outstanding Notes the consent of whose Holders is necessary to modify or amend the Indenture; waive a default in the payment of principal of, premium, if any, or interest on the Notes; release any Subsidiary Guarantor from its Subsidiary Guarantee, except as provided in the Indenture; reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture, the Security Documents or for waiver of certain defaults; amend, change or modify any Subsidiary Guarantee or Deed of Guarantee in a manner that adversely affects the Holders, except as provided in the Indenture; release any Collateral, except as provided in the Indenture and the Security Documents; amend, change or modify any provision of any Security Document or the Indenture relating to the Collateral, in a manner that adversely affects the Holders, except in accordance with the other provisions of the Indenture, such Security Document; (1) reduce the amount payable upon a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from any Asset Sale or change the time or manner by which a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from any Asset Sale may be made or by which the Notes must be repurchased pursuant to a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from any Asset Sale, unless such amendment, waiver or modification shall be in effect prior to the occurrence of a Change of Control or the event giving rise to the repurchase of the Notes under Limitation on Asset Sales ; (m) change the redemption date or the redemption price of the Notes from that stated under Optional Redemption or Redemption for Tax Reasons ; (n) (o) amend, change or modify the obligation of the Company or any Subsidiary Guarantor to pay Additional Amounts; or amend, change or modify any provision of the Indenture or the related definitions to contractually subordinate in right of payment the Notes or any Subsidiary Guarantee to any other Indebtedness of the Company or any Subsidiary Guarantor (for the avoidance of doubt, the Notes and the Subsidiary Guarantees will not be contractually subordinated in right of payment to any other Indebtedness of the Company or any Subsidiary Guarantor solely by virtue of being unsecured or by virtue of being secured on a junior priority basis). 283

75 Satisfaction and Discharge The Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when: (1) either: (a) (b) all of the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust by the Company and thereafter repaid to the Company) have been delivered to the Paying Agent for cancellation; or all Notes not theretofore delivered to the Paying Agent for cancellation have become due and payable pursuant to an optional redemption notice or otherwise or will become due and payable within one year, and the Company has irrevocably deposited or caused to be deposited with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose) funds, in cash in U.S. dollars, non-callable U.S. Government Obligations or a combination thereof, in an amount sufficient to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Paying Agent for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable written instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (2) the Company or any Subsidiary Guarantor has paid all other sums payable under this Indenture; and (3) such deposit will not result in a breach or violation of, or constitute a default under, any instruments to which the Company or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound (other than the Indenture, the Notes or any Security Document). In addition, the Company must deliver to the Trustee an Officer s Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been satisfied. Unclaimed Money Claims against the Company for the payment of principal of, premium, if any, or interest, on the Notes will become void unless presentation for payment is made as required under the Indenture within a period of six years. No Personal Liability of Incorporators, Stockholders, Members, Officers, Directors, Commissioners or Employees No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any of the Subsidiary Guarantors in the Indenture, or in any of the Notes or the Subsidiary Guarantees or because of the creation of any Indebtedness represented thereby, will be had against any incorporator, stockholder, officer, commissioner, director, employee or controlling person of the Company or any of the Subsidiary Guarantors or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive liabilities under any applicable securities law. 284

76 Concerning the Trustee and the Agents The Bank of New York Mellon is to be appointed as Trustee and The Bank of New York Mellon is to be appointed as paying agent (the Paying Agent ) under the Indenture. The Bank of New York Mellon is to be appointed as registrar (the Registrar ) and transfer agent (the Transfer Agent and together with the Registrar and the Paying Agent, the Agents ) with regard to the Notes. The Bank of New York Mellon is to be appointed as collateral agent (the Collateral Agent ) with regard to the Collateral under the Security Documents. Except during the continuance of a Default, the Trustee will not be liable, except for the performance of such duties and only such duties as are specifically set forth in the Indenture, and no implied covenant or obligation shall be read into the Indenture against the Trustee and the Agents. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it under the Indenture as a prudent person would exercise under the circumstances in the conduct of such person s own affairs. The Trustee is permitted to engage in transactions with the Company and its respective Affiliates; provided that if it acquires any conflicting interest, it must eliminate such conflict or resign. For so long as the Notes are listed on the Singapore Exchange Securities Trading Limited (the SGX-ST ) and the rules of the SGX-ST so require, if a Global Note is exchanged for Certificated Notes, the Company will appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, and make an announcement of such exchange through the SGX-ST that will include all material information with respect to the delivery of the Certificated Notes, including details of the paying agent in Singapore by way of an announcement through SGXNET. The Trustee will be under no obligation to exercise any of the rights or powers conferred on it under the Indenture at the request or direction of any of the Holders unless such Holders have provided to the Trustee indemnity and/or security (including by way of pre-funding) to its satisfaction against any loss, liability or expense that might be incurred by it in compliance with such request or direction. With respect to a request or direction from Holders to enforce the Deeds of Guarantee, or any other document governed under the laws of the Republic of Indonesia against the Subsidiary Guarantors or any other Person, indemnity and security shall include, without limitation (and without limiting the Trustee s ability to accept other forms of security and indemnity), prefunding by the requesting Holders of an account in the name of the Trustee in such amounts as the Trustee determines in its sole and absolute discretion. The foregoing prefunding requirements shall be in addition, and subject in all respects, to any other requirements of the Trustee regarding the indemnity or security to be provided to it in connection with any such enforcement request, including requirements regarding the creditworthiness of the requesting Holders. Whenever the Trustee is required or entitled by the terms of the Indenture and the Notes to exercise any discretion or power, take any action of any nature, make any decision or give any direction or certification, the Trustee is entitled, prior to exercising any such discretion or power, taking any such action, making any such decision, or giving any such direction or certification, to solicit Holders for direction, and the Trustee is not responsible for any loss or liability incurred by any person as a result of any delay in it exercising such discretion or power, taking such action, making such decision, or giving such direction or certification where the Trustee is seeking such directions or the non-exercise of such discretion or power, or not taking any such action or making any such decision or giving any such direction or certification in the absence of any such directions from Holders. In any event, and as provided elsewhere herein, even where the Trustee has been directed by the Holders, the Trustee shall not be required to exercise any such discretion, power or take any such action as aforesaid unless it has been indemnified and/or secured and/or prefunded to its satisfaction. 285

77 The Indenture provides that the Company and the Subsidiary Guarantors will jointly and severally indemnify the Trustee, each of the Agents and their respective officers, directors, employees, representatives and agents for all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind imposed against the Trustee, any of the Agents or any of their respective officers, directors, employees, representatives and agents, as applicable, arising out of or in connection with the acceptance or administration of its duties under the Indenture except to the extent that any of the foregoing are finally judicially determined to have resulted solely from the gross negligence or willful misconduct of the Trustee, any of the Agents or any of their respective officers, directors, employees, representatives and agents, as applicable. The Indenture provides that the Trustee will not be liable with respect to any action taken or omitted to be taken in accordance with the direction of the Holders of Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee in respect of such Notes. Book-Entry; Delivery and Form The certificates representing the Notes will be issued in fully registered form without interest coupons. Notes sold in offshore transactions in reliance on Regulation S under the Securities Act will initially be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (each a Regulation S Global Note ) and will be deposited with The Bank of New York Mellon as custodian for, and registered in the name of a nominee of, DTC for the accounts of Euroclear and Clearstream Luxembourg. Notes sold in reliance on Rule 144A will be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (each a Restricted Global Note and together with the Regulation S Global Notes, the Global Notes ) and will be deposited with The Bank of New York Mellon as custodian for, and registered in the name of a nominee of, DTC. Each Global Note (and any Notes issued for exchange therefor) will be subject to certain restrictions on transfer set forth therein as described under Transfer Restrictions. Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC ( participants ) or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Beneficial owners may hold their interests in a Global Note directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. Euroclear and Clearstream Luxembourg will hold interests in the Global Notes on behalf of their participants through DTC. So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Indenture and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC s applicable procedures, in addition to those provided for under the Indenture and, if applicable, those of Euroclear and Clearstream Luxembourg. None of the Trustee, the Agents or any of their respective agents will have any responsibility or be liable for any aspect of the records relating to the book-entry interests. 286

78 Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither the Company nor any of the Subsidiary Guarantors, the Trustee nor any of the Agents nor the Collateral Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. The Company expects that DTC will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants and which may be legended as set forth under the heading Transfer Restrictions. Although DTC, Euroclear and Clearstream are expected to follow the foregoing procedures in order to facilitate transfers of interests in a Global Note among participants of DTC, Euroclear and Clearstream Luxembourg, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Company, any of the Subsidiary Guarantors, the Trustee, the Agents or the Collateral Agent will have any responsibility for the performance by DTC, Euroclear or Clearstream Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days, the Company, upon prior written notice given to the Trustee, will issue Certificated Notes in registered form, which may bear the legend referred to under Transfer Restrictions, in exchange for the Global Notes. Holders of an interest in a Global Note may receive Certificated Notes, which may bear the legend referred to under Transfer Restrictions, in accordance with the DTC s rules and procedures in addition to those provided for under the Indenture. The Clearing Systems General DTC, Euroclear and Clearstream Luxembourg have advised the Company as follows: DTC. DTC is a limited-purpose trust company organized under the laws of the State of New York, a banking organization within the meaning of New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of securities certificates. DTC s participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom own DTC, and 287

79 may include the Initial Purchasers. Indirect access to the DTC system is also available to others that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly ( indirect participants ). Transfers of ownership or other interests in Notes in DTC may be made only through DTC participants. In addition, beneficial owners of Notes in DTC will receive all distributions of principal of and interest on the Notes from the Trustee through such DTC participant. Euroclear and Clearstream Luxembourg. Euroclear and Clearstream Luxembourg hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream Luxembourg provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream Luxembourg interface with domestic securities markets. Euroclear and Clearstream Luxembourg participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream Luxembourg is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream participant, either directly or indirectly. None of the Company, the Subsidiary Guarantors, the Trustee or any of their respective agents will have responsibility for the performance of Euroclear or Clearstream Luxembourg or their respective participants of their respective obligations under the rules and procedures governing their operations, including rules and procedures relating to book-entry interests. Initial Settlement Initial settlement of the Notes will be made in immediately available funds. Investors interests in Notes held in book-entry form by DTC will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Euroclear and Clearstream will hold positions on behalf of their participants through DTC. Investors electing to hold their Notes through DTC (other than through accounts at Euroclear or Clearstream) Luxembourg must follow the settlement practices applicable to United States corporate debt obligations. The securities custody accounts of investors will be credited with their holdings against payment in same day funds on the settlement date. Investors electing to hold their Notes through Euroclear or Clearstream Luxembourg accounts will follow the settlement procedures applicable to conventional Eurobonds in registered form. Notes will be credited to the securities custody accounts of Euroclear Holders and of Clearstream Luxembourg Holders on the Business Day following the settlement date against payment for value on the settlement date. Secondary Market Trading Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules. Secondary market trading between Clearstream Luxembourg participants and/or Euroclear participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream Luxembourg and Euroclear and will be settled using the procedures applicable to conventional eurobonds. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Luxembourg participants or Euroclear participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its U.S. depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing 288

80 system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if a transaction meets its settlement requirements, deliver instructions to its U.S. depositary to take action to effect final settlement on its behalf by delivering or receiving Notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Luxembourg participants and Euroclear participants may not deliver instructions directly to the U.S. depositaries. Because of time zone differences, credits of Notes received in Clearstream Luxembourg or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and dated the Business Day following the DTC settlement date. Such credits or any transactions in such Notes settled during such processing will be reported to the relevant Clearstream Luxembourg participants or Euroclear participants on such Business Day. Cash received in Clearstream Luxembourg or Euroclear as a result of sales of Notes by or through a Clearstream Luxembourg participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream Luxembourg or Euroclear cash account only as of the Business Day following settlement in DTC. Notices All notices or demands required or permitted by the terms of the Notes or the Indenture to be given to or by the Holders are required to be in writing and may be given or served by being sent by prepaid courier or by being deposited, first-class postage prepaid, in the United States mails (if intended for the Company or any Subsidiary Guarantor) addressed to the Company or such Subsidiary Guarantor at the registered office of the Company, (if intended for the Trustee) addressed to the Trustee, at the corporate trust office of the Trustee; and (if intended for any Holder) addressed to such Holder at such Holder s last address as it appears in the Note register. Any such notice or demand will be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of DTC. Any such notice will be deemed to have been delivered on the day such notice is delivered to DTC or if by mail, when so sent or deposited. Consent to Jurisdiction; Service of Process The Company and each of the Subsidiary Guarantors will irrevocably (i) submit to the non-exclusive jurisdiction of any U.S. federal or New York state court located in the Borough of Manhattan, The City of New York in connection with any suit, action or proceeding arising out of, or relating to, the Notes, any Subsidiary Guarantee or the Indenture or any transaction contemplated thereby and (ii) designate and appoint Law Debenture Corporate Services Inc. for receipt of service of process in any such suit, action or proceeding. Governing Law Each of the Notes, the Subsidiary Guarantees, the Indenture and the Security Documents provides that such instrument will be governed by, and construed in accordance with, the laws of the State of New York. Definitions Set forth below are defined terms used in the covenants and other provisions of the Indenture. Reference is made to the Indenture for other capitalized terms used in this Description of the Notes for which no definition is provided. 289

81 Acquired Indebtedness means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary, whether or not Incurred in connection with, or in contemplation of, the Person merging with or into or becoming a Restricted Subsidiary. Adjusted Treasury Rate means, with respect to any redemption date, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated H.15(519) or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under Treasury Constant Maturities, for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three (3) months before or after August 1, 2020, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case calculated on the third Business Day immediately preceding the redemption date. Affiliate means, with respect to any Person, any other Person (i) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or (ii) who is a director, commissioner or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (i) of this definition. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with ), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. Applicable Premium means, with respect to a Note at any redemption date, the greater of (i) 1.00% of the principal amount of such Note and (ii) the excess of (A) the present value at such redemption date of the redemption price of such Note on August 1, 2020 (such redemption price being described in the first paragraph in the Optional Redemption section exclusive of any accrued interest), plus all required remaining scheduled interest payments due on such Note through August 1, 2020 (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate plus 50 basis points, over (B) the principal amount of such Note on such redemption date. None of the Trustee or any of the Agents will be responsible for calculating or verifying the Applicable Premium. Asset Acquisition means (i) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person will become a Restricted Subsidiary or will be merged into or consolidated with the Company or any Restricted Subsidiary, or (ii) an acquisition by the Company or any Restricted Subsidiary of the property and assets of any Person other than the Company or any Restricted Subsidiary that constitute substantially all of a division or line of business of such Person. Asset Disposition means the sale or other disposition by the Company or any Restricted Subsidiary (other than to the Company or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary or (ii) all or substantially all of the assets that constitute a division or line of business of the Company or any Restricted Subsidiary. 290

82 Asset Sale means any sale, transfer or other disposition of any of its property or assets (including by way of merger, consolidation or Sale and Leaseback Transaction and including any sale or issuance of Capital Stock by a Restricted Subsidiary), in each case in one transaction or a series of related transactions by the Company or any Restricted Subsidiary to any Person; provided that Asset Sale will not include: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) any sale, transfer or other disposition of inventory, receivables and other current assets in the ordinary course of business; any sale, transfer or other disposition of assets constituting a Restricted Payment permitted to be made under the covenant described under the caption Certain Covenants Limitation on Restricted Payments ; any sale, transfer or other disposition of assets with a Fair Market Value not in excess of US$2.0 million (or the Dollar Equivalent thereof) in any transaction or series of related transactions; any sale, transfer or other disposition of any property or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries; any sale, transfer or other disposition deemed to occur in connection with creating or granting any Permitted Lien; a transaction covered by the covenant under the caption Consolidation, Merger and Sale of Assets ; any sale, transfer or other disposition of any assets by the Company or any Restricted Subsidiary to the Company or to any Restricted Subsidiary; any transfer resulting from any casualty or condemnation of property; provided that any Net Cash Proceeds from any such transfer shall be applied in accordance with the covenant described under the caption Limitation on Asset Sales ; any sale or other disposition of cash or Temporary Cash Investments; any transfer, termination, unwinding or other disposition of Hedging Obligations; any sale, transfer or other disposition of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between joint venture parties set forth in joint venture arrangements and similar binding arrangements; provided that any Net Cash Proceeds from any such sale, transfer or other disposition shall be applied in accordance with the covenant described under the caption Limitation on Asset Sales ; any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business; and a MIFA Sale, provided the Net Cash Proceeds from such sale are applied in accordance with clause (19) of Permitted Investments. Attributable Indebtedness means, in respect of a Sale and Leaseback Transaction, at the time of determination, the present value, discounted at the interest rate implicit in such Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in such Sale and Leaseback Transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended, determined in accordance with GAAP. 291

83 Average Life means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments. Beneficial Owner has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular person (as that term is used in Section 13(d)(3) of the Exchange Act), such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or exercisable only upon the occurrence of a subsequent condition. The terms Beneficially Owns and Beneficially Owned will have a corresponding meaning. Board of Directors means the board of directors of the Company elected or appointed by the stockholders of the Company to manage the business of the Company or any committee of such board duly authorized to take the action purported to be taken by such committee. Board Resolution means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors. Business Day means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions in The City of New York, Singapore, London or Indonesia (or in any other place in which payments on the Notes are to be made) are authorized by law or governmental regulation to close. Capital Stock means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including all Common Stock and Preferred Stock, but excluding debt securities convertible into such equity. Capitalized Lease means, with respect to any Person, any lease of any property (whether real, personal or mixed), which, in conformity with GAAP, is required to be capitalized on the statement of financial position of such Person. Capitalized Lease Obligations means the discounted present value of the rental obligations under a Capitalized Lease. Change of Control means the occurrence of one or more of the following events: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any person within the meaning of Section 13(d) of the Exchange Act, other than to one or more Permitted Holders; (2) the Company consolidates with, or merges with or into, any Person (other than one or more Permitted Holders), or any Person (other than one or more Permitted Holders) consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for (or continues as) Voting Stock (other than 292

84 Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and in substantially the same proportion as before the transaction; (3) the Permitted Holders are collectively the beneficial owners of less than a majority of the total voting power of the Voting Stock of the Company; (4) any person or group (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than one or more Permitted Holders, is or becomes the Beneficial Owner, directly or indirectly, of a larger percentage of the voting power of the Voting Stock than the Permitted Holders; (5) individuals who on the Original Issue Date constituted the Board of Directors (together with any new directors whose election was approved by a vote of at least two-thirds of the members of the Board of Directors then in office who were members of the Board of Directors on the Original Issue Date or whose election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; or (6) the adoption of a plan relating to the liquidation or dissolution of the Company. Clearstream Luxembourg means Clearstream Banking S.A. or any successor thereof. Commodity Agreement means any spot, forward or futures contract, commodity swap agreement, commodity price protection, commodity cap or floor agreement, commodity option agreement or other similar agreement or arrangement. Common Stock means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person s common stock or ordinary shares, whether or not outstanding on the Original Issue Date, and include all series and classes of such common stock or ordinary shares. Comparable Treasury Issue means the U.S. Treasury security having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes from the redemption date to August 1, Comparable Treasury Price means, with respect to any redemption date, if clause (ii) of the Adjusted Treasury Rate is applicable, the average of three, or such lesser number as is obtained by the Company, Reference Treasury Dealer Quotations for such redemption date. Consolidated Debt to EBITDA Ratio means, on any Transaction Date, the ratio of (1) the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries on a consolidated basis outstanding on such Transaction Date to (2) the aggregate Consolidated EBITDA for the Four Quarter Period with respect to such Transaction Date, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustments set forth in the definition of Fixed Charge Coverage Ratio. Consolidated EBITDA means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income: (1) Consolidated Interest Expense; 293

85 (2) income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets); and (3) depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than non-cash items in a period which reflect cash expenses paid or to be paid in another period), less all non-cash items increasing Consolidated Net Income (other than accrual of revenue in the ordinary course of business), all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; provided that the amounts referred to in clauses (2) and (3) relating to a Restricted Subsidiary will be added to Consolidated Net Income to compute Consolidated EBITDA only to the extent that a corresponding amount would be permitted at the date of determination to be dividended by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. Consolidated Fixed Charges means, for any period, the sum (without duplication) of (i) Consolidated Interest Expense for such period and (ii) all cash and non-cash dividends or distributions paid, declared, accrued or accumulated during such period on any Disqualified Stock, Preferred Stock or perpetual capital or similar securities (other than Common Stock) of the Company or any Restricted Subsidiary held by Persons other than the Company or any Restricted Subsidiary, except for dividends payable in the Company s Capital Stock (other than Disqualified Stock); provided that dividends declared, accrued or accounted for in one period shall not be included in Consolidated Fixed Charges of a later period when subsequently paid in such later period). Consolidated Interest Expense means, for any period, the amount that would be included in gross interest expense on a consolidated statement of comprehensive income prepared in accordance with GAAP for such period of the Company and its Restricted Subsidiaries, plus, to the extent not included in such gross interest expense, and to the extent incurred, accrued or payable during such period by the Company and its Restricted Subsidiaries, without duplication, (i) interest expense attributable to Capitalized Lease Obligations and imputed interest with respect to Attributable Indebtedness, (ii) amortization of debt issuance costs and original issue discount expense and non-cash interest payments in respect of any Indebtedness, (iii) the interest portion of any deferred payment obligation except Trade Payables, (iv) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness, (v) the net costs associated with Hedging Obligations (including the amortization of fees), (vi) interest accruing on Indebtedness of any other Person that is guaranteed by the Company or any Restricted Subsidiary or secured by a Lien on assets of the Company or any Restricted Subsidiary proportionate to the extent that such Indebtedness is guaranteed or secured, (vii) any capitalized interest and (viii) all other non-cash interest expense. Consolidated Net Income means, with respect to any specified Person for any period, the aggregate of the total comprehensive income (or loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in conformity with GAAP; provided that the following items will be excluded in computing Consolidated Net Income (without duplication): (1) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting, except to the extent of the amount of net income actually paid in cash to, or the amount of loss actually funded in cash by, the specified Person or a Restricted Subsidiary of the Person during such period; (2) the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any Restricted Subsidiary or all or substantially all of the property and assets of such Person are acquired by the Company or any Restricted Subsidiary; 294

86 (3) the net income (but not loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter, articles of association or other similar constitutive documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (4) the cumulative effect of a change in accounting principles; (5) any net after tax gains realized on the sale or other disposition of (A) any property or assets of the Company or any Restricted Subsidiary which is not sold in the ordinary course of business or (B) any Capital Stock of any Person (including any gains by the Company realized on sales of Capital Stock of the Company or any Restricted Subsidiary); (6) any translation gains or losses due solely to fluctuations in currency values and related tax effects; (7) any net after-tax extraordinary gains or losses unless such gain is permitted to be included pursuant to clause (8); and (8) any reversal of an impairment loss relating to an impairment loss taken prior to the Original Issue Date; provided that Consolidated Net Income will be increased, in an aggregate amount not to exceed US$40.0 million (or the Dollar Equivalent thereof), by any reversals of impairment loss recognized after the Original Issue Date relating to the impairment loss on mining properties taken with respect to the MIFA concession area in the years ended December 31, 2014 or Consolidated Net Worth means, at any date of determination, stockholders equity as set forth on the most recently available annual, semi-annual or quarterly consolidated statements of financial position of the Company and its Restricted Subsidiaries provided to the Trustee, plus, to the extent not included, any Preferred Stock of the Company, less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP. Corporate Trust Office means the office of the Trustee at which the corporate trust business of the Trustee is principally administered, which shall initially be located at 101 Barclay Street, New York, New York 10286, United States of America, facsimile: +1 (212) /5366, attention: Global Corporate Trust (the Specified Corporate Trust Office ). Credit Facility means one or more debt facilities or commercial paper facilities with banks or other lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit or issuances of debt securities evidenced by notes, debentures, bonds, indentures or similar instruments, in each case as amended, restated, modified, renewed, refunded, replaced or refinanced (including by means of sales of debt securities) in whole or in part from time to time (and whether or not with the original administrative agent, lenders or trustee or another administrative agent or agents, other lenders or trustee and whether provided under any credit or other agreement or indenture). Currency Agreement means any foreign exchange forward or futures contract, currency swap agreement, currency cap or floor agreement, currency hedge agreement, currency option agreement or other similar agreement or arrangement. Default means any event that is, or after notice or passage of time or both would be, an Event of Default. 295

87 Disqualified Stock means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed on or prior to the date that is 366 days after the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock on or prior to the date that is 366 days after the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity on or prior to the date that is 366 days after the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an asset sale or change of control occurring prior to the Stated Maturity of the Notes will not constitute Disqualified Stock if the asset sale or change of control provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Certain Covenants Limitation on Asset Sales and Repurchase of Notes upon a Change of Control covenants and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company s repurchase of the Notes as are required to be repurchased pursuant to the Certain Covenants Limitation on Asset Sales and Repurchase of Notes Upon a Change of Control covenants. Dollar Equivalent means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the base rate for the purchase of U.S. dollars with the applicable foreign currency as quoted by Bank Indonesia or its successor on the date of determination. DTC means The Depository Trust Company and its successors. Equity Offering means any underwritten public offering or private placement of Common Stock of the Company after the Original Issue Date to any Person other than to an Affiliate of the Company or any Permitted Holder; provided that the aggregate gross cash proceeds received by the Company from such transaction will be no less than US$20.0 million (or the Dollar Equivalent thereof). Euroclear means Euroclear Bank SA/NV or any successor thereof. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Fair Market Value means the price that would be paid in an arm s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination will be conclusive if evidenced by a Board Resolution. Finance Subsidiary means a Wholly-Owned Restricted Subsidiary of the Company or another Finance Subsidiary (i) the operations of which are primarily comprised of Incurring Indebtedness to Persons other than the Company or any of its Subsidiaries from time to time to finance the operations of the Company and/or its Restricted Subsidiaries and other activities incidental, related to or ancillary to such operations, including activities related to the establishment or maintenance of its corporate existence; and (ii) which conducts no business and owns no material assets other than (w) any equity interests in another Finance Subsidiary or equity interests of a Wholly Owned Subsidiary (a FS Subsidiary ) of it organized outside of Indonesia that on lends the proceeds of any Indebtedness Incurred by the Finance Subsidiary to the Company or any of its Restricted Subsidiaries, (x) intercompany loans or other securities representing the proceeds of Indebtedness described in clause (i), (y) any such debt obligations upon a repurchase, redemption or other acquisition thereof and prior to cancellation thereof and (z) cash or Temporary Cash Investments. Fitch means Fitch Ratings Ltd. or any successor to the rating agency business thereof. 296

88 Fixed Charge Coverage Ratio means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the Four Quarter Period with respect to such Transaction Date to (2) the aggregate Consolidated Fixed Charges during such Four Quarter Period. In making the foregoing calculation: (A) (B) (C) (D) (E) pro forma effect will be given to any Indebtedness Incurred, repaid or redeemed during the Reference Period relating to such Four Quarter Period in each case as if such Indebtedness had been Incurred, repaid or redeemed on the first day of such Reference Period (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement or any predecessor revolving credit or similar arrangement); provided that, in the event of any such repayment or redemption, Consolidated EBITDA for such period will be calculated as if the Company or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to repay or redeem such Indebtedness; Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate will be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; pro forma effect will be given to the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries during the Reference Period as if such creation, designation or redesignation had occurred on the first day of such Reference Period; pro forma effect will be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and pro forma effect will be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period, provided that to the extent that clause (D) or (E) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation will be based upon the Four Quarter Period immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available. Four Quarter Period means, as of any Transaction Date, the then most recent four fiscal quarters prior to such Transaction Date for which consolidated financial statements of the Company (which may be internal financial statements) are available and have been provided to the Trustee. FS Subsidiary has the meaning set forth in the definition of Finance Subsidiary. GAAP means generally accepted accounting principles in the Republic of Indonesia as in effect from time to time. 297

89 guarantee means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term guarantee will not include endorsements for collection or deposit in the ordinary course of business. The term guarantee used as a verb has a corresponding meaning. Hedging Obligation of any Person means the obligations of such Person pursuant to any Commodity Agreement, Currency Agreement or Interest Rate Agreement. Holder means the Person in whose name a Note is registered in the Note register. Incur means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that (1) any Indebtedness and Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount, the accrual of interest, the accrual of dividends, the payment of interest in the form of additional Indebtedness, the reclassification of Preferred Stock as Indebtedness due to a change in accounting principles and the payment of dividends on Preferred Stock or Disqualified Stock in the form of additional shares of Preferred Stock or Disqualified Stock (to the extent provided for when the Indebtedness, Preferred Stock or Disqualified Stock on which such interest or dividend is paid was originally issued) will not be considered an Incurrence of Indebtedness. The terms Incurrence, Incurred and Incurring have meanings correlative with the foregoing. Indebtedness means, with respect to any Person at any date of determination (without duplication): (1) all indebtedness of such Person for borrowed money; (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all obligations of such Person in respect of letters of credit, bankers acceptances or other similar instruments; (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables; (5) all Capitalized Lease Obligations and Attributable Indebtedness; (6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness will be the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness; (7) all Indebtedness of other Persons guaranteed by such Person to the extent such Indebtedness is guaranteed by such Person; 298

90 (8) to the extent not otherwise included in this definition, Hedging Obligations; and (9) all Disqualified Stock issued by such Person and all Preferred Stock issued by any Restricted Subsidiary of such Person valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase or redemption price plus accrued dividends. The amount of Indebtedness of any Person at any time will be the outstanding balance at such time of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided: (A) (B) (C) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP; that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness will not be deemed to be Indebtedness so long as such money is held to secure the payment of such interest; and the amount of Indebtedness with respect to any Hedging Obligation shall be equal to the net amount payable if the Commodity Agreement, Currency Agreement or Interest Rate Agreement giving rise to such Hedging Obligation terminated at that time due to default by such Person. Initial Subsidiary Guarantors means PT Reswara Minergi Hartama ( Reswara ), PT Tunas Inti Abadi ( TIA ), PT Pelabuhan Buana Reja ( PBR ), PT Cipta Kridatama ( CK ), PT Cipta Krida Bahari ( CKB ), PT Sanggar Sarana Baja ( SSB ), PT Alfa Trans Raya ( ATR ), PT Baruna Dirga Dharma ( BDD ), PT Dianta Daya Embara ( DDE ) and PT Prima Wiguna Parama ( PWP ). Interest Rate Agreement means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement. Investment means: (i) (ii) any direct or indirect advance, loan or other extension of credit to another Person; any capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others); (iii) any purchase or acquisition of Capital Stock (or options, warrants or other rights to acquire such Capital Stock), Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person; (iv) (v) any guarantee of any obligation of another Person to the extent such obligation is outstanding and to the extent guaranteed by such Person; or all other items that would be classified as investments (including purchases of assets outside the ordinary course of business) on a statement of financial position of such Person prepared in accordance with GAAP. For the purposes of the provisions of the Certain Covenants Designation of Restricted and Unrestricted Subsidiaries and Certain Covenants Limitation on Restricted Payments covenants: (i) the Company will be deemed to have made an Investment in an Unrestricted Subsidiary 299

91 in an amount equal to the Fair Market Value of the Company s proportionate interest in the assets (net of the Company s proportionate interest in the liabilities owed to any Person other than the Company or a Restricted Subsidiary and that are not guaranteed by the Company or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary at the time of such designation, (ii) any property transferred to or from any Person will be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Directors and (iii) if the Company or any Restricted Subsidiary issues, sells or otherwise disposes of any Capital Stock of a Restricted Subsidiary such that, after giving effect thereto, such Person is no longer a Restricted Subsidiary, any Investment by the Company or any Restricted Subsidiary in such Person remaining after giving effect thereto will be deemed to be a new Investment at that time. Investment Grade means a rating of AAA, AA, A or BBB, as modified by a + or - indication, or an equivalent rating representing one of the four highest rating categories, by S&P or Fitch or any of their respective successors or assigns, or a rating of Aaa, or Aa, A or Baa, as modified by a 1, 2 or 3 indication, or an equivalent rating representing one of the four highest rating categories, by Moody s or any of its successors or assigns, or a rating of AAA, AA, A or BBB, as modified by a + or - indication, or an equivalent rating representing one of the four highest rating categories of any internationally recognized rating agency or agencies, as the case may be, which shall have been designated by the Company as having been substituted for S&P, Fitch or Moody s or two or three of them, as the case may be. Lien means any mortgage, pledge, fiduciary security, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind). Moody s means Moody s Investors Service, Inc. and its affiliates and its successors. Net Cash Proceeds means: (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or Temporary Cash Investments, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or Temporary Cash Investments and proceeds from the conversion of other property received when converted to cash or Temporary Cash Investments, net of: (1) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment banks) related to such Asset Sale; (2) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole; (3) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale; (4) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP; and (5) all distributions and other payments required to be made to minority shareholders; and 300

92 (b) with respect to any issuance or sale of Capital Stock of the Company, the proceeds of such issuance or sale in the form of cash or Temporary Cash Investments, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or Temporary Cash Investments and proceeds from the conversion of other property received when converted to cash or Temporary Cash Investments, net of attorneys fees, accountants fees, underwriters or placement agents fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. Offer to Purchase means an offer to purchase the Notes by the Company from the Holders commenced by the Company mailing a notice by first class mail, postage prepaid, to the Trustee and each Holder at its last address appearing in the Note register stating: (1) the provision of the Indenture pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (2) the purchase price and the date of purchase (which will be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the Offer to Purchase Payment Date ); (3) that any Note not tendered will continue to accrue interest pursuant to its terms; (4) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase will cease to accrue interest on and after the Offer to Purchase Payment Date; (5) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled Option of the Holder to Elect Purchase on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Offer to Purchase Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Offer to Purchase Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each new Note issued will be in a principal amount of US$200,000 or integral multiples of US$1,000 in excess thereof. One Business Day prior to the Offer to Purchase Payment Date, the Company will deposit with the Paying Agent or tender agent for such Offer to Purchase immediately available and cleared funds sufficient to pay the purchase price of all Notes or portions thereof to be accepted by the Company for payment on the Offer to Purchase Payment Date. On the Offer to Purchase Payment Date, Company will (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; and (b) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officer s Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent or tender agent for such Offer to Purchase will as soon as practicable mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Registrar will as soon as practicable authenticate and mail to such Holders a new Note 301

93 equal in principal amount to any unpurchased portion of the Note surrendered; provided that each new Note issued will be in a principal amount of US$200,000 or integral multiples of US$1,000 in excess thereof. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Offer to Purchase Payment Date. The materials used in connection with an Offer to Purchase are required to contain or incorporate by reference information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Company to make the Offer to Purchase, and any other information required by applicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the requirements of the Indenture governing the relevant Offer to Purchase, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under the Notes, the Indenture and the Subsidiary Guarantees by virtue of their compliance with such securities laws or regulations. Officer of any Person means one of the directors or executive officers of such Person. Officer s Certificate means a certificate signed by an Officer. Opinion of Counsel means a written opinion from legal counsel and in form and substance acceptable to the Trustee and that meets the requirements of the Indenture; provided that legal counsel shall be entitled to rely on certificates of the Company and any Subsidiary of the Company as to matters of fact. Original Issue Date means the date on which the Notes are originally issued under the Indenture. Permitted Business means any business conducted or proposed to be conducted (as described in the Offering Memorandum) by the Company and its Subsidiaries on the Original Issue Date and any other business reasonably related, ancillary or complementary to any such business. Permitted Holders means any or all of the following: (1) Ahmad Hadiat Hamami; (2) any Affiliate (other than an Affiliate as defined in sub-clause (ii) of the definition of Affiliate) of a Person specified in clause (1); and (3) any other Person who is a spouse, child, parent, brother, sister, parent-in-law, son-in-law, daughter-in-law, grandchild, grandparent, uncle, aunt, nephew or niece of a Person described in clause (1). Permitted Investment means: (1) any Investment in (a) the Company or a Restricted Subsidiary that is, directly or indirectly, primarily engaged in a Permitted Business or (b) a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Business or be merged or consolidated with or into or transfer or convey all or substantially all its assets to the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business; (2) cash or Temporary Cash Investments; 302

94 (3) payroll, travel, entertainment, relocation and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; (4) stock, obligations or securities received in satisfaction of judgments; (5) an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary; (6) any Investment pursuant to a Hedging Obligation designed solely to protect the Company or any Restricted Subsidiary against fluctuations in interest rates, foreign currency exchange rates or commodity prices and not for speculation; (7) receivables, trade credits or other current assets owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms, including such concessionary trade terms as the Company or any Restricted Subsidiary considers reasonable under the circumstances; (8) any securities or other Investments received as consideration in, or retained in connection with, sales or other dispositions of property or assets, including Asset Dispositions made in compliance with the covenant described under the caption Certain Covenants Limitation on Asset Sales ; (9) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of Permitted Liens or made in connection with Liens permitted under the covenant described under the caption Certain Covenants Limitation on Liens ; (10) deposits made in order to comply with statutory or regulatory obligations to maintain deposits for workers, compensation claims and other purposes specified by statute or regulation from time to time in the ordinary course of a Permitted Business; (11) Investments received in compromise or resolution of obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any Restricted Subsidiary, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer or as a result of foreclosure of or transfer of title with respect to any secured Investment and any Investments obtained in exchange for any such Investments; (12) advances or extensions of credit to customers, suppliers, contractors or distributors for the acquisition of assets, consumables or services or construction of property and equipment in the ordinary course of business that are recorded as deposits or prepaid expenses on the Company s consolidated statement of financial position; (13) repurchases of the Notes; (14) loans or advances to, or guarantees of obligations of, directors, commissioners, officers or employees of the Company or a Restricted Subsidiary in the ordinary course of business in an aggregate amount not to exceed US$2.0 million (or the Dollar Equivalent thereof) at any time outstanding; (15) deposits made to secure the performance of tenders, bids, leases, bankers acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business; 303

95 (16) deposits made in order to secure the performance of the Company or any of its Restricted Subsidiaries and prepayments made in connection with the acquisition of real property by the Company or any Restricted Subsidiary, in each case, in the ordinary course of business; (17) any guarantee of Indebtedness of the Company or a Restricted Subsidiary Incurred in accordance with the covenant described under the caption Certain Covenants Limitation on Indebtedness ; (18) Investments existing, or made pursuant to legally binding commitments in existence, at the Original Issue Date and described in the Offering Memorandum and any Investment that amends, extends, renews, replaces or refinances an Investment existing on such date; provided that such new Investment is on terms and conditions no less favorable to the Company or the applicable Restricted Subsidiary than the Investment being amended, extended, renewed, replaced or refinanced; (19) any Investment by the Company or any Restricted Subsidiary in the Capital Stock of MIFA remaining after the issuance, sale or other disposition of any Capital Stock of MIFA ( MIFA Sale ) if, after giving effect thereto, MIFA is no longer a Restricted Subsidiary of the Company; provided that (x) all loans from the Company or any of its Restricted Subsidiaries to MIFA or any of its Subsidiaries outstanding on the Original Issue Date (except to the extent subsequently repaid) are repaid in full; (y) the proceeds referred to in clause (x), together with any cash proceeds received by the Company or any of its Restricted Subsidiaries from the MIFA Sale (subject in the case of this clause (y) to the adjustments in clause (a) of the definition of Net Cash Proceeds and without duplication), are applied in accordance with the second paragraph of the covenant described under the caption Limitation on Asset Sales, and (z) immediately after giving pro forma effect thereto, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of paragraph (a) of the covenant described under the caption Limitation on Indebtedness; and (20) other Investments in any Person (other than an Unrestricted Subsidiary) having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (20) since the Original Issue Date that are at the time outstanding, not to exceed US$15.0 million (or the Dollar Equivalent thereof). Permitted Liens means: (1) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as will be required in conformity with GAAP will have been made; (2) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen, employees or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as required in conformity with GAAP will have been made and Liens arising solely by virtue of any statutory or common law provisions relating to attorney s Liens; (3) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature or deposits as security for contested taxes or import duties, in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); 304

96 (4) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company or its Restricted Subsidiaries, taken as a whole; (5) any interest or title of a lessor in the property subject to any operating lease; (6) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets acquired; provided further that such Liens were not created in contemplation of or in connection with the transactions or series of transactions pursuant to which such Person became a Restricted Subsidiary; (7) Liens in favor of the Company or any Restricted Subsidiary; (8) Liens arising from attachment or the rendering of a final judgment or order against the Company or any Restricted Subsidiary that does not give rise to an Event of Default; (9) Liens existing on the Original Issue Date; (10) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (b)(4) of the covenant described under the caption Certain Covenants Limitation on Indebtedness ; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced; (11) Liens (including extensions and renewals thereof) upon real or personal property, assets, machinery, plant or equipment acquired, developed, installed, improved or expanded after the Original Issue Date (including through the acquisition of Capital Stock of any Person that owns such real or personal property, assets, machinery, plant or equipment which will, upon such acquisition, become a Restricted Subsidiary and including any interest or title of a lessor under Capitalized Lease Obligations); provided that (a) such Lien is created solely for the purpose of securing Indebtedness Incurred under clause (b)(10) of the covenant described under the caption Limitation on Indebtedness, (b) such Lien is created prior to, at the time of or within 180 days after the later of the acquisition or the completion of development, construction, installation, improvement or expansion of such property, (c) the principal amount of Indebtedness secured by such Lien does not exceed 100% of the cost (including adjustment of purchase price or similar obligations) of such property, development, construction, installation, improvement or expansion and (d) such Lien shall not extend to or cover any property or assets other than such item of real or personal property, assets, machinery, plant or equipment and any improvements on such item (12) Liens securing Indebtedness under Hedging Obligations permitted by clause (b)(5) of the covenant described under the caption Certain Covenants Limitation on Indebtedness ; (13) Liens on deposits made in order to comply with statutory obligations to maintain deposits for workers compensation claims, unemployment insurance and other purposes specified by statute made in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary; (14) Liens under the Security Documents securing the Notes (including any Additional Notes) or any Subsidiary Guarantee; (15) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; 305

97 (16) Liens securing rights of setoff in favor of a bank imposed by law or customary general terms of banks and incurred in the ordinary course of business on deposit accounts maintained with such bank and cash and Temporary Cash Investments in such accounts; (17) (x) Liens on property or assets securing Indebtedness used or to be used to defease or satisfy and discharge the Notes; provided that (a) the Incurrence of such Indebtedness was not prohibited by the Indenture and (b) such defeasance or satisfaction and discharge is not prohibited by the Indenture and (y) Liens on cash and Temporary Cash Investments arising in connection with the defeasance, discharge or redemption of Indebtedness; (18) Liens securing Indebtedness permitted to be Incurred under clause (b)(9) of the covenant described under the caption Certain Covenants Limitation on Indebtedness ; (19) Liens on (i) Capital Stock of a Finance Subsidiary and any intercompany loans or advances from such Finance Subsidiary to the Company or any Restricted Subsidiary, (ii) Capital Stock of a Wholly-Owned Subsidiary of a Finance Subsidiary and on any intercompany loans or advances made by such Wholly-Owned Subsidiary to the Company or any Restricted Subsidiary; and (iii) any interest reserve, debt service reserve, debt service accrual or similar account used to service interest payments or debt obligations with respect to such Indebtedness or any escrow account holding all or any part of the proceeds of such Indebtedness, in each case securing Indebtedness of such Finance Subsidiary (and guarantees by the Subsidiary Guarantors of such Indebtedness) permitted to be Incurred under the covenant described under the caption entitled Certain Covenants Limitation on Indebtedness ; (20) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person s obligations in respect of bankers acceptances issued or credited for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (21) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any Restricted Subsidiary in the ordinary course of business; (22) Liens Incurred in connection with any cash or treasury management program, or cash pooling, netting or set-off arrangements, in each case established in the ordinary course of business for the benefit of the Company or any Restricted Subsidiary; (23) Liens in favor of customs and revenue authorities arising by operation of law to secure payment of customs duties in connection with importation or exportation of goods in the ordinary course of business; (24) Liens on the Capital Stock of Unrestricted Subsidiaries or any Person that is not a Subsidiary of the Company solely to secure Indebtedness of such Unrestricted Subsidiaries or such Person, in each case that is non-recourse to the Company or any Restricted Subsidiary, unless the Company or such Restricted Subsidiary could have incurred such Indebtedness under the Indenture on the date of incurrence of such Lien; (25) Liens with respect to minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or municipal ordinances, zoning ordinances or other restrictions as to the use of real property, not interfering in any material respect with the conduct of the business of the Company and its Restricted Subsidiaries; (26) licenses or leases or subleases as licensor, lessor or sublessor of any of the Company s or the Restricted Subsidiaries property, including intellectual property, in the ordinary course of business; 306

98 (27) Liens resulting from escrow arrangements entered into in connection with the disposition of assets; (28) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets; (29) any encumbrance or restriction, including customary rights of first refusal and tag, drag and similar rights with respect to Capital Stock of any joint venture pursuant to joint venture agreements entered into in the ordinary course of business; (30) Liens on any interest reserve, debt service reserve, debt service accrual or similar account used to service interest payments or debt obligations with respect to Indebtedness permitted to be Incurred under the covenant described under the caption entitled Certain Covenants Limitation on Indebtedness; (31) Liens on inventories and accounts receivable to secure working capital facilities of the Company or any Restricted Subsidiary used for working capital; (32) Liens securing Priority Indebtedness; and (33) Liens with respect to obligations that do not exceed US$10.0 million (or the Dollar Equivalent thereof) at any one time outstanding; provided that for purposes of the Collateral, Permitted Liens shall mean Liens described in clauses (1), (14) and (16). Person means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. Preferred Stock as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its terms is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over any other class of Capital Stock of such Person. Priority Indebtedness means (i) any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor or a Finance Subsidiary and (ii) any Indebtedness of the Company, any Subsidiary Guarantor or a Finance Subsidiary secured by (or constituting) a Lien on any asset or property; provided that (A) Indebtedness of the Company or any Subsidiary Guarantor under the Notes, the Subsidiary Guarantees and the Indenture, (B) Indebtedness of a Wholly-Owned Subsidiary of a Finance Subsidiary consisting of Liens described in clause (19) of the definition of Permitted Liens, (C) Indebtedness Incurred under clauses (b)(3), (b)(5), (b)(9) or (b)(10) of the covenant described under the caption Certain Covenants Limitation on Indebtedness, (D) Indebtedness of the Company or any Subsidiary Guarantor secured by a Lien on property or assets which Lien also equally and ratably secures the Notes and any Subsidiary Guarantee and (E) Indebtedness Incurred under the covenant Limitation on Indebtedness to the extent secured by Liens described in clauses (17), (19) or (30) of the definition of Permitted Liens shall, in each case, not constitute Priority Indebtedness. Rating Agencies means (i) S&P, (ii) Moody s and (iii) Fitch; provided that if S&P, Moody s or Fitch shall not make a rating of the Notes publicly available, one or more nationally recognized statistical rating organizations, as the case may be, within the meaning of Section 3(a)(62) under the Exchange Act, as the Company may select, which will be substituted for any of S&P, Moody s or Fitch, as the case may be. 307

99 Rating Category means (i) with respect to S&P and Fitch, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii) with respect to Moody s, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P, Fitch or Moody s used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories ( + and - for S&P and Fitch; 1, 2 and 3 for Moody s; or the equivalent gradations for another Rating Agency) will be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). Rating Date means, in connection with actions contemplated under the caption Consolidation, Merger and Sale of Assets, that date which is 90 days prior to the earlier of (x) the occurrence of any such actions as set forth therein and (y) a public notice of the occurrence of any such actions. Rating Decline means, in connection with actions contemplated under the caption Consolidation, Merger and Sale of Assets, the notification by any of the Rating Agencies that such proposed actions will result in any of the events listed below: (a) (b) (c) (d) in the event the Notes are rated by all three Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by any two of the three or all three Rating Agencies shall be below Investment Grade; in the event the Notes are rated by any two, but not all three, of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by either of such two Rating Agencies shall be below Investment Grade; in the event the Notes are rated by only one of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by such Rating Agency will be below Investment Grade; or in the event the Notes are rated below Investment Grade by all Rating Agencies on the Rating Date, the rating of the Notes by any Rating Agency will be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories), provided that a Rating Agency will be deemed to have not changed its rating of the Notes to below Investment Grade or to have decreased its rating of the Notes if such Rating Agency states publicly in writing that (i) its change in rating of the Notes is the result of a rating downgrade applicable to the Government of Indonesia or generally applicable to companies in the Company s industry or companies located or operating in Indonesia and (ii) is not as a result of such proposed action contemplated under the caption Consolidation, Merger and Sale of Assets. Reference Period means, as of any Transaction Date, the period commencing on and including the first day of the Four Quarter Period with respect to such Transaction Date and ending on and including the Transaction Date. Reference Treasury Dealer means each of any three investment banks of recognized standing that is a primary U.S. Government securities dealer in The City of New York, selected by the Company in good faith. Reference Treasury Dealer Quotations means, with respect to each Reference Treasury Dealer and any redemption date, the average as determined by an investment banking firm of recognized international standing, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing by such Reference Treasury Dealer at 5:00 p.m. New York City time on the third Business Day preceding such redemption date. 308

100 Replacement Assets means, with respect to an Asset Sale, (1) properties and assets that replace the properties and assets that were the subject of such Asset Sale and properties or assets (other than current assets) that will be used in a Permitted Business, (2) acquiring all or substantially all of the assets of any Person that is primarily engaged in a Permitted Business or the Capital Stock of any Person that is primarily engaged in a Permitted Business holding such property or assets if such Person will, upon the acquisition by the Company or any of its Restricted Subsidiaries of such Capital Stock, become a Restricted Subsidiary or (3) any other capital expenditure relating to properties or assets that are used in a Permitted Business. Restricted Subsidiary means any Subsidiary of the Company other than an Unrestricted Subsidiary. S&P means Standard & Poor s Ratings Services and its affiliates. Sale and Leaseback Transaction means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Company or any Restricted Subsidiary transfers such property to another Person and the Company or any Restricted Subsidiary leases it from such Person. Securities Act means the U.S. Securities Act of 1933, as amended. Security Documents means collectively, charge agreement and any other agreements or instruments that may evidence or create any security interest in favor of the Collateral Agent, the Trustee or any Holder, in any or all of the Collateral. Senior Indebtedness of the Company or any Restricted Subsidiary, as the case may be, means all Indebtedness of the Company or such Restricted Subsidiary, as relevant, whether outstanding on the Original Issue Date or thereafter created, except for Indebtedness which, in the instrument creating or evidencing the same, is expressly stated to be subordinated in right of payment to the Notes or, in respect of any Restricted Subsidiary that is a Subsidiary Guarantor, its Subsidiary Guarantee; provided that Senior Indebtedness does not include (a) any obligation to the Company or any Restricted Subsidiary, (b) trade payables or (c) Indebtedness Incurred in violation of the Indenture. Significant Subsidiary means any Restricted Subsidiary that would be a significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated under the Securities Act, as such regulation is in effect on the Original Issue Date; provided that in each instance in such definition in which the term 10 percent is used, the term 5 percent shall be substituted therefor. Stated Maturity means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness. Subordinated Indebtedness means any Indebtedness of the Company or any Subsidiary Guarantor which is contractually subordinated or junior in right of payment to the Notes or any Subsidiary Guarantee, as applicable, pursuant to a written agreement to such effect. Subsidiary means, with respect to any Person, any corporation, association or other business entity (a) of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person or (b) of which 50% of the outstanding Voting Stock is owned, directly or indirectly, by such Person and which is controlled and consolidated by such Person in accordance with GAAP; provided that with respect to clause (b) the occurrence of any event (other than the issuance or sale of Capital Stock) as a result of which such corporation, association or other business entity ceases to be controlled by such 309

101 Person under GAAP and to constitute a Subsidiary of such Person shall be deemed to be a designation of such corporation, association or other business entity as an Unrestricted Subsidiary by such Person and be subject to the requirements under the first paragraph of Designation of Restricted and Unrestricted Subsidiaries covenant. Subsidiary Guarantee means any guarantee of the obligations of the Company under the Indenture and the Notes by any Subsidiary Guarantor. Subsidiary Guarantor means each of the Initial Subsidiary Guarantors and any other Restricted Subsidiary which guarantees the payment of the Notes pursuant to the Indenture and the Notes; provided that Subsidiary Guarantor will not include any Person whose Subsidiary Guarantee has been released in accordance with the Indenture and the Notes. Temporary Cash Investments means any of the following: (1) direct obligations of the United States of America, any state of the European Economic Area, the United Kingdom, Singapore or Hong Kong or any agency of the foregoing; provided that such country or state is rated AA (or such similar equivalent rating) or higher by at least two nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) (each such country or state a Rated Country/State ), or obligations fully and unconditionally guaranteed by any Rated Country/State, in each case (unless such securities are deposited to defease or satisfy and discharge any Indebtedness) maturing within one year of the date of acquisition thereof; (2) demand or time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any state thereof, or any other Rated Country/State, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of US$500 million (or the Dollar Equivalent thereof) and has outstanding debt which is rated A (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above; (4) commercial paper, maturing within 180 days of the date of acquisition thereof, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody s or A-1 (or higher) according to S&P; (5) securities maturing within one year of the date of acquisition thereof, issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or Moody s; (6) any mutual or money market fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above; and (7) demand or time deposit accounts, certificates of deposit, overnight or call deposits and money market deposits with (i) PT Bank OCBC NISP Tbk, PT Bank Mandiri (Persero) Tbk, PT Bank ANZ Indonesia, PT Bank DBS Indonesia, PT Bank Permata Tbk, PT Bank ICBC Indonesia, PT Bank Mega Tbk, PT Bank Maybank Indonesia Tbk, PT Bank Negara 310

102 Indonesia (Persero) Tbk, PT Bank CIMB Niaga Tbk, Standard Chartered Bank, Indonesia, PT Bank Rakyat Indonesia Tbk, PT Bank Syariah Mandiri, PT Bank Sumitomo Mitsui Indonesia, Citibank N.A., Indonesia, PT Bank Tabungan Pensiunan Nasional Tbk, Bank Tabungan Negara Tbk; (ii) any other bank, financial institution or trust company organized under the laws of the Republic of Indonesia or a jurisdiction where the principal place of business of a Restricted Subsidiary is located or to which the Company or a Restricted Subsidiary sells its products or services whose long-term debt rating by Moody s or S&P is rated as high or higher than any of those banks listed in clause (i) of this paragraph or (iii) any other bank, financial institution or trust company organized under the laws of the Republic of Indonesia or a jurisdiction where the principal place of business of a Restricted Subsidiary is located or to which the Company or a Restricted Subsidiary sells its products or services; provided that, in the case of clause (iii), such deposits do not exceed US$5.0 million (or the Dollar Equivalent thereof) with any single bank or US$15.0 million (or the Dollar Equivalent thereof) in the aggregate, at any date of determination thereafter. Total Assets means, as of any date of determination, the total consolidated assets of the Company and its Restricted Subsidiaries measured in accordance with GAAP as of the last day of the most recently ended fiscal quarter prior to such date for which consolidated financial statements (which may be internal financial statements) of the Company are available; provided that Total Assets will be calculated after giving pro forma effect to reflect (without duplication) (a) the cumulative value of all assets, real or personal property, machinery, plant and equipment, the acquisition, development, installation, expansion, construction or improvement of which requires or required the Incurrence of Indebtedness, as measured by the purchase price or cost therefor or budgeted cost provided in good faith by the Company or any Restricted Subsidiary to the bank or financial institutional lender providing such Indebtedness (but only to the extent that such cumulative value is not reflected in such total consolidated assets as of the last day of such fiscal quarter) and (b) any asset acquisitions and asset dispositions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made since the last day of such fiscal quarter and on or prior to such date of determination. Trade Payables means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services. Transaction Date means, with respect to (i) the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred, (ii) any Restricted Payment, the date such Restricted Payment is to be made, and (iii) the incurrence or assumption of any Lien, the date such Lien is to be incurred or assumed. Unrestricted Subsidiary means (1) any Subsidiary of the Company that at the time of determination will be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided in the Indenture; and (2) any Subsidiary of an Unrestricted Subsidiary. U.S. Government Obligations means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the holder thereof at any time prior to the Stated Maturity of the Notes, and will also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that 311

103 (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. Voting Stock means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. Wholly Owned means, with respect to any Subsidiary of any Person, the ownership of 100% of the outstanding Capital Stock of such Subsidiary (other than any director s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. 312

104 TAXATION The following summary is based on applicable tax laws as in effect on the date of this Offering Memorandum, and is subject to changes in such laws, including changes that could have retroactive effect. The following summary does not take into account or discuss the tax laws of any jurisdiction other than the ones described below. Prospective purchasers in all jurisdictions are advised to consult their own tax advisors as to tax consequences applicable to the acquisition, ownership and disposition of the Notes, including, in particular, the effect of any foreign, state or local tax laws to which they are subject. Indonesian Taxation The following is a summary of certain Indonesian income tax and stamp duty consequences relevant to the prospective Noteholders who are not tax residents of Indonesia and have no permanent establishment in Indonesia, and Indonesian tax resident whenever applicable. The summary does not address any laws other than the tax laws of the Republic of Indonesia in force as of the date of this Offering Memorandum. The summary represents a general guide only. The summary does not constitute tax advice for particular individual or corporate Noteholders. Prospective investors in all jurisdictions are advised to consult their own tax advisors as to other tax consequences of the acquisition, ownership and disposition of the Notes relevant to their facts and circumstances. General Generally, an individual is considered to be a Non-resident Taxpayer of Indonesia if the individual does not reside in Indonesia or does not stay (or intend to stay) in Indonesia for more than 183 days within a 12 month period. A corporation will be considered as a Non-resident Taxpayers of Indonesia if the entity is not established or domiciled in Indonesia. In determining the tax residence or existence of a permanent establishment of an individual or corporation, consideration will also be given to the provision of any applicable double tax treaty which Indonesia has concluded with other countries ( Tax Treaty ). In this section, non-resident individuals and non-resident corporations will be referred to collectively as Non-resident Taxpayers. Non-resident Taxpayers, who derive Indonesian sourced income, including interest are generally subject to a final withholding tax on that income at a rate of 20%, as long as the income is not effectively connected with a permanent establishment of the Non-resident Taxpayer in Indonesia. If the income is effectively connected with a permanent establishment in Indonesia, such income shall be regarded as income earned by the permanent establishment, and is taxable in the same manner as for resident taxpayers. This withholding tax may be reduced or exempted under the provisions of any applicable Tax Treaty. Taxation on Interest and other payments related to the Notes Payments of principal under the Notes are not subject to withholding tax in Indonesia, whilst the interest paid or due to be paid by the Company to the Non-resident Taxpayer with non-permanent establishment is subject to final withholding tax in Indonesia at the statutory rate of 20% or the relevant reduced rate under an applicable Tax Treaty between Indonesia and countries where the Noteholders become tax residents. To use the reduced rate under an applicable Tax Treaty, a non-resident individual and corporation must satisfy the eligibility requirements under the applicable Tax Treaty and domestic tax regulations, including the requirement that the interest recipient be the beneficial owner ( BO ) of the income. See Anti-Avoidance Rule on the Tax Treaty and Certificate of Domicile Requirements below. However, as described under the Description of the Notes Additional Amounts, and subject to the limitations therein, Noteholders will generally be entitled to Additional Amounts with respect to Indonesian withholding tax irrespective of whether such Noteholders qualify for Treaty benefits. 313

105 Payment of principal (excluding interest, premium or discount) under the Notes to an Indonesian tax resident (individual or corporation) or permanent establishment in Indonesia ( Indonesian Tax Resident ) are not subject to tax. Whilst interest due (including premium or discount, and any other payments in the nature of interest in form of additional amount, applicable premium, etc) to any Indonesian Tax Resident Notes holder (other than banks operating in Indonesia and government approved pension funds in which case are exempt from withholding tax) are subject to a final withholding tax rate of 15%. A special tax rate of 5% is available for interest received by a mutual fund registered with the Financial Services Authority (Otoritas Jasa Keuangan/OJK) until year 2020 and 10% thereafter. Taxation on Sale or Disposition Notes Under Government Regulation No. 16/2009 effective 1 January 2009 ( Government Regulation No. 16 ) and amended by Government Regulation No. 100/2013 which took effect on December 31, 2013 ( Government Regulation No. 100 ), Non-resident Taxpayer individual and corporation without a permanent establishment in Indonesia may be subject to Indonesian withholding tax on any gain derived from the sale or other disposal of Notes. Under Government Regulation No. 16 and the amendment, Government Regulation No. 100, a gain on such sales would be subject to Indonesian withholding tax as the Director General of Tax ( DGT ) would treat the capital gain as Indonesian-sourced interest. Therefore, any gain from the sale of Notes by an investor that is not an Indonesian tax resident where the transactions is conducted through a securities company, dealer or bank in Indonesia (either as intermediary or buyer) will be subject to the 20% Indonesian withholding tax normally applicable to Indonesian-sourced interest. However, if the Non-resident Taxpayer individual and corporation is a tax resident of a country that has a Tax Treaty with Indonesia which defines gain on the disposal of the Notes not as interest, instead such as capital gains and provides capital gain exemption provision for the disposal of the Notes, relief from the imposition of such withholding tax shall be available. The reduced rate or exempted withholding tax applicable to a Non-resident Taxpayer individual and corporation who resides in a treaty country is also subject to the satisfaction of eligibility and reporting requirements under the relevant Tax Treaty and domestic tax regulations (see Anti-Avoidance Rule on the Tax Treaty and Certificate of Domicile Requirements below). Any gains from disposal of the Notes (i.e. discount) derived by Indonesian Tax Resident are subject to 15% final withholding tax. Anti-Avoidance Rule on the Tax Treaty and Certificate of Domicile Requirements Indonesia has concluded tax treaties with a number of countries including Australia, Belgium, China, Canada, France, Germany, Hong Kong, Japan, Luxembourg, the Netherlands, Singapore, Sweden, Switzerland, the United Kingdom. The relevant Tax Treaty may affect the definition of Non-resident Taxpayers and level of withholding tax applied to payments on the Notes. Where a Tax Treaty exists and the eligibility requirements of that treaty benefit are satisfied, a reduced rate of withholding tax may be applicable in the case of interest (or payments in the nature of interest, such as premium or discount). This is also subject to there being no misuse of the tax treaties, the Non-resident Taxpayers meeting the administrative requirements under the Indonesian tax regulations and the Non-resident Taxpayer individual or corporation must be the BOs of the income received from Indonesia. Some tax treaties also provide an exemption from Indonesian tax on any capital gains of Non-resident Taxpayers arising from alienation of movable assets or Notes in Indonesia. On 5 November 2009, the DGT issued two regulations which are designed to prevent Tax Treaty abuse, i.e. PER-61/PJ./2009 ( DGT-61 ) regarding the administrative procedures to apply a Tax Treaty, including the template of Form DGT-1 and Form DGT-2 (as amended on 15 December 2009) 314

106 and PER-62/PJ./2009 ( DGT-62 ) regarding the avoidance of Tax Treaty misuse. Further, on 30 April 2010, those tax regulations were amended, respectively, by DGT Regulation No. PER- 24/PJ/2010 ( DGT-24 ) and No. PER-25/PJ/2010 ( DGT-25 ). These new regulations set out stringent anti-tax Treaty misuse tests (please see below the misuse tests) and administrative requirements to be satisfied. Failure to comply with the conditions means that Indonesian withholding tax will apply at 20%. Under DGT-61 and DGT-62, in order for Non-resident Taxpayers or recipients of the payment from Indonesia to be eligible for Tax Treaty benefits, they must: not be Indonesian tax residents; not commit any Tax Treaty misuse; and fulfill the administrative requirements necessary to implement the Tax Treaty provisions. DGT-62 stipulates that misuse of a Tax Treaty may occur in the case that: a transaction that has no economic substance is performed using a structure or scheme that is arranged solely to enjoy the benefit of the Tax Treaty; a transaction has a structure or scheme whose legal form differs from its economic substance solely with the intention to enjoy the benefit of the Tax Treaty; the recipient of the income is not the actual owner of the economic benefit of the income (the BO ). The BO criteria shall be applied only to income for which the article in the relevant Tax Treaty contains the BO requirement. Usually this is relevant for interest income. DGT-62 defines the BO of the income as a Non-resident Taxpayer income recipient that is not acting as an agent, a nominee, or a conduit company. Agent is defined as a person or an entity that acts as an intermediary and conducts action for and/or on behalf of other party. A nominee is defined as a person or an entity that legally owns an asset and/or income (i.e. a legal owner) for the interests of or based on instruction/mandate from the party who is the actual owner of the asset and/or the party who actually enjoys the benefit of the income. A conduit company is defined as a company which enjoys the Tax Treaty benefits in relation to income sourced from another country, while the economic benefits of said income is owned by persons in another country who would not be able to enjoy Tax Treaty benefits if such income were directly received by them. However, in practice DGT-62 does not apply a look through to the ultimate owner of the economic benefit of the income and therefore immediately denies the application of any Tax Treaty provision if the Indonesian sourced income is paid to a conduit company. DGT-62 further states that the following Non-resident Taxpayers, residing in a treaty partner country, shall not be deemed to commit Tax Treaty misuse: an individual who is not acting as an agent or a nominee; an institution whose name is clearly stated in the Tax Treaty or one that has been jointly agreed by the competent authorities in Indonesia and the treaty partner country; a Non-resident Taxpayer that receives or earns income through a custodian in relation to income from transactions on the transfer of shares or bonds (i.e. Notes) that are traded or reported in a capital market in Indonesia, other than interest and dividend, in the case that the Non-resident Taxpayer is not acting as an agent or as a nominee; a company whose shares are listed on a stock exchange and are regularly traded; 315

107 a pension fund that is established under the laws of the Tax Treaty partner country and is a tax subject of the Tax Treaty partner country; a bank; or a company that satisfies the following conditions: i. the establishment of the company in the Tax Treaty partner country or the arrangement of the transaction structure/scheme is not aimed solely at utilizing Tax Treaty benefits; ii. iii. iv. the company has its own management to conduct the business and the management has independent discretion; the company employs sufficient qualified employees; the company engages in active trade or business activities; v. the income derived from Indonesia is subject to tax in the country of the recipient; and vi. the company does not use more than 50% of its total income (non-consolidated) to fulfill obligations to other parties in the form of interest, royalty, or other fees (excluding reasonable remuneration to employees, other expenses normally incurred by the company in running the business, or dividends distribution to shareholders). For interest and any payment which will be considered as interest by DGT Those conditions are reflected in Part V, point 7-12 of Form DGT-1. According to DGT-61 and DGT-62, Tax Treaty relief can only be applied if the answer to all of those questions under point (g) above would be yes. If any of the answers is no, withholding tax of 20% is due. For capital gain The provision in the tax treaty usually does not include the typical BO requirement for non-passive income (including capital gain). In line with DGT-61 it is not mandatory that the answer to all those questions under point (g) above would be yes. However in practice certain local tax office may still require the beneficial ownership test to be fulfilled and that the answer to all those questions would be yes to apply the Tax Treaty benefits. Under DGT-61, the administrative requirements to be fulfilled by the Non-resident Taxpayer in order to apply the Tax Treaty benefit are in the new certificate of domicile ( CoD ) form, which must be: in the form prescribed by the DGT (i.e. Form DGT-1 or Form DGT-2, where applicable); filled in completely by the Non-resident Taxpayer; signed by the Non-resident Taxpayer; certified by the competent tax authority of the treaty country of the Non-resident Taxpayer; and submitted prior to the lodgment of the relevant monthly tax return for the tax period of the tax payable. 316

108 The sign-off of foreign residency by the foreign tax authority in page 1 of Form DGT-1 or Form DGT-2 can be substituted with a standard CoD issued by the foreign tax authority, subject to it meeting certain conditions. The CoD is to confirm that the Non-resident Taxpayer income recipient is a tax resident of the foreign country. Page one and two of Form DGT-1 or Form DGT-2 must still be completed in other respects. The second page of Form DGT-1 does not require any sign-off by a competent tax authority. The second page of Form DGT-1 requires the Non-resident Taxpayer income recipient to confirm that it satisfies the relevant test(s). The original and valid Form DGT-1 or Form DGT-2 shall be obtained before the tax withholding is due and shall be made available to the withholding agent before the monthly withholding tax return filing deadline, i.e. the 20th day of the following month, to be submitted along with the monthly withholding tax returns. If there is any late filing or the signature of the competent authority in the respective jurisdiction is received after the date when withholding tax is due, the withholding tax of 20% is due. The first page of Form DGT-1 or Form DGT 2 is valid for 12 months since the date of validation and must be renewed subsequently. However, the second page of Form DGT-1 shall be produced by the Non-resident Taxpayer income recipient in respect of each payment of income. New regulation on procedures for applying tax treaty rate On 19 June 2017, the DGT issued a regulation No. PER-10/PJ/2017 ( DGT-10 ) regarding the Procedure for Implementing Tax Treaty. DGT-10 revokes DGT-61 (and DGT-24) and DGT-62 (and DGT-25). DGT-10 will become effective starting 1 August As a transition rule, any CoD that is issued under DGT-61 and DGT-62 should remain valid until its expiry date. Below are the new procedures for the Tax Treaty implementation. Under DGT-10, in order for non-resident taxpayers or recipients of payments from Indonesia to be eligible for Tax Treaty benefit, they must: not be an Indonesian tax resident; not commit to any Tax Treaty misuse; fulfil the administrative requirements and Other Specific Requirements; and be the BO, if such a BO requirement is required in the Tax Treaty. DGT-10 states that misuse of a Tax Treaty can happen in the case when the main purpose or one of the main purposes of a transaction is to enjoy the benefit of the Tax Treaty and it is against the purpose and the objective/intention of the Tax Treaty. A transaction shall not be deemed to commit Tax Treaty misuse, if: a transaction has economic substance in the establishment of the entities or the transaction implementation; a transaction has a structure or scheme whose legal form is aligned with its economic substance in the establishment of the entities or the transaction implementation. In the case that there is a discrepancy between the legal and the substance of a transaction schemes, the tax will be imposed based on the economic substance of the transaction (substance over form principle); the business activities of the company are managed by its own management and the management has sufficient authority to undertake transactions. The active business must be in accordance with the factual circumstances which are supported by direct expenditures incurred to generate the business, including a significant efforts to maintain the going concerns for the company; 317

109 the company has sufficient fixed assets and other assets which are used to undertake the business operations in the relevant country, other than the assets that generate income from Indonesia;the company has sufficient qualified employees who have enough competency and skills which are relevant to undertake the business operations of the company in the relevant country; and the company has other activities or other active business other than dividends, interest, and/or royalty income sourced from Indonesia. The BO criteria shall be applied only to the income for which the article in the relevant Tax Treaty contains the BO requirement. Usually this is relevant for interest income (not for capital gains in relation to the disposal of the Notes). A non-resident taxpayer is considered a BO if the following conditions are all met: for an individual, he/she is not acting as an agent or a nominee; or for a company, it is not acting as an agent, nominee, or conduit and must fulfil the following requirements: i. the compay has control to use or is able to enjoy the fund, or has right, on the income from Indonesia; ii. iii. iv. the company does not use more than 50% of its total income (non-consolidated) to fulfill obligations to other parties other than reasonable remuneration to employees, other expenses normally incurred by the company in running the business, or dividends distributed to shareholders; the company bears risk on its own assets, capital, and/or obligation; and the company does not have any obligation written or unwritten to any party to deliver its income received from Indonesia, partly or entirely, to another party. The definition of an agent, a nominee, and a conduit company are similar to those defined under DGT-62. CoD Under DGT-10, the administrative requirements to be fulfilled by the non-tax resident in order to apply the Tax Treaty benefit are in the CoD form, these must be: in the form prescribed by the DGT (i.e. Form DGT-1 or Form DGT-2, where applicable); filled in completely by the non-resident; signed by the non-resident taxpayers; certified by the competent tax authority of the treaty country of the non-resident taxpayers; that the CoD is valid in accordance with the period indicated therein; and that the CoD is submitted prior to the lodgement of the relevant monthly tax return for the tax period of the tax payable. If a non-tax resident does not obtain certification of the Form DGT-1 or Form DGT-2, a Standard Tax Residency Certificate issued by the competent tax authority of the Tax Treaty country may be used to satisfy the CoD certification requirement, subject to it meeting the following conditions: 318

110 that it is issued in English; that it is an original, or a copy which has been legalised by the DGT where the Indonesian tax withholder is registered as a taxpayer; that it states the name of the non-tax resident, the date of the issue, and applicable fiscal year of the effective period of the relevant CoD; and that it is signed by an authorised person, or authorised according to common practice in the Tax Treaty country, with the name of the authorised person specified. A DGT Form is still required to be completed in other respects (except Part III of Form DGT-1 or Form DGT-2). The effective period of the CoD is no longer than 12 months. Other Specific Requirements that must also be fulfilled consisting of the following: the non-resident taxpayer must declare that it/she/he has: i. relevant economic motive for the set up of the company; ii. iii. iv. that the business activities are managed by the company s own management and that it has sufficient authority to undertkake transactions; sufficient fixed assets and other assets which are used to undertake the business operations in the relevant country; employees with certain technical competency which are relevant in undertaking the business operation of the company; and v. other activities or other active business other than dividends, interest, and/or royalty income sourced from Indonesia. If the Tax Treaty contains BO requirements, the non-resident taxpayer must also declare that: i. for an individual, he/she is not acting as an agent or a nominee; or ii. for a company, it is not acting as an agent, nominee, or conduit and must fulfill the following requirements: a. the compay has control over, or is able to enjoy the fund, or has right, on the income received from Indonesia; b. the company does not use more than 50% of its total income (non-consolidated) to fulfill obligations to other parties in the form of interest, royalties, or other fees (excluding reasonable remuneration to employees, other expenses normally incurred by the company in running the business, or dividends distribution to shareholders); c. the company bears risk on its own assets, capital, and/or obligation; and d. the company does not have any obligation (written or unwritten) to any party to deliver its income received from Indonesia, partly or entirely, to any other party. 319

111 For a company that is required to complete Form DGT-2, it should also provide a declaration in the relevant Form that: it is a Tax Subject of the relevant Tax Treaty country in accordance with the in-country taxation regulations; and it is not acting as an agent, nomine, or conduit, if it receives income for which there is BO requirement under the Tax Treaty Form DGT-2 is to be used by: a non-resident taxpayer that receives or earns income through a custodian in relation to income from transactions on the transfer of shares or bonds (i.e. Notes) that are traded or reported in a capital market in Indonesia, other than interest and dividends, in the case that the non-resident taxpayer is not acting as an agent or as a nominee; a bank; or a pension fund For Central Bank or an institution whose name is clearly stated in the Tax Treaty or one that has been jointly agreed by the competent authorities in Indonesia and the treaty partner country, they are not required to complete Form DGT-1 or Form DGT-2. However, they are required to provide a Standard Tax Residency Certificate which contains the requirements mentioned above. Such a Tax Residency Certificate is valid in accordance with the tax year specified in the relevant Certificate. Tax Treaty relief can only be applied if all the relevant requirements above are fulfilled. Otherwise, withholding tax of 20% is due. Further, the original and valid Form DGT-1 or Form DGT-2 shall be obtained before the tax withholding is due and shall be made available to the tax withholder before the monthly withholding tax return filing deadline, i.e. the 20th day of the following month, to be submitted along with the monthly withholding tax returns. If there is any late filing or the signature of the competent authority in the respective jurisdiction is received after the date when withholding tax is due, the withholding tax of 20% is due instead of withholding Tax Treaty relief being applied, although the non-resident taxpayer may apply for a tax refund through another mechanism. The validity period of Form DGT-1 and Form DGT-2 is no longer than 12 months. However, the second page of Form DGT-1 shall be produced by the foreign income recipient in respect of each payment of income. Stamp Duty In Indonesia, nominal stamp duty applies per document basis, and is computed based on the value of the transaction. Stamp duty applies on certain documents made, executed or brought into Indonesia or intended to be used as evidence for civil proceedings. Documents subject to stamp duty include notarial deeds, documents evidencing or recording the receipt of money, and securities instruments. The nominal amount of the Indonesian stamp duty for any kind of securities transaction having a value greater than Rp.1,000,000 is Rp.6,000. Generally, the stamp duty is due at the time the document is executed. Stamp duty is payable by the party who benefits from the executed document unless all parties involved decided otherwise. 320

112 Other Indonesian Taxes There are no Indonesian estate, inheritance, succession or gift taxes generally applicable to the acquisition, ownership or disposal of the Notes. There are no Indonesian registrations or similar taxes payable by the Holders of the Notes. Singapore Taxation The statements made herein regarding Singapore taxation are general in nature and based on certain aspects of the current tax laws of Singapore, administrative guidelines and circulars issued by the Monetary Authority of Singapore ( MAS ) in force as of the date of this Offering Memorandum and are subject to any changes in such laws, administrative guidelines or circulars, or in the interpretation of these laws, guidelines or circulars, occurring after such date, which changes could be made on a retrospective basis. These laws, guidelines and circulars are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. Neither these statements nor any other statements in this Offering Memorandum are intended or are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and do not purport to deal with the tax consequences applicable to all categories of investors some of which (such as dealers in securities or financial institutions in Singapore which have been granted the relevant Financial Sector Incentive(s)) may be subject to special rules or tax rates. Prospective investors are advised to consult their own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership or disposition of the Notes, including, in particular, the effect of any foreign, state or local tax laws to which they are subject to. It is emphasized that none of the Company, the Initial Purchasers and any other persons involved in the issuance of the Notes accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Notes. Interest and Other Payments Subject to the following paragraphs, under Section 12(6) of the Income Tax Act, Chapter 134 of Singapore ( ITA ), the following payments are deemed to be derived from Singapore: (a) (b) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore) or (ii) deductible against any income accruing in or derived from Singapore; or any income derived from loans where the funds provided by such loans are brought into or used in Singapore. Such payments, where made to a person not known to the paying party to be a resident in Singapore for tax purposes, are generally subject to withholding tax in Singapore. The rate at which tax is to be withheld for such payments (other than those subject to the 15% final withholding tax described below) to non-resident persons (other than non-resident individuals) is currently 17%. The applicable rate for non-resident individuals is currently 22%. However, if the payment is derived by a person not resident in Singapore otherwise than from any trade, business, profession or vocation carried on or exercised by such person in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the payment is subject to a final withholding tax of 15%. The rate of 15% may be reduced by applicable tax treaties. 321

113 Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including: (a) interest from debt securities derived on or after January 1, 2004; (b) (c) discount income (not including discount income arising from secondary trading) from debt securities derived on or after February 17, 2006; and prepayment fee, redemption premium and break cost from debt securities derived on or after February 15, 2007, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession in Singapore. As the issue of the Notes is jointly lead-managed by Credit Suisse (Singapore) Limited, DBS Bank Ltd., Oversea-Chinese Banking Corporation Limited and Standard Chartered Bank, Singapore Branch and on the basis that each of them is a Financial Sector Incentive (Bond Market), Financial Sector Incentive (Capital Market) or Financial Sector Incentive (Standard Tier) Company (as defined in the ITA) at such time, and the Notes are issued as debt securities prior to December 31, 2018, the Notes would be qualifying debt securities ( QDS ) for the purposes of the ITA, to which the following treatment shall apply: (a) (b) (c) subject to certain prescribed conditions having been fulfilled (including the submission by the Company, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Notes in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Notes as the MAS may require and subject to the Company including in all offering documents relating to the Notes of a statement to the effect that where interest, discount income, prepayment fee, redemption premium or break cost is derived from the Notes by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption for qualifying debt securities shall not apply if the non-resident person acquires the Notes using the funds and profits of such person s operations through the Singapore permanent establishment), interest, discount income (not including discount income arising from secondary trading), prepayment fee, redemption premium and break cost (collectively, the Qualifying Income ) from the Notes paid by the Company and derived by a holder who is not resident in Singapore and who (aa) does not have any permanent establishment in Singapore or (bb) carries on any operation in Singapore through a permanent establishment in Singapore but the funds used by that person to acquire the Notes are not obtained from such person s operation through a permanent establishment in Singapore, are exempt from Singapore income tax; subject to certain conditions having been fulfilled (including the submission by the Company, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Notes in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Notes that the MAS may require), Qualifying Income from the Notes paid by the Company and derived by any company or a body of persons (as defined in the ITA) in Singapore is subject to Singapore income tax at a concessionary rate of 10% (except for holders of the relevant Financial Sector Incentive(s) who may be taxed at different rates); and subject to: i. the Company including in all offering documents relating to the Notes a statement to the effect that any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Notes is not exempt from tax shall include such income in a return of income made under the ITA; and 322

114 ii. the submission by the Company, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Notes in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Notes that the MAS may require, payments of Qualifying Income derived from the Notes are not subject to withholding of Singapore tax (if any) by the Company. Notwithstanding the foregoing: (a) (b) if during the primary launch of the Notes, the Notes are issued to fewer than four persons and 50% or more of the issue of the Notes are beneficially held or funded, directly or indirectly, by related parties of the Company, the Notes would not qualify as QDS; and even though the Notes are QDS, if, at any time during the tenure of the Notes, 50% or more of the Notes which are outstanding at any time during the life of their issue is beneficially held or funded, directly or indirectly, by any related party(ies) of the Company, Qualifying Income derived from the Notes held by: i. any related party of the Company; or ii. any other person where the funds used by such person to acquire the Notes are obtained, directly or indirectly from any related party of the Company, shall not be eligible for the tax exemption or concessionary rate of tax described above. The term related party, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person directly or indirectly are under the control of a common person. The terms break cost, prepayment fee and redemption premium are defined in the ITA as follows: break cost, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by any loss or liability incurred by the holder of the securities in connection with such redemption; prepayment fee, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by the terms of the issuance of the securities; and redemption premium, in relation to debt securities and qualifying debt securities, means any premium payable by the issuer of the securities on the redemption of the securities upon their maturity. References to break cost, prepayment fee and redemption premium in this Singapore tax disclosure have the same meaning as defined in the ITA. Where interest, discount income, prepayment fee, redemption premium and break cost (i.e. the Qualifying Income) is derived from any of the Notes by any person who is not resident in Singapore and who carries on any operations in Singapore through a permanent establishment in Singapore, the tax exemption available for QDS under the ITA (as mentioned above) shall not apply if such person acquires such Notes using funds and profits of such person s operations through a permanent establishment in Singapore. Any person whose interest, discount income, prepayment fee, redemption premium and break cost (i.e. the Qualifying Income) derived from the Notes is not exempt from tax is required to include such income in a return of income made under the ITA. 323

115 Gains on Disposal of the Notes Any gains considered to be in the nature of capital made from the disposal of the Notes will not be taxable in Singapore. However, any gains derived by any person from the disposal of the Notes which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature. Noteholders who apply or are required to apply Singapore Financial Reporting Standard 39 Financial Instruments: Recognition and Measurement ( FRS 39 ), may for Singapore income tax purposes be required to recognize gains or losses (not being gains or losses in the nature of capital) on the Notes, irrespective of disposal, in accordance with FRS 39. Please see the section below on Adoption of FRS 39 Treatment for Singapore Income Tax Purposes. Adoption of FRS 39 Treatment for Singapore Income Tax Purposes The Inland Revenue Authority of Singapore has issued a circular entitled Income Tax Implications Arising from the Adoption of FRS 39 Financial Instruments: Recognition and Measurement (the FRS 39 Circular ). The ITA has since been amended to give effect to the FRS 39 Circular. The FRS 39 Circular generally applies, subject to certain opt-out provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes. Noteholders who may be subject to the tax treatment under the FRS 39 Circular should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Notes. Estate Duty Singapore estate duty has been abolished with respect to all deaths occurring on or after February 15, Certain U.S. Federal Income Tax Considerations The following is a general discussion based upon present law of certain U.S. federal income tax considerations for prospective purchasers of the Notes. This discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (the Code ). Treasury regulations issued thereunder, and judicial and administrative interpretations thereof, each as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Except to the extent set forth below, the discussion addresses only U.S. Holders (as defined below) that purchase Notes in the original offering, hold the Notes as capital assets, and use the U.S. dollar as their functional currency. The discussion does not consider the circumstances of particular purchasers, some of which (such as financial institutions, insurance companies, regulated investment companies, tax exempt organizations, dealers, traders who elect to mark their investment to market, U.S. expatriates and persons holding the Notes as part of a hedge, straddle, conversion, constructive sale or integrated transaction) are subject to special tax regimes. The discussion does not address any state, local or foreign taxes, the Medicare tax on net investment income or the federal alternative minimum tax. Prospective investors should note that no rulings have been, or are expected to be, sought from the U.S. Internal Revenue Service (the IRS ) with respect to any of the U.S. federal income tax consequences discussed below, and no assurance can be given that the IRS or a court will not take contrary positions. EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES UNDER THE FEDERAL, STATE AND LOCAL LAWS OF THE UNITED STATES, INDONESIA AND THE LAWS OF ANY OTHER JURISDICTION WHERE THE PURCHASER MAY BE SUBJECT TO TAXATION. 324

116 For purposes of this discussion, U.S. Holder means the beneficial owner of a Note that for federal income tax purposes is a citizen or individual resident of the United States, a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States or any political subdivision thereof, a trust subject to the control of one or more U.S. persons and the primary supervision of a U.S. court or that has validly elected to be treated as a U.S. person, or an estate the income of which is subject to U.S. federal income taxation regardless of its source. Non-U.S. Holder means a person that is a beneficial owner of a Note other than a U.S. Holder. The treatment of partners in a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that owns Notes may depend on the status of such partners and the status and activities of the partnership and such persons should consult their own tax advisors about the consequences of an investment in the Notes. Potential Contingent Payment Debt Instrument Treatment In certain circumstances the Company may be required to make payments on a Note that would change the yield of the Note. See Description of the Notes Repurchase of Notes Upon a Change of Control Triggering Event and Optional Redemption. This obligation may implicate the provisions of Treasury regulations relating to contingent payment debt instruments ( CPDIs ). According to the applicable Treasury regulations, certain contingencies will not cause a debt instrument to be treated as a CPDI if such contingencies, as of the date of issuance, are remote or incidental or certain other circumstances apply. The Company intends to take the position that the Notes are not CPDIs. This determination is binding on each holder of the Notes unless such holder discloses its contrary position in the manner required by the applicable Treasury regulations. This determination, however, is not binding on the IRS and if the IRS were to successfully challenge this determination, a holder may be required to accrue income on the Notes that such holder owns in excess of stated interest, and to treat as ordinary income rather than capital gain any income realized on the taxable disposition of such Notes before the resolution of the contingency. If the Notes are not CPDIs but such contingent payments were required to be made, it would affect the amount and timing of the income that a U.S. Holder recognizes. U.S. Holders are urged to consult their own tax advisors regarding the potential application to the Notes of the CPDI rules and other rules above and the consequences thereof. The remainder of this discussion assumes that the Notes will not be treated as CPDIs. Interest Stated interest paid to a U.S. Holder, and any Additional Amounts with respect to withholding tax on the Notes (including the amount of tax withheld from payments of interest and Additional Amounts), will be includible in the U.S. Holder s gross income as ordinary interest income at the time interest and Additional Amounts are received or accrued in accordance with the U.S. Holder s regular method of tax accounting for U.S. federal income tax purposes. It is expected, and the remainder of this discussion assumes, that the Notes will not be issued with original issue discount for U.S. federal income tax purposes. Interest on the Notes generally will be treated as foreign source income for U.S. federal income tax purposes and generally will constitute passive category income for most U.S. Holders. Subject to generally applicable restrictions and conditions (including a minimum holding period requirement), 325

117 a U.S. Holder generally will be entitled to a foreign tax credit in respect of any Indonesian income taxes withheld on interest payments on the Notes. However, U.S. Holders will not be entitled to claim foreign tax credits for amounts withheld in excess of the 10% rate applicable to interest under the Convention for the Avoidance of Double Taxation of Income and the Prevention of Fiscal Evasion between the United States and Indonesia. Alternatively, the U.S. Holder may be able to deduct such taxes in computing taxable income for U.S. federal income tax purposes. The rules governing the foreign tax credit are complex. U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit or a deduction for foreign taxes paid under their particular circumstances. Sale, Exchange or Other Taxable Disposition Upon the sale, exchange or other taxable disposition (including redemption) of a Note, a U.S. Holder generally will recognize taxable gain or loss equal to the difference, if any, between the amount realized on the sale, exchange or other taxable disposition (other than accrued but unpaid interest, which will be taxable as interest) and the U.S. Holder s adjusted tax basis in the Note. A U.S. Holder s adjusted tax basis in a Note generally will be equal to the amount that the U.S. Holder paid for the Note. Any such gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the Note has been held for more than one year at the time of its sale, exchange or other taxable disposition. Certain non-corporate U.S. Holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of capital losses is subject to limitations. Non-U.S. Holders Subject to the discussion of backup withholding below, interest on a Note paid to a Non-U.S. Holder is not subject to U.S. withholding tax. A Non-U.S. Holder generally will not be subject to U.S. federal income tax on a net income basis on payments or upon or gain from the sale, exchange or other taxable disposition (including redemption) of a Note, unless that payment or gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States or, in the case of gain realized by an individual Non-U.S. Holder, the Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met. U.S. Backup Withholding and Information Reporting Information reporting generally will apply to payments of principal of, and interest on, Notes (including Additional Amounts), and to proceeds from the sale, exchange or other taxable disposition (including redemption) of Notes within the United States, or by a U.S. payor or U.S. middleman, to a U.S. Holder (other than an exempt recipient). Backup withholding may be required on reportable payments if the holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, information reporting and backup withholding. Non-U.S. Holders generally will be required to comply with applicable certification procedures to establish that they are not U.S. Holders in order to avoid the application of information reporting and backup withholding. Backup withholding is not an additional tax. A holder of Notes generally will be entitled to credit any amounts withheld under the backup withholding rules against its U.S. federal income tax liability or to obtain a refund of the amounts withheld provided the required information is furnished to the IRS in a timely manner. 326

118 Specified Foreign Financial Asset Reporting Owners of specified foreign financial assets with an aggregate value in excess of US$50,000 (and in some circumstances, a higher threshold), may be required to file an information statement with respect to such assets with their U.S. federal income tax returns, currently on IRS Form The Notes generally are expected to constitute specified foreign financial assets unless they are held in accounts maintained by financial institutions. U.S. Holders are urged to consult their tax advisors regarding the application of this legislation to their ownership of the Notes. The above description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of the Notes. Prospective purchasers of Notes should consult their own tax advisors concerning the tax consequences of their particular situations. 327

119 PLAN OF DISTRIBUTION Credit Suisse (Singapore) Limited, DBS Bank Ltd., Oversea-Chinese Banking Corporation Limited and Standard Chartered Bank are acting as the Initial Purchasers. Subject to the terms and conditions stated in the purchase agreement dated the date of this Offering Memorandum (the Purchase Agreement ), each Initial Purchaser named below has severally and not jointly agreed to purchase, or procure purchasers for, and the Company has agreed to issue and sell to each such Initial Purchaser, the principal amount of the Notes set forth opposite the name of such Initial Purchaser. Initial Purchaser Principal Amount Credit Suisse (Singapore) Limited... DBS Bank Ltd.... Oversea-Chinese Banking Corporation Limited... Standard Chartered Bank... Total... US$195,000,000 US$30,000,000 US$60,000,000 US$15,000,000 US$300,000,000 The Purchase Agreement provides that the several and not joint obligations of the Initial Purchasers to purchase the Notes are subject to approval of certain legal matters by counsel and to certain other conditions. The Initial Purchasers must purchase all of the Notes if they purchase any of the Notes. The initial offering price is set forth on the cover page of this Offering Memorandum. After the Notes are released for sale, the Initial Purchasers may change the offering price and other selling terms. The Initial Purchasers reserve the right to withdraw, cancel or modify offers to investors and to reject orders in whole or in part. Delivery of the Notes is expected to occur on or about August 1, The Company and the Subsidiary Guarantors have agreed to indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Initial Purchasers may be required to make in respect of any of such liabilities. The Company has agreed with the Initial Purchasers that it will pay a commission to certain private banks in connection with the distribution of the Notes to their clients. This commission will be based on the principal amount of the Notes so distributed, and may be deducted from the purchase price for the Notes payable by such private banks upon settlement. The Company and the Subsidiary Guarantors have agreed not to, for a period of 30 days after the date of this Offering Memorandum (i) offer for sale, sell, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any debt securities substantially similar to the Notes or securities convertible into or exchangeable for such debt securities, or sell or grant options, rights or warrants with respect to such debt securities or securities convertible into or exchangeable for such debt securities, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such debt securities, (iii) file or cause to be filed a registration statement, including any amendments, with respect to the registration of debt securities substantially similar to the Notes or securities convertible, exercisable or exchangeable into such debt securities or (iv) publicly announce an offering of any debt securities substantially similar to the Notes or securities convertible or exchangeable into such debt securities, in each case without the prior written consent of the Initial Purchasers. The Notes have not been registered under the Securities Act and, unless so registered, may not be offered or sold within the United States except in certain transactions exempt from, or not subject to, the registration requirements of the Securities Act. 328

120 The Notes will constitute a new class of securities with no established trading market. Approval-in-principle has been received for the listing and quotation of the Notes on the SGX-ST. The Company does not intend to apply for listing or quotation of the Notes on any national securities exchange in the United States. However, there can be no assurance that the prices at which the Notes will sell in the market after the offering of the Notes will not be lower than the initial offering price or that an active trading market for the Notes after the completion of the offering of the Notes will develop and continue after the offering. The Initial Purchasers have advised us that they currently intend to make a market in the Notes. However, they are not obligated to do so and may discontinue any market-making activities with respect to the Notes at any time without notice. In addition, market-making activity will be subject to the limits imposed by applicable law. Accordingly, there can be no assurance that the trading market for the Notes will have any liquidity. In connection with the offering of the Notes, Credit Suisse (Singapore) Limited, as stabilizing manager, or any person acting for it, may purchase and sell Notes in the open market. These transactions may, to the extent permitted by law, include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale of a greater amount of Notes than the Initial Purchasers are required to purchase in the offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. These activities, to the extent permitted by law, may stabilize, maintain or otherwise affect the market price of the Notes. These activities may be conducted in the over-the-counter market or otherwise. As a result, the price of the Notes may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time and must in any event be brought to an end after a limited time. These activities will be undertaken solely for the account of the stabilizing manager and not for and on behalf of the Company. Certain of the Initial Purchasers and their respective affiliates have, from time to time, performed, and may in the future perform, certain commercial banking and lending, investment banking and advisory and other banking services for us, and/or our affiliates for which they have received or will receive customary fees and expenses. The Initial Purchasers and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advice, investment management, principal investment, hedging, financing and brokerage activities. In the ordinary course of their various business activities, the Initial Purchasers and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and instruments of the Company or any of the Subsidiary Guarantors. Certain of the Initial Purchasers and/or their affiliates are acting as lenders of the Club Facility that is expected to be repaid using a portion of the proceeds of the offering of the Notes. As a result, certain of the Initial Purchasers and/or their affiliates may receive proceeds of the offering in connection with its repayment. If a jurisdiction requires that the offering of the Notes be made by a licensed broker or dealer and the Initial Purchasers or any affiliate of the Initial Purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Initial Purchaser or its affiliate on behalf of the Company in such jurisdiction. Delivery of the Notes is expected on or about August 1, 2017 which is the fifth business day following the date of this Offering Memorandum (such settlement cycle being referred to as T+5 ). Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or the next succeeding 329

121 business day will be required, because the Notes initially will settle in T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers who wish to trade the Notes on the pricing date or the next succeeding business day should consult their own advisers. Selling Restrictions General No action has been taken or will be taken in any jurisdiction by the Company, the Subsidiary Guarantors or the Initial Purchasers that would permit a public offering of Notes, or the possession, circulation or distribution of this Offering Memorandum or any other material relating to the Notes or the offering of the Notes, in any jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Offering Memorandum nor such other material may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of such country or jurisdiction. United States The Notes have not been, and will not be, registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. See Transfer Restrictions for a description of other restrictions on the transfer of Notes. Accordingly, the Notes are being offered and sold only (1) in the United States to qualified institutional buyers in reliance on Rule 144A and (2) outside the United States in offshore transactions in reliance on Regulation S. Resales of the Notes are restricted as described under Transfer Restrictions. As used herein, the term United States has the meaning given to it in Regulation S. United Kingdom This Offering Memorandum is for distribution only to persons who (i) fall within Article 43(2)(b) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Financial Promotion Order ), (ii) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Promotion Order, (iii) are persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations etc ) of the Financial Promotion Order, (iv) are outside the United Kingdom, or (v) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons ). This Offering Memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. Each of the Initial Purchasers has represented, warranted and agreed that: (1) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA ) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Company; and 330

122 (2) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom. European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State ), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Memorandum to the public in that Relevant Member State other than: to any legal entity which is a qualified investor as defined in the Prospectus Directive; to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the Initial Purchasers for any such offer; or in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes shall require the Company, the Subsidiary Guarantors or any Initial Purchaser to publish a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an offer of Notes to the public in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State; the expression Prospectus Directive means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State. France This offering memorandum has not been prepared in the context of a public offering in France within the meaning of Article L of the Code Monétaire et Financier and Title I of Book II of the Règlement Général of the Autorité des marchés financiers (the AMF ) and therefore has not been submitted for clearance to the AMF. Consequently, the Notes may not be, directly or indirectly, offered or sold to the public in France, and offers and sales of the Notes will only be made in France to providers of investment services relating to portfolio management for the account of third parties (personnes fournissant le service d investissement de gestion de portefeuille pour le compte de tiers) and/or to qualified investors (investisseurs qualifiés) and/or to a closed circle of investors (cercle restreint d investisseurs) acting for their own accounts, as defined in and in accordance with Articles L and D of the Code Monétaire et Financier. Neither this Offering Memorandum nor any other offering material may be distributed to the public in France. Germany The offering of the Notes is not a public offering in the Federal Republic of Germany. The Notes may only be offered, sold and acquired in accordance with the provisions of the Securities Prospectus Act of the Federal Republic of Germany (the Securities Prospectus Act, Wertpapierprospektgesetz, WpPG), as amended, and any other applicable German law. No application has been made under German law to permit a public offer of the Notes in the Federal Republic of Germany. The Notes are not registered or authorized for distribution under the Securities Prospectus Act and accordingly may not be, and are not being, offered or advertised publicly or by public promotion. Therefore, this Offering Memorandum is strictly for private use and the offer is only being made to recipients to 331

123 whom the document is personally addressed and does not constitute an offer or advertisement to the public. The Notes will only be available to, and this Offering Memorandum and any other offering material in relation to the Notes is directed only at, persons who are qualified investors (qualifizierte Anleger) within the meaning of Section 2, No. 6 of the Securities Prospectus A or who are the subject of another exemption in accordance with Section 3 para. 2 of the Securities Prospectus Act. Any resale of the Notes in Germany may only be made in accordance with the Securities Prospectus Act and other applicable laws. Netherlands The Notes that are the subject of the offering of the Notes contemplated by this Offering Memorandum are not and may not be offered in the Netherlands other than to persons or entities that are qualified investors as defined in article 1:1 of the Dutch Financial Supervision Act (Wetophet financieel toezicht or the FSA ). Each purchaser of Notes described in this Offering Memorandum located in the Netherlands will be deemed to have represented, acknowledged and agreed that it is a qualified investor (gekwalificeerde beleggers) as defined in section 1:1 of the FSA. Switzerland The Notes may not be publicly offered, sold or advertised, directly or indirectly, in, into or from Switzerland and will not be listed on the SIX Swiss Exchange or any other exchange or regulated trading facility in Switzerland. Neither this Offering Memorandum nor any other offering or marketing material relating to the Notes constitutes (i) a prospectus as such term is understood pursuant to Article 652a or 1156 of the Swiss Code of Obligations or (ii) a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other regulated trading facility in Switzerland, and neither this Offering Memorandum nor any other marketing material relating to the Notes may be publicly distributed or otherwise made publicly available in Switzerland. In addition, this Offering Memorandum nor any other offering or marketing material relating to the Notes may not comply with the Directive for Notes of Foreign Borrowers of the Swiss Bankers Association. The Notes are being offered in Switzerland by way of private placement, without any public advertisement and only to investors who do not purchase the Notes with the intention to distribute them to the public. The investors will be individually approached directly from time to time. This Offering Memorandum, as well as any other offering or marketing material relating to the Notes, is personal and confidential and does not constitute an offer to any other person. This Offering Memorandum, as well as any other offering or marketing material relating to the Notes, may only be used by those investors to whom it has been handed out in connection with the offering and may neither directly nor indirectly be distributed or made available to other persons without the Company s express consent. Singapore This Offering Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. As such, each of the Initial Purchasers has represented, warranted and agreed, and each investor should note, as the case may be, that the Notes may not be offered or sold, or made the subject of an invitation for subscription or purchase, nor may this Offering Memorandum or any of the documents or materials in connection with the offer or sale or invitation for subscription or any Notes be circulated or distributed, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: 332

124 a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor; securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; where no consideration is or will be given for the transfer; where the transfer is by operation of law; as specified in Section 276(7) of the SFA; or as specified in Regulation 32 of the Securities and Futures (Offers and Investments) (Shares and Debentures) Regulations 2005 of Singapore. Hong Kong The Notes may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the Notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to the Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder. China This Offering Memorandum does not constitute a public offer of the Notes, whether by way of sale or subscription, in China. Other than to qualified domestic institutional investors in China, the Notes are not being offered and may not be offered or sold, directly or indirectly, in China to or for the benefit of, legal or natural persons of China. According to the laws and regulatory requirements of China, with the exception of qualified domestic institutional investors in China, the Notes may, subject to the laws and regulations of the relevant jurisdictions, only be offered or sold to non-chinese natural or legal persons in any country other than China. Indonesia This offering does not constitute a public offering in Indonesia under Law No. 8 of 1995 on Capital Market. This Offering Memorandum may not be distributed in Indonesia and the Notes may not be offered to more than 100 Indonesian parties and/or sold to more than 50 Indonesian parties wherever they are domiciled, or to Indonesian citizens, in a manner which constitutes a public offering under the laws and regulations of Indonesia. 333

125 Japan The Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and the initial purchasers have agreed that they will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan. 334

126 TRANSFER RESTRICTIONS Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer, sale, resale, pledge or other transfer of the Notes. We have not registered the Notes under the Securities Act and the Notes may only be offered or sold (i) within the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act or (ii) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act. Terms used above and otherwise in this section of this Offering Memorandum have the meanings given to them by Regulation S and Rule 144A. Each purchaser of Notes will be deemed to have represented and agreed as follows: (1) You understand and acknowledge that the Notes have not been and will not be registered under the Securities Act or any other applicable securities laws and that the Notes are being offered for resale in transactions not requiring registration under the Securities Act or any other securities laws, including resales pursuant to Rule 144A, and, unless so registered, may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom, or in a transaction not subject thereto, and in each case in compliance with the conditions for transfer set forth in paragraph (3) below. You are not our affiliate (as defined in Rule 144 under the Securities Act), you are not acting on our behalf and you are either: (a) a qualified institutional buyer and are aware that any sale of these Notes to you will be made in reliance on Rule 144A and such acquisition will be for your own account or for the account of another qualified institutional buyer; or (b) purchasing Notes in an offshore transaction in accordance with Regulation S. (2) You acknowledge that none of us, the Initial Purchasers or any person representing us or the Initial Purchasers has made any representation to you with respect to us or the offer or sale of any of the Notes, other than the information contained in this Offering Memorandum, which Offering Memorandum has been delivered to you. You represent that you are only relying on this Offering Memorandum in making your investment decision with respect to the Notes. You acknowledge that the Initial Purchasers make no representation or warranty as to the accuracy or completeness of this Offering Memorandum. You have had access to such financial and other information concerning us and the Notes, including an opportunity to ask questions of, and request information from, us and the Initial Purchasers. (3) You are purchasing Notes for your own account, or for one or more investor accounts for which you are acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirement of law that the disposition of your property or the property of such investor account or accounts be at all times within your or their control and subject to your or their ability to resell such Notes pursuant to Rule 144A, Regulation S or any other available exemption from registration available under the Securities Act. You agree on your own behalf and on behalf of any investor account for which you are purchasing the Notes, and each subsequent holder of these Notes by its acceptance thereof will agree, to offer, sell or otherwise transfer such Notes prior to (x) the date which is one year (or such shorter period of time as permitted by Rule 144(d) under the Securities Act 335

127 or any successor provision thereunder) after the later of the date of the original issue of these Notes and the last date on which we or any of our affiliates were the owner of such Notes (or any predecessor thereto) or (y) such later date, if any, as may be required by applicable law (the Resale Restriction Termination Date ) only: (a) (b) (c) (d) (e) to us or any of our affiliates; pursuant to a registration statement which has been declared effective under the Securities Act; for so long as the Notes are eligible for resale pursuant to Rule 144A, to a person you reasonably believe is a qualified institutional buyer that purchases for its own account or for the account of another qualified institutional buyer to whom you give notice that the transfer is being made in reliance on Rule 144A; outside the United States in offshore transactions meeting the requirements of Rule 904 under the Securities Act; or pursuant to any other available exemption from the registration requirements of the Securities Act; subject in each of the foregoing cases to any requirement of law that the disposition of the seller s property or the property of an investor account or accounts be within the seller or account s control, and in compliance with any applicable state securities laws. You acknowledge that we, the Trustee and the Registrar reserve the right prior to any offer, sale or other transfer of the Notes pursuant to clause (e) above prior to the Resale Restriction Termination Date of the Notes to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to us, the trustee and the registrar. (4) You acknowledge that each Note will contain a legend substantially in the following form: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A QIB ) OR (B) IT IS NOT IN THE UNITED STATES, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A PERSON WITHIN THE UNITED STATES AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144 UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY OF ITS AFFILIATES THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES 336

128 LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS OFFSHORE TRANSACTION AND UNITED STATES HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. If you purchase Notes, you will also be deemed to acknowledge that the foregoing restrictions apply to holders of beneficial interests in these Notes as well as to holders of these Notes. (5) You acknowledge that the registrar will not be required to accept for registration or transfer any Notes acquired by you, except upon presentation of evidence satisfactory to us and the registrar that the restrictions set forth herein have been complied with. (6) You acknowledge that: (a) (b) the Company and its subsidiaries, the Initial Purchasers and others will rely upon the truth and accuracy of your acknowledgements, representations and agreements set forth herein and you agree that, if any of your acknowledgements, representations or agreements herein cease to be accurate and complete, you will notify us and the Initial Purchasers promptly in writing; and if you are acquiring any Notes as fiduciary or agent for one or more investor accounts, you represent with respect to each such account that: (i) (ii) you have sole investment discretion; and you have full power to make the foregoing acknowledgements, representations and agreements. (7) You agree that you will give to each person to whom you transfer these Notes notice of any restrictions on the transfer of the Notes. (8) You understand that no action has been taken in any jurisdiction (including the United States) by us or the Initial Purchasers that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Memorandum or any other material relating to us or the Notes in any jurisdiction where action for that purpose is required. Consequently, any transfer of the Notes will be subject to the selling restrictions set forth under Plan of Distribution. (9) The Notes may not be sold or transferred to, and you as a purchaser, by your purchase and holding of the Notes, shall be deemed to have represented and covenanted that you are not acquiring the Notes for or on behalf of, and will not transfer the Notes to, any employee benefit plan that is subject to Title I of the United States Employee Retirement Income Security Act of 1974, as amended ( ERISA ), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the Code ), and entities whose underlying assets are considered to include plan assets of such employee benefit plans, plans accounts or arrangements (pursuant to Section 3(42) of ERISA and regulations promulgated under ERISA by the U.S. Department of Labor), unless such purchase and holding will not constitute a non-exempt prohibited transaction under Title I of ERISA and the Code. 337

129 RATINGS The Notes are expected to be rated Ba3 by Moody s and BB- by Fitch. The ratings reflect the rating agencies assessment of the likelihood of timely payment of the principal of and interest on the Notes. The ratings do not address the payment of any additional amounts and do not constitute recommendations to purchase, hold or sell the Notes inasmuch as such ratings do not comment as to market price or suitability for a particular investor. There can be no assurance that the ratings will remain in effect for any given period or that the ratings will not be revised by such rating agencies in the future if in their judgment circumstances so warrant. Each such rating should be evaluated independently of any other rating on the Notes, on other securities of the Company, or on the Company. See Risk Factors Risks Relating to the Notes, the Subsidiary Guarantees and the Collateral The ratings assigned to the Notes may be lowered or withdrawn. 338

130 LEGAL MATTERS Certain legal matters with respect to the Notes will be passed upon for us by Milbank, Tweed, Hadley & McCloy LLP as to matters of United States federal and New York law and Assegaf Hamzah & Partners as to matters of Indonesian law. Certain legal matters will be passed upon for the Initial Purchasers by Shearman & Sterling LLP as to matters of United States federal and New York law, and Witara Cakra Advocates as to matters of Indonesian law. 339

131 INDEPENDENT MINING CONSULTANT Our proved and probable coal reserves figures presented in this Offering Memorandum are estimates that have been prepared by RPM, an independent mining consultant. RPM has given and has not withdrawn its written consent to the issue of this Offering Memorandum with the inclusion herein of their name and all references thereto and to the inclusion of the Reserve Statements at Appendix A and Appendix B in this Offering Memorandum, in the form and context in which they appear in this Offering Memorandum and to act in such capacity in relation to this Offering Memorandum. RPM has provided, and is expected to continue to provide, mining consulting services to us. 340

132 INDEPENDENT PUBLIC ACCOUNTANTS Our financial statements as of and for the years ended December 31, 2014, 2015, and 2016, which are prepared by the company s management, have been audited by Purwantono, Sungkoro & Surja (the Indonesian member firm of Ernst & Young Global Limited), independent public accountants, in accordance with Standards or Auditing established by the Indonesian Institute of Certified Public Accountants ( IICPA ), as stated in their audit report appearing elsewhere in this Offering Memorandum. Our unaudited interim consolidated financial statements as of and for the three-month periods ended March 31, 2016 and 2017 which are prepared by the company s management and included elsewhere in this Offering Memorandum have been reviewed by Purwantono, Sungkoro & Surja (the Indonesian member firm of Ernst & Young Global Limited), independent public accountants, in accordance with Standard on Review Engagements 2410 established by the IICPA, Review of Interim Financial Information Performed by the Independent Auditor of the Entity ( SRE 2410 ), as stated in their review report appearing elsewhere in this Offering Memorandum (presented combined with the audit report mentioned above). 341

133 SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN FAS AND U.S. GAAP Our consolidated financial statements included elsewhere in this Offering Memorandum have been prepared and presented in accordance with Indonesian FAS. Significant differences exist between Indonesian FAS and U.S. GAAP, which might be material to the consolidated financial statements herein. The matters described below should not be expected to reveal all differences between Indonesian FAS and U.S. GAAP that are relevant to us. Management has made no attempt to quantify the impact of those differences, nor has any attempt been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions or events are presented in the consolidated financial statements. Had any such quantification or identification been undertaken by management, other potential significant accounting and disclosure differences may have come to its attention which are not summarized below. Accordingly, it should not be construed that the following summary of certain significant differences between Indonesian FAS and U.S. GAAP is complete. Regulatory bodies that promulgate Indonesian FAS and U.S. GAAP have significant ongoing projects that could affect future comparisons such as this one. Further, no attempt has been made to identify future differences between Indonesian FAS and U.S. GAAP as a result of prescribed changes in accounting standards and regulations. Finally, no attempt has been made to identify all future differences between Indonesian FAS and U.S. GAAP that may affect the consolidated financial statements as a result of transactions or events that may occur in future. Management believes that the application of U.S. GAAP to the consolidated financial statements could have a material and significant impact upon the consolidated financial statements reported under Indonesian FAS. In making an investment decision, investors must rely upon their own examination of us, terms of the offering, and the consolidated financial statements. Potential Investors should consult their own professional advisors for an understanding of the differences between Indonesian FAS and U.S. GAAP, and how those differences might affect the consolidated financial statements included herein. Interim Financial Reporting Under Indonesian FAS, each interim period is viewed as a discrete reporting period. A cost that does not meet the definition of an asset at the end of an interim period is not deferred, and a liability recognized at an interim reporting date must represent an existing obligation. Under U.S. GAAP, each interim period is viewed as an integral part of an annual period. As a result, certain costs that benefit more than one interim period may be allocated among those periods, resulting in deferral or accrual of certain costs. Consolidation, Joint Venture Accounting, and Equity-Method Investment Indonesian FAS provides a single control model for all entities, including structured entities. An investor controls an investee when it is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under Indonesian FAS, potential voting rights and the notion of de facto control are considered. U.S. GAAP provides for primarily two consolidation models (i.e. variable interest model and voting model). The variable interest model evaluates control based on determining which party has power and benefits, while the voting model evaluates control based on existing voting rights. All entities are first evaluated as potential variable interest entities ( VIEs ). If an entity is not a VIE, it is evaluated for control pursuant to the voting model. Under U.S. GAAP, potential voting rights are generally not included in either evaluation and the notion of de factor control is not considered. Under Indonesian FAS, uniform accounting policies between parent and subsidiary are required. Under U.S. GAAP, uniform accounting policies between parent and subsidiary are not required. 342

134 Under Indonesian FAS, proportionate consolidation is not permitted, regardless of industry. However, when a joint arrangement meets the definition of a joint operation instead of a joint venture, an investor would recognize its share of the entity s assets, liabilities, revenues, and expenses, and not apply the equity method. Under U.S. GAAP, proportionate consolidation may be permitted to account for interests in unincorporated entities in certain limited industries when it is an established practice (i.e. construction and extractive industries). Under Indonesian FAS, when determining significant influence (i.e. an investment of 20% or more of the equity of an investee (including potential rights)), potential voting rights are considered if currently exercisable. Under U.S. GAAP, when determining significant influence (i.e. an investment of 20% or more of the voting common stock of an investee), potential voting rights are generally not considered. Under Indonesian FAS, investments in associates held by venture capital organizations, mutual funds, unit trusts, or similar entities are exempt from using the equity method and the investor may elect to measure its investment at fair value. U.S. GAAP provides entities the option to account for certain equity method investments at fair value. If the entity does not elect to use the fair value option, the equity method of accounting is required. Consolidation of Foreign Operations Under Indonesian FAS, the method of consolidation is not specified and, as a result, either the direct method or the step-by-step method of consolidation is used. Under the direct method, each entity within the consolidated group is directly translated into the functional currency of the ultimate parent and then consolidated into the ultimate parent (i.e. the reporting entity) without regard to any intermediate parent. The choice of consolidation method used could affect the cumulative translation adjustments deferred within equity at intermediate levels, and therefore, affect the recycling of such exchange rate differences upon disposal of an intermediate foreign operation. Under U.S. GAAP, a bottom-up approach is required in order to reflect the appropriate foreign currency effects and hedges in place. As such, an entity should be consolidated by the enterprise that controls the entity. Therefore, the step-by-step method of consolidation is used, whereby each entity is consolidated into its immediate parent until the ultimate parent has consolidated the financial statements of all the entities below it. Business Combinations Under Indonesian FAS, non-controlling interest components that are present ownership interests and entitle their holders to a proportionate share of the acquiree s net assets in the event of liquidation may be measured at: (i) fair value (including goodwill), or (ii) the non-controlling interest s proportionate share of the fair value of the acquiree s identifiable net assets (exclusive of goodwill), while all other components of non-controlling interest are measured at fair value unless another measurement basis is required. Accordingly, the choice is available on a transaction-by-transaction basis. Under U.S. GAAP, non-controlling interest is measured at fair value (including goodwill). Under Indonesian FAS, separate recognition of an intangible asset or liability is required only if the acquire is a lessee. If the acquire is a lessor, the terms of the lease are taken into account in estimating the fair value of the asset subject to the lease and that separate recognition of an intangible asset or liability is not required. Under U.S. GAAP, if the terms of an acquiree s operating lease are favorable or unfavorable relative to market terms, the acquirer recognizes an intangible asset or liability, respectively, regardless of whether the acquire is the lessor or the lessee. Under Indonesian FAS, liabilities arising from contingencies are recognized as of the acquisition date if there is a present obligation that arises from past events and the fair value can be measured reliably, while contingent assets are not recognized. Liabilities subject to contingencies are subsequently measured at the higher of: (i) the amount that would be recognized in accordance with Indonesian Statement of Financial Accounting Standards (Pernyataan Standar Akuntansi Keuangan or 343

135 PSAK ) 57, Provisions, Contingent Liabilities, and Contingent Assets ( PSAK 57 ), or (ii) the amount initially recognized less, if appropriate, cumulative amortization recognized in accordance with PSAK 23, Revenue. Under U.S. GAAP, assets and liabilities arising from contingencies are recognized at fair value in accordance with Accounting Standards Codification 820, Fair Value Measurement and Disclosures ( ASC 820 ), if the fair value can be determined during the measurement period; otherwise, those assets or liabilities are recognized at the acquisition date in accordance with ASC 450, Contingencies ( ASC 450 ), if the related criteria for recognition are met. If contingent assets and liabilities are initially recognized at fair value, an acquirer should develop a systematic and rational basis for subsequently measuring and accounting for those assets and liabilities depending on their nature. If amounts are initially recognized and measured in accordance with ASC 450, the subsequent accounting and measurement should be based on that guidance. Under Indonesian FAS, no guidance exists for pushdown accounting. The general view is that entities may not use the hierarchy in PSAK 25, Accounting Policies, Changes in Accounting Estimates, and Errors to refer to U.S. GAAP and apply pushdown accounting in the separate financial statements of an acquired subsidiary, because the application of pushdown accounting will result in the recognition and measurement of assets and liabilities in a manner that conflicts with certain standards and interpretations under Indonesian FAS. Under U.S. GAAP, an acquired entity can choose to apply pushdown accounting in its separate financial statements when an acquirer obtains control of it. However, an entity s election to apply pushdown accounting is irrevocable. Inventory Under Indonesian FAS, inventory is carried at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Under U.S. GAAP, prior to the adoption of Accounting Standards Update , Inventory (Topic 330): Simplifying the Measurement of Inventory ( ASU ) (which is effective for public business entities for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years, and effective for all other entities for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017), inventory is carried at the lower of cost or market value. Market value is defined as the current replacement cost (by purchase or by reproduction), provided that it meets both of the following conditions: (i) market value shall not exceed net realizable value, and (ii) market value shall not be less than net realizable value reduced by an allowance for an approximately normal profit margin. Under Indonesian FAS, the use of the LIFO method in determining the cost of inventory is not permitted. Further, same cost formula must be applied to all inventories similar in nature or use to the entity. Under U.S. GAAP, the use of the LIFO method in determining the cost of inventory is permitted. Under Indonesian FAS, when the circumstances that previously caused inventory to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed (the reversal is limited to the amount of the original write-down) so that the new carrying amount is the lower of the cost or the revised net realizable value. Under U.S. GAAP, inventory that was previously written-down below cost cannot be reversed. Land Rights In Indonesia, except for ownership rights granted to individuals, the title to land rests with the Government of the Republic of Indonesia under the Agrarian Law No. 5 of Land use is accomplished through land rights whereby the holder of the rights enjoys the full use of the land for a stated period of time, subject to extensions. Under Indonesian FAS, land right is not depreciated 344

136 unless management believes that it is highly unlikely that extensions of the land right will not be granted by the Government. The predominant practice is to capitalize (and not to amortize) the costs of acquired land rights, as entities generally believe that extensions of land rights will be granted by the Government. Other expenses associated with the acquisition of government permits to use land, including legal fees, area survey and re-measurement fees, notary fees, and taxes, are capitalized and amortized over the period of the right to use the land. Under U.S. GAAP, the costs and other expenses associated with the acquisition of land rights are capitalized and amortized over the period of the right to use the land. Long-Lived Assets Under Indonesian FAS, revaluation of long-lived assets is a permitted accounting policy election whereby long-lived assets are revalued to their fair values on a regular basis. If a long-lived asset is revalued, then all long-lived assets within the same category are also required to be revalued. Under U.S. GAAP, revaluation of long-lived assets is not permitted. Under Indonesian FAS, long-lived asset component depreciation is required if components of an asset have differing patterns of benefit. Under U.S. GAAP, long-lived asset component depreciation is permitted, but considered not common. Under Indonesian FAS, eligible borrowing costs that are capitalized as part of a qualifying long-lived asset include exchange rate differences from foreign currency borrowings to the extent that such borrowing costs are regarded as an adjustment to interest costs. For borrowings associated with a specific qualifying long-lived asset, actual borrowing costs are capitalized and offset by investment income earned on those borrowings. Under U.S. GAAP, long-lived asset component depreciation is permitted, but considered not common. Under Indonesian FAS, costs that represent a replacement of a previously identified component of a long-lived asset (i.e. costs of a major overhaul) are capitalized if future economic benefits are probable and the costs can be reliably measured; otherwise, expensed as incurred. Under U.S. GAAP, eligible borrowing costs that are capitalized as part of a qualifying long-lived asset do not include exchange rate differences. Interest earned on the investment of borrowed funds generally cannot offset interest costs incurred during the period. For borrowings associated with a specific qualifying long-lived asset, borrowing costs equal to the weighted-average accumulated expenditures times the borrowing rate are capitalized. Under U.S. GAAP, multiple accounting models have evolved in practice for costs related to a major overhaul, including: (i) expense costs as incurred, (ii) capitalize costs and amortize them through the date of the next overhaul, or (iii) follow the approach provided under Indonesian FAS or the International Financial Reporting Standards. Under Indonesian FAS, investment property is separately defined as property held to earn rent or for capital appreciation (or both) and may include property held by lessees under a finance or operating lease. Investment property may be accounted for on a historical cost basis or on a fair value basis as an accounting policy election. Capitalized operating leases classified as investment property must be accounted for using the fair value model. Under U.S. GAAP, investment property is not separately defined, and therefore, is accounted for as held for use or held for sale. Intangible Assets Under Indonesian FAS, development costs are capitalized when technical and economic feasibility of a project can be demonstrated in accordance with specific criteria, including: (i) demonstrating technical feasibility, (ii) intent to complete the asset, and (iii) ability to sell the asset in the future. Although application of these principles may be largely consistent with those under U.S. GAAP, there is no separate guidance addressing development costs for computer software. Under U.S. GAAP, development costs are expensed as incurred unless addressed by guidance in another ASC 345

137 Topic. Development costs related to computer software developed or external use are capitalized once technological feasibility is established in accordance with specific criteria. In the case of software developed for internal use, only those costs incurred during the application development stage may be capitalized. Under Indonesian FAS, advertising and promotional costs are expensed as incurred. A prepayment may be recognized as an asset only when payment for the goods or services is made in advance of the entity having access to the goods or receiving the services. Under U.S. GAAP, advertising and promotional costs are either expensed as incurred or expensed when the advertising takes place for the first time (policy choice). Direct response advertising may be capitalized if the specific criteria are met. Under Indonesian FAS, revaluation to fair value of intangible assets other than goodwill is a permitted accounting policy election for a class of intangible assets. Because revaluation requires reference to an active market for the specific type of intangible, this is relatively uncommon in practice. Under U.S. GAAP, revaluation of to fair value of intangible assets other than goodwill is not permitted. Impairment of Long-Lived Assets, Goodwill, and Intangible Assets Under Indonesian FAS, impairment of long-lived assets is determined using the one-step approach, which requires that impairment loss calculation be performed if impairment indicators exist. Impairment loss is recognized when the carrying amount of the long-lived asset exceeds its recoverable amount. Recoverable amount is the higher of: (i) fair value less costs to sell, or (ii) value in use (the present value of future cash flows in use, including disposal value). Under U.S. GAAP, impairment of long-lived assets is determined using the two-steps approach, which requires that a recoverability test (i.e. carrying amount of the long-lived asset is compared with the sum of the future undiscounted cash flows generated through use and eventual disposition) be performed first. If it is determined that the long-lived asset is not recoverable, an impairment loss calculation is required. Impairment loss is recognized when the carrying amount of the long-lived asset exceeds its fair value as calculated in accordance with ASC 820. Under Indonesian FAS, goodwill is allocated to a cash-generating unit ( CGU ) or group of CGUs that represents the lowest level within the entity at which the goodwill is monitored for internal management purposes and cannot be larger than an operating segment (before aggregation). The use of qualitative assessment in determining the impairment of goodwill (and indefinite-lived intangibles) is not permitted. Impairment of goodwill (and indefinite-lived intangibles) is determined using the one-step approach, which requires that an impairment test be performed at the CGU level by comparing the CGU s carrying amount (including goodwill) and its recoverable amount. Impairment loss on the CGU (amount by which the CGU s carrying amount (including goodwill) exceeds its recoverable amount) is allocated first to reduce goodwill to zero, then, the carrying amount of other assets in the CGU are reduced on a pro rata basis based on the carrying amount of each asset. Under U.S. GAAP, goodwill is assigned to a reporting unit, which is defined as an operating segment or one level below an operating segment (component). Entities have the option to qualitatively assess whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. Impairment of goodwill (and indefinite-lived intangibles) is determined using the two-steps approach, which requires that a recoverability test be performed first at the reporting unit level (the carrying amount of the reporting unit is compared with its fair value). If the carrying amount of the reporting unit exceeds its fair value, then impairment testing must be performed. Under Indonesian FAS, if the indefinite-lived intangible asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, then the indefinite-lived intangible asset should be tested for impairment as part of the CGU to which it belongs unless certain conditions are met. Under U.S. GAAP, indefinite-lived intangible assets separately recognized should 346

138 be assessed for impairment individually unless they operate in concert with other indefinite-lived intangible assets as a single asset (i.e. the indefinite-lived intangible assets are essentially inseparable). Indefinite-live intangible assets may be combined with other assets (e.g. finite-lived intangible assets or goodwill) for purposes of an impairment test. Under Indonesian FAS, the reversal of impairment loss previously recognized is prohibited for goodwill, while other assets must be reviewed at the end of each reporting period for reversal indicators. If appropriate, impairment loss should be reversed up to the newly estimated recoverable amount, not to exceed the initial carrying amount adjusted for depreciation. Under U.S. GAAP, the reversal of impairment loss previously recognized is prohibited for all assets to be held and used. Financial Instruments Under Indonesian FAS, compound (hybrid) financial instruments are required to be split into a debt component and an equity component and, if applicable, a derivative component. The derivative component is accounted for using fair value accounting. Under U.S. GAAP, compound (hybrid) financial instruments are not split into debt and equity components unless certain specific requirements are met, but they may be bifurcated into debt and derivative components, with the derivate component accounted for using fair value accounting. Under Indonesian FAS, only objective evidence of one or more credit loss events can generally result in an impairment being recognized in the statement of comprehensive income for an available-for-sale ( AFS ) debt instrument. The impairment loss is measured as the difference between the debt instrument s amortized cost basis and its fair value. Impairment losses for AFS debt instruments may be reversed through the statement of other comprehensive income if the fair value of the instrument increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognized. Under U.S. GAAP, declines in fair value below cost may result in an impairment loss being recognized in the income statement on an AFS debt instrument due solely to a change in interest rates (risk free or otherwise) if the entity has the intent to sell the debt instrument or it is more likely than not that it will be required to sell the debt instrument before its anticipated recovery. In this circumstance, the impairment loss is measured as the difference between the debt instrument s amortized cost basis and its fair value. When a credit loss exits, but: (i) the entity does not intend to sell the debt instrument, or (ii) it is not more likely than not that the entity will be required to sell the debt instrument before the recovery of the remaining cost basis, the impairment is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total impairment related to the credit loss is recognized in the income statement and the amount related to all other factors is recognized in other comprehensive income, net of applicable taxes. When an impairment loss is recognized in the income statement, a new cost basis in the instrument is established equal to the previous cost basis less the impairment recognized in earnings, and therefore, impairment losses recognized in the income statement cannot be reversed for any future recoveries. Under Indonesian FAS, impairment of an AFS equity instrument is recognized in the statement of comprehensive income when there is objective evidence that the AFS equity instrument is impaired and the cost of the investment in the equity instrument may not be recovered. A significant or prolonged decline in the fair value of an equity instrument below its cost is considered objective evidence of an impairment. Under U.S. GAAP, impairment of an AFS equity instrument is recognized in the income statement if the equity instrument s fair value is not expected to recover sufficiently in the near term to allow a full recovery of the entity s cost basis. An entity must have the intent and ability to hold an impaired equity instrument until such near-term recovery; otherwise, an impairment loss must be recognized in the income statement. Under Indonesian FAS, the impairment loss of a held-to-maturity ( HTM ) instrument is measured as the difference between the carrying amount of the instrument and the present value of estimated future cash flows discounted at the instrument s initial effective interest rate. The carrying amount of the instrument is reduced either directly or through the use of an allowance account. The 347

139 amount of impairment loss is recognized in the statement of comprehensive income. Under U.S. GAAP, the impairment loss of a HTM instrument is measured as the difference between its fair value and amortized cost basis. The amount of the total impairment related to the credit loss is recognized in the income statement, and the amount related to all other factors is recognized in other comprehensive income. The carrying amount of an HTM investment after recognition of an impairment is the fair value of the debt instrument at the date of the impairment. The new cost basis of the debt instrument is equal to the previous cost basis less the impairment recognized in the income statement. The impairment recognized in other comprehensive income is accredited to the carrying amount of the HTM instrument through other comprehensive income over its remaining life. Under Indonesian FAS, the definition of a derivative does not include a requirement that a notional amount be indicated, nor is net settlement a requirement. Certain of the scope exceptions under Indonesian FAS differ from those under U.S. GAAP. Under U.S. GAAP, to meet the definition of a derivative, an instrument must: (i) have one or more underlyings, one or more notional amounts or payment provisions, or both, (ii) require no initial net investment (as defined), and (iii) be able to be settled net (as defined). Certain scope exceptions exit for instruments that would otherwise meet these criteria. Indonesian FAS allows risks associated with only a portion of the instrument s cash flows or fair value (such as one or more selected contractual cash flows or portions of them or a percentage of the fair value) when hedging a risk component of a financial instrument, provided that effectiveness can be measured, that is, the portion is separately identifiable and reliably measurable. Under U.S. GAAP, the risk components that may be hedged are specifically defined by the literature, with no additional flexibility. Under U.S. GAAP, the shortcut method for interest rate swaps hedging recognized debt instruments is permitted. The long-haul method of assessing and measuring hedge effectiveness for a fair value hedge of the benchmark interest rate component of a fixed rate debt instrument requires that all contractual cash flows be considered in calculating the change in the hedged item s fair value even though only a component of the contractual coupon payment is the designated hedged item. Under Indonesian FAS, the use of the shortcut method for interest rate swaps hedging recognized debt is not permitted. Assessment and measurement of hedge effectiveness considers only the change in fair valued of the designated hedged portion of the instrument s cash flows, as long as the portion is separately identifiable and reliably measureable. Under Indonesian FAS, the inclusion of an option s time value in assessing and measuring the hedge effectiveness is not permitted. Under U.S. GAAP, the inclusion of an option s time value in assessing and measuring the hedge effectiveness is permitted. Under Indonesian FAS, derecognition of financial assets is based on a mixed model that considers transfer of risks and rewards and control. Transfer of control is considered only when the transfer of risks and rewards assessment is not conclusive. If the transferor has neither retained nor transferred substantially all of the risks and rewards, there is then an evaluation of the transfer of control. Control is considered to be surrendered if the transferee has the practical ability to unilaterally sell the transferred asset to a third party without restrictions. There is no legal isolation test required. The derecognition criteria may be applied to a portion of a financial asset if the cash flows are specifically identified or represent a pro rata share of the financial asset or a pro rata share of specifically identified cash flows. Under U.S. GAAP, derecognition of financial assets (i.e. sales treatment) occurs when effective control over the financial asset has been surrendered whereby: (i) the transferred financial assets are legally isolated from the transferor, (ii) each transferee (or, if the transferee is a securitization entity or an entity whose sole purpose is to facilitate an asset-backed financing, each holder of its beneficial interests) has the right to pledge or exchange the transferred financial assets (or beneficial interests), and (iii) the transferor does not maintain effective control over the transferred financial assets or beneficial interests (e.g. through a call option or repurchase agreement). The derecognition criteria may be applied to a portion of a financial asset only if it mirrors the characteristics of the initial entire financial asset. 348

140 Indonesian FAS requires the initial effective interest rate to be used throughout the life of the instrument for all financial assets and liabilities, except for certain reclassified financial assets, in which case the effect of increases in cash flows are recognized as prospective adjustments to the effective interest rate. U.S. GAAP requires the use of catch-up approach, retrospective method, or prospective method of calculating the interest for amortized cost-based assets, depending on the type of instrument. Under Indonesian FAS, loans and receivables are carried at amortized cost unless classified into the fair value through profit or loss category or the available for sale category, both of which are carried at fair value on the statement of financial position. Under U.S. GAAP, unless the fair value option is elected, loans and receivables are classified as either: (i) held for investment, which are measured at amortized cost, or (ii) held for sale, which are measured at the lower of cost or fair value. Under Indonesian FAS, the day one gains and losses on financial instruments are recognized only when their fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. level or level 2 input) or based on a valuation technique that uses only data from observable markets. Under U.S. GAAP, entities are not precluded from recognizing day one gains and losses on financial instruments reported at fair value even when all inputs to the measurement model are not observable. Unlike Indonesian FAS, U.S. GAAP contains no specific requirements regarding the observability of inputs, thereby potentially allowing for the recognition of gains or losses at initial recognition of an asset or liability even when the fair value measurement is based on a valuation model with significant unobservable inputs (i.e. level 3 measurements). Under Indonesian FAS, there is no practical expedient to assume that net asset value per share ( NAV ) represents the fair value of certain alternative investments. Under U.S. GAAP, entities are provided a practical expedient to estimate the fair value of certain alternative investments (i.e. a limited partner interest in a Private Equity fund) using NAV or its equivalent. Leases Under Indonesian FAS, when the leaseback is classified as a capital leaseback, gain or loss on a sale-leaseback transaction is deferred and amortized over the lease term. Under U.S. GAAP, when the leaseback is classified as a capital leaseback, the seller-lessee is presumed to have retained substantially all of the remaining use of the leased asset, and therefore, the profit on sale is deferred. Under Indonesian FAS, when the leaseback is classified as an operating leaseback, gain or loss on a sale-leaseback transaction is recognized immediately, subject to adjustment if the sales price differs from fair value. Under U.S. GAAP, when the leaseback is classified as an operating leaseback, if the seller-lessee retains only a minor use of the leased asset through the sale-leaseback, the sale and leaseback are accounted for as separate transactions based on their respective terms (unless rentals are unreasonable in relation to market conditions). If a seller-lessee retains more than a minor use of the leased asset but less than substantially all of it, and the profit on the sale exceeds the present value of the minimum lease payments due under the operating leaseback, such excess is recognized as profit at the date of sale. All other profit is deferred and generally amortized over the lease term. Income Taxes Indonesian FAS requires taxes paid on intercompany profits to be recognized as incurred and requires the recognition of deferred taxes on temporary differences between the tax-bases of assets transferred between entities/tax jurisdictions that remain within the consolidated group. U.S. GAAP requires taxed paid on intercompany profits to be deferred and prohibits the recognition of deferred taxes on temporary differences between the tax-bases of assets transferred between entities/tax jurisdictions that remain within the consolidated group. Under Indonesian FAS, there is no specific guidance on uncertain tax positions. PSAK 46, Income Taxes, indicates that tax assets and liabilities should be measured at the amount expected 349

141 to be paid based on enacted or substantively enacted tax legislation. Some adopt a one-step approach that recognized all uncertain tax positions at an expected value, while others adopt a two-step approach that recognizes only those uncertain tax positions that are considered probable to result in a cash outflow. Practice varies regarding the consideration of detection risk in the analysis. Under U.S. GAAP, entities are required to recognize and measure their uncertain tax positions using a two-step process, separating recognition from measurement. A benefit is recognized when it is more likely than not to be sustained based on the technical merits of the position. Detection risk is precluded from being considered in the analysis. The amount of benefit to be recognized is based on the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. Under Indonesian FAS, deferred tax effects arising from the initial recognition of an asset or liability are not recognized when: (i) the amounts did not arise from a business combination, and (ii) upon occurrence, the transaction affects neither accounting nor taxable profit (e.g. acquisition of non-deductible assets). Under U.S. GAAP, there is no exemption for non-recognition of deferred tax effects for certain assets or liabilities. Under Indonesian FAS, deferred tax assets are recognized only to the extent that it is probable that they will be realized. Under U.S. GAAP, deferred tax assets are recognized in full (except for certain outside basis differences), but valuation allowance reduces deferred tax assets to the amounts that are more likely than not to be realized. Under Indonesian FAS, enacted or substantively enacted tax rates as of the date of the statement of financial position must be used in computing deferred tax asset or liability. Under U.S. GAAP, enacted tax rates must be used in computing deferred tax asset or liability. Under Indonesian FAS, recognition of deferred tax liabilities from investments in subsidiaries or joint ventures (often referred to as outside basis differences) is required unless the reporting entity has control over the timing of the reversal of the temporary difference and it is probable that the difference will not reverse in the foreseeable future. Under U.S. GAAP, recognition of deferred tax liabilities from investments in subsidiaries or joint ventures (often referred to as outside basis differences) is not required for investment in a foreign subsidiary or foreign corporate joint venture that is essentially permanent in duration unless it becomes apparent that the difference will reverse in the foreseeable future. Provisions and Contingencies Under Indonesian FAS, a loss must be probable (in which probable is interpreted as more likely than not ) to be recognized. More likely than not refers to a probability of greater than 50%. Under U.S. GAAP, a loss must be probable (in which probable is interpreted as likely ) to be recognized. While ASC 450 does not ascribe a percentage to probable, it is intended to denote a high likelihood (e.g. 70% or more). Under Indonesian FAS, provisions should be recorded at the estimated amount to settle or transfer the obligation taking into consideration the time value of money. The discount rate to be used should be a pre-tax rate (or rates) that reflects (or reflect) current market assessments of the time value of money and the risks specific to the liability. Under U.S. GAAP, provisions may be discounted only when the amount of the liability and the timing of the payments are fixed or reliably determinable, or when the obligation is a fair value obligation. The discount rate to be used is dependent upon the nature of the provision. However, when a provision is measured at fair value, the time value of money and the risks specific to the liability should be considered. Under Indonesian FAS, best estimate of obligation should be accrued. For a large population of items being measured (such a warranty costs), best estimate is typically expected value, although midpoint in the range may also be used when any point in a continuous range is as likely as another. 350

142 Best estimate for a single obligation may be the most likely outcome, although other possible outcomes should still be considered. Under U.S. GAAP, most likely outcome within the range should be accrued. When no one outcome is more likely than the others, the minimum amount in the range of outcomes should be accrued. Under Indonesian FAS, once management has demonstrably committed (i.e. a legal or constructive obligation has been incurred) to a detailed exit plan, the general provisions under PSAK 57, apply. Costs typically are recognized earlier than under U.S. GAAP because PSAK 57 focuses on the exit plan as a whole, rather than individual cost components of the plan. Under U.S. GAAP, once management has committed to a detailed exit plan, each type of cost is examined to determine when recognized. Involuntary employee termination costs under a one-time benefit arrangement are recognized over future service period, or immediately if there is no future service required. Other exit costs are expensed when incurred. Revenue Recognition Under Indonesian FAS, revenue from sale of goods is recognized only when: (i) risks and rewards of ownership have been transferred, (ii) the seller retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, (iii) revenues can be measured reliably, (iv) it is probable that the economic benefits will flow to the seller, and (v) the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services may be recognized in accordance with long-term contract accounting whenever revenues, costs, and the stage of completion can be measured reliably and it is probable that economic benefits will flow to the seller. Under U.S. GAAP, public companies must follow Staff Accounting Bulletin Topic 13, Revenue Recognition ( SAB Topic 13 ) when recognizing revenue from sale of goods, which requires that: (i) delivery has occurred (the risks and rewards of ownership have been transferred), (ii) there is a persuasive evidence of an arrangement, (iii) the fee is fixed or determinable, and (iv) collectability is reasonable assured. Revenue from rendering certain types of services, primarily relating to services sold with software, are addressed separately in U.S. GAAP literature, while all other service revenue should follow SAB Topic 13. Application of long-term contract accounting generally is not permitted for non-construction services. Under Indonesian FAS, construction contracts are accounted for using the percentage-of-completion method if certain criteria are met; otherwise, revenue recognition is limited to recoverable costs incurred. The use of completed contract method is not permitted. Construction contracts are combined or segmented if certain criteria are met. Under U.S. GAAP, construction contracts are accounted for using the percentage-of-completion method if certain criteria are met; otherwise, the completed contract method must be used. Construction contracts may be, but are not required to be, combined or segmented if certain criteria are met. Indonesian FAS requires recognition of revenue for each separately identifiable component of a single transaction if separation reflects the substance of the transaction; conversely, two or more transactions may be grouped together when their commercial effects are linked. Indonesian FAS does not provide specific criteria for making the determination on how to identify separate components in a single transaction. Under U.S. GAAP, specific criteria are required in order for each element to be a separate unit of accounting, including delivered elements must have standalone value. If those criteria are met, revenue for each element of the transaction may be recognized when the element is delivered. Under Indonesian FAS, deferred receipt of receivables is considered to be a financing agreement. Accordingly, the value of revenue to be recognized is determined by discounting all future receipts using an imputed rate of interest. Under U.S. GAAP, discounting the deferred receipt of receivables to present value is required only in limited situations. 351

143 Share-Based Payments Under Indonesian FAS, a performance condition is a vesting condition that must be met while the counterparty is rendering service. Therefore, the period of time to achieve a performance condition must not extend beyond the end of the service period. If a performance target can be achieved after the employee s requisite service period, it would be accounted for as a non-vesting condition that affects the grant date fair value of the award. Under U.S. GAAP, a performance condition where the performance target affects vesting can be achieved after the employee s requisite service period. Therefore, the period to time to achieve a performance target can extend beyond the end of the service period. Indonesian FAS has a more general definition of an employee, which includes individuals who provide services similar to those rendered by employees. The fair value of the transaction should be based on the fair value of the goods or services received, and only on the fair value of the equity instruments granted in the rare circumstance that the fair value of the goods and services cannot be reliably estimated. Measurement date is considered as the date the entity obtains the goods or the counterparty renders the services. There is no performance commitment concept exits. Under U.S. GAAP, the definition of an employee focuses primarily on the common law definition of an employee. The fair value of: (i) the goods or services received, or (ii) the equity instruments granted, whichever is more reliably measureable, is used to value the transaction. Measurement date is considered as the earlier of: (i) the date at which a commitment for performance by the counterparty is reached, or (ii) the date at which the counterparty s performance is complete. Under Indonesian FAS, in measuring and recognizing the expense-awards with graded vesting features, entities must recognize compensation cost on an accelerated basis and each individual tranche must be separately measured. Under U.S. GAAP, in measuring and recognizing the expense-awards with graded vesting features, entities make an accounting policy election to recognize compensation cost for awards containing only service conditions either on a straight-line basis or on an accelerated basis, regardless of whether the fair value of the award is measured based on the award as a whole or for each individual tranche. Under Indonesian FAS, when there are equity repurchase features at the employee s election, a liability classification is required (i.e. unlike U.S. GAAP, no six-month consideration exists). Under U.S. GAAP, when there are equity repurchase features at the employee s election, a liability classification is not required if employee bears risks and rewards of equity ownership for at least six months from the date the shares are issued or vest. Under Indonesian FAS, deferred taxes on share-based payments are calculated based on the estimated tax deduction determined at each reporting date (e.g. intrinsic value). If the tax deduction exceeds the cumulative compensation cost, deferred tax based on the excess is credited to shareholders equity. If the tax deduction is less than or equal to cumulative compensation cost, deferred taxes are recorded in income. Under U.S. GAAP, deferred taxes on share-based payments are calculated based on the cumulative expense recognized and trued up or down upon realization of the tax benefit. If the tax benefit exceeds the deferred tax assets, the excess ( windfall benefit ) is credited directly to shareholders equity. Any shortfall of the tax benefit below the deferred tax asset is charged to shareholders equity to the extent of prior windfall benefits, and not as expense thereafter. Under Indonesian FAS, compensation cost is the grant date fair value of the award, together with any incremental fair value at the modification date. Therefore, when there is modification of vesting terms that are improbable of achievement, the determination of whether the initial grant date fair value affects the accounting is based on the ultimate outcome (i.e. whether the initial or modified conditions are met) rather than the probability of vesting as of the modification date. Under U.S. GAAP, if an 352

144 award is modified such that the service or performance condition, which was previously improbable of achievement, is probable of achievement as a result of the modification, the compensation cost is based on the fair value of the modified award at the modification date. Grant date fair value of the initial award is not recognized. Employee Benefits other than Share-Based Payments Under Indonesian FAS, the projected unit credit method is required in all cases when computing employee benefits liability in defined benefit plans. Under U.S. GAAP, different methods are required when computing employee benefits liability in defined benefit plans, depending on the characteristics of the plan s benefit formula. Under Indonesian FAS, the concept of an expected return on plan assets does not exist. Instead, a net interest expense/(income) on the net defined benefit liability/(asset) is recognized as a component of defined benefit cost based on the discount rate used to determine the obligation. Under U.S. GAAP, the concept of an expected return on plan assets exists, which is calculated using the expected long-term rate of return on invested assets and the market related value of the assets (based on either the fair value of plan assets at the measurement date or a calculated value that smooths changes in fair value over a period not to exceed five years, at the employer s election). Under Indonesian FAS, treatment of actuarial gains and losses must be recognized immediately in other comprehensive income. Gains and losses are not subsequently recognized in net income. Under U.S. GAAP, actuarial gains and losses may be recognized in net income as they occur or deferred in other comprehensive income and subsequently amortized to net income through a corridor approach. Under Indonesian FAS, prior service costs or credits from plan amendments are immediately recognized in net income. Under U.S. GAAP, prior service costs or credits from plan amendments are initially deferred in other comprehensive income and subsequently recognized in net income over the average remaining service period of active employees or, when all or almost all participants are inactive, over the average remaining life expectancy of those participants. Under Indonesian FAS, gain or loss from settlement is recognized in net income when it occurs. Change in the defined benefit obligation from a curtailment is recognized in net income at the earlier of when it occurs or when related restructuring costs or termination benefits are recognized. Under U.S. GAAP, settlement gain or loss is recognized in net income when the obligation is settled. Curtailment loss is recognized in net income when the curtailment is probable of occurring and the loss is estimable, while curtailment gain is recognized in net income only when the curtailment occurs. Under Indonesian FAS, multi-employer post-retirement plans are accounted for as either a defined contribution plan or defined benefit plan based on the terms (contractual and constructive) of the plan. If a defined benefit plan, it must account for the proportionate share of the plan similar to any other defined benefit plan unless sufficient information is not available. Under U.S. GAAP, multi-employer post-retirement plans are accounted for similar to a defined contribution plan. Earnings per Share Under Indonesian FAS, contracts that may be settled in shares or cash at the issuer s option are always assumed to be settled in shares. Under U.S. GAAP, contracts that may be settled in shares or cash at the issuer s option are presumed to be settled in shares unless evidence is provided to the contrary (i.e. the issuer s past practice or stated policy is to settle in cash). Under Indonesian FAS, in computing the year-to-date and annual diluted earnings per share ( EPS ) for options and warrants (using the treasury stock method) and for contingently issuable shares, regardless of whether the period is profitable, the number of incremental shares is computed as if the entire year-to-date period were the period (i.e. not to average the current quarter with each 353

145 of the prior quarters). Under U.S. GAAP, in computing the year-to-date and annual diluted EPS for options and warrants (using the treasury stock method) and for contingently issuable shares, for year-to-date and annual computations when each period is profitable, the number of incremental shares added to the denominator is the weighted average of the incremental shares that were added to the denominator in each of the quarterly computations. Under Indonesian FAS, when using the treasury stock method for options, warrants, and their equivalents, there is no explicit requirement to assume proceeds to include the income tax effects on additional paid-in capital. Under U.S. GAAP, when using the treasury stock method, it assumes that proceeds include the income tax effects, if any, on additional paid-in capital at exercise. Under Indonesian FAS, potentially issuable shares in contingently convertible debt are considered contingently issuable and are included in diluted EPS using the if-converted method only if the contingencies are satisfied at the end of the reporting period. Under U.S. GAAP, potentially issuable shares in contingently convertible debt are included in diluted EPS using the if-converted method if one or more contingencies relate to a market price trigger (e.g. the entity s share price), even if the market price trigger is not satisfied at the end of the reporting period. Segment Reporting Under Indonesian FAS, all entities determine segments based on the management approach, regardless of form of organization. Under U.S. GAAP, entities with a matrix form of organization must determine segments based on products and services. Ijarah Under Indonesian FAS, Ijarah is a lease agreement between mu jir (lessor) with musta jir (lessee) on ma jur (lease object) to get rewards or leasing goods. Ijarah mumtahiyah bittamlik is a lease agreement between the lessor and the lessee where the ownership of the lease object is transferred to the lessee at the end of the agreement. The ijarah issuance costs are directly deducted from the issue proceeds in the consolidated statement of financial position as a discount and are amotized using the effective interest method over the period of the Ijarah. Unlike Indonesian FAS, there is no specific accounting standard that governs the accounting for ijarah under U.S. GAAP. Subsequent Events Under Indonesian FAS, subsequent events are evaluated through the date that the financial statements are authorized for issuance. Depending on an entity s corporate governance structure and statutory requirements, authorization may come from management or a board of directors. Under U.S. GAAP, subsequent events are evaluated through the date the financial statements are issued (United States Securities and Exchange Commission ( SEC )) registrants and conduit bond obligors or available to be issued (all entities other than SEC registrants and conduit bond obligors). Financial statements are considered issued when they are widely distributed to shareholders or other users in a form that complies with U.S. GAAP. Financial statements are considered available to be issued when they are in a form that complies with U.S. GAAP and all necessary approvals have been obtained. Indonesian FAS does not specifically address the reissuance of financial statements and recognizes only one date through which subsequent events are evaluated, that is, the date that the financial statements are authorized for issuance, even if they are being reissued. As a result, only one date will be disclosed with respect to the evaluation of subsequent events, and an entity could have adjusting subsequent events in reissued financial statements. Under U.S. GAAP, if the financial statements are reissued, events or transactions may have occurred that require disclosure in the reissued financial statements to keep them from being misleading. However, an entity should not recognize events occurring between the time the financial statements were issued or available to be issued and the time the financial statements were reissued unless the adjustment is required by U.S. GAAP or regulatory requirements. 354

146 GLOSSARY OF CERTAIN TERMS USED IN THE OFFERING MEMORANDUM The explanations of certain terms used in this Offering Memorandum are not intended as technical definitions, but have been provided to assist the reader to understand certain terms as used in this Offering Memorandum. We have also included abbreviations and acronyms of certain units of measurement in this Offering Memorandum. General Company Law demurrage FAS FOB Government IDX Indonesia Indonesian GAAP Laytime MOLHR Offering Memorandum Regulation S Reserve Statement for TIA Reserve Statement for MIFA and BEL Rupiah or Rp. Rule 144A Law No. 40 of 2007 of the Republic of Indonesia on Limited Liability Companies. financial compensation paid by charterer to the vessel-owner for delays after the Laytime has expired at the load/discharge port. an arrangement for the transfer of goods where the seller is responsible for the charges of transporting the goods to the named port of shipment, except for the charges of loading the goods onto the vessel, and the buyer is responsible for all shipping or handling charges after delivery at the port. the price paid for coal excluding freight and insurance costs where the buyer pays and arranges for transportation (and insurance thereof) and the seller s responsibility stops at delivery over the rail of the ship at a named port of shipment. Government of the Republic of Indonesia. Indonesia Stock Exchange. Republic of Indonesia. Indonesian Financial Accounting Standards. time allowed for the vessel s cargo to be loaded/discharged without incurring demurrage. Minister of Law and Human Rights of the Republic of Indonesia. this offering memorandum. Regulation S under the U.S. Securities Act. Statement of Open Cut Coal Resources and Reserves as at July 7, 2017 for TIA s concession attached as Appendix A to this Offering Memorandum. Statement of Open Cut Coal Resources and Reserves as at July 10, 2017 for MIFA s and BEL s concessions attached as Appendix B to this Offering Memorandum. the lawful currency of Indonesia. Rule 144A under the U.S. Securities Act. 355

147 Trakindo Trakindo Group U.S. dollar, U.S. dollars, US$ U.S. GAAP U.S. Securities Act PT Trakindo Utama. PT Tiara Marga Trakindo and its subsidiaries. the lawful currency of the United States. accounting principles generally accepted in the United States. United States Securities Act of 1933, as amended. ABM Group ABM Group ATR BDD BEL CK CKB Company or ABM DDE MDB MIFA Reswara SSB TIA SS PT ABM Investama Tbk and its subsidiaries PT Alfa Trans Raya PT Baruna Dirga Dharma PT Bara Energi Lestari PT Cipta Kridatama PT Cipta Krida Bahari PT ABM Investama Tbk PT Dianta Daya Embara PT Media Djaya Bersama PT MIFA Bersaudara PT Reswara Minergi Hartama PT Sanggar Sarana Baja PT Tunas Inti Abadi PT Sumberdaya Sewatama Coal Terms air dried basis an analysis expressed on the basis of a coal sample with moisture content in approximate equilibrium with the surrounding atmosphere. ash impurities consisting of iron, alumina and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the characteristics of coal. barge a long and large, usually flat-bottomed, boat of between 180 to 300 feet in length that is towed by a tugboat. blasting the process of causing an explosion in the overburden/ interburden and/or coal of a mine in order to enable the heavy equipment to operate more efficiently. 356

148 blending calorific value coal coal seam or seam coke contour Exploration IUP high wall indicated resources IUP the process of mixing coal to obtain the desired coal quality. a coal sample s energy content measured as the heat released on complete combustion in air or oxygen, usually expressed as the amount of heat (measured in kilo calories) per unit weight of coal (measured in kilograms) or (kcal/kg). a readily combustible black or brownish-black graphite-like material with a composition, including inherent moisture, which consists of more than 50.0% by weight and more than 70.0% by volume of carbonaceous material. It is formed from plant remains that have been compacted, hardened, chemically altered and metamorphosed by heat and pressure over time. coal deposits occur in layers in a bed of coal lying between a roof and floor with each layer called a coal seam or seam. a hard, dry primarily carbon substance produced by heating coal to a very high temperature in the absence of air and used in the manufacture of iron and steel. a line that connects all points on a surface having the same elevation. a mining business license that is granted in order that general surveys, explorations and feasibility studies can be undertaken. an unexcavated face of exposed overburden and coal in a surface mine or bank on the uphill side of a contour mine excavation. refers to that part of the coal deposit for which quality and quantity can be estimated with a reasonable level of confidence, as defined in the 2012 JORC Code. Indicated resources have a lower level of geological confidence than measured resources. Izin Usaha Pertambangan, mining business license. JORC the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia 2012 JORC Code the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 edition, prepared by the JORC, which sets out the minimum standards, recommendations and guidelines for public reporting of exploration results, mineral resources and ore reserves in Australasia. marketable reserves an estimate of the quantity of coal that could be profitably sold under expected market conditions. 357

149 measured resources open cut mining overburden probable reserves Production Operation IUP proved reserves rank reclamation rehabilitation that part of the coal deposit for which quality and quantity can be estimated with a high level of confidence, as defined in the 2012 JORC Code. a form of mining designed to extract coal from seams that generally lie near the surface. Overburden is removed to expose the coal seam for mining. Overburden covering the minerals is blasted and removed by excavators and trucks. any material, consolidated or unconsolidated, such as layers of earth and rock, that overlies a coal seam or lies in between a number of coal seams (typically called interburden). In surface mining operations, overburden is removed prior to coal extraction. is the economically mineable part of an indicated, and in some circumstances, a measured resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments indicate at the time of reporting that extraction could reasonably be justified (as defined in the 2012 JORC Code). a mining business license that is granted upon the completion of the exploration activities under the respective Exploration IUP to commence the construction, mining, processing and refining, transportation and sales activities. is the economically mineable part of a measured resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments indicate at the time of reporting that extraction could reasonably be justified (as defined in the 2012 JORC Code). vitronite reflectance value calculated on a Ro Max basis (typically in Australia) or a Ro Mean basis (typically in Asian markets). the process of restoring the environment to close to its original state following mining activities. The process commonly includes recontouring or reshaping the land to its approximate original appearance. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is regulated by applicable local law. the process of restoring topsoil and planting vegetation. The process commonly includes planting native grass and ground covers. 358

150 reserve coal, about which size, form, distribution, quantity and quality are known to a certain degree of confidence, and which is mineable considering the economic, technical, legal and environmental aspects at the time of measurement. run-of-mine or ROM strip or strip ratio sulfur sulfur content surface mine thermal coal washing Usually the typical quality of coal that is extracted prior to any act of beneficiation such as washing, crushing or screening. The term is used loosely and can be applied on a pit-by-pit basis and is typically also used to refer to the processing and raw stockpile areas. a strip ratio is the number of bank cubic meters of overburden needing removal to access one ton of coal, e.g. a strip ratio of 4:1 means that four bank cubic meters of overburden must be stripped to produce one ton of ROM coal. one of the elements present, in varying quantities in coal. Sulfur dioxide is produced as a gaseous by-product of coal combustion. coking coal is commonly described by its sulfur content due to the importance of sulfur to customers concerned about the quality of steel. Low sulfur coal has a variety of definitions, but typically is used to describe coking coal consisting of 0.8% or less sulfur. a mine in which the coal lies near the surface and can be extracted by removing the overburden. coal used in thermal plants to generate electricity or heat in cement plants. the removal or reduction of impurities from coal. Units of Measurement bank cubic meter or BCM DWT hectare or ha kcal/kg km kw kwh a measure of the volume of overburden waste material. deadweight tons, reflecting the deadweight capacity of vessel comprising cargo, fuel and other matters. a metric unit of square measurement of surface or land equal to 10,000 square meters, or approximately acres. kilocalorie per kilogram. kilometer(s). Kilowatt, or one thousand watts, or megawatts, or gigawatts. Kilowatt-hour, the standard unit of energy used in the electric power industry. One kilowatt-hour is the amount of energy that would be produced by a generator producing one thousand watts for one hour. One kilowatt-hour is megawatt-hours, or gigawatt-hours. 359

151 m mtpa MW sqm ton meter. million metric tons per annum. megawatt, or one million watts, or one thousand kilowatts, or gigawatts. square meter(s). a metric ton or ton which is equivalent to 1,000 kilograms, or 2, pounds. The metric ton, and not the net ton or British ton, nor the short ton, is the unit of weight measure referred to in this Offering Memorandum. 360

152 INDEX TO THE FINANCIAL STATEMENTS Index Page Consolidated financial statements as of March 31, 2017 and 2016 and for the three-month periods then ended with report on the review of interim financial information and as of December 31, 2016, 2015, and 2014 and for the years then ended with independent auditors report Board of Directors Statement... F-3 Report on Review of Interim Financial Information.... F-5 Independent Auditors Report... F-7 Consolidated Statements of Financial Position... F-9 Consolidated Statements of Profit or Loss and Other Comprehensive Income...F-12 Consolidated Statements of Changes in Equity...F-14 Consolidated Statements of Cash Flows...F-15 Notes to the Financial Statements...F-17 F-1

153 PT ABM Investama Tbk and its Subsidiaries Consolidated financial statements as of March 31, 2017 and 2016 and for the three-month periods then ended with report on review of interim financial information and as of December 31, 2016, 2015, and 2014 and for the years then ended with independent auditors report F-2

154 F-3

155 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2017 AND 2016 AND FOR THE THREE-MONTH PERIODS THEN ENDED WITH REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION AND AS OF DECEMBER 31, 2016, 2015, AND 2014 AND FOR THE YEARS THEN ENDED WITH INDEPENDENT AUDITORS REPORT Table of Contents Report on Review of Interim Financial Information Page Independent Auditors Report Consolidated Statements of Financial Position Consolidated Statements of Profit or Loss and Other Comprehensive Income Consolidated Statements of Changes in Equity... 6 Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements *************************** F-4

156 F-5

157 F-6

158 F-7

159 F-8

160 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) March 31, December 31, Notes (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents 2e,2u,4 101,093, ,397,359 81,713, ,355, ,305,096 Other current financial assets 2f,2u,5 9,268 1,978,984 10,534,818 27,562,306 19,479,591 Trade receivables 2u,6,14 Third parties - net 118,862, ,376, ,042, ,742, ,992,041 Related parties - net 2g,30 20,758,731 20,213,848 21,773,702 18,547,258 29,530,469 Non-trade receivables 2u Third parties - net 2,706,199 2,208,686 2,563,883 7,954,534 20,452,381 Related parties 2g,30 33, ,894 16, ,479 16,639 Inventories - net 2h,7,14 26,954,076 23,712,251 25,647,360 21,276,103 25,053,377 Advances 2,002,064 1,562,022 2,680,259 1,945,926 3,672,879 Prepaid expenses 2i 7,956,572 5,844,859 7,951,708 3,848,459 4,855,779 Prepaid taxes 2q 10,168,612 19,577,511 14,663,392 22,193,655 20,069,777 Other current assets 2u 6,019, ,450 1,443,189 1,442,650 1,948,653 TOTAL CURRENT ASSETS 296,566, ,917, ,030, ,995, ,376,682 NON-CURRENT ASSETS Investment in associates - net 2j,8 8,268,112 8,421,704 8,240,191 8,051,518 7,769,241 Long-term trade receivables - third parties 2u,6 12,467, ,974 17,213,123 14,603,600 11,051,547 Deferred tax assets - net 2q,21e 25,100,775 20,082,160 24,106,322 18,831,858 25,103,270 2k,2l,2m,2n, Fixed assets - net 9,14 656,971, ,037, ,600, ,775, ,070,520 Estimated claims for tax refund - net 2q,21a 25,314,543 20,228,046 22,837,558 18,898,389 26,613,154 Mining properties - net 2m,2r,10 32,154,676 36,617,807 33,285,913 37,668,285 37,919,028 Goodwill - net 1c,2c,2m,11-1,121,086-1,078,908 1,483,435 Other non-current assets - net 2i,2u 13,267,930 16,571,970 12,867,988 12,903,911 16,306,854 TOTAL NON-CURRENT ASSETS 773,544, ,662, ,152, ,811, ,317,049 TOTAL ASSETS 1,070,111,114 1,182,579,945 1,073,182,119 1,189,807,687 1,132,693,731 The accompanying notes form an integral part of these consolidated financial statements. 1 F-9

161 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued) As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) LIABILITIES AND EQUITY LIABILITIES March 31, December 31, Notes (Unaudited) (Unaudited) CURRENT LIABILITIES Short-term loans 2u,12 43,307,289 44,178,849 43,008,514 48,932,765 26,106,109 Trade payables 2u,13 Third parties 44,743,740 37,329,742 36,850,595 42,253,849 61,021,888 Related parties 2g,30 126,542, ,113, ,015, ,116, ,106,087 Non-trade payables 2u Third parties 1,973,499 3,348,011 3,321,933 3,600,639 5,780,942 Related parties 2g,30 252, , , ,489 1,206,810 Taxes payable 2q,21b 8,327,364 4,414,252 3,827,577 3,305,475 4,860,675 Accrued expenses 2u,15 45,051,761 49,866,673 39,185,954 32,570,846 21,460,164 Short-term employee benefits liability 2u,15 9,560,704 7,493,004 8,152,637 6,350,165 9,550,526 Advances from customers 2o,16 Third parties 1,335,379 4,627,111 1,786,211 2,824,138 4,493,524 Related party 2g,30 13, ,812 73,110 18, ,874 Current maturities of long-term debts: 2u Bank loans 6,7,9,14 31,075, ,416,443 29,742,990 78,623,208 18,678,746 Bonds payable 2w,19 43,562,074-43,170,259-17,560,394 Sukuk ijarah 2w,2x,20 14,995,550-14,860, Loan from related party 2g,30 506, Finance lease payables 2k,18 Third parties 8,872,933 21,788,038 9,155,726 23,962,839 30,387,118 Related party 2g,30 10,764,054 11,360,072 9,562,238 12,677,513 9,882,729 TOTAL CURRENT LIABILITIES 390,884, ,884, ,836, ,091, ,438,586 NON-CURRENT LIABILITIES Provision for environmental restoration obligation 2s,17 2,323,079 2,242,517 2,319,352 2,218,974 1,356,813 Long-term debts - net of current maturities: 2u Bank loans 6,7,9,14 290,706, ,902, ,073, ,259, ,265,039 Bonds payable 2w,19-43,635,671-41,977,229 46,479,472 Sukuk ijarah 2w,2x,20-15,020,885-14,449,993 15,999,818 Loan from related party 2g,30 9,442, Finance lease payables 2k,18 Third parties 1,295,313 2,323,578 3,304,373 6,544,328 30,512,241 Related party 2g,30 23,502,957 33,772,410 26,660,152 35,296,419 34,278,545 Long-term trade payables - 2u,13 related party 2g,30 109,357, ,380, ,117, ,684, ,000 Long-term loan from shareholder 2g,30 30,000,000-30,000, Deferred tax liabilities - net 2q,21e 22,647,949 20,521,576 21,741,689 20,049,517 20,144,242 Long-term employee benefits liability 2t,29 15,759,026 10,417,235 13,913,890 12,678,906 14,994,767 Other long-term financial liability 2,793,613-3,001, TOTAL NON-CURRENT LIABILITIES 507,827, ,217, ,131, ,159, ,730,937 TOTAL LIABILITIES 898,712, ,102, ,968,195 1,016,251, ,169,523 The accompanying notes form an integral part of these consolidated financial statements. 2 F-10

162 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued) As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) March 31, December 31, Notes (Unaudited) (Unaudited) EQUITY EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY Share capital - Rp500 par value per share Authorized capital - 9,360,000,000 shares Issued and fully paid capital - 2,753,165,000 shares ,554, ,554, ,554, ,554, ,554,908 Additional paid-in capital - net 2w,23 120,981, ,491, ,981, ,491, ,491,549 Difference arising from transactions with non-controlling interests 1c (460,059) (460,059) (460,059) - - Other components of equity 21f 19,855-3, Retained earnings (deficit) Appropriated 310, , , , ,278 Unappropriated (42,244,398) (59,305,731) (56,508,295) (69,146,479) (31,094,313) Other comprehensive loss 2j,2p,2t (37,060,650) (32,366,246) (36,042,309) (36,291,513) (30,408,513) Sub-total 188,101, ,224, ,840, ,918, ,853,909 Non-controlling interests 1c,2b,24 (16,703,382) 9,253,075 (15,626,437) 10,637,469 (3,329,701) NET EQUITY 171,398, ,477, ,213, ,556, ,524,208 TOTAL LIABILITIES AND EQUITY 1,070,111,114 1,182,579,945 1,073,182,119 1,189,807,687 1,132,693,731 The accompanying notes form an integral part of these consolidated financial statements. 3 F-11

163 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Three-Month Periods Ended March 31, 2017 and 2016, and Years Ended December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) Three-Month Periods Ended March 31, Years Ended December 31, Notes (Unaudited) (Unaudited) NET REVENUE 2g,2o,26,30 169,042, ,039, ,695, ,585, ,620,468 2g,2o,9,10, COST OF REVENUE 27,30 (124,326,033) (112,121,779) (462,785,716) (527,423,013) (577,723,147) GROSS PROFIT 44,716,485 33,917, ,910, ,162, ,897,321 Selling, general and administrative expenses 2g,2o,28,30 (13,373,028) (14,367,376) (61,589,126) (102,657,455) (140,929,741) Other income 2o,2p,9 701, ,460 2,882,300 3,936,506 18,200,585 Other expenses 2m,2o,9 (2,963,509) (3,666,805) (26,878,187) (22,388,118) (20,846,435) Impairment loss on mining properties 2m, (1,148,038) (67,707,382) PROFIT (LOSS) FROM OPERATIONS 29,081,443 16,293,067 42,325,246 4,905,766 (65,385,652) Share of profit of associates - net 2j,8 64,949 66, , , ,576 Finance income - net 2o 445, ,650 7,075,308 4,813,622 5,290,545 Finance charges 2g,2o,2p,30 (9,470,472) (7,005,801) (35,021,121) (41,335,443) (39,856,905) PROFIT (LOSS) BEFORE FINAL TAX AND INCOME TAX 20,121,309 10,247,446 14,820,756 (30,731,011) (99,311,436) Final tax expense 2q (381,126) (135,899) (1,361,795) (1,079,861) (826,809) PROFIT (LOSS) BEFORE INCOME TAX 19,740,183 10,111,547 13,458,961 (31,810,872) (100,138,245) Income tax expense - net 2q,21c (6,549,628) (1,578,119) (6,556,840) (13,522,068) (15,473,850) PROFIT (LOSS) FOR THE PERIOD 13,190,555 8,533,428 6,902,121 (45,332,940) (115,612,095) OTHER COMPREHENSIVE INCOME Item that will be reclassified to profit or loss: Share of other comprehensive income (loss) of associates 2j (128,699) - (441,407) 187,755 - Exchange difference from financial statements translation 2p 275,278 3,383, ,222 (7,353,383) (1,463,722) Item that will not be reclassified to profit or loss: Remeasurement of defined benefit plan 2t (1,558,031) 717,603 (140,067) 1,722, ,990 Related income tax 2q 389,508 (179,401) 35,017 (430,518) (26,747) TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD 12,168,611 12,454,752 7,144,886 (51,207,016) (116,995,574) The accompanying notes form an integral part of these consolidated financial statements. 4 F-12

164 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (continued) For the Three-Month Periods Ended March 31, 2017 and 2016, and Years Ended December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) Three-Month Periods Ended March 31, Years Ended December 31, Notes (Unaudited) (Unaudited) Profit (loss) for the period attributable to: Owners of the parent company 14,263,897 9,840,748 12,638,184 (38,052,166) (112,973,070) Non-controlling interests 2b (1,073,342) (1,307,320) (5,736,063) (7,280,774) (2,639,025) TOTAL 13,190,555 8,533,428 6,902,121 (45,332,940) (115,612,095) Total comprehensive income (loss) for the period attributable to: Owners of the parent company 13,245,556 13,766,015 12,887,388 (43,935,166) (114,350,363) Non-controlling interests 2b,24 (1,076,945) (1,311,263) (5,742,502) (7,271,850) (2,645,211) TOTAL 12,168,611 12,454,752 7,144,886 (51,207,016) (116,995,574) BASIC EARNING (LOSS) PER SHARE 2v ( ) ( ) The accompanying notes form an integral part of these consolidated financial statements. 5 F-13

165 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the Three-Month Periods Ended March 31, 2017 and 2016, and Years Ended December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) Equity Attributable to Owners of the Parent Company Other Comprehensive Loss Exchange Difference Difference from Arising from Translation of Share Capital - Transactions with Retained Earnings (Deficit) Financial Remeasurement Issued and Additional Paid-in Non-controlling Other Components Statements of Defined Non-controlling Notes Fully Paid Capital - Net Interests of Equity Appropriated Unappropriated Translation Benefit Plan Sub-total Interests Net Equity Balance, December 31, ,554, ,491, ,278 83,130,402 (27,171,960 ) (1,859,260) 322,355,917 (1,416,590) 320,939,327 Appropriation of retained earnings for general reserve ,000 (100,000 ) Distribution of cash dividends (1,151,645 ) - - (1,151,645) - (1,151,645) Capital injection from non-controlling interests to subsidiaries , ,100 Total comprehensive loss for the year (112,973,070 ) (1,463,722 ) 86,429 (114,350,363) (2,645,211) (116,995,574 ) Balance, December 31, ,554, ,491, ,278 (31,094,313 ) (28,635,682 ) (1,772,831) 206,853,909 (3,329,701) 203,524,208 Mandatory convertible bond ,239,020 21,239,020 Total comprehensive loss for the year (38,052,166 ) (7,165,628 ) 1,282,628 (43,935,166) (7,271,850) (51,207,016 ) Balance, December 31, ,554, ,491, ,278 (69,146,479 ) (35,801,310 ) (490,203) 162,918,743 10,637, ,556,212 Total comprehensive income for the period ,840,748 3,383, ,145 13,766,015 (1,311,263) 12,454,752 Difference arising from transactions with non-controlling interests 1c - - (460,059) (460,059) (73,131) (533,190 ) Balance, March 31, 2016 (Unaudited) 146,554, ,491,549 (460,059) - 310,278 (59,305,731 ) (32,418,188 ) 51, ,224,699 9,253, ,477,774 Balance, December 31, ,554, ,491, ,278 (69,146,479 ) (35,801,310 ) (490,203) 162,918,743 10,637, ,556,212 Tax amnesty 21f , ,855-3,855 Difference arising from transactions with non-controlling interests 1c - - (460,059) (460,059) (73,131) (533,190 ) Acquisition of non-controlling interests 1c , ,433 Increase of share capital - subsidiary 1c , ,314 Reclassification of mandatory convertible bond 24 - (509,566) (509,566) (21,239,020) (21,748,586 ) Total comprehensive income for the year ,638, ,815 (98,611) 12,887,388 (5,742,502) 7,144,886 Balance, December 31, ,554, ,981,983 (460,059) 3, ,278 (56,508,295 ) (35,453,495 ) (588,814) 174,840,361 (15,626,437) 159,213,924 Tax amnesty 21f , ,000-16,000 Total comprehensive income for the period ,263, ,579 (1,164,920) 13,245,556 (1,076,945) 12,168,611 Balance, March 31, 2017 (Unaudited) 146,554, ,981,983 (460,059) 19, ,278 (42,244,398 ) (35,306,916 ) (1,753,734) 188,101,917 (16,703,382) 171,398,535 The accompanying notes form an integral part of these consolidated financial statements. 6 F-14

166 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three-Month Periods Ended March 31, 2017 and 2016, and Years Ended December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) Three-Month Periods Ended March 31, Years Ended December 31, Notes (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 183,016, ,477, ,947, ,399, ,882,150 Payments to suppliers and others (108,784,859) (101,726,794) (364,536,872) (355,215,210) (488,050,761) Payments to employees (23,917,891) (23,921,346) (97,653,641) (116,403,472) (116,487,116) Cash generated from operations 50,314,101 20,829, ,756, ,781, ,344,273 Receipts from: Tax refund 6,364,070 1,609,008 10,290,273 11,746,999 - Interest income 445, ,026 7,075,308 3,359,883 5,290,545 Payments for income taxes (4,959,258) (4,841,518) (11,809,573) (11,874,667) (6,697,943) Net Cash Provided by Operating Activities 52,164,302 18,398, ,312, ,013, ,936,875 CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other current financial assets 10,525,550 25,726,785 17,027,488 (8,596,533) (5,236,545) Proceeds from sale of fixed assets 66,267 89,238 1,079, ,735 42,412,122 Acquisition of fixed assets (6,856,989) (1,642,075) (21,697,358) (31,236,787) (65,514,787) Payment of payables related to the acquisition of fixed assets (5,326,335) (9,930,523) (28,606,608) (62,549,672) (53,691,807) Expenditures for mining exploration and development costs (312,139) (239,878) (1,521,360) (10,614,688) (619,739) Addition to advances for purchase of fixed assets (203,385) (191,334) - - (8,716,144) Net Cash Provided by (Used in) Investing Activities (2,107,031) 13,812,213 (33,718,347) (112,391,945) (91,366,900) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from: Loan from related party 30 9,948, Short-term loans - 1,496,222 7,396,222 36,100,184 34,274,604 Long-term loan from shareholder ,000, Increase of share capital - subsidiary 1c , Acquisition of non-controlling interests 1c , Mandatory convertible bond ,239,020 - Long-term bank loans ,998,442 Payments for: Long-term bank loans (29,756,645) (4,423,944) (64,256,499) (17,111,086) (297,242,140) Interest (6,836,086) (8,241,232) (34,070,324) (34,379,867) (44,266,652) Finance lease payables (4,224,267) (9,240,675) (29,413,430) (39,811,620) (38,745,983) Short-term loans - (7,535,647) (14,179,916) (11,226,908) (58,196,401) Mandatory convertible bond - - (21,748,586) - - Difference arising from transactions with non-controlling interests - - (542,350) - - Dividends (1,151,645) Net Cash Used in Financing Activities (30,868,498) (27,945,276) (126,024,136) (45,190,277) (4,329,775) The accompanying notes form an integral part of these consolidated financial statements. 7 F-15

167 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) For the Three-Month Periods Ended March 31, 2017 and 2016, and Years Ended December 31, 2016, 2015, and 2014 (Expressed in United States Dollar, Unless Otherwise Stated) Three-Month Periods Ended March 31, Years Ended December 31, Notes (Unaudited) (Unaudited) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,188,773 4,265,096 (39,429,736) 13,431,263 16,240,200 NET EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 191,974 7,776,349 8,787,013 (5,380,445) (2,003,081) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4 81,713, ,355, ,355, ,305,096 90,067,977 CASH AND CASH EQUIVALENTS AT END OF PERIOD 4 101,093, ,397,359 81,713, ,355, ,305,096 Supplementary cash flow information is presented in Note 38. The accompanying notes form an integral part of these consolidated financial statements. 8 F-16

168 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL a. The Company s Establishment PT ABM Investama Tbk (the Company ) was established based on Notarial Deed No. 01 dated June 1, 2006 of Asih Wahyuni Martaningrum, S.H., in Depok, Indonesia under the name PT Adiratna Bani Makmur. The Deed of Establishment was approved by the Ministry of Law and Human Rights of the Republic of Indonesia through its Decision Letter No. C HT TH.2006 dated August 3, Based on Notarial Deed No. 5 dated August 31, 2009 of Dwi Yulianti, S.H., the Company s name was changed from PT Adiratna Bani Makmur to PT ABM Investama. The amendment was approved by the Ministry of Law and Human Rights of the Republic of Indonesia through its Decision Letter No. AHU AH Year 2009 dated October 16, The Company s Articles of Association has been amended several times, the latest of which was based on Notarial Deed No. 46 dated May 18, 2016 of Jose Dima Satria, S.H., M.Kn., concerning the change of the Company s Board of Directors. The amendment was acknowledged by the Ministry of Law and Human Rights of the Republic of Indonesia through its Letter No. AHU-AH dated May 20, The Company is domiciled in Tiara Marga Trakindo I building, 18 th floor, Jl. Cilandak KKO No. 1, South Jakarta 12560, Indonesia. The Company started its operations in In accordance with Article 3 of the Company s Articles of Association, the Company s scope of activities is conducting business management consultancy services, including planning and design for development of business management, and rental services. AHK Holdings Pte. Ltd. incorporated in Singapore is the ultimate parent entity of the Company and its subsidiaries (collectively referred to as the Group ). Valle Verde Pte. Ltd. incorporated in Singapore is the parent entity of the Group. b. The Company s Public Offerings The Company obtained the effective statement from the Capital Market and Financial Institution Supervisory Agency ( BAPEPAM-LK ) in its letter No. S-12687/BL/2011 dated November 24, 2011 to conduct public offering of its 550,633,000 shares with nominal value of Rp500 per share at a price of Rp3,750 per share. On December 6, 2011, the Company listed all of its issued shares on the Indonesia Stock Exchange. c. Structure of the Subsidiaries The Company has control, either directly or indirectly, in the following subsidiaries as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014: Percentage of Ownership (Direct/Indirect) March 31, December 31, Domicile, Start of Scope of Date of Commercial Subsidiaries Activities Establishment Operations (Unaudited) (Unaudited) Direct ownership: PT Cipta Kridatama ( CK ) Mining contractor Jakarta, % 100% 100% 100% 100% April 8, 1997 PT Reswara Minergi Hartama Trading Jakarta, % 100% 100% 100% 100% ( Reswara ) October 19, F-17

169 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) The percentages of ownership, either directly or indirectly, of the Company in the subsidiaries as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, are as follows: (continued) Percentage of Ownership (Direct/Indirect) March 31, December 31, Domicile, Start of Scope of Date of Commercial Subsidiaries Activities Establishment Operations (Unaudited) (Unaudited) Direct ownership: (continued) PT Sumberdaya Sewatama Power engines Jakarta, % 100% 100% 100% 100% ( SS ) rental January 31,1992 PT Cipta Krida Bahari Logistic services Jakarta, % 100% 100% 100% 100% ( CKB ) May 9, 1997 PT Sanggar Sarana Baja Engineering, Jakarta, % 99.99% 99.99% 99.99% 99.99% ( SSB ) development March 19, 1977 and manufacture of heavy equipment attachment and materials handling products PT Anzara Janitra Nusantara Thermal energy IPP Jakarta, - 100% - 100% - - ( AJN )/formerly PT Pradipa December 31, 2014 Aceh Daya ( PAD ) Indirect ownership: Through Reswara: PT Tunas Inti Abadi Development Jakarta, % 100% 100% 100% 100% ( TIA ) and mining resources November 11, 2003 principally coal PT Media Djaya Bersama Trading, development, Jakarta, - 70% 70% 70% 70% 70% ( MDB ) and industry May 6, 2005 PT Pelabuhan Buana Reja Port management Jakarta, - 100% 100% 100% 100% 100% ( PBR ) services December 2, 2010 PT Mifa Bersaudara Coal mining Nanggroe Aceh % 70% 70% 70% 70% ( Mifa ) Darussalam, January 14, 2002 PT Bara Energi Lestari Coal mining Nanggroe Aceh % 70% 70% 70% 70% ( BEL ) Darussalam, June 24, 2005 Through SS: PT Pradipa Aryasatya Thermal energy IPP Jakarta, - 100% 100% 100% 100% 100% ( PAS ) May 13, 2011 PT Energi Alamraya Thermal energy IPP Nanggroe Aceh % 70% 70% 70% 70% Semesta ( EAS ) Darussalam, March 22, 2005 PT Karimun Power Plant Thermal energy IPP Jakarta, - 85% 85% 85% 85% 85% ( KPP ) April 22, 2014 PT Pradipa Aceh Daya Thermal energy IPP Jakarta, % - 100% 100% ( PAD ) December 31, 2014 PT Nagata Bisma Shakti Renewable energy IPP Jakarta, - 100% 100% 100% 100% 100% ( NBS ) May 13, 2011 PT Nagata Bio Energi Renewable energy IPP Jakarta, % - 100% 100% ( NBE ) September 15, 2014 PT Nagata Dinamika Renewable energy IPP Jakarta, % - 51% 51% ( ND ) January 18, 2012 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, % - 51% 51% Madong ( NDHM ) April 29, 2013 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, % - 51% 51% Buakayu ( NDHB ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, % - 51% 51% Buakayu Ulu ( NDHBU ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, % - 51% 51% Pongko ( NDHP ) October 28, 2014 PT Punggawa Nagata Dinamika Renewable energy IPP Jakarta, % - 43% 43% Hidro ( PNDH ) January 22, 2014 PT Nagata Biogas Dwienergi Renewable energy IPP Jakarta, % - 100% - ( NBD ) July 1, F-18

170 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) The percentages of ownership, either directly or indirectly, of the Company in the subsidiaries as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, are as follows: (continued) Percentage of Ownership (Direct/Indirect) March 31, December 31, Domicile, Start of Scope of Date of Commercial Subsidiaries Activities Establishment Operations (Unaudited) (Unaudited) Indirect ownership: (continued) Through CKB: PT Alfa Trans Raya Sea transportation Jakarta, % 100% 100% 100% 100% ( ATR ) November 28, 2006 PT Baruna Dirga Dharma Domestic sea Jakarta, % 100% 100% 100% 100% ( BDD ) transportation May 24, 2011 PT Dianta Daya Embara Postal and Jakarta, - 100% 99.6% 100% 100% - ( DDE ) courier services June 15, 2015 Through SSB: PT Prima Wiguna Parama General trading Jakarta, - 100% 100% 100% 100% 100% ( PWP ) and construction June 20, 2011 Through AJN: PT Nagata Dinamika Renewable energy IPP Jakarta, - 100% - 100% - - ( ND ) January 18, 2012 PT Nagata Bio Energi Renewable energy IPP Jakarta, - 100% - 100% - - ( NBE ) September 15, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 51% - 51% - - Madong ( NDHM ) April 29, 2013 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 51% - 51% - - Buakayu ( NDHB ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 51% - 51% - - Buakayu Ulu ( NDHBU ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 51% - 51% - - Pongko ( NDHP ) October 28, 2014 PT Punggawa Nagata Dinamika Renewable energy IPP Jakarta, - 43% - 43% - - Hidro ( PNDH ) January 22, 2014 PT Nagata Biogas Dwienergi Renewable energy IPP Jakarta, - 100% - 100% - - ( NBD ) July 1, 2015 PT Andara Candria Energi Renewable energy IPP Jakarta, - 100% - 100% - - ( ACE ) November 15, 2016 The total assets of the subsidiaries as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, are as follows: Total Assets Before Elimination March 31, December 31, Domicile, Start of Scope of Date of Commercial Subsidiaries Activities Establishment Operations (Unaudited) (Unaudited) Direct ownership: PT Cipta Kridatama ( CK ) Mining contractor Jakarta, ,244, ,297, ,064, ,679, ,846,806 April 8, 1997 PT Reswara Minergi Hartama Trading Jakarta, ,209, ,403, ,932, ,504, ,531,680 ( Reswara ) October 19, 2010 PT Sumberdaya Sewatama Power engines Jakarta, ,071, ,851, ,265, ,107, ,195,483 ( SS ) rental January 31,1992 PT Cipta Krida Bahari Logistic services Jakarta, ,944,055 81,326,297 74,175,223 76,939,699 96,462,157 ( CKB ) May 9, 1997 PT Sanggar Sarana Baja Engineering, Jakarta, ,277,334 59,390,646 58,595,758 61,285,040 72,805,297 ( SSB ) development March 19, 1977 and manufacture of heavy equipment attachment and materials handling products PT Anzara Janitra Nusantara Thermal energy IPP Jakarta, - 15,392,266-10,300, ( AJN )/formerly PT Pradipa December 31, 2014 Aceh Daya ( PAD ) 11 F-19

171 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) The total assets of the subsidiaries as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, are as follows: (continued) Total Assets Before Elimination March 31, December 31, Domicile, Start of Scope of Date of Commercial Subsidiaries Activities Establishment Operations (Unaudited) (Unaudited) Indirect ownership: Through Reswara: PT Tunas Inti Abadi Development Jakarta, ,574,978 69,263,447 75,647,637 71,761,392 72,068,960 ( TIA ) and mining resources November 11, 2003 principally coal PT Media Djaya Bersama Trading, development, Jakarta, - 175,806, ,607, ,229, ,702, ,765,240 ( MDB ) and industry May 6, 2005 PT Pelabuhan Buana Reja Port management Jakarta, - 1,281,241 1,280,307 1,282,354 1,283,088 1,276,032 ( PBR ) services December 2, 2010 PT Mifa Bersaudara Coal mining Nanggroe Aceh ,944, ,429, ,507, ,167, ,459,790 ( Mifa ) Darussalam, January 14, 2002 PT Bara Energi Lestari Coal mining Nanggroe Aceh ,268,255 8,334,788 8,269,846 7,860,425 7,360,087 ( BEL ) Darussalam, June 24, 2005 Through SS: PT Pradipa Aryasatya Thermal energy IPP Jakarta, - 12,153,442 13,147,258 12,549,119 12,314,281 11,476,692 ( PAS ) May 13, 2011 PT Energi Alamraya Thermal energy IPP Nanggroe Aceh ,438,030 5,520,488 4,891,887 5,030,442 4,909,810 Semesta ( EAS ) Darussalam, March 22, 2005 PT Karimun Power Plant Thermal energy IPP Jakarta, - 1,408,828 1,353,947 1,396,972 1,271, ,077 ( KPP ) April 22, 2014 PT Pradipa Aceh Daya Thermal energy IPP Jakarta, ,982-18,244 20,096 ( PAD ) December 31, 2014 PT Nagata Bisma Shakti Renewable energy IPP Jakarta, - 866,151 4,057, ,500 5,268,486 2,818,410 ( NBS ) May 13, 2011 PT Nagata Bio Energi Renewable energy IPP Jakarta, ,092-38,658 20,096 ( NBE ) September 15, 2014 PT Nagata Dinamika Renewable energy IPP Jakarta, - - 4,360,651-4,157,602 2,874,001 ( ND ) January 18, 2012 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - - 1,325,399-1,257, ,887 Madong ( NDHM ) April 29, 2013 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, ,114-64,585 20,096 Buakayu ( NDHB ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, , ,362 20,096 Buakayu Ulu ( NDHBU ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, , ,451 20,096 Pongko ( NDHP ) October 28, 2014 PT Punggawa Nagata Dinamika Renewable energy IPP Jakarta, , , ,627 Hidro ( PNDH ) January 22, 2014 PT Nagata Biogas Dwienergi Renewable energy IPP Jakarta, ,831-18,123 - ( NBD ) July 1, 2015 Through CKB: PT Alfa Trans Raya Sea transportation Jakarta, ,783,682 24,514,218 23,588,144 25,448,127 26,907,112 ( ATR ) November 28, 2006 PT Baruna Dirga Dharma Domestic sea Jakarta, ,032,684 20,032,684 20,540,073 19,586,021 22,295,087 ( BDD ) transportation May 24, 2011 PT Dianta Daya Embara Postal and Jakarta, - 349, , , ,986 - ( DDE ) courier services June 15, F-20

172 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) The total assets of the subsidiaries as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, are as follows: (continued) Total Assets Before Elimination March 31, December 31, Domicile, Start of Scope of Date of Commercial Subsidiaries Activities Establishment Operations (Unaudited) (Unaudited) Indirect ownership: (continued) Through SSB: PT Prima Wiguna Parama General trading Jakarta, - 473, , , ,598 45,179 ( PWP ) and construction June 20, 2011 Through AJN: PT Nagata Dinamika Renewable energy IPP Jakarta, - 3,133,413-7,635, ( ND ) January 18, 2012 PT Nagata Bio Energi Renewable energy IPP Jakarta, - 382, , ( NBE ) September 15, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 2,627,302-2,596, Madong ( NDHM ) April 29, 2013 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 66,725-66, Buakayu ( NDHB ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 169, , Buakayu Ulu ( NDHBU ) October 28, 2014 PT Nagata Dinamika Hidro Renewable energy IPP Jakarta, - 174, , Pongko ( NDHP ) October 28, 2014 PT Punggawa Nagata Dinamika Renewable energy IPP Jakarta, - 1,140,525-1,130, Hidro ( PNDH ) January 22, 2014 PT Nagata Biogas Dwienergi Renewable energy IPP Jakarta, - 68,495-68, ( NBD ) July 1, 2015 PT Andara Candria Energi Renewable energy IPP Jakarta, - 12,031,482-7,029, ( ACE ) November 15, 2016 TIA As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, TIA has mining business rights ( Izin Usaha Pertambangan / IUP ) as follows: Location Area Code Area (ha) IUP Production Operations Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Total Three-Month Accumulated Period Ended Production as of March 31, March 31, Remaining Reserves (Million Tonnes) Sub-district Kusan Hulu and Sungai Loba TB.07 OKTPR 45 3,085 No /255/ DISTAMBEN/2013 Valid until March 5, Location Area Code Area (ha) IUP Production Operations Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Total Three-Month Accumulated Period Ended Production as of March 31, March 31, Remaining Reserves (Million Tonnes) Sub-district Kusan Hulu and Sungai Loba TB.07 OKTPR 45 3,085 No /255/ DISTAMBEN/2013 Valid until March 5, F-21

173 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) TIA (continued) As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, TIA has mining business rights ( Izin Usaha Pertambangan / IUP ) as follows: (continued) Location Area Code Area (ha) IUP Production Operations Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2016 Total Accumulated Production as of December 31, 2016 Remaining Reserves (Million Tonnes) Sub-district Kusan Hulu and Sungai Loba TB.07 OKTPR 45 3,085 No /255/ DISTAMBEN/2013 Valid until March 5, Location Area Code Area (ha) IUP Production Operations Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2015 Total Accumulated Production as of December 31, 2015 Remaining Reserves (Million Tonnes) Sub-district Kusan Hulu and Sungai Loba TB.07 OKTPR 45 3,085 No /255/ DISTAMBEN/2013 Valid until March 5, Location Area Code Area (ha) IUP Production Operations Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2014 Total Accumulated Production as of December 31, 2014 Remaining Reserves (Million Tonnes) Sub-district Kusan Hulu and Sungai Loba TB.07 OKTPR 45 3,085 No /255/ DISTAMBEN/2013 Valid until March 5, As of March 31, 2017 and December 31, 2016, total reserves are based on the results of the survey conducted by Competent Person Indonesia (CPI-Perhapi), an internal party, as described in its report No. DOK:TSE/ESR-TIA/11/2016 issued in November As of March 31, 2016 and December 31, 2015, and 2014, total reserves are based on the results of the survey conducted by PT Runge Indonesia, a third party, in its report No. ADV-JA-03768_TIA_2011 issued in September Based on Decision Letter of Tanah Bumbu Regent No /255/DISTAMBEN/2013 dated April 29, 2013, TIA has obtained approval for merging its production operations IUP. The Directorate General of Mineral and Coal at the Ministry of Energy and Mineral Resources announced on July 12, 2013 the Clear and Clean status for TIA s IUP. TIA has met the requirements set in Law No. 4/2009 and Government Regulation No. 23/2010 including no overlapping of IUP area with other party and the IUP documentations are in accordance with the regulation. 14 F-22

174 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) TIA (continued) In addition to IUP, as of March 31, 2017 and 2016, and December 31, 2016 and 2015, TIA has obtained permit Izin Pinjam Pakai Kawasan Hutan ( IPPKH ) from the Ministry of Forestry as follows: Location Area (ha) IPPKH Number Valid Until Tanah Bumbu Regency, South Kalimantan Province 300 Tanah Bumbu Regency, South Kalimantan Province 142 Tanah Bumbu Regency, South Kalimantan Province Tanah Bumbu Regency, South Kalimantan Province June 23, 2019 December 17, 2017 March 5, 2021 March 5, 2021 In addition to IUP, as of December 31, 2014, TIA has obtained permit Izin Pinjam Pakai Kawasan Hutan ( IPPKH ) from the Ministry of Forestry as follows: Location Area (ha) IPPKH Number Valid Until Tanah Bumbu Regency, South Kalimantan Province 300 Tanah Bumbu Regency, South Kalimantan Province 1, Tanah Bumbu Regency, South Kalimantan Province 142 Tanah Bumbu Regency, South Kalimantan Province SK.370/Menhut- II/2009 SK.742/Menhut- II/2012 SK.719/Menhut- II/ /1/IPPKH/PMDN/ 2015 SK.370/Menhut- II/2009 SK.479/Menhut- II/2010 SK.742/Menhut- II/2012 SK.719/Menhut- II/2014 June 23, 2019 March 16, 2015 December 17, 2017 March 5, 2021 Based on a decision from Minister of Transportation No. 483 Tahun 2010, TIA obtained an approval to operate special port for internal use as long as the usage of such port is to support TIA s main business activities. Mifa As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, Mifa has IUP, as follows: Location Area Code Area (ha) Meureubo, West Aceh KW /MB 3,134 IUP Production Operations No. 117.b Tahun 2011 Valid until April 13, 2025 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Total Three-Month Accumulated Period Ended Production as of March 31, March 31, Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Meureubo, West Aceh KW /MB 3,134 IUP Production Operations No. 117.b Tahun 2011 Valid until April 13, 2025 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Total Three-Month Accumulated Period ended Production as of March 31, March 31, Remaining Reserves (Million Tonnes) F-23

175 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) Mifa (continued) As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, Mifa has IUP, as follows: (continued) Location Area Code Area (ha) Meureubo, West Aceh KW /MB 3,134 IUP Production Operations No. 117.b Tahun 2011 Valid until April 13, 2025 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2016 Total Accumulated Production as of December 31, 2016 Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Meureubo, West Aceh KW /MB 3,134 IUP Production Operations No. 117.b Tahun 2011 Valid until April 13, 2025 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2015 Total Accumulated Production as of December 31, 2015 Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Meureubo, West Aceh KW /MB 3,134 IUP Production Operations No. 117.b Tahun 2011 Valid until April 13, 2025 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2014 Total Accumulated Production as of December 31, 2014 Remaining Reserves (Million Tonnes) As of March 31, 2017 and December 31, 2016, total reserves are based on the results of the survey conducted by Competent Person Indonesia (CPI-Perhapi), an internal party, as described in its report No. TSE/ESR-MIFA/11/2016 issued in November As of March 31, 2016, December 31, 2015 and 2014, total reserves are based on the results of the survey conducted by PT Runge Indonesia, a third party, in its report No. ADV-JA-03770_MDB_2011 issued in July Mifa holds Mining Exploration Permit No. 157 dated August 30, 2003 for a mining area of 3,000 hectares at Meureubo and Kaway XVI Sub-districts, West Aceh Regency, Aceh Province, Mining Exploitation Right No. 96 dated August 1, 2005 and Mining Right for Loading and Selling for Mining No. 95 dated August 1, 2005 from the Regent of West Aceh. Mifa also has a location permit for coal mining area of 3,134 hectares in Meureubo and Kaway XVI Sub-districts, West Aceh Regency, Aceh Province which was last amended based on Decision Letter No. 179 Year 2008, dated May 31, 2008 of the Regent of West Aceh. Those licenses were last amended by IUP No. 117.b Tahun 2011 dated March 30, 2011 for a mining area of 3,134 hectares at Meureuboe Sub-districts, West Aceh Regency, Aceh Province. Based on Decision Letter No. 117.b Year 2011 dated March 30, 2011 from the District Head ( Bupati ) of West Aceh, Mifa has rights for construction, production, hauling and selling which included coal processing and refining which are valid until April 13, 2025, and could be extended twice by 10 years each, which already included 2 years of construction plans. 16 F-24

176 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) BEL As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, BEL has IUP, as follows: Location Area Code Area (ha) Seunagan and Suka Makmue, Nagan Raya KW Sng 01 Ep ,495 IUP Production Operations No. 545/41/SK/IUP- OP/2010 Valid until September 26, 2017 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Total Three-Month Accumulated Period Ended Production as of March 31, March 31, Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Seunagan and Suka Makmue, Nagan Raya KW Sng 01 Ep ,495 IUP Production Operations No. 545/41/SK/IUP- OP/2010 Valid until September 26, 2017 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Total Three-Month Accumulated Period Ended Production as of March 31, March 31, Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Seunagan and Suka Makmue, Nagan Raya KW Sng 01 Ep ,495 IUP Production Operations No. 545/41/SK/IUP- OP/2010 Valid until September 26, 2017 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2016 Total Accumulated Production as of December 31, 2016 Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Seunagan and Suka Makmue, Nagan Raya KW Sng 01 Ep ,495 IUP Production Operations No. 545/41/SK/IUP- OP/2010 Valid until September 26, 2017 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2015 Total Accumulated Production as of December 31, 2015 Remaining Reserves (Million Tonnes) Location Area Code Area (ha) Seunagan and Suka Makmue, Nagan Raya KW Sng 01 Ep ,495 IUP Production Operations No. 545/41/SK/IUP- OP/2010 Valid until September 26, 2017 Total Reserves (Million Tonnes) Total Production (Million Tonnes) - Unaudited For the Year Ended December 31, 2014 Total Accumulated Production as of December 31, 2014 Remaining Reserves (Million Tonnes) As of March 31, 2017 and December 31, 2016, total reserves are based on the results of the survey conducted by Competent Person Indonesia (CPI-Perhapi), an internal party, as described in its report No. TSE/ESR-BEL/11/2016 issued in November F-25

177 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) BEL (continued) As of March 31, 2016, December 31, 2015 and 2014, total reserves are based on the results of the survey conducted by PT Runge Indonesia, a third party, in its report No. ADV-JA-03770_MDB_2011 issued in July Based on Nagan Raya Regency Decree No. 545/41/SK/IUP-OP/2010 dated March 18, 2010, BEL has obtained an approval for a change of its mining exploitation right to become IUP and BEL has rights for construction, production, hauling and selling which included coal processing and refining are valid until September 26, 2017, and could be extended twice by 10 years each, which already included 2 years of construction plans. ND Based on Notarial Deed No. 9 dated January 18, 2012 of Mohammad Dalwan Ginting, S.H., Sp.N., NBS and PT Jaya Dinamika Geohidroenergi ( JDG ), a third party, established PT Nagata Dinamika, with a total initial paid-up capital of Rp250 million, with ownership percentage of 51.00% and 49.00%, respectively. Based on Notarial Deed No. 1 dated September 15, 2014 of Ny. Mina Ng, S.H., M.Kn., the shareholders agreed to inject additional paid-up capital amounting to Rp14,500 million by which NBS and JDG has ownership percentage of 51.00% and 49.00%, respectively. Related to the Group restructuring, NBS and PAS acquired the 49.00% minority interest of JDG in ND hence the ownership of NBS and PAS became 99.00% and 1.00%, respectively. This transaction was notarized based on Notarial Deed No. 33 of Pratiwi Handayani, S.H., dated March 23, The difference in the acquisition price and carrying amount of the investment of JDG amounting to Rp6,173 million (US$460,059) was accounted for as an equity transaction and recorded in Difference arising from transaction with non-controlling interest. Furthermore, AJN acquired 99.51% ownership in ND from NBS, an entity under common control. This transaction was notarized based on Notarial Deed No. 89 of Hasbullah Abdul Rasyid, S.H., M.Kn, dated November 16, 2016, the transaction was accounted for in accordance with PSAK No. 38 (Revised 2012) Business Combination Under Common Control and has no impact to the consolidated financial statements of the Group. NDH Madong Based on Notarial Deed No. 54 dated April 29, 2013 of Mohammad Dalwan Ginting, S.H., Sp.N., ND and NBS established PT Nagata Dinamika Hidro Madong, with a total initial paid-up capital of Rp1,000 million, with ownership percentage of 99.00% and 1.00%, respectively. Based on Notarial Deed No. 31 dated April 13, 2016 of Jose Dima Satria, S.H., M.Kn, ND converted its receivable from NDH Madong to additional share capital amounting to Rp14,985 million. Based on the same deed, ND transferred share ownership in Madong to Asian Energy Hydro Power Pte. Ltd. ( AEHP ) and Toraja Hidro Energi, third parties, amounting to Rp7,832 million (US$594,314), equivalent to 24.50% ownership interest each. 18 F-26

178 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) AJN Based on Notarial Deed No. 14 of Ny. Djumini Setyoadi, S.H., M.Kn., dated May 12, 2014, PAS and SS established PT Pradipa Aceh Daya, with a total initial paid-up capital of Rp250 million, with ownership percentage of 99.00% and 1.00%, respectively. Based on Notarial Deed No. 134 of Hasbullah Abdul Rasyid, S.H., M.Kn. dated October 25, 2016, PT Pradipa Aceh Daya changed its name to PT Anzara Janitra Nusantara. Related to the Group restructuring, the Company acquired 99.00% ownership in AJN from PAS, an entity under common control. The transaction was accounted for in accordance with PSAK No. 38 (Revised 2012) Business Combination Under Common Control and has no impact to the consolidated financial statements of the Group. ACE Related to the Group restructuring, SS and AJN established PT Andara Candria Energi based on Notarial Deed No. 85 of Hasbullah Abdul Rasyid, S.H., M.Kn., dated November 15, 2016, with total initial paid-up capital of Rp500 million and with ownership percentage of 51.00% and 49.00%, respectively. Furthermore, based on Notarial Deed No. 04 of Bayu Nirwana Sari, S.H., M.Kn., dated December 8, 2016, total paid-up capital increased to become Rp550 million and the ownership percentage changed to become with AJN 53.64% and SS with 46.36%. DDE Based on Notarial Deed No. 8 of Muslim, S.H., M.Kn., dated June 15, 2015, CKB and SS established PT Dianta Daya Embara, with a total initial paid-up capital of Rp250 million, with ownership percentage of 99.60% and 0.40%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU AH dated June 17, NBD Based on Notarial Deed No. 1 of Argo Wahyu Jati Kusumo, S.H., M.Kn., dated July 1, 2015, NBS and PAS established PT Nagata Biogas Dwienergi, with a total initial paid-up capital of Rp250 million, with ownership percentage of 98.80% and 1.20%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU AH TAHUN 2015 dated July 6, F-27

179 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) KPP Based on Notarial Deed No. 03 of Relawati, S.H., dated August 19, 2014, KPP issued new shares of 2,250 shares at nominal value, which was acquired by PAS and PT Kharisma Usaha Unggul ( Kharisma ), a third party, of 2,125 shares at Rp4,500 million and 125 shares at Rp265 million, respectively. Subsequently, ownership of PAS and Kharisma in KPP became 85% and 15%, respectively. This transaction did not result in any goodwill. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU AHU dated September 4, KPP was established in April 2014 and has not yet started its commercial operations. PNDH Based on Notarial Deed No. 4 of Andi Fachrysyam, S.H., M.Kn., dated January 22, 2014, ND and Perusahaan Daerah Gowa Mandiri, a third party, established PT Punggawa Nagata Dinamika Hidro, with a total initial paid-up capital of Rp6,300 million, with ownership percentage of 84.00% and 16.00%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU AH dated June 6, Based on Notarial Deed No. 30 of Jose Dima Satria, S.H., M.Kn., dated April 13, 2016, ND transferred 41% ownership in PNDH amounting to Rp2,589 million (US$196,433) to AEHP, third party. NDHBU Based on Notarial Deed No. 12 of Pratiwi Handayani, S.H., dated October 28, 2014, ND and NBS established PT Nagata Dinamika Hidro Buakayu Ulu, with a total initial paid-up capital of Rp250 million, with ownership percentage of 99.00% and 1.00%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU dated October 30, NDHB Based on Notarial Deed No. 13 of Pratiwi Handayani, S.H., dated October 28, 2014, ND and NBS established PT Nagata Dinamika Hidro Buakayu, with a total initial paid-up capital of Rp250 million, with ownership percentage of 99.00% and 1.00%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU dated October 30, NDHP Based on Notarial Deed No. 14 of Pratiwi Handayani, S.H., dated October 28, 2014, ND and NBS established PT Nagata Dinamika Hidro Pongko, with a total initial paid-up capital of Rp250 million, with ownership percentage of 99.00% and 1.00%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU dated October 30, F-28

180 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) c. Structure of the Subsidiaries (continued) NBE Based on Notarial Deed No. 2 of Mina Ng, S.H., M.Kn., dated September 15, 2014, NBS and PAS established PT Nagata Bio Energi, with a total initial paid-up capital of Rp250 million, with ownership percentage of 98.80% and 1.20%, respectively. The Deed was approved by the Minister of Law and Human Rights of the Republic of Indonesia in its Decision Letter No. AHU dated October 15, d. The Boards of Commissioners and Directors, Audit Committee and Employees As of March 31, 2017 and December 31, 2016, the composition of the Boards of Commissioners and Directors and Audit Commitee of the Company is as follows: Board of Commissioners: President Commissioner Commissioner Independent Commissioner Board of Directors: President Director Director Independent Director Audit Committee: Chairman Member Member : Rachmat Mulyana Hamami : Mivida Hamami : Arief Tarunakarya Surowidjojo : Achmad Ananda Djajanegara : Adrian Erlangga : Syahnan Poerba : Arief Tarunakarya Surowidjojo : Andradiet I.J Alis : Setiawan Kriswanto As of March 31, 2016 and December 31, 2015, the composition of the Boards of Commissioners and Directors and Audit Commitee of the Company is as follows: Board of Commissioners: President Commissioner Commissioner Independent Commissioner Board of Directors: President Director Director Director Director Director Independent Director : Rachmat Mulyana Hamami : Mivida Hamami : Arief Tarunakarya Surowidjojo : Achmad Ananda Djajanegara : Yovie Priadi : Adrian Erlangga : Natali Hasto Kristijono : Irfan Setiaputra : Syahnan Poerba 21 F-29

181 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 1. GENERAL (continued) d. The Boards of Commissioners and Directors, Audit Committee and Employees (continued) As of March 31, 2016 and December 31, 2015, the composition of the Boards of Commissioners and Directors and Audit Commitee of the Company is as follows: (continued) Audit Committee: Chairman Member Member : Arief Tarunakarya Surowidjojo : Andradiet I.J Alis : Setiawan Kriswanto As of December 31, 2014, the composition of the Boards of Commissioners and Directors and Audit Commitee of the Company is as follows: Board of Commissioners: President Commissioner Commissioner Independent Commissioner Board of Directors: President Director Director Director Independent Director Audit Committee: Chairman Member Member : Rachmat Mulyana Hamami : Mivida Hamami : Erry Riyana Hardjapamekas : Achmad Ananda Djajanegara : Adrian Erlangga : Yovie Priadi : Syahnan Poerba : Erry Riyana Handjapamekas : Andradiet I.J Alis : Lucy Saptari The establishment of the Company s Audit Committee is in compliance with Otoritas Jasa Keuangan ( OJK ) Regulation No. 55/POJK.04/2015. Based on the President Director s Decision Letter No. 008/ABM-RES-DIRUT/V/2015 dated May 13, 2015, the Company s Board of Directors has appointed Budi Triastomo as Internal Audit Chairman. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the Group has 5,021, 4,390, 5,075, 4,827, and 5,846 permanent employees (unaudited), respectively. e. Completion of the Consolidated Financial Statements The management of the Company is responsible for the preparation of the consolidated financial statements which were completed and authorized for issuance by the Company s Board of Directors on May 29, F-30

182 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Statement of Compliance and Basis of Preparation of the Consolidated Financial Statements The consolidated financial statements have been prepared in accordance with Indonesian Financial Accounting Standards ( SAK ), which comprise the Statements of Financial Accounting Standards ( PSAK ) and Interpretations to Financial Acccounting Standards ( ISAK ) issued by the Financial Accounting Standards Board of the Indonesian Institute of Accountants and Sharia Accounting Standards Board of the Indonesian Institute of Accountants, and Rule No. VIII.G.7 regarding Financial Statement Presentation and Disclosures of Listed or Public Company issued by Indonesian Financial Service Authority ( OJK ). The interim consolidated financial statements have been prepared in accordance with PSAK No. 1 (Revised 2013), Presentation of Financial Statements and PSAK No. 3 (Revised 2010), Interim Financial Statements. The consolidated financial statements have been prepared using the accrual basis, and the measurement basis used is historical cost, except for certain accounts which are measured on the bases as described in the relevant Notes herein. The consolidated statements of cash flows, present the receipts and payments of cash and cash equivalents classified into operating, investing and financing activities, using the direct method. The Group uses United States dollar ( US$ ) as the presentation currency, which is also the functional currency except for certain subsidiaries. Accounts included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entities operate ( the functional currency ). The changes of reporting currency of the Company and certain subsidiaries have been approved by the Directorate General of Tax ( DGT ). The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those adopted in the preparation of the Company and its subsidiaries consolidated financial statements as of December 31, 2016 and for the year then ended. The Group have adopted all the new and revised standards that are effective on January 1, 2017 as follows: Amendments to PSAK No. 1: Presentation of Financial Statements on Disclosures Initiative. PSAK No. 24 (2016 Improvement): Employee Benefits. PSAK No. 60 (2016 Improvement): Financial Instruments. 23 F-31

183 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) b. Principles of Consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries, mentioned in Note 1c. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has all of the following: (a) power over the investee (i.e., existing rights that give them current ability to direct the relevant activities of the investee); (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the Group s returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: (a) The contractual arrangement with the other vote holders of the investee, (b) Rights arising from other contractual arrangements, and (c) The Group's voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of subsidiaries begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired during a certain year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Total comprehensive income within a subsidiary is attributed to the owners of the parent and to the non-controlling interests ( NCI ) even if that results in a deficit balance of NCI. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All significant intra and inter-group balances, transactions, income and expenses, and unrealized profits and losses resulting from intra-group transactions and dividends have been eliminated. Subsidiaries are fully consolidated from the date of acquisitions, being the date on which the Company obtained control, and continue to be consolidated until the date when such control ceases. Control is presumed to exist if the Company owns, directly or indirectly through subsidiaries, more than half of the voting right of an entity. A change in the parent s ownership interest in a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, NCI and other component of equity, while the difference is recognized in the profit or loss. Any investment retained is recognized at fair value. 24 F-32

184 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) c. Business Combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value on the acquisition date and the amount of any NCI in the acquiree. For each business combination, the acquirer measures the NCI in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Transaction costs incurred are directly expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the acquisition-date fair value of the acquirer s previously held equity interest in the acquiree is restated to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized in accordance with PSAK No. 55 (Revised 2014), Financial Instruments: Recognition and Measurement, either in profit or loss or as other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. At acquisition date, goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for NCI over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated from the acquisition date, to each of the Group s cash generating unit ( CGU ) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquirer are assigned to those CGUs. Where goodwill forms part of a CGU and part of the operations within that CGU is disposed of, the goodwill associated with the operations disposed of is included in the carrying amount of the operations when determining the gain or loss on disposal of the operations. Goodwill disposed of in this circumstance is measured based on the relative values of the operations disposed of and the portion of the CGU retained. 25 F-33

185 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) d. Restructuring Transactions of Entities under Common Control Business combination transaction under common control, in the form of transfer of business within the framework of reorganization of entities under the same business group is not a change of ownership in economic substance, therefore it would not result in a gain or loss for the group as a whole or to the individual entity within the same group, therefore the transactions are recorded using the pooling-of-interests method. In applying the pooling-of-interests method, the components of the financial statements for the period during which the business combination occurred and for other periods presented for comparison purposes, are presented in such a manner as if the combination has already occurred since the beginning of the period in which the entities were under common control. The entity that disposed and received business records the difference between the consideration received/transferred and the carrying amount of the disposed business/carrying amount of any business combination transaction in equity and presents it in Additional Paid-in Capital account. e. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and in banks and time deposits with original maturity periods of three months or less at the time of placements and not restricted in use. f. Other Current Financial Assets Other current financial assets consist of: Time deposits with maturities of more than 3 (three) months but not exceeding 1 (one) year at the time of placements. Restricted cash relating to customer deposits which are restricted for the payments of tax clearance in accordance with goods handling activities in ports. g. Transactions with Related Parties A party is considered to be related to the Group if: a. directly, or indirectly through one or more intermediaries, the party (i) controls, is controlled by, or is under common control with the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group; b. the party is an associate of the Group; c. the party is a joint venture in which the Group is a venturer; d. the party is a member of the key management personnel of the Group or its parent; e. the party is a close member of the family of any individual referred to in (a) or (d); f. the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or, g. the party is a post-employment benefit plan for the benefit of employees of the Group or of any entity that is a related party of the Group. 26 F-34

186 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) h. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted-average method which comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Allowance for inventory obsolescence and/or decline in the value of inventories is provided to reduce the carrying value of inventories to their net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. i. Prepaid Expenses Prepaid expenses are amortized and charged to operations over the periods benefited. The longterm portion of prepaid expenses is presented as part of Other Non-current Assets in the consolidated statement of financial position. j. Investment in Associates The Group s investment in associates is accounted for using the equity method. An associate is an entity in which the Group has significant influence. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group s share of net assets of the associate since the acquisition date. The consolidated statement of profit or loss and other comprehensive income reflect the Group s share of the results of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any such changes and discloses this, when applicable, in the consolidated statements of changes in equity. Unrealized gains or losses resulting from transactions between the Group and the associate are eliminated to the extent of the Group s interest in the associate. The Group determines whether it is necessary to recognize an impairment loss on the Group s investment in associates. The Group determines at each reporting date whether there is any objective evidence indicated that the investment in associates is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment in associates and its carrying value, and recognizes the amount in profit or loss. Joint venture is an entity which the Company or subsidiaries jointly control with one or more other venturers. An interest in joint venture is accounted for using the equity method. At the end of each reporting period, the Group assesses when there is objective evidence that an investment in joint venture and associate is impaired. 27 F-35

187 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) k. Leases The Group classifies leases based on the extent to which risks and rewards incidental to the ownership of a leased asset are vested upon the lessor or the lessee, and the substance of the transaction rather than the form of the contract. Lease which includes both land and building elements is classified for each element separately whether as a finance lease or an operating lease. The Group as Lessee i. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the finance lease assets. Such leases are capitalized at the fair value of the finance lease assets or at the present value of minimum lease payments, if the present value is lower than the fair value. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of liability. Finance charges are charged directly to current year operations. Capitalized finance lease assets are depreciated over the shorter of the estimated useful life of the finance lease asset or the lease term, if there is no reasonable certainty that lessee will obtain ownership by the end of the lease term. Any excess of sales proceeds over the carrying amount of an asset in a sale-and-leaseback transaction is deferred and amortized over the lease term. ii. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of the leased asset. Accordingly, the related lease payments are recognized as expense on a straight-line basis over the lease term. The Group as Lessor Leases where the Group does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct cost incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized as expense over the lease term on the same basis as rental income. Lease income from operating leases shall be recognized as income on a straight-line basis over the lease term. 28 F-36

188 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) l. Fixed Assets Fixed assets are stated at cost less accumulated depreciation (except for land that is not depreciated) and impairment losses, if any. Such cost includes the cost of replacing part of the fixed assets when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the fixed assets as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs that do not meet the recognition criteria are recognized in profit or loss as incurred. Depreciation starts when the fixed assets are ready for their intended use which is computed using the straight-line method over the estimated useful lives of the assets, as follows: Years Road and infrastructure 10 Building and improvements 5-20 Office furniture, fixtures and equipment 3-5 Vehicles 3-8 Vessels 3-16 Machinery and equipment 3-8 The Company and certain subsidiaries computed depreciation for certain machinery and equipment, based on duration of use method. Estimated duration of use for the certain machinery and equipment range from 6,000 hours to 120,000 hours. Construction in-progress is stated at cost and presented as part of Fixed Assets in the consolidated statements of financial position. The accumulated costs will be reclassified to the appropriate fixed asset account when the construction is substantially completed and the constructed asset is ready for its intended use. An item of fixed asset is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognized. Residual values, useful lives and methods of depreciation are reviewed, and adjusted prospectively, if appropriate, at each financial year end. Land are stated at cost and not depreciated. Legal cost of land rights when the land was initially acquired are recognized as part of the cost of the land. The extension or the legal renewal costs of land rights are recognized as part of Deferred Charges - Net account in the consolidated statements of financial position and are amortized over the shorter of the rights legal life and land s economic life. Specific costs associated with the renewal of land titles may be deferred and amortized over the legal term of the landrights or economic life of the land, whichever is shorter. 29 F-37

189 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) m. Impairment of Non-financial Assets The Group assesses at each reporting period whether there is an indication that an asset may be impaired. If any such indication exists or when annual impairment testing for an asset (i.e., an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of the asset s or its CGU s fair value less costs of disposal and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognized in the consolidated statements of profit or loss and other comprehensive income as impairment losses. In assessing the value in use, the estimated net future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If no such transactions can be identified, an appropriate valuation model is used to determine the fair value of the assets. These calculations are corroborated by valuation multiples or other available fair value indicators. In measurement of fair value less costs of disposal, recent market transactions are taken into account, if available. Impairment losses of continuing operations, if any, are recognized in the consolidated statements of profit or loss and other comprehensive income under expense categories that are consistent with the functions of the impaired assets. An assessment is made at each annual reporting period as to whether there is any indication that previously recognized impairment losses recognized for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss for an asset other than goodwill is reversed only if there has been a change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Reversal of an impairment loss is recognized in the consolidated statements of profit or loss and other comprehensive income. After such a reversal, the depreciation charge on the said asset is adjusted in future periods to allocate the asset s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Goodwill is tested for impairment at each reporting period and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. 30 F-38

190 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) n. Capitalization of Borrowing Costs The Group capitalizes interest charges incurred on borrowings and other related costs to finance the construction or installation of major facilities. Capitalization of these borrowing costs ceases when the construction or installation is completed and the related asset constructed or installed are ready for their intended use. o. Revenue and Expense Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts and Value Added Tax ( VAT ). The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as principal in all of its revenue arrangement. The following specific recognition criteria must also be met before revenue is recognized: Sales of Goods Revenue from sales arising from physical delivery of the Group s products is recognized at the time when the significant risks and rewards of ownership of the products have passed to the buyer, which time generally coincides with their delivery and acceptance. Revenues from Services Revenues from mining services and rental of power engine are recognized when the services are rendered. Revenues from logistic services, container equipment and cargo handling services, and from agency and terminal activities are recognized when the services are rendered. Time charter revenue is recognized over the life of the time charter agreement. Revenue from coal affreightment is recognized based on metric ton measurement. Revenues from rendering sea freight forwarding services are recognized when the services are rendered. Revenues from and cost of contracting activities, such as from fabrication work, are recognized based on the percentage of completion. When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Payments received for the uncompleted portion of services are recognized as unearned revenues and recorded as part of Advances from Customers account. Interest Income and Expense For all financial instruments measured at amortized cost, interest income or expense is recorded using the effective interest rate ( EIR ) method which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Expenses are recognized when incurred. 31 F-39

191 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) p. Foreign Currency Transactions and Translation The Group considers the primary indicators and other indicators in determining its functional currency, if indicators are mixed and the functional currency is not obvious, management uses its judgments to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. For consolidation purposes, assets and liabilities of certain subsidiaries which are recorded in Rupiah as the functional currency, are translated into United States dollar using the prevailing exchange rates at such statements of financial position date. Income and expenses accounts are translated using prevailing average exchange rate for the period. Differences arising from such exchange rates are presented as part of other comprehensive income. Transactions involving other currencies other than US$ are recorded in US$ at the rates of exchange prevailing at the time the transactions are made. At the reporting date, monetary assets and liabilities denominated in currencies other than US$ are adjusted to US$ using the middle rates published by Bank Indonesia at that date. The resulting gains or losses are credited or charged to current year. The exchange rates used to translate the monetary assets and liabilities as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: March 31, December 31, European Euro (EUR)/US$ Australian dollar (AUD)/US$ ,000 Indonesian Rupiah (Rp)/US$ q. Income Tax Final Tax Tax regulation in Indonesia determined that certain taxable income is subject to final tax. Final tax applied to the gross value of transactions is applied even when the parties carrying the transactions are recognizing losses. The difference between the carrying amount of a revalued asset and its tax base is a temporary difference and gives rise to a deferred tax liability or asset, except for certain asset such as land, which realization is taxed with final tax on gross value of transaction. Based on Government Regulation No. 51 Tahun 2008 dated July 20, 2008 which was amended by Government Regulation No. 40 Tahun 2009 dated June 4, 2009, income derived from construction services is subject to final income tax. This regulation is effective on August 1, F-40

192 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) q. Income Tax (continued) Final Tax (continued) Based on the Decision Letters No. 416/KMK.04/1996 and No. 417/KMK.04/1996 dated June 14, 1996 of the Ministry of Finance of the Republic of Indonesia and Circular Letter No. 29/PJ.4/1996 dated August 13, 1996 of the Directorate General of Taxation, revenues from freight operations and charter of vessels are subject to final income tax computed at 1.20% and 2.64% of the revenues for domestic and foreign companies, respectively, and the related costs and expenses are considered non-deductible for income tax purposes. Certain subsidiaries revenues are subject to final income tax at 1.20% since those subsidiaries are domestic shipping companies. Current tax expense related to income subject to final income tax is recognized in proportion to total income recognized during the current year for accounting purposes. The difference between the final income tax paid and the final income tax expense for the current year is recognized as prepaid tax or tax payable. Current Tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authority. Current tax expense is determined based on the taxable profit for the year computed using the prevailing tax rates. Underpayment/overpayment of income tax are presented as part of Tax Expense - Current in the consolidated statements of profit or loss and other comprehensive income. The Group also presented interest/penalty, if any, as part of Tax Expense - Current. Amendments to tax obligations are recorded when a tax assessment letter is received or, if appealed against, when the result of the appeal is determined. Deferred Tax Deferred tax assets and liabilities are recognized using the liability method for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases at each reporting date. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for deductible temporary differences and accumulated fiscal losses to the extent that it is probable that taxable profit will be available in future years against which the deductible temporary differences and accumulated fiscal losses can be utilized. The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. At the end of each reporting period, the Group reassesses unrecognized deferred tax assets. The Group recognizes a previously unrecognized deferred tax assets to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. 33 F-41

193 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) q. Income Tax (continued) Deferred Tax (continued) Deferred tax is calculated at the tax rates that have been enacted or substantively enacted at the reporting date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are charged to current year operations, except to the extent that they relate to items previously charged or credited to equity. Deferred tax assets and liabilities are offset in the consolidated statements of financial position, except if they are for different legal entities, consistent with the presentation of current tax assets and liabilities. Value Added Tax ( VAT ) Revenues, expenses and assets are recognized net of the amount of VAT, except: Where the VAT incurred on purchase of assets or services is not recoverable according to tax regulations. In which case the VAT is recognized as the part of the cost of acquisition of the asset or as the part of the related expense item. Receivables and payables that are stated with the amount of VAT included. r. Mining Properties Pre-license Costs Pre-license costs are expensed in the periodinwhichthey areincurred. Exploration and Evaluation Expenditures Exploration and evaluation expenditures are capitalized and recognized as exploration and evaluation assets for each area of interest when mining rights are obtained and still valid and: (i) the costs are expected to be recouped through successful development and exploitation of the area of interest, or (ii) where activities in the area of interest have not reached the stage that allow a reasonable assessment of the existence of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. These expenditures include materials and fuel used, surveying costs, drilling and stripping costs before the commencement of production stage and payments made to contractors. Exploration and evaluation assets are subsequently measured using the cost model and classified as tangible assets, unless they are qualified to be recognized as intangible asset. The ultimate recoupment of deferred exploration expenditure is dependent upon successful development and commercial exploitation of the related area of interest. Exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. In such a case, an entity shall measure, present and disclose any resulting impairment loss in accordance with PSAK No. 48 (Revised 2014), Impairment of Assets. Exploration and evaluation assets are transferred to Mines under Construction in the Mining Properties account after the mines are determined to be economically viable to be developed. 34 F-42

194 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) r. Mining Properties (continued) Expenditures for Mines under Construction Expenditures for mines under construction and incorporated costs in developing an area of interest subsequent to the transfer from exploration and evaluation assets but prior to the commencement of production stage in the respective area, are capitalized to Mines under Construction as long as they meet the capitalization criteria. Producing Mines Upon completion of mines under construction and the production stage is commenced, the mines under construction are transferred into Producing Mines in the Mining Properties account, which are stated at cost, less depletion and accumulated impairment losses. Depletion of producing mines are based on unit-of-production method from the date of commercial production of the respective area of interest over the lesser of the life of the mine and the remaining terms of IUP. Stripping Activities The Group applied ISAK No. 29, Stripping Costs in the Production Phase of a Surface Mining, which prescribes the treatment for costs of waste removal incurred in the production phase of a surface mines. Stripping costs in the production phase are capitalised as stripping activity asset where all of the following criteria are met: a) it is probable that the future economic benefit (improved access to the coal seam) associated with the stripping activity will flow to the Group; b) the Group can identify the component of the coal seam for which access has been improved; and c) the costs relating to the stripping activity associated with that component can be measured reliably. The stripping activity asset should be initially measured at cost, which are costs directly incurred to perform the stripping activity that improve access to the identified component of coal, plus an allocation of directly attributable overhead costs. After initial recognition, the asset is depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the coal seam that becomes more accessible as a result of the stripping activity. Changes in the estimated technical and/or other economic parameters that impact coal reserves will also have an impact upon capitalisation and subsequent amortisation of the deferred stripping costs. These changes in estimates are accounted for prospectively from the date of change. 35 F-43

195 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) r. Mining Properties (continued) Mining Properties from Business Combination Mining properties represent the fair value adjustment of mining properties acquired at the date of acquisition and are stated at cost. Mining properties are amortized over the life of the property using the unit-of-production method from the date of the acquisition based on estimated reserves. The useful life of mining properties pertaining to contractual rights is not longer than the validity period of such rights, except if the contractual rights can be renewed upon expiration without incurring significant costs for such renewal. Changes in estimated reserves are accounted for on a prospective basis, from the beginning of the period in which the change occurs. Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date. The Group recognizes the deferred tax arising from mining properties. s. Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. Provision for asset dismantling costs is estimated based on certain assumptions and carried at fair value based on applicable discount rates. Restoration, rehabilitation, and other environmental expenditures incurred during the production phase of operations are charged as part of the cost of production. The Group has certain obligations to restore and rehabilitate mining areas following the completion of production. Such obligations are being accrued using the unit-of-production method over the life of the mine so that the accrual will be adequate to meet those obligations once production from the resource is completed. Changes in estimated restoration and environmental costs to be incurred are accounted for on a prospective basis over the remaining life of the mine. t. Long-term Employee Benefits Liability Long-term employee benefits of the Group comprise the following: Defined Contribution Pension Plan The Company and certain subsidiaries have a defined contribution pension plan for all of their eligible permanent employees. Contributions for the defined contribution pension plan are charged to current period operations. 36 F-44

196 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) t. Long-term Employee Benefits Liability (continued) Defined Benefit Pension Plan, Labor Law No. 13/2003 and Other Post-employment Benefits The Group has a defined benefit pension plan covering substantially all of its eligible employees and an unfunded liability for employee benefits in accordance with Labor Law No. 13/2003 dated March 25, 2003 (the Law No. 13 ). The provision for the Law No. 13 has been calculated by comparing the benefit that will be received by an employee at normal pension age from the Pension Plan with the benefit as stipulated under the Law No. 13 after deduction of accumulated employee contributions and the related investment results. If the employer-funded portion of the Pension Plan benefit is less than the benefit as required by the Law No. 13, the Group will provide for such shortage. The Group also provides long-term employee benefits other than pension named unfunded jubile. Termination Benefits Termination benefits are payable whenever an employee s employment is terminated before the normal retirement date. The Group recognizes termination benefits when it is demonstrably committed to terminate the employment of current employees according to a detailed formal plan with a low possibility of withdrawal. u. Financial Instruments PSAK No. 50 (Revised 2014), Financial Instruments: Presentation, provides deeper criterion on legally enforceable right to set off the recognized amounts and criterion to settle on a net basis. PSAK No. 55 (Revised 2014), Financial Instruments: Recognition and Measurement, among others, provides additional provision for the criteria of non-expiration or non-termination of hedging instrument, and provision to account financial instruments at the measurement date and after initial recognition. PSAK No. 60 (2014), Financial Instruments: Disclosures, among others, provides additional provision on offsetting disclosures with quantitative and qualitative information, and disclosures on transfers of financial instruments. i. Financial Assets Initial Recognition Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The Group s financial assets are cash and cash equivalents, other current financial assets, trade receivables, non-trade receivables, certain other current assets and certain other noncurrent assets classified as loans and receivables. 37 F-45

197 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial Instruments (continued) i. Financial Assets (continued) Financial assets are recognized initially at fair value and in the case of financial assets not at fair value through profit or loss, the fair value plus directly attributable transaction costs. Subsequent Measurement Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are carried at amortized cost using the EIR method, which is a method of calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. Gains and losses are recognized in profit or loss when the loans and receivables are derecognized or impaired, as well as through the amortization process. Derecognition of Financial Assets A financial asset, or where applicable, a part of a financial asset or part of a group of similar financial assets, is derecognized when: i. the contractual rights to receive cash flows from the asset have expired; or ii. the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and (a) substantially transferred all the risks and rewards of the asset, or (b) neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from a financial asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset, is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (i) the consideration received, including any new assets obtained less any new liabilities assumed, and (ii) any cumulative gain or loss which had been recognized in the equity, should be recognized in profit or loss. Impairment of Financial Assets At each reporting date, the Group assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred loss event ) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. 38 F-46

198 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial Instruments (continued) i. Financial Assets (continued) Impairment of Financial Assets (continued) Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables carried at amortized cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and the group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for impairment. If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original EIR. If loans and receivables financial asset has a variable interest rate, the discount rate for measuring impairment loss is the current EIR. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral, if any, has been realized or has been transferred to the Group. If in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced (reversed) by adjusting the allowance account. The recovery should not lead to the carrying amount of the asset exceeding its amortized cost that would have been determined had no impairment loss been recognized for the asset at the reversal date. The amount of reversal is recognized in the profit or loss. If a future write-off is later recovered, the recovery is recognized in profit or loss. 39 F-47

199 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial Instruments (continued) ii. Financial Liabilities Initial Recognition The Group determines the classification of its financial liabilities at initial recognition. Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Financial liabilities are classified as financial liabilities at fair value through profit or loss, financial liabilities at amortized cost, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and, in the case of financial liabilities at amortized cost, inclusive of directly attributable transaction costs. The Group s financial liabilities include short-term loans, trade payables, non-trade payables, accrued expenses, short-term employee benefits liability, long-term bank loans, bonds payable, long-term loan from related parties, sukuk ijarah, finance lease payables, long-term loan from shareholder and other long-term financial liabilities An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instrument issued by an entity will be recognized at amount received, after deducted with directly attributable share issuance cost. An instrument is an equity instrument if, and only if, both conditions (a) and (b) below are met. a) The instrument includes no contractual obligation: i. to deliver cash or another financial asset to another entity; or ii. to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the issuer. b) If the instrument will or may be settled in the issuer's own equity instruments, it is: i. a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments; or ii. a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments. For these purposes the issuer s own equity instruments do not include instruments that are contracts for the future receipt or delivery of the issuer s own equity instruments. The Group s mandatory convertible bond is classified as an equity instrument. Subsequent Measurement After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. At consolidated statement of financial position date, the accrued interest is recorded separately from the respective principal loans as part of current liabilities. Gains or losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process using the EIR method. 40 F-48

200 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial Instruments (continued) ii. Financial Liabilities (continued) Derecognition of Financial Liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss. iii. Offsetting of Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. iv. Fair Value of Financial Instruments The fair value of financial instruments that are traded in active markets is determined by reference to quoted market bid prices at the close of business at the end of the reporting period. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm s length market transaction; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis; or other valuation models. v. Amortized Cost of Financial Instruments Amortized cost of financial instruments are presented using EIR method less any allowance for impairment losses and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the EIR. v. Earnings per Share The amount of earnings per share is calculated by dividing the income for the year attributable to owners of the parent company by the weighted-average number of shares outstanding during the current period of 2,753,165,000 shares. 41 F-49

201 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) w. Shares and Bond Issuance Costs Shares issuance costs are presented as a reduction to Additional Paid-in Capital - Net under the equity section of the consolidated statement of financial position. Bonds and Sukuk Ijarah issuance costs are directly deducted from the issue proceeds in the consolidated statements of financial position as a discount and are amortized using the EIR method over the period of the bonds and Sukuk Ijarah. Issuance costs of mandatory convertible bond are accounted for as a deduction from equity. x. Ijarah Ijarah is a lease agreement between mu'jir (lessor) with musta'jir (lessee) on ma'jur (lease object) to get rewards or leasing goods. Ijarah mumtahiyah bittamlik is a lease agreement between the lessor and the lessee where the ownership of the lease object is transferred to the lessee at the end of the agreement. y. Segment Information A segment is a distinguishable component of the Group that is engaged either in providing certain products (business segment), or in providing products within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. They are determined before intra-group balances and intra-group transactions are eliminated as part of consolidation process. The Group did not disclose information related to geographical segment since the Group believes that the Group operates in the same economic environment, which is subject to the same risks and benefits. z. Contingencies Unless the possibility of an outflow of resources embodying economic benefits is remote, contingent liabilities are disclosed. Contingent assets are not recognized in the consolidated financial statements but disclosed when an inflow of economic benefits is probable. 42 F-50

202 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) aa. Events after the Reporting Period Post period-end events that provide additional information about the Group s financial position at the reporting date (adjusting events), if any, are reflected in the consolidated financial statements. Post period-end events that are not adjusting events are disclosed in the Notes to the consolidated financial statements, when material. ab. Accounting Standards Issued but not yet Effective The following are several accounting standards issued by the Indonesian Financial Accounting Standards Board (DSAK) that are considered relevant to the financial reporting of the Group but are not yet effective for March 31, 2017 consolidated financial statements: Amendments to PSAK No. 2: Statement of Cash Flows on the Disclosures Initiative, effective January 1, 2018 with earlier application is permitted. The amendments require entities to provide disclosures that enable the financial statements users to evaluate the changes in liabilities arising from financing activities, including changes from cash flow and non-cash. Amendments to PSAK No. 46: Income Taxes on the Recognition of Deferred Tax Assets for Unrealized Losses, effective January 1, 2018 with earlier application is permitted. The amendments clarify that to determine whether the taxable income will be available so that the deductible temporary differences can be utilized; estimates of the most likely future taxable income can include recovery of certain assets of the entity which exceeds its carrying amount. Improvement to PSAK No. 15: Investments in Associates and Joint Ventures, effective January 1, 2018 with earlier application is permitted. This improvement clarifies that at initial recognition an entity may elect to measure its investee at fair value on the basis of an investment-by-investment. Improvement to PSAK No. 67: Disclosure of Interests in Other Entities, effective January 1, 2018 with earlier application is permitted. This improvement clarifies that the disclosure requirements in PSAK No. 67 also apply to any interest in the entity that is classified in accordance with PSAK No. 58: Non-Current Assets Held for Sale and Discontinued Operation. The Group is presently evaluating and has not yet determined the effects of these accounting standards on its consolidated financial statements. 43 F-51

203 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 3. SOURCES OF ESTIMATION UNCERTAINTY The preparation of the Group s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. Uncertainty about these judgments, assumptions and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets and liabilities affected in future years. Judgments The following judgments are made by management in the process of applying the Group s accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements: Determination of Functional Currency The functional currency of the Group is the currency of the primary economic environment in which each entity operates. Management determined that the functional currency of the Group is US dollar, except for certain subsidiaries. It is the currency that mainly influences the revenue and cost of rendering services. Classification of Financial Assets and Financial Liabilities The Group determines the classification of certain assets and liabilities as financial assets and financial liabilities by judging if they meet the definition set forth in PSAK No. 55 (Revised 2014), Financial Instruments: Recognition and Measurement. Accordingly, the financial assets and financial liabilities are accounted for in accordance with the Group s accounting policies as disclosed in Note 2u. Allowance for Impairment Losses on Trade Receivables The Group evaluates specific accounts where it has information that certain customers are unable to meet their financial obligations. In these cases, the Group uses judgment, based on the best available facts and circumstances, including but not limited to, the length of its relationship with the customer and the customer s current credit status based on third party credit reports and known market factors, to record specific provisions for customers against amounts due to reduce the receivable amounts that the Group expects to collect. These specific provisions are re-evaluated and adjusted as additional information received affects the amounts of allowance for impairment losses of trade receivables. The carrying amounts of the Group s trade receivables before allowance for impairment losses amounted to US$240,600,332 as of March 31, 2017, US$263,027,292 as of March 31, 2016, US$255,518,030 as of December 31, 2016, US$244,468,136 as of December 31, 2015, and US$222,892,056 as of December 31, Further details are disclosed in Note 6. Purchase Price Allocation and Goodwill Impairment Acquisition accounting requires extensive use of accounting estimates to allocate the purchase price to the reliable fair market values of the assets and liabilities purchased, including intangible assets. Certain business acquisitions of the Group has resulted in goodwill. Under PSAK No. 22 (Revised 2010), Business Combinations, such goodwill is not amortized and subject to an annual impairment testing. The carrying amounts of the Group s goodwill before allowance for impairment losses are amounted to US$18,402,817 as of March 31, 2017, US$18,416,133 as of March 31, 2016, US$18,402,817 as of December 31, 2016, US$18,373,955 as of December 31, 2015, and US$18,491,472 as of December 31, Further details are disclosed in Note F-52

204 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 3. SOURCES OF ESTIMATION UNCERTAINTY (continued) Judgments (continued) Purchase Price Allocation and Goodwill Impairment (continued) Impairment testing is performed when certain impairment indicators are present. In the case of goodwill, such assets are subject to annual impairment testing and whenever there is an indication that such asset may be impaired, management has to use its judgment in estimating the recoverable value and in determining the amount of impairment. Leases The Group has several leases whereas the Group acts as lessee in respect of rental of vessels and vehicles and acts as lessor in respect of rental of power engines and vessels. The Group evaluates whether significant risks and rewards of ownership of the leased assets are transferred based on PSAK No. 30 (Revised 2011), Leases. Based on the review performed by the Group for the rental agreements of power engines and vehicles, the rent transactions were classified as operating leases, while for the rental agreements of vessels and vehicles, the rent transactions were classified as finance leases. Contingency The Group is currently involved in certain legal proceedings. The estimate of the probable costs for the resolution of these claims has been developed in consultation with outside counsel handling the defense in this matter and is based upon an analysis of potential results. The Group currently does not believe these proceedings will have a material effect on the Group s consolidated financial statements. It is possible, however, that future results of operations could be materially affected by changes in the estimates or in the effectiveness of the strategies relating to these proceedings. Further details are disclosed in Note 32. Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are disclosed below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Allowance for Decline in Value of Inventories Allowance for decline in value of inventories is estimated based on the best available facts and circumstances, including but not limited to, the physical conditions of the inventories owned, their market selling prices, estimated costs of completion and estimated costs to sell. The provisions are reevaluated and adjusted as additional information received affects the amount estimated. The carrying amounts of the Group s inventories before allowance for decline in values of inventories amounted to US$28,822,945 as of March 31, 2017, US$24,885,016 as of March 31, 2016, US$27,493,912 as of December 31, 2016, US$23,647,722 as of December 31, 2015, and US$26,444,268 as of December 31, Further details are disclosed in Note F-53

205 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 3. SOURCES OF ESTIMATION UNCERTAINTY (continued) Estimates and Assumptions (continued) Depreciation of Fixed Assets The costs of fixed assets are depreciated on a straight-line basis and duration of use method over their estimated useful lives and duration. Management estimates the useful lives and duration of use of these fixed assets as disclosed in Note 2l. These are common life expectancies applied in the industries where the Group conducts its businesses. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, and therefore future depreciation charges could be revised. The net carrying amounts of the Group s fixed assets before impairment losses amounted to US$671,600,672 as of March 31, 2017, US$727,127,360 as of March 31, 2016, US$672,122,328 as of December 31, 2016, US$739,865,556 as of December 31, 2015, and US$668,478,329 as of December 31, Further details are disclosed in Note 9. Income Tax Significant judgment is involved in determining the provision for corporate income tax. There are certain transactions and computation for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for expected corporate income tax issues based on estimates of whether additional corporate income tax will be due. The carrying amounts of the Group s income taxes payable under Articles 25 and 29 totalling to US$7,217,746 as of March 31, 2017, US$2,716,840 as of March 31, 2016, US$2,597,314 as of December 31, 2016, US$1,903,801 as of December 31, 2015, and US$3,636,654 as of December 31, Further details are disclosed in Note 21b. Realization of Deferred Tax Assets The Group reviews the carrying amounts of deferred tax assets at the end of each reporting period and reduces these to the extent that sufficient taxable income will be available to allow all or part of the deferred income tax assets to be utilized. The Group s assessment on the recognition of deferred tax assets on deductible temporary differences is based on the level and timing of forecasted taxable income of the subsequent reporting periods. The forecast of taxable income is based on the Group s past results and future expectations on revenues and expenses as well as future tax planning strategies. However, there is no assurance that the Group will generate sufficient taxable income to allow all or part of the deferred tax assets to be utilized. The carrying amounts of the Group s deferred tax assets amounted to US$25,100,775 as of March 31, 2017, US$20,082,160 as of March 31, 2016, US$24,106,322 as of December 31, 2016, US$18,831,858 as of December 31, 2015, and US$25,103,270 as of December 31, Further details are disclosed in Note 21e. Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management estimates are required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. 46 F-54

206 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 3. SOURCES OF ESTIMATION UNCERTAINTY (continued) Estimates and Assumptions (continued) Uncertain Tax Liabilities In certain circumstances, the Group may not be able to determine the exact amount of its current or future tax liabilities due to ongoing investigations by the taxation authority. Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. In determining the amount to be recognized in respect of an uncertain tax liability, the Group applies similar considerations as it would use in determining the amount of a provision to be recognized in accordance with PSAK No. 57 (Revised 2009), Provisions, Contingent Liabilities and Contingent Assets. The Group makes an analysis of all tax positions related to income taxes to determine whether a tax liability of unrecognized tax expense should be recognized. Mines Under Construction The Coal Mining Group s accounting policy for exploration expenditure results in certain items of expenditure being capitalized for an area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not yet reached a stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after having capitalized the expenditure under the policy, a judgment is made that recovery of the expenditure is unlikely, the capitalized amount will be charged to the consolidated statements of profit or loss and other comprehensive income. Development activities commence after project acknowledgement by the appropriate level of management. Judgment is applied by management in determining when a project is economically viable. In exercising this judgment, management is required to make certain estimates and assumptions similar to those described above for capitalized exploration expenditure. Any such estimates and assumptions may change as new information becomes available. If, after having commenced the development activity, a judgment is made that a development asset is impaired, the appropriate amount will be charged to the consolidated statements of profit or loss and other comprehensive income. Further details are disclosed in Note 10. Reserve Estimates Reserves are estimates of the quantity of coal that can be economically and legally extracted from TIA, Mifa and BEL s ( Coal Mining Group ) mining authorization areas. The Coal Mining Group determines and reports its coal reserves under the principles incorporated in the Standar Nasional Indonesia. In order to estimate coal reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, production techniques, stripping ratio, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or calorific value of coal reserves requires the size, shape and depth of coal bodies or fields to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. 47 F-55

207 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 3. SOURCES OF ESTIMATION UNCERTAINTY (continued) Estimates and Assumptions (continued) Reserve Estimates (continued) Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data are generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Coal Mining Group s financial results and positions in a number of ways, including the following: Depreciation and amortization charged in the consolidated statements of profit or loss and other comprehensive income may change where such charges are determined on the units-of-production basis. Provision for environmental and reclamation costs may change where changes in estimated reserves affect expectations about the timing or cost of these activities. Provision for Environmental and Reclamation Costs The Coal Mining Group s accounting policy for the recognition of provision for environmental and reclamation costs requires significant estimates and assumptions, such as requirements of the relevant legal and regulatory framework, and the timing, extent and costs of required environmental and reclamation activity. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognized for each location is periodically reviewed and updated based on the facts and circumstances available at that time. The balance of the provision is recorded as part of Provision for Environmental Restoration Obligation. Further details are disclosed in Note 17. Deferred Stripping Costs Stripping costs are amortised over the life of the mine on a units of production basis. Where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning, initial stripping costs are accounted for separately by reference to the coal seam from each separate pit. If, however, the pits are highly integrated, the initial stripping of the second and subsequent pits is considered to be production phase stripping. The Group s determination of whether multiple pit mines are considered separate or integrated operations depends on each mine s specific circumstances. Production Start Date The Coal Mining Group assesses the stage of each mine under development to determine when a mine moves into the production stage, being the time when the mine is substantially developed and ready for commercial production. The criteria used to assess the start date of production are determined based on the unique nature of each mine construction project, such as the complexity of a plant and its location. The Group considers various relevant criteria to assess when the production phase is considered to commence and all related amounts are reclassified from Deferred Mining Exploration and Development Costs Related to Area of Interest which have not yet Reached the Commercial Production Stage to Deferred Mining Exploration and Development Costs related to Areas of Interest which have Reached the Commercial Production Stage. Some of the criteria used will include, but are not limited to, the following: Level of capital expenditure incurred compared to the original construction cost estimates; Completion of a reasonable period of testing of the mine plant and equipment; Ability to produce metal in saleable form (within specifications); and Ability to sustain ongoing production. 48 F-56

208 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 3. SOURCES OF ESTIMATION UNCERTAINTY (continued) Estimates and Assumptions (continued) Production Start Date (continued) When a mine development/construction project moves into the production stage, the capitalization of certain mine development/construction costs ceases and costs are either regarded as forming part of the cost of revenue, except for costs that qualify for capitalization relating to mining asset additions or improvements or mineable reserve development. It is also at this point that depreciation/amortization commences. Fair Value of Financial Instruments When the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Pension and Employee Benefits The parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers the market yields (at the end of the reporting period) on government bonds and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The currency and term of the government bonds are consistent with the currency and estimated term of the post-employment benefits obligation. The mortality rate is based on Indonesian Mortality Table ( TMI ) Those mortality tables tend to change only at intervals in response to demographic changes. Salary growth rate is based on expected future inflation, productivity and normal progress of employees within a given group and promotions. The carrying amounts of the Group s long-term employee benefits liability are amounted to US$15,759,026 as of March 31, 2017, US$ 10,417,235 as of March 31, 2016, US$13,913,890 as of December 31, 2016, US$12,678,906 as of December 31, 2015, and US$14,994,767 as of December 31, Further details are disclosed in Note 29. Impairment of Non-financial Assets Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm s length transaction of similar assets or observable market prices less incremental costs for disposing the asset. The value in use calculation is based on a discounted cash flow model. The cash flows data are derived from budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset s performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. Other than certain fixed assets and mining properties deemed to be impaired (Notes 9, 10 and 11), as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, management believes that there is no event or change in circumstances that may indicate any impairment of non-financial assets value. 49 F-57

209 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 4. CASH AND CASH EQUIVALENTS This account consists of: March 31, December 31, (Unaudited) (Unaudited) Cash on hand Rupiah 436, ,468 93, , ,708 United States dollar ,575 4,760 Other foreign currencies Sub-total 436, ,481 93, , ,470 Cash in banks United States dollar PT Bank OCBC NISP Tbk 16,385,017 10,834,743 18,358,952 4,430,433 4,258,403 PT Bank Mandiri (Persero) Tbk 5,599,558 25,397,245 8,521,387 12,988,340 7,078,453 PT Bank ANZ Indonesia 2,883, ,788 36, ,316 3,135,897 PT Bank DBS Indonesia 732,027 2,470,121 1,044,078 3,434, ,775 Citibank N.A., Indonesia 373, ,112 4,830, , ,537 Standard Chartered Bank, Indonesia 50,340 50,486 50,400 50, ,330 PT Bank Permata Tbk 43,692-81, PT Bank Negara Indonesia (Persero) Tbk 25,799 25,062 25,739 25,068 26,070 PT Bank ICBC Indonesia 8,564 1,801,214 25,200 50,017 - PT Bank Mega Tbk 1,397 1,461 1,412 1,477 - Rupiah PT Bank Mandiri (Persero) Tbk 8,627,644 13,462,886 6,809,201 4,328,665 5,975,823 PT Bank OCBC NISP Tbk 4,699,200 53,440 3,435,188 44,401 55,469 PT Bank Maybank Indonesia Tbk 2,063, , , ,959 2,395,342 PT Bank Negara Indonesia (Persero) Tbk 766, ,460 1,163,381 55, ,238 PT Bank DBS Indonesia 300, , , ,091 57,871 Citibank N.A., Indonesia 64, , , , ,033 PT Bank Permata Tbk 43, PT Bank CIMB Niaga Tbk 19,163 17,147 18,993 16,443 - Standard Chartered Bank, Indonesia 8,768 9,607 17,381 17, ,894 PT Bank ANZ Indonesia 7, ,773 30,473 54, ,268 PT Bank ICBC Indonesia 7, ,968 61,923 58,134 57,625 PT Bank Rakyat Indonesia Tbk 4,610 6,826 4, PT Bank Syariah Mandiri , , , ,802 PT Bank Mega Tbk PT Bank Sumitomo Mitsui Indonesia ,937 Lain-lain 13 3,436 5,114 53,688 90,203 Singapore Dollar PT Bank Mandiri (Persero) Tbk 29,445 6,489 17,594 51,007 57,082 European Euro Citibank N.A., Indonesia 4,937 4,634 5,207 2,672 7,421 PT Bank Mandiri (Persero) Tbk 4,711 57,059 75,153 6,368 34,583 Standard Chartered Bank, Indonesia ,098 Others 2,998 5,459 5,730 5,497 9,509 Sub-total 42,757,579 57,640,652 45,860,061 27,975,875 26,026,663 Time deposits United States dollar PT Bank OCBC NISP Tbk 13,600,000 2,500,000-3,500,000 9,109,995 PT Bank Permata Tbk 10,700,000 6,200,000 10,700,000 20,580,000 - PT Bank Maybank Indonesia Tbk 10,506,319 25,756,319-6,920,000 5,510,187 PT Bank Tabungan Pensiunan Nasional Tbk 8,608,000-4,700, PT Bank Mega Tbk - 5,885,000 8,250,000 15,540,000 24,725,000 Rupiah PT Bank Tabungan Pensiunan Nasional Tbk 12,609,507 9,091,594 10,182,160 12,736,499 31,118,971 PT Bank Mandiri (Persero) Tbk 957,362 1,019, ,168 11,931, ,087 PT Bank Maybank Indonesia Tbk 450, ,619-3,334,542 5,747,588 PT Bank Tabungan Negara Tbk 431, , , , ,891 PT Bank OCBC NISP Tbk 36,524 36, ,245 36,524 - PT Bank ANZ Indonesia ,249,003 - PT Bank DBS Indonesia ,390 - PT Bank Negara Indonesia (Persero) Tbk ,390 - PT Bank Mega Tbk - 188, , ,244 PT Bank CIMB Niaga - 15,064, Sub-total 57,899,778 66,548,226 35,759,135 84,271,341 78,132,963 Total 101,093, ,397,359 81,713, ,355, ,305, F-58

210 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 4. CASH AND CASH EQUIVALENTS (continued) The ranges of interest rates on time deposits per annum are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) United States dollar 0.85% % 0.65% % 0.65% % 0.75% % 0.25% % Rupiah 5.75% % 4.25% % 3.62% % 4.25% % 4.25% % As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, there are no cash and cash equivalents balances placed to any related party. 5. OTHER CURRENT FINANCIAL ASSETS This account consists of: March 31, December 31, (Unaudited) (Unaudited) Time deposits Third party United States dollar PT Bank Maybank Indonesia Tbk - 900,000 10,506,319 26,656,319 18,956,319 Rupiah PT Bank Maybank Indonesia Tbk - 866, ,635 - Restricted cash in banks Third party Rupiah PT Bank Mandiri (Persero) Tbk 9, ,760 28,499 72, ,272 Total 9,268 1,978,984 10,534,818 27,562,306 19,479,591 The ranges of interest rates on time deposits per annum are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) United States dollar % 1.00% % 1.25% % 2.75% % Rupiah % % % - Time deposits which were placed in PT Bank Maybank Indonesia Tbk represent time deposits with maturity of more than 3 months. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, CKB s cash balance in PT Bank Mandiri (Persero) Tbk amounting to Rp123 million (equivalent to US$9,268), Rp2,825 million (equivalent to US$212,760), Rp383 million (equivalent to US$28,499) and Rp998 million (equivalent to US$72,352), and Rp6,510 million (equivalent US$523,272), respectively, are restricted for use. 51 F-59

211 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 6. TRADE RECEIVABLES - NET This account consists of: March 31, December 31, (Unaudited) (Unaudited) Trade receivables Third parties 215,140, ,702, ,046, ,824, ,283,933 Allowance for impairment losses (83,810,216) (81,743,298) (83,791,482) (81,478,513) (71,240,345) Net 131,330, ,959, ,255, ,346, ,043,588 Less current portion (118,862,933) (153,376,283) (128,042,233) (122,742,687) (109,992,041) Non-current portion 12,467, ,974 17,213,123 14,603,600 11,051,547 Related parties (Note 30) 25,459,580 27,324,737 26,471,192 25,643,336 30,608,123 Allowance for impairment losses (4,700,849) (7,110,889) (4,697,490) (7,096,078) (1,077,654) Net 20,758,731 20,213,848 21,773,702 18,547,258 29,530,469 Trade receivables - net 152,089, ,173, ,029, ,893, ,574,057 The details of trade receivables from third parties based on customers are as follows: March 31, December 31, (Unaudited) (Unaudited) PT Riau Bara Harum 48,165,231 48,180,286 48,127,219 48,012,635 48,479,260 PT Tunas Muda Jaya 22,472,881 22,480,167 22,454,481 22,399,380 22,625,126 PT Rinjani Kertanegara 20,054,864 21,330,791 21,944,318 23,540,130 17,225,873 PT PLN (Persero) 18,078,993 22,998,267 14,413,902 12,008,724 18,912,183 PT Adimitra Baratama Nusantara 17,008,716 20,367,457 13,758,229 19,387,723 - PT Bangun Olahsarana Sukses 10,082,568 8,599,614 10,227,756 8,379,636 3,869,354 TAJ Asia Trading Ltd., Hong Kong 7,534,177-15,057, PT Cakra Bumi Pertiwi (formerly PT Titan Wijaya) 7,377,366 12,450,954 9,314,189 12,205,538 9,198,157 PT Mitrabara Adiperdana Tbk 4,895,291 3,889,357 3,378,292 2,967,658 - PT Kaltim Jaya Bara 4,287,540 16,011,151 6,524,906 6,231,242 6,199,928 PT Kaltim Prima Coal 3,475,026 4,045,594 1,596,343 2,844,513 4,318,872 PT Indomining 3,474,118 1,533,547 3,970,326 2,185,768 - PT Realita Jaya Mandiri 3,466,538 3,468,979 3,460,373 3,441,791 3,517,543 PT Trisensa Mineral Utama 3,010,715-3,796, PT Freeport Indonesia 3,001,873 2,695,129 1,502,800 3,661,677 1,401,242 PT Wargi Santosa 2,878,264 2,624,867 2,584,126 1,327,333 - PT Hamparan Anugrah Abadi 2,603,342-4,388, PT Mandau Wiraniaga 1,901,900 1,902,165 1,901, PT Holcim Indonesia Tbk 1,730,163 2,664,307 2,416, Huaxiang Global, Ltd., Hong Kong 1,615, ,000 2,176, Farlin Energy & Commodities FZE, UEA 1,508,167-2,441, PT Dizamatra Powerindo 1,386,196-1,610, PT Multi Structure 1,273, ,742 1,403, PT Cemindo Gemilang 1,028, Others (below US$1,000,000, each) 22,829,259 39,067,181 30,596,223 50,231,052 56,536,395 Total 215,140, ,702, ,046, ,824, ,283, F-60

212 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 6. TRADE RECEIVABLES - NET (continued) The details of trade receivables based on currencies are as follows: March 31, December 31, (Unaudited) (Unaudited) United States dollar 160,949, ,109, ,037, ,086, ,673,722 Rupiah 79,650,755 78,872,225 80,481,004 62,381,866 60,218,144 Other foreign currencies - 45, Total 240,600, ,027, ,518, ,468, ,892,056 Allowance for impairment losses (88,511,065) (88,854,187) (88,488,972) (88,574,591) (72,317,999) Less non-current portion (12,467,603) (582,974) (17,213,123) (14,603,600) (11,051,547) Current portion 139,621, ,590, ,815, ,289, ,522,510 The aging analysis of trade receivables are as follows: March 31, December 31, (Unaudited) (Unaudited) Current 120,278,484 91,395, ,081,779 89,579,951 96,229,744 Overdue: 1-30 days 16,560,334 31,016,695 24,479,670 21,664,357 24,889, days 8,905,693 4,001,031 3,510,291 6,329,067 3,349, days 5,557,781 5,782,489 3,726,490 10,015,745 2,163,917 More than 90 days 89,298, ,831,989 88,719, ,879,016 96,258,979 Total 240,600, ,027, ,518, ,468, ,892,056 Allowance for impairment losses (88,511,065) (88,854,187) (88,488,972) (88,574,591) (72,317,999) Less non-current portion (12,467,603) (582,974) (17,213,123) (14,603,600) (11,051,547) Current portion 139,621, ,590, ,815, ,289, ,522,510 The movements in the allowance for impairment losses on trade receivables are as follows: Three-Month Period Ended March 31, 2017 (Unaudited) Individual Collective Total Beginning balance 88,384, ,353 88,488,972 Reversal during the period (61,939) - (61,939) Translation adjustment 83, ,032 Ending Balance 88,405, ,253 88,511,065 Three-Month Period Ended March 31, 2016 (Unaudited) Individual Collective Total Beginning balance 88,574,591-88,574,591 Provision during the period 263, ,931 Reversal during the period (79,517) - (79,517) Translation adjustment 95,182-95,182 Ending Balance 88,854,187-88,854, F-61

213 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 6. TRADE RECEIVABLES - NET (continued) The movement in the allowance for impairment losses on trade receivables are as follows: (continued) Year Ended December 31, 2016 Individual Collective Total Beginning balance 88,574,591-88,574,591 Provision during the year 3,000, ,353 3,104,849 Reversal during the year (3,148,983) - (3,148,983) Write-off (323,572) - (323,572) Translation adjustment 282, ,087 Ending Balance 88,384, ,353 88,488,972 Year Ended December 31, 2015 Individual Collective Total Beginning balance 72,317,999-72,317,999 Provision during the year 16,485,683-16,485,683 Reversal during the year (143,485) - (143,485) Translation adjustment (85,606) - (85,606) Ending Balance 88,574,591-88,574,591 Year Ended December 31, 2014 Individual Collective Total Beginning balance 14,257,641-14,257,641 Provision during the year 58,501,635-58,501,635 Reversal during the year (213,706) - (213,706) Write-off (212,927) - (212,927) Translation adjustment (14,644) - (14,644) Ending Balance 72,317,999-72,317,999 CK has signed a Debt Settlement Agreement with several customers regarding the restructuring of trade receivables. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the balance of such receivables amounted to US$53,511,847, US$21,330,791, US$58,546,183, US$23,540,130, and US$17,225,873, respectively. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, trade receivables owned by SSB, CK, CKB, BDD, TIA, Mifa, BEL, MDB, and Reswara are pledged as collateral for the Company s bank loans (Note 14). Based on the review of the status of the individual receivables at the end of each period, the Group s management believes that the allowance for impairment losses of trade receivables is adequate to cover any loss from uncollectible of the trade receivables. 54 F-62

214 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 7. INVENTORIES - NET This account consists of: March 31, December 31, (Unaudited) (Unaudited) Raw materials and semi-finished goods 11,675,534 13,022,712 11,747,408 11,111,217 12,326,437 Spare parts 9,974,076 6,784,732 9,552,266 6,422,360 5,540,998 Work in process 3,485,930 3,863,491 3,796,803 4,974,279 4,981,474 Finished goods 3,317,423 1,144,097 2,250, ,596 3,490,145 Others 369,982 69, , , ,214 Total 28,822,945 24,885,016 27,493,912 23,647,722 26,444,268 Allowance for decline in value of inventories (1,868,869) (1,172,765) (1,846,552) (2,371,619) (1,390,891) Inventories - net 26,954,076 23,712,251 25,647,360 21,276,103 25,053,377 The movements in the allowance for decline in value of inventories are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Beginning balance 1,846,552 2,371,619 2,371,619 1,390, ,288 Provision during the period 52, ,251 1,483,223 1,290,844 Reversal during the period (45,699) (1,245,426) (1,544,106) (374,125) - Translation adjustment 15,942 46,572 25,788 (128,370) (2,241) Ending balance 1,868,869 1,172,765 1,846,552 2,371,619 1,390,891 Reversal during the period is due to the obsolete inventories that are already used and sold. Based on the review of the condition of inventories at the end each period, the Group s management believes that the allowance for decline in value of inventories is adequate to cover possible losses that may arise from non-recoverability of slow-moving inventories. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the Group s inventories are covered by insurance against losses by fire and other risks under blanket policies totalling to US$14,983,252, US$15,694,040, US$15,694,040, US$17,541,140, and US$17,411,663, respectively. The Group s management believes that the above coverage is sufficient to cover possible losses arising from those risks. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, inventories owned by CK, TIA, BEL and Mifa are pledged as collateral for the Company s bank loans (Note 14). 8. INVESTMENTS IN ASSOCIATES - NET The details of investments in associates are as follows: Three-Month Period Ended March 31, 2017 (Unaudited) Share of Other Beginning Comprehensive Translation Impairment Associates Balance Share of Profit Loss Difference Loss Ending Balance PT Meppo-Gen 8,240, ,663 (128,699 ) 91,671 (285,714) 8,268,112 Total 8,240, ,663 (128,699 ) 91,671 (285,714) 8,268, F-63

215 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 8. INVESTMENTS IN ASSOCIATES - NET (continued) The details of investments in associates are as follows: (continued) Three-Month Period Ended March 31, 2016 (Unaudited) Share of Other Beginning Comprehensive Translation Impairment Associates Balance Share of Profit Income Difference Loss Ending Balance PT Meppo-Gen 8,016,745 66, ,146-8,383,421 Joint operation with PT Jaya Dinamika Geohidroenergi ( JOA ) 34, ,510-38,283 Total 8,051,518 66, ,656-8,421,704 Year Ended December 31, 2016 Share of Other Beginning Comprehensive Translation Impairment Associates Balance Share of Profit Loss Difference Loss Ending Balance PT Meppo-Gen 8,016, ,323 (441,407 ) 481,530 (258,000) 8,240,191 Joint operation with PT Jaya Dinamika Geohidroenergi ( JOA ) 34, (34,773) - Total 8,051, ,323 (441,407 ) 481,530 (292,773) 8,240,191 Year Ended December 31, 2015 Share of Other Beginning Comprehensive Translation Impairment Associates Balance Share of Profit Income Difference Loss Ending Balance PT Meppo-Gen 7,728, , ,755 (784,440) - 8,016,745 Joint operation with PT Jaya Dinamika Geohidroenergi ( JOA ) 40, (6,082) - 34,773 Total 7,769, , ,755 (790,522) - 8,051,518 Year Ended December 31, 2014 Share of Other Beginning Comprehensive Translation Impairment Associates Balance Share of Profit Income Difference Loss Ending Balance PT Meppo-Gen 7,338, ,576 - (250,293) - 7,728,386 Joint operation with PT Jaya Dinamika Geohidroenergi ( JOA ) 41, (842) - 40,855 Total 7,379, ,576 - (251,135) - 7,769,241 During the three-month period ended March 31, 2017 and the year ended December 31, 2016, SS recognized impairment loss on its investment in PT Meppo-Gen and JOA, and were recorded as part of Other Expenses in the consolidated statements of profit or loss and other comprehensive income. PT Meppo-Gen On November 24, 2010, SS acquired 27,900 shares (at par value of Rp1,000,000 per share) of PT Meppo-Gen from PT Widjaja Tunggal Sejahtera for US$6,500,000, representing 20% equity ownership in PT Meppo-Gen. 56 F-64

216 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 8. INVESTMENTS IN ASSOCIATES - NET (continued) PT Meppo-Gen (continued) The details of total assets, liabilities, net sales, profit for the periods and total comprehensive income (loss) for the periods of the associate are as follows: March 31, December 31, (Unaudited) (Unaudited) PT Meppo-Gen Assets 108,318, ,790, ,498, ,797, ,255,501 Liabilities 79,674,949 84,414,055 80,218,938 81,792,607 79,007,824 Net sales 2,076,420 3,967,620 60,718,333 46,338,294 35,774,299 Total comprehensive income (loss) for the period 1,431, ,680 (1,473,771) 5,237,271 2,691, FIXED ASSETS - NET The details of fixed assets are as follows: Three-Month Period Ended March 31, 2017 (Unaudited) Beginning Translation Ending Balances Additions Deductions Reclassifications Difference Balances Acquisition cost Direct ownership Land 23,630,165 6, ,484 23,682,513 Road and infrastructure 145,527,928 - (113,410 ) ,414,518 Building and improvements 51,115,522 60,874-71,100 1,305,298 52,552,794 Office furniture, fixtures and equipment 21,839, ,744 (76,845 ) 13,682 (139,899) 21,781,463 Vehicles 22,088, ,636 (21,920 ) 134,886 59,637 22,618,743 Vessels 31,603, ,460-4,675-32,056,538 Machinery and equipment 744,645,211 1,238,385 (3,735,906 ) 4,187,367 2,987, ,322,522 Sub-total 1,040,450,514 2,256,963 (3,948,081 ) 4,411,710 4,257,985 1,047,429,091 Construction in-progress 8,816,338 18,796,243 - (4,838,210) (642,025) 22,132,346 Finance lease Office furniture, fixtures and equipment Vehicles 23,101, ,102,772 Vessels 24,879,027 26, ,905,696 Machinery and equipment 120,296, , ,723,400 Sub-total 168,277,443 27, , ,731,868 Total acquisition cost 1,217,544,295 21,080,309 (3,948,081 ) - 3,616,782 1,238,293,305 Accumulated depreciation Direct ownership Road and infrastructure 28,142, ,701 (12,151 ) ,992,809 Building and improvements 16,900,083 1,022, (253,524) 17,668,844 Office furniture, fixtures and equipment 17,473, ,794 (76,276 ) - (53,211) 18,089,539 Vehicles 19,161, ,033 (21,876 ) 624,214 46,049 20,238,580 Vessels 14,915, ,627 - (13,105) - 15,662,071 Machinery and equipment 371,432,360 15,021,474 (3,677,427 ) (40,515) 2,208, ,944,096 Sub-total 468,024,643 18,840,914 (3,787,730 ) 570,594 1,947, ,595,939 Finance lease Office furniture, fixtures and equipment Vehicles 13,533,183 1,122,585 - (753,691) 7,088 13,909,165 Vessels 7,277, , ,713,502 Machinery and equipment 56,586,362 2,703, , ,474,027 Sub-total 77,397,324 4,262,078 - (570,594) 7,886 81,096,694 Total accumulated depreciation 545,421,967 23,102,992 (3,787,730 ) - 1,955, ,692,633 Impairment loss Office furniture, fixtures and equipment 4, ,503 Machinery and equipment 14,516, ,053 14,624,984 Net carrying amount 657,600, ,971, F-65

217 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) The details of fixed assets are as follows: (continued) Three-Month Period Ended March 31, 2016 (Unaudited) Beginning Translation Ending Balances Additions Deductions Reclassifications Difference Balances Acquisition cost Direct ownership Land 24,614, , ,679 25,264,062 Road and infrastructure 144,624, ,624,236 Building and improvements 50,655, ,766 (391,942 ) (217,493) 735,751 50,895,566 Office furniture, fixtures and equipment 21,587, ,701 (1,034,562 ) 946, ,204 22,023,579 Vehicles 14,547, (107,414 ) 119, ,027 14,753,173 Vessels 31,408,376 8,817-3,738-31,420,931 Machinery and equipment 720,717,583 1,036,049 (4,745,632 ) 28,995,539 14,639, ,642,651 Sub-total 1,008,155,379 1,591,042 (6,279,550 ) 29,847,554 16,309,773 1,049,624,198 Construction in-progress 19,828,842 4,236,043 - (20,952,694) 240,596 3,352,787 Finance lease Office furniture, fixtures and equipment 1,115, ,115,382 Vehicles 30,600,363 94,963 - (119,129) 74,270 30,650,467 Vessels 24,493, , ,597,745 Machinery and equipment 146,973,600 2,226 - (8,775,731) 31, ,231,485 Sub-total 203,182, ,790 - (8,894,860) 105, ,595,079 Total acquisition cost 1,231,166,710 6,028,875 (6,279,550 ) - 16,656,029 1,247,572,064 Accumulated depreciation Direct ownership Road and infrastructure 18,772,192 2,372, ,144,402 Building and improvements 12,604,421 1,034,283 (131,946 ) (92,187) 237,517 13,652,088 Office furniture, fixtures and equipment 15,459, ,587 (1,025,204 ) (112,417) 240,391 15,474,493 Vehicles 12,495, ,864 - (21,140) 184,087 13,056,974 Vessels 11,663, , ,462,951 Machinery and equipment 337,906,945 16,047,634 (4,502,719 ) 7,211,825 8,055, ,719,429 Sub-total 408,901,549 21,564,681 (5,659,869 ) 6,986,237 8,717, ,510,337 Finance lease Office furniture, fixtures and equipment 892, ,271-21,140 45,090 1,102,803 Vehicles 13,581,144 1,804, ,139 15,388,149 Vessels 5,532, ,532,404 Machinery and equipment 62,393,755 2,041,569 - (7,007,377) 483,064 57,911,011 Sub-total 82,399,605 3,990,706 - (6,986,237) 530,293 79,934,367 Total accumulated depreciation 491,301,154 25,555,387 (5,659,869 ) - 9,248, ,444,704 Impairment loss Machinery and equipment 2,090, ,090,309 Net carrying amount 737,775, ,037, F-66

218 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) The details of fixed assets are as follows: (continued) Year Ended December 31, 2016 Beginning Translation Ending Balances Additions Deductions Reclassifications Difference Balances Acquisition cost Direct ownership Land 24,614, ,088 (1,613,012 ) - 289,575 23,630,165 Road and infrastructure 144,624, ,504 (37,803 ) 297, ,527,928 Building and improvements 50,655, ,941 (612,946 ) 1,390,410 (634,367) 51,115,522 Office furniture, fixtures and equipment 21,587, ,927 (3,138,776 ) 2,316, ,704 21,839,781 Vehicles 14,547, ,476 (1,321,376 ) 8,315, ,582 22,088,504 Vessels 31,408,376 56, ,973-31,603,403 Machinery and equipment 720,717,583 7,630,219 (53,909,683 ) 59,280,361 10,926, ,645,211 Sub-total 1,008,155,379 10,064,209 (60,633,596 ) 71,739,297 11,125,225 1,040,450,514 Construction in-progress 19,828,842 25,495,602 (251,170 ) (36,421,379) 164,443 8,816,338 Finance lease Office furniture, fixtures and equipment 1,115, (1,115,382) - - Vehicles 30,600,363 - (69,538 ) (7,501,231) 71,935 23,101,529 Vessels 24,493, , ,879,027 Machinery and equipment 146,973,600 2,199 - (26,701,305) 22, ,296,887 Sub-total 203,182, ,082 (69,538 ) (35,317,918) 94, ,277,443 Total acquisition cost 1,231,166,710 35,947,893 (60,954,304 ) - 11,383,996 1,217,544,295 Accumulated depreciation Direct ownership Road and infrastructure 18,772,192 9,371,554 (1,487 ) ,142,259 Building and improvements 12,604,421 4,186,693 (267,898 ) (89,973) 466,840 16,900,083 Office furniture, fixtures and equipment 15,459,136 3,670,880 (2,953,803 ) 1,028, ,198 17,473,232 Vehicles 12,495,163 1,964,359 (1,313,374 ) 5,916,100 98,912 19,161,160 Vessels 11,663,692 3,250, ,112 14,915,549 Machinery and equipment 337,906,945 58,920,036 (45,350,278 ) 14,985,273 4,970, ,432,360 Sub-total 408,901,549 81,364,267 (49,886,840 ) 21,840,221 5,805, ,024,643 Finance lease Office furniture, fixtures and equipment 892, ,128 - (1,022,430) - - Vehicles 13,581,144 5,258,258 (70,662 ) (5,295,990) 60,433 13,533,183 Vessels 5,532,404 1,746, (685) 7,277,779 Machinery and equipment 62,393,755 9,687,537 - (15,521,801) 26,871 56,586,362 Sub-total 82,399,605 16,821,983 (70,662 ) (21,840,221) 86,619 77,397,324 Total accumulated depreciation 491,301,154 98,186,250 (49,957,502 ) - 5,892, ,421,967 Impairment loss Office furniture, fixtures and equipment - 4, (44) 4,440 Machinery and equipment 2,090,309 12,870,633 (318,182 ) - (125,829) 14,516,931 Net carrying amount 737,775, ,600, F-67

219 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) The details of fixed assets are as follows: (continued) Year Ended December 31, 2015 Beginning Translation Ending Balances Additions Deductions Reclassifications Difference Balances Acquisition cost Direct ownership Land 25,542, , (1,168,508) 24,614,514 Road and infrastructure 134,691,142 11,883,102 - (1,950,008) - 144,624,236 Building and improvements 46,940,792 1,191,072 (1,751,341 ) 6,304,341 (2,029,380) 50,655,484 Office furniture, fixtures and equipment 40,079,880 4,643,106 (2,212,572 ) (20,067,183) (855,636) 21,587,595 Vehicles 7,413, ,590 (2,242,123 ) 9,760,380 (515,678) 14,547,591 Vessels 30,846, ,489-12,191-31,408,376 Machinery and equipment 565,830,367 48,384,057 (59,642,511 ) 203,271,621 (37,125,951) 720,717,583 Sub-total 851,344,795 67,022,942 (65,848,547 ) 197,331,342 (41,695,153) 1,008,155,379 Construction in-progress 55,330, ,049,338 (2,767,206 ) (188,473,164) (310,531) 19,828,842 Finance lease Office furniture, fixtures and equipment 2,598, (1,483,411) - 1,115,382 Vehicles 2,324,045 35,910-28,474,893 (234,485) 30,600,363 Vessels 23,925, , ,493,144 Machinery and equipment 183,000, (35,849,660) (177,507) 146,973,600 Sub-total 211,849, ,529 - (8,858,178) (411,992) 203,182,489 Total acquisition cost 1,118,524, ,675,809 (68,615,753 ) - (42,417,676) 1,231,166,710 Accumulated depreciation Direct ownership Road and infrastructure 11,585,563 7,774,991 - (588,362) - 18,772,192 Building and improvements 9,688,777 4,254,346 (1,375,306 ) 726,423 (689,819) 12,604,421 Office furniture, fixtures and equipment 24,652,419 7,026,826 (1,725,242 ) (13,930,253) (564,614) 15,459,136 Vehicles 5,938,249 1,801,288 (2,014,553 ) 7,533,548 (763,369) 12,495,163 Vessels 8,720,893 2,942, ,663,692 Machinery and equipment 308,750,160 60,811,954 (38,541,857 ) 23,924,725 (17,038,037) 337,906,945 Sub-total 369,336,061 84,612,204 (43,656,958 ) 17,666,081 (19,055,839) 408,901,549 Finance lease Office furniture, fixtures and equipment 1,164, ,259 - (597,400) - 892,302 Vehicles 1,038, ,118-12,543,287 (506,704) 13,581,144 Vessels 3,609,362 1,923, ,532,404 Machinery and equipment 74,897,692 18,198,529 - (29,611,968) (1,090,498) 62,393,755 Sub-total 80,709,940 20,952,948 - (17,666,081) (1,597,202) 82,399,605 Total accumulated depreciation 450,046, ,565,152 (43,656,958 ) - (20,653,041) 491,301,154 Impairment loss Machinery and equipment 1,407,809 1,284,807 (602,307 ) - - 2,090,309 Net carrying amount 667,070, ,775, F-68

220 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) The details of fixed assets are as follows: (continued) Year Ended December 31, 2014 Beginning Translation Ending Balances Additions Deductions Reclassifications Difference Balances Acquisition cost Direct ownership Land 16,074,684 7,157,454 (723 ) 2,452,782 (141,701) 25,542,496 Road and infrastructure 34,546,423 7,033,024-93,185,393 (73,698) 134,691,142 Building and improvements 32,773, ,711 (346,471 ) 14,168,709 (354,786) 46,940,792 Office furniture, fixtures and equipment 17,430,185 6,478,457 (1,641,131 ) 17,961,980 (149,611) 40,079,880 Vehicles 7,590, ,195 (102,987 ) (110,386) (68,217) 7,413,422 Vessels 43,768, ,921 (17,827,780 ) 4,022,360-30,846,696 Machinery and equipment 527,804,622 66,569,857 (32,601,697 ) 11,052,910 (6,995,325) 565,830,367 Sub-total 679,988,555 88,926,619 (52,520,789 ) 142,733,748 (7,783,338) 851,344,795 Construction in-progress 66,171, ,963,717 (63,778 ) (117,732,848) (8,553) 55,330,405 Finance lease Office furniture, fixtures and Equipment 515, ,082,962-2,598,793 Vehicles 4,774, ,980 - (2,665,270) (87,390) 2,324,045 Vessels 27,455, ,820 - (3,825,198) - 23,925,525 Machinery and equipment 203,540, ,622 - (20,593,394) (100,155) 183,000,767 Sub-total 236,287, ,422 - (25,000,900) (187,545) 211,849,130 Total acquisition cost 982,447, ,640,758 (52,584,567 ) - (7,979,436) 1,118,524,330 Accumulated depreciation Direct ownership Road and infrastructure 6,520,520 5,082, (17,236) 11,585,563 Building and improvements 6,165,637 3,766,589 (120,116 ) - (123,333) 9,688,777 Office furniture, fixtures and equipment 7,917,699 6,488,109 (1,397,654 ) 11,794,738 (150,473) 24,652,419 Vehicles 5,114, ,634 (93,688 ) 20,482 (84,614) 5,938,249 Vessels 6,992,393 2,544,243 (842,264 ) 26,521-8,720,893 Machinery and equipment 254,868,241 59,692,973 (9,994,632 ) 9,328,376 (5,144,798) 308,750,160 Sub-total 287,578,925 78,555,827 (12,448,354 ) 21,170,117 (5,520,454) 369,336,061 Finance lease Office furniture, fixtures and equipment 456, , , ,164,443 Vehicles 2,104, ,473 - (1,710,488) (73,489) 1,038,443 Vessels 1,551,496 2,160,800 - (102,934) - 3,609,362 Machinery and equipment 77,117,757 17,490,667 - (19,628,637) (82,095) 74,897,692 Sub-total 81,230,220 20,805,199 - (21,170,117) (155,362) 80,709,940 Total accumulated depreciation 368,809,145 99,361,026 (12,448,354 ) - (5,675,816) 450,046,001 Impairment loss Machinery and equipment - 1,407, ,407,809 Net carrying amount 613,638, ,070, F-69

221 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) The details of gain (loss) on sale of fixed assets are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Proceeds from sale of fixed assets 66, ,379 9,968,598 22,142,418 38,912,122 Proceeds from claim to insurance company ,500,000 Carrying amounts of fixed assets (58,520) (559,674) (6,191,750) (24,106,170) (38,227,534) Gain (loss) on sale of fixed assets - net 7,747 (251,295) 3,776,848 (1,963,752) 4,184,588 Gain on sale of fixed assets is recorded as part of Other Income and loss on sale of fixed assets is recorded as part of Other Expenses in the consolidated statements of profit or loss and other comprehensive income for the three-month periods ended March 31, 2017 and 2016, and for the years ended December 31, 2016, 2015, and Carrying amounts of fixed assets that were written-off for the three-month periods ended March 31, 2017 and 2016, and for the years ended December 31, 2016, 2015, and 2014 amounted to US$101,831, US$60,007, US$4,805,052, US$852,625 and US$1,908,679, respectively. Construction in-progress Construction in-progress consists of the following: Percentage of March 31, 2017 (Unaudited) Completion Acquisition Cost Estimated Time of Completion Road and infrastructure 86% 316,778 June 2017 Building and improvements 30% - 98% 7,079,774 June - December 2017 Machinery and equipment 1% - 95% 14,408,549 June - December 2017 Office furniture and fixtures 70% - 80% 327,245 June 2017 Total 22,132,346 Percentage of March 31, 2016 (Unaudited) Completion Acquisition Cost Estimated Time of Completion Road and infrastructure 1% - 73% 16,991 June July 2019 Building and improvements 20% - 95% 11,754 April - December 2016 Machinery and equipment 36% - 95% 3,316,167 April September 2017 Office furniture and fixtures 80% - 90% 7,875 April 2016 Total 3,352,787 Percentage of December 31, 2016 Completion Acquisition Cost Estimated Time of Completion Road and infrastructure 1% - 90% 339,012 March July 2019 Building and improvements 45% - 72% 267,421 March - December 2017 Machinery and equipment 10% - 95% 8,209,057 December 2017 Office furniture and fixtures 95% 848 January 2017 Total 8,816, F-70

222 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) Construction in-progress (continued) Construction in-progress consists of the following: (continued) Percentage of December 31, 2015 Completion Acquisition Cost Estimated Time of Completion Road and infrastructure 1% - 40% 185,521 January July 2019 Building and improvements 19% - 80% 1,390,410 December 2016 Machinery and equipment 30% - 95% 16,983,582 January - June 2016 Office furniture and fixtures 49.7% - 95% 1,269,329 January 2016 Total 19,828,842 Percentage of December 31, 2014 Completion Acquisition Cost Estimated Time of Completion Road and infrastructure 30% - 35% 187,493 January - March 2015 Building and improvements 38% - 71% 1,907,442 June - December 2015 Machinery and equipment 90% 52,682,970 January - March 2015 Office furniture and fixtures 65% 540,309 October 2015 Vessels 13% 12,191 January 2015 Total 55,330,405 As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, there are no significant obstacles in the completion of the construction in-progress. Allocation of depreciation expense is as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Cost of revenue 22,626,935 24,803,098 95,399, ,753,345 96,055,451 Selling, general and administrative expenses 476, ,289 2,786,349 2,811,807 3,305,575 Total 23,102,992 25,555,387 98,186, ,565,152 99,361,026 As of December 31, 2016, 2015 and 2014, the Group recognized impairment losses on unused fixed assets value amounting to US$12,875,117, US$1,284,807, and US$1,407,809, respectively, and is presented as part of Other Expenses in the consolidated statements of profit or loss and other comprehensive income. 63 F-71

223 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 9. FIXED ASSETS - NET (continued) The Group s vessels are covered by insurance against damage of hull and machinery and increased value under blanket policies amounting to US$35.7 million as of March 31, 2017, US$37.5 million and Rp25.5 billion (equivalent to US$1.9 million) as of March 31, 2016, US$37.5 million and Rp25.5 billion (equivalent to US$1.9 million) as of December 31, 2016, US$46.6 million and Rp26 billion (equivalent to US$1.9 million) as of December 31, 2015, and Rp26 billion (equivalent to US$2.1 million) as of December 31, Management believes that the insurance coverage is adequate to cover possible losses that may arise from such risks. The Group has insured its fixed assets, except land and vessels as stated above, against losses by fire and other risks with a total insurance coverage of Rp92.8 billion (equivalent to US$6.9 million) and US$898 million as of March 31, 2017, Rp126 billion (equivalent to US$9.5 million) and US$372 million as of March 31, 2016, Rp149.1 billion (equivalent to US$11.2 million) and US$943 million as of December 31, 2016, Rp181.1 billion (equivalent to US$13.1 million) and US$780 million as of December 31, 2015, and Rp142.7 billion (equivalent to US$11.5 million) and US$711 million as of December 31, Management believes that the insurance coverage is adequate to cover possible losses that may arise from such risks. As of March 31, 2017, certain subsidiaries (SSB, SS, Mifa, TIA and CKB) have 40 parcels of land with Building Rights ( HGB ), which will expire on various dates from 2023 until Management believes that the landrights can be extended on their respective expiration dates. The borrowing costs capitalized to the construction in-progress amounted to US$Nil for the periods ended March 31, 2017 and 2016, and US$Nil, US$481,753, and US$4,546,443 for the years ended December 31, 2016, 2015, and 2014, respectively. Leased assets are pledged as collateral for finance lease payables (Note 18). As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, fixed assets owned by CK, CKB, BDD, TIA, Mifa, BEL and ATR are pledged as collateral for the Company s bank loan (Note 14). 10. MINING PROPERTIES - NET The details of mining properties are as follows: Mining Properties Mines Under Deferred from Business Construction Producing Mines Stripping Cost Combination Total Cost as of December 31, ,189,400 9,027,825 14,819,113 69,180, ,216,526 Addition during the year 619,739-14,368,016-14,987,755 Transfer to producing mines (8,612,540) 8,612, Reclasification (3,227,037) (3,227,037) Elimination , ,686 Cost as of December 31, ,969,562 17,640,365 29,520,815 69,180, ,310,930 Addition during the year 972,564-12,686,190-13,658,754 Transfer to producing mines (508,929) 508, Reclasification (149,818) - 149, Elimination - - (3,044,066) - (3,044,066) Cost as of December 31, ,283,379 18,149,294 39,312,757 69,180, ,925,618 Addition during the period 13, , ,878 Elimination , ,837 Cost as of March 31, ,296,607 18,149,294 39,732,244 69,180, ,358,333 Cost as of December 31, ,283,379 18,149,294 39,312,757 69,180, ,925,618 Addition during the year 346, ,183-1,067,495 Write-off (704,959) (704,959) Elimination , ,865 Cost as of December 31, ,924,732 18,149,294 40,487,805 69,180, ,742,019 Addition during the period ,476-53,476 Elimination , ,663 Cost as of March 31, ,924,732 18,149,294 40,799,944 69,180, ,054, F-72

224 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 10. MINING PROPERTIES - NET (continued) The details of mining properties are as follows: (continued) Mining Properties Mines Under Deferred from Business Construction Producing Mines Stripping Cost Combination Total Accumulated amortization as of December 31, (2,954,483) - (200,429) (3,154,912) Amortization during the year - (2,703,926) (10,701,343) (124,339) (13,529,608) Accumulated amortization as of December 31, (5,658,409) (10,701,343) (324,768) (16,684,520) Amortization during the year - (2,495,554) (3,881,549) - (6,377,103) Accumulated amortization as of December 31, (8,153,963) (14,582,892) (324,768) (23,061,623) Amortization during the period - (561,178) (922,015) - (1,483,193) Accumulated amortization as of March 31, (8,715,141) (15,504,907) (324,768) (24,544,816) Accumulated amortization as of December 31, (8,153,963) (14,582,892) (324,768) (23,061,623) Amortization during the year - (1,413,177) (3,785,596) - (5,198,773) Accumulated amortization as of December 31, (9,567,140) (18,368,488) (324,768) (28,260,396) Amortization during the period - (334,657) (1,108,719) - (1,443,376) Accumulated amortization as of March 31, (9,901,797) (19,477,207) (324,768) (29,703,772) Impairment loss on mining properties as of December 31, (67,707,382) (67,707,382) Impairment loss on mining properties as of December 31, (2,170,971) (1,169,319) (68,855,420) (72,195,710) Impairment loss on mining properties as of March 31, (2,170,971) (1,169,319) (68,855,420) (72,195,710) Impairment loss on mining properties as of December 31, (2,170,971) (1,169,319) (68,855,420) (72,195,710) Impairment loss on mining properties as of March 31, (2,170,971) (1,169,319) (68,855,420) (72,195,710) Net book value as of December 31, ,189,400 6,073,342 14,819,113 68,979, ,061,614 Net book value as of December 31, ,969,562 11,981,956 18,819,472 1,148,038 37,919,028 Net book value as of December 31, ,283,379 7,824,360 23,560,546-37,668,285 Net book value as of March 31, ,296,607 7,263,182 23,058,018-36,617,807 Net book value as of December 31, ,924,732 6,411,183 20,949,998-33,285,913 Net book value as of March 31, ,924,732 6,076,526 20,153,418-32,154, F-73

225 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 10. MINING PROPERTIES - NET (continued) Amortization of mining properties - producing mines and mining properties from business combination are presented as part of Cost of Revenue in the consolidated statements of profit or loss and other comprehensive income (Note 27). For the years ended December 31, 2015 and 2014, the fair value less cost to sell of all CGU is less than their carrying values. As a result, the Group recognized an impairment loss on mining properties amounting to US$1,148,038 and US$67,707,382 respectively, which is presented as Impairment Loss on Mining Properties in the consolidated statements of profit or loss and other comprehensive income. Management believes that the allowance for impairment losses in the value of mining properties as of March 31, 2017 and 2016, December 31, 2016, 2015, and 2014 is adequate to cover any losses from the impairment of mining properties. 11. GOODWILL - NET This account represents goodwill on: March 31, December 31, (Unaudited) (Unaudited) PT Media Djaya Bersama ( MDB ) The coal mines 17,295,047 17,295,047 17,295,047 17,295,047 17,295,047 Allowance for impairment losses (17,295,047) (17,295,047) (17,295,047) (17,295,047) (17,008,037) PT Energi Alamraya Semesta ( EAS ) Thermal energy independent power plant 1,569,993 1,569,993 1,569,993 1,569,993 1,569,993 Allowance for impairment losses (1,107,770) - (1,107,770) - - Translation adjustment (462,223) (448,907) (462,223) (491,085) (373,568) Net - 1,121,086-1,078,908 1,483,435 For the year ended December 31, 2016, the Group recognized impairment loss on goodwill of EAS amounting to US$1,107,770, since the recoverable amount of the goodwill was less than the carrying value. For the years ended December 31, 2015 and 2014, the Group recognized an impairment loss on goodwill of MDB amounting to US$17,295,047 and US$17,008,037, respectively, since the recoverable amount of the goodwill was less than the carrying value. For impairment testing purposes, the recoverable amounts of MDB and EAS have been determined based on a value in use calculation using cash flow projections covering ten-year period and five-year period, respectively. A summary of key assumptions used is as follows: March 31, December 31, (Unaudited) (Unaudited) Projected coal price US$20 - US$25 US$ US$24 US$20 - US$25 US$ US$24 US$24 - US$33 Projected mining electricity tarif Rp680 Rp2,400 Rp680 Rp2,400 Rp1,472 Pre-tax discount rate 11% 11% 11% 11% 9.69% % Management determined the key assumptions based on a combination of past experience and external sources. Changes to the assumptions used by the management to determine the recoverable value, in particular the discount and terminal growth rates, may have significant impact on the results of the assessment. 66 F-74

226 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 12. SHORT-TERM LOANS This account consists of: March 31, December 31, (Unaudited) (Unaudited) Third parties United States dollar PT Bank ANZ Indonesia 8,400,000 8,400,000 8,400,000 14,500,000 4,000,000 Rupiah PT Bank Sumitomo Mitsui Indonesia 16,139,929 16,947,876 16,001,785 16,310,257 18,086,816 PT Indonesia Infrastructure Finance 15,013,888 15,064,779 14,885,383 14,498,006 - PT Bank Mandiri (Persero) Tbk 3,753,472 3,766,194 3,721,346 3,624,502 4,019,293 Total 43,307,289 44,178,849 43,008,514 48,932,765 26,106,109 PT Bank Sumitomo Mitsui Indonesia ( BSMI ) On November 12, 2014, SS entered into a revolving uncommitted loan agreement with BSMI. Based on the loan agreement, SS obtained the following credit facilities: a. Loan on Note facility with maximum credit amount of Rp225 billion and will mature in 3 (three) months from the last drawdown date of the facility. The loan bears annual interest rate at Jakarta Interbank Offered Rate ( JIBOR ) plus certain margin. The facility is use for working capital. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the outstanding loan from this facility amounted to Rp215 billion, Rp225 billion, Rp215 billion, Rp225 billion, and Rp225 billion, respectively. b. Commercial Letter of Credit ( L/C ) facility with maximum credit amount of US$2,000,000 or other currency equivalent and will mature in 4 (four) months from the last drawdown of the facility. This facility is available for funding import equipment, spare parts, fuel and other supporting goods in relation with SS operation. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, this facility was not utilized by SS. c. Acceptance facility with maximum credit amount of US$2,000,000 or other currency equivalent and will mature in 3 (three) months from the last drawdown of the facility. This facility is used to settle usance Commercial L/C and Domestic Letter of Credit ( SKBDN ). As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, this facility was not utilized by SS. d. Loan on Note Trust Receipt ( LON T/R ) facility with maximum credit amount of US$2,000,000 or equivalent in Rupiah and will mature in 3 (three) months from the last drawdown of the facility. The loan bears annual interest rate at JIBOR plus certain margin if drawdown is made in Rupiah and London Interbank Offered Rate ( LIBOR ) plus certain margin if drawdown is made in US Dollar. This facility is available to settle sight L/C and SKBDN. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, this facility was not utilized by SS. e. Bank Guarantee facility with maximum credit amount of US$2,000,000 and will mature 12 (twelve) months from the last utilization date of the facility. The facility is available to issue bank guarantee in relation to SS operation. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, this facility was not utilized by SS. The above facilities are available until September 2015 and has been extended until June 30, No assets are pledged as collateral for these loan facilities. Maximum combination limit of Trade Facilities such as Commercial L/C facility, Acceptance facility, LON T/R facility, and Bank Guarantee facility is US$2,000, F-75

227 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 12. SHORT-TERM LOANS (continued) PT Bank Sumitomo Mitsui Indonesia ( BSMI ) (continued) Maximum combination limit of Trade Facilities and Loan on Note Facility is Rp225 billion. SS is required to maintain certain financial ratios such as debt to equity ratio, debt service ratio and unencumbered fixed asset to total debt ratio at maximum of 300%, 100% and 125%, respectively. PT Indonesia Infrastructure Finance ( IIF ) On October 29, 2015, SS and its subsidiaries obtained uncommitted revolving loan facility with maximum credit amount of Rp200 billion. The revolving loan facility is available up to October 28, 2017 and will mature 3 (three) months from the facility drawdown date and bears interest at 10.50% per annum. No assets are pledges as colleteral for this facility. SS has fully drawdown from the facility of Rp200 billion on November 16, 2015, November 25, 2015 and December 14, As of March 31, 2017 and 2016, and December 31, 2016 and 2015, the outstanding loan from this facility amounted to Rp200 billion, respectively (2014: RpNil). Based on the loan agreement, SS is required to comply with certain restrictive covenants related to SS nature of business, corporate action and others and to maintain certain financial ratios such as debt service coverage ratio and debt to equity ratio at maximum of 100% and 300%, respectively. PT Bank Mandiri (Persero) Tbk ( Mandiri ) On August 15, 2011, SS obtained a revolving working capital and bank guarantee facility with total maximum credit amounts of Rp50 billion and Rp70 billion, respectively. On March 22, 2012, Mandiri agreed to increase the maximum credit amount of bank guarantee to become Rp143 billion. The bank guarantee facility period has been extended several times, most recently until September 26, The loan from the working capital facility bears interest at 10.50% per annum. No assets are pledged as collateral for this facility. Based on loan agreement, SS is required to comply with certain restrictive covenants related to SS nature of business, corporate action and others and to maintain certain ratios such as debt to equity ratio and debt service coverage ratio at maximum of 300% and 100%, respectively. PT Bank ANZ Indonesia ( ANZ ) On August 16, 2011, SS obtained an uncommitted revolving loan facility from ANZ to finance the purchase of spare parts, repair costs and working capital with a maximum credit limit of US$20,000,000 and interest rate at Cost of Fund ( CoF ) plus 2.50% per annum. On September 24, 2014, based on an amendment and restatement of credit agreement, the revolving uncommitted loan facilities consist of: a. Revolving credit facility ( RC ) with maximum credit amount of US$20,000,000 after utilization of Bank Guarantee facility ( BG ) and Standby Letter of Credit facility ( SBLC ). 68 F-76

228 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 12. SHORT-TERM LOANS (continued) PT Bank ANZ Indonesia ( ANZ ) (continued) On September 24, 2014, based on an amendment and restatement of credit agreement, the revolving uncommitted loan facilities consist of: (continued) b. Financial Guarantee facility ( BG ) with maximum credit amount of US$10,000,000 and will mature in 6 (six) months excluding 30 (thirty) days claim period. This facility is used to provide financial quarantee. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, SS did not use the facility. c. SBLC facility with maximum credit amount of US$10,000,000 and will expire in 6 (six) months excluding 30 (thirty) days claim period. This facility is used in connection with acquisition process of targeted entity. On September 9, 2016, based on the second amendment of credit agreement, the loan facilities were amended into Revolving credit facility ( RC ) with maximum credit amount of US$8,400,000 and at no time shall the aggregate drawings under an individual facility exceed the specified individual facility limits. This facility will expire at maximum 6 (six) months and used to finance purchase of spare parts, maintenance cost, and working capital. As of March 31, 2017 and December 31, 2016, the outstanding loan from this facility amounted to US$8,400,000 (equivalent to Rp111,896 million and Rp112,862 million, respectively). ANZ stated that the facility is subject to review at any time and will, in any event, be reviewed on July 31, The annual interest rates is 4.85% in 2017, ranged from 4.79% to 5.10% in 2016, 4.70% to 5.09% in 2015, and 4.60% to 4.69% in No assets are pledged as collateral for this loan facility. Based on the loan agreement, SS is required to comply with certain restrictive covenants related to SS nature of business, corporate action and others and to maintain certain financial ratios such as debt service coverage ratio and debt to EBITDA ratio at maximum 150% and 300%, respectively. Payments made for short-term loans are as follows: March 31, December 31, (Unaudited) (Unaudited) ANZ Revolving - 6,100,000 12,000,000 7,500,000 4,000,000 Mandiri Revolving - 1,435,647 1,435,647 3,726,908 23,864,173 BSMI , PT Bank DBS Indonesia ,791,515 PT Standard Chartered Bank Indonesia ,136,471 PT Bank OCBC NISP Tbk ,242 Total - 7,535,647 14,179,916 11,226,908 58,196,401 As of March 31, 2017 and 2016, and December 31, 2016 and 2015, SS did not meet the financial ratios as required in the loan agreements. And as of December 31, 2014, SS complied with all the financial ratios required. As of the completion date of the consolidated financial statements, SS is in the process of debt restructuring with lenders of these short-term loans together with long-term bank loans, bonds payable and sukuk ijarah. 69 F-77

229 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 13. TRADE PAYABLES Trade payables represent payables for purchase of goods and services, with details as follows: March 31, December 31, (Unaudited) (Unaudited) Trade payables Third parties 44,743,740 37,329,742 36,850,595 42,253,849 61,021,888 Related parties (Note 30) 235,900, ,494, ,132, ,801, ,806,087 Total 280,643, ,823, ,983, ,055, ,827,975 Less current portion: Third parties (44,743,740) (37,329,742) (36,850,595) (42,253,849) (61,021,888) Related parties (Note 30) (126,542,787) (120,113,365) (132,015,763) (129,116,952) (134,106,087) Non-current portion 109,357, ,380, ,117, ,684, ,000 The details of trade payables to third parties based on suppliers are as follows: March 31, December 31, (Unaudited) (Unaudited) PT Solaris Prima Energy 5,337,352 1,998,386 2,957,653 2,600,708 - PT Pertamina Patra Niaga 3,535,318 2,774,649 2,431,262 4,814,993 3,078,084 PT Wargi Santosa 2,481, ,553 2,446,638 1,128,009 1,261,607 PT Pertamina (Persero) UPMS IV 2,205, ,979 1,404,138 1,465,076 3,300,388 PT Hexindo Adiperkasa 1,647, ,119 1,090, ,758 1,181,625 PT Petroleum Lima 1,496,576 1,104,592 1,759,727 1,078, ,499 PT Dahana (Persero) 1,169, ,026 1,015, ,110 - Others (below US$1,000,000 each) 26,869,487 28,990,438 23,744,593 30,054,713 51,326,685 Total 44,743,740 37,329,742 36,850,595 42,253,849 61,021,888 The details of trade payables based on currencies are as follows: March 31, December 31, (Unaudited) (Unaudited) United States dollar 174,000, ,550, ,657, ,999, ,888,793 Rupiah 106,424, ,689, ,031,593 97,208,782 61,146,752 Other foreign currencies 218, , ,792 1,847,140 4,792,430 Total 280,643, ,823, ,983, ,055, ,827,975 Less current portion (171,286,527) (157,443,107) (168,866,358) (171,370,801) (195,127,975) Non-current portion 109,357, ,380, ,117, ,684, , F-78

230 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 13. TRADE PAYABLES (continued) The details of aging of trade payables is as follows: March 31, December 31, (Unaudited) (Unaudited) Current 170,119, ,361, ,002, ,871, ,556,161 Overdue: 1-30 days 4,766,001 12,290,719 6,684,444 43,060,480 16,182, days 1,030,504 6,096,411 3,323,689 11,925,604 7,724, days 288,558 5,305,821 2,766,134 14,097,467 3,578,286 More than 90 days 104,439,407 66,769,581 74,206,623 99,820 43,786,561 Total 280,643, ,823, ,983, ,055, ,827,975 Less current portion (171,286,527) (157,443,107) (168,866,358) (171,370,801) (195,127,975) Non-current portion 109,357, ,380, ,117, ,684, , LONG-TERM BANK LOANS This account consists of: March 31, December 31, (Unaudited) (Unaudited) United States dollar OCBC Bank Ltd. - Club Deal Facility 302,967, ,539, ,779, ,018, ,850,540 Rupiah PT Bank ICBC Indonesia 7,409,959 10,221,272 7,342,740 10,729,308 15,855,454 PT Bank DBS Indonesia 6,586,942 9,086,004 6,527,188 9,537,613 14,094,402 PT Bank Mandiri (Persero) Tbk 4,817,008 10,472,085 6,167,317 12,597,250 25,143,389 Total 321,781, ,319, ,816, ,883, ,943,785 Less current maturities (31,075,496) (169,416,443) (29,742,990) (78,623,208) (18,678,746) Non-current portion 290,706, ,902, ,073, ,259, ,265,039 Oversea-Chinese Banking Corporation Limited ( OCBC ), Singapore - Club Deal Facility On December 18, 2013, the Company entered into a Club Deal facility agreement with total amount of US$450,000,000 with Oversea-Chinese Banking Corporation Limited ( OCBC ), PT Bank OCBC NISP Tbk ( OCBC NISP ), DBS Bank Ltd. ( DBS ), PT Bank ANZ Indonesia ( ANZ ) and PT Bank Mandiri (Persero) Tbk ( Mandiri ), where OCBC is acting as Agent and OCBC NISP is acting as Security Agent. The loan will be applied for refinancing the Group s existing loan and working capital, except for SS. 71 F-79

231 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 14. LONG-TERM BANK LOANS (continued) Oversea-Chinese Banking Corporation Limited ( OCBC ), Singapore - Club Deal Facility (continued) The loan consists of 3 (three) facilities as follows: a. Term loan facility ( TLF Facility ) with maximum credit facility of US$312,000,000 which will mature in 60 (sixty) months from the date of first loan utilization with grace period of 27 (twenty seven) months from date of drawdown. The TLF facility is payable in 12 (twelve) quarterly installments starting April The loan facility is used to refinance all existing loan of the Group excluding SS. b. Working Capital facility ( WCF Facility ) with maximum credit facility of US$78,000,000 which will mature in 3 (three) years from the first date of loan utilization and can be extended to 5 (five) years. The loan facility is used to finance general corporate and working capital of the Group excluding SS. c. Additional tranches (the Additional Debts ) with the aggregate amount of the commitments not to exceed US$450,000,000 which will mature in 5 (five) years from date of TLF facility utilization. The loan facility shall be used to fund capital expenditures of the Group and permitted acquisitions of the Group and all related costs in connection with the permitted acquisitions. The above facilities bear annual interest rates at LIBOR plus a certain margin. On January 20, 2014, the Company has fully drawn the TLF facility of US$312,000,000 and has transferred such loan to the subsidiaries to pay the Group s short-term and long-term bank loans, except SS. The Company has fully drawn the WCF facility of US$78,000,000 in several dates in On April 1, 2015, the Company has entered into an amendment deed of facility agreement with OCBC, which arranged the change of term of certain financial ratios. The amendment will be effective on April 16, On October 13, 2016, the Company entered into a Club Deal facility agreement with total amount of US$358,113,600 with OCBC, OCBC NISP, DBS, ANZ and Mandiri, where OCBC is acting as Agent and OCBC NISP is acting as Security Agent. This TLF Facility is obtained to refinance the Club Deal facility dated December 18, 2013 which has been amended by the deed of amendment agreement on April 1, The TLF facility is repayable in 18 (eighteen) quarterly installments starting October 2016 and will expire on January 22, On October 24, 2016, the Company has fully drawn the TLF facility of US$358,113,600 which was applied for settlement of Club Deal Facility dated December 18, F-80

232 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 14. LONG-TERM BANK LOANS (continued) Oversea-Chinese Banking Corporation Limited ( OCBC ), Singapore - Club Deal Facility (continued) The facility bears annual interest rates at LIBOR plus a certain margin. The loans from the above facilities are secured by trade receivables, inventories and fixed assets of subsidiaries (Notes 6, 7 and 9) at the date of refinancing. Based on the loan agreement, the Group (excluding SS) is required to comply with certain restrictive covenants related to the Group s nature of business, corporate action and others and to maintain certain financial ratios such as consolidated net debt to EBITDA ratio and consolidated net debt to equity ratio. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the Group (excluding SS) has met the financial ratios as required in all the loan agreements. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the outstanding loan from the above facilities amounted to US$302,967,618, US$385,539,921, US$329,779,157, US$385,018,937, and US$382,850,540, respectively, net of unamortized transaction costs amounting to US$8,294,030, US$4,460,079, US$9,834,443, US$4,981,063 and US$7,149,460, respectively. PT Bank Mandiri (Persero) Tbk ( Mandiri ) On March 22, 2012, Mandiri agreed to provide Special Transactions Loan III ( PTK III ) facility with a maximum credit limit of Rp600 billion to SS. This facility is available up to March 21, Based on the latest addendum dated March 17, 2014, total facility is decreased to become Rp260 billion. As of March 31, 2017, the above facility has been terminated and fully paid. As of March 31, 2016 and December 31, 2016, 2015, and 2014, the outstanding balance of the PTK III facility amounted to US$Nil, US$Nil, Rp16.07 billion (equivalent to US$1,164,595) and Rp80.36 billion (equivalent to US$6,460,011) net of unamortized transaction cost amounting to US$Nil, US$Nil, Rp169 milion (equivalent to US$12,264) and Rp811 million (equivalent to US$65,217), respectively. On November 8, 2013, Mandiri agreed to provide Special Transactions Loan IV ( PTK IV ) facility with a maximum credit limit of Rp300 billion to SS. This facility will expire on November 7, As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the outstanding balances of PTK IV facility amounted to Rp64.18 billion (equivalent to US$4,817,008), Rp billion (equivalent to US$10,472,055), Rp82.86 billion (equivalent to US$6,167,317), Rp billion (equivalent to US$11,432,655) and Rp billion (equivalent to US$18,683,378) respectively, net of unamortized transaction cost amounting to Rp39 million (equivalent to US$2,961), Rp179 million (equivalent to US$13,513), Rp136 million (equivalent to US$10,495), Rp243 million (equivalent to US$17,639), Rp536 million (equivalent to US$43,053), respectively. The above loans bear interest of 10.50% per annum in 2017, 2016, 2015, and No assets are pledged as collateral for these loan facilities. 73 F-81

233 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 14. LONG-TERM BANK LOANS (continued) PT Bank Mandiri (Persero) Tbk ( Mandiri ) (continued) Based on the loan agreement, SS is required to comply with certain restrictive covenants related to the SS nature of business, corporate action and others and to maintain certain financial ratios such as debt to equity ratio and debt service ratio at maximum of 300% and 100%, respectively. Based on the agreement, without the prior written consent from Mandiri, SS shall not, among others: a. Change the composition of shareholders, unless it does not change the ownership of the majority or controlling stake of Hamami family; and b. Distribute dividends, unless the distribution does not exceed 50% of net profit every year, and after the distribution of dividends, Debt to Equity Ratio (interest bearing) shall not exceed 300%. PT Bank DBS Indonesia ( DBS ) and PT Bank ICBC Indonesia ( ICBC ) On June 15, 2012, SS entered into an agreement with DBS and ICBC where in DBS acted as Agent and Security Agent. The loan is divided into two facilities, as follows: a. Term loan facility ( Facility A ) with maximum credit amount of Rp510 billion and will expire in 72 (seventy-two) months from the date of the agreement. b. Revolving loan facility ( Facility B ) with a maximum credit limit of Rp400 billion and will expire 12 (twelve) months from the date of agreement, and has been extented until June 15, 2015 with amendment of maximum credit limit to become Rp370 billion. The Facility has been terminated and not extended. As of March 31, 2017, outstanding loan from Facility A amounted to Rp billion (equivalent to US$13,996,901), net of unamortized transaction cost amounting to Rp12 million (equivalent to US$916). Amount of Facility A from DBS amounted to Rp87.74 billion (equivalent to US$6,586,942), net of unamortized transaction cost amounting to Rp6 million (equivalent to US$431). Amount of Facility A from ICBC amounted to Rp98.71 billion (equivalent to US$7,409,959), net of unamortized transaction cost amounting to Rp6 million (equivalent to US$485). As of March 31, 2016, outstanding loan from Facility A amounted to Rp billion (equivalent to US$19,307,276), net of unamortized transaction cost amounting to Rp66 million (equivalent to US$4,971). Amount of Facility A from DBS amounted to Rp billion (equivalent to US$9,086,004), net of unamortized transaction cost amounting to Rp31 million (equivalent to US$2,335). Amount of Facility A from ICBC amounted to Rp billion (equivalent to US$10,221,272), net of unamortized transaction cost amounting to Rp35 million (equivalent to US$2,636). 74 F-82

234 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 14. LONG-TERM BANK LOANS (continued) PT Bank DBS Indonesia ( DBS ) and PT Bank ICBC Indonesia ( ICBC ) (continued) As of December 31, 2016, outstanding loan from Facility A amounted to Rp billion (equivalent to US$13,869,928), net of unamortized transaction cost amounting to Rp109 million (equivalent to US$8,081). Amount of Facility A from DBS amounted to Rp87.70 billion (equivalent to US$6,527,188), net of unamortized transaction cost amounting to Rp57 million (equivalent to US$4,242). Amount of Facility A from ICBC amounted to Rp98.66 billion (equivalent to US$7,342,740), net of unamortized transaction cost amounting to Rp57 million (equivalent to US$4,278). As of December 31, 2015, outstanding loan from Facility A amounted to Rp billion (equivalent to US$20,266,921), net of unamortized transaction cost amounting to Rp115 million (equivalent to US$8,336). Amount of Facility A from DBS amounted to Rp billion (equivalent to US$9,537,613), net of unamortized transaction cost amounting to Rp54 million (equivalent to US$3,914). Amount of Facility A from ICBC amounted to Rp billion (equivalent to US$10,729,308), net of unamortized transaction cost amounting to Rp61 million (equivalent to US$4,422). As of December 31, 2014, outstanding loan from Facility A amounted to Rp billion (equivalent to US$29,949,856), net of unamortized transaction cost amounting to Rp354 million (equivalent to US$28,427). Amount of Facility A from DBS amounted to Rp billion (equivalent to US$14,094,402), net of unamortized transaction cost amounting to Rp166 million (equivalent to US$13,378). Amount of Facility A from ICBC amounted to Rp billion (equivalent to US$15,855,454), net of unamortized transaction cost amounting to Rp187 million (equivalent to US$15,049). The facilities bear interest 12.32% to 12.58% per annum in 2017, 12.32% to 12.45% per annum in 2016, 12.45% to 12.58% per annum in 2015 and 11.63% to 12.45% per annum in Based on the loan agreement, SS is required to comply with certain restrictive covenants related to SS nature of business, corporate action and others and to maintain certain financial ratios such as debt to EBITDA ratio, total debt to consolidated net worth ratio and EBITDA to debt service ratio at maximum of 400%, 300% and 100%, respectively. Based on the agreement, SS shall not: a. Enter into merger, consolidation or corporate reconstruction; b. Change business; and c. Declare and pay dividends of any kind to its shareholders. On August 6, 2012, DBS agreed to amend the dividend distribution provision as the Company is obliged to issue a written notification dated at least 14 (fourteen) days prior if the Company decides to declare dividend in any form payment to shareholders. No assets are pledged as collateral for these facilities. 75 F-83

235 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 14. LONG-TERM BANK LOANS (continued) PT Bank DBS Indonesia ( DBS ) and PT Bank ICBC Indonesia ( ICBC ) (continued) Payments of long-term bank loans are as follows: March 31, December 31, (Unaudited) (Unaudited) OCBC Club deal facility 28,351,951-50,386, DBS & ICBC Club deal facility - 1,781,013 7,018,161 6,966,831 7,853,498 Mandiri 1,404,694 2,642,931 6,851,938 10,144,255 20,350,586 PT Bank DBS Indonesia ,104,000 PT Bank OCBC NISP Tbk ,511,020 Anz Banking Group Limited - Syndicated loan ,157,036 Qatar National Bank Ltd. - Syndicated loan ,266,000 Total 29,756,645 4,423,944 64,256,499 17,111, ,242,140 As of March 31, 2017 and 2016, and December 31, 2016 and 2015, SS did not meet the financial ratios as required in all the loan agreements. Accordingly, all of SS long-term bank loans were classified as current liabilities in the consolidated statements of financial position. Until the completion date of the consolidated financial statements, SS is in the process of debt restructuring with the lenders of these long-term loans. 15. ACCRUED EXPENSES AND SHORT-TERM EMPLOYEE BENEFITS LIABILITY Accrued expenses The detail of accrued expenses are as follows: March 31, December 31, (Unaudited) (Unaudited) Project cost 25,201,065 33,978,000 23,811,499 17,709,643 9,715,468 Royalty 2,379,667 2,165,089 2,076,414 1,762,560 4,162,563 Interest 1,288, , ,710 1,497,483 1,248,590 Professional fees 835, , ,557 1,063, ,277 Others 15,347,054 12,106,565 11,798,774 10,538,137 5,519,266 Total 45,051,761 49,866,673 39,185,954 32,570,846 21,460,164 Short-term Employee Benefits Liability This account consists of accrual for employee salaries and benefits. March 31, December 31, (Unaudited) (Unaudited) Short-term employee benefits liability 9,560,704 7,493,004 8,152,637 6,350,165 9,550, F-84

236 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 16. ADVANCES FROM CUSTOMERS The details of advances from customers are as follows: March 31, December 31, (Unaudited) (Unaudited) Third parties 1,335,379 4,627,111 1,786,211 2,824,138 4,493,524 Related parties (Note 30) PT Tri Swardana Utama 12, PT Trakindo Utama 1, ,018 73,110 18, ,874 PT Chakra Jawara Sub-total 13, ,812 73,110 18, ,874 Total 1,349,034 4,820,923 1,859,321 2,843,120 4,836, PROVISION FOR ENVIRONMENTAL RESTORATION OBLIGATION A financial surety, or reclamation guarantee, is required under Government Regulation No. 78 of 2010 ( GR 78/2010 ). The regulation requires that an annual study be undertaken by a mining company operating in Indonesia to estimate its reclamation costs and that a plan be submitted to the Government. The plan includes an estimate of the cost of performing the rehabilitation work by an outside contractor. For any work a company does not carry out in the period pursuant to the plan, the Government can require payment for the outstanding work to be carried out by the contractor. The surety can be in the form of a joint account, time deposit, bank guarantee or, in certain circumstances involving public companies, an accounting reserve recorded in the accounts of the Group. This account pertains to the provision for the restoration of the mine area at the end of the mine term. The movements in the provision for environmental restoration are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Beginning balance 2,319,352 2,218,974 2,218,974 1,356, ,242 Provisions for restoration during the period 90, , ,736 1,418,664 1,819,633 Actual restoration costs paid during the period (86,456) (98,945) (420,358) (556,503) (766,062) Ending balance 2,323,079 2,242,517 2,319,352 2,218,974 1,356,813 The Group s management believes that the provision is adequate to cover all obligations for environmental restoration. Management further believes that the provision is in accordance with existing regulations. 77 F-85

237 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 18. FINANCE LEASE PAYABLES The Group has lease commitments covering office furniture, fixtures and equipment, vehicles, vessels and machinery and equipment with lease terms ranging from 3 (three) years to more than 5 (five) years and expiring on various dates with details as follows: March 31, December 31, (Unaudited) (Unaudited) Third parties: PT Caterpillar Finance Indonesia 10,559,677 25,120,066 12,999,057 31,373,244 60,098,465 PT Adira Dinamika Multi Finance Tbk - 37,271-39,172 89,032 PT Mitra Pinasthika Mustika Finance ,610,605 Related party: PT Chandra Sakti Utama Leasing (Note 30) 38,381,342 51,911,931 40,941,423 51,968,195 50,646,423 Total 48,941,019 77,069,268 53,940,480 83,380, ,444,525 Less amount applicable to interest (4,505,762) (7,825,170) (5,257,991) (4,899,512) (9,383,892) Net 44,435,257 69,244,098 48,682,489 78,481, ,060,633 Less current maturities Third parties PT Caterpillar Finance Indonesia (8,872,933) (21,769,920) (9,155,726) (23,945,738) (26,813,666) PT Adira Dinamika Multi Finance Tbk - (18,118) - (17,101) (19,936) PT Mitra Pinasthika Mustika Finance (3,553,516) Sub-total (8,872,933) (21,788,038) (9,155,726) (23,962,839) (30,387,118 ) Related party PT Chandra Sakti Utama Leasing (Note 30) (10,764,054) (11,360,072) (9,562,238) (12,677,513) (9,882,729) Finance lease payables - net of current maturities Third parties PT Caterpillar Finance Indonesia 1,295,313 2,298,258 3,304,373 6,514,718 30,460,444 PT Adira Dinamika Multi Finance Tbk - 25,320-29,610 51,797 Sub-total 1,295,313 2,323,578 3,304,373 6,544,328 30,512,241 Related party PT Chandra Sakti Utama Leasing (Note 30) 23,502,957 33,772,410 26,660,152 35,296,419 34,278,545 The present values of the scheduled payments of the finance lease payables by the year of maturity are as follows: March 31, 2017 (Unaudited) Minimum Lease Payments Interest Component Present Value Within 1 year 22,123,070 (2,486,083) 19,636,987 Within 2-5 years 26,817,949 (2,019,679) 24,798,270 Total 48,941,019 (4,505,762) 44,435, F-86

238 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 18. FINANCE LEASE PAYABLES (continued) The present values of the scheduled payments of the finance lease payables by the year of maturity are as follows: (continued) March 31, 2016 (Unaudited) Minimum Lease Payments Interest Component Present Value Within 1 year 36,493,624 (3,345,730) 33,147,894 Within 2-5 years 40,575,644 (4,479,440) 36,096,204 Total 77,069,268 (7,825,170) 69,244,098 December 31, 2016 Minimum Lease Payments Interest Component Present Value Within 1 year 21,476,757 (2,758,793) 18,717,964 Within 2-5 years 32,463,723 (2,499,198) 29,964,525 Total 53,940,480 (5,257,991) 48,682,489 December 31, 2015 Minimum Lease Payments Interest Component Present Value Within 1 year 39,444,921 (2,804,569) 36,640,352 Within 2-5 years 43,935,690 (2,094,943) 41,840,747 Total 83,380,611 (4,899,512) 78,481,099 December 31, 2014 Minimum Lease Payments Interest Component Present Value Within 1 year 44,918,327 (4,648,480) 40,269,847 Within 2-5 years 69,513,007 (4,734,050) 64,778,957 More than 5 years 13,191 (1,362) 11,829 Total 114,444,525 (9,383,892) 105,060,633 Interest rates per annum March 31, December 31, (Unaudited) (Unaudited) United States dollar PT Caterpillar Finance Indonesia 4.20% % 4.23% % 4.20% % 3.86% % 3.86% % PT Chandra Sakti Utama Leasing 6.23% % 6.23% % 6.23% % 5.48% % 5.00% % PT Mitra Pinasthika Mustika Finance % % 3.70% % Rupiah PT Chandra Sakti Utama Leasing 8.60% % 8.60% % 8.60% % 14.03% % 13.37% % PT Adira Dinamika Multi Finance Tbk % % 7.74% All assets acquired under finance lease agreements are used as collateral for the finance lease payables (Note 9). 79 F-87

239 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 19. BONDS PAYABLE The details of bonds payable are as follows: March 31, 2017 (Unaudited) Unamortized Principal Issuance Costs Total Current Non-current Obligasi Sumberdaya Sewatama I Tahun 2012: - Series B 43,615,344 (53,270) 43,562,074 43,562,074 - Total 43,615,344 (53,270) 43,562,074 43,562,074 - March 31, 2016 (Unaudited) Unamortized Principal Issuance Costs Total Current Non-current Obligasi Sumberdaya Sewatama I Tahun 2012: - Series B 43,763,182 (127,511) 43,635,671-43,635,671 Total 43,763,182 (127,511) 43,635,671-43,635,671 December 31, 2016 Unamortized Principal Issuance Costs Total Current Non-current Obligasi Sumberdaya Sewatama I Tahun 2012: - Series B 43,242,036 (71,777) 43,170,259 43,170,259 - Total 43,242,036 (71,777) 43,170,259 43,170,259 - December 31, 2015 Unamortized Principal Issuance Costs Total Current Non-current Obligasi Sumberdaya Sewatama I Tahun 2012: - Series B 42,116,709 (139,480) 41,977,229-41,977,229 Total 42,116,709 (139,480) 41,977,229-41,977,229 December 31, 2014 Unamortized Principal Issuance Costs Total Current Non-current Obligasi Sumberdaya Sewatama I Tahun 2012: - Series A 17,604,502 (44,108) 17,560,394 17,560, Series B 46,704,180 (224,708) 46,479,472-46,479,472 Total 64,308,682 (268,816) 64,039,866 17,560,394 46,479,472 SS issued bonds Obligasi Sumberdaya Sewatama I Tahun 2012 amounting to Rp800 billion consisting of 2 (two) series, Obligasi Series A and Obligasi Series B. The trustee was PT Bank CIMB Niaga Tbk (the Trustee ), a third party. The issuance of bonds payable and Sukuk Ijarah (Note 20) has received the effective statement from the Chairman of BAPEPAM-LK in its letter No. S-13443/BL/2012 dated November 22, F-88

240 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 19. BONDS PAYABLE (continued) Obligasi Series A amounting to Rp219 billion was issued on November 30, 2012, listed on the Indonesia Stock Exchange, matured on November 30, The interest rate is 8.60% per annum and paid quarterly. Obligasi Series B amounting to Rp581 billion was issued on November 30, 2012, listed on the Indonesia Stock Exchange, will mature on November 30, The interest rate is 9.60% per annum and paid quarterly. Based on credit rating on the long-term debt securities dated September 9, 2015 from PT Pemeringkat Efek Indonesia ( Pefindo ) covering the period from September 9, 2015 until September 1, 2016, Obligasi Sumberdaya Sewatama I Tahun 2012 has received a rating of ida. On September 14, 2016, Obligasi Sumberdaya Sewatama I Tahun 2012 has received a rating of ida from Pefindo covering the period from September 14, 2016 up until September 1, Based on credit rating issued by Pefindo on February 24, 2017, Obligasi Sumberdaya Sewatama I Tahun 2012 rating has been lowered to idbbb-. All bonds were issued in Indonesia and denominated in Rupiah. All bonds payable of SS are unsecured. The funds received from issuance of bonds net of issuance costs are to be used for partial payment of bank loans and working capital amounting to 60% and 40%, respectively. In 2014, SS has utilized proceeds from issuance of bonds payable for working capital amounting to Rp32 billion. In 2013, SS has utilized proceeds from issuance of bonds payable for working capital amounting to Rp billion. Under the terms of the bond agreements, SS is required to comply with certain agreed restrictive covenants, which include the requirements to maintain certain financial ratios and to obtain prior written approval from the Trustee with respect to transactions involving amounts exceeding certain thresholds or exceeding requirements agreed with the Trustee, such as, among others, declaration and payment of dividends if the Company failed to pay the interest; sale and transfer of assets; granting of guarantees or pledging of assets; mergers; acquisitions; issuance of bonds and/or other debt instruments, and/or bank loans which are ranked higher than the current bonds; changes in SS main business activities; reducing its capital; providing a corporate guarantee; providing loan and filing for bankruptcy. Financial ratios should be maintained as follows: 1. Debt to equity ratio maximum 3:1. 2. Ratio between EBITDA to interest expense minimum 1:1. 3. Ratio between fixed assets not pledged to debt minimum 125%. As of March 31, 2017 and December 31, 2016, SS has not met the required debt to equity ratio. As of March 31, 2016, December 31, 2015, and 2014, SS has complied all covenants related to bonds as disclosed above. As of the date of completion of the consolidated financial statements, SS is in the process of restructuring of bonds payable together with short-term loans, long-term bank loans and sukuk ijarah. 81 F-89

241 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 20. SUKUK IJARAH SS issued Sukuk Ijarah Sumberdaya Sewatama I Tahun 2012 amounting to Rp200 billion (equivalent to US$13,645,357) on November 30, 2012 and listed on the Indonesia Stock Exchange, which will mature on November 30, Sukuk Ijarah will give an annual fixed return amounting to Rp19.2 billion (equivalent to US$1,391,809). The trustee was PT Bank CIMB Niaga Tbk (the Trustee ), a third party. Based on credit rating on the long-term debt securities dated September 9, 2015 from PT Pemeringkat Efek Indonesia ( Pefindo ) covering the period from September 2, 2015 until September 1, 2016, Sukuk Ijarah Sumberdaya Sewatama I Tahun 2012 has received a rating of ida. On September 14, 2016, Sukuk Ijarah Sumberdaya Sewatama I Tahun 2012 has received again a rating of ida (sy) from Pefindo covering the period from September 14, 2016 until September 1, Sukuk Ijarah is issued in Indonesia and in Indonesian rupiah. Sukuk Ijarah of SS are unsecured. For the issuance of Sukuk Ijarah, SS entered into a contract that required to fulfill Ijarah financing transactions, among others, based on the contract of Ijarah and the contract of Wakalah. The funds received from issuance of Sukuk Ijarah net of issuance costs are to be used for payment of bank loan and working capital at a proportion of 60% and 40%, respectively. In 2014, the Company has utilized proceeds from issuance of Sukuk Ijarah for working capital amounting to Rp8 billion (equivalent to US$545,814). In 2013, SS has utilized proceeds from issuance of Sukuk Ijarah for working capital amounting to Rp33.67 billion. Under the terms of Sukuk Ijarah agreements, SS is required to comply with certain agreed restrictive covenants, which include the requirements to maintain certain financial ratios and to obtain prior written approval from the Trustee with respect to transactions involving amounts exceeding certain thresholds or exceeding requirements agreed with the Trustee, such as, among others, declaration and payment of dividends if SS failed to pay interest; sale and transfer of assets; granting of guarantees or pledging of assets; mergers; acquisitions; issuance of bonds and/or other debt instruments, and/or bank loans which are ranked higher than the current bonds; changes in SS main business activities; reducing its capital; providing a corporate guarantee; providing loan and filing for bankruptcy. Financial ratios should be maintained as follows: 1. Debt to equity ratio maximum 3:1. 2. Ratio between EBITDA to interest expense at minimum of 1:1. 3. Ratio between fixed assets not pledged to debt at minimum of 125%. As of March 31, 2017 and December 31, 2016, SS has not met the required debt to equity ratio. As of March 31, 2016, December 31, 2015 and 2014, SS has complied all the covenants related to Sukuk Ijarah as disclosed above. As of the date of completion of the consolidated financial statements, SS is in the process of restructuring of sukuk ijarah together with short-term loans, long-term bank loans and bonds payable. 82 F-90

242 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION a. Estimated Claims for Tax Refund March 31, December 31, (Unaudited) (Unaudited) Overpayments of corporate income taxes: ,266,999 2,509,717 9,905, ,078,817 8,502,998 9,088,404 8,238, ,645,292 6,290,071 1,631,209 6,127,805 6,561, ,218 15,218 15,218 15,218 12,280, ,605,221 1,780, ,921 13,968 13,802 13,442 14, ,599-94, , , , ,975 Overpayments of value added tax: ,605 20,674 20, , ,282 19, ,343,981 1,023,607 1,341,239 1,023, , , , , , ,197-33,380 37, , ,172 Payment of tax assessments for: value added tax: ,274 26,650 40,646 25,647 28, , , , , , ,117 58, ,174 56,510 66, ,179-4,984 5, , , , , , ,862,493 3,875,585 3,829,433 3,729,776 4,136, , , , , ,495 Sub-total 29,619,485 24,005,764 27,105,705 22,501,684 26,718,580 Allowance for losses on estimated claims for tax refund (4,304,942) (3,777,718) (4,268,147) (3,603,295) (105,426 ) Estimated claims for tax refund - net 25,314,543 20,228,046 22,837,558 18,898,389 26,613, Corporate Income Tax SSB SSB recorded tax overpayment of 2015 corporate income amounting to Rp10.83 billion (equivalent to US$806,341). On September 2, 2016, the Directorate General of Tax (the DGT ) has issued field letter of inspection. Until the completion of the consolidated financial statements the DGT audit process is still ongoing. Reswara On October 12, 2016, Reswara received Notice Letter of Field Inspection of corporate income tax in 2015 with a value of restitution claims amounting to US$102,527. Until the completion date of the consolidated financial statement, the DGT has not released the result of the tax audit. 83 F-91

243 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) a. Estimated Claims for Tax Refund (continued) 2014 Corporate Income Tax The Company On April 20, 2016, the Company received Tax Overpayment Assessment Letter ( SKPLB ) for 2014 corporate income tax amounting to US$1,287,458, which was the same amount of refund that was claimed by the Company. The Company has received tax refund from the DGT. In accordance with the SKPLB, the Company s tax loss for 2014 was corrected to US$3,468,887 out of the tax loss of US$9,630,632 that was reported by the Company. The Company has submited objection on the correction of tax loss to the DGT on July 19, On April 22, 2015, the Company received SKPLB for 2013 corporate income tax amounting to US$653,499 out of the refund of US$653,531 that was claimed by the Company and recorded the difference in Selling, General and Administrative Expenses. The Company has received tax refund from the DGT. In accordance with the SKPLB, the Company s tax loss for 2013 was corrected to US$5,915,790 out of the tax loss of US$18,757,664 that was reported by the Company. On July 6, 2015, the Company has submitted objection on the correction of tax loss to the DGT. On July 1, 2016, DGT rejected the Company s objection for fiscal loss correction and the Company did not submit an appeal. SSB On April 20, 2016, SSB received SKPLB for 2014 corporate income tax amounting to Rp23.44 billion (equivalent to US$1,803,391), which is lower by Rp1.18 billion (equivalent to US$90,880) than previously reported. In accordance with the SKPLB, SSB s fiscal loss for 2014 was corrected to Rp7.03 billion (equivalent to US$533,386) out of the fiscal loss of Rp8.44 billion (equivalent to US$640,351) that was reported by SSB and recorded the correction of fiscal loss amounting to Rp1.41 billion (equivalent to US$106,965) as deduction to fiscal loss. SSB has received refund from tax office on May 2016 and submitted objection amounting to Rp55.16 million (equivalent to US$4,243) to the DGT on May 30, 2016 against the SKPLB. Until the completion date of the consolidated financial statements, the DGT has not yet released the result of the tax appeal. SS On August 8, 2015, SS received SKPLB for 2014 corporate income tax amounting to Rp4.89 billion (equivalent to US$376,212), Rp21.93 billion lower than tax overpayment that was claimed by SS amounting to Rp26.82 billion. SS has received the tax refund from the DGT on September 8, SS filed an objection for the correction and until the date of completion of the consolidated financial statements the appeals is still on process. In accordance with the SKPLB, SS tax loss for 2014 was corrected to Rp11.54 billion out of the fiscal loss of Rp19 billion that was reported by SS. 84 F-92

244 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) a. Estimated Claims for Tax Refund (continued) 2014 Corporate Income Tax (continued) Reswara On April 25, 2016, Reswara received SKPLB for 2014 corporate income tax amounting to US$689,583 from total refund that was claimed by Reswara. In accordance with the SKPLB, Reswara s tax loss for 2014 was corrected to US$1,204,579 out of the fiscal loss of US$1,237,101 that was reported and US$32,522 was recorded as deduction to tax loss. CKB On April 20, 2016, CKB received SKPLB for 2014 corporate income tax amounting to Rp5.29 billion out of the refund of Rp5.60 billion that was claimed by CKB. CKB has received tax refund from the DGT. In accordance with the SKPLB, CKB s tax loss for 2014 was corrected to Rp17.81 billion out of the fiscal loss of Rp16.22 billion that was reported by CKB. CKB agreed with correction of fiscal loss amounting to Rp1.59 billion Corporate Income Tax CK On April 28, 2015, CK received SKPLB for 2013 corporate income tax amounting to US$6,681,171 out of the refund of US$6,696,388 that was claimed by CK and the difference was recorded. CK has received tax refund from the DGT. In accordance to the SKPLB, CK s tax loss for 2013 was corrected to become taxable income of US$60,872 out of the fiscal loss of US$962,861 that was reported by CK. CK agreed with the correction of fiscal loss amounting to US$412,790 and submitted objection on the correction of fiscal loss amounting to US$610,943 to the DGT on July 6, On June 30, 2016, CK received Decision Letter of the Objection from the DGT for SKPLB for 2013 corporate income tax. Based on that letter, the DGT has rejected the objection submitted by CK. On September 7, 2016, CK submitted Tax Appeal to Tax Court related to the decision of DGT. Until the completion date of the financial statements, Tax Court has not yet issued decision relating to the appeal. CKB On April 24, 2015, CKB received SKPLB for 2013 corporate income tax amounting to Rp18.63 billion (equivalent to US$1,397,541) similar with tax overpayment that was claimed by CKB. CKB has received tax refund from the DGT. In accordance to the SKPLB, CKB s tax loss for 2013 was corrected to Rp26.36 billion out of the fiscal loss of Rp51.79 billion that was reported by CKB. CKB agreed with the correction of fiscal loss amounting to Rp5.6 billion and submitted tax objection for correction of fiscal loss amounting to Rp19.83 billion (equivalent to US$1,487,368) to the DGT on July 14, Until the completion date of the consolidated financial statements, the DGT has not yet issued decision relating to the objection. 85 F-93

245 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) a. Estimated Claims for Tax Refund (continued) 2013 Corporate Income Tax (continued) Reswara On April 23, 2015, Reswara received SKPLB for 2013 corporate income tax amounting to US$442,085 from total refund that was claimed by Reswara. In accordance with the SKPLB, Reswara s tax loss for 2013 was corrected to US$409,356 out of the fiscal loss of US$489,654 that was reported and US$80,298 was recorded as deduction to tax loss. SS On June 8, 2015, SS received SKPLB for 2013 corporate income tax amounting to Rp16.79 billion (equivalent to US$1,259,002), similar with tax overpayment that was claimed by SS. SS has received the tax refund from the DGT on July 10, In accordance with the SKPLB, SS tax loss for 2013 was corrected to Rp31.81 billion out of the fiscal loss of Rp38.32 billion that was reported by SS and Rp6.51 billion (equivalent to US$443,902) was recorded as deduction to tax loss Corporate Income Tax The Company On April 18, 2013, the Company received SKPLB where the Company s tax loss for 2011 was corrected to Rp31.80 billion out of the fiscal loss of Rp47.47 billion (equivalent to US$5,234,710) that was reported by the Company. The Company accepted tax loss correction amounting to Rp3.42 billion (equivalent to US$377,092) and submitted tax objection for tax loss correction amounting to Rp12.25 billion. On the same date, the Company also received several Tax Underpayment Assessment Letter ( SKPKBs ) and SKPLB for income taxes under Articles 23, 26 and 4(2) for year 2011 with total tax underpayment (after compensated) amounting to Rp22.74 billion. The Company has already received all tax overpayment and paid all tax underpayment. Based on the SKPKB and SKPLB, the Company agreed with correction amounting to Rp592 million and submitted tax objection for SKPKB of income tax under Article 26 for year 2011 amounting to Rp22.14 billion (equivalent to US$1,637,290). In July 2014, the DGT rejected the Company s objection for fiscal loss correction and SKPKB for income tax under Article 26. On October 2, 2014, the Company has filed the appeal to the Tax Court on the objection verdict. On November 12, 2015, the Tax Court has fully granted the appeal amounting to Rp22.14 billion (equivalent to US$1,637,290). The Company has received the refund of appeal on January 21, CK On April 4, 2013, CK received SKPLB from the DGT for 2011 corporate income tax, which approved the CK s estimated claims for tax amounting to Rp54.52 billion. The DGT also corrected CK s taxable income for fiscal year 2011 from Rp billion to become Rp billion. CK agreed with the correction on the taxable income amounting to Rp2.34 billion and submitted an objection on the correction amounting to Rp39.80 billion. On June 20, 2014, the DGT issued decision which approved the objection submitted by CK amounting to Rp6.72 billion. On the DGT s decision, CK submitted Tax Appeal amounting to Rp33.08 billion to the Tax Court. Until the completion date of the financial statements, the Tax Court has not yet issued decision relating to the appeal. 86 F-94

246 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) a. Estimated Claims for Tax Refund (continued) 2014 Value Added Tax (VAT) SS On September 1, 2016, SS received VAT SKPLB for December 2014 amounting to Rp85.85 billion out of Rp86.71 billion as claimed by SS. On the same date SS also received VAT Underpayment Tax Assessment Letter ( SKPKB ) for January - November 2014 amounting to Rp9.33 billion. Based on the tax assessment letters above, on January 4, 2017, SS has received the refund of VAT, after compensated with the underpayment of VAT, amounting to Rp84.40 billion. SS accepted the correction amounting to Rp1.60 billion and filled an objection for the correction amounting to Rp8.62 billion on November 29, Until the completion date of the consolidated financial statements, there is still no decision from DGT regarding the objection of SS Value Added Tax (VAT) The Company Overpayment of 2013 VAT amounted to US$1,023,607, until the completion of the consolidated financial statements, ABM is in progress audit by tax office. SS On March 30, 2016 and April 22, 2016, SS received VAT SKPLB for period December 2013 and VAT STP for period October - December 2013 amounting to Rp61.13 billion and Rp4.93 billion, respectively. On July 19, 2016, SS received refundable VAT of SKPLB for December On September 8, 2016, SS paid VAT STP for October 2013 amounting Rp557 million. On May 10, 2016, SS submitted objection for correction of VAT STP for period December 2013 amounting Rp4.37 billion. On November 18, 2016, DGT granted partial appeal amounting to Rp144 million. On December 7, 2016, SS submitted appeal for the rejected portion amounting Rp4.23 billion. Until the completion date of the consolidated financial statements the appeal is still in process. 87 F-95

247 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) a. Estimated Claims for Tax Refund (continued) 2011 Value Added Tax SS On July 16, 2013, SS received SKPLB for January - December 2011 VAT amounting to Rp27.09 billion out of Rp27.82 billion that was previously claimed and was received on August 21, SS has submitted an objection on September 23, 2013 for the correction of Rp0.73 billion. On September 22, 2014, DGT partialy approved the objection for the amount of Rp0.27 billion. On October 17, 2014, SS filed an appeal for the correction amounting to Rp0.46 billion. On November 16, 2015, SS received the Appeal Decision for January - December 2011 VAT amounting to Rp0.31 billion, and recorded Rp0.15 billion in Taxes Expense account in the 2015 consolidated statement of profit or loss and other comprehensive income. SS has received the refund of the appeal decision amounting to Rp0.15 billion on February 23, Value Added Tax CK Until the completion date of the consolidated financial statements, CK is still in the appeal process for Judicial Review of the Supreme Court in relation to 2006 prepaid VAT amounting to Rp51.5 billion (equivalent to US$3,829,443) Land and Building Tax On October 24, 2016, TIA received Notice of Research on land and building tax in On December 8, 2016, TIA received tax assessment letter on land and building tax in 2012 with the status of tax liability of underpayment by Rp1.15 billion (equivalent to US$85,925). b. Taxes Payable The details of taxes payable are as follows: March 31, December 31, (Unaudited) (Unaudited) Income taxes: Article 4 (2) 63, , ,938 49,773 96,312 Article 15 40, ,716 40,593 49,337 40,145 Article , , , , ,400 Article 22 44,323-99, Article , , , , ,957 Article , , , , ,121 Article ,735 92, ,452 81,060 89,288 Article 29 6,840,230 2,415,293 2,220,515 1,549,272 3,505,533 Value added tax 59, , , ,919 Total 8,327,364 4,414,252 3,827,577 3,305,475 4,860, F-96

248 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) c. Tax Expense The details of the tax expense of the Group are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Current Subsidiaries (6,247,395) (2,424,068) (10,074,551) (7,449,905) (8,258,283) Deferred The Company 145,577 49, ,611 (9,245,758) (648,064) Subsidiaries (447,810) 796,917 3,374,100 3,173,595 (6,567,503) Net (302,233) 845,949 3,517,711 (6,072,163) (7,215,567 ) Income tax expense - net (6,549,628) (1,578,119) (6,556,840) (13,522,068) (15,473,850 ) d. Current Tax The reconciliation between profit (loss) before income tax, as shown in the consolidated statements of profit or loss and other comprehensive income, and estimated tax loss is as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Profit (loss) before income tax per consolidated statement of profit or loss and other comprehensive income 19,740,183 10,111,547 13,458,961 (31,810,872) (100,138,245) Profit (loss) before income tax of the subsidiaries (19,697,485) (7,134,142) (11,843,611) 24,132,194 94,791,149 Profit (loss) before income tax of the Company 42,698 2,977,405 1,615,350 (7,678,678) (5,347,096) Temporary differences Accrued expenses 851,593 (559,474) 2,708,684 (102,429) (77,530) Depreciation 69,225 (73,721) 258,324 (124,333) (664,872) Provision for employee benefits - net 49,333 95, , , ,800 Provision for impairment losses on trade receivables 1, , ,773 - Amortization - (5,634) (15,168) 45,510 (132,184) Impairment losses on assets value , ,304 1,407,809 Finance lease payables ,422 43,012 Temporary differences - net 971,844 (543,350) 3,460, , ,035 Permanent differences Interest income already subjected to final income tax (251,143) (387,551) (1,217,689) (2,857,125) (3,512,863) Others 78, , ,388 (139,996) (1,554,708) Total permanent differences (172,511) (277,617) (750,301) (2,997,121) (5,067,571) Taxable income (loss) 842,031 2,156,438 4,325,908 (9,991,264) (9,630,632 ) Cumulative tax losses at beginning of year (24,141,962) (47,471,487) (47,471,487) (44,311,409) (40,014,239) Adjustment of tax loss ,003,617 6,831,186 5,333,462 Cumulative tax losses at end of year (23,299,931) (45,315,049) (24,141,962) (47,471,487) (44,311,409) Current tax expense - the Company Prepayments of income tax - Article , ,444 1,820,472 1,640,002 1,287,458 Estimatedclaimsfortaxrefund,, corporate income tax 237, ,444 1,820,472 1,640,002 1,287,458 Estimated claims for tax refund The Company 237, ,444 1,820,472 1,640,002 1,287,458 Subsidiaries 12,029,921 1,752,273 8,085,300 6,598,011 5,273,860 Total estimated claims for tax refund 12,266,999 2,509,717 9,905,772 8,238,013 6,561,318 Corporate income tax payables Subsidiaries 6,840,230 2,415,293 2,220,515 1,549,272 3,505, F-97

249 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) e. Deferred Tax The details of deferred tax assets and deferred tax liabilities are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Company Deferred tax assets Impairment losses on assets value 499, , , , ,952 Long-term employee benefits liability 200, , , , ,435 Other non-current assets 34,783 42,040 39,656 43,448 32,071 Allowance for impairment losses on trade receivables 117, Cumulative tax loss ,370,055 Total deferred tax assets 852, , , ,733 9,910,513 Deferred tax liabilities Fixed assets (135,918) (186,983) (158,102) (222,681) (191,596) Finance lease payable (3,856) Net deferred tax assets - Company 716, , , ,052 9,715,061 Subsidiaries Deferred tax assets PT Mifa Bersaudara 9,873,223 8,625,243 10,034,260 7,799,882 2,488,678 PT Sanggar Sarana Baja 4,878,053 5,659,607 5,105,934 5,855,904 6,049,738 PT Sumberdaya Sewatama 4,067,972-1,965, PT Tunas Inti Abadi 2,124,850 1,597,964 2,005,390 1,447,347 1,154,351 PT Cipta Krida Bahari 671, , , ,632 1,102,266 PT Bara Energi Lestari 529, , , , ,741 PT Reswara Minergi Hartama 267, , , , ,069 PT Dianta Daya Embara 130,228 33,398 97,841 19,575 - PT Baruna Dirga Dharma 39,860 25,609 46,222 31,755 74,976 PT Media Djaya Bersama 14,540 3,249 16, ,184,662 PT Nagata Dinamika 5,095 3,798 5,051 3,525 - PT Alfa Trans Raya 3, , ,353 PT Energi Alamraya Semesta - 36,005-10,471 4,806 Deferred tax assets - Subsidiaries 22,605,154 17,928,695 20,743,592 16,686,432 14,164,640 Unrealized intra-group profits 1,779,380 1,666,380 2,792,066 1,707,374 1,223,569 Deferred tax assets - net 25,100,775 20,082,160 24,106,322 18,831,858 25,103,270 Deferred tax liabilities PT Cipta Kridatama 22,647,949 17,623,209 21,741,689 16,606,551 9,312,667 PT Sumberdaya Sewatama - 2,898,367-3,442,966 10,544,565 PT Reswara Minergi Hartama ,010 Deferred tax liabilities - net 22,647,949 20,521,576 21,741,689 20,049,517 20,144, F-98

250 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) e. Deferred Tax (continued) The details of deferred tax benefit (expense) - net are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Company Effects of temporary differences at applicable tax rates: Depreciation (33,980) 26,571 64,581 (31,083) (166,218) Long-term employee benefits liability 50,051 23,870 25,978 49,072 (178,001) Amortization 4,537 (1,409) (3,793) 11,376 (33,046) Impairment losses on assets value 124,968-56,845 91, ,952 Allowance for impairment losses on trade receivables 29,325 Finance lease payables ,856 10,753 Cumulative tax loss (9,370,055) (633,504) Accrued expenses 237,877 Provision (267,201) Total - Company 145,577 49, ,611 (9,245,758) (648,064) Subsidiaries (494,136) 717,950 3,386,822 2,419,805 (6,184,645) Unrealized intra-group gain (loss) 46,326 78,967 (12,722) 753,790 (382,858) Tax benefit (expense) - net (302,233) 845,949 3,517,711 (6,072,163) (7,215,567) The reconciliation between income tax expense computed using the prevailing tax rates on the accounting loss before income tax expense and the tax expense reported in the consolidated statements of profit or loss and other comprehensive income for the years ended March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, is as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Profit (loss) before income tax per consolidated statements of profit or loss and other comprehensive income 19,740,183 10,111,547 13,458,961 (31,810,872) (100,138,245) Elimination of transactions with subsidiaries 278,283 (1,044,935) (572,534) 2,210,073 1,550,860 Profit (loss) before income tax 20,018,466 9,066,612 12,886,427 (29,600,799) (98,587,385) Income tax with applicable tax rate (5,004,617) (2,266,653) (3,221,607) 7,400,200 24,646,846 Tax effects on permanent differences: Interest income already subject to final tax (62,786) 96,888 (304,422) 714,281 1,068,063 Representation - (502) - (2,226) (46,112 ) Taxes and penalties (367) (30,376 ) Gifts and donation - (92) (151,409) (92) (151,409 ) Others (26,668) 282, ,381 37,685 (2,230,777 ) Deferred tax asset adjustment (1,501,883) 230,588 (3,010,061) (2,407,006) 451,953 Adjustment on tax loss based on tax assessment - - (1,707,797) (1,333,366 ) Unrealized gain (loss) 46,326 78,967 (12,722) 753,790 (382,858 ) Reversal (provision) of valuation allowance on deferred tax assets: Allowance for impairment losses on trade receivables ,356,684 (17,694,896 ) Goodwill (287,010) (16,978,569 ) Cumulative tax loss (11,867,872) (2,772,966 ) Accrued expenses (10,512,338) (19,383 ) Income tax expense per consolidated statements of profit or loss and other comprehensive income (6,549,628) (1,578,119) (6,556,840) (13,522,068) (15,473,850 ) 91 F-99

251 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 21. TAXATION (continued) f. Tax Amnesty TIA, EAS, ATR, BDD, and Reswara decided to utilize tax amnesty facility based on Tax Amnesty Law. Tax amnesty assets are measured at the amount reported in the Tax Amnesty Approval Letter ( SKPP ). The redemption money (the amount of tax paid in accordance with Tax Amnesty law) shall be charged directly to profit or loss in the period when the SKPP was received. Based on PSAK No. 70 Accounting for Assets and Liabilities of Tax Amnesty, any difference between amounts initially recognised for the tax amnesty assets and the related tax amnesty liabilities is presented as Additional Paid-in Capital and shall not be reclassified to retained earnings or recycled to profit or loss subsequently. Such difference was presented as Other Components of Equity in the consolidated statements of changes in equity for the three-month period ended March 31, 2017 and for the year ended December 31, SHARE CAPITAL The composition of the Company s shareholders as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: March 31, 2017 (Unaudited) Number of shares Issued and Percentage of Shareholders Fully Paid Ownership Amount Valle Verde Pte. Ltd., Singapore 1,514,240, % 79,992,678 PT Tiara Marga Trakindo 636,366, % 33,806,816 Momentum Fund SP.B 285,916, % 15,296,584 Rachmat Mulyana Hamami (President Commissioner) 6,120, % 802,611 Achmad Ananda Djajanegara (President Director) 946, % 51,899 Syahnan Poerba (Independent Director) 309, % 16,947 Mivida Hamami (Commissioner) 133, % 7,333 Public and employees (each with ownership interest below 5%) 309,133, % 16,580,040 Total 2,753,165, % 146,554,908 March 31, 2016 (Unaudited) Number of shares Issued and Percentage of Shareholders Fully Paid Ownership Amount Valle Verde Pte. Ltd., Singapore 1,514,240, % 79,992,678 PT Tiara Marga Trakindo 636,366, % 33,806,816 Momentum Fund SP.B 287,755, % 15,805,504 Achmad Ananda Djajanegara (President Director) 946, % 51,899 Syahnan Poerba (Independent Director) 309, % 16,947 Yovie Priadi (Director) 294, % 16,134 Rachmat Mulyana Hamami (President Commissioner) 165, % 9,090 Mivida Hamami (Commissioner) 133, % 7,333 Natali Hasto Kristijono (Director) 22, % 1,198 Public and employees (each with ownership interest below 5%) 312,933, % 16,847,309 Total 2,753,165, % 146,554, F-100

252 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 22. SHARE CAPITAL (continued) The composition of the Company s shareholders as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: (continued) December 31, 2016 Number of shares Issued and Percentage of Shareholders Fully Paid Ownership Amount Valle Verde Pte. Ltd., Singapore 1,514,240, % 79,992,678 PT Tiara Marga Trakindo 636,366, % 33,806,816 Momentum Fund SP.B 287,080, % 15,296,584 Rachmat Mulyana Hamami (President Commissioner) 6,120, % 802,611 Achmad Ananda Djajanegara (President Director) 946, % 51,899 Syahnan Poerba (Independent Director) 309, % 16,947 Mivida Hamami (Commissioner) 133, % 7,333 Public and employees (each with ownership interest below 5%) 307,969, % 16,580,040 Total 2,753,165, % 146,554,908 December 31, 2015 Number of shares Issued and Percentage of Shareholders Fully Paid Ownership Amount Valle Verde Pte. Ltd., Singapore 1,514,240, % 79,992,678 PT Tiara Marga Trakindo 636,366, % 33,806,816 Momentum Fund SP.B 287,790, % 15,807,426 Achmad Ananda Djajanegara (President Director) 946, % 51,899 Syahnan Poerba (Independent Director) 309, % 16,947 Yovie Priadi (Director) 294, % 16,134 Rachmat Mulyana Hamami (President Commissioner) 165, % 9,090 Mivida Hamami (Commissioner) 133, % 7,333 Public and employees (each with ownership interest below 5%) 312,920, % 16,846,585 Total 2,753,165, % 146,554, F-101

253 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 22. SHARE CAPITAL (continued) The composition of the Company s shareholders as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: (continued) December 31, 2014 Number of shares Issued and Percentage of Shareholders Fully Paid Ownership Amount Valle Verde Pte. Ltd., Singapore 1,514,240, % 79,992,678 PT Tiara Marga Trakindo 636,366, % 33,806,816 Momentum Fund SP.B 288,000, % 15,818,961 Achmad Ananda Djajanegara (President Director) 946, % 51,899 Syahnan Poerba (Independent Director) 309, % 16,947 Yovie Priadi (Director) 294, % 16,134 Rachmat Mulyana Hamami (President Commissioner) 165, % 9,090 Mivida Hamami (Commissioner) 133, % 7,333 Public and employees (each with ownership interest below 5%) 312,710, % 16,835,050 Total 2,753,165, % 146,554, ADDITIONAL PAID-IN CAPITAL - NET The details of this account are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Additional paid-in capital from initial public offering 147,510, ,510, ,510, ,510, ,510,299 Share issuance costs (8,098,156) (8,098,156) (8,098,156) (8,098,156) (8,098,156) Difference in value of transaction of entities under common control (17,920,594) (17,920,594) (17,920,594) (17,920,594) (17,920,594) Issuance cost of mandatory convertible bond (509,566) - (509,566) - - Net 120,981, ,491, ,981, ,491, ,491,549 Difference in Value of Transaction with Entities under Common Control In 2010 and 2009, the Company acquired subsidiaries shares which were previously owned by PT Tiara Marga Trakindo, PT Trakindo Utama and SS. The differences arising from the restructuring are as follows: Difference in Value of Transaction with Book Value Entities under Transfer Price of Net Assets Common Control PT Sumberdaya Sewatama 68,440 7,594,496 (7,526,056) PT Sanggar Sarana Baja 310,867 6,198,158 (5,887,291) PT Cipta Krida Bahari 85,750 4,760,310 (4,674,560 ) PT Cipta Kridatama 16,271,180 (9,242,148) 25,513,328 PT Tunas Inti Abadi 1,092,319 (9,402,854) 10,495,173 Total 17,828,556 (92,038) 17,920, F-102

254 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 24. NON-CONTROLLING INTERESTS As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the details of non-controlling interests in net assets of the subsidiaries are as follows: March 31, December 31, (Unaudited) (Unaudited) PT Sumberdaya Sewatama 1,499,235 23,079,458 1,619,474 23,187,152 2,359,967 PT Anzara Janitra Nusantara 946, , PT Sanggar Sarana Baja 55,245 54,954 55,183 54,849 55,209 PT Reswara Minergi Hartama (19,204,502) (13,881,337) (18,178,825) (12,604,532) (5,744,877) Total (16,703,382) 9,253,075 (15,626,437) 10,637,469 (3,329,701 ) For the three-month periods ended March 31, 2017 and 2016, and for the years ended December 31, 2016, 2015, and 2014, the details of non-controlling interests in total comprehensive income (loss) of the subsidiaries are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) PT Sumberdaya Sewatama (120,239) (34,563) (162,303) (411,835) (136,504 ) PT Sanggar Sarana Baja (360) (2,763) PT Reswara Minergi Hartama (1,025,677) (1,276,805) (5,574,293) (6,859,655) (2,505,944) PT Anzara Janitra Nusantara 68,909 - (6,240) - - Total (1,076,945) (1,311,263) (5,742,502) (7,271,850) (2,645,211) Set out below is the summarized financial information for the Group s material subsidiaries that has non-controlling interests that are material to the Group. Summarized consolidated statements of financial position of PT Reswara Minergi Hartama are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Assets Current assets 48,387,459 25,018,842 43,262,720 26,900,802 33,079,580 Non-current assets 206,822, ,384, ,669, ,603, ,820,104 Total assets 255,209, ,403, ,932, ,504, ,899,684 Liabilities Current liabilities (49,154,362) (40,057,644) (40,941,250) (54,917,850) (54,148,428) Non-current liabilities (231,048,467) (247,586,437) (248,152,064) (238,035,287) (225,069,399) Total liabilities (280,202,829) (287,644,081) (289,093,314) (292,953,137) (279,217,827) Non-controlling interests 19,294,549 13,973,735 18,273,121 12,689,012 5,830,376 Net liabilities (5,698,395) (25,267,202) (16,887,843) (26,759,856) (24,487,767) 95 F-103

255 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 24. NON-CONTROLLING INTERESTS (continued) Summarized consolidated statements of financial position of PT Sumberdaya Sewatama are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Assets Current assets 51,308,010 81,754,519 53,357,810 81,069,831 65,155,979 Non-current assets 181,763, ,089, ,928, ,037, ,311,998 Total assets 233,071, ,844, ,286, ,107, ,467,977 Liabilities Current liabilities (224,108,325) (177,538,265) (221,024,753) (150,324,469) (125,364,126) Non-current liabilities (2,966,819) (63,142,965) (2,331,268) (81,965,276) (111,805,404) Total liabilities (227,075,144) (240,681,230) (223,356,021) (232,289,745) (237,169,530) Non-controlling interests (956,310) (1,307,246) (1,071,173) (1,376,074) (1,978,342) Net assets 5,040,463 51,855,904 7,858,931 52,441,579 56,320,105 Summarized consolidated statements of profit or loss and other comprehensive income (loss) of PT Reswara Minergi Hartama are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Net revenue 66,716,024 41,034, ,767, ,217, ,029,871 Profit (loss) for the period 10,226, ,802 4,273,119 (9,214,519) (66,849,431) Other comprehensive income (loss) for the period, net of tax (59,545) 40,135 12,789 83,794 (38,156) Total comprehensive income (loss) for the period 10,166, ,937 4,285,908 (9,130,725) (66,887,587) Total comprehensive loss attributable to the subsidiaries non-controlling interest (1,021,238) (1,284,719) (5,582,250) (6,858,637) (2,501,543) Summarized consolidated statements of profit or loss and other comprehensive income (loss) of PT Sumberdaya Sewatama are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Net revenue 20,048,618 25,292,542 95,088, ,962, ,924,645 Profit (loss) for the period (2,529,852) (2,118,356) (23,869,856) (20,435,009) 1,352,843 Other comprehensive loss for the period, net of tax (474,268) (49,087) (605,807) (6,013,916) (1,295,714) Total comprehensive income (loss) for the period (3,004,120) (2,167,443) (24,475,663) (26,448,925) 57,129 Total comprehensive loss attributable to the subsidiaries non-controlling interest (123,830) (36,815) (183,047) (412,195) (136,525) 96 F-104

256 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 24. NON-CONTROLLING INTERESTS (continued) Summarized consolidated statements of cash flows of PT Reswara Minergi Hartama are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Net cash flows provided by (used in) operating activities 34,336,028 (3,520,741) 14,930,281 30,492,600 28,912,788 Net cash flows used in investing activities (260,123) (445,835) (3,040,181) (31,024,121) (47,969,939) Net cash flows provided by (used in) financing activities (21,304,010) 3,559,313 (9,182,633) (3,130,167) 15,681,519 Increase (decrease) in cash and cash equivalent 12,771,895 (407,263) 2,707,467 (3,661,688) (3,375,632) Cash and cash equivalent at beginning of period 10,769,109 8,061,642 8,061,642 11,723,330 15,105,203 Effect of exchange rate differences on cash and cash equivalent (31,929) 45, (6,241) Cash and cash equivalent at end of period 23,509,075 7,699,719 10,769,109 8,061,642 11,723,330 Summarized consolidated statements of cash flows of PT Sumberdaya Sewatama are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Net cash flows provided by (used in) operating activities 12,108,701 (33,820) 35,933,239 52,501,009 60,707,303 Net cash flows provided by (used in) investing activities (8,033,706) 5,691,624 (6,668,875) (21,063,656) (50,000,569) Net cash flows used in financing activities (4,660,311) (14,400,497) (55,910,985) (930,213) (19,614,765) Increase (decrease) in cash and cash equivalent (585,316) (8,742,693) (26,646,621) 30,507,140 (8,908,031) Cash and cash equivalent at beginning of period 7,300,834 33,174,266 33,174,266 2,957,637 11,926,573 Effect of exchange rate differences on cash and cash equivalent 61,150 1,391, ,189 (290,511) (60,905) Cash and cash equivalent at end of period 6,776,668 25,822,612 7,300,834 33,174,266 2,957,637 Mandatory Convertible Bond On December 30, 2015, SS entered into a Mandatory Convertible Bond ( MCB ) subscription agreement with PT Indonesia Infrastucture Finance ( IIF ), as bond holder, amounting to Rp300 billion (equivalent to US$21,748,586). Directly attributable cost related to the issuance of MCB amounted to Rp7.03 billion (equivalent to US$509,566). The MCB is non-interest bearing and would be converted into pre-determined common shares of SS after five years from issuance date. The MCB is not listed on the Indonesia Stock Exchange and is non-tradable or non-transferable until the conversion date. On November 22, 2016, due to the amendment in the contractual terms, the MCB was reclassified as a financial liability and subsequently settled by SS. The difference between the carrying amount of the recognized liability and the amount previously recognized in equity remained in equity. 97 F-105

257 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 25. CASH DIVIDENDS AND GENERAL RESERVE Based on Annual General Meeting of Shareholders held on May 18, 2016 and covered by Notarial Deed No. 45 dated May 18, 2016, by Jose Dima Satria, S.H., M.Kn., the shareholders of the Company approved the second agenda of the Annual General Meeting of Shareholders that no distributions of net income and reserves will be made due to the Company s losses for the year ended December 31, Based on Annual General Meeting of Shareholders held on May 18, 2015 and covered by Notarial Deed No. 37 dated May 18, 2015, by Jose Dima Satria, S.H., M.Kn., the shareholders of the Company approved the second agenda of the Annual General Meeting of Shareholders that no distributions of net income and reserves will be made due to the Company s losses for the year ended December 31, Based on Annual General Shareholders Meeting held on May 19, 2014 which was covered by Notarial Deed No. 46 dated May 19, 2014 of Jose Dima Satria, S.H., M.Kn., the shareholders approved, among others, the following: a. Additional appropriation of retained earnings for general reserve amounting to US$100,000; and b. The distribution of cash dividends amounting to US$ per share or with total amount of US$1,151,645 which were taken from income for 2013 attributable to equity holders of the parent company. In July 2014, the Company has paid such cash dividends. 26. NET REVENUE The details of sales and services are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Mining contractors and coal mining 119,457,052 92,128, ,073, ,806, ,349,266 Services Power engine rental 20,123,586 25,519,218 96,259, ,587, ,688,065 Logistics and vessel rental 17,951,558 16,820,069 66,880,218 82,341,107 89,552,518 Site Services Division ( SSD ) and Remanufacturing (Reman) 8,874,399 9,172,466 34,836,629 35,070,400 40,846,773 Manufacturing 2,635,923 2,399,439 11,646,625 16,781,120 38,183,846 Total 169,042, ,039, ,695, ,585, ,620,468 The details of sales and services to individual customers representing more than 10% of the total sales and services are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Amount: TAJ Asia Trading Ltd., Hong Kong 28,450,895-29,179, PT Adimitra Baratama Nusantara 23,041,637 25,662,047 96,514,357 67,416,809 - PT PLN (Persero) 14,738,410 18,357,881 69,527,602 74,452, ,997,565 Xiamen C & D Energy Resource Co Ltd., China - 18,040,399 48,822,303 57,927,353 77,865,040 Percentage: TAJ Asia Trading Ltd., Hong Kong 16.83% % - - PT Adimitra Baratama Nusantara 13.63% 17.57% 16.34% 10.30% - PT PLN (Persero) 8.72% 12.57% 11.77% 11.37% 15.62% Xiamen C & D Energy Resource Co Ltd., China % 8.27% 8.85% 10.76% Revenue from to TAJ Asia Trading Ltd., Hong Kong, PT Adimitra Baratama Nusantara, Xiamen C & D Energy Resource Co Ltd., China, represent sales from mining contractors and coal mining segment and revenue from PT PLN (Persero) mainly represent revenue from services segment. 98 F-106

258 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 27. COST OF REVENUE The details of cost of revenue are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Mining contractors and coal mining 76,896,766 64,699, ,314, ,229, ,503,943 Services Power engine rental 20,423,459 19,842,530 71,777,287 88,814,683 93,817,025 Logistic and vessel rental 17,292,981 18,206,791 76,305,867 90,876, ,027,404 Site Services Division (SSD) and Remanufacturing (Reman) 2,066,296 2,327,576 11,565,678 28,312,668 32,093,510 Manufacturing 7,646,531 7,045,396 27,822,813 15,189,995 34,281,265 Total 124,326, ,121, ,785, ,423, ,723,147 Purchases from suppliers with amounts more than 10% from total purchases are purchases from related parties, as described in the Note SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The details of selling, general and administrative expenses are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Salaries and employees benefits 7,082,601 7,570,398 32,889,079 36,890,748 42,156,103 Professional fees 1,482,758 2,157,616 8,806,532 9,990,130 9,270,090 Selling expense 1,758,787 1,352,392 3,628,933 8,947,381 6,190,860 Rental 910,343 1,127,072 4,273,319 5,186,313 5,991,973 Depreciation and amortization 560, ,945 3,093,618 3,155,935 3,638,590 Information and technology 364, ,739 1,526,750 2,466,084 2,972,963 Travelling 266, , ,389 1,651,965 3,446,095 Utilities and facilities 216, , ,912 1,065,031 1,538,507 Telecommunication 92, , , , ,408 Provision (reversal) for impairment losses on trade receivables (61,939) 184,414 (44,134) 16,342,198 58,287,929 Others 701, ,203 5,301,856 16,215,810 6,577,223 Total 13,373,028 14,367,376 61,589, ,657, ,929, LONG-TERM EMPLOYEE BENEFITS LIABILITY Defined Contribution Pension Plan The Company and certain subsidiaries have a defined contribution pension plan for all of their eligible permanent employees. The defined contribution pension plan is managed by Dana Pensiun Lembaga Keuangan PT Bank Negara Indonesia (Persero) Tbk. Defined Benefit Pension Plan The Company and certain subsidiaries have a defined benefit pension plan, covering certain permanent employees, which plan is funded through monthly contributions to a separately administered fund. The pension plan is managed by Dana Pensiun PT Trakindo Utama. The fund for the pension plan is contributed by the Company and certain subsidiaries and their covered employees. The benefits under such pension plan have been adjusted to cover minimum benefits under Labor Law No. 13/2003 dated March 25, 2003 ( the Law ). The additional benefits under the Law are unfunded. The normal retirement age is 55 years. 99 F-107

259 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) Defined Benefit Pension Plan (continued) The obligation under the Law has been calculated by comparing the benefit that will be received by an employee at normal pension age from the Pension Plan with the benefit as stipulated under the Law after deducting the accumulated employer contributions and the related investment results. If the employer-funded portion of the Pension Plan benefit is less than the benefit as required by the Law, the Group will provide for such shortage. Some permanent employees are not covered in both programs. The Group s liability for the benefits of these employees is calculated based on the minimum requirement of the Law. The employee benefits liability were determined through actuarial valuations performed by an independent actuary (PT Sentra Jasa Aktuaria), based on its reports dated May 12, 2017 for March 31, 2017, May 5, 2017 for March 31, 2016, February 20, 2017 for December 31, 2016, February 22, 2016 for December 31, 2015, and February 16, 2015 for December 31, The employee benefits liability are calculated using the Projected Unit Credit method and based on the following assumptions: March 31, December 31, (Unaudited) (Unaudited) Discount rate 7.51% p.a 8.14% p.a 8.25% p.a 9.00% p.a 8.00% p.a Annual salary increase 8.00% p.a 8.00% p.a 8.00% p.a 9.00% p.a 9.00% p.a Investment rate 7.51% p.a 8.14% p.a 8.25% p.a 9.00% p.a 8.00% p.a Mortality rate TMI 3 (2011) TMI 3 (2011) TMI 3 (2011) TMI 3 (2011) TMI 3 (2011 ) Retirement age 55 years 55 years 55 years 55 years 55 years Resignation rate 6% for employees before age of 30 years and will linearly decrease until 0% at the age of 52 years Disability rate 10% of the mortality rate a. Net Employee Benefits Expense The details of employee benefits expense are as follows: Unfunded plan Post Other employment long-term Funded benefit benefits Total March 31, 2017 (Unaudited) Current service cost 58, , , ,302 Past service cost Transfer in (out) Settlement Interest cost - net 15, ,238 53, ,980 Net actuarial gains recognized in the period - net ,054 86,054 Net employee benefits expense 74, , ,750 1,246, F-108

260 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) a. Net Employee Benefits Expense (continued) The details of employee benefits expense are as follows: (continued) Unfunded plan Post Other employment long-term Funded benefit benefits Total March 31, 2016 (Unaudited) Current service cost 50, , , ,939 Past service cost - (148,566) 26,151 (122,415) Transfer in (out) - (12,832) (4,528) (17,360) Settlement - (2,178,889) (411,790) (2,590,679) Interest cost - net 2, ,118 56, ,929 Net actuarial gains recognized in the period - net - - (131,633) (131,633) Net employee benefits expense (income) 53,783 (1,436,151) (353,851) (1,736,219) December 31, 2016 Current service cost 104,222 3,005, ,062 3,564,537 Past service cost - (151,657) 26,556 (125,101) Transfer in (out) - (664) (1,658) (2,322) Settlement - (2,338,547) (460,901) (2,799,448) Interest cost - net 11, , ,762 1,182,948 Net actuarial gains recognized in the year - net - - (148,785) (148,785) Net employee benefits expense 115,655 1,454, ,036 1,671,829 December 31, 2015 Current service cost 254,862 2,981, ,834 3,697,045 Past service cost 100,843 1,252,846 76,029 1,429,718 Transfer in (out) 111,805 (2,083) (271) 109,451 Settlement - (553,197) (347,060) (900,257) Interest cost - net 22, , ,360 1,108,127 Net actuarial gains recognized in the year - net - - (163,342) (163,342) Termination benefit - 2,656,323-2,656,323 Net employee benefits expense 489,726 7,230, ,550 7,937,065 December 31, 2014 Current service cost 332,628 3,121, ,467 3,955,180 Past service cost - 41,100-41,100 Transfer in (out) Settlement - (1,731,592) (299,983) (2,031,575) Interest cost - net 46,195 1,009, ,483 1,266,144 Net actuarial gains recognized in the year - net - - (114,929) (114,929) Net employee benefits expense 378,823 2,440, ,038 3,115, F-109

261 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits The details of the net liability for employee benefits: March 31, 2017 (Unaudited) Funded Plan Unfunded Plan Total Present value of defined benefits obligation 5,353,116 15,966,975 21,320,091 Fair value of plan assets (4,432,777) (1,128,288) (5,561,065) Long-term employee benefits liability 920,339 14,838,687 15,759,026 March 31, 2016 (Unaudited) Funded Plan Unfunded Plan Total Present value of defined benefits obligation 4,597,755 11,298,992 15,896,747 Fair value of plan assets (4,904,371) (575,141) (5,479,512) Long-term employee benefits liability (306,616) 10,723,851 10,417,235 December 31, 2016 Funded Plan Unfunded Plan Total Present value of defined benefit obligation 4,931,094 14,000,293 18,931,387 Fair value of plan assets (4,193,182) (824,315) (5,017,497) Long-term employee benefits liability 737,912 13,175,978 13,913,890 December 31, 2015 Funded Plan Unfunded Plan Total Present value of defined benefits obligation 4,749,816 13,469,481 18,219,297 Fair value of plan assets (4,627,280) (913,111) (5,540,391) Long-term employee benefits liability 122,536 12,556,370 12,678,906 December 31, 2014 Funded Plan Unfunded Plan Total Present value of defined benefits obligation 5,350,745 15,056,559 20,407,304 Fair value of plan assets (5,051,620) (360,917) (5,412,537) Long-term employee benefits liability 299,125 14,695,642 14,994, F-110

262 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) The movement in present value of defined benefit obligation are as follows: March 31, 2017 (Unaudited) Funded Plan Unfunded Plan Total Present value of defined benefit obligation at January 1 4,931,094 14,000,293 18,931,387 Current service cost 58, , ,302 Interest cost 102, , ,140 Contribution by plan participants 14,342-14,342 Benefits paid - pension fund (37,998) - (37,998) Benefits paid - (736,913) (736,913) Actuarial gain from changes in financial assumption 284,982 1,359,683 1,644,665 Actuarial gain from changes from experience adjustment (43,798) 109,355 65,557 Translation difference 43, , ,609 Present value of defined benefit obligation at March 31 5,353,116 15,966,975 21,320,091 March 31, 2016 (Unaudited) Funded Plan Unfunded Plan Total Present value of defined benefit obligation at January 1 4,749,816 13,469,481 18,219,297 Current service cost 50, , ,939 Interest cost 108, , ,057 Contribution by plan participants 19,223-19,223 Benefits paid - pension fund (92,447) - (92,447) Benefits paid - (187,854) (187,854) Transfer in (out) - (17,360) (17,360) Past service cost - (122,415) (122,415 ) Transfer asset (6,429) - (6,429 ) Curtailments - (2,834,087) (2,834,087 ) Actuarial gain from changes in financial assumption 33,935 (121,034) (87,099) Actuarial gain from changes from experience adjustment (445,721) (457,294) (903,015) Translation difference 179, , ,937 Present value of defined benefit obligation at March 31 4,597,755 11,298,992 15,896, F-111

263 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) The movement in present value of defined benefit obligation are as follows: (continued) December 31, 2016 Funded Plan Unfunded Plan Total Present value of defined benefit obligation at January 1 4,749,816 13,469,481 18,219,297 Current service cost 104,222 3,460,315 3,564,537 Interest cost 438,905 1,244,644 1,683,549 Contribution by plan participants 64,092-64,092 Benefit paid - pension fund (990,259) - (990,259) Benefits paid - (189,126) (189,126) Transfer in (out) - (2,322) (2,322) Past service cost - (125,101) (125,101) Transfer asset (6,472) - (6,472) Curtailments - (3,197,021) (3,197,021) Settlement - (2,799,448) (2,799,448) Actuarial gain from changes in financial assumption 347,948 (754,003) (406,055) Translation difference 222,842 2,892,874 3,115,716 Present value of defined benefit obligation at December 31 4,931,094 14,000,293 18,931,387 December 31, 2015 Funded Plan Unfunded Plan Total Present value of defined benefit obligation at January 1 5,350,745 15,056,559 20,407,304 Current service cost 254,862 3,442,183 3,697,045 Interest cost 22, , ,767 Contribution by plan participants 87,178-87,178 Benefit paid - pension fund (401,592) (2,656,323) (3,057,915) Benefits paid - (300,733) (300,733) Transfer in (out) 111,805 (2,354) 109,451 Past service cost 100,843 1,328,875 1,429,718 Initial asset 50,577-50,577 Transfer asset 29,685-29,685 Business combination - (100,892) (100,892) Curtailments - (3,763,474) (3,763,474) Actuarial gain from changes in financial assumption (340,847) (1,612,356) (1,953,203) Actuarial gain from changes from experience adjustment (510,233) (60,731) (570,964) Translation difference (5,423) 1,243,176 1,237,753 Present value of defined benefit obligation at December 31 4,749,816 13,469,481 18,219, F-112

264 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) The movement in present value of defined benefit obligation are as follows: (continued) December 31, 2014 Funded Plan Unfunded Plan Total Present value of defined benefit obligation at January 1 4,792,927 14,141,024 18,933,951 Current service cost 332,628 3,622,552 3,955,180 Interest cost 46,195 1,219,950 1,266,145 Benefit paid (206,655) (1,750,123) (1,956,778) Past service cost - 39,677 39,677 Actuarial losses from changes in financial assumption 209, , ,125 Actuarial losses from changes from experience adjustment (167,289) (534,798) (702,087) Curtailment - Settlement - (1,961,275) (1,961,275 ) Employee contribution 93,164-93,164 Translation difference 250,666 (497,464) (246,798) Present value of defined benefit obligation at December 31 5,350,745 15,056,559 20,407,304 The movement in fair value of plan assets are as follows: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Fair value of plan assets, at beginning of period 5,017,497 5,540,391 5,540,391 5,412,537 4,247,630 Return of plan assets 104, , , , ,764 Contribution by the employer 353,304 65, ,611 3,760, ,763 Contribution by the participant 14,372 19,586 64,092 84,680 93,164 Benefit paid (38,078) (94,195) (990,259) (401,592) (331,602) Transfer assets - (6,550) (6,472) 28,834 - Initial assets ,128 - Settlement - (248,010) (424,451) (2,879,179) - Actuarial (gains) losses on plan assets 66,275 (143,542) (397,419) (373,203) 484,522 Translation difference 43, , ,044 (531,652) (85,704) Fair value of plan assets at end of period 5,561,065 5,479,512 5,017,497 5,540,391 5,412, F-113

265 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) Movements in the employee benefits liability for the years ended March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: March 31, 2017 (Unaudited) Funded Plan Unfunded Plan Total Beginning balance 737,912 13,175,978 13,913,890 Employee benefits expense 74,081 1,172,255 1,246,336 Employee benefits expense recognized in the other comprehensive income 175,048 1,382,983 1,558,031 Termination benefit Contribution paid (73,441) (279,122) (352,563) Translation difference 6, , ,245 Benefit paid - (736,913) (736,913) Ending balance 920,339 14,838,687 15,759,026 March 31, 2016 (Unaudited) Funded Plan Unfunded Plan Total Beginning balance 122,536 12,556,370 12,678,906 Employee benefits expense 53,783 (1,790,002) (1,736,219) Employee benefits expense recognized in the other comprehensive income (415,197) (302,406) (717,603) Termination benefit - (525,257) (525,257) Contribution paid (64,477) - (64,477) Translation difference (3,261) 973, ,739 Benefit paid - (187,854) (187,854) Ending balance (306,616) 10,723,851 10,417,235 December 31, 2016 Funded Plan Unfunded Plan Total Beginning balance 122,536 12,556,370 12,678,906 Employee benefits expense 115,655 1,556,174 1,671,829 Employee benefits expense recognized in the other comprehensive income 605,919 (465,852) 140,067 Termination benefit - (352,808) (352,808) Contribution paid (201,409) (375,742) (577,151) Translation difference 95, , ,967 Benefit paid - (381,920) (381,920) Ending balance 737,912 13,175,978 13,913, F-114

266 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) Movements in the employee benefits liability for the years ended March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: (continued) December 31, 2015 Funded Plan Unfunded Plan Total Beginning balance 299,125 14,695,642 14,994,767 Employee benefits expense 489,726 7,447,339 7,937,065 Employee benefits expense recognized in the other comprehensive income (374,989) (1,347,081) (1,722,070) Termination benefit - (2,656,323) (2,656,323 ) Contribution paid (266,286) (3,605,005) (3,871,291 ) Translation difference (25,040) (1,677,469) (1,702,509) Benefit paid - (300,733) (300,733 ) Ending balance 122,536 12,556,370 12,678,906 December 31, 2014 Funded Plan Unfunded Plan Total Beginning balance 545,296 14,141,025 14,686,321 Employee benefits expense 378,823 2,737,097 3,115,920 Employee benefits expense recognized in the other comprehensive income (492,390) 385,400 (106,990) Contribution paid (176,556) (2,255,654) (2,432,210 ) Translation difference 43,952 (312,226) (268,274 ) Ending balance 299,125 14,695,642 14,994,767 A quantitative sensitivity analysis for significant assumptions as of March 31, 2017 (unaudited) is as follows: Discount Rate (Unfunded) Increase Decrease Impact on the defined benefit obligation (1,774,100) 2,080,529 Impact on the current service cost and interest cost (75,781) 88,922 Discount Rate (Funded) Increase Decrease Impact on the defined benefit obligation (307,320) 346,690 Impact on the current service cost and interest cost (4,009) 4, F-115

267 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) A quantitative sensitivity analysis for significant assumptions as of March 31, 2017 (unaudited) is as follows: (continued) Salary Increase (Unfunded) Increase Decrease Impact on the defined benefit obligation 1,920,287 (1,670,180) Impact on the current service cost and interest cost 83,161 (72,323) Salary Increase (Funded) Increase Decrease Impact on the defined benefit obligation 280,315 (257,959) Impact on the current service cost and interest cost 4,435 (4,074) A quantitative sensitivity analysis for significant assumptions as of March 31, 2016 (unaudited) is as follows: Discount Rate (Unfunded) Increase Decrease Impact on the defined benefit obligation (1,285,543) 1,623,520 Impact on the current service cost and interest cost (82,023) 69,599 Discount Rate (Funded) Increase Decrease Impact on the defined benefit obligation (278,462) 315,385 Impact on the current service cost and interest cost (3,815) 4, F-116

268 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) A quantitative sensitivity analysis for significant assumptions as of March 31, 2016 (unaudited) is as follows: (continued) Salary Increase (Unfunded) Increase Decrease Impact on the defined benefit obligation 1,627,063 (1,426,948) Impact on the current service cost and interest cost 67,510 (103,476) Salary Increase (Funded) Increase Decrease Impact on the defined benefit obligation 269,992 (258,002) Impact on the current service cost and interest cost 4,500 (3,958) A quantitative sensitivity analysis for significant assumptions as of December 31, 2016 is as follows: Discount Rate (Unfunded) Increase Decrease Impact on the defined benefit obligation (1,466,088) 1,734,928 Impact on the current service cost and interest cost (323,975) 251,332 Discount Rate (Funded) Increase Decrease Impact on the defined benefit obligation (270,956) 321,706 Impact on the current service cost and interest cost (15,002) 7,866 Salary Increase (Unfunded) Increase Decrease Impact on the defined benefit obligation 1,655,062 (1,400,066) Impact on the current service cost and interest cost 236,221 (309,318) 109 F-117

269 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) A quantitative sensitivity analysis for significant assumptions as of December 31, 2016 is as follows: (continued) Salary Increase (Funded) Increase Decrease Impact on the defined benefit obligation 234,554 (202,309) Impact on the current service cost and interest cost 6,384 (13,561) A quantitative sensitivity analysis for significant assumptions as of December 31, 2015 is as follows: Discount Rate (Unfunded) Increase Decrease Impact on the defined benefit obligation (1,468,216) 1,732,909 Impact on the current service cost and interest cost (296,936) 347,338 Discount Rate (Funded) Increase Decrease Impact on the defined benefit obligation (353,325) 333,798 Impact on the current service cost and interest cost (21,032) 23,820 Salary Increase (Unfunded) Increase Decrease Impact on the defined benefit obligation 1,621,879 (1,360,335) Impact on the current service cost and interest cost 340,099 (305,289) Salary Increase (Funded) Increase Decrease Impact on the defined benefit obligation 325,827 (296,564) Impact on the current service cost and interest cost 21,498 (19,514) 110 F-118

270 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) b. Liability for Employee Benefits (continued) A quantitative sensitivity analysis for significant assumptions as of December 31, 2014 is as follows: Discount Rate (Unfunded) Increase Decrease Impact on the defined benefit obligation (1,524,714) 1,816,835 Impact on the current service cost and interest cost (247,007) 390,885 Discount Rate (Funded) Increase Decrease Impact on the defined benefit obligation (393,587) 447,781 Impact on the current service cost and interest cost (28,063) 32,075 Salary Increase (Unfunded) Increase Decrease Impact on the defined benefit obligation 1,800,126 (1,470,593) Impact on the current service cost and interest cost 373,100 (303,416) Salary Increase (Funded) Increase Decrease Impact on the defined benefit obligation 389,602 (351,620) Impact on the current service cost and interest cost 28,155 (25,313) The maturity profile of defined benefit obligation as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are as follows: March 31, December 31, (Unaudited) (Unaudited) Within the next 12 months 2,327,168 1,326,016 1,331, ,449 1,053,995 Between 1 and 2 years 569,164 1,120,487 1,349,105 1,712,467 5,649,875 Between 2 and 5 years 11,314,307 8,302,454 8,935,415 5,893,058 12,474,885 Beyond 5 years 142,379, ,466, ,669, ,075, ,348,797 Total 156,589, ,215, ,285, ,786, ,527, F-119

271 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 29. LONG-TERM EMPLOYEE BENEFITS LIABILITY (continued) Program of Restructuration - CK As a step to adjust the organization based on market condition in order to achieve higher level of organization efficiency, CK executed a program of restructuration of 389 employees, both permanent and contractual (unaudited) with total payments estimated at Rp49.65 billion (equivalent to US$3.71 million). Until December 31, 2015, the number of employees who have been laid off were 379 employees, both permanent and contractual (unaudited) with total payments estimated at Rp44.98 billion (equivalent to US$3.36 million). Such severance payments are recorded as part of Selling, General and Administrative Expenses - Salaries and Employees Benefits in the 2015 consolidated statement of profit or loss and other comprehensive income (Note 28). The outstanding expenses amounted to Rp4.66 billion (equivalent to US$0.35 million) have been fully paid on Program of Restructuration - SS As a step to adjust the organization based on market condition in order to achieve higher level of organization efficiency, on 2016 SS executed a program of restructuration of 265 employees, both permanent and contractual (unaudited) with total payments for the year ended December 31, 2016 amounted to Rp47.39 billion (equivalent to US$3,555,672). Program of Restructuration - SSB As a step to adjust the organization based on market condition in order to achieve higher level of organization efficiency, on 2016 SSB executed a program of restructuration of 111 employees, both permanent and contractual (unaudited) with total payments estimated at Rp16.87 billion (equivalent to US$1,255,377). Until December 31, 2016, the number of employees who have been laid off were 70 employees, both permanent and contractual (unaudited) with total payments Rp10.82 billion (equivalent to US$805,643). 112 F-120

272 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES In the normal course of business, the Group has transactions with entities which are considered related parties. The entities are considered related parties of the Group in view of their common ownership. Sales or purchase price among related parties is determined based on prices agreed by both parties. Details of transactions and balances with related parties are as follows: a. Significant Balances with Related Parties Total Percentage to total consolidated assets March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Trade Receivables (Note 6) PT Multi Harapan Utama 13,919,566 15,899, % 1.34% PT Trakindo Utama 8,516,023 9,417, % 0.80% Mega Strada Pte. Ltd., Singapore 1,077,654 1,077, % 0.09% PT Chakra Jawara 926, , % 0.05% PT Meppo-Gen 820, % - PT Triyasa Propertindo 155, , % 0,02% PT Mitra Solusi Telematika 25,605 65, % 0.01% PT Chandra Sakti Utama Leasing 9,623 20, % 0,00% PT Tri Swardana Utama 5,723 2, % 0.00% PT Chitra Paratama 2,410 1, % 0,00% PT Tiara Marga Trakindo % - Total 25,459,580 27,324, % 2.31% Allowance for impairment losses (4,700,849) (7,110,889) (0.44)% (0.60)% Net 20,758,731 20,213, % 1.71% Total Percentage to total consolidated assets December 31, December 31, Trade Receivables (Note 6) PT Multi Harapan Utama 14,549,185 15,993, % 1.34% PT Trakindo Utama 8,065,241 6,779, % 0.57% PT Chakra Jawara 1,767,132 1,343, % 0.11% Mega Strada Pte. Ltd., Singapore 1,077,654 1,077, % 0.09% PT Meppo-Gen 786, % - PT Triyasa Propertindo 166, , % 0.02% PT Mitra Solusi Telematika 23,912 65, % 0.01% PT Tri Swardana Utama 23, , % 0.01% PT Chandra Sakti Utama Leasing 6, % - PT Chitra Paratama 4,649 2, % 0.00% Total 26,471,192 25,643, % 2.15% Allowance for impairment losses (4,697,490) (7,096,078) (0.44)% (0.60)% Net 21,773,702 18,547, % 1.55% 113 F-121

273 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) a. Significant Balances with Related Parties (continued) Total Percentage to total consolidated assets December 31, December 31, Trade Receivables (Note 6) PT Multi Harapan Utama 16,968, % PT Trakindo Utama 8,021, % PT Chakra Jawara 2,692, % PT Meppo-Gen 1,371, % Mega Strada Pte, Ltd, Singapore 1,077, % PT Triyasa Propertindo 249, % PT Mitra Solusi Telematika 130, % Halcon Primo Logistics Pte. Ltd., Singapore 64, % PT Chandra Sakti Utama Leasing 18, % PT Chitra Paratama 8, % PT Tri Swardana Utama 3, % Total 30,608, % Allowance for impairment losses (1,077,654) (0.10)% Net 29,530, % Total March31, Percentage to total consolidated assets March31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Non-trade Receivables PT Trakindo Utama 33, , % 0.02% PT Mahadana Dasha Utama % 0.00% PT Chitra Paratama % Total 33, , % 0.02% Total Percentage to total consolidated assets December 31, December 31, Non-trade Receivables PT Trakindo Utama 15, , % 0.01% PT Mahadana Dasha Utama % 0.00% Total 16, , % 0.01% Total Percentage to total consolidated assets December 31, December 31, Non-trade Receivables PT Trakindo Utama 16, % PT Chitra Paratama % Total 16, % Trade and non-trade receivables represent receivables with maturity of less than 1 year. 114 F-122

274 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) a. Significant Balances with Related Parties (continued) Total March31, Percentage to total consolidated liabilities March31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Trade Payables (Note 13) PT Trakindo Utama 232,906, ,458, % 26.72% PT Chitra Paratama 2,353, , % 0.09% PT Tri Swardana Utama 240, , % 0.03% PT Chakra Jawara 213, , % 0.01% PT Mitra Solusi Telematika 62, , % 0.02% PT Tiara Marga Trakindo 52, , % 0.04% Pan Terra Pte. Ltd., Singapore 31,920 84, % 0,01% Halcon Primo Logistics Pte. Ltd., Singapore 28,720 12, % 0.00% PT Meppo-Gen 10, % - Total 235,900, ,494, % 26.92% Less non-current portion (109,357,448) (148,380,863) (12.17)% (14.88)% Current portion 126,542, ,113, % 12.04% Total Percentage to total consolidated liabilities December 31, December 31, Trade Payables (Note 13) PT Trakindo Utama 247,184, ,316, % 28.08% PT Chitra Paratama 2,129,412 1,409, % 0.14% PT Tri Swardana Utama 423, , % 0.06% PT Chakra Jawara 162,182 97, % 0.01% PT Mitra Solusi Telematika 154, , % 0.02% PT Tiara Marga Trakindo 53, , % 0.01% Pan Terra Pte. Ltd., Singapore 12,798 34, % 0.00% Halcon Primo Logistics Pte. Ltd., Singapore 12,594 46, % 0.00% PT Triyasa Propertindo % Total 250,132, ,801, % 28.32% Less non-current portion (118,117,115) (158,684,349) (12.92)% (15.61)% Current portion 132,015, ,116, % 12.71% Total Percentage to total consolidated liabilities December 31, December 31, Trade Payables (Note 13) PT Trakindo Utama 125,903, % PT Chakra Jawara 4,120, % Halcon Primo Logistics Pte. Ltd., Singapore 1,979, % Pan Terra Pte. Ltd., Singapore 1,322, % PT Chitra Paratama 983, % PT Tri Swardana Utama 288, % PT Mitra Solusi Telematika 189, % PT Tiara Marga Trakindo 18, % PT Chandra Sakti Utama Leasing % Total 134,806, % Less non-current portion (700,000) (0.08)% Net 134,106, % 115 F-123

275 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) a. Significant Balances with Related Parties (continued) Total March31, Percentage to total consolidated liabilities March31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Non-trade Payables PT Chandra Sakti Utama Leasing 159,951 68, % 0.01% PT Mitra Solusi Telematika 56, , % 0.03% PT Tiara Marga Trakindo 34, , % 0.04% PT Trakindo Utama 1, % - PT Chakra Jawara % 0.00% PT Triyasa Propertindo % Total 252, , % 0.08% Total Percentage to total consolidated liabilities December 31, December 31, Non-trade Payables PT Mitra Solusi Telematika 79, , % 0.02% PT Tiara Marga Trakindo 37, , % 0.06% PT Trakindo Utama 4, % - PT Triyasa Propertindo 807 1, % 0.00% PT Chandra Sakti Utama Leasing 300 2, % 0.00% PT Chakra Jawara % - Total 122, , % 0.08% Total Percentage to total consolidated liabilities December 31, December 31, Non-trade Payables PT Tiara Marga Trakindo 547, % PT Mitra Solusi Telematika 485, % PT Trakindo Utama 160, % PT Chitra Paratama 12, % PT Chandra Sakti Utama Leasing % Total 1,206, % 116 F-124

276 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) a. Significant Balances with Related Parties (continued) Total March31, Percentage to total consolidated liabilities March31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Advances from Customers (Note 16) PT Tri Swardana Utama 12, % - PT Trakindo Utama 1, , % 0.02% PT Chakra Jawara % Total 13, , % 0.02% Total Percentage to total consolidated liabilities December 31, December 31, Advances from Customers (Note 16) PT Trakindo Utama 73,110 18, % 0.00% PT Tri Swardana Utama % Total 73,110 18, % 0.00% Total Percentage to total consolidated liabilities December 31, December 31, Advances from Customers (Note 16) PT Trakindo Utama 342, % Total March31, Percentage to total consolidated liabilities March31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Finance Lease Payables (Note 18) PT Chandra Sakti Utama Leasing 34,267,011 45,132, % 4.53% Total Percentage to total consolidated liabilities December 31, December 31, Finance Lease Payable (Note 18) PT Chandra Sakti Utama Leasing 36,222,390 47,973, % 4.72% 117 F-125

277 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) a. Significant Balances with Related Parties (continued) Total Percentage to total consolidated liabilities December 31, December 31, Finance Lease Payables (Note 18) PT Chandra Sakti Utama Leasing 44,161, % Total Percentage to total consolidated liabilities March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Long-term loan from shareholder Valle Varde Pte. Ltd., Singapore 30,000, % - Total Percentage to total consolidated liabilities December 31, December 31, Long-term loan from shareholder Valle Varde Pte. Ltd., Singapore 30,000, % - Total Percentage to total consolidated liabilities March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Loan from related party PT Chandra Sakti Utama Leasing 9,948, % F-126

278 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) b. Significant Transactions with Related Parties Total Percentage to total consolidated net revenue March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net Revenue (Note 26) PT Trakindo Utama 13,598,479 13,714, % 9.39% PT Chakra Jawara 691, , % 0.13% PT Mitra Solusi Telematika 30,323 50, % 0.03% PT Tri Swardana Utama 4,916 6, % 0.00% PT Chitra Paratama 3,750 2, % 0.00% PT Chandra Sakti Utama Leasing 3,348 19, % 0.01% PT Multi Harapan Utama % - Halcon Primo Logistics Pte. Ltd., Singapore % Total 14,332,741 13,988, % 9.56% Total Percentage to total consolidated net revenue December 31, December 31, Net Revenue (Note 26) PT Trakindo Utama 51,676,038 59,879, % 9.15% PT Chakra Jawara 3,172,291 2,213, % 0.34% PT Mitra Solusi Telematika 204, , % 0.02% PT Tri Swardana Utama 130,924 2,351, % 0.36% PT Chandra Sakti Utama Leasing 39,642 54, % 0.01% PT Chitra Paratama 31,590 33, % 0.01% Halcon Primo Logistics Pte. Ltd., Singapore 4,476 4, % 0.00% PT Triyasa Propertindo 2,416 31, % 0.00% PT Multi Harapan Utama 1,401 19,281, % 2.95% Mega Strada Pte. Ltd., Singapore - 9,454, % Total 55,263,260 93,465, % 14.28% Total Percentage to total consolidated net revenue December 31, December 31, Net Revenue (Note 26) PT Trakindo Utama 66,769, % PT Multi Harapan Utama 36,213, % PT Chakra Jawara 6,485, % PT Meppo-Gen 3,160, % PT Triyasa Propertindo 231, % PT Mitra Solusi Telematika 148, % Halcon Primo Logistics Pte. Ltd., Singapore 66, % PT Tri Swardana Utama 58, % PT Chitra Paratama 48, % PT Chandra Sakti Utama Leasing 42, % Total 113,226, % 119 F-127

279 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) b. Significant Transactions with Related Parties (continued) Total Percentage to total consolidated assets March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Purchase of Fixed Assets PT Trakindo Utama 150,085 17,390, % 1.62% PT Tri Swardana Utama - 12, % Total 150,085 17,402, % 1.62% Total Percentage to total consolidated assets December 31, December 31, Purchase of Fixed Assets PT Trakindo Utama 17,462, ,194, % 13.46% PT Chakra Jawara 63,874 4,560, % 0.38% PT Tri Swardana Utama 8,250 4,727, % 0.40% PT Mitra Solusi Telematika 3, , % 0.01% PT Chitra Paratama - 159, % PT Chandra Sakti Utama Leasing - 71, % Pan Terra Pte. Ltd., Singapore - 43, % PT Triyasa Propertindo % Total 17,538, ,928, % 14.27% Total Percentage to total consolidated assets December 31, December 31, Purchase of Fixed Assets PT Trakindo Utama 41,581, % Total Percentage to total respective expenses March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Rented Space, Parking Spaces and Vehicles PT Trakindo Utama 2,147,614 8, % 0.08% PT Tiara Marga Trakindo 403, , % 2.69% PT Chakra Jawara 25, % - PT Mitra Solusi Telematika 7,443 4, % 0.04% PT Triyasa Propertindo % 0.00% Total 2,584, , % 2.81% 120 F-128

280 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) b. Significant Transactions with Related Parties (continued) Total Percentage to total respective expenses December 31, December 31, Rented Space, Parking Spaces and Vehicles PT Trakindo Utama 1,371,902 29, % 0.03% PT Tiara Marga Trakindo 132,197 5,939, % 5.79% PT Mitra Solusi Telematika 62,799 19, % 0.02% PT Chakra Jawara 40, % - PT Triyasa Propertindo , % 0.01% Total 1,608,033 6,001, % 5.85% Total Percentage to total respective expenses December 31, December 31, Rented Space, Parking Spaces and Vehicles PT Tiara Marga Trakindo 5,319, % PT Tri Swadana Utama 83, % PT Trakindo Utama 35, % Total 5,438, % Total Percentage to total respective expenses March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Purchased Information and Technology Services PT Mitra Solusi Telematika 176,897 1,006, % 1.67% Total Percentage to total respective expenses December 31, December 31, Purchased Information and Technology Services PT Mitra Solusi Telematika 1,006,049 1,257, % 1.22% PT Chandra Sakti Utama Leasing - 6, % Total 1,006,049 1,263, % 1.23% 121 F-129

281 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) b. Significant Transactions with Related Parties (continued) Total Percentage to total respective expenses December 31, December 31, Purchase Information and Technology Services PT Mitra Solusi Telematika 1,517, % PT Chandra Sakti Utama Leasing 5, % Total 1,523, % Total Percentage to total respective expenses March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Purchase of Spare Parts and Others PT Trakindo Utama 11,999,669 4,580, % 15.25% PT Chakra Jawara 158,631 10, % 0.04% PT Chitra Paratama 72,127 47, % 0.16% PT Tri Swardana Utama 36,346 8, % 0.03% PT Mitra Solusi Telematika 2, % - Pan Terra Pte. Ltd., Singapore 412 2, % 0.01% Halcon Primo Logistics Pte. Ltd., Singapore % 0.00% PT Tiara Marga Trakindo - 2, % Total 12,269,908 4,652, % 15.50% Total Percentage to total respective expenses December 31, December 31, Purchase of Spare Parts and Others PT Trakindo Utama 39,492,719 34,707, % 6.58% PT Tri Swardana Utama 224, , % 0.09% PT Chitra Paratama 174, , % 0.04% PT Chakra Jawara 138, , % 0.07% Pan Terra Pte. Ltd., Singapore 6,562 6, % 0.00% PT Tiara Marga Trakindo 2,818 16, % 0.00% PT Mitra Solusi Telematika 1, % - Halcon Primo Logistics Pte. Ltd., Singapore 604 6,158, % 1.17% Total 40,041,519 41,943, % 7.95% 122 F-130

282 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) b. Significant Transactions with Related Parties (continued) Total Percentage to total respective expenses December 31, December 31, Purchased of Spare Parts and Others PT Trakindo Utama 33,030, % Halcon Primo Logistics Pte. Ltd., Singapore 6,468, % PT Chitra Paratama 4,378, % PT Tri Swadana Utama 613, % PT Chakra Jawara 421, % Pan Terra Pte. Ltd., Singapore 294, % PT Triyasa Propertindo 2, % Total 45,211, % Total Percentage to total respective expenses March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Employee Training PT Trakindo Utama % - PT Tiara Marga Trakindo % - Total % - Total Percentage to total respective expenses December 31, December 31, Employee Training PT Trakindo Utama 1, % 0.00% PT Tiara Marga Trakindo % 0.00% Total 1,798 1, % 0.00% Total Percentage to total respective expenses December 31, December 31, Employee Training PT Trakindo Utama 19, % PT Mahadana Dasha Utama 3, % PT Mitra Solusi Telematika % Total 23, % 123 F-131

283 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) b. Significant Transactions with Related Parties (continued) Total Percentage to total respective expenses March 31, March 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) Finance Charges PT Chandra Sakti Utama Leasing 355, , % 9.08% Total Percentage to total respective expenses December 31, December 31, Finance Charges PT Trakindo Utama 10,080,207 3,055, % 12.45% PT Chandra Sakti Utama Leasing 2,195,679 3,491, % 8.91% Valle Verde Pte. Ltd., Singapore 298, % - Total 12,574,469 6,547, % 21.36% Total Percentage to total respective expenses December 31, December 31, Finance Charges PT Chandra Sakti Utama Leasing 3,024, % Total Percentage to total respective expenses December 31, December 31, Other Expense PT Trakindo Utama 2,348, % 124 F-132

284 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Details of transactions and balances with related parties are as follows: (continued) c. Transaction with Key Management Personnel Key Management Compensation In the operational activities, the Group has several key personnel consisting of the Group s Boards of Commissioners and Directors. The compensation to key management for the three-month periods ended March 31, 2017 and 2016, and for the years ended December 31, 2016, 2015, and 2014, are as follows: March 31, December 31, (Unaudited) (Unaudited) Salaries and other short-term employee benefits: Board of Commissioners 142, , , , ,141 Board of Directors 755, ,872 4,330,265 4,483,514 4,673,526 Total 897,935 1,073,734 4,965,245 5,303,392 5,417,667 d. Long-term Loan from Shareholder Loan Facility from Valle Verde Pte. Ltd., Singapore On June 27, 2014, the Company entered into subordinated loan with Valle Verde Pte. Ltd., Singapore, parent entity, with maximum credit amount of US$30,000,000. The loan facility has a term of 5 (five) years after the signing of loan agreement and and can be extended according to the agreement of both parties. The loan bears annual interest rate at LIBOR plus a certain margin. The loan will be repayable on the fifth year from the drawdown date, or upon full repayment of club deal facility dated October 13, 2016 (Note 14), whichever is the earlier. On September 29, 2016, the Company entered into second loan agreement with Valle Verde Pte. Ltd., Singapore, parent entity, with maximum credit amount of US$10,000,000. This facility was provided as Standby Working Capital whereby drawdown could only be executed to remedy any provisions under the Club Deal agreement. On October 18, 2016, the Company entered into an amendment deed related to the first facility agreement with Valle Verde Pte. Ltd., Singapore, which arranged the change in repayment clause. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the outstanding balance of long-term loan from shareholder amounted to US$30,000,000, US$Nil, US$30,000,000, US$Nil, and US$Nil, respectively. 125 F-133

285 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) e. Nature of Relationship with Related Parties The details nature of relationship with related parties are as follows: Company Valle Verde Pte. Ltd., Singapore PT Tiara Marga Trakindo ( TMT ) Halcon Primo Logistics Pte. Ltd., Singapore Mega Strada Pte. Ltd., Singapore Pan Terra Pte. Ltd., Singapore PT Trakindo Utama PT Chandra Sakti Utama Leasing PT Mahadana Dasha Utama PT Chakra Jawara PT Chitra Paratama PT Tri Swardana Utama PT Triyasa Propertindo PT Mitra Solusi Telematika Dana Pensiun PT Trakindo Utama PT Multi Harapan Utama PT Meppo-Gen Nature of Relationship Parent entity of the Company Entity with significant influence over the Group Entity controlled by shareholder of the Group Entity controlled by shareholder of the Group Entity controlled by shareholder of the Group Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by TMT Entity controlled by AHK Holdings Pte. Ltd., Singapore Associated entity 126 F-134

286 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 31. SEGMENT INFORMATION Primary Segments The Group classifies its business into three business segments, namely services, manufacturing and coal mining. Information concerning the Group s business segments is as follows: Three-Month Periods Ended March 31, 2017 (Unaudited) Mining Contractors and Services Manufacturing Coal Mining Others Elimination Net Net revenue from external customers 46,949,542 2,635, ,457, ,042,518 Net revenue inter-segment 9,479, ,343 13,811,110 - (23,505,888) - Net revenue 56,428,977 2,851, ,268,163 - (23,505,888) 169,042,518 Cost of revenue 45,362,972 2,066,296 94,211,853 - (17,315,088) 124,326,033 Gross profit 11,066, ,970 39,056,310 - (6,190,800) 44,716,485 Selling, general and administrative expenses (13,373,028) Other income 701,495 Other expenses (2,963,509) Profit from operations 29,081,443 Share of profit of associates - net 64,949 Finance income - net 445,389 Finance charges (9,470,472) Profit before final tax and income tax 20,121,309 Final tax expense (381,126) Profit before income tax 19,740,183 Income tax expense - net (6,549,628) Profit for the period 13,190,555 Other comprehensive loss (1,021,944) Total comprehensive income for the period 12,168,611 Segment assets 376,620,635 5,064, ,454, ,627,370 (551,656,230) 1,070,111,114 Segment liabilities 308,684,680 11,050, ,424, ,229,489 (378,676,233) 898,712,579 Other information: Capital expenditures 12,474,271 49,662 8,556, ,080,309 Depreciation and amotization expense 7,674, ,113 15,602, ,733-23,778, F-135

287 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 31. SEGMENT INFORMATION (continued) Primary Segments (continued) The Group classifies its business into three business segments, namely services, manufacturing and coal mining. Information concerning the Group s business segments is as follows: (continued) Three-Month Periods Ended March 31, 2016 (Unaudited) Mining Contractors and Services Manufacturing Coal Mining Others Elimination Net Net revenue from external customers 51,511,753 2,399,439 92,128, ,039,567 Net revenue inter-segment 6,571,072 61,660 15,169,717 - (21,802,449) - Net revenue 58,082,825 2,461, ,298,092 - (21,802,449) 146,039,567 Cost of revenue 45,094,717 2,327,576 82,503,008 - (17,803,522) 112,121,779 Gross profit 12,988, ,523 24,795,084 - (3,998,927) 33,917,788 Selling, general and administrative expenses (14,367,376) Other income 409,460 Other expenses (3,666,805) Profit from operations 16,293,067 Share of profit of associates - net 66,530 Finance income 893,650 Finance charges (7,005,801) Profit before final tax and income tax 10,247,446 Final tax expense (135,899) Profit before income tax 10,111,547 Income tax expense - net (1,578,119) Profit for the period 8,533,428 Other comprehensive income 3,921,324 Total comprehensive income for the period 12,454,752 Segment assets 419,170,507 15,426, ,700, ,389,080 (588,106,325) 1,182,579,945 Segment liabilities 309,874,948 25,246, ,469, ,661,187 (418,149,754) 997,102,171 Other information: Capital expenditures , ,359 Depreciation and amortization expense 10,685, ,693 15,088, ,458-26,219, F-136

288 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 31. SEGMENT INFORMATION (continued) Primary Segments (continued) The Group classifies its business into three business segments, namely services, manufacturing and coal mining. Information concerning the Group s business segments is as follows: (continued) Year Ended December 31, 2016 Mining Contractors and Services Manufacturing Coal Mining Others Elimination Net Net revenue from external customers 197,976,107 11,646, ,073, ,695,975 Net revenue inter-segment 29,500, ,181 47,769,361 - (77,888,688) - Net revenue 227,476,253 12,265, ,842,604 - (77,888,688) 590,695,975 Cost of revenue 175,905,967 11,565, ,962,079 - (58,648,008) 462,785,716 Gross profit 51,570, ,128 94,880,525 - (19,240,680) 127,910,259 Selling, general and administrative expenses (61,589,126) Other income 2,882,300 Other expenses (26,878,187) Profit from operations 42,325,246 Share of profit of associates - net 441,323 Finance income - net 7,075,308 Finance charges (35,021,121) Profit before final tax and income tax 14,820,756 Final tax expense (1,361,795) Profit before income tax 13,458,961 Income tax expense - net (6,556,840) Profit for the year 6,902,121 Other comprehensive income 242,765 Total comprehensive income for the year 7,144,886 Segment assets 366,316,742 10,550, ,221, ,082,036 (579,988,843) 1,073,182,119 Segment liabilities 309,223,767 5,422, ,048, ,793,975 (407,519,887) 913,968,195 Other information: Capital expenditures 28,468, ,715 11,981, ,097-41,005,688 Depreciation and amortization expense 35,573, ,338 61,576,872 1,823,646-99,636, F-137

289 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 31. SEGMENT INFORMATION (continued) Primary Segments (continued) The Group classifies its business into three business segments, namely services, manufacturing and coal mining. Information concerning the Group s business segments is as follows: (continued) Year Ended December 31, 2015 Mining Contractors and Services Manufacturing Coal Mining Others Elimination Net Net revenue from external customers 231,998,635 16,781, ,806, ,585,884 Net revenue inter-segment 28,697, ,406 89,833,047 - (118,838,020) - Net revenue 260,696,202 17,088, ,639,176 - (118,838,020) 654,585,884 Cost of revenue 214,027,317 15,456, ,832,404 - (91,893,190) 527,423,013 Gross profit 46,668,885 1,632, ,806,772 - (26,944,830) 127,162,871 Selling, general and administrative expenses (102,657,455) Other income 3,936,506 Impairment loss on mining properties (1,148,038) Other expenses (22,388,118) Profit from operations 4,905,766 Share of profit of associates - net 885,044 Finance income - net 4,813,622 Finance charges (41,335,443) Loss before final tax and income tax (30,731,011 ) Final tax expense (1,079,861) Loss before income tax (31,810,872 ) Income tax expense - net (13,522,068) Loss for the year (45,332,940 ) Other comprehensive loss (5,874,076) Total comprehensive loss for the year (51,207,016 ) Segment assets 409,963,186 14,368, ,931, ,238,105 (571,693,613) 1,189,807,687 Segment liabilities 321,087,328 7,637, ,765, ,438,818 (403,677,286) 1,016,251,475 Other information: Capital expenditures 38,996, , ,754, , ,497,837 Depreciation and amortization expense 50,410,035 2,055,869 56,493,539 1,307, ,267, F-138

290 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 31. SEGMENT INFORMATION (continued) Primary Segments (continued) The Group classifies its business into three business segments, namely services, manufacturing and coal mining. Information concerning the Group s business segments is as follows: (continued) Year Ended December 31, 2014 Mining Contractors and Services Manufacturing Coal Mining Others Elimination Net Net revenue from external customers 269,087,356 38,183, ,349, ,620,468 Net revenue inter-segment 35,370,467 1,011, ,984,202 - (143,366,551) - Net revenue 304,457,823 39,195, ,333,468 - (143,366,551) 723,620,468 Cost of revenue 239,614,045 35,867, ,735,837 - (119,494,045) 577,723,147 Gross profit 64,843,778 3,328, ,597,631 - (23,872,506) 145,897,321 Selling, general and administrative expenses (140,929,741) Other income 18,200,585 Impairment loss on mining properties (67,707,382) Other expenses (20,846,435) Loss from operations (65,385,652) Share of profit of associates - net 640,576 Finance income - net 5,290,545 Finance charges (39,856,905) Loss before final tax and income tax (99,311,436) Final tax expense (826,809) Loss before income tax (100,138,245) Income tax expense - net (15,473,850) Loss for the year (115,612,095) Other comprehensive loss (1,383,479) Total comprehensive loss for the year (116,995,574) Segment assets 428,279,807 23,976, ,750, ,641,221 (567,954,128) 1,132,693,731 Segment liabilities 343,368,214 8,151, ,699, ,649,533 (399,699,607) 929,169,523 Other information: Capital expenditures 75,166,943 82, ,354, ,662 (964,715) 197,260,497 Depreciation and amortization expense 61,710,450 1,259,081 38,765,004 1,314,460 (526,688) 102,522, F-139

291 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 32. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES The following are significant agreements of the Group: The Company Revolving Non-Cash Loan Facility from PT Bank Mandiri (Persero) Tbk ( Mandiri ) On March 25, 2014, the Company entered into a loan agreement with Mandiri, a third party, for revolving non-cash loan facility with a maximum credit amount of US$20,000,000 and can be used for issuance of L/C, SKBDN, Bank Guarantee (Bid Bonds/ Performance Bonds/ Advance Payment/ Maintenance/ Retention/ Custom Bond) and Standby L/C ( SBLC ). The facility will end in one year since signing of loan agreement and used to refinance existing non-cash loan facility of the Group. On April 21, 2017, this facility has been extended until April 24, The non-cash loan facility used amounted to US$1,836,056, Rp96.55 billion (equivalent to US$7,247,701) and EUR297,600 (equivalent to US$318,283) as of March 31, 2017, US$10,261,447, Rp53.09 billion (equivalent to US$4,003,616) and EUR94,114 (equivalent to US$103,986). As of March 31, 2016, US$1,985,988, Rp80.29 billion (equivalent to US$6,080,947) and EUR244,310 (equivalent to US$257,062) as of December 31, 2016, US$11,568,275, Rp70.77 billion (equivalent to US$5,077,821) and EUR83,424 (equivalent to US$91,120) as of December 31, 2015, and US$3,988,105, Rp26 billion (equivalent to US$2,110,544), EUR336,312 (equivalent to US$409,117) and AUD710,401 (equivalent to US$583,511) as of December 31, Based on the loan agreement, the Company is required to maintain certain financial ratios, such as net debt to EBITDA ratio and net debt to equity ratio. As of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014, the Company has maintained all financial ratios as required in the loan agreement. Unused Credit Facilities Subordinated Loan Facility from Valle Verde Pte. Ltd., Singapore On June 27, 2014, the Company entered into subordinated loan with Valle Verde Pte. Ltd., Singapore, parent entity, with maximum credit amount of US$30,000,000. The loan facility has a term of 5 years after the signing of loan agreement and and can be extended according to the agreement of both parties. The loan bears annual interest rate at LIBOR plus a certain margin. The loan will be repayable on the fifth year from the drawdown date, or upon full repayment of club deal facility, whichever is the earlier. Demand Loan - Revolving Working Capital Financing Facility from PT Bank OCBC NISP Tbk ( OCBC NISP ) On November 27, 2014, the Company entered into a Demand Loan - Revolving Working Capital Financing Facility agreement with OCBC NISP, a third party, with maximum credit amount of US$5,000,000 and annual interest rate at LIBOR plus a certain margin. This loan facility will be due in 1 year upon signing of the agreement. No assets are pledged as collateral for this facility. The facility is available up to June 30, The facility has been terminated and not extended. Specific Advance Facility from Oversea-Chinese Banking Corporation Limited ( OCBC ), Singapore On December 12, 2014, the Company entered into a Specific Advance Facility agreement with OCBC, a third party, with maximum credit amount of US$20,000,000 and annual interest rate at LIBOR plus a certain margin. This loan facility is available in an unspecified time. No assets are pledged as collateral for this facility. 132 F-140

292 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 32. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued) SS Advance for Purchase of Asset On October 31, 2011, SS and Chromalloy San Diego Corporation, a third party, entered into a purchase and sale agreement covering LM2500 Generator Package, consisting of a complete gas turbine engine and a package of support equipment with total purchase price amounting to US$6,500,000. As of December 31, 2015, SS has paid US$6,210,000 and recorded as part of Other Non-Current Assets in the consolidated statements of financial position. Power Plant Rental Contract On July 1, 2016, SS entered into Heavy Fuel Oil (HFO) Power Plant Rental Contract with PT Agincourt Resources. This power plant will be located at Martabe Mine Site, North Sumatera. Ijarah In September 2014, SS obtained an Ijarah Muntahiyah Bittamlik ( IMBT ) financing facility from PT Bank Syariah Mandiri ( BSM ) with a maximum amount of Rp317.4 billion with credit terms of 48 months. The facility is available for rental of 69 units of engine gensets. Based on the agreement, SS will leaseback the engine gensets for a period of 48 months. The transfer of ownership at the end of IMBT deed or after the final financing is by purchase of the IMBT object with selling price to be later determined by the parties. In September 2014, SS sold 47 units of engine gensets to BSM with a sale price amounting to Rp billion (equivalent to US$19,108,222). Loss on sale of the ijarah object amounted to Rp6.6 billion (equivalent to US$550,924) and was presented as part of Other Expenses. In accordance with PSAK No. 107, the IMBT transaction is treated as operating lease with option hibah at the end of lease period. The repayment of installment was recorded as rent expense. Total repayments until March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 amounted to Rp billion, Rp65.35 billion, Rp98.03 billion, Rp54.46 billion and Rp10.89 billion, respectively. Based on lmbt agreement, SS is required to comply with certain restrictive covenants related to SS nature of business, corporate action and others and to maintain certain ratios, such as debt to equity and debt service coverage ratios. As of March 31, 2017 and December 31, 2016, SS did not meet the financial ratios as required in the IMBT agreement, and as of March 31, 2016, December 31, 2015 and 2014, SS complied with all the financial ratios as required in the IMBT agreement. As of the completion date of the consolidated financial statements, SS is in the process of debt restructuring of the IMBT loan. PT Kwartadaya Dirganusa ( KDD ) In 2010, SS paid advance for stock subscription amounting to US$3,000,000 (equivalent to Rp26,871 million) to purchase 75.00% equity ownership (equivalent to 54,000 shares) with par value of Rp1,000,000 in PT Kwartadaya Dirganusa ( KDD ) from PT Sinergi Pancawahana Setara ( SPS ), with purchase value of US$5,000,000. Subsequently in March 2011, SS decided to cancel the purchase and requested the advance to be refunded. In 2011, SS received a payment amounting to US$75,000. As stated in the sales and purchase agreement between SS and SPS, the balance will be charged with interest at 6.00% per annum. This receivable is collateralized by a fiduciary assignment over 2 units of General Electric Type Frame - 5 and its equipment. 133 F-141

293 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 32. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued) SS (continued) PT Kwartadaya Dirganusa ( KDD ) (continued) On October 22, 2012, SS signed an auction agreement with GoIndustry DoveBid (S) Pte. Ltd. to perform the auction for asset pledge as collateral of 2 units of General Electric Type Frame-5 and its equipment. However, in 2013, the asset auction plan was cancelled. Therefore, receivable balance as of December 31, 2013 of US$3,000,000 was reclassified as long-term non-trade receivable presented as part of Other Non-Current Assets in the consolidated statement of financial position. In 2013, SS received partial payment from KDD amounting to US$488,000 (equivalent to Rp6 billion). As of December 31, 2016, SS recorded allowance for impairment losses of non-trade receivable from KDD amounting to US$2,610,000. As of March 31, 2017 and 2016, and December 31, 2016 and 2015, outstanding non-trade receivable net of allowance for impairment losses from KDD amounted to US$750,000. And as of December 31, 2014, outstanding non-trade receivable from KDD amounted to US$3,180,000. Siam Power Generation Public Company Limited ( SIPCO ) Non-trade receivable from SIPCO represents short term loan amounting to US$4,000,000 and the interest receivable amounting to US$394,332. As of December 31, 2016, management believes that settlement of non-trade receivable from SIPCO would occur within 2 years, therefore as of December 31, 2016, the aforementioned non-trade receivable was reclassified as part of Other Non-Current Asset account. As of December 31, 2016, SS has recorded allowance for impairment losses of non-trade receivable from SIPCO amounting to US$414,610. TIA Coal Hauling Road Maintenance On January 28, 2014, TIA and PT Prolindo Cipta Nusantara ( PCN ) entered into coal hauling road maintenance agreement. PCN may pass the hauling road which is owned by TIA for a certain volume for certain contract period and pay certain fees for maintenance to TIA. The contract is effective as of June 4, 2015 up to June 3, For the three-month periods ended March 31, 2017 and 2016, total maintenance income recognized by TIA amounted to US$481,911 and US$348,361, respectively, recorded as part of Other Income in the consolidated statements of profit or loss and other comprehensive income. For the years ended December 31, 2016, 2015, and 2014, total maintenance income recognized by TIA amounted to US$1,765,714, US$2,499,113 and US$5,770,907, respectively, presented as part of Other Income in the consolidated statements of profit or loss and other comprehensive income. Exploitation Fee Based on Government Regulation No. 45/2003 ( PP No. 45 ), all companies holding mining rights will have an obligation to pay exploitation fees ranging from 4% to 5% of sales, further changed by PP No. 9/2012, with effective implementation since January 6, 2012, wherein percentage of the production fees was changed to become 3% to 7% of sales. 134 F-142

294 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 32. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued) TIA (continued) Exploitation Fee (continued) For the three-month periods ended March 31, 2017 and 2016, exploitation fees amounting to US$2,688,421 and US$2,170,271, respectively, are recorded as part of Cost of Revenue in the consolidated statements of profit or loss and other comprehensive income (Note 27). For the years ended December 31, 2016, 2015, and 2014, exploitation fees amounting to US$8,089,968, US$7,696,990 and US$11,723,356, respectively, are presented as part of Cost of Revenue in the consolidated statements of profit or loss and other comprehensive income (Note 27). BEL Exploitation Fee Based on Government Regulation No. 45/2003 ( PP No. 45 ), all companies holding mining rights will have an obligation to pay exploitation fees ranging from 4% to 5% of sales, further changed by PP No. 9/2012, with effective implementation since January 6, 2012, wherein percentage of the production fees was changed to become 3% to 7% of sales. For the three-month periods ended March 31, 2017 and 2016, exploitation fees amounting to US$Nil and US$57,709, respectively, are presented as part of Cost of Revenue in the consolidated statements of profit or loss and comprehensive income (Note 27). For the years ended December 31, 2016, 2015, and 2014, exploitation fees amounting to US$133,552, US$139,607, and US$115,866, respectively, are presented as part of Cost of Revenue in the consolidated statements of profit or loss and comprehensive income (Note 27). Coal Mining Service Agreement On June 29, 2012, BEL entered into an agreement for coal mining service in Nagan Raya mine with PT Tata Bara Utama ( TBU ). Under this agreement, TBU agreed to render stripping and mining activities for the period from July 1, 2012 until June 30, Mifa Exploitation Fee Based on Government Regulation No. 45/2003 ( PP No. 45 ), all companies holding mining rights will have an obligation to pay exploitation fees ranging from 4% to 5% of sales, further changed by PP No. 9/2012, with effective implementation since January 6, 2012, wherein percentage of the production fees was changed to become 3% to 7% of sales. For the three-month periods ended March 31, 2017 and 2016, exploitation fees amounting to US$718,311 and US$60,281, respectively, are presented as part of Cost of Revenue in the consolidated statements of profit or loss and other comprehensive income (Note 27). For the years ended December 31, 2016, 2015, and 2014, exploitation fees amounting to US$982,826, US$1,348,675, and US$343,382, respectively, are presented as part of Cost of Revenue in the consolidated statements of profit or loss and other comprehensive income (Note 27). 135 F-143

295 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 32. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued) CK Mining Services Contract CK has several significant mining services contracts. Under the contracts, CK provides coal mining services at several locations in Kalimantan, Maluku and Sumatera. The periods of the contracts are varied and will expire until Litigations a. CK filed a civil lawsuit against PT Artha Sumatera Energi ( ASE ) as a Corporate Guarantor of PT Realita Jaya Mandiri ( RJM ) on August 14, 2014 to South Jakarta District Court with Registration No. 449/Pdt.G/2014/PN.JKT.SEL. The lawsuit was filed to obtain settlement of RJM s outstanding debt based on Coal Mining Services Contract No. 01/CK-RJM/KONT-TAMB/III/2013 dated March 15, On November 4, 2015, the South Jakarta District Court has pronounced decision which rejected the exception of ASE and not accepted the lawsuit of CK. On such decision, on November 16, 2015, CK filed an appeal to Jakarta High Court. On December 18, 2015, CK submit an appeal brief to South Jakarta District Court. Through its letter dated November 28, 2016 addressed to Chief of South Jakarta District Court, the Jakarta High Court stated that civil case No. 449/Pdt/G/2014/PN.Jkt.Sel between CK against ASE has been accepted by the Jakarta High Court and registered under No. 711/Pdt/2016/PT/DKI.Jakarta. Until the completion date of the consolidated financial statements, the process is still on going in Jakarta High Court. b. CK filed an arbitration petition to RJM through Indonesia National Board of Arbitration ( BANI ) with Registration No. 738/VIII/ARB-BANI/2015 dated August 26, SSB The arbitration petition was filed to obtain settlement of RJM s outstanding debt based on Coal Mining Services Contract No. 01/CK-RJM/KONT-TAMB/III/2013 dated March 15, On May 20, 2016, BANI has pronounced its decission which partially granted CK s petition. Until the completion date of the consolidated financial statements, CK is still in the proses to execute BANI s decision. Litigations Based on Civil Lawsuit dated April 3, 2013, SSB was sued by the heirs of deceased Tone, in connection with the ownership of land located in Kariangau, Balikpapan to Balikpapan State Court. The plaintiffs have requested the Court to return the ownership of the land to them and pay compensation amounting to Rp4 billion (equivalent to US$307,740). On the claim, the District Court of Balikpapan issued Decision No.51/Pdt.G/2013/PN.Bpp. dated December 11, The Court decided to reject the claim. On this decision, the plaintiffs have filed an appeal document on February 27, SSB received notification regarding the appeal decision from the High Court of Samarinda on February 26, 2015, which decided to accept appeal from the plaintiffs and cancel the District Court of Balikpapan s decision dated December 11, F-144

296 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 32. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued) SSB (continued) Litigations (continued) On March 11, 2015, with case Registration No. 83/II/KA/PDT/2015/PN.Bpp, SSB submitted cassation to the Supreme Court as the response over the High Court decision. On March 23, 2016, the Supreme Court announced Decision No. 2938/K/PDT/2015 that rejected the cassation filed by SSB. As a response to the cassation decision, on January 25, 2017, SSB, through the District Court of Balikpapan, filed a judicial review to the Supreme Court. Until the completion date of the consolidated financial statements, the judicial review proposal is still in process in the Supreme Court. TIA Litigations a. Based on Civil Lawsuit dated June 30, 2016 which was registered in Batu Licin Distrcit Court, with Registration No.10/Pdt.G/2016/16/PN BLN, TIA was sued civilly by H. Andi Syamsul Bahri related to the land ownership located in ± KM 19 Sungai Tahi Wasi RT. IV and RT. VII, Desa Sebamban Baru, Kecamatan Sungai Loban, South Kalimantan Province. On November 16, 2016, the judges decided to clear TIA of the lawsuit. Based on that decision of Batu Licin District Court, plaintiff have filed an appeal. Until the completion date of the consolidated financial statements, the case is still in the appeal process at Banjarmasin s High Court. b. As registered in case register number 03/Pdt.G/2017/PN.Bln in Batu Licin District Court, H. Bustani and others filed a lawsuit against TIA regarding dispute ownership on land area of 393 ha located in Sebamban Baru Village, Sungai Loban Sub-District, Tanah Bumbu District, South Kalimantan Province. NDHM The defendant claimed TIA to pay material and immaterial loss. The defendant has revoked the case on 13 February 2017 and resubmitted it again on March 21, The case is registered under new number of No. 05/Pdt.G/2017/Pn.Bln, at Batu Licin District Court. Until the completion date of the consolidated financial statements, this case in still in the examination process in Batu Licin District Court. Power Purchase Agreement On June 27, 2016, NDHM entered into power purchase agreement with PT PLN (Persero) with installed capacity 2 x 5MW in South Sulawesi. This power purchase agreement will last for 240 months from the Commercial Operation Date (COD). NBE Power Purchase Agreement On April 25, 2016, NBE entered into Power Purchase Agreement with PT PLN (Persero) with installed capacity of 2MW in South Kalimantan. This Power Purchase Agreement is valid for 20 years from the date of commercial operations. 137 F-145

297 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 33. ASSETS AND LIABILITIES IN FOREIGN CURRENCIES As of March 31, 2017 and 2016, the Group has significant monetary assets and liabilities denominated in foreign currencies as follows: March 31, 2017 (Unaudited) March 31, 2016 (Unaudited) Equivalent Equivalent In millions Amount in US$ In millions Amount in US$ Rupiah Assets Cash and cash equivalents 420,076 31,534, ,059 42,713,154 Other current financial assets 123 9,268 14,325 1,078,984 Trade receivables 1,061,028 79,650,755 1,047,108 78,872,225 Non-trade receivables 23,248 1,745, Prepaid taxes 100,303 7,529, ,911 19,577,511 Other current assets 6, , Estimated claims for tax refund 38,172 2,865, ,269 18,173,332 Other non-current assets 87,662 6,580,750 55,828 4,205,193 Sub-total 1,737, ,422,773 2,185, ,621,138 Liabilities Short-term loans 465,000 34,907, ,000 35,778,849 Trade payables 1,417, ,424,730 1,429, ,689,999 Non-trade payables 22,485 1,687, Taxes payable 110,929 8,327,363 79,040 5,953,582 Accrued expenses 438,766 32,937, ,451 Short-term employee benefits liability 106,065 7,962,276 98,735 7,437,125 Long-term bank loans 250,620 18,813, ,351 29,779,361 Finance lease payables ,904 1, ,397 Bonds payable and sukuk ijarah 780,046 58,557, ,724 58,656,556 Sub-total 3,591, ,648,954 3,258, ,445,614 Liabilities in Rupiah - net 1,854, ,226,181 1,073,026 80,824,476 European Euro Asset Cash and cash equivalents , ,693 Non-trade receivables , ,416 Sub-total , ,109 Liability Trade payables , ,457 Accrued expenses ,717 Sub-total , ,174 Liabilities in Euro - net , ,065 Other foreign currencies Assets Cash and cash equivalents 32,447 11,951 Other current assets 34,227 - Trade receivables - 45,904 Sub-total 66,674 57,855 Liability Trade payables 185, ,497 Non-trade payables - 11,516 Accrued expenses - 5,835 Sub-total 185, ,848 Liability in other foreign currencies - net 118, , F-146

298 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 33. ASSETS AND LIABILITIES IN FOREIGN CURRENCIES (continued) As of December 31, 2016 and 2015, the Group has significant monetary assets and liabilities denominated in foreign currencies as follows: December 31, 2016 December 31, 2015 Equivalent Equivalent In millions Amount in US$ In millions Amount in US$ Rupiah Assets Cash and cash equivalents 335,698 24,984, ,990 43,855,753 Other current financial assets ,499 12, ,987 Trade receivables 1,081,343 80,481, ,558 62,381,866 Non-trade receivables Prepaid taxes 197,017 14,663, ,161 22,193,655 Other current assets Estimated claims for tax refund 306,845 22,837, ,703 18,898,389 Other non-current assets 57,828 4,303, ,470 8,660,391 Sub-total 1,979, ,300,195 2,164, ,896,872 Liabilities Short-term loans 465,000 34,608, ,000 34,432,765 Trade payables 1,572, ,031,593 1,340,995 97,208,782 Non-trade payables Taxes payable 51,427 3,827,577 45,599 3,305,475 Accrued expenses 20 1, ,987 Short-term employee benefits liability 109,539 8,152,637 87,601 6,350,165 Long-term bank loans 269,220 20,037, ,361 32,864,171 Finance lease payables ,601 2, ,949 Bonds payable and sukuk ijarah 779,704 58,030, ,414 56,427,222 Sub-total 3,234, ,726,759 3,183, ,763,754 Liabilitas dalam Rupiah - neto 1,255,716 94,426,564 1,018,995 73,866,882 European Euro Asset Cash and cash equivalents , ,040 Non-trade receivables , Sub-total ,058, ,040 Liability Trade payables , ,768 Assets in Euro - net , ,272 Other foreign currencies Assets Cash and cash equivalents 23,327 56,507 Other current assets 33,088 - Other non-current assets 14,143 - Sub-total 70,558 56,507 Liability Trade payables 175,642 1,844,372 Liability in other foreign currencies - net 105,084 1,787, F-147

299 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 33. ASSETS AND LIABILITIES IN FOREIGN CURRENCIES (continued) As of December 31, 2014, the Group has significant monetary assets and liabilities denominated in foreign currencies as follows: December 31, 2014 In millions Equivalent Amount in US$ Rupiah Assets Cash and cash equivalents 609,647 49,006,994 Other current financial assets 6, ,272 Trade receivables 749,114 60,218,144 Non-trade receivables 212,261 17,062,829 Prepaid taxes 249,668 20,069,777 Other current assets 12,884 1,035,683 Estimated claims for tax refund 150,604 12,106,414 Other non-current assets 73,991 5,947,849 Sub-total 2,064, ,970,962 Liabilities Short-term loans 275,000 22,106,109 Trade payables 760,665 61,146,752 Non-trade payables 33,546 2,696,603 Taxes payable 18,085 1,453,775 Accrued expenses 167,735 13,483,536 Short-term employee benefits liability 118,809 9,550,526 Long-term bank loans 685,360 55,093,245 Finance lease payables 7, ,001 Bonds payable and sukuk ijarah 995,694 80,039,684 Sub-total 3,062, ,213,231 Liabilities in Rupiah - net 998,214 80,242,269 European Euro Asset Cash and cash equivalents ,102 Liability Trade payables ,891 Liability in Euro - net ,789 Other foreign currencies Assets Cash and cash equivalents 66,593 Trade receivables 190 Other current assets 3,203 Sub-total 69,986 Liability Trade payables 4,136,539 Liability in other foreign currencies - net 4,066,553 In the Other Income and Other Expenses include gain and (loss) on foreign exchange from operations amounting to US$(7,201), US$1,381,775, US$(495,637), US$(4,048,069) and US$(475,406) for the three-month periods ended March 31, 2017 and 2016, and for the years ended December 31, 2016, 2015, and 2014, respectively. 140 F-148

300 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 34. FAIR VALUES OF FINANCIAL INSTRUMENTS Fair values of the financial assets and liabilities are included at the amounts at which the instruments could be exchanged in a current transaction between knowledgeable willing parties in an arm's length transaction, other than in a forced or liquidation sale. The following are the methods and assumptions used to estimate the fair value of each class of the Group s financial instruments: a. Cash and cash equivalents, other current financial assets, trade receivables, non-trade receivables, certain other current assets, trade payables, non-trade payables, accrued expenses and short-term employee benefits liability approximate their carrying amounts largely due to the short-term maturities of these instruments. b. The carrying values of bank loans approximate their fair values due to the floating rate interests on these instruments which are subject to adjustments by the banks. c. The fair values of long-term trade receivables, certain other non-current assets and finance lease payables are estimated by discounting future cash flows, using rates currently available for debt with similar terms, credit risks and remaining maturities. The bonds payable and Sukuk Ijarah are carried at amortized costs using the EIR method and rate of return. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are integral part of the EIR method and rate of return. The following tables set forth the fair values of financial assets and financial liabilities of the Group: March 31, December 31, (Unaudited) (Unaudited) Current Financial Assets Loans and receivables Cash and cash equivalents 101,093, ,397,359 81,713, ,355, ,305,096 Other current financial assets 9,268 1,978,984 10,534,818 27,562,306 19,479,591 Trade receivables 139,621, ,590, ,815, ,289, ,522,510 Non-trade receivables 2,740,160 2,396,580 2,580,215 8,081,013 20,469,020 Other current assets 5,799, ,134 1,250,696 1,284,362 1,140,800 Total Current Financial Assets 249,264, ,004, ,894, ,573, ,917,017 Non-current Financial Assets Loans and receivables Long-term trade receivables - third parties 12,467, ,974 17,213,123 14,603,600 11,051,547 Other non-current assets - net 1,178, ,522 1,224, ,111 1,635,854 Total Non-current Financial Assets 13,645,623 1,112,496 18,437,507 15,497,711 12,687,401 Total Financial Assets 262,909, ,116, ,332, ,071, ,604, F-149

301 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 34. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) The following tables set forth the fair values of financial assets and financial liabilities of the Group: (continued) March 31, December 31, (Unaudited) (Unaudited) Current Financial Liabilities Loans and borrowings Short-term loans 43,307,289 44,178,849 43,008,514 48,932,765 26,106,109 Trade payables 171,286, ,443, ,866, ,370, ,127,975 Non-trade payables 2,225,877 4,103,236 3,444,004 4,455,128 6,987,752 Accrued expenses 45,051,761 49,866,673 39,185,954 32,570,846 21,460,164 Short-term employee benefits liability 9,560,704 7,493,004 8,152,637 6,350,165 9,550,526 Current maturities of long-term debts: Bank loans 31,075, ,416,443 29,742,990 78,623,208 18,678,746 Bonds payable 43,562,074-43,170,259-17,560,394 Sukuk ijarah 14,995,550-14,860, Loan from related party 506, Finance lease payables 19,636,987 33,148,110 18,717,964 36,640,352 40,269,847 Total Current Financial Liabilities 381,208, ,649, ,149, ,943, ,741,513 Non-current Financial Liabilities Loans and borrowings Long-term debts - net of current maturities: Bank loans 290,706, ,902, ,073, ,259, ,265,039 Bonds payable - 43,635,671-41,977,229 46,479,472 Sukuk ijarah - 15,020,885-14,449,993 15,999,818 Loan from related party 9,442, Finance lease payables 24,798,270 36,095,988 29,964,525 41,840,747 64,790,786 Long-term trade payables - related party 109,357, ,380, ,117, ,684, ,000 Long-term loan from shareholder 30,000,000-30,000, Other long-term financial liability 2,793,613-3,001, Total Non-current Financial Liabilities 467,097, ,036, ,157, ,212, ,235,115 Total Financial Liabilities 848,306, ,685, ,306, ,155, ,976, F-150

302 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES a. Risk Management The principal financial liabilities of the Group consist of short-term loans, long-term bank loans, trade and non-trade payables, bonds payable, sukuk ijarah, finance lease payables and accrued expenses. The main purpose of these financial liabilities is to raise funds for the operations of the Group. The Group also has various financial assets such as cash and cash equivalents, other current financial assets, trade and non-trade receivables, and certain other current assets which arise directly from its operations. The main risks arising from the Group s financial instruments are fair value and cash flow interest rate risk, foreign exchange rate risk, credit risk and liquidity risk. The priority in managing these risks has significantly increased in light of the considerable change and volatility in both Indonesian and international financial markets. The Company s Board of Directors reviews and approves the policies for managing these risks which are summarized below: a. Fair Value and Cash Flow Interest Rate Risk Fair value and cash flow interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to the risk of changes in market interest rates relating primarily to its short-term loans and long-term loans. Interest rate fluctuations influence the cost of new loans and the interest on the outstanding variable rate loans of the Group. The Group s policies relating to interest rate risk are to manage interest cost through a mix of fixed and variable rate debts. The Group evaluates the fixed to floating ratio of its short-term loans and other long-term loans in line with movements of relevant interest rates in the financial markets. Currently, the Group does not have a formal hedging policy for interest rate exposures. For finance lease payables and long-term loans, the Group may seek to mitigate interest rate risk by passing it on to its customers. The following table sets out the carrying amounts, by maturity, of the Group s consolidated financial assets and liabilities that are exposed to interest rate risk: March 31, 2017 (Unaudited) Floating interest rate Fixed interest rate Less than or More than Less than or More than equal one year one year equal one year one year ( 1 Year) (> 1 Year) ( 1 Year) (> 1 Year) Total Assets Cash and cash equivalents 101,093, ,093,938 Other current financial assets 9, ,268 Trade receivables 139,621, ,467, ,089,267 Total 240,724, ,467, ,192,473 Liabilities Short-term loans 43,307, ,307,289 Long-term bank loans 31,075, ,706, ,781,527 Bonds payable 43,562, ,562,074 Sukuk ijarah 14,995, ,995,550 Loan from related party 506,151 9,442, ,948,500 Long-term loan from shareholder - 30,000, ,000,000 Finance lease payables 19,636,987 24,798, ,435,257 Total 153,083, ,946, ,030, F-151

303 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) a. Risk Management (continued) b. Foreign Exchange Rate Risk Foreign exchange rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group s exposure to exchange rate fluctuations results primarily from short-term loans, long-term loans, trade receivables from sales in foreign currencies and trade payables from purchases in foreign currencies. Monetary assets and liabilities of the Group which are denominated in foreign currencies as of March 31, 2017 and 2016, and December 31, 2016, 2015, and 2014 are presented in Note 33. The Group does not have any formal hedging policy for foreign exchange exposure. However, in relation to the matters discussed in the preceding paragraph, the fluctuations in the exchange rates between the United States dollar and each of the Rupiah, Australian Dollar, Singapore Dollar, Japanese Yen, Great Britain Poundsterling and European Euro provide some degree of natural hedge for the Group s foreign exchange exposure. c. Credit Risk Credit risk is the risk that a party to a financial instrument will fail to discharge its obligation and will result in a financial loss to the other party. The Group is exposed to credit risk arising from the credit granted to its customers. The Group trades only with recognized and credit worthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, trade receivables balances are monitored on an ongoing basis and allowance for impairment losses is provided, if needed. In addition, the Standard and Operating Procedures relating to credit granting to customers and monitoring on credit is continuously being improved. The maximum exposure to credit risk is represented by the carrying amount of trade receivables as shown in Note 6. There is no concentration of credit risk. With respect to credit risk arising from other financial assets, which comprise cash and cash equivalents and other current financial assets, from default of the counterparty, the Group has a policy not to place investments in instruments that have a high credit risk and to put the investments only in banks with high credit ratings. The maximum exposure to this risk is equal to the carrying amounts of the above mentioned financial assets as disclosed in Notes 4 and 5. d. Liquidity Risk Liquidity risk is a risk arising when the cash flow position of the Group is not enough to cover the liabilities which become due. 144 F-152

304 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) a. Risk Management (continued) d. Liquidity Risk (continued) In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate to finance the Group s operations and to mitigate the effects of fluctuation in cash flows. The Group also regularly evaluates the projected and actual cash flows, including its long-term loan maturity profiles, and continuously assesses conditions in the financial markets to maintain flexibility in funding by keeping committed credit facilities available. In addition, in January 2014, the Group has refinanced all of the bank loans of the Group (except bank loan of SS), therefore, for the next 2 years starting 2014, the Group does not need to pay the outstanding principal loan (excluding SS). On October 13, 2016, the Company entered into a Term Loan Facility ( TLF Facility ). This TLF Facility is obtained to refinance the Club Deal facility dated December 18, 2013, which has been amended by the deed of amendment agreement on April 1, The TLF facility is repayable in 18 quarterly installments starting October 2016 and will mature on January 22, The table below summarizes the maturity profile of the Group s financial liabilities as of March 31, 2017 based on contractual discounted payments to be made (including interest payments): Below 1 year 1-3 years 3-5 years Over 5 years Total Current Liabilities Short-term loans 43,307, ,307,289 Trade payables 171,286, ,357, ,643,975 Non-trade payables 2,225, ,225,877 Accrued expenses 45,051, ,051,761 Sub-total 261,871, ,357, ,228,902 Non-current Liabilities Long-term bank loans 31,075,496 57,712, ,993, ,781,527 Bonds payable 43,562, ,562,074 Loan from related party 506,151 9,442, ,948,500 Finance lease payables 19,637,987 20,560,483 3,968, ,460 44,435,257 Long-term loan from shareholder ,000,000-30,000,000 Sukuk ijarah 14,995, ,995,550 Sub-total 109,777,258 87,714, ,962, , ,722,908 Total 371,648, ,072, ,962, , ,951,810 Unamortized transaction cost (8,294,030) Net 827,657,780 b. Capital Management The primary objective of the Group s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize stockholder value. The capital of the Group consists of share capital and retained earnings. The Group manages the capital structure and make adjustments to changing economic conditions and to meet the requirements of the lenders. 145 F-153

305 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) b. Capital Management (continued) The Group monitors its capital using gearing ratios, by dividing net debts with the net equity. The Group s policy is to maintain the gearing ratio within the range of gearing ratios of the leading companies with similar industry in Indonesia in order to secure access to finance at a reasonable cost. The Group includes within net debts, short-term loans, long-term bank loans, bonds payable, sukuk ijarah, loan from related party, long-term loan from shareholder and finance lease payables less cash and cash equivalents. Capital includes share capital, and equity attributable to the majority shareholders of the Company. March 31, December 31, (Unaudited) (Unaudited) Short-term loans 43,307,289 44,178,849 43,008,514 48,932,765 26,106,109 Long-term bank loans 321,781, ,319, ,816, ,883, ,943,785 Bonds payable 43,562,074 43,635,671 43,170,259 41,977,229 64,039,866 Sukuk ijarah 14,995,550 15,020,885 14,860,674 14,449,993 15,999,818 Loan from related party 9,948, Long-term loan from shareholder 30,000,000-30,000, Finance lease payables 44,435,257 69,244,098 48,682,489 78,481, ,060,633 Total 508,030, ,398, ,538, ,724, ,150,211 Less cash and cash equivalents (101,093,938) (124,397,359) (81,713,191) (112,355,914) (104,305,096 ) Net debts 406,936, ,001, ,825, ,368, ,845,115 Net equity 171,398, ,477, ,213, ,556, ,524,208 Gearing ratio Debt to equity ratio There are no changes to the objectives, policies and processes as of March 31, 2017 and 2016, and December 31, 2016, 2015, and The Group is in compliance with the capital requirements of lenders. 36. MINING REGULATIONS Law on mineral and coal mining ( UU Minerba ) and the related government regulations On January 12, 2009, the Government of the Republic of Indonesia issued UU Minerba. The application of UU Minerba might create such risks as the lack of domestic buyers for certain mining products related to the obligation to supply the domestic markets, the decrease of mining reserves due to limitation in the mining exploration area and production activities, and Group s capability to build processing and refinery facilities within five years or up to On February 1, 2010, the Government of the Republic of Indonesia issued Government Regulation No. 22 Year 2010 regarding Mining Areas ( PP No. 22 ) and Government Regulation No. 23 Year 2010 regarding The Implementation of Coal and Mineral Mining Operations ( PP No. 23 ). PP No. 22 regulates further provisions concerning the boundary, area, and mechanism in determining the mine area, assignment procedures for investigation, research and data processing. PP No. 23 regulates further provisions concerning preferential treatment of minerals and/or coal for domestic purposes; procedures for granting the IUP, Special Mining Right ( IUPK ) and People Mining Right ( IPR ); implementation of community development and empowerment; the procedures for reporting the results of exploration and production operations and the share divestment of IUP holder and IUPK holder whose shares are owned by foreign shareholders. PP No. 23 also requires a KP to be converted into an IUP within three months of the issue of PP No. 23, however, the details of procedures remain to be specified by the Government. 146 F-154

306 PT ABM INVESTAMA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2017 and 2016, and for the Three-Month Periods then Ended and As of December 31, 2016, 2015, and 2014, andfor the Years then Ended (Expressed in United States Dollar, Unless Otherwise Stated) 37. RECLAMATION GUARANTEE On February 28, 2014, the Minister of Energy and Mineral Resources issued Ministerial Regulation No. 7/2014 ( Permen ESDM 07/2014 ) regarding mine reclamation and post-mining activities in the mineral and coal mining activities. As at the effective date of this regulation, Ministerial Regulation No. 18/2008 regarding mine reclamation and mine closure was revoked and was no longer valid. Permen ESDM 7/2014 states that a company is required to provide mine reclamation and postmining guarantees which may be in the form of a time deposit, bank guarantee, or accounting reserve, all of which have a duration corresponding to the reclamation schedule. On December 20, 2010, the Government released an implementing regulation for Law No. 4/2009 on Mineral and Coal Mining ( 2009 Mining Law ), which is Government Regulation No. 78/2010 ("PP No. 78") that deals with reclamation and post-mining activities for both Ijin Usaha Pertambangan ( IUP )-Exploration and Ijin Usaha Pertambangan ( IUP )-Production Operation holders. An IUP-Production Operation holder, among other requirements, must (1) prepare a five-year reclamation plan; (2) prepare a post-mining plan; (3) provide a reclamation guarantee which may be in the form of a joint account or time deposit placed at a state-owned bank, a bank guarantee or an accounting reserve (if eligible); and (4) provide a post-mine guarantee in the form of a time deposit at a state-owned bank. The requirement to provide reclamation and post-mine guarantees does not release the IUP holder from the requirement to perform reclamation and post-mine activities. TIA, Mifa and BEL provided Reclamation and Post Mining Activities Guarantee in the form of joint account, time deposit and bank guarantee. The guarantee, which has been placed by TIA, Mifa and BEL, totaling to Rp3 billion (equivalent to US$227,215) and US$150,284 for the three-month period ended March 31, 2017, Rp6.9 billion (equivalent to US$520,000) and US$150,799 for the three-month period ended March 31, 2016, Rp6 billion (equivalent to US$446,910) and US$150,284 for the year ended December 31, 2016, Rp17.1 billion (equivalent to US$1,245,488) and US$150,796 as of December 31, 2015 and Rp13.8 billion (equivalent to US$1,109,602) and US$150,784 as of December 31, SUPPLEMENTARY CASH FLOWS INFORMATION Significant non-cash transactions: Three-Month Periods Ended March 31, Years Ended December 31, (Unaudited) (Unaudited) Acquisition of fixed assets through: Non-trade payables 14,223,320 20,236,783 13,862, ,835, ,266,155 Finance lease payables 27, , , ,602 Realization of advances for purchase of fixed assets - 300, ,630,733 Sale of fixed assets through non-trade receivable - 30,152 8,889,107 21,536,683 - Borrowing costs capitalized to fixed assets ,546,443 Reclassification from mining properties to fixed assets ,227, REISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS In connection with the proposed offering of the debt securities of the Company in the United States of America and outside of the United States of America in reliance on Rule 144A and Regulation S, respectively, under the United States Securities Act of 1933, the Company has reissued its consolidated financial statements as of March 31, 2017 and 2016, and for the three-month periods then ended, and as of December 31, 2016, 2015, and 2014, and for the years then ended. 147 F-155

307 APPENDIX A RESERVE STATEMENT FOR TIA A-1

308 Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 PT. Tunas Inti Abadi Job No: ADV-JA Date: 7 July 2017 A-2

309 A-3

310 A-4

311 IMPORTANT INFORMATION ABOUT THIS DOCUMENT 1. Our Client This report has been produced by or on behalf of PT. RungePincockMinarco ( RPM ) solely for PT. Reswara Minergi Hartama (the Client ). 2. Client Use The Client s use and disclosure of this report is subject to the terms and conditions under which RPM prepared the report. 3. Notice to Third Parties RPM prepared this report for the Client only. If you are not the Client: RPM has prepared this report having regard to the particular needs and interests of the Client, and in accordance with the Client s instructions. It did not draft this report having regard to any other person s particular needs or interests. Your needs and interests may be distinctly different to the Client s needs and interests, and the report may not be sufficient, fit or appropriate for your purposes. RPM does not make and expressly disclaims from making any representation or warranty to you express or implied regarding this report or the conclusions or opinions set out in this report (including without limitation any representation or warranty regarding the standard of care used in preparing this report, or that any forward-looking statements, forecasts, opinions or projections contained in the report will be achieved, will prove to be correct or are based on reasonable assumptions). RPM expressly disclaims any liability to you and any duty of care to you. RPM does not authorise you to rely on this report. If you choose to use or rely on all or part of this report, then any loss or damage you may suffer in so doing is at your sole and exclusive risk. 4. Inputs, subsequent changes and no duty to update RPM has created this report using data and information provided by or on behalf of the Client [and Client s agents and contractors]. Unless specifically stated otherwise, RPM has not independently verified that data and information. RPM accepts no liability for the accuracy or completeness of that data and information, even if that data and information has been incorporated into or relied upon in creating this report (or parts of it). The conclusions and opinions contained in this report apply as at the date of the report. Events (including changes to any of the data and information that RPM used in preparing the report) may have occurred since that date which may impact on those conclusions and opinions and make them unreliable. RPM is under no duty to update the report upon the occurrence of any such event, though it reserves the right to do so. 5. Mining Unknown Factors The ability of any person to achieve forward-looking production and economic targets is dependent on numerous factors that are beyond RPM s control and that RPM cannot anticipate. These factors include, but are not limited to, site-specific mining and geological conditions, management and personnel capabilities, availability of funding to properly operate and capitalize the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation and new industry developments. Any of these factors may substantially alter the performance of any mining operation. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page iii of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-5

312 Executive Summary RungePincockMinarco ( RPM ) was commissioned by PT. Reswara Minergi Hartama (the Client or RMH ) to prepare an independent estimate (hereafter, referred to as the Statement ) of the Open Cut Coal Resources and Reserves of PT. Tunas Inti Abadi coal mining concession ( TIA or the Project ), located in the Tanah Bumbu Regency, Kalimantan Selatan Province, Indonesia. RMH is a subholding integrated coal mine company, currently operating 3 mining concessions in production status, including TIA. The Statement reports the Coal Resources as at 31 December 2016 and has been undertaken in accordance with the requirements of the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia ( The JORC Code ). The topography of the TIA concession is low undulating terrain varying in height from approximately 30 m to 80 m ASL. The Project is based on a sub-bituminous coal deposit occurring in the Middle Miocene age Warukin Formation. The geology is best described as multiple-seam deposit overlying the eastern limb of a syncline structure. Strata gently dip at up to 4 degrees to the west. No faulting has been interpreted although it is recognised that some minor faulting may occur in the area. A total of 30 seams and sub-seams (or seam splits) have been identified across the TIA Project area. The B, C and D seam are the main seams. The average total thickness of the main seams are quite similar, ranging between 2 to 3 m, with some local thickening or thinning within each seam. The B seam has local thickening in the middle area of up to 6.3 m. The C seam has more variability in thickness, thinning to the east and thickening to the west. The D seam, the lowermost seam, shows local thickening to up to 4.5 m to the west. The D seam also shows thinning to the east and eventually pinchout to the northernmost area. According to the ASTM Classification standard the coal is classified as sub-bituminous rank coal. The coal quality is characterised by low ash (average 4.9% adb), low sulphur (average 0.14% adb), and a low Calorific Value ( CV ) average of 4,030 kcal/kg (gar). There is no significant quality variation between coal seams in the TIA project. The TIA Resource area has been subject to detailed drilling. The typical drill hole spacing is 200 m over the target Resource areas. A total of 316 drill holes were used to build the geological model, with average depth 55 m and maximum depth 140 m. The majority of the drillholes are geophysically logged. Drill hole collar survey and topographic data were acquired by high accuracy total station. RPM is of the opinion that the geological database and geological models are adequate for Coal Resource estimates to be reported in accordance with the JORC 2012 Code. Coal Resources have been estimated from the geological model prepared by TIA geologists based on the drill hole data available at 31 December The Coal Resource estimations were completed based on the geological confidence with the consideration of geological assumptions along with the evaluation of reasonable prospect for eventual economic extraction. RPM categorised the Coal Resources at the Project into three categories; Measured, Indicated and Inferred. The categorisations relied on the structural and coal quality Point of Observations which were derived from drill hole information. The determination of the Coal Resource category was mainly based on seam characteristic which were related to the variability of seam thickness, quality and structural complexity. The Coal Resource classification was based on a seam group basis. The Coal Resources at the Project are estimated by RPM to total 32 Mt of which 18 Mt are classed as Measured, 11 Mt are classed as Indicated and 3 Mt are classed as Inferred. A summary of the Resources Estimate by Resource Category is provided in Table ES1. The Resources are estimated as of 31 December Note: Totals have been rounded to reflect the order of accuracy of estimates. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page iv of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-6

313 Area/Block Measured Resources Resources (Mt) Table ES 1 Coal Resources Summary TM CV CV Ash TS IM RD % Kcal/Kg Kcal/Kg % % % Measured Indicated Inferred Total (ar) (adb) (gar) (adb) (adb) (adb) In situ TIA ,435 4, Indicated Resources TIA ,445 4, Inferred Resources TIA ,430 4, Grand Total/Average ,440 4, TIA provided pit design, LOM scheduling data, operating costs and a projected coal price which were reviewed and modified as necessary by RPM for this study. A coal benchmark price of USD75 per tonne at 6,322 kcal/kg gross as received ( gar) calorific value was adopted and RPM is of the opinion that this benchmark price is a reasonable forecast at the time of reporting. RPM then use provided data to determining the Breakeven Strip Ratio (BESR) corresponding to reviewing the viability and economics validation of TIA pit design. RPM also conduct Mine Optimisation using Minex Optimiser software to generate a series of incremental pit shells which reflect different economic scenarios and changes in the breakeven incremental strip ratio. RPM is of the opinion that TIA pit design were acceptable and viable for this study. Open Cut Coal Reserves were estimated by applying mining factors and exclusion criteria to the Coal Resources. The mining factors (such as recovery and dilution) were defined from the current open cut mining method. The exclusion criteria included the lease boundary and a minimum working section thickness. The Measured Coal Resources within the economic and practical pit boundaries are converted to Proved Coal Reserves and the Indicated Coal Resource are converted to Probable Coal Reserves with the application of the appropriate mining modifying factors (such as recovery, dilution and global losses). The Coal Reserves and weighted average coal qualities are listed by block in Table ES 2. Open Cut Coal Reserves were estimated to total 24 Mt, of which 16 Mt are classed as Proved with the balance of 8 Mt classed as Probable. The Coal Resources are reported inclusive of Coal Reserves, (that is, Coal Reserves are not additional to Coal Resources). Table ES 2 Coal Reserves Summary Area/Block Proved Reserves Reserves (Mt) TM CV Ash TS RD % Kcal/Kg % % Proved Probable Total (ar) (gar) (ar) (ar) In situ TIA , Probable Reserves TIA , Grand , Total/Average Note: Totals have been rounded to reflect the order of accuracy of estimates. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page v of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-7

314 There are a number of technical, marketing, planning and statutory inputs which may impact on the stated Coal Reserves in future JORC statements. When the next JORC statement is prepared it is likely to have different pit shells and quantities. The changed inputs could include: results from further geotechnical studies; results from ongoing exploration drilling (including coal quality coring), and subsequent updates to the geological model; updates to the life of mine plan; changes in regulatory requirements; changes in the coal prices; and changes in the operating cost. The Coal Resources were estimated by Mr Oki Wijayanto, BSc (Geology) who is a Member of the Australasian Institute of Mining and Metallurgy. He is a full time employee of RPM and has sufficient experience which is relevant to the style and type of deposit under consideration and to the activity undertaken to qualify him as a Competent Person as defined in the 2012 Edition of the JORC Code. The estimates are based on information compiled and reviewed by RPM geologists under the supervision of Mr Oki Wijayanto. The Coal Reserves were estimated by Mr Gusti Sumardika, BSc (Mining) who is a Member of the Australasian Institute of Mining and Metallurgy. He is a full time employee of RPM and has sufficient experience which is relevant to the style and type of deposit under consideration and to the activity undertaken to qualify him as a Competent Person as defined in the 2012 Edition of the JORC Code. The estimates are based on information compiled and reviewed by RPM engineers under the supervision of Mr Gusti Sumardika. This report may only be presented in its entirety. Parties wishing to publish or edit selected parts of the text, or use the Statement for public reporting, must obtain prior written approval from RPM and the signatories of this report. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page vi of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-8

315 Table of Contents EXECUTIVE SUMMARY... IV 1. INTRODUCTION General Approach Relevant Reports and Studies Purpose of this Report Previous Coal Resource and Reserve Statements COMPETENT PERSONS STATEMENT PROJECT DESCRIPTION Location Coal Tenements, Mining Approvals and Land Tenure Status Mining Concession Mining Operations Infrastructure of Coal Handling Facilities GEOLOGY & MINERALISATION Regional Geology Warukin Formation Local Geology Coal Quality EXPLORATION Summary Exploration To April Exploration Post April Geological Database Sampling RPM QA QC Topo and Collar Survey Geophysical Logging Lithological Logging Core Recovery Seam Picks and Correlation Sample Intervals Coal Quality Laboratory Testing Quality Analysis QA QC Performed by RPM for Coal Quality Total Moisture Relative Density Conversion DEPOSIT MODELLING Structural Model Quality Model RESOURCE ESTIMATION Basis of Estimation Reasonable Prospects for Eventual Economic Extraction ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page vii of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-9

316 7.3 Definition of Points of Observation Structural PoO Quality PoO Resource Classification Coal Resource Estimate Previous Resource Estimate MINING RESERVE ESTIMATES Coal Resource Estimate Cost and Revenue Factors Mining Factors Cut-off Parameters and Pit Limits Metallurgical Factors Marketing and Product Specifications Life of Mine Plan Classification Audits and Reviews - JORC Code Check List Results Discussion of Relative Accuracy and Confidence Relevant Factors Previous Reserve Estimates List of Tables Table ES 1 Coal Resources Summary... v Table ES 2 Coal Reserves Summary... v Table 3.1 TIA Mining Concession... 6 Table 4.1 Seam Groups Average Thicknesses & Interburdens, TIA Table 4.2 Coal Quality Summary Table 5.1 Drilling Statistics used for Model Development Table 6.1 Geological Model Parameters and Details Table 7.1 Point of Observation Types Table 7.2 Coal Resources Categorisation Parameter Table 7.3 Radius of Influence Table 7.4 Coal Resources Summary Table 7.5 Comparison with Previous Coal Resources Table 8.1 Incremental and Breakeven Stripping Ratio Table 8.2 Total Mineable Quantity and Quality Table 8.3 Total Open Cut Coal Reserves Table 8.4 Open Cut Coal Product Reserves by Seam Table 8.5 Comparison With Previous Open Cut Coal Reserves List of Figures Figure 1.1 General relationship between Exploration Results, Mineral Resources and Ore Reserves... 3 Figure 3.1 General Location Plan... 8 Figure 4.1 Tectonic Setting of Kalimantan... 9 Figure 4.2 Geology of the Barito Basin Figure 4.3 Stratigraphy of the Barito Basin Figure 4.4 Schematic Geological Cross Section of Barito, Kutai and Tarakan Basin Figure 4.5 Distribution of Warukin Formation within the Barito and Asem-asem Basin Figure 4.6 TIA Geological Map Figure 4.7 Typical Cross Sections Figure 4.8 General Stratigraphy Figure 4.9 Total Floor Contour C Seam Group Figure 4.10 Total Thickness Contour C Seam Group Figure 4.11 Total Ash Contour C Seam Group ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page viii of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-10

317 Figure 4.12 Total Sulphur Contour C Seam Group Figure 4.13 Total CV Gar Contour C Seam Group Figure 5.1 Drillhole Location Figure 5.2 Typical Seam Picks and Correlation of the B, C, and D seam group Figure 7.1 Coal Resource Limit Seam C Group Figure 7.2 Coal Resource Limit Seam D Group Figure 8.1 JORC Reserves Pit Shells List of Graphs Graph 5.1 Cross Plot of Ash vs CV (Adb) All Samples Graph 5.2 Cross Plot of Ash vs RD (Adb) All Samples Graph 6.1 Histogram of CV (gar) All Seams Graph 6.2 Histogram of Ash (adb) All Seams Graph 6.3 Histogram of Total Sulphur (adb) All Seams List of Appendices Appendix A. Appendix B. Appendix C. Appendix D. Appendix E. Appendix F. Appendix G. TABLE 1 JORC COMPLIANCE CHECK LIST FOR RESOURCES AND EXPLORATION TABLE 1 JORC COMPLIANCE CHECK LIST FOR ORE RESERVES SEAM NOMENCLATURE & THICKNESS BY BLOCKS COAL QUALITY & RESOURCES GEOLOGY PLANS RESERVE PLANS LIFE OF MINE PLANS MAP ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page ix of xi This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-11

318 1. Introduction 1.1 General In April 2017 PT RungePincockMinarco ( RPM ) was commissioned by PT. Reswara Minergi Hartama (the Client or RMH ) to prepare an independent estimate (hereafter, referred to as the Statement ) of the Open Cut Coal Resources and Reserves of PT. Tunas Inti Abadi coal mining concession ( TIA or Project ). RMH is a subholding integrated coal mine company, currently operating 3 mining concessions in production status, including TIA. The TIA project is located in the Tanah Bumbu Regency, Kalimantan Selatan Province, Indonesia. This Statement reports the Coal Resources as at 31 December 2016 and has been undertaken in accordance with the requirements of the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia ( The JORC Code ). The following terms have been adopted for the reporting of Coal Resources: Coal Resources as used in this report are the same as Mineral Resource in The JORC Code and Geological Resources, a common term used in the industry. Coal Resources have been subdivided into Measured, Indicated and Inferred Resources to reflect the confidence in the underlying resource estimate. Coal Reserves as used in this Statement are the same as Ore Reserves in The JORC Code and Mining Reserves, a common term used in the industry, Coal Reserves in the JORC Code are subdivided into Proved and Probable to reflect the confidence in the underlying resource estimate and the associated mine planning Modifying Factors, Marketable Reserves allow for practical yields in a beneficiation plant, the result of processing commonly being known in the industry by the term product coal. In some circumstances beneficiation may not be required, in these cases Marketable Reserves may be the same as Coal Reserves, and Coal Resources are reported inclusive of Coal Reserves (that is, Coal Reserves are not additional to Coal Resources). Additional terminology applied within this report includes the following: Geological Model, (or In Situ Model), is the computerised three dimensional representation of the coal deposit based on topographic survey data, coal seam data derived from outcrop, drill hole or other data points, including coal thickness and quality. Mineable Pit Shell is the theoretical economic pit shell after modification to conform to a practical pit design. Mineable In Situ Coal, (non-jorc terminology), as used in this report is in situ coal within the mineable pit shell Run of Mine ( ROM ) Coal, (non-jorc terminology), as used in this report is coal in the mineable pit shell after application of Modifying Factors including geological and mining losses, roof and floor loss, dilution and moisture content changes and includes the Coal Reserves plus the coal from areas of Inferred Coal Resources. 1.2 Approach The process adopted for the Project is described below. An in situ geological model was created by TIA geologists from the TIA exploration data using ABB Minescape Stratmodel software, version This model had no cut off criteria applied, hence the in situ model term. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 1 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-12

319 This model and underlying raw data such as drill hole logs, coal quality reports and geophysical logs were compiled and reviewed by RPM geologist under supervision from Mr Oki Wijayanto to determine if the geological data was reliable and that the model was a good representation of the geology of the minesite and honoured the input data. Categorisation of the coal seams in the geological model into Measured, Indicated and Inferred confidence areas was based on geological confidence. Previous estimates of coal volumes, tonnages and qualities were reviewed and reported in these categories after applying the appropriate cut-off criteria. Resources estimated and reviewed by applying the categorised coal seams are tabulated in this report. The ABB Minescape Stratmodel model grids were imported into Minex mine planning software. RPM mine planners characterised the deposit based on structure, strata dip magnitude and directions, number, and thickness of coal seams and coal quality in conjunction with the proposed equipment and mining method to decide on appropriate Modifying Factors including; minimum mining thickness, coal loss, and dilution factors, surface constraints, depth constraints and geotechnical criteria. The Modifying Factors and the Preston-Sanders density conversion were used to convert the in situ geological models to ROM models. Reasonable costs and revenue factors were estimated for the Project. The Minex Optimiser software which uses a Lerchs Grossman algorithm was used to develop a series of pit shells for varying revenue inputs based on the Modifying Factors. Pit shells ( Optimised Pit Shells ) were selected and adjustments made (as necessary) to form practical pit designs ( Mineable Pit Shells ). These pit shells formed the basis of the subsequent Coal Reserves estimates, LOM schedules and options analysis. The Measured, Indicated and Inferred confidence limits were overlaid on these pit shells. The Measured and Indicated confidence limits were reviewed based on the economic pit limits from the Optimiser. Inferred tonnes were excluded from the Reserve estimate. The Coal Reserves were categorised as Proved or Probable based on the Coal Resource confidence and the level of detail in the mine planning, operational history and confidence in the modifying parameters. Checks were undertaken and results and supporting information documented in this report. The JORC Code framework for classifying tonnage and grade estimates to reflect different levels of geological confidence and different degrees of technical and economic evaluation were applied in the estimation of the Coal Resources and Coal Reserves is shown in Figure Relevant Reports and Studies The following reports, documents and studies were used as reference material in the preparation of the Statement. Preston, KB and Sanders, RH, Estimating the In-Situ Relative Density of Coal, Australian Coal Geology, Vol. 9, pp 22-26, May Australian Guidelines for Estimation and Classification of Coal Resources, 2014, Prepared by the Guidelines Review Committee on behalf of the Coalfields Geology Council of New South Wales and the Queensland Resources Council. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, (The JORC Code 2012 Edition), 2012, Prepared by the Joint Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC). ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 2 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-13

320 Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves, 2003, Prepared by the Coalfields Geology Council of New South Wales and the Queensland Resources Council. An Outline of the Geology of Indonesia, Ikatan Ahli Geologi Indonesia, August Pedoman Pelaporan, Sumberdaya, dan Cadangan Batubara, (SNI 5015:2011), PT. Tunas Inti Abadi, Statement of Open Cut Coal Resources and Reserves as at 1 st September 2011 (ADV-JA-03768). Minarco Mineconsult JORC Report, dated September Purpose of this Report The purpose of the report is to provide an objective assessment of Coal Resources and Reserves which are reported in accordance with the Australian Code for Reporting of Mineral Resources and Ore Reserves, December 2012 (The JORC Code) for the TIA area at 31 December Previous Coal Resource and Reserve Statements RPM has previously completed Coal Resources and Reserve Statements compliant with the JORC Code (2004) for the TIA Project, with the most recent estimated as of 1 st September This report supersedes the previous Resources Statements. Figure 1.1 General relationship between Exploration Results, Mineral Resources and Ore Reserves Source: Pg. 9, Australasian Code for Reporting of Mineral Resources and Ore Reserves, The JORC Code 2012 Edition ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 3 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-14

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323 3. Project Description 3.1 Location The TIA project is a sub-bituminous coal resource located in Tanah Bumbu Regency, Kalimantan Selatan Province, Indonesia. The mining concession covers an area of 3,085 Ha, and is located approximately 110 km southeast of Banjarmasin, the Provincial Capital of Kalimantan Selatan. The boundaries of the mining Concession are presented in Figure 3.1. The area can be divided into two areas: the southern area and the northern area. The majority of the southern area is mined out and backfilled. The mining operation is now progressing towards the northern area. The remaining resources is particularly located in northern area. The original topography of the TIA concession is low undulating terrain varying in height from approximately 30 m to 80 m ASL. The project area has a tropical climate. It has a high annual precipitation of around 2,700 mm per year, with no clear difference between dry and rainy season. 3.2 Coal Tenements, Mining Approvals and Land Tenure Status Mining Concession The Project is undertaken by virtue of the Contract Agreement between the Government of Indonesia and PT. Tunas Inti Abadi, which was issued on 29 April This mineral license merges the 2 adjacent concessions previously held by TIA. The TIA Project is best described as being in exploitation stage with mining activity progressing from south to north. The summary of the license is summarised in Table 3.1 below. Table 3.1 TIA Mining Concession Asset Name License Number Mineral License License Area (ha) License Expiry Date PT. Tunas Inti Abadi / 255 / DISTAMBEN / 2013 Persetujuan Penggabungan Izin Usaha Pertambangan Operasi Produksi Batubara Oleh Bupati Tanah Bumbu 3,085 5 March 2021 RPM has not completed a comprehensive review of land acquisition; land compensation, statutory or legal verification of the Mineral Licence status. It is understood that the project area is overlain by a Production Forest permit, however TIA advised that the required forestry permits are in place. RPM has made reasonable enquiries and exercised professional judgement on all information provided and found no reason to doubt the accuracy or reliability of the information or data that it was supplied. 3.3 Mining Operations Small scale mining commenced in July 2009 in the south of the deposit, a total of approximately 28 million tonnes (t) coal during period of has been produced. Planned annual production for 2017 to 2021 is approximately 5.7 million tonnes. Current mining operations are conducted by single mining contractor, PT Cipta Kridatama (CK). The mining method can be described as multi seam, shallow dip open cut coal mining in a haulback or backfill operation. After an initial box cut, waste is to be hauled back into the mined out areas and the dump areas are then rehabilitated. The open cut operation use appropriately sized hydraulic excavators and trucks to mine the coal and waste. The run-of-mine (ROM) coal is not washed but crushed to produce a thermal export coal. 3.4 Infrastructure of Coal Handling Facilities Facilities at the TIA concession area include operational facilities such as port area with crushing plant and barge loading conveyor, product stockpile, supporting stockpile, dedicated barge and floating crane, ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 6 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-17

324 underpass and hauling road, as well as support facilities such as workshops, warehouses, messing facility and office building. To support the production several infrastructures are in place: 3.5 Ha of coal stockpile area with capacity of 100,000 metric tons; Coal crushing plant consist of 1 X 900 metric tons per hour capacity and 1 X 450 metric tons per hour capacity; A twin-arm barge loading conveyor with 1,000 metric tons per hour capacity through 950 meter conveyor length; Coal port at Sebamban (South Kalimantan) includes dedicated barge and floating crane. Coal mining is contracted to CK, the Sebamban Baru port operation is conducted by TIA, and barging and transhipment is contracted to BDD (Baruna Dirga Dharma). ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 7 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-18

325 Banjarmasin Ta mba n '0"E Belawang Pamakuan Ulin Martapura Basung Astambul Banjarbaru 115 0'0"E Sampang Emput Karangintan Binuang Pengaron Awangbangkal '0"E Tambarangan Muarahalimau '0"E Batuamparan Lasung 116 0'0"E Batukemud Sarungga Rantaupanjang Batulicin Sungaikupang Palawan Pantai Stagen Sembung '0"E Kotabaru Berangas Sungabali '0"E Kurau Batibati Tabanio Pelaihari Satui PT Tunas Inti Abadi Sebamban Pagatan Batubai Talok Kintap Karambu Jorong Teluk Kemuning Batakan '0"E 115 0'0"E '0"E '0"E 116 0'0"E '0"E '0"E 4 0'0"S 3 40'0"S 3 20'0"S 3 0'0"S 4 0'0"S 3 40'0"S 3 20'0"S 3 0'0"S South Kalimantan LEGEND CLIENT PROJECT Town Road River Concession Boundary Political Boundaries N NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING GENERAL LOCATION PLAN PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date kilometres 3.1 ADV-JA Jun 2017 DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE 0 A-19

326 4. Geology & Mineralisation 4.1 Regional Geology The island of Kalimantan presently lies upon the southeastern margin of the greater Eurasian plate. It is bounded to the north by the South China Sea marginal oceanic basin, to the east by the Philippine Mobile Belt and the Philippine Sea Plate and to the south by the Banda and Sunda arc systems. It is bounded to the west by the Sunda Shelf and ultimately by Paleozoic and Mesozoic continental crust of the Malay Peninsula. Kalimantan can be divided into several roughly E-W trending tectonic provinces as follows and shown in Figure 4.1: The Melawi-Ketungau Basins and the Kutai Basin, formed during the Late Eocene. The Kutai Basin developed primarily along an arm of the Makassar rift system while the Melawi-Ketungau basins and the Upper Kutai basins occupy more of a fore-arc to intra-arc position to Tertiary volcanism. Tarakan and Sandakan Basins, are developed in the northeast part of Kalimantan. The Barito Basin, occupies the southern part of Kalimantan. The Schwaner Batholith, a triangular exposure of Cretaceous granitic rocks which intrude Paleozoic and Mesozoic volcanics, volcaniclastics, and marine sediments. The eastern margin of the Barito Basin is formed by the Meratus ophiolite, which also separated the Asem-asem Basin. Asem-asem Basin, grades eastwards into the Paternoster carbonate Platform. Figure 4.1 Tectonic Setting of Kalimantan (After Kusuma and Darin, 1989) ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 9 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-20

327 The Project area is located within the Asem-asem Basin, a sub-basin of the Barito Basin. The Barito Basin commenced its development in the Late Cretaceous. During the Miocene, an uplift of the Schwaner Core and the Meratus Mountains occurred and separated the Asem-asem Basin from the Barito Basin. The Asem-asem Basin is bounded to the north and west by the Meratus Complex, and to the south the basin opens into the Java Sea, Figure 4.2. The Tertiary stratigraphic succession within the Asem-asem Basin is similar to the Barito Basin, and described in ascending stratigraphic order as follows: Tanjung Formation, Eocene age, deposited in a transgressive environment: alluvial and lacustrine in the lower part, fluviodeltaic in the middle, and eventually marine in the upper part of the formation. The lower part is distinguished by quartz sandstone and conglomerate, with the middle part consists of claystone and sandstone with intercalations of siltstone and coal. The upper part consists of marine shales which marked the deposition of Berai Formation; Berai Formation, Oligocene to early Miocene age carbonate deposits, comprises of limestone, locally alternating with marl and sandstone. The formation is 500 1,500 m thick, and deposited in a neritic environment; Warukin Formation, middle Miocene age, consists of quartz sandstone, carbonaceous claystone, limestone, and coal intercalation. Conglomerate is identified in the lower part of the formation. This formation is the coal bearing formation in the TIA coal project; Dahor Formation, Pliocene age molassic-deltaic sediments consist of quartz sandstone, conglomerate, claystone and intercalations of lignite, kaolinite and limonite. This formation was unconformably deposited above the Warukin Formation; Quaternary alluvium, the youngest rocks in the basin. The stratigraphic column and comparison of Barito Basin and the nearby Kutai and Tarakan Basin is shown in Figure 4.3. The schematic geological cross section across the Barito, Kutai and Tarakan Basins is shown in Figure 4.4. Figure 4.2 Geology of the Barito Basin (After Darman, 2014) ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 10 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-21

328 Figure 4.3 Stratigraphy of the Barito Basin (After Satyana et al, 1999) Figure 4.4 Schematic Geological Cross Section of Barito, Kutai and Tarakan Basin (After Satyana et al, 1999) ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 11 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-22

329 4.1.1 Warukin Formation The TIA coal concessions occur within the Warukin Formation. The coal of the Warukin formation is usually dull in colour, contains resin and shows woody structure, with seam thickness ranging from several meters to dozens of meters. In general the coal is clean with only a few dirt band or partings. Plant root traces are commonly found in the coal floor, suggesting the coal is autochthonous. Distribution of the Warukin Formation in the Asem-asem Basin and Barito is shown in Figure 4.5. Figure 4.5 Distribution of Warukin Formation within the Barito and Asem-asem Basin (After Witts et al, 2012) 4.2 Local Geology The geology of the Project is best described as multiple-seam deposit overlying the eastern limb of a syncline structure. Strata gently dip at up to 4 degrees to the west. No faulting has been interpreted although it is recognised that some minor faulting may occur in the area. The coal seams in TIA are correlatable and continuous along the strike within the concession. However due to limited drill data, the lower two seams (Seam C and Seam D) can only be traced within the northern area, which is more than 3 km along strike. Meanwhile, the upper seam (Seam B), can be traced from north to south across the concession for more than 9 km. The geological map of the TIA concessions is shown in Figure 4.6. A number of cross sections is shown in Figure 4.7. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 12 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-23

330 A total of 30 seams and sub-seams (or seam splits) have been identified across the TIA Project area. The B, C and D seams, ordered stratigraphically from young to old, are the main seams. The average total thickness of the main seams are quite similar, ranging between 2 to 3 m, with some local thickening or thinning within each seam. The B seam has local thickening in the middle area of up to 6.3 m. The C seam has more variability in thickness, thinning to the east and thickening to the west. The D seam, the lowermost seam, shows local thickening to up to 4.5 m to the west. The D seam also thins to the east and eventually pinches out in the northernmost part of the area. The C and D seam continuity to the south is limited due to limitation of drill data. It is noted that majority of the seam groups are consist of two sub seams and are subject to simple splitting. The seam groups thicknesses and interburden are summarized in Table 4.1. Note: thicknesses reported are apparent thickness, i.e. as intersected in the drill holes. A detailed tabulation of seam nomenclature and thickness for all modelled seams for all areas is included in Appendix C. The general stratigraphy is shown in Figure 4.8. The C seam floor structure and thickness contours are shown in Figure 4.9 and Figure 4.10 respectively. Seam Group Table 4.1 Seam Groups Average Thicknesses & Interburdens, TIA No. of Data Points Vertical Thickness (m) Average Minimum Maximum Interburden Above (m) XUB UB B LB UC C LC D Coal Quality The coal rank of the deposit can be categorised as sub-bituminous coal according to the ASTM standard. The coal quality in general is characterised by low to medium CV, low to medium ash content with a low TS content. There is no significant quality variation between coal seams in the TIA project. The average coal quality of the TIA resource is shown in Table 4.2 below. The main seams (Seam B, C and D) show a relatively consistent Ash content across the deposit which the values normally ranges from 1 to 6%. However, higher Ash value towards eastern part is identified and potentially related with seam thinning and non coal contamination. The CV also indicates similar trend with Ash value. No particular trend was observed for TS values. The raw ash, energy and total sulphur of the seams is shown in Appendix D. Table 4.2 Coal Quality Summary TM CV CV Ash TS IM RD Area / Block % (kcal/kg) (kcal/kg) % % % (ar) (adb) (gar) (adb) (adb) (adb) In situ TIA ,440 4, The raw coal ash, total sulphur and specific energy contours for the C seam for are shown in Figure 4.11 to Figure ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 13 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-24

331 PT Tunas Inti Abadi Geology TQd Dahor Formation: Quartz sandstone, friable, locally intercalations with clay, lignite, limonite, smoky-quartz and basalt gravels. The Dahor formation was deposited in paralic environment and units thickness of ± 750m Tmw Warukin Formation: Alternation of quartz sandstone and claystone, intercalated with shale, coal and limestone. Quartz sandstone and carbonaceous claystone, locally contain iron oxide. This unit is deposited in a lithoral to paralic environment and thickness is about m. The formation contains some fossils such as Miogyosina sp., Cycloclypeus sp., and Lepidocyclina cf. Sumatrensis indicating an Middle Miocene-Late Miocene age and overlies conformably the Berai Formation TQd Tomb Berai Formation: Bioclastic limestone, locally alternating with marl and sandstone; contain fragments of chert. Foraminifera identified are Spiroclypeus sp., Discocyclina sp., Pelatispira sp. and Nummulites sp. which indicate if Oligocene-Early Miocene age, and deposited in neritic environment. Thickness of the unit is between 500 and 1500m. The Berai Formation interfingers with the Pamaluan Formation and overlies conformably the Tanjung Formation. the type locality is at Mt. Berai, east of Tanjung, South Kalimantan. Source: 1. Geological Map of The Kotabaru Sheet, South Kalimantan Geological Research and Development Centre, kilometers DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING REGIONAL GEOLOGY PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.6 ADV-JA June 2017 A-25

332 N E N E XUB B_1 LB UB C_1U LB C_1L D_2 0 A C_2U C_2L D_1 0 A' LB UC UC C C 0 C_2 0 UC_2 C_1 B LC LC C_2 B' CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING TYPICAL CROSS SECTION PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.7 ADV-JA Jun 2017 W W C SD155 XUB UB B C W DEX001 LB_2 LB_1 UC C D DEX_111 DEX_103 W XUB UB B W XUB UB B LB C_2 W C DEX_132 DEX_122 XUB UB B_2 C_1U C_1L W W B DEX_149 DEX_141 W LB_2 LB_1 C D W C DEX_166 ABM_149R 100 W B LB_2 LB_1 UC C RTI_302R N E N E W B SD092 W LB W B D ABM_135R DEV_C_1032A LB_2 LB_1 W UB W B ABM_1012R ABM_1011AR XUB UB C_1 UB B W B D CTI_1019 W XUB B D CTI_1018 W XUB UB B C D CTI_1017 W UB B D W CTI_1016 RTI_2010 CTI_1014 LB_2 LB_1 C LB C W W RTI_2008 LB_2 LB_1 W C RTI_2009 W UB LB_2 LB_1 B D C RTI_ Disposal Boundary Disposal Boundary A A B B A-26

333 INTERBURDEN THICKNESS STRATIGRAPHY SEAM NAME/ THICKNESS XUB = 0.6m IB = 13m UB = 1.3m IB = 4m B = 2.8m IB = 17m LB = 1.9m IB = 6m UC = 0.7m IB = 5m C = 2.1m IB = 6m LC = 0.6m IB = 8m D = 2.6m CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING GENERAL STRATIGRAPHY PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.8 ADV-JA June 2017 A-27

334 LEGEND Concession Boundary N Floor Contour Subcrop meters -60 DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE Minedout Disposal Boundary 10 Disposal Boundary CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING TOTAL FLOOR CONTOUR - SEAM C GROUP PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.9 ADV-JA June 2017 A-28

335 LEGEND Concession Boundary N Drilling Drilling Used in 2011 JORC meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE Minedout Total Vertical Thickness (m) CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING TOTAL THICKNESS CONTOUR - SEAM C GROUP PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.10 ADV-JA June 2017 A-29

336 LEGEND Concession Boundary N Drilling Drilling Used in 2011 JORC meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE Minedout Ash Content (%) CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING CONTOUR QUALITY TOTAL ASH - SEAM C GROUP PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.11 ADV-JA June 2017 A-30

337 LEGEND Concession Boundary N Drilling Drilling Used in 2011 JORC meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE Minedout Total Sulphur (%) CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING CONTOUR QUALITY TOTAL SULPHUR SEAM C GROUP - PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.12 ADV-JA June 2017 A-31

338 LEGEND Concession Boundary N Drilling Drilling Used in 2011 JORC meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE Minedout CV (Gar) - KCal/Kg CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING CONTOUR QUALITY CV GAR - SEAM C GROUP PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 4.13 ADV-JA June 2017 A-32

339 5. Exploration 5.1 Summary Exploration in TIA area has been conducted in several stages. TIA commenced exploration in 2004 with general coal prospecting survey over the concession area. Following the survey, a number of drilling campaign was undertaken. To date, the drilling covers the majority of the resource area in the concession. The TIA resource area has been subject to detail drilling, with typical drill hole spacing of 200 m over the target areas. A geological model covering the whole concession was built by TIA geologist. The statistics of the drill holes completed in TIA which were used to build the geological model are shown in Table 5.1. Drill hole locations are shown in Figure 5.1. Table 5.1 Drilling Statistics used for Model Development Drilling Year Open Hole Quality Hole Geoph. Logged Hole TS Surveyed Hole Total Hole Total Exploration To April 2011 The drilling in the TIA area to April 2011 consisted of several drilling campaigns, and the data were used as the basis of the 2011 Minarco Mineconsult JORC Resources and Reserves Statement. A total of 256 drill holes from the exploration completed prior to April 2011 have been excluded from model development due to absence of geophysical logs and ambiguous data. 253 drill holes from the exploration completed prior to April 2011 were used to build the current geological model, and included 66 cored holes and 187 open holes, of which the majority were supported by geophysical logs. Drill holes were typically shallow, less than 80 m total depth and predominantly at 200 m spacings. All drill holes were drilled vertically and collars were surveyed using Total Station. The summary of the drilling completed up until April 2011 is presented below: 2004 by TIA, general stratigraphic drilling with 1,000 3,000 m drill spacing. The drillholes were not incorporated into the geological model because supporting information is unavailable to RPM for review; 2004 by PT Danmar Explorindo, semi detail drilling with approximately 500 m drill spacings. A total of 129 drill holes were completed, of these only 49 drill holes were geophysically logged. Due to the limited number of geophysical logs, only 50 drill holes were incorporated into the geological model; Between 2006 and 2009, 153 drill holes with 250 m drill spacings were completed by PT Adiratna Bani Makmur, a local drilling company. No further information is available to RPM for review; In 2010, a total of 29 drill holes were completed by PT Tata Bara Utama, a local drilling company. Of these, only 14 drill holes were incorporated into the geological model; 2011 by PT Danmar Explorindo, JORC drilling programme which completed 198 drill holes, including 45 cored holes; ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 22 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-33

340 5.3 Exploration Post April Additional drilling in the TIA area since the previous 2011 JORC Resources and Reserves report is summarized below: Additional drilling by TIA in October 2011, completed 63 open holes with no geophysical logging. The majority of these drillholes located within the in pit dump area that had been backfilled and mostly revegetated, and were omitted from the geological model; In 2012 a total of 20 geotechnical holes were completed, the data were not incorporated into geological model and were not available to RPM for review; 2013 by PT Sampulu Sada Mandiri ( SSM ), 25 drill holes were completed, of which 17 drill holes are cored holes; In 2014, 22 drill holes were completed by SSM, consist of 18 open holes and 4 cored holes; The latest drilling campaign was in 2016, 20 drillholes were completed, including 5 cored holes. Of the 20 drill holes, 4 open holes were excluded from geological model due to unclear collar resurvey; To summarize, a total of 150 drill holes were completed since the last JORC statement, of which 87 drill holes were excluded from geological model due to absence of geophysical logs or unclear resurvey information. The majority of omitted drill holes were located within the disposal area, so the exclusion will not have material impact on the resource area; 63 additional drill holes were used to build the geological model, including 26 cored holes and 37 open holes; all were supported by geophysical logs; Drill holes were typically shallow, with an average depth of 68 m and maximum depth of 120 m with 200 m drill hole spacings; All drill holes were drilled vertically; and All of the drill hole collars were surveyed using Total Station. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 23 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-34

341 LEGEND Concession Boundary N Drilling Drilling Used in 2011 JORC meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE Disposal Boundary Disposal Boundary CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING DRILLHOLE LOCATION PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 5.1 ADV-JA June 2017 A-35

342 5.4 Geological Database All data used by RPM to develop the Resource and Reserves estimates has been supplied by TIA geologist, and validated by RPM using a range of in house QA QC procedures which are described in Section 5.6 and Appendix A. TIA geologists have developed an electronic data storage system based on Microsoft Excel Software for the TIA area to which all drill hole data excluding core photographs and LAS data (Log ASCII Standard) has been loaded. 5.5 Sampling Drill core sampling was performed by the wellsite geologists who followed a standard operating procedure. The sampling procedures are summarised as follows: i. Drill core is recovered from the inner tube sample splits at the drill site; ii. iii. iv. Drill core recoveries were measured immediately at the drill rig on a run by run basis. The core length were compared to drilling penetration to acquire core recovery values; Drill core is then stored in a core box in chronological order and photographed; Core description is undertaken by the wellsite geologist, detailed description including core loss is filed in a core log sheet; v. Appropriate sample intervals were determined in a ply by ply basis, and placed into separate sealed plastic sample bags; vi. vii. viii. ix. Each of the bags containing drill core samples were numbered sequentially using a predetermined sample numbering system that ensures the integrity and unique identity of each individual sample The wellsite geologists were responsible for ensuring that the hole number, depths, and core log were recorded; A document listing the samples intervals for each drill hole was completed and used to determine the laboratory testing requirements for each hole; The coal cores were transported to the camp site and then to the laboratory and final checks were also performed to ensure that sample analyses results were received from the lab for each sample interval that was submitted. RPM considers that it is likely that the total moisture reported by the laboratory is less than the insitu value due to core exposures from step (ii) to (v). This moisture will not be weighted by laboratory measurement and not reported by the laboratory. Due to the relatively strict protocols described above, it is most likely that there is no material difference between the insitu and total moisture values. However, RPM was not able to compare and validate these. 5.6 RPM QA QC RPM has performed rigorous QA of TIA data acquisition procedures and QC of all data supplied by the Client. The QC processes followed by RPM are described in this section Topo and Collar Survey A detailed ground topographic survey has been acquired over the study area and all of the drill hole collars have been surveyed by Total Station. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 25 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-36

343 A comparison between the surveyed collar elevations of all drill holes and the topography model was conducted, particularly in the northern area. A total of 8 drill holes within northern area have more than 2 m deviation. RPM identified that the majority of these holes are located within the disturbed area, hence the topography is affected by cut and fill that occurred during mining. RPM considers that in general the topography and drill hole collar survey work has been carried out to a good standard and no material seam model issue was caused. Therefore the topographic surface and drill hole collar data is suitable for Resource and Reserves evaluation Geophysical Logging Geophysical logging has been performed by a number of contractors using a range of sonde types. The type of the sondes that were used includes: Gamma Ray, Density, and Caliper. Those sondes are commonly used in coal exploration. A representative number of LAS data has been collected by RPM along with pdf and jpg format data for review. The geophysical logging data contain following information: the drill hole or well name, consistency of nomenclature and format for; o Company, o Field, o Location, o Date, o Probe types. RPM has validated down hole geophysical logging data by: visual inspection to ensure that the data acquired has not been affected by sonde malfunctions; confirming difference between geophysically logged depth and actual drilled depth; and review that gamma and density data depths were coincident. RPM reviewed the geophysical logged depth and total depth of holes and found that the geophysical log depth was often less than the drill hole total depth, based on representative number of geophysical log data. It is normal for the geophysically logged depth to be at least three metres less than the drill hole depth because the geophysical sondes usually extend up to 3 metres deeper than the detector. It also a safety measure to hang geophysical sondes above the drill hole depth to prevent sondes from becoming stuck in the slimes at the drill hole total depth. RPM found no issues with the down hole geophysical log data that was reviewed, and conclude that the data was acquired to a good standard, and that the data can be used to reliably estimate Resources and reserves Lithological Logging Lithological logging was performed by wellsite geologists immediately after data is recovered from the drill holes. Both drill cuttings (for open holes) and core were logged. Cutting samples were taken at 1 m intervals and logged at the drill site. The procedures for core handling and core logging are described in Section 5.5. RPM reviewed and considered that the wellsite geologists had followed the relevant QA-QC procedures. RPM consider that the lithology data was acquired to a good standard and that the data can be used to reliably estimate Resources and reserves Core Recovery RPM assessed the core recovery quoted by TIA by reviewing a number of core photographs compared with core recovery record to assess linear recovery and found that the core recovery in coal was greater than 90%. A comparison to the provided geophysical logging data is also made to confirm coal seam thickness and recovery factor. It is noted that a number of drillholes which had lower core recovery were redrilled to obtain representative core. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 26 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-37

344 5.6.5 Seam Picks and Correlation RPM consider that geophysical signatures, supported by seam and interburden thickness, can be used to consistently identify individual coal plies for each of the seams in the TIA Resource, particularly in the northern area. The gamma ray and density log signatures of the main coal seams are easily identified throughout the TIA concession. The signatures of the main seams and interburden thickness were used as stratigraphic marker intervals to establish a framework which enabled positive identification of the other seams in the stratigraphic sequence. B, C, and D Seams The B seam, the uppermost main seam, is generally 3 m thick and mainly presents as compound seam across TIA concession. Locally the seam splits into two plies, B_2 and B_1. The continuity of the B seam can be traced over 9 km and the seam is generally thinning to the southern part of the concession. In northern part, the seam total thickness is reasonably consistent. Local thickening occurs up to 6.3 m however it is identified within the mined out area. The C seam has more variability in thickness and seam splits. This seam consists of up to 4 plies, however the 4 plies only occurs locally. The majority of the C seam presents as one compound seam or consists of 2 plies, C_2, and C_1. In general the C seam is thickening to the west, with 2 m total thickness in the eastern area and 5.5 m in the western area. Seam thickening up to 7 m also identified, however the thickening occurs locally as a variation to the general westward thickening. The seam continuity to the south is limited due to limitation of drills data. The D seam, the lowermost seam is generally presents as compound seam or simple splits. The upper ply splits further into 2 plies, however this is identified as local occurrence. The total thickness in the northern part is generally between 3 to 4 m. Simple splitting occurs in the northernmost part of the concession, where seam thinning also occurs. The seam continuity to the south is limited due to limitation of drills data. Typical seam picks and correlation of the B, C, and D seam group is shown in Figure 5.2. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 27 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-38

345 CTI_1020 CTI_1024 CTI_1025 GR SD GR LD SD GR LD LD SD B B UB B LB LB C C C D D D CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING TYPICAL SEAM PICKS AND CORRELATION PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 5.2 ADV-JA June A-39

346 5.6.6 Sample Intervals All sample and analytical testing data supplied by the Client was in an excel formats. RPM performed sample mismatch checks on the Sample Dispatch tables against seam pick intervals in the lithological database for all drill holes loaded into the modelling software, ABB Minescape Stratmodel. Sample data were checked for overlapping samples, duplicate samples and erroneous values. See Section for detailed QA QC performed by RPM for coal quality. RPM is of the opinion that the coal quality data contain no major flaws and that the sample intervals, coal quality data intervals and seam pick intervals match and produce a reliable coal quality model for estimation of Resources and Reserves Coal Quality RPM performed a range of data validation procedures for the coal quality data, including: visual checking of data to ensure that the data set was complete and that there were no obvious data errors; Confirm that IM is not higher than TM. No such issue was identified; ensuring that proximate analyses sum to 100%. All samples indicated total proximate value of 100%; classical statistics for major parameters such as: TM, Ash, and TS. A more detail explanation is provided in Section 6.2; creation of q-q scatterplots, where certain relationships can be expected between two quality parameters, such as RD and ash and ash and energy. A more detail discussion is provided in Section After coal quality data was composited and model surfaces created, each coal quality variable was contoured in Stratmodel. Anomalous values within the dataset were identified by bulls-eyes in the contours, and were investigated with regards to the geological context of the sample and the drill hole. RPM noticed that no material issues were found in the coal quality database, therefore the coal quality data can be used to support the Resource and Reserve estimation work. 5.7 Laboratory Testing Quality Analysis The coal samples from the 2004 exploration works were sent and analysed at PT Sucofindo laboratory in Banjarmasin. The remaining and majority coal samples were sent and analysed at PT Geoservices laboratory in Banjarbaru. Both PT Sucofindo and PT Geoservices are internationally accredited laboratory. In TIA, a total of 506 samples from 92 cored holes were processed for TM, Proximate, TS, and CV. A representative number of samples were also analysed for Hardgrove Grindability Index (HGI). It is noted that no Moisture Holding Capacity ( MHC ) test was conducted QA QC Performed by RPM for Coal Quality RPM performed basic statistical analysis to validate the consistency and reliability of the coal quality data using simple regressions. The samples for all seams from the TIA area were used in the regression analysis. The CV and Ash regression for all samples indicates that the majority of laboratory results confirmed to a normal trend although some outliers were identified. The RD and ash regression for all samples also indicates that the majority of the laboratory results confirmed to a normal trend. However, RPM identified 3 significant outliers caused by incorrect RD values, with typo error in one outlier. RPM adjusted the 2 remaining outliers using the trend formula produced by the regression. It is noted that the outliers are the coal roof / floor samples. The regressions of the laboratory analysis result that were used in the coal quality model are shown in Graph 5.1 and Graph 5.2. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 29 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-40

347 Graph 5.1 Cross Plot of Ash vs CV (Adb) All Samples 7000 Ash vs CV (adb) 6000 CV (adb) Kcal/Kg y = x R² = Ash Content (adb) % Graph 5.2 Cross Plot of Ash vs RD (Adb) All Samples 2.50 Ash vs adjusted RD (adb) 2.00 RD (adb) y = x R² = Ash Content (adb) % RPM consider that the results of coal quality testing are fit for purpose for developing coal quality models to support Resource and Reserve estimation Total Moisture A total of 506 samples were analysed for Total Moisture (TM). The average TM value in TIA is 37.3% based on all seam samples in the concession. The high TM value is common for the Warukin Formation coal seam in the surrounding area. It is noted that no either EQM or MHC test work has been carried by Client. However, a specific care has been applied by TIA to prevent significant moisture loss from the core samples and is described in Section 5.5. RPM opine that the TM value is sufficiently representative of the insitu moisture for Resource and Reserve estimation. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 30 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-41

348 5.7.3 Relative Density Conversion The air dried relative density (RD) values acquired from analyses of coal cores and from the relationship with the Ash results were used to develop the RD modelled grids. The air dried RD from grid outputs have been converted to an in situ RD by applying the Preston-Sanders equation to estimate Resources. The Total Moisture (TM) was used to represent the In Situ Moisture. The Preston-Sanders equation is reproduced below: Where is = in situ ad = air dried RD = relative density IM = inherent moisture Mis = in situ moisture. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 31 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-42

349 6. Deposit Modelling The TIA geologist developed a three dimensional structural geological model and a coal quality model covering the whole TIA concession using the ABB Minescape Stratmodel software suite version that is widely used in the coal industry. The surface model was built up from individual layers including topographic surface, weathering surface, seam roofs and floors. The software is also capable of modelling seam splits and faulting. RPM geologist conducted a thorough review of the geological model and updated the quality model as necessary. RPM concluded that the updated geological model is fit for purpose for estimation of Resources and Reserves. 6.1 Structural Model The structural model was developed by integration and interpretation of several data types including drill hole data supported with geophysical log information and core descriptions. The model was built based on gridded seams which included seam splitting. The seam correlation between holes is derived from the drill hole information. The seam pinch out was used as the default setting to ensure that coal will only be modelled continuously whenever there is supporting geological information available, to ensure that coal quantity is not overestimated. Geophysical logs were used as the main tool to identify the seam picks and correlations correctly. In the absence of geophysical log data, seam correlation was based on coal and interburden thickness by acknowledging coal dips and geological trends. No faults have been identified in the TIA area based on review of drill hole data and mapping information. A weathering limit was created based on drill log information. The weathering information was uploaded into the structural model database and created during the geological model generation to ensure that the coal seams are truncated near, but below the topographic surface. RPM consider that the Client geologist followed good procedures for geological model development. The summary of geological model parameters are shown in Table 6.1 below. Table 6.1 Geological Model Parameters and Details Parameter TIA Model Name TIA_0317_GXP_CR1 Software ABB MineScape version Grid Spacing 25 m Model Developed By GeoXP Date of Model Generation 29-Mar-17 Schema Name TIA_0317_GXP Seam File dholes.dgn Coal Quality File qual_rawr1 Quality Model qual_ins Qualities Modelled TM, Proximate, TS, CV, RD, ID 6.2 Quality Model The quality models were developed from analysed core samples which were reconciled to geophysical log depth to ensure that seam from and to depths were correct for the seam and sample intervals. The sample analyses were loaded to the Stratmodel table on a ply basis and composited to the coal seam intervals during the modelling process. Contours and postings of quality attributes were created and RPM confirmed that the contours honour the borehole data postings reasonably well. The histograms of the main quality parameters, energy, ash, and TS for all seams intersected in the TIA area are shown in Graphs 6.1 to Graph 6.3. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 32 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-43

350 The histograms of CV (gar) indicates that the energy of the coal is predominantly in the range of 3,750 to 4,250 Kcal/kg. The majority of the lower values occur locally where the coal seams contain partings, suggested by corresponding higher ash value. It is noted that parting with less than 10 cm thick is included in the coal samples. The ash content in the histogram shows the TIA deposit are of low ash coal with majority in the range of %. The higher ash value may related to non coal contamination (partings with less than 10 cm thickness) during coal sampling. The total sulphur histogram shows a consistent low value which is in the range of 0.1 to 0.2%. This is the expected value for this typical deposit. Graph 6.1 Histogram of CV (gar) All Seams CV (gar) Histogram No. of Data CV (gar) Kcal/kg Graph 6.2 Histogram of Ash (adb) All Seams 120 Ash (adb) Histogram 100 No. of Data > 12.5 Ash (adb) % ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 33 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-44

351 Graph 6.3 Histogram of Total Sulphur (adb) All Seams Total Sulphur (adb) Histogram No. of Data > 0.4 Total Sulphur (adb) % ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 34 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-45

352 7. Resource Estimation 7.1 Basis of Estimation The Resource classification at the Project has based on an assessment of the geology of the coal deposit, with the consideration of the following: Regional geological setting; Comparison to the adjacent neighbouring projects, including an understanding of geological similarities and differences; The nature of the coal seam, including whether the seam is thick and continuous, or is made up of multiple thin seams and whether there is significant splitting etc.; Structure of the deposit, including seam dip, faulting, folding etc.; Post-depositional influences, including depth of weathering, unconformities and wash-outs; Geotechnical properties of the coal and the non-coal strata and their influence on the proposed mining method; Coal composition and rank and the impact upon coal quality parameters and potential coal product(s); Geographical features and the relationship between structural and depositional features, particularly with respect to topographical variability, river systems, weathering and oxidation. A comprehensive analysis to the data have been completed by RPM which following the QC procedures and detail interpretation against geological conditions in the Project area. The summary of the method employed to estimate Coal Resources can be described as follow: Geological model was created from the TIA exploration data using ABB Stratmodel software. No quality restrictions were used and no thickness cut off was applied for structural model. Mined out limits were used, consequently the geological model was built outside the mined out area. No coal seams are modelled within the extent of the mined out boundaries. A total of 506 representative samples have been analysed for Total Moisture (TM) in TIA. The average TM of the TIA area is 37.3%. The air dried density derived from laboratory analysis was recalculated as insitu density using the Preston Sanders equation. Categorisation of the coal seams into the Measured, Indicated and Inferred categories was based on assessment of geological confidence. The Resource categorisation is made on a seam group basis. A valid mining permit/concession lease has also been used to limit the Resource boundaries. The estimation was based on the In-situ density of each seam basis by applying the Preston- Sanders formula to the density reported by the coal testing laboratory. A minimum seam thickness of 0.4 m was used in the estimation process. The Resources were reported for individual seams and have been rounded to the nearest 50 kt for Measured, 100 kt for Indicated and 200 kt for Inferred resources, and total Coal Resources by category are rounded to 1 Mt to reflect the overall accuracy of the estimates. 7.2 Reasonable Prospects for Eventual Economic Extraction RPM have used the following parameters: The remaining TIA Resources area is located adjacent to current active mining. The TIA Resource has been mined since 2009 and has sufficient infrastructure for mining of the remaining TIA Resource. The TIA product coal has been sold into the seaborne thermal coal export market. The product coal to be produced from the Resource area is also proposed to be marketed as a thermal coal which predominantly using export scenario. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 35 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-46

353 A minimum thickness of 0.4 m has been applied in the Resource estimation. RPM is of the opinion that the assumption is reasonable and is common Kalimantan open cut mining practice. Maximum parting thickness that is considered as part of the coal is 0.1 m has been applied. RPM is of the opinion that the assumption is reasonable and a common mining practice in Kalimantan. The Coal Resources have been delineated by the tenure held by the Client with valid permits issued by the Indonesia Government. RPM is unaware of any material issues that will impede the coal extraction within the Resource limits. The mine optimization results completed by RPM using a higher revenue factor have been used as the basis for Resource limits. RPM used a revenue factor approximately 30% higher than the Reserves base. The average depth of deep drilling was also used as a lower limit to the Resources limits, to ensure the continuity of coal seams within the selected optimization results. This resulted in an average insitu strip ratio of approximately 7.3:1 for the remaining TIA area. In RPM s opinion, this strip ratio can be used as a basis to justify the reasonable prospect of eventual economic extraction using open cut mine method for at least through the end of concession s life. RPM also make the following assumptions when considering reasonable prospects for eventual economic extraction; o Demand for thermal coal does not decline materially over the term of the LOM, o o The thermal coal price does not decline materially over the term of the LOM, That conditions affecting the license to exploit the TIA Resource do not change materially over the term of the LOM. 7.3 Definition of Points of Observation Points of Observation are sections of coal-bearing strata, at known locations, which provide information about the coal by observation, measurement and/or testing. They allow the presence of coal to be unambiguously determined. Points of Observation have varying degrees of reliability and can include surface or underground exposures, bore cores, calibrated downhole geophysical logs and representative drill cuttings in non-cored drill holes. Points of Observation are classified by Quantity or Coal Quality. Resource confidence outlines for the Project were determined by merging of Quantity (Structural) confidence limits with Coal Quality confidence limits. In Indonesian coal Project, there are typically four PoO types summarised in Table 7.1. RPM used two of the PoO types (Type 1 and 3) for Resource classification. RPM also used barren drill holes without geophysical log data to limit coal seam and categorisation extents. Table 7.1 Point of Observation Types Type Point of Observation Description Value and Use of Point of Observation 1 Cored and analysed intersection of seam with geophysical log, may or may not have lithology log 2 Cored and analysed intersection of seam without geophysical log, may or may not have lithology log 3 Non cored intersection of seam with geophysical log, may or may not have lithology log Types 1 3 Reliable for structure and thickness Types 1 2 Required for quality confirmation Type 3 May support quality 4 Non cored intersection of seam without geophysical log, may or may not have lithology log Type 4 Supportive of structure and thickness ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 36 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-47

354 7.3.1 Structural PoO Structural PoOs are defined by: Open holes with geophysical log to the floor depth of seam being used as a PoO. Cored holes with geophysics, with or without down hole survey, and with or without coal quality data. All drill holes have reliable collar survey data Quality PoO Coal Quality PoOs are defined by; All drill holes have reliable collar survey data Cored holes with geophysics, with or without down hole survey Cored hole with coal quality test data for Proximate, CV, and TS. Coal seam recovery greater than 90% The quality PoO spacing is twice the quantity (structural) PoO spacing. 7.4 Resource Classification The JORC 2012 Code and the 2014 Australian Guidelines for The Resource Estimation and Classification of Coal Resources do not contain specific or prescriptive guidance for the Competent Person for estimation of coal Resources. The RPM Competent Person has developed an approach which is based on the Indonesian Coal Guidelines (SNI: ). It is in the Competent Person s view that the guideline is reasonable for classification of Indonesian coal deposits. The Indonesian Coal Guideline classifies coal deposits by a number of criteria into three levels of complexity that are described below; Simple: o The deposit is not significantly affected by folding, faulting and intrusion. o Strata dip is in general shallow. o Coal seam continuity can be traced over thousands of meters, o Coal seams have limited and simple splitting. o No material variability on both quality and coal lateral thickness observed, Moderate: o The coal was deposited within a more fluctuating sedimentary environment resulting in moderate levels of splitting, and lateral seam thickness variability, o Seam continuity can be traced over hundreds of meters. o The strata have been tectonically affected after deposition and are folded and faulted. Strata dips are moderate. however the o The coal quality variability is directly related to the increased variability due to seam thickness changes and seam splitting o In some places, igneous intrusion affect seam structure and quality. Complex o In general, coal was deposited within a complex sedimentation environment resulting in; - Seam splitting is common and forms complex splitting and coalescing patterns - Seam wash out, shale out - Coal quality is highly variable - Coal lateral distribution is limited and can only be traced over dozens of meters. o Has been tectonically and extensively deformed resulting in steep strata dips and structurally induced seam thickness variability. - Folding, with some overturned bedding - Steep seam dips o Coal seams are difficult to be constructed and correlated. The key attributes of the Resource categorisation parameters are summarised in Table 7.2. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 37 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-48

355 RPM considers that the Project can be categorised is a simple deposit due to the following: Dips are gentle, and the majority of the Resource has a dominant shallow dip at less than 4 degrees, The coal quality is consistent across the project, no significant anomaly was identified, The coal seams, particularly main seam groups on each block can be easily recognised from their geophysical signatures and thickness. The main seam groups can also maintain its total thickness throughout the Resource area, Table 7.2 Coal Resources Categorisation Parameter Parameter Simple Moderate Complex Sedimentation X Quality X Structure X Drill Hole Spacing - Measured 500 m 250 m 100 m - Indicated 500-1,000 m m m - Inferred 1,000-1,500 m 500-1,000 m m RPM has classified the TIA Resource based on the following premises: Measured key characteristics can be estimated with a high level of confidence Indicated key characteristics can be estimated with a reasonable level of confidence Inferred key characteristics can be estimated with a low level of confidence Note that key characteristics include tonnage, densities, shape, physical characteristics, grade and mineral content. In the context of coal, this means that both physical disposition and key coal quality characteristics must be known. RPM used the additional criteria for determining the PoO spacing for classifying the TIA Resources; Modelled cross sections, to assess structural variation and veracity of the model along the section lines, Seam isopachs and postings to assess lateral thickness variation, and Ash and CV GAR contours and postings to assess lateral quality variation. RPM used two distinct PoO radii for Resource limit creation, based on the seam group continuity and consistency. Smaller PoO radii were applied to the UC and C seam group as these seam group exhibit more variability in thickness and quality than other seam groups. The detail drill radius for resource classification is shown in Table 7.3 below. Seam Group Table 7.3 Radius of Influence Radius of Influence (m) Radius of Influence (m) Quality Quantity Measured Indicated Inferred Measured Indicated Inferred XUB ,600 UB ,600 B ,600 LB ,600 UC ,200 C ,200 D ,600 ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 38 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-49

356 The Resources were classified on a seam group basis. An example of the Coal Resource boundaries for the C and D seam are in Figure 7.1 and Figure 7.2 with more set of the resource boundaries are provided in Appendix E. 7.5 Coal Resource Estimate 2016 RPM completed Coal Resources estimation over the TIA area. The summary of Coal Resources is shown in Table 7.4 below. The detail Coal Resources estimation by seam is provided in the Appendix D. Area/Block Measured Resources Resources (Mt) Table 7.4 Coal Resources Summary 2016 TM CV CV Ash TS IM RD % Kcal/Kg Kcal/Kg % % % gr/cc Measured Indicated Inferred Total (ar) (adb) (gar) (adb) (adb) (adb) In situ TIA ,435 4, Indicated Resources TIA ,445 4, Inferred Resources TIA ,430 4, Grand Total/Average ,440 4, Previous Resource Estimate In 2011, a JORC compliant Resources and Reserves Statement was prepared by PTRI. The revised Coal Resources estimates for TIA are compared with the previous report in Table 7.5 below: Table 7.5 Comparison with Previous Coal Resources Resources (Mt) Date Measured Indicated Inferred Total RPM Dec PTRI Sep Variance The variances in general can be described as follow: Depletion due to mining, TIA has mined approximately 28 Mt during ; Coal resource estimate only carried out in the northern area due to the central and southern area had been mined out and backfilled. It is noted that majority of the backfilled area had also been revegetated. RPM is of the opinion that high unlikely the remaining coal if any, can potentially be mined in the future due to the current status. The current coverage area is only approximately 2 km in strike length, which significantly reduced from 9 km in the previous statement, RPM applied pit optimisation to limit Coal Resources estimate to further comply with reasonable prospect for eventual economic extraction. It is noted that no mine optimization was used to limit the Coal Resource estimate in previous Statement due to the application of Coal Guideline 2003 as a reference ; and Model update which incorporated additional drilling data, seam re-correlation, and update for detail topography data. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 39 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-50

357 W XUB UB B C D_2 D_1 W XUB UB B LB C D W UB B LB_2 LB_1 UC C D W XUB UB B LB UC C D W B LB_2 LB_1 C D W C D C W C Minedout Disposal Boundary LEGEND Concession Boundary Quality Data Open Hole OPT Resource Boundary Subcrop Line Disposal Boundary Measured Resource Boundary Indicated Resource Boundary Inferred Resource Boundary meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE E N Inferred Indicated DEP_245 DEP_247 Measured DEP_249 CTI_313 RTI_312 Indicated DEV_C_1177 RTI_317 DEV_C_ E N Measured Indicated Inferred Uncategorized other seams CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING COAL RESOURCE LIMIT - SEAM C GROUP PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 7.1 ADV-JA June 2017 A-51

358 W XUB UB B C D_2 D_1 W XUB UB B LB C D W UB B LB_2 LB_1 UC C D W XUB UB B LB UC C D W B LB_2 LB_1 C D W C D C W C B B' Minedout Disposal Boundary LEGEND Concession Boundary Quality Data Open Hole OPT Resource Boundary Subcrop Line Disposal Boundary Measured Resource Boundary Indicated Resource Boundary In ed Resource Boundary N meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE E N B 0-50 Inferred Indicated DEP_245 DEP_247 Measured DEP_249 CTI_313 RTI_312 DEV_C_1177 RTI_317 DEV_C_ E N B' Measured Indicated Inferred Uncategorized other seams CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING COAL RESOURCE LIMIT - SEAM D GROUP PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 7.2 ADV-JA June 2017 A-52

359 8. Mining Reserve Estimates The following sections describe the process used in converting the Coal Resources into Coal Reserves. This process includes defining viable pit limits and applying mining cost, revenue and other modifying factors to the Coal Resources to estimate Coal Reserves. 8.1 Coal Resource Estimate The Coal Resource estimate that is used as a basis for the Coal Reserve Estimate is documented in this report (see Section 7). The same geological model has been used for this Reserve estimate as was used for the Resource estimate. Coal Resources are reported inclusive of Coal Reserves (that is, Coal Reserves are not additional to Coal Resources). The Competent Person who carried out the Coal Resource estimate is Mr. Oki Wijayanto. 8.2 Cost and Revenue Factors The coal price assumption was estimated from the historic long term price index and independent coal price forecasts. RPM is of the opinion that a price of 75 USD/tonne (based on 6,322 kcal/kg gar) is reasonable and acceptable to be used as a benchmark price for this study. RPM has received tables of mining costs based on TIA contracted rates (refer to Client s file: Opex TIA 2017.xls ) and is of the opinion they are reasonable contracted cost assumptions based on knowledge of similar mining operations in Indonesia. Cost and revenue factors estimated for the Project were discussed with the Client and agreed to be used as input parameters for the optimisation process. This allowed a Breakeven Stripping Ratio (BESR) to be estimated. The following points summarise the cost and revenue factors respectively that were used for the estimate: All costs are in US dollars (USD). A benchmark coal price of $75 per tonne for coal of CV 6,322 kcal/kg (gar) was used for the estimates. Waste and coal mining cost of approximately $21 per tonne at the breakeven stripping ratio Coal Hauling, crushing, and stockpiling costs of approximately $3.9 per tonne. Administration, financing and marketing costs allowed totalled approximately $4.5 per tonne. Barging and documentation costs of approximately $3.7 per tonne. Royalties of 5% of revenue less marketing, barging and shipping costs have been allowed. All cost above already include VAT of 10% based on information from Client. 8.3 Mining Factors As the coal seams are not clearly defined and delineated from the waste in some areas, it is not practical to mine the interface between the waste and the coal without incurring some coal loss and waste contamination of the coal. There will be times when some coal is left unintentionally unmined or which is mined as waste (loss) and other times when waste is mined as coal (dilution). The Modifying Factors applied to the Coal Resource model for deriving mining quantities were selected based on the use of excavators and trucks. Loss and dilution factors guidelines are as follows: Roof and Floor Loss: It is assumed that 75 mm will be lost in the roof and 75 mm of coal will be lost in floor of all coal seams (i.e. total coal loss of 150 mm). ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 42 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-53

360 Roof and Floor Dilution: It is assumed that 25 mm of waste material will be mined with the roof and 25 mm with the floor of all coal seams (i.e. total dilution of 50 mm). Minimum Mining Thickness: Minimum mining thickness of 0.4 m has been applied on all seams. Minimum Parting Thickness: Partings less than 0.2 m were assumed to be mined with the coal. Global Loss: It is assumed that 4% of all coal mined will be lost. This global allowance covers both geological and mining losses. 8.4 Cut-off Parameters and Pit Limits The Optimiser software uses the geological model, mining costs and revenue assumptions to produce a set of nested pit shells based on varying the revenue applied to seams (forcing factors) to estimate the economic pit limits. The pit shell wall designed at overall dip slope projected from the pit crest to the variable pit basal floors. An overall slope of 30 degrees were applied on the optimisation process for the high wall and side wall, and 26 degree of overall slope was applied for the low wall. The optimisation base was limited at RL minus 75 as the geological confidence limit. A breakeven strip ratio ( BESR ) was estimated using costs and revenue factors based on the above inputs. The breakeven strip ratio estimated for the Project is ~9.2:1 bcm per ROM tonne. The pit optimisation results were examined and then a pit shell selected by identifying the shell with the Incremental Stripping Ratio, ( ISR ), slightly lower than the Breakeven Strip Ratio, ( BESR ). A higher ISR than the BESR would mean the mining cost is greater than the revenue for the incremental slice of the pit. The selected pit shells were subsequently modified to form Practical or Mineable Pit Shells. This allows the pit shell to be refined to allow for practical considerations such as floor position, access restrictions and the removal of small areas that would be impractical to mine. The incremental and break even stripping ratio is provided in Table 8.1. Table 8.1 Incremental and Breakeven Stripping Ratio ISR BESR PIT (bcm/t) (bcm/t) TIA The practical pit shell is shown on Figure 8.1 and labelled the JORC Reserves Pit Shell. 8.5 Metallurgical Factors The coal is sold unwashed so no metallurgical factors have been applied. 8.6 Marketing and Product Specifications TIA has been operating since 2009 and has produced approximately 28 Mt of coal product during period of A detailed market study has not been carried out; however, TIA has established customers, there is a market for the coal, and as such, RPM does not anticipate issues in selling this product. 8.7 Life of Mine Plan A Life of Mine (LOM) plan has been completed by the Client to support the JORC reserve estimate. RPM compared the Client prepared LOM pit design to the practical pit design used for the Reserve estimate. It is RPM s opinion that the LOM plan provided by the Client is a reasonable estimate of the economic and technical feasibility of the Coal Reserves. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 43 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-54

361 The LOM outcomes are outlined below: Cut off date topography use the same cut off date that was used for the Reserve estimation, which is 31 December 2016; average of 4 Mt per annum of coal produced and 5.5 Mt peak production, and 7 years of mine life Table 8.2 shows the total mineable quantity and average quality within the TIA practical pt. Table 8.2 Total Mineable Quantity and Quality Waste Coal SR TM % Ash % TS % CV Kcal/Kg Mbcm Mt bcm/t (ar) (ar) (ar) (gar) , Classification RPM estimated the Reserves within the practical pit shells and only those portions of Measured and Indicated Resources that are within the pit shell are available for Reserves. 8.9 Audits and Reviews - JORC Code Check List The JORC Code provides guidelines which set out minimum standards, recommendations and guidelines for the Public Reporting of exploration results, Mineral Resources and Ore Reserves. Within the code is a Checklist of Assessment and Reporting Criteria (Table 1 JORC Code). This checklist has been used as a review guide and demonstrates compliance of this report with the requirements of the JORC Code. Table 1 JORC Code is attached to this Reserves Statement as Appendix B. The process and inputs for the Reserves estimate has been subject to internal peer review by RPM staff Results The purpose of the work was to provide an estimate of the Open Cut Reserves of the TIA Mine based on the updated geological model and current cost and price assumptions as per cut off date of 31 December Total of 24 Mt Open Cut Coal Reserves were estimated within the practical economic TIA pit, of which 16 Mt are classed as Proved with the balance of 8 Mt classed as Probable. TIA coal is sold as unwashed coal, therefore Coal Reserves are equivalent to Marketable Coal Reserves. The rounding of the Reserve estimates is in accordance with the JORC Code which states: Ore Reserve estimates are not precise calculations. Reporting of tonnage and grade figures should reflect the relative uncertainty of the estimate by rounding off to appropriately significant figures. The Coal Reserves and weighted average coal qualities are presented in the following Table 8.3 and Table 8.4. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 44 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-55

362 Table 8.3 Total Open Cut Coal Reserves Area/Block Reserves (Mt) TM CV Ash TS RD % Kcal/Kg % % Proved Probable Total (ar) (gar) (adb) (adb) In situ Proved Reserves TIA , Probable Reserves TIA , Grand Total/Average , Notes: Estimate has been rounded to reflect accuracy. Table 8.4 Open Cut Coal Product Reserves by Seam CV Coal Reserve (Mt) TM % Ash % TS % RD Seam kcal/kg Proved Probable Total (ar) (ar) (gar) In situ (ar) XUB ,620 UB ,770 B ,970 LB_ ,460 LB ,710 LB_ ,460 UC ,820 C_ ,740 C ,960 C_ ,840 D ,020 Total ,910 Notes: Estimate has been rounded to reflect accuracy Discussion of Relative Accuracy and Confidence A long term benchmark price of 75 USD per tonne at caloric value of 6,322 kcal/kg (gar) was adopted and adjusted to reflect the lower calorific value of the Project s coal using formulas of Indonesian Price Index (Harga Patokan Batubara or HPB) published by the Indonesian Ministry of Energy and Mineral Resources as a primary basis of the coal discount factor. The coal price was also compared to the Indonesian Coal Price Index (ICI 4) for caloric value of 4,200 kcal/kg (gar) provided by Client as a comparison price and RPM is of the opinion that the benchmark price is reasonable to be used in this study. The pit practical design used as the basis to estimate Reserves has been checked against the BESR determined by the cost provided by the Client. The LOM has been provided by the Client to demonstrate the viability of the mining schedule, mining sequence and the mass balance of waste dump availability. ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 45 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-56

363 TIA has been operating since 2009 and has produced approximately 28 Mt of coal product during period of Open Cut Coal Reserves were estimated by applying mining factors and exclusion criteria to the Coal Resources. The Measured Coal Resources within the economic and practical pit boundaries are converted to Proved Coal Reserves and the Indicated Coal Resource are converted to Probable Coal Reserves with the application of the appropriate mining modifying factors (such as recovery, dilution and global losses) 8.12 Relevant Factors There are a number of technical, marketing, planning and statutory inputs which may impact on the stated Coal Reserves in future JORC statements. When the next JORC statement is prepared it is likely to have different pit shells and quantities. The changed inputs could include: results from further geotechnical studies; results from ongoing exploration drilling (including coal quality coring), and subsequent updates to the geological model; updates to the life of mine plan; changes in regulatory requirements; changes in the coal prices; and changes in the operating cost Previous Reserve Estimates The revised Coal Reserve estimates for TIA compared with the previous report published 1 September 2011 is shown in Table 8.5 below. Overall Coal Reserve estimates have decrease by -28 Mt. The principal variances are as follow: the assumed long term Newcastle benchmark coal price has been decreased from $115/t to $75/t; Depletion due to actual mining production, TIA has mined approximately 28 Mt during , updated geological model, updated Resource boundaries, Table 8.5 Comparison With Previous Open Cut Coal Reserves Open Cut Coal Reserve (Mt) Proved Probable Total RPM Dec PTRI Sep Variance ADV-JA Statement of Open Cut Coal Resources and Reserves as at 31 December 2016 July 2017 Page 46 of 46 This report has been prepared for PT. Reswara Minergi Hartama and must be read in its entirety and subject to the third party disclaimer clauses contained in the body of the report RungePincockMinarco Limited 2017 A-57

364 W XUB UB B C D_2 D_1 W XUB UB B LB C D W UB B LB_2 LB_1 UC C D W XUB UB B LB UC C D W B LB_2 LB_1 C D W C D C W C LEGEND Concession Boundary Pit U meters DO NOT SCALE THIS DRAWING - USE FIGURED DIMENSIONS ONLY. VERIFY ALL DIMENSIONS ON SITE E N B 0-50 Inferred Indicated DEP_245 DEP_247 Measured DEP_249 CTI_313 RTI_312 DEV_C_1177 RTI_317 DEV_C_ E N B' Measured Indicated Inferred Uncategorized other seams CLIENT PROJECT NAME JORC OPEN CUT COAL RESOURCES & RESERVES DRAWING JORC RESERVE PIT SHELLS PT TUNAS INTI ABADI FIGURE No. PROJECT No. Date 8.1 ADV-JA June 2017 A-58