o GrantThornton ! i' Hendra'iJir12lo Gani & Hidayat

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2 i o GrantThornton Hendra'iJir12lo Gani & Hidayat / Our audit was cendi~c!(:,l fo: the purpo.~c Dr' forming au opillivn 011 :hc basi.: 20:0 and 201J9 >.:cn;;:o!ida:.!<l financial stm.cillcllls. l<:kcn as, a whoic, 1~ne 1l.ccompa:;::":ng st:pph:!:i!~i\;3ry inlimna:k.'n i, prcs<.':ntcd fer t!:c purpos<:: of additional ana~ysis of :he b35; :0 UJ and 2(,09 COI1~nlic;J.ted financial ihat<!mcms (3:hJr thall tc present the fin:mdal oosilion_ fe's:;!! vf operations and cash fl0\'< cf the?arcm Comp;;.ny a:; ~ scpar<u(; i:mi~y_ 3tid :5 not a required!xl~ of :h,:;- basic 2010 and :::G09... cosoiidnted I1n.a!lcl.:t1 ~:m:nwl1t:>. This snpplementary inrcnualion IS Inc re~?unslh:ljty of li1r: CCi1lP~ll:-'~ ll1t1l1ti:;<:m'<!llt $(1':::1 ilift'~lllali,,, ni:b been subjected 10 th~ ~F.ldhil1f.l. procca!.::""c; ;}?plied in mit audits of (he ha~ic H.i 2()',!) t(.)!ls<)lkh;:r:d fillllocial $13tcmc:nts ano, in our op:nion i~ fairly ~,ated ill ali :ntl.lcriaj resrec:t \I.. hen ccn3;~-!(;:(d in rdal;",) to Ihe basic 2010 and 2009 ccnsolidah:.d f'inaflcialslei.cihclhs, tnkcfl:\;; a whcle. Ciwi Pnino. CPA l,,!ci:nsc 1\0, O::;.!.0860 Tlle :.!co,:llillpar.y'ng ~nns!)i\\imcu lir.;m('iaf &awmcul~ i!.~ il~t::nccc :J ;m.1~ll1. ;11.:: l(w~;,;k~,cj )kntltj~! p{l$l!(v!:. ~i'.1nilll'l~~!",1 f1::;u!ts or 0;>~'nlI101\:> lli'ij COIl$Q1idtl.c;! ~ fi!)\~s in ilt;:o[ll~ll4' "';Ii> ~;o,:;;)iimih~ rl<ncir <.l$ ilrd Py~C!icts gtl:,,'the)' J\:::cp I.:c' :;-, Indcr:(;.1;i~ ~nd r.1)1,h101 l,!f an, otl1.::- juri:m.ii(i;<jl1~. The ~1;,\lh;anj" p!lao,:,lur..:s ~nt.l ;vactic;! l(\ J~ui, ~m:l: CQ1:~fjEd.dtt;l fh~r:~ic<j 5tal~mt:ms JJ">; 111m;.: g(1)';f~u)' a~cq:ll::ij,art! :!!'!-,licrl ;11 I,KI"",c,,_,,_ A.ccun,lingly.!ne w,:(\>;n;l?f!yitli; ~JfhJljtia;e.i i'!~<l:d'" ~a!r.mc,(!s lioti their lllllizmi(ll) arc nm '::~'Sig!lo:J (of lj\ol'l: \\l!g 1Ir>: no: :lllnm~..i 1!hCUl l:l4;m,,;.i;;n ~~~'''~!l;ifls jyir. irl\;~. r" o«-:iur('l' and prar:it;':~,! i'

3 CONSOLIDATED BALANCE SHEET A S S E T S Notes CURRENT ASSETS Cash and cash equivalents 2f,4 9,484,683,980 3,103,395 Advance payment 5 298,896,235 Prepaid rent 6 1,152,547,287 Other receivables 2g,7,20a 1,190,774,000 2,774,000 Total current assets 12,126,901,502 5,877,395 NON CURRENT ASSETS Plant and equipment 2h,2l,8 7,848,814,405 Refundable deposit 23,346,500 Goodwill 2b,3,10 3,703,050,090 5,635,076,224 Deferred exploration expenditures 2i,9 133,177,680,929 47,289,870,089 Total non current assets 144,752,891,924 52,924,946,313 TOTAL ASSETS 156,879,793,426 52,930,823,708 The accompanying notes form an integral part of these consolidated financial statements 1

4 CONSOLIDATED BALANCE SHEET (Continued) LIABILITIES AND EQUITY (CAPITAL DEFICIENCY) Notes CURRENT LIABILITIES Other payables 2e,11,14a 25,111,480 25,111,480 Taxes payable 2j,15b 2,539,920,566 Accrued expense 12,20c 24,349,256,965 Total current liabilities 26,914,289,011 25,111,480 NON CURRENT LIABILITIES Due to related parties 13,20b 58,227,850,525 73,942,662,625 Long term loan 14,20d 86,311,949,415 Deferred tax liabilities 2j,15c 8,166,049 Total non current liabilities 144,547,965,989 73,942,662,625 EQUITY (CAPITAL DEFICIENCY) Capital stock Authorized 4,000 shares at 1,000,000 par value per share Issued and fully paid up capital 1,000 shares at 1,000,000 par value per share 16 1,000,000,000 1,000,000,000 Exchange difference due to financial statement translations 2d 5,335,593,473 4,652,956,678 Accumulated deficit 24 (20,918,055,047) (26,689,907,076) Total equity (capital deficiency) (14,582,461,574) (21,036,950,398) TOTAL LIABILITIES AND EQUITY (CAPITAL DEFICIENCY) 156,879,793,426 52,930,823,707 The accompanying notes form an integral part of these consolidated financial statements 2

5 CONSOLIDATED STATEMENT OF INCOME For the year ended March 31, 2010 and for three months period ended March 31, 2009 Notes Operating expenses General and administrative expenses 2k,18 899,935,528 Operating loss (899,935,528) Other income (expenses) net 2c,2k,19,20e 6,756,345,446 (2,670,123,660) Profit (loss) before income tax 5,856,409,918 (2,670,123,660 ) Corporate income tax Current tax - Nil 2j,15a (76,391,840 ) Deferred tax Expense 2j,15a,15c (8,166,049 ) Total corporate income tax (84,557,889 ) Net profit (loss) 5,771,852,029 (2,670,123,660 ) The accompanying notes form an integral part of these consolidated financial statements 3

6 CONSOLIDATED STATEMENT OF INCOME For the year ended March 31, 2010 and for three months period ended March 31, 2009 Exchange difference due to financial Capital stock statement translations Accumulated deficit Total Balance as of December 31, ,000,000,000 4,560,014,316 (24,019,783,416 ) (18,459,769,100 ) Net loss for the period (2,670,123,660 ) (2,670,123,660 ) Exchange difference due to financial statement translations 92,942,362 92,942,362 Balance as of March 31, ,000,000,000 4,652,956,678 (26,689,907,076 ) (21,036,950,398 ) Net profit for the year 5,771,852,029 5,771,852,029 Exchange difference due to financial statement translations 682,636, ,636,795 Balance as of March 31, ,000,000,000 5,335,593,473 (20,918,055,047 ) (14,582,461,574 ) The accompanying notes form an integral part of these consolidated financial statements 4

7 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended March 31, 2010 and for three months period ended March 31, 2009 Cash flows from operating activities Profit (loss) before income tax 5,856,409,918 (2,670,123,660 ) Adjustments to reconcile net loss to net cash used in operating activities : Exchange difference due to financial statement Translations 682,636,795 92,942,362 Foreign exchange gain on due to related parties (15,714,812,100) Foreign exchange loss (gain) on deferred exploration expenditure 7,480,482,488 (1,900,529,087 ) Translation difference of plant and equipment 754,522 Depreciation of plant and equipment 35,626,586 Amortization of goodwill 1,932,026, ,006,534 Operating profit (loss) before working capital changes 273,124,343 (3,994,703,851) Prepaid rent (1,152,547,287) Other receivables (1,188,000,000) Advance payment (298,896,235) Refundable deposit (23,346,500) Accrued expenses 24,349,256,965 Taxes payable 2,463,528,726 (83,180,573) Net cash provided by (used in) operations 24,423,120,012 (4,077,884,424) Cash flows from investing activities Exploration expenditures, net of depreciation expense (93,368,293,328) (190,003,301) Purchase of plant and equipment (7,885,195,514) Net cash used in investing activities (101,253,488,842 ) (190,003,301) Cash flows from financing activities Long term loan 86,311,949,415 3,992,584,375 Net cash provided by financing activities 86,311,949,415 3,992,584,375 Net increase (decrease) in cash and cash equivalents 9,481,580,585 (275,303,350) Cash and cash equivalents at beginning of year / period 3,103, ,406,745 Cash and cash equivalents at end of year / period 9,484,683,980 3,103,395 The accompanying notes form an integral part of these financial statements 5

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. G E N E R A L a. Articles of Association PT Duta Sarana Internusa (the Company), domiciled in Jakarta, was established based on notarial deed of No. 12 dated December 5, 2006 of Darmawan Tjoa, SH, SE, notary in Jakarta, which has been approved by the Minister of Justice and Human Right of the Republic of Indonesia under Decision Letter No. W HT TH.2007 dated January 17, 2007 and had been published in state gazette No. 43, Supplement No. 5264/2007 dated May 29, The Company s articles of incorporation have been amended several times and the latest amendment was made based upon notarial deed No. 165 dated June 27, 2008 of Sugito Tedjamulja, SH, notary in Jakarta, concerning the changes of the Company s articles of association to conform with Law No. 40 Year 2007 of Limited Liability Company, which has been approved by the Minister of Justice of the Republic of Indonesia under Decision Letter No. AHU AH Tahun 2008 dated October 14, 2008 and notarial deed No. No. 01 dated October 16, 2008 of Zulfiah Tenri Abeng, SH., M.Hum, M.Kn., notary in Jakarta, which has been approved by the Minister of Justice and Human Right of the Republic of Indonesia under Decision Letter No. AHU AH Year 2008 dated November 6, 2008 regarding the changes in change the Company status from General Corporation into Foreign Capital Investment and therefore change the expose stated in the Company s Article of Incorporation to conform with Law No. 25 Year 2007 regarding Capital Investment. Until the date of this report this amendment has not been published in the State Gazette. Notification of the Presidential Approval has been given by the Capital Investment Coordinating Board (BKPM) by its letter No. 234/V/PMA/2008 dated September 25, In accordance with article 3 of The Company s article of association, the scope of its activities is in service industry which covers business and management consultation which cover management, consultation services, advice and operational help, planning, supervising, evaluate and investment and business development strategy, analysis and feasibilities study of business services and related business activities. The Company s head office is located in Jakarta. The Company and Subsidiary are required to prepare consolidated financial statements for the year ended March 31, 2010 and three months period up to March 31, 2009 for the consolidation purpose. b. Board of Directors and Commissioner The composition of the Company s Board of Directors and Commissioners as of March 31, 2010 and 2009 are as follow : Commissioners : Mr. Raaj Kunar Mr. Raaj Kumar Director : Mr. Ashis Basu Mr. Ashis Basu 6

9 1. G E N E R A L (Continued) c. Consolidated Subsidiary Subsidiary Domicile Nature of business Percentage of ownership Start of commercial operations Total assets before elimination as of March 31, 2009 March 31, 2008 March 31, 2010 March 31, 2009 % % year PT Barasentosa Lestari Jakarta Coal mining 100%* 100%** - 149,182,083,993 47,289,870,089 * Based on deed of share ownership transferred No. 36 dated February 24, 2009 of Mala Mukti, S.H., LL.M, notary in Jakarta, Mr. Buntardjo Hartadi Sutanto, the Company shareholders has transferred his ownership of 1 share with total nominal value of 1,000,000 to PT Unsoco, the related parties of the Company. Therefore the effective ownership of the Company in PT Barasentosa Lestari is 100%. ** Based on notarial deed No. 125 dated January 31, 2008 of Sugito Tedjamulja, SH, notary in Jakarta, the Company s own 3,499 shares of 3,500 shares outstanding (99.97%), in which the remaining shares (1 shares) were own by Mr. Buntardjo Hartadi Sutanto, the stockholder of the Company (note 9). Therefore the effective ownership of the Company in PT Barasentosa Lestari is 100%. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of significant accounting policies adopted by the Company, which affects the determination of its financial position and results of its operations, is presented below. a. Presentation of Consolidated Financial Statements The Company s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Indonesia. The consolidated financial statements have been prepared under historical cost concept and on the accrual basis, unless otherwise stated. The consolidated statement of cash flows is prepared based on the indirect method by classifying cash flows on the basis of operating, investing and financing activities. For the purpose of the cash flow statement, cash and cash equivalent include cash in hand, cash in banks, and time deposits with a maturity period of 3 months or less, as long as these time deposits are not pledged as collateral for borrowings nor restricted. 7

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) a. Presentation of Consolidated Financial Statements (Continued) The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect : the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management s best knowledge of current events and activities, actual results may differ from those estimates. Figures in the consolidated financial statements are expressed in Rupiah, unless otherwise stated. b. Principle of Consolidation The consolidated financial statements include the accounts of the Parent Company and Subsidiary that are controlled by the Parent Company, other than those are excluded because control is assumed to be temporary or due to long term restrictions significantly impairing a subsidiary s ability to transfer funds to the Parent Company. When a Subsidiary either began or ceased to be controlled during the period, the results of the Subsidiary s operations are included only from the date of control commenced or up to the date of control ceased. Control is presumed to exist where more than 50% of a Subsidiary s voting power is directly or indirectly controlled by the Parent Company; or the Parent Company able to govern the financial and operating policies of a Subsidiary; or control the removal or appointment of a majority of a Subsidiary s board of directors. For investment amounted to 20% or more but not more than 50%, investment was stated in financial statement using equity method, meanwhile for investment less than 20% stated using cost method. Upon acquisition, the assets and liabilities of a Subsidiary are measured at its fair values at the date of acquisition. Any excess of the cost of acquisition over the interest in the fair values of the identifiable assets and liabilities acquired is recognized as Goodwill and amortized using the straight line method over 5 (five) years. When the cost of acquisition is less than the interest in the fair value of the identifiable assets and liabilities acquired as at the date of acquisition, the fair values the acquired non monetary assets are reduced proportionately until all the excess are eliminated. The excess remaining after reducing the fair values of non monetary assets acquired is recognized as negative goodwill, treated as deferred revenue and recognized as revenue on a straight line method over twenty years. Minority interest in the result and equity of controlled entities are shown separately in the consolidated statements of income and balance sheets respectively. 8

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) b. Principle of Consolidation (Continued) The interest of the minority stockholders is stated at the minority s proportion of the historical cost of the net assets. The minority interest is subsequently adjusted for the minority s share of movements in equity. Any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the Parent. The results of Subsidiary acquired or disposed of during the period are included in the consolidated statement of income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of the Subsidiary to bring the accounting policies used in line with those used by the Parent Company. All material transactions and balances between consolidated companies have been eliminated in the consolidated financial statements. c. Foreign Currency Translation (1) Reporting Currency The consolidated financial statements are presented in Rupiah, which is the reporting currency of the Parent Company. (2) Transactions and Balances Transactions denominated in US Dollar and other currencies are converted into Rupiah at the exchange rate prevailing at the date of the transaction. At the balance sheet date, monetary assets and liabilities in US Dollar and other foreign currencies are translated at the exchange rates prevailing at that date. Exchange gains and losses arising on transactions in US Dollar and other foreign currencies and on the translation of US Dollar and other foreign currencies monetary assets and liabilities are recognized in the consolidated statement of income. d. Financial Statements Translation The financial statements of PT Barasentosa Lestari (BSL), the Company Subsidiary, were presented in US Dollar currency. For consolidation purposes, the financial statements of BSL had been converted into Indonesian Rupiah Currency. 9

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Financial Statements Translation (Continued) Consolidated financial statements are presented in the reporting currency applied to the parent. The translation of the subsidiary's financial statements into the reporting currency for inclusion in the consolidated financial statements should be as follows : (i) (ii) (iii) (iv) (v) Assets and liabilities are be translated using the exchange rate on the balance sheet date; Equity is translated using the historical exchange rates; Income and expenses are translated using the weighted average exchange rate; Dividends are measured using the exchange rate on the date of the declaration of the dividends; and Procedures (i) and (iv) will produce a difference in translation which will be presented in the equity account as Exchange difference due to financial statement translations. For practical reasons, an exchange rate that is close to the real exchange rate, such as the average exchange rate during a period, is often used to translate revenues and expenses of a subsidiary. The recording currency of the parent enterprise should be the same as the reporting currency for the consolidation. e. Transactions with Related Parties In conducting its business, the Company and Subsidiary have transactions with its related parties in accordance with the definition in SFAS 7 regarding Related Party Disclosures. All transactions with related parties whether or not made at similar interest rates, terms and conditions as those done with third parties, are disclosed in the consolidated financial statements. f. Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposit held on call with banks and other short term highly liquid investments with original maturities of three months or less. 10

13 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) g. Receivables Receivables are recorded net of an allowance for doubtful accounts, based on a review of the collectibility of outstanding amounts. Accounts are written off as bad debts during the year in which they are determined to be not collectible. h. Plant and equipment Initially, an item of plant and equipment is measured at its cost, which comprises its purchase price and any cost directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management, and also include the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Subsequent expenditures such as replacement and major inspection are added to the carrying amount of the asset when it is probable that future economic benefits will flow to the Company and Subsidiary and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced or any remaining carrying amounts of the cost of the previous inspection is derecognized. The costs of day-to-day servicing of an asset are recognized as an expense in the period in which they are incurred. Depreciation is recognized on a straight-line method to write down the depreciable amount of plant and equipment. The estimated useful lives of the assets are as follows: Years % per annum Building Office equipment 5 20 Furniture and fixtures 5 20 The residual values, useful lives and depreciation method are reviewed at each balance sheet date to ensure that such residual values, useful lives and depreciation method are consistent with the expected pattern of economic benefits from those assets. When an asset is disposed of or when no future economic benefits are expected from its use or disposal, the cost and accumulated depreciation and accumulated impairment losses, if any, are removed from the accounts. Any resulting gain or losses from de-recognition of an item of plant and equipment is included in the profit and loss. 11

14 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) h. Plant and equipment (Continued) Effective 1 January 2008, the Company and Subsidiary applied SFAS No. 16 on Property, Plant and Equipment (Revised 2007), which supersedes SFAS No. 16 on Fixed Assets and Other Assets (1994) and SFAS No. 17 on Accounting for Depreciation (1994). Based on the revised SFAS, an entity shall choose either the cost model or revaluation model as its accounting policy and shall apply that policy to an entire class of plant and equipment. If the entity has plant and equipment revalued before the application of the revised SFAS and adopts the cost model, the revalued amounts of those assets are considered as deemed cost. The balance of the revaluation surplus of the assets at initial adoption of the revised SFAS must be reclassified to retained earnings. The Company and Subsidiary chose to adopt the cost model; accordingly, the Company and Subsidiary s plant and equipment, are carried at cost less accumulated depreciation and accumulated impairment losses, if any. i. Deferred exploration expenditures PT Barasentosa Lestari (BSL), Company s Subsidiary Exploration expenditures incurred is capitalized and carried forward, on an area of interest basis, provided one of the following conditions is met: i. Such cost are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or ii. Exploration activities in the area of interest have not yet reached the stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in or in relation to the area are continuing. Ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective area. Exploration expenditures in respect of an area of interest, which has been abandoned or for which a decision has been made by the BSL s Directors against the commercial viability of the area of interest, are written-off in the period the decision is made. Deferred exploration expenditures represents the accumulated cost relating to general investigation, administration and license, geology and geophysics expenditures before the commencement of the BSL s commercial operations. Deferred exploration expenditure is amortized from the commencement of commercial production. 12

15 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) j. Income Tax Current tax expense is provided based on the estimated taxable income for the year. Deferred tax assets and liabilities are recognized for temporary differences between commercial and tax bases of assets and liabilities at each reporting date. Future tax benefit, such as the carry forward of unused tax losses, if any, is also recognized to the extent that realization of such tax benefit is probable. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the assets are realized or the liabilities are settled, based on the applicable tax rates (and tax law) that have been enacted or substantively enacted at the balance sheet date. Changes in the carrying amount of the deferred tax assets and liabilities due to change in tax rates is charged to current year operations, except to the extent that it relates to items previously charged or credited to equity. Amendments to tax obligations are recorded when an assessment is received or, if appealed against by the Company, when the result of the appeal is determined. k. Expense Recognition Expenses that do not meet the conditions for deferred exploration expenditure recognition are treated as expenses in the current period and recognized when these are incurred (accrual basis). l. Impairment of Non-Current Asset At balance sheet date, the Company and Subsidiary reviews whether there is any indication of asset impairment or not. Plant and equipment and other non-current assets, including intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. 13

16 3. ACQUISITIONS OF SUBSIDIARY Acquisitions of subsidiary up to March 31, 2010 are as follows : PT Barasentosa Lestari (BSL) Based on the agreement dated March 12, 2007 between PT Indo Tambangraya Megah and PT Centralink Wisesa International as sellers and the Company and Mr. Buntardjo Hartadi Sutanto as purchasers, the sellers are willing to sell and the purchasers are willing to purchase the shares including receivables owed by BSL to PT Indo Tambangraya Megah and Banpu Public Company Limited for the amount including interests, in aggregate of US$ 3,300,000 (or equivalent with 29,902,199,911). These changes in BSL stockholder has been notarized in deed No. 125 dated January 31, 2008 of Sugito Tedjamulja, SH. Excess of the cost of acquisition over the interest in the fair values of the identifiable net assets amounted 9,660,130,670 is recognized as goodwill and amortized using the straight-line method over five years (Note 10). 4. CASH AND CASH EQUIVALENTS Cash on hand 32,413,637 Cash in banks : PT Bank Central Asia Tbk US Dollars 7,776,811,524 2,157,464 Rupiah 1,675,458, ,931 9,452,270,343 3,103, ADVANCE PAYMENT 9,484,683,980 3,103,395 This account consists of advance payment given to the employee regarding the operational activities of the Subsidiary Company, which will be reimbursed when it is fully used. 6. PREPAID RENT The details of prepaid rent are as follows: House 715,520,548 Office 283,733,589 Guest house 153,293,150 Total 1,152,547,287 14

17 7. OTHER RECEIVABLE Related parties Mr. Bing Tobing 1,188,000,000 Third parties PT Petrosea Tbk 2,774,000 2,774,000 Total 1,190,774,000 2,774,000 Less current portion of other receivables (530,774,000) (2,774,000 ) Long term portion of other receivables 660,000,000 Based on the agreement made dated December 15, 2009, PT Barasentosa Lestari, the Company s Subsidiary, has granted a personal loan amounted 1,584,000,000 to Mr. Bing Tobing, the Company s key management. This receivable amount will be repaid by in 36 equated monthly installment of 44,000,000 per month. The first installment commenced from the month of July PLANT AND EQUIPMENT The details of plant and equipment are as follows : Beginning Ending balances Additions Disposals balances Acquisition cost : Buildings 236,746, ,746,565 Office equipment 64,830, ,380, ,211,292 Furniture and fixtures 334,423, ,423,840 Construction in progress 7,056,391,359 7,056,391, ,577,542 7,885,195,514 8,186,773,056 Accumulated depreciation : Buildings 236,746, ,746,565 Office equipment 64,830,977 26,430,965 91,261,942 Furniture and fixtures 9,950,144 9,950, ,577,542 36,381, ,958,651 Book value 7,848,814,405 15

18 8. PLANT AND EQUIPMENT (Continued) Beginning Ending balances Additions Disposals balances Acquisition cost : Buildings 236,746, ,746,565 Office equipment 64,830,977 64,830, ,577, ,577,542 Accumulated depreciation : Buildings 236,746, ,746,565 Office equipment 64,830,977 64,830, ,577, ,577,542 Book value Plant and equipment were not covered with insurance against fire and other possible losses. Management believes that the Company and Subsidiary are able to cover all possible losses. 9. DEFERRED EXPLORATION EXPENDITURES General investigation expenses Feasibility study expenses 23,368,297,216 9,826,904,650 Exploration extension 9,127,874,396 9,101,623,427 Drilling expenses 6,317,944, ,033,475 Airborne and digital expenses 4,694,507,565 5,961,483,825 Detailed mine study 3,519,049,775 2,096,376,102 Survey expenses 1,996,097,040 2,427,479,680 Analysis expenses 1,892,194,615 1,573,068,394 Rental 1,809,309, ,100,000 Geophysical services 1,330,097,480 1,651,111,777 Geological mapping expenses 975,368,805 1,238,606,025 Sub contractor expenses 734,386, ,586,175 Desk study 37,910,000 10,900,000 55,803,037,765 35,869,273,530 16

19 9. DEFERRED EXPLORATION EXPENDITURES (Continued) Other exploration expenses Consultation 46,435,588,421 Salaries and allowances 12,526,494,018 2,279,094,350 Licenses and regional tax 3,644,724,243 3,656,298,865 Recruitment charges 2,487,638,055 Capital expenditure 1,724,526,262 Traveling expenses 1,738,092,108 1,278,240,933 Office expenses 1,556,524, ,297,025 Equipment rental and vehicle expenses 1,290,006, ,755,400 Interest expenses 1,056,627,197 Transportation expenses 892,408, ,464,200 Professional fee 631,332, ,595,366 Depreciation expense 583,524, ,008,350 Manpower Outsourcing 418,365,013 Repairs and maintenance 357,753, ,270,250 Representation and entertainment 289,448, ,892,425 Communications 280,914,488 Socialisation cost 244,287,344 Fuel expenses 198,440, ,201,200 Medical allowances 194,212, ,656,925 Other expenses (less than US$ 10,000) 823,735, ,821,270 77,374,643,164 11,420,596,559 Total 133,177,680,929 47,289,870, GOODWILL Acquisition cost 9,660,130,670 9,660,130,670 Accumulated amortization (5,957,080,580) (4,025,054,446) Net book value 3,703,050,090 5,635,076,224 Goodwill was derived from purchase transaction of PT Barasentosa Lestari shares from third parties on March 12, In 2010 and 2009 the amortization of goodwill amounted to 1,932,026,134 and 483,006,534 were allocated as other income (expenses) (note 19). 17

20 11. OTHER PAYABLES Third parties 25,111,480 25,111, ACCRUED EXPENSE Related parties : Consultancy 19,483,312,500 Interest 1,639,923,236 21,123,235,736 Third parties : Construction in progress 1,687,321,024 Logistic consultant 668,072,326 Transportation 317,312,164 Geological mapping 127,400,000 Office maintenances 105,635,961 Tax consultant 85,498,208 Employees social security 80,835,354 Audit fees 78,300,000 Survey 22,410,000 Communication 18,548,442 Capital expenditure 16,060,000 Travel 7,792,750 Miscellaneous 10,835,000 3,226,021,229 Total 24,349,256, DUE TO RELATED PARTIES Related parties: PT Dwikarya Sejati Utama 58,227,850,525 73,942,662,625 The other payable to PT Dwikarya Sejati Utama, the Company s shareholder has no repayment schedule and non bearing interest. In 12 (twelve) month from December 31, 2008, DSU will decide whether this payable will be converted as paid-in capital or will be stated in the loan agreement and treated as long term loan. This conversion period has been extended up to 12 (twelve) month from December 31,

21 14. LONG TERM LOAN Related parties: GMR Energy (Netherlands) B.V 86,311,949,415 On April 15, 2009, the Company has entered into loan agreement with GMR Energy (Netherlands) B.V, the ultimate shareholder of the Company. Based on the loan agreement GMR should provide an unsecured loan with a revolving line of Credit in which GMR may make advance provided that the aggregate amount of all loan outstanding under the line of credit at any one time shall not exceed US$ 10,000,000. The detail of the loan are as follow : Interest rate : 6% Settlement date : March 31, 2011 Amount of installment repayment : USD 10 million/outstanding amount as on that date plus any interest as due on this date 15. TAXATION a. Income Tax Expense Income tax expenses for the year ended March 31, 2010 and for the period from January 1 up to March 31, 2009 are 84,557,889 and nil. Reconciliation between loss before provision for income tax as per Company s statements of income and estimated taxable losses are as follow : Profit (loss) before tax of the Company 5,848,243,869 (2,670,123,660) Interest income subject to final tax (7,749,037) (39,901) Loss on investment in subsidiary 2,861,843, ,506,534 Estimated tax losses to be carried forward before compensated tax losses 8,702,338,333 (2,184,657,028) Compensated tax losses (8,429,510,470) (6,244,853,442) Estimated taxable profit (losses) 272,827,863 (8,429,510,470 28% x 272,828,000 76,391,840 Estimated corporate income tax 76,391,840 19

22 15. TAXATION (Continued) b. Taxes payable Income tax Article ,907,374 Article 23 76,419,802 Article 29 76,391,840 Value added tax 2,108,201,550 Total 2,539,920,566 c. Deferred tax assets The Company Tax losses carried forward 2,360,292,931 Unrecognized deferred tax assets (2,360,262,931) The Subsidiary Tax losses carried forward 1,438,668,304 1,737,668,632 Unrecognized deferred tax assets (1,438,668,304 ) (1,737,668,632 ) Depreciation of plant and equipment (8,166,049 ) (8,166,049 ) Net deferred tax liabilities 8,166,049 As of, the Company and Subsidiary have an unrecognized deferred tax asset in respect of the 2010 and 2009 tax losses of 1,438,668,304 and 4,097,931,563, respectively. Tax assets have not been recognized on the basis that there is significant uncertainty as to whether the tax losses will be offset by sufficient taxable profits in the future. d. Administration Under the taxation laws of Indonesia, the Company and Subsidiary submits tax returns on the basis of self-assessment. The taxation authorities may assess or amend the tax within ten years after the tax becomes payable. 20

23 16. CAPITAL STOCK Based on the Circular Resolution of Stockholders as stated in notarial deed No. 01 dated October 16, 2008, the stockholder agreed to increase the authorizes capital from 200,000,000 to become 4,000,000,000 and has agreed to increase the issued and fully paid-up capital from 100,000,000 to become 1,000,000,000 which will be proportionally paid by the Company stockholder as follow : PT Dwikarya Sejati Utama amounted to 891 shares and Mr. Buntardjo Hartadi Sutanto amounted to 9 shares Based on deed of share ownership transferred No. 39 dated February 24, 2009 of Mala Mukti, S.H., LL.M, notary in Jakarta, Mr. Buntardjo Hartadi Sutanto, the Company stockholders has transferred its ownership of 10 share with total nominal value of 10,000,000 to GMR Energy (Netherlands) BV. Therefore the composition of stockholders as of, is as follows : Number of Percentage of Stockholders shares Par value ownership % PT Dwikarya Sejati Utama ,000, GMR Energy (Netherlands) BV 10 10,000, ,000 1,000,000, GENERAL RESERVE The Limited Liability Company Law of the Republic of Indonesia No. 1/1995 introduced in March 1995 requires the establishment of a general reserve from net profits amounting to at least 20% of a company s issued and paid up capital. This regulation has been amended by Indonesian Limited Company Law No. 40 year 2007 which also requires companies to set up a general reserve amounting to at least 20 % of the issued and paid-up share capital. As of, the Company and Subsidiary have not yet established a general reserve as it is in accumulated loss position. 21

24 18. GENERAL AND ADMINISTRATIVE EXPENSES Deadrent 374,297,026 Audit fee 255,622,515 Taxes on land and building 184,703,400 Tax consultant fee 42,790,000 Depreciation expenses 35,626,586 Others 6,896,000 Total 899,935, OTHER INCOME (EXPENSES) Gain (loss) on foreign exchange net 9,297,367,540 (2,184,234,602) Interest income 1,077,883,248 39,901 Bank charges (5,479,087) (422,425 ) Interest expenses (1,656,793,921) Amortization of goodwill (Note 10) (1,932,026,134) (483,006,534) Other (24,606,200) (2,500,000) Total 6,756,345,446 (2,670,123,660) 20. RELATED PARTY TRANSACTIONS In conducting its business, the Company and Subsidiary entered into certain business and financial transactions with its related parties and these transactions are made at normal prices and conditions. Related parties Nature of related parties Transactions PT Dwikarya Sejati Utama Stockholder Due to related parties Mr. Bing Tobing Key management Other receivables GMR Energy (Netherlands) B.V Ultimate stockholder Accrued expenses, long term loan, interest expenses GMR Consulting Services Pvt Ltd Affiliated companies Accrued expenses a. Other receivable (note 7) Mr. Bing Tobing 1,188,000,000 22

25 20. RELATED PARTY TRANSACTIONS (Continued) b. Due to related parties (Note 13) PT Dwikarya Sejati Utama 58,227,850,525 73,942,662,625 c. Accrued expenses (Note 12) GMR Consulting Services Pvt Ltd 19,483,312,500 GMR Energy (Netherlands) B.V 1,639,923,236 21,123,235,736 d. Long term loan (Note 14) GMR Energy (Netherlands) B.V 86,311,949,415 e. Interest expense (Note 19) GMR Energy (Netherlands) B.V 1,656,793, POST EMPLOYMENT BENEFITS OBLIGATION Referring to Labor Law No. 13/2003 regarding severance payments, requires companies to pay their employees, termination, appreciation and compensation benefits in case of employment dismissal based on the employees number of years of services if the conditions set forth in the law are met. The Company and Subsidiary are presently evaluating the effects of the decree and had not record provision in the 2010 financial statements, because the Company s employees is consider as a new employee and have less than 1 year of service. As of, the Company and Subsidiary had 24 and no employees, respectively. 23

26 22. COMMITMENT AND CONTINGENT LIABILITIES As of, the Company and Subsidiary had no significant commitments or contingent liabilities. As of, PT Barasentosa Lestari, the Company Subsidiary, has not made any provision for mine closure as it has not yet entered the production stage. 23. NEW ACCOUNTING STANDARD Indonesian Institute of Accountants has issued the following revised accounting standards which has not been effective: SFAS 1 (Revised 2009) Presentation of Financial Statements (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 1 (Revised 1998) Presentation of Financial Statements. SFAS 2 (Revised 2009) Cash Flow Statements (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 2 (Revised 1994) Cash Flows Statements SFAS 48 (Revised 2009) Impairment of Assets (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 48 (Revised 1998) Impairment of Assets. SFAS 7 (Revised 2010) Disclosure of Related Parties (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 7 (Revised 1994) Disclosure of Related Parties. SFAS 10 (Revised 2010) The Impact of Foreign Exchange Gain (Loss) (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 10 (Revised 1994) Transaction in Foreign Currency. SFAS 19 (Revised 2010) Intangible Assets (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 19 (Revised 1994) Intangible Assets. SFAS 22 (Revised 2010) Business Combination (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 22 (Revised 1994) Business Combination. SFAS 23 (Revised 2010) Income (applicable for financial statements covering periods beginning on or after 1 January 2011). This standard will replace SFAS 23 (Revised 1994) Income. The Company and Subsidiary are still evaluating the possible impact of these standards on the financial statements. 24

27 24. ECONOMIC CONDITIONS The operations of the Company and Subsidiary s have been affected, and may continue to be affected, by global economic conditions. These conditions may negatively impact the Company and Subsidiary s ability to achieve their profit and cash flow targets. As shown in the consolidated financial statements, the Company and Subsidiary s net worth showed accumulated deficit and capital deficiency of 20,918,055,047 and 14,582,461,574 as of March 31, 2010 and 26,689,907,076 and 21,036,950,398 as of March 31, PT Barasentosa Lestari (BSL), the Company s Subsidiary coal property remains in the exploration phase and is consistently in need of capital injection for its exploration costs. To cover that cost and the incurred capital deficiency, the ultimate shareholder of the Company has committed to provide funding through stockholder loan in a form of Mandatory Convertible Bond to PT Dwikarya Sejati Utama, the Company stockholder until BSL has started its commercial operation and generate income on its own. The Company itself has suffered losses from operations and depends on ongoing financial support from its ultimate controlling stockholder. Ultimate recovery of the Company s assets and its ability to pay its liabilities depends on the successful development of BSL. To overcome this condition, the Company s plan to speeding up BSL commercial operation. At present, the Company has been received an approval on its production feasibility study from Department of Energy and Mineral Resources, and has been appointing the third party consultant to assist the Company in obtaining the approval for environmental impact study (AMDAL) in order to get construction permit. Once the Company have completed part of the construction, it will be granted an exploitation licence. The Company is dependent upon the continuing financial support of its ultimate controlling stockholder. The accompanying consolidated financial statements do not include the effect of any adjustments that may be required if the Company cannot continue as a going concern. Management considers that its ongoing plans will allow it to continue as a going concern for the foreseeable future. These plans include the ability to defer payment of current liabilities to the Company s ultimate controlling stockholder, which has confirmed to management that it will not recall these current liabilities to the detriment of the Company. The consolidated financial statements have been prepared on going concern basis, and do not include any adjustment that might results from the outcome of the uncertainties. Related effects will be reported in the financial statement as they become known and can be estimated. There is no event subsequent to consolidated balance sheet date until the date of this report occur that give rise to the uncertainties of the Company and Subsidiary going concern as an impact of the worsening current economy of Indonesia. 25. APPROVAL AND AUTHORIZATION TO ISSUE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements on pages 1 to 25 were approved and authorized for issue by the Company s Directors on April 29,

28 PT DUTA SARANA INTERNUSA PARENT COMPANY ONLY SUPPLEMENTARY INFORMATION The following financial statements of PT Duta Sarana Internusa (Parent Company only) on pages 27 to 30 present the Company s investments in Subsidiary under the equity method, as opposed to the consolidation method Balance Sheets Statements of Income Statements of Changes in Equity Statements of Cash Flows 26

29 Supplementary Information PT DUTA SARANA INTERNUSA PARENT COMPANY ONLY BALANCE SHEETS For the period from January 1 up to ASSETS CURRENT ASSETS Cash and cash equivalents 3,991,885,344 3,103,395 Other receivables 122,892,530,842 46,131,782,742 Total current assets 126,884,416,186 46,134,886,137 NON CURRENT ASSETS Investment 2,340,598,763 Total non current assets 2,340,598,763 TOTAL ASSETS 126,884,416,186 48,475,484,900 LIABILITIES AND EQUITY CURRENT LIABILITIES Other payables 25,111,480 25,111,480 Taxes payable 76,391,840 Accrued expense 1,639,923,236 Total current liabilities 1,741,426,556 25,111,480 NON CURRENT LIABILITIE Long term loan 86,311,949,415 Due to related parties 58,749,095,262 74,140,280,496 Total non current liabilities 145,061,044,677 74,140,280,496 EQUITY (CAPITAL DEFICIENCY) Share capital 1,000,000 par value per share Authorized 4,000 shares Subscribed and paid up capital 1,000 shares 1,000,000,000 1,000,000,000 Accumulated deficit (20,918,055,047) (26,689,907,076) Total equity (capital deficiency) (19,918,055,047) (25,689,907,076) TOTAL LIABILITIES AND EQUITY (CAPITAL DEFICIENCY) 126,884,416,186 48,475,484,900 27

30 Supplementary Information PT DUTA SARANA INTERNUSA PARENT COMPANY ONLY STATEMENTS OF INCOME For the year ended March 31, 2010 and for three months period ended March 31, 2009 OPERATING EXPENSES General and administrative Total operating expenses LOSS FROM OPERATIONS OTHER INCOME (EXPENSES) Interest income 1,071,354,070 39,901 Gain (loss) on foreign exchange, net 9,297,367,540 (2,184,234,602) Equity in net loss of subsidiary (2,861,843,501) (485,506,534) Other net (1,658,634,240) (422,425) Total other income (expenses) net 5,848,243,869 (2,670,123,660) PROFIT (LOSS) BEFORE INCOME TAX 5,848,243,869 (2,670,123,660) TAX EXPENSES (76,391,840) NET PROFIT (LOSS) 5,771,852,029 (2,670,123,660) 28

31 PT DUTA SARANA INTERNUSA PARENT COMPANY ONLY STATEMENT OF CHANGES IN EQUITY For the year ended March 31, 2010 and for three months period ended March 31, 2009 Supplementary Information Accumulated Total equity Capital stock deficit (capital deficiency) Balance as of December 31, ,000,000,000 (24,019,783,416) (23,019,783,416) Net loss for the period (2,670,123,660) (2,670,123,660) Balance as of March 31, ,000,000,000 (26,689,907,076) (25,689,907,076) Net profit for the year 5,771,852,029 5,771,852,029 Balance as of March 31, ,000,000,000 (20,918, ) (19,918, ) 29

32 PT DUTA SARANA INTERNUSA PARENT COMPANY ONLY STATEMENT OF CASH FLOWS For the year ended March 31, 2010 and for three months period ended March 31, 2009 Supplementary Information Cash flows from operating activities Profit (loss) before income tax 5,848,243,869 (2,670,123,660) Adjustments for : Foreign exchange gain on due to related parties (15,912,429,971) Equity in net income of subsidiary 2,861,843, ,506,534 Cash flows from operations before changes in working capital (7,202,342,601) (2,184,617,126) Working capital changes: Other receivables (76,760,748,100) (2,197,707,897) Taxes payables (83,180,572) Accrued expenses 1,639,923,236 Net cash used in operating activities (82,323,167,465) (4,465,505,595) Cash flows from financing activities Due to related parties 4,190,202,246 Long term loan 86,311,949,415 Net cash provided by financing activities 86,311,949,415 4,190,202,246 Net increase (decrease) in cash and cash equivalents 3,988,781,949 (275,303,349) Cash and cash equivalents at beginning of year / period 3,103, ,406,744 Cash and cash equivalents at end of year / period 3,991,885,344 3,103,395 30