PROSPECTUS DATED 17 JULY

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PROSPECTUS DATED 17 JULY 2008 (registered by the Monetary Authority of Singapore on 17 July 2008) This document is important.

We have applied to the Singapore Exchange Securities Trading Limited (the SGX-ST ) for permission to deal in, and for quotation of, all the ordinary shares (the Shares ) in the capital of

Such permission will be granted when we have been admitted to the Official List of the SGX-ST. The dealing in and quotation of the Shares will be in Singapore dollars.

Monies paid in respect of any application accepted will be returned to you, at your own risk, without interest or any share of revenues or other benefit arising therefrom if the completion

herein), or DBS Bank Ltd and CIMB-GK Securities Pte. Ltd., the Joint Underwriters and Placement Agents (as defined herein).

Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries or our Shares, including the New Shares.

The Authority assumes no responsibility for the contents of this Prospectus.

regulatory requirements, have been complied with.

No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority. Kencana Agri Limited Growth.

S. persons, as defined in Regulation S under the U.S. Securities Act ( Regulation S ) unless the Shares are registered under the U.S. Securities Act, or an exemption from the registration requirements of the U.

The Shares are being offered outside the United States in accordance with Regulation S and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except to persons in offshore transactions in reliance on Regulation S.

The Shares, or the New Shares may not be offered or sold, directly or indirectly in Indonesia or to Indonesian citizen in a manner constituting a public offering under the laws and

1 PROSPECTUS DATED 17 JULY 2008 (registered by the Monetary Authority of Singapore on 17 July 2008) This document is important. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser. We have applied to the Singapore Exchange Securities Trading Limited (the SGX-ST ) for permission to deal in, and for quotation of, all the ordinary shares (the Shares ) in the capital of Kencana Agri Limited (the Company ) already issued and the new Shares (the New Shares ) which are the subject of this Invitation (as defined herein) on the Main Board of the SGX-ST. Such permission will be granted when we have been admitted to the Official List of the SGX-ST. The dealing in and quotation of the Shares will be in Singapore dollars. Acceptance of applications will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in and for quotation of all our existing issued Shares and the New Shares. Monies paid in respect of any application accepted will be returned to you, at your own risk, without interest or any share of revenues or other benefit arising therefrom if the completion of the Invitation does not occur if the said permission is not granted or for any other reason and you will not have any claim against us or DBS Bank Ltd, the Issue Manager (as defined herein), or DBS Bank Ltd and CIMB-GK Securities Pte. Ltd., the Joint Underwriters and Placement Agents (as defined herein). The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries or our Shares, including the New Shares. A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the Authority ) on 16 June 2008 and 17 July 2008 respectively. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, Chapter 289 of Singapore (the Securities and Futures Act ), or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the Shares, or the New Shares being offered or in respect of which the Invitation is made, for investment. Investing in our Shares involves risks. Potential investors in our Company are advised to read the section Risk Factors of this Prospectus and the rest of this Prospectus carefully and to seek professional advice if in doubt. No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority. Kencana Agri Limited Growth. Excellence. Integrity The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the U.S. Securities Act ), and may not be offered or sold in the United States or to U.S. persons, as defined in Regulation S under the U.S. Securities Act ( Regulation S ) unless the Shares are registered under the U.S. Securities Act, or an exemption from the registration requirements of the U.S. Securities Act is available. The Shares are being offered outside the United States in accordance with Regulation S and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except to persons in offshore transactions in reliance on Regulation S. For a description of certain restrictions on transfer of the Shares, see the section Transfer Restrictions of this Prospectus. The Shares, or the New Shares may not be offered or sold, directly or indirectly in Indonesia or to Indonesian citizen in a manner constituting a public offering under the laws and regulations of the Republic of Indonesia. Kencana Agri Limited (Registration Number: E) (Incorporated in the Republic of Singapore) Invitation in respect of 200,000,000 New Shares comprising: (a) 1,000,000 Offer Shares at S$0.305 each by way of public offer; and (b) 199,000,000 Placement Shares by way of placement, comprising: (i) 186,600,000 Placement Shares at S$0.305 each for applications by way of Placement Share application forms or such other forms of application as the Issue Manager and the Joint Underwriters and Placement Agents may, in consultation with the Company, deem appropriate; (ii) 300,000 Internet Placement Shares at S$0.305 each for applications made through the Internet website of DBS Vickers Securities (Singapore) Pte Ltd; and (iii) 12,100,000 Reserved Shares at S$0.305 each reserved for our employees, business associates, Independent Directors and persons who have contributed to the success of our Group, payable in full on application. Issue Manager Joint Underwriters and Placement Agents

located in the Sumatera and Kalimantan regions, where climatic conditions are wellsuited for the planting of oil palms.

We have successfully grown our land bank from 9,000 hectares in 1995 to 107,782* hectares as at the Latest Practicable Date.

95,410 Plasma Programme Land Bank (Hectares) 4,791 7,581 12,372 Our Aggregate Land Bank 19,122 88,660 107,782 Own Planted Area (Hectares) 5,587 18,762 24,349 Plasma Programme Planted

7 - Average Oil Extraction Rate: CPO (%) 20.5 22.1 - Average Oil Extraction Rate: CPKO (%) 41.2 41.

2 Growth. Excellence. Integrity Kencana Agri Limited ( Kencana ) is a fast-growing producer of crude palm oil ( CPO ) and crude palm kernel oil ( CPKO ) in Indonesia, with oil palm plantations strategically located in the Sumatera and Kalimantan regions, where climatic conditions are wellsuited for the planting of oil palms. We aim to be a leading palm oil producer and supplier of choice for the local Indonesian and international markets. We have successfully grown our land bank from 9,000 hectares in 1995 to 107,782* hectares as at the Latest Practicable Date. *Inclusive of land bank under our Plasma Programme Our Oil Palm Plantations & Facilities As at Latest Practicable Date Sumatera Kalimantan Total Own Land Bank (Hectares) 14,331 81,079 95,410 Plasma Programme Land Bank (Hectares) 4,791 7,581 12,372 Our Aggregate Land Bank 19,122 88, ,782 Own Planted Area (Hectares) 5,587 18,762 24,349 Plasma Programme Planted Area (Hectares) 4,783 3,198 7,981 Our Aggregate Planted Area 10,370 21,960 32,330 For the Year ended 31 Dec 2007 Average Prime fresh palm fruit bunches ( FFB ) Yield (MT/Hectare) Average Oil Extraction Rate: CPO (%) Average Oil Extraction Rate: CPKO (%) Palm Oil Mill: Production Capacity (MT/Hour) Kernel Crushing Plant: Production Capacity (MT/Day) Bulking Terminal: Tank Storage Capacity (MT) 19,500-19,500 Vessels: 2 Barges, Max. Capacity (MT) - - 4,500 Renewable Biomass Power Generation: Max. Capacity (MW) 6-6 Medan West Malaysia East Malaysia Bulungan Dumai Sumatera Singapore Bangka Ketapang West Kalimantan Central Kalimantan East Kalimantan Kutai Samarinda Balikpapan Jakarta Belitung Indonesia South Kalimantan Southeast Sulawesi Oil palm estate Oil palm estate with palm oil mill and kernel crushing plant Bulking terminal Biomass power generation Surabaya Bali

Our Business & Operations Our integrated plantation operations comprise

logistics services, as well as a renewable biomass power plant to support and

Plantation Processing Products Supporting Businesses Palm Oil Mill Crude Palm

Logistics Biomass Powerplant Financial Highlights Revenue Gross Profit and Gross

Gross Profit Margin USD million 70.0 60.0 50.0 40.0 30.0 20.0 36.6 41.1 69.3 35.

0 8.5 10.0% 60.0 50.0 40.0 30.0 20.0 14.8 39.2 10.0 5.0 4.4 5.0% 10.

3 Our Business & Operations Our integrated plantation operations comprise plantations, palm oil mills, kernel crushing plants, bulking facilities and logistics services, as well as a renewable biomass power plant to support and complement our plantation operations. Plantation Processing Products Supporting Businesses Palm Oil Mill Crude Palm Oil Bulking Terminal Plantation Kernel Crushing Plant Crude Palm Kernel Oil Logistics Biomass Powerplant Financial Highlights Revenue Gross Profit and Gross Profit Margin Profit/(loss) for the year* USD million USD million (Gross Profit) Gross Profit Margin USD million % 35.0% % % % % % 15.0% % % FY05 FY06 FY % FY05 FY06 FY07 0 FY05 FY06 FY07 Gross Profit Margin (7.0) *Including net gains/(losses) on fair value changes in biological assets.

Competitive Strengths Significant cultivatable land bank with new planting potential We intend to increase our planted area from 24,349 hectares as at the Latest Practicable Date to over 80,000

0% (estimated) 60,000 40,000 20,000 0 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Potential benefits from maturing oil palms in the near future As at the Latest Practicable Date, approximately 50% of

We expect the majority of these immature plants to mature from 2009 to 2010, thus helping to increase our FFB harvests, reduce our reliance on third party suppliers, lower our unit production cost

4 Competitive Strengths Significant cultivatable land bank with new planting potential We intend to increase our planted area from 24,349 hectares as at the Latest Practicable Date to over 80,000 hectares in the next five years Land Bank as at the Latest Practicable Date Hectares Land Bank Total Planted 100,000 80,000 CAGR 25.0% (estimated) 60,000 40,000 20,000 0 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Potential benefits from maturing oil palms in the near future As at the Latest Practicable Date, approximately 50% of our planted area is immature. We expect the majority of these immature plants to mature from 2009 to 2010, thus helping to increase our FFB harvests, reduce our reliance on third party suppliers, lower our unit production cost and improve our average CPO extraction rates Age Profile of Planted Oil Palm Trees 7,412 Ha 30% 4,865 Ha 20% 12,072 Ha 50% Immature (<3 years) Mature Young (4-6 years) Mature Prime (7-18 years) Proven and recognised track record in plantation cultivation and management We have an experienced and committed management team led by our Chairman and CEO, Mr Henry Maknawi Our management s track record is demonstrated by successful cultivation of all our current plantations from greenfield land We have received recognition from the provincial governments in the Sumatera and Kalimantan regions based on our management and administration of the Plasma Programme and social, economic and environmental considerations Integrated value-chain resulting in operational synergies Our plantation operations consist of palm oil mills, kernel crushing plants, logistics services and bulking facilities, as well as renewable power generation capabilities We entered into an agreement with IOPRI to develop oil palm seed breeding and seed processing facilities Having our own bulking facilities and barges enables us to exercise better control over our logistics management and to meet customers delivery requirements at short notice

Strategy and Future Plans Expand our oil palm plantation business Focus on new plantings and expanding our current planted area Accumulate additional land bank Acquire high-yielding mature

CPO oil extraction rates by utilising the latest proven technology Improve transportation system and existing supporting infrastructure Develop seed production capability Develop own seed processing

the germinated seeds Develop a core plantation of parent oil palms trees to provide seeds for our seed processing facilities Develop our bulking and logistics services and renewable biomass power

5 Strategy and Future Plans Expand our oil palm plantation business Focus on new plantings and expanding our current planted area Accumulate additional land bank Acquire high-yielding mature plantations Expand production capacity, improve efficiency and product quality Build two additional palm oil mills in Kalimantan to cater for the expected increase in our future sales volume Increase CPO oil extraction rates by utilising the latest proven technology Improve transportation system and existing supporting infrastructure Develop seed production capability Develop own seed processing capability to control and ensure a steady supply of high quality germinated seeds Build the seed processing facilities close to our plantations to lower transportation costs and minimise spoilage of the germinated seeds Develop a core plantation of parent oil palms trees to provide seeds for our seed processing facilities Develop our bulking and logistics services and renewable biomass power generation business Increase the amount of services we provide to third party customers Add a double-hull vessel to the two barges we currently operate Build renewable biomass power plants in Kalimantan when appropriate or commercially viable and sell the carbon credits attributable to these future CDM projects Industry Prospects Driven by world population growth and increasing demand for palm oil, palm oil consumption registered the highest compound annual growth rate of 8.3% amongst the vegetable oils for the past 10 years ended Prices of palm oil have increased substantially in tandem with growing market demand. World Consumption and Production of Palm Oil Million MT Production (Indonesia) Production (Malaysia) Production (Other Countries) World Consumption Actual Data Projections 2010 Source: Oil world annual and monthly publications and information from its website

Key factors underpinning the growth of palm oil industry Economic advantages of palm oil Lower production costs and higher yield compared to other oil-yielding crops Greater resilience against

non-food applications Growing popularity of palm oil Versatile use in the food industry as well as for non-food applications Increased market share at the expense of other competing vegetable oils

Source: Oil world annual and monthly publications and information from its website http://www.oilworld.

provide free basic medical services to the local communities; build and repair places of worship, sponsor and participate in traditional events and social functions Plasma Programme Develop

6 Key factors underpinning the growth of palm oil industry Economic advantages of palm oil Lower production costs and higher yield compared to other oil-yielding crops Greater resilience against adverse weather conditions hence improving supply reliability Rising demand for oils and fats Increasing demand for food per capita, especially in Asia, Central & South America Additional demand for non-food applications Growing popularity of palm oil Versatile use in the food industry as well as for non-food applications Increased market share at the expense of other competing vegetable oils Source: Oil world Palm Oil Prices Palm oil prices showed a tremendous increase from an average of US$437 in June 2006, US$583 in December 2006, US$805 in June 2007 to US$1,174 in April Source: Oil world annual and monthly publications and information from its website Corporate Social Responsibility ( CSR ) We are committed to the welfare of the local communities through various CSR initiatives: Educational, Medical and Social Initiatives Offer scholarships, provide free basic medical services to the local communities; build and repair places of worship, sponsor and participate in traditional events and social functions Plasma Programme Develop surrounding small landholders plantations and assist in harvesting and production of FFB, such that the plantation owners benefit socially and economically with increasing incomes and better welfare such as training and education in oil palm cultivation Environmentally-friendly Policies Undertake comprehensive and participatory independent social and environmental impact assessment prior to any new plantings Apply zero burning and zero waste management policies Indicative Timetable Time and Date Event 9:00 a.m. on 18 July 2008 Commencement of Invitation 12:00 noon on 23 July 2008 Close of Application List and closing date and time for the Invitation 9:00 a.m. on 25 July 2008 Commence trading on a ready basis Applications for the Shares may be made through: ATMs of DBS Bank (including POSB), OCBC and UOB Group, Internet banking websites of DBS Bank and UOB Group, or Printed application forms which form part of the Prospectus.

7 CONTENTS CORPORATE INFORMATION... 4 DEFINITIONS... 6 GLOSSARY OF TECHNICAL TERMS CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS TRANSFER RESTRICTIONS DETAILS OF THE INVITATION LISTING ON THE SGX-ST INDICATIVE TIMETABLE FOR LISTING PROSPECTUS SUMMARY OVERVIEW OF OUR GROUP SUMMARY OF OUR FINANCIAL INFORMATION THE INVITATION RISK FACTORS EXCHANGE RATES AND EXCHANGE CONTROLS INVITATION STATISTICS USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED MANAGEMENT, UNDERWRITING AND PLACEMENT AGREEMENTS DIVIDEND POLICY SHARE CAPITAL PRINCIPAL SHAREHOLDERS SHAREHOLDERS MORATORIUM CAPITALISATION AND INDEBTEDNESS DILUTION RESTRUCTURING EXERCISE GROUP STRUCTURE GENERAL INFORMATION ON OUR GROUP BUSINESS OUR HISTORY COMPETITIVE STRENGTHS STRATEGY AND FUTURE PLANS BUSINESS AND OPERATIONS

8 CONTENTS SEASONALITY CORPORATE SOCIAL RESPONSIBILITY AWARDS AND CERTIFICATIONS QUALITY CONTROL RESEARCH AND DEVELOPMENT INTELLECTUAL PROPERTY SALES AND MARKETING CREDIT MANAGEMENT CREDIT TERMS GRANTED BY SUPPLIERS INVENTORY MANAGEMENT RISK MANAGEMENT MAJOR SUPPLIERS MAJOR CUSTOMERS COMPETITION PROPERTIES AND FIXED ASSETS INSURANCE PROCESS OF OBTAINING HGU LAND TITLE GOVERNMENT REGULATIONS MANAGEMENT S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OPERATING RESULTS OF OUR GROUP SELECTED OPERATING DATA OVERVIEW SEGMENTAL BREAKDOWN OF PAST PERFORMANCE REVIEW OF OVERALL PAST PERFORMANCE REVIEW OF FINANCIAL POSITION LIQUIDITY AND CAPITAL RESOURCES CAPITAL EXPENDITURE, COMMITMENTS AND CAPITAL DIVESTMENT COMMODITY HEDGING POLICY FOREIGN EXCHANGE EXPOSURE INFLATION ACCOUNTING POLICIES PROSPECTS PALM OIL INDUSTRY TREND INFORMATION ORDER BOOK DIRECTORS, EXECUTIVE OFFICERS AND STAFF MANAGEMENT REPORTING STRUCTURE DIRECTORS AND EXECUTIVE OFFICERS

9 CONTENTS REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS PENSION AND RETIREMENT BENEFITS SERVICE AGREEMENTS EMPLOYEES STAFF TRAINING AND DEVELOPMENT CORPORATE GOVERNANCE INTERESTED PERSON TRANSACTIONS AND CONFLICT OF INTERESTS INTERESTED PERSON TRANSACTIONS PAST INTERESTED PERSON TRANSACTIONS PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS POTENTIAL CONFLICT OF INTERESTS INTERESTS OF EXPERTS PLAN OF DISTRIBUTION CLEARANCE AND SETTLEMENT GENERAL AND STATUTORY INFORMATION APPENDIX A TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS AND ACCEPTANCE... A-1 APPENDIX B TAXATION... B-1 APPENDIX C INDONESIAN REGULATORY OVERVIEW... C-1 APPENDIX D SUMMARY OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY... D-1 APPENDIX E INDEPENDENT AUDITORS REPORT ON THE UNAUDITED PROFORMA COMBINED FINANCIAL INFORMATION OF KENCANA AGRI LIMITED FOR THE FINANCIAL YEAR ENDED 31 DECEMBER E-1 APPENDIX F INDEPENDENT AUDITORS REPORT ON THE AUDITED COMBINED FINANCIAL STATEMENTS OF KENCANA AGRI LIMITED FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2005, 2006 AND F-1 APPENDIX G AKA INDEPENDENT PUBLIC CONSULTANT APPRAISER S REPORT MARKET RENT VALUE OF OFFICE SPACE OF PT SAWINDO KENCANA... G-1 3

10 CORPORATE INFORMATION BOARD OF DIRECTORS : Mr. Henry Maknawi (Executive Chairman and CEO) Tengku Alwin Aziz (Vice-Chairman and Non-Executive Director) Ms. Ratna Maknawi (Deputy CEO) Mr. Kent Surya (Executive Director) Mr. Soh Yew Hock (Lead Independent Director) Mr. Leung Yew Kwong (Independent Director) COMPANY SECRETARY : Catherine Lim Siok Ching, ACIS, LLB(Hons)(London) COMPANY REGISTRATION NUMBER : E REGISTERED OFFICE : 3 Shenton Way #10-06 Shenton House Singapore PRINCIPAL OFFICE : Graha Kencana Jl. Raya Perjuangan No.88GK Jakarta Indonesia SHARE REGISTRAR AND SHARE : Boardroom Corporate & Advisory Services Pte. Ltd. TRANSFER AGENT 3 Church Street #08-01 Samsung Hub Singapore ISSUE MANAGER AND RECEIVING : DBS Bank Ltd BANK 6 Shenton Way DBS Building Tower One Singapore JOINT UNDERWRITERS AND : DBS Bank Ltd PLACEMENT AGENTS 6 Shenton Way DBS Building Tower One Singapore CIMB-GK Securities Pte. Ltd. 50 Raffles Place #19-00 Singapore Land Tower Singapore REPORTING ACCOUNTANTS AND : RSM Chio Lim AUDITORS 18 Cross Street #08-01 Marsh & McLennan Centre Singapore SOLICITORS TO THE INVITATION : Stamford Law Corporation AND LEGAL ADVISER TO OUR 9 Raffles Place #32-00 COMPANY ON SINGAPORE LAW Republic Plaza Singapore Partner in Charge: Mr. Peter Jacob (a member of the Institute of Certified Public Accountants of Singapore) 4

11 CORPORATE INFORMATION SOLICITORS TO THE ISSUE MANAGER : Venture Law LLC AND THE JOINT UNDERWRITERS 50 Raffles Place #30-00 AND PLACEMENT AGENTS Singapore Land Tower Singapore LEGAL ADVISER TO OUR COMPANY : Ali Budiardjo, Nugroho, Reksodiputro ON INDONESIAN LAW Graha Niaga, 24 th Floor Jalan Jenderal Sudirman Kav. 58 Jakarta 12190, Indonesia INDUSTRY EXPERT : ISTA Mielke GmBH (Global Research & Analyses) Langenberg Hamburg, Germany INDEPENDENT VALUER (PROPERTY) : PT Actual Kencana Appraisal Hayam Wuruk No. 1-RL & 2E Jakarta 10120, Indonesia INDEPENDENT VALUER : PT Asian Appraisal Indonesia (BIOLOGICAL ASSETS) Jalan Musi 38 Jakarta 10150, Indonesia PRINCIPAL BANKERS : PT Bank Mandiri (Persero) Tbk. Plaza Mandiri Jl. Jend. Gatot Subroto Kav Jakarta 12190, Indonesia PT Bank DBS Indonesia Plaza Permata, Ground 9 & 12th Floor Jl. M.H. Thamrin Kav 57 Jakarta 10350, Indonesia PT Bank Danamon Indonesia, Tbk. Menara Bank Danamon Jl. Prof. Dr. Satrio Kav. E4 No. 6 Mega Kuningan, Jakarta 12950, Indonesia 5

12 DEFINITIONS In this Prospectus and the accompanying Application Forms, and in relation to the Electronic Applications, the instructions appearing on the screens of ATMs of Participating Banks or the IB websites of the relevant Participating Banks, unless the context otherwise requires, the following terms or expressions shall have the following meanings: Group Companies Company or Kencana Agri : Kencana Agri Limited Group or Proforma Group : Our Company and its subsidiaries, assuming that our group structure as set out in the section Group Structure of this Prospectus had been in place since 1 January 2005, including an entity under common control whose accounts we have consolidated in our Group s financial statements but has been liquidated prior to the Restructuring Exercise Group Company : Our Company or any of its subsidiaries Singapore KB : Kencana Bio-energy Pte. Ltd. KL : Kencana Logistics Pte. Ltd. KP : Kencana Plantations Pte. Ltd. SA : Sawindo Agri Pte. Ltd. Indonesia AML : PT Agro Mas Lestari AIK : PT Agro Inti Kencanamas AEK : PT Agri Eastborneo Kencana AKM : PT Alamraya Kencana Mas ASML : PT Agro Sawitmas Lestari ATK : PT Agrojaya Tirta Kencana BE : PT Belitung Energy BPS : PT Bumi Permai Sentosa CPG : PT Cahaya Permata Gemilang IDT : PT Indotrust KAJ : PT Kencana Agro Jaya LK : PT Listrindo Kencana LNM : PT Langgeng Nusa Makmur PAM : PT Pelayaran Asia Marine 6

13 DEFINITIONS PMKS : PT Palm Makmur Sentosa SPL : PT Sawit Permai Lestari SKL : PT Sawit Kaltim Lestari SCEM : PT Sawindo Cemerlang SWK : PT Sawindo Kencana WMP : PT Wira Mas Permai WPM : PT Wira Palm Mandiri WSM : PT Wira Sawit Mandiri Other Companies, Organisations and Agencies Authority or MAS : The Monetary Authority of Singapore CDP or Depository : The Central Depository (Pte) Limited CPF : Central Provident Fund CIMB-GK : CIMB-GK Securities Pte. Ltd. DBS Bank, Issue Manager : DBS Bank Ltd or Receiving Banker IOI Group : IOI Corporation Berhad (Plantation) and its subsidiaries IOPRI : Indonesian Oil Palm Research Institute, otherwise known as Pusat Penelitian Kelapa Sawit (PPKS) Joint Underwriters and : DBS Bank and CIMB-GK Placement Agents, Joint Underwriters or Joint Placement Agents Keck Seng Group : Keck Seng (Malaysia) Berhad and its subsidiaries KH or Kencana Holdings : Kencana Holdings Pte. Ltd. Minamas Group : PT Minamas Gemilang and its subsidiaries PLN : PT Perusahaan Listrik Negara (Persero) Regional Land Agency : A part of the National Land Agency, a non-departmental government agency directly responsible to the President of the Republic of Indonesia in charge of land affairs at national, regional or sector-related levels SGX-ST : Singapore Exchange Securities Trading Limited Sinar Mas Group : PT Sinar Mas Agro Resources & Technology Tbk and its subsidiaries UNFCCC : United Nations Framework Convention on Climate Change 7

14 DEFINITIONS Wilmar Group : Wilmar International Limited and its subsidiaries General Act or Companies Act or : The Companies Act, (Chapter 50) of Singapore, as amended or Singapore Companies Act modified from time to time Application Forms : The printed application forms to be used for the purpose of the Invitation and which form part of this Prospectus Application List : The list of applications for subscription of the New Shares Articles of Association : Articles of association of our Company, as amended, supplemented or modified from time to time associate : (a) In relation to a director, chief executive officer, substantial shareholder or controlling shareholder of a corporation who is an individual, means: (i) (ii) (iii) his immediate family; a trustee, acting in his capacity as such trustee, of any trust of which the individual or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary object; and any corporation in which he and his immediate family together (directly or indirectly) have an interest of not less than 30% of the aggregate of the nominal amount of all the voting shares. (b) In relation to a corporation, means: (i) (ii) any corporation in which the corporation or its subsidiary has, or the corporation and its subsidiary together have, a direct interest of not less than 20% but not more than 50% of the aggregate of the nominal amount of all the voting shares; or any corporation, other than a subsidiary of the corporation or a corporation which is an associated company by virtue of paragraph (a), the policies of which the corporation or its subsidiary, or the corporation together with its subsidiary, is able to control or influence materially ATM : Automated teller machine of a Participating Bank Audit Committee : The audit committee of our Company as at the date of this Prospectus and from time to time constituted Board : The board of Directors of our Company as at the date of this Prospectus and from time to time constituted CEO : Chief Executive Officer 8

15 DEFINITIONS Controlling Shareholder : A person who: (a) (b) holds directly or indirectly 15% or more of the nominal amount of all voting shares in a company. The SGX-ST may determine that a person who satisfies this paragraph is not a controlling shareholder; or in fact exercises control over a company Directors : The directors of our Company as at the date of this Prospectus, except where otherwise stated or where the context requires otherwise Electronic Applications : Applications for the Offer Shares made through an ATM of one of the relevant Participating Banks or the IB website of one of the relevant Participating Banks, subject to and on the terms and conditions of this Prospectus EGM : Extraordinary General Meeting EPS : Earnings per Share Executive Directors : The executive Directors of our Company as at the date of this Prospectus, except where otherwise stated or where the context requires otherwise Executive Officers : The executive officers of our Company as at the date of this Prospectus, except where otherwise stated or where the context requires otherwise FY : Financial year ended, or as the case may be, ending 31 December GST : Goods and Services Tax HGU : Hak Guna Usaha, a right to utilise government-owned land for plantation, fisheries or farming with minimum area of five hectares, for a period of up to 35 years, extendable for an additional period of up to 25 years. HGU can be renewed for an additional period of up to 35 years, subject to fulfillment of requirements under the prevailing laws and regulations IB : Internet Banking Independent Directors : The independent Directors of our Company as at the date of this Prospectus, except where otherwise stated or where the context requires otherwise Invitation : The Invitation by our Company for subscription by investors for the New Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus Ijin Lokasi : A permit that allows our Group to acquire the land up to the area covered by the location permit in accordance with the prevailing laws and regulations Any reference in this Prospectus to acquisition/accumulation of land/land bank refers to the acquisition of rights over the land 9

16 DEFINITIONS Internet Placement Shares : The 300,000 Placement Shares for which our Company invites applications to be made through the Internet website of DBS Vickers Securities (Singapore) Pte Ltd ( DBS Vickers ), on the terms and subject to the conditions of this Prospectus Issue Price : S$0.305 per New Share Kadastral land : Land that has been measured by the Panitia B to determine the actual land area for the HGU title based on the application submitted by our Group. A land map (which includes the borders) and other technical information of the relevant land will be produced following the land measurement. Please refer to the section Process Of Obtaining HGU Land Title of this Prospectus for a summary of the process by which HGU is obtained KKPA : Kredit Koperasi Primer Anggota, a plantation business cooperative scheme under the Plasma Programme pursuant to which plantation owners develop land owned by the local community and plant and maintain the oil palm to maturity, after which the land is maintained and managed by the villager or the plantation owner KKSR : Kebun Kelapa Sawit Rakyat, a cooperation in local community palm oil plantation scheme under the Plasma Programme pursuant to which plantation owners co-operate with the regional authorities to provide seedlings and fertiliser to the villager who owns the land land bank : The land for which Ijin Lokasi has been allocated to our Group, Kadastral land measured and/or land for which HGU has been obtained by our Group. Please refer to the section Process of obtaining HGU Land Title of this Prospectus for a summary of the process by which HGU is obtained Latest Practicable Date : 2 June 2008, being the latest practicable date for the ascertainment of information prior to the printing of this Prospectus Listing Date : The date of commencement of dealing in our Shares on the SGX- ST Listing Manual : Listing Manual of the SGX-ST, as amended, modified or supplemented from time to time LPS : Loss per Share Market Day : A day on which the SGX-ST is open for trading in securities NAV : Net asset value New Shares : The 200,000,000 new Shares for which our Company invites applications to subscribe for pursuant to the Invitation, subject to and on the terms and conditions of this Prospectus Nominating Committee : The nominating committee of our Company as at the date of this Prospectus and from time to time constituted 10

17 DEFINITIONS Non-executive Directors : Non-executive Directors of our Company (including Independent Directors) as at the date of this Prospectus, except where otherwise stated or where the context requires otherwise NTA : Net tangible assets Offer : The offer by our Company of the Offer Shares to the public in Singapore for subscription at the Issue Price, on the terms and subject to the conditions of this Prospectus Offer Shares : The 1,000,000 New Shares which are the subject of the Offer Panitia B : A special committee formed by the Regional Land Agency with the duty to review, research, and analyse the technical documents submitted by our Group including verifying and inspecting the physical condition of the land in the framework of the process for the issuance of the HGU title Participating Banks : DBS Bank Ltd (including POSB) ( DBS Bank ), Oversea-Chinese Banking Corporation Limited ( OCBC ) and United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (the UOB Group ) period under review : The period which comprises FY2005, FY2006 and FY2007 PER : Price earnings ratio Placement : The placement of the Placement Shares by the Joint Placement Agents on behalf of our Company for subscription at the Issue Price, subject to and on the terms and conditions of this Prospectus Placement Shares : The 199,000,000 New Shares which are the subject of the Placement Plasma Mandiri : An independent plasma scheme whereby the plantation owner will provide the seedlings to the villager who owns the land, and the villager will plant and maintain the plantation Remuneration Committee : The remuneration committee of our Company as at the date of this Prospectus and from time to time constituted Reserved Shares : The 12,100,000 Placement Shares reserved for subscription by our employees, business associates, Independent Directors and persons who have contributed to the success of our Group Restructuring Exercise : The restructuring exercise that we carried out to rationalise and streamline our corporate structure as described in the section Restructuring Exercise of this Prospectus SBI : Sertifikat Bank Indonesia Securities Account : Securities account maintained by a Depositor with CDP, not including a securities sub-account Securities and Futures Act : Securities and Futures Act, (Chapter 289) of Singapore, as amended or modified from time to time 11

18 DEFINITIONS Service Agreements : The service agreements entered into between our Company and our Executive Directors as described in the section Service Agreements of this Prospectus Shares : Ordinary shares in the capital of our Company Shareholders : Registered shareholders of our Company SIBOR : Singapore Inter-Bank Offered Rate Singapore Take-over Laws : The take-over laws and regulations in Singapore, comprising and Regulations sections 138, 139 and 140 of the Securities and Futures Act and the Singapore Code on Take-overs and Mergers Sub-division : The sub-division of ordinary shares in the capital of our Company as defined in the section Share Capital of this Prospectus Substantial Shareholder : A person who holds directly or indirectly 5% or more of the total issued share capital of our Company US or USA : United States of America, its territories and possessions and all areas subject to its jurisdiction Currencies, Units and Others % or per cent : Per centum or percentage Ha : Hectare(s) MT : Metric tonne KWh : Kilowatt-hour MW : Megawatt MWh : Megawatt-hour Rp or Rupiah : Indonesian Rupiah S$ and cents : Singapore dollars and cents, respectively sq ft : Square feet sq m : Square metres US$ and US cents : United States dollars and cents respectively The expressions Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. The terms associated company, associated entity, controlling interest-holder, controlling shareholder, related corporation, related entity, subsidiary, subsidiary entity and substantial interest-holder shall have the same meanings ascribed to them respectively in the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include corporations. 12

19 DEFINITIONS Any discrepancies in tables included herein between the amounts listed and the totals thereof are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. Any reference in this Prospectus, the Application Forms or the Electronic Applications to any statute or enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act and the Securities and Futures Act or any statutory modification thereof and used in this Prospectus, the Application Forms or the Electronic Applications shall, where applicable, have the meaning assigned to it under the Companies Act, the Securities and Futures Act or such statutory modification, as the case may be. Any reference in this Prospectus and the Application Forms and/or Electronic Applications to Shares being allotted and/or allocated to an applicant includes allotment to CDP for the account of that applicant. Any reference to a time of day in this Prospectus, the Application Forms and the Electronic Applications shall be a reference to Singapore time, unless otherwise stated. Any references to we, our, and us or other grammatical variations thereof in this Prospectus is a reference to our Company or any member of our Company (including an entity under common control whose accounts we have consolidated in our Group s financial statements) as the context requires. All exchange rates referred to in this Prospectus are extracted from Bloomberg L.P. and Bank Indonesia. Certain names in Bahasa Indonesia have been translated into English. Such translations are provided solely for the convenience of Singapore-based investors. They may not be registered with the relevant Indonesian authorities and should not be construed as representations that the English names actually represent the Indonesian names. 13

20 GLOSSARY OF TECHNICAL TERMS To facilitate a better understanding of the business of our Group, the following glossary provides a description of the technical terms and abbreviations commonly found in our industry. The terms and their assigned meanings may not correspond to standard industry meanings or usage of these terms: AMDAL : Environmental Impact Assessment (locally known as Analisis Mengenai Dampak Lingkungan) biomass : Plant material, vegetation, or agricultural waste used as a fuel or energy source bulking : Storage facilities including tank farms for palm oil products and other liquids CDM : Clean Development Mechanism is an arrangement under the Kyoto Protocol allowing industrialised countries to invest in projects that reduce greenhouse gas emissions CPO : Crude palm oil CPKO : Crude palm kernel oil EFB : Empty palm fruit bunches FFB : Fresh palm fruit bunches Ijin Usaha : A written license from the authorised official which must mandatorily be Perkebunan possessed by a company undertaking a plantation business activity integrated with plantation product manufacturing in Indonesia nucleus : The oil palm plantations which are owned and developed by our Company, as opposed to plantations which are owned and developed for small landholders under the Plasma Programme oleochemical : Chemicals derived from biological oils or fats. Oleochemicals are analogous to petrochemicals which are chemicals derived from petroleum PKC : Palm kernel cake / Palm kernel meal Plasma Programme : The programme initiated by the Indonesian government to encourage the development of smallholders plantations with the assistance of certain oil palm plantation owners, such as our Group 14

21 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS All statements contained in this Prospectus, statements made in press releases and oral statements that may be made by our Company, Directors, Executive Officers or employees acting on our behalf, that are not statements of historical fact, constitute forward-looking statements. Some of these statements can be identified by forward-looking terms such as expect, believe, plan, intend, estimate, anticipate, may, will, would and could or similar words or phases. However, these words are not the exclusive means of identifying forward-looking statements. All statements regarding our expected financial position, business strategies, plans and prospects, and the future prospects of our industry are forward-looking statements. These forward-looking statements and other matters discussed in this Prospectus regarding matters that are not historical fact are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risk factors and uncertainties are discussed in more details in this Prospectus, in particular, but not limited to, discussions in the section entitled Risk Factors. Given the risks and uncertainties that may cause our actual future results, performance or achievements to be materially different from that expected, expressed or implied by the forward-looking statements in this Prospectus, we advise you not to place undue reliance on those statements. Neither our Company, the Issue Manager, the Joint Underwriters and Placement Agents, nor any other person represents or warrants to you that our actual future results, performance or achievements will be as discussed in those statements. Our actual future results may differ materially from those anticipated in these forward-looking statements as a result of the risks faced by us. Our Company, the Issue Manager, the Joint Underwriters and Placement Agents disclaim any responsibility to update any of those forward-looking statements or publicly announce any revisions to those forward-looking statements to reflect future developments, events or circumstances for any reason, even if new information becomes available or other events occur in the future. Our Company is however subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, pursuant to Section 241 of the Securities and Futures Act, if after this Prospectus is registered but before the close of the Invitation, we become aware of (a) a false or misleading statement in this Prospectus; (b) an omission from this Prospectus of any information that should have been included in it under Sections 243 of the Securities and Futures Act; or (c) a new circumstance that has arisen since this Prospectus was lodged with the Authority and would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, if it had arisen before this Prospectus was lodged and that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority. 15

22 TRANSFER RESTRICTIONS TRANSFER RESTRICTIONS Each purchaser of Shares offered in reliance on Regulation S will be deemed to have acknowledged, represented and agreed with our Company, the Issue Manager and the Joint Underwriters and Placement Agents as follows (terms defined in Regulation S shall have the same meaning when used in this section): (i) (ii) (iii) (iv) The Shares have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state or territory of the United States and are subject to significant restrictions on transfer. The purchaser (and the person, if any, for whose account it is acquiring Shares under the Invitation) is not a U.S. person and is acquiring the Shares in an offshore transaction meeting the requirements of Regulation S. It is not an affiliate of our Company or a person acting on behalf of such affiliate; and it is not in the business of buying and selling securities or, if it is in such business, it did not acquire the Shares from our Company or an affiliate thereof in the initial distribution of the Shares. Such purchaser will not, prior to the expiration of 40 days after the later of the commencement of the Invitation and the last closing date of the Invitation (the Restricted Period ), offer, sell, pledge or otherwise transfer any interest in the Shares except in an offshore transaction in accordance with Regulation S, and in accordance with any applicable securities laws of any state or territory of the United States and any other jurisdiction. Upon the expiration of the Restricted Period, the New Shares offered in reliance on Regulation S shall no longer be subject to the restrictions set out above, if, at the time of such expiration, the offer or sale of such Shares in the United States would not be restricted under the securities laws of the United States or any state of the United States. 16

23 DETAILS OF THE INVITATION LISTING ON THE SGX-ST An application has been made to the SGX-ST for permission to deal in and for quotation of, all our Shares already issued (including the New Shares). Such permission will be granted when our Company has been admitted to the Official List of the SGX-ST. Acceptance of applications will be conditional upon, inter alia, the SGX-ST granting permission to deal in, and for quotation of, all our existing issued Shares (including the New Shares). Monies paid in respect of any application accepted will be returned to you, subject to applicable laws, without interest or any share of revenue or other benefit arising therefrom and at your own risk, if the said permission is not granted or for any other reason and you will not have any claims whatsoever against our Company, the Issue Manager, or the Joint Underwriters and Placement Agents. No Share shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority. The SGX-ST assumes no responsibility for the correctness of any statements made, reports contained or opinion expressed in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries, our Shares or the New Shares. A copy of this Prospectus has been lodged with and registered by the Authority on 16 June 2008 and 17 July 2008, respectively. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares (including the New Shares), as the case may be, being offered or in respect of which an Invitation is made, for investment. This Prospectus has been seen and approved by our Directors and they individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Prospectus are fair and accurate in all material respects as at the date of this Prospectus and that there are no material facts the omission of which would make any statements in this Prospectus misleading and that this Prospectus constitutes full and true disclosure of all material facts about the Invitation and our Company. No person has been or is authorised to give any information or to make any representation not contained in this Prospectus in connection with the Invitation and, if given or made, such information or representation must not be relied upon as having been authorised by our Company, the Issue Manager, or the Joint Underwriters and Placement Agents. Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change, or development reasonably likely to involve a change, in our affairs, condition or prospects, or our Shares (including the New Shares), or in the statements of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur and are material or are required to be disclosed by law, we will make an announcement of the same to the SGX-ST and the public and, if required, lodge a supplementary or replacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act and other applicable provisions of the Securities and Futures Act and take immediate steps to comply with the requirements of the Securities and Futures Act. We will also comply with all other applicable requirements of the Securities and Futures Act and/or any other requirements of the Authority and/or SGX-ST. All applicants should take note of any such announcements, supplementary or replacement prospectus and, upon the release of the same, shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies. Neither our Company, the Issue Manager, the Joint Underwriters and Placement Agents, our Directors, the experts nor any other parties involved in the Invitation is making any representation to any person regarding the legality of an investment in our Shares by such person under any investment or other laws or regulations. No 17

24 DETAILS OF THE INVITATION information in this Prospectus should be considered to be business, legal or tax advice. Investors should be aware that they may be required to bear the financial risk of an investment in our Shares (including the New Shares) for an indefinite period of time. Each prospective investor should consult his own professional or other advisers for business, financial, legal or tax advice regarding an investment in our Shares (including the New Shares). This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon by any other persons other than the applicants in connection with their application for the New Shares or for any other purpose. This Prospectus does not constitute an offer, solicitation or invitation to subscribe for the New Shares in any jurisdiction in which such offer, or solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. We are subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, if after this Prospectus is registered but before the close of the Invitation, we become aware of: (a) (b) (c) a false or misleading statement in this Prospectus; an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or a new circumstance that has arisen since this Prospectus was lodged with the Authority which would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus if it had arisen before this Prospectus was lodged, that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act. Where prior to the lodgement of the supplementary or replacement prospectus, applications have been made under this Prospectus to subscribe for the New Shares and: (a) where the New Shares have not been issued to the applicants, our Company shall either: (i) (ii) (iii) within two days (excluding any Saturday, Sunday or public holiday) from the date of lodgement of the supplementary or replacement prospectus, give applicants notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or replacement prospectus, as the case may be, and provide applicants with an option to withdraw their applications, and take all reasonable steps to make available within a reasonable period the supplementary or replacement prospectus, as the case may be, to applicants who have indicated that they wish to obtain, or who have arranged to receive, a copy of the supplementary or replacement prospectus; or within seven days from the date of lodgement of the supplementary or replacement prospectus, give the applicants the supplementary or replacement prospectus, as the case may be, and provide the applicants with an option to withdraw their applications; or treat the applications as withdrawn and cancelled, in which case the applications shall be deemed to have been withdrawn and cancelled, and our Company shall, within seven days from the date of lodgement of the supplementary or replacement prospectus, return all monies paid in respect of any application to, without interest or a share of revenue or benefit arising therefrom; or 18

25 DETAILS OF THE INVITATION (b) where our New Shares have been issued and/or sold to the applicants, our Company shall either: (i) (ii) (iii) within two days (excluding any Saturday, Sunday or public holiday) from the date of lodgement of the supplementary or replacement prospectus, give applicants notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or replacement prospectus, as the case may be, and provide applicants with an option to withdraw their applications, and take all reasonable steps to make available within a reasonable period the supplementary or replacement prospectus, as the case may be, to applicants who have indicated that they wish to obtain, or who have arranged to receive, a copy of the supplementary or replacement prospectus; or within seven days from the date of lodgement of the supplementary or replacement prospectus, give the applicants the supplementary or replacement prospectus, as the case may be, and provide the applicants with an option to return to us the New Shares, which they do not wish to retain title in; or treat the issue of the New Shares as void, in which case the issue or sale shall be deemed void and our Company shall, within seven days from the date of lodgement of the supplementary or replacement prospectus, return all monies paid in respect of any application, without interest or a share of revenue or benefit arising therefrom. An applicant who wishes to exercise his option under paragraph (a)(i) and (a)(ii) to withdraw his application shall, within 14 days from the date of lodgement of the supplementary or replacement prospectus, notify our Company of this, whereupon our Company shall, within seven days from the receipt of such notification, pay to him all monies paid by him on account of his application for those Shares without interest or a share of revenue or benefit arising therefrom, at the applicant s risk. An applicant who wishes to exercise his option under paragraph (b)(i) and (b)(ii) to return the New Shares issued to him shall, within 14 days from the date of lodgement of the supplementary or replacement prospectus, notify our Company of this and return all documents, if any, purporting to be evidence of title to those New Shares, to our Company, whereupon our Company shall, within seven days from the receipt of such notification and documents, if any, pay to him all monies paid by him for those Shares, without interest or a share of revenue or benefit arising thereform at the applicant s risk and the issue of those Shares shall be deemed to be void. Pursuant to Section 242 of the Securities and Futures Act, the Authority may, in certain circumstances issue a stop order (the Stop Order ) to our Company, directing that no or no further New Shares to which this Prospectus relates, be allotted, issued or sold. Such circumstances will include a situation where this Prospectus (i) contains a statement, which in the opinion of the Authority is false or misleading; (ii) omits any information that should be included in accordance with the Securities and Futures Act; (iii) does not, in the opinion of the Authority, comply with the requirements of the Securities and Futures Act; or (iv) if the Authority is of the opinion that it is in the public interest to do so. In the event that the Authority issues a Stop Order and applications to subscribe for the New Shares have been made prior to the Stop Order, then: (a) (b) where the New Shares have not been issued to the applicants, the applications for the New Shares shall be deemed to have been withdrawn and cancelled and our Company shall, within 14 days from the date of the Stop Order, pay to the applicants all monies the applicants have paid on account of their applications for the New Shares; or where the New Shares have been issued to the applicants, the issue of the New Shares shall be deemed to be void and our Company shall, within 14 days from the date of the Stop Order, pay to the applicants all monies paid by them for the New Shares. 19

26 DETAILS OF THE INVITATION Such monies paid in respect of the applicants application shall be returned to the applicants at their own risk, without interest or any share or revenue or other benefit arising therefrom, and the applicants will not have any claim against our Company, the Issue Manager, or the Joint Underwriters and Placement Agents. Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, during office hours from: DBS Bank Ltd CIMB-GK Securities Pte. Ltd. 6 Shenton Way #36-01 CIMB-GK Investment Centre DBS Building Tower One 50 Raffles Place #01-01 Singapore Singapore Land Tower Singapore and from branches of DBS Bank (including POSB), members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on the SGX-ST website at and the Authority s OPERA website at The Application List will open at a.m. on 23 July 2008 and will remain open until noon on the same day or for such further period or periods as our Directors may, in consultation with the Issue Manager and the Joint Underwriters and Placement Agents decide, subject to any limitation under all applicable laws PROVIDED ALWAYS THAT where a supplementary or replacement prospectus has been lodged with the Authority, the Application List shall be kept open for at least 14 days after the lodgement of the supplementary or replacement prospectus. Details of the procedure for applications to subscribe for the New Shares are set out in Appendix A of this Prospectus. 20

27 DETAILS OF THE INVITATION INDICATIVE TIMETABLE FOR LISTING An indicative timetable for the Invitation and trading in our Shares is set out for the reference of applicants: Indicative time/date Event 9.00 a.m. on 18 July 2008 Commencement of Invitation noon on 23 July 2008 Close of Application List and closing date and time for the Invitation 24 July 2008 Balloting of applications, if necessary (in the event of oversubscription for the Offer Shares) 9.00 a.m. on 25 July 2008 Commence trading on a ready basis 30 July 2008 Settlement date for all trades done on a ready basis The above timetable is only indicative as it assumes that the date of closing of the Application List will be 23 July 2008, the date of admission of our Company to the Official List of the SGX-ST will be 25 July 2008, the shareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 25 July The actual date on which our Shares will commence trading on a ready basis will be announced when it is confirmed by the SGX-ST. The above timetable and procedures may be subject to such modification as the SGX-ST may, in its absolute discretion, decide, including the decision to permit trading on a ready basis and the commencement date of such trading. Investors should consult the SGX-ST s announcement on ready trading date on the Internet (at the SGX-ST internet website or the newspapers, or check with their brokers on the date on which trading on a ready basis will commence. In the event of any changes in the closure of the Application List or the time period during which the Invitation is open, we will publicly announce the same: (a) (b) through SGXNET announcement to be posted on the internet at the SGX-ST s internet website at and through a paid advertisement in a major Singapore English newspaper such as The Straits Times or The Business Times. We will provide details of the results of the Invitation (including the level of subscription for the New Shares and the basis of allocation of the New Shares pursuant to the Invitation), as soon as it is practicable after the closure of the Application List through the channels in (a) and (b) above. 21

28 PROSPECTUS SUMMARY The information contained in this summary is derived from and should be read in conjunction with, the full text of this Prospectus. Because it is a summary, it does not contain all the information that potential investors should consider before investing in the Shares of our Company. Potential investors should read this entire Prospectus carefully, especially the section Risk Factors of this Prospectus. OVERVIEW OF OUR GROUP Our Company was incorporated in Singapore on 26 September 2007 under the Companies Act as a private limited company, under the name of Kencana Agri Pte. Ltd. and changed its name to Kencana Agri Limited upon conversion to a public company. Our Group comprises our Company and our various subsidiaries. Please refer to the section Group Structure of this Prospectus for more details. Business We are a fast-growing producer of CPO and CPKO in Indonesia with oil palm plantations located in the Sumatera and Kalimantan regions. From 2005 to the Latest Practicable Date, our Group s total land bank increased from 77,374 hectares to 95,410 hectares and our total planted area increased from 12,277 hectares to 24,349 hectares. Our Group has implemented a Plasma Programme under the plantation business cooperatives scheme (KKPA), the cooperation in local community palm oil plantation scheme (KKSR), and the independent plasma scheme (Plasma Mandiri). As at the Latest Practicable Date, we have approximately 12,372 hectares of plantation land under our Plasma Programme, of which approximately 7,981 hectares have been planted. For the purpose of the disclosures made in respect of our land bank and planted area in this Prospectus, we have not included the land and planted area under our Plasma Programme. If we had included the land and planted area under our Plasma Programme, our aggregate land bank as at the Latest Practicable Date would be 107,782 hectares and our aggregate planted area would be 32,330 hectares. Our Group has two palm oil mills and two kernel crushing plants, with one of each located on Bangka Island in Sumatera and in South Kalimantan respectively. Our palm oil mills have a total production capacity of 120 MT/hour, and our kernel crushing plants have a combined production capacity of 435 MT/day. We operate a bulking terminal in Belinyu, Bangka Island consisting of three storage tanks with a total capacity of 19,500 MT and a nearby jetty for vessels to take delivery of our products. We also operate a jetty in East Kalimantan to facilitate the transportation of our products. In addition, we own and operate two barges which we use primarily to transport our own products. Our bulking terminal and logistics services primarily serve to complement and support our palm oil business by enabling us to be self-sufficient in terms of storage and transportation. Our Group also operates a renewable biomass power plant on Bangka Island which generates electricity by utilising waste recycled from the CPO production process. Most of the electricity generated is sold to PLN, a state-owned electricity company. The balance is used for internal consumption by our plantation located on Bangka Island. Further details are set out in the section General Information On Our Group Business of this Prospectus. 22

29 PROSPECTUS SUMMARY Competitive Strengths We believe that our Group has the following competitive strengths: Significant cultivatable land bank with new planting potential The following table shows our land bank and planted area as at the Latest Practicable Date: Location Land Bank (Hectares) Planted Area (Hectares) Sumatera 14,331 5,587 Kalimantan 81,079 18,762 Total 95,410 24,349 As we intend to increase our planted area to over 80,000 hectares in the next five years (which is an estimated compounded annual growth rate of 25.0% from 2007 to 2012), we estimate future planting of approximately 56,000 hectares of our land bank. The graph below shows our planned expansion of our planted area within our existing land bank. Hectares Land bank as at the Latest Practicable Date Land Bank Total Planted CAGR 25.0% Taking into account our existing land bank and planting programme, we believe that we are well positioned to substantially increase our planted area over the next few years. We are also continuously seeking opportunities to increase the aggregate size of our land bank and planted area through selective external acquisitions. Potential benefits from maturing oil palm trees in the near future Oil palm trees generally mature after three years of growth and reach their prime after six years, when FFB production levels peak. As at the Latest Practicable Date, our total planted area is 24,349 hectares, of which 12,277 hectares (approximately 50.4%) are mature and 12,072 hectares (approximately 49.6%) are immature. We expect the majority of these immature plants to mature from 2009 to The majority of our expected increase in FFB crop will be from our Kalimantan plantations. 23

30 PROSPECTUS SUMMARY 12,277 ha Immature Mature 12,072 ha Going forward, we expect our FFB harvested from our Kalimantan plantations to increase and thereby lower our reliance on third party FFB suppliers. We believe that this will significantly reduce our unit production cost and improve our average extraction rates as we will generally have better control over quality in terms of FFB harvested from our plantation. In addition, we expect the utilisation rates of our palm oil mill in Kalimantan to improve as our Kalimantan plantations continue to mature and reach peak production age. We expect to benefit from economies of scale as our FFB production volume increases. Proven and recognised track record in plantation cultivation and management Our Group has an experienced and committed management team which has successfully operated in various challenging business conditions and is able to understand and adapt to the local culture in the regions that our Group operates. We believe that our management s track record is demonstrated by our successful cultivation of all our current plantations from greenfield land. The development of greenfield land into a plantation requires detailed planning, careful implementation of a planting programme as well as close cooperation with the local community. Our Group s plantation operations have received recognition from the provincial governments in the Sumatera and Kalimantan regions based on an assessment of large scale private plantations. Please refer to the section Awards and Certifications of this Prospectus for more information. Integrated value-chain resulting in operational synergies We have integrated our plantation operations, complete with palm oil mills, kernel crushing plants, logistics services and bulking facilities. As part of our plans to improve our value-chain, we have recently entered into an agreement with IOPRI, a reputable research institute on germinated oil palm seeds to develop seed processing facilities. Our bulking and logistics services complement our plantation operations by allowing us to store and transport our products in an efficient and effective manner. Our Group currently owns and operates two barges, with a total capacity of 4,500 MT, which serve our plantations in both Sumatera and Kalimantan. Having tank storage facilities for bulking and our own barges for transportation enables us to exercise better control over our logistics management and to meet customers delivery requirements at short notice. The strategic location of our bulking terminal in Belinyu also provides us with direct access from Sumatera and Kalimantan to both local and international customers. In addition, our first renewable biomass power plant, which is located within our plantation in the Sumatera region, utilises the waste products from our production facilities, such as EFB and palm kernel shells, as fuel for the generation of electricity. Most of the generated electricity is sold to PLN. We are also currently applying to the relevant authorities for our renewable biomass plant to be registered as a Clean Development Mechanism ( CDM ) project that will in turn allow us to sell the carbon credits attributable to this project. Please refer to the section General Information On Our Group Competitive Strengths of this Prospectus for more details. 24

31 PROSPECTUS SUMMARY Strategy and Future Plans Our strategy and future plans are as follows: (i) Expand our oil palm plantation business Our key strategy is to focus on growing our oil palm plantations. We have a considerable amount of undeveloped, cultivatable land which represents a significant potential for growth. We plan to focus on new plantings by increasing our current planted oil palm area from 24,349 hectares as at the Latest Practicable Date to over 80,000 hectares in the next five years, within our existing land bank. We also plan to, where appropriate, accumulate additional land bank and/or acquire highyielding mature plantations directly or indirectly through acquisitions of companies with such interests whenever suitable opportunities arise. (ii) Expand production capacity and improve efficiency and product quality To cater for the expected increase in our future sales volume, we plan to increase our annual CPO processing capacity from 120 MT/hour to 210 MT/hour by 2010, by building two more palm oil mills in the Kalimantan region. Our new palm oil mills will utilise the latest proven technology which we expect will improve operational efficiency and increase CPO extraction rates. With the expansion of our plantations, we plan to improve our transportation system and existing supporting infrastructure to increase the efficiency of our delivery of harvested FFB to our processing facilities. (iii) Develop seed production capability We intend to develop our own seed processing capability to control and ensure a steady supply of high quality germinated seeds, which in turn will increase our FFB yields. We plan to build the seed processing facilities close to our plantations to lower transportation costs and minimise spoilage of the germinated seeds. We have entered into an agreement with IOPRI for them to provide technical assistance for the development of our seed processing facilities to produce high-yielding seeds (otherwise known as Benih-bina ). We also have plans to develop a core plantation of parent oil palm trees to provide seeds for our seed processing facilities. Our long-term objective is to eventually become a seed producer and develop self-sufficiency in respect of seed supply. (iv) Develop our bulking and logistics services and renewable biomass power generation business We currently complement our plantation business with our bulking and logistics operations and renewable biomass power generation business. As part of our long-term business strategy, we intend to continue developing our bulking and logistics services in tandem with our main plantation business. We intend to add a double-hull vessel to the two barges we currently operate. We intend to increase the amount of services we provide to third party customers. 25

32 PROSPECTUS SUMMARY Following the successful implementation of our first renewable biomass power plant in Bangka Island, we have commenced construction of our second renewable biomass power plant in Belitung. Like our first renewable biomass power plant, this will enable us to sell electricity to PLN to meet the needs of local communities in power-scarce areas and serve as an additional source of revenue. We intend to build similar renewable biomass power plants in Kalimantan when appropriate or commercially viable. We also intend to sell the carbon credits attributable to these future CDM projects and will, at the appropriate time, apply to the relevant authorities for validation of such projects. As at the Latest Practicable Date, our renewable power plant in Bangka Island has been validated as a CDM project and is now pending registration status by the executive board of the UNFCCC. For more details, please refer to the section General Information On Our Group Strategy and Future Plans of this Prospectus. Where you can find us Our registered office is located at 3 Shenton Way, #10-06 Shenton House, Singapore Our telephone number is and our facsimile number is

33 PROSPECTUS SUMMARY SUMMARY OF OUR FINANCIAL INFORMATION You should read the following summary financial information in conjunction with the audited combined financial statements of our Group and the related notes and the section Management s Discussion and Analysis of Results of Operations and Financial Condition of this Prospectus. Our audited combined financial statements for FY2005, FY2006 and FY2007 are set out in Appendix F of this Prospectus. Our unaudited proforma combined financial information for FY2007 is set out in Appendix E of this Prospectus. Selected items from the combined operating results of our Group (1) Audited (US$ 000) FY2005 FY2006 FY2007 Revenue 36,623 41,067 69,280 Gross profit 4,434 8,497 23,454 Profit / (loss) before tax (9,175) 20,317 54,556 Profit / (loss) for the year (7,037) 14,835 39,202 EPS / (LPS) (US cents) (2) (0.9) Selected items from the combined financial position and proforma combined financial position of our Group (3) As at 31 December 2007 (US$ 000) Audited Proforma Non-current assets 135, ,041 Current assets 19,153 16,223 Current liabilities 17,304 18,304 Net current assets / (liabilities) 1,849 (2,081) Non-current liabilities 58,313 58,313 Shareholders equity 78,577 74,647 NTA per Share (US cents) (4) Notes: (1) The audited combined operating results of our Group for FY2005, FY2006 and FY2007 have been prepared assuming that our Group had been in existence since 1 January (2) For comparative purposes, EPS/(LPS) for FY2005, FY2006 and FY2007 have been computed based on the profit/(loss) for the year and our pre-invitation share capital of 798,044,720 Shares. (3) The audited combined financial position of our Group as at 31 December 2007 has been prepared assuming that our Group had been in existence as at 1 January The proforma combined financial position as at 31 December 2007 has been prepared assuming that our Group had existed since 1 January 2005 and takes into account the intended distribution of dividends amounting to Rp9 billion (approximately US$1 million) and changes in capital structure as a result of the Restructuring Exercise. Please refer to Appendix E Independent Auditors Report of the Unaudited Proforma Combined Financial Information of Kencana Agri Ltd for the Financial Year Ended 31 December 2007 for a description of the proforma adjustments. (4) For comparative purposes, the NTA per Share for the period under review has been computed based on our pre-invitation share capital of 798,044,720 Shares. 27

34 THE INVITATION Issue Size : 200,000,000 New Shares comprising 1,000,000 Offer Shares and 199,000,000 Placement Shares which, upon allotment and issue, rank pari passu with our existing issued Shares. Issue Price : S$0.305 for each New Share. The Offer : The Offer comprises an Invitation by our Company to the public in Singapore to subscribe for 1,000,000 Offer Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus. The Placement : The Placement comprises a placement of 199,000,000 Placement Shares (including 300,000 Internet Placement Shares) and 12,100,000 Reserved Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus. Purpose of the Invitation : Our Directors consider that the listing of our Company and the quotation of our Shares on the SGX-ST will enhance our public image locally and overseas and enable us to tap into the capital markets for the expansion of our business operations. The Invitation will also provide members of the public with an opportunity to participate in the equity of our Company. Listing status : Our Shares will be quoted in Singapore dollars on the Mainboard of the SGX-ST, subject to admission of our Company to the Official List of the SGX-ST and permission for dealing in, and for quotation of, our Shares being granted by the SGX-ST and the Authority not issuing a Stop Order. 28

35 RISK FACTORS Prospective investors should carefully consider and evaluate the following considerations and all other information contained in this Prospectus before deciding to invest in our Shares. Some of the following risk factors relate principally to the industries in which our Group operates and the business of our Group in general. Other considerations relate principally to general economic and political conditions and the securities market and ownership of our Shares, including possible future sales of Shares. If any of the following considerations and uncertainties develop into actual events, our business, results of operations and financial condition could be materially and adversely affected. In such cases, the trading price of our Shares could decline due to any of these considerations and uncertainties, and investors may lose all or part of their investment in our Shares. To the best of our Directors belief and knowledge, all the risk factors that are material to investors in making an informed judgement have been set out below. RISKS RELATING TO OUR BUSINESS AND THE INDUSTRIES IN WHICH OUR GROUP OPERATES Risks Relating To Our Business We may not be able to obtain HGU certification in respect of our Kadastral land and Ijin Lokasi As at the Latest Practicable Date, we are in the final process of obtaining HGU certificates in respect of 42,640 hectares of Kadastral land (representing approximately 44.7% of the total land bank held by our Group) and are also occupying 33,100 hectares of land under Ijin Lokasi. We intend to apply for HGU certification in respect of the 33,100 hectares of Ijin Lokasi in due course. Please refer to the section General Information On Our Group Process of Obtaining HGU Land Title of this Prospectus for a summary of the process by which HGU certification is obtained. Prior to the issuance of the HGU certificates, such lands are considered as uncertified land. Pending the issuance of HGU certificates, our Group is allowed to physically occupy, build and plant crops on the uncertified land. However, as the administration of land laws and regulations may be subject to a certain degree of discretion by the Indonesian government authorities, there is no assurance that the relevant authorities would not take a different approach or view with respect to the uncertified land, its use, registration and future disposal for value. A significant portion of our Group s land has been allocated in the form of Kadastral land. We have been advised by Ali Budiardjo, Nugroho, Reksodiputro, legal advisers to our Company on Indonesian Law, that on the basis that we have actual possession of the uncertified land and the measurement process by Panitia B having been completed, our Group would have the right to obtain HGU certification over such land, subject to the fulfilment of the registration procedures as required under the Basic Agrarian Law of 1960 (the Agrarian Law ). As for the land under Ijin Lokasi, such Ijin Lokasi may be revoked by the Indonesian government if we fail to acquire the land within the stipulated validity period (or any extension thereof) of the said Ijin Lokasi. In such an event, we may lose our rights granted by the Indonesian government under the Ijin Lokasi. Presently, we are taking steps to acquire the land in respect of such Ijin Lokasi. Please refer to the section General Information On Our Group Process of Obtaining HGU Land Title of this Prospectus for more information. If for any reason our Group fails to fulfill the registration procedures as required under the Agrarian Law, there is no assurance that the Regional Land Agency will proceed to issue a HGU certificate for land on which we have begun planting. In the event that HGU certification is not obtained for whatever reason, we are required by law to clear such land on which we have started planting, which in turn would materially adversely affect our operations and prospects. As at the Latest Practicable Date, we have planted over 11,838 hectares (or 27.8%) of our Kadastral Land of 42,640 hectares. We have not yet commenced planting on the 33,100 hectares of land under Ijin Lokasi as we had just obtained the Ijin Lokasi for ASML on 26 March 2008, SCEM on 8 April 2008 and WSM on 27 November We need to effectively manage our expansion plans and may be adversely affected by risks relating to the expansion of our plantations and processing operations Our main operations are currently based in Indonesia. As disclosed in the section Strategy and Future Plans of this Prospectus, our Directors intend to, among others, grow and expand our oil palm plantations, increase our production capacity by building more processing facilities and relying on new 29

36 RISK FACTORS technology. We are also looking into developing germinated seeds to improve our planting process. Our expansion plans involve various risks which include operational, construction and regulatory risks and risks involving investment in working capital. The success of our expansion plans depends on many factors, some of which are not within our control. For example, our expansion plans are subject to the following events: Indonesian government policies could limit our ability to obtain adequate land rights to additional land suitable for plantations; we may not be able to convert all of the land bank that we hold to HGU title and therefore may not be able to use all of this land for our planned expansion; we may not be able to complete our plantation and processing facilities expansion on time or within budget; our new or expanded plantations may not be able to produce FFB at expected production levels or may require additional costs to cultivate and harvest; we may experience difficulties integrating our new expanded plantations with our current plantations and processing facilities; we may not be able to carry out our planned expansion due to unfavourable weather conditions and natural disasters; and unforeseen circumstances and problems relating to our expansion projects. Any of these factors may affect our ability to execute our expansion plans successfully, in which event, our business, financial condition and results of operations may be adversely affected. We are vulnerable to significant fluctuations in prices and availability of our key raw materials and germinated seeds Our operations depend on key raw materials which include FFB, kernels, kernel shells, fertiliser, pesticide, herbicide and diesel fuel. Approximately 75.7%, 67.7% and 78.7% of our costs of sales were for FFB and kernels purchased from third parties in FY2005, FY2006 and FY2007 respectively. We do not have long term supply contracts with such third parties, save for FFB supplied by villagers under our Plasma Programme. The prices and availability of raw materials may be affected by factors such as changes in their global demand and supply, the state of the global economy, inflationary pressure, environmental regulations, tariffs, natural disasters, forest fires, weather conditions and labour unrest. Under Indonesian government policy, oil palm plantation companies are encouraged to develop new plantations that will be operated by local small landholders, a scheme known as the Plasma Programme. Under this programme, we are committed to purchase FFB from landholders at a formula price fixed by the local government. All plantations in the region must purchase FFB under the Plasma Programme at this price. There can be no assurance, however, that the formula price will continue to approximate the market price. As our plantations continue to expand with new plantings, the land area assigned under our Plasma Programme will increase accordingly. This may adversely affect our margins as we are required to buy a higher proportion of FFB at the formula price which may be greater than market price. In the event of a shortage of germinated seeds arising from factors such as high demand for germinated seeds in the industry or from natural disasters, we may not achieve our new planting targets under our expansion plans and we may not be able to seek alternative sources of supply in a timely manner. Between FY2005 and FY2007, we purchased a significant proportion of FFB and kernels from third parties. In the event that there is a disruption or significant reduction in the supply of FFB and kernels from these third parties, we may not be able to achieve a comparable level of production of CPO and CPKO, and accordingly our financial performance may be affected. 30

37 RISK FACTORS Any significant fluctuation in the prices and availability of such materials may significantly increase our cost of sales, which in turn may adversely affect our business, profitability and overall financial performance. Our financial results may fluctuate due to increases or decreases in the appraised fair value of our biological assets We reassess the fair value of our biological assets on our plantations at every balance sheet date. Our annual valuations are prepared by independent valuers and the estimations are based on discounted cashflows of the underlying biological assets. In accordance with Singapore Financial Reporting Standards ( SFRS ), we recognise changes to the appraised fair value of our biological assets on our plantations as an increase or decrease (as applicable) in our income statements. However, there is no cash flow impact arising from any fair value increase or decrease as long as the relevant plantations on which the biological assets are located are held by our Group. Based upon our audited combined income statements, we recognised fair value gains of US$16.7 million and US$41.9 million in FY2006 and FY2007 respectively and a fair value loss of US$9.0 million in FY2005. The appraised fair value of our biological assets may fluctuate further in the future, and our historical results should not be regarded as an indicator of the future profits of our Group. The appraised fair value of our biological assets may decrease in the future. Any decrease in the fair value of our biological assets could have a material adverse effect on our profitability, overall financial condition and results of operations. We may not be able to effectively hedge the risks of price fluctuations for our products Our Group from time to time utilises forward physical contracts in the ordinary course of business to hedge the risks of adverse price fluctuations of our products, namely CPO and CPKO. Nonetheless, as we enter into forward physical contracts for only a portion of our products, our Group may not be able to fully hedge against the risks of future price fluctuations of our remaining products. Should the future market prices of these remaining products decrease, our profitability may be adversely affected. We may face prohibitions and constraints in our ownership and acquisition of plantation land We currently possess land that is in different stages of the regulatory processes described therein. As at the Latest Practicable Date, our land bank is 95,410 hectares. We have obtained HGU title in respect of 19,670 hectares. We are also in the final process of obtaining HGU title for 42,640 hectares of our Kadastral land bank. The balance of 33,100 hectares is held under Ijin Lokasi. In Indonesia, the government holds title to all land under Basic Agrarian Law of In order to obtain HGU title from the Indonesian government, an application needs to be made to the National Land Agency. HGU titles granted by the Indonesian government have a fixed duration that may be extended for additional periods provided that the holders can fulfill certain requirements. HGU is a right to utilise government-owned land for plantation, fisheries or farming with minimum area of five hectares, for a period of up to 35 years, extendable for an additional period of up to 25 years, provided holders can fulfill the extension requirements. A holder of HGU title can also renew this land use right after the extended term expires. Only Indonesian citizens and legal entities established under Indonesian Law with domicile in Indonesia may hold HGU. The HGUs we hold expire between the years 2034 and 2042 in our South Kalimantan plantation and between the years 2032 and 2037 in our Bangka plantation, unless further extended. The intermediate stages of obtaining approval for HGU include the acquisition of the land bank and the survey of the land by Panitia B, after which the Decision Letter on the Granting of HGU (Surat Keputusan Pemberian HGU) is issued followed by registration of the HGU. Please refer to Appendix C Indonesian Regulatory Overview of this Prospectus for more information. With regard to limitations on the maximum size of land allowable for plantation business, on 10 February 1999, the State Minister of Agrarian Affairs / Head of the National Land Agency issued Regulation No. 2 of 1999 ( Regulation No. 2/1999 ), which limits the aggregate size of agricultural plantations (including oil palm plantations) held by any person, company, group or related persons or companies. According to Regulation No. 2/1999, the maximum aggregate size for oil palm plantations for a company or a group of companies under the same shareholding is 100,000 hectares nationally and 20,000 hectares for each province of Indonesia, except for the province of Papua (formerly known as Irian Jaya) where the maximum area is 40,000 hectares. The above limitations are only applicable to HGU titles and do not apply to Kadastral land or land under Ijin Lokasi. 31

38 RISK FACTORS Further on 23 May 2002, the Minister of Agriculture issued Decree No. 357/Kpts/HK.350/5/2002 on guidelines for licensing plantation business ( Decree No. 357/2002 ) with the same restrictions on the size of land-plots for the business of plantation cultivation. However on 11 August 2004, the Indonesian government enacted Law No. 18 of 2004 concerning Plantation ( Law No. 18/2004 or Plantation Law ), which provides, inter-alia, that for the use of land for a plantation business, the minister in charge of and responsible for managing the plantation sector (the Minister of Agriculture ) shall stipulate the land s maximum and minimum area of use, while the agency in charge of land affairs shall issue the land titles. In determining the maximum and minimum land areas permitted to be used for the purposes of a plantation business, the Minister of Agriculture shall be guided by the following factors: (i) the types of plants; (ii) the availability of land according to the agro-climatic conditions; (iii) capitalisation of the business; (iv) the factory s capacity; (v) the population density of the area; (vi) the business development pattern; (vii) the local conditions; and (viii) the respective general technology development. In addition to the above, a plantation shall be operated with the aim of: (i) improving the community s income; (ii) increasing the state s revenue; (iii) increasing the state s foreign exchange receipts; (iv) creating job opportunities; (v) increasing productivity, added value and competitiveness; and (vi) optimising the management of natural resources in a sustainable way. Further to the implementation of Law No. 18/2004, on 29 February 2007, the Regulation of the Minister of Agriculture No. 26/Permentan/OT.140/2/2007 ( Regulation No. 26/2007 ) was issued which provides, among others, the maximum acreage of plantation area which can be granted to a plantation company as a single legal entity. The maximum acreage of the plantation area is determined based on the types of commodities as stated in Regulation No. 26/2007, such as oil palm and rubber, where the maximum acreage is 100,000 hectares and 25,000 hectares, respectively, except that the maximum acreage of plantation area in the province of Papua is two times the maximum acreage of plantation area as set forth in Regulation No. 26/2007. Regulation No. 26/2007 also provides various exceptions to the size limitations, one of which is that the limitations do not apply to plantation companies listed in Indonesia and in which the majority of the shares is owned by the public. The Plantation Business Licence (Ijin Usaha Perkebunan IUP) issued prior to the enactment of Regulation No. 26/2007 is still valid and serves as a business licence for the holder. Please note that based on the issuance of Regulation No. 26/2007, Decree No. 357/2002 was revoked. Even though Regulation No. 26/2007 has been effective since February 2007, Regulation No. 2/1999 has never been revoked. Hence, it is unclear how the National Land Agency or the provincial governments will respond to the issuance of Regulation No. 26/2007, which allows each company to own plantations up to 100,000 hectares. Although Decree No. 357/2002 has been revoked by Regulation No. 26/2007, in practice, the National Land Agency still preserves the limitation of plantation area as stipulated in Decree No. 357/2002. As at the Latest Practicable Date, our Group is in compliance with both Regulation No. 2/1999 and Regulation No. 26/2007. We also believe that by enacting the Law No. 18/2004 the Indonesian government has given its support to the development and expansion of plantation business activities. In addition, due to the developing nature of Indonesian property law and the lack of a uniform title system in Indonesia, disputes over our purchase of title from previous land owners could occur. In particular, rights to plantation lands that have been formed from the land of many small landholders or lands belonging to the indigenous people may give rise to disputes with former or illegal land owners. We have entered into various agreements with small landholders who own uncertified land pursuant to which these individuals have relinquished their title over the land to the State so as to enable us to obtain a HGU title over the land. Following the relinquishment of title, such land is typically left vacant pending its intended use by us. As we are only in possession of a contractual right to physical possession of the land based on our agreements with the previous landowners, we are therefore required to apply for a HGU title with the Indonesian government before we are able to obtain valid title to the land. We believe that we are able to submit successful applications to obtain a HGU title over such land on the basis that there are currently no legal disputes over such land. However, due to the developing nature of Indonesian land law, disputes over title from previous landowners or any third parties may arise in the future. A dispute may prevent or indefinitely postpone the granting of HGU titles in our favour, which could in turn have an adverse effect on our prospects and future plans. 32

39 RISK FACTORS Further, before allocating undeveloped land for plantation use, the regional government will consult other related government agencies. As there are difficulties in producing accurate maps, the regional government may assign overlapping Ijin Lokasi for different uses for the same area of land. There is a risk that we may be assigned Ijin Lokasi in respect of land for which there are conflicting Ijin Lokasi or overlapping protected areas such as woodlands. Such conflicts would prevent us from fully utilising the land and require us to seek further approvals from the authorities. There can be no assurance that such approvals will be granted. Failure to obtain HGU certification for our land bank and any disputes over our land which we are involved in, could each have an adverse effect on our business, financial condition, results of operations, and prospects. The issuance of Ijin Lokasi is subject to approval and recommendation from the relevant authorities As at the Latest Practicable Date, our Group is applying for additional Ijin Lokasi (outside our current total land bank) in respect of approximately 36,700 hectares of plantation land in Indonesia allocated by the Indonesian government. The Ijin Lokasi will be issued by the Head of Regency having jurisdiction over the location of the plots of land in respect of which the Ijin Lokasi is being applied for. The issuance of Ijin Lokasi will be made by the Head of Regency in accordance with the regional spatial layout and based on the recommendations from the regional land office and other government related agencies, such as the Department of Agriculture and the Department of Forestry ( Relevant Department ). There is a possibility that the Relevant Department may, for any reason, not issue the required recommendations in our favour, and in such circumstances, the Head of Regency may not issue the Ijin Lokasi under our name. This in turn may have a material adverse effect on our prospects and future plans. The Ijin Lokasi (location permit) of certain of our properties may not be extended As at the Latest Practicable Date, our Group holds Ijin Lokasi in respect of approximately 33,100 hectares of plantation land in Indonesia allocated by the Indonesian government. The Ijin Lokasi allows our Group to acquire rights over the land covered by the Ijin Lokasi in accordance with the prevailing laws and regulations. Upon the completion of the acquisition of such land, our Group will be entitled to begin the process of application for HGU certification over such land. Under Regulation No. 2/1999, Ijin Lokasi may be extended only if the holder of the Ijin Lokasi has acquired from existing landowners more than 50% of the land covered under the Ijin Lokasi. The duration of Ijin Lokasi may not be extended by the Indonesian government and will automatically expire if our Group fails to acquire up to 50% of the land covered in the Ijin Lokasi within the stipulated validity period of the said Ijin Lokasi. In such an event, our Group may lose the rights granted by the Indonesian government under the Ijin Lokasi in respect of the remaining area covered by the original Ijin Lokasi, which would have a material adverse effect on our prospects and future plans. Our Group is presently taking steps to acquire the remaining land in respect of such Ijin Lokasi. Please refer to Appendix C Indonesian Regulatory Overview of this Prospectus for more information. We will be adversely affected by any significant or prolonged disruption to our production facilities Any prolonged and/or significant disruption to our production facilities (whether occasioned by the need for repair, maintenance or servicing or the result of industrial accidents or human error) will adversely affect our operations. Further, any major or sustained disruptions in the supply of utilities such as water or electricity or any fire, flood, earthquake or other natural calamities could lead to significant disruption to our operations or result in significant damage to our production facilities or inventories. These will adversely affect our business, financial performance and prospects. We may have insufficient insurance coverage or no insurance coverage for certain contingencies Our operations are subject to hazards and risks inherent in agriculture and processing operations, such as fires, storage tank leaks, mechanical failure of equipment at our processing facilities and natural disasters. Many of these operating and other risks may cause personal injury and loss of life, severe damage to or destruction of our properties and environmental pollution, and could result in suspension of part or all of our operations and the imposition of penalties. 33

40 RISK FACTORS We face the risks of loss and damage to our properties, machinery and FFB due to fire, theft and natural disasters such as earthquakes and floods. Such events may cause a disruption to or cessation of our operations. While our insurance policies cover some losses in respect of loss and damage to our properties, machinery and inventories, our insurance coverage may not be sufficient to cover all of our potential losses. In addition, our insurance coverage may not cover all the risks which we may be exposed to, such as loss and damage to our biological assets. In the event our losses exceed our insurance coverage, or if we are not covered by the insurance policies we have taken up, we may be liable to cover any shortfall or losses. Our insurance premiums may also increase substantially because of such claims. In such circumstances, our financial results may be materially and adversely affected. We do not insure our plantations against fire, diseases, or pests. We currently maintain insurance coverage for industrial all risks, machinery breakdown, and earthquake of approximately US$67.7 million in respect of our Bangka Island and Kalimantan processing facilities which includes equipment and machineries, stocks, inventories and power plant. Our insurance coverage is also subject to certain exclusions such as war, terrorism and nuclear contamination. In the event that our processing facilities are damaged, such insurance coverage may be inadequate to cover the loss or damage that may be incurred as a result of such events. In addition, the operation of our vessels is subject to risks such as losses caused by adverse weather conditions, mechanical failures, collisions, human error, war, terrorism, piracy, labour stoppages and other circumstances or events including spills and other environmental mishaps. In addition, transporting cargo across international jurisdictions involves the risk of business interruptions due to political circumstances in foreign countries, hostilities, labour strikes and boycotts, and the risk of government expropriation of our vessels. We may not be able to obtain adequate insurance coverage at reasonable rates for our vessels in the future or successfully make claims against the insurance companies. Furthermore, even if insurance coverage is adequate to cover our losses, we may not be able to obtain a replacement ship in a timely manner. Any significant loss or liability for which we are not adequately insured or any delay in obtaining a replacement ship could have a material adverse effect on our business, financial position and results of operations. We also maintain marine hull insurance coverage of Rp19.6 billion (approximately US$2.2 million) in respect of our vessels. Such insurance covers events such as fire, explosion, perils of the seas, piracy, accidents in loading, discharging or shifting cargo and is subject to certain exclusions including loss of life and personal injury, war, derelict bombs or torpedoes, nuclear fission and terrorism. The amount of such insurance coverage may be inadequate to cover the loss or damage that may be incurred as a result of such events. If we suffer a large uninsured loss or in the event that any insured loss suffered by us significantly exceeds our insurance coverage, our business, financial condition, results of operations and prospects could be materially and adversely affected. Please refer to the section General Information On Our Group Insurance of this Prospectus for more information. We are dependent on our key management team and skilled employees The continued services of our management team and skilled employees make up one of our key success factors. Our Group s success is to a large extent attributable to the strategy and vision of our founder and Chairman and CEO, Mr. Henry Maknawi, as well as our senior management team and operational personnel who are familiar with our Group s operations and are able to meet the needs and requirements of our customers. As we do not have keyman insurance, the loss of the services of the aforementioned persons would have an impact on our business and operations. There is no assurance that we will be able to retain our key management personnel. A loss of any of our key personnel without sufficiently qualified and timely replacements may have an adverse impact on our operations and our growth, prospects and future performance. 34

41 RISK FACTORS We rely on bank borrowings to finance our operations and may require additional funding for our future growth Certain of our Group companies currently rely on credit facilities from financial institutions. Such facilities involve restrictive covenants such as (i) limiting certain of our Group companies ability to pay dividends or requiring us to seek consent from the relevant financial institutions for the payment of dividends; (ii) requiring us to maintain certain financial ratios, failing which repayment of the debt may be accelerated; (iii) restricting our ability to undertake or requiring us to obtain consents from the relevant financial institutions for corporate restructurings, mergers and acquisitions, additional financing or other fundraising exercises; and/or (iv) requiring the retention of ultimate majority shareholding interest in certain of our Group companies by members of the Maknawi family both prior to and after the Invitation. In the event that such restrictive covenants are not discharged or such consent is not granted by the relevant financial institutions, our operations, future expansion and the attractiveness of our Shares as an investment may be adversely affected. As at the Latest Practicable Date, the aggregate amount of bank borrowings which are covered by these restrictive covenants was approximately US$39.7 million (86.7% of our total indebtedness). Apart from internal funding resources, we also rely on finance leases and term loans to finance our operations. Please refer to the section Capitalisation and Indebtedness of this Prospectus for details of our bank borrowings. If all or a substantial portion of our facilities are withdrawn and we are unable to secure alternative funding on acceptable commercial terms, or if the cost of such alternative funding is higher than our present cost of funds, our operations and financial position will be materially and adversely affected. We may need additional financing to fund our activities in future. There is no assurance that we will be able to obtain additional financing on terms that are acceptable to us or at all. If we are unable to do so, our future plans and growth prospects may be adversely affected. Our operations are subject to negative impact of government export taxes, import policies and tariffs and price control measures As we export a significant portion of our products to countries outside Indonesia, we are currently affected by export taxes levied by the Indonesian government. For instance, the Indonesian government had on 15 June 2007 implemented a price control measure by imposing an export duty hike on CPO to lower and curb any further increase in the price of cooking oil. Tariffs and government import policies of our Group s export markets (such as India) will also affect the cost of materials to our foreign customers. Such taxes increase the cost of our export sales. Based on the Regulation of the Minister of Finance No. 94/PMK.011/2007 dated 31 August 2007 ( MOF Regulation No. 94 ) in conjunction with the Regulation of the Minister of Trade No. 35/M-DAG/PER/8/2007 dated 31 August 2007, the Ministry of Trade will determine Export Check Price ( ECP ), also commonly known as Harga Patokan Export ( HPE ), on a monthly basis for certain Export Goods ( MOT Regulation No. 35 ) in order to ensure a sufficient supply of raw material for the domestic cooking oil industry and to maintain the stability of domestic cooking oil prices. The Ministry of Trade utilises the monthly average international price and/or FOB Indonesian ports to determine the ECP. The Ministry of Finance will then determine the percentage of export tax to be applied to the ECP every month based on the average monthly CIF Rotterdam ( Reference Price ). Pursuant to the Regulation of the Ministry of Finance No. 72/PMK.011/2008 dated 8 May 2008, a new range of export tax rates were imposed on CPO and its derivative products. The export tax rate imposed on CPO and CPKO could extend up to a maximum of 25% depending on the Reference Price. If the Indonesian government further increases the export tax level on our products or imposes an export ban on our products or takes other similar actions, our export sales and the prices we can charge in the Indonesian market will be adversely affected, which could adversely affect our business, financial condition, results of operations and prospects. Any material changes in Indonesian export policies or the import policies of our Group s export markets such as an export or import ban or an increase in export or import taxes or other similar or related actions by the various governments would adversely affect the price competitiveness of our Group s products. 35

42 RISK FACTORS We are exposed to foreign exchange fluctuation risks Our Company s functional and reporting currency is the US dollar and that of our Indonesian subsidiaries is the Rupiah. The majority of the sales of palm oil products of our Group are quoted in US dollars while our purchases (with the exception of certain key costs such as fertilisers, plant and heavy equipment) and business operations in Indonesia are mainly denominated in Rupiah. For FY2007, approximately 96.6% and 3.4% of our revenue were denominated in US dollars and Rupiah respectively. For the same period, approximately 5.1% and 94.9% of our total purchases were denominated in US dollars and Rupiah respectively. As such, our Group has a net foreign exchange exposure due to a mismatch in the currencies of receipts and payments. To the extent of such mismatch, any significant appreciation or depreciation in the US dollar against the Rupiah and/or arising from timing difference due to credit terms given by our suppliers and to our customers may cause our Group to incur foreign exchange losses or, conversely, benefit from foreign exchange gains. In addition, our Group has significant borrowings denominated in US dollars to finance our operations in Indonesia. As such, any appreciation in the US dollar against the Rupiah may also result in our Group incurring foreign exchange losses due to settlement or revaluation of our US dollar-denominated borrowings. As at 31 December 2007, approximately 34.6% and 65.4% of our Group s total borrowings were denominated in US dollars and Rupiah respectively. Our Group records its financial results in either Rupiah or US dollars and the accounts of our Indonesian subsidiaries will need to be translated to US dollars for consolidation purposes. Any fluctuations in currency exchange rates will also result in exchange translation gains or losses. For the last three financial years ended 31 December 2005, 2006 and 2007, the net foreign exchange gains/(losses) of our Group are as follows: FY2005 FY2006 FY2007 Net foreign exchange gains/(losses) recognised in income statement (US$ 000) (563) 1,206 (773) In seeking to mitigate the volatility associated with US dollar-denominated sales, our Group usually utilises foreign currency forward contracts. The value of such foreign currency forward contracts is equivalent to approximately 30.0% of US dollar-denominated sales. Our Group s foreign currency hedging policy aims to reduce the impact of significant fluctuations in the exchange rate between the US dollar and the Rupiah, on our financial performance. Nonetheless, any sudden and significant changes in the exchange rate between the US dollar and the Rupiah could affect the results of our operations, if the prices of our products fail to fully reflect the changes in raw material costs or if our currency position is not properly or adequately hedged. Our operations are subject to disruptions in transportation and volatility in freight costs We are dependent on freight and transportation services provided in part by external parties to transport materials between our processing and storage facilities as well as for delivery of our products to our customers. Disruption of transportation services arising from factors such as unfavourable weather conditions, labour unrest, significant downtime arising from major and unexpected repairs or other events could impair our production process and affect the quality of our products and our ability to supply our products to customers on time. Failure to or delay in supply of our products to customers may result in contractual claims against us and any repeated delay or failure to supply our products to customers may in the long term, adversely affect the demand for our products, our reputation and the growth and prospects of our business as a whole. Freight and handling expenses incurred in the transportation of our products account for a substantial portion of our Group s distribution costs and are therefore vital factors in customers purchasing decisions. Increases in freight and transportation related costs, including cost increases due to an escalation of fuel prices, could increase our Group s expenses which may in turn have a material adverse effect on our operating results. 36

43 RISK FACTORS A significant portion of our revenue is attributable to a major end customer Kuok Oils & Grains Pte. Ltd. (now part of the Wilmar Group) is our major end customer accounting for approximately 62.7%, 52.2% and 35.2% of our revenues for FY2005, FY2006 and FY2007 respectively. Please refer to the section General Information On Our Group Major Customers of this Prospectus for more information. We generally do not have any long-term supply agreements with our customers. The strength of our relationship with our major customers in the future will depend on our ability to supply quality products in a timely manner and at acceptable prices. Hence, there can be no assurance that the Wilmar Group or any of our other major customers will continue to place orders with us at current levels and any significant reduction or cessation in orders would have a material adverse effect on our financial results. We may be adversely affected by the imposition and enforcement of more stringent environmental regulations Our main environmental concerns relate to the discharge of effluent arising from the milling of FFB and clearance of land and forest for developing our plantations. Our main social concern relates to possible conflicts that may arise with local communities in the areas around our plantations. Any environmental claims or failure to comply with any present or future regulations could result in the imposition of fines, or the suspension or cessation of our operations. Our plantations are subject to both scheduled and unscheduled inspections by various government agencies, each of whom may have different perspectives or standards from the others. These agencies have the power to examine and control our compliance with their environmental regulations, including the imposition of fines and revocation of licenses and land rights. However, governmental agencies may adopt additional regulations that would require us to spend additional funds on environmental matters. Please refer to Appendix C Indonesian Regulatory Overview of this Prospectus for more information. Environmental regulations and social practices in Indonesia tend to be less stringent than in developed countries. It is possible that these regulations could become more stringent in the future and compliance with them may involve incurring significant costs. This may consequently have an adverse effect on our operations. Any failure to comply with the laws and regulations could subject us to liabilities. Our plantation operations may face disruption from environmental groups, non-governmental organisations and interested individuals Environmental groups, non-governmental organisations and interested individuals may from time to time seek to challenge or impair the ability of plantation companies to engage in plantation activities. For instance, groups and individuals may stage protests that disrupt harvesting or production plans and may file or threaten to file legal proceedings seeking to disrupt the operations of plantation companies generally. Such activities may generate negative press about plantation companies in general. Any delay in or restrictions on harvesting or production activities imposed as a result of the intervention of environmental groups, non-governmental organisations or such interested individuals or other action that may give rise to negative perceptions about plantation companies generally, may adversely affect our reputation and disrupt our operations which in turn may cause us to suffer financial loss. We may be adversely affected by third parties actions in using fire for land clearing We adopt a strict zero burning policy for land clearing and practice fire-control measures such as maintaining watchtowers and conducting regular patrols. However, there is a possibility that third parties may conduct burning in order to carry out land clearing activities near our plantation areas or commit arson or subterfuge that cause fires to occur in our plantation areas, resulting in damage to our plantations. This may lead to legal proceedings against us in respect of fires occurring in our plantations, which may affect our reputation and disrupt our operations, which in turn may cause us to suffer financial loss. We may make acquisitions which could place a strain on our resources and adversely affect our financial performance Going forward, we may make acquisitions to expand our existing business. The entire acquisition process involves, inter alia, identifying suitable targets, negotiations and due diligence investigations and could place a strain on our resources and may not result in the completion of successful acquisitions. Future acquisitions could also divert our management s attention from other business concerns and may expose 37

44 RISK FACTORS our business to unforeseen liabilities or risks associated with entering new markets. We may also lose key employees while integrating new organisations. Consequently, the acquired business may not be successfully integrated and we may not achieve the anticipated revenues and cost benefits. Such acquisitions could also result in, inter alia, loss of customers, potential dilutive issuance of equity securities or the incurrence of debt, contingent liabilities or other unanticipated events or circumstances, any of which could adversely affect our business and financial performance. Labour activism and strikes, or failure to comply with various labour regulations or maintain satisfactory labour relations may adversely affect our Group Our plantations and processing plants are labour-intensive. In addition, our plantations are surrounded by plasma plantations which may affect our field maintenance and plant harvesting. Our operations have not been materially affected by any significant labor dispute or dispute with the villagers of the local communities in the past. However, we may, in the future, experience labor unrest, activism, disputes or actions involving our employees or villagers, any of which could have a material adverse effect on our business operations and, in turn, our financial performance as a whole. Although the operations of our Group have not been materially affected by any significant labour dispute in the last three financial years ended 31 December 2005, 2006 and 2007 and the period from 1 January 2008 to the Latest Practicable Date, there is no assurance that we will not experience labour unrest, activism or disputes in future which may be significant and could adversely and materially affect our business and financial performance as a whole. Our Group may be exposed to the risk of small landholders defaulting on repayment of the loans extended or guaranteed by our Group under the Plasma Programme in which we participate The Indonesian government requires oil palm plantations to develop the surrounding local plantation areas held by small landholders when applying for land rights for oil palm plantations. This form of assistance to local small landholders is generally known as a Plasma Programme. Under a Plasma Programme, a plantation developer transfers a designated land area to small landholders, who then operate the plasma plantation under the supervision of the plantation developer. Our Group has implemented a Plasma Programme using the plantation business cooperatives scheme (KKPA), the cooperation in local community palm oil plantation scheme (KKSR), and the independent plasma scheme (Plasma Mandiri). Under the KKPA scheme, the land is typically occupied by the villagers and our Group helps to develop the land (including assisting the villagers to obtain land certificates) and manage the oil palm trees to maturity. The development costs are funded by bank loans, which are guaranteed by the land rights over the small landholders oil palm plantations and by corporate guarantees from our Group. In the event that the small landholders default on repayment of their loans, and the banks claim on the guarantees provided by our Group, our Group will be entitled under Indonesian law to be subrogated in relation to the security held by the banks over the debts of the small landholders. Upon maturity of the oil palm trees, the land will be maintained and managed by the villagers or in the future by our Group. The harvested FFB will then be sold to our Group. The loan facilities will be repaid by the villagers from part of the FFB sales proceeds. The banks typically charge interest at fixed and floating rates under the government scheme or a floating rate under the company scheme for the financing of such development costs. Historically, the interest rates charged ranged between 10.0% and 18.9% per annum. Repayment of interest typically starts after the fourth year of planting and repayment of the principal (including interest) starts between the sixth and seventh year of planting. Our Group will obtain a power of attorney to manage the account of the villagers into which the sales proceeds of FFB will be deposited. This power of attorney allows our Group to withdraw funds from such account to pay for all the villagers operating costs and expenses. Under the KKSR scheme, the land is also typically occupied by the villagers. Our Group will provide seedlings and the regional authorities will provide fertiliser to the villagers. Post-harvest, the FFB will be sold to our Group and part of the sale proceeds will be paid to our Group and the regional authorities as payment for the seedlings and fertiliser respectively. 38

45 RISK FACTORS Plasma Mandiri is a scheme whereby our Group will provide the seedlings to the villagers, and the villagers will plant and maintain the plantation. Post-harvest, the FFB will be sold to our Group and part of the sales proceeds will be paid to our Group as payment for the seedlings provided. There is no governmental involvement under this scheme. Please refer to Appendix C Indonesian Regulatory Overview of this Prospectus for more information on the above schemes under our Plasma Programme. There is no assurance that the small landholders will not default on their obligations to sell FFB to our Group. As such, this may result in them defaulting on their loan repayments to the banks and our Group. In such event, the banks may call upon the guarantees which have been provided by our Group to the banks to secure the loans of the small landholders. Under the KKPA scheme, our Group has provided guarantees for loan facilities of up to Rp92.1 billion (approximately US$9.9 million) and approximately Rp50.0 billion (approximately US$5.4 million) of such loans have been drawn down as at the Latest Practicable Date. In addition, under our Plasma Programme, our Group may provide financial aid to small landholders for the development of their plantations, where necessary. As at the Latest Practicable Date, the receivables from small landholders amounted to approximately Rp10.6 billion (approximately US$1.1 million). Any material default by such small landholders on their obligations to the banks and/or our Group would therefore have a material adverse impact on our Group s business and financial performance as a whole. Our bulking terminal is situated on leased property and such lease may be terminated and/or may have to be relocated at the end of the lease period We lease the land on which our bulking terminal (including the nearby jetty for vessels to berth) is situated as well as our storage tanks from PT Timah Industri. The respective leases will expire in There is no assurance that these leases (or any future leases taken up) will not be terminated prior to their expiry or that when an application for extension is made, that an extension for such leases will be granted, or granted on no less favourable terms. In addition, we occupy the pier in the Belinyu port area pursuant to a co-operation agreement with PT (Persero) Pelabuhan Indonesia II Pangkalbalam Branch which will expire at the end of If the lease or co-operation agreement is terminated or if our Group is unable to extend the same on the expiry of their respective existing terms, we would have to relocate the infrastructure built on the leased property and incur significant relocation costs, which in turn may have an adverse effect on our Group s financial performance. Our renewable biomass power generation business is in its early stages of development and therefore exposed to operational risks Our renewable biomass power generation operations are relatively new and may face operational risks typically associated with new businesses. The technology our power plant relies on utilises renewable biomass as a commercially viable fuel source. This technology is relatively new and may not be as stable as conventional power plant technology. In addition, we rely on third parties for the supply of over 30% of the raw materials, namely kernel shells and EFB, used as the fuel source for our biomass power generation operations. In the event that we are unable to obtain sufficient raw materials for use as biomass or should the technology we rely on prove more unstable than conventional technology, our power output may fluctuate as a result. This may adversely affect the financial performance of our power generation business. Our renewable biomass power generation business only supplies PLN, a state-owned electricity enterprise with whom we do not have any long term contractual agreement for the supply of our power supply services. We currently have a one-year renewable contract with PLN for the supply of power generated from our renewable biomass power plant on Bangka Island in Sumatera which will expire on 31 May We are in the process of negotiating for a renewal of the contract and, where possible, for a longer term power purchase contract. However, there is no assurance that PLN will continue to transact with us at the same levels and price in the future as they have had in the past. In the event that our contract for our Bangka Island power plant is not renewed and we are unable to secure alternative purchasers, our revenue and profitability from our power generation operations will be adversely affected. 39

46 RISK FACTORS We are dependent on temporary labour for some of our production proceses We engage temporary labour directly or through sub-contractors to carry out certain aspects of our production processes including the harvesting of FFB and the upkeep of our oil palm plantations. Labour for harvesting is generally engaged on a yearly contract basis while labour for the upkeep of our plantations are engaged on a daily basis without any contract. There can be no assurance that we can engage sufficient temporary labour for the upkeep of our plantations or, upon the expiry of the relevant contracts, temporary labour for the harvesting of our FFB. In the event that we are unable to secure sufficient temporary labour, our ability to produce our products may be adversely affected and accordingly, our business, results of operations and financial performance may be adversely affected. We are subject to intense competition We operate in an industry which is highly competitive and we face competition from other producers of similar CPO and CPKO products in both the local and foreign markets. Some of these producers have similar capabilities and compete with us on key attributes such as quality of products, pricing, time-tomarket and available production capacity. There can be no assurance that we can compete successfully in the future and maintain or increase our market share. In the event that we are unable to compete effectively, our business and future growth will be adversely affected. We are affected by regional and worldwide social, political and economic conditions Globalisation has resulted in our exposure to global, social, political and economic conditions. Uncertainties arising from war, the potential threat of terrorism and the outbreak of infectious diseases may cause our customers to take a cautious approach to spending and consumption of services. Adverse changes in the political and social conditions both regionally and worldwide may affect consumers sentiment and result in the reduction of demand for our CPO and CPKO which will have an adverse effect on our Group s financial performance and growth. We are and will continue to be dependent on the economic growth, political stability as well as, social conditions of Indonesia and any other countries in which we operate or intend to operate. Our growth and expansion plans may also be undermined by any labour disputes, political unrest, economic or financial crisis or disturbances occurring in any of such countries. RISKS RELATING TO THE PALM OIL INDUSTRY The prices of our products may fluctuate based on international prices Our main products, CPO and CPKO, are freely-traded market commodities. As such, their international prices are affected by various factors that include changes in global demand for and supply of CPO and CPKO, prices and global demand for and supply of other vegetable oils, world consumption levels of these products and import and export tariffs. Our increase in revenue between FY2006 and FY2007 was partially attributable to the increase in CPO and CPKO prices. Downward fluctuations in the prices for these products could have a material adverse effect on our business, financial condition, results of operations and prospects. Our products are subject to changes in consumer preferences and may face significant competition from other substitute products CPO, soybean oil and rapeseed oil are some of the most consumed vegetable oils and to a certain extent are substitutable for one another. We believe worldwide consumption of palm oil has increased faster than any other vegetable oil and its success is linked to its versatile use in the food industry as well as for many non-food applications. Any significant increase in demand for products manufactured from soybean or rapeseed or substitution of palm oil for its competing vegetable oils in both food and non-food operations may have a material adverse effect on our business, results of operations and financial performance. 40

47 RISK FACTORS We are adversely affected by downturns in the harvesting of FFB due to adverse weather conditions, natural disasters and other factors The production of CPO and other palm oil derivative products are highly dependent on a sufficient supply of FFB. Being an agricultural product, the occurrence of unfavourable weather conditions and natural disasters such as fires, droughts, floods, earthquakes, volcanic activity, pestilence, crop disease and annual drought in the Kalimantan regions which typically lasts for approximately three months (although in the past have lasted for up to five months), haze from forest fires, labour strikes or other disturbances and delay in fertiliser application will affect the supply of FFB. In addition, the Indonesian government may take action against us, such as suspending our land rights, if forest fires occur on our plantations. Any of these factors may result in FFB supply being less readily available, which in turn could have a material adverse effect on our business, financial condition, results of operations and prospects. We may be adversely affected by pests and diseases Palm oil plantations are susceptible to pests and diseases. The outbreak of leaf eating insects such as nettle caterpillars and bagworms are commonly encountered, especially in plantations where only one type of crop is grown on the land. The outbreak of pest infestation and disease may result in a decrease in the production of FFB and destruction of oil palm trees in some instances, which in turn may have a negative impact on our business operations and financial performance. In addition, we may have to incur additional expenditure to control or eradicate such outbreaks. Since the commencement of our business, we have not experienced any outbreak of pests infestation and diseases that has had a significant impact on our operations or FFB production. There can be no assurance that there will be no major outbreaks of pest infestation and disease in the future that could materially and adversely affect our business, financial condition, results of operations and prospects. RISKS RELATING TO INDONESIA Our operations may be adversely affected by political and social instability in Indonesia All our operations are located in Indonesia. There is no assurance that Indonesia s political landscape will not change, giving rise to political instability, social and civil unrest and disruption of businesses and the economy. These could have adverse effects on our operations. Since the change of government in 1998, Indonesia has experienced a process of democratic change, resulting in political and social events that have highlighted the unpredictable nature of Indonesia s changing political landscape. These events have resulted in political instability, as well as general social and civil unrest on certain occasions in the past few years. For example, since 2000, thousands of Indonesians have participated in demonstrations in Jakarta and other Indonesian cities both for and against the government and government officials, as well as in response to specific issues, including fuel tariff increases, labour matters, privatisation of state assets, anti-corruption measures, decentralisation and provincial autonomy, actions of former government officials and their family members and the US-led military campaigns in Afghanistan and Iraq. In October 2005, demonstrations affected several cities after the government mandated an increase in fuel prices. Although these demonstrations were generally peaceful, some have turned violent. In 2004, Indonesians directly elected the President, the Vice-President and representatives of the Indonesian parliament through a proportional voting system for the first time. Although the 2004 elections were conducted peacefully, future political campaigns and elections may bring a degree of political and social uncertainty to Indonesia. Political and social unrest may occur if the results of future elections are disputed or unpopular. Political and social developments in Indonesia have been unpredictable in the past and have caused confidence in the Indonesian economy to remain low. Any resurgence of political instability could adversely affect the Indonesian economy, which could adversely affect our Group s respective businesses. Social and civil disturbances could occur in the future and on a wider scale, directly or indirectly, have a material adverse effect on our business, financial condition, results of operations, prospects and on our Shares. 41

48 RISK FACTORS Terrorist attacks in Indonesia could destabilise the country Terrorist acts could destabilise Indonesia and increase internal divisions within the Indonesian government as it evaluates responses to that instability and unrest. Violent acts arising from, and leading to, instability and unrest have occurred in the past, and may continue to have, a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy. Such terrorist attacks or armed conflicts in Indonesia may directly impact our physical facilities or those of the suppliers and customers. They may also have an adverse effect on the demand for and supply of our products, our production capability and our ability to deliver products to customers in a timely manner which in turn may have a material adverse effect on our business, financial condition, results of operations and prospects. Economic changes in Indonesia may adversely affect our business The economic crisis which affected Southeast Asia, including Indonesia, from mid-1997 was characterised in Indonesia by, among other effects, currency depreciation, negative economic growth, high interest rates, high inflation, social unrest and extraordinary political developments. These conditions had material adverse effect on Indonesian businesses. The economic difficulties faced by Indonesia during the Asian economic crisis in 1997 resulted in among other things, significant volatility in interest rates, which had a material adverse impact on the ability of many Indonesian companies to service their then existing indebtedness. A loss of investor confidence in the financial system of emerging and other developing markets, or other factors, may cause increased volatility in the Indonesian financial markets and a slowdown or negative growth could have a material adverse effect on our business, financial condition, results of operations and prospects. Our operations may be adversely affected by earthquakes, tsunamis, floods or other natural disasters The Indonesian archipelago is one of the most active volcanic regions in the world. As it is located in the convergence zone of three major lithospheric plates, it is subject to significant seismic activity that can lead to destructive earthquakes, tidal waves and volcanic eruptions. On 26 December 2004, an underwater earthquake off the coast of Sumatera resulted in a tsunami that devastated coastal communities in Indonesia, Thailand and Sri Lanka. In March 2007, a major earthquake struck Solok in Central Sumatera, destroying hundreds of buildings and resulting in human casualties. In February 2007, incessant rain caused rivers to overflow across Jakarta. As a result, residential and government buildings, retail malls and roads were flooded. The authorities were forced to cut off electricity and water supplies in certain areas. There can be no assurance that future geological occurrences will not significantly impact our operations. An earthquake or other geological disturbance in any of Indonesia s more populated cities and financial centres could disrupt the Indonesian economy and our operations, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Our operations may be adversely affected by an outbreak of SARS, avian influenza or other epidemics During the last three years, large parts of Asia experienced unprecedented outbreaks of avian flu. No fully effective avian flu vaccines have been developed and there is evidence that the H5N1 virus is evolving. An effective vaccine may not be discovered in time to protect against the potential avian flu pandemic. In 2003, certain countries in Asia experienced an outbreak of SARS, a highly contagious form of atypical pneumonia, which seriously interrupted the economic activities and the demand for goods plummeted in the affected regions. An outbreak of avian flu, SARS or other contagious disease or the measures taken by the governments of affected countries against such potential outbreaks, could seriously interrupt our 42

49 RISK FACTORS production operations or those of our suppliers and customers, which could have a material adverse effect on our business, financial condition, results of operations and prospects. The perception that an outbreak of avian flu, SARS or other contagious disease may occur again may also have an adverse effect on the economic conditions of countries in Asia. The Indonesian legal system is subject to considerable discretion and uncertainty As Indonesia is a developing market, its legal and regulatory regime may be less certain than in more developed markets and may be subject to unforeseen changes. At times, the interpretation or application of laws and regulations may be unclear and the content of applicable laws and regulations may not be immediately available to the public. In particular, regional regulations are not nationally published. Under such circumstances, consultation with the relevant regional authority in Indonesia may be necessary to obtain better understanding or clarification of applicable laws and regulations. Indonesia s legal system is a civil law system based on written statutes. Judicial decisions in Indonesia, in particular those rendered by the Supreme Court, are persuasive but they do not constitute binding precedent. These decisions are not as systematically and immediately published as in developed countries. Many of Indonesia s commercial and civil laws and rules on judicial process are based on preindependence Dutch law and have not been revised to reflect the complexities of modern financial transactions and instruments. Indonesian courts are often unfamiliar with sophisticated commercial or financial transactions, leading in practice to uncertainty in the interpretation and application of Indonesian legal principles. The application of many Indonesian laws and regulations depends, in large part, upon subjective criteria such as the good faith of the parties to the transaction and principles of public policy. Indonesian judges operate in an inquisitorial legal system and have very broad fact-finding powers and a high level of discretion in relation to the manner in which those powers are exercised. In practice, Indonesian court decisions may omit, or may not be decided upon, a legal and factual analysis of the issues presented in a case. As a result, administration and enforcement of laws and regulations by Indonesian courts and governmental agencies may be subject to uncertainty and considerable discretion. For instance, the amount we have set aside which we believe to be adequate as provision for taxes and other related charges may be insufficient based on the relevant authorities assessment and we may be required to pay more as a result. Uncertainty regarding the application of various laws and regulations to our Group s business, our entitlement to the various licenses we require to operate our Group s business, our Group s entitlement to various land rights or other legal or regulatory matters relating to our Group s business could have a material adverse effect on our Group s business, financial condition, results of operations and prospects. Future restrictions on foreign ownership The Government of Indonesia recently promulgated Law No. 25/2007 dated 26 April 2007 on investment (the New Investment Law ) and issued Government Regulation No. 77 dated 3 July 2007 on a list of closed and restricted business sectors for capital Investment (the Negative List ). Under the New Investment Law, as long as the field activity is open for foreign investment, foreign companies and individuals may own 100% of the shares of the foreign investment company ( PMA Company ). However, certain strategic industries, such as the port, telecommunication, airport, shipping, airline, water supply, railway, oil and gas, electricity or power plant, tourism, multimedia and plantation industries are prohibited from being directly wholly-owned by foreign individuals or foreign companies. Our Group comprises PMA Companies, namely SPL, WPM, BPS and CPG, which are presently owned by our Singapore-incorporated subsidiaries (save for the remaining 100 shares in SPL, WPM and BPS held by Mr. Henry Maknawi and the remaining 97 shares in CPG held by the initial shareholders of LK and BE). As our PMA Companies do not fall under the relevant restricted industries, and our remaining Indonesian subsidiaries are not deemed to be PMA Companies, our current Group structure is in compliance with the New Investment Law. However, it is still not clear under the New Investment Law whether SA, KP, KL and KB must divest their respective shareholdings in SPL, WPM, BPS and CPG as required under the previous foreign investment regulation. In addition, the New Investment Law does not specify the amount of the divestment required and the divestment period. BKPM officials have indicated that this is subject to the implementing regulations of the New Investment Law. The substantial portion of the implementing regulations of the 43

50 RISK FACTORS New Investment Law has not been issued to date. Based on the previous foreign investment regulation, the divestment period is 15 years from the first commercial production. If our Singapore-incorporated subsidiaries are forced to divest a substantial portion of their shareholdings in our PMA Companies, our business, financial condition, results of operations and prospects may be adversely affected. Please refer to Appendix C Indonesian Regulatory Overview of this Prospectus for further information. RISKS RELATING TO AN INVESTMENT IN OUR SHARES Our Directors and Substantial Shareholders will retain significant control over our Company after the Invitation, which will allow them to influence the outcome of matters submitted to Shareholders for approval Upon the completion of the Invitation, our Directors, Substantial Shareholders and their associates and such Shareholders who are related to our Directors or Substantial Shareholders, will beneficially own in aggregate approximately 73.8% of our Company s post-invitation share capital. As a result, these persons will be able to exercise significant influence over all matters requiring shareholders approval, including the election of directors and the approval of significant corporate transactions, if they act together. These persons will also have veto power, if they act together, with respect to any shareholders action or approval requiring a majority vote except where they are required by the rules of the Listing Manual or the SGX-ST to abstain from voting. Such concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our Company which may not benefit our Shareholders. Any future sales of our Shares could adversely affect our Share price There could be downward pressure on our Share price as a result of any future sale or availability of our Shares. The sale of a significant amount of Shares in the public market after the Invitation, or the perception that such sales may occur, could adversely affect the market price of our Shares. These factors could also affect our ability to sell additional equity securities. Except as otherwise described in the section Moratorium of this Prospectus, there will be no restrictions imposed on our Directors, Substantial Shareholders and their associates to dispose of their shareholding. Currency fluctuations could adversely affect the dividends of the Shares Our Company may declare and pay dividends in US dollars, while Shareholders holding their Shares through the CDP may receive their dividends in Singapore dollars. Hence, fluctuations in the exchange rates between the US dollar and the Singapore dollar may adversely affect the amount of cash dividends received by such Shareholders holding their Shares are held through CDP. There has been no prior market for our Shares There has been no public market for our Shares, prior to the Invitation. We have applied to the SGX-ST for the listing and quotation of our Shares on the Official List of the SGX-ST. However, no assurance can be given that an active trading market for our Shares will develop or, if developed, will be sustained, or that the market price for our Shares will not decline below the Issue Price. The Issue Price may not be indicative of the market price for our Shares after the completion of the Invitation. Our Share price may fluctuate following the Invitation The market price of our Shares may fluctuate significantly and rapidly as a result of, among others, the following factors, some of which are beyond our control: variations of our operating results; changes in securities analysts recommendation, perceptions or estimates of our financial performance; changes in market valuations and share prices of companies with similar businesses to our Company that may be listed in Singapore; announcements by us of significant acquisitions or divestments, strategic alliances or joint ventures; 44

51 RISK FACTORS additions or departures of key personnel; fluctuations in stock market prices and volume; involvement in litigation; success or failure of our management team in implementing business and growth strategies; announcements of technological innovations or new products; changes in conditions affecting our industry, the general economic conditions or stock market sentiments or other events or factors; events adversely affecting the political, economic and social situation in Indonesia; and negative publicity involving our Company, any of our Directors, Executive Officers or Substantial Shareholders, whether or not it is justified. New investors will incur immediate dilution and may experience further dilution Our Issue Price of our Shares is substantially higher than the Adjusted NTA per Share based on the post- Invitation issued share capital. If we were liquidated immediately following the Invitation, each investor subscribing to the Invitation would receive less than the price paid for his Shares. Please refer to the section Dilution of this Prospectus for more information. Additional funds raised through issue of new Shares for our future growth will dilute Shareholders equity interests We may in the future expand our capabilities and business through acquisition, joint venture and strategic partnership with parties who can add value to our business. We may require additional equity funding after the Invitation and our Shareholders will face dilution of their shareholdings should we issue new Shares to finance future acquisitions, joint ventures and strategic partnerships. Our operating subsidiaries are incorporated or established, and their assets are located outside Singapore, hence the rights and protection accorded to our Shareholders may not be the same as those applicable to shareholders of a Singapore incorporated company Our operating subsidiaries (all of which are incorporated outside Singapore) have their operations and assets located in Indonesia. The Singapore Companies Act may provide shareholders of Singapore incorporated companies with certain rights and protection of which there may be no corresponding or similar provisions under the laws of Indonesia. As such, if you invest in our Shares, you may or may not be accorded the same level of shareholder rights and protection that a shareholder of a Singapore incorporated company would be accorded under the Singapore Companies Act. In addition, all our Executive Directors, as at the Latest Practicable Date, are non-residents of Singapore and their assets are mainly located outside Singapore. As such, it may be difficult for you to commence any action as services of process will have to be effected outside Singapore against our operating subsidiaries and those of our Directors residing outside Singapore, or to enforce a judgement obtained in Singapore against our Group or any of such Directors. 45

52 EXCHANGE RATES AND EXCHANGE CONTROLS EXCHANGE RATES Our financial statements are expressed in US dollars. The exchange rates for Rp to US$ as outlined in the table below are the foreign exchange rates for public transactions as quoted by Bank Indonesia. The fixing rate is at a.m. Indonesian time. These exchange rates have been presented solely for information only. The tables and figures below should not be construed as representations that those US dollar or Rupiah amounts could have been, could be or would be, converted or convertible into Rupiah or US dollars at any particular rate, the rate stated below, or at all. Bank Indonesia and Bloomberg L.P. have not consented to the inclusion of the exchange rates quoted under this section for the purposes of Section 249 of the Securities and Futures Act and are thereby not liable for these exchange rates under Sections 253 and 254 of the Securities and Futures Act. Our Company has included the above exchange rates in the proper form and context in this Prospectus. The information has not been verified by our Company, the Issue Manager, or the Joint Underwriters and Placement Agents. The following table sets out the high and low exchange rates between the US dollar and Rupiah for each of the past six months prior to the Latest Practicable Date. The table illustrates how many Rupiah it would take to buy one US dollar. Rp / US$ Bank Indonesia Bloomberg Period Average Low High Average Low High December ,380 9,268 9,481 9,356 9,240 9,428 January ,453 9,333 9,533 9,406 9,240 9,490 February ,227 9,096 9,315 9,182 9,045 9,265 March ,231 9,117 9,372 9,178 9,085 9,265 April ,255 9,225 9,285 9,203 9,135 9,245 May ,337 9,273 9,423 9,281 9,220 9,350 Source: Bank Indonesia and Bloomberg L.P. The following table sets out, for the financial periods indicated, the amount of Rupiah it would take to buy one US dollar, based on the average of monthly closing exchange rates over the financial period ( Average ). Rp / US$ Bank Indonesia Bloomberg Average Closing Average Closing Exchange Rate Exchange Rate Exchange Rate Exchange Rate FY2005 9,711 9,830 9,712 9,830 FY2006 9,167 9,020 9,165 8,994 FY2007 9,136 9,419 9,139 9,400 Source: Bank Indonesia and Bloomberg L.P. As at the Latest Practicable Date, the exchange rate between the US dollar and the Rupiah was US$1: Rp9,

53 EXCHANGE RATES AND EXCHANGE CONTROLS Bloomberg L.P. has not consented to the inclusion of the exchange rates quoted under this section for the purposes of Section 249 of the Securities and Futures Act and is thereby not liable for these exchange rates under Sections 253 and 254 of the Securities and Futures Act. The Company has included the above exchange rates in the proper form and context in this Prospectus. The information has not been verified by our Company, the Issue Manager or the Joint Underwriters and Placement Agents. For certain parts of this Prospectus, we have converted Singapore dollars to US dollars for the convenience of the potential investors in our Company. The exchange rates for S$ to US$ as outlined in the table below are extracted from published information by Bloomberg L.P. These exchange rates have been presented solely for information only. The tables and figures below should not be construed as representations that these US dollar amounts could have been, could be or would be, converted or convertible into Singapore dollars at any particular rate, the rate stated below, or at all. The following table sets out the high and low exchange rates between the Singapore dollar and US dollar for each of the past six months prior to the Latest Practicable Date. The table indicates how many Singapore dollars it would take to buy one US dollar. S$ / US$ Period High Low December January February March April May Source: Bloomberg L.P. The following table sets out, for the financial periods indicated, how many Singapore dollars it would take to buy one US dollar, based on the average of monthly closing exchange rates over the financial period ( Average Exchange Rate ). S$ / US$ Average Exchange Rate Closing Exchange Rate FY FY FY Source: Bloomberg L.P. As at the Latest Practicable Date, the exchange rate between the US dollar and the Singapore dollar was US$1: S$ EXCHANGE CONTROLS The following is a description of the exchange controls existing in the jurisdictions in which our Group operates which may affect the repatriation of capital and the remittance of profits by or to our Company. SINGAPORE Currently, no foreign exchange control restrictions exist in Singapore. 47

54 EXCHANGE RATES AND EXCHANGE CONTROLS INDONESIA The Rupiah and foreign currency have been, and in general are, freely convertible. Bank Indonesia has introduced regulations to prohibit the movement of Rupiah from banks within Indonesia to banks located offshore, thereby limiting offshore trading to existing sources of liquidity. The movement of Rupiah to foreign parties (which include foreign citizens, foreign legal entities, foreign bodies, Indonesian citizens having permanent resident status in another country and not domiciled in Indonesia, offices of Indonesian banks and Indonesian companies located offshore) within banks in Indonesia without certain underlying trade or investment reasons is also prohibited. In addition, there is a reporting requirement to Bank Indonesia of foreign exchange transactions carried through banks or non-bank financial institutions (for example, insurance companies, securities companies, finance companies or venture capital companies) in Indonesia. The repatriation of capital or remittance of profit may be made subject to the reporting requirement to Bank Indonesia on the foreign exchange activities. The requirement is imposed on the relevant Indonesian banks or non-bank financial institutions that carry out the transactions. There is also a reporting requirement to Bank Indonesia imposed on certain activities of Indonesian companies (with total assets or annual sales of not less than Rp100 billion) with regard to their offshore financial assets and liabilities which are not carried out through the Indonesian banking system. The Indonesian subsidiaries will repatriate profit and capital to the parent listed entity in Singapore. Therefore, the above regulations will not affect repatriation of capital and remittance of profit into Indonesia. Save for the regulations pertaining to the reporting of foreign exchange activities, there are no other regulations governing profit and capital remittance into Indonesia. 48

55 INVITATION STATISTICS Issue Price 30.5 cents (equivalent to 22.4 US cents (1) ) NTA NTA per Share based on the proforma balance sheet for FY2007 (2) of our Group as disclosed in this Prospectus: (a) (b) before adjusting for the estimated net proceeds from the issue of the New Shares and based on our pre-invitation share capital of 798,044,720 Shares after adjusting for the estimated net proceeds from the issue of the New Shares and based on our post-invitation share capital of 998,044,720 Shares 9.4 US cents 11.5 US cents Premium of Issue Price over the proforma NTA per Share as at FY2007: (a) (b) before adjusting for the estimated net proceeds from the issue of the New Shares and based on our pre-invitation share capital of 798,044,720 Shares after adjusting for the estimated net proceeds from the issue of the New Shares and based on our post-invitation share capital of 998,044,720 Shares per cent 94.2 per cent Earnings Historical EPS of our Company based on our audited results of our Group for FY2007 and our pre-invitation share capital of 798,044,720 Shares Historical EPS of our Company based on our audited results of our Group for FY2007 and our pre-invitation share capital of 798,044,720 Shares had the Service Agreements been in effect since the beginning of FY2007 Price Earnings Ratio Historical price earnings ratio based on the historical EPS of our Company for FY2007 Historical price earnings ratio based on the historical EPS of our Company had the Service Agreements been in effect since the beginning of FY US cents 4.9 US cents 4.6 times 4.6 times Notes: (1) Based on exchange rate as at the Latest Practicable Date of US$1: S$ (2) Please refer to Appendix E - Independent Auditors Report on the Unaudited Proforma Combined Financial Information of Kencana Agri Limited for the financial year ended 31 December 2007 of this Prospectus for more information. 49

56 INVITATION STATISTICS Net Operating Cash Flow (1) Historical audited net operating cash flow per Share for FY2007 based on our pre- Invitation share capital of 798,044,720 Shares Historical audited net operating cash flow per Share for FY2007 based on our pre- Invitation share capital of 798,044,720 Shares had the Service Agreements been in place since the beginning of FY2007 Price to Net Operating Cash Flow Ratio Issue Price to historical audited net operating cash flow per Share of our Company for FY2007 based on our pre-invitation share capital of 798,044,720 Shares Issue Price to historical audited net operating cash flow per Share of our Company for FY2007 based on our pre-invitation share capital of 798,044,720 Shares had the Service Agreements been in place since the beginning of FY2007 Market Capitalisation Market capitalisation based on our post-invitation share capital of 998,044,720 Shares and the Issue Price 2.2 US cents 2.2 US cents 10.1 times 10.4 times US$223.3 million Note: (1) Net operating cash flow is defined as net profit before taxation adjusted for non-cash operating activities such as depreciation, changes in working capital and income tax paid. 50

57 USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED The net proceeds from the issue of the New Shares are estimated to be approximately S$55.0 million (approximately US$40.4 million (1) ). The net proceeds represent the amount that we will receive after payment of underwriting commissions and other transaction expenses related to the Invitation estimated to be S$6.0 million (approximately US$4.4 million (1) ). Which we intend to use in the following manner: Amount allocated for each dollar of the gross proceeds Estimated Estimated raised by Use of proceeds Amount Amount our Company (US$ 000) (S$ 000) (%) (a) (b) (c) Establishment of new planting for existing land, and acquiring rights for additional land banks of companies holding land banks or mature plantations 20,913 28, Build new palm oil mills and maintaining and improving the infrastructure of our plantations 6,970 9, Repayment of loans from financial institutions (please see below for more information) 12,469 16, Net Proceeds from the Invitation 40,352 55, Expenses (a) Listing fees (b) Professional fees and charges 2,715 3, (c) Underwriting commission, placement commission and brokerage 1,119 1, (d) Miscellaneous expenses Gross proceeds from the Invitation 44,754 61, Notes: (1) Based on exchange rate as at the Latest Practicable Date, US$1: S$ Indebtedness to be repaid Financial from Invitation Annual institutions Description of loan facility and maturity proceeds Purpose interest rate PT Bank DBS 18 months term loan of principal amount of US$2,000,000 To refinance existing Bank s Indonesia (1) US$2,000,000 repayable in full at the earlier facilities to SWK and cost of of (i) the end of period in March 2009 or AKM; and refinance funds plus (ii) completion of initial public offering of the Group inter-company loans ( COF ) between SWK, AKM 2.5% and AIK 51

58 USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED Indebtedness to be repaid Financial from Invitation Annual institutions Description of loan facility and maturity proceeds Purpose interest rate PT Bank DBS 18 months long term loan of US$4,000,000 US$4,000,000 To refinance existing COF + 2.5% Indonesia (1) repayable in full at the earlier of (i) the end of facilities to SWK and March 2009 or (ii) completion of initial AKM; and refinance public offering of our Group inter-company loans between SWK, AKM and AIK PT Bank DBS 18 months term loan of US$1,000,000 repayable US$1,000,000 To provide financing COF + 2.5% Indonesia (1) in full at the earlier of (i) March 2009 or for the Company to (ii) completion of initial public offering purchase palm of our Group kernels, fertilizers, and FFB PT Bank One year term loan of US$3,850,000 US$3,818,500 To finance internal SIBOR + 3% Danamon repayable in full at the earlier of (i) end of shareholding Indonesia, Tbk. March 2009 or (ii) completion of reorganisation initial public offering of our Group PT Bank One year term loan of US$1,650,000 US$1,650,000 To finance internal SIBOR + 3% Danamon repayable in full at the earlier of (i) the end shareholding Indonesia, Tbk. of March 2009 or (ii) completion of reorganisation initial public offering of our Group Note: (1) PT Bank DBS Indonesia is a subsidiary of DBS Bank. Please refer to the section General Information On Our Group Strategy and Future Plans of this Prospectus for more information on our plans above. Pending the deployment of the net proceeds as aforesaid, the funds will be placed in short-term deposits with financial institutions, used to invest in short-term money market instruments and/or used for working capital requirements as our Directors may deem appropriate. In the event that any part of our proposed uses of the net proceeds from the issue of the New Shares do not materialise or proceed as planned, our Directors will carefully monitor the situation and may reallocate the proceeds to other purposes and/or hold such funds on short-term deposits for so long as our Directors deem it to be in the interest of our Company and our Shareholders, taken as a whole. Any change in the use of the net proceeds will be subject to the listing rules of the SGX-ST and appropriate announcements will be made by our Company on SGXNET. As and when the funds from the Invitation are materially disbursed, our Company will make periodic announcements via SGXNET on the use of the net proceeds and will provide a status report on the use thereof in our annual report. In the opinion of our Directors, no minimum amount must be raised by the Invitation. 52

59 MANAGEMENT, UNDERWRITING AND PLACEMENT AGREEMENTS Pursuant to the Management and Underwriting Agreement dated 17 July 2008 (the Management and Underwriting Agreement ) made between our Company, DBS Bank and CIMB-GK, our Company appointed DBS Bank to manage the Invitation and DBS Bank and CIMB-GK to underwrite the subscription of the number of Offer Shares set forth opposite each of their respective names in the following table, at the Issue Price. Joint Underwriters Number of Offer Shares DBS Bank 750,000 CIMB-GK 250,000 DBS Bank and CIMB-GK may, at their absolute discretion, appoint one or more sub-underwriters to subunderwrite the Offer Shares. DBS Bank will receive a management fee, payable by our Company, for its services rendered as Issue Manager in connection with the Invitation. DBS Bank and CIMB-GK will each also receive an underwriting commission of 2.25 per cent of the Issue Price save for accepted applications for Offer Shares made on Application Forms bearing the stamp of DBS Bank or through the ATMs or IB website of DBS Bank for which the commission shall be 2.0 per cent of the Issue Price. In the event that the minimum brokerage of S$5,000 (as described below) levied by DBS Bank as one of the Participating Banks is not met, the amount of underwriting commission payable to each Joint Underwriter for accepted applications for Offer Shares made on Application Forms bearing the stamp of DBS Bank or through the ATMs or IB website of DBS Bank shall be 2.5 per cent of the Issue Price and reduced by the aforementioned minimum brokerage fee. Payment of the commission shall be made whether or not any allotment or issue of the Offer Shares is made to each Joint Underwriter, and whether or not any part of the Offer Shares have been applied to satisfy excess application for Placement Shares. Pursuant to the Placement Agreement dated 17 July 2008 (the Placement Agreement ) made between our Company, DBS Bank and CIMB-GK, DBS Bank and CIMB-GK agreed to subscribe for and/or procure subscribers for the number of Placement Shares set forth opposite each of their respective names in the following table, at the Issue Price. Joint Placement Agents Number of Placement Shares DBS Bank 149,250,000 CIMB-GK 49,750,000 DBS Bank and CIMB-GK will each receive a placement commission of 2.5 per cent of the Issue Price for the total number of Placement Shares set out against their respective names in the table above. DBS Bank and CIMB-GK may, at their absolute discretion, appoint sub-placement agent(s) for the Placement Shares. Brokerage will be paid by our Company to DBS Bank, members of the SGX-ST, Participating Banks, merchant banks and members of the Association of Banks in Singapore in respect of all accepted applications made on Application Forms bearing their respective stamps or to Participating Banks in respect of successful applications made through Electronic Applications at their respective ATMs or IB websites, at the rate of 0.25 per cent of the Issue Price for each Offer Share, subject to any minimum brokerage agreed with any of the Participating Banks. DBS Bank levies a brokerage of 0.5 per cent of the Issue Price or minimum brokerage of S$5,000 that will be borne by our Company. Discretionary fees of 0.2 per cent and per cent of the aggregate gross proceeds of the Invitation will be payable to DBS Bank and CIMB-GK respectively at the sole discretion of our Group. Subscribers of the Placement Shares may be required to pay a brokerage of up to 1% of the Issue Price. 53

60 MANAGEMENT, UNDERWRITING AND PLACEMENT AGREEMENTS The New Shares may be re-allocated between the Offer and the Placement, at the discretion of DBS Bank and CIMB-GK in consultation with our Company. The Management and Underwriting Agreement may be terminated by the Joint Underwriters at any time on or before 9.00 a.m. on the date of commencement of trading of the Shares on SGX-ST on the occurrence of certain events including without limitation: (a) if there shall come to the knowledge of the Issue Manager or the Joint Underwriters of: (i) (ii) (iii) any breach of any obligations of our Company under the Management and Underwriting Agreement or the Placement Agreement or that any of the warranties in the Management and Underwriting Agreement or the Placement Agreement is untrue, inaccurate, misleading or breached in any respect; or any event occurring after the date of the Management and Underwriting Agreement, which if it had occurred before the date of the Management and Underwriting Agreement would have rendered any of the warranties contained in the Management and Underwriting Agreement untrue, inaccurate or misleading or breached in any respect; or any material adverse change (whether or not foreseeable at the date of the Management and Underwriting Agreement), or any development (which has occured or is likely to occur) involving a prospective material adverse change, in the business or in the condition (financial or otherwise), or prospects of our Group taken as a whole; or (b) if there shall have been in the opinion of the Joint Underwriters, since the date of the Management and Underwriting Agreement: (i) (ii) (iii) (iv) (v) any new or prospective introduction of or any change or prospective change in any legislation, regulation, order, policy, rule, guideline or directive (including without prejudice the generality of the foregoing in respect of any laws or regulations relating to taxation or exchange controls) in Singapore, Indonesia or elsewhere (whether or not having the force of law) and including, without limitation, any directive or request issued by the Authority, the Securities Industry Council of Singapore or the SGX-ST or other authorities in Singapore or Indonesia or in the interpretation or application thereof by any court, government body, regulatory authority or other competent authority; or any event or series of events resulting in or representing any change, or any development involving a prospective change, in local, national, regional or international financial markets (including stock market, foreign exchange markets, inter-bank markets or interest rates or money market), political, industrial, economic, legal or monetary conditions (including without limitation, the imposition of any moratorium, suspension or material restriction on trading in securities generally on the SGX-ST or the Indonesia Stock Exchange, any banking moratorium declared by any U.S. Federal, New York, United Kingdom, Indonesia, or Singapore authorities due to exceptional financial circumstances or otherwise); or any event or series of events in the nature of force majeure (including without limitation, acts of government, strikes, lock-outs, fire, explosion, flooding, epidemic or pestilence, civil commotion, acts of war, acts of terrorism, acts of God); or any imminent threat or occurrence of any local, national or international outbreak or escalation of hostilities, insurrection or armed conflict (whether or not involving financial markets); or any other occurrence of any nature whatsoever, 54

61 MANAGEMENT, UNDERWRITING AND PLACEMENT AGREEMENTS which event or events shall in the opinion of the Joint Underwriters (1) result or be likely to result in a material adverse fluctuation or adverse conditions in the stock market in Singapore or overseas, or (2) be likely to prejudice the success of the subscription or offer of the New Shares and the distribution of the New Shares or dealings in the Shares (whether in the primary market or in respect of dealings in the secondary market), or (3) make it impracticable, inadvisable, inexpedient or uncommercial to proceed with any of the transactions contemplated in the Management and Underwriting Agreement, or (4) be likely to have an adverse effect on the business, trading position, operations or prospects of our Company or of our Group as a whole, or (5) be such that no reasonable underwriter would have entered into the Management and Underwriting Agreement, or (6) result or be likely to result in the issue of a Stop Order by the Authority pursuant to the Securities and Futures Act (notwithstanding that a supplementary or replacement prospectus is subsequently registered by the Authority pursuant to section 241 of the Securities and Futures Act), or (7) make it uncommercial or otherwise contrary to or outside the usual commercial practices of underwriters in Singapore for the Joint Underwriters to observe or perform or be obliged to observe or perform the terms of the Management and Underwriting Agreement. The Placement Agreement is conditional upon the Management and Underwriting Agreement not having been terminated or rescinded pursuant to the provisions of the Management and Underwriting Agreement. In the event that the Management and Underwriting Agreement is terminated, we and the Joint Underwriters and Placement Agents reserve the right, at our absolute discretion, to cancel the Invitation. Save for DBS Bank s role as the Issue Manager, a Joint Underwriter and Placement Agent and the Receiving Bank in connection with the Invitation and PT Bank DBS Indonesia s role as a Principal Banker, we do not have any material relationship with DBS Bank. DBS Bank may engage in further commercial banking and/or investment banking transactions with our Group in the future and may receive customary fees for such transactions. Net proceeds from the Invitation will also be used to partially repay bank loans provided by PT Bank DBS Indonesia to us. Please refer to the section Use of Proceeds from the Invitation and Expenses Incurred of this Prospectus for more information. 55

62 DIVIDEND POLICY Save as disclosed below, no dividends have been paid or proposed by our Company or its subsidiaries for each of FY2005, FY2006 and FY2007. In FY2007, one of our Indonesian subsidiaries had declared and made a dividend payment of Rp18.5 billion (approximately US$2.0 million) to its shareholders prior to the Invitation. In FY2008, one of our Indonesian subsidiaries has declared and intends to make a dividend payment of Rp9.0 billion to its shareholders prior to the Invitation. The amount of past dividends is not indicative of the amount that we will pay in the future. Further dividends will be paid by us as and when approved by our Shareholders and our Directors. In making their recommendation, our Directors will consider, among other things, our future earnings, operations, capital requirements, cash flow and financial condition, as well as conditions in the general business environment and other factors (including, but not limited to, certain limitations imposed on us in connection with our bank borrowings) which may be considered relevant by our Directors. There can be no assurance that dividends will be paid in the future or as to the timing of any dividends that are to be paid in the future. Our Company may declare dividends by ordinary resolution of our Shareholders at a general meeting, but we may not pay dividends in excess of the amount recommended by our Board. Our Board may, without the approval of our Shareholders, also declare interim dividends. We currently do not have a formal dividend policy. We may pay dividends in Singapore dollars or US dollars. Shareholders whose Shares are held through CDP will receive their dividends in Singapore dollars. We intend to make the necessary arrangements with CDP to convert the dividends received from our Company in US dollars into its Singapore dollar equivalent at such foreign exchange rate as we or CDP (as the case may be) may determine for onward distribution to such shareholders entitled thereto. Neither our Company nor CDP will be liable for any loss howsoever arising from the conversion of the dividend entitlement of shareholders holding their Shares through CDP from US dollars into their Singapore dollar equivalent. Please refer to Appendix B - Taxation of this Prospectus. for information relating to taxes payable on dividends. 56

63 SHARE CAPITAL Our Company was incorporated in Singapore on 26 September 2007 under the Act as a private company limited by shares under the name Kencana Agri Pte. Ltd.. On 10 July 2008, our Company changed its name to Kencana Agri Limited in connection with its conversion to a public company limited by shares. As at the date of this Prospectus, our Company has only one class of shares in its share capital. The rights and privileges of our Shares are stated in our Articles of Association. There are no founder, management, deferred shares, preference or unissued shares reserved for issuance for any purpose. Pursuant to written resolutions passed by our Shareholders on 20 June 2008, our Shareholders approved the following: (a) (b) (c) (d) (e) the conversion of our Company into a public company limited by shares and the consequential change of name to Kencana Agri Limited ; the adoption of our new Articles of Association; the authorisation to our Directors to allot and issue Shares and/or convertible securities (where the maximum number of Shares to be issued upon conversion can be determined at the time of issue of such convertible securities) from time to time (whether by way of rights, bonus or otherwise) and upon such terms and conditions and for such purposes and to such persons as our directors may in their absolute discretion deem fit, provided that the aggregate number of Shares and/or convertible securities which may be issued pursuant to such authority shall not exceed 50% of the issued shares of our Company, of which the aggregate number of Shares and/or convertible securities which may be issued other than on a pro-rata basis to the existing shareholders of our Company shall not exceed 20% of the issued shares of our Company (the percentage of issued shares being based on the post-invitation issued shares of our Company after adjusting for new Shares arising from the conversion or exercise of any convertible securities or employee share options on issue at the time such authority is given and any subsequent consolidation or subdivision of shares) and, unless revoked or varied by our Company in general meeting, such authority shall continue in force until the conclusion of the next annual general meeting of our Company or on the date by which the next annual general meeting is required by law to be held, whichever is earlier; the issue of the Shares pursuant to the Invitation, which when fully paid, will rank pari passu in all respects with the existing issued Shares; and the sub-division of every one ordinary share in the issued and paid up capital of our Company into 40 ordinary shares. As at the Latest Practicable Date, the issued share capital of our Company is S$19,951,118 comprising 798,044,720 Shares. Upon the allotment of the New Shares which are the subject of the Invitation, the resultant issued share capital of our Company will be increased to S$74,951,118 comprising 998,044,720 Shares. 57

64 SHARE CAPITAL Details of the changes in our issued share capital since our incorporation and our issued share capital immediately after the Invitation are as follows: Number of Shares Resultant Paid-up Capital (S$) Upon first and second allotment and issue of two ordinary shares 2 2 New ordinary shares issued and adjustments to share capital (1) pursuant to the Restructuring Exercise 19,951,116 19,951,118 (2) Additional shares issued pursuant to subdivision of every one ordinary share into 40 ordinary shares 778,093,602 19,951,118 Pre-Invitation share capital 798,044,720 19,951,118 New Shares to be issued pursuant to the Invitation 200,000,000 55,000,000 (3) Post-Invitation share capital 998,044,720 74,951,118 Notes: (1) Please refer to Appendix E Independent Auditors Report on the Unaudited Proforma Combined Financial Information of Kencana Agri Limited for the Financial Year ended 31 December 2007 of this Prospectus for details of the adjustments made to the share capital (2) Converted from US dollars to Singapore dollars based on historical exchange rate of US$1 to S$1.537 (3) Resultant share capital has taken into account the estimated expenses in connection with the Invitation The shareholders funds of our Company (after adjustments to share capital) after the Restructuring Exercise (and adjustments to the reserves) and after the Invitation are set out below. These statements should be read in conjunction with Appendix E - Independent Auditors Report on the Unaudited Proforma Combined Financial Information of Kencana Agri Limited for the Financial Year ended 31 December 2007 of this Prospectus. After the (S$) As at Incorporation Restructuring Exercise After the Invitation Shareholders Equity Issued and paid-up share capital 1 19,951,118 (1) 74,951,118 Reserves 88,860,706 (2) 88,860,706 (2) Total shareholders equity 1 108,811, ,811,824 Notes: (1) Converted from US dollars to Singapore dollars based on historical exchange rate of US$1 to S$ (2) Converted from US dollars to Singapore dollars based on a closing exchange rate of US$1 to S$1.441 as at 31 December

65 SHARE CAPITAL The changes in the issued and paid-up share capital of our Company and our subsidiaries existing at the date hereof within the three years preceding the Latest Practicable Date are set out below: Our Company No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (S$) (S$) 26 September 2007 First allotment 1 NA (1) and issue 10 January 2008 Allotment and 1 NA (1) issue Kencana Bio-energy Pte. Ltd. No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (S$) (S$) 29 December 2006 First allotment 2 NA (1) and issue Kencana Logistics Pte. Ltd. No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (S$) (S$) 29 December 2006 First allotment 2 NA (1) and issue Kencana Plantations Pte. Ltd. No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (S$) (S$) 29 December 2006 First allotment 2 NA (1) and issue Sawindo Agri Pte. Ltd. No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (S$) (S$) 29 December 2006 First allotment 2 NA (1) and issue PT Agri Eastborneo Kencana No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 13 September 2007 Reclassification 25 serial A 10,000 10,000 25,250,000 of shares and shares with issue and right to appoint allotment members of the board of directors and board of commissioners 59

66 SHARE CAPITAL PT Agro Inti Kencanamas No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 15 February 2006 Issue and 10,880 1,000,000 1,000,000 11,000,000,000 allotment 18 September 2006 Issue and 10,000 1,000,000 1,000,000 21,000,000,000 allotment 23 August 2007 Issue and 7,000 1,000,000 1,000,000 28,000,000,000 allotment 23 August 2007 Issue and 2,000 1,000,000 1,000,000 30,000,000,000 allotment 13 September 2007 Reclassification 300 serial A 1,000,000 1,000,000 30,300,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners PT Alamraya Kencana Mas No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 11 January 2006 Issue and 4,780 1,000,000 1,000,000 33,941,000,000 allotment 11 January 2006 Issue and 15,059 1,000,000 1,000,000 49,000,000,000 allotment 10 January 2007 Issue and 11,000 1,000,000 1,000,000 60,000,000,000 allotment 27 August 2007 Issue and 10,000 1,000,000 1,000,000 70,000,000,000 allotment 13 September 2007 Reclassification 500 serial A 1,000,000 1,000,000 70,500,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners 60

67 SHARE CAPITAL PT Agro Mas Lestari No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 31 August 2007 First allotment , ,000 25,000,000 and issue 25 September 2007 Reclassification 2 serial A 100, ,000 25,200,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners PT Agro Sawitmas Lestari No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 3 May 2005 First allotment 2,500 10,000 10,000 25,000,000 and issue PT Agrojaya Tirta Kencana No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 9 June 2006 Issue and 1,300 1,000,000 1,000,000 1,400,000,000 allotment 13 September 2007 Reclassification 14 serial A 1,000, ,000 1,414,000,000 of shares and shares with issue and right to appoint allotment members of the board of directors and board of commissioners PT Belitung Energy No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 13 September 2007 Reclassification 5 serial A 100, ,000 50,500,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners 61

68 SHARE CAPITAL PT Bumi Permai Sentosa No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 26 July 2007 First allotment , ,000 25,000,000 and issue 19 May 2008 Issue and 28, , ,000 2,864,800,000 allotment PT Cahaya Permata Gemilang No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 17 July 2007 First allotment , ,000 25,000,000 and issue 14 May 2008 Issue and 13, , ,000 1,350,000,000 allotment PT Indotrust No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 17 September 2007 Reclassification 500 serial A 10,000 10, ,000,000 of shares and shares with issue and right to appoint allotment members of the board of directors and board of commissioners PT Kencana Agro Jaya No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 29 August 2007 Issue and 1,000,000 1,000 1,000 2,000,000,000 allotment 13 September 2007 Reclassification 20,000 serial A 1,000 1,000 2,020,000,000 of shares and shares with issue and right to appoint allotment members of the board of directors and board of commissioners PT Langgeng Nusa Makmur No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 22 August 2007 First allotment , ,000 25,000,000 and issue 62

69 SHARE CAPITAL PT Listrindo Kencana No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 12 September 2007 Issue and 2,211,190 1,000 1,000 2,500,000,000 allotment 13 September 2007 Reclassifcation 25,000 serial A 1,000 1,000 2,525,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners PT Palm Makmur Sentosa No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 22 August 2007 First allotment , ,000 25,000,000 and issue PT Pelayaran Asia Marine No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 2 August 2007 Issue and 100,000 10,000 10,000 2,000,000,000 allotment 6 September 2007 Issue and 70,000 10,000 10,000 1,000,000,000 allotment 17 September 2007 Reclassification 2,000 serial A 10,000 10,000 2,020,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners PT Sawindo Cemerlang No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 22 August 2007 First allotment 25 1,000,000 1,000,000 25,000,000 and issue 13 September 2007 Reclassification 1 serial A 1,000,000 1,000,000 26,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners 63

70 SHARE CAPITAL PT Sawit Kaltim Lestari No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 13 September 2007 Reclassification 25 serial A 10,000 10,000 25,250,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners PT Sawit Permai Lestari No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 17 July 2007 First allotment , ,000 25,000,000 and issue 16 May 2008 Issue 961, , ,000 96,158,400,000 and allotment PT Sawindo Kencana No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 13 September 2007 Reclassification 500 serial A 1,000,000 1,000,000 60,000,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners PT Wira Mas Permai No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 23 August 2007 First allotment , ,000 25,000,000 and issue PT Wira Palm Mandiri No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 23 July 2007 First allotment , ,000 25,000,000 and issue 19 May 2008 Issue 185, , ,000 18,534,700,000 and allotment 64

71 SHARE CAPITAL PT Wira Sawit Mandiri No. of shares Issue Price Resultant Issued Date of Issue Event issued Par Value Per Share share capital (Rp) (Rp) (Rp) 16 April 2006 First allotment , , ,000,000 and issue 17 September 2007 Reclassification 2 serial A 500, , ,000,000 of shares and shares carrying issue and the right to allotment appoint members of the board of directors and board of commissioners Note: (1) Not applicable. Save as disclosed above, no shares in our Company or any of our subsidiaries existing at the date hereof had been issued as fully or partly paid for in cash or for a consideration other than cash, within the past three years preceding the Latest Practicable Date. 65

72 PRINCIPAL SHAREHOLDERS SHAREHOLDERS Our Shareholders and their respective shareholdings immediately before and after the Invitation are set out below: Before the Invitation After the Invitation Direct Interest Deemed Interest Direct Interest Deemed Interest Number of % Number of % Number of % Number of % Shares Shares Shares Shares Directors Henry Maknawi (1) (2)(4) 35,592, ,580, ,592, ,580, Ratna Maknawi (3) (4) 5,506, ,600 n.m 5,506, ,600 n.m Tengku Alwin Aziz 1,675, ,675, Kent Surya 1,037, ,037, Executive Officers Albert Maknawi (1) 2,234, ,234, Ajis Chandra (3) 159,600 n.m 5,506, ,600 n.m 5,506, Substantial Shareholders Kencana Holdings (2) 689,829, ,829, Other shareholders Karmila Maknawi (1) 1,516, ,516, Jeanny Maknawi (4) 8,140, ,140, Eddy Maknawi (4) 7,581, ,581, Johan Maknawi (4) 6,943, ,943, Bambang Pangestu Djoko 159,600 n.m 159,600 n.m Dick Permana 6,384, ,384, Drs. Soetikno 1,276, ,276, Edy Suroso 159,600 n.m 159,600 n.m Heri Dwi Basuki 239,400 n.m 239,400 n.m PT Intinusa Metrotama 3,750, ,750, J. Amin Delarosa 5,745, ,745, Jauhari Chandra 1,276, ,276, Jimmy Chandra 2,074, ,074, Letjen TNI (Purn.) 9,177, ,177, Soekarto Lili Suryani 159,600 n.m 159,600 n.m Mayjen TNI (Purn.) 5,745, ,745, Soeprapto Muhidin Mardjuki 1,276, ,276, Samsuri Samaun 239,400 n.m 239,400 n.m Wisely Antonius Tang 159,600 n.m 159,600 n.m Public shareholders 200,000, Total 798,044, ,044, Notes: (1) Mr. Henry Maknawi is deemed to be interested in the Shares held by his son Mr. Albert Maknawi and his daughter Ms. Karmila Maknawi. (2) Kencana Holdings is an investment company incorporated in Singapore on 28 November Mr. Henry Maknawi is deemed to be interested in the Shares held by Kencana Holdings by virtue of his 43.4% shareholding interest in Kencana Holdings. Kencana Holdings became a shareholder of our Company pursuant to the Restructuring Exercise (please refer to the section Restructuring Exercise of this Prospectus for further information). (3) Ms. Ratna Maknawi is the wife of Mr. Ajis Chandra and is therefore deemed to be interested in the Shares held by Mr. Chandra. For the same reason, Mr. Chandra is likewise deemed to be interested in the Shares held by Ms. Ratna Maknawi. (4) Mr. Henry Maknawi, Ms. Ratna Maknawi, Ms. Jeanny Maknawi, Mr. Eddy Maknawi and Mr. Johan Maknawi are siblings. (5) n.m means not meaningful. 66

73 PRINCIPAL SHAREHOLDERS Save as disclosed in the section Restructuring Exercise of this Prospectus, there are no significant changes in percentage of ownership of our Company over the last three years prior to the date of this Prospectus. Save as disclosed above, none of our Directors and our Substantial Shareholders are related to one another. Save 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. No option to subscribe for shares in, or debentures of, our Company or our subsidiaries has been granted to, or was exercised by, any Director or Executive Officer within the two financial years preceding the date of this Prospectus. No person has been, or is entitled to be, given an option to subscribe for any shares in or debentures of our Company or any of our subsidiaries. The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from the New Shares. Our Directors are not aware of any arrangement the operation of which may, at a subsequent date, result in a change of control of our Company. 67

74 PRINCIPAL SHAREHOLDERS MORATORIUM To demonstrate its commitment to our Company, Kencana Holdings, our holding company, which will hold 689,829,840 Shares representing approximately 69.1% of our Company s post-invitation issued share capital, has given an undertaking to DBS Bank and CIMB-GK, not to sell, realise, transfer or otherwise dispose of or transfer any part of its existing shareholding in our Company for a period of six months from the date of admission to the Official List of the SGX-ST. In addition, each of the shareholders of Kencana Holdings has also undertaken to DBS Bank and CIMB- GK that each of them will not dispose of or transfer any part of their shareholdings in Kencana Holdings for a period of six months from the date of admission of our Company to the Official List of the SGX-ST. Finally, each of our Shareholders immediately after the Invitation (save for Kencana Holdings and the public Shareholders), as set out in the section Principal Shareholders - Shareholders of this Prospectus, in aggregate representing approximately 10.8% of our Company s post-invitation issued share capital, have each undertaken to DBS Bank and CIMB-GK that they will not sell, realise, transfer or otherwise dispose of or transfer any part of their individual existing shareholding in our Company for a period of six months from the date of admission to the Official List of the SGX-ST. 68

75 CAPITALISATION AND INDEBTEDNESS The following table shows the cash and cash equivalents as well as capitalisation and indebtedness of our Group as at 30 April 2008 (i) on an actual basis; and (ii) as adjusted to give effect to the issuance of 200,000,000 New Shares based on an Issue Price of S$0.305 per Share pursuant to the Invitation and the application of the net proceeds of the Invitation after deducting estimated expenses incurred for the Invitation. As at 30 April 2008 (US$ 000) (1) Actual Adjusted Cash and cash equivalents (3) 2,834 30,717 Indebtedness Short-term Secured and not guaranteed 21,635 9,166 Long Term Secured and guaranteed 4,575 4,575 (2) Secured and not guaranteed 11,915 11,915 (2) Unsecured and not guaranteed 5,000 5,000 Total indebtedness 43,125 30,656 Total proforma shareholders equity 76, ,126 Total Capitalisation & Indebtedness 119, ,782 Notes: (1) Facilities borrowed in Rupiah were converted to US$ based on the exchange rate of US$1: Rp9,305 as at the Latest Practicable Date. (2) Approximately S$17.0 million (US$12.5 million) will be used for the repayment of loans from financial institutions. Please refer to the section Use of Proceeds from the Invitation and Expenses Incurred of this Prospectus for further information. (3) There were no cash balances restricted in use as at 30 April The cash and cash equivalents of our Company are mainly held in Rupiah and US dollars. 69

76 CAPITALISATION AND INDEBTEDNESS As at the Latest Practicable Date, our total facilities (utilised and unutilised) are as follows: Facilities Utilised Unutilised Interest rates Maturity profile granted (US$ 000) (US$ 000) (US$ 000) Term loans 19,843 18,652 1,191 (1) 5.59% to 11.67% Monthly instalments and per annum end of period payment expiring in one to three years Working Capital 13,399 10,012 3, % to 12.0% End of period payment loans per annum expiring in one to two months Investment loans 28,675 17,116 11,559 (1) 8.25% to 12.0% Monthly and quarterly per annum instalments expiring in one to eight years Total 61,917 45,780 16,137 (1) Note: (1) The unutilised amount is based on the existing unutilised facilities and does not take into account repayments made. To the best of our Directors knowledge, we are not in breach of any terms and conditions or covenants associated with any credit arrangement or bank loan which could materially affect our financial position and results or business operations, or the investments of our Shareholders. The above facilities are secured by mortgages over our Group s leasehold properties and joint and several personal guarantees of our Chairman and CEO, Mr. Henry Maknawi and our Deputy CEO, Ms. Ratna Maknawi. Please refer to the section Interested Person Transactions And Conflicts of Interest Interested Person Transactions of this Prospectus for further details of the joint and several guarantees provided by our Executive Directors. The guarantors intend to obtain a release and discharge of the guarantee granted in favour of PT Bank Mandiri (Persero) Tbk. after the admission of our Company to the Official list of the SGX-ST. In the event that PT Bank Mandiri (Persero) Tbk. does not agree to release the personal guarantees, the guarantors will either continue to provide the said guarantee or substitute the same with other securities to be furnished by our Group that are acceptable to PT Bank Mandiri (Persero) Tbk. As at the Latest Practicable Date, we have obligations under finance leases amounting to US$0.4 million. These leases are for plant and equipment which are secured by certain fixed assets of our Group. Contingent Liabilities As at the Latest Practicable Date, our Group has contingent liabilities of approximately US$5.4 million due to corporate guarantees given by our Group under our Plasma Programme. Please refer to the section General Information on Our Group Business and Operations Plasma Programme of this Prospectus. Save as disclosed above, we have no other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptances (other than normal trading credits) or acceptances credits, mortgages, charges, hire purchase commitments, guarantees or other contingent liabilities. 70

77 DILUTION Dilution is the amount by which the Issue Price paid by the subscribers of our Shares in the Invitation exceeds the NAV per Share after the Invitation. Our proforma NAV per Share as at 31 December 2007 before adjusting for the net proceeds from the issue of the New Shares and based on our pre-invitation share capital of 798,044,720 Shares is 9.4 US cents. Pursuant to the Invitation in respect of 200,000,000 New Shares at the Issue Price, our proforma NAV per Share as at 31 December 2007 after adjusting for the estimated net proceeds from the Invitation and based on the post-invitation share capital of 998,044,720 Shares ( Adjusted NAV ) would have been 11.5 US cents. This represents an immediate increase in proforma NAV per Share of 2.1 US cents to our existing Shareholders and an immediate dilution in proforma NAV per Share of 10.9 US cents to our new investors. The following table illustrates the dilution per Share as at 31 December 2007: US cents Issue Price per Share 22.4 (or 30.5 Singapore cents) Proforma NAV per Share based on the pre-invitation share capital of 798,044,720 Shares 9.4 Increase in proforma NAV per Share attributable to existing Shareholders 2.1 Proforma NAV per Share after the Invitation 11.5 Dilution in proforma NAV per Share to new investors 10.9 The following table summarises the total number of Shares issued by us, the total consideration paid and the average price per Share paid by our existing Shareholders and by our new public investors in the Invitation. Average Number of Total effective cost Shares consideration per Share % (US$ ) (US cents) Existing Shareholders 798,044, ,637,650 (1) 1.8 New public investors 200,000, ,754,219 (1) 22.4 Total 998,044, Note: (1) The US$ equivalent is computed based on an exchange rate of US$1 to S$ as at the Latest Practicable Date. 71

78 RESTRUCTURING EXERCISE Prior to the Invitation, the Restructuring Exercise was carried out to rationalise and streamline our corporate structure, resulting in our Company becoming the holding company of our Group. The following steps were taken in the Restructuring Exercise: (a) (b) Our Company was incorporated on 26 September 2007 with one subscriber share issued to our Chairman and CEO, Mr. Henry Maknawi. The share capital of our Company was subsequently increased to two shares on 10 January 2008 by the issue of an additional share to our Chairman and CEO, Mr. Henry Maknawi. These shares were subsequently transferred to Kencana Holdings. SA, KP, KL and KB (collectively, the Sincos and each a Sinco ) were incorporated in Singapore on 29 December 2006 with an initial share capital of two shares each. The two subscriber shares in each of SA, KP, KL and KB were transferred to our Company on 16 April 2008 and in consideration of such transfers, our Company issued eight new shares in favour of Kencana Holdings as directed by the initial shareholders of the Sincos. SA and KP are established to be the holding companies for our plantation business, KL for our bulking and logistics business and KB for our power generation business. The initial shareholders of each of the Sincos are as follows: Sinco SA KP KL KB Initial shareholders of Sincos (No. of shares held) Ratna Maknawi (1 share) and Albert Maknawi (1 share) Ratna Maknawi (1 share) and Albert Maknawi (1 share) Ajis Chandra (1 share) and Albert Maknawi (1 share) Ratna Maknawi (1 share) and Albert Maknawi (1 share) These initial shareholders held the subscriber shares in the Sincos as nominees of the Company. (c) SPL, WPM, BPS and CPG (collectively, the Indocos and each an Indoco ) were respectively established in Indonesia on 16 February 2007, 19 February 2007, 22 February 2007 and 22 February 2007 with a share capital of 250 shares each. SPL and WPM are established to be the Indonesian holding companies for our plantation operations, BPS for our bulking and logistics business and CPG for our power generation operations. The initial shareholders of each of the Indocos comprised the individual shareholders of the Indonesian operating companies, namely, SWK, KAJ, AKM, AIK, ATK, AEK, SKL, AML, SCEM, WSM, ASML, PMKS, LNM, WMP, IDT, PAM, LK and BE (collectively, the Operating Companies and each an Operating Company ). For the purposes of the rest of this Restructuring Exercise section, the individual shareholders of the Indonesian operating companies will be collectively referred to as the Initial Shareholders. Each of the Initial Shareholders (other than our Chairman and CEO, Mr. Henry Maknawi) was allocated one share in the capital of the Indocos (save for CPG) with the balance of the share capital of the Indocos (that is, 226 shares in SPL, 236 shares in WPM and 241 shares in BPS) allocated to Mr. Henry Maknawi. In relation to CPG, each of the Initial Shareholders (other than Mr. Henry Maknawi and the other Initial Shareholders of LK and BE) was allocated one share each in the capital of CPG. The balance of 202 shares and 46 shares in the share capital of CPG was allocated to Mr. Henry Maknawi and the other Initial Shareholders of LK and BE (in accordance with their interests in LK and BE) respectively. (Such shares of Indocos held by the Initial Shareholders are hereinafter referred to as the Initial Indoco Shares ). 72

79 RESTRUCTURING EXERCISE (d) (e) Each of the Indocos then subscribed for Serial A shares issued by the respective Operating Companies. The Serial A shares entitle each of the Indocos to have full power to appoint the members of the respective board of directors and board of commissioners of the Operating Companies. Between June and August 2007, each of the Indocos entered into various conditional sale and purchase agreements with the Initial Shareholders to acquire : (i) (ii) all of the shareholding interests in the Operating Companies (other than BE) (except for our Chairman and CEO, Mr. Henry Maknawi, who retained one share in each of the Operating Companies); and 90.1% of shareholding interest in BE (the balance 9.9% is held by our Chairman and CEO, Mr. Henry Maknawi). The purchase consideration for all the Operating Companies (other than PAM) was based on valuation determined by an independent valuer. The purchase consideration for PAM was based on the audited net asset value of PAM as at 31 December Pursuant to these agreements and on or about 9 May 2008, the Initial Shareholders transferred all of their shareholding interests in the Operating Companies to the respective Indocos which resulted in the following : SPL and WPM became the Indonesian holding companies of our plantation Operating Companies; BPS, the Indonesian holding company of our bulking and logistics Operating Companies; and CPG, the Indonesian holding company of our power generation Operating Companies. In consideration for the transfer by the Initial Shareholders of their respective shareholding interests in the respective Operating Companies to the Indocos, each of the Indocos provisionally allotted new shares in each of its share capital ( New Indoco Shares ) as detailed below to the Initial Shareholders: No. of New Indoco Shares In consideration for: 961,334 New Indoco Shares in SPL 100% (less one share (1) ) of certain of our plantation Operating Companies, namely, SWK (2), AKM, and KAJ 185,097 New Indoco Shares in WPM 100% (less one share (1) ) of certain of our plantation Operating Companies, namely, AIK, SKL, AEK, ATK, AML, SCEM, PMKS, WMP, LNM, ASML and WSM 28,398 New Indoco Shares in BPS 100% (less one share (1) ) of each of IDT and PAM, which are our bulking and logistics Operating Companies 1,686 New Indoco Shares in CPG 100% (less one share (1) ) of LK and 90.1% of BE, which are our power generation Operating Companies Notes: (1) Held by our Chairman and CEO, Mr. Henry Maknawi in order to comply with Indonesian law which requires companies in Indonesia to have at least two shareholders. (2) The consideration paid for the share capital of SWK consisted of cash and New Indoco Shares in SPL. The cash consideration paid by SPL amounted to Rp27.6 billion and the number of New Indoco Shares in SPL issued as consideration amounted to 362,933 New Indoco Shares in SPL. 73

80 RESTRUCTURING EXERCISE The Initial Shareholders then assigned their rights in the New Indoco Shares (as detailed below) to the Sincos and these shares were issued directly to Sincos. Following the issuance of such New Indoco Shares directly to the Sincos, SA became the Singapore holding company of SPL; KP, the Singapore holding company of WPM; KL, the Singapore holding company of BPS; and KB, the Singapore holding company of CPG. In consideration for the assignment by the Intial Shareholders of their right to the New Indoco Shares to the Sincos (as detailed below), each of the Sincos provisionally allotted new shares in each of its share capital to the Initial Shareholders ( First Issuance of new Sinco shares ). The Initial Shareholders then assigned their rights in the First Issuance of new Sinco shares to our Company and the shares were issued directly to our Company as follows: Aggregate no. of Indoco Shares No. of new Sinco shares provisionally allotted and directed to be issued to the Company 961,334 New Indoco Shares in SPL 16,293,793 new Sinco shares in the capital of SA issued to SA 185,097 New Indoco Shares in WPM 3,137,239 new Sinco shares in the capital of KP issued to KP 28,398 New Indoco Shares in BPS 481,326 new Sinco shares in the capital of KL issued to KL 1,686 New Indoco Shares in CPG (1) 28,582 new Sinco shares in the capital of KB issued to KB Note: (1) CPG issued 11,564 additional shares to comply with the minimum capital requirement set by the Indonesian authority regulating foreign investment in Indonesia (Badan Koordinasi Penanaman Modal or BKPM ). KB subscribed for 10,986 shares whilst the Initial Shareholders subscribed for the remaining shares. The 1,686 New Indoco Shares in CPG together with the 153 Initial Indoco Shares of CPG (see restructuring step in paragraph (f) below) constitute 95% of the share capital of CPG. The balance 5% of the share capital of CPG are held by the Initial Shareholders of LK and BE. (f) In October 2007, each of the Sincos entered into various conditional sale and purchase agreements with certain Initial Shareholders to purchase 150 Initial Indoco Shares (referred to in paragraph (c) above) in each of the Indocos (save for CPG, whereby the number of shares purchased was 153 Initial Indoco shares) based on the par value of the Initial Indoco Shares. On 9 May 2008, the Initial Shareholders transferred their Initial Indoco Shares as stated below to the respective Sincos: No. of new Sinco shares In consideration for: 2,542 new Sinco shares in SA 150 Initial Indoco Shares (1) of SPL 2,542 new Sinco shares in KP 150 Initial Indoco Shares (1) of WPM 2,542 new Sinco shares in KL 150 Initial Indoco Shares (1) of BPS 2,542 new Sinco shares in KB 153 Initial Indoco Shares (1) of CPG Note: (1) 100 Initial Indoco Shares in each of SPL, WPM and BPS are held by our Chairman and CEO, Mr. Henry Maknawi, and 97 Initial Indoco Shares in CPG are held by the Initial Shareholders of LK and BE, so as to comply with Indonesian law which requires companies in Indonesia to have at least two shareholders. 74

81 RESTRUCTURING EXERCISE In consideration for these Initial Indoco Shares in each of the Indocos, each of the Sincos provisionally allotted to the Initial Shareholders new shares in each of its share capital ( Second Issuance of new Sinco Shares ).The Initial Shareholders then assigned their rights in the Second Issuance of new Sinco shares to our Company and such new Sinco shares were accordingly issued directly to our Company. For the purposes of the rest of this Restructuring Exercise section, the First Issuance of new Sinco shares and the Second Issuance of new Sinco shares will be referred to as the New Sinco Shares. (g) Pursuant to a share allotment and issuance direction agreement entered into on 19 June 2008 between our Company and the Initial Shareholders (the Allotment and Direction Agreement ), our Company issued in aggregate an additional 19,951,108 new shares in its capital to the Initial Shareholders as consideration for the New Sinco Shares, (after taking into account the values of the respective shareholding interests in the Operating Companies and Indocos transferred from each of them to the Indocos and Sincos respectively as set out under paragraphs (e) and (f) above). (h) To streamline our shareholding structure, some of the Initial Shareholders, who also hold shares in Kencana Holdings ( Kencana Holdings Shareholders ) as described in paragraphs (a) and (b) above, directed their shares in our Company to be issued directly to Kencana Holdings thereby resulting in Kencana Holdings holding an additional 17,245,736 of our Company s shares. As consideration for these new Shares in our Company, Kencana Holdings issued a total of 17,245,736 new ordinary shares in its capital to the Kencana Holdings Shareholders. Kencana Holdings in aggregate holds 17,245,746 of our Shares. The following table shows the respective shareholdings of the shareholders of Kencana Holdings pursuant to the Allotment and Direction Agreement (after taking into account the values of the respective shareholding interests in the Operating Companies and Indocos transferred from each of them to the Indocos and Sincos as set out under paragraphs (e) and (f) above and the existing shares of Kencana Holdings). Name of Initial Shareholders % of shareholding interests in Kencana Holdings Henry Maknawi 43.4 Ratna Maknawi 7.2 Tengku Alwin Aziz 2.2 Albert Maknawi 2.9 Jimmy Chandra 2.6 Dick Permana 8.2 Jauhari Chandra 1.7 Jeanny Maknawi 10.6 Eddy Maknawi 9.9 Johan Maknawi 9.1 Karmila Maknawi 2.0 Ajis Chandra

82 GROUP STRUCTURE As at the date of this Prospectus, our Group structure is as set out below: 100% OUR COMPANY 100% 100% 100% Plantation Plantation Logistics Power Generation & Bulking SA KP KL KB 100% (1) 100% (1) 100% (1) 95.0% (2) SPL WPM BPS CPG 100% (3) 100%(3) 100% (3) 100% (3) SWK AIK ATK IDT LK 90.1% (4) KAJ AEK SKL PAM BE AKM AML SCEM WSM ASML Notes: (1) In accordance with Indonesian law requirements for a minimum of two shareholders, remaining 100 shares are held by Mr. Henry Maknawi. PMKS LNM (2) The balance 97 shares representing 5.0% of the share capital of CPG are held by the initial shareholders of LK and BE. WMP (3) In accordance with Indonesian law requirements for a minimum of two shareholders, remaining one share held by Mr. Henry Maknawi. (4) Remaining 9.9% of share capital is held by Mr Henry Maknawi. 76

83 GROUP STRUCTURE The following table sets out details of our subsidiaries as at the date of this Prospectus: Singapore Issued and Percentage Date and place of Principal Principal place paid-up owned by our Name establishment business of business capital (S$) Company (%) SA 29 December 2006, Trading and Singapore 16,296, Singapore Investment holding KL 29 December 2006, Investment Singapore 483, Singapore holding KB 29 December 2006, Investment Singapore 31, Singapore holding KP 29 December 2006, Investment Singapore 3,139, Singapore holding Indonesia Issued and Percentage Date and place of Principal Principal place paid-up owned by our Name establishment business of business capital (Rp) Company (%) AEK 9 March 2004, Agribusiness East Kalimantan 25,250, (4) Jakarta AIK 25 March 1997, Agribusiness East Kalimantan 30,300,000, (4) Jakarta AKM 9 December 1996, Agribusiness South Kalimantan 70,500,000, (4) Jakarta AML 19 February 2007, Agribusiness East Kalimantan 25,200, (4) Jakarta ASML 9 March 2004, Agribusiness Jakarta 25,000, (4) Jakarta ATK 25 March 1997, Agribusiness East Kalimantan 1,414,000, (4) Jakarta BE 8 August 2006, Power Belitung 50,500, (1) Bangka generation Belitung BPS 22 February 2007, Wholesale of Jakarta 2,864,800, (2) Jakarta shippingrelated products CPG 22 February 2007, Wholesale of Jakarta 1,350,000, (3) Jakarta products related to electricity IDT 13 September 2002, Bulking Bangka Island, 505,000, (4) Bangka Island Sumatera KAJ 16 August 2002, Agribusiness Bangka Island, 2,020,000, (4) Bangka Island Sumatera 77

84 GROUP STRUCTURE Issued and Percentage Date and place of Principal Principal place paid-up owned by our Name establishment business of business capital (Rp) Company (%) LK 8 December 2003, Power Bangka Island, 2,525,000, (4) Bangka Island generation Sumatera LNM 16 February 2007, Agribusiness Jakarta 25,000, (4) Jakarta PAM 17 October 2003, Logistics Jakarta 2,020,000, (4) Jakarta PMKS 19 February 2007, Agribusiness Jakarta 25,000, (4) Jakarta SKL 9 March 2004, Agribusiness East Kalimantan 25,250, (4) Jakarta SPL 16 February 2007, Wholesale of Jakarta 96,158,400,000 (4) 100 (2) Jakarta plantationrelated products SCEM 4 September 2006, Agribusiness East Kalimantan 26,000, (4) Jakarta SWK 16 September 1994, Agribusiness Bangka Island, 60,000,000, (4) Jakarta Sumatera WMP 16 February 2007, Agribusiness Jakarta 25,000, (4) Jakarta WPM 19 February 2007, Wholesale of Jakarta 18,534,700, (2) Jakarta plantationrelated products WSM 13 January 2006, Agribusiness Jakarta 126,000, (4) Jakarta Notes: (1) Remaining 9.9% of the share capital is held by Mr. Henry Maknawi (2) Remaining 100 shares are held by Mr. Henry Maknawi (3) Remaining 5.0% of the share capital is held by the initial shareholders of LK and BE (4) Remaining one share held by Mr. Henry Maknawi We do not have any associated companies. None of our subsidiaries are listed on any stock exchange. 78

85 GENERAL INFORMATION ON OUR GROUP BUSINESS We aim to be a leading palm oil producer and supplier of choice for the local Indonesian and international markets through continuous improvement of both operational efficiencies and product quality. Our mission is to expand our plantation business, commit to the welfare of local communities where our plantations and processing facilities are located through various corporate social responsibility programmes and implement environmentally-friendly practices such as zero burning and zero waste management (recycling). We are a fast-growing producer of CPO and CPKO in Indonesia with oil palm plantations located in the Sumatera and Kalimantan regions, where climatic conditions are well-suited for the planting of oil palm trees. From 2005 to the Latest Practicable Date, our Group s total land bank increased by 23.3% from 77,374 hectares to 95,410 hectares and our total planted area increased by 98.3% from 12,277 hectares to 24,349 hectares. As at the Latest Practicable Date, 85.0% of our total land bank is in Kalimantan with a planted area of 18,762 hectares, while our remaining land bank is situated in Sumatera, with a planted area of 5,587 hectares. As our planted area covers only 25.5% of our current land bank, we believe that we are able to significantly increase our planted area within our existing land bank. Our Group also participates in the Plasma Programme under which the Indonesian government requires plantation owners to develop surrounding small landholders plantations and purchase the FFB harvested from such plantations. This is one way in which our Group contributes to the welfare of the local communities in the areas that our Group operates. As at the Latest Practicable Date, we have approximately 12,372 hectares of plantation land under our Plasma Programme of which approximately 7,981 hectares have been planted. For the purpose of the disclosures made in respect of our land bank and planted area in this Prospectus, we have not included the land and planted area under our Plasma Programme. If we had included the land and planted area under our Plasma Programme, our aggregate land bank as at the Latest Practicable Date would be 107,782 hectares and our aggregate planted area would be 32,330 hectares. Our Group has two palm oil mills and two kernel crushing plants, with one of each located on Bangka Island in Sumatera and in South Kalimantan respectively. Our palm oil mills have a total production capacity of 120 MT/hour, and our kernel crushing plants have a combined production capacity of 435 MT/day. We operate a bulking terminal in Belinyu, Bangka Island, which is conveniently situated approximately 80 km from our plantation. This bulking terminal has three storage tanks with a total capacity of 19,500 MT and a nearby jetty for vessels to berth at and take delivery of our products. For our plantation operations in South Kalimantan, we also operate a jetty approximately 50 km from the plantations to facilitate the transportation of our products. We own and operate two barges with a total capacity of 4,500 MT which we use primarily for the transportation of our own products. Our bulking terminal and logistics services primarily serve to complement and support our palm oil business by enabling us to be self-sufficient in terms of storage and transportation. Our Group also has a 6.0 MW renewable biomass power plant on Bangka Island, which is used to generate electricity by utilising waste, namely EFB and kernel shells recycled from the CPO production process. Most of the electricity generated is sold to PLN, a state-owned electricity company. The balance is used for internal consumption by our plantation located on Bangka Island. 79

86 GENERAL INFORMATION ON OUR GROUP OUR HISTORY Our Company was incorporated in Singapore on 26 September 2007 as a private company with limited liability and was converted to a public limited company on 20 June Our Company became the holding company of our Group pursuant to the Restructuring Exercise. The history of our Group can be traced back to 1995 when our Chairman and CEO, Mr. Henry Maknawi acquired a land bank of 9,000 hectares on Bangka Island in Sumatera for the cultivation of oil palm plantations. We began our operations in the first quarter of 1995 and commenced planting in early In September 1997, our Group further acquired a land bank of approximately 15,000 hectares in South Kalimantan and began planting in The following sets out certain milestones achieved as part of our expansion strategy: (a) (b) (c) (d) In March 2001, our Group began commercial production of CPO with a capacity of 30 MT/hour at our first palm oil mill located on Bangka Island. We also acquired an additional land bank of 650 hectares on Bangka Island in December We upgraded our oil mill operations in 2004 by increasing our production capacity to 60 MT/hour. In August 2002, our Group began commercial production of CPKO at our first kernel crushing plant on Bangka Island with a capacity of 100 MT/day, which we increased to 135 MT/day in To support our business operations, our Group then began operating a bulking terminal in Belinyu, Bangka Island in September 2002 for storage of our CPO and CPKO. In August 2003, our Group began commercial production of CPO at our second palm oil mill in South Kalimantan with a capacity of 45 MT/hour. Our second kernel crushing plant, situated in the same vicinity as our second palm oil mill, commenced operations in June 2004 and had a CPKO production capacity of 300 MT/day. To cater for the expansion in business activities, our Group built and operated our first oil barge in March 2004 and later acquired a self-propelled oil barge in July In February 2004, as part of our Group s strategy to build up our land bank, we acquired approximately another 12,000 hectares in East Kalimantan and acquired an additional 2,000 hectares in April 2005, at which we began planting in (e) In October 2005, our Group continued to build up our land bank by acquiring an additional 44,000 hectares in a separate area in East Kalimantan. We began planting in this area in (f) (g) In line with our zero-waste management policy to provide green renewable electricity, we began construction of our first biomass power plant on Bangka Island at the start of 2005 to supplement the electricity needs of the Bangka Island s local community as well as our energy requirements. In May 2007, we first entered into a one-year renewable power purchase agreement with PLN to supply PLN with electricity. We have since renewed this contract for another year up to 31 May With the success of this pilot project, we were invited by the local government in Belitung Island and PLN in 2007 to build a second renewable biomass power plant on Belitung Island in Sumatera. For 2006, SWK scored the highest among 18 private plantation companies in the province of Bangka Island Belitung in an assessment of large scale private plantations by the provincial government of Bangka Island Belitung classifying SWK under a plantation class of good. AKM was awarded a certificate giving AKM a plantation class of very good by the Governor of the Province of South Kalimantan, based on a merit point system for the classification of plantation companies operating in the region. (h) In August 2007, our Group applied for the allocation of the location permit of an area of 19,600 hectares in West Kalimantan which was granted in November As at the Latest Practicable Date, our total land bank comprised approximately 95,410 hectares with a total planted area of 24,349 hectares. 80

GENERAL INFORMATION ON OUR GROUP COMPETITIVE STRENGTHS Our Group is well positioned to take advantage of the expected strong demand for palm oil products in the coming years and we intend to leverage

87 GENERAL INFORMATION ON OUR GROUP COMPETITIVE STRENGTHS Our Group is well positioned to take advantage of the expected strong demand for palm oil products in the coming years and we intend to leverage our competitive strengths to become a choice supplier of palm oil products. Our Group s core competitive strengths are as follows: Significant cultivatable land bank with new planting potential We set up our initial oil palm plantations in Sumatera and Kalimantan, where we began planting in 1996 and 1998, respectively. Since 2005, we have been focusing on strategic acquisitions of substantial land banks in the Kalimantan region to expand our oil palm plantations. We believe that the Kalimantan region is well-suited for the cultivation of oil palm plantations given the conducive environment with good rainfall, suitable soil and sunshine. From 2005 to the Latest Practicable Date, our Group s total land bank increased by 23.3% from 77,374 hectares to 95,410 hectares and our total planted area increased by 98.3% from 12,277 hectares to 24,349 hectares. The following table shows our land bank and planted area as at the Latest Practicable Date: Location Land Bank (Hectares) Planted Area (Hectares) Sumatera 14,331 5,587 Kalimantan 81,079 18,762 Total 95,410 24,349 We have approximately over 70,000 hectares of our land bank available for future planting. We intend to increase our planted area to over 80,000 hectares in the next five years within our existing land bank (which is an estimated compounded annual growth rate of 25.0% from 2007 to 2012). We estimate future planting of approximately 56,000 hectares of our land bank. The graph below shows the planned expansion of our planted area within our existing land bank. Hectares Land bank as at the Latest Practicable Date Land Bank Total Planted CAGR 25.0% 81

KENCANA AGRI LIMITED

THIS APPENDIX IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. This Appendix ( Appendix ) is circulated to Shareholders of Kencana Agri Limited (the Company ) together with the Company s annual report