> annual report 2005 - golden agri-resources · pt bank internasional indonesia tbk, pt bank...

> Annual Report 2005

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Golden Agri-Resources Ltd

c/o 3 Shenton Way

#17-03 Shenton House

Singapore 068805

Tel : 65 - 6220 7720

Fax: 65 - 6220 7020

Email: [email protected]

1 Corporate Profile

2 Network of Operations

4 Corporate Directory

5 Corporate Structure

6 Board of Directors

9 Chairman’s Statement

11 Operations Review

15 Financial Report > Shareholding Statistics

> Notice of Annual General Meeting

> Proxy Form

> Contents


> Corporate Profile

1

Listed on the Singapore Exchange Securities Trading Limited (SGX-ST) in 1999,

Golden Agri-Resources Ltd (GAR) is one of the largest privately owned oil palm

plantation companies in the world. Its operations are strategically located over

Indonesia.

With a total planted area of 287,000 hectares, GAR operates 31 palm oil

processing mills, two refineries and four kernel crushing plants. The Group’s

primary activities include cultivating and harvesting of oil palm trees; processing

of fresh fruit bunch into crude palm oil (CPO) and palm kernel oil; and refining

CPO into value-added products such as cooking oils, margarine and shortening.

In December 2005, GAR expanded its operations into China which include

refineries, port and oil-seed crushing facilities in Ningbo and Zhuhai.

GAR is 55 percent owned by SGX-ST listed Asia Food & Properties Limited

(AFP), an investment holding company with operating businesses in Agri-business,

Food and Property. Listed in 1997, AFP’s principal operations are located in

Indonesia, China, Singapore and Malaysia. The AFP Group of Companies employs

about 45,000 people with strong local, regional and international knowledge and

experience. AFP Group’s turnover in 2005 was S$2.5 billion.


weaimtobethebest


> Network of Operations

2

INDONESIA AGRI-BUSINESS

Sumatra

North Sumatra

Riau

South Sumatra

Bangka

Belitung

Jambi

Lampung

Sulawesi

South Sulawesi

Irian Jaya

Irian

Java

Jakarta

West Java

Central Java

East Java

Bali

Bali

Kalimantan

East Kalimantan

West Kalimantan

South Kalimantan

Central Kalimantan

.

.

.Distribution Centers

Refineries

Bulking Stations

.Plantations, CPO Millsand PK Crushing Plants

Sumatra Kalimantan

Sulawesi

Irian Jaya

Java

Maluku

Bali

Golden Agri-Resources Ltd3

Crushing Plants

Distribution Centers

Refineries

Port and Storage Facility

CHINA AGRI-BUSINESS

Central Region

Changsha

Nanchang

Wuhan

East Region

Anhui

Hangzhou

Jinhua

Nantong

Ningbo

Quzhou

Shanghai

Wuxi

South Region

Fuzhou

Guangzhou

Shenzhen

Zhanzhou

Zhuhai

..

..

Northwest RegionNorth Region

Northeast Region

Central Region

East Region

South Region


> Corporate Directory

Board of DirectorsFranky Oesman Widjaja (Chairman), Muktar Widjaja, Frankle (Djafar) Widjaja, Simon Lim, Rafael Buhay Concepcion, Jr.,Lew Syn Pau, Hong Pian Tee, Kunihiko Naito, Kaneyalall Hawabhay, Bertrand Denis Richard De Chazal

Audit CommitteeHong Pian Tee (Chairman), Kaneyalall Hawabhay, Kunihiko Naito

Nominating CommitteeHong Pian Tee (Chairman), Kunihiko Naito, Franky Oesman Widjaja

Remuneration CommitteeHong Pian Tee (Chairman), Kunihiko Naito, Frankle (Djafar) Widjaja

SecretaryMulticonsult Limited

Registered Office10 Frere Felix de Valois Street, Port Louis, Republic of MauritiusTel: (230) 202 3000 Fax: (230) 212 5265

Correspondence Address3 Shenton Way, #17-03 Shenton House, Singapore 068805Tel: (65) 6220 7720 Fax: (65) 6220 7020

Share Registrar and Transfer OfficeB.A.C.S. Private Limited63 Cantonment Road, Singapore 089758Tel: (65) 6323 6200 Fax: (65) 6323 6990

Auditors and Reporting AccountantsMoore Stephens, Certified Public Accountants11 Collyer Quay #10-02The Arcade, Singapore 049317Tel: (65) 6221 3771 Fax: (65) 6221 3815Partner-in-charge: Christopher Bruce Johnson (Appointed in December 2002)

Moore Stephens, Chartered Certified Accountants6th Floor, Nirmal House, 22 Sir William Newton Street, Port Louis, Republic of MauritiusTel: (230) 211 6535 Fax: (230) 211 6964Partner-in-charge: Arvin Rogbeer (Appointed in December 2002)

Principal BankersPT Bank Internasional Indonesia Tbk, PT Bank Mandiri (Persero) Tbk, PT Bank Central Asia Tbk and PT Bank NegaraIndonesia (Persero) Tbk

Date and Country of Incorporation15 October 1996, Republic of Mauritius

Share ListingThe Company’s shares are listed on the Singapore Exchange Securities Trading Limited

Date of Listing9 July 1999

4


> Corporate Structure

Note:

*Listed on the Jakarta Stock Exchange and Surabaya Stock Exchange

A simplified corporate structure of the Group showing the main subsidiaries, directly or indirectly held by the Company

13.96%

GO

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AG

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RC

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LT

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Golden Agri International Finance Ltd100%

Golden Agri International Pte Ltd100%

Silverand Holdings Ltd100%

PT P

urim

as S

asm

ita

86.04%

Asia Integrated Agri Resources Limited100%

Re f ined Product s , Por t & S torage Fac i l i t i e s

74.63%

91%

P l a n t a t i o n s

PT Sawit Mas Sejahtera

PT Sinar Kencana Inti Perkasa

100%

100%

A S A T 3 1 D E C E M B E R 2 0 0 5

5

P l a n t a t i o n s & R e f i n e d P r o d u c t s

PT Ivo Mas Tunggal

PT Sinar Mas Agro Resources and Technology Tbk *

9%

Golden Agri-Resources Ltd 6

Mr. Franky Widjaja, aged 48 was appointed Chairman in 2000. He has been a Director and Chief Executive Officer of GAR since

1996. He received his tertiary education at the Aoyama Gakuin University, Japan, where he graduated with a Bachelor’s degree

in Commerce in 1979.

Mr. Franky Widjaja has extensive management and operational experience in the different businesses of the Sinar Mas Group

such as pulp and paper, property, chemical, financial services and agriculture since 1982. He presently heads the Agri-Business and

Consumer Food Products Division of the Sinar Mas Group.

Mr. Franky Widjaja is a member of GAR’s Executive Committee and Nominating Committee. He is President Commissioner of

GAR’s Indonesian subsidiary, PT Sinar Mas Agro Resources and Technology Tbk, which is listed on the Jakarta and Surabaya Stock

Exchanges.

Mr. Franky Widjaja is Chairman and Chief Executive Officer of Asia Food & Properties Limited, and President Commissioner of

its Jakarta and Surabaya Stock Exchange listed Indonesian property subsidiary, PT Duta Pertiwi Tbk. He also sits on the Boards of

Directors of several Sinar Mas companies.

Mr. Muktar Widjaja, aged 51 was appointed as President and Vice Chairman of GAR in 2000. He has been a Director since 1999.

His last re-election as a Director was in 2004. He obtained his Bachelor’s degree in Business Administration with a major in

Commerce in 1976 from the University Concordia, Canada.

Mr. Muktar Widjaja has been actively involved in the management and operations of the property, financial services, agriculture,

chemical and pulp and paper businesses of the Sinar Mas Group since 1983. Mr. Muktar Widjaja is a member of GAR’s Executive

Committee. He is President Director of PT Sinar Mas Agro Resources and Technology Tbk, Director and President of Asia Food

& Properties Limited and President Director of PT Duta Pertiwi Tbk. He also serves on the Boards of Directors of several Sinar

Mas companies.

Mr. Frankle Widjaja, aged 49 has been a Director and Vice President of GAR since 1999. His last re-election as a Director was in

2005. He studied at the University of California, Berkeley, USA, and obtained a Bachelor of Science degree in Science (Industrial

Engineering & Operational Research) in 1978.

He has been involved in the management and operations of the pulp and paper, financial services, food and agriculture and real

estate businesses of the Sinar Mas Group since 1979.

Mr. Frankle Widjaja is a member of GAR’s Executive Committee and Remuneration Committee. He is a Director and Vice

President of Asia Food & Properties Limited, and Vice President Commissioner of PT Duta Pertiwi Tbk. He presently sits on the

Boards of Directors of several Sinar Mas companies.

Franky Oesman Widjaja, Chairman and Chief Executive Officer

Muktar Widjaja, Director and President

Frankle (Djafar) Widjaja, Director and Vice President

> Board of Directors


Mr. Lim, aged 43 was appointed as a Director and Chief Financial Officer in 2002. His last re-election as a Director was in 2003.

A 1988 graduate from University of Trisakti, Indonesia, majoring in Accounting and Finance, he later obtained a Master in

Business Management from the Asian Institute of Management, Philippines in 1992 with a full scholarship from ADB-Japan.

He has extensive financial, management and operational experience having worked in different industries.

Mr. Lim is a member of GAR’s Executive Committee. He is Vice President Director of PT Sinar Mas Agro Resources and

Technology Tbk, Commissioner of PT Duta Pertiwi Tbk, and Director and Chief Financial Officer of Asia Food & Properties

Limited.

Mr. Concepcion, aged 39 was appointed as a Director in 2002. His last re-election as a Director was in 2003. He studied at the

University of the Philippines where he obtained a Bachelor of Science in Economics in 1988. In 1992, he obtained a Master in

Business Management from the Asian Institute of Management, Philippines with scholarship from SGV Philippines. He worked

on regional projects and has extensive experience in corporate and financial planning. After 5 years with Pilipinas Shell Petroleum

Corporation, Mr. Concepcion joined PT Sinar Mas Agro Resources and Technology Tbk, and now holds the position of

Director. He is a member of GAR’s Executive Committee and a Director of Asia Food & Properties Limited.

Mr. Lew, aged 52 has been a Director of GAR since 1999. His last re-election as a Director was in 2005. A Singapore Government

scholar, Mr. Lew obtained a Master in Engineering from Cambridge University, UK and a Master of Business Administration from

Stanford University, USA.

He is Managing Director of Stanbridge International Pte Ltd. Prior to Stanbridge, Mr. Lew was Senior Country Officer and

General Manager for Banque Indosuez Singapore, where he worked from 1994 to 1997. He was General Manager and subsequently,

Managing Director of NTUC Comfort from 1987 to 1993 and Executive Director of NTUC Fairprice from 1993 to 1994. He

was a Member of Parliament from 1988 to 2001.

Mr. Lew sits on the Boards of Directors of several public listed companies namely, Poh Tiong Choon Logistics Ltd, Magnus Energy

Group Ltd, Lafe Technology Ltd, Achieva Ltd, Food Empire Holdings Ltd, RSH Limited and Guangzhao Industrial Forest Biotechnology

Group Ltd. He is also Chairman of ArianeCorp Ltd and Ascendas Pte Ltd, and President of The Singapore Manufacturers’

Federation.

Mr. Hong, aged 61 joined GAR’s Board of Directors in 2001. His last re-election as a Director was in 2005. Prior to retiring

from professional practice, he was a partner of PricewaterhouseCoopers, a position he held from 1985 to 1999.

Mr. Hong’s experience and expertise are in corporate advisory, financial reconstruction and corporate insolvencies since 1977.

He has been a corporate/financial advisor to clients with businesses in Singapore and Indonesia and in addition was engaged to

restructure companies with operations in Taiwan, Indonesia and Malaysia.

He is Chairman of GAR’s Audit Committee, Remuneration Committee and Nominating Committee. He is also Chairman of Pei

Hwa Foundation.

Simon Lim, Director and Chief Financial Officer

Rafael Buhay Concepcion, Jr., Director

Lew Syn Pau, Independent Director

Hong Pian Tee, Independent Director and Chairman of Audit Committee, Remuneration Committee and Nominating Committee


Mr. Naito, aged 61 was appointed to GAR’s Board of Directors in 2006. He is a graduate of the Waseda University, Japan, where

he obtained his Bachelor’s degree in Engineering in 1967.

Mr. Naito is Representative Director of NSN Global Partners Ltd, Japan. Previously, Mr. Naito was the Deputy General Manager

for the South East Asia region of Nissho Iwai Corporation. The position was based in Singapore. He was with Nissho Iwai

Corporation for 36 years, of which 14 years was with its subsidiary in New York, USA, where he was actively involved in food and

automotive project management. His last title there was Chief Representative for Nissho Iwai Corporation Indonesia.

Mr. Naito is a member of GAR’s Audit Committee, Remuneration Committee and Nominating Committee.

Mr. Hawabhay, aged 58 was appointed as a Director of GAR in 2003. His last re-election as a Director was in 2004. He is a

Fellow of the Institute of Chartered Accountants in England and Wales. He has been a Partner (Assurance and Business

Advisory Services (“ABAS”)) of De Chazal du Mée & Co, Mauritius from 1987 to June 2002 and Director of Multiconsult

Limited from July 2002 to 2005. Presently, he is Partner (ABAS) of BDO De Chazal du Mee, Mauritius.

Mr. Hawabhay is a member of GAR’s Audit Committee.

Mr. De Chazal, aged 64 joined GAR’s Board of Directors in 2003. His last re-election as a Director was in 2004. He is a Fellow

of the Institute of Chartered Accountants of England and Wales. He was a Senior Financial Analyst from 1986 to 2003 with

World Bank. Mr. De Chazal’s experience and expertise include financial analysis, economic sector work and fiduciary compliance.

He is currently a non-executive director of Mauritius Commercial Bank Ltd, Promotion and Development Limited and Caudan

Properties Limited.

Kunihiko Naito, Independent Director

Kaneyalall Hawabhay, Independent Director

Bertrand Denis Richard De Chazal, Independent Director


> Chairman’s Statement

Group Performance

I am pleased to report growth momentum in our business

operations in 2005 with the increase in revenue to US$819.3

million and net profit attributable to equity holders to US$74.6

million for Golden Agri-Resources Ltd (“GAR”) and its

subsidiaries (the “Group”). These represented growth of

7.8 percent in revenue and 14 percent in net profit

attributable to equity holders as compared to US$759.7 million

and US$65.5 million respectively in 2004. Our crude palm oil

(“CPO”) production output rose 8.2 percent to 1,479,000

tonnes in 2005 from 1,367,000 tonnes produced in 2004. Our

better performance reflects the results of our innovation and

continuous improvement initiatives.

The average International CPO price (CIF Rotterdam) was

US$420 per tonne, approximately 10 percent lower than the 2004

average of US$469 per tonne. Despite the lower realised prices

of CPO and related palm products in 2005, our earnings per share

for 2005 increased 14 percent to USD 3.44 cents from USD 3.02

cents for 2004. Our net asset value per share was almost

25 percent higher at USD 46.2 cents as at 31 December 2005

compared to USD 37.2 cents at the end of December 2004.

Accordingly, we are pleased to propose a first and final dividend

of SGD 1 cent per share subject to shareholders’ approval at the

forthcoming Annual General Meeting.

In 2005, we have extended our penetration into a few key

markets including China, India, Korea and the Philippines. As part

of our long-term priority is to build geographic presence in

attractive regional markets, GAR acquired the China Agri-

business operations (Asia Integrated Agri Resources Limited

(“AIAR”) group of companies) from its immediate holding

company, Asia Food & Properties Limited in the last quarter of

2005 (“4Q2005”). The acquisition will facilitate the market

expansion of the Group’s palm oil business into China.

The increase in revenue was mainly due to the contribution from

the China Agri-business operations in 4Q2005, amounting

to US$95.5 million. This division operates a deep-sea port and

storage facility for oil and grain, oilseed crushing and vegetable oil

refining facilities in Ningbo and Zhuhai, and produces soybean oil,

soy-based animal feeds, palm oil and blended edible oils.

On the other hand, revenue from the Indonesia Agri-business

operations fell US$36 million or 4.7 percent to US$723.7 million

from US$759.7 million in 2004. This was mainly due to the lower

realised prices of CPO and related palm products during 2005.

Operations

Our total planted area was 287,000 hectares as of end 2005,

96 percent of which was mature estates. Following the

completion of three more CPO mills, Muara Wahau (East

Kalimantan), Sungai Bengkal (Jambi) and Tanah Laut (South

Kalimantan), we currently operate 31 CPO mills with combined

installed capacity of 8,045,000 tonnes per annum, and two

refineries with processing capacity of about 840,000 tonnes

per annum.

Further, our fresh fruit bunch (“FFB”) production yield increased

to 21.43 tonnes per hectare, up from the 20.23 tonnes per

hectare whereas CPO extraction rate was 23.29 percent, up

from 23.19 percent in 2004.

Outlook

Going forward, the Group’s performance continues to depend

on the global economic outlook, global climatic conditions, CPO

price, foreign exchange rates movement, and developments in

Indonesia and China.

The outlook for palm oil industry is favourable as palm oil prices

are expected to be sustained by robust demand in spite of the


Revenue(US$ million)

EBITDA(US$ million)

anticipated increase in supply. A large part of the anticipated

demand lies in the recent lifting by the Chinese government of

its import quota on palm oil. The growing interest in using palm

oil as an alternative energy source (bio-diesel) also benefits the

industry. Further, being naturally semi-solid, palm oil does not

require hydrogenation, and is thus emerging as a viable

alternative for other edible oils. Demand is expected to grow,

especially with stricter food labelling laws coming into effect in

the United States.

Having successfully restructured all our debts that required

restructuring, we are now able to focus on our operations,

improve our operating efficiencies, increase our penetration of

our downstream businesses and grow our business both

organically and by way of acquisition.

Appreciation

On behalf of the Board, I would like to express my appreciation

to our independent directors, Dr Hong Hai and Mr Foo Meng

Kee, who resigned from the Board on 21 February 2006, for

their valuable services and contributions since their appointments

in 2001. I would also like to extend a warm welcome to the

Board, our new director, Mr Kunihiko Naito, who was appointed

on 21 February 2006.

Last but not least, I also wish to thank our shareholders, business

associates and customers for their continuous support, and our

management and staff for their contributions and commitment

to create continuous growth with long-term sustainable value.

Franky Oesman Widjaja

Chairman & Chief Executive Officer

16 March 2006


> Operations Review

Annual CPO and PK Production(‘000 Tonnes)

CPO

PK

Annual CPO Mills Processing Capacity(‘000 Tonnes)

Golden Agri-Resources Ltd (“GAR”) is one of the largest oilpalm plantation companies in the world with operations inIndonesia and China.

GAR is an integrated palm oil producer and its primaryactivities are cultivation and harvesting of oil palm trees andprocessing fresh fruit bunch (“FFB”) into crude palm oil(“CPO”) and palm kernel oil. As a value-adding process, GARalso refines CPO into branded and unbranded cooking oils,margarine, shortening and similar products.

In the last quarter of 2005, GAR acquired the ChinaAgri-business operations (Asia Integrated Agri ResourcesLimited (“AIAR”) group of companies) from its immediateholding company, Asia Food & Properties Limited. Thisdivision operates a deep-sea port and storage facility for oiland grain, oilseed crushing and vegetable oil refining facilitiesin Ningbo and Zhuhai, producing soybean oil, soy-basedanimal feeds, palm oil and blended edible oils.

INDONESIA AGRI-BUSINESS

PlantationsTotal planted area remained at 287,000 hectares as at end2005, with 96 percent (274,000 hectares) of mature plantedestates.

Production of FFB reached 5,870,000 tonnes in 2005,representing a 3.8 percent increase over the 5,654,000 tonnesproduced in 2004. The increase would have been higher if notfor the prolonged drought season and delay in rainfall in SouthKalimantan and Lampung Sumatra earlier in 2005, whichreduced the yield per hectare. Nonetheless, average FFByield per hectare in 2005 was still higher at 21.43 tonnes perhectare as compared to 20.23 tonnes per hectare in 2004 asmore trees reached their prime (7-18 years).

We remain focused on improving our agricultural techniquesand production yields to maintain our position as a leadingCPO producer. On-going activities include optimal fertiliser


Immature Mature Total

Sumatra 6 205 211

Kalimantan 7 59 66

Irian Jaya 0 10 10

Total 13 274 287

Total Tree Planted (By Location)(‘000 Hectares)

Total Planted Area(‘000 Hectares)

application, field management techniques, oil palm breedingand selection and research to cultivate seedlings withsuperior characteristics.

Selective replanting to replace old palm trees will be carriedout to sustain long-term production volume. We are carefulto ensure zero burning in clearing our plantations, in line withour commitment to responsible environmental practices.

ProductionWe completed the construction of three additional CPO mills,Muara Wahau (East Kalimantan), Sungai Bengkal (Jambi) andTanah Laut (South Kalimantan) in 2005, bringing our totalnumber of CPO mills to 31, with combined installed capacityof 8,045,000 tonnes of FFB per annum. We processed 6,352,000tonnes of FFB in 2005 compared to 5,896,000 tonnes in 2004,utilising about 79 percent of our total annual capacity.

We have two refineries with processing capacity of about840,000 tonnes per annum, and four palm kernel crushing plantswith processing capacity of 324,000 tonnes per annum.

Despite the prolonged drought season in South Kalimantanand Lampung Sumatra earlier in 2005, CPO production roseto 1,479,000 tonnes in 2005, 8.2 percent higher than the1,367,000 tonnes produced in 2004, mainly due to the increasein planted hectares of prime age. In addition, we saw markedimprovement in our production in the second half of 2005,

having recovered from the adverse effect of the droughtseason in previous quarters.

CPO extraction rate was 23.29 percent up from 23.19percent in 2004. We will continue to improve CPO qualityand extraction rates of our milling operations and achieveoptimum levels of output.

We firmly believe in preserving the environment andmaintaining quality; occupational health and safety isof paramount importance. PT Sinar Mas Agro Resourcesand Technology Tbk (“SMART”) has implemented theISO 14001:2000 for environment and ISO 9001:2000 forquality throughout its plantations and refineries.

In January 2006, SMART received the HACCP (HazardAnalysis Critical Control Point) Certification for both itsrefineries in Medan and Surabaya for implementinginternational standard for food safety. This is an accreditationfor food safety for our cooking oil, margarine and shortening.The certification is recognition of our refined products ashallmarks of quality.

Downstream ActivitiesThe high level of integration through our refineries in Medanand Surabaya, gives us the flexibility to sell either CPO orrefined products, and to either export or sell locally. The CPOand palm kernel we produce is largely being utilised inour downstream manufacturing operations. Sales of refinedproducts accounted for about 32 percent of our revenuein 2005.

The research facility at our Surabaya refinery is developingnew refined palm oil based products and testing ways toimprove the quality of our refined products through blendingand alternative processing methods to reduce production cost.


A. Cooking OilsB. CPOC. PKO & PKMD. Margarine and ShorteningE. Other Refined Palm Oil Based

ProductsF. Other Products

Sales: By Products(Percentage)

Net Sales: Domestic vs Exports(Percentage)

Indonesia

40% 60%

Outside Indonesia

We have continued to maintain our market share of brandedproducts in the Indonesia market and expand our penetrationin the China market through various marketing efforts suchas mass media advertising, sale promotions and expandeddistribution coverage.

In January 2005, our flagship brand FILMA received theIndonesian Customer Loyalty Award from SWA Magazine andMars Marketing Research for the highest customer loyalty inthe cooking oil category. In July 2005, FILMA was awardedSuperbrand Status 2005/2006 by Superbrands International.As part of our marketing initiatives to enhance the salesof our established brands, FILMA and KUNCI MAS, welaunched our new product ‘FILMA Margarine’ with considerablesuccess in the middle of 2005.

CHINA AGRI-BUSINESSOur newly acquired China Agri-business division (AIAR groupof companies) is one of the largest fully integrated port,oilseed storage and processing, palm oil refining and vegetableoil trading operations in China, with logistics advantages inits target markets. Subsequent to GAR’s acquisition ofthis division, the 3-month results for the fourth quarter of2005 of this division were accounted for in the Group’sconsolidated results.

We intend to expand our presence in China by increasingthis division’s capacity utilisation rate, established distributionand sales network. We plan to tap on our experienceand expertise in the Indonesia market and replicate ourdownstream palm oil based products business model in China.Like the Indonesia Agri-business division, we also have researchfacilities at our refineries in Ningbo and Zhuhai to improvethe quality of our refined products and research alternativeprocessing methods.

In Ningbo, Zhejiang Province, the division has a deep-seaport and storage facility for oil and grain and an oilseed crush-ing plant with one million tonnes annual capacity. It also hasrefining facilities in Ningbo and a refining plant in Zhuhai,Guangdong Province with 280,000 tonnes and 100,000 tonnesannual capacity respectively.

The oilseed crushing operations produce soybean meal,which are sold locally under our in-house brand, and crudesoybean oils, which are in turn processed by the refineriestogether with other edible oils. These refined oils are sold toconsumers in bulk and in consumer packs; the small-packcooking oils are mainly sold under Grand Slam brand (one ofthe top three brands in eastern China).

Capacity utilisation rate of the oilseed crushing facilities inNingbo rose to approximately 91 percent in 2005 from


Age Profile of Trees(Percentage)

CPO Prices cif Rotterdam(US$ per Tonne)

75 percent in 2004. Utilisation rates of the refineries at Ningboand Zhuhai, were 63 percent (2004: 65 percent) and 66percent (2004: 49 percent) respectively. Our crushingoperations processed 928,000 tonnes of soybeans in 2005(2004: 768,000 tonnes); and produced 742,000 tonnes ofsoybean meal (2004: 614,000 tonnes) and 166,000 tonnes ofcrude soybean oil (2004: 139,000 tonnes).

Consumer packs remained competitive with new blendedproducts, including sunflower oil, olive oil and corn oil, beinglaunched to increase our market share. We are now focusingon high-margin products and improved sales distributionto concentrate on markets in the vicinity. We launched theMaster Chef brand of cooking oil in September 2005 as partof a niche marketing initiative targeting at the restaurant,hotel and catering businesses.

STRATEGYOur commitment to grow our core businesses to yieldlong-term sustainable value to our stakeholders is on-track.To this end, we remain focused on our core business and willcapitalise on our position as a leading CPO producer,our expertise in cultivating oil palm plantations, and our value-added capability to produce refined palm oil and edible oilproducts for commercial and retail markets.

We will continue to strengthen our competitive advantage inour core business through:

> Improving overall efficiency of our integrated operations

from plantations, mills and refineries to refined end-products;

> Strengthening our foothold in domestic markets by

maintaining our branded product market share in Indonesia

and expanding our market presence in China;

> Expanding our export sales for branded and unbranded

products;

> Consolidating our range of brands and being a one-stop shop

supplier for the high-margin range of industrial oil and fat

products in the Indonesia market;

> Planting and acquiring oil palm plantations; and

> Exploiting the growing interest to use palm oil as an

alternative energy source, bio-diesel included, and

exploring the possibility to participate in the production

of this value-added product.


> Financial Report

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTS

31 DECEMBER 2005

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) AND ITS SUBSIDIARIES


31 DECEMBER 2005

CONTENTS PAGE Report of the Directors 1 - 9 Statement by the Directors 10 Report of the Auditors 11 - 12 Consolidated Income Statement 13 Consolidated Balance Sheet 14 - 15 Consolidated Statement of Changes in Equity 16 Consolidated Cash Flow Statement 17 - 19 Notes to the Consolidated Financial Statements 20 - 77

1

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) REPORT OF THE DIRECTORS 31 DECEMBER 2005 The directors are pleased to present their report together with the audited financial statements of Golden Agri-Resources Ltd ("GAR" or the "Company") and its subsidiaries (the "Group") for the financial year ended 31 December 2005. 1 Directors

The directors of the Company in office at the date of this report are: Franky Oesman Widjaja Muktar Widjaja Frankle (Djafar) Widjaja Simon Lim Rafael Buhay Concepcion, Jr. Lew Syn Pau Hong Pian Tee Kunihiko Naito (appointed on 21 February 2006) Kaneyalall Hawabhay Bertrand Denis Richard De Chazal Hong Hai and Foo Meng Kee resigned as directors of the Company on 21 February 2006. The directors would like to thank them for their contributions while serving as directors of the Company.

2 Arrangements to Enable Directors to Acquire Benefits by Means of the Acquisition of Shares and

Debentures

Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object was to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

3 Directors' Interests in Shares and Debentures No director holding office at 31 December 2005 had an interest in the shares or debentures of the

Company. The directors' interest in Shares and Debentures of the Company at 21 January 2006 were the same as

at 31 December 2005. 4 Directors’ Receipt and Entitlement to Contractual Benefits

Since the beginning of the financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except that certain directors have received remuneration from related corporations in their capacity as directors and/or executives of those related corporations and except as disclosed in the financial statements.

2

4 Directors’ Receipt and Entitlement to Contractual Benefits (cont'd) There were certain transactions (shown in the consolidated financial statements) with corporations in

which certain directors have an interest. 5 Options to Take Up Unissued Shares

During the financial year, no option to take up unissued shares of the Company was granted. 6 Options Exercised

During the financial year, there were no shares of the Company or any corporation in the Group issued by virtue of the exercise of an option to take up unissued shares.

7 Unissued Shares Under Options

At the end of the financial year, there were no unissued shares under option. 8 Corporate Governance

The Company recognises the importance and is committed to attaining high standards of corporate governance in conformity with the Code of Corporate Governance (the “Code”) issued by Singapore Exchange Securities Trading Limited (“SGX-ST”). This Report outlines the Company's corporate governance processes and activities.

The Board of Directors

Presently, the Board of Directors (the “Board”) comprises 10 directors, with 5 executive directors and 5 non-executive, independent directors. The names and key information of the directors are set out in pages 6 to 8 of the Annual Report.

3

8 Corporate Governance (cont'd) The Board of Directors (cont’d)

The Board meets to consider, inter alia, the following corporate events and actions:

• approval of results announcements; • approval of the annual report and accounts; • convening of shareholders’ meetings; • material acquisitions and disposal of assets; • annual budgets; • interested person transactions; and • corporate governance.

Certain matters are delegated to the various Board Committees set up by the Board, which act within their respective terms of references as approved by the Board. See paragraphs (i) to (iv) on Board Committees below.

In 2005, the Board held 5 meetings. The Company’s Articles of Association provides for meetings of the Board by means of teleconference or similar communication equipment. The attendance of the directors and committee members at meetings of the Board and Board Committees respectively, in 2005 is as follows:

GAR Board Audit Committee Nominating Committee Remuneration Committee

Name

No. of Meetings

Held

No. of Meetings Attended

No. of Meetings

Held


No. of Meetings

Held


No. of Meetings

Held


Franky Oesman Widjaja (executive) 5 4 - - 1 1 - -

Muktar Widjaja (executive) 5 5 - - - - - -

Frankle (Djafar) Widjaja (executive) 5 5 - - - - 2 2

Simon Lim (executive) 5 4 - - - - - -

Rafael Buhay Concepcion, Jr. (executive) 5 5 - - - - - -

Lew Syn Pau (non-executive, independent) 5 5 8 8a 1 1a - -

Hong Pian Teeb (non-executive, independent) 5 5 8 8 - - 2 2

Kaneyalall Hawabhayc (non-executive, independent) 5 5 - - - - - -

Bertrand Denis Richard De Chazal (non-executive, independent) 5 2 - - - - - -

Hong Haid (non-executive, independent) 5 5 8 7** 1 1 - -

Foo Meng Keee (non-executive, independent) 5 5 8 7** - - 2 2

Kunihiko Naitof (non-executive, independent) - - - - - - - -

** Represents full attendance at all relevant audit committee meetings a Resigned on 21 February 2006 (Audit Committee and Nominating Committee) b Appointed on 21 February 2006 (Nominating Committee) c Appointed on 21 February 2006 (Audit Committee) d Resigned on 21 February 2006 (Board, Audit Committee and Nominating Committee) e Resigned on 21 February 2006 (Board, Audit Committee and Remuneration Committee) f Appointed on 21 February 2006 (Board, Audit Committee and Remuneration Committee) and on 27 February

2006 (Nominating Committee)

4

8 Corporate Governance (cont’d)

The Board of Directors (cont’d) The Board examines its size and comprises directors from different industries, with vast experience and knowledge. There is a strong and independent element on the Board, with independent directors making up half of the Board. We believe that the independent directors have demonstrated a high commitment in their roles as directors and have ensured that there is a good balance of power and authority. In view of the Chairman and Chief Executive Officer posts being held by the same person, the Chairman of the Audit Committee acts as the Lead Independent Director. The Board Committees

Particulars of the various Committees set up by the Board are as follows:

(i) Executive Committee

The Executive Committee ("EC") currently comprises the following members:

Group A Franky Oesman Widjaja Muktar Widjaja Frankle (Djafar) Widjaja Group B Simon Lim Rafael Buhay Concepcion, Jr. Bertrand Denis Richard De Chazal

Kaneyalall Hawabhay (resigned from EC on 21 February 2006) The EC's role includes supervising the management of the business and affairs of the Group. (ii) Audit Committee

The Audit Committee ("AC") currently comprises 3 members all of whom are non-executive and independent. Members of the AC are as follows:

Hong Pian Tee (appointed as Chairman on 21 February 2006) Kunihiko Naito Kaneyalall Hawabhay

In 2005, the AC held 8 meetings.

The AC has the explicit authority to investigate any matter within its terms of reference. In addition, the AC has full access to and co-operation of Management and has full discretion to invite any director or executive officer to attend its meetings. Reasonable resources are made available to enable it to discharge its functions properly.

The duties of the AC include keeping under review the scope and results of the audit and its cost effectiveness and the independence and objectivity of the external auditors.

5


The Board Committees (cont'd)

(ii) Audit Committee (cont'd) In performing its functions, the AC meets with the internal and external auditors, and reviews the overall scope of both internal and external audits, and the assistance given by Management to the auditors. Where necessary, the AC also meets with the internal and external auditors without the presence of Management. The internal and external auditors have unrestricted access to the AC. During the course of audit, the external auditors carried out a review of the effectiveness of the Company’s material internal controls, including financial, operational and compliance controls to the extent of their scope as laid out in their audit plan. Material non-compliance and internal control weaknesses noted during their audit are reported to the AC together with their recommendations. The AC has reviewed the Group's risk assessment, and, based on the audit reports and management controls in place, is satisfied that there are adequate internal controls in the Group.

In addition to its statutory functions, the AC considers and reviews any other matters as may be agreed to by the AC and the Board. In particular, it reviews with Management, and where relevant, the auditors, the results announcements, annual report and accounts, interested person transactions and corporate governance, before submission to the Board for approval or adoption. The AC also reviews the audit plans, and the co-operation and assistance given by Management to the external auditors.

The AC reviews the independence of the external auditors and recommends to the Board of Directors the nomination of external auditors. The Chief Internal Auditor reports to the chairman of the AC. On administrative matters, he reports to the Chief Executive Officer. The Chief Internal Auditor has met the standards set by nationally or internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

The AC ensures that the internal audit function is adequately staffed and has appropriate standing within the Company. It also ensures the adequacy of the internal audit function. (iii) Nominating Committee

The Nominating Committee ("NC") currently comprises 3 members, a majority of whom, including the chairman, is non-executive and independent. Members of the NC are as follows:

Hong Pian Tee (appointed as Chairman on 21 February 2006) Kunihiko Naito Franky Oesman Widjaja

In 2005, the NC met once.

The role of the NC is to establish a formal and transparent process for the Company, for the appointment of new directors and re-nomination and re-election of directors at regular intervals. Except for the director holding the position of Chief Executive Officer, all directors are to submit themselves for re-election at regular intervals.

6


The Board Committees (cont'd)

(iii) Nominating Committee (cont’d)

The Company has in place a system to assess the effectiveness/performance of the Board. In proposing objective performance criteria for such evaluation and determination, for the Board's approval, consideration was given to a number of factors, including those set out in the Code. The Board has approved specific objective performance criteria for such evaluation. The Board adopts the independence test recommended by the Code. Taking into account the independence test, the NC considers and determines the independence of directors. (iv) Remuneration Committee

The Remuneration Committee ("RC") currently comprises 3 members, a majority of whom, including the chairman, is non-executive and independent. Its members are as follows:

Hong Pian Tee (Chairman) Kunihiko Naito Frankle (Djafar) Widjaja

In 2005, the RC held 2 meetings.

The RC’s role is to review and recommend to the Board, an appropriate and competitive framework of remuneration or compensation policy for the Board, key executives and employees within the Group. Currently, the Company does not have long-term incentive schemes, including share schemes. Detailed public disclosure of the directors and key executives' remuneration is currently not adopted. The number of directors falling under the remuneration bands of S$250,000 are as follows:

Number of Directors Remuneration Band 2005 2004 S$500,000 to S$749,999 1 1 S$250,000 to S$499,999 1 1 Below S$250,000 9 10 11 12

Access to Information

In order to ensure that the Board is able to fulfill its responsibilities, Management provides the Board with complete and adequate information in a timely manner. Such information extends to documents on matters to be brought up before the Board at board meetings. Senior staff and professionals, who can provide additional insights into the matters to be discussed at Board meetings, are also invited to be present at meetings. As directors may have further enquiries on the information provided, they have separate and independent access to the Company’s senior management. Management provides the Board with financial statements of the Group on a quarterly basis. In view of the Group's size and nature of operations, such quarterly, and not monthly, reporting is considered adequate.

7


Access to Information (cont'd)

The directors also have separate and independent access to the company secretary’s nominee(s) who attends all Board meetings. Where the directors, either individually or as a group, in the furtherance of their duties, require professional advice, the company secretary’s nominee(s) can assist them in obtaining independent professional advice, at the Company’s expense. Communication with Shareholders

Since 2003, the Company announces its results on a quarterly basis. All information and its quarterly results are disseminated via SGXNET.

The Company does not practise selective disclosure. Results and annual reports are announced or issued within the mandatory period.

All shareholders of the Company receive the annual report and notice of annual general meeting. The notice is also advertised in the newspapers. At the annual general meeting, shareholders are given the opportunity to air their views and ask directors questions regarding the Group. The Articles of Association of the Company allows a member of the Company to appoint one or two proxies to attend and vote instead of the member. Dealings in Securities

The Company adopts the SGX-ST Best Practices Guide, applicable to the Company, its directors and officers, in relation to dealings in the Company’s securities. Dealings in the Company’s securities are prohibited during the period commencing (i) two weeks before announcement of the Company’s first, second and third quarter results and (ii) one month before the announcement of the Company’s full year results, and ending on the date of the announcement of the results. Such dealings are also prohibited whilst in possession of unpublished material price-sensitive information.

8

9 Interested Person Transactions Disclosure The aggregate value of all interested person transactions during the financial year under review is as

follows:

Name of interested person

Aggregate value of all interested person

transactions during the financial year under review (excluding transactions less

than S$100,000 and transactions conducted under

shareholders' mandate* pursuant to Rule 920)

Aggregate value of all

interested person transactions conducted

under shareholders' mandate* pursuant to

Rule 920 (excluding transactions less than S$100,000)

US$ US$ Asia Food & Properties Limited 155,000,000** 4,448,288 AFP International Finance (2) Ltd Nil 1,354,115 Asia Integrated Agri Resources

Limited

Nil

18,012,195

P.T. Asuransi Sinar Mas Nil 2,140,095 P.T. Cakrawala Mega Indah Nil 1,351,175 P.T. Rolimex Kimia Nusamas Nil 21,145,090 P.T. Royal Oriental Nil 1,433,230 Zhuhai Huafeng Foodstuff Co., Ltd Nil 219,358 Zhuhai Shining Gold Oil and Fats

Industry Co., Ltd

Nil

4,650,745

Total 155,000,000 54,754,291

Name of interested person

Aggregate value of all interested person

transactions during the financial year under review (excluding transactions less

than S$100,000 and transactions conducted under

shareholders' mandate* pursuant to Rule 920)

Aggregate Balance as at 31 December 2005***

US$ US$ BII Limited, Cook Islands Nil 3,304,000

* Renewed at Annual General Meeting on 28 April 2005. ** Independent shareholders' approval obtained for the interested person transaction at the

Extraordinary General Meeting held on 13 October 2005. *** This refers to the placement of deposits with an interested person as at 31 December 2005.

There was no placement of further or fresh deposits with BII Limited, Cook Islands during the year; transactions comprised only roll-overs of deposits and its accrued interest thereon. No disclosure is made of the aggregate value of these transactions conducted during the financial year as it is not practicable to determine these aggregate values since these transactions involve numerous roll-over of placements. Subsequently, these deposits have been fully repaid on 7 February 2006.

9

10 Key Management Staff

The key management staff are also directors of the Company, and their background information are set out in pages 6 to 8 of the Annual Report.

11 Auditors

The auditors, Moore Stephens, have expressed their willingness to accept reappointment.

On behalf of the Board of Directors FRANKY OESMAN WIDJAJA Director SIMON LIM Director 16 March 2006

10

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) STATEMENT BY THE DIRECTORS 31 DECEMBER 2005 In the opinion of the directors, the consolidated financial statements set out on pages 13 to 77 are drawn up so as to give a true and fair view of the state of affairs of the Group as at 31 December 2005 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the Group will be able to pay its debts as and when they fall due. On behalf of the Board of Directors FRANKY OESMAN WIDJAJA SIMON LIM Director Director 16 March 2006

11

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) 1 We have audited the accompanying consolidated financial statements of Golden Agri-Resources Ltd

(the "Company") and its subsidiaries (the "Group") as at 31 December 2005 and for the year then ended set out on pages 13 to 77. These financial statements are the responsibility of the directors of the Company whose opinion thereon is set out in the statement by the directors. Our responsibility is to express an opinion on these financial statements based on our audit.

2 We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes an examination, on a test basis, of evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3 Biological Assets The independent auditors’ report on the financial statements of P.T. Purimas Sasmita ("Purimas")

contained an “except for” opinion in relation to the Group’s biological assets. According to International Accounting Standards No. 41 “Agriculture”, biological assets should be measured at fair value less estimated point-of-sale costs from initial recognition of biological assets up to the point of harvest, unless market prices or alternative estimates of fair value are not available or determined to be unreliable, where cost less accumulated depreciation and impairment losses would be acceptable. As there are currently no accepted standard ways of determining the value of the biological component of plantation assets in accordance with this Accounting Standard, the directors were consequently unable to determine the fair value of the Group’s biological assets in line with this Standard. The directors have instead recorded plantation assets at either revalued amount or cost less accumulated depreciation and impairment losses amounting to US$622,989,000 in total as at 31 December 2005 (2004: US$389,988,000). The auditors were unable to express an opinion as to the appropriateness of the valuation of Purimas’ plantation assets. The independent auditors report on the financial statements of Purimas for the year ended 31 December 2004, contained the same qualification.

12

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) 4 Opinion

Except for the matter referred to in the preceding paragraph, in our opinion the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2005, the results of its operations, its cash flows and changes in equity for the financial year then ended, in accordance with International Financial Reporting Standards.

Moore Stephens Certified Public Accountants Singapore Date: 16 March 2006 Date:

13

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Note 2005 2004 US$’000 US$’000 Revenue 4 819,286 759,711 Cost of sales (644,312) (557,232) Gross profit 174,974 202,479 Operating expenses Selling expenses 5 (28,721) (21,001) General and administrative expenses 5 (59,661) (58,643) (88,382) (79,644) Operating Profit 86,592 122,835 Other income(expenses) Financial income 6 7,334 4,202 Financial expenses 6 (28,101) (30,214) Share of results of associated companies, net (294) (3,203) Foreign exchange (loss)gain (2,031) 1,523 Other operating income(expenses), net 7 9,317 (5,419) (13,775) (33,111) Exceptional items Negative goodwill written off 13,024 - Impairment loss on property, plant and equipment (83) (1,063) (Loss)Profit on disposal of: Property, plant and equipment (2,001) - Plantation assets (6,975) - Investment in subsidiaries (1,466) 2,411 2,499 1,348 Profit before income tax 8 75,316 91,072 Income tax 9 10,561 (20,081) Profit for the year 85,877 70,991 Attributable to: Equity holders of the Company 74,602 65,460 Minority interests 11,275 5,531 85,877 70,991 Earnings per ordinary share (cents) Basic 10 3.44 3.02 Diluted 10 3.44 3.02 The accompanying notes form an integral part of these financial statements.

14

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 Note 2005 2004 US$’000 US$’000 Assets Current Assets Cash and cash equivalents 11 79,988 51,389 Short-term investments 12 21,142 39,694 Due from a related party 16 3,304 - Trade receivables 13 49,282 33,381 Other receivables 14 64,885 27,161 Inventories 15 143,335 89,979 361,936 241,604 Non-Current Assets Due from a related party 16 - 118,632 Other long-term receivables 17 94,657 155,550 Associated companies 19 18,047 18,632 Property, plant and equipment 20 647,962 414,027 Plantation assets 21 622,989 389,988 Deferred income tax 18 18,173 10,394 Deferred charges 22 4,580 3,620 Brands and trademarks 23 2,882 3,202 Goodwill 24 26,060 18,194 1,435,350 1,132,239 Total Assets 1,797,286 1,373,843 The accompanying notes form an integral part of these financial statements.

15

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED BALANCE SHEET (cont’d) AS AT 31 DECEMBER 2005 Note 2005 2004 US$’000 US$’000 Liabilities and Equity Current Liabilities Bank overdraft, unsecured - 8 Short-term loans 25 158,448 122,629 Trade payables 26 139,317 53,823 Other payables 27 48,094 49,156 Taxes payable 9 3,355 4,352 Obligations under finance leases 28 715 105 349,929 230,073 Non-Current Liabilities Obligations under finance leases 28 1,327 212 Long-term borrowings 29 207,040 271,693 Deferred income tax 18 103,347 31,976 Other long-term payables 30 1,715 1 313,429 303,882 Total Liabilities 663,358 533,955 Equity Attributable to Equity Holders of the Company Issued capital 31 216,867 216,867 Share premium 296,595 296,595 Other paid-in capital 184,318 184,318 Other reserves 125,389 9,031 Hedging reserve (1,853) - Foreign currency translation reserve 196 - Cumulative translation adjustments (16,684) (16,684) Retained earnings 197,075 116,676 1,001,903 806,803 Minority Interests 132,025 33,085 Total Equity 1,133,928 839,888 Total Liabilities and Equity 1,797,286 1,373,843 The accompanying notes form an integral part of these financial statements.

16

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2005 Minority Total <------------------------------------------------Attributable to Equity Holders of the Company-----------------------------------------------> Interests Equity Foreign Other Currency Cumulative Issued Share Paid-in Other Hedging Translation Retained Translation Capital Premium Capital Reserves Reserve Reserve Earnings Adjustments Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Balance at 1.1.2004 216,867 296,595 184,318 9,199 - - 51,216 (16,684) 741,511 27,180 768,691 Profit for the year - - - - - - 65,460 - 65,460 5,531 70,991 Revaluation Surplus - - - 414 - - - - 414 374 788 Adjustment to fair value for entities under common control

-

-

-

(582)

-

-

-

-

(582)

-

(582) Net (loss)gain recognised directly in equity - - - (168) - - - - (168) 374 206

Balance at 31.12.2004

216,867

296,595

184,318

9,031

-

-

116,676

(16,684)

806,803

33,085

839,888

Balance at 1.1.2005 as previously reported

216,867

296,595

184,318

9,031

-

-

116,676

(16,684)

806,803

33,085

839,888

Effect of adopting IFRS3 - - - - - - 5,797 - 5,797 1,908 7,705 Balance at 1.1.2005 as restated

216,867

296,595

184,318

9,031

-

-

122,473

(16,684)

812,600

34,993

847,593

Profit for the year - - - - - - 74,602 - 74,602 11,275 85,877 Revaluation Surplus - - - 116,358 - - - - 116,358 72,000 188,358 Arising from acquisition of a subsidiary

-

-

-

-

-

-

-

-

-

13,436

13,436 Additional investment in subsidiaries

-

-

-

-

-

-

-

-

-

(872)

(872) Cash subscribed by minority shareholders

-

-

-

-

-

-

-

-

-

1,165

1,165 Decrease in fair value of hedging derivatives

-

-

-

-

(1,853)

-

-

-

(1,853)

-

(1,853) Foreign currency translation

-

-

-

-

-

196

-

-

196

28

224

Net gain(loss) recognised directly in equity - - - 116,358 (1,853) 196 - - 114,701 85,757 200,458

Balance at 31.12.2005

216,867

296,595

184,318

125,389

(1,853)

196

197,075

(16,684)

1,001,903

132,025

1,133,928

The accompanying notes form an integral part of these financial statements.

17

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 2005 2004 US$’000 US$’000 Cash flows from operating activities Profit before income tax 75,316 91,072 Adjustments for: Depreciation 58,710 55,580 Amortisation 1,004 4,562

Unrealised foreign exchange gain on short-term loans, long-term borrowings and receivables, net

(3,050)

(4,401)

(Gain)Loss on conversion of project plasma plantations (282) 3,305 Share of results of associated companies, net 294 3,203 Write off of negative goodwill (13,024) (366) Impairment loss on property, plant and equipment 83 1,063 Loss on disposal and write off of: Property, plant and equipment 2,314 396 Plantation assets 7,189 8,638 Loss(Profit) on disposal of investment in subsidiaries 1,466 (2,411) Allowance(Write-back) for impairment loss on: Inventories (824) - Trade receivables and trade receivables written off 73 1,168 Non-trade receivables - 755 Interest income (7,334) (4,202) Interest expense 27,709 29,488 Operating cash flows before working capital changes 149,644 187,850 Changes in operating assets and liabilities: Trade receivables (3,857) (10,322) Inventories (20,146) (6,565) Other receivables (7,356) 3,646 Trade payables (2,822) 5,271 Other payables (2,227) (12,035) Cash generated from operations 113,236 167,845 Interest paid (34,974) (27,573) Interest received 4,251 2,433 Income tax refund 3,962 6,225 Net cash from operating activities 86,475 148,930 The accompanying notes form an integral part of these financial statements.

18

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 (cont’d) 2005 2004 US$’000 US$’000 Cash flows from investing activities Proceeds from sale of property, plant and equipment 5,966 3,973 Proceeds from sale of plantation assets 8,785 670 Capital expenditure on property, plant and equipment (56,694) (49,966) Capital expenditure on plantation assets (9,633) (17,083) Net decrease(increase) in short-term investments 18,890 (39,206) Repayments of current account and deposit with a related party 118,156 57,755 Investments in Plasma/KKPA program plantations, net 2,158 (54) Net decrease(increase) in other long-term receivables from related parties 62,034 (52,706) Dividends received 215 - Acquisition of subsidiaries, net of cash acquired (Note A) (121,672) (1,810) Proceeds from sale of investment in subsidiaries (Note B) 1,390 5,100 Investments in software development (199) (1,213) Increase in deferred land rights (1,245) (1,408) Net decrease in other receivables 608 289 Net cash from(used in) investing activities 28,759 (95,659) Cash flows from financing activities Proceeds from short-term loans and overdraft 57,131 24,614 Proceeds from long-term borrowings 8,119 114,967 Payments of short-term loans (47,051) (23,876) Payments of long-term borrowings (103,483) (154,302) Decrease in trade financing (795) (1,085) Due to related parties - (500) Decrease in trust receipt payables (1,521) (1,229) Cash subscribed from minority shareholders 1,165 - Deferred loan charges and long-term bank loan administration costs (200) (804) Net cash used in financing activities (86,635) (42,215) Net increase in cash and cash equivalents 28,599 11,056 Cash and cash equivalents at the beginning of the year 51,389 40,333 Cash and cash equivalents at the end of the year (Note 11) 79,988 51,389

The accompanying notes form an integral part of these financial statements.

19

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) CONSOLIDATED CASH FLOW STATEMENT (cont’d) FOR THE YEAR ENDED 31 DECEMBER 2005 Notes to the Consolidated Cash Flow Statement: A. Summary of the effect of acquisition of subsidiaries 2005 2004 US$’000 US$’000 Cash and cash equivalents 33,741 1,087 Other current assets 89,628 1,845 Other current liabilities (159,062) (12,443) Non-current assets 217,043 8,210 Non-current liabilities (12,591) - Minority interests (13,491) - Net assets(liabilities) acquired 155,268 (1,301) Goodwill on consolidation 145 4,198 Total purchase price 155,413 2,897 Cash of acquired subsidiaries (33,741) (1,087) Net cash outflow on acquisition of subsidiaries 121,672 1,810 B. Summary of the effect of disposal of subsidiaries 2005 2004 US$’000 US$’000 Cash and cash equivalents 119 184 Other current assets 76 1,134 Current liabilities (450) (1,774) Net current liabilities (255) (456) Non-current assets 3,230 4,842 Non-current liabilities - (1,513) Exceptional (loss)gain on disposal of subsidiaries (1,466) 2,411 Proceed from disposal of subsidiaries 1,509 5,284 Cash of disposed subsidiaries (119) (184) Net cash inflow on disposal of subsidiaries 1,390 5,100 The accompanying notes form an integral part of these financial statements.

20

GOLDEN AGRI-RESOURCES LTD AND ITS SUBSIDIARIES (Incorporated in Mauritius) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial statements. 1 General

Golden Agri-Resources Ltd (the "Company") is a limited company incorporated in Mauritius. The registered office of the Company is at 10, Frère Félix de Valois Street, Port Louis, Mauritius.

The immediate holding company is Asia Food & Properties Limited (“AFP”), incorporated in Singapore. The directors regard Flambo International Limited, a company incorporated in the British Virgin Islands as the ultimate holding company. The Controlling Shareholders of the Company comprise certain members of the Widjaja Family. The Company is principally engaged as an investment holding company. The principal activities of the subsidiaries and associated companies are described in Note 41 to the consolidated financial statements.

The consolidated financial statements for the year ended 31 December 2005 were authorised for issue by the Board of Directors on 16 March 2006.

2 Adoption of New and Revised International Financial Reporting Standards ("IFRS")

In the current year, the Group has adopted the following new and revised Standards and Interpretations issued by the International Accounting Standards Boards ("IASB") and the International Financial Reporting Interpretations Committee of the IASB that are relevant to its operations, and effective for accounting periods beginning on 1 January 2005. • IFRS 3, Business Combinations (New 2003) • IFRS 5, Non-current Assets Held for Sale and Discontinued Operations (New 2004) • IAS 1, Presentation of Financial Statements (Revised 2003) • IAS 2, Inventories (Revised 2003) • IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (Revised 2003) • IAS 10, Events after the Balance Sheet Date (Revised 2003) • IAS 16, Property, Plant and Equipment (Revised 2003) • IAS 17, Leases (Revised 2003) • IAS 21, The Effect of Changes in Foreign Exchange Rates (Revised 2003) • IAS 24, Related Party Disclosures (Revised 2003) • IAS 27, Consolidated and Separate Financial Statements (Revised 2003) • IAS 28, Investments in Associates (Revised 2003) • IAS 32, Financial Instruments: Disclosure and Presentation (Revised 2003) • IAS 33, Earnings per Share (Revised 2003) • IAS 39, Financial Instruments: Recognition and Measurement (Revised 2004)

Except for the adoption of IFRS 3, Business Combinations as disclosed below, the adoption of the above mentioned standards had no significant impact on the Group's financial statements.

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 2 Adoption of New and Revised International Financial Reporting Standards ("IFRS") (cont'd)

The adoption of IFRS 3, Business Combinations, has resulted in a change in the accounting policy for goodwill. Goodwill is stated at cost less any accumulated impairment losses and is no longer amortised. Instead, goodwill is tested annually for impairment or when circumstances change, indicating that goodwill might be impaired. Negative goodwill is recognised immediately in the income statement, instead of being amortised over its useful life. In accordance with the transitional rules of IFRS 3, in respect of goodwill acquired in business combinations for which the agreement date was before 31 March 2004, the Group has applied the revised accounting policy for goodwill prospectively from the beginning of its first annual period beginning on or after 31 March 2004, i.e. 1 January 2005. Therefore, from 1 January 2005, the Group has discontinued amortising such goodwill and has tested the goodwill for impairment. As at 1 January 2005, the carrying amount of amortisation accumulated before that date of US$8,014,000 has been eliminated, with a corresponding decrease in the cost of goodwill. The carrying amount of negative goodwill which amounted to US$7,705,000 has been derecognised, with a corresponding credit to opening retained earnings and minority interests of US$5,797,000 and US$1,908,000 respectively. Because this revised accounting policy has been applied prospectively, the change has had no impact on amounts reported for 2004 or prior periods. No amortisation has been charged in 2005. The net amortisation charged in year 2004 was US$867,000.

3 Summary of Significant Policies

(I) Accounting Policies

(a) Basis of Financial Statements Preparation

The consolidated financial statements, which are expressed in United States dollars, are prepared in accordance with the historical cost convention, except as disclosed in the accounting policies below. The consolidated financial statements are drawn up under IFRS, however, as disclosed in Note 21(c), they are not prepared in accordance with International Accounting Standards No. 41, Agriculture, as the directors are unable to determine the fair value of the Group's biological assets in line with this Standard. The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management's best knowledge of current events and actions, actual results may actually differ from these estimates. (b) Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (the "Group") made up to 31 December. The results of subsidiaries acquired or disposed during the year are included in or excluded from the consolidated financial statements from the effective date of acquisition or disposal. All inter-company balances, transactions and any unrealised profit or loss on inter-company transactions are eliminated on consolidation.

22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 3 Summary of Significant Policies (cont’d)

(I) Accounting Policies (cont’d) (b) Basis of Consolidation (cont'd)

A company is a subsidiary if it is controlled by any of the Group companies, which generally occurs when more than 50% of the issued voting capital is held long-term, directly or indirectly, by the Group and the Group is able to govern the financial and operating policies of the company so as to obtain benefits from its activities. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an individual investment to cover losses. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interests.

Business combinations which involve the transfer of net assets or the exchange of shares between entities under common control are accounted for as a uniting of interests. The financial information included in the consolidated financial statements reflects the combined results of the entities concerned as if the merger had been in effect for all periods presented.

(c) Associated Companies

Associated companies are entities in which the Group has significant influence, but not control, which generally occurs when the Group has a direct or indirect ownership interest of 20% to 50% or is in the position to exercise significant influence on the financial and operating policy decisions, and are accounted for by the equity method. Under the equity method, the cost of investment is increased or decreased by the Group's share in net earnings or losses and other equity changes of the associated company since the date of acquisition. Losses of an associated company in excess of the Group's interest in that associated company (which includes any long-term interests, in substance, form part of the Group's net investments in that associated company) are not recognised.

(d) Functional and Presentation Currency

The functional currency of the Company, its Indonesian subsidiaries and a number of its other subsidiaries is the United States dollar. Because of the international nature of the crude palm oil and soybean products that the Group is principally engaged in and the fact that the transactions are usually denominated in or derived from United States dollars, the directors are of the opinion that the United States dollar reflects the primary economic environment in which the entities operate.

23


(I) Accounting Policies (cont’d)

(d) Functional and Presentation Currency (cont'd)

The consolidated financial statements are presented in United States dollars, which is the Company’s functional currency and presentation currency.

(e) Foreign Currencies Transactions involving foreign currencies are translated into the respective functional currencies of the companies in the Group at the rates of exchange prevailing at the time the transactions are entered into. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currencies at exchange rates prevailing at such date, and any exchange difference are taken to the income statement. Currency translation differences on non-monetary items, such as equity investments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Currency translation differences on non-monetary items, such as equity investments classified as available-for-sale financial assets, are included as part of the fair value gain or loss. In the preparation of the consolidated financial statements, the financial statements of those subsidiaries whose functional currency is not the United States dollar (i.e. “foreign entities”) have been translated to United States dollars, the functional currency of the Company, as follows:

(i) all assets and liabilities at the exchange rates approximating those prevailing on the

balance sheet dates;

(ii) share capital and reserves at historical exchange rates; and (iii) profit and loss items at the average exchange rates for the years.

Exchange differences arising from the above translations are taken directly to “Foreign Currency Translation” reserve. Such translation differences are recognised in income statement in the period in which the foreign entity is disposed of. (f) Revenue Recognition

Revenue arising from sales of goods is recognised when the products are shipped for export sales and when the products are delivered to the customers for domestic sales and collectibility of the related receivables is probable. Revenue from processing services is recognised when the services are rendered. Interest income is accrued on a time-proportion basis, by reference to the principal outstanding and at the effective interest rate applicable.

24



(g) Cash and Cash Equivalents Cash for the cash flow statement includes cash and cash equivalents. Cash and cash equivalents

classified under current assets comprise cash on hand, cash in banks and time deposits which are short term, highly liquid assets that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

(h) Trade Receivables

Trade receivables are measured at initial recognition at fair value which is normally the original invoiced amount, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. (i) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is determined by the weighted average method for finished goods and by the moving average method for other inventories, such as raw material, spare parts and fuel, chemical and packing supplies and others. Net realisable value is the estimated selling price less all estimated costs of completion necessary to make the sale.

(j) Financial Assets

The Group classifies its financial assets in the following categories: loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets are acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables are carried at amortised cost using the effective interest method. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any other category. Available-for-sale financial assets are carried at fair value and gains and losses arising from changes in the fair value of the available-for-sale financial assets are taken to the income statement.

25



(k) Property, Plant and Equipment

Property, plant and equipment are carried at cost, less accumulated depreciation and any impairment losses where the recoverable amount of the asset is estimated to be lower than its carrying amount.

Depreciation is charged so as to write off the cost of assets, using the straight-line method, over the following estimated useful lives:

No. of years Storage tanks, land improvements and bridges - 50 Buildings - 20 to 50 Machinery and equipment - 5 to 25 Furniture and fixtures - 5 to 10 Transportation equipment - 5 to 10

Land rights in the China Agri-business division which have finite economic lives are amortised over the terms of the land rights, which range from 46 to 50 years. Amortisation commences upon obtaining regulatory approval from the relevant authorities. Land rights in the Indonesia Agri-business division are carried at cost and not subject to amortisation. Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The cost of maintenance and repairs is charged to income statement as incurred; significant renewals and improvements are capitalised. When assets are retired or otherwise disposed of, their carrying amounts and the related accumulated depreciation are removed from the financial statements and any resulting gains or losses are reflected in the income statement for the year.

The cost of construction in progress represents all costs (including borrowing costs on such borrowings) attributable to bringing the constructed asset to its working condition and getting it ready for its intended use. The accumulated costs will be reclassified to the appropriate property, plant and equipment account when the construction is completed. No depreciation charge is provided for construction-in-progress until the fixed assets are transferred and used in operations.

Assets held under finance leases are depreciated over their estimated useful lives on the same basis as owned assets or, where shorter, the term of the relevant leases.

The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date.

(l) Plantation Assets

Plantation assets include mature plantations, immature plantations and nursery that are established or acquired by the Group.

26



(l) Plantation Assets (cont'd) Mature plantations are stated at either cost or valuation, less accumulated depreciation and any

impairment losses where the recoverable amount of the asset is estimated to be lower than its carrying amount. Depreciation is charged so as to write off the cost or valuation of mature plantations, using the straight-line method, over the following estimated useful lives:

No. of years Mature plantations: Oil palm plantations - 25 Other plantations - 25

Costs incurred in the preparation of the nursery, purchase of seedlings and their maintenance are stated at cost. The accumulated costs will be transferred to Immature plantations account at the time of planting. Immature plantations are stated at cost. The costs of immature plantations consist mainly of the accumulated cost of planting, fertilising and maintaining the plantation, including borrowing costs on such borrowings and other indirect overhead costs up to the time the trees are harvestable and to the extent appropriate. An oil palm plantation is considered mature when such plantation starts to produce at the beginning of the fourth year. The residual values and useful lives of plantation assets are reviewed, and adjusted as appropriate, at each balance sheet date. (m) Deferred Charges

Certain expenditures, whose benefits extend over a period of more than one year, are being deferred and amortised, over the periods benefited using the straight-line method and comprise:

(i) Administration costs directly attributable to the obtaining of the bank loans, which are amortised over three years or over the period of the loan, whichever is shorter; and

(ii) Incidental costs incurred in connection with the acquisition or renewal of land rights,

which are amortised over the term of the related land rights.

(n) Brands and Trademarks

Brands and trademarks are stated at acquisition cost or net present value of future cash payments of the acquisition cost at the date of the acquisition and are amortised over their estimated useful lives of 20 years using the straight-line method.

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(o) Software Development Costs

Software development costs represent all costs related to the Group's business process reengineering as part of the SAP R/3 system implementation. These costs are amortised through the income statement over the estimated useful life of the software, which is 5 years. Direct expenditure, which enhances or extends the performance of computer software beyond its specifications and which can be reliably measured, is recognised as a capital improvement and added to the original cost of the software. Costs associated with maintaining computer software are recognised as an expense as incurred.

(p) Goodwill

The excess of the cost of a business combination over the fair value of the Group's share of the identifiable net assets of the acquired subsidiaries accounted for under the purchase method is recognised as ''Goodwill'' in the consolidated financial statements. Prior to 1 January 2005, goodwill is amortised over its estimated useful life of 20 years using the straight-line method, while negative goodwill is recognised in the income statement as follows: (i) to the extent that negative goodwill relates to expected future losses and expenses that are

identified in the Group’s plan for the acquisition and can be measured reliably, that portion of negative goodwill is recognised as income when the future losses and expenses are recognised;

(ii) the amount of negative goodwill not exceeding the fair values of acquired identifiable non-

monetary assets is recognised as income on a systematic basis over the remaining weighted average useful lives of the identifiable acquired depreciable/amortisable assets; and

(iii) the amount of negative goodwill in excess of the fair values of acquired identifiable non-

monetary assets is recognised as income immediately. With effect from 1 January 2005, goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or when circumstances change, indicating that goodwill might be impaired. If the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of acquisition, the Group will reassess the identification and measurement of the identifiable assets, liabilities and contingent liabilities and the measurement of the cost of acquisition, and any excess thereafter is recognised as income immediately. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash generating units. If the recoverable amount of a cash-generating unit is estimated to be less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

28



(q) Impairment of Assets excluding Goodwill At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An asset's recoverable amount is calculated as the higher of the asset's value in use and/or its fair value less cost to sell. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that it does not restate the asset to a carrying amount in excess of what would have been determined (net of depreciation) had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (r) Deferred Income Tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority. Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associated companies except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

29


(I) Accounting Policies (cont’d) (s) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases and the related lease obligations are recognised in the balance sheet at the fair value of the leased assets at the inception of the leases. The excess of the lease payments over the recorded lease obligations is treated as a finance charge which is amortised over each lease term to give a constant rate of charge on the remaining balance of the obligation. Rental costs under operating leases are charged to the income statement in equal annual amounts over the period of the leases. (t) Bank Borrowings

Interest-bearing bank borrowings are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accrual basis in the income statement using the effective interest method. (u) Trade Payables

Trade payables are carried at cost which is the fair value of the consideration to be paid in the future of goods and services received. Interest-bearing trade payables are recognised initially at cost less attributable transaction costs. Subsequent to initial recognition, interest-bearing trade payables are stated at amortised cost. (v) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a

past event where it is probable that it will result in an outflow of economic benefits that can be reasonably estimated.

(w) Borrowing Costs

Interest expense and similar charges are expensed in the income statement in the period in which they are incurred, except to the extent they are capitalised as being directly attributable to the acquisition and construction of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale.

30



(w) Borrowing Costs (cont'd)

Certain subsidiaries capitalise borrowing costs, including interest and other financial charges on borrowings used to finance the construction of factories, expansion of plantations, construction of fixed assets and development of properties. Capitalisation ceases when substantially all the activities necessary to prepare the related assets for their intended use or sale are completed. The capitalised costs are depreciated over the same periods and on the same basis as the underlying assets.

(x) Retirement Benefit Costs Certain subsidiaries have defined benefit retirement plans covering substantially all of their qualified permanent employees. The retirement plan obligations are accounted for using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Past service costs are recognised immediately to the extent that the benefits are already vested, and otherwise are amortised on a straight-line basis over the average period until the benefits become vested. Actuarial gains or losses that exceed 10 percent of the greater of the present value of the defined benefit obligation and the fair value of plan assets are amortised over the expected average remaining working lives. The retirement plan obligations recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan. Payments made to state-managed retirement benefits schemes are dealt with as payments to defined contribution plans where the company’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit plan.

(y) Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new equity instruments, other than for the acquisition of a business, are taken to equity as a deduction, net of tax, from the proceeds. (z) Dividend Distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

31


(I) Accounting Policies (cont’d) (aa) Segment Reporting A segment is a distinguishable component of the Group that is engaged in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those or other segments. Segment information is presented in respect of the Group's business and geographical segments. The primary format, geographical segment, is based on the Group's location of principal activities. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year. (bb) Derivatives Derivative financial instruments are used to manage exposures to foreign exchange and commodity price risks arising from operational activities. Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged as described in 3(I)(cc). (cc) Cash Flow Hedges When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss in the derivative financial instrument is recognised directly in equity. When the forecast transaction subsequently results in a recognition of a non-financial asset or non-financial liability, or the forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which the fair value hedge accounting is applied, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or non-financial liability. For other cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects the income statement. The ineffective part of any gain or loss is recognised immediately in the income statement. When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the accumulated gain or loss recognised in equity is recognised immediately in the income statement.

32


(II) Financial Risk Management Policies The Group’s activities expose it to a variety of financial risks: interest rate risk, currency risk, credit risk, liquidity risk and cash flow risks. The Group uses derivative financial instruments to hedge certain risk exposures. The Group’s policy prohibits it to enter into speculative transactions.

(a) Interest Rate Risk

The Group is exposed to interest rate risk primarily on its existing floating rate receivables and borrowings. The interest rate that the Group will be able to obtain on debt financing will depend on market conditions at that time, and may differ from the rates the Group has secured currently. Effective interest rates and re-pricing analysis In respect of interest-earning financial assets and interest-bearing financial liabilities, the interest rates and repayment terms are disclosed in Notes 16, 17, 25, 28 and 29 to the consolidated financial statements. The tables below set out the Group’s exposure to interest rate risks. Included in the tables are the assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.

Fixed Rates Variable Rates

Non- interest bearing Total

Less than 1 year

1 to 5 years

Less than 1 year

1 to 5 years

Over 5 years

At 31 December 2005 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Assets Cash and cash equivalents - - 79,988 - - - 79,988 Trade and other receivables - - 4,816 7,467 5,503 108,175 125,961 Other financial assets - - 24,008 - - 438 24,446 Non-financial assets - - - - - 1,566,891 1,566,891 Total Assets - - 108,812 7,467 5,503 1,675,504 1,797,286

Liabilities Borrowings 50,108 8,888 56,229 242,463 9,842 - 367,530 Other financial liabilities - - 18,698 - - 170,428 189,126 Non-financial liabilities - - - - - 106,702 106,702 Total Liabilities 50,108 8,888 74,927 242,463 9,842 277,130 663,358

33


(II) Financial Risk Management Policies (cont'd) (a) Interest Rate Risk (cont'd)

Fixed Rates Variable Rates

Non- interest bearing Total

Less than 1 year

1 to 5 years

Less than 1 year

1 to 5 years

Over 5 years

At 31 December 2004 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Assets Cash and cash equivalents - - 51,389 - - - 51,389 Trade and other receivables - - - 68,739 6,265 79,631 154,635 Other financial assets - - 39,694 118,632 - - 158,326 Non-financial assets - - - - - 1,009,493 1,009,493 Total Assets - - 91,083 187,371 6,265 1,089,124 1,373,843

Liabilities Borrowings - 9,722 77,279 177,811 129,835 1 394,648 Other financial liabilities - - 20,334 - - 82,645 102,979 Non-financial liabilities - - - - - 36,328 36,328 Total Liabilities - 9,722 97,613 177,811 129,835 118,974 533,955

(b) Credit Risk

The Group performs ongoing credit evaluation of its customers’ financial conditions. Customers may be required to provide security in terms of cash deposits or letters of credit. The maximum exposure to credit risk in the event that the counter parties fail to perform their obligations as at the end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the balance sheet. (c) Significant Concentrations of Credit Risk

Concentrations of credit risk exist when changes in economic, industry or geographical factors similarly affect counter-parties whose aggregate credit exposure is significant in relation to the Group’s total credit exposure. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

(d) Liquidity Risk

To manage liquidity risk, the Group maintains a level of cash and cash equivalents and funding facilities deemed adequate by management to finance its operations. In assessing the adequacy of the facilities, management reviews its working capital requirements.

34


(II) Financial Risk Management Policies (cont'd) (e) Foreign Currency Risk

The Group transacts in many currencies and its foreign currency exposures arose mainly from the exchange rate movements of the Indonesian rupiah and the United States dollar which is also the Group’s functional currency.

The Group did not actively engage in activities to hedge its foreign currency exposures during the financial year. (f) Market Risk

Market risk is the risk that the value of the financial instrument will fluctuate as a result of changes in market prices. The Group's exposure to market risk relates to its trading activities of commodities. The Group monitors market closely to ensure that the risk exposure to the volatility of the commodities is kept minimum.

(g) Agricultural Activity

The Group derives a significant portion of its revenue from refined palm products and crude palm oil (“CPO”). Oil palm trees require approximately three years to mature and do not reach peak production until seven years after planting. The Group operates a controlled replanting program to ensure that oil palm trees reaching the end of their economic life are replaced by higher-yielding varieties. The prices of refined palm products and CPO are based upon international prices, which tend to be subject to fluctuations depending upon the supply and demand dynamics of CPO and palm oil products, changes in world CPO production levels (which tend to be affected by global weather conditions), world consumption levels and changes in the world economy.

4 Revenue Note 2005 2004 US$’000 US$’000 Sales in Indonesia Third parties 293,153 320,811 Associated companies 36,505 43,885 329,658 364,696 Export sales Third parties 484,418 392,804 Related parties 32a 5,210 2,211 489,628 395,015 Total revenue 819,286 759,711

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 4 Revenue (cont'd) 2005 2004 US$’000 US$’000 Sales in Indonesia Palm oil based products: Crude palm oil 117,581 130,144 Fresh fruit bunch 2,955 9,089 Margarine and fat 14,753 14,908 Palm fatty acid distillate 805 823 Palm kernel 30,465 29,732 Palm kernel fatty acid distillate 74 102 Palm kernel meal 108 330 Palm kernel oil 18,745 18,361 Refined bleached deodorised olein 103,544 116,672 Refined bleached deodorised stearin 20,201 23,261 Refined bleached deodorised palm oil 11,884 14,545 Refined bleached deodorised palm kernel oil 319 1,077 Others 3,995 3,546 Sub total 325,429 362,590 Other products 4,229 2,106 Total sales in Indonesia 329,658 364,696

Export sales Palm oil based products: Crude palm oil 225,026 206,009 Margarine and fat 9,131 6,268 Palm fatty acid distillate 8,943 10,063 Palm kernel meal 4,485 6,289 Palm kernel oil 25,518 19,953 Refined bleached deodorised olein 90,020 93,731 Refined bleached deodorised palm oil 2,748 12,248 Refined bleached deodorised palm kernel oil 4,029 7,494 Refined bleached deodorised stearin 25,984 24,304 Others 807 8,656 Sub total 396,691 395,015 Soy bean based products 92,207 - Others 730 - Total export sales 489,628 395,015 Total revenue 819,286 759,711

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 5 Selling, General and Administrative Expenses 2005 2004 US$’000 US$’000 Selling expenses: Transportation 11,444 11,228 Advertising and promotions 6,659 2,517 Bulking 526 205 Export tax and administration 4,573 2,970 Salaries and employees’ benefits 2,682 1,876 Depreciation 326 214 Others 2,511 1,991 28,721 21,001 General and administrative expenses: Salaries and employees’ benefits 32,507 29,139 Amortisation of deferred charges and brands and

trademarks

721

3,102 Rent, tax and licenses 4,878 3,340 Travelling 3,204 2,505 Depreciation 5,956 5,397 Office supplies 662 700 Repairs and maintenance 2,116 1,471 Management fees 4,514 4,154 Professional fees 3,441 5,371 Others 1,662 3,464 59,661 58,643 88,382 79,644 6 Financial Income and Financial Expenses Note 2005 2004 US$’000 US$’000 Interest income: Third parties 1,915 941 Associated company 235 146 Related parties 32a 5,184 3,115 7,334 4,202 Interest expense: Third parties (27,546) (28,541) Associated company (44) (36) Related parties 32a (119) (911) Amortisation of deferred loan charges (283) (593) Finance charges (109) (133) (28,101) (30,214) Financial expenses, net (20,767) (26,012)

37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 7 Other Operating Income(Expenses), Net 2005 2004 US$’000 US$’000 Amortisation of goodwill - (867) Write-back of payables 2,365 - Gain on derivative transactions 1,451 256 Changes in fair value of available-for-sale financial

assets

1,184

- Gain(Loss) on conversion of project plasma plantations 282 (3,305) Management and technical fee income 2,548 2,034 Shipping income 660 278 Storage tank income 373 160 Trucking income 480 - Workshop income 559 211 Write off and loss on disposal of: Plantation assets (214) (396) Property, plant and equipment (331) (996) Write off of trade receivables (73) (1,168) Others 33 (1,626) 9,317 (5,419) 8 Profit Before Income Tax

In addition to the charges and credits disclosed elsewhere in the notes to the consolidated financial statements, this item includes the following charges:

2005 2004 US$’000 US$’000 Non-audit services paid/payable to: Auditors of the Company 78 - Auditors of the subsidiaries 292 - Bad trade receivables written off 73 1,168 Cost of inventories recognised as an expense in cost of sales 527,474 537,867 Loss on disposal and write off of: Property, plant and equipment 2,314 396 Plantation assets 7,189 8,638 Staff costs Wages and salaries 31,567 28,530 Pension costs – defined benefit plans (Note 33) 5,087 2,485

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 9 Income Tax 2005 2004 US$’000 US$’000 Tax (credit)expense attributable to the profit is made up of: Current income tax 1,256 2,216 Deferred income tax (11,893) 17,858 Share of taxes of associated companies 76 7 (10,561) 20,081

Substantially all the Group’s operations are located in Indonesia. Accordingly, the Indonesian statutory tax rate of 30% (2004: 30%) is used in the reconciliation of the tax expense and the product of accounting profit multiplied by the applicable tax rate. The income tax expense on the results for the financial year varies from the amount of income tax determined by applying the applicable rate of income tax to profit before income tax due to the following factors:

2005 2004 US$’000 US$’000 Profit before income tax 75,316 91,072 Less: Share of results of associated companies, net 294 3,203 75,610 94,275 Tax calculated at a tax rate of 30% (2004: 30%) 22,683 28,282 Effect of different tax rates in other countries (3,058) (2,646) Permanent differences arising mainly from remeasurement net of

non-deductible expenses

(10,076)

(3,500) Utilisation of previously unrecognised tax losses (38,468) (9,388) Income tax at preferential rate (23) (404) Unrecognised deferred tax assets 18,138 5,747 Withholding tax expense 167 1,983 (10,637) 20,074 Add: Share of taxes of associated companies 76 7 (10,561) 20,081

Taxes Payable

As at 31 December 2005, the details of taxes payable account are as follows: 2005 2004 US$’000 US$’000 Estimated income tax payable of subsidiaries 647 205 Income and other taxes Article 21 935 1,030 Article 23 370 541 Article 25 29 337 Article 26 41 443 Property tax 6 47 Value added tax 1,327 1,749 Total 3,355 4,352

39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 10 Earnings Per Share and Net Asset Value Per Share

The earnings per ordinary share is based on profit attributable to equity holders of the Company amounting to US$74,602,000 (2004: US$65,460,000) and the weighted average number of ordinary shares in issue of 2,168,675,948 (2004: 2,168,675,948) shares.

There is no dilution as the Group did not have any potential ordinary shares outstanding as at 31 December 2005 and 2004. The net asset value per ordinary share based on the existing issued share capital as at 31 December 2005 is USD46.20cents (2004: USD37.20cents).

11 Cash and Cash Equivalents

Cash and cash equivalents which represent cash on hand, cash in banks and time deposits with maturity less than three months are detailed as follows:

2005 2004 US$’000 US$’000 Cash on hand 276 203 Cash in banks Chinese renminbi 10,148 - Indonesian rupiah 8,765 7,817 Korean won 2,738 - United States dollar 9,931 9,550 Others 377 53 31,959 17,420 Time deposits Chinese renminbi 1,436 - Euro - 102 Indonesian rupiah 20,589 17,815 United States dollar 25,728 15,849 47,753 33,766 Total 79,988 51,389 The above time deposits earn interest at the following rates per annum: 2005 2004 % % Chinese renminbi 0.7 - Indonesian rupiah 10.4 - 13.0 5.5 - 7.2 United States dollar 2.2 - 4.2 0.5 - 2.2 Euro - 1.5

The above bank balances include balance with a related party of US$4,000 (2004: US$Nil). Time deposits of the Group amounting to US$4,257,000 (2004: US$Nil) have been pledged to banks as security for credit facilities (see Note 25 and 29).

40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 12 Short-Term Investments

Short-term investments which represent placements in mutual funds and time deposits with maturity over three months but not more than one year are detailed as follows:

2005 2004 US$’000 US$’000 Time deposits Chinese renminbi 16,105 - Indonesian rupiah 4,599 - United States dollar - 33,500 20,704 33,500 Available-for-sale financial assets Unquoted equity 338 - Mutual funds Indonesian rupiah 100 6,194 438 6,194 21,142 39,694

The above time deposits earn interest at the following rates per annum: 2005 2004 % % Chinese renminbi 2.2 - Indonesian rupiah 6.5 - 10.5 - United States dollar - 6.2

Time deposits of the Group amounting to US$16,105,000 (2004: US$Nil) have been pledged to banks as security for credit facilities (see Note 25 and 29).

13 Trade Receivables Note 2005 2004 US$’000 US$’000 Associated companies 1,197 905 Related parties 32a 1,578 - Third parties * 46,507 32,476 49,282 33,381

* The above balance shown net of impairment. Movements in the impairment loss of trade receivables are as follows:

2005 2004 US$’000 US$’000 Balance at the beginning of the year 660 - Allowance charge - 660 Balance at the end of the year 660 660

41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 13 Trade Receivables (cont'd)

The trade receivables are denominated in the following currencies:

2005 2004 US$’000 US$’000 Chinese renminbi 11,549 - Indonesian rupiah 17,702 29,416 United States dollar 19,575 3,965 Others 456 - 49,282 33,381

Trade receivables of the Group, including intra-group trade receivables, amounting to US$14,085,000 (2004: US$14,020,000) have been pledged as security for credit facilities (see Notes 25 and 29).

14 Other Receivables Note 2005 2004 US$’000 US$’000 Advances for projects 487 4,731 Advances to suppliers 17,756 3,775 Deposits 9,989 1,276 Insurance recoverable - 357 Loan to a director of a subsidiary 32d 30 61 Prepaid expenses 3,015 2,671 Prepaid value added tax 9,349 10,397 Staff advances 1,974 606 Technical fee receivable 3,558 - Others 3,606 2,098 49,764 25,972 Receivable from: Associated companies 16 54 Immediate holding company 3 18 Related parties * 32a 15,102 1,117 15,121 1,189 64,885 27,161

* The amounts receivable from related parties include US$5,372,000 (2004: US$Nil) which bear interest at the rate of 6% (2004: Nil%) per annum and are repayable on demand.

42

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 14 Other Receivables (cont'd)

The other receivables are denominated in the following currencies: 2005 2004 US$’000 US$’000 Chinese renminbi 26,379 - Indonesian rupiah 25,080 24,522 United States dollar 12,488 2,559 Others 938 80 64,885 27,161 15 Inventories 2005 2004 US$’000 US$’000 Finished goods 45,119 22,973 Fertilisers and general material 13,460 14,509 Raw materials 69,107 38,320 Spare parts and fuel 8,062 6,307 Chemical and packing supplies 4,025 3,486 Others 3,447 4,384 Goods in transit 115 - 143,335 89,979

Inventories amounting to US$50,885,000 (2004: US$19,899,000) have been pledged to banks as security for credit facilities (see Notes 25 and 29).

16 Due from a Related Party

This represents current accounts and time deposits with BII Limited, Cook Islands (“BII Limited”), a related party. BII Limited has been experiencing liquidity shortages brought about by its inability to recover deposits and loans given principally to related parties in Indonesia, which have been affected by the volatility of the Indonesian Rupiah and the unfavourable economic conditions in Indonesia.

43

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 16 Due from a Related Party (cont'd)

BII Limited communicated to the Group management that it was unable to repay these current accounts and time deposits upon their maturity. In May 2001, BII Limited proposed to repay the AFP Group’s current accounts and time deposits totalling US$297,000,000 (including the GAR Group companies which amounted to US$226,000,000 as at the date of the letter of proposed repayment), over a 5 year period as follows:

Date AFP Group US$’000 By 30 April 2002 27,000 By 31 October 2002 25,000 By 30 April 2003 25,000 By 31 October 2003 36,500 By 30 April 2004 36,500 Balance to be repaid within 24 months from 30 April 2004 147,000 Total 297,000

Between May 2001 to 31 December 2005 the repayable deposit to the AFP Group and the Group has reduced by US$295,300,000 and US$230,900,000 respectively. A restructuring deed (the “Restructuring Deed”) dated 2 November 2001 and as amended and restated on 29 May 2002 was entered into between BII Limited and inter alia, each of the respective GAR Group companies which have outstanding deposits with BII Limited (the “Depositors”) formalising the repayment terms. In addition, a security package has been obtained by the AFP Group (of which the GAR Group is a part of) consisting of (a) the security over direct and indirect interests in 42.5% of the shares in two project companies which are involved in a property development in Bekasi Regency, Indonesia (the “Development Project”) which has been appraised at total market value of US$610,000,000 as at 1 December 2003. Based on an effective interest of 42.5% in the Development Project, AFP Group’s share of the market value is approximately US$259,000,000 and (b) the assignment of loans amounting to ¥27,397,291,582 (equivalent to approximately US$225,000,000) as at the date of the assignment, made to the project companies by ACF Solutions Holdings Limited, a related party.

As announced on 2 November 2001, the Company stated that the independent financial advisor has advised, based on the information then available, that the security package is one that the Independent Directors may in the circumstances reasonably consider and accept, particularly as the Group is not in anyway compromising its rights to recover the deposits. The security package is additional to the rights the Group already has as the Group reserved the right to require BII Limited to pay the full amount of deposits at any time.

For the period from 1 January 2001 to 31 March 2001, the time deposits earned interest at their respective contractual deposit rates as at 31 December 2000. From 1 April 2001 to 1 November 2001, interest rate on the time deposit was deemed to have accrued at the respective rates set out in the Restructuring Deed. Thereafter, interest income on the time deposits and current accounts in United States dollar currency was accrued based on 0.25% above the average fixed deposit rates quoted by two leading Singapore banks for United States Dollar fixed deposits of 6 month tenor, as stipulated in the Restructuring Deed. These current accounts and time deposits with BII Limited earned interest at the following rates per annum:

2005 2004 % % United States dollar 2.0 - 4.2 1.0 - 2.1

44

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 16 Due from a Related Party (cont'd)

The carrying values of the amount due from a related party approximate their fair values. Subsequent to 31 December 2005 and on 7 February 2006, BII Limited has, ahead of the repayment schedule, repaid to each of the Depositors their respective deposits (including interest) in full.

17 Other Long-Term Receivables Note 2005 2004 US$’000 US$’000 Receivable from: Associated company (a) 5,503 6,265 Related party (b) 32a 7,467 68,739 12,970 75,004 Loan receivable (c) 45,000 45,000 Advances for project plasma plantations – net (d) 6,285 3,461 Tax recoverable 21,563 19,555 Advances for investment in land 2,553 2,582 Advances for projects 684 2,925 Advances for non-operating assets 1,208 1,246 Land clearing 1,107 1,152 Others 3,287 4,625 94,657 155,550

The other long-term receivables are denominated in the following currencies: 2005 2004 US$’000 US$’000 Indonesian rupiah 35,703 34,562 United States dollar 58,954 120,988 94,657 155,550

(a) The unsecured receivable bears interest ranging from 2.8% to 4.9% (2004: 1.9% to 2.8%) per annum and is repayable by annual instalments until 2014.

(b) The unsecured receivable bears interest ranging from 5.4% to 5.5% (2004: 2.2% to 4.6%) per

annum and is repayable by various instalments until 2007.

(c) The loan receivable relates to an investment in a convertible loan pursuant to a loan agreement entered into by the Company on 20 December 2000 with Nalliwan Trading Ltd (“borrower”). The loan is non-interest bearing on the condition that the borrower and its subsidiaries shall supply all of its palm oil production to the Group.

45

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 17 Other Long-Term Receivables (cont'd)

(c) As security for the loan, the Company received a pledge over all the shares of, as well as an option to acquire 100% of the equity in Madascar Investment Ltd (“Madascar”), a wholly owned subsidiary of the borrower (the "option"). Madascar in turn owns two subsidiaries, the principal one being P.T. Binasawit Abadipratama (“BAP”), which is a plantation company, in which Madascar holds 99.99%. The option on the loan to the borrower expired on 20 December 2005 but has been extended and may be exercised at any time after 20 December 2008. The extension of the option has no effect on the pledge, which shall continue to secure the loan. The exercise price of the option has been fixed at US$67,000,000, determined based on imputed market value of Madascar of approximately US$75,000,000 which was based on a valuation of BAP, conducted by an independent valuation company as at November 2005. The extension of the option is to ensure, in the event that should the Company decide to exercise the option, it will take over Madascar at a time when the estates are fully mature and productive.

The embedded derivative (share option) in the convertible loan is not separated from the host contract (loan) on initial issuance and at the balance sheet date because in the opinion of the directors, the value of the embedded derivative is immaterial to the Group and accordingly, the whole compound financial asset is accounted for in the consolidated financial statements as one financial instrument.

(d) In accordance with the policy of the Government of the Republic of Indonesia, certain land rights used to develop plantations are usually granted if a nucleus company agrees to develop areas for local small landholders (Plasma Program farmers) in addition to developing its own plantations. The nucleus company is also required to train and supervise the Plasma Program farmers and purchase the plantation production from the farmers at prices determined by the Government. A Plasma Program plantation is funded by a state-owned bank. The investment credit is made to the nucleus company, which receives the funds in advance through several drawdowns during the preparation and immature period. Advances for Plasma Program plantations represent accumulated costs (including borrowing costs and indirect overhead costs) to develop Plasma Program areas, less the investment credit obtained from the bank. When a Plasma Program plantation is completed and ready to be transferred or turned-over to the Plasma Program farmers, the corresponding investment credit from the bank is also transferred to the Plasma Program farmers. Gain or loss resulting from the difference between the carrying amount of the Plasma Program plantation transferred and the related investment credit transferred is credited or charged to the income statement. Provision for losses on future conversion of Plasma Program plantations amounted to US$Nil (2004: US$3,305,000) for the year ended 31 December 2005 and the amounts of “Advances for Project Plasma plantations” shown above are determined after deducting the provision for losses.

46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 18 Deferred Income Tax

Accelerated

tax depreciation

Deferred charges

Lease expenses

Tax losses/ unutilised

capital allowances

Valuation

allowances/ others

Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Balance at 1 January 2004 (49,502) (1,996) (188) 89,859 (43,154) (4,981) Credited(Charged) to income

statement 460 1,741 (71) (29,959) 9,971 (17,858) Acquisition(Disposal) of

subsidiaries 741 1 - (283) (781) (322) Credited against equity - - - - 186 186 Translation adjustment 4,241 113 19 (6,071) 3,091 1,393 Balance at

31 December 2004 (44,060) (141) (240) 53,546 (30,687) (21,582) Balance at 1 January 2005 (44,060) (141) (240) 53,546 (30,687) (21,582) Credited(Charged) to income

statement (2,385) (11) 230 34,176 (20,117) 11,893 Acquisition(Disposal) of

subsidiaries 235 - - (927) (10,883) (11,575) Charged against equity - - - - (65,005) (65,005) Translation adjustment 2,455 7 10 (3,565) 2,188 1,095 Balance at

31 December 2005 (43,755) (145) - 83,230 (124,504) (85,174)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on different entities which intend to settle on a net basis, or realise the assets and liabilities simultaneously in the future. The following amounts, determined after appropriate offsetting, are shown in the balance sheet:

2005 2004 US$’000 US$’000 Deferred tax liabilities (103,347) (31,976) Deferred tax assets 18,173 10,394 (85,174) (21,582)

Realisation of deferred tax assets is dependent on the generation of sufficient taxable income prior to expiration of the tax losses carry-forward. Although realisation is not assured, the directors of the Company believe it is more likely than not that the deferred tax assets, net of the valuation allowance, will be realised. The amount of the deferred tax assets considered realisable could be reduced or increased if estimates of future taxable income during the carry-forward period are reduced or increased.

47

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 18 Deferred Income Tax (cont'd)

As at 31 December 2005, a subsidiary, Golden Agri International Pte Ltd ("GAI") has not provided for deferred tax liabilities amounting to approximately US$3,737,000 (2004: US$3,350,000) that would be payable upon remittance into Singapore of its offshore interest income, which amounted to approximately US$18,687,000 (2004: US$16,748,000) as at 31 December 2005 as it is the intention of the directors of GAI to permanently reinvest the unremitted interest income.

The amount of deferred tax (charged)credited to equity during the financial year is as follows: 2005 2004 US$’000 US$’000 Assets revaluation (65,005) 186 19 Associated Companies 2005 2004 US$’000 US$’000 Unquoted equity shares, at cost 20,522 20,522 Share of post-acquisition losses, net of dividend received (2,475) (1,890) 18,047 18,632

Particulars of the associated companies are disclosed in Note 41 to the consolidated financial statements. Summarised financial information in respect of the Group's associated companies is as follows:

2005 2004 US$’000 US$’000 Assets and liabilities Total assets 60,236 63,771 Total liabilities (19,255) (21,418) Net assets 40,981 42,353 Results Revenue 45,539 49,682 Loss before tax for the year (859) (1,016)

The Group has not recognised losses amounting to US$59,300 (2004: US$238,300) for one of its associated companies. The accumulated losses not recognised were US$1,670,000 (2004: US$1,704,900).

48

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 20 Property, Plant and Equipment

Land rights

Storage tanks, land

improvements and bridges

Buildings

Machinery and

equipment

Furniture and

fixtures

Transportation equipment

Properties

under finance lease

Construction in progress

Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Cost

Balance at 1.1.2004 58,297 44,209 124,161 228,402 33,802 51,261 1,838 39,812 581,782

Additions 192 500 1,821 6,959 3,409 9,478 370 27,608 50,337

Disposals (702) (1) (128) (1,020) (248) (4,864) (242) (176) (7,381)

Write off (151) (9) (158) (602) (520) (496) - (6) (1,942)

Acquisition of

subsidiaries

370

67

339

27

138

3,174

-

22

4,137

Disposal of

subsidiaries

(253)

(185)

(2,310)

(1,008)

(350)

(341)

-

-

(4,447)

Revaluation surplus - - 76 4 15 435 - - 530

Impairment loss (876) - - - - (2) - (1) (879)

Transfers - 6,872 15,874 29,253 1,377 653 (1,596) (52,433) -

Balance at 31.12.2004 56,877 51,453 139,675 262,015 37,623 59,298 370 14,826 622,137

Balance at 1.1.2005 56,877 51,453 139,675 262,015 37,623 59,298 370 14,826 622,137

Translation adjustment 21 - 129 237 5 5 - 14 411

Additions 667 1,738 2,017 7,086 5,953 12,175 2,081 26,815 58,532

Disposals (1,095) (146) (3,315) (1,433) (2,015) (6,994) - (349) (15,347)

Write off - (2) (166) (106) (288) (915) - (96) (1,573)

Acquisition of

subsidiaries

15,232

-

67,100

157,732

1,763

2,296

-

5,200

249,323

Disposal of

subsidiaries

(199)

(3)

(82)

(35)

(25)

(93)

-

(47)

(484)

Revaluation surplus - - - - 21 45 - 11 77

Impairment loss - (2) (117) - (6) (91) - - (216)

Transfers 89 2,133 8,738 2,917 1,145 375 - (15,397) -

Balance at 31.12.2005 71,592 55,171 213,979 428,413 44,176 66,101 2,451 30,977 912,860

Accumulated depreciation

Balance at 1.1.2004 5,103 9,292 34,798 72,180 26,790 34,536 497 - 183,196

Charge for the year - 1,133 6,015 11,060 5,245 7,958 123 - 31,534

Disposals - - (1) (412) (195) (2,779) (185) - (3,572)

Write off (2) (4) (60) (392) (518) (406) - - (1,382)

Acquisition of

subsidiaries

39

1

7

15

21

322

-

-

405

Disposal of

subsidiaries

-

(35)

(821)

(613)

(342)

(260)

-

-

(2,071)

Transfer - (12) 15 (876) 1,075 196 (398) - -

Balance at 31.12.2004 5,140 10,375 39,953 80,962 32,076 39,567 37 - 208,110

49

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 20 Property, Plant and Equipment (cont'd)

Land rights

Storage tanks, land

improvements and bridges

Buildings

Machinery and

equipment

Furniture and

fixtures

Transportation equipment

Properties

under finance lease

Construction in progress

Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Accumulated depreciation

Balance at 1.1.2005 5,140 10,375 39,953 80,962 32,076 39,567 37 - 208,110

Translation adjustment 3 - 23 63 4 3 - 3 99

Charge for the year 78 1,205 6,408 13,157 3,510 8,863 70 - 33,291

Disposals - (41) (241) (1,157) (1,508) (4,451) - - (7,398)

Write off - (1) (68) (89) (284) (800) - - (1,242)

Impairment loss - (1) (53) - (3) (76) - - (133)

Acquisition of

subsidiaries

1,076

-

7,605

20,625

1,114

904

-

966

32,290

Disposal of

subsidiaries

-

-

(10)

(34)

(16)

(59)

-

-

(119)

Balance at 31.12.2005 6,297 11,537 53,617 113,527 34,893 43,951 107 969 264,898

Net book values

At 31.12.2004 51,737 41,078 99,722 181,053 5,547 19,731 333 14,826 414,027

At 31.12.2005 65,295 43,634 160,362 314,886 9,283 22,150 2,344 30,008 647,962

As at 31 December 2005, the net carrying amount of property, plant and equipment which have been pledged as security for credit facilities (see Notes 25 and 29) amounted to US$317,398,000 (2004: US$148,636,000).

50

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 21 Plantation Assets 2005 2004 US$’000 US$’000 Cost or valuation Balance at the beginning of the year 532,415 526,041 Additions 9,633 17,083 Disposals (41,690) (1,340) Acquisition of subsidiaries - 3,759 Disposal of subsidiaries (2,400) (4,036) Write off (262) (9,744) Revaluation surplus, net 265,303 - Transfer from land clearing 1,590 652 Balance at the end of the year 764,589 532,415 Less: accumulated depreciation Balance at the beginning of the year 142,427 122,765 Charge for the year 25,419 24,046 Write off (48) (1,770) Disposals (25,930) (6) Acquisition of subsidiaries - 76 Disposal of subsidiaries (268) (2,684) Balance at the end of the year 141,600 142,427 Net book values At the beginning of the year 389,988 403,276 At the end of the year 622,989 389,988 Had the plantation assets been carried at cost less accumulated

depreciation, the net book values would have been:

At the beginning of the year 389,988 403,276 At the end of the year 582,076 389,988 The net book values at the end of the year consist of the following: Mature plantations 610,504 385,690 Immature plantations 8,533 712 Nursery 3,952 3,586 622,989 389,988

(a) The Group’s plantations are located in Indonesia. As at the end of 2005, the Group’s total planted area was 287,000 hectares. During the year, 5,870,000 (2004: 5,654,000) tonnes of fresh fruit bunch were harvested from the plantations.

(b) As at 31 December 2005, the net book value of plantation assets which have been pledged as

security for credit facilities (see Notes 25 and 29) amounted to US$255,125,000 (2004: US$190,164,000).

51

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 21 Plantation Assets (cont'd)

(c) The Group has adopted measurement of the plantation assets at either revalued amount or at cost less any accumulated depreciation and impairment losses as there are currently no standard ways of determining the value of the biological component of the plantation assets in accordance with IAS 41. The directors were consequently unable to determine the fair value of the Group’s biological assets in line with this Standard. Hence, the directors have instead recorded such assets at either revalued amount or at cost less accumulated depreciation and impairment losses amounting to US$622,989,000 as at 31 December 2005.

(d) With respect to the merger of certain subsidiaries (see Note 41) and compliance with the local

regulation, valuations of plantation assets were conducted for the following subsidiaries:

Name of subsidiary Date of valuation Independent Appraisal P.T. Buana Wiralestari Mas 31 December 2005 P.T. Heburinas Nusantara P.T. Bumipermai Lestari 30 April 2005 P.T. Heburinas Nusantara P.T. Forestalestari Dwikarya 31 December 2005 P.T. Mega Appraisindo P.T. Ramajaya Pramukti 30 November 2005 P.T. Mega Appraisindo P.T. Sinar Kencana Inti Perkasa 31 December 2005 P.T. Pronilai Konsulis Indonesia P.T. Sumber Indahperkasa 30 November 2005 P.T. Mega Appraisindo P.T. Tapian Nadenggan 30 September 2005 P.T. Asian Appraisal Indonesia

22 Deferred Charges Loan Land rights/ charges Others Total US$’000 US$’000 US$’000 Cost Balance at 1 January 2004 3,947 4,877 8,824 Additions 804 2,621 3,425 Write off (3,820) (321) (4,141) Balance at 31 December 2004 931 7,177 8,108 Balance at 1 January 2005 931 7,177 8,108 Additions 200 1,444 1,644 Write off (47) (3,262) (3,309) Balance at 31 December 2005 1,084 5,359 6,443 Less accumulated amortisation Balance at 1 January 2004 3,634 1,621 5,255 Amortisation charges 593 2,781 3,374 Write off (3,820) (321) (4,141) Balance at 31 December 2004 407 4,081 4,488 Balance at 1 January 2005 407 4,081 4,488 Amortisation charges 283 401 684 Write off (47) (3,262) (3,309) Balance at 31 December 2005 643 1,220 1,863

52

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 22 Deferred Charges (cont'd) Loan Land rights/ charges Others Total US$’000 US$’000 US$’000 Net carrying amount Balance at 31 December 2004 524 3,096 3,620 Balance at 31 December 2005 441 4,139 4,580 23 Brands and Trademarks 2005 2004 US$’000 US$’000 Cost 6,924 6,924 Less: accumulated amortisation Balance at the beginning of the year 3,722 3,401 Amortisation charges 320 321 Balance at the end of the year 4,042 3,722 Net carrying amount 2,882 3,202 24 Goodwill Negative Goodwill Goodwill Net US$’000 US$’000 US$’000 Cost Balance at 1 January 2004 31,748 (10,231) 21,517 Arising from acquisition of subsidiaries 4,198 - 4,198 Write off (1,450) - (1,450) Adjustment to fair value for entity under

common control

(582)

-

(582) Balance at 31 December 2004 33,914 (10,231) 23,683 Balance at 1 January 2005 33,914 (10,231) 23,683 Arising from acquisition of subsidiaries 160 - 160 Elimination of amortisation accumulated prior to

the adoption of IFRS 3

(8,014)

-

(8,014) Adjustment against opening retained earnings

and minority interest for derecognition of negative goodwill accumulated prior to the adoption of IFRS 3

-

10,231

10,231 Balance at 31 December 2005 26,060 - 26,060

53

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 24 Goodwill (cont'd) Negative Goodwill Goodwill Net US$’000 US$’000 US$’000 Less: accumulated amortisation Balance at 1 January 2004 8,433 (1,995) 6,438 Amortisation 1,387 (520) 867 Write off (1,816) - (1,816) Balance at 31 December 2004 8,004 (2,515) 5,489 Balance at 1 January 2005 8,004 (2,515) 5,489 Reclassification 10 (10) - Elimination of amortisation accumulated prior to

the adoption of IFRS 3

(8,014)

-

(8,014) Adjustment against opening retained earnings

and minority interest for derecognition of negative goodwill accumulated prior to the adoption of IFRS 3

-

2,525

2,525 Balance at 31 December 2005 - - - Net carrying amount Balance at 31 December 2004 25,910 (7,716) 18,194 Balance at 31 December 2005 26,060 - 26,060

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. No impairment loss has been recognised during the year ended 31 December 2005.

25 Short-Term Loans Note 2005 2004 US$’000 US$’000 Short-term bank loans: Chinese renminbi 23,794 - Indonesian rupiah 2,347 7,743 United States dollar 70,255 67,532 Current maturities of long-term borrowings 29 62,052 47,354 158,448 122,629

Short-term bank loans include US$92,896,000 (2004: US$75,275,000) that are secured. Short-term loans have a maturity period ranging from 1 to 12 months (2004: 1 to 12 months) from the end of the financial year.

54

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 25 Short-Term Loans (cont'd)

The above short-term loans bear interest at the following rates per annum during the year: 2005 2004 % % Chinese renminbi 2.3 – 6.4 - Indonesian rupiah 13.5 – 17.8 12.8 - 13.9 United States dollar 4.4 - 8.5 3.2 - 8.5 26 Trade Payables Note 2005 2004 US$’000 US$’000 Trust receipts payable (a) 16,198 17,719 Trade payable to: Third parties 116,420 28,935 Associated companies 158 257 Related parties 32a 6,541 6,912 139,317 53,823

The trade payables are denominated in the following currencies: 2005 2004 US$’000 US$’000 Chinese renminbi 86,539 - Indonesia rupiah 31,350 36,036 United States dollar 21,415 17,719 Others 13 68 Total 139,317 53,823

(a) Trust receipts payable, which represent amounts due to certain banks, bear interest ranging from 3.5% to 6.0% (2004: 2.6% to 4.8%) per annum.

55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005

27 Other Payables Note 2005 2004 US$’000 US$’000 Accrued expenses 16,554 16,619 Advances from customers 5,653 3,506 Advances from third parties 7,509 6,473 Contractor payable 2,865 2,689 Derivative payable (a) 2,138 - Interest payable 3,940 12,255 Others 2,826 4,984 41,485 46,526 Associated company (b) 2,500 2,615 Immediate holding company 1,115 13 Related parties 32a 2,994 2 48,094 49,156

The other payables are denominated in the following currencies:

2005 2004 US$’000 US$’000 Chinese renminbi 6,896 - Indonesian rupiah 23,464 28,942 Singapore dollar 1,892 267 United States dollar 14,306 18,001 Others 1,536 1,946 48,094 49,156

(a) This represents future contracts to purchase soybean. The notional principal amounts of the

outstanding contracts at 31 December 2005 are US$35,426,000.

Gains and losses recognised in the hedging reserve in equity on future contracts as at 31 December 2005 will be released to the income statement at various dates between 3 to 6 months from the balance sheet date.

(b) The unsecured payable bears interest ranging from 1.2% to 1.6% (2004: 1.2% to 1.4%) per

annum and are repayable on demand.

56

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 28 Obligations under Finance Leases

Minimum lease payments Present value of

minimum lease payments 2005 2004 2005 2004 US$’000 US$’000 US$’000 US$’000 Finance leases payable: Within one year 859 120 715 105 In the second to fifth year 1,443 222 1,327 212 2,302 342 2,042 317 Less: Future finance charges (260) (25) Present value of lease obligation 2,042 317 Less: Amount due for settlement

within 12 months

(715)

(105) Amount due for settlement after

12 months

1,327

212 Interest rate per annum 5.7% – 15.00% 6.8% - 7.2% 29 Long-Term Borrowings Note 2005 2004 US$’000 US$’000 Bank loans 215,030 250,433 Other loans 56,195 68,614 Less: Unamortised discount on borrowings (2,133) - 54,062 68,614 Total long-term borrowings 269,092 319,047 Less : current maturities of long-term borrowings 25 (62,052) (47,354) Non-current portion 207,040 271,693

The long-term borrowings are denominated in the following currencies: 2005 2004 US$’000 US$’000 Chinese renminbi 2,479 - Indonesian rupiah 24,857 46,017 Japanese yen 15,169 24,090 Ringgit Malaysia 588 976 Singapore dollar 751 1,377 United States dollar 225,248 246,587 269,092 319,047

57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 29 Long-Term Borrowings (cont'd)

The long-term borrowings of the Group bear interest at the following rates per annum during the year:

2005 2004 % % Chinese renminbi 5.6 – 5.8 - Indonesian rupiah 9.6 – 16.0 9.0 - 15.0 Japanese yen 3.0 3.0 Ringgit Malaysia 7.8 7.8 Singapore dollar 2.5 – 3.3 1.7 - 2.4 United States dollar 4.1 – 11.5 2.6 - 9.2

Long-term borrowings of the Group, broken down by secured and unsecured are as follows: 2005 2004 US$’000 US$’000 Secured borrowings 213,691 249,056 Unsecured borrowings 55,401 69,991 269,092 319,047

(a) Certain time deposits, trade receivables, inventories, plantation assets and property, plant and equipment have been pledged to banks to obtain the above secured loans (as disclosed in Notes 11, 12, 13, 15, 20 and 21 to the consolidated financial statements). In addition, certain bank facilities are covered by corporate and personal guarantees of certain related parties.

(b) The loan agreements generally include covenants that require the maintenance of certain

financial ratios, limit or require written notification of the amount of additional borrowings that may be incurred, and limit the transfer or disposal of pledged assets and acting as guarantor to other parties. Any non-compliance with these covenants will result in these loans becoming repayable immediately upon service of a notice of default by the lenders. In addition, certain loan agreements contain cross default clauses whereby non-compliance with covenants for other financial indebtedness would result in acceleration of the outstanding loan balances.

58

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 29 Long-Term Borrowings (cont’d)

(c) The scheduled maturities of the Group's borrowings as at 31 December 2005 are as follows: United

States dollar

Year Original loan currency equivalent

US$’000 Rp’000 RMB’000 ¥’000 S$’000 RM'000 US$’000 Long-term borrowings: 2006 45,608 74,784,859 15,000 687,500 1,250 1,484 62,052 2007 58,339 73,001,200 5,000 550,000 - 740 71,249 2008 56,756 76,766,156 - 550,000 - - 69,234 2009 30,504 19,780,929 - - - - 32,516 2010 24,199 - - - - - 24,199 Thereafter 9,842 - - - - - 9,842 Total 225,248 244,333,144 20,000 1,787,500 1,250 2,224 269,092 Less:

Current portion (Note 25)

(45,608)

(74,784,859)

(15,000)

(687,500)

(1,250)

(1,484)

(62,052) Non-current portion 179,640 169,548,285 5,000 1,100,000 - 740 207,040

(d) On 15 August 2002, Asia Integrated Agri Resources Limited (“AIAR”) had restructured a

US$25,000,000 obligation (the “Obligation”) owing to an Investor (the “Investor”). On 8 December 2005, the Company acquired AIAR from its immediate holding company, AFP. The Obligation survived the Acquisition.

Subject to conditions precedent, the Investor was given a right to compel AFP to grant it an option to convert the Obligation into shares of either AFP or AFP's shareholding in the Company. However, an agreed limitation to the grant of any such option would be that in the event the Investor elects to convert the Obligation to ordinary shares in the Company only and such conversion results in dilution of AFP's ownership in the Company to below 51%, then the option to convert the Obligation to ordinary shares in the Company lapses automatically and the Investor may only convert the Obligation to ordinary shares in AFP (the “Option”). The exercise price of the Option would be based on the average trading value of either AFP's share price or the Company's share price (as the case may be) as quoted on the Singapore Exchange Securities Trading Limited Main Board 30 days prior to conversion. Alternatively, the Investor may surrender the Option to AFP for a cash consideration of US$17.8 million (the “Surrender”).

In the event that the Investor surrenders the Option, under the terms of the agreements, AIAR would be responsible for paying the Investor a cash consideration of US$17.8 million.

59

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 30 Other Long-Term Payables 2005 2004 US$’000 US$’000 Payable to minority shareholders 1,715 1 The payable is unsecured, interest-free and not expected to be repaid within the next 12 months. 31 Issued Capital 2005 2004 US$’000 US$’000 Authorised: 15,000,000,000 ordinary shares of US$0.10 each 1,500,000 1,500,000 Issued and fully paid: 2,168,675,948 ordinary shares of US$0.10 each 216,867 216,867 32 Related Party Transactions

(a) Related parties are entities (except for holding company and associated company) with

common direct or indirect shareholders and/or directors. Parties are considered to be related (directly or indirectly) if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

(b) In addition to the related party information disclosed elsewhere in the consolidated financial

statements, significant transactions with related parties, on terms agreed between parties, were as follows:

2005 2004 US$’000 US$’000 i) Sale of services Management fee income from associated companies 694 276 ii) Purchase of goods and services Insurance premium to related party 1,575 1,229 Management fee expense to immediate holding company 4,474 4,137 Purchase of palm oil products from associated companies 239 5,393 Purchase of non-palm oil products from related parties 18,167 24,483 Rental and service charge expense to related party 3,240 2,965 Toll manufacturing expense to associated company 553 -

60

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 32 Related Party Transactions (cont'd)

(c) The remuneration of key management personnel who are also directors are as follows:

2005 2004 US$’000 US$’000 Directors’ remuneration: Directors of the holding company 877 967 Directors of subsidiaries 1,133 1,085

Included in the above remuneration are post-employment benefits of US$19,000 for the financial year ended 31 December 2005.

(d) Loan to a director of a subsidiary

A housing loan has been granted to a director of a subsidiary. The loan is unsecured, interest free and repayable in 5 yearly instalment of S$50,000 (equivalent to US$30,000), commencing from June 2002 to June 2006.

33 Pension Plans

In August 1995, certain subsidiaries within the Group established defined benefit pension plans under which pension benefits are to be paid based on the latest basic salaries and number of years of service of the employees. The plans are managed by the following foundations: Dana Pensiun SMART Corporation 1, Dana Pensiun SMART Corporation 2 and Dana Pensiun SMART Corporation 3. Based on the approval of Ministry of Finance (Decision No. Kep-054/KM.6/2003 dated 4 February 2003), Dana Pensiun SMART Corporation 4 is to be liquidated and merged with Dana Pensiun SMART Corporation 3.

The foundations' main source of funds is from the employees and the employers' actuarially computed pension contributions. The employees' contributions range from 2% to 4% of their basic salaries and any remaining amounts required to fund the plans are contributed by the employer.

The composition of the net periodic pension cost for the Group's plans is as follows:

2005 2004 US$’000 US$’000 Current service cost (benefits earned during the year) 2,313 1,477 Expected return on plan assets (2,749) (1,796) Net amortisation and deferral 6 38 Interest cost 3,113 2,266 Assets gain - 784 Curtailment and settlement 2,404 (284) Net periodic pension cost 5,087 2,485

61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 33 Pension Plans (cont'd)

The actuarial valuations for the pension plans as of 31 December 2005 and as of 31 December 2004 were prepared by the independent actuaries, P.T. Dayamandiri Dharmakonsilindo and P.T. Watson Wyatt Purbajaga, respectively. The principal actuarial assumptions used by the actuaries were as follows:

2005 2004 % % Discount rate 12.0 10.0 Expected long-term rate of return on plan assets 12.0 10.0 Salary growth rate 9.0 8.0

Included in other payables in the consolidated balance sheet at 31 December 2005 are accrued pension cost of US$6,930,000 (2004: US$6,890,000) comprising:

2005 2004 US$’000 US$’000 Projected benefit obligation 31,996 27,583 Plan assets at fair value (25,007) (21,262) Excess of projected benefit obligation over plan assets 6,989 6,321 Unrecognised net actuarial gains or losses resulting from changes

in plan experience and actuarial assumptions

(1,244)

(125) Unamortised prior service cost (179) (216) Unamortised assets gain - 910 Disallowed assets arising from asset limitation 1,364 - Accrued pension cost 6,930 6,890

Plan assets consist of principally time deposits, mutual funds and debt securities. The actual return on plan assets amounted to US$2,749,000 (2004: US$1,258,000) during the year ended 31 December 2005. The movements in accrued pension cost are as follows:

2005 2004 US$’000 US$’000 Beginning accrued pension cost 6,890 3,026 Net periodic pension cost 5,087 2,485 Group’s contributions to the pension fund (4,548) (4,748) Adjustment for curtailment and settlement (56) 6,553 Translation adjustment (443) (426) Ending accrued pension cost 6,930 6,890

As at 31 December 2005, the Group had accounted for post employment benefits and effect of Labour Law No.13 (year 2003) in the consolidated financial statements.

62

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 34 Dividends

A first and final tax exempt dividend of SGD1 cent per share amounting to a total of S$21,687,000 (equivalent of US$13,017,300) will be recommended at the Annual General Meeting on 28 April 2006. These consolidated financial statements do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2006.

35 Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of financial assets and liabilities with a maturity of less than one year, which include cash and cash equivalents, time deposits, short-term investments, trade and other receivables, trade and other payables, and short-term loans are assumed to approximate their fair values due to their short term maturities.

The fair values of long-term receivables and long-term interest-bearing borrowings are calculated based on discounted expected future principal and interest cash flows. The discount rates used are based on market rates for similar instruments at the balance sheet. As at 31 December 2005, the carrying amounts of the long-term receivables and long-term interest-bearing borrowings approximate their fair values.

36 Significant Contingencies

As at 31 December 2005, the Group has the following significant contingencies:

(a) A subsidiary is a guarantor of a loan obtained by P.T. Nala Vini Eka Beverages (”NAVIKA”), a subsidiary of P.T. Intersmart Corporation, amounting to ¥2,189,690,000, equivalent to approximately US$21,240,000 as at 31 December 2005. The loan was due to mature on various dates up to 2 September 2003. Since 2001, NAVIKA has not fulfilled its principal and interest payment obligation that have been due. In December 2003, NAVIKA received written notice from the lender that the lender had transferred its right and obligation as the creditor to Unity Holding Limited. As such, as at the end of the financial year, NAVIKA has a loan due to Unity Holding Limited. Negotiations between NAVIKA and the lender are ongoing.

(b) As at the end of the financial year, the contingent liabilities of the Company are as follows:

(i) Corporate guarantees and letters of indemnities issued by the Company to financial institutions of US$138,818,000 (2004: US$274,315,000) in connection with credit facilities and trade financing facilities granted to subsidiaries, of which US$70,098,000 (2004: US$97,887,000) relates to credit facilities utilised by subsidiaries.

(ii) Corporate guarantee issued by the Company to a creditor amounted to

US$45,000,000 (2004: US$45,000,000) in connection with a term loan facility granted to a wholly-owned subsidiary of the immediate holding company.

63

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 36 Significant Contingencies (cont'd)

(c) A subsidiary is facing a claim in respect of title on a piece of land. The case has been appealed to the Supreme Court. As at the date the consolidated financial statements are authorised for issue by the directors of the Company, the resolution of this case is still pending.

(d) AIAR has a US$25,000,000 debt owing to an Investor which was restructured in August 2002.

According to the terms of the restructuring, the Investor may surrender the option and AIAR will have to pay the Investor an additional US$17.8 million (see Note 29(d)).

37 Significant Commitments

Operating lease commitments At the balance sheet date, the commitment in respect of non-cancellable operating leases for the rental of office premises and properties with a term of more than one year are as follows:

2005 2004 US$’000 US$’000 Within one year 3,451 3,077 Between one year to five years 6,510 8,311 Minimum lease payments paid under operating leases 3,208 3,033

38 Group Segmental Reporting

Geographical Segment

For management purposes, the Group is currently organised into two geographical operating divisions, namely Indonesia Agri-business and China Agri-business. These divisions are the basis on which the Group reports its primary segment information (based on location of assets). Principal activities are as follows: Indonesia Agri-business - ownership and cultivation of oil palm plantation, ownership and operation

of mills and refineries and producer of consumer cooking oil and margarine in Indonesia;

China Agri-business - refinery, port and oilseed crushing operations in China.

64

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 38 Group Segmental Reporting (cont'd)

Segmental information by geographical segment is presented as follows. No comparative segmental information by geographical segment is presented as the China Agri-business segment was acquired during the financial year ended 31 December 2005.

Indonesia Agri China Agri- Business Business Elimination Consolidated 2005 US$’000 US$’000 US$’000 US$’000 Revenue External revenue 723,740 95,546 - 819,286 Inter-segment sales 9,512 - (9,512) - Total revenue 733,252 95,546 (9,512) 819,286 Results Segment results from operations 88,160 5,718 - 93,878 Exceptional items 2,499 - - 2,499 Financial income 7,334 Financial expenses (28,101) Profit before share of results of

associated companies

75,610 Share of results of associated

companies, net

(294)

-

-

(294) Profit before income tax 75,316 Income tax 10,561 Profit for the year 85,877 Assets Segment assets 1,341,305 303,756 - 1,645,061 Investment in associated companies 18,047 - - 18,047 Unallocated corporate assets 134,178 Consolidated total assets 1,797,286 Liabilities Segment liabilities (74,664) (97,979) - (172,643) Unallocated corporate liabilities (490,715) Consolidated total liabilities (663,358) Other information Capital expenditure 67,616 549 - 68,165 Depreciation and amortisation 57,286 2,428 - 59,714 Impairment loss 83 - - 83

65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 38 Group Segmental Reporting (cont'd)

Segmental revenue based on geographical location of customers is as follows:

2005 2004 US$’000 US$’000 Indonesia 329,658 364,696 China 425,652 326,557 India 186 187 Rest of Southeast Asia 25,877 53,422 Rest of Asia 8,995 697 Europe 24,038 12,750 Others 4,880 1,402 Consolidated total 819,286 759,711

39 Business Combinations

Pursuant to a Restructuring and Settlement Agreement entered into on 15 April 2005, P.T. Purimas Sasmita ("Purimas"), a wholly owned subsidiary of the Company, had restructured a loan of approximately IDR1,939,551 million (approximately US$198,623,000) owing by P.T. Sinar Mas Agro Resources and Technology Tbk ("SMART") (the "Loan"). In addition, the Loan was utilised by Purimas to subscribe for 1,385,393,366 ordinary shares of IDR200 each in the capital of SMART after the Stock Split (as defined below) ("Debt-Equity Conversion"). Pursuant to a stock split undertaken by SMART, each SMART share was to be split into 5 New SMART Shares ("Stock Split"). The Company's percentage shareholding in SMART remained unchanged after the Stock Split. Prior to the Debt-Equity Conversion, the Company, through Purimas, held a 51% interest in SMART. Upon completion of the Debt-Equity Conversion on 29 June 2005, the Company's shareholding interest, through Purimas, in SMART has increased from 51% to approximately 74.63% of the issued and paid-up share capital of SMART. This additional interest in SMART has been accounted for by the purchase method of accounting and resulted in a fair value adjustment of US$224,554,000 in plantation assets due to the higher fair value as compared to its carrying amount. This also resulted in corresponding adjustments in the revaluation reserve, deferred tax liabilities and minority interests. The fair value of SMART was derived by the directors based on the Balance Sheet Method, on the assumption that SMART's assets had been sold and all financial obligations had been fulfilled. The main value driver used was the value per hectare approach. The financial effect of this acquisition of an additional interest is as follows:

US$’000 Additional interests acquired 211,631 Consideration, satisfied by the Debt-Equity Conversion 198,623 Excess of acquirer's interest in the net fair value of acquiree's identifiable assets,

liabilities and contingent liabilities over cost ("negative goodwill")

13,008

66

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 39 Business Combinations (cont'd)

On 20 June 2005, the Company entered into a sale and purchase agreement ("the Agreement") with AFP, its immediate holding company, in relation to the proposed acquisition of the entire issued and paid-up share capital of Asia Integrated Agri Resources Limited from AFP at a consideration of US$155,000,000. In October 2005, the Company obtained its shareholders' approval for this proposed acquisition. This transaction has been accounted for by the purchase method of accounting. The net assets acquired in the transaction are as follows:

Acquiree's carrying amount Fair value Net assets acquired: before combination adjustments Fair value US$’000 US$’000 US$’000 Property, plant and equipment 108,366 108,013 216,379 Goodwill 4,053 (4,053) - Cash and cash equivalents 33,509 - 33,509 Trade and other receivables 56,392 - 56,392 Inventories 32,180 - 32,180 Bank loans (58,507) - (58,507) Trade and other payables (155,926) - (155,926) Other long-term payable (1,708) - (1,708) Deferred tax liability - (10,883) (10,883) Minority interests (8,659) (4,777) (13,436) 9,700 88,300 98,000 Goodwill - Total consideration 98,000

AIAR Group contributed US$95,546,000 revenue and US$4,810,000 to the Group's profit before income tax for the period between the date of acquisition and the balance sheet date. If the acquisition had been completed on 1 January 2005, total group revenue for the year would have been US$1,094,045,000, and profit for the year would have been US$93,228,000.

40 Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates may differ from the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as follows:

67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005

40 Critical Accounting Estimates and Assumptions (cont'd) (a) Estimated Impairment of Goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 3(I)(p). The recoverable amounts of the cash-generating units ("CGU") are determined from value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates and expected changes in CPO prices and direct costs during the period. The growth and discount rates are based on industry forecasts. Changes in CPO prices and direct costs are based on past practices and expectations of future changes in the market. (b) Income Taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowances, deductibility of certain expenses and taxability of certain income during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

(c) Useful Lives of Property, Plant and Equipment and Plantation Assets

The Group estimates the useful lives of property, plant and equipment and plantation assets based on

the period over which the assets are expected to be available for use. The estimated useful lives of property, plant and equipment and plantation assets are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition the estimation of the useful lives of property, plant and equipment and plantation assets are based on the collective assessment of industry practice, internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment and plantation assets would increase the recorded expenses and decrease the non-current assets.

There is no change in the estimated useful lives of property, plant and equipment and plantation assets

during the period. The carrying values of property, plant and equipment as of 31 December 2005 amounted to US$647,962,000 (Note 20) and for plantation assets amounted to US$622,989,000 (Note 21). (d) Impairment of Assets

The Group reviews the carrying amounts of the assets as at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount or value in use is estimated. Determining the value in use of property, plant and equipment and other long-lived assets, which require the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets, requires the Group to make estimates and assumptions that can materially affect the financial statements. Any resulting impairment loss could have a material adverse impact on the Group's financial position and results of operations.

68

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 40 Critical Accounting Estimates and Assumptions (cont'd)

(d) Impairment of Assets (cont'd) The preparation of the estimated future cash flows involves significant judgement and estimations. While

the Group believes that the assumptions are appropriate and reasonable, significant changes in the assumptions may materially affect the assessment of recoverable amounts and may lead to future impairment charges.

As of 31 December 2005 there is no significant impairment loss recognised in the financial statements.

(e) Retirement Costs The determination of the obligation and cost for pension and other retirement benefits is dependent on

the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions, which include among others, discount rates and rates of compensation increase, are described in Note 33. In accordance with IAS 19 “Employee Benefits”, actual results that differ from the assumptions are accumulated and amortised over future periods and therefore, generally affect the recognised expense and recorded obligation in such future periods. While the Group believes that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the pension and other retirement obligations. As of 31 December 2005, accrued retirement costs amounted to US$6,930,000 (Note 33).

(f) Deferred Tax Assets

The Group's assessment on the recognition of deferred tax assets on non deductible temporary

differences is based on the forecasted taxable income of the following reporting period. This forecast is based on the Group's past results and future expectations on revenue and expenses. As of 31 December 2005, the Group has deferred tax assets of US$18,173,000 (Note 18).

41 Group Companies

Substantially all the subsidiaries' operations relate to the oil palm business. The details of the subsidiaries are as follows:

Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Direct subsidiaries of the Company P.T. Purimas Sasmita

(''Purimas'') (e5) Investment holding 16 October 1989

Indonesia 100.00 a 100.00 a

Golden Agri International Pte

Ltd (“Golden Agri International”)

Trading in crude palm oil and related products

17 February 1998 Singapore

100.00 100.00

Silverand Holdings Ltd (e1) Investment holding 19 June 1998

Mauritius 100.00 100.00

69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont'd)

Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Direct subsidiaries of the Company (cont'd) Golden Agri Investment

Holding Ltd (e1) Investment holding 7 December 1999

Mauritius 100.00 b 100.00 b

Golden Agri International

Trading Ltd ("Golden Agri International Trading") (e1)


11 December 2000 Malaysia

100.00 100.00


Finance Ltd (e1) Treasury management 4 April 2000

Mauritius 100.00 100.00


Finance (2) Ltd (e2) Treasury management 10 May 2004

British Virgin Islands 100.00 100.00

Asia Integrated Agri Resources

Limited ("AIAR") Investment holding 24 November 1999

Bermuda 100.00 g -

Subsidiaries of Golden Agri International Golden Agri International

(Mauritius) Ltd (e1) Trading in crude palm oil and related products

1 September 1999 Mauritius

100.00 100.00


(Cayman) Ltd (e2) Trading in crude palm oil and related products

2 March 2000 Cayman Islands

100.00 100.00


Trading (Mauritius) Ltd (e1) Investment holding 15 March 2000

Mauritius 100.00 100.00


Trading (Cayman) Ltd (e2) Trading in crude palm oil and related products

28 March 2000 Cayman Islands

100.00 100.00

Golden Agri International (L)

Ltd (e1) Trading in crude palm oil and related products

29 May 2000 Malaysia

100.00 100.00

Sinarkonex Korea Co., Ltd

("Sinarkonex") (e1 ) Distribution and sales of edible oils and related products

4 July 2005 Korea

70.00 -

Subsidiaries of Golden Agri International Trading AFP Agri-Resources Trading

(M) Sdn. Bhd. (e1) Investment holding 10 May 1999

Malaysia 100.00 100.00

Goederhand Finance B.V. (e4) Treasury management 21 April 2004

The Netherlands 100.00 100.00

70

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont'd) Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Direct subsidiaries of Purimas P.T. Sinar Mas Agro

Resources and Technology Tbk (''SMART'') (e5)

Investment holding, ownership and cultivation of oil palm plantation, ownership and operation of mill, refinery and producer of consumer cooking oil, shortening and margarine

18 June 1962 Indonesia

74.63 51.00

P.T. Trimeru (e4) Ownership and cultivation of oil

palm plantation 16 January 1975 Indonesia

100.00 100.00

P.T. Sawit Mas Sejahtera

(''Sawit Mas'') (e6) Investment holding, ownership and cultivation of oil palm plantation, ownership and operation of mill

23 December 1975 Indonesia

100.00 100.00

P.T. Ivo Mas Tunggal

(''Ivo Mas Tunggal'') (e5) Investment holding, ownership and cultivation of oil palm plantation, ownership and operation of mill and refinery

19 July 1978 Indonesia

97.72 95.59

P.T. Tarunacipta Kencana

("Tarunacipta") (e6) Ownership and operation of marine cargo

1 November 1994 Indonesia

100.00 100.00

P.T. Sinar Kencana Inti

Perkasa (e6) Ownership and cultivation of oil palm plantation, ownership and operation of mill


100.00 100.00

Direct subsidiaries of AIAR Dragon Capital Investments

Ltd ("Dragon") (e9) Investment holding 5 September 1996

Mauritius 100.00 g -

Premier Foods International

Ltd ("Premier") (e9) Investment holding 4 September 1996


Rapid Growth Investments Ltd

("Rapid") (e9) Investment holding 5 September 1996


Straits Investments Ltd

("Strait") (e9) Investment holding 5 September 1996

Mauritius 84.31 g -

Subsidiary of Tarunacipta P.T. Paramitra Agung

Cemerlang (e6) Provision of shipping and chartering services

16 October 1998 Indonesia

100.00 100.00

71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d) Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Subsidiaries of Sawit Mas P.T. Bumi Sawit Permai (e6) Ownership and cultivation of oil

palm plantation 27 February 1987 Indonesia

100.00 100.00

P.T. Rawa Bangunyaman (e4) Ownership and cultivation of oil

palm plantation 28 April 1987 Indonesia

100.00 100.00

P.T. Sumber Indahperkasa

(e6) Ownership and cultivation of oil palm plantation, ownership and operation of mill

31 March 1989 Indonesia

100.00 100.00

P.T. Bumipermai Lestari (e6) Ownership and cultivation of oil

palm plantation, ownership and operation of mill

8 August 1989 Indonesia

100.00 100.00

P.T. Djuandasawit Lestari (e6) Ownership and cultivation of oil



100.00 100.00

P.T. Forestalestari Dwikarya



100.00 100.00

P.T. Tradisi Mas Sejahtera (e4) Investment holding 9 November 1992

Indonesia 62.50 62.50

P.T. Tradisi Sawit Mandiri

Utama (e4) Ownership and cultivation of oil palm plantation

2 February 1996 Indonesia

85.00 85.00

P.T. Swakarya Adhi Usaha

(e6) Provision of maintenance services for palm oil processing units


100.00 100.00

P.T. Sinarindo Pirantimas (e7) Transportation services 16 October 1989

Indonesia - h 100.00

Subsidiaries of SMART P.T. Maskapai Perkebunan

Leidong West Indonesia (e5) Ownership and cultivation of oil palm plantation, ownership and operation of mill

19 September 1961 Indonesia

74.63 51.00

P.T. Perusahaan Perkebunan

Panigoran (e6) Ownership and cultivation of oil palm plantation


74.63 51.00

72

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d) Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Subsidiaries of SMART (cont'd) P.T. Satya Kisma Usaha (e6) Ownership and cultivation of oil

palm plantation 4 July 1974 Indonesia

74.63 51.00

P.T. Tapian Nadenggan (e5) Investment holding, ownership

and cultivation of oil palm plantation, ownership and operation of mill


74.63 51.00

P.T. Kresna Duta Agroindo



74.63 51.00

P.T. Langgeng Subur (e6) Ownership and cultivation of

ornamental plants 16 October 1989 Indonesia

42.91 c 29.32 c

P.T. Rama Flora Sejahtera (e4) Ownership and cultivation of oil

palm plantation 10 January 1990 Indonesia

74.63 51.00

P.T. Gemamina Kencana (e4) Ownership and cultivation of oil


74.63 51.00

P.T. Alam Sumber Rahmat

(e4) Ownership and cultivation of oil palm plantation


76.94 55.46

P.T. Pratama Ronaperintis (e4) Investment holding 26 April 1995

Indonesia 52.24 35.70 c

P.T. Sanggata Andalan Utama


17 June 1995 Indonesia

74.63 51.00

P.T. Bulungan Sarana Utama



- i 51.00

P.T. Berau Sarana Jaya

(formerly known as P.T. Nunukan Sarana Jaya) (e4)

Ownership and cultivation of oil palm plantation

31 May 1996 Indonesia

74.63 51.00

P.T. Pelangi Sungai Siak (e4) Ownership and cultivation of oil


63.44 43.35 c

P.T. Pratita Laksanasetia (e5) Ownership and cultivation of oil

palm plantation 26 September 1996 Indonesia

- i 51.00

73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d) Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Subsidiaries of Ivo Mas Tunggal P.T. Ivomas Tunggal Lestari

(e5) Provision of maintenance services for palm oil processing units

9 July 1984 Indonesia

97.72 95.59

P.T. Ramajaya Pramukti (e5) Ownership and cultivation of oil


27 November 1987 Indonesia

97.72 95.59

P.T. Buana Wiralestari Mas



97.72 95.59

P.T. Bumipalma

Lestaripersada (e5) Ownership and cultivation of oil palm plantation, ownership and operation of mill


97.72 95.59

P.T. Mantap Andalan Unggul


2 May 1990 Indonesia

97.72 95.59

P.T. Meganusa Intisawit (e5) Ownership and cultivation of oil

palm plantation 6 May 1994 Indonesia

97.05 66.91

P.T. Aimer Agromas ("Aimer

Agromas") (e6) Ownership and cultivation of oil palm plantation


- f 91.80

P.T. Nusantara Candra (e4) Ownership and cultivation of oil

palm plantation 17 November 1995 Indonesia

97.72 95.59

P.T. Kurnia Cakra Sakti (e4) Ownership and cultivation of oil

palm plantation 5 February 1996 Indonesia

97.72 95.59

P.T. Agropalma Sejahtera (e4) Investment holding 7 August 1996


P.T. Satrindojaya Agropalma



97.72 95.59

P.T. Usaha Malindo Jaya (e4) Ownership and cultivation of oil

palm plantation 27 November 1996 Indonesia

97.72 95.59

P.T. Mitra Ekasukses Abadi


1 January 1997 Indonesia

97.72 95.59

74

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d) Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Subsidiaries of Ivo Mas Tunggal (cont’d) P.T. Aimer Sawitmas ("Aimer

Sawitmas") (e4) Investment holding 12 September 1997

Indonesia 97.72 f 64.05

P.T. Griyagraha Sarimakmur



97.72 95.59

P.T. Ivo Mas Asia (e6) Transportation services 12 May 2000


P.T. Dumai Refinery Sejahtera

(e6) Refinery operation 28 August 2000


Subsidiaries of Dragon AFP International Trading

(Shanghai) Co., Ltd (e10) Dormant 3 January 2001

People's Republic of China

100.00 g -

Zhuhai Shining Gold Oil and

Fats Industry Co., Ltd (e10) Refinery of palm and vegetable oil

11 December 1995 People's Republic of China

85.00 g -

Subsidiary of Premier Shining Gold Foodstuffs

(Ningbo) Industry Co.,Ltd (e10) Refinery of palm and vegetable oil

4 February 1994 People's Republic of China

100.00 g -

Subsidiary of Rapid Shining Gold Oilseed Crushing

(Ningbo) Industry Co.,Ltd (e10) Manufacturing of crude vegetable oil

29 December 1995 People's Republic of China

100.00 g -

Subsidiaries of Strait Ningbo Shining Gold Cereal Oil

Port Co., Ltd (e10) Port and storage facilities 29 December 1995

People's Republic of China

68.91 g -

Ningbo Shining Gold Cereal Oil

Storage Co., Ltd (e10) Provide services in port loading, storage, packaging and transportation

8 January 1998 People's Republic of China

68.91 g -

75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d) Date and place Effective interest Name of Company Principal activities of incorporation of the Company 2005 2004 % % Others P.T. Trans Indojaya Mas (e6) Transportation services 18 November 1988


P.T. Universal Transindo Mas

(e6) Transportation services 15 April 2003


P.T. Sinar Mas Super Air (e6) Aerial manuring 18 September 1997


P.T. Bumi Persada Sejahtera

(e7) Investment holding, ownership and cultivation of oil palm plantation, transportation and general trading


98.88 97.84

P.T Sawit Kencana Lestari (e7)

Investment holding, ownership and cultivation of oil palm plantation, transportation and general trading


- j 97.84

P.T Buana Indah Mandiri (e7) Investment holding, ownership

and cultivation of oil palm plantation, transportation and general trading


98.88 97.84

The Group's associated companies are:

P.T. Hortimart Agrogemilang (e4)

Production and sale of seeds 24 December 1990 Indonesia

29.18 19.94 d

P.T. Sinar Oleochemical

International (e11) Oleochemical industries 20 October 1992


P.T. Sinar Meadow

International Indonesia (e5) Production of special vegetable oil and fat


48.86 47.80

P.T. Dami Mas Sejahtera (e6) Production and sale of oil palm

seeds 17 March 1997 Indonesia

48.86 47.80

The Group's joint venture company is:

Cargill – Mas Holdings Ltd Dormant 17 April 2000

Mauritius - b 50.00b

76

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d)

Notes:

(a) 86.04% of the share capital of Purimas is directly held by the Company and the remaining

13.96% of the share capital is held by Silverand Holdings Ltd.

(b) On 20 June 2001, the Group announced termination of its alliance with a third party to jointly develop, acquire, manage and own oil palm plantations as well as to build and operate a palm oil refinery in Indonesia. The joint venture company held jointly by the third party and Golden Agri Investment Holding Ltd was dissolved on 21 February 2005.

(c) These companies are held by non-wholly owned subsidiaries. Hence the effective interest of

the Company in these companies is less than 50%.

(d) This associated company is held by non-wholly owned subsidiaries. Hence the effective interest of the Company in the associated company is less than 20%.

(e) The above subsidiaries are audited by Moore Stephens, Singapore except for subsidiaries that

are indicated below:

(1) Audited by member firms of Moore Stephens International of which Moore Stephens, Singapore is a member.

(2) Not required to be audited by law in its country of incorporation. (3) Not audited as the subsidiary is in the process of winding up/liquidation/dissolution. (4) Not audited as the subsidiary is newly incorporated/has not commenced its operation. (5) Audited by Dedy, Muliadi & Rekan (Moore Stephens), except for 31 December 2004 which

was audited by other firm of accountants, Prasetio, Sarwoko & Sandjaja (Ernst & Young). (6) Audited by other firm of accountants, Drs. RB Tanubrata & Rekan (BDO).

(7) Audited by other firm of accountants, Drs. RB Tanubrata & Rekan (BDO), except for 31

December 2004 which was audited by other firm of accountants, Eddy Prakarsa Permana & Siddharta.

(8) Audited by other firm of accountants, Drs. RB Tanubrata & Rekan (BDO), except for 31

December 2004 which was audited by other firm of accountants, Kosasih & Nurdiyaman.

(9) Audited by other firm of accountants, J. Louis Couacaud (F.C.A).

(10) Audited by other firm of accountants, BDO International, Shanghai - People's Republic of China.

(11) Audited by other firm of accountants, Prasetio, Sarwoko & Sandjaja (Ernst & Young).

77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2005 41 Group Companies (cont’d)

Notes:

(f) During the financial year, Ivo Mas Tunggal acquired an additional 33% interest in Aimer

Sawitmas, resulting in Aimer Sawitmas being held wholly by Ivo Mas Tunggal, at a consideration of IDR495,000,000 (equivalent to US$54,000).

Subsequent to the abovementioned acquisition, Ivo Mas Tunggal and Aimer Sawitmas disposed of their entire shareholding in Aimer Agromas for a consideration of IDR14,000,000,000 (equivalent to US$1,509,000).

(g) On 8 December 2005, the Company announced its completion on the proposed acquisition of

the entire share capital of AIAR (the "Proposed Acquisition") following the payment by the Company of the cash consideration of US$155,000,000 and the transfer of 394,435,640 shares of AIAR to the Company. AIAR and its subsidiaries become subsidiaries of the Company as a result of the completion of the Proposed Acquisition.

(h) During the financial year, P.T. Sinarindo Pirantimas was merged into P.T. Forestalestari

Dwikarya with P.T. Forestalestari Dwikarya as the surviving company. (i) During the financial year, P.T. Bulungan Sarana Utama and P.T. Pratita Laksanasetia were

merged into P.T. Tapian Nadenggan with P.T. Tapian Nadenggan as the surviving company.

(j) During the financial year, P.T Sawit Kencana Lestari was merged into P.T. Buana Indah Mandiri with P.T. Buana Indah Mandiri as the surviving company.

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius)


31 DECEMBER 2005

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius)


31 DECEMBER 2005 CONTENTS PAGE Report of the Directors 1 Secretary’s Report 2 Report of the Auditors 3 - 4 Income Statement 5 Balance Sheet 6 Statement of Changes in Equity 7 Cash Flow Statement 8 Notes to the Financial Statements 9 - 20

1

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) REPORT OF THE DIRECTORS TO THE MEMBERS 31 DECEMBER 2005 DIRECTORS' REPORT TO THE MEMBERS The directors present their report together with the audited financial statements of Golden Agri-Resources Ltd (the "Company") for the financial year ended 31 December 2005. PRINCIPAL ACTIVITY The Company was incorporated on 15 October 1996 and its principal activity is that of an investment holding company. RESULTS AND DIVIDENDS The Company's net gain for the year ended 31 December 2005 is US$1,718,000 (2004: Net loss of US$1,157,000). At the Annual General Meeting on 28 April 2006, a first and final tax exempt dividend of SGD1 cent per share amounting to a total of S$21,687,000 (equivalent to US$13,017,300) will be recommended by the directors. STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS Company law requires the directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs and of the profit and loss of the Company. In preparing those financial statements, the directors are required to: • Select suitable accounting policies and then apply them consistently; • Make judgements and estimates that are reasonable and prudent; • State whether applicable accounting standards have been followed, subject to any material departures

disclosed and explained in the financial statements; and • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Company will continue in business. The directors confirm that they have complied with the above requirements in preparing the financial statements. The directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Mauritian Companies Act 2001 and International Financial Reporting Standards. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. By order of the Board Multiconsult Limited CORPORATE SECRETARY Date: 16 March 2006

2

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) SECRETARY’S REPORT TO THE MEMBERS 31 DECEMBER 2005 We certify that, to the best of our knowledge and belief, Golden Agri-Resources Ltd (the "Company") has filed with the Registrar of Companies, all such returns as are required of the Company under Section 166(d) of the Companies Act 2001. Multiconsult Limited CORPORATE SECRETARY, 10, Fre re Fe lix de Valois Street, Port Louis, MAURITIUS Date: 16 March 2006

3

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) 1 We have audited the financial statements of Golden Agri-Resources Ltd (the "Company") for the year

ended 31 December 2005 set out on pages 5 to 20, all expressed in U.S. dollars which have been prepared in accordance with the accounting policies set out on pages 10 to 13.

2 Responsibilities of directors The Company’s directors are responsible for the preparation and presentation of financial statements which are in accordance with and comply with International Financial Reporting Standards (“IFRS”) and International Accounting Standards ("IAS"), including Interpretations issued by the IAS Board which give a true and fair view of the matters to which they relate, and which present fairly the financial position of the Company as at 31 December 2005 and its financial performance, changes in equity and cash flows for the year then ended.

3 Auditors’ responsibilities

We are responsible for expressing an independent opinion, based on our audit on the financial statements presented by the directors and reporting our opinion to you. This opinion has been prepared for and only for, the Company’s shareholders in accordance with Section 205 of the Mauritian Companies Act 2001 and for no other purpose. We will not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

4 Basis of opinion We conducted our audit in accordance with International Standards on Auditing. Our audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations, which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

We have no relationship with, or any interests in, the Company other than in our capacity as auditors, tax and business advisers, and arm’s length dealings with the Company in the ordinary course of business.

4

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) 5 Biological Assets The independent auditors’ report on the financial statements of P.T. Purimas Sasmita ("Purimas")

contained an “except for” opinion in relation to the Group’s biological assets. According to International Accounting Standards No. 41 “Agriculture”, biological assets should be measured at fair value less estimated point-of-sale costs from initial recognition of biological assets up to the point of harvest, unless market prices or alternative estimates of fair value are not available or determined to be unreliable, where cost less accumulated depreciation and impairment losses would be acceptable. As there are currently no accepted standard ways of determining the value of the biological component of plantation assets in accordance with this Accounting Standard, the directors were consequently unable to determine the fair value of the Group’s biological assets in line with this Standard. The directors have instead recorded plantation assets at either revalued amount or cost less accumulated depreciation and impairment losses amounting to US$622,989,000 in total as at 31 December 2005 (2004: US$389,988,000). The auditors were unable to express an opinion as to the appropriateness of the valuation of Purimas’ plantation assets. The independent auditors report on the financial statements of Purimas for the year ended 31 December 2004, contained the same qualification.

6 Opinion Except for the matter referred to in paragraph 5 above, in our opinion: (a) we have obtained all such information and explanations which we considered necessary;

(b) proper accounting records have been kept by the Company as far as it appears from our

examination of those records; and

(c) the financial statements on pages 5 to 20:

(i) have been prepared in accordance with and comply with the Mauritian Companies Act 2001 and International Financial Reporting Standards and International Accounting Standards including Interpretations issued by the IAS Board;

(ii) give a true and fair view of the matters to which they relate; and

(iii) present fairly the financial position of the Company as at 31 December 2005 and its

financial performance, changes in equity and cash flows for the year then ended.

Moore Stephens Chartered Certified Accountants Port Louis, Mauritius Date: 16 March 2006

5

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Note 2005 2004 US$’000 US$’000 Administrative expenses (2,249) (1,285) Financial income 4 6,174 4,924 Financial expenses 4 (1,318) (4,302) Foreign exchange loss, net (885) (494) Profit(Loss) before income tax 5 1,722 (1,157) Income tax expense 6 (4) - Profit(Loss) for the year 1,718 (1,157) The accompanying notes form an integral part of these financial statements.

6

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) BALANCE SHEET AS AT 31 DECEMBER 2005 Note 2005 2004 US$’000 US$’000 Current assets Cash and cash equivalents 7 1,494 1,007 Non-current assets Interest in subsidiaries 8 1,184,102 1,085,720 Long-term receivable 9 45,000 45,000 Other non-current asset 10 - 98,394 1,229,102 1,229,114 Total Assets 1,230,596 1,230,121 Current liabilities Short-term bank loan, unsecured 11 3,500 3,500 Accrued operating expenses 277 223 Other creditors 292 - Loans and advances from subsidiaries, unsecured 12 33,241 35,826 Due to immediate holding company, unsecured 13 1,005 13 Provision for taxation 4 4 - 38,319 39,562 Net Assets 1,192,277 1,190,559 Equity Share capital 14 216,867 216,867 Share premium 931,465 931,465 Retained earnings 43,945 42,227 1,192,277 1,190,559 On behalf of the Board of Directors FRANKY OESMAN WIDJAJA SIMON LIM Director Director The accompanying notes form an integral part of these financial statements.

7

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2005 Share Share Retained Capital Premium Earnings Total US$’000 US$’000 US$’000 US$’000 Balance as at 1 January 2004 216,867 931,465 43,384 1,191,716 Loss for the year - - (1,157) (1,157) Balance as at 31 December 2004 216,867 931,465 42,227 1,190,559 Balance as at 1 January 2005 216,867 931,465 42,227 1,190,559 Profit for the year - - 1,718 1,718 Balance as at 31 December 2005 216,867 931,465 43,945 1,192,277 The accompanying notes form an integral part of these financial statements.

8

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005

Note 2005 2004

US$’000 US$’000

Cash flows from operating activities Profit(Loss) before income tax 1,722 (1,157) Adjustments for: Interest expense 1,318 4,302 Interest income (6,174) (4,924) Bad debts recovered (63) - Unrealised loss on foreign exchange for bond issued by a subsidiary 345 612 Operating cash flow before working capital changes (2,852) (1,167) Changes in operating assets and liabilities: Due to immediate holding company, unsecured 992 (674) Accrued operating expenses 51 4 Other creditors 292 - Cash used in operations (1,517) (1,837) Interest paid (185) (124) Interest received 28 8 Net cash used in operating activities (1,674) (1,953) Cash flows from investing activities Loans and advances to subsidiaries 179,478 71,677 Bonds issued by a subsidiary (75,602) - Acquisition of a subsidiary (98,000) - Net cash generated from investing activities 5,876 71,677 Cash flows from financing activities Loans and advances from subsidiaries (3,715) (68,791) Net cash used in financing activities (3,715) (68,791) Net increase in cash and cash equivalents 487 933 Cash and cash equivalents at the beginning of the year 1,007 74 Cash and cash equivalents at the end of the year 7 1,494 1,007 Non-Cash Transactions The Company has extended and obtained loans from its subsidiaries. The amounts are repayable on demand and the applicable interest has been rolled over with the loan principal. Accordingly, the accrued interest receivables/payables have been excluded from the Cash Flow Statement as they are non-cash transactions. The accompanying notes form an integral part of these financial statements.

9

GOLDEN AGRI-RESOURCES LTD (Incorporated in Mauritius) NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 These notes are an integral part of and should be read in conjunction with the accompanying financial statements. 1 General

Golden Agri-Resources Ltd (the "Company") was incorporated in Mauritius on 15 October 1996 under Section 19 of the Companies Act 1984 as a private company limited by shares and was granted an offshore certificate under Section16(4) of the Mauritius Offshore Business Activities ("MOBA") Act 1992 on 16 October 1996. On 9 July 1999, the Company was admitted to the Official List of the Singapore Exchange Securities Trading Limited. The Companies Act 1984 and the MOBA Act 1992 had been repealed and replaced by the Companies Act 2001 and the Financial Services Development ("FSD") Act 2001, respectively. With effect from 1 December 2001, "offshore companies" are now referred to as "Global Business Licence Category 1 ("GBL1") companies". The immediate holding company is Asia Food & Properties Limited ("AFP"), a public company incorporated in Singapore. The directors regard Flambo International Limited, a company incorporated in the British Virgin Islands, as the ultimate holding company. The Controlling Shareholders of the Company comprise certain members of the Widjaja Family. The registered office of the Company is at 10, Frère Félix de Valois Street, Port Louis, Mauritius. The principal activity of the Company is that of an investment holding company. The financial statements were authorised for issue by the Board of Directors on 16 March 2006.

2 Adoption of New and Revised International Financial Reporting Standards ("IFRS")

In the current year, the Company has adopted the following new and revised Standards and Interpretations issued by the International Accounting Standards Boards ("IASB") and the International Reporting Interpretations Committee of the IASB that are relevant to its operations, and effective for accounting periods beginning on 1 January 2005. IFRS 3, Business Combination (New 2003) IFRS 5, Non-current Assets Held for Sale and Discontinued Operations (New 2004) IAS 1, Presentation of Financial Statements (Revised 2003) IAS 2, Inventories (Revised 2003) IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (Revised 2003) IAS 10, Events after the Balance Sheet Date (Revised 2003) IAS 16, Property, Plant and Equipment (Revised 2003) IAS 17, Leases (Revised 2003) IAS 21, The Effect of Changes in Foreign Exchange Rates (Revised 2003) IAS 24, Related Party Disclosures (Revised 2003)

10

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 2 Adoption of New and Revised International Financial Reporting Standards ("IFRS") (cont'd)

IAS 27, Consolidated and Separate Financial Statements (Revised 2003) IAS 28, Investments in Associates (Revised 2003) IAS 32, Financial Instruments: Disclosure and Presentation (Revised 2003) IAS 33, Earnings per Share (Revised 2003) IAS 39, Financial Instruments: Recognition and Measurement (Revised 2004)

The adoption of the above mentioned Standards had no significant impact on the Company's financial statements.

3 Summary of Significant Policies

(I) Accounting Policies

(a) Basis of Financial Statements Preparation

The financial statements, which are expressed in United States (U.S.) dollars, are prepared in accordance with the historical cost convention, except as disclosed in the accounting policies below and are drawn up in accordance with the provisions of IFRS. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial period. Although these estimates are based on management's best knowledge of current events and actions, actual results may actually differ from these estimates.

(b) Functional and Presentation Currency

The financial statements are prepared in U.S. dollars primarily because of the international nature of the crude palm oil products that the Company and its subsidiaries (“Group”) is principally engaged in and the fact that the transactions of the Group are denominated in or derived from U.S. dollars more than any other currency. The functional currency of the Company is the U.S. dollar and the directors are of the opinion that the U.S. dollar provides information about the Company which is useful and reflects the primary economic environment in which the Company operates. (c) Foreign Currencies Transactions in a currency other than the functional currency ("foreign currency") are translated into U.S. dollars at the rates of exchange prevailing at the time the transactions are entered into. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates prevailing at such date. Exchange differences arising are taken to the income statement.

11

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 3 Summary of Significant Policies (cont’d)


(c) Foreign Currencies (cont'd)

Currency translation differences on non-monetary items, such as equity investments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Currency translation differences on non-monetary items, such as equity investments classified as available-for-sales financial assets, are included as part of the fair value gain or loss.

(d) Revenue Recognition Interest income from time deposits and other financial assets are recognised on a time-proportion basis, by reference to the principal outstanding and at the effective interest rate applicable. (e) Deferred Tax Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial statements. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax liabilities are recognised on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference can be controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. (f) Cash and Cash Equivalents Cash and cash equivalents comprise cash in banks and time deposits with maturities of three months or less at the time of placement.

12


(I) Accounting Policies (cont’d) (g) Investment in Subsidiaries Investment in subsidiaries is stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down to its recoverable amount. A subsidiary is an entity controlled by the Company. Control is normally evidenced when the Company owns directly or indirectly, more than 50% of the voting rights of the subsidiaries' issued share capital and is able to govern the financial and operating policies of the company so as to benefit from its activities. (h) Impairment of Assets At each balance sheet date, the Company reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An asset's recoverable amount is calculated as the higher of the asset's value in use and/or its fair value less cost to sell. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is land or buildings at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that it does not restate the asset to a carrying amount in excess of what would have been determined (net of depreciation) had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (i) Bank Borrowings Interest-bearing bank loans are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accrual basis to the income statement using effective interest method.

13

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005

3 Summary of Significant Policies (cont’d) (I) Accounting Policies (cont’d) (j) Financial Instruments Receivables are measured at initial recognition at fair value which is normally the face value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Payables are stated at face value which is the fair value of the debts. Where the effect of time value of money is material, the liabilities are the present values of the expenditures expected to be required to settle the obligation. (k) Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders. (II) Financial Risk Management Policies The Company’s activities exposed it to a variety of financial risks, including the effects of changes in interest rate risk, foreign exchange risk and credit risk arising in the normal course of the Company’s business. The Company’s risk management seeks to minimise the potential adverse effects from these exposures. The management reviews and agrees policies for managing each of these risks and they are summarised below: (a) Interest Rate Risk The Company’s exposure to interest rate risk arises from its short-term bank loan and loans and advances to and from subsidiaries. The Company constantly reviews its debt portfolio and monitors the changes in interest rate environment to ensure that interest receipts and payments are within acceptable level. Information relating to the Company’s interest rates and terms of repayment is disclosed in the respective notes to the financial statements on the Company’s loan and advances to and from subsidiaries.

14


(II) Financial Risk Management Policies (cont'd) (b) Credit Risk The Company’s policy is to enter into transactions with creditworthy counterparties so as to mitigate any significant credit risk. Bank balances were placed in financial institutions of high credit rating and the convertible bonds are monitored closely by the Company on an on-going basis. The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as at the end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the balance sheet. As at the balance sheet date, the Company does not have any significant concentration of credit risk. (c) Foreign Currency Risk The Company’s foreign currency exposure arises mainly from the exchange rate movements of the Indonesian Rupiah and the U.S. dollar which is also the Company’s functional currency. The Company did not actively engage in activities to hedge its foreign currency exposure during the financial year. (d) Liquidity Risk To manage liquidity risk, the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance its operations and mitigate the effects of fluctuations in cash flows. The Company relies on funds from subsidiaries as a significant source of liquidity.

4 Financial Income and Expenses 2005 2004

US$’000 US$’000 Interest income: - loans to subsidiaries 6,146 4,915 - cash in banks and time deposit 28 9 6,174 4,924 Interest expenses: - short-term bank loan (188) (126) - loans from subsidiaries (1,130) (4,176) (1,318) (4,302)

15

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 5 Profit(Loss) before Income Tax This is arrived at after charging:

2005 2004 US$’000 US$’000 Staff costs* 335 356 Amount paid/payable to auditors for non-audit services 78 -

* This represents short-term employment benefits paid to key management personnel who are also directors.

6 Tax

The reconciliation of the current year tax expense and the product of accounting loss multiplied by the Mauritius statutory tax rate is as follows:

2005 2004 US$’000 US$’000 Profit(Loss) before income tax 1,722 (1,157) Tax calculated at tax rate of 15% (2004: 15%) 258 (174) Expenses not deductible for tax purposes 243 85 Utilisation of previously unrecognised tax losses (482) - Unrecognised deferred tax assets - 89 Deemed foreign tax credit (15) - 4 -

The Company, being a GBL1 company for the purpose of the FSD Act 2001 is taxed at a fixed rate of 15% (2004: 15%) on its chargeable income and is entitled to a deemed foreign tax credit of 80% (2004: 80%) on its foreign source income. As at 31 December 2004, the Company has unutilised tax losses amounting to approximately US$3,213,000 available for offsetting against future taxable income. The deferred tax asset arising from these unutilised losses amounting to US$482,000 has not been recognised in the financial statements in accordance with the accounting policy in Note 3(I)(e) to the financial statements.

7 Cash and Cash Equivalents 2005 2004

US$’000 US$’000 Cash in banks 545 58 Time deposit 949 949 1,494 1,007

The above time deposit earns interest ranging from 2.2% - 4.1% (2004: 0.7% - 2.2%) per annum and has been pledged as security for banker guarantee. The carrying amount of these assets approximates their fair value due to the relatively short-term maturity of these balances.

16

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 8 Interest in Subsidiaries

2005 2004 US$’000 US$’000 Investment in unquoted equity shares at cost (a) 930,875 832,875 Loans and advances to subsidiaries, unsecured (b) 228,698 205,260 Bonds issued by subsidiaries (c) 24,529 47,585 1,184,102 1,085,720 (a) Details of the direct subsidiaries held by the Company are as follows: Name of subsidiary/Country of

incorporation and place of business Principal activities

Effective interest of the Company

Cost of investment

2005 2004 2005 2004 % % US$’000 US$’000 P.T. Purimas Sasmita (ii)

Indonesia

Investment holding

100 100 646,360 646,360

Golden Agri International Pte Ltd Singapore


100 100 297 297

Golden Agri Investment Holding Ltd(i) Mauritius

Investment holding

100 100 - * - *

Silverand Holdings Ltd (i) Mauritius

Investment holding

100 100 186,218 186,218

Golden Agri International Trading Ltd(i) Malaysia


100 100 - ** - **

Golden Agri International Finance Ltd ("GAIF")(i) Mauritius

Treasury management

100 100 - * - *

Golden Agri International Finance (2) Ltd(iii) British Virgin Islands

Treasury management

100 100 - *** - ***

Asia Integrated Agri Resources Limited ("AIAR") (d) Bermuda

Investment holding

100 - 98,000 -

930,875 832,875

* Cost of investment amounted to US$2 ** Cost of investment amounted to US$1 *** Cost of investment amounted to US$450

17

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 8 Interest in Subsidiaries (cont'd) (a) Note:

The above subsidiaries are audited by Moore Stephens, Singapore except for subsidiaries that are indicated below:

(i) Audited by member firms of Moore Stephens International of which Moore Stephens,

Singapore is a member. (ii) Audited by Dedy, Muliadi & Rekan (Moore Stephens), except for 31 December 2004 which was

audited by other firm of accountants, Prasetio, Sarwoko & Sandjaja (Ernst & Young).

(iii) Not required to be audited by law in its country of incorporation.

(b) The loans and advances to subsidiaries are stated after provision for impairment of receivables of US$Nil (2004: US$63,000). The loans and advances to subsidiaries bear interest ranging from 0% - 5.2% (2004: 0% - 11.4%) per annum and have no fixed terms of repayment. The carrying amount of these loans approximates their fair value.

(c) In 2000, P.T. Forestalestari Dwikarya, a subsidiary of P.T. Purimas Sasmita, issued Zero Percent

Convertible Bonds (the "FLD Bonds") due in 2005 to the Company. In January 2004, the Company assigned the FLD Bonds to GAIF with an outstanding balance in aggregate of IDR58,326,954,000. During the financial year 2005, the maturity date of the FLD Bonds has been extended to 2010. At the end of the financial year, the outstanding balance in aggregate of the FLD Bonds amounted to IDR58,326,954,000 (equivalent to US$5,927,500) (2004: IDR58,326,954,000, equivalent to US$6,271,000).

On 15 January 2001, P.T. Purimas Sasmita issued a Zero Percent Convertible Bond (the "Purimas Bond") due on 15 January 2006 to the Company. In August 2004, the Company assigned the Purimas Bond to GAIF with an outstanding balance of US$41,314,000 as at 31 December 2004. In January 2005, the Purimas Bond has been converted into an interest-bearing loan to GAIF.

On 24 June 2005, P.T. Purimas Sasmita issued a Zero Percent Convertible Bond due 24 June 2010 with nominal face value of US$18,601,500 to the Company.

The Zero Percent Convertible Bonds are convertible on their maturity dates into ordinary shares, at 100

percent of the value of the shares on the exercise date. The value of the shares will be determined by the net tangible assets per share of the subsidiary.

As at 31 December 2005, the Company has not exercised the convertible option of the bonds.

18

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 8 Interest in Subsidiaries (cont'd) (d) On 20 June 2005, the Company entered into a sale and purchase agreement with AFP, its immediate

holding company, in relation to the proposed acquisition of the entire issued and paid-up share capital of AIAR from AFP at a consideration of US$155,000,000.

In December 2005, the proposed acquisition has been completed following the payment by the

Company of the cash consideration of US$155,000,000 to AFP and the transfer of 394,435,640 shares of AIAR to the Company. On completion date, the aggregate amount of loans provided to AIAR group of companies by AFP of US$57,000,000 had been assigned to the Company, offseting the total cash consideration of US$155,000,000.

In the opinion of the directors, the recoverable amount of its interest in subsidiaries is not less than the

carrying amount of the interest in subsidiaries, on the basis that the present value of estimated future cash flows expected to arise from the subsidiaries’ operations over the next few years will exceed the carrying amount of the investment in these subsidiaries.

9 Long-Term Receivable

The long-term receivable relates to an investment in a convertible loan pursuant to a loan agreement entered into by the Company on 20 December 2000 with Nalliwan Trading Ltd (“borrower”). The loan is non-interest bearing on the condition that the borrower and its subsidiaries shall supply all of its palm oil production to the Company and its subsidiaries. As security for the loan, the Company received a pledge over all the shares of, as well as an option to acquire 100% of the equity in Madascar Investment Ltd (“Madascar”), a wholly owned subsidiary of the borrower (the "option"). Madascar in turn owns two subsidiaries, the principal one being P.T. Binasawit Abadipratama (“BAP”), which is a plantation company, in which Madascar holds 99.99%.

The option on the loan to the borrower expired on 20 December 2005 but has been extended and may be exercised at any time after 20 December 2008. The extension of the option has no effect on the pledge, which shall continue to secure the loan. The exercise price of the option has been fixed at US$67,000,000, determined based on imputed market value of Madascar of approximately US$75,000,000, which was based on a valuation of BAP, conducted by an independent valuation company as at November 2005. The extension of the option is to ensure, in the event that should the Company decide to exercise the option, it will take over Madascar at a time when the estates are fully mature and productive.

The embedded derivative (share option) in the convertible loan has not been separated from the host contract (loan) on initial issuance and at the balance sheet date because in the opinion of the directors, the value of the embedded derivative is immaterial to the Company and accordingly, the whole compound financial asset is accounted for in the financial statements as one financial instrument.

19

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 10 Other Non-Current Asset

2005 2004 US$’000 US$’000 Long-term advance payment to a subsidiary - 98,394

As at 31 December 2004, this balance represents an advance payment to a subsidiary, P.T. Sinar Mas Agro Resources and Technology Tbk ("SMART"), for the purchase of crude palm oil and related products to be delivered between 1 January 2004 and 31 December 2006.

In May 2005, this advance payment has been converted into a loan to SMART and subsequently fully repaid by SMART.

11 Short-Term Bank Loan, Unsecured

The short-term bank loan bears interest ranging from 4.5% to 6.5% (2004: 3.3% to 4.5%) per annum and is repayable on demand. The carrying amount of this loan approximates its fair value due to the relatively short-term maturity of this balance.

12 Loans and Advances from Subsidiaries, Unsecured

The loans and advances from subsidiaries bear interest ranging from 0% - 6.0% (2004: 0% - 11.8%) per annum and are repayable on demand. The carrying amount of these loans approximate their fair value due to the relatively short-term maturity of these balances.

13 Due to Immediate Holding Company, Unsecured The amount due to immediate holding company is interest free and repayable on demand. The carrying amount of the balance due to immediate holding company approximates its fair value.

14 Share Capital 2005 2004

US$’000 US$’000 Authorised: 15,000,000,000 ordinary shares of US$0.10 each 1,500,000 1,500,000 Issued and fully paid: 2,168,675,948 ordinary shares of US$0.10 each 216,867 216,867

20

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 15 Related Party Transactions

(a) Related parties are entities (except for holding company and associated company) with common direct or indirect shareholders and/or directors. Parties are considered to be related (directly or indirectly) if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

(b) In addition to the related party information disclosed elsewhere in the financial statements,

significant transaction with related party, on terms agreed between parties, was as follows: 2005 2004 US$’000 US$’000 Management fee expense paid/payable to immediate

holding company

807

595

16 Dividends At the Annual General Meeting on 28 April 2006, a first and final tax exempt dividend of SGD1 cent per share amounting to a total of S$21,687,000 (equivalent to US$13,017,300) will be recommended. These financial statements do not reflect this dividend, which will be accounted for in shareholders' equity as an appropriation of retained earnings in the financial year ending 31 December 2006.

17 Contingent Liabilities As at the end of the financial year, the contingent liabilities of the Company are as follows:

(i) Corporate guarantees and letter of indemnities issued by the Company to financial institutions of US$138,818,000 (2004: US$274,315,000) in connection with credit facilities and trade financing facilities granted to subsidiaries, of which US$70,098,000 (2004: US$97,887,000) relates to credit facilities utilised by subsidiaries.

(ii) Corporate guarantee given by the Company to a creditor amounted to US$45,000,000 (2003:

US$45,000,000) in connection with a term loan facility granted to a wholly-owned subsidiary of the immediate holding company.

GOLDEN AGRI-RESOURCES LTD (Incorporated in the Republic of Mauritius)

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that an Annual General Meeting of Golden Agri-Resources Ltd (the “Company” or “GAR”) will be held on Friday, 28 April 2006 at 10.30 a.m. at Holiday Inn Atrium Singapore, Level 4, Atrium Ballroom, 317 Outram Road, Singapore 169075 to transact the following business: AS ORDINARY BUSINESS 1. To receive and adopt the Audited Financial Statements for the year ended 31 December

2005 together with the Directors’ and Auditors’ Reports thereon. (Resolution 1) 2. To declare a first and final dividend of S$1cent per ordinary share (tax exempt) for the year

ended 31 December 2005. (Resolution 2) 3. To approve the Directors’ Fees of S$154,000 for the year ended 31 December 2005.

(FY2004: S$154,000) (Resolution 3) 4. To re-elect the following Directors retiring by rotation pursuant to Article 90 of the Articles of

Association of the Company:

a) Mr Simon Lim (Resolution 4) b) Mr Rafael Buhay Concepcion, Jr. (Resolution 5) c) Mr Kaneyalall Hawabhay {please see note 1} (Resolution 6)

5. To re-elect the following Director retiring pursuant to Article 96 of the Articles of Association of the Company:

a) Mr Kunihiko Naito {please see note 2} (Resolution 7)

6. To re-appoint Moore Stephens as Auditors and to authorise the Directors to fix their

remuneration. (Resolution 8) AS SPECIAL BUSINESS 7. To consider and, if thought fit, to pass with or without any amendments, the following

resolutions as Ordinary Resolutions: 7A. “That pursuant to the Mauritius Companies Act 2001 and the Listing Rules of the Singapore

Exchange Securities Trading Limited, the Directors of the Company be and are hereby authorised to issue and allot (including the issue and allotment of shares and convertible securities pursuant to offers, agreements or options made or granted by the Company while this authority remains in force) or otherwise dispose of shares in the Company (including making and granting offers, agreements and options which would or which might require shares and convertible securities to be issued, allotted or otherwise disposed of) at any time, whether during the continuance of such authority or thereafter, to such persons, upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit without first offering such shares and convertible securities to the members of the Company provided that the aggregate number of shares and convertible securities to be issued pursuant to this Resolution shall not exceed fifty percent (50%) of the issued share capital of the Company at the date of this Resolution, and provided further that where members of the Company with registered addresses in Singapore are not given an opportunity to participate in the same on a pro-rata basis, then the shares and convertible securities to be issued under such circumstances shall not exceed twenty percent (20%) of the issued share capital of the Company at the date of this Resolution.” {please see note 3} (Resolution 9)

7B. “(a)That pursuant to Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited, approval be and is hereby given to the Company, its subsidiaries and associated companies that are not listed on the Singapore Exchange Securities Trading Limited or an approved exchange, provided that the Company and its subsidiaries (the "Group”), or the Group and its interested person(s), has control over the associated companies, or any of them to enter into any of the transactions falling within the types of Interested Person Transactions, particulars of which are set out in the Appendix 1 to this Notice of Annual General Meeting {please see note 4}, with any party who is of the class of Interested Persons described in the said Appendix 1, provided that such transactions are carried out in the ordinary course of business and in accordance with the guidelines of the Company for Interested Person Transactions as set out in the said Appendix 1 (the “IPT Mandate”);

(b)That the IPT Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the next Annual General Meeting of the Company; and (c)That the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary or in the interests of the Company to give effect to the IPT Mandate and/or this Resolution.” {please see note 4A} (Resolution 10)

By Order of the Board Simon Lim Director 12 April 2006 Singapore Notes: A member entitled to attend and vote at the Annual General Meeting is entitled to appoint no more than two proxies to attend and vote in his stead. A proxy need not be a member of the Company. Proxies must be lodged at the mailing address of the Company at 3 Shenton Way, #17-03 Shenton House, Singapore 068805 not later than 48 hours before the Annual General Meeting.

Additional information relating to the Notice of Annual General Meeting: 1. Mr Kaneyalall Hawabhay if re-elected, will remain on the Audit Committee. Mr Kaneyalall

Hawabhay is considered to be independent. 2. Mr Kunihiko Naito if re-elected, will remain on the Audit Committee. Mr Kunihiko Naito is

considered to be independent. 3. The Ordinary Resolution 9 proposed in item 7A above, if passed, is to empower the

Directors from the date of the above Meeting until the date of the next Annual General Meeting, to issue shares and convertible securities in the capital of the Company. The number of shares and convertible securities that the Directors may issue under this Resolution would not exceed fifty percent (50%) of the issued capital of the Company at the time this Resolution is passed. For issue of shares and convertible securities other than on a pro-rata basis to shareholders, the aggregate number of shares and convertible securities to be issued shall not exceed twenty percent (20%) of the issued capital of the Company.

The percentage of issued capital is based on the Company’s issued capital after adjusting

for (a) new shares arising from the conversion of convertible securities or any employee share options on issue at the time this Resolution is passed and (b) any subsequent consolidation or subdivision of shares.

4. The mandate for transactions with Interested Persons as described in the Appendix 1 (the

“Appendix 1”) to this Notice of Annual General Meeting include the placement of deposits by the Company with financial institutions in which Interested Persons have an interest. However, the Board of Directors of the Company will terminate all banking arrangements with BII Limited, Cook Islands.

4A. The Ordinary Resolution 10 proposed in item 7B above, if passed, is to renew for another

year, up to the next Annual General Meeting of the Company, the mandate for transactions with Interested Persons as described in the Appendix 1, which will, unless previously revoked or varied by the Company at a general meeting, expire at the next Annual General Meeting.

GOLDEN AGRI-RESOURCES LTD (Incorporated in the Republic of Mauritius) PROXY FORM ANNUAL GENERAL MEETING I/We, _________________________________________________________________________________(Name) of___________________________________________________________________________________(Address) being a member/members of Golden Agri-Resources Ltd (the “Company” or “GAR”) hereby appoint:

Proportion of Shareholdings

Name

Address

NRIC /

Passport Number No. of Shares %

and/or (delete as appropriate):

or failing him/her, the Chairman of the Annual General Meeting of the Company (the “AGM”) as my/our proxy/proxies to attend and vote for me/us on my/our behalf and, if necessary, to demand a poll at the AGM to be held on Friday, 28 April 2006 at 10.30 a.m. and at any adjournment thereof. (Please indicate with an “X'' in the space provided whether you wish your vote(s) to be cast for or against the resolution as set out in the Notice of AGM. In the absence of specific direction, the proxy/proxies will vote or abstain as he/they will on any other matter arising at the AGM).

No. Resolutions For Against

ORDINARY BUSINESS

1

Adoption of Reports and Accounts

2

Declaration of First and Final Dividend (tax exempt)

3

Approval of Directors’ Fees

4

Re-election of Mr Simon Lim

5

Re-election of Mr Rafael Buhay Concepcion, Jr.

6

Re-election of Mr Kaneyalall Hawabhay

7

Re-election of Mr Kunihiko Naito

8

Re-appointment of Auditors

SPECIAL BUSINESS

9

Authority to Directors to issue shares and convertible securities

10

Renewal of Shareholders’ Mandate for Interested Person Transactions

Dated this _______ day of _____________ 2006.

Total Number of Shares Held

___________________________________ Signature(s) or Common Seal of Member(s) IMPORTANT: PLEASE READ NOTES ON THE REVERSE

Notes:

1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in the Articles of Association of the Company), you should insert that number. If you have shares registered in your name in the Register of Members of the Company, you should insert that number. If you have shares entered against your name in the Depository Register and registered in your name in the Register of Members, you should insert the aggregate number. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by you.

2. A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies

to attend and vote on his behalf. A proxy need not be a member of the Company. 3. The instrument appointing a proxy or proxies must be deposited at the Company's mailing address at 3 Shenton

Way #17-03 Shenton House Singapore 068805 not less than 48 hours before the time set for the AGM. 4. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the

proportion of his holding to be represented by each proxy. 5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly

authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its officer or attorney duly authorised.

6. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the power of attorney

(or other authority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a member may authorise by resolution of its directors or other governing body such person

as it thinks fit to act as its representative at the AGM, in accordance with Section 179 of the Companies Act, Cap 50 of Singapore.

8. The Company shall be entitled to reject an instrument of proxy which is incomplete, improperly completed,

illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the instrument of proxy. In addition, in the case of shares entered in the Depository Register, the Company may reject an instrument of proxy if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time fixed for holding the AGM, as certified by The Central Depository (Pte) Limited to the Company.

fold along this line

PROXY FORM

The Company Secretary GOLDEN AGRI-RESOURCES LTD

c/o 3 Shenton Way #17-03 Shenton House

Singapore 068805

Affix

Stamp Here

1 Corporate Profile

2 Network of Operations

4 Corporate Directory

5 Corporate Structure

6 Board of Directors

9 Chairman’s Statement

11 Operations Review

15 Financial Report > Shareholding Statistics

> Notice of Annual General Meeting

> Proxy Form

> Contents

> Annual Report 2005

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c/o 3 Shenton Way

#17-03 Shenton House

Singapore 068805

Tel : 65 - 6220 7720

Fax: 65 - 6220 7020

Email: [email protected]

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