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PT CG Power Systems Indonesia

Financial statements as of March 31, 2015 andfor the year then ended with independent auditors’ report

PT CG POWER SYSTEMS INDONESIAFINANCIAL STATEMENTS

AS OF MARCH 31, 2015AND FOR THE YEAR THEN ENDED

WITH INDEPENDENT AUDITORS’ REPORT

Table of Contents

Page

Statement of Directors

Independent Auditors’ Report

Statement of Financial Position..…………………………………………………………………………… 1 - 2

Statement of Comprehensive Income …..………………………………………………………………… 3

Statement of Changes in Equity .…………………………………………………………………………. 4

Statement of Cash Flows …………………………………………………………………………………. 5 - 6

Notes to the Financial Statements ………………………………………………………………………… 7 - 41

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

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PT CG POWER SYSTEMS INDONESIASTATEMENT OF FINANCIAL POSITION

As of March 31, 2015(Expressed in United States Dollars, unless otherwise stated)

Notes 2015 2014

ASSETS

CURRENT ASSETSCash and cash equivalents 4 1,383,888 4,020,890Accounts receivable, net 5 24,583,794 26,193,019Unbilled receivables 14,273,895 8,067,340Costs and estimated earnings in excess of billings, net 6 10,323,237 -Inventories, net 7 16,067,489 15,252,467Prepaid tax 9a 2,385,388 1,798,187Derivative assets 10 393,129 -Loans to related parties 25c 45,404,573 43,730,340Other current assets 8 1,752,408 1,908,713

TOTAL CURRENT ASSETS 116,567,801 100,970,956

NON-CURRENT ASSETEstimated claims of refundable taxes 9b 9,557,094 7,984,982Fixed assets, net 11 15,290,484 16,250,922Deposits 423,305 175,707Deferred tax assets, net 9f - 26,472

TOTAL NON-CURRENT ASSETS 25,270,883 24,438,083

TOTAL ASSETS 141,838,684 125,409,039

LIABILITIES AND EQUITY

LIABILITIES

CURRENT LIABILITIESAccounts payable 12 25,930,664 19,740,557Billings in excess of costs and estimated earnings, net 15 - 2,134,031Taxes payable 9c 125,890 1,011,150Derivative liabilities 10 98,904 524,516Advances from customers 13 7,108,326 11,687,784Advances a related party 25d 1,702,108 -Accruals and provisions 14 9,064,398 5,717,899Short term employee benefits 960,566 674,942Bank overdraft 16 3,782,088 -

TOTAL CURRENT LIABILITIES 48,772,944 41,490,879

NON-CURRENT LIABILITIESDeferred tax liability, net 9f 527,547 -Provision for employee benefits 17 579,227 1,586,292

TOTAL NON-CURRENT LIABILITIES 1,106,774 1,586,292

TOTAL LIABILITIES 49,879,718 43,077,171


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PT CG POWER SYSTEMS INDONESIASTATEMENT OF FINANCIAL POSITION (continued)

As of March 31, 2015(Expressed in United States Dollars, unless otherwise stated)

Notes 2015 2014

EQUITYShare capital - authorised 20,000 shares (Series A 19,000, Series B 1,000); issued and fully paid 12,057 shares of Series A and 635 shares of Series B of USD1,000 or Rp1,853,000 per share 18 12,692,000 12,692,000Hedging reserve 10 (181,611) (599,623)Retained earnings: Appropriated 19 2,538,400 2,538,400 Unappropriated 76,910,177 67,701,091

TOTAL EQUITY 91,958,966 82,331,868

TOTAL LIABILITIES AND EQUITY 141,838,684 125,409,039


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PT CG POWER SYSTEMS INDONESIASTATEMENT OF COMPREHENSIVE INCOME

For the Year ended March 31, 2015 (Expressed in United States Dollars, unless otherwise stated)

Notes 2015 2014

NET REVENUE 20 128,613,594 122,786,058

COST OF REVENUE 21 (102,177,465) (98,971,506)

GROSS PROFIT 26,436,129 23,814,552

OPERATING EXPENSES:General and administration expenses 23 (7,225,426) (5,913,031)Selling and marketing expenses 22 (3,303,623) (2,752,070)Foreign exchange (loss)/gain, net (2,612,158) 206,822Other operating expenses, net 24 (732,393) (103,574)

Total operating expenses (13,873,600) (8,561,853)

OPERATING INCOME 12,562,529 15,252,699

OTHER INCOME:Interest expense (170,840) (251,479)Interest income 513,126 460,852

342,286 209,373

INCOME BEFORE CORPORATE INCOME TAX 12,904,815 15,462,072

CORPORATE INCOME TAX:Current tax expense (3,141,710) (4,726,778)Deferred tax expense (554,019) (48,347)

(3,695,729) (4,775,125)

INCOME FOR THE YEAR 9,209,086 10,686,947

OTHER COMPREHENSIVE INCOME:Cash flow hedges 10 418,012 (161,141)

TOTAL COMPREHENSIVE INCOME 9,627,098 10,525,806


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PT CG POWER SYSTEMS INDONESIASTATEMENT OF CHANGES IN EQUITY

Year ended March 31, 2015(Expressed in United States Dollars, unless otherwise stated)

Retained Earnings Share Hedging Total Capital Reserve Appropriated Un-appropriated Equity

Balance as of March 31, 2013 12,692,000 (438,482) 2,538,400 57,014,144 71,806,062

Total comprehensive income for the year - (161,141) - 10,686,947 10,525,806


Total comprehensive income for the year - 418,012 - 9,209,086 9,627,098



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PT CG POWER SYSTEMS INDONESIASTATEMENT OF CASH FLOWS

For the Year ended March 31, 2015 (Expressed in United States Dollars, unless otherwise stated)

Notes 2015 2014

CASH FLOWS FROM OPERATING ACTIVITIES:Income before corporate income tax expense 12,904,815 15,462,072Adjustments to reconcile income before corporate income tax expense to net cash provided (used in)/by operating activities: Depreciation expense 11 1,667,263 1,524,298 Interest expense 170,840 251,479 Provision for employee benefits 17 919,637 1,037,171 Reversal allowance for impairment of trade receivables 5 - (314,000) Reversal for decline in value of inventory 7 (100,922) (138,831) Loss/(gain) on disposal of fixed assets 48,997 (6,099) Unrealized foreign exchange gain 1,272,032 (128,675) Interest income (513,126) (460,852)

16,369,536 17,226,563Changes in operating assets and liabilities: Accounts receivables 1,148,739 (4,425,308) Unbilled receivables (6,206,555) (5,139,391) Costs and estimated earnings in excess of billings (10,323,237) 8,805,221 Billings in excess of cost and estimated earnings (2,134,031) 2,134,031 Inventories (714,100) 3,030,723 Prepaid taxes (587,201) (745,249) Derivatives, net (400,729) (97,547) Other current assets 156,305 2,018,905 Estimated claim for refundable tax and tax assessments under appeal (318,717) 1,216,117 Deposits (247,598) (37,940) Accounts payable 5,170,674 (2,201,223) Taxes payable (92,452) 95,182 Advances from customers (4,579,458) 580,171 Advances from a related party 1,702,108 - Accruals and provisions 3,346,499 (1,882,881) Short term employee benefit 285,624 52,942

Cash generated from operations (13,794,129) 3,403,753

Corporate income tax paid (5,187,913) (5,743,688) Employee benefit paid 17 (249,888) (101,709) Contribution to plan assets (1,468,927) -

Net cash (used in)/provided by operating activities (4,331,321) 14,784,919


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PT CG POWER SYSTEMS INDONESIASTATEMENT OF CASH FLOWS (continued)

For the year ended March 31, 2015 (Expressed in United States Dollars, unless otherwise stated)

Notes 2015 2014

CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of fixed assets 11 82,546 7,633Acquisitions of fixed assets 11 (838,368) (3,161,658)Loans to related parties (1,208,849) (6,972,500)Interest received 47,742 13,771

Net cash used in investing activities (1,916,929) (10,112,754)

CASH FLOWS FROM FINANCING ACTIVITIES:Interest paid (170,840) (251,479)Increase/(decrease) in bank overdraft 3,782,088 (4,204,097)

Net cash provided/(used in) by financing activities 3,611,248 (4,455,576)

NET (DECREASE)/INCREASE IN CASH ANDCASH EQUIVALENTS (2,637,002) 216,589

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 4,020,890 3,804,301

CASH AND CASH EQUIVALENTS AT ENDOF YEAR 4 1,383,888 4,020,890

PT CG POWER SYSTEMS INDONESIANOTES TO THE FINANCIAL STATEMENTS

As of March 31, 2015 and for the Year Then Ended(Expressed in United States Dollars, unless otherwise stated)

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1. GENERAL

PT CG Power Systems Indonesia, (the “Company”), was established under the name of PT PauwelsTrafo Asia within the framework of the Foreign Investment Law No. 1 of 1967 as amended by lawNo. 11 of 1970 based on Notarial Deed No. 47 of Irawati Marzuki Arifin, S.H., dated November 20,1990. The Deed of Establishment was approved by the Minister of Justice of the Republic of Indonesiain Decision Letter No. C2-181O.HT.01.92 dated February 25, 1992.

The Company's Articles of Association have been amended several times, most recently by NotarialDeed No. 148 of Sutjipto, SH., M.Kn. dated August 25, 2011, to approve the appointment of theCompany’s Board of Commissioners and Directors for a period of five years. This change wasapproved by the Minister of Law and Human Rights of the Republic of Indonesia in Decision LetterNo. AHU-AH.01.10-31715 dated October 4, 2011.

The Company started commercial operations in March 1993. The Company engages in themanufacturing, marketing and maintenance of power transformers and sells its products to domesticand international markets, including Australia, New Zealand, Saudi Arabia, Africa, North America andSoutheast Asia. The Company also engages in the field of engineering, procurement and constructionservice in relation with the electricity transformers. The Company’s plant and head office are located inCileungsi, Bogor, West Java.

As at March 31, 2015, the Company has 453 permanent employees (2014: 447 permanentemployees) (unaudited).

The composition of the Board of Commissioners and Board of Directors as of March 31, 2015 and2014 are as follows:

2015 2014

President Commissioner Mr. Jean-Michel Aubertin Mr. Jayant Govindrao KulkarniCommissioners Mr. Trilochan Sar

Mr. Syahril Anwar Mr. Madhav Acharya

Mr. Syahril AnwarPresident Director Mr. Jan Prins Mr. Jan PrinsDirectors Mr. Abhaya Bhushan Chatterjee Mr. Abhaya Bhushan Chatterjee

Mr. Paolo Ruggero Damiani Mr. Trilochan Sar

The composition of the Company’s Board of Commissioners and Board of Directors as of March 31,2015 is based on Notarial Deed No. 64 of Aryanti Artisari, S.H., M. Kn., dated March 19, 2015, whichwas acknowledged by the Minister of Justice and Human Rights through his letter No. AHU-AH.01.03.0017704 dated March 19, 2015.

As March 18, 2015, Mr. Paolo Ruggero Damiani submitted resignation letter to the company. Up to thecompletion date of financial statement, the resignation of Mr. Paolo Ruggero Damiani has not beenlegalized through notarial deed.

The financial statements were completed and authorized for issuance by the Company’s managementon April 22, 2015.



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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Preparation of The Financial Statements

The financial statements have been prepared in accordance with Indonesian Financial AccountingStandards (“SAK”), which comprise of the Statements of Financial Accounting Standards (“PSAK”)and the Interpretations Financial Accounting Standards (“ISAK”) issued by the FinancialAccounting Standards Board of the Indonesian Institute of Accountants.

The financial statements have been prepared using the accrual basis, and the measurement basisused is historical cost, except for certain accounts which are measured on the basis as describedin the related accounting policies.

The statement of cash flow is prepared based on the indirect method by classifying cash flows onthe basis of operating, investing and financing activities using the indirect method.

The Company's financial statements are presented in US Dollars which is the functional currencyof the Company.

The financial reporting period of the Company is April 1 - March 31.

b. Foreign Currency Transactions and Balances

Transaction in foreign currencies are initially recorded by the Company at their respectivefunctional currency rate prevailing at the date of transaction. Monetary assets and liabiltiesdenominated in foreign currencies are translated into the functional currency at rates of exchangeat the reporting date.

The exchange rates used as of March 31, 2015 and 2014 are as follows (in full amount):

2015 2014

Rupiah/US Dollar 1 13,080 11,366 New Zealand Dollar/US Dollar 1 0.75 0.87 Euro/US Dollar 1 1.07 1.35 Singapore Dollar/US Dollar 1 0.73 0.79 Australian Dollar/US Dollar 1 0.76 0.93 Great Britain Poundsterling/US Dollar 1 1.48 1.66 Swedian Kroner/US Dollar 1 0.12 0.15 France Swiss/US Dollar 1 1.03 1.13

c. Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and in banks, short-term deposits with originalmaturities of three months or less, at the time of palecements and not restricted as to use.

d. Accounts Receivable

Accounts receivables are stated at original invoice amount less an allowance for impairment. Theaccounting policy for allowance for impairment as of March 31, 2015 and 2014 is described inNote 2e.



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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Financial Instruments

a. Financial Assets

Initial recognition and measurement

Financial assets within the scope of PSAK No. 55 (Revised 2011) are classified as financialassets at fair value through profit or loss, loans and receivables, held-to-maturity investments,or available-for-sale financial assets, as appropriate. The Company determine theclassification of its financial assets after initial recognition and, where allowed and appropriate,re-evaluate this designation at each financial year-end.

When financial assets are initially recognized, they are measured at fair value, plus, in thecase of financial assets not at fair value through statement of income, directly attributabletransaction costs.

The Company’s financial assets include cash and cash equivalents, trade receivable, unbilledreceivable, other receivables and loans to related parties which fall under the loans andreceivables category.

The Company’s financial assets also consist of derivative assets which are classified underfinancial assets at fair value through profit or loss.

Subsequent measurement

Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. Such financial assets are carried at amortized costusing the effective interest method. Gains and losses are recognized in the statement ofcomprehensive income when the loans and receivables are derecognized or impaired, as wellas through the amortization process.

Derivative assets are subsequently measured at fair value (Note 2f).

Derecognition

A financial asset (or where applicable, a part of a financial asset or part of a group of similarfinancial assets) is derecognized when: (1) the rights to receive cash flows from the assethave expired; or (2) the Company has transferred its rights to receive cash flows from theasset or has assumed an obligation to pay the received cash flows in full without materialdelay to a third party under a “pass-through” arrangement; and either (a) the Company hastransferred substantially all the risks and rewards of the asset, or (b) the Company has neithertransferred nor retained substantially all the risks and rewards of the asset, but has transferredcontrol of the asset.

Impairment of Financial Assets

The Company assesses at each balance sheet date whether there is any objective evidencethat a financial asset or a group of financial assets is impaired. A financial asset or a group offinancial assets is deemed to be impaired if, and only if, there is objective evidence ofimpairment as a result of one or more events that has occurred after the initial recognition ofthe asset (an incurred ‘loss event’) and that loss event has an impact on the estimated futurecash flows of the financial asset or the group of financial assets that can be reliably estimated.



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e. Financial Instruments (continued)

a. Financial Assets (continued)

Assets carried at amortized cost

The Company first assesses individually whether objective evidence of impairment existsindividually for financial assets that are individually significant, or collectively for financialassets that are not individually significant. If the Company determines that no objectiveevidence of impairment exists for an individually assessed financial asset, whether significantor not, it includes the asset in financial assets with similar credit risk characteristics andcollectively assesses them for impairment. Assets that are individually assessed forimpairment and for which an impairment loss is, or continues to be, recognized are notincluded in a collective assessment of impairment.

The Company assesses whether objective evidence of impairment exists collectively. If thereis objective evidence that an impairment loss on financial assets carried at amortized cost hasbeen incurred, the amount of the loss is measured as the difference between the asset'scarrying amount and the present value of estimated future cash flows discounted at thefinancial asset's original effective interest rate. The carrying amount of the asset is reducedthrough the use of an allowance account. The impairment loss is recognized in the statementof comprehensive income.

When the asset becomes uncollectible, the carrying amount of impaired financial assets isreduced directly or if an amount has been charged to the allowance account, the amountscharged are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assetshas been incurred, the Company considers factors such as the probability of insolvency orsignificant financial difficulties of the debtor and default or significant delay in payments.

If in a subsequent period, the amount of the impairment loss decreases and the decrease canbe related objectively to an event occurring after the impairment was recognized, thepreviously recognized impairment loss is reversed to the extent that the carrying amount ofthe asset does not exceed its amortized cost at the reversal date. The amount of reversal isrecognized in the statement of comprehensive income.

b. Financial Liabilities

Initial recognition and measurement

Financial liabilities within the scope of PSAK No. 55 (Revised 2011) are classified as financialliabilities at fair value through profit and loss, financial liabilities measured at amortized cost, oras derivatives designated as hedging instruments in an effective hedge, as appropriate. TheCompany determine the classification of its financial liabilities at initial recognition.

Financial liabilities are recognized initially at fair value, plus, in the case of financial liabilitiesother than derivatives, directly attributable transaction costs.

The Company’s financial liabilities include accounts payable, accruals and short-term loanswhich are classified under financial liabilities measured at amortized cost.

Derivative liabilities is classified under financial liabilities at fair value through profit and loss.Derivative liabilities is subsequently measured at fair value (Note 2f).



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e. Financial Instruments (continued)

b. Financial Liabilities (continued)

Subsequent measurement

Subsequent to initial recognition, all financial liabilities are measured at amortized cost usingthe effective interest method, except for derivatives, which are measured at fair value, unlessthe effect of discounting would be immaterial, in which case they are stated at cost.

For financial liabilities other than derivatives, gains and losses are recognized in the statementof comprehensive income when the liabilities are derecognized and through the amortizationprocess. Any gains or losses arising from changes in fair value of derivatives are recognized inthe statement of comprehensive income. Net gains or losses on derivatives include exchangedifferences

Derecognition

A financial liability is derecognized when the obligation specified in the contract is dischargedor cancelled or expired. When an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability aresubstantially modified, such an exchange or modification is treated as a derecognition of theoriginal liability and the recognition of a new liability, and the difference in the respectivecarrying amounts is recognized in the statement of comprehensive income.

c. Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount are reported in thestatement of financial position if, and only if, there is a currently enforceable legal right to offsetthe recognized amounts and there is an intention to settle on a net basis, or to realize theassets and settle the liabilities simultaneously.

d. Fair Value of Financial Instruments

The fair value of financial instruments that are actively traded in organized financial markets isdetermined by reference to quoted market bid prices at the close of business at the end of thereporting period. For financial instruments where there is no active market, fair value isdetermined using valuation techniques permitted by PSAK No. 55 (Revised 2011), suchtechniques may include using recent arm’s length market transactions; reference to thecurrent fair value of another instrument that is substantially the same; discounted cash flowanalysis; or other valuation models.



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f. Derivative Financial Instruments and Hedge Accounting

Derivatives are initially recognized at fair value on the date the derivative contract is entered intoand are subsequently re-measured at their fair value. The method of recognizing the resulting gainor loss depends on whether the derivative is designated as a hedging instrument, and if so, thenature of the item being hedged The Company designates derivatives as hedges of a particularrisk associated with a recognized asset of liability or a highly probable forecast transaction (cashflow hedge).

The Company documents at the inception of the transaction the relationship between hedginginstruments and hedged items, as well as its risk management objective and strategy forundertaking various hedge transactions. The Company also documents its assessment, both athedge inception and on an ongoing basis, of whether the derivatives that are used in hedgingtransactions are highly effective in offsetting changes in cash flows of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify ascash flow hedges is recognized in equity. The gain or loss relating to the ineffective portion isrecognized immediately in the profit or loss within foreign exchange gain/(loss) - net.

Amounts accumulated in equity are recycled in the profit or loss in the periods when the hedgeditem affects profit or loss (for example, when the forecast sale that is hedged takes place).

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria forhedge accounting, any cumulative gain or loss existing in equity at that time remains in equity andis recognized when the forecast transaction is ultimately recognized in the profit or loss. When aforecast transaction is no longer expected to occur, the cumulative gain or loss that was reportedin equity is immediately transferred to the profit or loss within foreign exchange gain/(loss) - net.

Changes in the fair value of derivative instruments that do not qualify for hedge accounting arerecognized immediately in the profit or loss.

g. Related Parties Transactions

The Company conducts transactions with related parties. The definition of related party is inaccordance with “PSAK” No. 7 (Revised 2010), “Related Party Disclosures”.

All material transactions with related parties are disclosed in the notes to the Company’s financialstatements.

The nature and extent of transactions with related parties are described in Note 25.

h. Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined based on themoving average method and includes an appropriate proportion of directly attributable fixed andvariable overheads. Net realisable value is the estimate of the selling price in the ordinary courseof business, less the costs of completion and selling expenses.

Allowance for decline in value of inventory is determined on the basis of estimated future usage orsale of individual inventory items.



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i. Fixed Assets

Fiixed assets are stated at cost less accumulated depreciation and impairment losses. Such costincludes the cost of replacing part of the fixed assets when that cost is incurred, if the recognitioncriteria are met. Likewise, when a major inspection is performed, its cost is recognized in thecarrying amount of the fixed assets as a replacement if the recognition criteria are satisfied. Allother repairs and maintenance costs that do not meet the recognition criteria are recognized in thestatement of comprehensive income as incurred.

Depreciation is computed using the straight-line or double-declining balance methods based on theestimated useful lives or depreciation rates of the assets as follows:

Years Straight-line: Buildings 25 Machinery and equipment 10 - 20

Rates Double declining-balance: Transportation equipment 50% Office furniture, fixtures and equipment 25%

Land is stated at cost and is not depreciated.

An item of fixed assets is derecognized upon disposal or when no future economic benefits areexpected from its use or disposal. Any gain or loss arising on derecognition of the asset(calculated as the difference between the net disposal proceeds and the carrying amount of theasset) is included in the statement of comprehensive income in the period the asset isderecognized.

The residual values, useful lives and methods of depreciation of fixed assets are reviewed, andadjusted prospectively if appropriate, at each financial year end.

Construction in progress represents the accumulated costs of materials and other relevant costsup to the date when the asset is complete and ready for use. These costs are reclassified to therespective fixed asset accounts when the asset has been made ready for use.

When the carrying amount of an asset exceeds its estimated recoverable amount, the asset iswritten down to its estimated recoverable amount, which is determined as the higher of the netselling price or value in use.

j. Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance ofthe arrangement at the inception date and whether the fulfillment of the arrangement is dependenton the use of a specific asset and the arrangement conveys a right to use the asset. Leases thattransfer to the lessee substantially all of the risks and rewards incidental to ownership of theleased item are classified as finance leases. Leases which do not transfer substantially all of therisks and rewards incidental to ownership of the leased item are classified as operating leases.



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j. Leases (continued)

The Company as a lessee

i) Under a finance lease, the Company is required to recognize assets and liabilities in itsstatement of financial position at amounts equal to the fair value of the leased property or, iflower, the present value of the minimum lease payments, each determined at the inception ofthe lease. Minimum lease payments are required to be apportioned between finance chargesand the reduction of the outstanding liability. The finance charges are required to be allocatedto each period during the lease term so as to produce a constant periodic rate of interest onthe remaining balance of the liability. Contingent rents are required to be charged asexpenses in the periods in which they are incurred. Finance charges are reflected in thefinancial statement of comprehensive income. Capitalized leased assets (presented are partof fixed assets) are depreciated over the shorter of the estimated useful life of the asset andthe lease term, if there is no reasonable certainty that the Company will obtain ownership ofthe asset by the end of the lease term.

ii) Under an operating lease, the related lease payments are recognized in statement ofcomprehensive income on a straight-line basis over the lease term.

k. Impairment of Non-Financial Assets

The Company assess at each annual reporting period whether there is an indication that an assetmay be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e.an intangible asset with an indefinite useful life, or goodwill acquired in a business combination) isrequired, the Company makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or Cash Generating Unit (CGU)’s fairvalue less costs to sell and its value in use, and is determined for an individual asset, unless theasset does not generate cash inflows that are largely independent of those from other assets orgroups of assets. Where the carrying amount of an asset exceeds its recoverable amount, theasset is considered impaired and is written down to its recoverable amount. Impairment losses ofcontinuing operations are recognized in statement of comprehensive income as “impairmentlosses”. In assessing the value in use, the estimated net future cash flows are discounted to theirpresent value using a pretax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. In determining fair value less costs to sell,recent market transactions are taken into account, if available. If no such transactions can beidentified, an appropriate valuation model is used to determine the fair value of the assets. Thesecalculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations, if any, are recognized as profit or loss under expensecategories that are consistent with the functions of the impaired assets.

l. Trade and Other Payables

Trade and other payables are obligation to pay for goods or services that have been acquired inthe ordinary course of business from suppliers. The accounting policy for trade and other payablesas of March 31, 2015 and 2014 is described in Note 2e.



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m. Provision

Provisions are recognized when the Company has a present obligation (legal or constructive)where, as a result of a past event, it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate can be made of the amountof the obligation.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates. Ifit is no longer probable that an outflow of resources embodying economic benefits will be requiredto settle the obligation, the provision is reversed.

n. Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of newshares (if any) are shown in equity as a deduction, net of tax, from the proceeds.

o. Project work in progress, Revenue and Expense Recognition

Revenue from the sale of products is recognised when all significant risks and rewards ofownership have been transferred to the customers, net of returns, discounts, sales incentives andvalue added tax.

Revenue from construction contract is accounted for using the percentage of completion basis,after management’s assessment of each individual contract. Stage of completion is measured byreference to costs incurred to date as a percentage of total contract cost. All foreseeable lossesare recognised as soon as they are apparent. Project work in progress is valued with reference tocost plus profit recognised to date.

Expenses are recognised when they are incurred (accrual basis).

Contract cost includes direct labour and overheads that relate to specific contracts, and theappropriate portion of those costs which can be attributed to contract activity in general and whichcan be allocated on a reasonable basis. Amounts provided for losses on contracts and progressbillings, are deducted from the amount of the project cost at valuation.

Revenue in excess of the amount billed is recorded as an asset, in project work in progress.Progress billing in excess of revenue is recorded as a liability, in advance from customers.

p. Corporate Income Tax

Current tax expense is determined based on the estimated taxable income for the year computedusing prevailing tax rates.

The Company presented adjustments of income tax from previous years, if any, as part of “CurrentTax (Expense)/Benefit” in the statement of comprehensive income.



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p. Corporate Income Tax (continued)

Deferred tax assets and liabilities are recognized for the future tax consequences attributable todifferences between the financial statements carrying amounts of existing assets and liabilities andtheir respective tax bases. Deferred tax liabilities are recognized for all taxable temporarydifferences and deferred tax assets are recognized for deductible temporary differences and carryforward tax benefit of unused fiscal losses to the extent that it is probable that taxable income willbe available in future periods against which the deductible temporary differences and carry forwardtax benefit of unused fiscal losses can be utilized.

Deferred tax is calculated at the tax rates that have been enacted or substantially enacted at thereporting date. Deferred tax is charged or credited in the statement of comprehensive income,except when it relates to items charged or credited directly to equity, in which case the deferred taxis also charged or credited directly to equity.

Deferred tax assets and liabilities are offset in the statement of financial position, except if theseare for different legal entities, in the same manner the current tax assets and liabilities arepresented.

Amendments to taxation obligation are recorded when an assessment is received or, if appeal isapplied, when the results of the appeal are received. The additional taxes and penalty imposedthrough Tax Assessment Letter (“SKP”) are recognized as income or expense in the current periodprofit or loss, unless objection/appeal action is taken. The additional taxes and penalty imposedthrough SKP are deferred as long as they meet the asset recognition criteria.

q. Provision for Employee Benefits

Short-term employee benefits

Short-term employee benefits are recognised when they accrue to the employees.

Pension benefits and other post-employment benefits

The cost of providing employee benefits under the Law is determined using the “Projected UnitCredit” actuarial valuation method. Actuarial gains and losses are recognized as income orexpense when the net cumulative unrecognized actuarial gains and losses for each individual planat the end of the previous reporting year exceeded 10% of the defined benefit obligation at thatdate. These gains or losses are recognized on a straight-line basis over the remaining workinglives of each employee.

The Company also provides other post-employment termination, which is separation pay. Theseparation pay benefit is paid to employees in the case of voluntary resignation, subject to aminimum number of years of service. This benefit has been accounted for using the samemethodology as for the defined benefit pension plan.

Other long-term benefits

The Company also provides other long-term employee benefits as per collective labor agreementsuch as long service leave and jubilee awards. Entitlement to these benefits is usually based onthe employee remaining in service up to retirement age and the completion of a minimum serviceperiod. The expected costs of these benefits are accrued over the period of employment, using anaccounting methodology similar to that for defined benefit pension plans, but in a simplified form.These obligations are valued annually by independent qualified actuary.



17


r. Segment Information

A segment is a distinguishable component of the Company that is engaged either in providingcertain products (business segment), or in providing products within a particular economicenvironment (geographical segment), which is subject to risks and rewards that are different fromthose in other segments.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis to that segment. They aredetermined before intra-group balances and intra-group transactions are eliminated.

s. New and Revised Accounting Standards that have been Published but not yet Effective

The following are several published accounting standards by the Indonesian Financial AccountingStandards Board (“DSAK”) that are considered relevant to the financial reporting of the Companybut not yet effective for 2014 financial statements are as follows:

i) PSAK 1 (2013): Presentation of Financial Statements, adopted from IAS 1, effectiveJanuary 1, 2015

ii) PSAK 24 (2013): Employee Benefits, adopted from IAS 19, effective January 1, 2015iii) PSAK 46 (2014): Income Taxes, adopted from IAS 12, effective January 1, 2015 PSAK 50

(2014): Financial Instruments: Presentation, adopted from IAS 32, effective January 1, 2015iv) PSAK 48 (2014): Impairment of Assets, adopted from IAS 36, effective January 1, 2015v) PSAK 50 (2014): Financial Instruments: Presentation, adopted from IAS 32, effective

January 1, 2015vi) PSAK 55 (2014): Financial Instruments: Recognition and Measurement, adopted from IAS

39, effective January 1, 2015vii) PSAK 60 (2014): Financial Instruments: Disclosures, adopted from IFRS 7, effective January

1, 2015viii) PSAK 68: Fair Value Measurement, adopted from IFRS 13, effective January 1, 2015ix) ISAK 26 (2014): Reassessment of Embedded Derivatives, adopted from IFRIC 9, effectively

January 1, 2015

The Company is presently evaluating and has not determined the effects of the revised and newPSAK on the financial statements.

3. SOURCE OF ESTIMATION UNCERTAINTY

The preparation of the Company’s financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets andliabilities, and the disclosure of contingent liabilities, at the end of the reporting period. Uncertaintyabout these assumptions and estimates could result in outcomes that require a material adjustment tothe carrying amount of the asset and liability affected in future periods.

Judgments

The following judgments are made by management in the process of applying the Company’saccounting policies that have the most significant effects on the amounts recognized in the financialstatements:

Classification of Financial Assets and Financial Liabilities

The Company determined the classifications of certain assets and liabilities as financial assets andfinancial liabilities by judging if they meet the definition set forth in PSAK No. 55 (Revised 2011).Accordingly, the financial assets and financial liabilities are accounted for in accordance with theCompany and accounting policies disclosed in Note 2e.



18

3. SOURCE OF ESTIMATION UNCERTAINTY (continued)

Judgments (continued)

Determination of Functional Currency

Functional currency of the Company is the currency of the primary economic environment in which theCompany operates. The functional currency is a currency that affects the revenues and expenses ofthe services rendered. The Company determined that its functional currency is US Dollar.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year/period are disclosed below. The Company based itsassumptions and estimates on parameters available when the financial statements were prepared.Existing circumstances and assumptions about future developments may change due to marketchanges or circumstances arising beyond the control of the Company. Such changes are reflected inthe assumptions when they occur.

Employee Benefits

The present value of the pension obligations depends on a number of factors that are determined onan actuarial basis using a number of assumptions. The assumptions used in determining the netcost/(income) for pensions include the discount rate. Any changes in these assumptions will impact thecarrying amount of pension obligations.

The Company determines the appropriate discount rate at the end of each reporting period. This is theinterest rate that should be used to determine the present value of estimated future cash outflowsexpected to be required to settle the pension obligations. In determining the appropriate discount rate,the Company considers the interest rates of government bonds that are denominated in the currencyin which the benefits will be paid and that have terms to maturity approximating the terms of the relatedpension obligation.

Other key assumptions for pension obligations are based in part on current market conditions.Additional information is disclosed in Note 17.

Revenue Recognition

The Company uses the percentage of completion method in accounting for its fixed price contracts todeliver construction services. The use of percentage of completion method requires the Company toestimate the services performed to date as a proportion of the total services to be performed.

Warranty

The Company provide guarantee that their product is reliable and free from known defects and that theCompany will, without charge, repair or replace defective parts within 24 months and under certainconditions. Based on past experience, the Company believes that the actual warranty will not exceed0.5% of the actual sales for the last 24 months. The Company has, therefore, recognized provision forwarranty and recorded as a cost of sales.

Penalty on Late Delivery

Based on the sales agreement with the customer, the Company provide guarantee that they arereliable to provide and install the goods in their customer’s premises in the date stipulated in thecontracts. Failure to provide on the agreed date will resulted on penalty as per mentioned in thecontract. The Company has, therefore, recognized provision for penalty on late delivery based onfurther review over the actual recognized delivery date and the date in contract.



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3. SOURCE OF ESTIMATION UNCERTAINTY (continued)

Estimates and Assumptions (continued)

Depreciation of Fixed Assets

Management determines the estimated useful lives and related depreciation charges for the fixedassets. Management will revise the depreciation charge where useful lives are different to thosepreviously estimated, or it will write off or write down technically obsolete assets or non-strategicassets that have been abandoned or sold. Further details are disclosed in Note 11.

Income Tax

Significant judgment is involved in determining the provision for corporate income tax. There arecertain transactions and computation for which the ultimate tax determination is uncertain during theordinary course of business. The Company recognized liabilities for corporate income tax issues basedon estimates of whether additional corporate income tax will be due.

Uncertain Tax Exposure

In certain circumstances, the Company may not be able to determine the exact amount of its current orfuture tax liabilities due to ongoing investigations by the taxation authority. Uncertainties exist withrespect to the interpretation of complex tax regulations and the amount and timing of future taxableincome.

In determining the amount to be recognized in respect of an uncertain tax liability, the Companyapplies similar considerations as it would use in determining the amount of a provision to berecognized in accordance with PSAK No. 57, “Provisions, Contingent Liabilities and ContingentAssets”. The Company makes an analysis of all tax positions related to income taxes to determinewhether a tax liability on unrecognized tax benefit should be recognized.

Deferred Tax Assets

Deferred tax assets are recognized for all deductible temporary differences, to the extent that it isprobable that taxable profit will be available against which the deductible temporary differences.Significant management estimates are required to determine the amount of deferred tax assets thatcan be recognized, based upon the likely timing and the level of the future taxable profits together withfuture tax planning strategies.

Allowance for Decline in Value of Inventories

Allowance for declining value of inventories is estimated based on the best available facts andcircumstances, including but not limited to, the inventories’ own physical conditions, their marketselling prices, estimated costs of completion and estimated costs to sell. The allowance are re-evaluated and adjusted as additional information received affects the amount estimated. The carryingamounts of the Company’s inventories before allowance for declining value of inventories aredisclosed in Note 7.

Fair Value of Financial Instruments

Where the fair value of financial assets and financial liabilities recorded in the statement of financialposition cannot be derived from active markets, their fair value is determined using valuationtechniques including the discounted cash flow model. The inputs to these models are taken fromobservable markets where possible, but where this is not feasible, a degree of judgment is required inestablishing fair values. The judgments include considerations of inputs such as liquidity risk, creditrisk and volatility. Changes in assumptions about these factors could affect the reported fair value offinancial instruments.



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4. CASH AND CASH EQUIVALENTS

2015 2014

Cash on hand 11,298 14,222 Cash in banks: U.S. Dollar accounts 625,154 1,692,163 New Zealand Dollar accounts 620,760 689,218 Australian Dollar accounts 74,380 969,199 Indonesian Rupiah accounts 46,561 410,119 European Euro accounts 5,735 245,969

1,383,888 4,020,890

5. ACCOUNTS RECEIVABLES, NET

2015 2014

Third parties 24,533,610 26,113,259 Related party (Note 25a) 50,184 79,760

Total 24,583,794 26,193,019 Less: Allowance for impairment - -

Total 24,583,794 26,193,019

Changes in the allowance for impairment are as follows:

2015 2014

Beginning balance - (314,000) Reversal allowance for impairment - 314,000

Ending balance - -

As of March 31, 2015, management believes that all receivable are collectible and a provision forimpairment is not considered necessary. As of March 31, 2014, management believes that theallowance for impairment is adequate to cover possible losses on uncollectible accounts. Managementalso believes that there are no significant concentrations of credit risk in trade receivables.

6. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS

2015 2014

Contract costs incurred 54,064,765 - Estimated earnings 9,026,922 -

63,091,687 -Less: progress billings (52,768,450) -

10,323,237 -



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7. INVENTORIES, NET

2015 2014

Project work in process 10,720,238 11,602,616 Raw materials 5,278,156 3,194,951 Materials in transit 275,768 762,495

16,274,162 15,560,062Allowance for decline in value of inventory (206,673) (307,595)

Total Inventories 16,067,489 15,252,467

Changes in the allowance for decline in value of inventory are as follows:

2015 2014

Beginning balance (307,595) (446,426) Reversal allowance for decline in value of inventory 100,922 138,831

Ending balance (206,673) (307,595)

At year end management believes that the provision for decline in value of inventories is adequate tocover possible losses due to the slow moving inventories.

8. OTHER CURRENT ASSETS

2015 2014

Advances for purchase of raw materials 1,323,083 1,378,312 Prepayments: Prepaid rentals 194,164 277,509 Prepaid insurance 107,794 211,710 Others 127,009 27,903

1,752,050 1,895,434 Other receivables 358 13,279

1,752,408 1,908,713

9. TAXATION

a. Prepaid taxes

2015 2014

Value added tax 2,385,388 1,798,187



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9. TAXATION (continued).

b. Estimated claims of refundable taxes2015 2014

Refundable corporate income tax 2015 1,387,867 - Refundable corporate income tax 2014 - 160,828 Refundable corporate income tax 2011 440,009 440,009 Value added tax - fiscal year:

- 2015 912,356 -- 2014 5,791,926 1,745,143- 2013 593,860 5,542,217- 2012 431,076 96,785

9,557,094 7,984,982

Corporate Income Tax

Year Date of taxassessments

Totalunderpayments/(overpayment)

paidStatus as of March 31, 2015

2015 - US$1,387,867 Waiting for tax examination process

2014 - - Submitted a revised 2014 fiscal year corporateincome tax return which reported tax payableof US$67,072 while the Company reportedrefundable tax amounted to US$160,828. TheCompany charged the differences to currentyear statement of comprehensive income.

2011 April 25, 2013 US$440,009 Tax appeal process. Up to the completion dateof financial statements, the Tax Court has notyet issued any decision on such appeal letters.

Value Added Tax (VAT)

Tax periodDate of tax

assessmentsTotal

underpayments/(overpayment)

paid

Status as of March 31, 2015

January -February

2015

- US$912,356 Waiting for tax examination process

February -December

2014

February 5, 2015 US$5,776,905 The Company received the refund for VATperiod February 2014 amounted toUS$944,424 on April 10, 2015. For VATperiod March - December 2014, theCompany is being audited by theDirectorate General of Taxation (“DGT”).

January2014

January 19, 2015 US$15,021 The Company is requesting cancellation orreduction of the Tax Collection Letter to theDGT. Up to the completion date of financialstatements, the DGT has not yet issued itsdecision.

Total 2014 US$5,791,926



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b. Estimated claims of refundable taxes (continued)

Value Added Tax (VAT) (continued)

Tax periodDate of tax

assessmentsTotal

underpayments/(overpayment)

paid

Status as of March 31, 2015

October2013

December 15,2014

US$28,477 The Company partially received the refundon January 8, 2015 amounted toUS$382,907 against US$411,384. OnMarch 3, 2015, the Company submittedobjection letter to the DGT on the un-refunded amount. Up to the completiondate of financial statements, the DGT hasnot yet issued its decision.

January -July andOctober -December

2013

March 10,September 26and November

10 2014

US$565,383 The Company is requesting cancellation orreduction of Tax Collection Letter periodJanuary - July and December 2013 to theDGT. The Company has filed a lawsuitagainst the decision of the DGT to the TaxCourt for the Tax Collection Letter periodOctober and November 2013 on January13, 2015. Up to the completion date offinancial statements, the DGT and the TaxCourt have not yet issued its decision.

Total 2013 US$593,860

July -December

2012

January 20 andDecember 16,

2014

US$61,226 Tax objection process for VAT period July -December 2012. Up to the completion dateof financial statements, the DGT has notyet issued its decision on its objection.

July-December

2012

January 14, 2015 US$369,850 The Company is requesting cancellation orreduction of Tax Collection Letter periodDecember 2012 to the DGT. The Companyhas filed a lawsuit against the decision ofthe DGT to the Tax Court for the TaxCollection Letter period July - November2012 on February 10, 2015. Up to thecompletion date of financial statements, theDGT and the Tax Court have not yet issuedits decision.

Total 2012 US$431,076

c. Taxes payable2015 2014

Final tax 83,845 809,581 Withholding income tax Articles 23 and 26 41,517 98,110 Employee income tax Article 21 528 103,459

125,890 1,011,150



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d. Reconciliation of corporate income tax

The reconciliation between income before corporate income tax expense multiplied by the tax rateof 25% and income tax expense are presented below:

2015 2014

Income before corporate income tax expense 12,904,815 15,462,072

Tax on income at the statutory rate of 25% 3,226,204 3,865,518 Net permanent difference 315,448 330,916 Income subject to final tax 19,605 (75,435) Under provision of corporate income tax 134,472 641,980 Adjustment on beginning balance of deferred tax - 12,146

Corporate income tax expense 3,695,729 4,775,125

e. Components of corporate income tax expense

2015 2014

Current tax expense 2,923,393 3,473,751 Under provision of 2014 corporate income tax 227,900 - Over provision of 2012 corporate income tax (93,428) - Under provision of 2011 corporate income tax - 641,980 Final tax on construction contracts 83,845 611,047 Deferred tax expense relating to the origination and reversal of temporary differences 554,019 48,347

Total corporate income tax expense 3,695,729 4,775,125

f. Deferred tax assets and liabilities

2015 2014

Deferred tax assets: Provision for warranty 328,154 302,102 Provision for late delivery 252,612 413,524 Provision for commission 245,556 185,561 Provision for bonus 240,142 168,735 Provision for employee benefits 144,807 396,573 Allowance for decline in value of inventory 51,668 76,899

1,262,939 1,543,394 Deferred tax liability: Fixed assets (1,790,486) (1,516,922)

Deferred tax (liabilities)/assets, net (527,547) 26,472

The utilization of deferred tax assets recognized by the Company is dependent upon future taxableincome in excess of income arising from the reversal of existing taxable temporary differences.The Company’s management believes that the deferred tax assets can be utilized in the future.



25


g. Analysis of changes in deferred tax assets and liability

2015 2014

Deferred tax asset - beginning balance 26,472 74,819 Deferred tax expense for the year (554,019) (48,347)

Deferred tax (liabilities)/assets - ending balance (527,547) 26,472

h. Administration

Under the taxation laws of Indonesia, the Company submits tax returns on the basis of selfassessment. The DGT may assess or amend taxes for years prior to 2009 within ten years fromthe date the tax became due, or until the end of year 2014, whichever is earlier. Based on taxationlaws which are applicable starting in year 2009, the DGT may assess or amend taxes within fiveyears from the date the tax becomes due.

10. DERIVATIVE ASSETS AND LIABILITIES

2015 2014

Derivative Derivative Derivative Derivative assets liabilities assets Liabilities

Designated as cash flow hedges 393,129 (607,083) - (491,528) Not qualifying as hedges - 508,179 - (32,988)

393,129 (98,904) - (524,516)

The fair value of derivative liabilities have been determined using rates quoted by the Company’sbankers at the reporting date which are calculated by reference to the market interest rates and foreignexchange rates.

The Company entered into forward exchange and commodity contracts to manage its exposure to thevariability of cash flows, primarily related to future sales and purchases of inventories denominated inforeign currencies over the next 12 months. As of March 31, 2015, the Company had an outstandingforward foreign exchange contracts with a notional amount of MYR29,138,296, US$6,718,782,AUD2,421,355, and NZD1,899,702, EUR112,000. (2014: MYR25,412,994, US$6,020,326,AUD2,421,355, and NZD1,899,702).

As of March 31, 2015, the balance of deferred net loss on derivatives of US$181,611 (2014: net loss ofUS$599,623) incurred from changes in the fair value of forward foreign exchange and commoditycontracts that are highly effective, has been recognized in hedging reserve. The Company expects thatsubstantially all of this amount will be credited into the profit or loss within 12 months from the reportingdate.



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11. FIXED ASSETS

Movements in 2015Balance Transfers/ Balance

March 31, 2014 Additions Deductions Reclassification March 31, 2015

Cost:

Land 925,812 - - - 925,812Buildings 8,804,234 39,443 - 146,048 8,989,725Machinery and equipment 24,196,753 594,238 (1,112,563) 64,220 23,742,648Transportation equipment 55,063 - - 55,063Office furniture, fixtures

and equipment 2,154,293 83,506 (133,507) 36,950 2,141,242Assets under construction 126,037 121,181 (247,218) -

36,262,192 838,368 (1,246,070) - 35,854,490

Accumulated depreciation:

Buildings 4,986,176 390,462 - - 5,376,638Machinery and equipment 13,378,209 1,115,663 (1,012,434) - 13,481,438Transportation equipment 52,520 1,271 - - 53,791Office furniture, fixtures

and equipment 1,594,365 159,867 (102,093) - 1,652,139

20,011,270 1,667,263 (1,114,527) - 20,564,006

Net book value 16,250,922 15,290,484

Movements in 2014Balance Transfers/ Balance

March 31, 2013 Additions Deductions Reclassification March 31, 2014

Cost:

Land 925,812 - - - 925,812Buildings 7,870,629 - - 933,605 8,804,234Machinery and equipment 21,639,809 1,984,198 - 572,746 24,196,753Transportation equipment 72,678 - (17,615 ) - 55,063Office furniture, fixtures

and equipment 1,986,025 165,806 (9,876 ) 12,338 2,154,293Assets under construction 633,072 1,011,654 - (1,518,689) 126,037

33,128,025 3,161,658 (27,491 ) - 36,262,192

Accumulated depreciation:

Buildings 4,662,143 324,033 - - 4,986,176Machinery and equipment 12,318,710 1,059,499 - - 13,378,209Transportation equipment 67,236 2,706 (17,422 ) - 52,520Office furniture, fixtures

and equipment 1,464,840 138,060 (8,535 ) - 1,594,365

18,512,929 1,524,298 (25,957 ) - 20,011,270

Net book value 14,615,096 16,250,922

As of March 31, 2014, assets under construction mainly represent construction of building for windingshop and installation of hydraulic cylinder for pressing and lifting accessories.



27

11. FIXED ASSETS (continued)

Depreciation in 2015 and 2014 were charged to the following accounts:

2015 2014

Cost of revenue (Note 21) 1,527,910 1,394,565 General and administrative expenses (Note 23) 123,532 125,997 Selling expenses (Note 22) 15,821 3,736

1,667,263 1,524,298

12. ACCOUNTS PAYABLE

2015 2014

Trade payables: Third parties 24,059,610 19,472,852 Related parties (Note 25b) 1,871,054 267,705

25,930,664 19,740,557

Trade payables and other payables are non-interest bearing and are normally settled on terms rangedbetween 30 to 90 days.

For explanations on the Company’s liquidity risk management processes, refer to Note 26.

13. ADVANCES FROM CUSTOMERS

2015 2014

Advance from customers 7,108,326 11,687,784

This account represents advances from customers in relation to the sales of power transformer units.

14. ACCRUALS AND PROVISIONS

2015 2014

Accrued material cost 4,646,651 917,568 Provision warranty 1,312,616 1,208,410 Provision late delivery charges 1,010,446 1,654,097 Provision commission 982,223 742,240 Accrued freight charges 486,203 122,542 Others 626,259 1,073,042

9,064,398 5,717,899



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15. BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS, NET

2015 2014

Contract costs incurred - 28,317,148 Estimated earnings - 5,344,882

- 33,662,030Less: progress billings - (35,796,061)

- (2,134,031)

16. BANK OVERDRAFT

2015 2014

ANZ Bank Indonesia (“ANZ”) 1,681,282 - Standard Chartered Bank (“SCB”) 1,469,004 - Hongkong and Shanghai Banking Corporation (“HSBC”) 631,802 -

3,782,088 -

The Company obtained banking facilities from SCB based on banking facilities agreement dated May16, 2005, with combine limit of US$6,500,000. The agreement has been amended several times, thelatest was on July 3, 2014 to increase limit facility up to US$10,000,000 and extend the loan facilityuntil further amandment. This banking facilities include short term loan facility, bank overdraft facility,import Letter of Credit facilities, shipping guarantee facility, import invoice financing facility, exportinvoice financing facility and credit bill negotiated discrepant facility.

On April 20, 2012, the Company obtained banking facilities from HSBC with combined limit facilities ofUS$8,000,000. The agreement has been amended on April 23, 2013 to extend the loan facility untilMarch 31, 2015. This banking facilities includes bank overdraft, revolving loan, import facility, domesticreceivable financing and bank guarantee facility.

The Company obtained banking facilities from ANZ based on banking facilities agreement datedOctober 9, 2007, with combine limit of US$6,500,000. The agreement has been amended severaltimes, the latest on June 4, 2014 to extend the loan facility until May 31, 2015. This banking facilitiesinclude bank overdraft facility, import Letter of Credit facilities. Shipping guarantee facility, importinvoice financing facility, export invoice financing facility and credit bill negotiated discrepant facility.

Summary of Banking Facilities:

Standard Chartered Bank

2015 2014

Total Credit Facilities 10,000,000 6,500,000 Utilization: Bank Guarantee (5,936,108) (3,751,297) Letter of Credit (807,828) - Bank Overdraft (1,469,004) -

1,787,060 2,748,703



29

16. BANK OVERDRAFT (continued)

Summary of Banking Facilities: (continued)

ANZ Bank Indonesia

2015 2014

Total Credit Facilities 15,000,000 15,000,000 Utilization: Bank Guarantee (6,574,875) (2,669,476) Letter of Credit (5,956,386) (10,792,963) Bank Overdraft (1,681,282) -

787,457 1,537,561

The Hongkong and Shanghai Banking Corporation (HSBC)

2015 2014

Total Credit Facilities 8,000,000 8,000,000 Utilization: Bank Guarantee (4,650,660) (4,831,514) Letter of Credit (1,704,526) (1,235,975) Bank Overdraft (631,802) -

1,013,012 1,932,511

17. PROVISION FOR EMPLOYEE BENEFITS

As of March 31, 2015 and 2014, the Company provided provision for employee benefit based on thereport of independent actuaries, PT Padma Radya Aktuaria, as per its report dated April 1, 2015 andApril 1, 2014, respectively.

The estimated liabilities for employee service entitlements based on the actuary reports have beendetermined using the following assumptions:

2015 2014

Discount rate 7.50% per annum 8.60% per annumWages and salary increase 7.50% per annum 7.50% per annum

Retirement age 55 year of age 55 year of age Mortality rate TMI 3 - 2011 TMI 3 - 2011 Withdrawal rate 3.5% p.a at age 25 3.5% p.a at age 25

and reducing linearly and reducing linearly to 0% p.a at age 55 to 0% p.a at age 55



30

17. PROVISION FOR EMPLOYEE BENEFITS (continued)

The details of the provision for employee service entitlements as of March 31, 2015 and 2014 are asfollows:

2015 2014

Present value of benefit obligation 5,799,052 5,407,479 Fair value of plan assets (3,661,258) (2,444,290)

2,137,794 2,963,189

Unrecognized past service cost - non-vested (1,543,684) (1,357,549)Unrecognized actuarial loss (14,883) (19,348)

Provision for employee service entitlements 579,227 1,586,292

The changes in the provision for employee service entitlements for the years ended March 31, 2015and 2014 are as follows:

2015 2014

Beginning balance 1,586,292 710,162 Expenses charged to the profit and loss account 919,637 1,037,171

Payments during the year (249,888) (101,709) Effect of changes in foreign exchange rate (207,887) (59,332) Contribution paid to plan assets (1,468,927) -

Ending balance 579,227 1,586,292

A one percentage point change in the assumed discount rate would have the following effects:

Increase Decrease

Present value of define benefit obligation (503,977) 674,866

The movement of present value of obligation is as follows:

2015 2014

At beginning of year 5,407,479 6,537,274 Current service cost 666,281 774,851 Past service cost - 106,485 Interest cost 389,161 331,348 Curtailments and settlements - (96,692) Expected benefit payment (404,448) (181,385) Actuarial gains/(losses) 449,240 (1,051,812) Effect of changes in foreign exchange rate (708,661) (1,012,590)

At end of year 5,799,052 5,407,479



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17. PROVISION FOR EMPLOYEE BENEFITS (continued)

Comparison of present value of obligation:

Present value of obligation

March 31, 2015 5,799,052March 31, 2014 5,407,479March 31, 2013 6,537,274March 31, 2012 4,830,490March 31, 2011 2,753,980March 31, 2010 1,986,745

The details of the employee service entitlements expense recognized in the 2015 and 2014 statementof comprehensive income is as follows:

2015 2014

Current service cost 666,281 774,851 Interest cost 389,161 331,348 Amortization of past service cost - non-vested 2,704 2,975 Amortization actuarial loss 39,484 88,523 Expected return of plan assets (177,993) (108,369) Past service cost (vested) - 106,485 Effect of settlement - (96,692) Effect of changes in foreign exchange rate - (61,950)

919,637 1,037,171

As of March 31, 2015, the company has funded the total amount of post-employment benefit ofRp47,890,862,006 or equivalent to US$3,661,258 (2014: Rp27,316,987,550 or equivalent toUS$2,444,290) to Manulife Insurance.

18. SHARE CAPITAL

In accordance with Notarial Deed No. 11 (Indonesian version) and No. 12 (English version) of AryantiArtisari, S.H., M. Kn., dated September 4, 2013, 635 of the Company’s shares owned by PT MahesaEngineers and Constructor were sold to PT Meta Fokus Sarana Ananda. This deed has beenapproved by the Minister of Justice and Human Rights of the Republic Indonesia through his letterNo. AHU-101.AH.02.02 dated November 8, 2013.

Ownership of the Company’s share capital as of March 31, 2015 and 2014 were as follows:

Number of Percentage of Authorized, issued Shareholders shares ownership and paid in capital

CG Power Systems Belgium N.V. 12,057 95% 12,057,000 PT Meta Fokus Sarana Ananda 635 5% 635,000

12,692 100% 12,692,000



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19. APPROPRIATION FOR STATUTORY RESERVE

The Company established a statutory reserve amounting to USD 2,538,400. It is in accordance withLaw No. 40 Year 2007 on a Limited Liability Company, which requires companies to set up a reservereaching to a minimum 20% of the Company’s issued and fully paid share capital.

20. NET REVENUE2015 2014

Sales of products: Export 38,699,182 53,353,535 Domestic 60,484,763 49,064,264

Total sales of product 99,183,945 102,417,799

Revenue from construction contracts: Domestic 11,043,761 20,238,366 Export 18,385,888 129,893

Total revenue from construction contracts 29,429,649 20,368,259

128,613,594 122,786,058

Sales commissions of US$561,126 (2014: US$650,653) were recorded as part of net revenueattributable to sales of products.

21. COST OF REVENUE

2015 2014

Cost of goods sold: Material costs 62,007,029 67,311,699 Direct labor 780,746 884,761 Provision for employee benefits 490,111 582,663 Manufacturing expenses: Freight on sales 5,723,495 5,296,859 Indirect labor 3,248,792 2,845,883 Utilities 1,985,305 1,475,923 Depreciation of fixed assets (Note 11) 1,527,910 1,394,565 Others 666,469 2,581,811

76,429,857 82,374,164

Construction contract costs: Material costs 24,920,255 15,958,480 Direct labor 420,652 331,244 Overhead expenses 406,701 307,618

25,747,608 16,597,342

102,177,465 98,971,506



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22. SELLING AND MARKETING EXPENSES

2015 2014

Salaries and wages 2,167,713 1,437,172 Travelling 251,231 474,242 Provision for employee benefits 215,774 185,757 Marketing 136,569 234,880 Depreciation of fixed assets (Note 11) 15,821 3,736 Others 516,515 416,283

3,303,623 2,752,070

23. GENERAL AND ADMINISTRATIVE EXPENSES

2015 2014

Salaries and wages 3,533,312 2,872,878 Corporate fees 838,002 534,132 Utilities 573,425 464,990 License fees 453,051 499,975 Professional fees 436,042 468,890 Provision for employee benefits 213,752 268,751 Depreciation of fixed assets (Note 11) 123,532 125,997 Insurance 76,314 61,491 Others 977,996 615,927

7,225,426 5,913,031

24. OTHER OPERATING INCOME/(EXPENSES), NET

2015 2014

Sales of scrap 354,245 646,340 Bank charges (1,105,000) (761,092) Gain on disposal of fixed assets (48,997) 6,099 Others, net 67,359 5,079

(732,393) (103,574)



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25. RELATED PARTY BALANCES AND TRANSACTIONS

In the normal course of business, the Company engages in transactions with related parties which areconducted on term and conditions agreed between parties.

The nature of transactions and relationships with related parties, are as follows:

Nature of related parties Related parties Transactions

Ultimate Shareholder Crompton Greaves Ltd. Sales of transformers,reimbursement of expensesand purchase of rawmaterials

Ultimate Holding Company CG International B.V. Interest income

Shareholder CG Power Systems BelgiumN.V.

Reimbursement of expenses,management fee andpurchase of raw materials

Other related parties CG Power Systems Brazil Sales of transformers

Crompton Greaves Ltd.Mumbai

Reimbursement of expensesand purchase of rawmaterials

Crompton Greaves Ltd.Nashik

Purchase of raw materials

CG Holdings Belgium N.V. Interest income, purchase ofraw materials, managementfee and reimbursement ofexpenses

CG Sales Networks AmericasInc.

Reimbursement of expenses

CG Sales Networks Ireland Reimbursement of expenses

Crompton Greaves Ltd.Mandideep

Purchase of fixed assets

CG Electric Systems HungaryZrt

Purchase of raw materialsand reimbursement ofexpenses

Crompton Greaves SalesNetwork Malaysia

Sales of transformers,reimbursement of expenses

ZIV Aplicaciones YTechnologia S.L.


CG Power America Purchase of raw materialsand reimbursement ofexpenses

ZIV Grid Automations S.L Purchase of raw materialsand reimbursement ofexpenses

Crompton Graves MotorAhmednagar

Purchase of raw materials,reimbursement of expenses

CG International HoldingSingapore




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25. RELATED PARTY BALANCES AND TRANSACTIONS (continued)

The nature of transactions and relationships with related parties, are as follows (continued):

Nature of related parties Related parties TransactionsOther related parties Crompton Greaves Ltd.

Kanjur Marg EaPurchase of raw materials

CG Power Systems IrelandLtd


a) Due from related parties - accounts receivables (Note 5):

2015 2014

Crompton Greaves Sales Network Malaysia 40,192 23,570 ZIV Aplicaciones Y Technologia S.L. 9,992 - Crompton Greaves Ltd. Mumbai - 34,391 CG Holdings Belgium NV - 14,555 Crompton Greaves Ltd. - 4,134 CG Power Systems Belgium NV - 3,110

50,184 79,760

Outstanding balances of due from related parties at the year-end are unsecured and interest free.There have been no guarantees received for any amount due from related parties. For the yearended March 31, 2014 ad 2013, the Company did not record any impairment of due from relatedparties due to all due from related parties are collectible. This assessment is undertaken eachfinancial year through examining the financial position of the related party and the market in whichthe related party operates.

b) Due to related parties - accounts payable (Note 12):

2015 2014

Crompton Greaves Ltd. 851,096 5,000 CG Power Systems Belgium N.V. 812,852 48,544 CG Holdings Belgium NV 128,040 145,552 ZIV Grid Automations S.L 64,660 - Crompton Graves Motor Ahmednagar 7,250 - CG International Holding Singapore 7,156 - CG Power Systems Ireland Ltd - 34,001 Crompton Greaves Ltd. Kanjur Marg Ea - 21,508 Crompton Greaves Sales Network Malaysia - 13,100

1,871,054 267,705

Outstanding balances of due to related parties at the year-end are unsecured and interest free.There have been no guarantees provided for any amount due to related parties.



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c) Loans to related parties:

2015 2014

CG International B.V. 45,404,573 39,328,496CG Holdings Belgium N.V. - 4,401,844

45,404,573 43,730,340

The Company provided loans denominated in US Dollar currency to related parties. During theyear, the loans are charged with interest at the rates ranging from 1.15% to 1.17% per annum(2014: 1.15% to 1.25% per annum). The loans are covered by agreement, unsecured and have nofixed repayment schedules.

The loan to CG Holdings Belgium N.V. was settled on September 15, 2014

d) Advance from a related party:

2015 2014

CG Sales Network America Inc 1,702,108 -

1,702,108 -

e) Details of transactions with related parties:

2015 2014

Sales and other income

Interest income: CG International B.V. 441,127 404,909 CG Holdings Belgium N.V. 22,803 50,765

463,930 455,674

As a percentage of total interest income 96% 99%

Sales of transformers and services:

CG Power Systems Brazil 569,500 - CG Sales Network Malaysia 40,192 - Crompton Greaves Ltd. 6,825 -

616,517 -

As a percentage of total sales 0.5% -



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Purchases and other expenses

Purchase of raw material: Crompton Greaves Ltd. Mumbai 1,051,856 - CG Holdings Belgium N.V. 192,216 844,237 Ziv Grid Automation S.L. 64,660 - Crompton Greaves Ltd. Kanjur Marg Ea 18,000 - Cromptom Greaves Motors Ahmednagar 7,250 - CG Power Systems Belgium N.V. 3,186 738,469 Crompton Greaves Ltd. Nashik - 326,830 CG Electric Systems Hungary Zrt - 247,295

1,337,168 2,156,831

As a percentage of total purchase 2% 4%

e) Details of transactions with related parties (continued):

Reimbursement of expenses/(income): CG Holdings Belgium N.V. 1,262,733 941,427 CG Power Systems Belgium N.V. 488,363 559,311 Crompton Greaves Ltd. (67,001) - Ziv Aplicaciones Y Technologia S.L. (34,916) - CG Sales Network Malaysia 24,346 - Ziv Grid Automation S.L. (15,495) -

CG Electric Systems Hungary (14,309) - Crompton Greaves Ltd Mumbai (3,569) - CG Power Systems Ireland Ltd (2,623) - Crompton Greaves Ltd. Kanjur Marg Ea 57 - Crompton Greaves Ltd T-1 Kanjur Mumbai - 22,376 CG Power Systems USA Inc. - 13,950 CG Electric Systems Hungary Zrt - 938

1,637,586 1,538,002

As a percentage of total operating expenses 12% 18%

The Company is being charged with allocated charges over centralized department function thathas been performed by CG Power Systems Belgium N.V. and CG Holding Belgium N.V..

The Company has an agreement with CG Power Systems Belgium N.V. wherein the Companyagreed to have the right to reproduce, use and sell the products in ASEAN, Australia, NewZealand, and Japanese contractor business (irrespective of final destination and any countrywhere the order is transferred to the Company from a Group Company (“CG”)), in accordance withthe quality standards, norms and specifications instructed or approved and to use CG's technicalknow-how in the manufacture of the products. As compensation, the Company pays a license feeof design engineering fee to CG Power Systems Belgium N.V..

In 2009, the Company entered into an agreement with CG Holdings Belgium N.V. wherein theCompany agreed to use CG’s Trademark in the manufacture of the products. As compensation,the Company pays a branding fee to CG Holdings Belgium N.V..



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f) Key management compensation:

The key management personal employee benefit as at March 31, 2015 and 2014 are as follow:

2015 2014

Salaries and other short-term employee benefit 306,990 336,873 Post-employment benefit 23,613 20,911

330,603 357,784

26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

a. Financial Risk Factors

The Company’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk,and liquidity risk. The Company’s overall risk management program focuses on the unpredictabilityof financial markets and seeks to minimize potential adverse effects on the Company’s financialperformance. The Company uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by the Controlling Shareholder Group Treasury under policiesapproved by the Head Office. The Group Treasury identifies, evaluates and hedges financial risksin close co-operation with the Company’s operating units. The Head Office provides writtenprinciples for overall risk management, as well as written policies covering specific areas, such asforeign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Foreign exchange risk

The Company operates internationally and is exposed to foreign exchange risk arising from variouscurrency exposures, primarily with respect to the European Euro, Australian Dollar and NewZealand Dollar. Foreign exchange risk arises from future commercial transactions and recognisedassets and liabilities.

The Company is required to hedge its foreign exchange risk exposure with the Group Treasury. Tomanage its foreign exchange risk arising from future commercial transactions and recognisedassets and liabilities, the Company uses forward contracts, transacted with the Group Treasury.

The Group Treasury’s risk management policy is to hedge between 80% and 100% of anticipatedcash flows (mainly export sales and purchase of raw materials) in each major foreign currency forthe subsequent 12 months.

Credit risk

The Company has no significant concentrations of credit risk. It has policies in place to ensure thatsales of products are only made to customers with an appropriate credit history. Derivativecounterparties and cash transactions are limited to high-credit-quality financial institutions. TheCompany has policies that limit the amount of credit exposure to any financial institution.

Credit risk is managed on a Group basis. Credit risk arises from short-term bank deposits,derivative financial instruments and deposits with banks and financial institutions, as well as creditexposures to customers, including outstanding receivables and committed transactions. TheCompany trades only with recognized and creditworthy third parties. In addition, receivablebalances are monitored on an ongoing basis with the result that the Company’s exposure to baddebts is not significant.



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26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

a. Financial Risk Factors (continued)

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities,the availability of funding through an adequate amount of committed credit facilities and the abilityto close out market positions. The Company seeks to manage its liquid funds through cashplanning. The Company uses historical figures and experiences and forecasts from its collectionsand disbursements. Also, the Company only places funds that exceeded its requirements in themoney market. Placements made are strictly based on cash planning assumptions and covers onlya short period of time.

b. Fair Value Estimation

Fair value is the amount for which an asset could be exchanged, or a liability settled, in an arm’slength transaction basis.

The fair value of forward foreign exchange contracts is determined using quoted forward exchangerates at the reporting date.

The gross carrying amount for financial assets with maturity of less than one year, including cashand bank, accounts receivable, loan to related parties are assumed to approximate their fair valuesdue to their short-term maturity.

The carrying values of financial liabilities with maturity of less than one year, including accountspayable, are assumed to approximate their fair values as the impact of discounting is notconsidered significant.

27. COMMITMENTS

The Company has capital expenditure commitment on building, machinery and equipment forimproving testing unit facilities. As March 31, 2014, the outstanding commitment amounted toUS$617,894 (2013: US$488,919).

28. SEGMENT INFORMATION

The Company is presently engaged in the following business activities:a. Power divisionb. System division



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28. SEGMENT INFORMATION (continued)

Segment information based on business segments is presented below:

2015

Power Transformer System

Division Division Elimination Total

Revenue 107,929,457 29,429,648 (8,745,511 ) 128,613,594 Cost of revenue (85,175,368) (25,747,608) 8,745,511 (102,177,465)

Gross income 22,754,089 3,682,040 - 26,436,129 Operating expenses (11,900,038) (1,631,276) - (13,531,314)

Income before corporate income tax expense 10,854,051 2,050,764 - 12,904,815

2014

Power Transformer System

Division Division Elimination Total

Revenue 107,400,370 20,368,259 (4,982,571 ) 122,786,058 Cost of revenue (87,356,735) (16,597,342) 4,982,571 (98,971,506)

Gross income 20,043,635 3,770,917 - 23,814,552 Operating expenses (7,147,275) (1,205,205) - (8,352,480)

Income before corporate income tax expense 12,896,360 2,565,712 - 15,462,072

The following table shows the distribution of the Company’s information by geographical segment:

2015

Indonesia Australia New Zealand Total

Revenue 105,670,189 1,358,073 21,585,332 128,613,594 Cost of revenue (84,046,830) (989,952) (17,140,683 ) (102,177,465)

Gross income 21,623,359 368,121 4,444,649 26,436,129 Operating expenses (11,213,927) (745,633) (1,571,754 ) (13,531,314)

Income/(loss) before corporate income tax expense 10,409,432 (377,512) 2,872,895 12,904,815

2014

Indonesia Australia New Zealand Total

Revenue 93,501,181 6,311,654 22,973,223 122,786,058 Cost of revenue (77,627,728) (5,373,554) (15,970,224 ) (98,971,506)

Gross income 15,873,453 938,100 7,002,999 23,814,552 Operating expenses (4,242,818) (1,418,593) (2,691,069 ) (8,352,480)

Income/(loss) before corporate income tax expense 11,630,635 (480,493) 4,311,930 15,462,072



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29. NON-CASH TRANSACTIONS

Non-cash transactions of the Company as follow:

2015 2014

Reclassification of assets under construction to fixed assets (Note 11) 165,009 1,518,689

165,009 1,518,689

pt cg power systems indonesia - crompton greavescgglobal.com/pdfs/annual-report/ar14-15/28. pt cg...

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