AUDIT PLANNING MEMORANDUM (APM)

Client

: PT Indah Kiat Pulp & Paper Tbk

Balance Date: December 31, 2016

Approval

Prepared by:

Date :

Group 1 Paseo Group

Rosima Rajagukguk

008201300075

Fajar Widya

008201400035

Immanuel Christian

008201400044

Rizka Amalia

008201400094

Widya Simanjuntak

008201400110

Reviewed by:

Date :

Approved by Engagement Partner :

Date

Background Information

Head office:
Jl. Sisingamangaraja No.26,2nd Floor
Jakarta 12120,Indonesia
Tel: +62217202605- Fax: +622172788954

Client Contacts

As September 30, 2016

President Commissioner

Linda Suryasari Limantara

President Director

Ko Po Cheng

Vice President Director

Frenky Loa

Vice President Director

Hendra Jaya Kosasih

Vice President Director

Suresh Kilam

Director

Didi Harsa

Director

Kurniawan Yuwono

Director

Suhendra Wiriadinata

Director

Lioe
Djohan
Gunawan)

Director/Corporate Secretary

Agustian R. Partawidjaja

Independent Director

Suryamin Halim

(Djohan

Scope Of The Engagement

This is a recurring audit as last year financial statements as of December 31, 2015 was
audited by our audit firm (Y. Santosa and Partners), that rendered are present fairly
(unqualified opinion), which mean the company all financial report are present fairly and in
accordance with the standard and the audit evidence can be trusted as the audit object or the
financial statement also presented fairly.

The company and some creditor agree to sign Master Restructuring Agreement (MRA) to
restructuring the companys liabilities and obligations. But some of creditor still not sign the
agreement and bring the problem to the court. Until now the problem still in the process.

Understanding the Business

PT. Indah Kiat Pulp & Paper Tbk (IDX: INKP) is a multinational company that produces
paper that is headquartered in Jakarta, Indonesia. The company was founded in 1981. The
company produces various kinds of paper. Indah Kiat Serang is one of the biggest paper
packaging companies located in Serang, Banten Province, Indonesia. The 550 hectare facility
is strategically located close to reliable distribution hub, the seaport.
Indah Kiat Serang was established in 1991, to provide solution for all paper and board
packaging needs. The company operate two groups of paper machines; four machine produce
brown/industrial paperboard and the other two white grade machines carry out coated white
paperboard. In addition to paper manufacturing, Indah Kiat Serang also have own Converting
Plant producing Converted product and Folding Boxes which are used as packaging for wide
variety of products. The products are distributed all over the world, including to Asia, North
and South America, Australia, Africa, and also Europe.

Raw material, indirect material and spare part are provided by PT Sinar Mas Specialty
Minerals (SMSM)

The Company and Subsidiaries permanent employees as of September 30, 2016 and
December 31, 2015 were approximately 16 thousand and 17 thousand, respectively.

Ownership in September 2016, as follow:

Shareholders
PT
Purinusa
(Purinusa)

Shares
Ekapersada

% ownership

1.154.118 52,72

Public and Others (each below

1.034.898 47,28
5%)
Total

2.189.016 100

Paid up Capital (Rp.)

2.884.473.498

2.586.509.443

5.470.982.941

Issues in 2015, still exist in 2016

(if any)

Tax Assessment Letter

On May 15, 2015, the Company received tax assessment letter (SKPLB)
No.00066/406/13/092/15 regarding overpayment of 2013 corporate income tax amounting to
Rp191.4 billion and taxable loss settled at Rp6.2 trillion.

On February 11, 2016, the Company received tax assessment letter (SKPLB)
No.00009/406/14/092/16 regarding overpayment of 2014 corporate income tax amounting to
Rp128.6 billion and taxable income settled at Rp2.1 trillion.

Significant Litigation And Claims

On September 13, 2002, Oaktree Capital Management L.L.C. (Oaktree), Gramercy Advisors,
L.L.C. and General Electric Capital Corporation filed a claim in the New York State Supreme
Court against the Company, PT Lontar Papyrus Pulp & Paper Industry (Lontar), Asia Pulp &
Paper Company Ltd. (APP), APP International Finance Company B.V. (APP Finance) and
Indah Kiat International Finance Company B.V. (Indah Kiat B.V.) (Collectively the
Defendants) in respect to certain notes issued by APP Finance (the Lontar Notes) and Indah
Kiat B.V. (the Indah Kiat 02 and 06 Notes). The claims in respect to the Indah Kiat 02 and 06
Notes amounted to USD78.8 million and USD92.9 million, respectively. The claim in respect
to the Lontar Notes amounted to USD147.0 million. Judgments in relation to these notes were
entered in favor of the Plaintiffs on April 13, 2004 and February 24, 2006.

During the process of this litigation, certain original Plaintiffs have transferred their interests
in relation to the judgments in New York and related proceeding to other entities. By order
dated June 1, 2004, Warner Mansion Fund was substituted into the action for plaintiff General
Electric Capital Corporation. By order dated July 20, 2009, Upwood Investments Limited
was substituted into the action for plaintiff Gramercy Emerging Markets Fund. By order
dated November 23, 2009, Bernal Ventures Ltd. was substituted into the action for plaintiffs
Gryphon Domestic VI, L.L.C., OCM Opportunities Fund II, L.P., OCM Opportunities Fund
III, L.P., and Columbia/HCA Master Retirement Trust.

As of the date of this report, no further actions are being taken by the Plaintiffs to enforce the
Judgments obtained in New York.

Significant Ratios, Audit Issue & Approach

Ratios

2016

2015

(3rd Q)

(3rd Q)

Increase
(Decrease)

Current Assets

2.115,2

1.776,9

338,3

Current Ratio

1,6

1,35

0,25

0,51

0,36

0,15

136.362

158.844

(22.482)

24,54

31,62

(7.03)

909.279

865.608

43.674

207,9

190,6

17,3

1,2

1,2

Sales (in 000.000)

2.027.860

2.098.174

(70.314)

Total Assets (in 000.000)

6.853.260

7.038.412

(185.152)

Return on Assets (%)

1,41

2,57

(1,16)

Return on Equity (%)

4,43

8,26

(3,83)

Gross Profit Margin (%)

21,3

21,01

0,29

Selling Expenses (in 000.000)

100.285

135.831

(35.546)

Selling Expenses to Sales (%)

4,94

6,47

(1,53)

General and Admin Exp. (in

000.000)

109.917

78.151

31.766

General and Admin Exp. to Sales

(%)

5,42

3,72

1,7

Acid Test Ratio

Account Receivables (in 000.000)
Days of Receivable
Inventories (in 000.000)
Days of Inventory on Hand
Debt to Equity Ratio (%)

The following are audit issue and approach:

1

Current Ratio/Acid Test Ratio, if we try to compare between year 2015 and 2016, both
were having reduction in the current asset and the current liabilities, assuming that the
current asset is used to meet the obligation on the current liabilities.

Days of Receivable. The decreased in the numbers of days of receivable showed that the
company able to maintain the collectability of the bills.

Day of Inventories improved compare to 2015, this company showing good improvement
on managing the efficiency of their inventories stock.

Debt to Equity, There is no changes in this ratio. We assume that there is no increasing or
decreasing in debt and equity.

ROA/ROE, as an indicator of how profitable a company is relative to its total assets or its
money invested by the shareholders. ROA/ROE gives an idea as to how efficient
management is at using its assets or its invested money (from shareholders) to generate
earnings. The companys ROA and ROE is decreasing from year 2015 to 2016.

The ROE is decreased by half of the 2015 amount due to decrease of the sales even if
there is more money invested by the shareholders.

GPM, is slightly increased from 2015 to 2016 due to not significant changes of sales and
gross profit.

Selling, General and Administration (Operating) Expenses

The selling expense is decreased by 1,53%, while the G&A expense is increased by 1,7%.

Planning Materiality (PM)

Total Assets 30 September 2016 as base amount $ 6,853,260,000

Percentage

1% from Total Assets

Planning Materiality (PM)

$ 68,532,600

Tolerable error (TE)

$ 34,266,300

Time Table And Requirements

Activity:

Date:

Year end audit fieldwork ____________________

27 Jan - 25 Feb 2017

1st draft of audit report ______________________

15 February 2017

Final report, after received Representation Letter and Shareholder

Support Letter _________________________________
2017

Latest by 31 March

Engagement Personnel

Each member of team acknowledges that they have read and understand the Audit Planning
Memorandum (APM) by signing in the space provided below.

Engagement Team

Member

Name

Fajar Widya Kusumah

Signature

Initial

FWK

Immanuel Christian

IC

Rizka Amalia

RA

Widya Simanjuntak

WS

Rosima Rajagukguk

RR