2000 ANNUAL REPORT

COMPANY PROFILE
Citatah was the first private company to develop Indonesias marble resources, and has been involved in the extraction and processing of marble for more than twenty-five years. Established in 1974, the Company began mining beige marble from its quarry near Bandung, and subsequently achieved a dominant market position for its material in Indonesia. In January 1996, the Company acquired a 90% shareholding in PT Quarindah Ekamaju Marmer, a marble company with quarries and a modern processing plant in Pangkep, South Sulawesi. Soon after, Citatah acquired a license to mine an additional quarry at Pangkep, which increased the Companys raw material capacity to 60,000 cubic metres a year. In July 1996, Citatah listed on the Jakarta Stock Exchange and raised Rp 104.5 billion through an issue of new shares to fund a major expansion in the Companys processing and international sales capability. The slab and tile processing factory at Pangkep was extended with the installation of six new tiles lines. Today, the Pangkep factory is the main production centre for the Company with a total processing capacity of 130,000 square metres of slabs and tiles per month. In 1998, Citatah opened its Special Projects Centre at Karawang, east of Jakarta. This processing facility comprises a marble and granite slab cutting and polishing factory alongside a design and fabrication factory, which houses a variety of specialist cutting, shaping and finishing machinery. The Special Projects Centre is considered to be one of the most modern and complete stone fabrication factories in the world. Citatahs production is supported by an international sales network of agents and representatives. In 2000, half of the Companys production was exported, mainly to markets in the Asia Pacific region and the US, and overseas revenues accounted for over 75% of Total Sales. 1

For more information, visit the Companys website: www.citatahmarble.com

PT. CITATAH

FINANCIAL HIGHLIGHTS
Five year summary The summary of financial data is derived from the Companys audited financial statements for the past five years. PT Citatah Tbk and Subsidiaries (year ended 31December) 2000 1999 167,629 51,543 7,025 (37,249) 193,031 430,729 421,998 445,540 (14,811) (228,967) Rupiah millions 1998 273,937 93,858 32,482 (108,963) 235,493 499,086 305,734 466,028 23,334 (70,241) 1997 112,991 62,451 27,989 (30,836) 227,224 439,836 170,233 301,109 138,727 56,991 1996 99,137 57,119 36,344 24,612 144,892 253,337 56,152 77,942 175,395 88,740

Net Sales 137,574 Gross Profit 36,164 Operating Profit / (Loss) (8,590) Net Profit / (Loss) (182,334) Current Assets Total Assets Current Liabilities Total Liabilities Shareholders Equity 2 Net Working Capital 140,888 355,200 540,372 555,698 (200,498) (399,484)

Weighted average no. of shares outstanding (millions) 126 Equity valuations (Rupiah) Earnings per share (1,447) Book value per share (1,591) Operating performance (%) Operating Profit to Equity Operating Profit to Total Assets Net Profit to Equity Net Profit to Total Assets

126

126

126

101

(296) (118)

(865) 185

(245) 1,101

244 1,737

nil nil nil nil

nil 1.63 nil nil

84.18 6.51 nil nil

20.17 6.36 nil nil

20.72 14.35 14.03 9.72

Financial performance (%) Current ratio 26.07 Liabilities to Equity nil Liabilities to Total Assets 56.45

45.74 nil 103.44

77.03 1,167.55 90.27

133.48 217.05 68.46 Rp 3,355

258.04 44.44 30.77 Rp 2,383

Average exchange rate for US$Rp 8,541Rp 7,808Rp 9,895

PT Citatah has issued share capital of 126,000,000 shares at Rp 500 par value. The shares were listed on the Jakarta Stock Exchange in July, 1996. (Reuters code: CTTH.JK) At year end, Meridian Pacific (S) Ltd and PT Megapacific Nusapersada, which together represent the majority shareholders of PT Citatah, held 63.8% of the issued share capital.

2000 ANNUAL REPORT

PRESIDENT DIRECTORS REPORT

Although overseas demand for the Citatahs products remained at good levels and domestic sales showed a marked improvement over the previous year, Citatahs performance in 2000 was undermined by a short fall in working capital and capital investment in the quarries which led, in turn, to a decline in production output. The Companys inability to finance the replacement and repair of important quarry equipment during the early part of the year led directly to a reduction in quarry output. Consequently, the Company was unable to tender for large project contracts overseas and domestic sales were met through clearance sales of inventory, resulting in lower sales and margins for the year.

Review of Financial Performance Citatah reported Net Sales of Rp 137,574 million (US$ 16.1 million) in the financial year ended 31 December, 2000. Revenues from export sales and contributions from UGMC Inc. totalled Rp 108,801 million, 28% lower than the previous year (1999: Rp 150,922 million) as production output at the quarries was unable to meet demand levels. Domestic sales were 72% higher than the previous year at Rp 28,773 million (1998: Rp 16,707 million), largely due to clearance sales of tiles stocks and increased activity in residential construction. Citatahs gross profit margin was reduced to 26% due to the large volume of low value inventory sold into the domestic market. The Company recorded its first Operating Loss of Rp 8,590 million as Operating Expenses remained at the same level as the previous year despite the decline in Sales. The Company sees little scope for any further reduction in Operating Expenses. A further decline in the value of the Rupiah led to increased foreign exchange losses which, together with write-offs for inventories and bad debts, resulted in a Net Loss of Rp 182,334 million for the year. At the end of the year, the parent company had outstanding loans totalling US$ 35.4 million and Rp 48,975 million, and Total Liabilities of Rp 555,698 million. Total Assets were Rp 355,200 million. The Companys negotiations with its financial creditors to restructure the outstanding loans continued throughout the year without any conclusion as the unsettled political and economic situation in Indonesia dissuaded any new investors from participating in the restructuring process. However, the Board of Directors is confident that an agreement with its bank creditors will be concluded this year. 3

PT. CITATAH

Review of Production Division

Citatahs Production Division came under considerable pressure in 2000 as the quarries were starved of the necessary working capital to maintain the required output levels. Essential quarrying equipment, such as excavators and drilling rigs, fell into disrepair and could not be replaced. As a consequence, Citatahs quarries produced a total of 29,000 cubic metres of marble in 2000, 48% lower than the previous year. The majority of output came from the main quarry sites at Pangkep and Balocci in South Sulawesi. Operations at the new quarry site in West Timor, which began in late 1999, were temporarily suspended due to local social issues and the lack of working capital. Citatahs factories processed a total of 545,000 square metres of marble in 2000, about 20% lower than the previous year due to the reduced quarry output. The main processing facility at Pangkep produced a total of 111,500 square metres of polished slabs and 321,250 square metres of polished tiles. The Special Projects Centre (SPC) at Karawang saw increased capacity utilisation during the year as a number of large cut to size contracts were completed in the Design & Fabrication section. In total, 112,250 square metres of slab, tile and cut-to-size specialised production were completed at the SPC. During the year, the Company introduced a Total Quality Management programme at the production facilities to improve the standard of operating procedures to the levels required for ISO approval. The Company plans to allocate new working capital to the quarries in the current year following the completion of the debt restructuring plan, and expects to recover to normal output levels before year end. To improve capacity utilisation at the SPC, the Company plans to undertake more large volume specialist furniture contracts, such as fireplaces and vanity tops, as well as subcontract processing for local and overseas projects. The older factory at Bandung will be reopened during this year to undertake sub-contracted tile processing for the many local quarries in the area.

2000 ANNUAL REPORT

Analysis of Sales

domestic project: 31,000 m2

domestic direct: 281,000 m2

overseas project: 94,000 m2

overseas direct: 119,000 m 2

Direct sales regular volume deliveries of standard-sized slabs and tiles to agents/wholesalers and residential sales Project sales value-added deliveries of cut-to-size pieces and selected tiles for large-scale commerical construction projects Export destination Asia Pacific region China Taiwan Korea Japan Malaysia Hong Kong Singapore United States Australia Other Total slab & tile m 2 %

104,500 19,000 16,000 8,500 7,200 6,300 6,200 30,000 11,800 3,500 213,000

49 9 8 4 3 3 3 14 5 2 100

PT. CITATAH

Review of Sales Division

In 2000, Citatah sold 525,000 square metres of its marble in the domestic and overseas markets, generating Rp 71,050 million (US$ 8.3 million) in revenues, after eliminations for inter-company sales. Citatahs US based subsidiary, UGMC Inc., contributed a further Rp 66,524 million (US$ 7.8 million) to Net Sales. Export deliveries totalled 213,000 square metres which, together with 1,029 cubic metres of raw blocks, contributed Rp 47,542 million (US$ 5.6 million) to Net Sales, before the elimination of Rp 5,266 million of inter-company sales to the overseas subsidiaries. The volume of export sales is lower than the previous year as reduced output from the quarries had a direct impact on sales of slab and tiles to the main wholesale markets of China and the USA. The volume of project contracts was also lower as construction activity in many Asia-Pacific cities remained weak. The Company did make some progress in developing new markets, particularly in South Korea and Australia. Citatah marble was installed in two high profile retail stores in central Seoul, and has been specified by the construction division of Samsung for the largest residential project in Seoul. 6 Citatahs export division has over US$ 2.7 million of project orders for the current year and is confident of achieving US$ 6 million in overseas sales in 2001. UGMC Inc., sold over 30,000 square metres of Citatah marble into the US market, and supplied a number of prestigious projects in 2000, including the Marriott hotel in Anaheim, the Santa Barbara Club Resort in California. Large scale project construction failed to show any signs of improvement in the domestic market during 2000, but direct sales to residential customers and small contractors continued to show gradual recovery. Average monthly sales volumes were more than double the previous year, and overall sales volume was boosted by two grand sales of tiles stocks. In 2000, the Company achieved sales of Rp 28,773 million in the domestic market on deliveries of 312,000 square metres of Citatah marble and 6,000 square metres of imported stones. This compares with deliveries of 116,000 square metres of Citatah marble in 1999.

2000 ANNUAL REPORT

However, the average price per square metre in the domestic market was lower due to the large volume of old tile stocks which were cleared from the Bandung factory. The Company supplied a number of commercial projects during the year, including the renovation of Ratu Plaza in Jakarta, and the refurbishment of the Savoy Hoffman hotel in Bandung. The domestic market in 2001 is likely to remain active in the residential and small scale commercial sector, and Citatah has already booked Rp 20 billion of project work for the year.

Major projects in 2000 Citatah marble was supplied to a number of prestigious commercial buildings in 2000 including: China South Korea Beijing Peoples Convention Centre Bandi & Lunis bookstore Dache Young Fashion Plaza Kia Peng condominiums Bill Gates Tower (Microsoft office) Santa Barbara Club Resort Marriott Hotel, Anaheim Ratu Plaza renovation University of Indonesia faculty Sogo dept. store renovations Savoy Homann hotel renovation Beijing Seoul Seoul Kuala Lumpur Xing Chu California California Jakarta Jakarta Jakarta Bandung 9,000 m 2 5,000 m 2 5,000 m 2 11,500 m2 2,000 m 2 5,000 m 2 4,000 m 2 3,200 m 2 2,400 m 2 1,800 m 2 3,000 m 2 7

Malaysia Taiwan USA

Indonesia

PT. CITATAH

Corporate Developments and Outlook

Throughout the year, Citatahs management continued to negotiate with its banking creditors to agree terms for a restructuring of the Companys loans. A key element of these negotiations was the introduction of fresh capital from a new investor to enable the Company to regenerate its quarry operations. However, the prevailing uncertain political and economic conditions in Indonesia dissuaded any new investors from participating in the Companys restructuring, and the negotiations remain unresolved. Currently, the management are negotiating the terms of a debt restructuring programme with its creditor banks which excludes any injection of new capital. To overcome the shortfall in working capital, the Company continues to cut costs where feasible, and is trying to sell all non-operational assets. The Company is also clearing its inventory of slabs and tiles at below average market prices. In December, the Companys US subsidiary, UGMC Inc., increased its equity capital base by US$ 150,000 at the request of its bankers. Citatah declined its pre-emptive rights to the new shares in favour of its founding partner. As a consequence, Citatahs shareholding in UGMC Inc. was reduced to 49.7% as of 2 October, and the subsidiarys sales were not consolidated in the fourth quarter. 8 The Board of Directors is confident that the Company will reach a workable solution with its creditor banks in restructuring its loans. The Company still has considerable demand in the Asia-Pacific region for its marble products, and the management believe that capacity utilisation and sales will recover in the latter part of the current year.

Taufik Johannes

2000 ANNUAL REPORT

BOARD

OF

COMMISSIONERS

Arif Sianto President Commissioner Indonesian citizen, born in Makale, South Sulawesi in 1938. Mr. Sianto is a founder of the Company, having served as production director from 1974 until 1993. He was appointed President Commissioner in September 1994.

Ismail Husin Commissioner Indonesian citizen, born in Palembang, South Sumatra in 1965. Mr. Husin graduated from York University in Toronto, Canada in 1987. He was appointed Commissioner of the Company in 1998.

PT. CITATAH

BOARD

OF

DIRECTORS

Taufik Johannes President Director Indonesian citizen, born in Jakarta in 1959. Mr. Johannes majored in Mechanical Engineering at the University of Windsor, Canada. He was appointed President Director in 1980. He is also President Director of PT Megapasific Nusapersada.

Denise Johanes Sales and Marketing Director Indonesian citizen, born in Pematang Siantar, North Sumatra in 1957. Ms. Johanes graduated from York University in Toronto, Canada, with a degree in Mathematics in 1981. She was appointed Sales and Marketing Director in 1992, having previously served as Marketing Manager since 1982.

Tiffany Johanes Finance Director Indonesian citizen, born in Jakarta in 1965. Ms. Johanes graduated from the University of Southern California with a degree in Finance, and received her MBA from the California Polytechnic State University. She was appointed Finance Director in 1998, having previously served as Finance Manager since 1993.

Sergio Magliocco Technical Director Italian citizen, born in 1951 in Udini, Italy. Mr. Magliocco has worked in the stone excavation industry since 1968. He joined PT Quarindah Ekamaju Marmer in 1993 as Quarry Master, and was appointed Technical Director of the Company in 1999.

Hasan Sianto Production Director Indonesian citizen, born in Makassar, South Sulawesi in 1964. Mr. Sianto graduated from the University of Southern California, USA, in 1988. He was appointed Production Director of the Company in 1993. He is also a Director of PT Megapasific Nusapersada.

2000 ANNUAL REPORT

PT CITATAH Tbk. AND SUBSIDIARIES Balance Sheets 31December 2000 and Consolidated Balance Sheets 31 December 1999 (Expressed in Rupiah)

Notes Assets Current assets Cash and cash equivalents Trade accounts receivable, net of allowance for doubtful account of Rp5,979,602,764 (1999: Rp2,115,481,325) Other receivables Inventories Prepaid taxes Other current assets Total current assets Non-current assets Due from related parties Investments Fixed assets, net of accumulated depreciation of Rp 75,434,378,203 (1999: Rp 58,864,605,784) Deferred charges Goodwill Guarantee deposits Total non-current assets Total assets 4o,10 4l, 11 4i, 4j 4k, 12 4m,13 4n, 14 4f, 5

2000

1999

2,963,784,121

3,704,620,567

4g, 6 7 4h, 8 9

18,029,896,112 1,261,538,259 117,110,972,064 951,757,673 570,446,705 140,888,394,934 362,850,000 3,706,045,450 209,830,476,759 42,433,365 369,672,700 214,311,478,274 355,199,873,208

39,828,179,675 5,293,594,557 140,084,950,361 2,196,559,994 1,923,135,816 193,031,040,970 763,382,358 450,000,000

1
233,466,497,364 1,067,638,959 1,299,793,734 650,530,200 237,697,842,615 430,728,883,585

PT. CITATAH

PT CITATAH Tbk. AND SUBSIDIARIES Balance Sheets 31December 2000 and Consolidated Balance Sheets 31 December 1999 (consolidated) (Expressed in Rupiah) Notes Liabilities, Minority interests and Capital deficiency Current liabilities Bank loans Trade accounts payable Other payable Advances received Provision for taxes Accrued expenses Current portion of long term loans Current portion of lease obligations Total current liabilities Long-term liabilities Due to related parties 4o,22,3 5 20 21 31d 474,569,336 14,851,428,753 15,325,998,089 555,698,148,220 403,824,225 776,640,600 787,729,735 17,350,035,388 19,318,229,948 441,315,969,710 4,224,859,961 15 16 17 18 19 20 21 150,919,654,016 24,566,377,850 39,030,501,170 6,334,124,137 721,067,635 77,416,379,319 238,133,597,172 3,250,448,832 540,372,150,131 151,204,238,540 26,075,397,843 32,227,967,838 5,114,286,857 1,133,273,063 25,423,597,616 177,062,083,161 3,756,894,844 421,997,739,762 2000 1999

Bank loans Lease obligations Deferred tax liability Total long-term liabilities Total liabilities Minority interests in subsidiaries Capital deficiency Share capital: par value of Rp500 each, Authorized capital: 504,000,000 shares; Issued and fully paid up capital 126,000,000 shares Additional Paid in Capital Donated capital Exchange rate differences on financial statements translation Difference in value of restructuring transactions of entities under common control Accumulated losses Total capital deficiency Total liabilities, Minority interests and Capital deficiency

23 24 25 4d

63,000,000,000 81,662,675,269 2,194,663,242 -

63,000,000,000 82,500,000,000 2,194,663,242 2,354,316,057

26

(457,600,060) (346,898,013,463) (200,498,275,012)

(457,600,060) (164,403,325,325) (14,811,946,086)

355,199,873,208

430,728,883,585

2000 ANNUAL REPORT

PT CITATAH Tbk. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PROFIT AND LOSS For the years ended 31 December 2000 and 1999 (Expressed in Rupiah)

Notes

2000

1999

Net sales Cost of goods sold Gross profit Operating expenses: Marketing and selling General and administrative Total operating expenses Operating profit/(loss) Other income/(expenses): Interest income Gain on sale of fixed assets Interest expense Foreign exchange loss net Bad debts expense Gain on sale of investment Written off inventories Others Total other expenses Share of associated companys profit

4e,28 29

137,573,731,335 101,410,131,153 36,163,600,182

167,629,295,295 116,085,658,731 51,543,636,564

30 16,904,311,843 27,849,034,972 44,753,346,815 (8,589,746,633) 16,225,603,896 28,292,880,362 44,518,484,258 7,025,152,306

446,492,009 243,871,216 (33,762,219,686) (104,782,326,894) (11,788,963,003) (18,744,846,718) (7,948,811,742) (176,336,804,818) 139,794,828

316,444,419 1,396,150,816 (30,717,974,738) (5,512,751,987) (7,718,106,106) 879,515,276 (2,441,235,075) (43,797,957,395) -

Loss before corporate income tax Corporate income tax expense/(credit) Current year Deferred tax 4q,31a

(184,786,756,623)

(36,772,805,089)

(2,298,216,235) (2,298,216,235)

227,434,795 1,866,355,276 2,093,790,071 (38,866,595,160)

Loss before minority interest

(182,488,540,388)

Share of minority interest in subsidiaries' net profit Loss after minority interest Operating profit/(loss) per share 4p

154,506,505 (182,334,033,883) (68)

1,617,692,403 (37,248,902,757) 56

PT. CITATAH

PT CITATAH Tbk. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended 31 December 2000 and 1999

(Expressed in Rupiah)
2000 1999 (Re-presented)

Cash flows from operating activities Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid for operating expenses (excluded salaries) 124,354,425,718 (66,398,865,551) (35,881,205,081) (20,493,590,304) 1,580,764,782 (2,937,246,068) 446,492,009 (81,756,137) 169,633,649,815 (109,549,203,985) (20,444,992,995) (21,303,039,123) 18,336,413,712 (17,151,677,308) 316,444,419 (4,658,005,029)

Interest paid Interest received Corporate income tax paid

Total net cash used in operating activities

(991,745,414)

(3,156,824,206)

Cash flows from investing activities Purchases of fixed assets Proceeds from sales of fixed assets Proceeds from sales of investment Addition of advance payments Addition of deferred charges Proceeds from divestment of subsidiary Total net cash used in investing activities (3,139,144,043) 451,893,174 (10,971,507,261) 3,335,002,000 3,333,796,000 (120,000,000) (50,000,000) 1,454,873,947

32

(2,687,250,869)

(3,017,835,314)

Cash flows from financing activities Bank loans Proceeds from long-term bank loans Cash paid to lease obligations 5,126,193,428 (2,188,033,591) 4,690,727,195 (924,113,987) (2,551,683,860)

Total net cash provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at the end of year

2,938,159,837

1,214,929,348

(740,836,446)

(4,959,730,172)

3,704,620,567

8,664,350,739

2,963,784,121

3,704,620,567