Annual Report 2011

Delivering profitable growth from coal

Annual Report 2011Bumi plc

More information

Bumi is a leading FTSE listed thermal coal group with interests in the largest coal producing assets in Indonesia – the world’s largest seaborne coal exporting nation. Our primary activity is to explore, mine and process coal.

The Bumi plc Annual Report is accessible online at:

www.bumiplc.com

* Bumi uses non-GAAP measures as key financial indicators to assess the underlying performance

of the Group.

Revenue($)

1.4bnUnderlying EBITDA ($)*

427mUnderlying earnings ($)*

33m

Operating profit ($)

280m

Bumi plc | IntroductionAnnual Report 2011

Underlying EBITDA

June 2011 December 2011

0

100

200

300

400

500

($m)

PT Berau and PT Bumi (100% basis)

Coal mined

(millions of tonnes)

0

20

40

60

80

100


Operating profit

($m)

0

50

100

150

200

250

300


• 2011 results: – Underlying EBITDA of $427m – Underlying earnings of $33m

• Operating profit of $280m, driven by higher volumes and stronger coal prices

• Coal mined at PT Berau increased from 17.4m tonnes to 19.4m tonnes; PT Bumi increased coal mined from 60.4m tonnes to 65.9m tonnes

• Major expansion phase underway across the Wider Group

For the purposes of this Annual Report the following definitions are used:

Company or Bumi = Bumi plc

Group = Bumi plc and PT Berau

Wider Group = Bumi plc, PT Berau and PT Bumi

PT Berau or subsidiary = PT Berau Coal Energy Tbk, a company listed on the Indonesia Stock Exchange

PT Bumi or associate = PT Bumi Resources Tbk, a company listed on the Indonesia Stock Exchange

The Introduction, Business Review and Governance sections make up the Directors’ Report in accordance with the Companies Act 2006.

Introduction Business Review Governance Financial Statements Other Information

2 Who We Are

4 What We Do

6 Chairman’s Statement

8 Chief Executive

Officer’s Statement

10 Group Strategy In Action

12 Market Overview

14 Delivering Profitable Growth

18 Operating Review

18 PT Berau

19 PT Bumi

22 Financial Review

25 Capital Projects

26 Reserves and Resources

28 Principal Risks

and Uncertainties

30 Health, Safety, Environment

and Communities

38 Board of Directors

40 Executive Management

41 Governance Report

45 Board Committees

45 Audit Committee

48 Nomination Committee

48 Remuneration Committee

48 Conflicts Committee


and Communities Committee

50 Remuneration Report

62 Other Statutory Information

69 Statement of Directors’

Responsibilities

72 Independent Auditors’

Report – Group

74 Consolidated Income Statement

75 Consolidated Statement of

Comprehensive Income

76 Consolidated Balance Sheet

77 Consolidated Statement

of Changes in Equity

78 Consolidated Statement

of Cash Flows

79 Notes to the Financial Statements

116 Independent Auditors’

Report – Company

118 Parent Company Balance Sheet

119 Parent Company Statement

of Changes in Equity

120 Parent Company Statement

of Cash Flows

121 Notes to the Parent Company

Financial Statements

126 Shareholder Information

DEFINITIONS

Berau

KPC

FBS

Arutmin

Pendopo

Indonesia

Kalimantan

Sumatra

Jakarta

The Wider Group’s coal operations are located in East and South Kalimantan, Indonesia. The majority of the mines are situated within 30 kilometres of the coast from where coal is shipped to key Asian destinations.

* CCoW denotes Coal Contract of Work which permits the undertaking of coal operations

for a defined period.

Main customer areas Operations

PT Berau asset PT Bumi asset

Arutmin Type: Thermal coal Concession area: 70,153haTotal reserves: 410MtCCoW* until: 2019

Pendopo Type: Thermal coal Concession area: 17,840haTotal reserves: 687MtCCoW* until: 2039

Fajar Bumi Sakti Type: Thermal coal Concession area: 9,054haTotal reserves: 12MtCCoW*: 2018/2028

Berau Type: Thermal coal Concession area: 118,400haTotal reserves: 447MtCCoW* until: 2025

Kaltim Prima Coal Type: Thermal coal Concession area: 90,960haTotal reserves: 1,292MtCCoW* until: 2021

2 Bumi plc | IntroductionAnnual Report 2011

Who We Are

1. Mainland China 49.4%

2. Indonesia 14.7%

3. Taiwan 13.7%

4. South Korea 8.5%

5. India 8.4%

6. Hong Kong (SAR of China) 5.0%

7. Japan 0.3%1

2

3

4

56

7

PT Berau*

1. Japan 22.4%

2. India 16.3%

3. Mainland China 15.5%

4. Indonesia 11.9%

5. Taiwan 8.3%

6. Europe 7.6%

7. Malaysia 7.1%

8. Philippines 4.1%

9. Hong Kong (SAR of China) 3.6%

10. Thailand 2.0%

11. South Korea 1.2%

1

2

34

5

6

7

89

1011

PT Bumi*

Thermal coal100% basis

(million tonnes)Bumi plc

economic interest %Bumi plc attributable share (million tonnes)

PT Berau

Proven 159 76.2% 121

Probable 288 76.2% 220

Total reserves 447 76.2% 341

PT Bumi

Proven 1,225 19.9% 244

Probable 1,176 21.9% 258

Total reserves 2,401 20.9% 502

Wider Group 2,848 29.6% 843

Note: Reserves are as at 31 December 2011.

For further reserves information see pages 26 to 27.

* 2011 calendar year.

Overland Conveyor/ Power Plant

Overland Conveyor

Q2 2012

32m

Three 18MW Power Stations

Q1 2013

–

Overland Conveyor/Coal Processing Plant

Q2/Q3 2012

14m

2012/15

10m

Project

ExpectedCompletion

Production volume (tonnes per annum)

KPC KPC Arutmin

PT Berau PT Bumi

3

Introduction

COAL RESERVES

MAJOR CAPITAL PROJECTS

CUSTOMERS

(In million tonnes)

2005 2006 2007 2008 2009 2010 2011 2012F 2013F

524

75%

605

70%

629

69%

646

69%

655

64%

714

59%

760

57%

815854

25%

30% 31% 31% 36%41%

43%

Indonesia

Source: Barclays Capital

Seaborne thermal coal market

Rest of the world

(US$/tonne)

2001 2003 2005 2007 2009 2011

50

100

150

200

21.3%26.8%

31.9%

68.1%

78.7%73.2%

Source: Bloomberg

Historical coal spot price (FOB Newcastle)

optimising its coal asset base to attain best in class performance across all operations. An operational benchmarking study across all the coal businesses, including a review of contractor performances, is underway. The aim of the benchmarking study is to unlock value from existing assets through cost and productivity improvements which will further drive shareholder value.

PT BerauPT Berau is the fifth largest coal producer in Indonesia. PT Berau has three principal open cut mining operations in its concession area of northeastern Kalimantan, namely Lati, Binungan and Sambarata. Production of thermal coal is blended to adjust the overall quality grade of the coal, with calorific values ranging from 5,000 kcal/kg to 5,700 kcal/kg (on a “gross as received” basis) for use in coal fired power plants.

PT Berau’s coal mined in 2011 amounted to 19.4m tonnes, an increase of 12% over 2010. Its key markets are all located in Asia and its customers are mainly utility companies and coal trading entities.

In 2011, PT Berau derived 15% of its total revenue from domestic sales and the balance from export sales. PT Berau subcontracts all of its mining, barging, drilling and blasting operations. This allows it to minimise capital expenditures and working capital requirements and to focus on exploration, mine planning, supervision and sales and marketing. PT Berau works closely with its mining contractors, including BUMA and Saptaindra Sejati, which undertake land clearing, overburden removal, coal excavation and hauling activities.

Once the coal is mined, crushed and stockpiled, contractors transport the coal by barge to a transhipment area at Muara Pantai in the Sulawesi Sea located approximately 50 to 100 kilometres from the ports at Lati, Suaran and Sambarata. At Muara Pantai, higher energy coal from the Sambarata mine is blended with coal from the Lati and Binungan mines.

PT Berau’s level of production is set to increase significantly in the near term. A number of expansion projects are underway including a new overland conveyor and the upgrading of existing coal handling facilities such as its barge loaders and crushers at the Lati coal handling facilities. Construction of a new crushing line and stockpile were completed in May 2011. PT Berau is forecast to increase coal mined by 50% to 30m tonnes per annum by 2014. Coal mined in 2012 is forecast to be 23m tonnes.

Bumi plc is a FTSE listed thermal coal producer with one of the largest organic expansion plans in thermal coal.

StrategyBumi plc is a leading thermal coal company, with interests in the largest coal-producing assets in Indonesia, the world’s biggest exporter of thermal coal. The Wider Group’s key assets are PT Berau, which is the country’s fifth largest coal producer, and a 29% interest in PT Bumi, which is the biggest coal producer in Indonesia. Both PT Berau and PT Bumi have cost competitive positions in thermal coal, with all mining operations situated in the lower half of the cost curve. Bumi plc’s strategy is to create a leading thermal coal champion with a focus on executing one of the largest organic expansion plans in thermal coal. The Wider Group’s coal mined is forecast to increase from the current level of 85m tonnes to 140m tonnes by 2014.

A key focus of the strategy is simplifying Bumi plc’s structure, reducing levels of indebtedness and funding costs across the Wider Group, and integrating and


What We Do

PT BumiPT Bumi is the largest thermal coal producer in Indonesia. Its principal coal operations are Kaltim Prima Coal (“KPC”) and Arutmin, both located in Kalimantan.

The largest operation within PT Bumi is KPC, which operates in East Kalimantan. KPC’s two principal mining areas are Sangatta and Bengalon. The Sangatta mining area is close to the port facilities at Tanjung Bara, which is linked to the mine by an overland conveyor. The Bengalon mining area is also close to the coast, being linked to its port facilities by a haul road.

PT Bumi’s second largest operation, Arutmin, operates in a concession area in the southeast of Kalimantan and has seven mines, namely the Senakin, Satui, Mulia, Asam Asam, Batulicin, Sarongga and Kintap mines, all strategically located near Arutmin’s port facility, North Pulau Laut Coal Terminal.

PT Bumi mines a substantial portion of the coal it produces through mining contractors. At KPC, approximately 60% of production is mined through three contractors, Pamapersada (“PAMA”), Thiess and Darma Henwa with the balance mined by KPC itself. At Arutmin all the production is mined through contractors, including Thiess, BUMA, Darma Henwa, PAMA and Cipta Kridatama. Around 88% of production for PT Bumi is exported, primarily to Asia, with the balance going to domestic sales.

PT Bumi’s calorific values range from 4,200 – 6,700 kcal/kg (on a “gross as received” basis).

Both KPC and Arutmin have competitive transportation costs with the majority of operations located within 30 kilometres of the coast. As a result of this and its competitive cost base, all operations are situated in the lower half of the cost curve. The proximity of primary coal markets in Asia provides PT Bumi with an additional freight cost advantage over competitors in Australia and South Africa.

PT Bumi is set to increase production significantly over the near term. The largest portion of the higher output will come from KPC, where production is

expected to increase over the near term from 41m tonnes to 70m tonnes, a 70% increase. The increase will be achieved by stepping up owner operated and contractor mining activities, the construction of a new coal crusher, three 18MW power stations and a new overland belt conveyor.

At Arutmin, three expansion projects involving construction of port facilities, overland belt conveyors and coal processing plants will see coal mined increasing from 25m tonnes to 40m tonnes over the near term.

Coal mined for PT Bumi in 2012 is expected to be 75m tonnes.

Bumi Resources Minerals (“BRM”)

BRM is an exploration company with an interest in one operating mine and a number of exploration projects. BRM is listed on the Indonesia Stock Exchange and is 87% owned by PT Bumi. For more information please refer to page 21.

BUSINESS MODEL

We aim to become the leading UK listed thermal coal producer with world class coal mining assets which will deliver superior shareholder returns over the long term. Our focus is on assets which have advantaged cost positions, clear expansion profiles and long lives. Through our subsidiary, PT Berau, we are pursuing a model that drives sharing of best practice and the pursuit of synergies across the Wider Group such as benchmarking and integrating our supply chain. The use of a number of mining contractors allows for efficient use of capital and diversifies our mining risk profile. We invest significant amounts of expansionary capital into developing new mines and infrastructure to further exploit our reserves, at the lowest cost, and extend the mine life. We also regard our performance in health, safety, the environment and community affairs as a key element of our operational performance. We believe thermal coal prices are forecast to remain strong over the medium term with continued high levels of demand from Asia where the overwhelming majority of our customer base is concentrated. These attributes, together with strong governance and risk management, allow us to support the creation of long term value for all our stakeholders.

5

Introduction

Indra Bakrie Chairman

I am delighted to announce that, in our first year, Bumi plc has made significant progress in putting together one of the largest thermal coal businesses in the world. It has been an exciting and productive 12 months, during which time we have started to put in place the foundations for long term commercial success.

Throughout 2011 we delivered high levels of performance and met our volume targets. We assembled a strong, independent Board comprising directors with extensive commercial experience across diverse nationalities. And we are executing on our strategy for delivering value to our stakeholders and investors.

The creation of a FTSE listed coal businessIn November 2010, Vallar plc announced its intention to acquire interests in PT Bumi and PT Berau, Indonesia’s largest and fifth largest coal producers respectively. Through these transactions, which were completed in March and April 2011 respectively, we created a London listed Indonesian coal champion at a cost of $3.4 billion. We attained our premium listing in June 2011, and in December 2011 we entered the FTSE index.

With our interests in PT Berau and PT Bumi, we have created, on a 100% basis, the largest thermal coal producer in the world and we have acquired assets with some of the lowest operating costs in the

sector. This is in part due to the unique location of the mines, which are mostly within 30 kilometres of the coast – a geographical advantage. The assets also maintain a competitive edge over other coal producers in terms of freight and shipping costs.

A clear strategyOur vision is to become the leading UK listed thermal coal producer through the development of our world class asset base.

The main thrust of our strategy is to deliver on what is acknowledged to be the most significant expansion programme in the industry. In 2011, PT Berau and PT Bumi mined 85m tonnes of thermal coal, and this is planned to increase to around 140m tonnes by 2014. PT Berau and PT Bumi are currently on track to achieve this stated target, and a significant amount of new infrastructure is being installed in the key operating units of PT Berau, KPC and Arutmin.

Another key aspect of our strategy focuses on optimising our asset base. Although we occupy a very competitive cost position, with the majority of operations in the first or second cost quartiles, we believe there is scope to further improve the way we operate. To this end, in August 2011 we announced a Group wide benchmarking review of all our coal mining operations.

The final strand of our strategy is to lower the Wider Group’s underlying level and cost of debt. We recognise the need to lower the net debt position of our associate, PT Bumi, and are exercising our influence to address this. In October 2011, PT Bumi announced it would reduce its debt levels by recouping certain loans and investments and in November 2011 it refinanced $600m of the China Investment Corporation (“CIC”) debt, thereby reducing its annual interest expense.

Corporate governanceThe UK Corporate Governance Code (the “Code”) calls for company chairmen to report to shareholders directly on governance matters and this can be found in our Governance Report on page 41 where we demonstrate our commitment to pursuing the highest standards of corporate governance.

The Board’s agenda this year was shaped by the creation of a FTSE listed coal champion and to ensure Bumi plc has an appropriate range and balance of skills, experience and background on the Board. Our Non-Executive Directors have made themselves available, often at short notice, when we have had to hold additional Board and Board Committee meetings.

“ We created a London listed Indonesian coal champion with the foundations for long term commercial success.”

“ Our vision is to become the leading UK listed thermal coal producer.”


Chairman’s Statement

Each of them has been unstinting in the time they have been prepared to commit to the Company. In accordance with the recommendations of the Code, all of the Directors will stand for re-election in 2012, with the exception of James Campbell and Badung Tariono who will be retiring at the AGM. I wish to thank both James and Badung for their hard work and wish them well for the future.

We are committed to ensuring that we, as a Board, act in the best interests of all our shareholders. We recognise that the shareholding structure of the Company requires us to ensure that the interests of all shareholders are well represented in the proceedings of the Board and the composition of the Board, together with the establishment of a Conflicts Committee, is evidence of the steps we have taken to achieve this.

Due to ill health, our CEO, Ari Hudaya, has not been able to attend all the Board meetings this year. As a result, the Board appointed Nalin Rathod to take over as CEO with effect from 26 March 2012. Nalin has over 20 years’ experience in the Indonesian coal business. On behalf of the Board, I wish to thank Ari for all his hard work in successfully launching Bumi plc and wish him a speedy return to full health.

On 30 December 2011, PT Bakrie & Brothers Tbk announced that it and Long Haul Holdings (together known as “the Bakrie Group”), which had been the joint owners of a 47.6% stake in Bumi plc, sold half of the stake to PT Borneo Lumbung Energi & Metal Tbk (“PT Borneo”), an Indonesian listed coal company. The Bakrie Group and PT Borneo now jointly own the 47.6% stake in Bumi plc.

As a result of the above changes, Samin Tan became Chairman of Bumi plc and Nathaniel Rothschild and I will remain as Non-Executive Directors with myself as Co-Chairman from 26 March 2012. At the same time Scott Merrillees, a director of PT Borneo, became Chief Financial Officer, taking over from Andrew Beckham who left the Board on 26 March 2012. On behalf of the Board, I would like to welcome Samin, Nalin and Scott and also to thank Andrew for all his efforts during the year.

Health, Safety, Environment and CommunitiesThe Board regards the Group’s performance in health, safety, environmental and community affairs as a key element of its operational performance. To oversee this key area the Company has established a specific committee, whose membership includes an experienced technical advisor, and a report of the Group’s activities can be found in the HSEC section on page 30. Our focus remains on prioritising the health and safety of our employees, minimising the Group’s environmental impact and engaging constructively with communities to create lasting economic and social value.

Having had zero fatalities at PT Berau for the last three years the most disappointing aspect of this year has been safety, with four fatalities in 2011. The Board is committed to zero harm. All fatalities in the Company and its subsidiary’s operations are required to be reported at Board meetings and PT Berau is separately reviewing its health and safety procedures and operations in order to ensure that safety is, and is seen as being, a key indicator of successful operational management.

I would like to thank our management and all our employees for their hard work during 2011. Their contribution has helped to make our first year of business a real success and we look forward to building on the great work and progress we have achieved so far.

Lastly, I welcome the appointment of Samin Tan as Bumi plc’s new Chairman and wish him all the best in taking Bumi plc forward to the next stage.

Indra BakrieChairman

Samin Tan was appointed as Chairman of Bumi plc on 26 March 2012, replacing Indra Bakrie. He is the President Director of Renaissance Capital. Between 2007 and 2011 Samin headed PT Borneo as its President Director. Prior to this, he was Deputy Managing Partner of the Indonesian consulting practice of Deloitte Touche and Head of the Indonesian tax practice of Deloitte Touche.

7

Introduction

In this, our first year of existence as Bumi plc, I am pleased to report a strong operating and financial performance for 2011. Thanks to increased production volumes and higher realised thermal coal prices, we achieved an operating profit of $280m and underlying earnings of $33m. It is an operating performance which everyone at Bumi plc should be extremely proud of.

Performance against strategyOur aim is to be the leading UK listed thermal coal producer. As outlined by our Chairman in the introduction to this report, we have devised a clear strategy in support of this goal which focuses on:

– Delivering sector leading growth – Optimising our asset base – Reducing overall levels and cost of debt

In 2011 we performed well in each of these core strategic areas.

Delivering sector leading growthThe Wider Group is currently undertaking one of the largest expansions in thermal coal. This will see total volumes of coal mined on a 100% basis rising from 85m tonnes in 2011 to 140m tonnes in 2014, an increase of over 60%. Over this period PT Berau will increase coal mined from 19.4m tonnes in 2011 to 30m tonnes, and PT Bumi from 66m tonnes to 110m tonnes.

To date, we are able to report good progress against these targets. In 2011, PT Berau increased coal mined by 2m tonnes to 19.4m tonnes, an increase of 12%, and PT Bumi increased production by 5.5m tonnes to 66m tonnes, an increase of 9%.

At PT Berau the expansion plans are on track with approval to construct a 42 kilometre overland conveyor at Binungan.

At PT Bumi’s KPC operation, work began on the Sangatta expansion. The second overland conveyor at KPC is under construction and should be completed in the first half of 2012. Likewise, the Melawan crusher and conveyor are on track for completion in 2012, and work has now commenced on upgrading the Bengalon facilities.

At Arutmin, construction of the West Mulia and Asam-Asam coal processing plants and conveyors is underway, with completion expected by the second half of 2012.

Optimising our asset baseIn August 2011 we began a benchmarking review of all our major coal operations. The aim of the exercise is to maximise operational and cost efficiencies at all mines and the results of the study will be implemented across the Wider Group. The review will also enable us to benchmark performance and share best practice.

Reducing overall cost and level of debtLevels of net debt vary across the Wider Group. Our subsidiary, PT Berau, had net debt of $291m as at 31 December 2011. PT Berau successfully launched a $500m bond at a fixed rate of 7.25% in March 2012 to refinance an existing debt facility, as well as to fund a capex programme to construct an overland conveyor and related power plant.

At PT Bumi, net debt stands at $4.2 billion. During the year PT Bumi made progress in refinancing a portion of this debt and identifying further ways to reduce overall levels of indebtedness. In November, PT Bumi announced they had completed repayment, two years ahead of schedule, of $600m of the $1.9 billion CIC debt. The amount was refinanced with the China Development Bank at LIBOR+ 6.7%. The effect of this debt refinancing will reduce PT Bumi’s annual interest expense by around $72m. It also expects to repay early the remainder of the $1.3 billion CIC debt in October 2012 ($600m), and in October 2013 ($700m).

“ I am pleased to report a strong operational performance for 2011 thanks to increased production volumes and higher thermal coal prices.”

“ The Wider Group is currently undertaking one of the largest expansions in thermal coal.”

Ari Hudaya Chief Executive Officer


Chief Executive Officer’s Statement

In addition, in 2011 PT Bumi reached an agreement on the repayment to PT Bumi of a $231m investment with Recapital in the first half of 2012. It was also agreed that a $251m loan to Bukit Mutiara, another Recapital company, would be repaid, half in 2012 and the balance in 2013.

Bumi Resources Minerals (“BRM”) In June we announced a proposed restructuring involving the acquisition of 75% of BRM, a diversified base metals exploration company, for $2.1 billion from PT Bumi. Due to ongoing market uncertainties the proposed acquisition did not proceed.

Health, Safety, Environment and Communities We believe that running our business in a socially and environmentally responsible way is fundamental to our licence to operate.

In terms of safety, we had a disappointing performance at PT Berau where we recorded four contractor fatalities. Any loss of life is totally unacceptable and PT Berau is currently reviewing its health and safety procedures.

OutlookWhile the global economic recovery continues to be fragile, there is increasing evidence of some improvement in fundamentals. Recent data indicates that Chinese GDP is expected to grow at around 7% for 2012. Improving economic data from the US is also encouraging. As such, while European industrial activity remains weak, global demand for key commodities remains robust.

In terms of thermal coal, the demand picture looks well supported for the Pacific region, with growing demand for lower calorific value coal from Indonesia forecast for India and China. While the Newcastle price has fallen in the final quarter of 2011, with weak demand in Europe affecting even Asian markets, growing demand from India and China is expected to support current pricing in the near term, particularly as restocking for the summer period begins in the second quarter. Readily available natural gas in the US is pushing some thermal coal volumes into the Atlantic region, already impacted by weak European coal markets.

With one of the strongest growth profiles in the industry over the next few years, the Wider Group expects to be a major beneficiary of strong thermal coal fundamentals over the medium and long term.

Lastly, I would like to thank all our employees for their hard work during the year and wish my successor, Nalin Rathod, all the best for the future.

Ari HudayaChief Executive Officer, Bumi plc

Nalin Rathod was appointed as CEO of Bumi plc on 26 March 2012, replacing Ari Hudaya. He is currently President Commissioner of KPC and Arutmin and a Commissioner of PT Bumi, BRM and PT Gorontalo Minerals. He was also managing director of Capital Managers Asia Pte Ltd, a financial advisory firm operating in Asia. Nalin has over 20 years’ experience in the Indonesian coal mining sector.

GrowthThe Wider Group is undertaking one of the largest expansions in thermal coal. This will see PT Berau and PT Bumi increasing output significantly.

DeleveragingA key goal is to reduce the cost and levels of indebtedness at PT Berau and PT Bumi. PT Bumi has refinanced $600m of $1.9bn debt owing to the China Investment Corporation which will reduce PT Bumi’s annual interest expense.

OptimisationA major benchmarking exercise across the Wider Group is underway. The aim is to maximse operational and cost efficiencies.

9

Introduction

With our close proximity to the fastest growing thermal coal markets in Asia, we aim to grow production significantly over the near term

We are working towards best in class performance for all operations

– Our location means that we have a freight distance advantage over competitors situated in Australia, South Africa and Colombia

– Thermal coal imports are set for robust growth in India and China driven by increased demand for coal fired power stations

– Historical coal spot price trends over the past 10 years show an upward trend

– For more information on market trends see pages 12 and 13

– Major drive to enhance operating efficiencies

– Operational benchmarking study underway, including review of contractor performances

– Review of supply chain across all businesses, covering existing operations and expansion programmes

– Review of health and safety procedures by PT Berau following four contractor fatalities in 2011

– Intention to reduce the Wider Group’s cost and level of overall debt

– PT Berau issued $500m bond at fixed rate of 7.25% in March 2012 to repay $340m of existing debt and finance capital projects

– PT Bumi, our 29% owned associate, to receive $231m from investment in Recapital in H1 2012 and $251m in 2012/13

• First $600m tranche of CIC debt refinanced by PT Bumi in October 2011 at LIBOR + 6.7%

• Cost of debt for PT Bumi decreased from 14.5% in 2010 to 12.2% in 2011

Bumi plc’s strategy is to create the leading UK thermal coal champion with a focus on executing one of the largest ever organic expansion plans in thermal coal.

Reducing the overall level of indebtedness and cost of debt in the Wider Group


Strategic Goals Commentary

Gro

wth

Op

timisa

tion

Dele

vera

gin

g

Group Strategy In Action

19.417.4

14.313.1

‘11‘10‘09‘08

1,657

1,055800

631

‘11‘10‘09‘08

536

310291146

‘11‘10‘09‘08

32.429.436.4

23.1

‘11‘10‘09‘08

231

330285

182

‘11‘10‘09‘08

564

338299153

‘11‘10‘09‘08

Coal mined (mt)

Revenue($m)

Operating profit($m)

Operating margin(%)

Net debt($m)

EBITDA($m)

12%

57%

73%

3%

-30%

67%

Allows us to measure our growth targets

Links to our growth goals

Enables us to measure our growth and optimisation targets

Links to both our growth and optimisation goals

Net debt and cost of debt measures how we are managing our capital structure

EBITDA is a key driver to reduce net debt

* 100% of PT Berau under local management reporting, in accordance with Indonesian GAAP.

11

Introduction

Assessing progressKPI* PERFORMANCE LINK TO STRATEGY

The Wider Group also sells a significant amount of coal domestically to the local Indonesian power utility.

The international coal markets are highly competitive. Principal competitors in Asia include large coal producers from Australia, South Africa and China. The Wider Group has competitive advantages over its Australian and South African competitors for its primary customers in Asia given its proximity to these customers. The Wider Group also competes against other Indonesian producers. The global coal markets and in particular, Asian coal markets, are expected to become increasingly competitive as a number of new mines and processing facilities are developed in different countries. However, the positive demand conditions over the medium term are expected to support the Wider Group’s production profile going forward.

PricingThe long term pricing trends for internationally traded coal are cyclical and subject to fluctuations. Unlike most other major commodities, there is no single global

Thermal coal prices are forecast to remain strong over the medium term, with continued high levels of demand from Asia.

Asia driving demand for thermal coalCoal is the cheapest and most easily accessed energy source in the world. Coal currently provides around 40% of the world’s electricity and is projected to supply over half of the world’s electricity needs by 2030. China is the world’s largest consumer of thermal coal, accounting for nearly half of the world’s coal production. Coal accounted for 71% of China’s energy needs in 2008 – more than three times the share of the US. China’s rapid pace of urbanisation and growing middle class has fuelled this growth. Yet on a relative basis the US consumes almost four times the amount of electricity per capita than China. In India, coal accounts for around two thirds of electricity generation. The demand for Indian electricity has grown at a faster rate than investment in coal production capacity. As a consequence India’s level of coal imports have almost tripled in five years.

The Wider Group is one of the largest exporters of thermal coal in the world. The overwhelming majority of the Group’s customer base is concentrated in Asia, in the form of power utility and coal trading companies.

The new overland conveyor at KPC’s Sangatta mine has been successfully installed, which will increase capacity by 32m tonnes per annum.


Market Overview

China imports (m tonnes)

0

50

100

150

200

129

49

Source: IEA, Antique

Thermal Coal Coking Coal

1990 2000 2005 2006 2007 2008 2009 2010

Thermal Coal

1990 2000 2005 2006 2007 2008 2009 2010

India imports (m tonnes) have grown at a steady pace over the last five years

0

10

20

30

40

50

60

70

80

90

60

30


Coking Coal1. China 48%

2. USA 15%

3. Europe 14%

4. India 8%

5. Others 5%

6. Japan 3%

7. Russia 3%

8. Australia 1%

9. Indonesia 1%

10. Others 2%

1

2

3

4

56

7

8910

Coal consumption by geography (%)


pricing standard for coal. As a result, the prices vary significantly in different geographical markets and according to product type. Each brand of thermal coal has distinctive features, mainly in terms of calorific value, moisture, ash and sulphur content. These features, and overall quality, dictate selling prices.

Across all markets, the Wider Group employs international marketing agents to sell its coal products. For PT Berau, this is Noble. PT Bumi uses Glencore as its marketing agent and Mitsubishi for its Japanese sales.

Global economic summary and outlookIn 2011, sovereign debt issues loomed large, principally in Europe and the US. Governments in these regions have been faced with difficult decisions on how to reduce budget deficits. The Eurozone, in particular, faced significantly higher borrowing costs, with bond yields rising in certain countries. The emerging market economies have not been left unscathed as levels of demand weakened, and China in particular saw slower levels of growth.

Thermal coal prices are forecast to remain strong over the medium term, with continued high levels of demand from Asia. India is expected to increase its levels of thermal coal imports over the next few years, and China’s electricity demand is also expected to grow significantly.

INDIA AND CHINA: KEY DRIVERS FOR THERMAL COAL

In India and China, coal fuelled power generation provides the majority of electricity to the grid. Recent power shortages in China have underlined the need for further investment in coal fired power generating capacity, with Chinese local producers struggling to meet demand. In India, persistent shortages of electricity have resulted in new capacity additions, with greater levels of thermal coal imports.

13

Introduction

The Wider Group, on a 100% basis, has one of the strongest thermal coal growth pipelines in the world. Organic growth is a critical part of our strategy and through PT Berau and PT Bumi the Wider Group is now commencing one of its most active phases in expanding production. With a strong pricing outlook for thermal coal, driven in particular by higher levels of electricity demand from Asia and other emerging markets, the organic growth profile will help meet this increased level of thermal coal demand.

Indonesia: a key producerIndonesia is uniquely positioned to meet the burgeoning demand for seaborne thermal coal, particularly for Asia. The country has emerged as the world’s largest exporter of thermal coal, supplying around one third of the seaborne market. Indonesia has been a natural source of coal for India, as well as Japan and China, due to its location and abundant reserves. In China the low sulphur, low ash Indonesian coals are ideal for blending with local coals and in India, the new coal fired electricity generating plants will be optimised around the use of Indonesian coal. In 2010, India sourced 66% of its imported thermal coal from Indonesia.

The Wider Group has an unrivalled suite of low cost thermal coal assets, ideally located in east and south Kalimantan, mostly located within 30 kilometres of the coastline.

PT BerauPT Berau’s coal mined in 2011 amounted to 19.4m tonnes, an increase of 12% over 2010. PT Berau’s level of production is set to increase significantly in the near term. A number of expansion projects are underway including the construction of a 42km overland conveyor at Binungan and the upgrading of existing coal handling facilities, such as its barge loaders and crushers at the Lati coal handling facilities. Construction of a new crushing line and stockpile was completed in May 2011. PT Berau is forecast to increase coal mined by 50% to 30m tonnes per annum by 2014. Coal mined in 2012 is forecast to be around 23m tonnes.

PT BumiPT Bumi is set to increase production significantly over the near term. In 2011, KPC and Arutmin between them produced 65.7m tonnes of thermal coal. The largest portion of the higher output will come from

PT Berau’s production is set to increase significantly in the near term. A number of expansion projects have commenced, including a new overland conveyor at PT Berau’s Binungan mine and the upgrading of existing coal handling facilities.

A major expansion programme across the Wider Group is underway over the next few years.


Delivering Profitable Growth

PT Bumi

2007 2008 2009 2010 2011 2012E 2013E 2014E

Volumes set to grow significantly

* Based on 100% output in PT Berau and PT Bumi

0

70

140

30

110

PT Berau

India

‘01 ’02 ‘03 ’04 ‘05 ’06 ‘07 ’08 ‘09 ’10

Coal consumption growth (bn tonnes) in India and China over 2000-2010

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


China

KPC, where coal mined is expected to increase over the near term from 41m tonnes to 70m tonnes, a 70% increase. The increase will be achieved by stepping up both owner operated and contractor mining activities as well as the construction of a new coal crusher. A second overland conveyor has been successfully installed at Sangatta which will increase capacity by 32m tonnes per annum. As a result of the second conveyor, as well as the new coal crusher and additional conveyors between pits, KPC’s

coal mined is forecast to increase by 10% in 2012, from 41m tonnes in 2011 to 45m tonnes in 2012.

At Arutmin, three expansion projects involving construction of port facilities, overland belt conveyors and coal processing plants will see coal mined increasing from 25m tonnes to 40m tonnes per annum in the near future. Coal mined is expected to increase from the current rate of 25m tonnes per annum to 30m tonnes in 2012, an increase of 20%.

Above: The new overland conveyor (left) at KPC’s Sangatta mine runs parallel to the existing conveyor (right). Both conveyors transport coal to the Tanjung Bara Coal Terminal from where it is shipped to key Asian destinations.

15

Introduction

Business Review

Business Review

1718 Operating Review

18 PT Berau

19 PT Bumi

22 Financial Review

25 Capital Projects

26 Reserves and Resources

28 Principal Risks

and Uncertainties


and Communities

19.417.4

14.313.1

‘11‘10‘09‘08

PT Berau’s assets are located in the north-eastern part of Kalimantan and consist of three operating mines, namely Lati (which is the largest mine, accounting for circa 56% of PT Berau’s output), Binungan and Sambarata.

PT Berau recorded a strong operating performance for 2011. Despite high levels of rainfall, PT Berau mined 19.4m tonnes of coal, a 12% increase over 2010, and recorded sales of 20.0m tonnes of coal. The increase in coal mined was mainly due to the opening of new pits (Lati East 2, Binungan pit H Blok 7 East; Parapatan).

PT Berau’s average selling price for the year was $81.4/tonne (2010: $59.6/tonne). Production cost of sales at PT Berau was $38.0/tonne (2010: $29.1/tonne). The increase in the cost of sales from 2010 was mainly due to an increase in the stripping ratio, greater haulage distances (between the coal mined and the coal processing plant), higher fuel prices, and higher contractor rates. The average stripping ratio for the period was 9.5 bcm/tonne (2010: 8.2 bcm/tonne).

In terms of sales by destination, 49% of sales went to mainland China, 14% to Taiwan and 22% to the rest of Asia, with the remaining 15% sold domestically into Indonesia.

In terms of PT Berau’s coal reserves, a new JORC report published in June 2011 showed total reserves increasing by 35% to 467m tonnes at 31 December 2010, from 346m tonnes at 31 December 2009.

Coal mined(millions of tonnes)

+ 11.8%

PT Berau: Production Data

2011 2010

Coal mined (millions of tonnes) 19.4 17.4

Sales (millions of tonnes) 20.0 17.1

FOB average selling price ($/tonne) 81.4 59.6

Production cost of sales ($/tonne) 38.0 29.1

Stripping ratio (bcm/tonne)1 9.5 8.2

1 Bank cubic metres (bcm) of overburden removed

per tonne of coal mined.

Key facts

• 118,400 Ha • 1st Generation CCoW • CCoW expires 26 April 2025

Mines • Lati • Binungan • Sambarata

Main brands of coal • Agathis • Sungkai • Sungkai HS • Mahoni • Mahoni B • Eboni HS

PT BERAU

PT Berau has increased levels of coal mined over the past four years by almost 50%, from 13 million tonnes in 2008 to over 19 million tonnes in 2011.

18 Bumi plc | Business ReviewAnnual Report 2011

Operating Review

41.039.340.337.5

‘11‘10‘09‘08

The largest operation within PT Bumi is KPC, which operates in East Kalimantan. KPC’s two mining areas are Sangatta and Bengalon. The Sangatta mining area is close to the port facilities at Tanjung Bara, which is linked to the mine by an overland conveyor. The Bengalon mining area is also close to the coast, being linked to its port facilities by a haul road.

Key facts

• 90,960 Ha • 1st Generation CCoW • CCoW expires 31 December 2021

Mining areas • Sangatta • Bengalon

Main brands of coal • Prima • Pinang • Melawan


+ 4.3%

KPC: Production Data

2011 2010








KPC mined 41.0m tonnes of coal in 2011, a slight increase over 2010, despite a 20-day crusher shutdown at Bengalon, a contractor strike at Sangatta from 10 November to 27 December and operational issues experienced by a contractor at the Bengalon site. The second half production in 2011 of 22.7m tonnes represented a 24% increase over the first half. KPC’s average selling price of $98.6/tonne was 32% higher than 2010.

Production costs of sales at KPC were $49.1/tonne against $37.2/tonne in the prior year. The main reasons for the increase were a higher stripping ratio, greater distances from the coal mined to the coal processing plant, higher fuel costs, and higher contractor costs.

The average stripping ratio for the year was 12.1 bcm/tonne (2010: 11.7 bcm/tonne).

Bumi plc holds a 29.2% interest in PT Bumi, which in turn owns 65% of KPC, 70% of

Arutmin, 50% of Fajar Bumi Sakti, 85% of Pendopo Energi Batubara, and 87.1% of BRM.

PT BUMI

Kaltim Prima Coal (“KPC”)

Business Review

19

24.720.819.3

15.4

‘11‘10‘09‘08

PT BUMI

Arutmin

PT Bumi’s second largest operation, Arutmin, operates in a concession area in the southeast of Kalimantan and has seven mines, all strategically located near Arutmin’s port facility, North Pulau Laut Coal Terminal.

Arutmin mined 24.7m tonnes of coal in 2011, 18% higher than the prior year, despite the impact of barge delays and idle equipment due to a shortage of qualified operators at its contractors. The increase was mainly due to the reopening of previously closed pits, as well as the opening of new pits. However, this has also led to an increase in the stripping ratio (see table). Arutmin’s average selling price of $83.8/tonne was 34% higher than 2010.

Production cost of sales at Arutmin was $38.7/tonne against $33.9/tonne in the prior year. The increase was mainly due to the higher stripping ratio and higher fuel prices.


+ 18.5%

The average stripping ratio for the year was 10.2 bcm/tonne (2010: 8.1 bcm/tonne). The increase in the stripping ratio was mainly due to the reopening of previously closed pits to take advantage of higher coal prices, and the opening of new pits. The stripping ratio was also impacted by the higher levels of rainfall, resulting in flooding, which led to coal being mined in alternative areas with a greater amount of overburden compared with the prior year.

Arutmin: Production Data

2011 2010








Key facts

• 70,153 Ha • 1st Generation CCoW • CCoW expires 1 October 2019

Mines • Senakin • Satui • Batulicin • Mulia • Kintap (West Mulia) • Asam Asam • Sarongga

Main brands of coal • Satui • Eco Coal • Arutmin • Senakin • Sarongga


Operating Review (continued)

Bumi Resources Minerals (“BRM”)

PT BUMI

Fajar Bumi Sakti (“FBS”)

BRM is 87% owned by PT Bumi and has interests in one operating mine and a number of exploration projects:

– Batu Hijau – a copper-gold mine in West Sumbawa, Indonesia. Batu Hijau is the second largest copper producer in Indonesia. Batu Hijau is majority owned by Newmont Mining (USA) and Sumitomo (Japan). BRM owns a 24% interest through its 75% owned subsidiary PT Multi Daerah Bersaing (giving BRM an 18% economic interest). Production at Batu Hijau was 283m lbs of copper and 318 thousand ozs of gold in 2011.

– Dairi Prima – a zinc-lead mining concession in North Sumatra, Indonesia owned by Dairi Prima, BRM’s 80% owned subsidiary. Dairi Prima’s total resources are estimated at 25.1m tonnes of ore, which includes 11m tonnes of reserves ( JORC standard). Dairi is also one of only a few mines in the world with zinc deposit grades above 11%.

– Gorontalo – a copper-gold mining concession in northern Sulawesi, Indonesia owned by Gorontalo Minerals, BRM’s 80% owned subsidiary. Exploration drilling activities commenced in October 2011 in the concession’s Sungai Mak and Cabang Kiri sites to determine reserves and resources to JORC standard.

– Mauritania – comprising four iron ore concession areas and two phosphate concession areas in Mauritania owned by Bumi Mauritania, BRM’s 60% owned subsidiary, under six exploration

licences. The exploitation permit to develop its Tamagot site was obtained in January 2012.

– Citra Palu – a mining concession for various metals, including gold and molybdenum, in Central and South Sulawesi, Indonesia, held by BRM’s 96% owned subsidiary. Exploration drilling activities started in November 2011 in the concession’s Poboya site, one of the project’s gold prospects, to determine reserves and resources to JORC standard.

– Konblo Bumi – a number of alluvial and kimberlite diamond as well as gold mining concessions in Liberia, held by BRM’s 94% owned subsidiary.

FBS is a 50% subsidiary of PT Bumi. It holds rights to exploit and mine coal in a concession area of 984.50 hectares in Loa Ulung, Kutai Kartanegara, East Kalimantan under a Kuasa Pertambangan (“KP”) issued by the Government of Indonesia. On 10 June 2008, FBS obtained an extension of the KP for a further 10 years. The Loa Ulung operations consist of an open pit mine with 12m tonnes of coal reserves (non-JORC compliant). Two additional development projects (Guruh Putra Bersama (“GPB”) and Ade Putra Tanrajeng (“APT”)) are being evaluated.

Pendopo is an 85% subsidiary of PT Bumi. It has a 17,840 hectare concession area located in Muara Enim, South Sumatra, with a 30-year operating permit, from 5 May 2009 until 5 May 2039. Pendopo has 1,102m tonnes of resources, including 687m tonnes of reserves ( JORC compliant), calculated as at August 2008, which are mainly suitable for power generation.

Pendopo is currently at the development stage, with several types of projects under assessment, including mine-mouth power generation, coal upgrading and coal gasification. On 23 February 2012, Pendopo announced that it had formed a consortium with DH Energy and South Korea’s POSCO Engineering & Construction, to build two 300-megawatt power plants on Indonesia’s Sumatra island, which Pendopo would supply its coal to.

Pendopo Energi Batubara

Business Review

21

Strong revenues of $1,407m and operating profit of $280m. Underlying earnings per share of $0.17, up from a loss of $0.21 in 2010.

Prices and volumes

Seaborne thermal coal prices showed a strong performance in 2011, and were buoyed by strong demand in our key markets of China, India and Japan. Prices are set by reference to the FOB Newcastle coal (“GCNEWC”) index, All Price Index 4 (“API4”) and the Japanese benchmark price and then adjusted for qualitative factors such as calorific value, moisture, ash and sulphur content. The GCNEWC averaged around $122/tonne in 2011, an increase of 23%.

As noted in the Operating Review, PT Berau’s sales volumes for the 12 month period increased 17% to 20m tonnes (2010: 17m tonnes), at an average selling price of $81.4/tonne (2010: $59.6/tonne).

Cost of sales

Cost of sales represents that of PT Berau as it is the only producing subsidiary in the Group. Cost of sales increased mainly due to increased volumes, higher fuel prices and higher stripping ratios. Fuel prices are linked to crude oil prices and the West Texas Intermediate Cushing Crude Oil benchmark (“WTI”) of oil prices averaged $95/bbl in 2011, an increase of 20%.

2011 was a year where Bumi plc transformed from a cash shell to a FTSE 250 mining company through the successful completion of its acquisition of PT Berau and an interest in PT Bumi on 8 April 2011 and 4 March 2011, respectively. This year’s Group results include 10 months’ contribution from those businesses.

The Group changed its presentational currency from GB pounds to US dollars from 1 January 2011 to reflect the fact that the majority of the Group’s costs and revenues are now in US dollars.

Review of financial resultsGroup revenue reflects that of PT Berau only and was $1,407m in the year. Gross profit was $486m, representing a gross margin of 35%.

Group operating profit was $280m and Group profit before finance items and tax was $241m, the difference of $39m being our share of the net loss of PT Bumi. PT Bumi’s results were impacted by early stage project costs expensed in line with Bumi plc Group accounting policies and amortisation of the fair value uplift in relation to the Purchase Price Allocation of $24m.


Financial Review

PT Berau’s average strip ratio increased from 8.2 bcm/tonne in 2010 to 9.5 bcm/tonne in 2011 due to longer coal hauling distances and the opening up of new pits.

Included in cost of sales is the amortisation of mining licences that were fair valued on the acquisition of PT Berau of $83m.

Other operating costs

At a Group level, costs increased year on year due to completion costs of the PT Bumi and PT Berau acquisitions and the costs associated with the proposed acquisition of BRM before the decision not to proceed was taken. In addition, general and administrative and distribution and marketing costs now include costs incurred by PT Berau.

Finance items, tax and other

Net finance costs include a loss of $286m (2010: $62m loss) in relation to the movement on acquisition related financial instruments. This is a non-cash cost that has arisen due to the relative movement in PT Berau, PT Bumi and Vallar plc share prices and the Indonesian rupiah exchange rate between 1 January 2011 and the completion of the acquisitions.

Excluding these items, net finance cost was $70m in the year, reflecting the borrowings of PT Berau.

Although the Group was loss making, the income tax expense was $167m (2010: nil). This is due to the large derivative losses and net finance cost which are not tax deductible, resulting in a profit for tax purposes.

The loss for the year attributable to owners of the parent was $319m, primarily due to the movement in acquisition related financial instruments of $286m, income tax of $167m, share of loss of the associate of $39m and corporate transaction costs of $66m.

Impacting the results is the amortisation of the cost of the mining licenses that have arisen as a result of a Purchase Price Allocation in accordance with IFRS 3. In 2011, the post tax and interest amount charged to earnings was $43m in respect of PT Berau and $24m in respect of PT Bumi.

Underlying earnings and underlying EBITDA

Management believes that underlying earnings and underlying EBITDA more clearly reflects the operating and financial performance of the business. They are calculated in the table opposite.

Acquisitions in the yearBumi plc completed its acquisition of 75% of PT Berau and 25% interest in PT Bumi in the year for consideration of $1.6 billion and $1.8 billion respectively. In June 2011, the investment in PT Berau was increased to 85% through a mandatory cash offer of $214m. By 15 July 2011, the investment in PT Bumi was increased to 29% through a share exchange of 15m Bumi plc shares for 868m shares in PT Bumi. The value of the exchange was $306m.

Management has completed their assessment of the fair value of the assets and liabilities acquired and the Purchase Price Allocation, as set out in Note 13 to the financial statements. In performing this exercise, we have taken a cautious view regarding certain business development assets and allocated zero value to them on acquisition. This has been compensated by a corresponding increase in the value allocated to mining licences. For PT Berau, $75m of business development assets was allocated zero value and for PT Bumi, $247m was allocated zero value.

On 18 May 2011, PT Berau acquired 100% of PT Mutiara Tanjung Lestari (“MTL”), a company incorporated in Indonesia engaged in mining services, for $11m. The whole of the consideration was satisfied in cash and the fair value of the assets acquired was $2m and goodwill of $9m.

Also on 18 May 2011, PT Berau acquired 100% ownership of PT Pelayaran Sandita Parkasa Maritim (“PSPM”), a company incorporated in Indonesia engaged in shipping services, for $8m. The whole of the consideration was satisfied in cash and the fair value of the assets acquired was $7m and goodwill of $1m.

Cash flowCash flows from operations were $435m, 55% above operating profit. Tax paid for 2011 was $255m, mainly due to the increase in taxable profits at PT Berau.

Purchase of property, plant and equipment was $66m, due to the commencement of expansion projects to achieve the Group’s production target of 30m tonnes by 2014.

Net cash paid for acquisitions was $17m, relating to the acquisitions of MTL and PSPM and net cash received of $489m (2010: net cash paid of $739m) relating to the completion of the PT Berau acquisition. Dividends received by the Group were $30m.

Underlying earnings and underlying EBITDA2011 $m

2010 $m

Net earnings (319) (108)

Add back:

Corporate transactions costs 66 32

Movement on acquisition related financial instruments

286 62

Underlying earnings/(loss) 33 (14)

Non-controlling interests 37 –

Taxation 167 –

Finance income (13) (1)

Finance cost 83 –

Depreciation and amortisation

120 –

Underlying EBITDA 427 (15)

Business Review

23

Balance sheetGoodwill arising on the acquisitions of subsidiaries in the year amounted to $1,320m and intangible mining properties were valued at $2,912m at the acquisition date. Similarly, notional goodwill arising on the interest acquired in the associate was $3,862m and intangible mining properties were fair valued at $8,581m, at the PT Bumi level. Both assets were tested for impairment at the year end, and we are satisfied that the carrying values are not impaired. Further details are shown in Note 12 to the financial statements.

During the year, the Company entered into a scheme of arrangement where the share capital of Bumi plc was reduced from $2,150m to $4m and distributable reserves of $2,146m were created.

For 2011, Group net debt includes the net debt position of PT Berau and was $222m, whereas in 2010 there was a net cash position of $324m. Net debt to total capital was 4.6% in 2011 and there was no debt in 2010.

The Group has assessed its cash needs and the Board approved the issue of a $500m bond by PT Berau at a fixed rate of 7.25% which will be used to repay approximately $340m of outstanding bank loans at PT Berau and to fund capital expenditures required for expanding the business.

In line with our stated strategy of deleveraging the Wider Group, the Group has been using its influence to encourage PT Bumi to reduce its debt and interest cost. During the year, the first $600m tranche of the CIC debt was repaid on 8 November 2011, and refinanced with the China Development Bank at LIBOR plus 6.7%, saving an estimated interest cost of $72m a year.

In order to facilitate debt repayment, PT Bumi has reached agreement with Recapital on the repayment to PT Bumi of a $231m investment in the first half of 2012. It was also agreed that a $251m loan to Bukit Mutiara, another Recapital company, would be repaid, half in 2012 and half in 2013.

Capital expenditureThe Group’s capital expenditure of $101m related principally to PT Berau. Expenditure at Lati was on upgrading the crusher and port facilities, at Binungan on upgrading the hauling facilities, at Sambarata to increase the coal-crushing and stock-piling capacities and there were also some land acquisition payments.

Going concernIn assessing the Group’s going concern status the Directors have taken into account the factors set out in the Business Review and Principal Risks and Uncertainties, the Group’s cash balances, borrowings, cash flow projections, current commodity prices and the market’s expectations of future prices. The Directors have also considered the Group’s operating cost profile and its capital expenditure and financing plans.

The Directors, having made appropriate enquiries, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Therefore they continue to adopt the going concern basis of accounting in preparing the financial statements.


Financial Review (continued)

Capital Projects

Projects

Total projected cost (100%)1

Own capital expenditure(100%) Description

PT Berau

Lati $75m $75m Upgrading existing coal handling facilities and construction of additional infrastructure, including a second barge-loading conveyor at Lati Port.

Constructing additional coal processing plant, dredging along the Berau River to increase the capacity of barges, and hard-surfacing and widening the Lati coal-hauling road to accommodate 120 tonne trucks (instead of 30-tonne trucks) in all weather conditions.

Expansions and upgrades expected to be completed by 2013. Coal crushing, stockpiling capacity and barge loading capacity expected to increase from 13m tonnes per annum to 18m tonnes per annum.

Binungan $65m $65m Upgrading coal receiving and stockyard facility, construction of additional infrastructure including a new crushing plant, stockpile, conveyor line and a new 20 kilometre hauling road to support the new pit at Binungan Block 8, scheduled to complete in 2014.

Sambarata $35m $35m Construction of additional infrastructure including a new coal receiving and stockpiling facility and a new coal crusher, expected to complete by 2013.

The coal crushing and stockpiling capacity is expected to increase from the current 3.7m tonnes per annum to approximately 8m tonnes per annum.

OLC and related power plant $300m $300m To transport coal between Binungan Block 8 and the Binungan coal processing plant to Suaran port, with a capacity of 10m tonnes per annum. Expected to complete in stages between 2012 and 2015.

PT Bumi

Kaltim Prima Coal

Power generators $150m – Three 18MW power station. First unit to be commissioned in March 2013, with the final unit to be commissioned in July 2013.

Second OLC and Tanjung Bara Coal Terminal (TBCT)

$135m – Expected to be commissioned in June 2012. This is expected to increase capacity by 32m tonnes per annum.

Melawan crusher and Western OLC

$100m – Expected to be commissioned in December 2012. The crusher and OLC are expected to increase capacity by 20m tonnes per annum.

Barge loading facility extension $20m – Expected to be completed November 2012, with a capacity of 12m tonnes per annum.

Inul workshop and facilities $40m $40m To reduce distance of moving mobile equipments to workshop for maintenance and support new pits being opened at Inul and Kamodo in 2013/14.

Arutmin

Asam-Asam OLC and coal processing plant (CPP)

$50m – Expected commissioning in June 2012. Both OLC and CPP are expected to have a capacity of 14m tonnes per annum.

West Mulia OLC and CPP $45m – Commissioning expected in September 2012. Both OLC and CPP are expected to have a capacity of 14m tonnes per annum.

Continuous barge unloader $45m – The project is expected to be completed in November 2012 and should increase the North Pulau Laut Coal Terminal (NPLCT) capacity to 19m tonnes per annum.

Bumi Resources Minerals

Dairi Prima $370m $370m To complete camp construction, land acquisition, mine access roads, tailings ponds, and infrastructure.

A 1m tonnes per annum concentrator will be constructed between Q4 2012 and Q3 2013.

Mining of ore expected to start Q3 2013, with first concentrate available from Q4 2013.

1 Business units have entered into agreements with contractors, who will carry out the construction of some of these projects,

and subsequently charge a rental fee to the business units for the use of the assets. Therefore, not all of these costs will be

incurred by the business units as their own capital expenditure.

Capital expenditure for the Wider Group in 2012 is expected to be approximately $664m on a 100% basis (Bumi plc share: $277m). This includes $133m for finance leases, and $154m for sustaining capital expenditure.

The table below summarises the key projects that are scheduled to help the Wider Group achieve its expansion programme targets.

Business Review

25

Capital Projects

Thermal coal

MineBumi plc share % Classification

Tonnes (ROM)

(millions) Yield (%)

Marketable tonnes

(millions)Quality

(kcal/kg)

PT Berau

Lati 76.2% Proven 57 100% 57

Probable 99 100% 99

Total 156 100% 156 5,005

Binungan 76.2% Proven 60 100% 60

Probable 150 100% 150

Total 210 100% 210 4,945

Sambarata 76.2% Proven 42 100% 42

Probable 39 100% 39

Total 81 100% 81 5,740

Total 447 100% 447 5,110

PT Bumi

Kaltim Prima Coal

Sangatta (including Bengalon) 19.0% Proven 849 99% 844 5,366

Probable 443 100% 443 4,977

Total 1,292 1,287 5,235

Arutmin

Senakin 20.4% Proven 21 81% 17 6,580

Probable 21 77% 16 6,580

Total 42 79% 33 6,580

Satui 20.4% Proven 51 100% 51 6,500

Probable 7 100% 7 6,310

Total 58 100% 58 6,481

Batulicin 20.4% Proven 5 90% 4 6,360

Probable 19 83% 16 6,380

Total 24 85% 20 6,375

East Mulia 20.4% Proven 31 100% 31 4,320

Probable 16 100% 16 4,120

Total 47 100% 47 4,255

West Mulia 20.4% Proven 51 100% 51 4,160

Probable 73 100% 73 4,030

Total 124 100% 124 4,083

Asam-Asam 20.4% Proven 49 100% 49 4,300

Probable 50 100% 50 4,260

Total 99 100% 99 4,281

ReservesReserves and resources are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, December 2004 (the “JORC Code”), which represents current best practice for reporting reserves and resources. The JORC Code requires the use of reasonable assumptions, including the use of projected long term commodity prices, in calculating reserve estimates.

Reserve and resource information in the tables below is based on information compiled by Competent Persons (as defined by JORC). Each has had a relevant estimation experience and is a member of a recognised

professional body whose members are bound by a professional code of ethics. Each Competent Person consents to the inclusion in this report of information they have provided, which has been used to calculate the reserves at 31 December 2011.

The reserve figures in the following table represent the Life of Mine reserves on a 100% basis, which extend beyond existing licence periods (including CCoWs for coal operations). Metric units are used throughout. The figures used in the calculations are often more precise than the rounded numbers shown in the tables, hence small differences might result if the calculations are repeated directly using the figures in these tables.


Reserves and Resources

Thermal coal

MineBumi plc share % Measured Indicated Inferred

Tonnes (MTIS)

Quality (kcal/kg)

PT Berau

Lati 76.2% 115 185 134 434 5,082

Binungan 76.2% 133 862 235 1,230 4,622

Sambarata 76.2% 74 90 73 237 5,850

322 1,137 442 1,901 4,883

PT Bumi

Kaltim Prima Coal

Sangatta (including Bengalon) 19.0% 3,520 3,083 2,525 9,128 5,969

Arutmin

Senakin 20.4% 80 110 215 405 6,212

Satui 20.4% 142 68 50 260 6,795

Batulicin 20.4% 46 63 62 171 6,404

East Mulia 20.4% 78 69 133 280 5,153

West Mulia 20.4% 63 66 174 303 5,094

Asam-Asam 20.4% 80 149 106 335 5,022

Sarongga 20.4% 20 27 251 298 4,300

Non-operating 20.4% 33 64 106 203 5,571

Total 542 616 1,097 2,255 5,507

Fajar Bumi Sakti

Tabang 14.6% 124 239 211 574 3,993

Pendopo Energi Batubara 24.8% 319 558 225 1,102 2,301

Thermal coal

MineBumi plc share % Classification

Tonnes (ROM)

(millions) Yield (%)

Marketable tonnes

(millions)Quality

(kcal/kg)

Sarongga 20.4% Proven 12 100% 12 3,570

Probable 4 100% 4 3,540

Total 16 100% 16 3,563

Total 410 397 4,822

Pendopo Energi Batubara 24.8% Proven 145 100% 145

Probable 542 100% 542

Total Total 687 100% 687 2,288

continued

ResourcesThe following tables contain details of mineralisation that management believe has a reasonable prospect of being economically extracted in the future, some of which has not yet been classified as Proven or Probable Reserves. This material is defined as Mineral Resources under the JORC Code. Estimates of such material are based largely on geological information with only preliminary consideration of the modifying factors (mining, economic, etc.). While in the judgement of the Competent Person there are realistic expectations

that all or part of the Mineral Resources will eventually become Proven or Probable Reserves, there is no guarantee that this will occur, as the result depends on further technical and economic studies, and economic conditions in the future.

As in the case of reserves, estimates are completed using or testing against Bumi plc’s long term pricing and market forecasts. Resources include the coal reserves disclosed previously, i.e. resources are not additional to the coal reserves.

Business Review

27

Understanding and managing the principal risks and uncertainties that arise from pursuing the Group’s objectives is important to achieving Bumi plc’s success. Bumi plc’s risk management processes, summarised in the Audit Committee Report, are forward looking to make the Company more resilient and prepared for the challenges and opportunities which lie ahead.

Risk Context Impact MitigationCoal price

Coal prices could fluctuate unfavourably.

The demand and price for coal will be largely determined by global supply and demand and the strength of the global economic environment.

Coal price volatility can result in material and adverse movement in the Group’s operating results, asset values, revenues and cash flows. It may also compromise the ability of the Group to adjust the timing of capital expenditure and deliver growth in future years as expansion projects may not be viable at lower prices.

The Group life of mine planning processes consider coal price forecasts, operating costs, market demand and production capacity and adjust plans and activities as far as possible to maintain margins.

Project delivery

Failure to meet project delivery objectives, timetables and budgets.

The Group has high production expansion targets which depend on execution of significant capital projects, in particular regarding mine infrastructure.

Failure to meet project delivery and growth timetables may affect operational performance, delay cash inflows, increase capital costs and reduce profitability as well as having a negative impact on the Group’s reputation.

Group management have a track record of delivering capital projects and has recently enhanced its team by hiring additional experienced project managers.

Contractor reliance and performance

Failure to effectively manage contractors resulting in cost inefficiencies and Group standards not being met.

The Group relies on contractors for all mining operations.

Failure to manage contractors effectively may affect operational performance, delay cash inflows, increase capital costs and reduce profitability as well as having a negative impact on the Group’s reputation.

Group management have a track record of managing contractors and works closely with them on a day to day basis so that performance issues can be addressed as soon as they arise.

At the operational level a newly formed contractor management team will, in 2012, conduct a review with a view to enhancing its procedures for managing contractors.

Country risk

The Group’s businesses may be affected by political and legal developments in Indonesia, including changes to fiscal and regulatory regimes.

The Group has no control over political and legal changes. It recognises that its licence to operate through mining rights is dependent on a number of factors, including compliance with regulations.

Potential impacts include expropriation of assets, further imposition of royalties or taxation targeted at mining companies, licences to operate not being renewed and requirements for local ownership or benefication. Political changes can also result in civil unrest and the nullification of mining permits and leases.

The Group maintains a dialogue with central and local government and regulators, and responds to developments through annual mine planning activities. This dialogue is coordinated by the local external relations teams.

Associates

Failure to achieve expected standards of operational and governance performance in associates.

Group management is establishing operational and governance performance standards for the Group. Management of non-controlled assets, including associates may not adopt or comply with Group standards.

Financial loss and reputational damage may arise due to different standards of governance and operational performance.

Group management seeks to align the standards of operational and governance performance of PT Bumi with those of Bumi plc through communication of requirements and Bumi plc representation on the PT Bumi Board.


Principal Risks and Uncertainties

Risk Context Impact MitigationHealth, Safety, Environment and Communities

Failure to meet expectations and standards of a UK plc across HSEC areas.

The transition to a UK plc introduces new standards and expectations across different HSEC areas which go beyond the legal obligations and practices required in Indonesia.

Reputational damage, financial impacts and operational disruption may arise if standards are not achieved.

HSEC governance has been established and continues to be put into place. A risk based work programme is underway supported by independent advisors.

Safety

Failure to maintain high levels of safety management can result in harm to the Group’s employees and contractors.

Achievement of a safe operating environment is a legal requirement and responsibility. Within contracted operations this depends to a large extent on the competency of, and controls over, contractors.

A greater number of incidents affecting the safety of employees and contractors may lead to lost production time, compensation claims and enforcement of legal responsibilities against those in charge of operations.

A review of existing safety practices at mine operations commenced in 2011 leading to the development of an improvement programme targeted initially at significant risk areas. The response programme will involve establishing a new working model with contractors.

Environment

Mining permits can be delayed or withdrawn due to the failure to achieve necessary environmental standards, particularly in relation to the conservation of biodiversity, ambient noise levels and maintenance of pre-existing air and water quality.

Environmental protection is an increasing area of focus under Indonesian legislation and is subject to global scrutiny.

Delays to operations and production targets through mining permits being deferred or withdrawn and reputational and financial consequences from perceived or actual environmental damage.

There is a dedicated environment team that monitors compliance with local legislation and regulations.

The Group plans to develop an approach to enhance environmental management in late 2012.

Communities

Disruption to operations as a result of community disputes.

Mining companies have to demonstrate long term social responsibility to communities impacted by operations.

Failure to maintain supportive relationships with local communities and government may adversely affect the Group’s reputation as well as its ability to maintain operations and bring projects into production.

The Group’s operations have a history of strong community relations, working collaboratively with communities and local government.

Enhanced working practices, aligned to international standards, are being developed during 2012.

Employees

Inability to recruit, develop or retain appropriate skills for the Group.

Local operations are subject to competition for skilled labour. Recruitment and retention can be challenging given the location of the Group’s operations.

Possible increased costs, interruptions to existing operations and delay in new projects arising from a shortage of employees, the Group’s employees having inadequate skills or due to industrial disputes.

Local human resources teams have arrangements in place to manage recruitment and retention which will continue to receive attention in 2012 in light of the expansion targets.

Local operations maintain an active relationship with local labour unions.

Business integrity

Failure to comply with the Group’s Code of Conduct including failure to prevent acts of fraud, bribery, corruption or anti-competitive behaviour.

In addition to operating in a country where the risk of corruption is high (as indicated by indices prepared by independent NGOs), the UK legal requirements and expected practices go beyond those commonly adopted in Indonesia.

Reputational, legal and financial consequences due to non-compliance with Group policies and requirements, including anti-bribery and corruption legislation.

The development and implementation of UK governance standards has been a priority of the Board. Policy development in key areas such as anti-bribery and corruption has been progressed in conjunction with operational management with an implementation programme agreed for 2012.

Shareholders

The actions of its major shareholders.

Bumi plc has three significant shareholders with substantial other business interests. Such shareholders or parties related to them may enter into contractual relationships with the Group or its associate.

The Group’s operations and reputation could be affected by the actions of its major shareholders and the effects of related party contracts.

The structure of the Board, with a full complement of active INEDs, together with a Conflicts Committee to monitor all contracts with related parties mitigates this risk.

Financial risk

Failure to manage financial arrangements and operating cash flows.

The Group carries significant debt and requires cash flows for large projects.

Inability to execute strategy from not meeting short term financial commitments.

The Group has significant cash reserves to meet short and medium term liquidity requirements and completed a $500m bond issue in March 2012.

Business Review

29

Our HSEC programme commenced in April 2011. Consistent with our overall Group philosophy, our approach is to work at a local level, building on what is already in place in the operating companies to achieve standards commensurate with those expected by commonly accepted international practices. We are therefore working in close collaboration with PT Berau to enable Group goals to be implemented in a practical manner.

The HSEC governance model centres on the Company providing the overarching framework of policy and guidance with local implementation of procedures and decisions being the responsibility of the operating companies. Through structured internal reporting Bumi plc will exercise oversight with appropriate Group interventions, for example in respect of capital projects and major third party contracts. The Group framework will be subject to continual improvement and will form the basis for the standard in the event of further acquisitions. The framework will be shared with all associate and joint venture companies, including the Company’s associate, PT Bumi, demonstrating our intention to seek to use our influence to raise standards in HSEC.

Independent consultants have been retained by the Bumi plc HSEC Committee to support the Committee and the Group through ongoing independent review, challenge and guidance. It is intended that the Group will build internal capacity in terms of resources and systems to enable self-sufficiency in Group HSEC management.

We understand that the achievement of “sustainable development” requires consideration of issues wider than HSEC, including socio-economic development, contractor management, human resource management and conduct and ethics. All of these areas will receive attention on the basis of a risk based approach to prioritisation and response.

HSEC governance structureHSEC forms an integral part of our corporate governance structure. The HSEC Committee (see page 49) was established by the Board in 2011 and is directly involved in overseeing the Group’s approach to HSEC and ensuring that the primary components of an HSEC governance and management framework are in place to demonstrate appropriate Bumi plc oversight. Tony Redman, an experienced mining professional is the technical advisor (“HSEC Advisor”) on the HSEC Committee (his biography is on page 49). Executive responsibility is held through the Group General Counsel and Company Secretary, with the CEO having ultimate responsibility for HSEC performance.

One of the HSEC Committee’s primary considerations has been the introduction of a governance structure to provide guidance and oversight over HSEC operations

OverviewA high standard of health, safety, environment and community (“HSEC”) performance is a critical goal for the Group. Our strategy for growth depends upon operating with the support and collaboration of governments, business partners, communities and employees. The Company’s overall governance practices relating to HSEC are supported by the values set out in the Bumi plc Code of Conduct which was adopted by the Boards of Bumi plc and PT Berau in 2011. The transition from a national operating company environment to an international plc creates new obligations and expectations with regard to HSEC governance and performance. We recognise that it is the duty of the Group to work towards achieving these standards and expectations. This work also gives us the opportunity to contribute to raising HSEC standards in emerging economies, which represent an increasing share of the world’s mineral wealth. Our ambition and approach is expressed through our Group Statement of Intent.

Access to mineral resources is fundamental to global economic growth and their exploitation in increasingly challenging environments is inevitable. We believe it is the duty of international mining companies to take responsibility for, and to support local management’s aspirations regarding, HSEC.

Bumi plc wants to innovate and succeed in developing sustainable mining practices that unlock social and economic capacity but at the same time conserve and protect social and natural heritage. This will be challenging and will take time. It will require us in Bumi plc to develop a broader view of performance, achieve inclusive governance and put greater focus on long term goals achieved through short to medium term milestones.

To enable us to achieve this, it is our intention to operate under the following principles:

– Enable our operating companies to build the capacity and understanding that is necessary for local decisions and practices to deliver international standards on a consistent basis

– Work in collaboration and partnership with government, contractors and communities to achieve a shared governance framework that reflects the interaction of responsibilities and dependencies

– Exercise a “stewardship based” decision model recognising that our activity at any asset is temporary and that the social and natural environments have to be sustained after mining has stopped

– Apply global governance that has, at its centre, adoption of local solutions that understand local needs and priorities

Group Statement of Intent


Health, Safety, Environment and Communities

PLC Committee

PLC HSEC team

Entities

Within entities

HSEC governance structure

PLC Committee

HSEC team

PT Berau HSEC Committee Associates and joint ventures

HSE Community

across the Group and ensure clear internal reporting and accountability. Having explored different structures, the structure adopted by the HSEC Committee is set out below.

The key parts of this structure include:

– The Bumi plc Board level HSEC Committee comprising independent Non-Executive Directors and also the HSEC Advisor provides strategic direction and challenge to the Board and management. The Committee members have particular understanding of the operating environment in Indonesia

– A Bumi plc HSEC team comprising the Group General Counsel and Company Secretary and the HSEC Advisor has been established to provide guidance and oversight over Group operations. The Group General Counsel and Company Secretary reports to the CEO and, with the HSEC Advisor, to the HSEC Committee

– At PT Berau an executive HSEC Committee comprising the President Director of PT Berau, and members of his executive team is responsible for overseeing and approving, amongst other matters, HSEC risks and mitigation plans, key operating procedures, including in relation to contractor management, integration of HSEC into operating decisions, including capital expenditure, and overall performance against plan in PT Berau

– An operational management structure in PT Berau which includes executive led teams for HSE and, separately, Community. Both report directly to the President Director. This structure has been revised during 2011 on the basis of the Group recommendations. During 2012 the Group will consider how these teams, in particular the HSE team, achieve appropriate governance and control over the contractor companies responsible for mining operations undertaken by PT Berau

Bumi plc is committed to contributing to local and regional development to benefit the communities affected by coal operations. In 2011, as part of the Group’s community programme, PT Berau engaged with 26 villages.

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31

Group Model for HSEC developmentThrough the work completed in 2011, the Group put in place a structured programme to establish key fundamentals of HSEC governance. It is planned that this approach will become the standard model for integration of new assets as well as the continued collaboration with existing assets. It is designed to achieve:

– Collaborative working across the Group – Effective alignment of local and Group

needs and priorities – Balanced decision making based on key risks – Internal and external transparency

The key steps of the model developed and applied in 2011 to PT Berau are shown below:

– Gap analysis and risk based priority setting – using international standards, including the ICMM and IFC frameworks as well as internationally recognised internal control and reporting frameworks (the Internal Controls framework: COSO and Global Reporting Initiative)

– Design of governance framework and supporting tools, including determination of operating company HSEC structures, the relationship between local and Group standards, internal reporting templates, risk assessment and mitigation requirements

– Integration support – providing guidance and practical help to assist the operating companies to implement enhanced and/or new procedures and review decisions and programmes

– Collaborative oversight – involving, in addition to general communication, oversight by the Bumi plc HSEC team, including attendance where appropriate at HSEC Committee meetings in local operations to ensure decision making respects local as well as Group needs and to help escalation of relevant matters to the Board, and

– Formal reporting – creating the basis for executive and Board review of progress and performance against risks

Priorities for 2011 and 2012The HSEC gap analysis was performed in July- September 2011. It involved visits and interviews with the operating company management at the head office in Kalimantan and at two of PT Berau’s operating mines. The gap analysis showed that local operations were operating above the typical standard for mining companies in Indonesia. It also showed that there was a shortfall against international expectations with a primary focus on compliance rather than risk and the implementation and enforcement of many of the written procedures.

It also highlighted the need to further consider the operating model between management and contractors.

Based on the gap analysis findings, it was determined that strengthening of the governance framework for HSEC was an essential first step. With respect to performance the Group determined that safety management and community development were the priority issues to address through the development of Group standards. This prioritisation reflects the operating phase of the existing mines and the demands that will be placed on management in connection with the expansion of operations.

Environmental compliance is already a priority and will be maintained, however the Group determined a stewardship based approach to environmental protection should start to be developed in late 2012. Health management provisions and procedures will also be considered further in 2012.

SafetyGood safety management is recognised to be critical to the continuation and efficiency of operations. The Group has prioritised safety, along with communities, to receive detailed attention with the intention to raise standards to an international level. PT Berau is certified to OSHAS 18001 with a set of operating procedures in place which are overseen through the HSE function.

Despite the focus on safety, 2011 has been a disappointing year. Four separate events in PT Berau, resulting in four fatalities, are unacceptable to us. There were no fatal events in the preceding three years. These events, and the resulting management actions agreed with the regulatory authorities in Indonesia, were reported to the Board in December 2011. Progress will continue to be overseen by the Bumi plc HSEC Committee and Board. The scope and quality of the lost time injury frequency (“LTIF”) data is an area of focus for 2012 with a view to achieving more complete reporting, including contractors and shipping operations.

A more detailed review of safety practices in key areas is now underway in PT Berau, which commenced in 2012 as part of the response to the fatal events. This review, which is being completed by independent consultants, will form the basis for an ongoing programme of work which will consider:

– Model for managing contractors – Minimum skill requirements and training

for contractors and staff – Behaviour change – Critical Standard Operating Procedures – Safety performance reporting

Progress against the work programme will be overseen by the HSEC Committee throughout 2012.


Health, Safety, Environment and Communities (continued)

The focus for community projects and programmes is agreed with the local community groups on the basis of an annual mapping exercise. The 2011 mapping included 26 villages. Key focus areas were:

Education and knowledge PT Berau established six dormitories for school children from remote areas with a capacity for more than 400 students, and almost 300 scholarships for higher education were provided. In addition PT Berau has provided more than 180 teacher scholarships as part of a four year programme started in 2009. In mid 2011, PT Berau began construction of a 500 person per year training centre with a focus on developing skilled mechanics and heavy equipment operators.

Health and nutrition In 2011, PT Berau provided free basic medical check ups, immunisations and food supplements to more than 5,500 local children below the age of five. PT Berau in conjunction with the University of Indonesia and the local government launched a nutrition and health programme to promote awareness around maintaining general health within local communities.

Cultural environment To support the preservation of local culture and heritage, PT Berau sponsored cultural events of the two former sultanates of Gunung Tabur and Sambaliung. In 2011, PT Berau, in cooperation with National Geographic Indonesia, launched a project to document the local ethnic and culture

of the Dayak Punan natives. PT Berau also sponsored initiatives to promote the traditional arts of Dayak Punan natives.

Infrastructure and economic development In the agricultural sector, the priority for 2011 was to work with small scale enterprises to improve productivity of 168 ha of cocoa plantation owned by 163 local farmers as well as to assist local development of rubber and orange plantations. By the end of 2011, PT Berau had provided houses in eight villages with electricity, and there are plans to extend this to more villages in 2012 as well as to begin to provide wastewater treatment facilities to further villages over a four year period.

Business Review

33

CASE STUDY – COMMUNITY ENGAGEMENT AND DEVELOPMENT IN KALIMANTAN

In 2011, PT Berau spent $5.5m on these community initiatives. PT Berau’s community work is funded through its normal business planning and budgeting processes with implementation performed by management working in conjunction with the Dharma Bhakti Berau Coal Foundation. Under the current five year agreement (2012 to 2016) PT Berau is required to invest at least $30m into community projects and programmes.

In addition to the community projects, PT Berau has defined procedures for land acquisition. Acquisition agreements are determined directly with the land owner with pricing thresholds based on past sales transaction in the market, reflecting the class of land and the type of land title held. With the plans for mine expansion, this is a key area of focus. As at the end of 2011, the majority of the acquisition agreements were in place for the areas impacted by the 2012/2013 expansion plans. As part of the expansion preparation, PT Berau plans to undertake its first community resettlement late in 2012. This will involve moving 110 households into three newly built villages. The planning is well progressed with all parties in agreement. This programme will be subject to review through the Group monitoring processes and by external parties.

EnvironmentEnvironmental stewardship is an important objective for the Group recognising the sensitivity of the natural environments in which the Group is operating. Consistent with Indonesian regulations, environmental planning for the mining operations commence at the mine development phase and are refreshed throughout the operational phase in order that environmental impacts of operations are mitigated and long term environmental impact is managed.

In 2011, the introduction of the mine closure plan requirement introduced a new longer term perspective. These closure plans have been submitted and approved, and reflect the environmental reclamation programmes already committed to by PT Berau. Meanwhile, shipping activities are required to comply with environmental regulations for maritime activities.

Based on the gap analysis exercise, current mining operations achieved compliance in the majority of areas which are subject to environmental permit conditions in 2011, including wastewater discharge, environmental impact on communities and land reclamation. Land reclamation programmes have progressed in line with agreed 2011 plans. PT Berau works with a number of universities to review the environmental condition of reclaimed areas and monitors biodiversity on an annual basis. All of PT Berau’s operations have successfully maintained ISO 14001 certification since 2008.

CommunityThe Group is committed to contributing to local and regional development to benefit the communities affected by its operations. This is achieved through employment, provision of infrastructure and assets for public use, as well as voluntary and statutory investment. Our operations have a history of strong community relations, working collaboratively with communities and local government, and the gap analysis work completed in 2011 showed that community programmes are well established in PT Berau. Community development programmes are approved in consultation with local government and communities and are implemented through a network of community representatives against annual plans. Mine closure plans were submitted in 2011 in line with new legislative requirements and have been approved for all the operating mines. These closure plans include provision and plans for long term social development. No major events of community outrage or disruption have occurred in 2011.

However, we recognise that the relationship between mining companies, communities and government with respect to socio-economic contribution is under intense scrutiny. We also recognise that community action against mining companies has a rising profile within other parts of Indonesia. It is therefore an area which the Group has prioritised for attention.

The Group approach is to provide and enforce a policy and framework that enables and ensures consistent local implementation. The Group is developing central guidance in the form of a “Group Practice Guide” containing the Group aims, principles and a framework for the planning, delivery and monitoring of all community interaction. It is based on commonly accepted best practice, including the World Bank and IFC standards as well as the methodologies set out by ICMM. Responsibility for implementation, including decisions on local priorities and methods of response, remain the responsibility of the operating companies. By putting this model in place, the Group is confident it can achieve and demonstrate a consistent and appropriate strategy and approach while maintaining necessary local autonomy to respond in a manner suitable to local circumstances.

The Group Practice Guide builds on the procedures already in place and covers:

– Community projects and programmes (referred locally as CSR)

– Land acquisition – Resettlement – Donations

It is in the process of being adopted and such adoption will be reviewed in mid 2012.


Health, Safety, Environment and Communities (continued)

The Group plans to focus on developing an environmental stewardship approach starting in late 2012. Key areas of focus for the mining operations will be energy efficiency, carbon impact and biodiversity management. There will be a programme to review the environmental procedures and standards in the shipping operations.

HealthThe Group recognises the increasing importance of managing health issues within the workforce. In the case of PT Berau, all mining operations are performed by contractors which represent the area presenting the highest risks to health. During 2012, the Group will work to determine how to progress an increased level of occupational health awareness and management in its operations.

Employees The development and well-being of our people is important to ensure we develop the capacity we need to meet our business goals and play a key role in the local communities where we have operations.

In 2011, the Bumi plc Board and the Board of PT Berau approved the Bumi plc Code of Conduct which is designed to align our people around a common purpose and set of values. The different cultures in which we operate create different inherent expectations and behaviours, and our success depends on always operating in a manner that is consistent with our Code of Conduct. A whistleblowing helpline is also being established which is available 24 hours a day, seven days a week to all employees as well as third parties affected by our operations. This will be communicated and adopted in 2012.

As at the end of 2011, the Group had more than 750 employees and 10,500 contractor personnel. Contractor personnel work across coal hauling and processing, maintenance, shipping and logistics

as well as catering and wider service support. The contractor headcount has grown by more than 10% in the year. Through 2011, PT Berau maintained its established employment policies recognising local legal requirements.

The general approach observed in PT Berau towards human resources aligns to the principles that the Group is seeking to adopt, in particular:

– Open recruitment processes that also draw on local communities where possible and as required by law

– Performance review and feedback processes that support skill development and progression

– Consideration to employee health, safety and wellbeing

– Pay and remuneration in line with industry standard levels in country

– Clear contracting and grievance procedures and mechanisms

Skill shortages and loss of staff to competitors in the mining industry is a key issue for all mining companies in Indonesia. To help ensure access to skills and resources, PT Berau runs an internship programme for graduates in mine engineering, geology, civil engineering, forestry, environmental, economics, and sociology. The internship consists of a one year programme where successful candidates are offered a permanent position.

The Group recognises the right of its employees to freely associate and join labour unions and maintains active relationships with those unions. In PT Berau almost 50% of employees are members of a labour union. There have been no cases of strikes or employee disruption occurring in 2011 in the Group.

Environmental stewardship is an important objective for the Group, recognising the sensitivity of the natural environment in which we operate.

Business Review

35

Governance

Governance

3738 Board of Directors

40 Executive management

41 Governance Report

45 Board Committees

45 Audit Committee

48 Nomination Committee

48 Remuneration Committee

48 Conflicts Committee


and Communities Committee

50 Remuneration Report

62 Other Statutory Information

69 Statement of Directors’

Responsibilities

Indra Bakrie Co-Chairman

Scott MerrilleesChief Financial Officer

Nalin RathodChief Executive Officer

Samin TanChairman

Ari Hudaya Non-Executive Director

Rosan Roeslani Non-Executive Director

Nathaniel Rothschild Non-Executive Director

James Campbell Non-Executive Director

Scott Merrillees was appointed

to the Board on 26 March 2012

and became Chief Financial

Officer, replacing Andrew

Beckham. Prior to that he

served as Director of Corporate

Finance and Investor Relations

at PT Borneo. He previously

served as South East Asia Head

of Natural Resources for ANZ

Bank and President Director

for BNP Paribas Securities

Indonesia. Other roles have

included Research Director for

UBS Securities Ltd in Indonesia.

Nalin Rathod was appointed

to the Board on 26 March 2012

and became Chief Executive

Officer, replacing Ari Hudaya.

He is currently President

Commissioner of KPC and

Arutmin and a Commissioner of

PT Bumi, BRM and PT Gorontalo

Minerals. He was also managing

director of Capital Managers

Asia Pte Ltd, a financial advisory

firm operating in Asia. Nalin has

over 20 years’ experience in the

Indonesian coal mining sector.

Samin Tan was appointed to

the Board on 26 March 2012

and became Chairman of the

Company replacing Indra Bakrie.

He is the President Director of

Renaissance Capital. Between

2007 and 2011 Samin headed

PT Borneo as its President

Director. Prior to this, he was

Deputy Managing Partner of the

Indonesian consulting practice

of Deloitte Touche and Head of

the Indonesian tax practice of

Deloitte Touche.

Rosan Roeslani is President

Director of PT Berau and

currently serves as President

Director of Recapital and

Commissioner of PT Mahaka

Media. He is also on the Board

of Commissioners for PT Lativi

Mediakarya, PT Lupita Amanda,

PT Saratoga Investama Sadaya

and several other multinational

companies based in Indonesia.

James Campbell is co-founder

of the Company alongside

Nathaniel Rothschild. From

2001 to 2008, James was

Chairman of Australian listed

nickel producer Minara

Resources. Prior to this, he

held a variety of operational

roles and Board appointments

within the Anglo American

Group. James was Managing

Director of De Beers Industrial

Diamond Division, Chairman

of AngloCoal, Chairman of

AngloBase, an Executive

Director of Anglo American plc,

a Director of AngloGold,

AngloPlatinum, Richards Bay

Coal Terminal Company and

of De Beers Centenary.

Indra Bakrie was Chairman of

the Company until 26 March

2012 and is now Co-Chairman

of the Company. Over the

past 20 years, he has helped

numerous businesses succeed

in diverse sectors such as

plantations, oil and gas

exploration and trading, real

estate, and infrastructure. Indra

graduated from the University

of Southern California in 1976

with a major in Business

Administration.

Nathaniel Rothschild is one of

the founders of the Company

and was Co-Chairman of the

Company until 26 March 2012.

He is also a Non-Executive

Director of Genel Energy plc

and Barrick Gold Corporation.

Nathaniel is a member of the

Belfer Center’s International

Council at the John F. Kennedy

School of Government at

Harvard University and

holds an MA in History

from Oxford University.

Ari Hudaya was Chief Executive

Officer of the Company until

26 March 2012. Ari has been

President Director of PT Bumi

since 2001, and has much

experience in the Asian natural

resources sector. Previously

he was President Director

of both KPC and Arutmin,

as well as Enercorp. He is a

Director of IndoCoal Resources,

Kalimanatan Coal and Sangatta

Resources. Ari graduated from

Institut Teknologi Bandung

with a degree in Mechanical

Engineering in 1983.

38 Bumi plc | GovernanceAnnual Report 2011

Board of Directors (from 26 March 2012)

Sir Graham Hearne Non-Executive Director

Lord Renwick Non-Executive Director

Sir Julian Horn-Smith Deputy Chairman and Senior Independent Director

Sony Harsono Non-Executive Director

Sir Julian Horn-Smith is the

Deputy Chairman and Senior

Independent Director of the

Company. He has more than

25 years’ experience in the

telecommunications sector

and joined Vodafone Group

at its foundation. Prior to this

he held positions at both Phillips

and Mars GB. In 2005 Sir Julian

became CEO of Vodafone. He

currently acts as a senior adviser

to investment bank UBS and

CVC Capital Partners, and is on

the Board of Directors of Lloyds

Banking Group plc and De La

Rue plc.

Sony Harsano has been a

professional business adviser for

over 30 years. He was previously

Chairman for one of Indonesia’s

biggest accountancy firms. He

now serves as CEO of Harsono

Hadibroto Consulting and is

Chairman of the Indonesia-

Japan Economic Committee

of the Indonesian Chamber

of Commerce (KADIN). He is

also a member of the Board of

Advisers to the United States-

Indonesia Society (USINDO).

Sir Graham Hearne is Chairman

of Catlin Group Limited and

Braemar Shipping Services

Group Plc. Prior to this he was

Chairman of Enterprise Oil plc

until 2002. He is also a Non-

Executive Director of Genel

Energy plc.

Lord Renwick is currently

Vice Chairman of Investment

Banking at J.P. Morgan Europe

and Vice Chairman of J.P.

Morgan Cazenove. He also

serves as a Non-Executive

Director and Chairman of

the Remuneration Committee

of Kazakhmys plc, Chairman

of Fluor Limited and is

a Director of Compagnie

Financiere Richemont AG.

He has previously served as

a Director of BHP Billiton plc,

British Airways plc, Fluor

Corporation and SABMiller plc.

Amir Sambodo Non-Executive Director

Badung Tariono Non-Executive Director

Philip Yeo Non-Executive Director

Steven Shapiro Non-Executive Director

Amir Sambodo is currently

the President Director of

PT Tuban Petrochemicals

Industries, one of the biggest

petrochemical producers

in Indonesia. He founded

Indonesian business technology

magazine PT Teknopreneur

Indonesia and is President

Commissioner of PT Tekno

Ventura. Amir is also the

current Special Adviser to

the Coordinating Minister for

Economic Affairs in Indonesia.

Steven Shapiro is a member of

the Board of Directors of Barrick

Gold Corporation and El Paso

Corporation. He has served

as Executive Vice President

and Chief Financial Officer of

Burlington Resources Inc. and

as Senior Vice President, Chief

Financial Officer and a Director

at Vastar Resources, Inc.

Steven has also spent 16 years

in various roles of increasing

responsibility with Atlantic

Richfield Company (ARCO).

Badung Tariono was appointed

to the Board as a Non-Executive

Director with effect from 1 July

2011. He is currently Head of

Private Equity at Trimegah

Securities in Jakarta, and

has worked at UBS O’Connor

Limited in London where he

specialised in the energy, metal

and mining sectors. Previously,

he was a Senior Portfolio

Manager at ABN AMRO Asset

Management and Finance and

Business Performance Advisor

at Shell International Exploration

and Production (EP), both

based in the Netherlands.

Philip Yeo is Chairman of

SPRING Singapore and a

member of the United Nations

Committee of Experts in Public

Administration (CEPA). He is

also Chairman of SingBridge

International Investments Pte

Ltd, a wholly owned subsidiary

of Temasek Holdings; Chairman

of Accuron Technologies Pte

Ltd; Chairman of Medical

Technologies Investment

Company Holdings Pte Ltd;

Chairman of Ascendas Property

Fund Trustee Pte Ltd; and

Chairman of i-Globe Partners,

a Singapore based venture

capital fund. Philip is also

a member of the Board of

Directors of United Overseas

Bank and City Development

Ltd (CDL).

Board Committees

The Board is supported by the following committees:

• Audit • Conflicts • Health, Safety, Environment and Communities

• Nomination • Remuneration • Chairman of Committee

Governance

39

Independent Non-Executive Directors

Ari Hudaya Chief Executive Officer

Daren Morris Group Head of Mergers and Acquisition

Andrew Beckham Chief Financial Officer

Nick von Schirnding Group Head of Communications & Investor Relations

Paul Vickers Group General Counsel and Company Secretary

See biography on page 38.

Daren Morris was a founding

member of the Company and

joined Bumi plc as Group Head

of Mergers and Acquisitions in

April 2011. Prior to joining the

Company, he was a managing

director at UBS Investment

Bank and Morgan Stanley.

Daren is a qualified chartered

accountant and has a degree in

physics from Oxford University.

Andrew Beckham was a Director

and Chief Financial Officer of the

Company until 26 March 2012. He

has been Chief Financial Officer

of PT Bumi since December 2006

and a Director of PT Bumi since

June 2010. He is also currently

a Director of Herald Resources.

Andrew graduated from

Portsmouth University with an

Honours Degree in Economics.

Nick von Schirnding is Group

Head of Communications &

Investor Relations and is a

member of the Group Executive

team. Prior to joining the

Company in May 2011, he was

Head of Investor & Corporate

Affairs at Anglo American plc

and has also worked for the

De Beers and Minorco mining

groups. Nick von Schirnding

is a qualified lawyer.

Paul Vickers joined Bumi plc

as Group General Counsel and

Company Secretary in February

2011. Prior to joining the Company,

Paul has held senior executive

roles with Cadbury Schweppes

plc, Cable & Wireless plc, Pearson

plc and 3UK (part of the Hutchison

Whampoa Group). Paul began

his career at Slaughter & May.

He is responsible for legal and

company secretarial affairs,

compliance, HSEC and HR for

the London office. Paul is also

acting Group Head of Internal

Audit and Risk Management.

Key1 Daren Morris2 Andrew Beckham3 Nick von Schirnding4 Paul Vickers5 Ari Hudaya

1 2 3 45


Executive Management (as of 31 December 2011)

The Governance Report set out below is designed to provide shareholders with a comprehensive summary of the Group’s governance arrangements and an explanation of how the Company has applied the main principles of the UK Corporate Governance Code (“Governance Code”) as relevant for the Company in 2011. The Directors believe that the Company has complied with the provisions set out in the Governance Code since the Directors joined the Board of Bumi plc on 11 April 2011 (and references in this Governance Report to “2011” shall be construed as meaning from this date) except that, when he joined the Board as Chairman, Indra Bakrie was not independent within the criteria of the Governance Code on the date of his appointment as he was nominated as a Director of the Company by PT Bakrie & Brothers Tbk and Long Haul Holdings Ltd (together the “Bakrie Group”) which are substantial shareholders in the Company.

The first meeting of the Board of Directors of the Company took place on 11 April 2011 in Jakarta. On 17 June 2011, the Company issued a prospectus applying for its issued voting ordinary share capital to be admitted to the premium listing segment of the Official List and to the London Stock Exchange, and for such shares to be admitted to trading on the London Stock Exchange’s main market for listed securities. On 28 June 2011, the Company’s ordinary shares were admitted to trading on the London Stock Exchange’s main market for listed securities and it became the parent company of Vallar plc (now Vallar Limited) and the ultimate owner of Vallar plc’s interests in PT Berau and PT Bumi.

The details of Vallar plc’s original acquisition of a 75% interest in PT Berau and a 25% interest in PT Bumi (which closed on 8 April 2011 and 4 March 2011, respectively) are set out in a prospectus issued by Vallar plc on 24 February 2011 and the 2010 Annual Report for Vallar plc which was issued on 28 April 2011.

LeadershipThe Board is responsible to Bumi plc’s shareholders for creating and delivering sustainable shareholder value through the management of the Group’s businesses within the Company’s governance framework. This framework is based on the principles in the Governance Code. The Board’s role is to set Group strategy and values and to ensure that appropriate standards, controls and resources are in place to deliver it. As well as oversight responsibility for financial performance, internal controls and risk management of the Group, the Board has a formal schedule of matters specifically reserved to it for its decision (which is available at www.bumiplc.com). These include major variations from and changes to the annual budget, material capital projects and investments, acquisitions and disposals, and financing.

Certain aspects of the Board’s responsibilities have been delegated to the following committees (“Committees”) and the terms of reference of such committees are available at www.bumiplc.com: Audit Committee; Remuneration Committee; Nomination Committee; Health, Safety, Environment and Communities (“HSEC”) Committee; and the Conflicts Committee.

A list of the individual Directors, their biographies and Committee memberships is set out on pages 38 and 39. As described in the Chairman’s statement on pages 6 and 7 and as announced following the Board meeting on 26 March 2012, the Board comprises 16 Directors and Messrs Samin Tan, Nalin Rathod and Scott Merrillees replaced Messrs Indra Bakrie, Ari Hudaya and Andrew Beckham as Chairman, CEO and CFO of the Company, respectively. Andrew Beckham stepped down from the Board and was replaced by Scott Merrillees as CFO, whilst Indra Bakrie became Co-Chairman and Messrs Nathaniel Rothschild and Ari Hudaya became non-independent Non-Executive Directors of the Company. The biographies of the new Directors are set out on pages 38 and 39.

The Board has resolved that all Directors will be subject to re-election annually by the shareholders starting with the Annual General Meeting (“AGM”) in 2012. The resolutions to be proposed regarding such re-elections and the appointment of new Directors are set out in the Company’s notice of AGM (“AGM Notice”) which is being issued at the same time as this Annual Report. One of the resolutions to be proposed at the AGM is to change the Articles of Association of the Company to increase the permitted size of the Board to 18 members to enable the appointment of further Directors.

The Board and its Committees have regular scheduled meetings and hold additional meetings as and when necessary. During 2011, the Board met five times on scheduled occasions and two additional meetings took place. Directors are expected, where possible, to attend all Board meetings, relevant Committee meetings and the AGM. The core activities of the Board and its Committees are documented and planned on an annual basis with an annual schedule of agenda items and the maintenance of, and follow up on, a list of matters arising from each meeting.

During the course of 2011, the Board has been establishing an effective governance framework to support the management of the Group’s activities and guide the affairs of the Group in pursuing its strategy. The Group’s strategy is discussed on a regular basis at Board meetings and from 2012 one scheduled Board meeting will be focused specifically on this subject and plans for future growth.

Governance

41

Governance Report

Both the Company’s subsidiary, PT Berau, and its associate, PT Bumi, are separately listed on the Indonesia Stock Exchange. As part of the governance framework, in 2011 oversight of the management of the Company’s subsidiary PT Berau was achieved through the presence on the PT Berau Board of one of the Company’s Non-Executive Directors, Rosan Roeslani, as PT Berau’s President Director. In the case of its associate PT Bumi, the ability of the Company to seek to influence the activities of PT Bumi was achieved through common Board membership, which in 2011 comprised Messrs Hudaya and Beckham who were the President Director and CFO respectively, of PT Bumi.

The roles of the Chairman and the Chief Executive Officer are separate and their responsibilities are set out in a statement approved by the Board and signed by the then Chairman in 2011 (“Responsibilities Statement”) which is available at www.bumiplc.com. The Chairman is responsible for the leadership and effective running of the Board. The Chief Executive Officer is responsible for the running of the Group’s business within the authorities delegated by the Board.

The structure of the Board is designed to ensure that the independent Non-Executive Directors (“INEDs”) are in a position to constructively challenge and help guide strategy, monitor management and the reporting of performance, and to satisfy themselves regarding the standards of the Group’s financial controls and systems of risk management. In accordance with the Governance Code at least half of the members of the Board are independent and the membership of all the Committees comprise only INEDs (and in the case of the HSEC Committee, an independent technical advisor).

Sir Julian Horn-Smith is the Senior Independent Director (“SID”) and Deputy Chairman of the Company. His role and responsibilities as SID are also set out in the Responsibilities Statement. As well as maintaining contact with major shareholders and making himself available to shareholders whose concerns have not been satisfied through the normal channels, the SID is the Chairman of the Nomination Committee and is also responsible for ensuring that the performance of the Board, its Committees and all Directors (including the Chairman) is formally and rigorously evaluated at least once a year working as appropriate with the Nomination Committee.

EffectivenessDuring 2011, the Board was made up of 14 Directors comprising the Chairman (Indra Bakrie), the Co-Chairman (Nathaniel Rothschild), two Executive Directors, two non-independent Non-Executive Directors and eight INEDs. As mentioned above, the membership of all the Board Committees comprises only INEDs. The Board considers all its INEDs to be independent in accordance with the Governance Code and reviews the independence of its INEDs annually in accordance with the criteria set out within the Governance Code.

The Board believes that there is an appropriate range and balance of skills, experience, independence and knowledge on the Board. The Board also believes there is an appropriate balance between independent and non-independent Directors and that the Non-Executive Directors have a broad range of experience gained in a suitable variety of private sector and government backgrounds internationally, and particularly in Indonesia.

As founders of the Company, Messrs Nathaniel Rothschild and James Campbell are not considered independent together with Messrs Indra Bakrie, Ari Hudaya, Andrew Beckham and Rosan Roeslani who were appointed under relationship agreements entered into with two significant shareholders of the Company, the Bakrie Group and PT Bukit Mutiara. These relationship agreements were fully disclosed when shareholder approval was received for the acquisition of the interests in PT Berau and PT Bumi. Under the terms of those relationship agreements, the Bakrie Group can nominate for appointment up to three Directors for the positions of Chairman, Chief Executive Officer and Chief Financial Officer, and PT Bukit Mutiara can nominate for appointment one Non-Executive Director, subject to each of the Bakrie Group and PT Bukit Mutiara respectively retaining control of 15% of the votes able to be cast at general meetings of the Company.

These relationship agreements also regulate relations between such shareholders and the Company with provisions which require that the Company will comply with the Listing Rules; the Company will be capable

Board meetings attended by each Director during 2011

Directors Meetings attended

Indra Bakrie 7/7

Nathaniel Rothschild 7/7

Ari Hudaya 3/7

Andrew Beckham 7/7

James Campbell 7/7

Rosan Roeslani 7/7

Independent Non-Executive Directors

Sir Julian Horn-Smith 7/7

Lord Renwick 7/7

Steven Shapiro 7/7

Sir Graham Hearne 7/7

Amir Sambodo 7/7

Philip Yeo 7/7

Sony Harsono 7/7

Badung Tariono1 3/3

1 Appointed 1 July 2011.


Governance (continued)

at all times of carrying on its business independently of such shareholders; all transactions and relationships between the Company and such shareholders are at arms-length on a normal commercial basis; and the goodwill, reputation and commercial interests of the Company are maintained.

The INEDs meet without the Executive Directors and the non-independent Non-Executive Directors at the end of each scheduled Board meeting and at other times when appropriate, such as on the occasion of the proposed acquisition of BRM by the Company and following the receipt of a notice under Section 303 of the Companies Act 2006 from PT Borneo requesting changes to the Board.

The responsibilities of the Nomination Committee are set out on page 48 and include succession planning and determining the selection criteria and suitability of prospective candidates having regard to the overall balance of skills, knowledge and experience on the Board and recommendations from the Company’s major shareholders. The Committee recognises the importance of diversity and when recruiting ensures that there are no obstacles to the Committee having visibility of suitable candidates for possible appointment to the Board, in particular regardless of gender.

The Nomination Committee reviews the background and profiles of the candidates using independent external consultants and search firms when appropriate and interviews are also carried out before candidates are recommended to the Board. In the case of appointments in 2011 and those proposed in the AGM Notice, as the focus was on Indonesian background and experience the Nomination Committee sought suggestions from its shareholders. Following this, candidates were the subject of detailed background checks by an independent consultant followed by meetings with, at a minimum, the SID and one other member of the Committee before being recommended to the Board. The same process was followed regarding the appointment of Messrs Tan, Rathod and Merrillees who were nominated in accordance with the above mentioned relationship agreement with the Bakrie Group.

Whilst Non-Executive Directors are appointed by the Board for an initial three year term, all Directors will be subject to re-election annually by the shareholders starting with the AGM in 2012. Subsequent appointment is subject to review by the Nomination Committee. Their terms of appointment are available for inspection in accordance with the Governance Code and the Board is satisfied that their other duties do not conflict with their time commitments as Directors of the Company. The Chairman’s other commitments are as indicated in his profile on page 38 and do not affect his ability to devote sufficient time to the Company. As disclosed in their profiles on page 38 and 40, Ari Hudaya and Andrew Beckham are also the President Director and CFO respectively of PT Bumi, an associate of the Company, and in addition to being a non-independent

Non-Executive Director of the Company, Rosan Roeslani is also the President Director of PT Berau, a subsidiary of the Company and President Director of Recapital. In each case the Board believes these roles are complementary to the interests of, and do not affect the ability of such Directors to devote sufficient time to, the Company.

All Directors appointed to the Board receive an induction programme which, depending upon their qualifications and experience, will include presentations and briefings, meetings with senior management and visits to key sites and offices.

Ongoing professional development is provided to all Directors. In 2011, the Board’s professional development focused primarily on the responsibilities and duties of a director of a premium listed company as well as briefings on developments in corporate governance and the UK Bribery Act. Board site visits are also considered important and, in April 2011, a three day visit to Kalimantan was arranged to enable the Directors to meet with key personnel, receive detailed briefings on the operations and expansion plans, and visit local offices and mine locations at PT Berau, KPC and Arutmin.

All Directors have access to the advice and services of the Group General Counsel and Company Secretary who is responsible to the Board for ensuring the Board procedures are complied with. The Group General Counsel and Company Secretary is responsible for advising the Board, through the Chairman, on all governance matters. Under the direction of the Chairman, the Group General Counsel and Company Secretary’s responsibilities include ensuring good information flows within the Board and its Committees, and between senior management and Non-Executive Directors, as well as facilitating induction and assisting with professional development as required.

The Group General Counsel and Company Secretary acts as secretary to the Board and to each of its Committees. The appointment or removal of the Group General Counsel and Company Secretary is a matter for the Board as a whole.

Directors may obtain independent professional advice at the Company’s expense if they believe it may be required in the furtherance of their duties.

In 2011, the Board, the Audit and Remuneration Committees and individual Director evaluations were conducted by the SID and the Chairmen of the Committees using written questionnaires which covered a number of key areas, including access to timely, clear and accurate information, the responsibilities of the Board and such Committees, the relationship between the Board and management, and ongoing development for Non-Executive Directors. The results of the evaluations were considered by the SID and the Committee Chairmen and have either been addressed or will form part of the agenda for the Board and such Committees in 2012.

Governance

43

Following these evaluations, the Directors concluded that the Board and its Committees operate effectively and also considered that each Director is contributing effectively and demonstrating commitment to the role. As mentioned in the Chairmen’s letter on pages 6 and 7, Ari Hudaya’s attendance record in 2011 was compromised by his ill health but this did not affect his commitment to the Company.

The Board, Committee and individual Director evaluations will be facilitated by an independent external facilitator in 2012, and at least once every three years going forwards in accordance with the Governance Code.

AccountabilityThrough this Annual Report and, as required, through other periodic financial statements the Board is committed to providing shareholders with a clear assessment of the Company’s position and prospects.

Statements regarding the status of the Company as a going concern and the Directors’ responsibilities for reporting the financial statements can be found on pages 24 and 69, respectively.

The terms of reference of the Audit Committee comply with the provisions of the Governance Code and accordingly statements regarding the review of the Company’s internal control and risk management systems, arrangements by which staff may in confidence raise concerns about possible improprieties, the appointment of external auditors, and the provision of non-audit services by the auditors can be found in the Audit Committee report on pages 45 to 47.

The Board has overall responsibility for the Group’s system of internal control. The system of internal control includes financial, operational and compliance controls, risk management procedures and a review of their effectiveness at least annually.

The Board has delegated its responsibility for reviewing the effectiveness of these controls to the Audit Committee. The results of the Audit Committee’s work were reported to and considered by the Board, which retains responsibility for the disclosures on internal control in the Annual Report. Similarly, while the Audit Committee is responsible for oversight of the effectiveness of the risk management systems, accountability for identifying and managing risks rests with the Board and executive management team.

The internal control systems are designed to meet the Group’s needs and manage the risks to which it is exposed, although these cannot be altogether eliminated. Such systems can only provide reasonable but not absolute assurance against material misstatement or loss.

The Board confirms that a system of internal controls for the period ended 31 December 2011 has been designed and is being established in accordance with the revised Turnbull Guidance on Internal Control published by the FRC to assist with implementing the Governance Code. The Board, with advice from the Audit Committee, has reviewed the effectiveness of the Group’s system of internal controls. With Bumi plc in its first year, and PT Berau a new public company only from August 2010, 2011 has been a period of evolution for the Group’s system of internal controls and this will continue in the current year. Significant progress has been achieved during the period, as reported, and plans have been established to address areas where the system of internal controls can be strengthened. The Board’s review process included consideration of the outcome of the work of the Audit Committee and reports provided by the Executive Directors.

This review excludes associates of the Company as the management of Bumi plc does not have the ability to dictate or modify the internal controls of these entities and therefore can only recommend that local management adopts the Group’s standards where relevant and appropriate.

RemunerationDetails of the level and make up of the Directors’ remuneration and the work of the Remuneration Committee as required by the Governance Code and the Large and Medium-sized Companies and Groups (Accounts and Reports Regulations 2008) can be found in the Remuneration Report on pages 50 to 61.

Relations with shareholdersThe Board supports the objectives of the UK Stewardship Code and welcomes opportunities to engage constructively with shareholders. The Board also recognises the importance of maintaining an ongoing relationship with the Company’s shareholders based on frequent and purposeful dialogue. During 2011, a number of meetings with institutional shareholders were held both in the UK and internationally by the Chairman, Co-Chairman, Chief Executive Officer, Chief Financial Officer, the SID and the Group Head of Communications and Investor Relations to ensure that the investor community received a balanced and comprehensive view of the Group’s performance and the issues it faced during its first year.

The Board monitors the views of shareholders by way of a report from the Group Head of Communications and Investor Relations at every Board meeting covering investor feedback as well as analysts’ and brokers’ reports and briefings, and a summary of the main movements in shareholdings. The Chairman, Co-Chairman and the SID remain available to meet institutional shareholders to discuss any issues or concerns.


Governance (continued)

Lord Renwick Chairman

The full terms of reference of the Committee can be found on the Company’s website, www.bumiplc.com, or can be obtained from the Group General Counsel and Company Secretary.

Role of the CommitteeThe Audit Committee’s remit includes the following: – monitoring the integrity of the financial statements

of the Company and any formal announcements relating to the Company’s financial performance, including reviewing significant financial reporting judgements contained in them;

– reviewing the effectiveness of the procedures for the identification, assessment and reporting of risk;

– monitoring the role and effectiveness of the Group’s internal audit function including approving the annual program of internal audit work and the appointment or removal of the head of internal audit;

– reviewing the effectiveness of the Company’s internal controls;

– reviewing arrangements by which staff may in confidence raise concerns about possible improprieties regarding financial reporting and other matters;

– considering and making recommendations to the Board on the appointment of the external auditors, including approving the remuneration and terms of engagement of the external auditors;

– approving the scope of the external auditors annual audit programme and reviewing the output;

– monitoring and reviewing the external auditors independence and the effectiveness of the audit process, taking into account the planning of, and results from, their work; and

– developing, implementing and monitoring compliance with a policy on the engagement of the external auditors to supply non-audit services.

All members of the Audit Committee are INEDs and Messrs Steven Shapiro and Sony Harsono have “recent and relevant financial experience” as required by the Governance Code.

The meetings of this Committee are normally attended by the Chief Financial Officer, the Group Financial Controller, the external auditors (who have direct access to the Chairman of the Committee) and, for internal audit reviews, KPMG following their appointment to support the Group internal audit and risk functions. At the end of every meeting the Committee has the opportunity to meet alone with the external auditors. The secretary to the Committee is the Group General Counsel and Company Secretary.

The Chairman of the Committee reports to subsequent meetings of the Board and the Board receives a copy of the minutes of each meeting once these have been approved by the Committee. The Committee’s effectiveness was reviewed as part of the Board evaluation process and it was concluded to have operated effectively.

MembersMeetings attended

Lord Renwick 4/4

Steven Shapiro 4/4

Sir Graham Hearne

4/4

Sony Harsono 4/4

Amir Sambodo* 3/3

* joined the Committee in June 2011.

Shareholders are kept informed of the progress and performance of the Group through the Annual Report, half year results, production reports, interim management statements, and the AGM. This information and other significant announcements of the Group are released to the London Stock Exchange and are available on www.bumiplc.com.

The Company’s first AGM will be held on 14 June 2012 at the Institute of Directors, 116 Pall Mall, London SW1Y 5ED. This will provide all shareholders with the opportunity to vote on the resolutions put to shareholders and, for those shareholders who are able to attend, to ask questions of the Board of Directors, including the Chairmen of the Committees. The AGM Notice is set out in a separate document accompanying the Annual Report and the result of the AGM voting on all resolutions will be published on the Company’s website.

Governance

45

Board Committees

Audit Committee

Activities during the yearThe Audit Committee met four times during 2011. The annual work programme includes meeting prior to the publication of the Company’s full and half year results and other regular scheduled items, areas considered to require particular focus and matters arising.

In this first year for the Group, the priority for the Audit Committee has been to establish a framework of risk management and internal controls to be operated throughout the Group with oversight from the Bumi plc Board, its Committees and executive management all in accordance with the guidance set out in the Governance Code and in the Committee of Sponsoring Organisations of the Treadway Commission (“COSO”) framework.

The development of the framework of controls has been informed by financial reporting procedures work performed in connection with the prospectus for the premium listing issued by the Company on 17 June 2011, and supported through the engagement of KPMG reporting to the Group General Counsel and Company Secretary acting as the Group Head of Internal Audit and Risk Management until a permanent appointment is made.

Whilst the Committee’s primary focus is on the Group, it has also sought to influence the Wider Group insofar as it is able to do so, through recommending to PT Bumi the adoption of Group governance and control policies where relevant and appropriate.

In respect of financial reporting, in addition to reviewing the above mentioned prospectus and the 2011 half year and full year results, the Committee:

– oversaw the implementation of a series of policies, practices and controls in relation to financial reporting and, in particular, Group reporting processes;

– reviewed and approved the Group accounting policies, including the introduction of new accounting policies, and the Group’s first IFRS budget and five year plan;

– conducted regular reviews of balance sheet items, including the carrying value of assets, business development funds and the repayment of related party balances;

– reviewed the fair values ascribed to the assets and liabilities on the acquisition of PT Berau and interests in PT Bumi;

– oversaw the development of a process to manage expenditure over the full project life cycle which is to be implemented in 2012;

– reviewed management’s reporting of reserves and resources;

– reviewed the process designed to ensure the external auditors are aware of all “relevant

information” as required under Sections 418 and 419 of the Companies Act;

– reviewed the work undertaken to support the going concern statement; and

– reviewed the management representation letter to the external auditors.

The Committee has also overseen the development of a risk management framework and an internal audit framework for the Group.

The Group’s risk management and internal audit planning commenced in April 2011. The Company’s aim was to build risk management and internal audit frameworks to achieve standards commensurate with those expected by commonly accepted international practices which could be implemented in a practical and comprehensive manner, and replicated with any future acquisitions. Consistent with the overall Group philosophy, our approach is to work at a local level, building on what is already in place, using the model developed by Bumi plc. The approach includes:

– a gap analysis – providing insights into the status of local company practices using international standards, including the IIA frameworks as well as internationally recognised internal control and reporting frameworks (COSO);

– the design of an integration plan and mechanisms, including internal reporting templates, risk assessment workshop materials and annual plans;

– integration support – providing guidance and practical help to implement enhanced and/or new procedures and review prior programmes;

– collaborative oversight – to ensure decision making respects local and Group needs and to help escalation of relevant matters to the Board; and

– formal reporting – creating the basis for the review of progress and reports by the Audit Committee.

The Group’s approach is to identify the key risks that could have a significant impact on the ability of the Group to achieve its objectives, analyse those risks, ensure appropriate responses are put in place to mitigate the risks and monitor the implementation and effectiveness of such controls with regular reporting to the Audit Committee. The principal aim of the risk management system is the management of business risks that are significant to the fulfilment of the Group’s strategic objectives, with a view to enhancing the value of the shareholders’ investment and the safeguarding of assets. Due to the limitations inherent in any risk management system, this is designed to manage rather than eliminate risk.

The development and implementation of the Bumi plc risk management framework took place in 2011 with the support of KPMG and resulted in the delivery of a continuous process for identifying, evaluating and managing the significant risks faced by the Group which supports the Principal Risks and Uncertainties


Board Committees (continued)

set out on pages 28 to 29. This process also delivered a Group risk register for 2011, regular reports at Committee meetings and the further development of risk assessment programmes to be applied in 2012, in each case working closely with the Head of Internal Audit at PT Berau. The Committee regularly reviews and reports on this process to the Board, and considers that it complies with the revised Turnbull Guidance on Internal Control published by the FRC included with the Governance Code.

The Committee is also responsible for Group internal audit. The role of the internal audit function is to help Bumi plc achieve its objectives by systematically evaluating and helping to improve risk management, internal controls and corporate governance. In 2011, with the assistance of KPMG, appointed on a co-source basis to support the development and implementation of the internal audit framework for the Group, a Group internal audit plan for 2011 was delivered together with detailed plans for 2012, in each case working closely with the Head of Internal Audit at PT Berau.

In addition the Audit Committee also oversaw:

– the development of the Group’s Code of Conduct which was adopted by the Boards of Bumi plc and PT Berau in 2011;

– with the assistance of Freshfields Bruckhaus Deringer LLP and PricewaterhouseCoopers LLP (“PwC”), the initiation of an anti-bribery and corruption (“ABC”) programme for the Group which is being rolled out in 2012 with policies covering key risk areas that have been approved by the Board; and

– the appointment of an internationally recognised independent third party helpline provider based in the US, Global Compliance, to implement a whistleblowing policy for the Group which is also to be rolled out in 2012.

During the period, the Audit Committee met four times and received regular reports, including internal audit reports, regarding the Company’s risk management and internal control systems which allowed it to monitor key matters, performance against objectives and follow up on actions to be taken to remedy any significant failings or weaknesses identified from such reports.

The Committee is also responsible for managing the relationship with PwC, the Group’s external auditors on behalf of the Board.

The Committee reviews the independence and objectivity of the external auditors and carries out an annual assessment taking into consideration their qualifications and expertise, regulatory requirements and the effectiveness of the audit process. Following their assessment in respect of 2011, the Committee has concluded that the external auditors have demonstrated appropriate qualifications and expertise, have remained independent of the Group and that the audit process was effective.

Accordingly the Committee recommended to the Board that PwC be re-appointed as the Group’s auditors for a further year. The Board has accepted this recommendation and has proposed a resolution to shareholders for the re-appointment of PwC in the AGM Notice which accompanies this Annual Report.

The Committee also reviewed PwC’s engagement letter and determined its remuneration in accordance with the authority given to it by shareholders, such remuneration being considered appropriate by the Committee.

The Committee has approved a policy which provides clear guidance regarding non-audit work that may be undertaken by the external auditors. Whilst the Committee believes that in certain circumstances it is appropriate for non-audit work to be undertaken by the external auditors these are limited and, in a normal year, total non-audit fees paid to the external auditors would be expected to be lower than total audit fees. However, the Committee has recognised that 2011 has been an exceptional year for the Group, reflecting its formation, and has resulted in the non-audit fees being higher than the audit fees. At each meeting, the Committee reviews the nature and amount of non-audit work performed by the auditors, as well as the fees charged, with a particular focus on ensuring that the engagement of such services does not undermine the auditors’ independence and objectivity.

An analysis of fees paid in respect of audit and non-audit services provided by PwC for 2011 is set out in note 6 on page 91. The majority of non-audit services provided by PwC during the year relate to work in connection with the prospectus for the premium listing, the proposed acquisition of PT Berau and investment in PT Bumi and the proposed acquisition of BRM. Having reviewed such non-audit services the Committee is satisfied that they were provided efficiently by the external auditors and did not prejudice their independence or objectivity.

Governance

47

Steven ShapiroChairman

Role of the CommitteeThe Conflicts Committee assists the Board to oversee any conflicts of interest concerning Directors (including, but not limited to, potential conflicts arising from personal investment activities and other professional activities such as directorships with third parties) and related party transactions involving the Company, its shareholders or any Director.

The members of the Committee are all INEDs and free of any relationship that would affect their impartiality in carrying out their responsibilities. The secretary to the Committee is the Group General Counsel and Company Secretary.

Sir Julian Horn-SmithChairman

Role of the CommitteeThe Nomination Committee is responsible for reviewing the structure and composition of the Board; identifying, evaluating and recommending candidates to join the Board and making recommendations regarding their election and re-election by shareholders. The Committee also oversees succession planning for the Directors and other senior executives and, with the SID, the annual evaluation of the Board and its Committees.

The members of the Committee are all INEDs and free of any relationship that would affect their impartiality in carrying out their responsibilities. The secretary to the Committee is the Group General Counsel and Company Secretary.

The Chairman of the Committee reports to subsequent meetings of the Board and the Board receives a copy of the minutes of each meeting once these have been approved by the Committee.


Activities during the yearDuring the year under review, the Nomination Committee met three times.

Its activities included reviewing the composition of the Board; recommending to the Board the appointment of Badung Tariono as Non-Executive Director; recommending that all Directors should retire at the 2012 AGM and all future AGMs and, where appropriate, stand for re-election; and overseeing the evaluation of the Board and the Audit and Remuneration Committees which was led by the Chairman of those Committees.


Steven Shapiro (Chairman)

3/3

Sony Harsono 3/3

Lord Renwick 3/3

Philip Yeo 3/3


Sir Julian Horn-Smith (Chairman)

3/3

Philip Yeo 3/3

Lord Renwick 3/3

Amir Sambodo 1/3

The Remuneration Committee’s principal responsibility is for the setting, reviewing and recommending to the Board for approval Bumi plc’s overall remuneration policy and strategy, and the setting of remuneration arrangements for Executive

Directors and Executive management. Full details of the Committee’s responsibilities, and a report of its activities during the year, are set out in the Remuneration Report on pages 50 to 61.


Nomination Committee

Conflicts Committee

Remuneration Committee

Amir SambodoChairman

Role of CommitteeThe Committee assists the Board to oversee management processes, standards and strategies designed to manage risks regarding health, safety, the environment and relationships with communities (together referred to as “HSEC”).

To enhance its effectiveness and ensure objectivity in the delivery of its key responsibilities, one of the members of the HSEC Committee, Tony Redman, is a technical advisor with extensive mining experience having worked in the mining industry for nearly 40 years with Anglo American plc (latterly as Group Technical Director before his retirement). In addition,


Amir Sambodo (Chairman)

2/2

Philip Yeo 2/2

Sony Harsono 2/2

Tony Redman (Technical advisor)

2/2

the HSEC Committee has also appointed PwC, a recognised leader in this field, to support the HSEC Committee in the delivery of its objectives.

The members of the HSEC Committee are all independent and free of any relationship that would affect their impartiality in carrying out their responsibilities. The secretary to the Committee is the Group General Counsel and Company Secretary.


The full terms of reference of the Committee can be found on the Company’s website, www.bumiplc.com, or can be obtained from the Group General Counsel and Company Secretary. Activities during the yearUnder its terms of reference, the HSEC Committee meets not less than three times a year. As the Board was not established until April 2011 only two meetings were held in the remainder of 2011, but a further meeting was held prior to the issue of this Annual Report, and not less than three meetings will be held in 2012.

A report on HSEC in 2011 is set out on pages 30 to 35.



Activities during the yearThe Conflicts Committee met three times during the year under review.

In addition to overseeing the procedure for the identification and monitoring of Director’s existing or potential conflicts, during 2011 the Conflicts Committee developed a Group wide process for the monitoring and, where appropriate, approval of related party transactions, the implementation of which will be reviewed in 2012.

Governance

49

Health, Safety, Environment and Communities Committee

Dear Shareholder,

I am pleased to introduce our first Directors’ report on remuneration, which sets out our remuneration policy for Executive Directors.

We are committed to creating a remuneration and governance framework which adheres to the highest standards of corporate governance and the key pillars of best practice. Within this framework, the principal aim of our remuneration policy is to align executive remuneration with the interests of our shareholders and the creation of long term shareholder value.

2011 was an important year for the Committee as the acquisitions were completed and we developed and started to implement our remuneration policy, and this process will continue in 2012. Since the establishment of the Bumi plc Remuneration Committee on 11 April 2011, key activities included:

– Determination of the overall executive remuneration policy for Bumi plc

– Within this policy, the agreement of the remuneration packages for the Executive Directors for 2011, the Company’s first year as a UK listed business

– Agreeing executive service contracts

– The development of the Bumi Incentive Plan, which was approved by shareholders.

– Consideration of overall performance for 2011 and determination of the bonuses due

For 2011, it was determined that no annual bonuses would be paid by Bumi plc to either of the Executive Directors.

I would like to thank my colleagues on the Committee for their hard work and valuable input during the year. The Committee looks forward to receiving your support at the AGM on 14 June 2012.

Sir Graham HearneChairman of the Remuneration Committee

Letter from the Chairman of the Remuneration Committee


Remuneration Report

IntroductionThis report has been prepared in accordance with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority, and describes how the Board has complied with the principles and provisions of the UK Corporate Governance Code relating to remuneration matters. The report will be presented at the AGM on 14 June 2012 for approval and shareholders will be able to ask questions on the report at the AGM.

The report is divided into two parts:

– The first part sets out the Company’s remuneration policy and the governance structures which underpin it. This is not required to be audited

– The second part contains the remuneration tables that have been audited in accordance with the relevant statutory requirements

The Remuneration Committee The Committee determines the remuneration packages, and any changes to the service contracts, of the Chairman, Co-Chairman, Executive Directors and other senior executives. The Committee also reviews and administers all incentive plans which apply to Executive Directors and senior management.

The Chairman, Co-Chairman and Executive Directors determine the fees for the Non-Executive Directors.


Sir Graham Hearne (Chairman)

3/3

Sir Julian Horn-Smith

2/3

Amir Sambodo 3/3

The table details the members of the Remuneration Committee, their role, the number of meetings the Committee had during the year and their respective attendance.

The members of the Committee are all INEDs and free from any relationship that would affect their impartiality in carrying out their responsibilities. The secretary to the Committee is the Group General Counsel and Company Secretary.


The Committee’s terms of reference are available on the Company’s website, www.bumiplc.com or can be obtained from the Group General Counsel and Company Secretary.

Advisors to the CommitteeDuring the year, the Committee appointed Deloitte LLP (“Deloitte”) to provide independent advice to the Committee on all aspects of executive remuneration. Deloitte did not provide any other services to the Company during the year.

The Committee also consulted with the Chairman and Co-Chairman who were invited to attend some Committee meetings during the year. No person was present during the part of a meeting when their own remuneration was being discussed.

Governance

51

Components of the Bumi plc remuneration framework for Executive Directors

Component Purpose/link to strategy Quantum Delivery Performance Period

Fix

ed

Base salary To provide market competitive fixed pay for the size, scope and responsibility of the role.

In 2011: CEO: £650,000CFO: £400,000

Cash Ongoing

Benefits To provide a market competitive benefit package for the size, nature and location of the role. This includes appropriate relocation and expatriate benefits.

Market rates Cash/other Ongoing

Va

ria

ble

Annual bonus To provide a performance related element of the package linked to the delivery of strong annual performance.

Performance is normally assessed against key financial and operational measures which support the execution of the strategy and the delivery of value for shareholders.

Maximum opportunity: 150% of salary

Cash Annual

Long term To provide a performance related element of the package linked to the delivery of shareholder value over the long term.

The award may take the form of: • Performance Shares under the Bumi Incentive Plan subject to relative TSR performance against two mining sector comparator groups

• Founder Securities which deliver value based on the increase in the Bumi share price above £10.

Maximum annual award: 200% of salary

Bumi plc shares Three years

Note: The terms “Performance Shares” and “Founder Securities” are defined on pages 54 and 55.

Principles of Executive Remuneration policyThe Executive Remuneration policy is designed to provide a competitive and performance related package which supports the delivery of the strategy and the creation of long term shareholder value. It is based on the following key principles:

– Provide a market competitive reward to attract and retain executives of the calibre needed to deliver on the Group strategy

– Include a significant variable element which is aligned to corporate performance, both over the financial year and in terms of long term shareholder value

– Support the delivery of strategic goals – Ensure that remuneration structures

do not encourage excessive risk taking – Uphold the key principles of best practice

on executive remuneration

Principles of competitive positioningWhen considering how to position the remuneration packages for the Executive Directors, the Committee considers market data from UK listed companies of a similar size and complexity, as well as practice in the UK listed mining sector. This data is provided by the independent advisors to the Committee.

The Committee positions salaries and incentive opportunities at what would be considered a market competitive level against the market data, taking into account the capabilities and experience of the individual. Salaries are normally positioned around the market mid point, although the Committee does not seek to “match the median”.

The Committee takes into account pay and conditions throughout the Group.

Remuneration Report (continued)


Balance between fixed and variable pay(%)

Salary

Annual Bonus

Long term incentive

Target

Maximum

31% 35%

22% 33%

34%

45%

0 20 40 60 80 100

The Executive Directors did not participate in a pension plan nor receive any allowances in respect of pension from Bumi plc.

Amounts in respect of benefits for Directors during 2011 are shown in the table on page 60.

Annual bonusThe purpose of the annual bonus is to provide a performance related element of the package linked to the delivery of strong annual performance and stretching targets related to key financial, operational and strategic goals.

For 2011, the maximum annual bonus opportunity was 150% of salary. In assessing performance for 2011, the Committee took into account that 2011 was a year of transition for the Company as the acquisitions were completed and integrated. In these circumstances it was not practicable to set predetermined financial and operational objectives for the Executive Directors. Based on the Committee’s assessment of the Company’s performance during the year, the Committee determined that no annual bonuses would be awarded to the Executive Directors in respect of the 2011 financial year. As noted in footnote 4 on page 60, PT Bumi determined that Ari Hudaya would be paid a bonus in respect of 2011. No cost relating to this bonus will be borne by Bumi plc.

The chart shows the balance between the fixed

and variable components of the remuneration

framework for Executive Directors at “target”

and “maximum” performance, illustrating the

significant portion which is related to performance

and to long term shareholder value creation.

Base salaryBase salaries are set at a market competitive rate based on UK listed companies of a similar size and complexity, as well as practice in the UK listed mining sector, taking into account the capabilities and experience of the individual and the size, scope and responsibility of the role. The annual base salaries for the Executive Directors in 2011 are shown in the table below.

Name Position 2011 base salary (£)

Ari Hudaya CEO £650,000

Andrew Beckham CFO £400,000

During 2011, in addition to their roles as Executive Directors of Bumi plc, Ari Hudaya and Andrew Beckham continued with their duties as Executive Directors of PT Bumi. The salaries, benefits and annual bonus opportunities described in this report represent the maximum entitlement receivable under the service agreements with Bumi plc in respect of services to all Group companies and associates. Under the service agreements, the Company may set off any entitlement against amounts received from other Group companies or associates.

There were no increases to the base salaries for Ari Hudaya and Andrew Beckham in 2012.

BenefitsThe Committee’s policy is to provide a market competitive benefit package for the size, nature and location of the role. This may include, depending on the location and scope of the role, private health insurance, life assurance, company car provision, housing and relocation allowances, and other expatriate benefits (such as travel allowances and assistance with tax compliance fees).

– Maximum annual opportunity: 150% of salary

– Payments under the annual bonus are based on the Committee’s assessment of performance against stretching annual targets. Significant outperformance is normally required to receive the highest levels of bonus payment

– Targets are set for financial and operational measures which the Committee determines, on an annual basis, to be the most appropriate measures to support the ongoing delivery of the Company strategy, as set out on pages 10 and 11 of this Annual Report

– A range of measures are used to ensure that the bonus is well balanced and rewards Executive Directors for the achievement of a number of different objectives in the year, which are all related to the delivery of the Company’s strategy

Key features of the annual bonus policy for Executive Directors are:

Governance

53

Long term incentivesThe purpose of the Company’s long term incentive awards is to support one of the key principles of the executive remuneration policy – that a significant proportion of the overall remuneration package should be linked to the delivery of shareholder value over the long term.

Long term incentive awards may be made under either the Bumi Incentive Plan or, if made available by Vallar Capital LP (“Vallar Capital”), in the form of Founders Securities. The key terms of both are discussed in the sections below.

Bumi Incentive Plan

Performance Shares are awarded under the Bumi Incentive Plan which is the Company’s main vehicle for making share based long term incentive awards to Executive Directors and senior management. The Plan was approved by shareholders in 2011. The key terms of the Plan, which is intended to be aligned with best practice, are summarised below:

– The maximum award that may normally be granted in any financial year is 200% of salary (400% in exceptional circumstances as determined by the Committee)

– Awards will normally vest at the end of a three year period. It is the Committee’s policy that awards will normally vest only to the extent that stretching performance conditions have been met over this period

– Awards are subject to clawback such that the Committee may reduce the size of outstanding awards if it becomes known that the participant had engaged in any activity which, in the opinion of the Committee, amounted to serious misconduct, fraud or misstatement or where effective risk management has been undermined, or any act or omission by the participant has contributed to material losses or serious reputational damage

– Unvested awards will normally lapse on cessation of employment. In the event of certain circumstances which include illness, injury, disability and redundancy, the Committee will normally allow an award to continue until the normal vesting date, and vest taking into account the achievement of applicable performance conditions and the period of time that has elapsed since the award was granted. In the case of death, an award may vest immediately taking into account time and performance to that date

– In the event of a change of control of Bumi, the extent to which awards may vest will be at the discretion of the Committee taking into account the performance of Bumi and the period of time which has elapsed since the date of the award and having regard to the interests of shareholders

– In any 10 year period, not more than 10% of the issued share capital of Bumi plc may be issued or issuable under the Bumi Incentive Plan or any other share plan of the Company

– Award size: 200% of salary

– Awards may be delivered in the form of Performance Shares under the Bumi Incentive Plan, in the form of Founders Securities, or a mixture of both

– Awards in the form of Performance Shares are subject to relative total shareholder return (TSR) performance over a three year period against two comparator groups (coal specific and a broader mining sector index)

– Awards are subject to clawback in certain scenarios

Key features of the overall long term incentive policy for Executive Directors are:



Bumi Incentive Plan – performance conditions

The extent to which Performance Share awards under the Bumi Incentive Plan may vest depends on the Company’s TSR performance over a three year period measured against two comparator groups as shown in the table above.

Relative TSR has been chosen as the performance measure for the Performance Shares because it aligns reward with the delivery of superior market performance against appropriate sector benchmarks over the long term.

Founders Securities

The Committee may also approve long term incentive awards being made to Executive Directors in the form of Founder Securities. The Founder Securities were issued to members of Vallar Capital at the time of the flotation of Vallar plc. The holders of the Founders Securities have agreed that up to 20% of the Founder Securities may be made available to be awarded to Bumi plc management, including Executive Directors.

A detailed description of the Founders Securities can be found in the Bumi plc prospectus issued in June 2011, a copy of which is available on the Company’s website, www.bumiplc.com. Broadly, the structure of the Founders Securities is economically equivalent to a conventional net settled share option over Bumi shares

with an exercise price of £10. As a result, the potential value which can be realised by holders is directly aligned to the increase in the Bumi share price.

Where such awards are made, all decisions regarding the size and terms of the awards will be made by the Committee. The awards will be subject to the same key terms as the Bumi Incentive Plan (set out above), including continued employment over a vesting period of at least three years and terms on cessation of employment and change of control.

The Committee considers that the Founder Securities have the following benefits as a vehicle for making long term incentive awards to executives:

– The level of reward for senior executives is fundamentally aligned to the creation of shareholder value through the increase in the Bumi share price

– There is no incremental dilutive cost to shareholders as the Founder Securities are already in existence and are held by Vallar Capital

No long term incentive awards were granted to Ari Hudaya or Andrew Beckham in, or in respect of 2011.

International Coal Mining Comparator Group HSBC Global Mining index

50% of the Performance Shares 50% of the Performance Shares

Arch Coal (US) Adaro Energy (Indonesia) This represents a commonly used index for measuring the performance of the global mining industryConsol Energy (US) Bayan Resources (Indonesia)

Peabody Energy (US) Indo Tambangraya Megah (Indonesia)

Walter Energy (US) Tambang Batubara Bukit Asam (Indonesia)

New Hope Corporation (Australia) Banpu (Thailand)

Whitehaven Coal (Australia) Exxaro Resources (South Africa)

New World Resources (UK) Sakari Resources (Singapore)

Company’s ranked TSR position Vesting (% of maximum) Company’s TSR vs index Vesting (% of maximum)

Upper quartile or above 100% Above index + 8% p.a. 100%

Median 25% Equal to the index 25%

Below median 0% Below the index 0%

Straight line vesting between these points Straight line vesting between these points

In addition vesting is also subject to the Committee being satisfied that the vesting outcome suitably reflects the underlying financial performance of the Company over the period.

TSR will be calculated in US dollars at the start and end of the relevant period, using three month averaging to smooth the impact of share price volatility.

Governance

55

Termination arrangements for former Executive DirectorsAri Hudaya and Andrew Beckham stepped down from their roles as Executive Directors on 26 March 2012. Ari Hudaya will remain on the Board as a Non-Executive Director. As at the date of this report, the final details of their termination arrangements had not been confirmed and these will be disclosed in next year’s report.

Executive Director service contractsThe service contracts for Executive Directors’ who served during the financial year contained the following key terms.

Provision Detailed terms

Contract dates • Contracts for both Executive Directors who served during the financial year were signed on 16 June 2011 with effective dates of 22 November 2010 for Ari Hudaya and 17 December 2010 for Andrew Beckham

Notice period • 12 months by either Company or Director

Termination payment • Payment in lieu of notice of up to 12 months’ salary

Remuneration of the Non-Executive Directors The Non-Executive Directors have letters of appointment on the terms set out in the table below.

Director Role Date of appointment

Indra Bakrie Chairman 11 April 2011

Nathaniel Rothschild Co-Chairman 11 April 2011

Sir Julian Horn-Smith Deputy Chairman and Senior Independent Director 22 February 2011

James Campbell1 Non-Executive 11 April 2011

Rosan Roeslani Non-Executive 11 April 2011

Lord Renwick Independent Non-Executive 22 February 2011

Steven Shapiro Independent Non-Executive 11 April 2011

Sir Graham Hearne Independent Non-Executive 11 April 2011

Amir Sambodo Independent Non-Executive 11 April 2011

Philip Yeo Independent Non-Executive 11 April 2011

Sony Harsono Independent Non-Executive 11 April 2011

Badung Tariono Independent Non-Executive 1 July 2011

All Non-Executive Directors’ offices can be terminated without notice. The Chairman and Co-Chairman

appointments in 2011 can be terminated on 12 months’ notice.

1 James Campbell also has a consultancy agreement in place with the Company under which he assisted and

contributed to the management of the operations and development of the Wider Group’s businesses and

mining assets, as well as the extension of activities into new businesses or geographic areas, for a fee of

£5,000 per day. No compensation is payable to him upon the termination of the consultancy agreement

other than in respect of accrued fees or expenses outstanding as at the date of termination. The agreement

contains non-compete and non-solicitation clauses which apply during the term of the agreement.



Fees for Non-Executive Directors are set at levels that are sufficient to attract and retain individuals with the required skills and experience to allow the Board to effectively carry out its duties, taking into account the responsibility of the role and the time commitments required.

The fee policy is set out in the table below. From 2012, all fees are payable in cash.

Non-Executive Director fee policy

Company Chairman/Co-Chairman £200,000

Senior Independent Director £140,000

Non-Executive Director fee £70,000

Additional fees for Committees

Audit Committee

Chairman £20,000

Member £10,000

Remuneration Committee

Chairman £15,000

Member £7,000

Nomination Committee

Chairman £10,000

Member £4,000

Conflicts Committee

Chairman £15,000

Member £6,000

Health, Safety, Environment and Communities Committee

Chairman £15,000

Member £6,000

Additional attendance fee for any Committee or Board meeting attended that involves more than 12 hours’ travel

£5,000

Indra Bakrie and Nathaniel Rothschild elected to waive their fees with effect from 1 July 2011.

With the exception of Rosan Roeslani (described below), Non-Executive Directors do not receive any other form of remuneration from the Group or participate in any Group incentive scheme.

As referred to on page 43, Rosan Roeslani is Non-Executive Director of Bumi plc and receives non-executive fees (per the table above) in respect of these duties. Rosan Roeslani is also the President Director of PT Berau which, whilst a subsidiary of Bumi plc, retains a listing on the Indonesia Stock Exchange. The remuneration package for Rosan Roeslani in respect of his executive duties at PT Berau is determined by the remuneration committee of PT Berau and is outside the remit of the Committee. Rosan Roeslani’s remuneration package as the President Director of PT Berau comprises a base salary and participation in annual bonus arrangements. Amounts in respect of these for the relevant period of account are shown in the table on page 60, in accordance with the reporting requirements under the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

Governance

57

Non-Executive Directors’ Share Matching Awards

At the time of the placing of Vallar plc, Sir Julian Horn-Smith, Lord Renwick, Steven Shapiro and Sir Graham Hearne (the “Participating Non-Executive Directors”) subscribed for ordinary shares at the placing price of £10 per share as part of the IPO, up to a maximum subscription of £150,000 each (15,000 ordinary shares).

On subscription for these shares, each Participating Non-Executive Director became eligible to subscribe for two matching shares (“Matching Shares”) for every ordinary share acquired at that time up to a maximum of 30,000 shares.

The Matching Shares were subject to vesting conditions and were to vest in two equal tranches

subject to the satisfaction of the vesting criteria. The first of these tranches would vest either on or after the first anniversary of appointment as a Non-Executive Director of Vallar plc or on or after the date of completion of an acquisition, as contemplated by the Vallar IPO Prospectus, whichever date is later. The second tranche would generally vest on the date of such completion, provided that it occurred prior to the second anniversary of his appointment as a Non-Executive Director of Vallar plc. Both of these criteria were satisfied during 2011 and the Participating Non-Executive Directors subscribed for their full allocation of Matching Shares which were allotted on 15 July 2011.

Details of the awards under this plan are shown in the table on page 61.



160

120

0

80

40

Total Shareholder Return performance graph

July 2010

December 2011

December2010

Bumi plc

FTSE 100

HSBC Global Mining Index

Directors’ interests in shares

DirectorNumber of ordinary shares

held as at 31 December 2011

Indra Bakrie Nil

Nathaniel Rothschild1,2 21,142,418

Ari Hudaya Nil

Andrew Beckham 5,300

Sir Julian Horn-Smith 45,000

James Campbell3 1,906,460

Rosan Roeslani4 23,667,250

Lord Renwick5 55,000

Steven Shapiro 55,000

Sir Graham Hearne 55,000

Amir Sambodo Nil

Philip Yeo Nil

Sony Harsono Nil

Badung Tariono Nil

1 11,178,872 of the shares in which Nathaniel Rothschild is interested are held by connected parties.2 As at 31 December 2011, Nathaniel Rothschild was also interested in 4,365,000 Founder Securities,

of which 1,820,000 Founder Securities were held by connected parties.3 These shares are held by Vallar Capital LP. James Campbell is also interested in 500,000 Founder Securities.4 All shareholdings of PT Bukit Mutiara have been attributed to Rosan Roeslani in the table above by virtue

of his beneficial ownership of PT Recapital Advisers which gives him an indirect interest in approximately

71.6% of the issued share capital of PT Bukit Mutiara. In accordance with the terms of the Mutiara Share

Transaction Arrangements which are described in the prospectus issued by the Company on 17 June 2011,

24,524,851 shares which were due to be issued to PT Bukit Mutiara under the terms of Vallar plc’s original

acquisition of a 75% interest in PT Berau (details of which are set out in a prospectus issued by Vallar plc on

24 February 2011) were instead issued direct to Long Haul Holdings Ltd in the form of suspended voting ordinary

shares in the capital of Vallar plc.5 On 28 February 2011, 50,000 Redeemable Deferred Shares were allotted and issued fully paid up for cash

to enable the Company to satisfy the minimum share capital requirement for it to be re-registered as a public

company under the Companies Act. The Redeemable Deferred Shares are not transferable, the holders

are not entitled to receive notice of (or attend or vote at) general meetings and are not entitled to receive

dividends, and they may be redeemed at their nominal value following a request made by either the

Company or the holder. At the time of issue, Lord Renwick volunteered to assist this process by having

these Redeemable Deferred Shares allotted in his name solely for the purpose noted above and no other.

The intention is to redeem these shares as soon as practicable.

Changes since 1 January 2012During the period from 1 January to 12 April 2012, the only changes to the Directors’ interests were in respect of the Founder Securities and shares held by Nathaniel Rothschild. On 4 January 2012, Nathaniel Rothschild’s interests in Founder Securities reduced by 178,109 and he is currently interested in 4,186,891 Founder Securities, of which 1,820,000 are held by connected parties. On 4 January 2012, Nathaniel Rothschild’s interests in ordinary shares reduced by 125,000 and on 3 and 4 April 2012, Nathaniel Rothschild purchased 507,500 shares. He currently holds 21,524,918 ordinary shares of which 11,178,872 are held by connected parties.

The chart shows the

Total Shareholder

Return of Bumi since

listing, compared to

the FTSE 100 and the

HSBC Global Mining

Index over the same

period. The Company

considered these

indices to be relevant

benchmarks for

comparison purposes.

Governance

59

AUDITED INFORMATION

Directors’ emoluments for the period ended 31 December 2011The emoluments for 2011 for Directors of Bumi plc who served during the financial year are set out in the table below. The emoluments include remuneration receivable from Bumi plc and Vallar plc.

Directors

Salary / fees Bonus Benefits9 Other Total10

2011 £000

2011 £000

2011 £000

2011 £000

2011 £000

Chairmen

Indra Bakrie1 137 137

Nathaniel Rothschild2 130 130

Executive Directors

Ari Hudaya3,4 650 4 654

Andrew Beckham3 400 50 450

Non-Executive Directors

Sir Julian Horn-Smith5 174 174

James Campbell 104 958 199

Rosan Roeslani6 98 98

Lord Renwick7 124 124

Steven Shapiro7 129 129

Sir Graham Hearne7 119 119

Amir Sambodo 108 108

Philip Yeo 92 92

Sony Harsono 97 97

Badung Tariono11 40 40

2,402 0 54 95 2,551

1 Amounts shown in the table represent fees paid to Indra Bakrie in respect of the year until 30 June 2011.

He waived his fees of £100,000 receivable for services provided from 1 July 2011. £22,050 of Indra Bakrie’s

fees relate to services in respect of 2010 and which were paid in 2011. 2 Amounts shown in the table represent fees paid to Nathaniel Rothschild in respect of the year until 30 June

2011. He waived his fees of £100,000 receivable for services provided from 1 July 2011. £24,600 of Nathaniel

Rothschild’s fees relate to services in respect of 2010 and which were paid in 2011. 3 The amounts shown in the table represent amounts receivable under the service agreements with Bumi plc.

For Ari Hudaya, all salary and benefits were paid by PT Bumi. For Andrew Beckham, his salary was paid by

PT Bumi until 30 June 2011 and by Bumi plc from 1 July 2011 onwards.4 PT Bumi determined that Ari Hudaya be paid a bonus of $583,000 in respect of 2011. No cost relating to this

bonus will be borne by Bumi plc.5 £33,333 of the annual fee was paid in the form of ordinary shares, as part of the Share Matching Awards

referred to on page 58.6 Rosan Roeslani is a Non-Executive Director of Bumi plc and receives fees in respect of these duties

(per the table above). Rosan Roeslani is also an Executive Director of PT Berau which, whilst a subsidiary

of Bumi plc, retains a listing on the Indonesia Stock Exchange. Rosan Roeslani’s remuneration package as an

Executive Director of PT Berau comprises a base salary of IDR 2,195,301,082 ($251,636 at an exchange rate

of IDR 8,724: $1) and participation in an annual bonus arrangement, under which a bonus of IDR 3,917,142,714

($449,002 at the same exchange rate) was paid in respect of 2011. 7 £30,000 of the annual fee was paid in the form of ordinary shares, as part of the Share Matching Awards

referred to on page 58.8 Represents amounts received under the consultancy agreement as referred to on page 56. 9 Benefits include: car and driver, accommodation, school fees, travel expenses, private medical insurance

and permanent health insurance.10 As this is the first Directors’ Remuneration Report of Bumi plc, there is no comparative data shown in

the table for 2010. Data for Directors of Vallar plc for the year ended 31 December 2010 is shown in the

Vallar plc Annual Report for that period. 11 Badung Tariono was appointed on 1 July 2011.



Share Matching AwardsThe interests of the Participating Non-Executive Directors in Share Matching Awards (as described in more detail on page 58) are set out below. In order to participate in the awards below, each Participating Non-Executive Director was required to subscribe for 15,000 shares in the Placing of Vallar plc.

Director

Date on which

Matching Shares were

awarded

Total Matching Shares at 1 January

2011

Vested and subscribed for during

2011

Total Matching Shares

outstanding at 31 December

2011

Subscription price for each

Matching Share

Date on which Matching Shares

allotted

Share price on date

of allotment of Matching

Shares

Sir Julian Horn-Smith 9 July 2010 30,000 (30,000) 0 £1.00 15 July 2011 £11.20

Sir Graham Hearne 9 July 2010 30,000 (30,000) 0 £1.00 15 July 2011 £11.20

Lord Renwick 9 July 2010 30,000 (30,000) 0 £1.00 15 July 2011 £11.20

Steven Shapiro 9 July 2010 30,000 (30,000) 0 £1.00 15 July 2011 £11.20

The share price as at 31 December 2011 was 880p. The share price ranged between 1,400p (high) and 707p (low) during the year.

This Remuneration Report was approved by the Board on 12 April 2012 and signed on its behalf by:

Sir Graham HearneChairman of the Remuneration Committee12 April 2012

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61

This section contains additional information which the Directors are required by law and regulation to include within the Annual Report.

Company registrationBumi plc is domiciled in England and incorporated and registered in England and Wales with the registered number 7460129. Its registered office is 2nd Floor, 4 Grosvenor Place, London SW1X 7HJ.

Principal activitiesBumi plc is a leading FTSE listed thermal coal group with interests in the largest coal-producing assets in Indonesia through its 85% holding in PT Berau and 29% holding in PT Bumi.

Business reviewA detailed review of the Group’s performance and future prospects is presented in the Chairman’s Statement (on pages 6 to 7), the Chief Executive Officer’s Statement (on pages 8 to 9) and the Business Review on pages 16 to 35.

Share CapitalThe Company has three classes of ordinary shares which carry no right to fixed income: Voting Ordinary Shares, Suspended Voting Ordinary Shares and Redeemable Deferred Shares. At the date of this Annual Report, the issued share capital of the Company comprised 180,514,285 Voting Ordinary Shares of £0.01 each (representing approximately 74.90% of the total issued share capital), 60,442,782 Suspended Voting Ordinary Shares of £0.01 each (representing approximately 25.08% of the total issued share capital) and 50,000 Redeemable Deferred Shares of £1.00 each (representing approximately 0.02% of the total issued share capital).

During the year the Company undertook a court approved reduction of capital involving a reduction in the nominal value of the Company’s Voting Ordinary Shares and Suspended Voting Ordinary Shares to create additional distributable reserves for the Company going forwards. On 6 July 2011, the High Court issued an order sanctioning the reduction in the nominal value of the Company’s voting ordinary shares and suspended voting ordinary shares from £6.00 to £0.01.

Share rightsThe rights and obligations attached to the Company’s ordinary shares are set out in the Articles of Association, copies of which can be obtained from Companies House in the UK or by writing to the Group General Counsel and Company Secretary. Subject to the provisions of the Companies Act, and without prejudice to any rights attached to any existing shares or class of shares, any share may be issued with such rights or

restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board may determine. The Board may issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or the holder. Subject to the Company’s Articles of Association and to the Companies Act, the unissued shares of the Company (whether forming part of the original or any increased capital) are at the disposal of the Board.

Voting Ordinary Shares

Holders of Voting Ordinary Shares are entitled to attend, speak and vote at general meetings of the Company, and to appoint proxies to exercise their rights. Holders of Voting Ordinary Shares may receive a dividend and on a winding up may share in the assets of the Company.

Suspended Voting Ordinary Shares

For the purposes of the rights and restrictions attaching to the Suspended Voting Ordinary Shares: “acting in concert” shall have the meaning given in the City Code (as applied by the UK Panel on Takeovers and Mergers), and references to acting in concert shall be construed as acting in concert in relation to the Company, but references to acting in concert with the Sellers or either of them or any Affiliate shall not include any member of the Issuer Concert Party Group;“Affiliate” shall mean, in relation to the Sellers, (i) any person that directly or indirectly controls, is controlled by, or is under common control with either Seller (but excluding the Company and any person or entity controlled by the Company), (ii) any person holding shares as nominee for either Seller or any of their Affiliates (but only in relation to the shares so held) and (iii) any person holding shares which represent an identifiable, distinct partnership interest of either Seller or any of their Affiliates (but only in relation to the shares so held), and, for the purposes of this definition, control, when used with respect to any person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise (and controlled shall be construed accordingly);“Group” means the Company and its subsidiary undertakings and parent undertakings and any subsidiary undertakings of any such parent undertakings for the time being and Group member shall be construed accordingly (for these purposes, subsidiary undertaking and parent undertaking shall have the meanings given to them in section 1162 of the Companies Act 2006);


Other Statutory Information

“Issuer Concert Party Group” means each Non-Seller Director, the Company and each other Group member and any person acting in concert with a Non-Seller Director or a Group member other than the Sellers, any Seller Nominated Director and any Affiliate;“Maximum Voting Percentage” shall mean such percentage as would, in the event of either Seller or any Affiliate subsequently acquiring one additional Voting Ordinary Share, result in one of the Sellers or any Affiliate being required to make a mandatory offer for the Company under Rule 9 of the City Code;“Non-Seller Director” means a Director of the Company who is not a Seller Nominated Director;“Seller Nominated Director” means any director of the Company appointed at the request of the Sellers, or either of them;“Sellers’ Voting Shareholding” shall mean the Voting Rights for the time being of the Sellers and any Affiliates in the aggregate being expressed as a percentage of the total Voting Rights at such time;“Voting Rights” shall mean, in relation to the Company, rights attaching to shares in the Company to vote at general meetings of the Company on all, or substantially all, matters.

Except as set out below, the Suspended Voting Ordinary Shares shall rank pari passu with the Voting Ordinary Shares in all respects and no action shall be taken by the Company in relation to, or offer made by the Company to the holders of, the Voting Ordinary Shares unless the same action is taken in respect of, or the same offer is made to the holders of, the Suspended Voting Ordinary Shares. Subject to this, the rights and restrictions attaching to the Suspended Voting Ordinary Shares are set out below.

1. On a distribution of profits (whether by cash dividend, dividend in specie, scrip dividend, capitalisation issue or otherwise), the Suspended Voting Ordinary Shares shall rank pari passu with the rights to distributions of profits attaching to the Voting Ordinary Shares.

2. On a return of capital, whether on a winding up or otherwise, the Suspended Voting Ordinary Shares shall rank pari passu with the rights to the assets of the Company attaching to the Voting Ordinary Shares.

3. A holder of Suspended Voting Ordinary Shares shall be entitled to receive notice of, and to attend and speak at, any general meeting of the Company, but shall not be entitled to vote in respect of any Suspended Voting Ordinary Shares held, except on any resolution:(a) proposed by any person other than PT Bakrie

& Brothers Tbk and Long Haul Holdings Ltd (“Sellers”) or either of them or any Affiliate or any person acting in concert with either Seller or any Affiliate, to wind up the Company or to present a petition to wind up the Company, other than for the purposes of a reconstruction or amalgamation whilst solvent,

(b) proposed by any person other than the Sellers or either of them or any Affiliate or any person acting in concert with either Seller or any

Affiliate, to appoint an administrator or to present a petition for the appointment of an administrator in relation to the Company, or to approve any arrangement with the Company’s creditors,

(c) proposed by the Board of Directors of the Company, to sell all or substantially all of the undertaking of the Company (provided that such resolution is not in connection with a transaction to which the UK City Code on Takeovers and Mergers (“City Code”) applies),

(d) proposed by the Board of Directors of the Company for the purposes of, or in connection with, any scheme of arrangement of the Company under the Act under which a body corporate (“Newco”) will acquire the Company and the holdings of the members of Newco following the scheme becoming effective will be substantially the same as the holdings of the members of the Company immediately before the scheme becoming effective; or

(e) proposed by any person other than the Sellers or either of them or any Affiliate or any person acting in concert with either Seller or any Affiliate, in accordance with the articles of association of the Company, to vary, modify or abrogate any of the class rights attaching to the Suspended Voting Ordinary Shares,

in any which case each holder of Suspended Voting Ordinary Shares on a show of hands shall have one vote, and on a poll shall be entitled to vote on the resolution on the basis of one vote for each Suspended Voting Ordinary Share held. For the purposes of any resolution of a type referred to in paragraphs (a) to (d) above, the Suspended Voting Ordinary Shares shall be treated for all purposes as being of the same class as the Voting Ordinary Shares (and any other suspended voting ordinary shares issued on substantially equivalent terms to the Suspended Voting Ordinary Shares) and no separate meeting or resolution of the holders of the Suspended Voting Ordinary Shares shall be required to be convened or passed.

4. The rights attaching to the Suspended Voting Ordinary Shares shall not be, and shall not be deemed to be, varied or abrogated in any way by the creation, allotment or issue of any Voting Ordinary Shares.

5. Upon a transfer of Suspended Voting Ordinary Shares by either Seller or an Affiliate to a person who is not an Affiliate or a Seller, such Suspended Voting Ordinary Shares shall convert into Voting Ordinary Shares (on a one for one basis) automatically upon, and contemporaneously with, registration by the Company (or its registrar) of the transfer in the register of members of the Company following receipt of a duly executed stock transfer form and the share certificates in respect of such Suspended Voting Ordinary Shares.

6. Upon:(a) a transfer of Voting Ordinary Shares by either

Seller or an Affiliate to a person who is not an Affiliate or a Seller; or

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63

(b) any issue of further shares by the Company as a result of which the Sellers’ Voting Shareholding is reduced below the Maximum Voting Percentage, such number of Suspended Voting Ordinary Shares as, immediately following conversion, will result in the Sellers’ Voting Shareholding being equal to the Maximum Voting Percentage, shall convert into Voting Ordinary Shares (on a one for one basis) automatically upon, and contemporaneously with, registration by the Company (or its registrar) of the transfer in the register of members of the Company following receipt of a duly executed transfer form and the share certificates in respect of such Voting Ordinary Shares or the issue of such further shares. In any such case, a proportionate number of each holder’s holding of Suspended Voting Ordinary Shares, also taking into account the conversion into Voting Ordinary Shares of any other suspended voting ordinary shares issued on terms substantially equivalent to the terms of the Suspended Voting Ordinary Shares, shall be so converted (in each case rounded up or down to the nearest whole number as determined by any Director in his absolute discretion).

7. At any time, either Seller (or any Affiliate) shall be entitled (but shall not be bound) to require the Company to convert Suspended Voting Ordinary Shares into Voting Ordinary Shares, on a one for one basis, so long as such conversion does not result in the Sellers’ Voting Shareholding being more than the Maximum Voting Percentage.

8. Within 21 days after the conversion of any Suspended Voting Ordinary Shares into Voting Ordinary Shares, the Company shall forward to the relevant Seller or Affiliate (as the case may be), at its own risk, free of charge, a definitive certificate for the appropriate number of fully paid up Voting Ordinary Shares and a new certificate for any unconverted Suspended Voting Ordinary Shares comprised in the certificate surrendered by it. Pending the despatch of definitive certificates, transfers shall be certified against the register of members of the Company.

9. The Company shall use best endeavours to procure that the Voting Ordinary Shares arising on conversion of the Suspended Voting Ordinary Shares are admitted to the Official List and to trading on London Stock Exchange plc’s main market for listed securities.

10. No admission to listing or admission to trading shall be sought for the Suspended Voting Ordinary Shares whilst they remain Suspended Voting Ordinary Shares.

Redeemable Deferred Shares

The rights and restrictions attaching to the Redeemable Deferred Shares are as set out below.

1. The Redeemable Deferred Shares shall not be transferable.

2. The holders of the Redeemable Deferred Shares are not entitled to receive notice of, or to attend or vote at, any general meeting of the Company.

3. Subject to the Companies Act, any Redeemable Deferred Share shall be redeemed on the next business day following written notice requesting such redemption being given by either the Company or the relevant holder of the Redeemable Deferred Share to the other.

4. On redemption of any Redeemable Deferred Share, the Company shall pay to the holder in full the amount paid up or credited as paid up on such Redeemable Deferred Share.

5. On a return of capital, holders of Redeemable Deferred Shares shall be entitled only to the payment of the nominal amounts of those shares, after repayment to the holders of any and all Voting Ordinary Shares and Suspended Voting Ordinary Shares then in issue of the amount paid up or credited as paid up on those Voting Ordinary Shares and Suspended Voting Ordinary Shares held by them respectively.

6. The holders of the Redeemable Deferred Shares have no right to receive any dividend or other distribution (whether of capital or income) other than as set out in (5.) above.

Voting rightsSubject to any rights or restrictions attached to any shares, on a show of hands every member who is present in person shall have one vote and on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder.

No member shall be entitled to vote at any general meeting, either in person or by proxy, unless all moneys presently payable by him in respect of shares in the Company have been paid.

If at any time the Board is satisfied that any member, or any other person appearing to be interested in shares held by such member, has been duly served with a notice under section 793 of the Companies Act 2006 and is in default for the prescribed period in supplying to the Company the information thereby required, or, in purported compliance with such a notice, has made a statement which is false or inadequate in a material particular, then the Board may, in its absolute discretion at any time thereafter by notice to such member direct that in respect of the shares in relation to which the default occurred, the member shall not be entitled to attend or vote either personally or by proxy at a general meeting or at a separate meeting of the holders of that class of shares or on a poll.

Restrictions on transfer of sharesThere are no specific restrictions on the transfer of shares in the Company other than:


Other Statutory Information (continued)

(i) the Redeemable Deferred Shares shall not be transferable;

(ii) the right of the Board to refuse to register the transfer of a certificated share that is not fully paid, provided that the refusal does not prevent dealings in shares in the Company from taking place on an open and proper basis. The Board may also refuse to register the transfer of a certificated share unless the instrument of transfer (a) is lodged, duly stamped (if applicable), at the office or at another place appointed by the Board accompanied by the certificate for the share to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer; (b) is in respect of only one class of shares; and (c) is in favour of not more than four transferees;

(iii) pursuant to the Company’s share dealing code whereby the Directors of the Company require, and employees require, approval to deal in Bumi plc’s shares;

(iv) certain restrictions may from time to time be imposed by laws and regulations; and

(v) where a person whose shares represent at least a 0.25% interest in Bumi plc’s shares has been served with a disclosure notice and has failed to provide the Company with information concerning interests in those shares, except as provided in the Articles.

The Company is not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.

Pursuant to the terms of certain arrangements entered into at the time between Long Haul Holdings Ltd and PT Bukit Mutiara, on closing of the Company’s acquisition of 25% of the issued share capital of PT Bumi, 24,524,851 Voting Ordinary Shares were issued by the Company to Long Haul Holdings Ltd. Under the terms of those arrangements, the Company understands that as at 31 December 2011 those shares were the subject of an (unexercised) right of re-transfer to PT Bukit Mutiara.

No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.

Appointment and replacement of DirectorsThe rules for the replacement and appointment of Directors are set out in the Articles of Association. Under the terms of a relationship agreement entered into by the Company and the Bakrie Group on 16 June 2011 and a relationship agreement entered into by the Company and PT Bukit Mutiara (“Mutiara”) on 16 June 2011, the Bakrie Group can nominate up to three Directors, to hold the positions of Chairman, Chief Executive Officer and Chief Financial Officer respectively, and Mutiara can nominate one Non-Executive Director, subject to each of the Bakrie Group and Mutiara retaining control of 15% of the votes able to be cast at general meetings of the Company.

Articles of AssociationThe Articles themselves may be amended by special resolution of the shareholders.

Powers of the DirectorsSubject to the provisions of the Companies Acts, the Company’s Articles of Association and to any directions given by special resolution, the business of the Company shall be managed by the Board, which may exercise all the powers of the Company.

DirectorsThe Directors of the Company are listed on pages 38 and 39.

Sir Julian Horn-Smith and Lord Renwick were appointed as Directors on 22 February 2011.

Capita Trust Corporate Services Limited and Colin Benford, the first Directors of the Company, resigned on 22 February 2011.

Indra Bakrie, Nathaniel Rothschild, Ari Hudaya, Andrew Beckham, James Campbell, Rosan Roeslani, Sir Graham Hearne, Steven Shapiro, Amir Sambodo, Philip Yeo and Sony Harsono were appointed as Directors on 11 April 2011.

Badung Tariono was appointed a Director of the Company on 1 July 2011.

On 26 March 2012, Samin Tan, Nalin Rathod and Scott Merrillees were appointed as Directors of the Company and Chairman, Chief Executive Officer and Chief Financial Officer respectively. Andrew Beckham resigned as a Director of the Company; Indra Bakrie became Co-Chairman of the Company; and Nathaniel Rothschild and Ari Hudaya became non-independent Non-Executive Directors.

It was further agreed at the Board meeting on 26 March 2012 that Alexander Ramlie, Graham Holdaway and Jean Mizrahi would be proposed as Directors of the Company at the 2012 AGM.

James Campbell and Badung Tariono will retire as Directors of the Company at the 2012 AGM on 14 June 2012.

Directors’ interestsThe Board of Directors’ interests in shares in the Company are detailed on page 59.

Directors’ indemnities The Company has entered into deeds of indemnity with each of its Directors which are qualifying indemnity provisions for the purpose of the Companies Act 2006.

Directors’ insuranceDirectors’ and officers’ liability insurance is provided for all Directors of the Company.

Directors’ share options (if relevant)Details of Directors’ share options are provided in the Directors’ Remuneration Report on page 59.

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65

Employment policiesThe Group is an equal opportunities employer and bases all decisions on individual ability regardless of race, religion, gender, sexual orientation, age or disability.

Applications for employment by disabled persons will always be fully considered, having regard to their particular aptitudes and abilities. Should any employee become disabled, every practical effort is made to provide continued employment. Depending on their skills and abilities, they will enjoy the same career prospects and scope for realising their potential as other employees. Appropriate training will be arranged for disabled employees, including retraining for alternative work for those who become disabled, to promote their career development within the organisation.

Supplier payment policyThe Group does not follow any specified code or standard on payment practice across its businesses. Businesses aim to adopt fair practises, which reflect local and industry norms. The Group values its suppliers and recognises the benefits of maintaining good relations including the maintenance of payment terms. It is the Group’s policy to agree the payment terms with each supplier at the start of business and to ensure that they are aware of the terms of payment. The Group had 44 days’ purchases outstanding at 31 December 2011 (2010: nil days’) based on the average daily amount invoiced by suppliers during the year.

Significant AgreementsThe Companies Act 2006 requires the Company to disclose the following significant agreements that contain provisions entitling the counterparties to exercise termination or other rights in the event of a change of control of the Company:

Relationship Agreements

The Company has entered into (i) a relationship agreement with members of the Bakrie Group dated 16 June 2011 (the “Bakrie Relationship Agreement”) and (ii) a relationship agreement with Mutiara dated 16 June 2011 (the “Mutiara Relationship Agreement”). The Bakrie Relationship Agreement and the Mutiara Relationship Agreement are together referred to herein as the “Relationship Agreements”.

The principal purpose of the Relationship Agreements is to ensure that the Company is capable at all times of carrying on its business independently of the Bakrie Group and of Mutiara (and their respective associates) and that all transactions and relationships between the Company and either members of the Bakrie Group or Mutiara are at arm’s length and on a normal commercial basis. Each of the Relationship Agreements will terminate on the earlier of: (a) the Company ceasing to have any of its ordinary shares listed on the Official List and traded on the London

Stock Exchange’s main market for listed securities; and (b) the Bakrie Group together with its associates (in the case of the Bakrie Relationship Agreement) or Mutiara together with its associates (in the case of the Mutiara Relationship Agreement) ceasing to be entitled to exercise or control the exercise of 10% of more of the votes available to be cast on all or substantially all matters at general meetings of the Company.

Pursuant to the terms of the Relationship Agreements, it has been agreed, among other things, that:

(i) the Bakrie Group and Mutiara (in respect of the applicable Relationship Agreement, the “Relationship Party”) will, and will procure so far as it is reasonably able to do so that each of its associates will(a) conduct all transactions and relationships with

any member of the Group, and ensure that all arrangements and agreements between the Relationship Party or any of its associates and the Company or any other member of the Group are entered into, on arm’s length terms and on a normal commercial basis;

(b) not take any action which precludes or inhibits any member of the Group from carrying on its business independently of the Relationship Party and its associates;

(c) not exercise any of its voting rights or other rights and powers to procure any amendment to the Articles of Association of the Company which would be inconsistent with or breach any provision of the applicable Relationship Agreement or the ability of any member of the Group to carry on its business independently of the Relationship Party and its associates;

(d) when paragraph 11.1.7R(3) of the Listing Rules applies to the Company, abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a “related party transaction” (as defined in paragraph 11.1.5R of the Listing Rules) involving the Relationship Party or any of its associates as the related party;

(e) comply with all provisions of the Listing Rules, the Disclosure and Transparency Rules, the requirements of the London Stock Exchange and the Financial Services and Markets Act 2000, that apply to it in connection with the Company; and

(f) not to do anything within their power to cause or authorise to be done anything which would prejudice either the Company’s status as a listed company or its suitability for listing, or listing on the premium listing segment of the Official List;

(ii) provided that the Relationship Party and its associates are entitled to exercise or control the exercise of 15% or more of the votes able to be cast on all or substantially all matters at general meetings of the Company, the Relationship Party



shall be entitled to nominate for appointment to the Board of Directors of the Company: in the case of Mutiara, one Director (to hold the position of Non-Executive Director) and, in the case of the Bakrie Group, three Directors (one to hold the position of Chairman, one to hold the position of Chief Executive Office and one to holder the position of Chief Financial Officer), in each case by giving notice to the Company;

(iii) pursuant to the Bakrie Relationship Agreement, provided that the Bakrie Group and its associates are entitled to exercise or control the exercise of 15% or more of the votes able to be cast on all or substantially all matters at general meetings of the Company, the Bakrie Group shall be entitled to nominate for appointment the President Commissioner and the President Director and a majority of the Board of Commissioners and directors of PT Bumi and the Company shall take all such steps as are available to it under Indonesian law to seek to appoint the President Commissioner and/or President Director of PT Bumi, as the case may be, in accordance with the nomination of the Bakrie Group; and

(iv) the Relationship Party will be restricted from voting on transactions where there is a conflict of interest between it and the Group.

12.5% Guaranteed Senior Secured Notes

On 8 July 2010, Berau Capital Resources Pte. Ltd. (“Berau Capital”), a wholly owned finance subsidiary of PT Berau, issued $350m aggregate principal amount of 12.5% guaranteed senior secured notes. Berau Capital also issued an additional $100m aggregate principal amount of 12.5% guaranteed senior secured notes on 29 July 2010 (together with the $350m aggregate principal amount of 12.5% guaranteed senior secured notes, the “12.5% Guaranteed Senior Secured Notes”). PT Berau Capital’s obligations under the 12.5% Guaranteed Senior Secured Notes are guaranteed by PT Berau and certain of its subsidiaries and subsidiary undertakings (collectively known as the “PT Berau Group”). The maturity date of the notes is 8 July 2015. The notes bear interest from 8 July 2010 at the rate of 12.5% per annum, payable semiannually every 8 January and 8 July commencing on 8 January 2011.

Berau Capital must make an offer to repurchase all of the 12.5% Guaranteed Senior Secured Notes outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, no later than 30 days after a “change of control”. For these purposes, a change of control is the occurrence of any of the following events:

(i) the merger, amalgamation or consolidation of PT Berau with or into another entity or the merger or amalgamation of another entity with or into PT Berau, or the sale of all or substantially all the assets of PT Berau to another entity, other than PT Recapital Advisors and its affiliates;

(ii) PT Recapital Advisors and its affiliates are the beneficial owners of less than 50.1% of the total voting power of the voting stock of PT Berau;

(iii) individuals who on 8 July 2010 constituted the Board of Directors of PT Berau, together with any new Directors whose election was approved by a vote of at least a majority of the Directors then still in office who were either Directors or whose election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office; or

(iv) the adoption of a plan relating to the liquidation or dissolution of PT Berau.

The acquisition by the Bumi Group of its interest in PT Berau (the “Berau Transaction”) constituted a change of control under the indentures governing the 12.5% Guaranteed Senior Secured Notes. Berau Capital made a change of control offer for all of such notes at 101% of their principal amount, plus accrued and unpaid interest within the requisite 30 day period. At the end of the acceptance period for that offer, no noteholder had accepted the offer.

PT Berau Senior Secured Credit Facility

On 23 July 2010, PT Berau and Rognar Holdings BV entered into a $400m senior secured credit facility (the “Berau Senior Secured Credit Facility”) with Credit Suisse AG, Singapore Branch as lead manager, facility agent and security agent and the financial institutions listed therein as lenders. The PT Berau Group drew down the entire $400m available under this facility on 23 July 2010. The facility comprised two tranches: (i) tranche A in a principal amount of $300m and (ii) tranche B in a principal amount of $100m. Interest for the tranche A loan was payable quarterly and accrued at the rate of LIBOR plus a margin of 4.75% per annum. The tranche A loan was scheduled to amortise in 13 quarterly instalments on the last day of each calendar quarter from 31 March 2011 through 31 March 2014 plus one final instalment on 23 July 2014. The repayment amount of each instalment varies and is set forth in the facility agreement. Interest for the tranche B loan was payable quarterly and accrued at the rate of LIBOR plus a margin of 5.75% per annum. The tranche B loan was scheduled to amortise in three equal instalments on 30 September 2014, 31 December 2014 and 23 April 2015. The lenders also had the right to require the PT Berau Group to prepay the loans in full (together with accrued interest and an amount equal to the margin that would have accrued on the loans from the day of prepayment to 23 July 2011) immediately following a change of control of PT Berau or PT Berau Coal.

PT Berau was the borrower under the PT Berau Senior Secured Credit Facility and its obligations under this facility ranked pari passu with its obligations under its guarantee of the 12.5% Guaranteed Senior Secured Notes.

Prior to the completion of the acquisition of 75% of PT Berau by Bumi plc (the “PT Berau Transaction”), PT Berau received a waiver from the lenders under the PT Berau Senior Secured Credit Facility of certain rights, including any prepayment rights thereunder that would have arisen as a result of the PT Berau Transaction.

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The PT Berau Senior Secured Credit Facility was repaid in full upon the issue of the 7.25% Guaranteed Senior Secured Notes described below.

7.25% Guaranteed Senior Secured Notes

On 13 March 2012, PT Berau issued $500m aggregate principal amount of 7.25% guaranteed senior secured notes (the “7.25% Guaranteed Senior Secured Notes”). PT Berau’s obligations under the 7.25% Guaranteed Senior Secured Notes are guaranteed by certain other members of the PT Berau Group. The maturity date of the notes is 13 March 2017. The notes bear interest from 13 March 2012 at the rate of 7.25% per annum, payable semiannually every 13 March and 13 September commencing on 13 September 2012.

PT Berau must make an offer to repurchase all of the 7.25% Guaranteed Senior Secured Notes outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, no later than 30 days after a “change of control”. For these purposes, a change of control is the occurrence of any of the following events:

(i) the merger, amalgamation or consolidation of PT Berau with or into another entity or the merger or amalgamation of another entity with or into PT Berau, or the sale of all or substantially all the assets of PT Berau to another entity, other than Bumi plc and its affiliates;

(ii) Bumi plc and its associates are the beneficial owners of less than 50.1% of the total voting power of the voting stock of PT Berau;

(iii) individuals who on 13 March 2012 constituted the Board of Directors of PT Berau, together with any new Directors whose election was approved by a vote of at least a majority of the Directors then still in office who were either Directors or whose election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office; or

(iv) the adoption of a plan relating to the liquidation or dissolution of PT Berau.

Charitable and political donationsDuring the year the Group made charitable donations of $8,801 to local charities in Indonesia.

The Group made no political donations during the year.

Substantial shareholdingsThe table below shows those shareholders who have been notified to the Company as holding substantial shareholdings amounting to more than 3% of the issued share capital of the Company, as at the date of this report.

Annual General MeetingThe Annual General Meeting (“AGM”) will be held on 14 June 2011 at the Institute of Directors, 116 Pall Mall, London SW1Y 5ED. Full details about the AGM, including explanatory notes, are contained in the AGM Notice which will be sent to shareholders with the Annual Report for the year ended 31 December 2011. The AGM Notice sets out the resolutions to be proposed at the AGM and an explanation of each resolution. All documents relating to the AGM are available on the Company’s website at www.bumiplc.com.

AuditorsThe auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the AGM.

Statement of disclosure of information to the auditorsEach of the Directors who held office at the date of the approval of this Annual Report confirms that, so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

By order of the Board

Paul VickersGroup General Counsel and Company Secretary12 April 2012

Substantial shareholdings

Name of holderNumber of Voting

Ordinary sharesPercentage of

voting rights %

PT Borneo 54,154,285 29.99

PT Bukit Mutiara 23,667,250 13.11

Nathaniel Rothschild 21,524,918 11.92

BlackRock Inc 9,907,542 6.36

Abu Dhabi Investment Council 7,500,000 4.15

Schroder Investment Management Ltd 7,197,288 3.99

Taube Hodson Stonex Partners LLP 5,703,919 3.16



The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group and parent company financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

– select suitable accounting policies and then apply them consistently;

– make judgements and accounting estimates that are reasonable and prudent;

– state whether applicable IFRSs, as adopted by the European Union, have been followed subject to any material departures disclosed and explained in the financial statements;

– prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ Statement pursuant to the Disclosure and Transparency RulesEach of the Directors, whose names and functions are listed in the Remuneration Report confirm that, to the best of their knowledge:

– the Group financial statements, which have been prepared in accordance with IFRSs, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and result of the Group and Company; and

– the Directors’ report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

By order of the Board

Ari HudayaDirector12 April 2012

Governance

69

Statement of Directors’ Responsibilities

72 Independent Auditors’ Report – Group

74 Consolidated Income Statement

75 Consolidated Statement of Comprehensive Income

76 Consolidated Balance Sheet

77 Consolidated Statement of Changes in Equity

78 Consolidated Statement of Cash Flows

79 Notes to the Financial Statements

79 General information

79 Principal accounting policies

89 Critical accounting judgements and key sources

of estimation uncertainty

90 Segmental analysis

91 Net operating costs

91 Auditors’ remuneration

92 Underlying earnings and underlying EBITDA

92 Employee numbers and payroll costs

93 Finance income and costs

93 Taxation

94 Earnings per share

95 Intangible assets

96 Business combinations

100 Property, plant and equipment

101 Investment in associate

101 Inventories

102 Trade and other receivables

102 Cash and cash equivalents

102 Trade and other payables

103 Financial Instruments by category

104 Borrowings

105 Financial instruments

106 Financial risk management

108 Deferred tax

109 Share capital, share premium and merger reserve

111 Non-controlling interests

111 Consolidated cash flow analysis

112 Contingent liabilities and contingent assets

112 Commitments

113 Related party transactions

115 Principal subsidiaries and associated company

115 Subsequent event

116 Independent Auditors’ Report – Company

118 Parent Company Balance Sheet

119 Parent Company Statement of Changes in Equity

120 Parent Company Statement of Cash Flows

121 Notes to the Parent Company Financial Statements



71

We have audited the Group financial statements of Bumi plc for the year ended 31 December 2011 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union.

Respective responsibilities of Directors and auditorsAs explained more fully in the Statement of Directors’ Responsibilities set out on page 69, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition we read all the financial and non financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any material misstatements or inconsistences we consider the implications for our report.

Opinion on financial statementsIn our opinion the Group financial statements:

– give a true and fair view of the state of the Group’s affairs as at 31 December 2011 and of its loss and cash flows for the year then ended;

– have been properly prepared in accordance with IFRSs as adopted by the European Union; and – have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4

of the lAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006In our opinion:

– the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements; and

– the information given in the Governance Section with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements.

Bumi plc | Financial StatementsAnnual Report 201172

Independent Auditors’ Report to the Members of Bumi plc

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

– certain disclosures of Directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit; or – a corporate governance statement has not been prepared by the parent company.

Under the Listing Rules we are required to review:

– the Directors’ statement, set out on page 24, in relation to going concern; – the part of the governance section relating to the Company’s compliance with the nine provisions

of the UK Corporate Governance Code specified for our review; and – certain elements of the report to shareholders by the Board on Directors’ remuneration.

Other matterWe have reported separately on the parent company financial statements of Bumi plc for the year ended 31 December 2011 and on the information in the Remuneration Report that is described as having been audited.

Ross Hunter (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon12 April 2012


73

Note

Year to 31 December

2011$m

9 months to 31 December

2010$m

Revenue 4 1,407 –

Cost of sales (921) –

Gross profit 486 –

General and administrative expenses (96) (15)

Distribution and marketing expenses (44) –

Costs associated with corporate transactions (66) (32)

Operating profit/(loss) 5 280 (47)

Share of loss of associate 15 (39) –

Profit/(loss) before finance items and income tax 241 (47)

Finance income 9 13 1

Finance costs 9 (83) –

Movement on financial instruments at fair value through profit or loss

9

(286)

(62)

Net finance costs (356) (61)

Loss before income tax (115) (108)

Income tax 10 (167) –

Loss for the year/period (282) (108)

Profit/(loss) attributable to:

Owners of the parent (319) (108)

Non-controlling interests 26 37 –

Loss per ordinary share $ $

Basic 11 (1.66) (1.61)

Diluted 11 (1.66) (1.61)

The notes on pages 79 to 115 form part of these consolidated financial statements.


Consolidated Income Statement

Note

Year to 31 December

2011$m


2010$m

Loss for the year/period (282) (108)

Other comprehensive income

Share of other comprehensive income of associate 15 2 –

Income tax recognised in other comprehensive income 10 – –

Total comprehensive expense for the year/period (280) (108)

Total comprehensive expense attributable to:

Owners of the parent (317) (108)

Non-controlling interests 26 37 –



75

Consolidated Statement of Comprehensive Income

Note

31 December 2011$m

31 December 2010

$m

Non-current assets

Goodwill 12 1,320 –

Exploration and evaluation assets 12 4 –

Property, plant and equipment 14 3,039 –

Investment in associate 15 2,022 –

Total non-current assets 6,385 –

Current assets

Inventories 16 30 –

Financial assets 22 – 659

Trade and other receivables 17 495 –

Cash and cash equivalents 18 608 324

Total current assets 1,133 983

Total assets 7,518 983

Current liabilities

Trade and other payables 19 625 9

Borrowings 21 85 –

Current taxation 126 –

Total current liabilities 836 9

Non-current liabilities

Borrowings 21 745 –

Deferred tax liabilities 24 1,277 –

Provisions 25 –

Total non-current liabilities 2,047 –

Total liabilities 2,883 9

Equity

Ordinary shares 25 4 622

Share premium 25 141 –

Share based payment reserve – 1

Merger reserve 25 2,248 428

Retained earnings/(accumulated losses) 1,551 (108)

Total attributable to owners of the parent 3,944 943

Non-controlling interests 26 691 31

Total equity 4,635 974

Total equity and liabilities 7,518 983

The notes on pages 79 to 115 form part of these financial statements.

The financial statements were authorised for issue by the Board of Directors on 12 April 2012 and signed on its behalf by

Ari HudayaDirector


Consolidated Balance Sheet

Attributable to owners of the parent

Note

Ordinary shares

$m

Share premium

$m

Share based

payment reserve

$m

Merger reserve

$m

Retained earnings

$mTotal

$m

Non– controlling

interest $m

Total equity

$m

At date of incorporation – – – – – – – –

Capital injected by non-controlling interests

– – – – – – 31 31

Ordinary shares issued 25 635 – – 437 – 1,072 – 1,072

Ordinary shares repurchased and cancelled (13) – – (9) – (22) – (22)

Share based payment reserve – – 1 – – 1 – 1

Total comprehensive expense – – – – (108) (108) – (108)

At 31 December 2010 622 – 1 428 (108) 943 31 974

Investment in associate 1,014 141 – 1,031 – 2,186 – 2,186

Acquisition of subsidiary 514 – – 604 – 1,118 864 1,982

Capital reduction 25 (2,146) – – – 2,146 – – –

Exchange of Founder Shares – – – 185 (162) 23 (23) –

Reduction in NCI following mandatory cash offer – – – – (8) (8) (206) (214)

Share based payment reserve – – (1) – – (1) – (1)

Dividend paid – – – – – – (12) (12)

Total comprehensive expense – – – – (317) (317) 37 (280)

At 31 December 2011 4 141 – 2,248 1,551 3,944 691 4,635



77

Consolidated Statement of Changes in Equity

Note

Year to 31 December

2011$m


2010$m

Net cash flows generated from/(used in) operations 27 435 (6)

Interest paid (63) –

Tax paid (255) –

Net cash generated from/(used in) operating activities 117 (6)

Cash flows from investing activities

Interest received 5 1

Acquisition of subsidiary, net of cash acquired 472 (739)

Purchase of property, plant and equipment (66) –

Capitalised exploration and evaluation expenditure (4) –

Dividends received from associate 30 –

Net cash generated from/(used in) investing activities 437 (738)

Cash flows before financing activities 554 (744)

Cash flows from financing activities

Proceeds from the issue of Founder Shares and Founder Securities – 31

Proceeds from the issue of ordinary shares – 1,072

Repurchase and cancellation of ordinary shares – (22)

Purchase of non-controlling interests (214) –

Costs associated with Initial Public Offering – (32)

Proceeds from borrowings 5 –

Repayment of borrowings (60) –

Dividends paid to non-controlling interests in subsidiaries (12) –

Net cash (used in)/generated from financing activities (281) 1,049

Effect of foreign exchange rates 11 19

Net increase in cash and cash equivalents 284 324

Opening cash and cash equivalents 324 –

Closing cash and cash equivalents 608 324



Consolidated Statement of Cash Flows

1. General information1.1. Definition

When reference is made to the “Top Company” in these financial statements, it means Vallar Ltd (formerly Vallar plc) up until 27 June 2011 and Bumi plc from 28 June 2011. When reference is made to the “Group” in these financial statements, it means Vallar Ltd (formerly Vallar plc) and its subsidiaries to 27 June 2011 and Bumi plc and its subsidiaries from 28 June 2011. When reference is made to the “Company” in these financial statements it means Bumi plc.

Bumi plc is the ultimate parent company of the Bumi plc group of companies (“Bumi”). It is incorporated, domiciled and registered in England and Wales as a public company limited by shares. The ordinary shares of the Company are traded on the London Stock Exchange and its registered office is 2nd Floor, 4 Grosvenor Place, London SW1X 7HJ. Bumi is the new holding company of the Vallar Ltd (formerly Vallar plc) group of companies. The main subsidiary PT Berau Coal Energy Tbk (“PT Berau”) is a coal mining group of companies listed on the Indonesia Stock Exchange. The Company also holds an investment in an associate, PT Bumi Resources Tbk (“PT Bumi”), which is also listed on the Indonesia Stock Exchange and is also engaged in coal mining operations and exploration and development of mineral mining concessions.

1.2. Scheme of arrangement

On 10 March 2011, Vallar Ltd (formerly Vallar plc) announced its intention to put in place a new parent company for the Group, Bumi, being a company incorporated in England and Wales that is tax resident in the United Kingdom. The introduction of the new holding company was implemented by means of a scheme of arrangement under Article 125 of the Companies ( Jersey) Law (“the Scheme”). The Scheme became effective on 28 June 2011.

Upon implementation of the Scheme, Bumi had the same proportionate interest in the profits, net assets and dividends of PT Berau and PT Bumi and their respective subsidiaries as Vallar Ltd (formerly Vallar plc) had prior to the effective date of the Scheme.

The Scheme falls outside the scope of IFRS 3 “Business Combinations”. Accordingly, following the guidance regarding the selection of an appropriate accounting policy provided by IAS 8 “Accounting policies, changes in accounting estimates and errors”, the Scheme has been accounted for using the principles of merger accounting. With merger accounting, the carrying values of the assets and liabilities of the parties to the combination are not required to be adjusted to fair value on consolidation and the difference between the carrying values and nominal value of shares issued is recorded in a merger reserve.

2. Principal accounting policiesThe principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

2.1. Basis of preparation

a) Statement of complianceThese consolidated financial statements of Bumi have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and International Financial Reporting Standards Interpretations Committee Interpretations (“IFRICs”) as adopted by the European Union (“IFRSs as adopted by the EU”), and the Companies Act 2006 applicable to companies reporting under IFRS. These consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

These consolidated financial statements are presented in millions of US dollars (“$”) except where otherwise indicated in the auditors’ remuneration and related party transactions notes.


79

Notes to the Financial Statements

2. Principal accounting policies continuedb) Comparative numbersIn accordance with the requirements of merger accounting, the comparative information in these consolidated financial statements has been extracted from the Vallar Ltd (formerly Vallar plc) consolidated financial statements for the nine months ended 31 December 2010 and translated to US dollars. Those financial statements incorporated the results of Vallar Ltd (formerly Vallar plc) and its subsidiary undertakings for the period then ended.

c) Going concernThe Directors have, at the time of approving these consolidated financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, the Group continues to adopt the going concern basis of accounting in preparing these consolidated financial statements.

2.2. New accounting standards

The Group applied all applicable standards and interpretations published by the IASB and as endorsed by the European Union for the year beginning 1 January 2011.

The Group did not early adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is after 1 January 2011.

The following new standards, interpretations and amendments to standards and interpretations have been issued, subject to EU endorsement, but are not effective for the financial year beginning 1 January 2011 and have not been early adopted by the Group:

Effective date for periods

beginning on or after

Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income” 1 July 2012

IFRS 9 “Financial Instruments” 1 January 2015

IFRS 10 “Consolidated financial statements” 1 January 2013

IAS 27 (Revised 2011) “Separate financial statements” 1 January 2013

IFRS 11 “Joint arrangements” 1 January 2013

IAS 28 (Revised 2011) “Investments in associates and joint ventures” 1 January 2013

IFRS 12 “Disclosure of interests in other entities” 1 January 2012

IFRS 13 “Fair value measurement” 1 January 2013

IFRIC Interpretation 20 “Stripping Costs in the Production Phase of a Surface Mine” 1 January 2013

The impact on the Group’s financial statements of the future standards, amendments and interpretations is still under review, but the Group does not currently expect any of these changes to have a material impact on the results or net assets of the Company or the Group with the exception of IFRIC Interpretation 20 “Stripping Costs in the Production Phase of a Surface Mine”.

This interpretation considers when and how to account separately for benefits arising from the production stage stripping activity, as well as how to measure these benefits both initially and subsequently. The interpretation, also addresses the recognition of production stripping costs as an asset, initial measurement of the stripping activity asset and subsequent measurement of the stripping activity asset. The full impact is still being assessed by the Group.


Notes to the Financial Statements (continued)

2.3. Consolidation

The consolidated financial information consists of the consolidation of the financial statements of the Company and its subsidiaries.

a) SubsidiariesSubsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. All intragroup transactions, balances, income and expenses are eliminated on consolidation.

b) AssociatesAn associate is an entity in which the Group has an equity interest and over which it has the ability to exercise significant influence. Under the equity method, investments in associates are carried at cost plus post acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. The income statement reflects the Group’s share of the results of the associate, which is net of interest and taxation and presents this as a single line item in arriving at Group profit before finance items and income tax on the face of the income statement. The Group’s share of post acquisition movements in other comprehensive income is recognised in the statement of comprehensive income.

c) Transactions with non-controlling interestsThe Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

d) Transactions between entities under common controlBusiness combinations involving entities under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or at the date that common control was established, if later. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s financial statements. Any differences on consolidation are recognised directly in equity.

2.4. Business combinations and goodwill

The Group uses the purchase method of accounting to account for business combinations in accordance with IFRS 3 (revised). The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.


81

2. Principal accounting policies continued2.5. Foreign currency translation

a) Change in functional currencyWith the proposed acquisition of PT Berau and PT Bumi agreed in November 2010, the Directors concluded that the most appropriate functional currency of Vallar Ltd (formerly Vallar plc) is US dollars. This reflected the fact that the majority of Vallar plc business became influenced by pricing in international commodity markets, with a US dollar economic environment. The previous functional currency of Vallar plc was the British pound. On the date of the change of functional currency, from 1 January 2011, all assets, liabilities, issued capital and other components of equity and income statement items were translated into US dollars at the prevailing exchange rate. As a result of the change in functional currency, the Company’s functional and presentation currency are now the same. Comparative amounts have been re-presented.

b) Presentation currencyThe Group’s financial statements are presented in millions of US dollars (“$”) in line with its functional currency.

c) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

2.6. Revenue recognition

Revenue comprises the fair value of the consideration received or receivable from the sale of goods (coal) in the ordinary course of the Group’s activities. Revenue is shown net of applicable sales taxes, returns, rebates and discounts and after eliminating sales within the Group.

Under the terms of PT Berau’s Coal Contract of Work (“CCoW”), the Government of Indonesia (the “Government”) is entitled to 13.5% of the coal production of PT Berau. Rather than deliver coal to the Government, as agreed PT Berau markets and sells the Government’s coal entitlement and pays the Government the cash proceeds less certain charges. Revenue in the income statement includes the proceeds of the sales of the Government’s entitlement as the Group suffers the credit risk associated with these sales. The Government’s entitlement is recognised as a royalty expense as part of the cost of sales.

Sales revenue is only recognised on individual sales when persuasive evidence exists that all of the following criteria are met:

– the significant risks and rewards of ownership of the product have been transferred to the buyer; – neither continuing managerial involvement to the degree usually associated with ownership,

nor effective control over the goods sold, has been retained; – the amount of revenue can be measured reliably; – it is probable that the economic benefits associated with the sale will flow to the Group; and – the costs incurred or to be incurred in respect of the sale can be measured reliably.

These conditions are satisfied when title passes to the customer. In most instances sales revenue is recognised when the product is delivered to the destination specified by the customer, which is the vessel on which it will be shipped, the destination port or the customer’s premises. The sale prices are based on the Newcastle Free on Board (“FOB”) benchmark with relevant adjustment for calorific value, moisture, ash and sulphur content and other factors.

Occasionally, products are “provisionally priced”. When the price adjustment for a particular year has not been agreed with the customer at the time a delivery is to be made, the Group will continue to invoice coal at the prior year’s price and adjust the price after reaching an agreement with the customer. When this occurs, the Group records the sales revenue on a prevailing market price for the coal and adjusts the sales revenue amount when a price agreement is reached with the customer.



2.7. Exploration and evaluation expenditure and assets

Exploration and evaluation activity involves the search for coal and mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation activity includes:

– Gathering exploration data through topographical, geochemical and geophysical studies – Exploratory drilling, trenching and sampling – Determining and examining the volume and grade of the resource – Surveying transportation and infrastructure requirements

Administration costs that are not directly attributable to a specific exploration area are charged to the income statement. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit.

Exploration and evaluation expenditure is charged to the income statement as incurred except in the following circumstances, in which case the expenditure is capitalised.

In respect of coal and mineral activities:

– the acquisition of a concession or licence area of interest at the exploration and evaluation stage from a third party, which is measured at fair value on acquisition; otherwise

– when the existence of a commercially viable mineral deposit has been established.

Capitalised exploration and evaluation expenditure is not depreciated as the asset is not available for use, but is monitored for indications of impairment. Where a potential impairment is indicated, an assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration is attributed. To the extent that capitalised expenditure is not expected to be recovered it is charged to the income statement.

Cash flows associated with capitalised exploration and evaluation expenditure are classified as investing activities in the consolidated statement of cash flows, and exploration and evaluation expenditure related cash flows that are expensed are classified as operating cash flows.

2.8. Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated depreciation. The cost of property, plant and equipment comprises the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the estimated costs of decommissioning the assets and site rehabilitation costs to the extent that they relate to the asset and are the responsibility of the Group.

The cost of an item of property, plant and equipment is capitalised into its various components where the useful life of the components differ from the main item of property, plant and equipment to which the component can be logically assigned.

Expenditure incurred to replace or modify a significant component of property, plant and equipment is capitalised and any remaining carrying value of the component replaced is written off as an expense in the income statement. Subsequent expenditure on property, plant and equipment is only capitalised when the expenditure enhances the value or output of the asset beyond original expectations and it can be measured reliably.

Costs incurred on repairing and maintaining assets are recognised in the income statement in the period in which they are incurred.

Gains and losses on the disposal of property, plant and equipment, which are represented by the proceeds on disposal of such assets less their carrying values at that date, are recognised in the income statement.


83

2. Principal accounting policies continuedWhen proven reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified as mining properties, and is disclosed as a component of property, plant and equipment. All subsequent development expenditure relating to the construction of infrastructure required to operate the mine is capitalised and classified as assets under construction. Development expenditure is net of proceeds from the sale of ore extracted during the development phase. On completion of the development phase, all assets included in assets under construction are reclassified as either plant and equipment or mining properties.

Mining properties includes assets in production and in development assets transferred from exploration and evaluation expenditure, deferred stripping performed in the development of the mine, and the fair value of mineral resources acquired through business combinations. Mining properties in development and acquired mineral resources are not depreciated until production commences.

Property, plant and equipment, including mining properties, are depreciated over their useful lives, the lease term, or the term of the CCoW, whichever is shorter. Depreciation commences when an asset is available for use.

The major categories of property, plant and equipment are depreciated on a straight line basis, except for the mining properties in production, which are depreciated on a units of production (“UoP”) basis as follows:

Category Estimated Useful Life

Land and buildings 20 years

Plant and equipment 3 to 30 years

Furniture, fixtures and office equipment 3 to 8 years

Assets under construction not depreciated

Mining properties over CCoW on a UoP basis

Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Changes to the estimated residual values or useful lives are accounted for prospectively.

Costs associated with commissioning new assets, in the period before they are capable of operating in the manner intended by management, are capitalised. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.

Interest on borrowings related to construction or development projects is capitalised until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete.

2.9. Deferred stripping

It is necessary to remove overburden and other waste materials to open the mining area before production commences. The process of removing overburden and waste materials is referred to as stripping.

Where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning, stripping costs are accounted for separately by reference to the ore from each separate pit. If, however, the pits are highly integrated for the purpose of mine planning, the second and subsequent pits are regarded as extensions of the first pit in accounting for stripping costs. In such cases, the initial stripping (i.e. overburden and other waste removal) of the second and subsequent pits is considered to be production phase stripping relating to the combined operation. The Group’s determination of whether multiple pit mines are considered separate or integrated operations depends on each mine’s specific circumstances.

In the development stage of a mine, before production commences, stripping costs are capitalised as part of mining properties and amortised on a UoP basis over the life of the mine. This includes any advance payments to contractors, where mining activities are outsourced, to compensate for the relatively high cost of overburden removal, which arises in the early stages of a mine’s life.

Stripping costs incurred in the production phase are deferred to the extent that the actual stripping ratio in the period exceeds the life of mine stripping ratio. These deferred costs are then released to the income statement as production costs, in those periods where the actual stripping ratio is less than the life of mine stripping ratio.



The life of mine stripping ratio is calculated as the total expected amount of overburden to be removed over the life of the mine, divided by the total expected amount of coal to be mined over the life of the mine. The life of mine stripping ratio is reviewed regularly and, where necessary, amended to reflect changes in the economically mineable coal reserves, and a more detailed understanding of the overburden to be removed. The accounting effects of changes to the life of mine stripping ratio are applied prospectively.

2.10. Impairment of non-financial assets

Assets that have an indefinite useful life such as goodwill or intangible assets not ready for use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

2.11. Financial instruments

Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables or as available for sale. The classification depends on the nature and purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition. The designation of financial instruments is re-evaluated at every reporting date.

a) Financial assets at fair value through profit or lossDerivatives are included in this category unless they are designated as hedges. The Group does not designate any other financial assets as fair value through profit or loss. Assets in this category are classified based on their maturity. The Group does not acquire financial assets for the purpose of selling in the short term. Financial assets carried at fair value through profit or loss are initially recognised at fair value. Gains and losses on initial recognition resulting from fair values that do not include any observable market conditions for the same instrument are deferred and recognised in the income statement in full on completion.

b) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non-current assets based on their maturity date. Loans and receivables comprise cash and cash equivalents and trade and other receivables (excluding prepayments) in the balance sheet. Loans and receivables are carried at amortised cost less any impairment.

i. Cash and cash equivalentsCash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short term highly liquid investments. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash, generally have an original maturity of 90 days or less and are subject to an insignificant risk of adverse changes in value. However, certain deposits of greater duration can be classified as cash equivalents if the funds can be withdrawn at short notice with an insignificant risk of adverse changes in value.

ii. Trade and other receivablesTrade receivables are recognised initially at fair value and are subsequently measured at amortised cost, using the effective interest rate method, reduced by any provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. Indicators of impairment would include significant financial difficulties of the debtor, likelihood of the debtor’s insolvency, default in payment or a significant deterioration in credit worthiness. Any impairment is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the income statement.

Included in this account are the trade receivables which pertain to amounts due from customers for coal sold in the ordinary course of business.


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2. Principal accounting policies continuedc) Available for sale financial assetsAvailable for sale financial assets include the Group’s investments in non-consolidated companies and equity or debt instruments that do not satisfy the criteria for classification in another category. These items are measured at fair value on initial recognition plus transaction costs.

At each balance sheet date, available for sale financial assets are measured at fair value. For listed companies, fair value is determined based on the quoted market price at the balance sheet date. For unlisted companies, fair value is measured based on standard valuation techniques such as discounted future cash flows.

Changes in fair value are recorded directly in other comprehensive income, except when the decline in the value of the investment below its historical acquisition cost is judged significant or prolonged enough to require an impairment. In this case, the loss is recognised in the income statement under impairment charges. Only impairment losses recognised on debt investments may be reversed through the income statement.

Interest on available for sale financial assets is calculated using the effective interest method recognised in the income statement. Dividends on available for sale financial assets are recognised in the income statement as part of finance income when the Group’s right to receive payment is established.

When financial assets classified as available for sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement.

Financial liabilities

Financial liabilities are classified as financial liabilities at fair value through profit or loss or at amortised cost, as appropriate. Financial liabilities are recognised initially at fair value and, in the case of financial liabilities at amortised cost, inclusive of directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification as follows:

a) Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include mainly derivative liabilities unless they are designated as effective hedging instruments. Financial liabilities at fair value through profit or loss are stated at fair value, with changes in fair value during a reporting period immediately recognised in the income statement.

b) Financial liabilities at amortised costAfter initial recognition, trade and other payables, interest bearing loans, notes and borrowings are measured at amortised cost using the effective interest rate method taking into account principal repayments or reductions. The calculation also takes into account any premium or discount paid or received either on acquisition or on redemption. It also includes transaction costs and fees that are an integral part of the effective interest rate. Gains and losses are recognised in the income statement when the liabilities are derecognised. Included in this category are trade and other payables and borrowings.

i. Trade and other payablesTrade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year otherwise they are presented as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

ii. BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowing using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre payment for liquidity services and amortised over the period of the facility to which it relates.



c) Derecognition of financial liabilitiesThe Group derecognise financial liabilities when, and only when, the Group’s obligations are discharged, transferred, cancelled or expired.

2.12. Inventories

Inventories are valued at the lower of cost and net realisable value, primarily on a weighted average cost basis. Cost of coal inventories is determined by a twelve month rolling weighted average of historical production costs, while cost of spare parts inventories are valued at cost, determined on a moving average basis. Stores and consumable supplies are charged to production in the period they are used.

Allowance for inventory obsolescence is provided to reduce the carrying values of inventories to their net realisable value based on the review of the status of the inventories at the end of the period.

2.13. Leases

The Group leases certain property, plant and equipment. Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. All other leases are classified as operating leases. Payments under operating leases are charged to the income statement on a straight line basis over the term of the relevant lease.

For finance leases, each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

2.14. Provisions

Provisions are recognised when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

a) Environmental rehabilitation provisionThe Group has an obligation to undertake restoration, rehabilitation and environmental work when environmental disturbance is caused by the development or ongoing production of a mining property. It is anticipated that these costs will be incurred over a period in excess of 20 years.

Rehabilitation costs are a normal consequence of mining, and are provided for as and when a legal or constructive obligation to incur costs associated with rehabilitation arises. The environmental rehabilitation provision consists of costs associated with continuous mine reclamation during mine operations.

Long term environmental rehabilitation provisions are measured based on the net present value of the estimated future costs. Although the ultimate cost to be incurred is uncertain, the Group’s businesses estimate their respective costs based on feasibility and engineering studies using current restoration standards and techniques, taking into account the Group’s environmental policy and current Indonesian environmental and regulatory requirements, including the requirements of the CCoW.

The unwinding of the discount applied in establishing the net present value of provisions is charged to the income statement in each accounting period as a financing cost.


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2. Principal accounting policies continuedb) Mine closure provisionsMine closure provisions, which include decommissioning, demobilisation and other closure activities, are recognised when the economic life of the mine ends within the period of the existing life of the CCoW because they relate to the facilities which are in use over the life of the mine.

The initial mine closure provision together with other movements in the provisions for environmental costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalised in mining properties, within property, plant and equipment. These costs are then depreciated over the useful life of the assets to which they relate on a UoP basis.

2.15. Taxation

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial information. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and assets arising on consideration except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is provided in respect of fair value adjustments on acquisitions. These adjustments may relate to assets such as mining rights or resources that, in general, are not eligible for income tax allowances. In such cases, the provision for deferred tax is based on the difference between the carrying value of the asset and its nil income tax base. The existence of a tax base for capital gains tax purposes is not taken into account in determining the deferred tax provision relating to such mining rights or resources because it is expected that the carrying amount will be recovered primarily through use and not from disposal.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.16. Ordinary shares

Ordinary shares are classified as equity. Where any group company purchases the Company’s ordinary shares, the consideration paid, including any directly attributable incremental costs is deducted from equity attributable to the Company’s owners until the shares are cancelled or reissued.

2.17. Merger Reserve

Upon implementation of the Scheme, the Group’s ordinary shares have been re-presented as that of Bumi plc, with a nominal value of £6. The difference between Vallar Ltd’s (formerly Vallar plc) net assets and the nominal value of the shares in issue is recorded in the merger reserve. In addition, certain consolidation adjustments are also recorded in the merger reserve.



3. Critical accounting judgements and key sources of estimation uncertaintyThe preparation of consolidated financial statements in accordance with IFRS requires the use of critical estimates and assumptions to determine the value of assets and liabilities, and contingent assets and liabilities at the balance sheet date, and revenues and expenses reported during the period. Due to uncertainties inherent in the estimation process, the Group regularly revises its estimates in light of currently available information. Final outcomes could differ from those estimates. The main estimates used in preparing the Group’s consolidated financial information are presented below.

3.1. Determination of coal reserve estimates

The Group reports its coal reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, December 2004 (the “JORC Code”), prepared and published by The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.

The term “coal reserve” is defined in the JORC Code as the economically mineable part of a measured and/or indicated coal resource. Coal reserves are subdivided in order of increasing confidence into “probable coal reserves” and “proved coal reserves”.

Under the JORC Code, the term “coal resource” refers to a concentration or occurrence of coal of intrinsic economic interest in or on the Earth’s crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a coal resource are known, estimated or interpreted from specific geological evidence and knowledge. Coal resources are subdivided, in order of increasing geological confidence, into “inferred”, “indicated” and “measured” categories.

Reserves determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of life of mine stripping ratios and in forecasting the timing of the payment of close down and restoration costs and clean up costs.

In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence for economic extraction.

There are numerous uncertainties inherent in estimating coal reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated.

3.2. Recoverable amount of property, plant and equipment and goodwill

The recoverable amount of goodwill and property, plant and equipment is based on estimates and assumptions regarding, in particular, the expected market outlook and future cash flows associated with the assets. Predicted future cash flows include estimates of future costs to produce proven and probable reserves, future commodity prices, foreign exchange rates and discount rates. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in an impairment.

3.3. Definition of underlying earnings and underlying earnings before interest, tax, depreciation

and amortisation (“underlying EBITDA”)

The Group presents underlying earnings and underlying EBITDA as an additional measure to provide greater understanding of the underlying business performance of its operations. The adjustments made to net earnings to arrive at underlying earnings and underlying EBITDA are explained in note 7.

3.4. Capitalisation and deferral of production stripping costs

The Group defers stripping costs incurred during the production stage of its operations when the actual stripping ratio for a specific period exceeds the expected average stripping ratio over the life time of the mine or pit. Such deferred costs are then charged against reported profits to the extent that, in subsequent periods, the current period ratio falls below the average stripping ratio.

The expected average ratio is based on proven and probable reserves of the mine. The expected average stripping ratio is highly dependent on the design of the mine and on the technical and economic parameters of the project. The Group regularly reviews the expected average stripping ratio of the mine.


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3. Critical accounting judgements and key sources of estimation uncertainty continued3.5. Taxation

Taxes are paid by the Group’s subsidiary in Indonesia under a number of different regulations and laws, which are subject to varying interpretations. In addition, these can change frequently and the judicial system does not have well developed rules of precedent. This, in turn, may result in transactions and activities that have not been challenged in the past being scrutinised in greater detail and additional taxes may be assessed based on new interpretations of the legislation and tax positions. Accordingly, management’s interpretation of such legislation as applied to the transactions and activity of the Group’s subsidiary, may be challenged by the relevant authorities.

Under Indonesian tax laws, fiscal periods up until 2007 remain open for 10 years, or until the end of 2013 whichever is earlier and fiscal periods ending after 2007 remain open for five years after the time that the tax becomes due.

At the date of these financial statements, the Group’s subsidiary, PT Berau has received several tax assessment letters that are not yet finalised. PT Berau has filed objections and/or appeals that are still in process or pending decisions, the outcomes of which are not presently determinable. Management believes that its interpretation of the relevant legislation is appropriate and the tax position included in these financial statements will be sustained.

3.6. Purchase Price Allocation: goodwill and fair values of assets acquired in a business combination

According to the definitions of IFRS 3 “Business Combinations” the value to be used in the application of the acquisition method is the fair value. Fair value is defined as “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction”. Guidance on fair value measurements with respect to assets acquired in a business combination indicates that quoted market prices in active markets provide the most reliable estimate of fair value. If no market exists for an asset, the fair value is the amount that the entity would have paid for the asset, at the acquisition date, in an arm’s length transaction between knowledgeable and willing parties, on the best information available, including the outcome of recent transactions for similar assets and the results of using other fair value measurement techniques, such as discounting estimated future net cash flows from the asset.

The Purchase Price Allocation process involves significant management judgements and estimations. Allocation of the purchase price affects the future results of the Group, as assets with finite useful lives are amortised whereas goodwill and assets with indefinite useful lives are not amortised, and could result in differing amortisation charges based on the allocation to goodwill and assets with finite useful lives. Similar judgements and estimations were also made in relation to the acquisition of the interest in PT Bumi.

4. Segmental analysisIn accordance with the provisions of IFRS 8 “Operating Segments”, the operating segments used to present segment information were identified on the basis of internal reports used by the Board of Directors to allocate resources to the segments and assess their performance. The Board of Directors is the Group’s chief operating decision maker within the meaning of IFRS 8.

The Board of Directors considers the business from a product perspective and has determined that the Group has a single reportable segment, being coal mining. Information on financial performance and net assets is presented in the income statement and balance sheet.

RevenueYear to 31 December 2011

Non-current assets31 December 2011

$m % $m %

China 763 54 – –

Taiwan 203 15 – –

Indonesia 175 12 6,384 100

India 103 7 – –

South Korea 98 7 – –

Hong Kong 65 5 – –

United Kingdom – – 1 –

Total 1,407 100 6,385 100



5. Net operating costs

Year to 31 December

2011 $m


2010$m

Changes in inventories of finished goods and work in progress (12) –

Stripping and mining costs 519 –

Employee costs 34 –

Freight and handling costs 101 –

Net foreign exchange gains (11) –

Coal processing and other production costs 53 –

Government royalties paid and payable 164 –

Depreciation and amortisation expense 120 –

Costs associated with corporate transactions 66 32

Professional and legal fees (including auditors’ remuneration) 33 9

Operating lease rentals 3 –

6. Auditors’ remunerationServices provided by the Company’s auditor

During the year the Group, including its overseas subsidiaries, obtained the following services from the Company’s auditor.

Year to 31 December

2011 $m


2010$m

Fees payable to the Company’s auditor in relation to:

The audit of the parent company and consolidated financial statements 1.9 0.1

The audit of subsidiaries 0.2 –

Fees related to the audit of the Company and its subsidiaries 2.1 0.1

Audit related assurance services1 0.9 –

Total fees for audit and audit related services 3.0 0.1

Services related to transactions2 8.7 3.6

Taxation advisory services3 0.8 0.4

All other non-audit services4 0.7 –

Total fees 13.2 4.11 Includes fees in respect of the review of Bumi plc’s interim financial statements, and quarterly reviews of PT Berau

financial information, as required by the Indonesia Stock Exchange.2 Comprises fees in respect of work as reporting accountants for the acquisition of PT Berau, the investment in

PT Bumi, the premium listing of Bumi plc and the proposed acquisition of BRM that did not proceed; also includes

work in relation to a bond offering by PT Berau (2010: includes fees in respect of the acquisition of PT Berau, the

investment in PT Bumi and acting as reporting accountants in connection with prospectuses issued by Vallar plc).3 Includes taxation related advice in relation to transactions.4 Includes fees of $0.3m in respect of advice on the Group’s Health, Safety, Environment and Communities

programme and $0.3m in relation to advice regarding the Group’s response to the UK Bribery Act.

The prior year comparatives reflect those of the Vallar plc consolidated financial statements.


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7. Underlying earnings and underlying EBITDAUnderlying earnings and underlying EBITDA exclude separate items. Separate items are those items of financial performance that the Group believes should be separately disclosed. Separate items include when applicable, impairment of goodwill and other assets, costs of acquiring and integrating acquisitions, fundamental restructuring of business, profit or loss on disposal of a business or significant other asset, material claims and settlements and significant gains and losses on derivative instruments.

Year to 31 December

2011 $m


2010$m

Loss attributable to owners of the parent (319) (108)

Exclusions from underlying earnings:

Movement on acquisition related financial instruments 286 62

Corporate transaction costs 66 32

Separate Items 352 94


Add back/(deduct):

Depreciation and amortisation 120 –

Finance income (13) (1)

Finance costs 83 –

Income tax 167 –

Non-controlling interest 37 –

Underlying EBITDA 427 (15)

8. Employee numbers and payroll costsThe average number of employees, excluding contractors and associates’ employees by principal location of employment was:

Year to 31 December

2011


2010

Indonesia 799 –

United Kingdom 10 10

809 10

Payroll costs in respect of the employees included in the tables above were:

Year to 31 December

2011 $m


2010$m

Wages and salaries 28 –

Social security costs – –

Post employment benefits – –

Share based payments – –

Total payroll costs 28 –



9. Finance income and costs

Year to 31 December

2011$m


2010$m

Finance income

Interest receivable and other finance income 13 1

Total finance income 13 1

Finance costs

Interest payable and other finance costs (83) –

Total finance costs (83) –

Movement on acquisition related financial instruments (286) (62)

Net finance costs (356) (61)

10. Taxation

Year to 31 December

2011$m


2010$m

Tax charged to the consolidated income statement in the year:

Current tax

UK Corporation Tax at 26.25% (2010: 28%)

Current year/period – –

Overseas tax

Current year/period (203) –

Deferred tax (origination and reversal of temporary differences) 36 –

Total tax charged to consolidated income statement (167) –

The movement in deferred tax, from $1,313m recognised as fair value at date of acquisition to $1,277m at the end of the year, relates to the release of $36m of the deferred tax liability linked to the depreciation of mining properties recognised in the Purchase Price Allocation following the acquisition of PT Berau.

The Group’s tax charge was higher than the UK statutory rate and can be reconciled as follows:

Year to 31 December

2011$m


2010$m

Loss before tax (115) (108)

Add back: Share of net loss from associate 39 –

(76) (108)

UK Corporation Tax at 26.25% (2010: 28%) 20 30

Expenses not deductible for tax purposes (111) (30)

Tax losses for which no deferred tax asset was recognised (5) –

Short term timing differences 4 –

Dividend withholding taxes (4) –

Effect of differences between local and United Kingdom tax rates (71) –

Total tax charged to consolidated income statement (167) –


93

10. Taxation continuedIn the prior year, Vallar Ltd (formerly Vallar plc) was incorporated and subject to Jersey income tax at a rate of 0%.

In the Budget on 23 March 2011, it was announced that the UK corporation tax rate will reduce from 28% to 23% over a period of three years from 2011. The first reduction in UK corporation tax from 28% to 26% relating to the period from 1 April 2011 to 31 March 2012 was substantially enacted on 29 March 2011. The second reduction in UK corporation tax from 26% to 25% relating to the period from 1 April 2012 onwards was substantially enacted on 5 July 2011. A further reduction from 25% to 24% from 1 April 2012 was announced in the budget on 21 March 2012. The Indonesian corporate tax rate is 25%, with the exception of the tax charged within a CCoW which incurs a tax rate of 45%.

No income tax has been charged or credited directly to equity or other comprehensive income during the year or preceding period.

11. Earnings per share (“EPS”)The calculation of earnings per ordinary share is based on profit attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares in issue during the year. In addition to the earnings per share required by IAS 33 “Earnings per Share”, underlying EPS has also been calculated and is based on earnings excluding the effect of separately disclosed items. It has been calculated to allow shareholders to have a better understanding of the trading performance of the Group. Details of the underlying EPS are set out below:

Year to 31 December

2011$m


2010$m

Loss attributable to ordinary shareholders (319) (108)

Separate items (note 7) 352 94


Number of shares (millions)

Basic weighted average number of ordinary shares1 192 67

Potentially dilutive share options – –

Diluted weighted average number of shares 192 67

$ $

Basic loss per share (1.66) (1.61)

Effect of potentially dilutive share options – –

Diluted loss per share (1.66) (1.61)

Basic underlying earnings/(loss) per share 0.17 (0.21)

Effect of potentially dilutive share options – –

Diluted underlying earnings/(loss) per share 0.17 (0.21)1 Basic weighted average number of ordinary shares in the prior year is stated as the number of ordinary shares

in issue at 31 December 2010, which the Directors believe provides a more relevant basis for the EPS than a

weighted average.



12. Intangible assets

Exploration and evaluation

assets$m

Goodwill$m

Cost

At 1 January 2011 – –

Acquired through business combinations – 1,320

Additions 4 –

At 31 December 2011 4 1,320

Accumulated amortisation and impairment losses

At 1 January 2011 – –

Charge for the year – –

At 31 December 2011 – –

Net book value at 31 December 2011 4 1,320

Impairment tests for goodwill

Goodwill arising through acquisitions has been allocated to individual or groups of cash generating units (“CGUs”), each representing the lowest level in the Group at which goodwill is monitored for internal management purposes.

The carrying value of the Group’s goodwill of $1,320m has predominantly arisen on the acquisition of PT Berau on 4 March 2011 (see note 13), which is treated as a single CGU.

The Group’s annual impairment review resulted in no impairment charge for 2011. PT Berau’s recoverable amount has been assessed based on fair value less costs to sell using discounted cash flows, in line with the policy in note 2.

Expected future cash flows are inherently uncertain and could materially change over time. They are significantly affected by a number of factors, including reserves and production estimates, commodity prices, discount rates, future operating costs and capital expenditure. Cash flow projections are based on financial budgets and production plans to the end of the CCoW, including two 10 year extensions, appropriately risk adjusted.

The key assumptions relating to the calculation of PT Berau’s fair value less costs to sell are the long term thermal coal price, operating costs, and discount rates. Future selling prices and operating costs have been estimated in line with the Group policy. Management believes that, currently, there are no reasonably possible changes in any of the key assumptions that would lead to the recoverable amount being below the carrying amount, except for the long term thermal coal price.

The forecast benchmark thermal coal price is within the range published by market analysts of $108 to $125 per tonne, in nominal terms. This price is then adjusted for various coal quality parameters, such as calorific value, moisture, ash content, sulphur content, to derive the expected realised selling prices, on a FOB basis.

Post tax cash flows were estimated for the period of the CCoW, based on a post tax discount rate of between 9.7% and 10.3%, expressed in nominal terms. The operating costs included in the fair value assessment are calculated based on PT Berau’s production plans for the remainder of the CCoW including extensions. Price assumptions for inputs are based on analysis of market fundamentals and are made consistent with related output price assumptions.

Based on the assessment of fair value less costs to sell, the recoverable amount significantly exceeds the carrying value at 31 December 2011. This calculation is highly sensitive to changes in the key assumptions, and a 10.5% decrease in the long term thermal coal price, in isolation, would lead to the fair value less costs to sell of PT Berau being equal to its carrying amount. However, management believe that a decrease in the long term thermal coal price would coincide with an associated beneficial impact on input costs which would, to a certain extent, offset the impact of the change in the long term thermal coal price.


95

13. Business combinations13.1. Investment in subsidiary

Acquisition of PT Berau

On 4 March 2011, Vallar Ltd (formerly Vallar plc) completed the acquisition of 26,175,000,000 PT Berau shares (representing 75% of the issued ordinary shares of PT Berau) at IDR 540 per PT Berau share, by payment of $739m in cash for 35% of PT Berau and the issue to the vendor of 52,297,680 Bumi plc ordinary shares in consideration for 40% of PT Berau.

On 4 March 2011, Vallar Ltd (formerly Vallar plc) obtained control of PT Berau. Legal completion followed on 8 April 2011 when shares were exchanged. PT Berau is a holding company that indirectly owns 90% of PT Berau Coal, the fifth largest coal producer in Indonesia in terms of production volume. PT Berau Coal engages in open cut mining of coal in its concession area in East Kalimantan, where it holds coal mining rights until 26 April 2025 under a CCoW.

On 14 June 2011, Vallar Ltd (formerly Vallar plc) increased its holding in PT Berau through a mandatory cash offer for the remaining shares following the acquisition described above. Vallar Ltd (formerly Vallar plc) acquired an additional 3,398,999,404 shares in PT Berau for $214m and its total ownership following this acquisition is 29,573,999,404 shares, representing 85% of the issued ordinary shares of PT Berau.

In the period from 4 March 2011, the date of acquisition, to 31 December 2011, the business has contributed $1,407m of revenues and $296m of profit before tax. If the acquisition had occurred on the first day of this reporting period, the contributions would have been $1,657m of revenues and $376m of profit before tax.

Final details of net assets acquired and fair value adjustments are set out as follows.



Book value prior to

acquisition$m

Fair value adjustments

$m

Final fair value

$m

Non-current assets

Goodwill 410 (410) –

Goodwill arising on acquisition – 1,310 1,310

Property, plant and equipment 610 2,441 3,051

Available for sale financial asset1 75 (75) –

Due from related parties 6 – 6

Other non-current assets 2 – 2

Total non-current assets 1,103 3,266 4,369

Current assets

Inventories 15 5 20

Trade and other receivables 411 – 411

Other current assets 20 – 20

Cash and cash equivalents 489 – 489

Total current assets 935 5 940

Total assets 2,038 3,271 5,309

Current liabilities

Trade and other payables 442 4 446

Borrowings 52 19 71

Current taxation 201 – 201

Total current liabilities 695 23 718

Non-current liabilities

Borrowings 765 54 819

Deferred tax liabilities 115 1,198 1,313

Provisions 7 – 7

Total non-current liabilities 887 1,252 2,139

Total liabilities 1,582 1,275 2,857

Net attributable assets including goodwill 456 1,996 2,452

Fair value of non-controlling interest2 (864)

Bumi plc share (75%) 1,588

Consideration satisfied by:

Cash paid in November 2010 739

Adjustment to fair value of consideration3 (269)

Transfer from financial instruments to consideration 470

Fair value of shares issued 1,118

Total consideration 1,588

Other subsidiaries acquired 19

Cash inflow on acquisitions:

Net cash of acquired companies 489

Cash paid for other subsidiaries (net of cash acquired) (17)

Net acquisition of subsidiaries per cash flow statement 472


97

13. Business combinations continued1 In finalising the allocation of the purchase price to the identifiable assets and liabilities of PT Berau, the Directors

have decided to allocate zero value to the available for sale financial asset. With a corresponding increase in

the value attributable to the coal mining properties at acquisition, there is no overall effect on the value of

net assets acquired.2 The fair value of the non-controlling interest is calculated with reference to the PT Berau share price on the

date of acquisition.3 Adjustments to the fair value of consideration relate to movements in the PT Berau share price, Vallar Ltd

(formerly Vallar plc) share price and the Indonesian Rupiah exchange rate between the date of the Berau Sale

and Purchase of Shares Agreement on 16 November 2010 and the completion of the acquisition of PT Berau.

Goodwill arising on acquisition is associated with the recognition of a deferred tax liability in respect of the fair value of mining properties.

Acquisition costs incurred on the PT Berau transactions expensed in the year were $21m.

Other acquisitions

On 18 May 2011, the Group acquired 100% of PT Mutiara Tanjung Lestari, a company incorporated in Indonesia engaged in mining services, for $11m. The whole of the consideration was satisfied in cash and the fair value of the assets acquired was $2m, with the difference representing goodwill arising on expected synergies.

Also on 18 May 2011, the Group acquired 100% ownership of PT Pelayaran Sandita Parkasa Maritim, a company incorporated in Indonesia engaged in shipping services, for $8m. The whole of the consideration was satisfied in cash and the fair value of the assets acquired was $7m, with the difference representing goodwill arising on expected synergies.



13.2. Investment in associate

Acquisition of shares in PT Bumi

On 4 March 2011, Vallar Ltd (formerly Vallar plc) completed its acquisition of 5,193,350,000 PT Bumi Shares (representing 25% of the issued ordinary share capital of PT Bumi) at IDR 3,025 per PT Bumi Share, in consideration of the payment, 90,072,216 ordinary shares were issued.

Final details of net assets acquired and fair value adjustments are set out below:

Book value prior to

acquisition$m

Fair value adjustments

$m

Final fair value

$m

Net assets acquired

Goodwill 243 (243) –

Goodwill arising on acquisition – 3,862 3,862

Property, plant and equipment 2,267 7,146 9,413

Exploration and evaluation assets 390 (390) –

Investments in associates 1,167 515 1,682

Other non-current assets1 932 (101) 831

Inventories 107 111 218

Available for sale financial assets 373 3 376

Trade and other receivables 923 (103) 820

Derivative financial instruments 488 6 494

Other current assets 221 (136) 85

Cash and cash equivalents 207 94 301

Trade and other payables (977) (41) (1,018)

Current tax (298) – (298)

Derivative financial instruments (133) 36 (97)

Borrowings (4,102) (463) (4,565)

Deferred tax liabilities (385) (3,646) (4,031)

Provisions (154) (30) (184)

Other liabilities (233) 51 (182)

Non-controlling interests (247) (329) (576)

Net attributable assets including goodwill 789 6,342 7,131

Bumi plc share 25% 1,783

Satisfied by:

Fair value of shares issued 1,910

Adjustment to fair value of shares issued2 (127)

Total consideration (non-cash) 1,7831 In finalising the allocation of the purchase price to the identifiable assets and liabilities of PT Bumi, the Directors

have reduced the value of the business development funds on acquisition by $247m. There is a corresponding

increase in the value of coal mining properties, with no overall effect on the value of net assets acquired.2 Adjustments to the fair value of shares relate to movements in the PT Bumi share price, Vallar Ltd (formerly Vallar

plc) share price and the Indonesian Rupiah exchange rate between the date of the PT Bumi Sale and Purchase

of Share Agreement on 16 November 2010 and the completion of the acquisition of PT Bumi on 4 March 2011.

Acquisition costs incurred on the PT Bumi transaction expensed in the year were $21m.


99

14. Property, plant and equipment

Mining1

properties$m

Land and buildings

$m

Plant, furniture,

fixtures and office

equipment$m

Assets under construction

$mTotal

$m

Cost

At 1 January 2011 – – – – –

On acquisition of subsidiary 2,948 15 20 75 3,058

Additions 34 – 12 55 101

Transfers – 9 8 (17) –

Disposals – – – – –

At 31 December 2011 2,982 24 40 113 3,159

Accumulated depreciation

At 1 January 2011 – – – – –

Depreciation for the year (115) (2) (3) – (120)

Disposals – – – – –

At 31 December 2011 (115) (2) (3) – (120)

Net book value at 31 December 2011

2,867

22

37

113

3,039

1 Mining properties include deferred stripping costs of $36m. Amortisation of deferred stripping costs of $34m

is included within depreciation for the year.

In accordance with the CCoW, certain fixed assets recorded in the consolidated financial statements remain the property of the Government of Indonesia. However, PT Berau has an exclusive right to use the fixed assets over the CCoW period.

Depreciation expense of $120m has been charged to cost of sales. No borrowing costs were capitalised during the period of this report. Property, plant and equipment includes no amounts under finance leases.



15. Investment in associate

2011$m

At 1 January –

Acquisition of 25% interest in PT Bumi 1,783

3.9% step up on 5 July 2011 282

0.3% step up on 15 July 2011 24

Share of loss (39)

Share of other comprehensive income 2

Dividends received (30)

Other equity movements –

At 31 December 2,022

On 5 and 15 July 2011, the Group acquired a further 13,880,802 and 1,179,745 of shares in PT Bumi for a total non-cash consideration of $306m as part of a share for share exchange.

As at 31 December 2011, the market value of the Group’s interest in PT Bumi, which is listed on the Indonesia Stock Exchange, was $1,470m. The Group does not believe this value represents the fair value of the underlying business, as stock markets are subject to short term volatility and this market value does not reflect the premium attached to the holding of a significant influence. Additionally, future discounted cash flows also support the carrying value of the investment in associate.

The Group’s share of the results of its associate, and its aggregated assets (including goodwill) and liabilities as at 31 December 2011 are as follows:

NameCountry of

incorporation Assets

$mLiabilities

$mRevenue

$mLoss

$m

Interest held

%

PT Bumi Indonesia 5,208 (3,132) 974 (39) 29.2

16. Inventories31 December

2011$m

31 December 2010

$m

Raw materials and consumables 7 –

Work in progress – –

Finished products 23 –

Total inventories 30 –

The cost of inventories recognised as an expense and included in cost of sales amounted to $562m (2010: $nil).


101

17. Trade and other receivables

31 December 2011

31 December 2010

Due within one year

$m

Due within one year

$m

Trade receivables 128 –

Tax recoverable 309 –

Other receivables 44 –

Prepayments and accrued income 14 –

Total trade and other receivables 495 –

Trade and other receivables includes VAT recoverable of $309m. This represents amounts claimed by PT Berau Coal from the Government of Indonesia. This amount is part of an ongoing dispute with the Government which resulted from a change in the VAT law in 2001 when coal became a VAT exempt supply. This change meant that PT Berau Coal can no longer claim credits for its input VAT on purchases. However, under the CCoW, PT Berau Coal is indemnified against Indonesian taxes not in effect at the time of signing of the CCoW. On this basis, PT Berau Coal claimed reimbursement for input VAT paid from 2001. The claims were rejected and PT Berau Coal began setting off the VAT receivable against royalty payments due under the CCoW. The VAT receivable and royalty payable amounts have been disclosed separately on a gross basis within trade and other receivables and trade and other payables, respectively.

The Group’s exposure to credit and currency risks related to trade and other receivables are disclosed in note 23.

18. Cash and cash equivalents

31 December 2011$m

31 December 2010

$m

Cash at bank and in hand 480 26

Short term bank deposits 128 298

Total cash and cash equivalents 608 324

Cash and cash equivalents include amounts that are held as collateral for bank loans and senior notes.

19. Trade and other payables

31 December 2011$m

31 December 2010

$m

Trade payables 132 –

Amounts owed to related parties 1 –

Royalties 315 –

Tax and social security 18 –

Other payables 7 9

Accruals and deferred income 152 –

Total trade and other payables 625 9

Royalties payable includes $309m, accumulated from 2001 to December 2011 for offset against VAT input recoverable from the Government of Indonesia, as disclosed in note 17.

Amounts owed to related parties are unsecured with no fixed payment date and are interest free.



20. Financial Instruments by categoryFinancial assets

The carrying amounts and fair values of financial assets are as follows:

31 December 2011 31 December 2010

Financial assets

Estimated fair value

$m

Carrying value

$m


$m

Carrying value

$m

At fair value through profit or loss

Financial derivatives – – 659 659

Loans and receivables

Cash and cash equivalents 608 608 324 324

Trade and other receivables 172 172 – –

Total financial assets 780 780 983 983


The carrying amounts and fair values of financial liabilities are as follows:




$m

Carrying value

$m


$m

Carrying value

$m

At amortised cost

Trade and other payables 140 140 9 9

Borrowings 850 830 – –

Total financial liabilities 990 970 9 9

Fair value hierarchy

An analysis of financial assets carried at fair value is set out below:

Financial assets

31 December 2011$m

31 December 2010

$m

At fair value through profit or loss

Level 1 – 659

Total financial assets – 659

Level 1 assets are valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes exchange traded derivatives.


103

21. BorrowingsAn analysis of borrowings is set out below:


Due within one year

$m

Due after one year

$mTotal

$m

Due within one year

$m

Due after one year

$mTotal

$m

Bank loans 76 269 345 – – –

Senior secured notes 9 476 485 – – –

Total 85 745 830 – – –

31 December 2011$m

31 December 2010

$m

Debt falling due:

In one year or less 85 –

Between one and two years 115 –

Between two and five years 630 –

Total borrowings 830 –

The carrying amounts of the Group’s borrowings are all denominated in US dollars.

a) Bank LoansOn 23 July 2010, PT Berau entered into a $400m Senior Secured Credit Facility with Credit Suisse AG, Singapore Branch. PT Berau drew down the entire $400m available under this facility. The facility comprises two tranches: (i) Tranche A in a principal amount of $300m and (ii) Tranche B in a principal amount of $100m. Interest for the Tranche A loans is payable quarterly and accrues at the rate of London Interbank Offered Rate (“LIBOR”) plus a margin of 4.75% per annum. Interest for Tranche B loans is payable quarterly and accrues at the rate of LIBOR plus a margin of 5.75% per annum, an additional utilisation fee is also payable on this tranche of 2.25% per annum.

b) Senior Secured NotesOn 8 July 2010, PT Berau issued $350m of 12.5% Guaranteed Senior Secured Notes (“Senior Notes”). PT Berau then issued an additional $100m of 12.5% Guaranteed Senior Secured Notes on 29 July 2010. The maturity date of the notes is 8 July 2015. The Senior Notes bear interest from 8 July 2010 at the rate of 12.5% per annum, payable semiannually.

There were no undrawn committed borrowing facilities at 31 December 2011 (2010: $nil).



22. Financial instrumentsThe Group’s financial instruments comprise of:

Acquisition of PT Berau

$m

Acquisition of PT Bumi

$m

Step up of PT Bumi

$mTotal

$m

On incorporation – – – –

Fair value of financial instrument on initial recognition1

701

118

–

819

Subsequent fair value (loss)/gain charged to the income statement

(126)

64

–

(62)

Deferred loss/(gain) on initial recognition recognised in balance sheet

20

(118)

–

(98)

As at 31 December 2010 595 64 – 659

Fair value of financial instrument on initial recognition

–

–

21

21

Subsequent fair value (loss)/gain charged to the income statement

(105) (309) 10 (404)

Deferred gain on initial recognition recognised in balance sheet

–

–

(21)

(21)

Write off deferred gain/(loss) on initial recognition to income statement

(20)

118

21

119

Transfer to cost of investment (470) 127 (31) (374)

As at 31 December 2011 – – – –1 Retranslated due to change in presentation currency.

a) Under the PT Berau Sale and Purchase of Shares Agreement, the Group paid $739m, on 16 November 2010 and committed to exchange 52,297,680 of the Top Company’s shares as consideration for 75% of the equity of PT Berau on 8 April 2011. The cash advance and embedded share for share exchange derivative were classified, together, as a financial instrument at fair value through profit or loss. The initial fair value loss of $20m arising on 16 November 2010, calculated as the difference between the fair value of the PT Berau shares to be received and the cash paid plus fair value of the Top Company’s shares to be issued was deferred until control of PT Berau passed to the Group on 4 March 2011. On that date it was recognised in the income statement. The subsequent fair value loss of $105m ($126m loss in the 9 months to 31 December 2010) was recognised in the income statement. Also on 4 March 2011, when control of PT Berau passed to the Group, the financial asset of $470m was transferred to the cost of the investment in PT Berau.

b) Under the PT Bumi Sale and Purchase of Shares Agreement, the Group committed to a share for share exchange as consideration for 25% of PT Bumi. The number of shares to be exchanged was fixed on 16 November 2010, but share exchange and completion occurred on 4 March 2011. The share for share exchange is classified as a derivative financial instrument. The initial fair value gain of $118m arising on 16 November 2010, calculated as the difference between the fair value of the PT Bumi shares to be received and fair value of the Top Company’s shares to be issued, was deferred until the transaction closed on 4 March 2011, at that point it was recognised in the income statement. The subsequent fair value loss of $309m for the period to 31 December 2011 ($64m gain in the 9 months to 31 December 2010) was recognised in the income statement. Also on 4 March 2011, when the Group gained significant influence over PT Bumi, an amount of $127m was set against the cost of the investment in PT Bumi.

c) On 27 June 2011, the Group entered into sale and purchase agreements with a number of shareholders in PT Bumi pursuant to which Bumi plc agreed to purchase shares in the capital of PT Bumi (representing approximately 4.2% of the issued ordinary share capital of PT Bumi) in consideration for the issue, to the Selling PT Bumi Shareholders of 15,059,827 Bumi plc Voting Ordinary Shares, disclosed in note 15. These transactions closed on 5 July 2011 and 15 July 2011, at which point the Group’s total shareholding in PT Bumi was increased to 29.2%. The share for share exchange is classified as a derivative financial instrument. The initial fair value gain of $21m arising on 27 June 2011, calculated as the difference between the fair value of the Bumi plc shares to be received and fair value of the Company’s shares to be issued, was deferred until the transactions closed on 5 July 2011 and 15 July 2011. The subsequent fair value gain of $10m was recognised in the income statement for the year to 31 December 2011. On 5 July 2011 and 15 July 2011, when control of the shares passed to the Group the financial asset of $31m was transferred to the cost of the investment in PT Bumi.


105

23. Financial risk management23.1. Financial risk factors

The Group’s policies with regard to financial risk management are clearly defined and consistently applied. They are a fundamental part of the Group’s long term strategy covering areas such as foreign exchange risk, commodity price risk, interest rate risk, credit risk, liquidity risk and capital risk management.

23.2. Market risk

a) Foreign exchange riskManagement believes the Group is naturally hedged against foreign exchange risk. The percentage of costs in US dollars is aligned with the revenues the Group receives in US dollars. This relationship also holds true for the Group’s revenues and costs in the Indonesian Rupiah. At 31 December 2011, it is estimated a general increase of 5% in the value of US dollar against the Indonesian Rupiah would have decreased the Group’s operating profit by approximately $2.6m. This analysis assumes all other variables remain constant. A 5% increase has been used based on management judgement and historical experience to best reflect future movements.

b) Commodity price riskThe movement in coal prices is determined by macro economic factors, with short term global supply and demand conditions further adding to volatility. The Group has taken steps to mitigate this risk by modelling the impact of movements in coal prices, closely monitoring the cost components, and adjusting plans and activities accordingly.

The Group’s normal policy is to sell its products at prevailing market prices. Exceptions to this rule are subject to strict limits laid down by the Board and to internal controls. The Board does not generally believe commodity price hedging would provide long term benefit to shareholders.

Contract prices for coal are generally agreed annually with customers, although volume commitments vary by product.

c) Interest rate riskThe Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk, which is offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

A 1% increase in the floating interest rate would have a positive $2.6m impact on the consolidated profit for the year, as the Group’s debt is largely at a fixed rate. A 1% increase in interest rates has been used based on management judgement and historical experience to best reflect future movements.

23.3. Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions and receivables. The Group places funds with banks and financial institutions only if independently rated with a minimum rating of B1.

The maximum exposure the Group faces due to credit risks on cash and cash equivalents is as follows:

31 December 2011$m

31 December 2010

$m

Cash and cash equivalents

AAA 134 –

AA- 385 324

A+ 83 –

Other 6 –

Total cash and cash equivalents 608 324



The Group requires all customers to provide irrevocable letters of credit or pay by confirmed electronic transfer, a method that is only applicable to Indonesian Government State Owned Enterprises. The historical level of customer default is minimal and as a result the credit quality of year end trade receivables is considered to be high. Of the year end trade receivables balance, the following were past due at 31 December:

31 December 2011$m

31 December 2010

$m

Not yet due 108 –

Less than one month 20 –

Total trade receivables 128 –

The overdue receivables ageing profile above is typical of the industry in which certain of the Group’s businesses operate. Given this, the existing insurance cover (including letters of credit from financial institutions) and the nature of the related counterparties, these amounts are considered recoverable. There was no impairment provision at 31 December 2011 (2010: $nil).

23.4. Liquidity risk

Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group Finance. Group Finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its debts at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and external regulatory and legal requirements.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:

At 31 December 2011

Carrying amount

$m

Contractual cash flows

$m

Six months or less

$m

6–12 months

$m1–2 years

$m2–5 years

$m

More than five years

$m

Non-derivative financial liabilities

Bank loans 345 392 41 56 122 173 –

Senior notes 485 648 28 28 56 536 –

Trade payables 625 625 625 – – – –

Total 1,455 1,665 694 84 178 709 –

There were no financial liabilities at 31 December 2010.

The table below provides information about the contractual undiscounted maturities and interest rate profile of the Group’s bank loans and senior notes at 31 December 2011:

2012$m

2013$m

2014$m

2015$m

2016$m

2017$m

Carrying amount

$m

Bank loans – – 235 105 2 3 345

Average interest rate

–

–

5.0%

8.3%

8.0%

7.5%

–

Senior notes – – – 485 – – 485

Average interest rate

–

–

–

12.5%

–

–

–

Total – – 235 590 2 3 830

The Group had no bank loans and senior notes at 31 December 2010.


107

23. Financial risk management continued23.5. Capital risk management

The Group’s objectives when managing capital are to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

31 December 2011$m

31 December 2010

$m

Borrowings 830 -

Share capital and share premium 145 622

Reserves1 3,799 321

Total capital 4,774 9431 Reserves include retained earnings, share based payment reserve and merger reserve.

The Group is not subject to any externally imposed capital requirements.

24. Deferred taxDeferred tax assets

The Group has deferred tax assets relating to unused tax losses of $28m (2010: $nil) and unremitted earnings from the associate of $7m (2010: $nil). These deferred tax assets have not been recognised as it is not expected that taxable profits will be available against which these assets can be utilised.

Deferred tax liabilities

The movement in deferred tax liabilities during the year is as follows:

Mining properties

$mOther

$mTotal

$m

At 1 January 2011 – – –

Acquired through business combinations 1,310 3 1,313

Credited to the income statement (36) – (36)

At 31 December 2011 1,274 3 1,277



25. Share capital, share premium and merger reserve

Issued and fully paid Ordinary shares (thousands)

Redeemable Deferred

Shares (thousands)

Par value (restated)

Ordinary shares

Share premium

Merger reserve

VotingSuspended

Voting Total Total $m $m $m

On incorporation on 31 March 2010 – – – – £6.00 – – –

Ordinary shares issued on 9 July 2010 following completion of initial public offering 68,718 – 68,718 – £6.00 635 – 437

Ordinary shares repurchased and cancelled on 16 August 2010 (1,375) – (1,375) – £6.00 (13) – (9)

Balance as at 31 December 2010 67,343 – 67,343 – 622 – 428

Shares issued in relation to PT Bumi transaction on 4 March 2011 28,861 61,211 90,072 – £6.00 878 – 1,031

Transfer between categories of ordinary shares 11,902 (11,902) – – £6.00 – – –

Shares issued in relation to PT Berau transaction on 8 April 2011 27,773 24,525 52,298 – £6.00 514 – 604

Shares allotted – – – 50 £1.00 – – –

PT Bumi step up transaction on 5 July 2011 13,880 – 13,880 – £6.00 136 119 –

Transfer between categories of ordinary shares 5,949 (5,949) – – – – –

Capital reduction adjustment on 7 July 2011 – – – – (2,146) – –

PT Bumi step up transaction on 15 July 2011 1,180 – 1,180 – £0.01 – 22 –

Share options exercised by Directors 120 – 120 – £0.01 – – –

Transfer between categories of ordinary shares 557 (557) – – £0.01 – – –

Exchange of Founder Shares 16,064 – 16,064 – £0.01 – – 185

Transfer between categories of ordinary shares 6,885 (6,885) – – £0.01 – – –

Balance as at 31 December 2011 180,514 60,443 240,957 50 4 141 2,248

25.1. Ordinary Shares

On 31 March 2010, two ordinary shares of £1 each were subscribed for at par value. On 9 July 2010, a written resolution of the sole member of the Top Company authorised the issue of 68,718,229 ordinary £1 shares at a price of £10 per share. On 16 August 2010, pursuant to the terms of a repurchase option, the Company repurchased 1,375,495 ordinary shares of £1 each in the Top Company at a price of £10 per ordinary share.

PT Bumi transaction

The PT Bumi transaction closed on 4 March 2011. At the closing of this transaction, the Top Company issued 90,072,216 Top Company Shares to the Bakrie Group for 25% of PT Bumi, of which 28,861,172 were Top Company Voting Ordinary Shares and 61,211,044 were Top Company Suspended Voting Ordinary Shares.


109

25. Share capital, share premium and merger reserve continuedPT Berau transaction

At the closing of the PT Berau transaction on 8 April 2011, PT Bukit Mutiara transferred title to, and registered ownership of, shares comprising 75% of PT Berau to Vallar Investments UK Ltd and the Top Company issued 52,297,680 Top Company Shares, of which 27,772,829 were Top Company Voting Ordinary Shares issued to PT Bukit Mutiara and 24,524,851 were Top Company Suspended Voting Ordinary Shares issued to the Bakrie Group (pursuant to PT Bukit Mutiara requirements). As part of the PT Berau transaction, the Top Company also agreed to pay $739m in cash consideration. Of this amount, approximately $639m was paid to PT Bukit Mutiara on 18 November 2010 and, following the closing of the PT Bumi transaction, the balance was released to PT Bumi, repaying part of a loan owed by PT Bukit Mutiara to PT Bumi. The closing of the PT Berau transaction triggered a mandatory cash offer for the remaining issued share capital of PT Berau, which has now completed, with the Group’s aggregate holding in PT Berau increasing to 84.7% as a result.

Transfer between classes of shares

The Top Company Suspended Voting Ordinary Shares convert into Voting Ordinary Shares on a one for one basis automatically on issue of new Voting Ordinary shares by the Company. This is to ensure that PT Bakrie Brothers Tbk, Long Haul Holdings and affiliates percentage ownership in the Top Company Voting Ordinary Shares remains at 29.9%.

Increase in investment in PT Bumi

On 27 June 2011, the Group entered into sale and purchase agreements with a number of shareholders in PT Bumi pursuant to which Bumi plc agreed to purchase shares in PT Bumi representing approximately 4.2% of the issued share capital of PT Bumi in consideration for the issue to the selling PT Bumi shareholders of 15,059,827 Bumi plc Voting Ordinary Shares. These purchases were completed during July 2011.

Capital reduction

On 7 July 2011, the Company undertook a capital reduction.

Repurchase of non-controlling interest

On 6 October 2011, the Founder Shares, a separate share class of Vallar Holding Company Ltd, were exchanged for 6.67% of the fully diluted ordinary shares of the Company, with a value of $185m. Further details are set out in a prospectus issued by Vallar Ltd (formerly Vallar plc) on 24 February 2011 and the 2010 Annual Report for Vallar plc, which was issued on 28 April 2011.

25.2. Redeemable Deferred Shares

The Redeemable Deferred Shares were allocated and issued in order for Bumi plc to satisfy the minimum share capital requirement for the Company to be reregistered as a public company under the Companies Act 2006, which was effected on 1 March 2011. There are 50,000 Redeemable Deferred Shares of £1 each in the capital of Bumi plc that carry no voting rights and have no economic value.

25.3. Merger Reserve

Upon implementation of the Scheme, the Group’s ordinary shares have been re-presented as that of Bumi plc, with a nominal value of £6. The difference between the Vallar Ltd’s (formerly Vallar plc) net assets and the nominal value of the shares in issue is recorded in the merger reserve. In addition, certain consolidation adjustments are also recorded in the merger reserve.

No dividends have been paid or proposed for the year.

25.4. Founder Securities

Founder Securities are a further separate class of equity share capital in Vallar Holding Company Ltd. The holders of the Founder Securities have the right to exchange the Founder Securities for ordinary shares in the Company to a value of 15% of the increase in value from the initial public offering value of £10. The original performance conditions attached to these shares were met in the year. Further details are set out in a prospectus issued by Vallar Ltd (formerly Vallar plc) on 24 February 2011 and the 2010 Annual Report for Vallar plc, which was issued on 28 April 2011.



26. Non-controlling interests

2011$m

2010$m

At 1 January 31 –

Issue of Founder Shares and Securities – 31

Acquired through business combination 864 –

Share of profit in the year 37 –

Purchase of non-controlling interests – mandatory cash offer PT Berau (206) –

Purchase of non-controlling interests – Founder Shares (23) –

Dividends paid to non-controlling interests (12) –

At 31 December 691 31

Transactions with non-controlling interests are dealt with in note 30 Related party transactions.

27. Consolidated cash flow analysis27.1. Reconciliation of loss before tax to cash flows from operations

Year to 31 December

2011$m


2010$m

Loss before income tax (115) (108)

Add back/(deduct):

Depreciation and amortisation 120 –

Movement on financial instruments at fair value through profit or loss 286 62

Net finance costs/(income) 70 (1)

Costs associated with initial public offering – 32

Share of loss from associate 39 –

Foreign exchange gains in operating costs (11) –

Increase in inventories (10) –

Increase in operating receivables (56) –

Increase in operating payables 129 9

Increase in provisions 18 –

Deferred stripping (35) –

Cash flows generated from/(used in) operations 435 (6)

27.2. Reconciliation of net cash flow to movement in net (debt)/cash

1 January 2011$m

Debt acquired on acquisition

$mCash flows

$m

Exchange adjustments

$m

31 December 2011$m

Cash 324 – 273 11 608

Borrowings – (775) (55) – (830)

Total net (debt)/cash 324 (775) 218 11 (222)


111

28. Contingent liabilities and contingent assetsContingent liabilities

The Group is subject to various claims in the normal course of business. These include but are not restricted to land claims. Occasionally local residents issue claims against the Group and the associate with regard to the mining on areas of land where ownership is in dispute between the Group and local inhabitants. The majority of cases are resolved with no material liability assumed by the Group and the associate.

No contingent liabilities were secured on the assets of the Group at 31 December 2011 or 31 December 2010.

Other Specific Contingent LiabilitiesOffset of Coal Production Royalties with input VAT

The Group has a contingent liability in respect of the coal sharing royalties payable to the Government of Indonesia which have been offset against VAT recoverable amounting to $309m. Please see note 17 for further details.

Contractual mine service fee agreement claim

PT Bumi has an ongoing dispute with a contractor regarding the contractual mining service fee and its escalation formula. The contractor is claiming the escalation formula no longer reflects the actual increase in its operating costs. The associate believes the contractor’s rate is supported by other comparative mining contractors’ rates.

Contingent assets

There were no significant contingent assets in the Group or the associate at 31 December 2011 or 31 December 2010.

29. CommitmentsAt 31 December the Group had the following outstanding capital commitments and commitments under non-cancellable operating leases:

Capital commitments

31 December 2011$m

31 December 2010

$m

Contracted but not provided:

Assets under construction 149 –

149 –

Operating leases

31 December 2011$m

31 December 2010

$m

Expiry date

Within one year 16 –

Greater than one year, less than two years 4 –

Greater than two years, less than five years 3 –

Greater than five years – –

23 –

Operating leases relate principally to land and buildings, vehicles and shipping vessels.



30. Related party transactionsDuring the year ended 31 December 2011, the Group entered into the following transactions in the ordinary course of business with related parties and entities related to them:

Nathaniel Rothschild

2011$m

Rosan Roeslani

2011$m

Indra Bakrie

2011$m

Nathaniel Rothschild and James Campbell

2011$m

Total2011$m

Purchase of goods – – (23.7) – (23.7)

Purchase of services (4.9) (0.5) – (2.9) (8.3)

Finance income – 0.4 – – 0.4

(4.9) (0.1) (23.7) (2.9) (31.6)

At 31 December 2011, the following balances were held with related parties:

Nathaniel Rothschild

2011$m

Rosan Roeslani

2011$m

Indra Bakrie

2011$m

Nathaniel Rothschild and James Campbell

2011$m

Total2011$m

Assets

Cash and cash equivalents – 3.9 – – 3.9

Liabilities

Trade and other payables – – (0.1) (1.2) (1.3)

– 3.9 (0.1) (1.2) 2.6

Transactions with Directors

Nathaniel RothschildThe Group conducted transactions with entities related to Nathaniel Rothschild, the sole activity being the payment of business expenses.

Rosan RoeslaniThe Group conducted transactions with entities related to Rosan Roeslani, the key activities being insurance services and the lease of office buildings.

PT Bank Pundi Indonesia Tbk is a bank related to Rosan Roeslani. Term deposits at the PT Bank Pundi Indonesia Tbk have market interest rates.

Indra BakrieThe Group conducted transactions with PT Petromine Energy Trading, a subsidiary of PT Bakrie and Brothers Tbk, a listed entity on the Indonesia Stock Exchange, which is related to the Bakrie family. The sole activity is the supply of fuel.

Nathaniel Rothschild and James CampbellThe Group conducted transactions with an entity related to Nathaniel Rothschild and James Campbell, the sole activity being the supply of professional services. The agreement to provide professional services was terminated in the year. In 2010, the Group paid fees of $7.7m to entities related to Nathaniel Rothschild and James Campbell.

All transactions are considered by the Directors to be undertaken at standard market rates.

Other transactions

During the year, Vallar Capital LP, a related party, exercised its right to exchange the Founder Shares, a separate share class of Vallar Holding Company Ltd, for 6.67% of the fully diluted ordinary shares of the Company. Please see note 25 for further details.There were no material transactions with the associate during the year.


113

30. Related party transactions continuedKey management personnel

In accordance with IAS 24 “Related Party Disclosures”, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, excluding any Director (executive and non-executive) of the Group.

Disclosure of Directors’ emoluments, pension entitlements, share options and long term incentive plan awards required by the Companies Act 2006 and those specified for audit by Regulation 11 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 are included in the Remuneration Report.

Compensation for key management was as follows:

Year to 31 December

2011$m


2010$m

Wages and salaries 1.4 –

Social security costs – –

Post employment benefits – –

Share based payments – –

Termination benefits – –

1.4 –

Transactions between PT Bumi and Bumi plc Directors

The Group is voluntarily disclosing these further transactions to increase the transparency of the financial statements. These amounts are stated at 100% of balances and transactions held by PT Bumi.

RosanRoeslani1

2011$m

IndraBakrie1

2011$m

Total2011$m

Purchase of goods – (508) (508)

Finance income 27 – 27

27 (508) 481

RosanRoeslani1

2011$m

IndraBakrie1

2011$m

Total2011$m

Assets

Loans receivable 259 – 259

Other financial assets 242 – 242

Liabilities

Trade and other payables – (44) (44)

501 (44) 4571 Includes all entities related to stated individuals.

Rosan Roeslani

PT Bumi has an investment with PT Recapital Asset Management, a company related to Rosan Roeslani.

PT Bumi also has a loan with PT Bukit Mutiara, a company related to Rosan Roeslani. The loan facility has a principal amount of up to $300m and attracts an interest rate of 12% per annum payable quarterly.

Indra Bakrie

PT Bumi conducted transactions with PT Petromine Energy Trading, a subsidiary of PT Bakrie and Brothers Tbk, a listed entity on the Indonesia Stock Exchange, which is related to the Bakrie family. The sole activity is the supply of fuel.



31. Principal subsidiaries and associated company

Subsidiary undertakingsCountry of

incorporation BusinessEffective ownership

percentage

31 December 2011

31 December 2010

PT Berau Coal Energy Tbk Indonesia Coal 84.7 –

PT Berau Coal Tbk Indonesia Coal 76.2 –

Vallar Investments UK Ltd UK Management Services Co

100 100

Vallar Holding Company Ltd1 Jersey Holding Co 100 100

Vallar Ltd Jersey Holding Co 100 100

Associated undertaking

PT Bumi Resources Tbk Indonesia Coal 29.2 –1 The Founder Shares and Securities represent a separate share class in Vallar Holding Company Ltd and do

not convey any voting rights therefore do not affect the ownership percentage of Vallar Holding Company Ltd.

32. Subsequent eventOn 13 March 2012, PT Berau issued fixed rate guaranteed senior notes of $500m, with a term of five years and a coupon rate of 7.25% payable semiannually. PT Berau used the net proceeds to repay the balance outstanding on its bank loan and will use the remainder of the proceeds to fund capital expenditure and other operating expenses.


115

We have audited the Parent Company Financial Statements of Bumi plc for the year ended 31 December 2011 which comprise Parent Company Balance Sheet, Parent Company Statement of Changes in Equity, Parent Company Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.

Respective responsibilities of Directors and auditorsAs explained more fully in the Statement of Directors’ Responsibilities set out on page 69 the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any material misstatements or inconsistencies we consider the implications for our report.

Opinions on financial statementsIn our opinion the parent company financial statements: – give a true and fair view of the state of the Company’s affairs as at 31 December 2011 and of its cash flows

for the period then ended; – have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied

in accordance with the provisions of the Companies Act 2006; and – have been prepared in accordance with the requirements of the Companies Act 2006.

Opinions on other matters prescribed by the Companies Act 2006In our opinion: – the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance

with the Companies Act 2006; and – the information given in the Directors’ Report for the financial year for which the parent company

financial statements are prepared is consistent with the Parent Company Financial Statements.


Independent Auditors’ Report to the Members of Bumi plc

Matters on which we are required to report by exception:We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

– the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

– certain disclosures of Directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit.

Other matterWe have reported separately on the Group financial statements of Bumi plc for the year ended 31 December 2011.

Ross Hunter(Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon12 April 2012


117

Note

31 December 2011$m

Non-current assets

Investment in subsidiary 3 4,079

Total non-current assets 4,079

Current assets

Cash and cash equivalents –

Total current assets –

Total assets 4,079

Current liabilities

Amounts owed to subsidiaries 1

Total current liabilities 1

Total liabilities 1

Equity

Ordinary shares 5 4

Share premium 5 141

Other reserve 1,757

Retained earnings 2,176

Total equity 4,078

Total equity and liabilities 4,079

These financial statements on pages 118 to 122 have been approved for issue by the Board of Directors on 12 April 2012 and signed on its behalf by

Ari HudayaDirector


Parent Company Balance Sheet

Note

Ordinary shares

$m

Share premium

$m

Other1

reserve$m

Retained earnings

$mTotal

$m

At incorporation – – – – –

Profit for the period – – – 30 30

Issue of ordinary shares

5 2,150 141 1,757 – 4,048

Capital reduction (2,146) – – 2,146 –

Dividends – – – – –

At 31 December 2011 4 141 1,757 2,176 4,0781 The other reserve was created as part of the Scheme. The difference between Vallar Ltd’s (formerly Vallar plc)

net assets and the value of its ordinary shares is represented in the Bumi plc parent company accounts as

other reserves.


119

Parent Company Statement of Changes in Equity

Note

Period to 31 December

2011$m

Cash flows from operating activities

Profit before tax 2 30

Adjustments for:

Movement on financial instruments at fair value through profit or loss (31)

Increase in operating payables 1

Net cash generated from operating activities –

Cash flows from financing activities –

Net increase in cash and cash equivalents –

Opening cash and cash equivalents –

Closing cash and cash equivalents –


Parent Company Statement of Cash Flows

1. General information, statement of compliance and basis of preparationBumi plc is a public limited company incorporated and domiciled in the United Kingdom under the Companies Act 2006 and is listed on the London Stock Exchange. The Company’s registered address is 2nd Floor, 4 Grosvenor Place, London SW1X 7HJ. The Company’s registered number is 7460129.

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and International Financial Reporting Interpretations Committee Interpretations (“IFRICs”) as adopted by the European Union. They also comply with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs.

The financial statements are presented in US dollars, rounded to the nearest million. They are prepared under the historic cost convention, as modified by financial assets and liabilities (including derivative instruments) at fair value through profit or loss. The principal accounting policies applied in the preparation of these financial statements are set out in note 2.

2. Accounting policiesThe Company is the ultimate parent entity of the Group. The Company’s financial statements are included in Bumi plc’s consolidated financial statements for the year ended 31 December 2011. As permitted by section 408 of the Companies Act, the Company has not presented its own income statement or statement of comprehensive income.

The Company’s profit for the period was $30m.

The accounting policies applied in the preparation of these Company financial statements are, where relevant, the same as those set out in note 2 to the Group financial statements with the addition of the following:

Investments

Investments in subsidiaries are stated at cost less provision for impairment.

3. Investment in subsidiary

2011$m

At incorporation –

Additions 4,079

At 31 December 4,079

The Company’s sole investment is in Vallar Ltd (formerly Vallar plc), which is a 100% owned subsidiary incorporated in Jersey and is an intermediate group holding company.

Details of indirectly held subsidiaries and the associate are disclosed in note 31 of the Group financial statements.

4. Financial risk managementThe Company’s sole significant risk is liquidity risk, relying on intercompany funding. This is managed through effective cash flow forecasting.


121

Notes to the Parent Company Financial Statements

5. Share capital and share premium

Number of shares

‘000s

Ordinary shares

$m

Share premium

$m

At incorporation – – –

Issue of ordinary shares 240,957 4 141

At 31 December 2011 240,957 4 141

The ordinary shares have a par value of £0.01 per share. All issued shares are fully paid. All shares have the same rights.

A further 50,000 of Deferred Redeemable Shares of £1.00 were issued on 28 February 2011.

For further details please refer to note 25 of the Group financial statements.

6. Related party transactionsSubsidiaries

The Company transacts and has outstanding balances with its subsidiaries. Amounts due to subsidiaries are disclosed on the face of the Company balance sheet. These amounts are repayable on demand and are non-interest bearing.

Key management personnel

Key management personnel are deemed to be the members of the Board of Directors of the Company. It is this Board which has responsibility for planning, directing and controlling the activities of the Company. Key management personnel compensation is disclosed in the Remuneration Report of the Group.

There were no other material related party transactions.


Notes to the Parent Company Financial Statements (continued)


123

Other Information

126 Shareholder

Information

Other Information

125

Forward Looking Statements

This Annual Report includes forward looking statements with respect to the business, strategy and plans of Bumi and its current goals, assumptions and expectations relating to its future financial condition, performance and results.

By their nature, forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause actual results, performance or achievements of Bumi to be materially different

Warning to shareholders Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless or non-existent, or an inflated price for shares they own. These calls come from fraudsters operating in “boiler rooms” that are mostly based abroad.

While high profits are promised, those who buy or sell shares in this way usually lose their money.

The Financial Services Authority (FSA) has found most share fraud victims are experienced investors who lose an average of £20,000, with around £200m lost in the UK each year.

Protect yourselfIf you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you should take these steps before handing over any money:

1. Get the name of the person and organisation contacting you.2. Check the FSA Register at www.fsa.gov.uk/fsaregister to ensure

they are authorised.

Registered office2nd Floor 4 Grosvenor Place,London SW1X 7HJUnited KingdomTelephone: +44 (0)20 7201 7500

Company website: www.bumiplc.com

Registered in England and Wales: 7460129

Registrars Capita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent BR3 4ZTUnited KingdomEmail: [email protected]

Telephone: +44 (0) 871 664 0300 for UK callersCalls to the above number are charged at 10p per minute plus network extras. Lines are open Monday to Friday from 9am to 5.30pm.

Telephone number from outside the UK: +44 (0) 208 639 3399

If you have any queries regarding your shareholding, please contact the registrars.

SponsorJPMorgan Cazenove Limited20 MoorgateLondon EC2R 6DAUnited Kingdom

Financial CalendarQ1 Interim Management Statement: 10 May 2012Annual General Meeting: 14 June 2012Half Year Results: 9 August 2012Q3 Interim Management Statement: 8 November 2012

Corporate BrokersJPMorgan Cazenove Limited20 MoorgateLondon EC2R 6DAUnited Kingdom

Credit Suisse InternationalOne Cabot SquareLondon E14 4QLUnited Kingdom

BofA Merrill Lynch2 King Edward StreetLondon EC1A 1HQUnited Kingdom

Barclays Capital5 The North ColonnadeCanary WharfLondon E14 4BBUnited Kingdom

AuditorsPricewaterhouseCoopers LLP 1 Embankment Place,London, WC2N 6RHUnited Kingdom

SolicitorsFreshfields Bruckhaus Deringer LLP65 Fleet StreetLondon EC4Y 1HTUnited Kingdom

3. Use the details on the FSA Register to contact the firm.4. Call the FSA Consumer Helpline on 0845 606 1234 if there are no

contact details on the register or you are told they are out of date.5. Search the FSA’s list of unauthorised firms and individuals to avoid

doing business with.6. REMEMBER: if it sounds too good to be true, it probably is.

If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

Report a scamIf you are approached about a share scam you should tell the FSA using the share fraud reporting form at www.fsa.gov.uk/scams, where you can find out about the latest investment scams. You can also call the FSA Consumer Helpline on 0845 606 1234.

If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040.

from any future results, performance or achievements expressed or implied by such forward looking statements.

Shareholders are cautioned not to place undue reliance on the forward looking statements. Except as required by the Listing Rules and applicable law, the Company does not undertake any obligation to update or change any forward looking statements to reflect events occurring after the date of this Annual Report.

Bumi plc | Other InformationAnnual Report 2011126

Shareholder Information

Other Information

127

Bumi plc | Other InformationAnnual Report 2011128

Notes:

Registered office: 2nd Floor, 4 Grosvenor Place London, SW1X 7HJ

Tel: +44 (0)20 7201 7500 Fax: +44 (0)20 7201 7501

Designed and produced by Addison www.addison.co.uk

Printed on Revive 100 White Silk paper and Revive Premium White uncoated paper.These papers have been independently certified according to the rules of the Forest Stewardship Council® (FSC). The inks used are all vegetable oil based.

Printed at Pureprint Group, ISO14001.FSC® certified and CarbonNeutral®.

www.bumiplc.com

Annual Report 2011

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