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Dear Fellow Shareholders,

2015 was a difficult year for our company. The most important story must be the continued weakness in the Indonesia economy and its knock on effects to our Automotive businesses. Combined with poor land sales this year in Bintan, our numbers are not pleasant to see or oversee.

The Indonesia economy continued its hangover from the commodities crash. In addition, the inability of the government to compromise with the opposition, reduced the expected impact of government infrastructure spending on the economy. Finally, the increased cost of living from inflation and currency depreciation has significantly reduced domestic consumption, which had been keeping the Indonesia economy bubbling along over the last few years.

Looking forward, while the commodities markets may not recover soon, we do see the government becoming more adept at compromise, and therefore releasing more spending into the economy in 2016. In addition, we see consumers getting over the shock of a weak currency, and starting to spend again.

Although our debt levels are high, they are still manageable, and we have been able to benefit from a continuing low interest rate environment. Therefore we remain fully committed to our long term strategy and will continue to implement it in the face of these down times, albeit, perhaps at a slightly slower pace, until our results are better or we have reduced our debt levels, or both.


Our reported results from Automotive differ from the results published by our listed subsidiary IMAS primarily because of differing accounting policies. Our company has always carried investment assets including land banks at our historical acquisition cost, without revaluation. This year IMAS had a S$52 million gain from asset revaluation, which to keep consistency with our Singapore accounting policies, we needed to reverse at the Group level.

We believe in the long term strategic benefit of being in the automotive business in Indonesia. The evolution of the motor vehicle market is still in its infancy, with a ratio of 8 motorcycles to 1 car, and only around one car per every 23 people. New tax laws and lower interest rates have reduced the monthly cost of owning a car to around twice that of a motorcycle, which will stimulate migration from two wheeled to four wheeled vehicles. If migration from two wheeled to four wheeled progresses at a very slow rate of 3% per year, it implies around 2.4 million car sales per year, compared to today's 1 million car sales.

IMAS, as the second largest distributor of automobiles in Indonesia, with over 110 owned dealerships, will capture a significant portion of this trend. In addition, IMAS' investments in the finance and service businesses as well as new initiatives in logistics will also provide significant growth drivers to our investment.


The electricity business in Indonesia is also still in growth mode, with an additional 15,000MW required to fill current demand. Our current capacity of 174MW makes us a relatively small player, but the strategic location of our assets in Bintan and Batam provides our business with a strong foundation. Our Utilities business benefitted from increased demand as a result of the new developments in Bintan Resorts and from lower fuel costs, although lower demand from our Industrial Parks' tenants partially offset that. We are working hard to improve our cost structure to become more efficient and profitable, including the construction of a new 30MW in anticipation of additional demand from Bintan Resorts developments as well as to replace some of our old and costly heavy fuel facilities in Bintan. Our water business is operating below optimum levels, but we still believe owning water assets in our strategic locations in Bintan and Batam is a very good long term investment. We are looking at new ways to optimise those investments in the next few years.


Our Industrial Parks business is in the second year of its makeover, and the progress is encouraging. As basic low value manufacturing in Indonesia faces increasing competition from India and Vietnam, we have been reorienting our parks to move up the value chain. Our excellent logistics connection to Singapore as well as the low turnover rate of our Indonesian workers works well for training intensive higher value added manufacturing. We will continue to pursue this refocusing, and believe that the new aviation park located adjacent to our airport will become a leader of this movement in Indonesia. We expect to attract aviation business not only from the rapidly growing domestic market, but also to extend our lower land and labour costs to complement the significant aviation market expertise in Singapore.


Although the numbers reported from our Property Development business this year are not good, the physical results on the ground are quite impressive. With three new hotels opened in 2015 and a large number more scheduled for 2016 and 2017, Lagoi Bay has been transformed, and we are proud of this accomplishment. Interest remains high, and we are confident that we will be able to report significant land sales transactions in 2016 regardless of the weakness of the domestic economy. In addition we are starting to see the symbiotic benefits of our Property Development business in increased revenues in our Utilities and our Resort Operations businesses.


Results from our ferry business and Bintan Resorts business improved on the back of the opening of the new hotels in Lagoi Bay. This helped our Resort Operations business to improve its results in 2015. With additional new hotels coming onstream in 2016 and 2017, we are expecting to see continued improvement in these businesses going forward.

Our company has reported its worst ever results. However, we believe we are well placed to benefit from a recovery in the Indonesia economy. We continue to strongly believe in our long term strategy, and hope that you will continue to support our company into a brighter 2016 and onwards.


Mr Lim Hock San Mr Eugene Park
Non-Executive Chairman
Independent Director
Chief Executive Officer
Executive Director