PT Indosat Tbk (PTITF) 6-K Current report (foreign)

PTIndosat Tbk and Its Subsidiaries

Consolidated financial statementsas of December 31, 2013

and for the year then ended with independent auditors’ report

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013 AND FOR THE YEAR THEN ENDED

WITH INDEPENDENT AUDITORS’ REPORT

Table of Contents

Page

Independent Auditors’ Report

Consolidated Statement of Financial Position

1 - 4

Consolidated Statement of Comprehensive Income

5 - 6

Consolidated Statement of Changes in Equity

7 - 8

Consolidated Statement of Cash Flows

9 - 10

Notes to the Consolidated Financial Statements

11 - 154

Supplementary Information:

Statement ofFinancial Position of the Parent Entity

Appendix 1

Statement of Comprehensive Income of the Parent Entity

Appendix 2

Statement of Change in Equity of the Parent Entity

Appendix 3

Statement of Cash Flows of the Parent Entity

Appendix 4

Notes to the Financial Statements of the Parent Entity

Appendix 5

***************************

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013 AND FOR THE YEAR THEN ENDED

WITH INDEPENDENT AUDITORS’ REPORT

This report is originally issued in the Indonesian language.

Independent Auditors‘ Report

Report No. RPC-5648/PSS/2014

The Stockholders and the Boards of Commissioners and Directors

PT Indosat Tbk.

We have audited the accompanying consolidated financial statements of PT Indosat Tbk. (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statement of financial position as of December 31, 2013, and the consolidated statements of comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of such consolidated financial statements in accordance with Indonesian Financial Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on such consolidated financial statements based on our audit.  We conducted our audit in accordance with Standards on Auditing established by the Indonesian Institute of Certified Public Accountants.  Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether such consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.  In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013 AND FOR THE YEAR THEN ENDED

WITH INDEPENDENT AUDITORS’ REPORT

This report is originally issued in the Indonesian language.

Independent Auditors’ Report (continued)

Report No. RPC-5648/PSS/2014 (continued)

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of PT Indosat Tbk. and its subsidiaries as of December 31, 2013, and their consolidated financial performance and cash flows for the year then ended, in accordance with Indonesian Financial Accounting Standards.

Other matter

Our audit of the accompanying consolidated financial statements of the Group as of December 31, 2013, and for the year then ended, was performed for the purpose of forming an opinion on such consolidated financial statements taken as a whole. The accompanying financial information of the Company (parent entity), which comprises the statement of financial position as of December 31, 2013, and the statements of comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information (collectively referred to as the “Financial Information of the Parent Entity”), which is presented as a supplementary information to the accompanying consolidated financial statements, is presented for the purposes of additional analysis and is not a required part of the accompanying consolidated financial statements under Indonesian Financial Accounting Standards. The Financial Information of the Parent Entity is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the accompanying consolidated financial statements. The Financial Information of the Parent Entity has been subjected to the auditing procedures applied in the audit of the accompanying consolidated financial statements in accordance with Standards on Auditing established by the Indonesian Institute of Certified Public Accountants. In our opinion, the Financial Information of the Parent Entity is fairly stated, in all material respects, in relation to the accompanying consolidated financial statements taken as a whole.

Purwantono, Suherman & Surja

Roy Iman Wirahardja, CPA

Public Accountant Registration No. AP.0699

April24, 2014

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

1

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of December 31, 2013

(Expressed in millions of rupiah, except share data)

				Notes	December 31, 2013	December 31, 2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents				2d,2n,2s	2,233,532	3,917,236
				4,21,31,38
Accounts receivable				2n,21
	Trade			5
		Related parties - net of
			allowance for impairment
			of Rp24,316 as of
			December 31, 2013	2s,2t,31,33j,
			(2012: Rp42,632)	33m,38	632,203	574,650
		Third parties - net of
			allowance for impairment
			of Rp497,090 as of
			December 31, 2013
			(2012: Rp521,998)		1,636,136	1,464,069
	Others - net of allowance
		for impairment of
		Rp35,388 as of
		December 31, 2013
		(2012: Rp18,748)		8, 38	16,294	22,441
Inventories - net of allowance
	for decline in value of
	Rp13,213 as of
	December 31, 2013
	(2012: Rp14,613)			2e	36,004	52,556
Derivative assets				2n,20,21,38	195,569	69,654
Advances				33j,33m	34,867	36,057
Prepaid taxes				2p,6	218,749	294,343
Prepaid frequency fee and licenses				2f,2j	1,757,586	1,528,215
Prepaid expenses - others				2f,2j,2m,2s,
				30,31	373,220	335,815
Other current financial assets - net				2d,2n,2s,7,
				21,31,38	31,673	13,382
Other current assets					3,184	392
Total Current Assets					7,169,017	8,308,810

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

2

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION(continued)

As of December 31, 2013

(Expressed in millions of rupiah, except share data)

		Notes	December 31, 2013	December 31, 2012
NON-CURRENT ASSETS
Due from related parties - net of
	allowance for impairment
	of Rp15	2n,2s,21,31,38	7,167	10,358
Deferred tax assets - net		2p,16	96,057	100,693
Property and equipment - net		2h,2i,2j,2l,8,
		26,33k	42,190,111	41,964,793
Goodwill and other
	intangible assets - net	2c,2i,9	1,362,600	1,373,707
Long-term prepaid rentals -
	net of current portion	2f,2s,10,31	810,354	755,237
Long-term prepaid licenses -
	net of current portion	2f	200,186	266,027
Long-term advances		11,30,33j,33m	92,162	40,994
Long-term prepaid pension - net
	of current portion	2m,2s,30,31	81,826	88,845
Long-term receivables		2n	12,838	17,959
Other non-current financial		2d,2n,2s,2t,12,
	assets - net	21,31,33j,33m,38	1,557,367	1,543,140
Other non-current assets - net		2g,2p,2s,
		13,16,31	941,206	754,498
Total Non-current Assets			47,351,874	46,916,251
TOTAL ASSETS			54,520,891	55,225,061

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

3

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION(continued)

As of December 31, 2013

(Expressed in millions of rupiah, except share data)

		Notes	December 31, 2013	December 31, 2012
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loan		2n,2s,14,21,
		31,38	1,499,849	299,529
Accounts payable - trade		2n,2s,21,31,38
	Related parties		47,603	22,650
	Third parties		291,707	209,087
Procurement payable		2n,2s,15,21,31,38	3,064,287	2,737,850
Taxes payable		2p,16	89,260	95,599
Accrued expenses		2m,2n,2s,17,21,30,31,38	2,107,467	1,961,285
Unearned income		2k,33n	922,403	1,073,088
Deposits from customers		2n,21,38	49,335	43,825
Derivative liabilities		2n,20,21,38	36,903	81,241
Current maturities of:
	Loans payable	2n,18,21,38	2,443,367	2,669,218
	Bonds payable	2n,19,21,38	2,356,310	1,329,175
Other current financial		2j,2n,2s,21,
	liabilities	31,33o,38	362,448	289,164
Other current liabilities		2s,29	223,498	204,040
Total Current Liabilities			13,494,437	11,015,751
NON-CURRENT LIABILITIES
Due to related parties		2n,2s,21,31,38	33,301	42,789
Obligations under finance lease -
	net of current maturities	2j,2n,21,33o,38	3,594,112	3,101,910
Deferred tax liabilities - net		2p,16	893,285	1,684,270
Loans payable - net of current
	maturities	2n,18,21,38	4,345,267	3,703,822
Bonds payable - net of current
	maturities	2n,19,21,38	13,285,207	13,986,507
Employee benefit obligations -
	net of current portion	2m,22	1,046,414	926,224
Other non-current financial         liabilities		2j,2n,21,38	82,855	69,273
Other non-current liabilities		29,38	1,228,415	1,299,131
Total Non-current Liabilities			24,508,856	24,813,926
TOTAL LIABILITIES			38,003,293	35,829,677

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

4

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION(continued)

As of December 31, 2013

(Expressed in millions of rupiah, except share data)

			Notes	December 31, 2013	December 31, 2012
EQUITY
EQUITY ATTRIBUTABLE TO
OWNERS OF THE COMPANY
Capital stock - Rp100 par value
	per A share and B share
	Authorized - 1 A share and
		19,999,999,999 B shares
	Issued and fully paid - 1 A share
		and 5,433,933,499 B shares	23	543,393	543,393
Premium on capital stock				1,546,587	1,546,587
Retained earnings
	Appropriated			134,446	134,446
	Unappropriated			12,877,143	15,846,721
Difference in transactions of
	equity changes in associated
	companies/subsidiaries		2b,2g	404,104	404,104
Difference in foreign currency
	translation		2b,2o	(5,210)	(3,600)
Unrealized changes in fair value of
	available-for-sale investment		12a	413,700	389,718
Total Equity Attributable to
	Owners of the Company			15,914,163	18,861,369
Non-controlling Interests			2b	603,435	534,015
TOTAL EQUITY				16,517,598	19,395,384
TOTAL LIABILITIES AND EQUITY				54,520,891	55,225,061

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

5

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2013

 (Expressed in millions of rupiah, except share data)

			Year ended December 31
		Notes	2013	2012
REVENUES		2j,2k,2s,24,31
		35,36,37
Cellular			19,374,638	18,489,329
Multimedia, Data Communication,
	Internet ("MIDI")	2t,33j,33m	3,265,847	2,908,033
Fixed telecommunications			1,214,787	1,021,450
Total Revenues			23,855,272	22,418,812
EXPENSES (INCOME)
Cost of services		2k,2s,25,31,33p
		33s,36,37	9,956,533	8,905,736
Depreciation and amortization		2h,2j,8,9,37	8,958,393	8,272,824
Personnel		2l,2m,2s,26,30, 31,37	1,727,594	1,427,194
General and administration		2k,2s,27,31,33h,37	901,534	625,540
Marketing		2k,2s,31,37	893,574	920,296
Gain on foreign exchange - net		2n,2o,5,8
		12,20,37	(224,518)	(44,793)
Gain on tower sale (including
	amortization of deferred gain on sale
	and leaseback of towers)	29,37	(141,050)	(1,183,963)
Others - net		6,8,12,13,16,37	273,996	306,080
Net Expenses			22,346,056	19,228,914
OPERATING PROFIT			1,509,216	3,189,898
Gain on change in fair value
	of derivatives - net	2n,20,37	273,259	4,964
Interest income		2s,31,37	107,193	133,544
Loss on foreign exchange - net		2n,2o,5,37	(3,011,410)	(789,438)
Financing cost		2j,2s,2t,14,18,19
		28,31,33o,37	(2,212,095)	(2,077,350)
Other Expenses - Net			(4,843,053)	(2,728,280)
PROFIT (LOSS) BEFORE INCOME TAX			(3,333,837)	461,618
INCOME TAX BENEFIT (EXPENSE)		2p,16,37
Current			(118,156)	(234,429)
Deferred			785,534	260,227
Income Tax Benefit - Net			667,378	25,798
PROFIT (LOSS) FOR THE YEAR			(2,666,459)	487,416

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

6

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)

For the Year Ended December 31, 2013

(Expressed in millions of rupiah, except share data)

			Year ended December 31
		Notes	2013	2012
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized changes in fair value of available-
	for-sale investment	12	23,982	389,718
Difference in foreign currency translation		2b,20	226	(36)
Income tax effect			(1,836)	(1,238)
Net			22,372	388,444
NET COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR			(2,644,087)	875,860
PROFIT (LOSS) FOR THE YEAR
ATTRIBUTABLE TO:
	Owners of the Company		(2,781,999)	375,106
	Non-controlling Interests	2b	115,540	112,310
	Net		(2,666,459)	487,416
OTHER COMPREHENSIVE INCOME -
NET OF TAX ATTRIBUTABLE TO:
	Owners of the Company		22,372	388,444
	Non-controlling Interests	2b	-	-
	Total		22,372	388,444
NET COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ATTRIBUTABLE TO:
	Owners of the Company		(2,759,627)	763,550
	Non-controlling Interests		115,540	112,310
	Net		(2,644,087)	875,860
BASIC AND DILUTED EARNINGS (LOSS) PER  SHARE ATTRIBUTABLE TO OWNERS
OF THE COMPANY		2r,23	(511.97)	69.03
BASIC AND DILUTED EARNINGS (LOSS)
PER ADS (50 SHARES PER ADS)
ATTRIBUTABLE TO OWNERS
OF THE COMPANY		2r,23	(25,598.39)	3,451.51

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

7

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Year Ended December 31, 2013

 (Expressed in millions of rupiah)

			Equity Attributable to Owners of the Company
									Unrealized
									Changes in
			Capital				Difference in	Difference	Fair Value of
			Stock -	Premium			Transactions of Equity	in Foreign	Available-for		Non-
			Issued and	on Capital	Retained Earnings		Changes in Associated	Currency	-Sale		controlling
Description		Notes	Fully Paid	Stock	Appropriated	Unappropriated	Companies/Subsidiaries	Translation	Investment	Total	Interests	Total Equity
Balance as of January 1, 2012			543,393	1,546,587	134,446	15,889,104	404,104	(2,326)	-	18,515,308	453,792	18,969,100
Difference in foreign currency translation arising from the
	translation of the financial statements of Indosat Finance
	Company B. V. and Indosat International Finance
	Company B.V. from euro to rupiah - net of applicable
	income tax expense of Rp460 and Rp180, respectively	2b	-	-	-	-	-	(1,274)	-	(1,274)	-	(1,274)
Unrealized change in fair value of available-for-sale investment		12	-	-	-	-	-	-	389,718	389,718	-	389,718
Resolution during the Annual Stockholders' General Meeting on
	May 14, 2012
	Declaration of cash dividend	32	-	-	-	(417,489)	-	-	-	(417,489)	-	(417,489)
Profit for the year			-	-	-	375,106	-	-	-	375,106	112,310	487,416
Changes in non-controlling interests			-	-	-	-	-	-	-	-	(32,087)	(32,087)
Balance as of December 31, 2012			543,393	1,546,587	134,446	15,846,721	404,104	(3,600)	389,718	18,861,369	534,015	19,395,384

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

8

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Year Ended December 31, 2013

 (Expressed in millions of rupiah)

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

9

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

For the Year Ended December 31, 2013

 (Expressed in millions of rupiah)

			Equity Attributable to Owners of the Company
									Unrealized
									Changes in
			Capital				Difference in	Difference	Fair Value of
			Stock -	Premium			Transactions of Equity	in Foreign	Available-for		Non-
			Issued and	on Capital	Retained Earnings		Changes in Associated	Currency	-Sale		controlling
Description		Notes	Fully Paid	Stock	Appropriated	Unappropriated	Companies/Subsidiaries	Translation	Investment	Total	Interests	Total Equity
Balance as of January 1, 2013			543,393	1,546,587	134,446	15,846,721	404,104	(3,600)	389,718	18,861,369	534,015	19,395,384
Difference in foreign currency arising from the translation of
	the financial statements of Indosat Finance Company B. V. and
	Indosat International Finance Company B. V. from euro to rupiah -
	net of applicable income tax expense of Rp1,211 and Rp470,
	respectively	2b	-	-	-	-	-	(1,610)	-	(1,610)	-	(1,610)
Unrealized changes in fair value of available-for-sale
	investment	12	-	-	-	-	-	-	23,982	23,982	-	23,982
Resolution during the Annual Stockholders' General Meeting on
	June 18, 2013
	Declaration of cash dividend	32	-	-	-	(187,579)	-	-	-	(187,579)	-	(187,579)
Profit (loss) for the year			-	-	-	(2,781,999)	-	-	-	(2,781,999)	115,540	(2,666,459)
Changes in non-controlling interests			-	-	-	-	-	-	-	-	(46,120)	(46,120)
Balance as of December 31, 2013			543,393	1,546,587	134,446	12,877,143	404,104	(5,210)	413,700	15,914,163	603,435	16,517,598

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

10

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2013

 (Expressed in millions of rupiah)

			Year ended December 31
		Notes	2013	2012
CASH FLOW FROM OPERATING ACTIVITIES
Cash received from:
	Customers		23,288,619	21,960,377
	Refunds of taxes	6,13	352,444	179,478
	Settlement from currency forward contracts	20v-eu	134,477	116,147
	Interest income		109,626	131,804
	Settlement from currency swap contracts	20a-i	26,149	34,410
Cash paid to/for:
	Authorities, other operators, suppliers and others		(11,563,977)	(11,607,302)
	Financing cost		(2,145,722)	(2,026,450)
	Employees		(1,443,524)	(1,252,470)
	Income taxes		(311,134)	(424,538)
	Settlement from interest rate swap contracts	20l-u	(32,000)	-
	Interest rate swap contracts	20j-u	(17,853)	(82,306)
	Swap cost from cross currency swap contracts	20a-i	(3,926)	(39,697)
Net Cash Provided by Operating Activities			8,393,179	6,989,453
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment		8,29	208,024	3,100,109
Cash dividend received from other long-term investment		12	53,141	-
Acquisitions of property and equipment		8	(9,322,410)	(5,765,942)
Acquisitions of intangible assets		9	(6,732)	(23,073)
Net Cash Used in Investing Activities			(9,067,977)	(2,688,906)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term loans		18	2,950,000	1,700,000
Proceeds from short-term loan		14	1,300,000	700,000
Decrease in restricted cash and cash equivalents			15,801	-
Repayment of long-term loans		18	(3,366,200)	(5,455,925)
Payment of bonds payable		19	(1,330,000)	(241,989)
Cash dividend paid by the Company		32	(187,579)	(417,489)
Repayment of short-term loan		14	(100,000)	(1,900,000)
Cash dividend paid by subsidiaries to non-controlling
	interests		(31,945)	(32,085)
Proceeds from bonds payable		19	-	3,000,000
Net Cash Used in Financing Activities			(749,923)	(2,647,488)
Net Foreign Exchange Differences
	from Cash and Cash Equivalents		(221,260)	39,971
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS			(1,645,981)	1,693,030
CASH AND CASH EQUIVALENTS
OF LIQUIDATED SUBSIDIARIES		1d	(37,723)	-
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR			3,917,236	2,224,206
CASH AND CASH EQUIVALENTS
AT END OF YEAR		4	2,233,532	3,917,236

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

11

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

For the Year Ended December 31, 2013

 (Expressed in millions of rupiah)

			Year ended December 31
		Notes	2013	2012
DETAILS OF CASH AND CASH EQUIVALENTS:		4
Time deposits with original maturities of three months or less and deposits on call			1,869,203	3,493,467
Cash on hand and in banks			364,329	423,769
Cash and cash equivalents as stated
	in the consolidated statement
	of financial position		2,233,532	3,917,236

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL

a.

Company’s Establishment

PT Indosat Tbk (“the Company”) was established in the Republic of Indonesia on November 10, 1967 within the framework of the Indonesian Foreign Investment Law No. 1 of 1967 based on the notarial deed No. 55 of Mohamad Said Tadjoedin, S.H. The deed of establishment was published in Supplement No. 24 of State Gazette No. 26 dated March 29, 1968 of the Republic of Indonesia. In 1980, the Company was sold by American Cable and Radio Corporation, an International Telephone & Telegraph subsidiary, to the Government of the Republic of Indonesia (“the Government”) and became a State-owned Company (Persero).

On February 7, 2003, the Company received the approval from the Capital Investment Coordinating Board (“BKPM”) in its letter No. 14/V/PMA/2003 for the change of its legal status from a State-owned Company (Persero) to a Foreign Capital Investment Company. Subsequently, on March 21, 2003, the Company received the approval from the Ministry of Justice and Human Rights of the Republic of Indonesia on the amendment of its Articles of Association to reflect the change in its legal status.

The Company’s Articles of Association has been amended from time to time. The latest amendment was covered by notarial deed No. 123 dated January 28, 2010 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.), as approved in the Stockholders’ Extraordinary General Meeting held on January 28, 2010, in order to comply with the Indonesian Capital Market and Financial Institutions Supervisory Agency (“BAPEPAM-LK”) Rule No. IX.J.1 dated May 14, 2008 on the Principles of Articles of Association of Limited Liability Companies that Conduct Public Offering of Equity Securities and Public Companies and Rule No. IX.E.1 on Affiliate Transactions and Certain Conflict of Interests Transactions. The latest amendment of the Company’s Articles of Association has been reported to, and approvedby, the Ministry of Law and Human Rights of the Republic of Indonesia based on its letters No. AHU-09555.AH.01.02 Year 2010 dated      February 22, 2010 and No. AHU-AH.01.10-04964 dated February 25, 2010. The latest amendment relates to, among other matters, the changes in the Company’s purposes, objectives and business activities, appointment of acting President Director if the incumbent President Director is unavailable, requirement of Board of Directors’ meetings and definition of conflict of interests.    

According to article 3 of its Articles of Association, the Company’s purposes and objectives are
to provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by carrying out the following main business activities:

a.

To provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services, including but not limited to providing basic telephony services, multimedia services, internet telephony services, network access point service, internet services, mobile telecommunications networks and fixed telecommunications networks; and

b.

To engage in payment transactions and money transfer services through telecommunications networks as well as information technology and/or convergence technology.

The Company can provide supporting business activities in order to achieve the purposes and objectives, and to support its main businesses, as follows:

a.

To plan, to procure, to modify, to build, to provide, to develop, to operate, to lease, to rent, and to maintain infrastructures/facilities including resources to support the Company’s business in providing telecommunications networks, telecommunications services as well as information technology and/or  convergence technology services;

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

a.

Company’s Establishment (continued)

b.

To conduct business and operating activities (including development, marketing and sales of telecommunications networks, telecommunications services as well as information technology and/or  convergence technology services by the Company), including research, customer services, education and courses (both domestic and overseas); and

c.

To conduct other activities necessary to support and/or related to the provision of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services including, but not limited to, electronic transactions and provision of hardware, software, content as well as telecommunications-managed services.    

The Company started its commercial operations in 1969.

For the year ended December 31, 2013, the Company had performed all main and supporting business activities as stated in its Articles of Association.

Based on Law No. 3 of 1989 on Telecommunications and pursuant to Government Regulation No. 77 of 1991, the Company had been re-confirmed as an Operating Body (“Badan Penyelenggara”) that provided international telecommunications services under the authority of the Government.

In 1999, the Government issued Law No. 36 on Telecommunications (“Telecommunications Law”) which took effect on September 8, 2000. Under the Telecommunications Law, telecommunications activities cover:

·

Telecommunications networks

·

Telecommunications services

·

Special telecommunications services

National state-owned companies, regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunications networks and services. Individuals, government institutions and legal entities, other than telecommunications networks and service providers, are allowed to render special telecommunications services.

The Telecommunications Law prohibits activities that result in monopolistic practices and unhealthy competition and expects to pave the way for market liberalization.

Based on the Telecommunications Law, the Company ceased as an Operating Body and has to obtain licenses from the Government for the Company to engage in the provision of specific telecommunications networks and services.

On August 14, 2000, the Government, through the Ministry of Communications (“MOC”), granted the Company an in-principle license as a nationwide Digital Communication System (“DCS”)  1800 telecommunications provider as compensation for the early termination of the exclusivity rights on international telecommunications services given to the Company prior to the granting of such license effective August 1, 2003. On August 23, 2001, the Company obtained the operating license from the MOC. Subsequently, based on Decree No. KP.247 dated November 6, 2001 issued by the MOC, the operating license was transferred to the Company’s subsidiary, PT Indosat Multi Media Mobile (see “e” below).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

a.

Company’s Establishment (continued)

On September 7, 2000, the Government, through the MOC, also granted the Company in-principle licenses for local and domestic long-distance telecommunications services as compensation for the termination of its exclusivity rights on international telecommunications services. On the other hand, PT Telekomunikasi Indonesia Tbk (“Telkom”) was granted an in- principle license for international telecommunications services as compensation for the early termination of Telkom’s rights on local and domestic long-distance telecommunications services.

Based on a letter dated August 1, 2002 from the MOC, the Company was granted an operating license for fixed local telecommunications network covering Jakarta and Surabaya. This operating license was converted to become a national license on April 17, 2003 based on Decree No. KP.130 Year 2003 of the MOC. The values of the above licenses granted to Telkom and the Company on the termination of their exclusive rights on local/domestic and international telecommunications services, respectively, have been determined by an independent appraiser.

The following are operating licenses obtained by the Company and PT Indosat Mega Media,
a subsidiary:

License No.	Date Issued	Issuing Body	Period of	Description
			License
19/KEP/M.KOMINFO/	February 14, 2006	Ministry of	10 years	Determination of the winner and operating license for IMT-2000 cellular network provider using 2.1 GHz radio frequency spectrum (a third generation ["3G"] mobile communications technology) for 1 block (2 x 5 Mhz) of  frequency (*)
02/2006 and	and March 27, 2006	Communications and
29/KEP/M.KOMINFO/		Information
03/2006		Technology
		("MOCIT")
504/KEP/M.KOMINFO/	August 31, 2012	MOCIT	Evaluated	Amended Indosat's Mobile Celluler License which allows Indosat to deploy 3rd Generation Partnership Project (3G system) at 900 MHz spectrum band. The Ministerial Decree replaces Indosat's previous licenses No. 252/KEP/M.KOMINFO/07/2011 and No. 102/KEP/M.KOMINFO/10/2006
08/2012			every
			5 years
460/M.KOMINFO/12/	December 7, 2011	MOCIT	Satellite end	Approval for Indonesian Satellite to utilize Orbital Slot 150.5o (**)
2011			of life
252/KEP/	July 6, 2011	MOCIT	Evaluated	Amended  operating license for  nationwide GSM cellular mobile network (including its basic telephony services and the rights and obligations relating to 3G services), which replaces the previous license No. 102/KEP/M.KOMINFO/10/2006 dated October 11, 2006
M.KOMINFO/07/2011			every
(previously			5 years
102/KEP/M.KOMINFO/
10/2006)
181/KEP/M.KOMINFO/	December 12, 2006	MOCIT	-	Allocation of two nationwide frequency channels, i.e., channels 589 and 630 in the 800 MHz spectrum for Local Fixed Wireless Network Services with Limited Mobility
12/2006
01/DIRJEN/2008	January 7, 2008	Directorate General	Evaluated	Operating license as internet service provider (***)
		of Post and	every
		Telecommunications	5 years
		("DGPT")
51/DIRJEN/2008	January 9, 2008	DGPT	Evaluated	Operating license for internet interconnection services (Network Access Point/NAP), which replaces the previous license given to PT Satelit Palapa Indonesia ("Satelindo") (***)
			every
			5 years
(*)    As one of the winners in the selection of IMT-2000 cellular providers, the Company was obliged to, among others, pay upfront fee of Rp320,000 (Note 3a)and  radio frequency fee (Note 33p).
(**) On September 19, 2013, the  MOCIT issued letter No. 838/KOMINFO/DJSDPPI.2/SP.01/09/2013 regarding the Government’s plan to retrieve the Company’s license to utilize Orbital Slot 150.5o. The Company has replied to the letter on September 30, 2013 describing the Company’s plan to construct Palapa E Satellite to fillup the Orbital Slot 150.5o (Note 33d). As ofDecember 31, 2013, the Company has not received any response from the MOCIT (Note 40n). (***) As of December 31, 2013, the Company is still in the process of extending the expiration date of these licenses.

1.

GENERAL (continued)

a.

Company’s Establishment (continued)

License No.	Date Issued	Issuing Body	Period of	Description
			License
52/DIRJEN/2008	January 9, 2008	DGPT	Evaluated	Operating license for telephony internet services which replaces the previous license No. 823/DIRJEN/2002 for Voice over Internet Protocol Service with national coverage that expired in 2007 (***)
			every
			5 years
237/KEP/M.KOMINFO/	July 27, 2009	MOCIT	10 years	Operating license for "Packet Switched" local fixed  telecommunications network using 2.3 GHZ radio frequency spectrum of Broadband Wireless Access (BWA) (****)
7/2009
268/KEP/M.KOMINFO/	September 1, 2009	MOCIT	10 years	Operating licenses for one additional block (2 x 5 Mhz) of 3G  frequency (*****)
9/2009
198/KEP/M.KOMINFO/	May 27, 2010	MOCIT	Evaluated	Amended operating license for nationwide closed fixed communications network (e.g.,VSAT, frame relay, etc.), which replaces the  previous license No.KP.69/Thn 2004 given to the Company
05/2010			every
			5 years
311/KEP/M.KOMINFO/	August 24, 2010	MOCIT	Evaluated	Amended operating license for fixed network and basic telephony service which covers the provision of local, national long-distance, and international long-distance telephony services, which replaces the previous license No. KP.203/Thn 2004 given to the Company
8/2010			every
312/KEP/M.KOMINFO/			5 years
8/2010
and
313/KEP/M.KOMINFO/
8/2010
(****)   PT Indosat Mega Media was obliged to, among others, pay upfront fee of Rp18,408 (Note 3a) and radio frequency fee (Note 33p).
(*****) The Company was obliged to, among others, pay upfront fee of Rp320,000 (Note 3a) and  radio frequency fee (Note 33p).

On January 9, 2008, based on letter No. 10/14/DASP from Bank Indonesia (Central Bank), the Company obtained approval for“Indosat m-wallet” prepaid cards as a new means of making payments to certain merchants. The Company was also appointed as a special principal and technical acquirer for such prepaid cards. On November 19, 2009, the Company launched“Indosat m-wallet”to the public.

On March 17, 2008, the MOCIT issued Ministerial Decree No. 02/PER/M.KOMINFO/2008 on the Guidelines of Construction and Utilization of Sharing Telecommunications Towers. Based on this Decree, the construction of telecommunications towers requires permits from the relevant governmental institution and the local government determines the placement of the towers and the location in which the towers can be constructed. Furthermore, a telecommunications provider or tower provider which owns telecommunications towers is obliged to allow other telecommunications operators to utilize its telecommunications towers without any discrimination. The Decree also mandated that each of the tower contractor, provider and owner be 100% locally owned companies.

On March 30, 2009, the Ministry of Domestic Affairs, Ministry of Public Works, MOCIT and Head of BKPM jointly issued Decrees No. 18 Year 2009, No. 07/PRT/M/2009, No. 19/PER/M.KOMINFO/03/09 and No. 3/P/2009, respectively, on the Detailed Guidelines of Construction and Utilization of Sharing Telecommunications Towers. The Decrees define the requirements and procedures for tower construction. A tower provider can be either a telecommunications operator or a non-telecommunications operator. If a tower provider is a non-telecommunications operator, it is required to be a 100% locally owned company.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

a.

Company’s Establishment (continued)

On September 3, 2010, based on letter No. 12/67/DASP/25 from Bank Indonesia (Central Bank), the Company obtained approval to become a “money remittance provider”to customers in the local and international markets.

On December 13, 2010, based on letter No. 2619/BSN/D3-d3/12/2010 from the Badan Standardisasi Nasional (National Standardization Bureau), the Company obtained Issuer Identification Number (IIN) on its applications for“Indosat m-wallet” and“money remittance”. On March 23, 2011, the President of the Republic of Indonesia issued Regulation orPeraturan Pemerintah (“PP”) No. 3 year 2011 regarding money remittance. This regulation becomes the operational guidance for the Company as a “money remittance provider”.

The Company is domiciled at Jalan Medan Merdeka Barat No. 21, Jakarta and has 3 regional offices located in Jakarta, Medan and Balikpapan.

Ooredoo QSC, Qatar (previously Qatar Telecom QSC) (“Ooredoo”) is the ultimate parent company of the Company and subsidiaries. The immediate parent company of the Company is Ooredoo Asia Pte. Ltd., previously Qatar Telecom (Qtel Asia) Pte. Ltd., Singapore.

b.

Company’s Public Offerings

On September 23, 1994, the Company obtained the effective statement from the Capital Market Supervisory Agency (“BAPEPAM”) to conduct the initial public offering in the Jakarta Stock Exchange through BAPEPAM Letter No S-1656/PM/1994 and in the New York Stock Exchange of its 362,425,000 B shares, consisting of 22,510,870 American Depositary Shares (ADS, each representing 10 B Shares) and 103,550,000 B shares from the divestment of the B shares owned by the Government. The Company’s B Shares have been registered in the Indonesia Stock Exchange (new entity after the merger of the Jakarta Stock Exchange and the Surabaya Stock Exchange in November 2007) since October 19, 1994, while the Company’s ADS were registered in the New York Stock Exchange from October 19, 1994 until May 17, 2013.

Based on a resolution at the Company’s Extraordinary General Meeting held on March 8, 2004, the stockholders approved to split the nominal value of the Company’s B shares from Rp500 to Rp100 resulting in the increase in the number of authorized shares from 4,000,000,000 to 20,000,000,000 shares and in the number of issued and fully paid shares from 1,035,500,000 to 5,177,500,000 shares.

During the period August 1, 2004 to December 31, 2006, the Company had issued additional 256,433,500 B shares in connection with the exercise of its Employee Stock Option Program (“ESOP”) Phase I and II. The ESOP program was approved in the Company’s Stockholders’ Annual General Meeting held on June 26, 2003.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

a.

Company’s Public Offerings (continued)

As of December 31, 2013, the outstanding bonds issued to the public by the Company and a subsidiary are as follows:

Bond (Note 19)	Effective Date	Traded on:
1.   Fifth Indosat Bonds in Year 2007 with Fixed	May 29, 2007	Indonesia Stock Exchange
Rates
2.   Indosat Sukuk Ijarah II in Year 2007	May 29, 2007	Indonesia Stock Exchange
3.   Sixth Indosat Bonds in Year 2008 with Fixed	April 9, 2008	Indonesia Stock Exchange
Rates
4.   Indosat Sukuk Ijarah III in Year 2008	April 9, 2008	Indonesia Stock Exchange
5.   Seventh Indosat Bonds in Year 2009 with	December 8, 2009	Indonesia Stock Exchange
Fixed Rates
6.   Indosat Sukuk Ijarah IV in Year 2009	December 8, 2009	Indonesia Stock Exchange
7.   Guaranteed Notes Due 2020	July 29, 2010	Singapore Exchange Securities Trading Limited
8.   Eighth Indosat Bonds in Year 2012	June 27, 2012	Indonesia Stock Exchange
9. Indosat Sukuk Ijarah V in Year 2012	June 27, 2012	Indonesia Stock Exchange

c.

Directors, Commissioners and Audit Committee

Based on resolutions at the Stockholders’ Annual General Meeting and the Stockholders’ Extraordinary General Meetings held on June 18, 2013 and September 17, 2012 which are notarized under Deeds No. 84 and No. 5 of Aryanti Artisari S.H., M.Kn., respectively, on the same dates, the composition of the Company’s Board of Commissioners and Board of Directors as of December 31,2013 and 2012, respectively, is as follows:

	December 31,
	2013			2012
Board of Commissioners:
President Commissioner	H.E Sheikh Abdulla		H.E Sheikh Abdulla
		Mohammed S.A. Al  Thani		Mohammed S.A. Al  Thani
Commissioner	Dr. Nasser Mohammed		Dr. Nasser Mohammed
		Marafih		Marafih
Commissioner	Rachmad Gobel		Rachmad Gobel
Commissioner	Richard Farnsworth		Richard Farnsworth
		Seney*		Seney*
Commissioner	Rionald Silaban		Rionald Silaban
Commissioner	Rudiantara*		Rudiantara*
Commissioner	Chris Kanter*		Chris Kanter*
Commissioner	Cynthia Alison		Thia Peng Heok
		Gordon**		George*
Commissioner	Soeprapto*		Soeprapto*
Commissioner	Beny Roelyawan		Beny Roelyawan

*

Independent Commissioner

**

Based on the resolution at the Company’s Stockholders’ Annual General Meeting (“SAGM”) held on June 18, 2013, Mrs. Cynthia Alison Gordon was appointed as Commissioner to replace Mr. Thia Peng Heok George, effective on the same date.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

a.

Directors, Commissioners and Audit Committee (continued)

December 31,

			2013		2012
Board of Directors:
President Director and Chief Executive Officer		Alexander Rusli		Alexander Rusli
Director and Chief Financial Officer		Curt Stefan Carlsson		Curt Stefan Carlsson
Director and Chief Commercial Officer		-		Frederik Johannes Meijer
Director and Chief Technology Officer		-		Hans Christiaan Moritz*
Director and Chief Wholesale and		Fadzri Sentosa		Fadzri Sentosa
	Enterprise Officer  (previously Director and Chief Wholesale and Infrastructure Officer)

*

Mr. Hans Christiaan Moritz submitted his resignation letter to the Board of Directors and Board of Commissioners on August 31, 2013. Based on Article 16 paragraphs 6 and 7 of the Company’s Articles of Association, among other things, it is stated that in the event that the Company does not convene the SAGM within a period of 60 days after the acceptance ofMr. Hans Christiaan Moritz’s resignation letter, then by the lapse of such period, the resignation of Mr. Hans Christiaan Moritz will become valid without the approval of the SAGM. As of December 31, 2013, the resignation of Mr. Hans Christiaan Moritz has become effectiveafter the lapse of 60 days from the date of acceptance of his resignation letter.

The composition of the Company’s Audit Committee as of December 31, 2013 and 2012, is as follows:

	December 31,
	2013	2012
Chairman	Richard Farnsworth Seney*	Thia Peng Heok George
Member	Chris Kanter	Chris Kanter
Member	Rudiantara*	Richard Farnsworth Seney
Member	Unggul Saut Marupa	Unggul Saut Marupa
	Tampubolon	Tampubolon
Member	Kanaka Puradiredja	Kanaka Puradiredja

*

Based ona resolution at the Company’s SAGM held on June 18, 2013, Mr. Thia Peng Heok George was no longer a member of the Company’s Board of Commissioners. Based on a resolution at the Board of Commissioners’ meeting held on June 18, 2013, the Board of Commissioners agreed to appoint Mr. Richard Farnsworth Seney as Audit Committee Chairman to replace Mr. Thia Peng Heok George and Mr. Rudiantara as a member of the Audit Committee.

The Company and subsidiaries (collectively referred to hereafter as “the Group”) has approximately 4,200 and 4,540employees (unaudited), including non-permanent employees, as of December 31, 2013 and 2012, respectively.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

d.

Structure of the Company’s Subsidiaries

As of December 31, 2013 and 2012, the Company has direct and indirect ownership in the following Subsidiaries:

						Percentage of  Ownership (%) as of December 31, 2012
				Start of	Percentage of
				Commercial	Ownership (%) as of
Name of Subsidiary		Location	Principal Activity	Operations	December 31, 2013
Indosat Palapa Company		Amsterdam	Finance	2010	100.00	100.00
	B.V. (“IPBV”)(1)
Indosat Mentari Company		Amsterdam	Finance	2010	100.00	100.00
	B.V. (“IMBV”)(1)
Indosat Finance Company		Amsterdam	Finance	2003	-	100.00
	B.V. (“IFB”) (4)
Indosat International		Amsterdam	Finance	2005	-	100.00
	Finance Company B.V.
	(“IIFB”) (4)
Indosat Singapore Pte.		Singapore	Telecommunication	2005	100.00	100.00
	Ltd. (“ISPL”)
PT Indosat Mega Media		Jakarta	Multimedia	2001	99.85	99.85
	(“IMM”)
PT Interactive Vision		Jakarta	Pay TV	-	99.83	99.83
	Media (“IVM”)(2)
PT Starone Mitra		Semarang	Telecommunication	2006	84.08	72.54
	Telekomunikasi
	(“SMT”) (5)
PT Aplikanusa Lintasarta		Jakarta	Data	1989	72.36	72.36
	(“Lintasarta”)		Communication
PT Lintas Media Danawa		Jakarta	Information and	2008	50.65	50.65
	(“LMD”)(3)		Communication
			Services
PT Artajasa Pembayaran		Jakarta	Telecommunication	2000	39.80	39.80
	Elektronis (“APE”)(3)

	Total Assets (Before Eliminations)
	December 31,
Name of Subsidiary	2013	2012
IPBV(1)	8,128,654	6,442,367
IMBV(1)	8,120,891	6,436,524
IFB(4)	-	21,963
IIFB(4)	-	8,853
ISPL	116,223	99,519
IMM	854,428	813,308
IVM(2)	5,681	5,448
SMT(5)	236,781	250,856
Lintasarta	2,204,471	2,041,724
LMD(3)	7,332	4,026
APE(3)	435,088	371,603

(1)

IPBV and IMBV were incorporated in Amsterdam on April 28, 2010 to engage in treasury activities, to lend and borrow money, whether in the form of securities or otherwise, to finance enterprises and companies, and to grant security in respect of their respective obligations or those of their group companies and third parties.

⁽²⁾

IVM, a subsidiary of IMM, was established on April 21, 2009 to engage in Pay TV services. IMM made capital injections to IVM on March 9 and 30, 2011 totaling Rp4,999. On July 12, 2011, IVM obtained the license to conduct its Pay TV services. However, as of December 31, 2013, IVM has not started its commercial operations.

⁽³⁾

Lintasarta has direct 55% and 70% ownership in APE and LMD, respectively.

⁽⁴⁾

On July 4, 2013, the Company as the sole shareholder of IFB and IIFB resolved to voluntarily dissolve and put those two entities into voluntary liquidation, by virtue of an Extraordinary General Meeting of Shareholders (EGMS). In connection with such liquidation, IFB and IIFB have appointed IMBV as the liquidator and custodian of the books and records. A liquidation agreement has also been executed by the Company, IFB, IIFB and IMBV concerning the liquidation. On October 21, 2013, the Company received the return on capital from IFB amounting to US$275.0 and EUR1,481.9 and from IIFB amounting to EUR673.9 due to their liquidation. The deregistration with the Dutch Chamber of Commerce was completed as of November 4, 2013.

⁽⁵⁾

On July 11, 2013, the Company made additional capital injection to SMT amounting to Rp16,549, resulting in the increase of the Company’s ownership in SMT from 72.54% to 84.08%.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1.

GENERAL (continued)

e.

Merger of the Company, Satelindo, Bimagraha and IM3

Based on Merger Deed No. 57 dated November 20, 2003 (“merger date”) of Poerbaningsih Adi Warsito, S.H., the Company, PT Satelit Palapa Indonesia (“Satelindo”), PT Bimagraha Telekomindo (“Bimagraha”) and PT Indosat Multi Media Mobile (“IM3”) agreed to merge, with the Company as the surviving entity. All assets and liabilities owned by Satelindo, Bimagraha and IM3 were transferred to the Company on the merger date. These three companies were dissolved by operation of law without the need to undergo the regular liquidation process.

The names “Satelindo” and “IM3” in the following notes refer to these entities before they were merged with the Company, or as the entities that entered into contractual agreements that were taken over by the Company as a result of the merger.

f.

Approval and Authorization for the Issuance of Consolidated Financial Statements

The issuance of the consolidated financial statements of the Group as of December 31, 2013 and for the year then ended with comparative figures as of December 31, 2012was approved and authorized by the Board of Directors on April24,2014, as reviewed and recommended for approval by the Audit Committee.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.

Basis of Presentation of Consolidated Financial Statements

The consolidated financial statements have been prepared in accordance with Indonesian Financial Accounting Standards, which comprise the Statements and Interpretations issued by the Financial Accounting Standards Board of the Indonesian Institute of Accountants (“DSAK”) and the Regulations No. VIII.G.7 of the Guidelines on Financial Statement Presentation and Disclosures issued by BAPEPAM-LK and Decision Letter No.KEP-347/BL/2012 of the Chief of BAPEPAM-LK regarding “Financial Presentation and Disclosure for Issuers or Public Companies.”

The consolidated financial statements are prepared in accordance with Statement of Financial Accounting Standards (“PSAK”) 1 (Revised 2009), “Presentation of Financial Statements”.

The consolidated financial statements, except for the consolidated statement of cash flows, have been prepared on the accrual basis using the historical cost concept of accounting, except as disclosed in the relevant notes herein.

The consolidated statement of cash flows, which has been prepared using the direct method, presents receipts and disbursements of cash and cash equivalents classified into operating, investing and financing activities.

The reporting currency used in the consolidated financial statements is the Indonesian rupiah, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

b.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and subsidiaries mentioned in Note 1d, in which the Company maintains (directly or indirectly) equity ownership of more than 50% or less than 50% but exercises control over the subsidiary as in the case of APE.

All material intercompany transactions and account balances (including the related significant unrealized gains or losses) have been eliminated.

Subsidiaries are fully consolidated from the date of acquisitions, being the date on which the Group obtains control, and continue to be consolidated until the date such control ceases. Control is presumed to exist if the Company owns, directly or indirectly through a subsidiary, more than half of the voting power of an entity. Control also exists when the parent owns half or less of the voting power of an entity when there is:

a)

power over more than half of the voting rights by virtue of an agreement with other investors;

b)

power to govern the financial and operating policies of the entity under a statute or an agreement;

c)

power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or

d)

power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.

Non-controlling interests (“NCI”) represent the portion of the profit or loss and net assets of the subsidiaries not attributable, directly or indirectly, to the Company, which are presented in the consolidated statement of comprehensive income and under the equity section of the  consolidated statement of financial position, respectively, separately from the corresponding portion attributable to the equity holders of the parent company.

Losses of a non-wholly owned subsidiary are attributed to the NCI even if they create an NCI deficit balance.

In case of loss of control over a subsidiary, the Group:

·

derecognizes the assets (including goodwill) and liabilities of the subsidiary;

·

derecognizes the carrying amount of any NCI;

·

derecognizes the cumulative translation differences, recorded in equity, if any;

·

recognizes the fair value of the consideration received;

·

recognizes the fair value of any investment retained;

·

recognizes any surplus or deficit in profit or loss; and

·

reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate.

c.

Business Combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value at acquisitiondate and the amount of any NCI in the acquiree. For each business combination, the acquirer measures the NCI in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are directly expensed and included in administrative expenses.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

c.

Business Combinations (continued)

When the Group acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrumentand within the scope of PSAK 55 (Revised 2006), is measured at fair value recognised either in profit or loss or as a change to Other Comprehensive Income. If the contingent consideration is not within the scope of PSAK 55, it is measured in accordance with the appropriate PSAK. Contingent consideration that is classified as equity is not be re-measured and subsequent settlement is accounted for within equity.

At acquisition date, goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for NCI over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (“CGUs”) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those CGUs.

Where goodwill forms part of a CGU and part of the operations within that CGU is disposed of, the goodwill associated with the operations disposed of is included in the carrying amount of the operations when determining the gain or loss on disposal of the operations. Goodwill disposed of in this circumstance is measured based on the relative values of the operations disposed of and the portion of the CGU retained.

d.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks and all unrestricted time deposits (including deposits on call) with original maturities of three months or less at the time of placement.

Time deposits which are pledged as collateral for bank guarantees are not classified as part of “Cash and Cash Equivalents”. These are presented as part of either “Other Current Financial Assets” or “Other Non-current Financial Assets”.

e.

Inventories

Inventories, which mainly consist of Subscriber Identification Module (“SIM”) cards, starter packs, broadband modems, cellular handsets  and pulse reload vouchers, are valued at the lower of cost or net realizable value. Cost is determined using the weighted average method.

In accordance with PSAK 14 (Revised 2008), the Group applies the guidance on the determination of inventory cost and its subsequent recognition as an expense, including any write-down to net realizable value, as well as guidance on the cost formula used to assign costs to inventories.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f.

Prepaid Frequency Fee and Licenses and Other Prepaid Expenses

Prepaid frequency fee and licenses and other prepaid expenses, which mainly consist of frequency fee, rentals, upfront fee of 3G and BWA licenses, advertising and insurance, are expensed as the related asset is utilized. The non-current portions of prepaid rentals and upfront fee of 3G and BWA licenses are shown as part of “Long-term Prepaid Rentals - Net of Current Portion” and “Long-term Prepaid Licenses - Net of Current Portion”, respectively.

g.

Investment in Associated Company

The Group’s investment in its associated company is accounted for using the equity method. An associated company is an entity in which the Group has significant influence. Under the equity method, the cost of investment is increased or decreased by the Group’s share in net earnings or losses of, and dividends received from, the associated company since the date of acquisition.

The consolidated statement of comprehensive income reflects the share of the results of operations of the associated company. Where there has been a change recognized directly in the equity of the associated company, the Group recognizes its share of any such changes and discloses this, when applicable, in the consolidated statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associated company are eliminated to the extent of the Group’s interest in the associated company.

The Group determines whether it is necessary to recognize an additional impairment loss on the Group’s investment in its associated company. The Group determines at each reporting date whether there is any objective evidence that the investment in the associated company is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment in associated company and its carrying value, and recognizes the amount in profit or loss.

h.

Property and Equipment

The Group has implemented PSAK 16 (Revised 2011), “Property, Plant and Equipment”, which impacts recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognized in relation to them. The revised PSAK No. 16 also prescribes accounting for land and provides further guidance related to the treatment of certain landrights in Indonesia and the related costs.

Property and equipment are stated at cost (which includes certain capitalized borrowing costs incurred during the construction phase), less accumulated depreciation and impairment in value.

The Group has chosen the cost model for the measurement of its property and equipment. Property and equipment, except land, are depreciated using the straight-line method, based on the estimated useful lives of the assets, as follows:

Years

Buildings

20 to 40

               Information technology equipment

3 to 5

               Office equipment

3 to 5

               Building and leasehold improvements

3 to 25

               Vehicles

3 to 5

               Cellular technical equipment

8

               Transmission and cross-connection equipment

3 to 15

Fixed Wireless Access (“FWA”) technical equipment

                   7

Operation and maintenance center and measurement unit

            3 to 5

Fixed access network equipment

3 to 10

The residual values, useful lives and methods of depreciation of property and equipment are reviewed and adjusted prospectively, if appropriate, at each financial year end.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

h.

Property and Equipment (continued)

Landrights, including the legal costs incurred at initial acquisition of landrights, are stated at cost and not amortized. Specific costs associated with the renewal or extension of land titles are deferred and amortized over the legal term of the landrights or economic life of the land, whichever is shorter.

The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments which enhance an asset’s condition on its initial performance are capitalized. When properties are retired or otherwise disposed of, their costs and the related accumulated depreciation are derecognized from the accounts, and any resulting gains or losses are recognized in profit or loss.

 Property and equipment acquired in exchange for a non-monetary asset or for a combination of        monetary and non-monetary assets are measured at fair values unless:

 (i)  the exchange transaction lacks commercial substance, or

 (ii) the fair value of neither the assets received nor the assets given up can be measured reliably.

The acquired assets are measured this way even if the Group cannot immediately derecognize the assets given up. If the acquired assets cannot be reliably measured at fair value, their value is measured at the carrying amount of the assets given up plus cash consideration.

Properties under construction and installation are stated at cost, which includes borrowing costs.Under PSAK 26 (Revised 2011), “Borrowing Costs”, all borrowing costs such as interest, finance charges in respect of finance leases recognized in accordance with PSAK 30 (Revised 2011) and foreign exchange differences (estimated quarterly to the extent that they are regarded as an adjustment to interest costs by capping the exchange differences taken as borrowing costs at the amount of borrowing costs on the functional currency equivalent borrowings) that can be attributed to qualifying assets, are capitalized to the cost of properties under construction and installation. Other borrowing costs are recognized as an expense in the period in which they are incurred. Capitalization of borrowing costs ceases when the construction or installation is completed and the constructed or installed asset is ready for its intended use.

i.

Impairment of Non-financial Assets

The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e., an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of the asset’s CGU’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognized in the consolidated statement of comprehensive income as “impairment losses”. In assessing the value in use, the estimated net future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used to determine the fair value of the asset. These calculations are corroborated by valuation multiples or other available fair value indicators.

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

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

i.

Impairment of Non-financial Assets (continued)

An assessment is made at each annual reporting period as to whether there is any indication that previously recognized impairment losses recognized for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss for an asset other than goodwill is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior periods. Reversal of an impairment loss is recognized in the consolidated statement of comprehensive income. After such a reversal, the depreciation charge on the said asset is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

In accordance with PSAK 19 (Revised 2010), software that is not an integral part of the related hardware is amortized using the straight-line method over 5 years and assessed for impairment whenever there is indication of impairment. The Company reviews the amortization period and the amortization method for the software at least at each financial year end. Residual value of software is assumed to be zero.

j.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Group as a lessee

A finance lease that transfers to the Group substantially all the risks and benefits incidental to ownership of the leased item, is capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in financing cost in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

j.

Leases (continued)

Group as a lessee (continued)

The current portion of obligations under finance lease is presented as part of Other Current Financial Liabilities.

Operating lease payments are recognized as an operating expense in profit or loss on a straight-line basis over the lease term.

Group as a lessor

A lease in which the Group does not transfer substantially all the risks and benefits of the ownership of an asset is classified as an operating lease. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents, if any, are recognized as revenue in the year they are earned.

A lease in which the Group transfers substantially all the risks and benefits of the ownership of an asset is classified as a finance lease. The leased asset is recognized as asset held under a finance lease in the consolidated statement of financial position and is presented as a receivable at an amount equal to the net investment in the lease. Selling profit or loss is recognized during the year, in accordance with the policy followed by the Group for outright sales. Costs incurred by the Group in connection with negotiating and arranging a lease are recognized as an expense when the selling profit is recognized.

Sale-and-leaseback transactions

When the Group enters into a sale-and-leaseback transaction, the Group analyzes if the leaseback arrangement meets the criteria of a finance lease or operating lease. Where the classification results in a finance lease, any excess of sales proceeds over the carrying value of the asset sold is deferred and amortized over the lease term. Where the transaction is classified as an operating lease and it is clear that the transaction is established at fair value, any profit or loss is recognized immediately.

k.

Revenue and Expense Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and Value Added Taxes (“VAT”). The following specific recognition criteria must also be met before revenue is recognized:

Cellular

Cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through the Company’s cellular network and presented on a gross basis.

For post-paid subscribers, monthly service fees are recognized as the service is provided.

The activation component of starter package sales is deferred and recognized as revenue over the expected average period of the customer relationship. Sales of initial/reload vouchers are recorded as unearned revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k.

Revenue and Expense Recognition (continued)

Cellular (continued)

Sales of wireless broadband modems and cellular handsets are recognized upon delivery to the customers.

Revenues from wireless broadband data communications are recognized based on the duration of usage or fixed monthly charges depending on the arrangement with the customers.

Cellular revenues are presented on a net basis, after compensation to value added service providers.

Customer Loyalty Program

The Company operated a customer loyalty program called“Poin Plus Plus”, which allowed customers to accumulate points for every reload and payment by the Company’s prepaid and post-paid subscribers, respectively. The points could then be redeemed for free telecommunications and non-telecommunications products, subject to a minimum number of points being obtained. Starting July 29, 2011, the“Poin Plus Plus” program was replaced with the“Indosat Senyum” program. Both programs had similarity in nature and scheme to redeem the points, except that under the new program, the Company no longer includes the subscription period as a variable item in calculating the points.Effective March 31, 2013, the Company ceased the “Indosat Senyum” program and all outstanding obligations expired as of December 31, 2013.

Customer loyalty credits were accounted for as a separate component of the sales transaction in which they were granted. The Company recorded a liability at the time of reload and payment by its prepaid and post-paid subscribers, respectively, based on the fair value expected to be incurred to supply products in the future. The consideration received was allocated between the cellular products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points issued was deferred and recognized as revenue when the points were redeemed,the redemption period expired or when the program was terminated.

Dealer Commissions

Consideration in the form of sales discount given by the Company to a dealer is recognized as a reduction of revenue.

If the Company receives, or will receive, an identifiable benefit in exchange for a consideration given by the Company to a dealer, and the fair value of such benefit can be reasonably estimated, the consideration will be recorded as a marketing expense.

Tower Leasing

Revenue arising from tower leasing classified as an operating leases is recognized on the straight-line basis over the lease term based on the amount stated in the agreement between the Company and the lessee.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k.

Revenue and Expense Recognition (continued)

MIDI

Internet

Revenues from installation services are deferred and recognized over the expected average period of the customer relationship. Revenues from monthly service fees are recognized as the services are provided. Revenues from usage charges are recognized monthly based on the duration of internet usage or based on the fixed amount of charges, depending on the arrangement with the customers.

Frame Net, World Link and Direct Link

Revenues arising from installation services are deferred and recognized over the expected average period of the customer relationship. Revenues from monthly service fees are recognized as the services are provided.

Satellite Operating Lease

Revenues are recognized on the straight-line basis over the lease term.

Revenues from other MIDI services are recognized when the services are rendered.

Fixed Telecommunications

International Calls

Revenue from outgoing international call traffic is reported on a gross basis.  

Fixed Wireless

Fixed wireless revenues arising from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.

For post-paid subscribers, monthly service fees are recognized as the services are provided.

For prepaid subscriber, the activation component of starter package sales is deferred and recognized as revenue over the expected average period of the customer relationship. Sale of initial/reload vouchers is recorded as unearned income and recognized as income upon usage of the airtime or upon expiration of the airtime.

Fixed Line

Revenues from fixed line installations are deferred and recognized over the expected average period of the customer relationship. Revenues from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.

Interconnection Revenue

Revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k.

Revenue and Expense Recognition (continued)

Agency Relationships

Revenues from an agency relationship are recorded based on the gross amount billed to the customer when the Group acts as a principal in the sale of services.

When the Group acts as an agent and earns commission from the supplier of the service, revenue is recorded based on the net amount retained (the amount paid by the customer less the amount paid to the supplier).

Expenses

Interconnection Expenses

Expenses from network interconnection with other domestic and international telecommunications carriers are accounted for as operating expenses in the period these are incurred.

Other Expenses

Expenses are recognized when incurred.

l.

Personnel Costs

Personnel costs which are directly related to the development, construction and installation of property and equipment are capitalized as part of the cost of such assets.

m.

Pension Plan and Employee Benefits

Pension costs under the Group’s defined benefit pension plans are determined by periodic actuarial calculation using the projected-unit-credit method and applying the assumptions on discount rate, expected return on plan assets and annual rate of increase in compensation.

Actuarial gains or losses from post-employment benefits are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed the greater of 10% of the present value of the defined benefit obligation or 10% of the fair value of plan assets, at that date. These gains or losses in excess of the 10% corridor are recognized on a straight-line basis over the expected average remaining working lives of the employees. The past service costs from post-employment benefits are recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits have already vested, following the introduction of changes to a pension plan, past service costs are recognized immediately.

Actuarial gains or losses and past service costs from other long-term employee benefits are recognized immediately in the consolidated statement of comprehensive income within personnel expense.

The Group recognizes gains or losses on the curtailment of a defined benefit plan when the curtailment occurs (when there is a commitment to make a material reduction in the number of employees covered by a plan or when there is an amendment of the defined benefit plan terms such that a material element of future services to be provided by current employees will no longer qualify for benefits, or will qualify only for reduced benefits). The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses and past service cost that had not previously been recognized.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments

The Group has applied PSAK 50 (Revised 2010), “Financial Instruments: Presentation”, PSAK 55 (Revised 2011), “Financial Instruments: Recognition and Measurement”, and PSAK 60, “Financial Instruments: Disclosures”.

PSAK 50 (Revised 2010) contains the requirements for the presentation of financial instruments and identifies the information that should be disclosed. The presentation requirements apply to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. This PSAK requires the disclosure of, among others, information about factors that affect the amount, timing and certainty of an entity’s future cash flows relating to financial instruments and the accounting policies applied to those instruments.

PSAK 55 (Revised 2011) establishes the principles for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This PSAK provides the definitions and characteristics of derivatives, the categories of financial instruments, recognition and measurement, hedge accounting and determination of hedging relationships, among others.

PSAK 60 requires the disclosures of the significance of financial instruments for financial position and performance; and the nature and extent of risks arising from financial instruments to which the Group is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

n1.

Financial assets

Initial recognition

Financial assets within the scope of PSAK 55 (Revised 2011) are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognized initially at fair value plus transaction costs, except in the case of financial assets which are recorded at fair value through profit or loss.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the assets.

The Group’s financial assets include cash and cash equivalents, trade and other accounts receivable, due from related parties, derivative assets, other current and non-current financial assets (quoted and unquoted financial instruments).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments (continued)

n1.

Financial assets (continued)

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

•

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.

Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position at fair value, with changes in fair value recognized in profit or loss.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in the consolidated statement of comprehensive income. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

The Group’s financial assets classified at fair value through profit or loss consist of derivative assets.

•

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (“EIR”) method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in profit or loss. The losses arising from impairment are also recognized in profit or loss.

The Group’s cash and cash equivalents, trade and other accounts receivable, due from related parties, other current financial assets, finance lease receivables and other non-current financial assets are included in this category.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments (continued)

n1.

Financial assets (continued)

Subsequent measurement (continued)

•

Held-to-maturity (HTM) investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the Group has the positive intention and ability to hold them to maturity. After initial measurement, HTM investments are measured at amortized cost using the EIR method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in profit or loss. The losses arising from impairment are recognized in profit or loss.

The Group did not have any HTM investments as of December 31, 2013 and
2012.

•

Available-for-sale (AFS) financial assets

AFS financial assets are non-derivative financial assets that are designated as available- for-sale or are not classified in any of the three preceding categories. After initial measurement, AFS financial assets are measured at fair value with unrealized gains or losses recognized in other comprehensive income until the investment is derecognized, at which time the cumulative gain or loss is recognized, or determined to be impaired, and is reclassified from other comprehensive income to profit or loss. Interest earned on AFS financial investments is reported as interest income using the EIR method.

The Group has the following investments classified as AFS:

-

Investments in shares of stock that do not have readily determinable fair value in which the equity interest is less than 20%. These are carried at cost less allowance for impairment.

-

Investments in equity shares that have readily determinable fair value in which the equity interest is less than 20% and which are classified as available-for-sale, are recorded at fair value.

n2.

Financial liabilities

Initial recognition

Financial liabilities within the scope of PSAK 55 (Revised 2011) are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, inclusive of directly attributable transaction costs.

The Group’s financial liabilities include trade accounts payable, procurement payable, accrued expenses, deposits from customers, obligations under financial lease, loans and bonds payable, due to related parties, derivative liabilities, other current and non-current financial liabilities.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments (continued)

n2.

Financial liabilities (continued)

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

•

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by PSAK 55 (Revised 2011). Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in profit or loss.

•

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. The EIR amortization is included in financing costs in profit or loss.

Gains or losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

n3.

Offsetting of financial instruments

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

n4.

Fair value of financial instruments

The fair value of financial instruments that are traded in active market at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long position and ask price for short position), without any deduction for transaction costs. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, or other valuation models.

Credit risk adjustment

The Company adjusts the price in the more advantageous market to reflect any differences in counterparty credit risk between instruments traded in that market and the ones being valued for financial asset positions. In determining the fair value of financial liability positions, the Company's own credit risk associated with the instrument is taken into account.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments (continued)

n5.

Amortized cost of financial instruments

Amortized cost is computed using the EIR method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the EIR.

n6.

Impairment of financial assets

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

•

Financial assets carried at amortized cost

For loans and receivables carried at amortized cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and the group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan or receivable has a variable interest rate, the discount rate for measuring impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is recognized in profit or loss.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments (continued)

n6. Impairment of financial assets (continued)

•

AFS financial assets

In the case of an equity investment classified as an AFS financial asset, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.

Where there is objective evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss - is recycled from other comprehensive income to profit or loss. Impairment loss on equity investment is not reversed through profit or loss; increase in its fair value after impairment is recognized in other comprehensive income.

In the case of a debt instrument classified as an AFS financial asset, impairment is assessed based on the same criteria as financial asset carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of the “Interest Income” account in profit or loss. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.

n7.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: (1) the rights to receive cash flows from the asset have expired; or (2) the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n.

Financial Instruments (continued)

n8.

Derivative financial instruments

The Company enters into and engages in cross currency swaps, interest rate swaps and other permitted instruments, if considered necessary, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies. These derivative financial instruments, while providing effective economic hedges of specific interest rate and foreign exchange risks under the Company’s financial risk management objectives and policies, do not meet the criteria for hedge accounting as provided in PSAK 55 (Revised 2011) and are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value of derivatives during the year, which are entered into as economic hedges that do not qualify for hedge accounting, are taken directly to profit or loss.

Derivative assets and liabilities are presented under current assets and liabilities, respectively. Embedded derivative is presented with the host contract in the consolidated statement of financial position which represents an appropriate presentation of overall future cash flows for the instrument taken as a whole.

The net changes in fair value of derivative instruments, swap cost or income, termination cost or income, and settlement of derivative instruments are credited (charged) to “Gainon Change in Fair Value of Derivatives - Net”, which is presented in profit or loss.

o.

Foreign Currency Transactions and Balances

The Group has applied PSAK 10 (Revised 2010), “The Effects of Changes in Foreign Exchange Rates”, which describes how to include foreign currency transactions and foreign operations in the financial statements of an entity and translate financial statements into a presentation currency. The Group considers the primary indicators and other indicators in determining its functional currency. If indicators are mixed and the functional currency is not obvious, management uses its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.

The consolidated financial statements are presented in rupiah, which is the Company’s functional currency and the Group’s presentation currency. Transactions involving foreign currencies are recorded at the rates of exchange prevailing at the time the transactions are made. At  consolidated statement of financial position date, monetary assets and liabilities denominated in foreign currencies are adjusted to reflect the prevailing exchange rates at such date and the resulting gains or losses are credited or charged to current operations, except for foreign exchange differentials that can be attributed to qualifying assets which are capitalized to properties under construction and installation.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

o.

Foreign Currency Transactions and Balances (continued)

The functional currency of IFB and IIFB (which were liquidated in July 2013) is the euro, while that of IPBV, IMBV and ISPL is the U.S. dollar. As at the end of the reporting period, the assets and liabilities of these subsidiaries are translated into the presentation currency of the Company at the spot rate which is the exchange rate prevailing at the end of the reporting period and their statements of comprehensive income are translated at the average exchange rates during the year. The resulting differences arising from the translations of the financial statements of IPBV, IMBV, IFB, IIFB and ISPL are included in other comprehensive income and presented as part of “Difference in Foreign Currency Translation” in the consolidated statement of changes in equity.

For December 31, 2013 and 2012, the foreign exchange rates used (in full amounts) were Rp12,189 and Rp9,670, respectively, per US$1 which are computed by taking the average of the buying and selling rates of bank notes last published by Bank Indonesia for the year.

p.

Income Tax

The Group has applied PSAK 46 (Revised 2010), which requires the Group to account for the current and future tax consequences of the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognized in the consolidated statement of financial position, and transactions and other events of the current period which are recognized in the consolidated statement of comprehensive income. The revised PSAK also requires the Group to present interest and penalties for the underpayment / overpayment of income tax, if any, as part of “Income Tax Benefit (Expense) - Current” in the consolidated statement of comprehensive income.

Current tax expense is provided based on the estimated taxable income for the year. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carryover of unused tax losses, are also recognized to the extent that realization of such benefits is probable. The tax effects for the year are allocated to current operations, except for the tax effects from transactions which are directly charged or credited to equity.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the year when the assets are realized or the liabilities are settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the consolidated statement of financial position date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are credited or charged to current operations, except to the extent that they relate to items previously charged or credited to equity.

The Company recognizes deferred tax liabilities and deferred tax assets associated with its investments in subsidiaries, except:

·

In respect of taxable temporary differences, when the timing of the reversals of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

·

In respect of deductible taxable temporary differences, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

p.

Income Tax (continued)

The difference between the financial statement carrying amounts of existing assets and liabilities, and their respective final tax bases are not recognized as deferred tax assets or liabilities.

The amounts of additional tax principal and penalty imposed through a tax assessment letter (“SKP”) are recognized as expense of the current year in the consolidated statement of comprehensive income, unless further settlement is submitted. The amounts of tax principal and penalty imposed through an SKP are deferred as long as they meet the asset recognition criteria.

For each of the consolidated entities, the tax effects of temporary differences and tax loss
carryover, which individually are either assets or liabilities, are shown at the applicable net amounts.

q.

Segment Reporting

The Group has applied PSAK 5 (Revised 2009), “Operating Segments”. This revised PSAK requires disclosures that will enable users of financial statements to evaluate the nature and financial effects of business activities in which the entity engages and the economic environments in which it operates.

A segment is a distinguishable component of the Group that is engaged in providing certain products (business segment), which component is subject to risks and rewards that are different from those of other segments.

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

r.

Basic and Diluted Earnings (Loss) per Share/ADS

The Group has applied PSAK 56 (Revised 2011), “Earnings per Share”, which prescribes principles for the determination and presentation of earnings (loss) per share.

The amount of basic and diluted earnings (loss) per share is computed by dividing profit (loss) for the year attributable to owners of the Company by the weighted-average number of shares outstanding during the year.

The amount of basic and diluted earnings (loss) per ADS attributable to owners of the Company is computed by multiplying basic earnings (loss) per share attributable to owners of the Company by 50, which is equal to the number of shares per ADS.

There were no potentially dilutive shares as of December 31, 2013 and 2012.

s.

Transactions with Related Parties

The Group has transactions with related parties as defined under PSAK 7 (Revised 2010), “Related Party Disclosures”.

The details of the accounts and the significant transactions entered into with related parties are presented in Note 31.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

t.

Concession Financial Assets

The Group constructs or upgrades infrastructure (construction or upgrade services) under arrangements to provide public service and operates and maintains that infrastructure (operation services) for a specified period of time. These arrangements may include infrastructure used in a public-to-private service concession arrangement for its entire useful life.

The arrangements are accounted for based on the nature of the consideration. The financial asset model is used when the Group has an unconditional contractual right to receive cash or another financial asset from, or at the direction of, the grantor for the construction services.

In the financial asset model, the amount due from the grantor meets the definition of a receivable which is measured at fair value. It is subsequently measured at amortized cost. The amount initially recognized plus the cumulative interest on that amount is calculated using the effective interest method.

The consideration received or receivable is allocated by reference to the relative fair values of the services provided, typically a construction component and a service element for operating and maintenance services performed. Revenue from the concession arrangements earned under the financial asset model consists of: (i) the fair value of the amount due from the grantor; and (ii) interest income related to the capital investment in the project.

Any asset carried under concession arrangements is derecognized on disposal or when no future economic benefits are expected from its future use or disposal or when the contractual rights to the financial asset expire.

u.

Recent Developments onAccounting Standards and Interpretations

The following are several accounting standards relevant to the financial reporting of the Group, which were issued by the Indonesian Financial Accounting Standards Board (DSAK) in 2013, but not yet effective for the 2013 financial statements:

·

PSAK 1 (2013): Presentation of Financial Statements, adopted from International Accounting Standards (IAS) 1, effective January 1, 2015

This PSAK changed the grouping of items presented in Other Comprehensive Income. Items that can be reclassified to profit or loss are to be presented separately from items that will never be reclassified.

·

PSAK 4 (2013): Separate Financial Statements, adopted from IAS 4, effective January 1, 2015

This PSAK prescribes only the accounting requirements when a parent entity prepares separate financial statements as additional information. Accounting for consolidated financial statements is determined in PSAK 65.

·

PSAK 15 (2013): Investments in Associates and Joint Ventures, adopted from IAS 28, effective January 1, 2015

This PSAK describes the application of the equity method to investments in joint ventures in addition to associates.

·

PSAK 24 (2013): Employee Benefits, adopted from IAS 19, effective January 1, 2015

This PSAKremoved the corridor mechanism and contingent liability disclosures and requires only simple clarifications and disclosures.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u.

Recent Developments on Accounting Standards and Interpretations (continued)

·

PSAK 65: Consolidated Financial Statements, adopted from International Financial Reporting Standards (IFRS) 10, effective January 1, 2015

This PSAK replaced the portion of PSAK 4 (2009) that addressed the accounting for consolidated financial statements, and established principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

·

PSAK 66: Joint Arrangements, adopted from IFRS 11, effective January 1, 2015

This PSAK replaced PSAK 12 (2009) and ISAK 12. This PSAK removed the option to account for jointly controlled entities using proportionate consolidation.

·

PSAK 67: Disclosure of Interest in Other Entities, adopted from IFRS 12, effective January 1, 2015

This PSAKincludes all of the disclosures that were previously required in PSAK 4 (2009), PSAK 12 (2009) and PSAK 15 (2009). These disclosures relate to an entity’s interests in other entities.

·

PSAK 68: Fair Value Measurement, adopted from IFRS 13, effective January 1, 2015

This PSAK provides guidance on how to measure fair value when fair value is required or permitted.

·

ISAK 27: Transfer of Assets from Customers, adopted from International Financial Reporting Interpretation Committee (IFRIC) 18, effective January 1, 2014

·

ISAK 28: Extinguishing Financial Liabilities with Equity Instruments, adopted from IFRIC 19, effective January 1, 2014

The Group is presently evaluating and has not yet determined the effects of these accounting standards on the consolidated financial statements.

3.

MANAGEMENT’S USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities affected in future years.

a.

Judgments

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those including estimations and assumptions, which have the most significant effect on the amounts recognized in the consolidated financial statements:

·

Determination of functional currency

The functional currency of each of the entities under the Group is the currency of the primary economic environment in which each entity operates. It is the currency that mainly influences the revenue and cost of rendering services.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

3.  

MANAGEMENT’S USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)

a.

Judgments (continued)

·

Leases

The Group has various lease agreements where the Group acts as lessee or lessor in respect of certain asset. The Group evaluates whether significant risks and rewards of ownership of the leased asset are transferred to the lessee or retained by the Group based on PSAK30 (Revised 2011),“Leases”, which requires the Group to make judgments and estimates of transfer of risks and rewards of ownership of leased asset.

Tower leases

For tower leases, the unit of account is considered at the level of the slot or site space because the lease is dependent on the use of a specific space in the tower where the Company places its equipment.

Licenses

In 2006, the Company was granted a license to use 2.1 GHz radio frequency spectrum (a 3G mobile communications technology - Note 1a) by the MOCIT. The Company was obliged to, among others, pay upfront fee and annual radio frequency fee for 10 years (Note 33p). The upfront fee is recorded as part of Long-term Prepaid Licenses for the non-current portion and Prepaid Expenses for the current portion, and amortized over the 10-year license term using the straight-line method.

In 2009, the Company received additional 3G license (Note 1a), and IMM was granted an operating license for “Packet Switched” local telecommunications network using 2.3 GHz radio frequency spectrum of Broadband Wireless Access (“BWA”). The Company and IMM were obliged to, among others, pay upfront fee and annual radio frequency fee for 10 years
(Note 33p). The upfront fee is recorded as part of Long-term Prepaid Licenses for the non-current portion and Prepaid Expenses for the current portion, and amortized over the 10-year license term using the straight-line method.

Management believes, as supported by written confirmation from the DGPT, that the 3G and BWA licenses may be returned at any time without any financial obligation to pay the remaining outstanding annual radio frequency fees (i.e., the license arrangement does not transfer substantially all the risks and rewards incidental to ownership). Accordingly, the Company and IMM recognize the annual radio frequency fee as prepaid operating lease expense, amortized using the straight-line method over the term of the rights to operate the 3G and BWA licenses. Management evaluates its plan to continue to use the licenses on an annual basis.

·

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in arm’s length transactions of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

3.  

MANAGEMENT’S USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)

a.

Judgments (continued)

·

Exchange of asset transactions

During 2010 to 2012, the Group entered into several contracts for the exchange of assets of a third party supplierwith certain existing cellular technical equipment of the Group. For the exchange of asset transactions, the Group evaluated whether the transactions contained commercial substance based on PSAK 16 (Revised 2011),“Property, Plant and Equipment”, which requires the Group to make judgments and estimates of the future cash flow and the fair value of the asset received and given up as a result of the transactions. Management considers the exchange of asset transactions to have met the criteria of commercial substance; however, the fair value of neither the asset received nor the asset given up could be measured reliably, hence, their value was measured at the carrying amount of the asset given up plus cash consideration paid.

·

Sale-and-leaseback transactions

The Group classifies leases into finance leases or operating leases in accordance with the accounting policies stated in Note 2j. Determining whether a lease transaction is a finance lease or an operating lease is a complex issue and requires substantial judgment as to whether the lease agreement transfers substantially all the risks and rewards of ownership to or from the Group. Careful and considered judgment is required on various complex aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether renewal options are included in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments.

The classification as a finance lease or operating lease determines whether the leased asset is capitalizable and recognized in the consolidated statement of financial position. In sale-and-leaseback transactions, the classification of the leaseback arrangements as described above determines how the gain or loss on the sale transaction is recognized. It is either deferred and amortized (finance lease) or recognized in the consolidated statement of comprehensive income immediately (operating lease).

·

Provision for legal contingency

IMM is currently under investigation by the Attorney General’s Office for being involved in a significant legal case(Note 33i). Management’s judgment of the probable cost for the resolution of the case has been developed in consultation with the Company’s  counsels handling the defense in this matter and is based upon their analysis of the potential results. Management currently does not believe this case could materially reduce the Company’s revenues and profitability. It is possible, however, that future financial performance could be materially affected by changes in their judgment or effectiveness of their strategy relating to thecase.

·

Allowance for impairment of receivables

If there is objective evidence that an impairment loss has been incurred on trade receivables, the Group recognizes an allowance for impairment loss related to the trade receivables that are specifically identified as doubtful for collection.

In addition to specific allowance against individually significant receivables, the Group also recognizes a collective impairment allowance against credit exposure of its debtors which are grouped based on common credit characteristics, and although not specifically identified as requiring a specific allowance, have a greater risk of default than when the receivables were originally granted to debtors.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

3.  

MANAGEMENT’S USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)

b.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:

·

Determination of fair values of financial assets and financial liabilities

When the fair value of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques, including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair value. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. See Note 21 for further discussion.

·

Estimating useful lives of property and equipment and intangible assets

The Group estimates the useful lives of its property and equipment and intangible assets based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological developments and market behavior. The estimation of the useful lives of property and equipment is based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. The estimated useful lives are reviewed at least each financial yearend and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of the assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above.

The amounts and timing of recorded expenses for any period are affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the Group’s property and equipment increases the recorded operating expenses and decreases non-current assets. An extension in the estimated useful lives of the Group’s property and equipment decreases the recorded operating expenses and increases non-current assets.

·

Goodwill and intangible assets

The consolidated financial statements reflect acquired businesses after the completion of the respective acquisitions. The Company accounts for the acquired businesses using the acquisition method starting January 1, 2011 and the purchase method for acquisitions prior to this date, which requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair market values of the acquiree’s identifiable assets and liabilities at the acquisition date. Any excess in the purchase price over the estimated fair market value of the net assets acquired is recorded as goodwill in the consolidated statement of financial position. Thus, the numerous judgments made in estimating the fair market value to be assigned to the acquiree’s assets and liabilities can materially affect the Company’s financial performance.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

3.  

MANAGEMENT’S USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)

b.

Estimates and Assumptions (continued)

·

Recoverability of deferred income tax assets

The Group reviews the carrying amounts of deferred tax assets at the end of each reporting period and reduces these to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax assets to be utilized. The Group’s assessment on the recognition of deferred tax assets on deductible temporary differences is based on the level and timing of forecasted taxable income of the subsequent reporting periods. This forecast is based on the Group’s past results and future expectations on revenues and expenses as well as future tax planning strategies. However, there is no assurance that the Group will generate sufficient taxable income to allow all or part of the deferred tax assets to be utilized.

·

Estimating allowance for impairment loss on receivables

The level of a specific allowance is evaluated by management on the basis of factors that affect the collectibility of the accounts. In these cases, the Group uses judgment based on the best available facts and circumstances, including but not limited to, the length of the Group’s relationship with the customers and the customers’ credit status based on third-party credit reports and known market factors, to record specific reserves for customers against amounts due in order to reduce the Group’s receivables to amounts that it expects to collect. These specific reserves are re-evaluated and adjusted as additional information received affects the amounts estimated.

Any collective allowance recognized is based on historical loss experience using various factors such as historical performance of the debtors within the collective group and judgments on the effect of deterioration in the markets in which the debtors operate and identified structural weaknesses or deterioration in the cash flows of debtors.

·

Estimation of pension cost and other employee benefits

The cost of defined benefit plan and present value of the pension obligation are determined using the projected-unit-credit method. Actuarial valuation includes making various assumptions which consist of, among other things, discount rates, expected rates of return on plan assets, rates of compensation increases and mortality rates. Actual results that differ from the Group’s assumptions are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting period exceed 10% of the higher of the present value of defined benefit obligation or the fair value of plan assets at that date. Due to the complexity of the valuation, the underlying assumptions and their long-term nature, a defined benefit obligation is highly sensitive to changes in assumptions.

While the Group believes that its assumptions are reasonable and appropriate, significant differences in the Group’s actual experience or significant changes in its assumptions may materially affect the costs and obligations of pension and other long-term employee benefits. All assumptions are reviewed at each reporting date.

Further details about the assumptions used, including a sensitivity analysis, are presented in Note 30.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

3.  

MANAGEMENT’S USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)

b.

Estimates and Assumptions (continued)

·

Asset retirement obligations

Asset retirement obligations are recognized in the year in which they are incurred if a reasonable estimate of fair value can be made. The recognition of the obligations requires an estimation of the cost to restore/dismantle on a per location basis and is based on the best estimate of the expenditure required to settle the obligation at the future restoration/dismantlement date, discounted using a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risk specific to the liability.

·

Revenue recognition

The Group’s revenue recognition policies require making use of estimates and assumptions that may affect the reported amounts of revenues and receivables.

The Company’s agreements with domestic and foreign carriers for inbound and outbound traffic subject to settlements require traffic reconciliations before actual settlement is done, which may not be the actual volume of traffic as measured by the Company. Initial recognition of revenues is based on observed traffic adjusted by the normal experience adjustments, which historically are not material to the consolidated statement of comprehensive income. Differences between the amounts initially recognized and the actual settlements are taken up in the accounts upon reconciliation. However, there is no assurance that the use of such estimates will not result in material adjustments in future periods.

The Group recognizes revenues from installation and activation-related fees and the corresponding costs over the expected average periods of customer relationship for cellular, MIDI and fixed telecommunications services. The Group estimates the expected average period of customer relationship based on the most recent churn-rate analysis.

·

Uncertain tax exposure

In certain circumstances, the Group may not be able to determine the exact amount of their current or future tax liabilities or recoverable amount of the claim for tax refund due to ongoing investigations by, or negotiations with, the taxation authority. Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. In determining the amount to be recognized in respect of an uncertain tax liability or the recoverable amount of the claim for tax refund related to uncertain tax positions, the Group applies similar considerations as they would use in determining the amount of a provision to be recognized in accordance with PSAK57 (Revised 2009),“Provisions, Contingent Liabilities and Contingent Assets”.The Group makes an analysis of all uncertain tax positions to determine if a tax liability for uncertain tax benefit or a provision for unrecoverable claim for tax refund should be recognized.

The Group presents interest and penalties for the underpayment of income tax, if any, in Income Tax Expense in profit or loss.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

4.

CASH AND CASH EQUIVALENTS

This account consists of the following:

December 31,       December 31,

					2013	2012
Cash on hand
	Rupiah				2,089	1,837
	U.S. dollar (US$4)				2	-
					2,091	1,837
Cash in banks
	Related parties (Note 31)
		Rupiah
			PT Bank Mandiri (Persero) Tbk ("Mandiri")		68,195	74,373
			PT Bank Negara Indonesia (Persero) Tbk ("BNI")		4,711	1,279
			PT Bank Pembangunan Daerah DKI Jakarta		2,314	2,996
			PT Bank Pembangunan Daerah Yogyakarta		2,073	685
			PT Bank Pembangunan Daerah Jawa Timur		1,606	1,326
			PT Bank Pembangunan Daerah Jawa Barat
				dan Banten Tbk ("BPD - Jawa Barat")	1,596	132
			PT Bank Pembangunan Daerah Maluku		1,133	4
			PT Bank Pembangunan Daerah
				Nusa Tenggara Timur	652	1,234
			PT Bank Pembangunan Daerah Sumatera Selatan		513	2,231
			PT Bank Rakyat Indonesia (Persero) Tbk ("BRI") (including PT Bank BRI Syariah (“BRI Syariah”))		306	1,178
			PT Bank Tabungan Negara (Persero) Tbk  ("BTN")		111	1,924
			Others (each below Rp1,000)		3,137	1,716
		U.S. dollar
			Mandiri (US$4,727 in 2013 and US$2,746 in 2012)		57,621	26,557
			Others (US$5 in 2013 and US$8 in 2012)		62	72
	Third parties
		Rupiah
			PT Bank Permata Tbk		5,809	927
			PT Bank Danamon Indonesia Tbk (“Danamon”)		5,603	404
			PT Bank CIMB Niaga Tbk ("CIMB Niaga")		5,198	17,678
			PT Bank Central Asia Tbk ("BCA")		5,178	159,969
			Citibank N.A., Jakarta Branch ("Citibank")		5,036	3,429
			Hongkong and Shanghai Bank Corporation,
			Jakarta Branch (“HSBC”)		1,149	14,076
			Others (each below Rp5,000)		11,530	9,832

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

4.

CASH AND CASH EQUIVALENTS (continued)

December 31,       December 31,

					2013	2012
Cash in banks (continued)
	Third parties (continued)
		U.S. dollar
			Fortis Bank N.V., The Netherlands
				(US$6,330 in 2013 and US$5,258 in 2012)	77,154	50,846
			Citibank N.A., Singapore Branch
				(US$4,461 in 2013 and US$3,411 in 2012)	54,375	32,983
			Deutsche Bank  AG, Jakarta Branch (“DB”)
				(US$2,778 in 2013 and US$728 in 2012)	33,864	7,042
			Citibank (US$628 in 2013 and US$801 in 2012)		7,652	7,750
			CIMB Niaga (US$429 in 2013 and US$25 in 2012)		5,225	243
			HSBC (US$4 in 2013 and US$14 in 2012)		49	132
			Others (US$31 in 2013 and US$95 in 2012)		386	914
					362,238	421,932
	Time deposit and deposits on call
		Related parties (Note 31)
			Rupiah
				Mandiri	232,897	198,800
				BNI	120,755	138,320
				BTN	83,658	169,372
				BRI	70,000	71,500
				BPD - Jawa Barat	32,500	34,850
				PT Bank Jawa Barat Banten Syariah	30,000	10,000
				PT Bank Syariah Mandiri (“Mandiri Syariah”)	22,000	34,000
				BRI Syariah	14,700	47,500
				PT Bank Pembangunan Daerah Sumatera Barat	10,000	10,000
				Other	2,000	1,000
			U.S. dollar
				Mandiri Syariah (US$5,000)	60,945	-
				PT Bank QNB Kesawan Tbk (“QNBK”) (US$3,000 in 2013 and US$10,000 in 2012)	36,567	96,700
				Mandiri (US$1,551 in 2013 and US$2,701 in 2012)	18,907	26,119
				BRI (US$60,000)	-	580,200

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

4.

CASH AND CASH EQUIVALENTS (continued)

December 31,December 31,

					2013	2012
Time deposit and deposits on call (continued)
	Third parties
		Rupiah
			DB		95,899	42,485
			PT Bank Syariah Muamalat Indonesia Tbk ("Muamalat")		81,500	96,800
			PT Bank Saudara Tbk
			(previously PT Bank Himpunan Saudara 1906 Tbk)		52,000	48,000
			Danamon		50,000	2,000
			CIMB Niaga (including CIMB Niaga Syariah)		47,000	4,000
			PT Bank Mega Syariah		43,500	25,500
			PT Bank Bukopin Tbk		36,000	88,500
			PT Bank Tabungan Pensiunan Nasional Tbk		20,000	82,500
			PT Bank ICB Bumiputera Tbk		12,000	11,500
			PT Mega Tbk		11,000	27,250
			PT Bank Pan Indonesia Tbk		10,000	-
			PT Bank Internasional Indonesia (“BII”) (including BII Syariah)		8,500	13,500
			Citibank		-	50,000
			Others		2,100	2,100
		U.S. dollar
			DB (US$36,039 in 2013 and US$19,752 in 2012)		439,278	191,005
			Permata Syariah (US$15,000 in 2013 and 2012)		182,835	145,050
			Muamalat (US$2,500)		30,473	-
			CIMB Niaga (US$1,000 in 2013 and
				US$50,000 in 2012)	12,189	483,500
			DBS (US$55,000)		-	531,850
			PT Bank UOB Buana Indonesia (US$15,000)		-	145,050
			Standard Chartered Bank, Jakarta Branch			��
				(“StandChart”) (US$5,000)	-	48,350
			Fortis Bank N.V., The Netherlands (US$3,740)		-	36,166
					1,869,203	3,493,467
Total					2,233,532	3,917,236

Time deposits and deposits on call denominated in rupiah earned interest at annual rates ranging from 2.00% to 11.00% in 2013 and from 2.00% to 9.50% in 2012, while those denominated in U.S. dollars earned interest at annual rates ranging from 0.03% to 3.50% in 2013 and from 0.01% to 3.00%in 2012.

The interest rates on deposits on call and time deposits with related parties are comparable to those offered by third parties.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

5.

ACCOUNTS RECEIVABLE - TRADE

This account consists of the following:

December 31,

December 31,

			2013	2012
Related parties (Note 31)
	Telkom (including US$70 in 2013 and US$436
		in 2012)	99,971	73,835
	Others (including US$6,752 in 2013 and US$7,318
		in 2012)	556,548	543,447
	Sub-total		656,519	617,282
	Less allowance for impairment		24,316	42,632
	Net		632,203	574,650
Third parties
	Local companies (including US$34,143 in 2013 and
		US$24,583 in 2012)	801,108	902,013
	Overseas international carriers (US$76,513
		in 2013 and US$79,275 in 2012)	932,619	766,070
	Post-paid subscribers from:
		Cellular	333,783	297,721
		Fixed telecommunication	65,716	20,263
	Sub-total		2,133,226	1,986,067
	Less allowance for impairment		497,090	521,998
	Net		1,636,136	1,464,069
Total			2,268,339	2,038,719

The aging schedule of the accounts receivable - trade is as follows:

	December 31, 2013		December 31, 2012
Number of		Percentage		Percentage
Months Outstanding	Amount	(%)	Amount	(%)
Related parties
0 - 6 months	611,654	93.17	477,272	77.32
7 - 12 months	13,070	1.99	52,246	8.46
13 - 24 months	8,967	1.36	30,390	4.92
Over 24 months	22,828	3.48	57,374	9.30
Total	656,519	100.00	617,282	100.00
Third parties
0 - 6 months	1,296,795	60.79	1,036,438	52.19
7 - 12 months	80,735	3.79	235,844	11.87
13 - 24 months	270,766	12.69	259,715	13.08
Over 24 months	484,930	22.73	454,070	22.86
Total	2,133,226	100.00	1,986,067	100.00

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

5.

ACCOUNTS RECEIVABLE - TRADE (continued)

The changes in the allowance for impairment of accounts receivable - trade are as follows:

			Related	Third
		Total	Parties	Parties
December 31, 2013
Balance at beginning of year		564,630	42,632	521,998
Provision (reversal) - net (Note 27)		102,307	(5,369)	107,676
Net effect of foreign exchange adjustment		21,867	1,108	20,759
Write-offs		(167,398)	(14,055)	(153,343)
Balance at end of year		521,406	24,316	497,090
Individual impairment		115,881	18,134	97,747
Collective impairment		405,525	6,182	399,343
Total		521,406	24,316	497,090
Gross amount of receivables, individually impaired,
	before deducting any individually assessed
	impairment allowance	295,329	69,267	226,062

December 31, 2012
Balance at beginning of year		536,651	47,107	489,544
Provision (reversal) - net (Note 27)		56,163	(6,567)	62,730
Net effect of foreign exchange adjustment		7,802	2,092	5,710
Write-offs		(35,986)	-	(35,986)
Balance at end of year		564,630	42,632	521,998
Individual impairment		208,208	37,852	170,356
Collective impairment		356,422	4,780	351,642
Total		564,630	42,632	521,998
Gross amount of receivables, individually impaired,
	before deducting any individually assessed
	impairment allowance	341,363	111,124	230,239

The aging schedule of the allowance for impairment of accounts receivable - trade is as follows:

	December 31, 2013		December 31, 2012
	Gross	Allowance for impairment		Gross	Allowance for impairment
Not past due and past due up to 6 months	1,908,449	28,246		1,513,710	35,270
Past due more than 7 to 12 months	93,805	21,173		288,090	35,992
Past due more than 13 to 24 months	279,733	54,160		290,105	57,293
Past due more than 24 months	507,758	417,827		511,444	436,075
Total	2,789,745	521,406		2,603,349	564,630

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

5.

ACCOUNTS RECEIVABLE - TRADE (continued)

The Group has made provision for impairment of account receivables - trade based on the collective assessment of historical impairment rates and individual assessment of its customers’ credit history. The Group does not apply a distinction between related party and third party receivables in assessing amounts past due. As of December 31, 2013 and 2012, the carrying amount of trade receivables of the Group considered past due but not impaired amounted to Rp1,491,450 and Rp1,172,818, respectively.

Management believes that receivables past due but not impaired, along with trade receivables that are neither past due nor impaired, are due from customers with good credit history and are expected to be recoverable.

The net effect of foreign exchange adjustment was due to the strengthening or weakening of the rupiah vis-à-vis the U.S. dollar in relation to U.S. dollar accounts previously provided with allowance and was credited or charged to “Gainon Foreign Exchange - Net”.

Information about the Group’s exposure to credit risk is disclosed in Note 38.

Management believes the established allowance is sufficient to cover impairment of accounts receivable - trade.

6.

PREPAID TAXES

This account consists of the following:

	December 31,   December 31,
	2013	2012
VAT - net	214,454	124,642
Claim for tax refund	676	167,216
Others	3,619	2,485
Total	218,749	294,343

On May 5, 2011, the Company submitted an appeal letter to the Tax Court concerning the Company’s request for cancellation of Tax Collection Letters (“STPs”) for the underpayment of the Company’s 2008 and 2009 income tax article 26 totaling Rp80,018 (including interest). On July 30, 2012, the Company received the Tax Court’s Decision Letter which accepted the Company’s appeal concerning these STPs. On December 26, 2012, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated July 30, 2012 for the underpayment of the Company’s 2008 and 2009 income tax article 26. On February 6, 2013, the Company submitted a Counter-Memorandum for Reconsideration Request to the Supreme Court. On October 25 and November 4, 2013, the Company received the refund from the Tax Office.

On November 6, 2012, the Company received the Decision Letter from the Tax Court accepting the Company’s appeal on Satelindo’s 2002 and 2003 income tax article 26 totaling Rp87,198, which is lower than the amount originally recognized by the Company in its financial statements. The Company accepted the corrections amounting to Rp4,655, which was charged to current operations as part of “Expenses - Others - Net”. On January 28, 2013, the Company received the refund from the Tax Office.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

7.

OTHER CURRENT FINANCIAL ASSETS - NET

This account consists of the following:

December 31,

December 31,

		2013	2012
Short-term investment*		-	25,395
Less allowance for impairment		-	25,395
Net		-	-
Restricted cash and cash equivalents (including
	US$205 in 2013 and US$231 in 2012)	25,008	5,483
Others (including US$21 in 2013 and US$257 in 2012)		6,665	7,899
Total		31,673	13,382

*

The Company wrote off the short-term investment in mutual funds of PT Jakarta Asset Management in April 2013 based on the approval dated April 16, 2013 from the Board of Commissioners.

8.

PROPERTY AND EQUIPMENT

The details of property and equipment are as follows:

		December 31,2013
		Balance				Balance
		at Beginning	Transactions during the Year			at End
		of Year	Additions	Derecognitions	Reclassifications	of Year
Cost
Direct ownership
Landrights		545,499	1,618	-	-	547,117
Buildings		871,174	2,609	-	4	873,787
Information technology equipment		3,649,793	-	(6,286)	708,960	4,352,467
Office equipment		1,213,413	36,734	(7,474)	32,727	1,275,400
Building and leasehold
	improvements	10,413,096	-	(81,938)	471,327	10,802,485
Vehicles		22,637	-	(4,264)	-	18,373
Cellular technical equipment		39,953,889	57,069	(397,614)	3,370,844	42,984,188
Transmission and cross -
	connection equipment	21,164,810	192,428	(219,115)	1,013,683	22,151,806
FWA technical equipment		1,345,306	-	-	-	1,345,306
Operation and maintenance
	center and measurement unit	1,478,308	-	-	17,790	1,496,098
Fixed access network
	equipment	1,190,936	-	-	16,115	1,207,051
Properties under
	construction and
	Installation	2,966,461	8,733,574	-	(5,580,780)	6,119,255
Under finance lease
Building and leasehold
	improvements (Note 2j)	3,551,653	340,305	-	-	3,891,958
Information technology equipment		50,670	-	-	(50,670)	-
Total		88,417,645	9,364,337	(716,691)	-	97,065,291

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

8.

PROPERTY AND EQUIPMENT (continued)

		December 31,2013
		Balance				Balance
		at Beginning	Transactions during the Year			at End
		of Year	Additions	Derecognitions	Reclassifications	of Year
Accumulated Depreciation
Direct ownership
Buildings		365,694	17,582	-	-	383,276
Information technology
	equipment	3,039,529	384,594	(6,286)	-	3,417,837
Office equipment		977,644	42,608	(7,474)	-	1,012,778
Building and leasehold
	improvements	5,296,960	799,979	(81,939)	-	6,015,000
Vehicles		19,154	1,215	(4,090)	-	16,279
Cellular technical equipment		21,851,774	4,842,704	(340,546)	-	26,353,932
Transmission and cross-
	connection equipment	11,231,139	1,909,579	(77,891)	-	13,062,827
FWA technical equipment		931,908	395,386	-	-	1,327,294
Operation and maintenance
	center and measurement unit	1,301,739	66,423	-	-	1,368,162
Fixed access network equipment		975,151	57,753	-	-	1,032,904
Under finance lease
Building and leasehold
	improvements (Note 2j)	363,549	422,731	-	-	786,280
Total		46,354,241	8,940,554	(518,226)	-	54,776,569
Less Impairment in Value		98,611	-	-	-	98,611
Net Book Value		41,964,793				42,190,111

		December 31,2012
		Balance				Balance
		at Beginning	Transactions during the Year			at End
		of Year	Additions	Derecognitions	Reclassifications	of Year
Cost
Direct ownership
Landrights		543,062	2,437	-	-	545,499
Buildings		867,712	-	-	3,462	871,174
Information technology equipment		3,395,355	66	-	254,372	3,649,793
Office equipment		1,242,130	7,958	(36,963)	288	1,213,413
Building and leasehold
	improvements	12,213,728	-	(2,386,031)	585,399	10,413,096
Vehicles		23,794	2,597	(3,754)	-	22,637
Cellular technical equipment		37,413,004	273,665	(585,293)	2,852,513	39,953,889
Transmission and cross -
	connection equipment	19,684,883	186,914	(77)	1,293,090	21,164,810
FWA technical equipment		1,345,306	-	-	-	1,345,306
Operation and maintenance
	center and measurement unit	1,452,593	-	-	25,715	1,478,308
Fixed access network
	equipment	1,167,401	-	-	23,535	1,190,936
Properties under
	construction and
	installation	2,808,976	5,195,859	-	(5,038,374)	2,966,461
Under finance lease
Building and leasehold
	improvements (Note 2j)	898,293	2,653,360	-	-	3,551,653
Information technology equipment		-	50,670	-	-	50,670
Total		83,056,237	8,373,526	(3,012,118)	-	88,417,645

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

8.

PROPERTY AND EQUIPMENT (continued)

		December 31,2012
		Balance				Balance
		at Beginning	Transactions during the Year			at End
		of Year	Additions	Derecognitions	Reclassifications	of Year
Accumulated Depreciation
Direct ownership
Buildings		348,244	17,450	-	-	365,694
Information technology
	equipment	2,718,609	320,920	-	-	3,039,529
Office equipment		972,372	41,868	(36,596)	-	977,644
Building and leasehold
	improvements	5,443,328	856,369	(1,002,737)	-	5,296,960
Vehicles		20,431	1,977	(3,254)	-	19,154
Cellular technical equipment		17,535,524	4,627,878	(311,628)	-	21,851,774
Transmission and cross-
	connection equipment	9,479,255	1,751,961	(77)	-	11,231,139
FWA technical equipment		657,696	274,212	-	-	931,908
Operation and maintenance					-
	center and measurement unit	1,219,365	82,374	-	-	1,301,739
Fixed access network equipment		909,355	65,796	-	-	975,151
Under finance lease
Building and leasehold
	improvements (Note 2j)	147,749	215,800	-	-	363,549
Total		39,451,928	8,256,605	(1,354,292)	-	46,354,241
Less Impairment in Value		98,611	-	-	-	98,611
Net Book Value		43,505,698				41,964,793

Submarine cables (presented as part of transmission and cross-connection equipment) represent the Company’s proportionate investment in submarine cable circuits jointly constructed, operated, maintained and owned with other countries, based on the respective contracts and/or the construction and maintenance agreements.

Depreciation expense charged to profit or loss amounted to Rp8,940,554 and Rp8,256,605 for the years ended December 31, 2013 and 2012, respectively.

Management believes that there is no impairment in asset values or recovery of the impairment reserve as contemplated in PSAK 48 (Revised 2009) for the current year.

As of December 31, 2013, the Group has no property and equipment pledged as collateral to any credit facilities.

As of December 31, 2013, the Group insured its property and equipment (except submarine cables and landrights) for US$233,663 and Rp30,841,197 including insurance amounting to US$102,500 on the Company‘s satellite. Management believes that the sum insured is sufficient to cover possible losses arising from fire, explosion, lightning, aircraft damage and other natural disasters.

As of December 31, 2013, the Group has property and equipment with total cost amounting to Rp5,157,156, which have been fully depreciated but are still being used.

As of December 31, 2013, the fair value of the Group’s property and equipment determined under the income approach amounted to Rp77,592,149.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

8.

PROPERTY AND EQUIPMENT (continued)

The details of the Group’s properties under construction and installation as of December 31, 2013 and 2012 are as follows:

	Percentage of		Estimated Date
	Completion	Cost	of Completion
December 31,2013
Cellular technical equipment	2- 99	4,555,736	January 2014 - December 2016
Transmission and cross-connection equipment	1- 99	661,369	January 2014 - December 2015
Building and leasehold improvements	10- 99	662,760	January - July 2014
Building	98	75,697	April 2014
Information technology equipment	34- 93	61,312	January - November 2014
Others	50 - 98	102,381	January - April 2014
Total		6,119,255

December 31,2012
Cellular technical equipment	9 - 99	1,944,855	January - March 2013
Transmission and cross-connection equipment	7 - 99	491,131	January - March 2013
Building and leasehold improvements	10 - 96	279,435	January - March 2013
Information technology equipment	18 - 95	202,740	January - September 2013
Others	30 - 80	48,300	January - December 2013
Total		2,966,461

There are no borrowing costs capitalized to properties under construction and installation for the years ended December 31, 2013 and 2012.

For the years ended December 31, 2013 and 2012, exchanges and sales of certain property and equipment were performed as follows:

		2013	2012
Exchange of assets
	Sumatra and Java Project (Note 33k)
	Carrying amount of assets received	57,069	273,665
	Carrying amount of assets given up	(57,069)	(273,665)
Sales of 2,500 towers (Note 29)
	Proceeds	-	3,870,600
	Net book value	-	(1,372,674)
	Excess of selling price over carrying amount	-	2,497,926
	Deferred gain from sales and leaseback	-	(1,318,923)
Recognized gain		-	1,179,003
Assets finance leased out
	Fair value of assets being leased out	196,464	-
	Net book value	(141,223)	-
Gain		55,241	-
Sales of assets
	Proceeds	11,560	7,215
	Net book value	(173)	(11,487)
Gain (loss)		11,387	(4,272)
Total Gain		66,628	1,174,731

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

8.

PROPERTY AND EQUIPMENT (continued)

In the above exchange of asset transaction, the fair value of neither the assets received nor the assets given up can be measured reliably, hence, their values were measured at the carrying amounts of the assets given up plus cash consideration paid.

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an annual basis.

Effective September 1, 2012, the Company changed its estimate of the useful lives of its cellular technical equipment from 10 years to 8 years. The change was made mainly due to the Company’s plan to change its network with new updated equipment that will enable the Company to fully utilize its 900 MHz frequency channel for 3G services. The effect of this change in estimate was to increase 2012 and 2013 depreciation expense by Rp1,256,941 and Rp1,323,176, respectively.

The effect of the change in the useful lives of these assets is to increase (decrease) income before income tax as follows:

 Period

Amount

 Year ending December 31, 2014

(624,964)

 Year ending December 31, 2015

(358,302)

 Year ending December 31, 2016

(206,442)

 Year ending December 31, 2017

667,750

As of December 31, 2013, the Company has undertaken a review of the estimated useful lives of its property and equipment. As a result of the review, the Company concluded that it should accelerate the depreciation of Fixed Wireless Assets technical equipment by Rp201,433, which was recognized in the 2013 consolidated statement of comprehensive income under “Expenses - depreciation and amortization”. The Company believes that net cash flows generated from Fixed Wireless services will continue to significantly decrease in the future mainly due to increased competition in the Fixed Wireless market that has resulted in lower average tariffs, declining active customers and declining Average Revenue Per User (“ARPU”).

On January 28, 2013, the Company and PT Link Net (Link Net) entered into an agreement, whereby the Company agreed to grant Link Net an Indefeasible Right of Use (“IRU”) for a pair of fiber optics in the Company’s Jakarta-Batam-Singapore (JAKABARE) submarine cable network for a non-cancellable period of 12 years from January 1, 2013 to December 31, 2024. Link Net agreed to pay the Company the amount of US$20,300 (equivalent to Rp196,464) for the right to use one pair of fiber optics (from the total capacity of fiber optics of 4 pairs of JAKABARE submarine cable). The payment was made in a series of installments, with the last one occurring on October 30, 2013.

Accordingly, for the year ended December 31, 2013, the Company derecognized a portion of its submarine cable network asset with a carrying value of Rp141,223 and recognized the gain from the above outright sale of Rp55,241.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

9.

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in goodwill and other intangible assets, including non-integrated software, for the years ended December 31, 2013 and2012 are as follows:

	Non-integrated	Other intangible
	software	assets	Goodwill	Total
Cost
At January1, 2012	285,969	597,560	2,944,362	3,827,891
Additions	23,055	18	-	23,073
At December 31, 2012	309,024	597,578	2,944,362	3,850,964
Additions	6,703	29	-	6,732
At December 31, 2013	315,727	597,607	2,944,362	3,857,696
Accumulated Amortization
At January 1, 2012	243,560	597,499	1,619,979	2,461,038
Amortization	16,210	9	-	16,219
At December 31, 2012	259,770	597,508	1,619,979	2,477,257
Amortization	17,829	10	-	17,839
At December 31, 2013	277,599	597,518	1,619,979	2,495,096
Net Book Value
At December 31, 2012	49,254	70	1,324,383	1,373,707
At December 31, 2013	38,128	89	1,324,383	1,362,600

Goodwill arose from the acquisition of ownership in Bimagraha and Satelindo in 2001 and 2002, respectively, and from the acquisition of additional ownership in Lintasarta in 2005, in SMT in 2008 and in LMD in 2010, respectively.

The details of other intangible assets arising from the acquisition of Satelindo in 2002 are as follows:

		Amount
Spectrum license		222,922
Customer base
-	Post-paid	154,220
-	Prepaid	73,128
Brand		147,178
Total		597,448

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

9.

GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

Goodwill acquired through business combination has been allocated to the cellular business unit, which is also considered as one of the Group’s operating segments.

Goodwill is tested for impairment annually (as at December 31) and when circumstances indicate the carrying value may be impaired. The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indications of impairment. As of December 31, 2013, the market capitalization of the Company was above the book value of its net assets. The recoverable amount of the cellular business unit has been determined based on fair values less cost to sell (“FVLCTS”) calculation that uses the Income Approach (a Discounted Cash Flows Method) and the Market Approach (a Guideline Public Company Method).

Key assumptions used in the FVLCTS calculation at December 31, 2013:

Discount rates - The Company has chosen to use the weighted average cost of capital (“WACC”) as the discount rate for the discounted cash flow. The estimated WACC applied in determining the recoverable amount of the cellular business unit is between 13% and 14%.

Compounded Annual Growth Rate (“CAGR”) - The CAGR projection for the 5-year budget period of the cellular business unit’s revenue based on the market analysts’ forecast is between 4.8% and 6.4%.

Cost to Sell - As the recoverable amount of the cellular business unit is determined using FVLCTS, the estimated cost to sell the business is based on a certain percentage of the equity value. The estimated cost to sell used for this calculation is at approximately 1.0% of the enterprise value.

As a result of the impairment testing, management did not identify an impairment for the cellular business unit to which goodwill of Rp1,324,383 is allocated.

10.

LONG-TERM PREPAID RENTALS - NET OF CURRENT PORTION

This account represents mainly the long-term portion of prepaid rentals on sites and towers.

11.

LONG-TERM ADVANCES

This account represents advances to suppliers and contractors for the purchase and construction/ installation of property and equipment which will be reclassified to the related property and equipment accounts upon the receipt of the property and equipment purchased or after the construction/installation of the property and equipment has reached a certain percentage of completion.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

12.

OTHER NON-CURRENT FINANCIAL ASSETS - NET

This account consists of the following:

December 31,

 December 31,

		2013	2012
Other long-term investments		1,507,299	1,483,317
Less allowance for impairment		113,577	113,577
	Net	1,393,722	1,369,740
Restricted cash and cash equivalents
	(including US$121 in 2013 and US$140 in 2012)	94,874	83,232
Employee loans receivable		8,890	11,025
Others (including US$1,317 in 2013 and US$1,010
	in 2012)	59,881	79,143
Sub-total		163,645	173,400
Total		1,557,367	1,543,140

Other long-term investments - net consist of the following:

a.

Investments in shares of stock classified as available-for-sale:

						Unrealized
				Ownership		Changes in Fair	Carrying
		Location	Principal Activity	(%)	Cost	Value	Value
December 31, 2013
PT Tower Bersama		Indonesia	Telecommunication
	Infrastructure Tbk		infrastructure	5.00	977,292	413,700	1,390,992
	(“Tower Bersama”)		service
	(Note 29)*
December 31, 2012
Tower Bersama		Indonesia	Telecommunication
	(Note 29)		infrastructure	5.00	977,292	389,718	1,367,010
			service

*The Company received dividend income amounting to Rp14,390 from Tower Bersamaon October 3, 2013.

On August 2, 2012, the Company received 5% ownership in Tower Bersama as part of its consideration for the sale and leaseback transaction of telecommunication towers (Notes 29 and 40l).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

12.

OTHER NON-CURRENT FINANCIAL ASSETS - NET (continued)

b.

Investments in shares of stock accounted under the cost method:

					Ownership	Cost/Carrying
			Location	Principal Activity	(%)	Value
December 31, 2013
PT First Media Tbk			Indonesia	Cable television and internet network service provider	1.07	50,000
Pendrell Corporation			United States of America	Satellite service	0.0065	49,977
	[previously ICO Global
	Communication
	(Holdings) Limited]**
Asean Cableship Pte. Ltd.			Singapore	Repairs and maintenance of submarine cables	16.67	1,265
		(“ACPL”)***
Others					12.80 - 18.89	14,966
Total						116,208
Less allowance for impairment						113,577
Net						2,631
December 31, 2012
PT First Media Tbk			Indonesia	Cable television and internet network service provider
					1.07	50,000
Pendrell Corporation**			United States of America	Satellite service	0.0067	49,977
ACPL***			Singapore	Repairs and maintenance of submarine cables
					16.67	1,265
Others					12.80 - 18.89	14,966
Total						116,208
Less allowance for impairment						113,577
Net						2,631

**

On March 15, 2011, the Company’s ownership in ICO Global Communication (Holdings) Limited was diluted from 0.0087% to 0.0068% since the Company did not exercise its right in relation to a rights issue conducted by ICO Global Communication (Holdings) Limited. On July 21, 2011, ICO Global Communication changed its name to Pendrell Corporation. Furthermore, as of December 31, 2013, the Company’s ownership in Pendrell has been diluted to 0.0065%.

***

The Company received dividend income from its investment in ACPL totaling US$3,573 (equivalent to Rp38,751) and Rp nilfor the years ended December 31, 2013 and2012, respectively.

The Company has provided allowance for impairment of its investments in shares of stock accounted under the cost method amounting to Rp113,577 as of December 31, 2013 and 2012, which the Company believes is adequate to cover impairment losses on the investments.

c.

Equity securities in BNI of Rp89 and Telkom of Rp10 are both classified as available-for-sale as of  December 31, 2013 and 2012.

13.

OTHER NON-CURRENT ASSETS - NET

This account consists of the following:

December 31,

 December 31,

	2013	2012
Investment in an associated company (i)	56,880	57,174
Less allowance for impairment	56,300	56,300
Net	580	874

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

13.

OTHER NON-CURRENT ASSETS - NET (continued)

December 31,

 December 31,

			2013	2012
Claims for tax refund
	Corporate income tax
		Current year (Note 16)	220,575		162,647
		Previous years (ii)	230,379		248,708
VAT and others (iii) - netof allowance for tax adjustments of Rp159,908in 2013 and Rp nil in 2012			424,640		339,796
			875,594		751,151

Others	65,032	2,473
Total	941,206	754,498

(i)

Investment in an associated company - accounted under the equity method

		Location	Principal Activity	Ownership %	Cost	Accumulated Equity in Undistributed Net loss	Carrying value
PT Citra Bakti		Indonesia	Certified service company for chip- based ATM/debit card and related devices and infrastructure
	Indonesia
December 31, 2013				33.33	1,000	420	580
December 31, 2012				33.33	1,000	126	874

(ii)

The claims for tax refund with respect to corporate income tax relating to previous years are as follows:

Fiscal Year	December 31,
	2013	2012
I. Related to uncertain tax positions
a. Satelindo - 2002	-	-
b. The Company - 2009	65,570	65,570
c. The Company - 2010	-	-
c. IMM - 2010	-	-
d. The Company - 2011	-	97,600
d. IMM - 2011	-	85,538
II. Not related to uncertain tax positions
The Company - 2012	132,316	-
IMM - 2012	32,493	-
Total	230,379	248,708

a.

Satelindo’s 2002 corporate income tax

On June 25, 2012, the Company received the Decision Letter from the Tax Court which declined the Company’s appeal in October 2010 on Satelindo’s corporate income tax for fiscal year 2002 amounting to Rp103,163. The Company charged the related claim for tax refund amounting to Rp103,163 to the 2012 operations as part of “Income Tax Expense - Current” (Note 16).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

13.

OTHER NON-CURRENT ASSETS - NET (continued)

(ii)

The claims for tax refund with respect to corporate income tax relating to previous years are as follows (continued):

a.

The Company’s 2009 corporate income tax

On April 21, 2011, the Company received an assessment letter of tax overpayment (“SKPLB”) from the Directorate General of Taxation (“DGT”) for the Company’s 2009 corporate income tax amounting to Rp29,272. The Company accepted a part of the corrections amounting to Rp836, which was charged to the 2011 operations (Note 16). On May 31, 2011, the Company received the tax refund of its claim for 2009 corporate income tax amounting to Rp23,695, which was offset against the VAT tax correction amount for the period January - December 2009. On July 20, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s 2009 corporate income tax amounting to Rp65,570. On June 29, 2012, the Company received the Decision Letter from the DGT which declined the Company’s objection. On September 21, 2012, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on corporate income tax for fiscal year 2009. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Tax Court on such appeal.

b.

The Company’s and IMM’s 2010 corporate income tax

On July 3, 2012, the Company received SKPLB from the DGT for the Company’s 2010 corporate income tax amounting to Rp89,381. The Company accepted some of the corrections amounting to Rp61, which was charged to the 2012 operations (Note 16). On August 24, 2012, the Company received the tax refund of its claim for 2010 corporate income tax amounting to Rp89,381. Within this SKPLB, the DGT also made a correction amounting to Rp101,978, which decreased the tax loss carried forward as of December 31, 2010. The Company accepted the correction amounting to Rp101,978.

On April 26, 2012, IMM received SKPLB from the DGT for IMM’s 2010 corporate income tax amounting to Rp68,657. IMM charged the unapproved 2010 claim for tax refund amounting to Rp6,422 to the 2012 operations as part of current income tax expense (Note 16). On the same date, IMM also received the assessment letter of tax underpayment (“SKPKBs”) for its 2010 income tax articles 21, 23 and 26 and VAT totaling Rp11,132 (including penalties and interest). On June 22, 2012, IMM received the refund of its claim for 2010 corporate income tax amounting to Rp57,525, net of the underpayment of its 2010 income tax articles 21, 23 and 26 and VAT.

c.

The Company’s and IMM’s 2011 corporate income tax

On June 26, 2013, the Company received SKPLB from the DGT for the Company’s 2011 corporate income tax amounting to Rp97,600. On August 14, 2013, the Company received this amount as tax refund from the DGT. Within this SKPLB, the Tax Office also made two corrections totaling Rp409,921, which decreased the tax loss carried forward as of  December 31, 2011. On September 23, 2013, the Company submitted an objection letter to the Tax Office regarding these two corrections. However, on October 16, 2013, the Company submitted a letter to cancel the objection of one of the corrections amounting to Rp165,944. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Tax Office on the remaining objection the correction amounting to Rp243,977.

On July 19, 2013, IMM received SKPLB from the DGT for IMM’s 2011 corporate income tax amounting to Rp90,812. On the same date, IMM also received SKPKBs for underpayment of its 2011 income tax articles 23 and 26 and VAT totaling Rp 3,184 (including penalties and interest). On September 6, 2013, IMM received the refund of its claim for 2011 corporate income tax amounting to Rp87,628, net of the above underpayment of its 2011 income tax articles 23 and 26 and VAT.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

13.

OTHER NON-CURRENT ASSETS - NET (continued)

(iii)

The claims for tax refund with respect to VAT and others are as follows:

Fiscal Year	December 31
	2013	2012
I. Related to uncertain tax positions
1a. The Company’s 2009 VAT	50,347	231,779
1b. The Company’s 2010 VAT	199,786	106,619
1c. The Company’s 2011 VAT	131,091	-
1d. The Company’s 2012 VAT	148,161	-
2. The Company’s 2005 income tax article 23	1,398	1,398
Allowance for tax adjustments	(159,908)	-
Net	370,875	339,796
II. Not related to uncertain tax positions
The Company’s restitution of VAT 2011 and 2012	53,765	-
Total	424,640	339,796

1.

The Company’s 2009, 2010, 2011 and 2012 VAT

a.

On April 21, 2011, the Company received SKPKBs from the DGT for the Company’s VAT for the period January - December 2009 totaling Rp182,800 (including penalties), which was paid on July 15, 2011. The Company accepted a part of the corrections amounting to Rp4,160, which was charged to the 2011 operations. On July 19, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s VAT for the period January - December 2009. On June 4, 2012, the Company received the decision letter from the DGT that declined the Company’s objection and, based on its audit, the DGT charged the Company additional underpayment for the period January, March, April, June, August - December 2009 totaling Rp57,166 and overpayment for the period February, May and July 2009 totaling Rp4,027. On July 4, 2012, the Company paid the additional underpayment amounting to Rp57,166. On August 24 and 31, 2012, the Company received the overpayment totaling Rp4,027. On September 3, 2012, the Company submitted an appeal letter to the Tax Court regarding the remaining correction on the Company’s VAT for the period January - December 2009 amounting to Rp231,779.

On February 12, 19 and 20, 2014, the Company received the Tax Court’s Decision Letters for the VAT periods “January - June 2009”, “July - August, October - December 2009” and “September 2009”, respectively, which accepted the Company’s appeal.However, it also charged for separate VAT underpayment totaling Rp180,930 for the same period. The Company accepted the correction made by the Tax Court and charged it to the 2013 operations. During April 15 - 23, 2014, the Company has received the restitution.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

13.

OTHER NON-CURRENT ASSETS - NET (continued)

(iii)

The claims for tax refund with respect to VAT and others are as follows (continued):

1.

The Company’s 2009, 2010, 2011 and 2012 VAT (continued)

a.

On July 3, 2012, the Company received SKPLB from the DGT for the Company’s VAT for the period March 2010 amounting to Rp28,545, which was lower than the original amount recognized by the Company in its 2012 financial statements, and SKPKBs for the Company’s VAT for the period January, February and April - December 2010 totaling Rp98,011 (including penalties). On August 2, 2012, the Company paid the underpayment amounting to Rp98,011. On August 24, 2012, the Company received the overpayment amounting to Rp28,545 from the DGT. On October 1 and 2, 2012, the Company submitted objection letters to the Tax Office regarding SKPLB and SKPKBs on the Company’s VAT for the period January - December 2010 totaling Rp106,619. On September 17 and 26, 2013, the Company received the decision letter from the DGT which charged the Company for additional underpayment for the period January - December 2010 totaling Rp93,167, which was paid on October 16 and 25, 2013. On December 10, 2013, the Company submitted an appeal letter to the Tax Court with respect to the correction of the Company’s VAT for the period January - December 2010 totaling Rp171,241. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Tax Court on such appeal.

b.

On June 26, 2013, the Company received SKPKBs from the DGT for the Company’s VAT for the period January - December 2011 totaling Rp133,160 (including penalties), which was paid on July 24, 2013. The Company accepted a part of the corrections on VAT totaling Rp2,069, which were charged to 2013 current operations. On September 23, 2013, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s VAT for the period January - December 2011. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Tax Office on such objection.

c.

On September 4, 2013, the Company received SKPKBs from the DGT for the Company’s VAT for the period January - December 2012 totaling Rp148,161 (including penalties), which was paid on October 3, 2013. On November 29, 2013, the Company submitted objection letters to the Tax Office with respect to the Company’s VAT for the period January - December 2012 totaling Rp148,161. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Tax Office on such objection.

Based on the Company’s assessment on the above-mentioned uncertain VAT positions as of December 31, 2013, the Company wrote off a part of the claims for tax refund amounting to Rp181,432, provided an allowance for adjustments on the claims for tax refund amounting to Rp159,908, and provided provision forVAT amounting to Rp125,486, all of which have been recorded in the 2013 consolidated financial statements.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

14.

SHORT-TERM LOAN

The balance of this account amounting to Rp1,499,849 and Rp299,529 (net of unamortized loan issuance cost of Rp151 and Rp471) as of December 31, 2013 and 2012, respectively represents unsecured facility drawdowns from Mandiri, a related party (Note 31).

On June 21, 2011, the Company entered into a Revolving Time Loan Facility agreement with Mandiri covering a maximum amount of Rp1,000,000 to finance the Company’s operational working capital, capital expenditure and/or refinancing requirements. This facility is available from June 21, 2011 to June 20, 2014 and drawdowns bear interest at 1-month Jakarta Inter-Bank Offered Rate (“JIBOR”) plus 1.4% per annum. Each drawdown matures 3 months from the drawdown date and can be extended for further 3-month periods by submitting a written request for such extension to Mandiri.

Subsequently, on December 5, 2011, the Company entered into an amendment of this agreement to cover the increase of the facility amount up to Rp1,500,000 and the change of the interest rate to         1-month JIBOR plus 1.25% per annum (Note 40h). On July 12, 2013, the interest rate was changed to 1-month JIBOR plus 1.75% per annum.

On August 2 and December 14, 2011; March 28, June 21 and December 12 and 26, 2012;April 5, June 4 and July 24, 2013, the Company made several drawdowns from this loan facility totaling Rp3,500,000.

On February 2, May 14, June 29, July 5, August 2, 2012 and January 15, 2013, the Company repaid the drawdowns made previously totaling Rp2,000,000.

Voluntary early repayment is permitted subject to 3 days’ prior written notice. The Company may early repay the whole or any part of the loan.

Based on the facility agreement, the Company is required to comply with certain covenants such as maintaining financial ratios. As of December 31, 2013 and 2012, the Company has complied with all the financial ratios required to be maintained under the loan agreement.

The amortization of the loan issuance cost for the years ended December 31, 2013 and 2012 amounted to Rp320 and Rp321, respectively (Note 28).

15.

PROCUREMENT PAYABLE

This account consists of amounts due for capital and operating expenditures procured from the following:

		December 31, 2013	December 31, 2012
Related parties (Note 31) (including US$42 in 2013
	and US$78 in 2012)	43,988	43,783
Third parties (including US$81,178 in 2013 and
	US$141,024 in 2012)	3,020,299	2,694,067
Total		3,064,287	2,737,850

The billed amount of procurement payable amounted toRp801,308 and Rp531,799 as of December 31,2013 and 2012, respectively. The unbilled amount of procurement payable amounted toRp2,262,979 and Rp2,206,051 as of December 31, 2013 and 2012, respectively.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION

a. Taxes payable

This account consists of the following:

		December 31, 2013	December 31, 2012
Estimated corporate income tax payable,			��
	less tax prepayments of Rp114,123 in 2013
	and Rp97,715 in 2012	6,198	26,137
Income tax:
	Article 4(2)	17,453	16,676
	Article 21	37,109	25,661
	Article 23	7,369	9,942
	Article 25	9,139	7,888
	Article 26	11,315	8,962
VAT		674	317
Others		3	16
Total		89,260	95,599

The computation of the estimated income tax payable / claim for tax refund for the yearsended December 31, 2013 and 2012 is as follows:

			2013	2012
Income tax expense (benefit) - current, at statutory tax rates
	Company
		Income tax expense - current	-	-
		Tax expense from tax correction on Satelindo’s corporate income tax for fiscal year 2002 (Note 13)	-	103,163
		Tax expense from tax correction on the Company’s corporate income tax for fiscal year 2010 (Note 13)	-	61
	Subsidiaries
		Income tax expense - current	120,321	123,852
		Tax expense (benefit) from tax correction from previous year	(2,165)	7,353
Income tax expense - current - net			118,156	234,429
Less prepayments of income tax of the Company
	Article 22		203,346	110,523
	Article 23		16,521	18,563
Total prepayments of income tax of the Company			219,867	129,086
Less prepayments of income tax of Subsidiaries
	Article 23		4,811	6,368
	Article 25		110,020	124,908
Total prepayments of income tax of Subsidiaries			114,831	131,276
Total prepayment of income tax			334,698	260,362
Estimated income tax payable
	Subsidiaries		6,198	26,137
Net			214,377	136,510

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION (continued)

a.

Taxes payable (continued)

		2013	2012
Presented in consolidated statement of financial position as:
Estimated income tax payable - part of “Taxes Payable”		6,198	26,137
Claim for tax refund - part of "Other Non-current Assets"         (Note 13)
	The Company	219,867	129,086
	Subsidiaries	708	33,561
Total		220,575	162,647
Net		214,377	136,510

b.

Income tax expense (benefit) - net

The reconciliation between profit (loss) before income tax and estimated taxable income (tax loss) of the Company is as follows:

				Year ended December 31
				2013	2012
Profit (loss) before income tax per consolidated statement of
	comprehensive income			(3,333,837)	461,618
Company's equity in Subsidiaries’ profit before income tax and reversal of inter-company consolidation eliminations				(250,850)	(256,634)
Profit (loss) before income tax of the Company				(3,584,687)	204,984
Positive adjustments
		Depreciation - net		2,632,492	856,483
		Charges from leasing transactions		680,635	134,934
		Tax expenses		295,936	8,772
		Assessments for income taxes and VAT (including penalties)		187,953	9,485
		Accrual of employee benefits - net		138,875	166,539
		Employee benefits		79,541	58,571
		Amortization of long-term prepaid licenses		16,278	3,433
		Donations		11,473	10,479
		Representation and entertainment		905	2,619
		5% final tax on tower sales (Note 29)		-	185,339
		Gain on sale and exchange of property and equipment		-	124,595
		Transaction cost for sale of towers subjected to final tax		-	56,446
		Provision for termination, gratuity and compensation benefits
			of employees - net	31,206	47,926
		Provision for impairment of accounts receivable - net		-	49,983
		Amortization of debt and bonds issuance costs,
			consent solicitation fees and discount (Notes 18 and 19)	-	25,238
		Others		50,840	73,060

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION (continued)

b.

Income tax expense (benefit) - net (continued)

				Year ended December 31,
				2013	2012
	Negative adjustments
		Equity in net income of investees		(257,301)		(234,930)
		Amortization of goodwill and other intangible assets		(128,994)		(150,515)
		Amortization of deferred gain on tower sales - net, already     subjected to final tax (Note 29)		(105,787)		-
		Gain on outright sale of assets being leased (Note 8)		(55,241)		-
		Provision for impairment (write-off) of accounts receivable - net		(45,716)		-
		Loss on sale and exchange of property and equipment		(41,566)		-
		Interest income already subjected to final tax		(40,113)		(69,817)
		Write-off of short-term investment (Note 7)		(25,395)		-
		Amortization of debt and bonds issuance costs,
			consent solicitation fees and discount (Notes 18 and 19)	(16,449)		-
		Net periodic pension cost		(5,074)		(2,241)
		Gain on tower sales - net, already subjected to final tax (Note 29)		-		(1,183,963)
		Others		(1,378)		(1,719)
	Estimated taxable income (tax loss) of the Company - current year			(181,567)		375,701
Tax losses carry-forward at beginning of year
(867,137)
(1,408,985)  (71,258)  (1,719)
	Adjustment on tax losses carry-forward due to tax audit of 2011 and 2010 corporate income tax			265,338		166,147
	Tax losses carry-forward at end of year			(783,366)		(867,137)

The components of the income tax expense (benefit) - net are as follows:

			Year ended December 31,
			2013	2012
Income tax expense (benefit) - current, at statutory tax rates
	Company
		Income tax expense - current	-	-
		Tax expense from tax correction on Satelindo’s corporate income tax for fiscal year 2002 (Note 13)	-	103,163
		Tax expense from tax correction on Company’s corporate income tax for fiscal year 2010 (Note 13)	-	61
	Subsidiaries
		Income tax expense - current	120,321	123,852
		Tax expense (benefit) from tax correction from previous year	(2,165)	7,353
Income tax expense - current - net			118,156	234,429

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION (continued)

b.

Income tax expense (benefit) - net (continued)

Year Ended December 31,
2013	2012

Income tax expense (benefit) - deferred - effect of temporary

	differences at enacted maximum tax rates (25% in 2013 and 2012)
	Company
		Equity in net income of investees			45,511		46,796
		Amortization of goodwill and other intangible assets			32,249		37,629
		Adjustment due to tax audit and others			14,018		824
		Gain on outright sale of assets being leased			13,810		-
		Write-off of accounts receivable (provision for impairment of
			receivables) - net		11,429		(12,496)
		Loss (gain) on sale and exchange of property and equipment - net			10,391		(31,149)
		Write-off of short-term investment (Note 7)			6,349		-
		Amortization of debt and bonds issuance costs,
			consent solicitation fees and discount (Notes 18 and 19)		4,112		(6,310)
		Net periodic pension cost			1,269		560
		Depreciation - net			(658,123)		(214,121)
		Charges from leasing transactions			(170,159)		(33,733)
		Utilization of tax losses carry-forward (tax loss)			(45,392)		93,925
		Accrual of employee benefits - net			(34,719)		(41,635)
		Provision for termination, gratuity
			and compensation benefits of employees - net		(7,802)		(11,981)
		Amortization of long-term prepaid licenses			(4,069)		(858)
		Reversal of deferred tax liabilities from tower sale			-		(91,938)
			transactions (Note 29)
		Others			(21,563)		(8,858)
		Net			(802,689)		(273,345)
	Subsidiaries			17,155		13,118
Net income tax benefit - deferred				(785,534)		(260,227)
Income tax benefit - net				(667,378)		(25,798)

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION (continued)

b.

Income tax expense (benefit) - net (continued)

The reconciliation between the income tax expense (benefit) calculated by applying the applicable tax rate of 25% to the profit (loss) before income tax and the income tax benefit-net as shown in the consolidated statement of comprehensive incomeis as follows:

				Year ended December 31,
				2013	2012
	Profit (loss) before income tax per consolidated statement
		of comprehensive income		(3,333,837)	461,618
	Income tax expense (benefit) at the applicable tax rate of 25%			(833,459)	115,404
	Company’s equity in Subsidiaries’ profit before income tax
		and reversal of  inter-company consolidation eliminations		64,446	58,938
	Tax effect on permanent differences
		Tax expenses		75,472	3,419
		Assessment for income taxes and VAT (including penalties)		46,988	2,940
		Employee benefits		27,934	21,070
		Donations		5,783	6,037
		Representation and entertainment		3,305	1,679
		Interest income already subjected to final tax		(26,632)	(28,362)
		Amortization of deferred gain on tower sale - net, already subjected to final tax (Note 29)		(26,447)	-
		5% final tax on sale of towers		-	46,335
		Transaction cost for sale of towers subjected to final tax		-	14,112
		Gain on tower sale - net, already subjected to final tax (Note 29)		-	(387,928)
		Others		(23,654)	(4,121)
	Adjustment due to tax audit and other			19,219	824
	Unrecognized deferred tax asset on current fiscal loss			7,011	13,278
	Utilization of tax losses carry-forward			(5,179)	-
	Tax expense (benefit) from tax correction from previous year			(2,165)	7,414
Tax expense from tax correction on Satelindo's corporate
			income tax for fiscal year 2002 (Note 13)	-	103,163
	Income tax benefit - net per consolidated statement
		of comprehensive income		(667,378)	(25,798)

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16. TAXATION (continued)

c.

Deferred tax assets and liabilities

The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of December 31, 2013 and 2012 are as follows:

		December 31, 2013	December 31, 2012
Deferred tax assets
	Accrual of employee benefits - net	302,553	260,033
	Charges from leasing transactions	222,715	52,556
	Tax losses carry-forward	195,842	216,784
	Allowance for impairment of accounts receivable	126,139	137,568
	Allowance for impairment of investment in associated company and other long-term investment	42,469	42,469
	Pension cost	16,468	17,736
	Allowance for impairment of short-term investment	-	6,349
	Others	4,093	345
	Total	910,279	733,840

Deferred tax liabilities
	Property and equipment		1,435,778	2,122,016
	Investments in subsidiaries		228,451	200,754
	Goodwill and other intangible assets		102,883	70,634
	Long-term prepaid licenses		11,949	16,018
	Deferred debt and bonds issuance costs,
		consent solicitation fees and discount	4,659	547
	Difference in transactions of equity changes in an
		associated company	1,460	1,460
	Others		-	463
	Total		1,785,180	2,411,892
Deferred tax liabilities - net			874,901	1,678,052

The breakdown by entity of the deferred tax assets and liabilities for the Group are:

		December 31, 2013		December 31, 2012
		Deferred Tax	Deferred Tax	Deferred Tax	Deferred Tax
		Assets	Liabilities	Assets	Liabilities
Company		-	874,901	-	1,678,052
Subsidiaries
	Lintasarta	77,860	17,958	78,593	-
	IMM	18,197	-	22,100	-
	APE	-	-	-	5,438
	ISPL	-	426	-	780
Total		96,057	893,285	100,693	1,684,270

The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference with respect to the recognition of depreciation of property and equipment.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION (continued)

c.

Deferred tax assets and liabilities (continued)

The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the accrued employee benefits are paid, the allowance for impairment of receivables is realized upon the write-off of the receivables after fulfilling certain requirements under the Income Tax Law, the allowance for impairment of investments in associated company and other long-term investments is realized upon sale of the investments and the pension cost is paid.

The significant deferred tax liabilities relate to the differences in the book and tax bases of property and equipment, investments in subsidiaries, goodwill and other intangible assets, long-term prepaid licenses, debt and bonds issuance costs, consent solicitation fees and discount.

As of December 31, 2013 and 2012, the aggregate amounts of temporary differences associated with investments in subsidiaries, for which deferred tax liabilities have not been recognized, were Rp451,447 and Rp406,962, respectively.

Realization of the deferred tax assets is dependent upon the Company and subsidiaries’ capability in generating future profitable operations. Although realization is not assured, the Company and subsidiaries believe that it is probable that these deferred tax assets will be realized through reduction of future taxable income when temporary differences reverse. The amount of the deferred tax assets is considered realizable; however, it could be reduced if actual future taxable income is lower than estimates.

SMT did not recognize deferred tax asset on the losses carried-forward as it is not probable that taxable income will be available against which the tax losses carry-forward can be utilized, if SMT was able to recognize all unrecognized deferred tax assets, the profit would increase by Rp43,149.

The tax losses carry-forward of SMT and the Company as of December 31, 2013 can be carried forward through to 2018 based on the following schedule:

Year of Expiration

SMTThe CompanyTotal

2014

43,353

-

43,353

2015

46,041

500,819

546,860

2016

22,771

100,980

123,751

2017

32,390

-

32,390

2018

28,044

181,567

209,611

Total

172,599

783,366

955,965

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

16.

TAXATION (continued)

d.

Tax assessment and administration

On November 28, 2012, the Company received SKPKBs from the DGT for the Company’s 2009 income tax articles 21, 22, 23, 26 and 4(2) totaling Rp4,829 (including penalties), which were charged to the 2012 operations as part of “Expenses - Others - Net”.

On June 26, 2013, the Company received SKPKBs from the DGT for the Company’s 2011 income tax articles 21, 26 and 4(2) totaling Rp4,171 (including penalties), which were charged to the 2013 operations as part of “Expenses - Others - Net”.

The taxation laws of Indonesia require that the Company and its local subsidiaries submit individual annual corporate income tax return on the basis of self-assessment. Under the prevailing tax regulations, the DGT may assess or amend taxes within a certain period. For fiscal years 2007 and earlier, this period is within ten years from the time the tax became due, but not later than 2013, while for fiscal years 2008 and onwards, the period is within five years from the time the tax became due.

On November 25, 2013, the Company submitted to the Tax Office a revised 2012 annual corporate income tax return after considering the result of tax audit on 2011 corporate income tax, which increased the estimated taxable income for the year ended December 31, 2012 and decreased the accumulated tax losses carry-forward as of December 31, 2012 by Rp163,561.

The tax audits on the Company’s corporate income tax have been completed for all fiscal years prior to 2012.

17.

ACCRUED EXPENSES

This account consists of the following:

	December 31, 2013	December 31, 2012
Employee benefits (Notes 22 and 30)	359,745	200,033
Interest	344,019	331,101
Network repairs and maintenance	233,392	229,921
Internet circuit	176,519	60,646
Marketing	165,008	235,957
Dealer incentives (Note 2k)	146,355	170,115
Rental	107,898	95,200
Utilities	103,590	87,669
Radio frequency fee (Note 35)	95,109	214,653
Universal Service Obligation (“USO”) (Note 35)	92,711	92,916
Blackberry access fee	84,914	48,666
Consultancy fees	63,716	44,331
Concession fee (Note 35)	30,667	41,277
General and administration	27,392	34,772
Others (each below Rp20,000)	76,432	74,028
Total	2,107,467	1,961,285

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18.

LOANS PAYABLE

This account consists of the following:

			December 31, 2013	December 31, 2012
Third parties - net*			6,788,634	6,373,040
Less current maturities - net **
	Third parties		2,443,367	2,669,218
Long-term portion
Third parties			4,345,267	3,703,822
*		net of unamortized debt issuance cost and consent solicitation fees of Rp80,364 as of December 31, 2013 and Rp111,333 as                     of December 31, 2012; and unamortized debt discount of Rp3,682 as of December 31, 2012
**		net of unamortized debt issuance cost and consent solicitation fees of  Rp41 as of December 31, 2013 and Rp6,415 as of December 31, 2012

The loans from third parties consist of the following:

		December 31, 2013	December 31, 2012
AB Svensk Exportkredit ("SEK"), Sweden with Guarantee
	from Exportkreditnamnden ("EKN") - net of unamortized
	debt issuance cost of Rp12,887 in 2013 and Rp21,351
	in 2012	1,784,991	1,840,124
BCA Revolving Time Loan - net of unamortized
	debt issuance cost of Rp41 in 2013 and Rp413
	in 2012	1,499,959	999,587
HSBC France - net of unamortized debt issuance cost
	and consent solicitation fees of Rp63,235 in 2013 and
	Rp84,315 in 2012	1,409,586	1,278,872
BCA Investment Credit Facility - net of unamortized debt
	issuance cost of Rp1,558	998,442	-
Bank Sumitomo Mitsui Indonesia ("BSMI")
	Revolving Time Loan - net of unamortized debt
	issuance cost of Rp645 in 2013 and Rp971 in 2012	649,355	99,029
PT Indonesia Infrastructure Finance (“IIF”) and PT Sarana Multi     Infrastruktur (“SMI”) Revolving Time Loan - net of     unamortized debt issuance cost of Rp1,096		298,904	-
9-Year Commercial Loan - net of unamortized
	debt issuance cost and consent solicitation fees
	of Rp902 in 2013 and Rp1,550 in 2012	147,397	155,318
Syndicated U.S. Dollar Loan Facility - net
	of unamortized debt issuance cost and consent
	solicitation fees of Rp2,733	-	1,520,292
Goldman Sachs International ("GSI")
	Principal, net of unamortized debt discount
	of Rp3,682	-	479,818
Total		6,788,634	6,373,040
Less current maturities (net of unamortized debt
	issuance costs and consent solicitation fees
	totaling Rp41 in 2013 and Rp6,415 in 2012	2,443,367	2,669,218
Long-term portion		4,345,267	3,703,822

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18.

LOANS PAYABLE (continued)

The details of the loans from a related party and third parties are as follows:

Counterparties		Loan Type		Maturity	Amount	Interest		Remarks on Repayment and Others
						Structure
a.	Mandiri*	▪	5-year unsecured	September 18,	Rp2,000,000	▪	Year 1:	▪	Without penalty if the
			credit facility 1	2012			9.75% p.a.		repayment was made
		▪	Loan drawdowns			▪	Year 2:		after the 24th month
			werepayable				10.5% p.a.		after the agreement
			annually			▪	Years 3-5:		date subject to 7 days’
							Average 3-		prior written notice
							month JIBOR	▪	With penalty of 2% of
							+ 1.5% p.a.		the prepaid amount for
						▪	Paid		repayment prior to the
							quarterly		24th month after the
									agreement date
								▪	On June 21, 2012, the
									Company obtained the
									consent letter from
									Mandiri for the sale of
									asset transaction
									(Note 29).
								▪	In September 2012,
									this loan was fully repaid.
b.	SEK Sweden	▪	Credit facilities	May 31, 2016	US$315,000	▪	Facility A:	▪	Permitted only in
	with Guarantee		consisting of	for Facility A,			Margin of		proportionate amount
	from EKN		Facilities A, B and	February 28,			0.25% London		for each of Facilities A,
			C with maximum	2017 for			Inter-Bank		B and C, after the last
			amounts of	Facility B and			Offered Rate		day of the availability
			US$100,000,	November 30,			("LIBOR"), SEK		period and on a
			US$155,000 and	2017 for			Funding Cost		repayment date subject
			US$60,000,	Facility C			of 1.05% and		to 20 days’ prior written
			Respectively				EKN		notice
		▪	Loan drawdowns				Premium	▪	In minimum amount of
			are payable semi-				Margin of		US$5,000 and in an
			annually				1.57%		amount divisible by
						▪	Facility B:		US$500
							Margin of	▪	Any repayment shall
							0.05%,		satisfy the obligation
							Commercial		of loan repayment in
							Interest		inverse chronological
							Reference		order
							Rate	▪	On June 18, 2012, the
							(“CIRR”) and		Company amended its
							EKN		credit facility agreement
							Premium		with HSBC Bank Plc,
							Margin of		as facility agent. The
							1.61%		amendment included
						▪	Facility C:		changes in definition of
							Margin of		certain terms related to
							0.05%, CIRR		sale of asset
							and EKN		transactions (Note 29).
							Premium
							Margin of 1.59%
						▪	Payable
							semi-
							annually

*   related party (Note 31)

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18. LOANS PAYABLE (continued)

Counterparties		Loan Type		Maturity	Amount	Interest		Remarkson Repayment and Others
						Structure
c.	BCA	▪	Revolving time loan	February 10,	Rp1,500,000	▪	JIBOR +	▪	Permitted subject to 1
			with maximum amount	2014			1.4% p.a.		day prior written notice.
			of Rp1,000,000				However,		The Company may repay
		▪	Each drawdown				starting		the whole or any part of
			matures 1 month from				December		the loan.
			the drawdown date.				1, 2011,	▪	On June 11, 2012, the
			Subsequently, on				JIBOR +		Company obtained the
			August 9, 2011, the				1.25% p.a.,		consent letter from BCA
			Company obtained an				starting		for the sale of asset
			approval from BCA to				July 26, 2013,		transaction (Note 29).
			amend the maturity				JIBOR +	▪	On December 19, 2012, the Company amended its credit facility agreement with BCA. The amendment included changes in definition of certain terms related to sale of asset transaction (Note 29).
			date of each drawdown				1.5% p.a.,
			to become at the latest				starting
			on February 10, 2014.				August 26,
		▪	On December 1, 2011, the facility amount was increased to Rp1,500,000 and the interest rate was changed.				2013, JIBOR +
							1.75% p.a., starting December 26, 2013, JIBOR + 2.00% p.a.
						▪	Payable
							monthly (Notes 40e and 40k)
d.	HSBC	▪	12 year - COFACE	September 30,	US$157,243	▪	5.69% p.a.	▪	Permitted with a
	France		term facility	2019		▪	Payable		corresponding
		▪	Payable in twenty				semi-		proportionate voluntary
			semi-annual				annually		prepayment under the
			installments						SINOSURE Facility
									after the last day of the
									availability period and
									on a repayment date
									subject to 30 days’ prior
									written notice
								▪	In minimum amount of
									US$10,000 and in an
									amount divisible by
									US$1,000
								▪	Any repayment shall
									satisfy the obligation of
									loan repayment in
									inverse chronological
									order
								▪	On June 18, 2012, the
									Company amended its
									COFACE credit facility
									agreement with HSBC
									France, as facility
									agent. The amendment
									included changes in
									definition of certain
									terms related to sale of
									asset transactions
									(Note 29).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18. LOANS PAYABLE (continued)

Counterparties		Loan Type		Maturity	Amount	Interest		Remarkson Repayment and Others
						Structure
d.	HSBC	▪	12 year -	September 30,	US$44,200	▪	USD LIBOR	▪	Permitted with a
	France		SINOSURE term	2019			+ 0.35% p.a.		corresponding
	(continued)		facility			▪	Payable		proportionate voluntary
		▪	Payable in twenty				semi-		prepayment under the
			semi-annual				annually		COFACE Facility after
			installments						the last day of the
									availability period and
									on a repayment date
									subject to 30 days’ prior
									written notice
								▪	In minimum amount of
									US$10,000 and in an
									amount divisible by
									US$1,000
								▪	Any repayment shall
									satisfy the obligation of
									loan repayment in
									inverse chronological
									order
								▪	On July 23, 2012, the
									Company amended its
									SINOSURE credit
									facility agreement with
									HSBC France, as
									facility agent. The
									amendment included
									changes in definition of
									certain terms related to
									sale of asset transaction
									(Notes 29).
e.	BCA	▪	5-year investment	December  12,	Rp1,000,000	▪	8.70% p.a.	▪	The Company may repay
			credit facility	2018			However,		the whole or any part of
		▪	Payable annually				starting		the loan without penalty if
							August 26,		the repayment is made on
							2013, 9.00%		interest payment date and
							p.a. and		subject to 5 days’ prior
							starting		written notice.
							September 26,
							2013, 9.25% p.a., starting December 26, 2013, JIBOR+9.50% p.a. (Note 40e)
						▪	Payable quarterly
f.	BSMI	▪	Revolving time	December 31,	Rp650,000	▪	JIBOR +	▪	Permitted subject to 5
			loan with maximum	2015			1.25% p.a.		days’ prior written notice,
			amount of			▪	Payable		the Company may
			Rp650,000				monthly,		repay the whole or any
		▪	Each drawdown				quarterly or		part of the loan.
			matures at the maximum				semi-annually
			of 36 months from the
			drawdown
			date, but not exceeding
			December 31, 2015.
g.	IIF and SMI	▪	Syndicated revolving	October 18,	Rp750,000	▪	JIBOR +	▪	Permitted subject to 5
			time loan with	2016			2.25% p.a.		days’ prior written notice,
			maximum amount			▪	Payable		the Company may
			of Rp750,000				quarterly or		repay the whole or any
		▪	Each drawdown matures				semi-annually		part of the loan.
			at the maximum of				(Note 40a)
			36 months from the
			drawdown date, but
			not exceeding
			October 18, 2016

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18. LOANS PAYABLE (continued)

Counterparties		Loan Type		Maturity	Amount	Interest		Remarkson Repayment and Others
						Structure
h.	HSBC	▪	9-year unsecured	November 28,	US$27,037	▪	USD LIBOR	▪	Permitted only on each
	Jakarta		commercial facility	2016			+ 1.45% p.a.		repayment date after
	Branch,	▪	Payable in fifteen			▪	Payable		the first repayment date
	CIMB Niaga		semi-annual				semi-		subject to 30 days’ prior
	and Bank of		payments after				annually		written notice
	China Limited		24 months from the					▪	In minimum amount of
	Jakarta		date of loan						US$5,000 and in an
	Branch		agreement. For the						amount divisible by
			1st five installments:						US$1,000
			US$1,351.85 each;					▪	Any prepayment shall
			and US$2,027.78						satisfy the obligation of
			each for the						loan repayment
			remaining						proportionately
			installments					▪	On June 20, 2012, the
			thereafter						Company amended its
									credit facility agreement
									with HSBC Ltd, as
									facility agent. The
									amendment included
									changes in definition of
									certain terms related to
									sale of asset transaction
									(Note 29).
i.	Syndicated U.S. Dollar Loan Facility - 12 Financial Institutions**	▪	5-year unsecured credit facility	June 12, 2013	US$450,000	▪	USD LIBOR + 1.90% p.a. (onshore lenders); USD LIBOR + 1.85% p.a. (offshore lenders)	▪	Permitted only after the 6th month from the date of loan agreement subject to 15 days' prior written notice (in the minimum amount of US$10,000 and in an amount divisible by US$1,000).
		▪	Loan drawdowns were paid semi- annually
						▪	Paid	▪	On June 19, 2012, the Company amended its credit facility agreement with PT Bank DBS Indonesia, as facility agent. The amendment included changes in definition of certain terms related to sale of asset transaction (Note 29).
							semi-
							annually
								▪	In June 2013, this loan
									was fully repaid.

**

On October 14, 2011, PT Bank UOB Indonesia (one of lenders under the Syndicated U.S. Dollar Loan Facility) transferred its portion of theloan to UOB Limited (another lender under the Syndicated U.S. Dollar Loan Facility), hence the number of lenders became 12.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18. LOANS PAYABLE (continued)

Counterparties		Loan Type		Maturity	Amount	Interest		Remarks on Repayment and Others
						Structure
j.	GSI***	▪	Investment loan	May 30, 2013	US$50,000	▪	8.75% p.a.	▪	Certain changes affecting
		▪	Provides an “FX			▪	Paid		withholding taxes in the
			Conversion Option”				quarterly		United Kingdom or
			for GSI to convert the			▪	If GSI took		Indonesia.
			loan payable into U.S.				FX	▪	Default under Guaranteed
			dollar loan of				Conversion		Notes due 2012.
			US$50,000 on				Option,	▪	Default under the
			May 30, 2012 (“FX				starting		Company’s USD Notes
			Conversion Option”)				May 30, 2012, the		and IDR Bonds.
		▪	Fair value of FX				loan would bear	▪	Redemption, purchase or
			Conversion Option as				interest at		cancellation of the
			of December 31,				the fixed		Guaranteed Notes Due
			2011 and 2010				annual rate		2012 and there are no
			amounting to				of 6.45%		USD Indosat Notes
			US$5,460.78				applied on		outstanding upon such
			(equivalent to				the fixed		redemption, purchase or
			Rp49,518) and				US$50,000		cancellation.
			US$6,072.20				principal.	▪	Change of control in the
			(equivalent to						Company.
			Rp54,595),					▪	In May 2013, this loan was
			respectively (Note 20)						fully repaid.
k.	BCA	▪	5-year	September 27,	Rp2,000,000	▪	Year 1: 9.75%	▪	Without penalty if the
			unsecured	2012			p.a.		repayment was made
			credit facility 1			▪	Year 2: 10.5%		after the 24th month
		▪	Loan				p.a.		after the agreement
			drawdowns were			▪	Years 3-5: 3-		date subject to 7 days’
			paid annually				month JIBOR +		prior written notice
							1.5% p.a.	▪	With penalty of 2% of
						▪	Paidquarterly quarterly quaterlyquarterly		the prepaid amount for
									repayment prior to the
									24th month after the
									agreement date
								▪	On June 11, 2012, the
									Company obtained the
									consent letter from
									BCA for the sale of
									asset transaction (Note
									29).
								▪	In September 2012,
									this loan was fully repaid.
l.	CIMB Niaga	▪	Investment	August 24,	Rp75,000	▪	14.5% p.a	▪	Permitted only on
			credit facility 6	2012			subject to review		interest payment date
			obtained by				by CIMB Niaga		subject to 15 days’ prior
			Lintasarta				depending on the		written notice.
		▪	Paid				the market condition		Lintasarta may repay
			quarterly				condition		the whole or any part of
						▪	Paid quarterly		the loan before the due
									date only by using the
									fund from Lintasarta’s
									operational activities.
									Repayment using the
									fund from loans
									obtained from other
									parties was allowed with
									penalty determined by
									CIMB Niaga.
								▪	The loan was
									collateralized by all
									equipment (Note 8)
									purchased from the
									proceeds of credit
									facility.
								▪	In April 2012, this
									loan was fully repaid.

*** On May 30, 2012, GSI exercised the FX conversion option to convert the loan into U.S. dollar loan of US$50,000. The Company earned gain from the conversion amounting to Rp5,319 and credited the gain to Gain on Change in Fair Value of Derivatives - Net.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

18.

LOANS PAYABLE (continued)

The future scheduled principal payments of all the loans payable as of December 31, 2013 are as follows:

		Twelve months ending December 31,
						2018 and
		2014	2015	2016	2017	thereafter	Total
In rupiah
BCA - revolving time loan		1,500,000	-	-	-	-	1,500,000
BCA - investment credit facility		100,000	100,000	150,000	150,000	500,000	1,000,000
BSMI - revolving time loan		-	650,000	-	-	-	650,000
IIF and SMI - revolving time loan		-	-	300,000	-	-	300,000
Sub-total		1,600,000	750,000	450,000	150,000	500,000	3,450,000
In U.S. dollar
SEK, Sweden
	(US$147,500)	548,505	548,505	461,441	239,427	-	1,797,878
HSBC France
	(US$120,832.02)	245,470	245,470	245,470	245,470	490,941	1,472,821
9-Year Commercial
	Facility
	(US$12,166.65)	49,433	49,433	49,433	-	-	148,299
Sub-total		843,408	843,408	756,344	484,897	490,941	3,418,998
Total		2,443,408	1,593,408	1,206,344	634,897	990,941	6,868,998
Less:
-	unamortized debt issuance costs and consent solicitation fees						(80,364)
Net							6,788,634

All loans are neither collateralized by any specific Group assets nor guaranteed by other parties, except for the assets that have been specifically used as security in Note 18l.

The total amortization of debt issuance, discount and consent solicitation fees on the loans for the years ended December 31, 2013 and 2012 amounted to Rp37,403 and Rp65,269, respectively (Note  28).

As of December 31, 2013 and 2012, the Group has complied with all financial ratios required to be maintained under the loan agreements.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

19. BONDS PAYABLE

This account consists of the following:

		December 31, 2013	December 31, 2012
a. Guaranteed Notes Due 2020 - net of unamortized
	notes issuance cost of Rp64,407 in 2013 and
	Rp73,454 in 2012 and discount of Rp20,100 in 2013
	and Rp23,154 in 2012	7,838,343	6,188,892
b. Eighth Indosat Bonds in Year 2012 with Fixed Rates
	- net of unamortized bonds issuance cost and
	consent solicitation fees of Rp7,696 in 2013
	and Rp8,478 in 2012	2,692,304	2,691,522
c. Fifth Indosat Bonds in Year 2007 with Fixed Rates
	- net of unamortized bonds issuance cost and
	consent solicitation fees of Rp4,657 in 2013 and
	Rp7,061 in 2012	2,595,343	2,592,939
d. Seventh Indosat Bonds in Year 2009 with Fixed Rates
	- net of unamortized bonds issuance cost of
	Rp2,292 in 2013 and Rp3,454  in 2012	1,297,708	1,296,546
e. Indosat Sukuk Ijarah II in Year 2007 - net of
	unamortized bonds issuance cost and consent
	solicitation fees of Rp214 in 2013 and Rp698 in 2012	399,786	399,302
f. Sixth Indosat Bonds in Year 2008 with Fixed Rates
	- net of unamortized bonds issuance cost and
	consent solicitation fees of Rp673 in 2013 and
	Rp1,609 in 2012	319,327	1,078,391
g. Indosat Sukuk Ijarah V in Year 2012 - net of
	unamortized bonds issuance cost and consent
	solicitation fees of Rp818 in 2013 and Rp930 in 2012	299,182	299,070
h. Indosat Sukuk Ijarah IV in Year 2009 - net of
	unamortized bonds issuance cost and consent
	solicitation fees of Rp476 in 2013 and Rp627 in 2012	199,524	199,373
i. Indosat Sukuk Ijarah III in Year 2008 - net of
	unamortized bonds issuance cost and consent
	solicitation fees of Rp353	-	569,647
Total bonds payable		15,641,517	15,315,682
Less current maturities (net of unamortized bonds
	issuance cost and consent solicitation fees totaling
	Rp1,690 in 2013 and Rp825 in 2012)	2,356,310	1,329,175
Long-term portion		13,285,207	13,986,507

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

19. BONDS PAYABLE (continued)

Bond		Nominal	Interest		Maturity	Remarks
		Amount
a.	Guaranteed	US$650,000	▪	7.375% p.a.	July 29, 2020	The notes are redeemable at the option of IPBV:
	Notes Due 2020		▪	Payable semi-annually
						▪		Prior to July 29, 2013, the Issuer mayredeem up to a maximum of 35% of theoriginal aggregate Notes issued with the proceeds of one or more PublicOfferings at a redemption price equal to107.375% of the principal amount.
						▪		Prior to July 29, 2015, the Issuer will beentitled at its option to redeem all or anyportion of the Notes at a redemptionprice equal to 100% of the principalamount  of the Notes plus the ApplicablePremium.
						▪		On and after July 29, 2015, the issuermay redeem the Notes in whole or inpart at any time and from time to time atthe certain redemption prices.
						▪		At any time, upon not less than 30days’ nor more than 60 days’ priornotice, the Issuer may redeem the Notesat a price equal to 100% of the principalamount thereof, plus any accrued andunpaid interest to (but not including) theredemption date and any additionalamounts, in the event of certain changesaffecting withholding taxes in Indonesiaand the Netherlands.
						▪		Upon a change in control of IPBV,the holder of the notes has the right torequire IPBV to repurchase all or anypart of such holder’s notes.
						▪		Based on latest rating reports (releasedin November, August and June 2013),the notes have BB+ (watch positive),Ba1 (stable outlook) and BBB(stable outlook) ratings from Standard &Poor’s (“S&P”), Moody’s InvestorsService (“Moody’s”) and Fitch Ratings(“Fitch”), respectively.
b. Eighth Indosat Bonds in Year 2012
	▪ Series A	Rp1,200,000	▪	8.625% p.a.	June 27, 2019	▪	The Company can buy back part or all ofthe bonds, after the 1st anniversary ofthe bonds, at market price temporarily oras an early settlement.
			▪	Payable quarterly
	▪ Series B	Rp1,500,000	▪	8.875% p.a.	June 27, 2022
			▪	Payable quarterly
						▪	Based on the latest rating report releasedin March 2013, the bonds haveidAA+rating from PT Pemeringkat EfekIndonesia (“Pefindo”).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

19. BONDS PAYABLE (continued)

Bond

Nominal

Interest

Maturity

Remarks

Amount

c. Fifth Indosat Bonds in Year 2007

▪ Series A

Rp1,230,000

▪

10.20% p.a.

May 29, 2014

· The Company can buy back part or all ofthe bonds, after the 1st anniversary ofthe bonds, at market price temporarily oras an early settlement.

▪

Payable quarterly

▪ Series B

Rp1,370,000

▪

10.65% p.a.

May 29, 2017

· Based on the latest rating report releasedin March 2013, the bonds haveidAA+rating from Pefindo.

▪

Payable quarterly

d.  Seventh Indosat Bonds in Year 2009

▪ Series A

Rp700,000

▪ ▪

11.25% p.a. Payable quarterly

December 8, 2014

· The Company can buy back part or  all of thebonds, after the 1st anniversary of the bonds,at market price temporarily or as an earlysettlement.

▪ Series B

Rp600,000

▪ ▪

11.75% p.a. Payable quarterly

December 8, 2016

· Based on the latest rating report released in   March 2013, the bonds have idAA+ rating   from Pefindo.

e. Indosat     Sukuk Ijarah     II in Year     2007     ("Sukuk    Ijarah II")

Rp400,000

▪

Bondholders are entitled to annualfixed Ijarah return (“Cicilan ImbalanIjarah”) totaling Rp40,800, payable ona quarterly basis starting August 29,2007 up to May 29, 2014.

May 29, 2014

· The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. · Based on the latest rating report released in March 2013, the bonds have idAA+(sy) rating from Pefindo.

f.

Sixth Indosat Bonds in Year 2008

▪ Series A

Rp760,000

▪

10.25% p.a. Payable quarterly

April 9, 2013

· The Company had the option to buy backpart or all of the bonds after the 1stanniversary of the bonds, at market pricetemporarily or as an early settlement.

▪ Series B

Rp320,000

▪

10.80% p.a. Payable quarterly

April 9, 2015

· Based on the latest rating report released in March 2013, the bonds have idAA + rating from Pefindo. · On April 9, 2013, the Company paid theseries A bonds in full.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

19. BONDS PAYABLE (continued)

Bond			Nominal	Interest		Maturity	Remarks
			Amount
g.		IndosatSukuk IjarahV in Year 2012("Sukuk Ijarah V")	Rp300,000	▪	Bondholders are entitled to annualfixed Ijarah return (“Cicilan ImbalanIjarah”) totaling Rp25,875, payable ona quarterly basis starting September 27,2012 up to June 27, 2019.	June 27, 2019	· The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. · Based on the latest rating report released in March 2013, the bonds have idAA+(sy) rating from Pefindo.
h. Indosat Sukuk Ijarah IV in Year 2009 ("Sukuk Ijarah IV")
	▪ Series A		Rp28,000	▪	Bondholders are entitled to annualfixed ijarah return (“Cicilan ImbalanIjarah”) totaling Rp3,150, payable ona quarterly basis starting March 8,2010 up to December 8, 2014.	December 8, 2014	· The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price.
	▪ Series B		Rp172,000	▪	Bondholders are entitled to annualfixed ijarah return (“Cicilan ImbalanIjarah”) totaling Rp20,210, paid ona quarterly basis starting March 8,2010 up to December 8, 2016.	December 8, 2016	· Based on the latest rating report released in March 2013, the bonds have idAA+(sy) rating from Pefindo.
i.	IndosatSukuk IjarahIII in Year2008("SukukIjarah III")		Rp570,000	▪	Bondholders were entitled to annualfixed Ijarah return (“Cicilan ImbalanIjarah”) totaling Rp58,425, paid ona quarterly basis starting July 9, 2008up to April 9, 2013.	April 9, 2013	· The Company had the option to  buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. · Based on the rating report released in March 2013, the bonds had idAA+(sy) (stable outlook) rating from Pefindo. · On April 9, 2013, the Company paid the bonds in full.

The future scheduled principal payments of all the bonds payable outstanding as of December 31, 2013 are as follows:

		Twelve months ending December 31,
						2018 and
		2014	2015	2016	2017	thereafter *	Total
In U.S. dollar
Guaranteed Notes
	Due 2020*
	(US$650,000)	-	-	-	-	7,922,850	7,922,850
In Rupiah
Eighth Indosat Bonds*		-	-	-	-	2,700,000	2,700,000
Fifth Indosat Bonds*		1,230,000	-	-	1,370,000	-	2,600,000
Seventh Indosat Bonds*		700,000	-	600,000	-	-	1,300,000
Sukuk Ijarah II*		400,000	-	-	-	-	400,000
Sixth Indosat Bonds*		-	320,000	-	-	-	320,000
Sukuk Ijarah V*		-	-	-	-	300,000	300,000
Sukuk Ijarah IV*		28,000	-	172,000	-	-	200,000
Sub-total		2,358,000	320,000	772,000	1,370,000	3,000,000	7,820,000
Total		2,358,000	320,000	772,000	1,370,000	10,922,850	15,742,850
Less:
-	unamortized notes issuance cost						(64,407)
-	unamortized notes discount						(20,100)
-	unamortized bonds issuance cost and consent solicitation fees						(16,826)
Net							15,641,517

*

Refer to previous discussion on early repayment options for each bond/note.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

19.

BONDS PAYABLE (continued)

All bonds are neither collateralized by any specific Group assets nor guaranteed by other parties. All of the Group’s assets, except for the assets that were specifically used as security (Note 18l) in 2011 to its other creditors, are used as pari-passu security to all of the Group’s other liabilities including the bonds.

On June 5, 2012, the Company and IPBV entered into a supplemental indenture with Bank of New York Mellon, as a trustee, for the IPBV Guaranteed Notes Due 2020 based on the consent letter received on May 21, 2012 representing 93.21% of the noteholders. The supplemental indenture included the amendment of certain definition under the previous Guaranteed Notes Due 2020 indentures and the approval for the sale of asset transaction  (Note 29).

On June 8, 2012, the Company received the consent letter from BRI, as a trustee, for the Eighth Indosat Bonds, Seventh Indosat Bonds, Sixth Indosat Bonds, Fifth Indosat Bonds, Second Indosat Bonds and Sukuk Ijarah V, IV, III and II regarding the Company’s sale of asset transaction (Note 29).

The total amortization of bonds issuance cost, consent solicitation fees, notes issuance cost and discount for the years ended December 31, 2013 and 2012amounted to Rp18,485 and Rp23,288, respectively (Note 28).

As of December 31, 2013 and 2012, the Group has complied with all financial ratios required to be maintained under the Notes Indenture and Trustee Agreements.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20.

DERIVATIVES

The Company entered into several swap and forward contracts. Listed below is information related to the contracts and their fair values (net of credit risk adjustment) as of December 31, 2013 and 2012:

					Fair Value (Rp)
				Notional	December 31, 2013			December 31, 2012
				Amount	Receivable	Payable		Receivable	Payable
				(US$)
Cross Currency Swap Contracts:
a.	Standard Chartered
		(“StandChart”)(1)		25,000	-	-		-	-
b.	StandChart(3)			25,000	-	-		-	-
c.	StandChart(4)			25,000	-	-	��	-	-
d.	MLIB(2)			25,000 with
			decreasing amount		-	-		7,919	-
e.	DBS(2)			25,000 with
			decreasing amount		-	-		7,962	-
f.	HSBC, Jakarta Branch(8)			10,000	-	-		2,631	-
g.	Barclays Bank PLC (“Barclays”)(8)			14,500	-	-		3,295	-
h.	HSBC, Jakarta Branch(9)			14,000	-	-		4,338	-
i.	HSBC, Jakarta Branch(10)			11,000	-	-		3,762	-
Sub-total					-	-		29,907	-
Interest Rate Swap Contracts:
j.	HSBC, Jakarta Branch			27,037 with
			decreasing amount		-	8,110		-	11,613
k.	HSBC, Jakarta Branch			44,200 with
			decreasing amount		-	28,793		-	38,260
l.	GSI(11)			100,000	-	-		-	25,287
m.	DBS(11)			25,000 with
			decreasing amount		-	-		-	1,391
n.	DBS(12)			25,000 with
			decreasing amount		-	-		-	1,244
o.	Bank of Tokyo MUFJ (“BTMUFJ”) (13)			25,000 with
		decreasing amount			-	-		-	894
p.	BTMUFJ(13)			25,000 with
			decreasing amount		-	-		-	804
q.	BTMUFJ(13)			25,000 with
			decreasing amount		-	-		-	735
r.	StandChart(13)			40,000 with
			decreasing amount		-	-		-	1,013
s.	DBS(6)			26,000 with
			decreasing amount		-	-		-	-
t.	DBS(7)			26,000 with
			decreasing amount		-	-		-	-
u.	BTMUFJ(5)			36,500 with
			decreasing amount		-	-		-	-
Sub-total					-	36,903		-	81,241

⁽¹⁾  

contract entered into in January 2006 and settled in June 2012

⁽²⁾  

The Company used the option to exercise US$8,750 in June 2013, US$2,000 in December 2012 and US$2,000 in June 2012 of the contract amount.

⁽³⁾  

contract entered into in March 2006 and settled in June 2012

⁽⁴⁾  

contract entered into in May 2006 and settled in June 2012

⁽⁵⁾  

contract entered into in March 2009 and settled in June 2012

⁽⁶⁾  

contract entered into in December 2008 and settled in December 2012

⁽⁷⁾  

contract entered into in January 2009 and settled in December 2012

⁽⁸⁾  

contract entered into in August 2012 and settled in January 2013

⁽⁹⁾  

contract entered into in August 2012 and settled in February 2013

⁽¹⁰⁾  

contract entered into in August 2012 and settled in March 2013

⁽¹¹⁾  

contract entered into in September 2008 and settled in June 2013

⁽¹²⁾  

contract entered into in October 2008 and settled in June 2013

⁽¹³⁾     contract entered into in December 2008 and settled in June 2013

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20.

DERIVATIVES (continued)

			Fair Value (Rp)
		Notional	December 31, 2013		December 31, 2012
		Amount	Receivable	Payable	Receivable	Payable
		(US$)
Currency Forward Contracts:
v.	HSBC, Jakarta Branch	10,000	-	-	-	-
w.	JP Morgan	2,000	-	-	-	-
x.	StandChart	7,000	-	-	-	-
y.	JP Morgan	9,500	-	-	-	-
z.	HSBC, Jakarta Branch	6,000	-	-	-	-
aa.	HSBC, Jakarta Branch	7,500	-	-	-	-
ab.	JP Morgan	13,750	-	-	-	-
ac.	StandChart	8,000	-	-	-	-
ad.	StandChart	6,600	-	-	-	-
ae.	StandChart	3,000	-	-	-	-
af.	DBS	10,000	-	-	-	-
ag.	ING	7,000	-	-	-	-
ah.	DBS	7,000	-	-	-	-
ai.	DBS	10,000	-	-	-	-
aj.	JP Morgan	10,000	-	-	-	-
ak.	HSBC, Jakarta branch	10,000	-	-	-	-
al.	ING	10,000	-	-	-	-
am.	ING	13,000	-	-	-	-
an.	DBS	13,000	-	-	-	-
ao.	ING	13,500	-	-	-	-
ap.	ING	10,000	-	-	-	-
aq.	ING	10,000	-	-	-	-
ar.	GSI	8,000	-	-	-	-
as.	GSI	13,000	-	-	-	-
at.	Royal Bank of Scotland (“RBS”)	12,000	-	-	-	-
au.	GSI	12,000	-	-	-	-
av.	GSI	12,500	-	-	-	-
aw.	HSBC	2,000	-	-	-	-
ax.	HSBC	14,000	-	-	-	-
ay.	StandChart	20,000	-	-	-	-
az.	HSBC	18,500	-	-	-	-
ba.	DBS	2,000	-	-	-	-
bb.	BNP Paribas	2,000	-	-	-	-
bc.	GSI	5,000	-	-	-	-
bd.	ING	5,000	-	-	-	-
be.	Barclays	10,000	-	-	-	-
bf.	Barclays	20,000	-	-	-	-
bg.	BNP Paribas	20,000	-	-	-	-
bh.	ING	23,000	-	-	4,137	-
bi.	GSI	13,000	-	-	3,278	-
bj.	JP Morgan	10,000	-	-	-	-
bk.	JP Morgan	10,000	-	-	-	-
bl.	BNP Paribas	20,000	-	-	2,981	-
bm.	Barclays	20,000	-	-	3,254	-
bn.	BNP Paribas	20,000	-	-	3,675	-
bo.	JP Morgan	20,000	-	-	4,427	-
bp.	ING	15,000	-	-	2,956	-
bq.	Barclays	15,000	-	-	2,166	-
br.	DBS	15,000	-	-	1,983	-
bs.	DBS	20,000	-	-	2,621	-

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20. DERIVATIVES (continued)

			Fair Value (Rp)
		Notional	December 31, 2013		December 31, 2012
		Amount	Receivable	Payable	Receivable	Payable
		(US$)
bt.	JP Morgan	25,000	-	-	77	-
bu.	DBS	15,000	-	-	140	-
bv.	Barclays	26,000	-	-	1,850	-
bw.	JP Morgan	30,000	-	-	2,231	-
bx.	BNP Paribas	25,000	-	-	2,356	-
by.	ING	15,000	-	-	1,615	-
bz.	StandChart	12,000	-	-	-	-
ca.	BTMU Singapore	13,000	-	-	-	-
cb.	BNP Paribas	11,000	-	-	-	-
cc.	ING	28,000	-	-	-	-
cd.	BTMU Singapore	20,000	-	-	-	-
ce.	BTMU Singapore	10,000	-	-	-	-
cf.	BTMU Singapore	13,000	-	-	-	-
cg.	DBS	20,000	-	-	-	-
ch.	DBS	20,000	-	-	-	-
ci.	Barclays	10,000	-	-	-	-
cj.	StandChart	15,000	-	-	-	-
ck.	CIMB Niaga	15,000	-	-	-	-
cl.	JP Morgan	10,000	-	-	-	-
cm.	StandChart	20,000	-	-	-	-
cn.	DBS	18,000	-	-	-	-
co.	BNP Paribas	20,000	-	-	-	-
cp.	Barclays	20,000	-	-	-	-
cq.	ING	20,000	-	-	-	-
cr.	Natixis	15,000	-	-	-	-
cs.	JP Morgan	15,000	-	-	-	-
ct.	JP Morgan	10,000	-	-	-	-
cu.	JP Morgan	15,000	-	-	-	-
cv.	CIMB Niaga	9,750	-	-	-	-
cw.	BNP Paribas	12,000	-	-	-	-
cx.	Barclays	25,000	-	-	-	-
cy.	CIMB Niaga	20,000	-	-	-	-
cz.	CIMB Niaga	20,000	-	-	-	-
da.	BNP Paribas	25,000	-	-	-	-
db.	DBS	20,000	-	-	-	-
dc.	Danareksa	10,000	-	-	-	-
dd.	Merril Lynch	12,000	-	-	-	-
de.	Merril Lynch	14,500	-	-	-	-
df.	Merril Lynch	12,000	-	-	-	-
dg.	DBS	25,000	-	-	-	-
dh.	StandChart	12,000	-	-	-	-
di.	BTMU	12,000	-	-	-	-
dj.	DBS	12,500	-	-	-	-
dk.	Danareksa	9,500	-	-	-	-
dl.	CIMB Niaga	11,000	-	-	-	-
dm.	CIMB Niaga	21,000	-	-	-	-
dn.	StandChart	15,000	-	-	-	-
do.	CIMB Niaga	12,000	22,692	-	-	-
dp.	CIMB Niaga	12,000	22,728	-	-	-
dq.	BTMU	10,000	-	-	-	-
dr.	DBS	5,000	-	-	-	-
ds.	Merrill Lynch	13,000	-	-	-	-
dt.	CIMB Niaga	9,500	-	-	-	-
du.	Barclays	14,000	-	-	-	-
dv.	BNP Paribas	9,500	-	-	-	-
dw.	BNP Paribas	10,000	4,944	-	-	-
dx.	Barclays	10,000	5,154	-	-	-
dy.	BTMU	10,000	5,060	-	-	-
dz.	Barclays	10,000	5,355	-	-	-
ea.	BTMU	10,000	5,200	-	-	-
eb.	BNP Paribas	10,000	10,142	-	-	-
ec.	Barclays	10,000	-	-	-	-
ed.	JP Morgan	10,000	-	-	-	-
ee.	BTMU	10,000	-	-	-	-
ef.	ING	10,000	6,829	-	-	-
eg.	Barclays	10,000	7,164	-	-	-
eh.	DBS	10,000	7,480	-	-	-
ei.	ING	10,000	9,044	-	-	-
ej.	ING	10,000	9,718	-	-	-
ek.	JP Morgan	10,000	10,032	-	-	-
el.	DBS	10,000	11,667	-	-	-
em.	BTMU	10,000	7,108	-	-	-
en.	DBS	10,000	6,521	-	-	-
eo.	BTMU	10,000	7,637	-	-	-
ep.	BNP Paribas	10,000	7,732	-	-	-
eq.	Barclays	10,000	5,575	-	-	-
er.	BNP Paribas	10,000	2,798	-	-	-
es.	ING	10,000	7,907	-	-	-
et.	DBS	10,000	3,134	-	-	-
eu.	DBS	10,000	3,948	-	-	-
Sub-total			195,569	-	39,747	-
Total			195,569	36,903	69,654	81,241

20. DERIVATIVES (continued)

The net changes in fair value of the swap contracts, currency forward contracts and embedded derivative, swap income or cost, termination income or cost, and settlement of derivative instruments totaling Rp273,259 and Rp4,964 for the years ended December 31, 2013 and 2012, respectively, were charged to “Gain on Change in Fair Value of Derivatives - Net”, which is presented in profit or loss.

The following are the details of the contracts:

Cross Currency Swap Contracts

No.	Counter-	Contract Period and	Annual Swap  Premium Rate	Swap Premium	Amount of Swap
					Premium Paid /
	parties	Swap Amount		Payment Date	Amortized (Rp)
					December 31, 2013	December 31, 2012
a.	StandChart(1)	January 11, 2006 - June 22, 2012	4.78% of US$25,000	Every June 22	-	5,754
		Swap Rp236,250 for US$25,000		and
				December 22
b.	StandChart(2)	March 15, 2006 - June 22, 2012	3.75% of US$25,000	Every June 22	-	4,515
		Swap Rp228,550 for US$25,000		and
				December 22
c.	StandChart(3)	May 12, 2006 - June 22, 2012	3.45% of US$25,000	Every June 22	-	4,153
		Swap Rp217,500 for US$25,000		and
				December 22
d.	MLIB(4)	September 2, 2008 - June 12, 2013.	4.10% of US$25,000 up to	Every June 12	2,223	5,806
		The Company will receive the following:	June 12, 2011, and 4.10% of	and
		• zero amount if the IDR/USD spot rate at	decreasing U.S. dollar amount as	December 12
		termination date is less than or equal to	arranged in the contract up to
		Rp8,800 to US$1 (in full amounts)	June 12, 2013
		• certain U.S. dollar amount as arranged in the
		contract multiplied by (IDR/USD spot rate -
		Rp8,800) (in full amount) divided by IDR/USD
		spot rate if the IDR/USD spot rate at
		termination date is greater than Rp8,800 but is
		less than or equal to Rp12,000 to US$1 (in full
		amounts)
		• certain U.S. dollar amount as arranged in the
		contract multiplied by (Rp3,200 [in full amount]
		divided by IDR/USD spot rate) if the IDR/USD
		spot rate at termination date is greater than
		Rp12,000 to US$1 (in full amounts)
e.	DBS(5)	September 10, 2008 - June 12, 2013	3.945% of US$25,000 up to	Every June 12	1,703	4,440
		The Company will receive the	June 12, 2011, and 3.945% of	and
		following:	decreasing U.S. dollar amount as	December 12
		• zero amount if the IDR/USD spot	arranged in the contract up to
		rate at the scheduled settlement	June 12, 2013
		date is at or less than Rp8,800 to
		US$1 (in full amounts)
		• certain U.S. dollar amount which is
		equal to U.S. dollar amount at
		scheduled settlement date
		multiplied by (IDR/USD spot rate -
		Rp8,800) (in full amount) divided by
		IDR/USD spot rate if the IDR/USD
		spot rate at settlement date is
		greater than Rp8,800 and is at or
		less than Rp12,000 to US$1 (in full
		amounts)
		• certain U.S. dollar amount which is
		equal to U.S. dollar amount at
		scheduled settlement date
		multiplied by (Rp12,000 - Rp8,800)
		(in full amounts) divided by
		IDR/USD spot rate if the IDR/USD
		spot rate at settlement date is
		greater than Rp12,000 to US$1 (in
		full amounts)

⁽¹⁾

On June 22, 2012, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp575.

⁽²⁾

On June 22, 2012, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp8,275.

⁽³⁾

On June 22, 2012, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp19,325.

    ⁽⁴⁾

On June 12, 2013, December 12, 2012 and June 13, 2012, the Company used the option to exercise US$8,750, US$2,000 and US$2,000 of the contract amount, and received settlement gain from the exercise amounting to US$1,055 or equivalent to Rp10,482 on June 12, 2013, US$186 or equivalent to Rp1,793 on December 12, 2012 and US$140 or equivalent to Rp1,325 on June 13, 2012.

⁽⁵⁾

On June 12, 2013, December 12, 2012 and June 12, 2012, the Company used the option to exercise US$8,750, US$2,000 and US$2,000 of the contract amount, and received settlement gain from the exercise amounting to US$1,055 or equivalent to Rp10,482 on June 12, 2013, US$186 or equivalent to Rp1,793 on December 12, 2012 and US$140 or equivalent to Rp1,324 on June 12, 2012.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20. DERIVATIVES (continued)

Cross Currency Swap Contracts (continued)

No.	Counter-	Contract Period and	Annual Swap  Premium Rate	Swap	Amount of Swap Premium Paid /
				Premium	Amortized (Rp)
	parties	Swap Amount		Payment Date	December 31, 2013	December 31, 2012
f.	HSBC(6)	August 23, 2012 - January 23, 2013	3.00% of US$10,000	Upfront	429	2,423
		Swap Rp96,000 for US$10,000		premium of
				US$300
				(equivalent to
				Rp2,851)
				which was fully
				paid on
				August 27, 2012.
				The premium is
				amortized over
				the contract
				period.
g.	Barclays(7)	August 23, 2012 - January 23, 2013	2.94% of US$14,500	Upfront	609	3,443
		Swap Rp139,200 for US$14,500		premium of
				US$426
				(equivalent to
				Rp4,052)
				which was fully
				paid on
				August 27, 2012.
				The premium is
				amortized over
				the contract
				period.
h.	HSBC(8)	August 23, 2012 - February 25, 2013	3.20% of US$14,000	Upfront	1,282	2,976
		Swap Rp134,400 for US$14,000		premium of
				US$448
				(equivalent to
				Rp4,258)
				which was fully
				paid on
				August 27, 2012.
				The premium is
				amortized over
				the contract
				period.
i.	HSBC(9)	August 23, 2012 - March 25, 2013	3.70% of US$11,000	Upfront	1,518	2,350
		Swap Rp105,600 for US$11,000		premium of
				US$407
				(equivalent to
				Rp3,868)
				which was fully
				paid on
				August 27, 2012.
				The premium is
				amortized over
				the contract
				period.
			Total		7,764	35,860

⁽⁶⁾

On January 25, 2013, this contract was terminated and the Company received settlement gain on the cross currency swap amounting to Rp430.

⁽⁷⁾

On February 8, 2013, this contract was terminated and the Company received settlement gain on the cross currency swap amounting to Rp2,204.

⁽⁸⁾

On February 27, 2013, this contract was terminated and the Company received settlement gain on the cross currency swap amounting to Rp1,176.

⁽⁹⁾

On March 27, 2013, this contract was terminated and the Company received settlement gain on the cross currency swap amounting to Rp1,375.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20. DERIVATIVES (continued)

Cross Currency Swap Contracts (continued)

Cross currency swap contract with GSI is structured to include credit-linkage with the Company as the reference entity and with the Company’s (i) bankruptcy, (ii) failure to pay on certain debt obligations or (iii) restructuring of certain debt obligations as the relevant credit events. Upon the occurrence of any of these credit events, the Company’s obligations and those of GSI under these swap contracts will be terminated without any further payments or settlements being made by or owed to either party, including a payment by either party of any marked-to-market value of the swap contracts.

Interest Rate Swap Contracts

No.	Counter-	Contract Period	Annual Interest Swap Rate	Swap Income	Amount of Swap Expense
				(Expense) Receipt	Paid (Rp)
	parties			(Payment) Date	December 31, 2013	December 31, 2012
j.	HSBC	April 23, 2008 -	5.42% of US$27,037, the notional	Every April 1 and October 1 up to	5,608	5,949
		November 27, 2016	amount of which will decrease based on	October 2009, and every May 27 and
			predetermined schedule, in exchange for	November 27 up to termination date
			6-month U.S. dollar LIBOR plus 1.45%  per annum
k.	HSBC	April 23, 2008 -	4.82% of US$44,200, the notional	Every  January 28  and July 28 up to	12,246	12,439
		September 29, 2019	amount of which will decrease based on	July  2009, and every March 29 and
			predetermined schedule, in exchange for	September 29 up to termination date
			U.S. dollar LIBOR plus 0.35% per annum
l.	GSI(12)	September 2, 2008 -	(8.10% - underlyer return) of	Every June 10 and December 10	-	45,178
		June 12, 2013	US$100,000 per annum, in exchange for	up to June 2011, and every
			6-month U.S. dollar LIBOR plus 1.85%  per annum	June 12 and December 12 up to
				termination date
m.	DBS(13)	September 5, 2008 -	5.625% of US$25,000 per annum, in	Every June 10 and December 10 up to	-	3,405
		June 12, 2013	exchange for 6-month U.S. dollar LIBOR	December 2010, and every June 12
			plus 1.85% per annum	and December 12 up to
				termination date
n.	DBS(14)	October 23, 2008 -	5.28% of US$25,000, the notional	Every March 25 and	-	3,017
		June 12, 2013	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and every June 12 and
			6-month U.S. dollar LIBOR plus 1.85%	December 12 up to termination date
			per annum
o.	BTMUFJ(15)	December 1, 2008 -	4.46% of US$25,000, the notional	Every March 25 and	-	2,094
		June 12, 2013	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and every June 12 and
			6-month U.S. dollar LIBOR plus 1.85% per annum	December 12 up to termination date
p.	BTMUFJ(16)	December 4, 2008 -	4.25% of US$25,000, the notional	Every March 25 and	-	1,858
		June 12, 2013	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and
			6-month U.S. dollar LIBOR plus 1.85%	every June 12 and
			per annum	December 12 up to
				termination date
q.	BTMUFJ(17)	December 12, 2008 -	4.09% of US$25,000, the notional	Every March 25 and	-	1,678
		June 12, 2013	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and
			6-month U.S. dollar LIBOR plus 1.85%	every June 12 and
			per annum	December 12 up to
				termination date
r.	StandChart(18)	December 19, 2008 -	3.85% of US$40,000, the notional	Every March 25 and	-	2,252
		June 12, 2013	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and
			6-month U.S. dollar LIBOR plus 1.85%	every June 12 and
			per annum	December 12 up to
				termination date
s.	DBS(11)	December 22, 2008 -	4.02% of US$26,000, the notional	Every March 25 and	-	1,663
		December 12, 2012	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and
			6-month U.S. dollar LIBOR plus 1.85%	every June 12 and
			per annum	December 12 up to
				termination date
t.	DBS(11)	January 21, 2009 -	3.83% of US$26,000, the notional	Every March 25 and	-	1,452
		December 12, 2012	amount of which will decrease based on	September 25 up to March
			predetermined schedule, in exchange for	2011, and
			6-month U.S. dollar LIBOR plus 1.85%	every June 12 and
			per annum	December 12 up to
				termination date
u.	BTMUFJ(10)	March 2, 2009 -	4.10% of US$36,500, the notional	Every March 25 and	-	1,321
		June 12, 2012	amount of which will decrease based on	September 25 up to
			predetermined schedule, in exchange for	March 2011, and every
			6-month U.S. dollar LIBOR plus 1.85%	June 12 and December
			per annum	12 up to termination
				date
Total					17,854	82,306

⁽¹⁰⁾

On June 12, 2012, this contract expired and the Company received zero settlement.

 ⁽¹¹⁾

On December 12, 2012, these contracts expired and the Company received zero settlement.

 ⁽¹²⁾

On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp25,854).

 ⁽¹³⁾

On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp1,406).

 ⁽¹⁴⁾

On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp1,257).

 ⁽¹⁵⁾

On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp903).

 ⁽¹⁶⁾

On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp813).

 ⁽¹⁷⁾

On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp743).

 ⁽¹⁸⁾  On June 12, 2013, this contract expired and the Company paid settlement loss on the interest rate swap amounting to (Rp1,024).

20.

DERIVATIVES (continued)

Currency Forward Contracts

No.	Counter-parties	Contract Period	IDR/USD Fixing Rate	Amount of Settlement Gain (Loss)
				(Rp)
			(in full amounts)	December 31, 2013	December 31, 2012
v.	HSBC	August 10,  2011 - January 24, 2012	Rp8,698 to US$1	-	3,200
w.	JP Morgan	August 10,  2011 - January 24, 2012	Rp8,696 to US$1	-	578
x.	StandChart	August 10,  2011 - January 24, 2012	Rp8,696 to US$1	-	966
y.	JP Morgan	August 11,  2011 - January 24, 2012	Rp8,693 to US$1	-	2,774
z.	HSBC	August 11,  2011 - February 28, 2012	Rp8,714 to US$1	-	2,226
aa.	HSBC	August 11,  2011 - February 28, 2012	Rp8,715 to US$1	-	2,775
ab.	JP Morgan	August 12,  2011 - March 29, 2012	Rp8,764 to US$1	-	5,830
ac.	StandChart	August 15,  2011 - May 30, 2012	Rp8,785 to US$1	-	5,495
ad.	StandChart	August 15,  2011 - May 30, 2012	Rp8,787 to US$1	-	5,168
ae.	StandChart	August 16,  2011 - June 12, 2012	Rp8,788 to US$1	-	5,280
af.	DBS	August 19,  2011 - January 27, 2012	Rp8,708 to US$1	-	3,173
ag.	ING	August 19,  2011 - January 27, 2012	Rp8,706 to US$1	-	2,235
ah.	DBS	August 19,  2011 - January 27, 2012	Rp8,705 to US$1	-	2,242
ai.	DBS	August 19,  2011 - June 12, 2012	Rp8,819 to US$1	-	6,430
aj.	JP Morgan	August 19,  2011 - June 12, 2012	Rp8,826 to US$1	-	6,365
ak.	HSBC	August 19,  2011 - June 12, 2012	Rp8,832 to US$1	-	6,160
al.	ING	August 22,  2011 - January 12, 2012	Rp8,662 to US$1	-	5,405
am.	ING	August 22,  2011 - January 30, 2012	Rp8,679 to US$1	-	4,053
an.	DBS	August 22,  2011 - February 28, 2012	Rp8,715 to US$1	-	4,786
ao.	ING	August 22,  2011 - March 28, 2012	Rp8,737 to US$1	-	6,070
ap.	ING	August 23,  2011 - January 12, 2012	Rp8,644 to US$1	-	5,585
aq.	ING	August 23,  2011 - January 12, 2012	Rp8,647 to US$1	-	5,555
ar.	GSI	August 23,  2011 - January 12, 2012	Rp8,640 to US$1	-	4,500
as.	GSI	August 24,  2011 - January 27, 2012	Rp8,645 to US$1	-	4,940
at.	RBS	August 24,  2011 - February 10, 2012	Rp8,666 to US$1	-	3,901
au.	GSI	August 24,  2011 - February 29, 2012	Rp8,663 to US$1	-	6,005
av.	GSI	August 24,  2011 - February 29, 2012	Rp8,675 to US$1	-	6,107
aw.	HSBC	August 16, 2012 - November 23, 2012	Rp9,647 to US$1	-	(38)
ax.	HSBC	August 16, 2012 - November 28, 2012	Rp9,654 to US$1	-	(644)
ay.	StandChart	August 16, 2012 - December 10, 2012	Rp9,681 to US$1	-	(560)
az.	HSBC	August 16, 2012 - December 10, 2012	Rp9,670 to US$1	-	(407)
ba.	DBS	August 23, 2012 - November 26, 2012	Rp9,616 to US$1	-	62
bb.	BNP Paribas	August 24, 2012 - December 21, 2012	Rp9,690 to US$1	-	46
bc.	GSI	August 24, 2012 - December 21, 2012	Rp9,694 to US$1	-	95
bd.	ING	August 24, 2012 - December 21, 2012	Rp9,695 to US$1	-	90
be.	Barclays	September 6, 2012 - December 5, 2012	Rp9,695 to US$1	-	(890)

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20.

DERIVATIVES (continued)

Currency Forward Contracts (continued)

No.	Counter-parties	Contract Period	IDR/USD Fixing Rate	Amount of Settlement Gain (Loss)
				(Rp)
			(in full amounts)	December 31, 2013	December 31, 2012
bf.	Barclays	September 7, 2012 - December 5, 2012	Rp9,694 to US$1	-	(1,760)
bg.	BNP Paribas	September 12, 2012 - December 13, 2012	Rp9,653 to US$1	-	1,112
bh.	ING	September 14, 2012 - January 11, 2013	Rp9,631 to US$1	4,564	-
bi.	GSI	September 17, 2012 - January 11, 2013	Rp9,560 to US$1	3,487	-
bj.	JP Morgan	September 28, 2012 - December 21, 2012	Rp9,660 to US$1	-	619
bk.	JP Morgan	October 5, 2012 - December 21, 2012	Rp9,642 to US$1	-	618
bl.	BNP Paribas	November 14, 2012 - February 8, 2013	Rp9,683 to US$1	20	-
bm.	Barclays	November 29, 2012 - March 4, 2013	Rp9,697 to US$1	(560)	-
bn.	BNP Paribas	November 30, 2012 - March 4, 2013	Rp9,669 to US$1	-	-
bo.	JP Morgan	December 3, 2012 - March 5, 2013	Rp9,638 to US$1	862	-
bp.	ING	December 4, 2012 - March 6, 2013	Rp9,666 to US$1	658	-
bq.	Barclays	December 5, 2012 - February 5, 2013	Rp9,690 to US$1	1,175	-
br.	DBS	December 5, 2012 - February 5, 2013	Rp9,695 to US$1	1,102	-
bs.	DBS	December 7, 2012 - February 11, 2013	Rp9,702 to US$1	496	-
bt.	JP Morgan	December 10, 2012 - March 13, 2013	Rp9,865 to US$1	(4,425)	-
bu.	DBS	December 10, 2012 - March 12, 2013	Rp9,853 to US$1	(2,475)	-
bv.	Barclays	December 12, 2012 - February 11, 2013	Rp9,770 to US$1	(1,118)	-
bw.	JP Morgan	December 12, 2012 - February 11, 2013	Rp9,765 to US$1	(1,140)	-
bx.	BNP Paribas	December 17, 2012 - March 20, 2013	Rp9,775 to US$1	(1,425)	-
by.	ING	December 18, 2012 - March 20, 2013	Rp9,770 to US$1	(780)	-
bz.	StandChart	January 22, 2013 - March 27, 2013	Rp9,815 to US$1	(1,080)	-
ca.	BTMU Singapore	January 22, 2013 - May 3, 2013	Rp9,834 to US$1	(1,457)	-
cb.	BNP Paribas	February 27, 2013 - May 3, 2013	Rp9,721 to US$1	11	-
cc.	ING	February 28, 2013 - May 3, 2013	Rp9,697 to US$1	701	-
cd.	BTMU Singapore	February 6, 2013 - May 3, 2013	Rp9,709 to US$1	937	-
ce.	BTMU Singapore	February 25, 2013 - April 9, 2013	Rp9,732 to US$1	239	-
cf.	BTMU Singapore	February 27, 2013 - May 3, 2013	Rp9,743 to US$1	(273)	-
cg.	DBS	February 8, 2013 - April 9, 2013	Rp9,694 to US$1	1,236	-
ch.	DBS	February 21, 2013 - April 9, 2013	Rp9,731 to US$1	498	-
ci.	Barclays	February 28, 2013 - May 13, 2013	Rp9,708 to US$1	141	-
cj.	StandChart	February 4, 2013 - May 28, 2013	Rp9,795 to US$1	105	-
ck.	CIMB Niaga	February 11, 2013 - May 28, 2013	Rp9,729 to US$1	1,095	-
cl.	JP Morgan	March 6, 2013 - May 10, 2013	Rp9,735 to US$1	60	-
cm.	StandChart	March 11, 2013 - May 28, 2013	Rp9,787 to US$1	300	-
cn.	DBS	March 13, 2013 - May 28, 2013	Rp9,779 to US$1	414	-

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20.

DERIVATIVES (continued)

Currency Forward Contracts (continued)

No.	Counter-parties	Contract Period	IDR/USD Fixing Rate	Amount of Settlement Gain (Loss)
				(Rp)
			(in full amounts)	December 31, 2013	December 31, 2012
co.	BNP Paribas	March 14, 2013 - June 5, 2013	Rp9,790 to US$1	2,387	-
cp.	Barclays	March 14, 2013 - June 5, 2013	Rp9,788 to US$1	2,427	-
cq.	ING	March 15, 2013 - June 3, 2013	Rp9,784 to US$1	2,506	-
cr.	Natixis	March 19, 2013 - June 5, 2013	Rp9,793 to US$1	1,745	-
cs.	JP Morgan	March 19, 2013 - June 5, 2013	Rp9,787 to US$1	1,835	-
ct.	JP Morgan	March 19, 2013 - July 26, 2013	Rp9,870 to US$1	3,839	-
cu.	JP Morgan	March 19, 2013 - July 26, 2013	Rp9,870 to US$1	5,759	-
cv.	CIMB Niaga	March 20, 2013 - June 17, 2013	Rp9,835 to US$1	1,014	-
cw.	BNP Paribas	March 22, 2013 - July 3, 2013	Rp9,900 to US$1	1,004	-
cx.	Barclays	March 22, 2013 - July 3, 2013	Rp9,899 to US$1	2,116	-
cy.	CIMB Niaga	March 26, 2013 - June 5, 2013	Rp9,833 to US$1	620	-
cz.	CIMB Niaga	March 26, 2013 - June 5, 2013	Rp9,817 to US$1	620	-
da.	BNP Paribas	March 27, 2013 - June 5, 2013	Rp9,815 to US$1	2,362	-
db.	DBS	March 27, 2013 - June 5, 2013	Rp9,814 to US$1	840	-
dc.	Danareksa	March 26, 2013 - June 5, 2013	Rp9,834 to US$1	220	-
dd.	Merrill Lynch	April 9, 2013 - July 3, 2013	Rp9,807 to US$1	3,335	-
de.	Merrill Lynch	April 10, 2013 - July 3, 2013	Rp9,755 to US$1	2,130	-
df.	Merrill Lynch	April 25, 2013 - August 2, 2013	Rp9,805 to US$1	6,172	-
dg.	DBS	April 26, 2013 - August 2, 2013	Rp9,802 to US$1	12,937	-
dh.	StandChart	May 27, 2013 - July 26, 2013	Rp9,884 to US$1	4,728	-
di.	BTMU	May 31, 2013 - July 26, 2013	Rp9,929 to US$1	4,188	-
dj.	DBS	June 5, 2013 - August 26, 2013	Rp9,965 to US$1	11,988	-
dk.	Danareksa	June 5, 2013 - September 16, 2013	Rp9,996 to US$1	14,944	-
dl.	CIMB Niaga	June 12, 2013 - September 16, 2013	Rp9,988 to US$1	15,785	-
dm.	CIMB Niaga	June 20, 2013 - July 8, 2013	Rp10,015 to US$1	5,523	-
dn.	StandChart	June 21, 2013 - November 25, 2013	Rp10,240 to US$1	26,055	-
do.	CIMB Niaga	June 27, 2013 - January 6, 2014	Rp10,285 to US$1	-	-
dp.	CIMB Niaga	June 27, 2013 - January 6, 2014	Rp10,282 to US$1	-	-
dq.	BTMU	July 15, 2013 - August 16, 2013	Rp10,140 to US$1	5,830	-
dr.	DBS	July 15, 2013 - August 16, 2013	Rp10,125 to US$1	2,990	-
ds.	Merrill Lynch	August 21, 2013 - November 21, 2013	Rp11,660 to US$1	(4,136)	-
dt.	CIMB Niaga	August 22, 2013 - December 20, 2013	Rp11,502 to US$1	6,774	-
du.	Barclays	August 30, 2013 - October 1, 2013	Rp11,375 to US$1	(1,129)	-
dv.	BNP Paribas	September 9, 2013 - October 11, 2013	Rp11,538 to US$1	(3,167)	-
dw.	BNP Paribas	September 12, 2013 - January 6, 2014	Rp11,720 to US$1	-	-
dx.	Barclays	September 13, 2013 - January 6, 2014	Rp11,680 to US$1	-	-
dy.	BTMU	September 13, 2013 - January 6, 2014	Rp11,675 to US$1	-	-
dz.	Barclays	September 18, 2013 - January 6, 2014	Rp11,660 to US$1	-	-
ea.	BTMU	September 18, 2013 - January 6, 2014	Rp11,661 to US$1	-	-
eb.	BNP Paribas	September 19, 2013 - January 6, 2014	Rp11,199 to US$1	-	-

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20.

DERIVATIVES (continued)

Currency Forward Contracts (continued)

No.	Counter-parties	Contract Period	IDR/USD Fixing Rate	Amount of Settlement Gain (Loss)
				(Rp)
			(in full amounts)	December 31, 2013	December 31, 2012
ec.	Barclays	September 24, 2013 - November 6, 2013	Rp11,362 to US$1	(3,365)	-
ed.	JP Morgan	September 24, 2013 - November 6, 2013	Rp11,407 to US$1	(3,828)	-
ee.	BTMU	September 24, 2013 - November 1, 2013	Rp11,440 to US$1	(5,939)	-
ef.	ING	October 8, 2013 - January 6, 2014	Rp11,508 to US$1	-	-
eg.	Barclays	October 10, 2013 – January 6, 2014	Rp11,480 to US$1	-	-
eh.	DBS	October 10, 2013 – January 6, 2014	Rp11,452 to US$1	-	-
ei.	ING	October 11, 2013 – February 4, 2014	Rp11,388 to US$1	-	-
ej.	ING	October 11, 2013 – February 4, 2014	Rp11,320 to US$1	-	-
ek.	JP Morgan	October 17, 2013 – January 6, 2014	Rp11,175 to US$1	-	-
el.	DBS	October 21, 2013 – February 4, 2014	Rp11,135 to US$1	-	-
em.	BTMU	November 14, 2013 – January 13, 2014	Rp11,495 to US$1	-	-
en.	DBS	November 18, 2013 – January 13, 2014	Rp11,572 to US$1	-	-
eo.	BTMU	November 19, 2013 – January 13, 2014	Rp11,442 to US$1	-	-
ep.	BNP Paribas	November 19, 2013 – January 13, 2014	Rp11,463 to US$1	-	-
eq.	Barclays	November 26, 2013 – January 29, 2014	Rp11,730 to US$1	-	-
er.	BNP Paribas	November 19, 2013 – January 6, 2014	Rp11,935 to US$1	-	-
es.	ING	November 29, 2013 – January 13, 2014	Rp11,425 to US$1	-	-
et.	DBS	November 29, 2013 – January 13, 2014	Rp11,887 to US$1	-	-
eu.	DBS	December 2, 2013 – February 4, 2014	Rp11,572 to US$1	-	-
		Total		134,477	116,147

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

21.

FINANCIAL ASSETS AND LIABILITIES

The Group has various financial assets such as trade and other accounts receivable, and unrestricted and restricted cash and cash equivalents, which arise directly from the Group’s operations. The Group’s principal financial liabilities, other than derivatives, consist of loans and bonds payable, procurement payable, and trade accounts payable and others. The main purpose of these financial liabilities is to finance the Group’s operations. The Company also enters into derivative transactions, primarily cross currency swaps, interest rate swaps, and currency forward contracts, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies.

The following table sets forth the carrying values and estimated fair values of the Group’s financial instruments that are carried in the consolidated statement of financial position:

		Carrying Amount		Fair Value
		December 31,	December 31,	December 31,	December 31,
		2013	2012	2013	2012
Current Financial Assets
Cash and cash equivalents		2,233,532	3,917,236	2,233,532	3,917,236
Accounts receivable - trade
	and others - net	2,284,633	2,061,160	2,284,633	2,061,160
Derivative assets		195,569	69,654	195,569	69,654
Other current financial
	assets - net	31,673	13,382	31,673	13,382
Total current financial
	assets	4,745,407	6,061,432	4,745,407	6,061,432
Non-current Financial Assets
Due from related parties		7,167	10,358	6,174	9,539
Other non-current
	financial assets - net	1,557,367	1,543,140	1,556,622	1,541,388
Total non-current
	financial assets	1,564,534	1,553,498	1,562,796	1,550,927
Total Financial Assets		6,309,941	7,614,930	6,308,203	7,612,359
Current Financial Liabilities
Short-term loan		1,499,849	299,529	1,499,849	299,529
Accounts payable - trade		339,310	231,737	339,310	231,737
Procurement payable		3,064,287	2,737,850	3,064,287	2,737,850
Accrued expenses		2,107,467	1,961,285	2,107,467	1,961,285
Deposits from customers		49,335	43,825	49,335	43,825
Derivative liabilities		36,903	81,241	36,903	81,241
Loans payable - current
	portion	2,443,367	2,669,218	2,624,742	2,791,147
Bonds payable - current
	portion	2,356,310	1,329,175	2,372,560	1,343,205
Other current financial
	liabilities	362,448	289,164	362,448	289,164
Total current financial
	liabilities	12,259,276	9,643,024	12,456,901	9,778,983
Non-current Financial
	Liabilities
Due to related parties		33,301	42,789	28,687	39,405
Obligations under finance lease
net of current maturities		3,594,112	3,101,910	3,594,112	3,101,910
Loans payable -
	non-current portion	4,345,267	3,703,822	3,276,815	3,331,132
Bonds payable -
	non-current portion	13,285,207	13,986,507	14,075,516	15,318,676
Other non-current financial liabilities		82,855	69,273	74,117	66,433
Total non-current
	financial liabilities	21,340,742	20,904,301	21,049,247	21,857,556
Total Financial Liabilities		33,600,018	30,547,325	33,506,148	31,636,539

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

21.

FINANCIAL ASSETS AND LIABILITIES (continued)

The fair values of the financial assets and liabilities are presented at the amounts at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value:

Short-term financial assets and liabilities:

·

Short-term financial instruments with remaining maturities of one year or less (cash and cash equivalents, trade and other accounts receivable, other current financial assets, short-term loan, trade accounts payable, procurement payable, accrued expenses, deposits from customers and other current financial liabilities).

These financial instruments approximate their carrying amounts largely due to their short-term maturities.

·

Derivative financial instruments

Cross currency swap contracts

These derivatives are measured at their fair values using internal valuation techniques as no quoted market prices exist for such instruments. The principal technique used to value these instruments is the use of discounted cash flows. The key inputs include interest rate yield curves, foreign exchange rates, Credit Default Spread (“CDS”), and the spot price of the underlying instruments.

Interest rate swap contracts

These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include interest rate yield curves and payment dates.

Currency forward contracts

These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include foreign exchange rates, payment dates and the spot price of the underlying instruments.

Long-term financial assets and liabilities:

·

Long-term fixed-rate and variable-rate financial liabilities (unquoted loans and bonds payable)

The fair value of these financial liabilities is determined by discounting future cash flows using applicable rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities.

·

Other long-term financial assets and liabilities (due from/to related parties, obligations under finance lease and other non-current financial assets)

Estimated fair value is based on discounted value of future cash flows adjusted to reflect counterparty risk (for financial assets) and the Group’s own credit risk (for financial liabilities) and using risk-free rates for similar instruments.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

21.

FINANCIAL ASSETS AND LIABILITIES (continued)

Long-term financial assets and liabilities (continued):

·

Financial instruments quoted in an active market

The fair value of the bonds issued by the Company which are traded in an active market is determined with reference to their quoted market prices.

For equity investments classified as available-for-sale, the fair value is determined based on the latest market quotation as published by the Indonesia Stock Exchange as of                  December 31, 2013 and 2012.

Fair Value Hierarchy

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument is not active, an entity establishes fair value by using a valuation technique. The objective of using a valuation technique is to establish what the transaction price would have been on the measurement date in an arm's length exchange motivated by normal business considerations. Valuation techniques include using recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the entity uses that technique. The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. Periodically, the Company calibrates the valuation technique and tests it for validity using prices from any observable current market transactions in the same instrument (i.e., without modification or repackaging) or based on any available observable market data.

The Company’s fair value hierarchy as of December 31, 2013 and 2012 is as follows:

December 31, 2013

Quoted pricesSignificant

in activeand

markets forobservable

identicalinputs,Significant

assets ordirectly orunobservable

liabilitiesindirectlyinputs

TOTAL(Level 1)(Level 2)(Level 3)

Current Financial Assets

Accounts receivable - trade and others - net

2,284,633

-

-2,284,633

Derivative assets

195,569

-

195,569

-

Other current financial assets - net

31,673

-

31,673-

Non-Current Financial Assets

Due from related parties - net

6,174

-

6,174-

Other non-current financial assets - net

1,556,622

1,393,722162,900

-

Total Financial Assets

4,074,671

1,393,722

396,316

2,284,633

Current Financial Liabilities

Derivative liabilities

36,903

-

36,903-

Loans payable - current maturities

2,624,742

-

2,624,742-

Bonds payable - current maturities

2,372,560

2,372,560--

Other current financial liabilities

362,448

-

362,448-

Non-current Financial Liabilities

Due to related parties

28,687

-

28,687-

Obligation under finance lease

3,594,112

-

3,594,112-

Loans payable - net of current maturities

3,276,815

-

3,276,815-

Bonds payable - net of current maturities

14,075,516

14,075,516--

Other non-current financial liabilities

74,117

-

74,117

-

Total Financial Liabilities

26,445,900

16,448,076

9,997,824

-

21. FINANCIAL ASSETS AND LIABILITIES (continued)

The Company’s fair value hierarchy as of December 31, 2013 and 2012 is as follows: (continued)

December 31, 2012

Quoted prices Significant

in activeand

markets forobservable

identicalinputs,Significant

assets ordirectly orunobservable

liabilitiesindirectlyinputs

TOTAL(Level 1)(Level 2)(Level 3)

Current Financial Assets

Accounts receivable - trade and others - net

2,061,160

-

-2,061,160

Derivative assets

69,654

-

69,654

-

Other current financial assets - net

13,382

-

13,382-

Non-Current Financial Assets

Due from related parties - net

9,539

-

9,539-

Other non-current financial assets - net

1,541,388

1,369,740171,648-

Total Financial Assets

3,695,123

1,369,740

264,2232,061,160

Current Financial Liabilities

Derivative liabilities

81,241

-

81,241-

Loans payable - current maturities

2,791,147

-

2,791,147-

Bonds payable - current maturities

1,343,205

1,343,205--

Other current financial liabilities

289,164

-

289,164-

Non-current Financial Liabilities

Due to related parties

39,405

-

39,405-

Obligation under finance lease

3,101,910

-

3,101,910-

Loans payable - net of current maturities

3,331,132

-

3,331,132-

Bonds payable - net of current maturities

15,318,676

15,318,676--

Other non-current financial liabilities

66,433

-

66,433-

Total Financial Liabilities

26,362,313

16,661,881

9,700,432-

For the years ended December 31, 2013 and 2012, there were no transfers between Level 1 and Level 2 fair value measurements.

22.

EMPLOYEE BENEFIT OBLIGATIONS - NET OF CURRENT PORTION

This account consists of the non-current portions of employee benefit obligations as follows:

	December 31, 2013	December 31, 2012
Post-retirement healthcare (Note 30)	715,398	632,735
Labor Law 13 (Note 30)	293,253	249,313
Service award	35,378	41,479
Accumulated leave benefits	2,385	2,697
Total	1,046,414	926,224

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

23. CAPITAL STOCK

The Company’s capital stock ownership is as follows:

			Number of		Percentage
			Shares Issued		of Ownership
Stockholders			and Fully Paid	Amount	(%)
December 31, 2013
A Share
	Government		1	-	-
B Shares
	Ooredoo Asia, Pte. Ltd.		3,532,056,600	353,206	65.00
	Government		776,624,999	77,662	14.29
	SKAGEN Funds (SKAGEN AS)		298,880,950	29,888	5.50
	Director:
	Fadzri Sentosa		10,000	1	0.00
	Others (each holding below 5%)		826,360,950	82,636	15.21
Total			5,433,933,500	543,393	100.00
December 31, 2012
A Share
	Government		1	-	-
B Shares
	Ooredoo Asia, Pte. Ltd.		3,532,056,600	353,206	65.00
	Government		776,624,999	77,662	14.29
	SKAGEN Funds (SKAGEN AS)		299,382,400	29,938	5.51
	Director:
		Fadzri Sentosa	10,000	1	0.00
	Others (each holding below 5%)		825,859,500	82,586	15.20
Total			5,433,933,500	543,393	100.00

The “A” share is a special share held by the Government and has special voting rights. The material rights and restrictions which are applicable to the “B” shares are also applicable to the “A” share, except that the Government may not transfer the “A” share, which has a veto right with respect to                                (i) amendment to the objective and purposes of the Company; (ii) increase of capital without pre-emptive rights; (iii) merger, consolidation, acquisition and demerger; (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution, bankruptcy and liquidation of the Company. The holder of “A” share also has the right to appoint one director and one commissioner of the Company.

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

24.

REVENUES

The details of this account consist of the following:

			Year ended December 31
			2013	2012
	Cellular
		Usage charges	9,281,316	8,629,697
		Value-added services	8,408,278	7,868,391
		Interconnection services (Note 36)	2,430,823	2,174,964
		Tower leasing (Note 33n)	573,263	504,857
		Monthly subscription charges	127,628	136,429
		Upfront discount and Customer Loyalty Program (Note 2k)	(1,671,899)	(1,022,262)
		Others	225,229	197,253
		Sub-total	19,374,638	18,489,329
	MIDI
		Internet Protocol Virtual Private Network (IP VPN)	706,005	711,427
		Internet	696,238	422,099
		Multiprotocol Label Switching (MPLS)	380,804	304,868
		World link and direct link	340,739	314,878
		Application services	283,760	251,893
		Satellite lease	278,244	213,052
		Leased line	169,293	148,635
		Digital data network	110,117	112,597
		Frame net	93,391	135,761
		Value added service	52,241	173,940
		Others	155,015	118,883
		Sub-total	3,265,847	2,908,033
	Fixed Telecommunications
		International Calls	1,019,980	801,442
		Fixed Line	135,168	121,735
		Fixed Wireless	59,639	98,273
		Sub-total	1,214,787	1,021,450
	Total		23,855,272	22,418,812
The details of net revenues (included as part of cellular revenue - value added services) received by the Company from agency relationships are as follows:
			Year ended December 31
			2013	2012
	Gross revenues		8,593,805	7,966,505
	Compensation to value added service providers		(185,527)	(98,114)
	Net revenues		8,408,278	7,868,391

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

24.

REVENUES (continued)

Operating revenues from related parties amounted to Rp2,059,851 and Rp1,812,619 for the years ended December 31, 2013 and 2012, respectively (Note 31). These amounts represent 8.64% and 8.09% of the total operating revenues for the years ended December 31, 2013 and 2012, respectively.

The operating revenues from interconnection services are presented on a gross basis (Note 2k).

25.

EXPENSES - COST OF SERVICES

The details of this account consist of the following:

	Year ended December 31
	2013	2012
Interconnection (Note 36)	2,946,483	2,557,775
Radio frequency fee (Notes 33p and 35)	2,225,610	1,961,377
Maintenance	981,191	829,757
Utilities	891,951	842,963
Rent (Note 33o)	726,915	726,872
Blackberry access fee	517,993	519,611
Leased circuits (Note 33s)	464,438	349,114
USO (Note 35)	330,469	273,943
Cost of SIM cards and pulse reload vouchers	253,343	234,239
Installation	161,404	169,440
Concession fee (Note 35)	149,354	141,111
Delivery and transportation	129,986	122,348
Communication Network	70,428	53,956
License	45,338	54,177
Billing and collection	28,995	41,767
Cost of handsets and modems	10,834	12,392
Others	21,801	14,894
Total	9,956,533	8,905,736

Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers (Note 2k).

102 \* Arabic  \* MERGEFORMAT 102

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and for the Year Then Ended

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

26.  EXPENSES - PERSONNEL

The details of this account consist of the following:

		Year ended December 31
		2013	2012
Salaries		605,798	547,923
Incentives and other employee benefits		318,897	325,312
Employee income tax		257,395	167,205
Bonuses		153,160	127,746
Severance benefits under ESP and VSS*		137,633	6,330
Post-retirement healthcare benefits (Note 30)		102,572	92,656
Medical expense		59,039	56,782
Separation, appreciation and compensation expense
	under Labor Law No. 13/2003 (Note 30)	55,394	57,758
Net periodic pension cost (Note 30)		13,504	24,719
Early retirement		5,075	1,210
Others		19,127	19,553
Total		1,727,594	1,427,194

*On January 2, 2012, Lintasarta’s Boards of Directors issued Directors’ Decree No.015/Direksi/40000/2012, regarding the organizational Restructuring Program through an offering scheme on the basis of mutual agreement between Lintasarta and certain employees (“VSS = Voluntary Separation Scheme”) that became effective on the same date. For the year ended December 31, 2012, there were 24 employees of Lintasarta who availed themselves of the scheme and the benefit paid amounted to Rp6,330.

On December 12, 2013, the Company’s Directors issued Directors’ Decree No. 050/AC0-ACBA/HRD-PKG/13, “Employment SeparationProgram (“ESP”) due to Reorganization”. Under this decree, there were 214employees of the Company who were qualified for this program after the approval from the Board of Directors,and the benefit to be paid amounted to Rp137,633.

The personnel expenses capitalized to properties under construction and installation for the            years ended December 31, 2013 and 2012 amounted to Rp50,623 and Rp52,339, respectively.

27.

EXPENSES - GENERAL AND ADMINISTRATION

The details of this account consist of the following:

	Year ended December 31
	2013	2012
Professional fees	365,348	186,886
Rent	136,205	117,845
Provision for impairment of receivables - net (Note 5)	102,307	56,163
Transportation	69,829	61,231
Insurance	33,857	37,582
Training, education and research	32,033	26,443
Social activities	30,269	27,683
Office	28,051	28,705
Public relations	22,374	13,084
Utilities	15,044	14,636
Land and building taxes	8,128	658
Communication	6,973	7,589
Membership	5,122	4,616
Others (each below Rp5,000)	45,994	42,419
Total	901,534	625,540

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

28.

FINANCING COST

The details of this account consist of the following:

		Year ended December 31
		2013	2012
Interest on loans		1,697,679	1,709,946
Finance charges under finance lease		446,917	261,458
Amortization of debt and bonds / notes issuance
	costs, consent solicitation fees and discount (Notes 14, 18 and 19)	56,208	88,878
Interest expense from Lintasarta’s USO Project		8,391	11,256
Bank charges		2,900	5,812
Total		2,212,095	2,077,350

29.

GAIN ON TOWER SALE

On February 7, 2012, the Company entered into an Asset Sale Agreement with PT Tower Bersama Infrastructure Tbk and its subsidiary, PT Solusi Menara Bersama (collectively referred to as “Tower Bersama”), whereby the Company agreed to sell 2,500 of its telecommunication towers to Tower Bersama for a total consideration of US$518,500, consisting of US$406,000 paid upfront and a maximum potential deferred payment of US$112,500. The upfront payment includes PT Tower Bersama Infrastructure Tbk's shares of not less than 5% of the increase in its capital stock (upon the Rights Issue of PT Tower Bersama Infrastructure Tbk). Based on the agreement, the Company also agreed to lease back the spaces in the 2,500 telecommunication towers for a 10-year period with fixed monthly lease rate of US$1,300 per tower slot (in full amount). The leases have an option to be renewed for a further 10-year period.

On August 2, 2012, the Company and Tower Bersama closed the deal on the sale-and-leaseback transaction of 2,500 telecommunication towers. On the closing date of  such transaction, the Company received cash amounting to US$326,289 (equal to Rp3,092,894) and obtained 5% ownership (equal to 239,826,310 shares) in Tower Bersama  with a value of US$103,101 (equivalent to Rp977,292) (Note12).

The total consideration of US$429,390 (equal to Rp4,070,187) is allocated to the sales of property and equipment amounting to Rp3,870,600 and the remainder is allocated to prepaid land lease and existing tower lease contracts from the 2,500 towers. The total carrying amount of the separately identifiable components of the transaction is Rp1,534,494 which includes the carrying amount of property and equipment amounting to Rp1,372,674. As of the agreement closing date, the Company recorded the excess of the selling price over the carrying amounts amounting to Rp2,535,693 (including the Rp2,497,926 from the sale of property and equipment) as “Gain on Sale of Towers” of Rp1,125,192, and “Deferred Gain on Sale-and-Leaseback Transactions” of Rp1,410,501. The deferred gain will be amortized over the term of the lease, being 10 years.

For the year ended December 31, 2012, the Company recognized total “Gain on Sale of Towers” of Rp1,183,963, which includes the amortization of the “Deferred Gain on Sale-and-Leaseback Transactions”. As of December 31, 2013 and 2012, the balances of the current portion of outstanding deferred gain on sale-and-leaseback transactions amounting to Rp141,050 each are presented as part of “Other Current Liabilities”, while the balances of the Iong-term portion amounting to Rp1,069,630 and Rp1,210,680, respectively, are presented as part of “Other Non-current Liabilities”.

For the years ended December 31, 2013 and 2012, the Company recorded amortization of deferred gain on sale-and-leaseback transactions amounting to Rp141,050 and Rp58,771, respectively.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN

The Company, Satelindo and Lintasarta have defined benefit and defined contribution pension plans covering substantially all of their respective qualified permanent employees.

Defined Benefit Pension Plan

The Company, Satelindo and Lintasarta provide defined benefit pension plans to their respective employees under which pension benefits to be paid upon retirement are based on the employees’ most recent basic salary and number of years of service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plans. Pension contributions are determined by periodic actuarial calculations performed by Jiwasraya.

Based on an amendment dated December 22, 2000 of the Company’s pension plan, which was further amended on March 29, 2001, the benefits and the premium payment pattern were changed.
Before the amendment, the premium was regularly paid annually until the plan would be fully funded and the benefits consisted of retirement benefit (regular monthly or lump-sum pension) and death insurance. In conjunction with the amendment, the plan would be fully funded after making installment payments up to January 2002 of the required amount to fully fund the plan determined as of September 1, 2000. The amendment also includes an additional benefit in the form of thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri (“Moslem Holiday”).

The amendment covers employees registered as participants of the pension plan as of
September 1, 2000 and includes an increase in basic salary pension by 9% compounded annually starting from September 1, 2001. The amendment also stipulates that there will be no increase in the premium even in cases of mass employee terminations or changes in marital status.

The total premium installments based on the amendment amounted to Rp355,000 and were paid on due dates.

On March 1, 2007, the Company entered into an agreement with Jiwasraya to provide defined death insurance plan to 1,276 employees as of January 1, 2007, who are not covered by the defined benefit pension plan as stated above. Based on the agreement, a participating employee will receive:

·

Expiration benefit equivalent to the cash value at the normal retirement age, or

·

Death benefit not due to accident equivalent to 100% of insurance money plus cash value when the employee dies not due to accident, or

·

Death benefit due to accident equivalent to 200% of insurance money plus cash value when the employee dies due to accident.

The premium of Rp7,600 was fully paid on March 29, 2007. Subsequently, in August 2007, February to December 2008, January to December 2009, January to December 2010, January to December 2011,  January to December 2012 and January to December 2013, the Company made payments for additional premium of Rp275 for additional 55 employees, Rp805 for additional 161 employees, Rp415 for additional 81 employees, Rp120 for additional 14 employees, Rp378 for additional 41 employees, Rp883 for additional 143 employees and Rp782 for additional 117 employees, respectively.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Defined Benefit Pension Plan (continued)

On June 25, 2003, Satelindo entered into an agreement with Jiwasraya to amend the benefits and premium payment pattern of the former’s pension plan. The amendment covers employees registered as participants of the pension plan as of December 25, 2002 up to June 25, 2003. Other new conditions include the following:

·

An increase in pension basic salary at 6% compounded annually starting from December 25, 2002

·

Thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri

·

An increase in periodic payment of retirement benefit at 6% compounded annually starting one year after receiving periodic retirement benefit for the first time

·

If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.

On April 15, 2005, Lintasarta entered into an agreement with Jiwasraya to replace their existing agreement. Based on the new agreement, the benefits and the premium payment pattern were changed. This agreement is effective starting January 1, 2005. The total premium installments based on the agreement amounted to Rp61,623, which is payable in 10 annual installments starting 2005 until 2015.  

The new agreement covers employees registered as participants of the pension plan as of
April 1, 2003. The conditions under the new agreement include the following:

·

An increase in pension basic salary by 3% (previously was estimated at 8%) compounded annually starting April 1, 2003

·

An increase in periodic payment of retirement benefit at 5% compounded annually starting one year after receiving periodic retirement benefit for the first time  

·

If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.

On May 2, 2005, Lintasarta entered into an agreement with Jiwasraya to amend the above agreement. The amendment covers employees registered as participants of the pension plan as of April 1, 2003 up to November 30, 2004 with additional 10 annual premium installments totaling Rp1,653 which are payable starting 2005 until 2015.

The contributions made by Lintasarta to Jiwasraya amounted to Rp9,653 each for the years ended December 31, 2013 and 2012, respectively.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Defined Benefit Pension Plan (continued)

The net periodic pension cost for the pension plans of the Company and Lintasarta for the               years ended December 31, 2013 and 2012 was calculated based on actuarial valuations as of December 31, 2013 and 2012, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:

	Year ended December 31
	2013	2012
Annual discount rate	9.0%	6.0%
Expected annual rate of return on plan assets	4.5, 6.0 and 9.0%	4.5, 6.0 and 8.0%
Annual rate of increase in compensation	3.0, 6.0 and 9.0%	3.0, 6.0 and 9.0%
Mortality rate (Indonesian Mortality Table - TMI)	TMI 2011	TMI 2011

a.

The composition of the net periodic pension cost is as follows:

2013
	The Company	Lintasarta	Total
Interest cost	28,829	3,434	32,263
Service cost	28,310	3,722	32,032
Amortization of unrecognized actuarial loss	-	1,797	1,797
Return on plan assets	(42,033)	(4,014)	(46,047)
Immediate recognition of past service      cost - vested benefit	-	(2,803)	(2,803)
Curtailment loss	6,723	-	6,723
Settlement gain	(10,461)	-	(10,461)
Net periodic pension cost (Note 26)	11,368	2,136	13,504

2012
	The Company	Lintasarta	Total
Interest cost	28,346	3,590	31,936
Service cost	25,617	3,219	28,836
Amortization of unrecognized actuarial loss	-	1,185	1,185
Return on plan assets	(37,479)	(3,607)	(41,086)
Curtailment loss	-	1,441	1,441
Settlement loss	-	2,407	2,407
Net periodic pension cost (Note 26)	16,484	8,235	24,719

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Defined Benefit Pension Plan (continued)

b.

The funded status of the plansis as follows:

		December 31, 2013	December 31, 2012
Plan assets at fair value		549,859	576,335
Projected benefit obligation		(422,206)*	(554,209)
Excess of plan assets over projected
	benefit obligation	127,653	22,126
Unrecognized actuarial loss (gain)		(41,988)	68,175
Total prepaid pension cost		85,665	90,301

^{* net of curtailment effect during 2013 due to ESP(Note 26)}

c.

The movements in the fair value of plan assets are as follows:

2013
		The Company	Lintasarta	Total
Fair value of plan assets
	at beginning of year	513,316	63,019	576,335
Expected return on plan assets		42,033	4,014	46,047
Actuarial gain (loss) on plan assets		5,877	(3,860)	2,017
Contributions		782	9,653	10,435
Benefit payments		(83,099)	(1,876)	(84,975)
Fair value of plan assets at end of year		478,909	70,950	549,859

2012
		The Company	Lintasarta	Total
Fair value of plan assets
	at beginning of year	476,890	62,012	538,902
Expected return on plan assets		37,479	3,607	41,086
Actuarial gain (loss) on plan assets		7,815	(3,175)	4,640
Contributions		883	9,653	10,536
Actual benefits paid		(9,751)	(9,078)	(18,829)
Fair value of plan assets at end of year		513,316	63,019	576,335

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Defined Benefit Pension Plan (continued)

d.

The movements in the present value of the defined benefit obligation are as follows:

2013
	The Company	Lintasarta	Total
Defined benefit obligation at beginning of year	493,854	60,355	554,209
Interest cost	28,829	3,434	32,263
Current service cost	28,310	3,722	32,032
Actuarial gain (loss) on obligation	1,763	(473)	1,290
Immediate recognition of prior service cost	-	(2,803)	(2,803)
Benefit payments outside settlement	(14,586)	(629)	(15,215)
Effect of changes in actuarial assumption	(105,924)	(13,582)	(119,506)
Effect of curtailment	8,129	-	8,129
Effect of settlement	(68,193)	-	(68,193)
Defined benefit obligation at end of year	372,182	50,024	422,206

2012
	The Company	Lintasarta	Total
Defined benefit obligation at beginning of year	409,808	53,266	463,074
Interest cost	28,346	3,590	31,936
Current service cost	25,617	3,219	28,836
Actuarial loss on obligation	2,434	356	2,790
Effect of settlement	-	(4,360)	(4,360)
Actual benefit paid	(9,751)	(3,909)	(13,660)
Effect of curtailment	-	917	917
Effect of changes in actuarial assumptions	37,400	7,276	44,676
Defined benefit obligation at end of year	493,854	60,355	554,209

e. The movements in the prepaid pension cost are as follows:

2013
	The Company	Lintasarta	Total
Prepaid pension cost at beginning of year	60,130	30,171	90,301
Contribution to Jiwasraya	782	9,653	10,435
Net periodic pension cost	(11,368)	(2,136)	(13,504)
Refund from Jiwasraya	(320)	(1,247)	(1,567)
Prepaid pension cost at end of year	49,224	36,441	85,665

2012
	The Company	Lintasarta	Total
Prepaid pension cost at beginning of year	75,731	29,561	105,292
Contribution to Jiwasraya	883	9,653	10,536
Net periodic pension cost	(16,484)	(8,235)	(24,719)
Refund from Jiwasraya	-	(808)	(808)
Prepaid pension cost at end of year	60,130	30,171	90,301

30. PENSION PLAN (continued)

Defined Benefit Pension Plan (continued)

f.

Prepaid pension cost consists of:

		December 31, 2013	December 31, 2012
Current portion (presented as part of
	“Prepaid expenses - others”)
	Company	1,276	1,224
	Lintasarta	2,563	232
		3,839	1,456
Long-term portion (presented as “Long-term
	prepaid pension - net of current portion”) (Note 31)
	Company	47,948	58,906
	Lintasarta	33,878	29,939
		81,826	88,845
Total prepaid pension cost		85,665	90,301

The major categories of plan assets as a percentage of the fair value of total plan are as follows:

	December 31, 2013	December 31, 2012
Investments in shares of stock and properties	46.17%	7.10%
Investments in mutual fund	43.93%	75.34%
Investments in time deposits	6.33%	12.13%
Investments in debt securities	3.57%	5.43%
Other investments	0.00%	0.00%

The overall expected rate of return on assets is determined based on the market expectations prevailing on that date, applicable to the period over which the obligation is to be settled.

Defined Contribution Pension Plan

In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans. Starting June 2004, the Company also assisted ex-IM3 employees in establishing their defined contribution pension plan. Under the defined contribution pension plan, the employees contribute 10% - 20% of their basic salaries, while the Company does not contribute to the plans. Total contributions of employees for the years ended December 31, 2013 and 2012 amounted to Rp53,473 and Rp49,836, respectively, which include total contributions for key management personnel amounting to Rp2,436 for each of the years ended December 31, 2013 and 2012. The plan assets are being administered and managed by seven financial institutions appointed by the Company and Satelindo, based on the choice of the employees.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Labor Law No. 13/2003

The Company, Lintasarta and IMM also accrue benefits under Labor Law No. 13/2003 (“Labor Law”) dated March 25, 2003. Their employees will receive the benefits under either this law or the defined benefit pension plan whichever is higher.

The net periodic pension cost of the Company and the subsidiaries under the Labor Law for the            years ended December 31, 2013 and 2012 was calculated based on actuarial valuations as of December 31, 2013 and 2012, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:

	Year ended December 31
	2013	2012
Annual discount rate	9.0 and 9.5%	6.0 and 6.5%
Annual rate of increase in compensation	7.5 and 8.5%	7.5 and 8.5%

a.

The composition of the periodic pension cost under the Labor Law is as follows:

Year ended 2013
			The Company	Lintasarta	IMM	Total
Service cost			30,321	4,160	2,917	37,398
Interest cost			19,427	2,944	1,279	23,650
Amortization of unrecognized
	actuarial loss		4,485	740	167	5,392
Immediate recognition of past
		service cost - vested benefit	-	728	-	728
Amortization of unrecognized
		past service cost	-	653	28	681
Curtailment gain			(9,265)	-	-	(9,265)
Settlement gain			(3,190)	-	-	(3,190)
Net periodic pension
	cost under the Labor
	Law (Note 26)		41,778	9,225	4,391	55,394

Year ended 2012
		The Company	Lintasarta	IMM	Total
Service cost		25,711	3,289	2,632	31,632
Interest cost		18,776	1,775	1,166	21,717
Amortization of unrecognized
	actuarial loss (gain)	4,729	(237)	110	4,602
Amortization of unrecognized
	past service cost	-	653	28	681
Immediate recognition of past
	service cost - vested benefit	-	-	(523)	(523)
Curtailment gain		-	(351)	-	(351)
Net periodic pension
	cost under the Labor
	Law (Note 26)	49,216	5,129	3,413	57,758

30.

PENSION PLAN (continued)

Labor Law No. 13/2003 (continued)

b.

The composition of the accrued pension cost under the Labor Law is as follows:

	December 31, 2013	December 31, 2012
Projected benefit obligation	244,877*	367,641
Unrecognized actuarial gain (loss)	60,887	(105,413)
Unrecognized past service cost	(7,115)	(7,795)
Net accrued pension cost under the Labor Law	298,649	254,433

^{* net of curtailment effect during 2013 due to ESP (Note 26)}

c.

The movements in the present value of the pension cost obligation under the Labor Law are as follows:

Year ended 2013
		The Company	Lintasarta	IMM	Total
Benefit obligation
	at beginning of year	299,410	48,489	19,742	367,641
Current service cost		30,321	4,160	2,917	37,398
Interest cost		19,427	2,944	1,279	23,650
Actual benefits paid		(1,074)	(463)	(143)	(1,680)
Effect of changes in actuarial Assumptions		(148,064)	(18,446)	(7,139)	(173,649)
Effect of curtailment		(6,935)	-	-	(6,935)
Effect of settlement		(9,498)	-	-	(9,498)
Actuarial gain (loss) on Obligation		(682)	10,904	(3,000)	7,222
Immediate recognition of past    service cost		-	728	-	728
Benefit obligation
	at end of year	182,905	48,316	13,656	244,877

Year ended 2012
		The Company	Lintasarta	IMM	Total
Benefit obligation
	at beginning of year	250,988	24,160	15,987	291,135
Current service cost		25,711	3,289	2,632	31,632
Interest cost		18,776	1,775	1,166	21,717
Actuarial loss (gain) on
	Obligation	(889)	16,734	57	15,902
Actual benefits paid		(1,290)	(186)	(878)	(2,354)
Effect of curtailment		-	(395)	-	(395)
Immediate recognition    of past service cost		-	-	(523)	(523)
Effect of changes in
	actuarial assumptions	6,114	3,112	1,301	10,527
Benefit obligation
	at end of year	299,410	48,489	19,742	367,641

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Labor Law No. 13/2003 (continued)

d.

The movements in the accrued pension cost under the Labor Law are as follows:

Year ended 2013
		The Company	Lintasarta	IMM	Total
Accrued pension cost under
	the Labor Law at beginning
	of year	213,139	26,432	14,862	254,433
Periodic Labor Law cost		41,778	9,225	4,391	55,394
Benefit payment		(10,572)	(463)	(143)	(11,178)
Accrued pension cost under
	the Labor Law at end
	of year	244,345	35,194	19,110	298,649

Year ended 2012
		The Company	Lintasarta	IMM	Total
Accrued pension cost under
	the Labor Law at beginning
	of year	165,213	21,489	12,327	199,029
Periodic Labor Law cost		49,216	5,129	3,413	57,758
Benefit payment		(1,290)	(186)	(878)	(2,354)
Accrued pension cost under
	the Labor Law at end
	of year	213,139	26,432	14,862	254,433

The current portion of pension cost under the Labor Law included in accrued expenses (Note 17) amounted to Rp5,396 and Rp5,120 as of December 31, 2013and2012, respectively. The non-current portion included in employee benefit obligations amounted to Rp293,253 andRp249,313 (Note 22) as of  December 31, 2013and2012, respectively.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Post-retirement Healthcare

The Company provides post-retirement healthcare benefits to its employees who leave the Company after the employees fulfill the early retirement requirement. The spouse and children who have been officially registered in the administration records of the Company are also eligible to receive benefits. If the employees die, the spouse and children are still eligible for the post-retirement healthcare until the spouse dies or remarries and the children reach the age of 25 or get married.

The utilization of post-retirement healthcare is limited to an annual maximum ceiling that refers to monthly pension from Jiwasraya as follows:

·

16 times the Jiwasraya monthly pension for a pensioner who receives monthly pension from Jiwasraya

·

16 times the equality monthly pension for a pensioner who became permanent employee after September 1, 2000

·

16 times the last monthly pension for a pensioner who retires after July 1, 2003 and does not receive Jiwasraya monthly pension.

The net periodic post-retirement healthcare cost for the years ended December 31, 2013 and 2012 was calculated based on actuarial valuations as of December 31, 2013 and 2012, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:

	Year ended December 31
	2013	2012
Annual discount rate	9.5%	7.0%
Ultimate cost trend rate	6.0%	6.0%
Next year trend rate	8.0%	10.0%
Period to reach ultimate cost trend rate	1 year	2 years

a.

The composition of the periodic post-retirement healthcare cost - netis as follows:

	Year ended December 31
	2013	2012
Interest cost	70,832	54,484
Service cost	40,321	27,712
Amortization of unrecognized past service cost	7,662	7,740
Amortization of unrecognized actuarial loss	20,728	2,720
Curtailment gain	(31,752)	-
Settlement gain	(5,219)	-
Net periodic post-retirement healthcare cost (Note 26)	102,572	92,656

30.

PENSION PLAN (continued)

Post-retirement Healthcare (continued)

b.

The composition of the accrued post-retirement healthcare cost is as follows:

	December 31, 2013	December 31, 2012
Projected benefit obligation	482,526*	1,017,673
Unrecognized actuarial gain (loss)	245,671	(362,116)
Unrecognized past service cost	-	(7,662)
Net accrued post-retirement healthcare cost	728,197	647,895

^{* net of curtailment effect during 2013 due to ESP (Note 26).}

c.

The movements in the present value of defined benefit obligation are as follows:

	Year ended December 31
	2013	2012
Balance at beginning of year	1,017,673	687,789
Interest cost	70,832	54,484
Service cost	40,321	27,712
Actual benefits paid	(11,569)	(13,470)
Effect of changes in actuarial assumptions	(317,082)	239,705
Effect of curtailment	(21,046)	-
Effect of settlement	(10,700)	-
Actuarial gain (loss) on obligation	(285,903)	21,453
Balance at end of year	482,526	1,017,673

d.

The movements in the accrued post-retirement healthcare cost are as follows:

	Year ended December 31
	2013	2012
Balance at beginning of year	647,895	568,709
Net periodic post-retirement healthcare cost	102,572	92,656
Benefit payment	(22,270)	(13,470)
Balance at end of year	728,197	647,895

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

Post-retirement Healthcare (continued)

The current portion of post-retirement healthcare cost included in accrued expenses - employee benefits (Note 17) amounted to Rp12,799 and Rp15,160 as of December 31, 2013 and 2012, respectively. The non-current portion included in employee benefit obligations amounted to Rp715,398 and Rp632,735as of December 31, 2013 and 2012, respectively (Note 22).

e.

The effect of a one percentage point change (increase or decrease) in assumed post-retirement healthcare cost trend rate would result in aggregate service and interest costs for the years ended  December 31, 2013 and  2012, and in accumulated post-retirement healthcare benefit obligation as of December 31, 2013 and 2012,as follows:

		Year ended December 31
		2013	2012
Increase in trend rate
Service and interest costs		111,153	82,196
Accumulated post-retirement healthcare benefit
	Obligation	579,778	1,270,669
Decrease in trend rate
Service and interest costs		111,153	82,196
Accumulated post-retirement healthcare benefit
	Obligation	406,023	824,853

Amounts of employee benefits for previous five annual periods:

      Defined Benefit Pension Plan

20132012201120102009

The Company

Plan assets

478,909

513,316

476,890

793,664

763,244

Projected benefit obligation

(372,182

)

(493,854) (409,808)(700,410)(684,611)

Excess of plan assets over

projected benefit obligation

106,727

19,462

67,082

93,25478,633

Experience gain (loss) adjustments

arising on plan liabilities

(1,763

)

(2,434)12,066156,063(624)

Experience loss (gain) adjustments

arising on plan assets

(5,877

)

(7,815)

(14,651)

12,0008,910

Lintasarta

Plan assets

70,950

63,019

62,012

59,294

50,344

Projected benefit obligation

(50,024

)

(60,355)(53,266)(50,215)(41,816)

Excess of plan assets over

projected benefit obligation

20,926

2,664

8,746

9,0798,528

Experience gain (loss) adjustments

     arising on plan liabilities

473

(356

)

560

486

1,100

Experience gain adjustments

arising on plan assets

3,861

3,175

610

2,6773,000

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

30.

PENSION PLAN (continued)

      Labor Law No. 13/2003

20132012

201120102009

The Company

Projected benefit obligation

(182,905

)

(299,410) (250,988)(182,572)(159,055)

Experience gain (loss) adjustments

     arising on plan liabilities

682

889(75,163)(1,166)3,316

Lintasarta

Projected benefit obligation

(48,316

)

 (48,489)(24,160)(24,340)(22,173)

Experience gain (loss) adjustments

     arising on plan liabilities

(10,904

)

(16,734)5,18289078

IMM

Projected benefit obligation

(13,656

)

(19,742)(15,987)(10,842)(6,660)

Experience gain (loss) adjustments

     arising on plan liabilities

3,000

(57)1,442(804)368

      Post-retirement Healthcare

2013

2012201120102009

The Company

Projected benefit obligation

(482,526)

(1,017,673) (687,789)(846,636)(605,660)

Experience gain (loss) adjustments

     arising on plan liabilities

 285,903

   (21,453)160,70338,57437,176

31.

ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES

The details of the accounts and the significant transactions entered into with related parties are as follows:

			Amount		Percentage to Total Assets/Liabilities (%)
			2013	2012	2013	2012
Cash and cash equivalents
	(Note 4)
	Government-related entities:
	State-owned banks		878,959	1,534,068	1.61	2.78
Accounts receivable - trade
	(Note 5)
	Government-related entities:
	State-owned companies		600,185	593,773	1.10	1.08
	Ultimate parent company:
	Ooredoo		56,334	23,509	0.10	0.04
	Total		656,519	617,282	1.20	1.12
	Less allowance for
		impairment	24,316	42,632	0.04	0.08
	Net		632,203	574,650	1.16	1.04
Prepaid expenses
	Government-related entities:
	State-owned companies		18,990	6,543	0.04	0.01
	Governmental departments		335	84	0.00	0.00
	Entity under common significant
	influence:
	Kopindosat		1,944	2,579	0.00	0.01
	Total		21,269	9,206	0.04	0.02
Other current and non-current
	assets - financial and non-financial
	Government-related entities:
	State-owned banks		149,868	162,071	0.28	0.29
	Governmental departments		87	87	0.00	0.00
			149,955	162,158	0.28	0.29

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

31.

ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)

The details of the accounts and the significant transactions entered into with related parties are as follows: (continued)

			Amount		Percentage to Total Assets/Liabilities (%)
			2013	2012	2013		2012
Due from related parties
	Entity under common significant
	influence:
	Kopindosat		3,169	6,188	0.01		0.01
	Government-related entities:
	State-owned companies		2,325	1,870	0.00		0.01
	Key management personnel:
	Senior management		1,688	1,621	0.00		0.00
	Ultimate parent company:
	Ooredoo		-	694	-		0.00
	Total		7,182	10,373	0.01		0.02
	Less allowance for
		impairment of
		receivables	15	15	0.00		0.00
	Net		7,167	10,358	0.01		0.02
Long-term prepaid rentals
	- net of current portion
	Government-related entities:
	State-owned companies		21,082	21,346		0.04	0.04
	Entity under common
	significant influence:
	Kopindosat		6,212	4,275		0.01	0.01
	Total		27,294	25,621		0.05	0.05
Long-term prepaid pension - net
	of current portion (Note 30)
	Government-related entities:
	State-owned companies		81,826	88,845		0.15	0.16
Short-term loan (Note 14)
	Government-related entity:
	State-owned bank		1,499,849	299,529		3.95	0.84
Accounts payable - trade
	Government-related entities:
	State-owned companies		41,603	22,614		0.11	0.06
	Entity under significant influence
	Kopindosat		5,941	-		0.02	-
	Ultimate parent company
	Ooredoo		59	36		0.00	0.00
	Total		47,603	22,650		0.13	0.06
Procurement payable (Note 15)
	Entities under common
	significant influence:
	PT Personel Alih Daya		15,934	17,993		0.04	0.05
	Kopindosat		13,581	11,875		0.04	0.03
	Government-related entities:
	State-owned companies		14,473	13,915		0.04	0.04
	Total		43,988	43,783		0.12	0.12
Accrued expenses
	Government-related entities:
	State-owned companies		112.464	56,590		0.30	0.16
	Entities under common
	significant influence:
	PT Personel Alih Daya		46,118	40,420		0.12	0.11
	Kopindosat		14,464	10,265		0.04	0.03
	Key management personnel:
	Senior management		-	43,610		-	0.12
	Total		173,046	150,885		0.46	0.42

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

31.

ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)

The details of the accounts and the significant transactions entered into with related parties are as follows: (continued)

		Amount		Percentage to Total Assets/Liabilities (%)
		2013	2012	2013		2012
Due to related parties
	Ultimate parent company:
	Ooredoo	17,045	25,968		0.04	0.07
	Government-related entities:
	State-owned companies	6,709	16,821		0.02	0.05
	State-owned banks	55	-		0.00	-
	Entities under common
	significant influence:
	Kopindosat	6,486	-		0.02	-
	PT Personel Alih Daya	3,006	-		0.01	-
Total		33,301	42,789		0.09	0.12
Other current and non-current
	liabilities - financial
	and non-financial
	Government-related entities:
	Governmental departments	11,025	4,131		0.03		0.01
	Total	11,025	4,131		0.03		0.01

					Percentage to Total Revenue
			Amount		or Expenses (%)
			2013	2012	2013		2012
Revenues (Note 24)
	Government-related entities:
	State-owned companies		1,729,361	1,509,179	7.25		6.74
	Governmental departments		240,842	224,219	1.01		1.00
	Ultimate parent company:
	Ooredoo		88,982	78,672	0.38		0.35
	Entity under common significant
	influence:
	Kopindosat		666	549	0.00		0.00
	Total		2,059,851	1,812,619	8.64		8.09
Expenses
Cost of services
	Government-related entities:
	State-owned companies		2,454,551	1,810,335	10.98	��	9.41
	Entities under common significant
	influence:
	Kopindosat		138,768	24,298	0.62		0.13
	PT Personel Alih Daya		115,913	70,967	0.52		0.37
	Ultimate parent company:
	Ooredoo		72,789	52,737	0.33		0.27
	Total		2,782,021	1,958,337	12.45		10.18
Personnel
	Key management personnel:
	Senior management
		Short-term employee benefits	165,498	147,439	0.74		0.76
		Termination benefits	11,701	1,210	0.05		0.01
		Other long-term benefits	10,748	14,860	0.05		0.08
	Sub-total		187,947	163,509	0.84		0.85
	Government-related entities:
	State-owned companies		13,504	24,719	0.06		0.13
	Total		201,451	188,228	0.90		0.98
Marketing
	Entities under common significant
	influence:
	PT Personel Alih Daya		108,100	88,688	0.48		0.46
	Kopindosat		27,092	21,230	0.13		0.11
	Government-related entities:
	State-owned companies		-	2	-		0.00
	Total		135,192	109,920	0.61		0.57

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

31.

ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)

The detail of the accounts and the significant transactions entered into with related parties are as follows: (continued)

				Percentage to Total Revenue
		Amount		or Expenses (%)
		2013	2012	2013	2012
General and administration
	Government-related entities
	State-owned companies	37,737	31,023	0.17	0.16
	Entities under common significant
	influence:
	Kopindosat	26,699	22,676	0.12	0.12
	PT Personel Alih Daya	25,127	14,838	0.11	0.08
	Total	89,563	68,537	0.40	0.36
Other expenses - net
	Government-related entities:
	State-owned banks	26,656	20,491	0.55	0.75

The relationship and nature of account balances/transactions with related parties are as follows:

			Nature of Account
No	Related Parties	Relationship	Balances/Transactions
1.	State-owned banks	Government-	Cash and cash equivalents, other current and non-current financial and non-financial assets, short-termloan,due to related parties and other expenses.
		related entities
2.	State-owned companies	Government-	Accounts receivable - trade, prepaid expenses, due from related parties, long-term prepaid rentals, long-term prepaid pension, accounts payable - trade, procurement payable, accrued expenses, due to related parties, revenues, expenses - cost of services, expenses - personnel,expenses - marketing expenses, and expenses - general and administration.
		related entities
3.	Ooredoo	Ultimate parent	Accounts receivable - trade, due from related parties, accounts payable -trade, due to related parties, revenues, and expenses - cost of services
		company
4.	Governmental departments	Government-related	Prepaid expenses, other current and non-current financial and non-financial assets, other current and non-current financial and non- financial liabilities, and revenues.
		entities

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

31.

ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)

The relationship and nature of account balances/transactions with related parties are as follows: (continued)

			Nature of Account
No	Related Parties	Relationship	Balances/Transactions
5.	Kopindosat	Entity under	Prepaid expenses, due from related parties, long-term prepaid rentals, accounts payable - trade, procurement payable, accrued expenses, due to related parties, revenues, expenses - cost of services, expenses - marketing, and  expenses - general and  administration
		common significant
		influence
6.	Senior management (consist	Key management personnel	Due from related parties, accrued expenses and expenses - personnel
	of members of Boards of
	Directors and
	Commissioners and those who directly report
	to the Board of Directors)
7.	PT Personel Alih Daya	Entity under	Procurement payable, accrued expenses, due to related parties, expenses -  cost of services, expenses -marketing and expenses - general and administration
		common significant
		influence

32.

DISTRIBUTION OF PROFIT AND APPROPRIATION OF RETAINED EARNINGS

At the Company’s SAGM, the shareholders approved, among others, the appropriation of annual profit for cash dividend distribution, as follows, and the utilization of the remaining amount for reinvestment and working capital:

SAGM Date	Dividend per Share (Rp)	Dividend Payment Date
2011 Profit
May 14, 2012	76.83	June 26, 2012*
2012 Profit
June 18, 2013	34.52	July 29, 2013**

*

Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia. On June 11 and June 26, 2012, the Company paid dividend amounting to Rp59,668 and Rp357,821, respectively, to the Government and other stockholders for the dividend declared on May 14, 2012.

**

Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia. On July 29, 2013, the Company paid dividend amounting to Rp26,809 and Rp160,770 to the Government and other stockholders, respectively, for the dividend declared on               June 18, 2013.

33.

SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY

a.

 As of December 31, 2013, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$118,767 and Rp1,478,760 (Note 40p).

The significant commitments on capital expenditures are as follows:

					Amount of Contract/Purchase Orders (“POs”) Already Issued		Amount of Contract/ POs Not Yet Served
Contract Date		Contract Description		Vendor
October 1, 2010 & December 10, 2012	Procurement of Telecommunications Equipment and Related Services		PT Ericsson Indonesia and Ericsson AB		US$607,990 and  Rp2,214,954	US$19,466 and Rp604,983
June 16, 2010 &December 10, 2012	Procurement ofTelecommunicationsInfrastructure		PT Nokia Siemens Networks and Nokia Siemens Networks Oy		US$537,984 and  Rp2,028,054	US$60,013  and Rp302,739
August 2, 2010 &December 21, 2012	Procurement ofTelecommunications Infrastructure		PT Huawei Tech Investment		US$177,196 and Rp589,419	US$8,004 and Rp188,695

b.

On December 27, 2013, the Company received SKPKBs from the DGT for the Company’s 2007 and 2008corporate income tax amounting to Rp110,413 and Rp97,132, respectively (Note 40h).

c.

On December 23, 2013, the Company entered into a 3-year time revolving facility from BTMUFJ amounting to Rp250,000.Drawdowns fromthis facility will bear interest at JIBOR + 2.45% per annum. As of December 31, 2013, the Company has not made any drawdownfrom this facility.

d.

On November 27, 2013, the Company and Orbital Sciences Corporation entered into an agreement on the procurement of Satellite Palapa E. The contract value ranges from             US$ 124,900 to US$218,300 depending on the price schemes available for the Company up to June 30, 2014. The execution of such contract will also depend on the final evaluation from the Government on the Company’s right to use 150.5^o orbital slot for the satellite (Note 40n). As of December 31, 2013, the Company has paid upfront payment to Orbital Sciences Corporation amounting to US$1,300.

e.

On October 10, 2013, the Company and Subpartners PTY LTD, Australia  entered into a Memorandum of Understanding (“MOU”) on the construction of  a fiber optic submarine cable system connecting Perth, Western Australia, and Singapore, with an intermediate landing in Jakarta, Indonesia  (“APX-West cable system”). The term of MOU will be valid for six months from the date of such MOU or until the definitive agreement is executed, whichever date is earlier.

f.

On May 1, 2013, the Company and PT XL Axiata entered into a cooperation agreement on the construction and use of optic cable for 6 links.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33.

SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

g.

On March 5, 2012, the Company received the Tax Court’s Decision Letter accepting the Company’s request for interest compensation related to the issuance of 2004 SKPLB amounting to Rp60,674. On June 29, 2012, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated March 5, 2012 for the interest compensation related to the issuance of 2004 SKPLB. On July 27, 2012, the Company submitted a Counter-Memorandum Requesting for Reconsideration to the Supreme Court. Based on the Company’s evaluation for the year ended December 31, 2012, the realization of income related with the interest compensation was only probable, instead of virtually certain. Therefore, the interest compensation was not recognized in the Company’s financial statements for the year ended December 31, 2012. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Supreme Court on such request.

h.

In 2012, the Company and Ooredoo, the Group's ultimate parent company, entered into a cooperation agreement, whereas Ooredoo agreed to provide its personnel to be seconded at the Company's request. This agreement is valid from January 1, 2012 for a period of five years and shall be automatically extended for additional terms of one year unless terminated by mutual consent of the parties thereto or upon the liquidation or insolvency of any of the parties thereto. For the years ended December 31, 2013 and 2012, the Company recorded the cost for the secondees totaling Rp44,273 and Rp76,596, respectively, as part of "General and Administration Expenses - Professional Fees."

In 2012, the Company and Ooredoo, the Group's ultimate parent company, also entered into acooperation agreement, whereas Ooredoo agreed to make available its personnel to provide projectmanagement and consultancy services at the Company's request. This agreement has an unlimited termuntil terminated by mutual consent of the parties thereto or upon the liquidation or insolvency of any of theparties thereto. Terms and conditions of such services are to be provided at arm's length terms which areto be agreed upon on a project by project basis. For the years ended December 31, 2013 and 2012, the Companyrecorded the cost for the project management and consultancy services totaling Rp21,475 and Rp nil, respectively, as part of"General and Administration Expenses - Professional Fees."

i.

On January 18, 2012, the Company and IMM, a subsidiary, were investigated by the Attorney General’s Office (AGO) in connection with the cooperation agreement between the Company and IMM to provide 3G-based broadband internet services. IMM had been accused of illegally sharing or using the Company’s 3G license (Note 1a) without paying annual frequency fee, concession fee and tender upfront fee. The MOCIT, as well as the Indonesian Regulatory Body (BRTI), has made a public statement that IMM has not breached any prevailing regulations; nevertheless, the case continues to be investigated by the AGO.

On July 8, 2013, the Corruption Court issued its final verdict which found Mr. Indar Atmanto, former President Director of IMM, guilty by virtue of representing IMM in signing and entering into a cooperation agreement with the Company and sentenced him to four years imprisonment, and fined him the amount of Rp200 (if Mr. Indar Atmanto fails to pay the fine, he would serve an additional three months imprisonment). In its decision, although IMM has not been named as a defendant, the District Court had also ordered IMM to pay substitution money in the amount of Rp1,358,343 as charged by the prosecutors for the losses sustained by the State.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33.

SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

A petition for an appeal was formally filed by Mr. Indar Atmanto on July 11, 2013 to the High Court of Jakarta (the “Appellate Court”) and subsequently the AGO also filed its appeal on July 15, 2013 to the Appellate Court. On January 10, 2014, the Appellate Court examined the case and reaffirmed the decision of the District Court. The Appellate Court increased the punishment of Mr. Indar Atmanto from four years to eight years imprisonment. The monetary fine and additional prison term (if Mr. Indar Atmanto refuses to pay the monetary fine) remain the same.  In addition, the conviction against IMM to pay substitution money in the amount of Rp1,358,343 was annulled.  The Appellate Court considered IMM as a separate legal entity, and therefore stated that any cases brought against it must be indicted separately as it was not named as a defendant in the original case against Mr.Indar Atmanto.

As of the issuance date of the consolidated financial statements, the Appellate Court decision is not yet final and binding as Mr.Indar Atmanto, as well as the prosecutors, has submitted their respective petitions for cassation. A petition for cassation on behalf ofMr. Indar Atmanto has been filed on January 23, 2014 and the Memorandum of Cassation has been submitted by the lawyers on February 7, 2014 to the Supreme Court. Mr. Indar Atmanto has also submitted his private Memorandum of Cassation on February 7, 2014. The prosecutors have also filed petition for cassation since the Appellate Court’s verdict is less than their prosecution plan and has annulled the charge of substitution money against IMM. This cassation implies that the prosecutors will not execute the decision of the Appellate Court before the Supreme Court issued its decision which, under Indonesian law, is considered as a final and binding decision.

As of December 31, 2013, the Company did not accrue any liabilities related to the legal case because the Company believes, as supported by MOCIT and its legal counsel, that the cooperation agreement between the Company and IMM does not breach any prevailing laws.

j.

On December 30, 2011, Lintasarta, entered into agreements with MOCIT-Balai Telekomunikasi dan Informasi Pedesaan (“MOCIT-BTIP”), whereby Lintasarta agreed to provide Public Access Services for Wireless Fidelity (WiFi) Internet inKewajiban Pelayanan Umum/ Universal Service Obligation (KPU/USO) Regencies (Kabupaten) (Penyediaan Jasa Akses Publik Layanan Internet WiFi Kabupaten KPU/USO) for Work Packages (Paket Pekerjaan) 3 and 6 that cover the provinces of West Kalimantan, South Kalimantan, Central Kalimantan, East Kalimantan, Bali, West Nusa Tenggara and East Nusa Tenggara. The agreements cover a four-year concession period and have contract values of Rp71,992 and Rp44,422 for Work Packages 3 and 6, respectively. In accordance with the contract, Lintasarta received advance payments representing 15% of the contract value. Fixed payment for services is received on a quarterly basis based on performance evaluation. At the end of the concession period, Lintasarta must transfer the assets subject to the concession agreement back to the local government.

Subsequently on January 10, 2012, Lintasarta, also entered into an agreement with MOCIT-BTIP for the provision of Public Access Services for Wireless Fidelity (WiFi) Internet in KPU/USO Regencies (Kabupaten KPU/USO) (Penyediaan Jasa Akses Publik Layanan Internet WiFi Kabupaten KPU/USO) for Work Package (Paket Pekerjaan) 4 that covers  the provinces of Gorontalo, West Sulawesi, South Sulawesi, Central Sulawesi, South East Sulawesi and North Sulawesi with contract value of Rp91,491. The terms and conditions of this agreement are consistent with those of the earlier agreement above.

On July 9, 2012, the agreements were amended to extend the period of pre-operational stage from six months to sixteen months for WiFi 3 and 4 and to fourteen months for WiFi 6 starting from the issuance of work order letter.

The consideration received or receivable in exchange for Lintasarta’s infrastructure construction services or its acquisition of infrastructure to be used in the arrangements was recognized as a financial asset to the extent that Lintasarta has an unconditional contractual right to receive cash or other financial asset for its construction services from or at the direction of the grantor.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

As of December 31, 2013 and 2012, the current portions of outstanding receivables arising from this service concession arrangement amounting to Rp15,258 and Rp nil, respectively, are classified as part of “Accounts Receivable - Trade - Related Parties”, while the long-term portions of the outstanding receivables amounting to Rp8,383 and Rp8,974, respectively, are classified as part of “Other Non-current Financial Assets”. Revenues from construction services earned by Lintasarta for the years ended December 31, 2013 and 2012 amounting to Rp13,787 and Rp37,175, respectively, are classified as part of “Revenues - MIDI”.

On February 8, 2012, Lintasarta entered into an agreement with PT Widtech Indonesia, for the procurement of equipment and infrastructure required for the construction of WiFi, as agreed with MOCIT-BTIP above, with total contract value amounting to Rp121,927. On May 29, 2013, the agreements were amended to change the payment of work progress.

k.

In May 2011 to March 2012, the Company issued several POs to PT Nokia Siemens Network and Nokia Siemens Network OY with total amounts of US$34,829 and Rp208,948 for the procurement of cellular technical equipment in the Sumatra and Java Areas. Based on the POs, the Company agreed to exchange certain existing cellular equipment with new equipment units and pay US$11,462 and Rp171,844 to Nokia for the installation services and additional equipment. For the year ended December 31, 2013, the carrying amount of the cellular technical equipment units given up amounted to Rp57,069 (Note 8) and the accumulated carrying amount of such equipment up to December 31, 2013 amounted to Rp446,468.

l.

On April 26, 2011, the Company received the Tax Court’s Decision Letter which accepted the Company’s appeal on the remaining correction of the 2006 corporate income tax. On June 21, 2011, the Company received the tax refund amounting to Rp82,626. OnAugust 22, 2011, the Company received a copy of a Memorandum Requesting for Reconsideration (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated April 26, 2011 for the 2006 corporate income tax. On September 21, 2011, the Company submitted a Counter-Memorandum Requesting for Reconsideration to the Supreme Court. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Supreme Court on such request.

m.

On April 15, 2010, Lintasarta, a subsidiary, entered into agreements with MOCIT-BTIP, whereby Lintasarta agreed to providePusat Layanan Jasa Akses Internet Kecamatan (Center for Internet Access and Services in Rural Areas) (PLIK) for Work Packages (Paket Pekerjaan) 7, 8 and 9 that cover the provinces of Bali, West Nusa Tenggara, East Nusa Tenggara, West Kalimantan, South Kalimantan, East Kalimantan, Central Kalimantan, Maluku and Papua. On December 22, 2010, the agreements were amended to increase the contract value. The agreements are non-cancellable and cover four years starting from October 15, 2010 with contract values amounting to Rp91,895, Rp143,668 and Rp116,721 for Work Packages 7, 8 and 9, respectively. In accordance with the agreements, Lintasarta placed its time deposits totaling Rp18,200 as a performance bond for the four-year contract period.These deposits are classified as part of “Other Non-current Financial Assets”. In accordance with the agreements, Lintasarta received advance payments representing 20% of the contract value. Fixed payment for services is received on a quarterly basis based on performance evaluation. At the end of the agreements, Lintasarta and MOCIT-BTIP plan to renegotiate the terms and conditions of any new arrangements.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

On December 12, 2010, Lintasarta entered into agreements with MOCIT-BTIP to providePusat Layanan Jasa Akses Internet Kecamatan Bergerak (Mobile Center for Internet Access and Services in Rural Areas) (PLIKB) for Work Packages 2, 3, 11, 15, 16 and 18 that cover the provinces of North Sumatra, West Sumatra, East Nusa Tenggara, West Kalimantan, South Kalimantan and East Kalimantan. The agreements are non-cancellable and cover four years starting on September 22, 2011 with contract values amounting to Rp79,533, Rp92,003, Rp60,149, Rp71,879, Rp84,583 and Rp69,830 for Work Packages 2, 3, 11, 15, 16 and 18, respectively. On October 19, 2011, the agreements were amended to change the work starting date from September 22, 2011 to December 22, 2011. In accordance with the agreements, Lintasarta received advance payments representing 15% of the contract value. Fixed payment for services is received on a quarterly basis based on performance evaluation. At the end of the concession period, Lintasarta must transfer all assets subject to the concession agreement to the local government.

On May 6, 2010, Lintasarta entered into an agreement with PT Wira Eka Bhakti (WEB), for the procurement of equipment and infrastructure required for the construction of PLIK, as agreed with MOCIT-BTIP above, with total contract value amounting to Rp189,704. The agreement had been amended several times, with the latest amendment dated March 9, 2011 increasing the contract value to Rp208,361.

On March 23, 2011, Lintasarta entered into agreements with WEB and PT Personel Alih Daya (a related party), for the procurement of equipment and infrastructure required for the construction of PLIKB, as agreed with MOCIT-BTIP above, with total contract values amounting to Rp276,274 and Rp60,739, respectively.

Subsequently on January 3, 2014, the agreement for PLIKB of Work Package 2 was amended to, among others, amend the clause on performance-related compensation.

As of December 31, 2013 and 2012, the current portions of outstanding receivables are classified as part of “Accounts Receivable-Trade- Related Parties” amounting to Rp270,204 and Rp283,945, respectively, while the long-term portions amounting to Rp20,754 and Rp45,097, respectively, are classified as part of “Other Non-current Financial Assets”.

There is no revenue from construction services earned by Lintasarta for the year ended December 31, 2013.

n.

On January 29, April 15, May 24 and June 3 in 2010, and February 4 and 10 in 2011, the Company agreed to lease part of its telecommunications towers and sites to PT Hutchison CP Telecommunications (“Hutchison”) for a period of 12 years, to PT Axis Telekom (previously PT Natrindo Telepon Selular) (“Axis”) for a period of 10 years, to PT XL Axiata Tbk (“XL Axiata”) for a period of 10 years, to PT Berca Global Access (“Berca”) for a period of 10 years, to PT Dayamitra Telekomunikasi (“Mitratel”) for a period of 10 years and to PT First Media Tbk (“FM”) for a period of 5 years, respectively. Hutchison, Axis and XL Axiata (on annual basis), Berca and Mitratel (on quarterly basis) and FM (on semi-annual basis) are required to pay the lease and maintenance fees in advance which are recorded as part of unearned income.

On August 18, 2011, the Company and Hutchison amended their tower leasing agreement covering changes in certain arrangements with respect to, among others, amount of compensation paid to landlords or residents around the leased site shouldered by the Company, penalty charged for overdue payments and effective lease period.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33.  SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

On December 11, 2012, the Company agreed to sublease part of its In-Building Coverage telecommunication infrastructure and sites to Hutchison for a period of 5 years.

Future minimum lease receivables under the agreements as at December 31, 2013 and 2012 are as follows:

	December 31, 2013	December 31, 2012
Within one year	444,932	655,894
After one year but not more than five years	1,729,048	2,597,263
More than five years	1,339,623	2,211,422
Total	3,513,603	5,464,579

o.

During 2008-2013, the Company entered into several agreements with PT Solusi Menara Indonesia, PT Professional Telekomunikasi Indonesia (“Protelindo”), PT Solusindo Kreasi Pratama, XL Axiata, Mitratel, PT BIT Teknologi Nusantara, PT Solusi Tunas Pratama,
PT Corona Telecommunication Services, PT Mitrayasa Sarana Informasi, and Tower Bersama (Note 29) for the Company to lease part of spaces in their telecommunication towers and sites for an initial period of 10 years. The Company may extend the lease period for another 10 years, with additional lease fees based on the inflation rates in Indonesia.

Future minimum rentals payable under the finance lease agreements as at December 31, 2013 are as follows:

	Minimum	Present value
	payments	of payments
Within one year	772,032	346,357
After one year but not more than five years	3,014,118	1,808,332
More than five years	2,112,762	1,785,780
Total	5,898,912	3,940,469
Less amount representing finance charge	1,958,443	-
Present value of minimum lease payments	3,940,469	3,940,469
Current portion (presented as part of Other Current Financial Liabilities)		346,357
Long-term portion (presented as Obligations under Finance Lease)		3,594,112
Total		3,940,469

p.

The Company and IMM have committed to pay annual radio frequency fee over the 3G and BWA licenses period, provided the Company and IMM hold the 3G and BWA licenses. The amount of annual payment is based on the payment scheme set out in Regulations
No. 7/PER/M.KOMINFO/2/2006, No. 268/KEP/M.KOMINFO/9/2009 and No. 237/KEP/ M.KOMINFO/7/2009 dated February 8, 2006, September 1, 2009 and July 27, 2009, respectively, of the MOCIT. The Company and IMM paid the annual frequency fee for the 3G and BWA licenses totaling Rp640,379 and Rp548,154 for the years ended December 31, 2013 and 2012, respectively.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33.  SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

q.

On July 20, 2005, the Company obtained facilities from HSBC to fund the Company’s short-term working capital needs. The facilities agreement has been amended several times. On September 20, 2011, the expiration date of the facilities was extended up to April 30, 2012 and the interest rate and certain provisions of the agreement were changed as follows:

·

Overdraft facility amounting to US$2,000 (including overdraft facility denominated in rupiah amounting to Rp17,000). Interest is charged on daily balances at 3.75% per annum and 6% per annum below the HSBC Best Lending Rate for the loan portions denominated in rupiah and U.S. dollar, respectively.

·

Revolving loan facility amounting to US$30,000 (including revolving loan denominated in rupiah amounting to Rp255,000). The loan matures within a maximum period of 180 days and can be drawn in tranches with minimum amounts of US$500 and Rp500 for loans denominated in U.S. dollar and rupiah, respectively. Interest is charged on daily balances at 2.25% per annum above the HSBC Cost of Fund Rate for the loans denominated either in rupiah or U.S. dollar.

·

The facilities are considered uncommitted facility based on guidelines No.12/516/DPNP/DPnP dated September 21, 2010 issued by the Central Bank of Indonesia; consequently, these facilities can be automatically cancelled by HSBC in the event that the Company’s credit collectibility declines to either substandard, doubtful or loss based on HSBC’s assessment pursuant to the general criteria set out by the Central Bank of Indonesia.

On March 27, 2012, the Company received the letter from HSBCextending these facilities up to April 30, 2013. Furthermore, on July 8, 2013, the Company received the letter from HSBC extending these facilities up to June 30, 2014.

b.

In 1994, the Company was appointed as a Financial Administrator (“FA”) by a consortium which was established to build and sell/lease Asia Pacific Cable Network (“APCN”) submarine cable in countries in the Asia-Pacific Region. As an FA, the Company collected and distributed funds from the sale of APCN’s Indefeasible Right of Use (“IRU”), Defined Underwritten Capacity (“DUC”) and Occasional Commercial Use (“OCU”).

The funds received from the sale of IRU, DUC and OCU and for upgrading the APCN cable did not belong to the Company and, therefore, were not recorded in the Company’s books. However, the Company managed these funds in separate accounts.

As of December 31 2013, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$3,971. Besides receiving their share of the funds from the sale of IRU, DUC and OCU, the members of the consortium also received their share of the interest earned by the above funds.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

33.

SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCY (continued)

c.

Other agreements made with Telkom are as follows:

·

Under a cooperation agreement, the compensation to Telkom relating to leased circuit/ channel services, such as world link and bit link, is calculated at 15% of the Company’s collected revenues from such services.

The Company and Satelindo also lease circuits from Telkom to link Jakarta, Medan and Surabaya.

·

In 1994, Satelindo entered into a land transfer agreement for the transfer of Telkom’s rights to use a 134,925-square meter land property located at Daan Mogot, West Jakarta, where Satelindo’s earth control station is currently situated. The land transfer agreement enables Satelindo to use the land for a period of 30 years from the date of the agreement, for a price equivalent to US$40,000 less Rp43,220. The period of the agreement may be extended based on mutual agreement.

The aforementioned agreement was subsequently superseded by a land rental agreement dated December 6, 2001, generally under the same terms as those of the land transfer agreement.

·

In 1999, Lintasarta entered into an agreement with Telkom, whereby Telkom agreed to lease transponder to Lintasarta. This agreement has been amended several times, the latest amendment of which is based on the tenth amendment agreement dated March 7, 2012. Transponder lease expense charged to operations amounting to Rp33,044 and Rp27,371 for the years ended December 31, 2013 and 2012, respectively, is presented as part of “Expenses - Cost of Services - Leased Circuits” (Note 25) in the consolidated statement of comprehensive income.

34.

TARIFF SYSTEM

a.

International telecommunications services

The service rates (“tariffs”) for overseas exchange carriers are set based on the international telecommunications regulations established by the International Telecommunications Union (“ITU”).

These regulations require the international telecommunications administrations to establish and revise, under mutual agreement, accounting rates to be applied among them, taking into account the cost of providing specific telecommunications services and relevant recommendations from the Consultative Committee on International Telegraph and Telephone (“CCITT”). The rates are divided into terminal shares payable to the administrations of terminal countries and, where appropriate, into transit shares payable to the administrations of transit countries.

The ITU also regulates that the monetary unit to be used, in the absence of special arrangements, shall be the Special Drawing Right (“SDR”) or the Gold Franc, which is equivalent to 1/3.061 SDR. Each administration shall, subject to applicable national law, establish the charges to be collected from its customers.

The tariffs billed to domestic subscribers for international calls originating in Indonesia, also known as collection rates, are established in a decision letter of the MOC, which rates are generally higher than the accounting rates. During the period 1996 to 1998, the MOC made tariff changes effective January 1, 1997, March 15, 1998 and November 15, 1998.

Based on Decision Letter No. 09/PER/M.KOMINFO/02/06 dated February 28, 2006 of the MOCIT,thecollectionratesareset by tariff formula known as price cap formula which already considers customer price index starting January 1, 2007.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

34.

TARIFF SYSTEM (continued)

b.

Cellular services

The basic telephony tariffs for cellular mobile network service are set on the basis of Regulation No. 12/PER/M.KOMINFO/02/2006 dated February 28, 2006 of the MOCIT. Under this regulation, the cellular tariffs consist of the following:

·

Connection fee

·

Monthly charges

·

Usage charges

·

Additional facilities fee

Cellular providers should implement the new tariffs referred to as “floor price”. For usage charges, the floor price should be the originating fee plus termination fee (total interconnection fee), while for connection fee and monthly charges, the floor price depends on the cost structure of each cellular provider.

In April 2008, the MOCIT issued Ministerial Decree No. 09/PER/M.KOMINFO/04/2008 about guidelines on calculating basic telephony service tariffs through cellular mobile network. Under this new Decree, the cellular providers should implement the new tariffs referred to as “price cap”. The types of tariffs for telecommunications services through cellular network consist of the following:

·

Tariff for basic telephony services

·

Tariff for roaming

·

Tariff for multimedia services

The retail tariffs should be calculated based on Network Element Cost, Activation Cost of Retail Services and Profit Margin.

The implementation of the new tariffs for a dominant operator has to be approved by the Government. A dominant operator is an operator that has revenue of more than 25% of the total industry revenue for a certain segment.

Starting May 2008, the Company has fully adopted the new cellular tariff system.

c.

Fixed telecommunications services

In February 2006, the MOCIT released Regulation No. 09/PER/M.KOMINFO/02/2006 regarding basic telephony tariffs for fixed network service.

In April 2008, the MOCIT issued Ministerial Decree No. 15/PER/M.KOMINFO/04/2008 about the guidelines on calculating basic telephony service tariffs through fixed network. This Decree also applies to fixed wireless access (FWA) network.  

Under this new decree, the tariffs for basic telephony services and SMS (short message service) must be calculated based on the formula stated in the Decree. The fixed network providers should implement the new tariffs referred to as “price cap”.

Starting May 2008, the Company has fully adopted the new fixed telecommunications tariff system.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

35.

INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING

Interconnection tariffs among domestic telecommunications operators are regulated by the MOC through its Decree No. KM.108/PR.301/MPPT-94 dated December 28, 1994. The Decree was updated several times with the latest update being Decree No. KM.37 Year 1999 (“Decree No. 37”) dated June 11, 1999. This Decree, along with Decree No. KM.46/PR.301/MPPT-98 (“Decree No. 46”) dated February 27, 1998, prescribed interconnection tariff structures between mobile cellular   telecommunications network and Public Switched Telephone Network (“PSTN”), mobile cellular telecommunications network and international telecommunications network, mobile cellular telecommunications network and other domestic mobile cellular telecommunications network, international telecommunications network and PSTN, and between two domestic PSTNs.

Based on the Decree of the MOC, the interconnection tariff arrangements are as follows:

1.

Structure of Interconnection Tariffs

a.    Between international and domestic PSTN

Based on Decree No. 37 dated June 11, 1999, the interconnection tariffs are as follows:

	Tariff	Basis
Access charge	Rp850 per call	Number of successful  outgoing
		and incoming calls
Usage charge	Rp550 per paid minute	Duration of successful outgoing
		and incoming calls

b.

Between domestic PSTN and another domestic PSTN

Interconnection charges for domestic telecommunications traffic (local andSambungan Langsung Jarak Jauh (“SLJJ”)) between a domestic PSTN and another domestic PSTN are based on agreements made by those domestic PSTN telecommunications carriers.

c.

Between cellular telecommunications network and domestic PSTN

Based on Decree No. 46 dated February 27, 1998 which became effective starting April 1, 1998, the interconnection tariffs are as follows:

(1)

Local Calls

For local calls from a cellular telecommunications network to a PSTN subscriber,
the cellular operator pays the PSTN operator 50% of the prevailing tariffs for local calls.
For local calls from the PSTN to a cellular subscriber, the cellular operator receives
the airtime charged by the PSTN operator to its subscribers.

(2)

SLJJ

For SLJJ which originates from the PSTN to a cellular subscriber, the cellular operator receives a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of
the prevailing SLJJ tariffs plus the airtime charges in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs plus the airtime charges in cases where the entire long-distance portion is carried by the cellular operator.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

35.

INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING (continued)

1.

Structure of Interconnection Tariffs (continued)

c.

Between cellular telecommunications network and domestic PSTN (continued)

(2)

SLJJ (continued)

For SLJJ which originates from a cellular telecommunications network to a PSTN subscriber, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator.

d.

Between cellular telecommunications network and another cellular telecommunications network

Based on Decree No. 46, the interconnection tariffs are as follows:

(1)

Local Calls

For local calls from a cellular telecommunications network to another, the “origin” cellular operator pays the airtime to the “destination” cellular operator. If the call is carried by
a PSTN, the “origin” cellular operator pays the PSTN operator 50% of the prevailing tariffs for local calls.

(2)

SLJJ

For SLJJ which originates from a cellular telecommunications network, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by
the cellular operator, to 85% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator and the call is delivered to another cellular operator, and to 100% if the call is delivered to the same cellular operator.

e.

Between international PSTN and cellular telecommunications network

Starting in 1998, the interconnection tariffs for international cellular call traffic to/from overseas from/to domestic cellular subscribers, regardless of whether the traffic is made through domestic PSTN or not, is based on the same tariffs applied to traffic made through domestic PSTN as discussed in “a” above. However, as agreed mutually with the cellular telecommunications operators, the Company (including Satelindo until it was merged -
Note 1e) still applied the original contractual sharing agreements regarding the interconnection tariffsuntil December 31, 2006 (Note 36).

f.

Between international gateway exchanges

Interconnection charges for international telecommunications traffic between international gateway exchanges are based on agreements between international telecommunications carriers and international telecommunications joint ventures.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

35.

INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING (continued)

1.

Structure of Interconnection Tariffs (continued)

Decree No. 37 and Decree No. 46 were subsequently superseded by Decree No. 32 Year 2004 of the MOC which provides cost-based interconnection to replace the current revenue-sharing arrangement. Under the new Decree, the operator of the network on which calls terminate determines the interconnection charge to be received by it based on a formula mandated by the Government, which is intended to have the effect of requiring that operators charge for calls based on the cost of carrying such calls.

The effective date of the new Decree, which was originally set to start on January 1, 2005, was subsequently postponed until January 1, 2007 based on Regulation No. 08/PER/M.KOMINFO/02/2006 dated February 8, 2006 of the MOCIT (Note 36).

The implementation of interconnection billing between operators starts from the time they sign their interconnection agreements. All interconnection agreements will be based on Reference Interconnection Offer (“RIO”). All operators have to publish their RIO and a dominant operator is required to obtain an approval of its RIO from the Government.

In August 2006, the DGPT issued Decree No. 278/DIRJEN/2006, which approved the RIO of the Company and two other dominant telecommunications operators (Telkom and Telkomsel). This decree was implemented since January 2007 as agreed by all operators and approved by the Government. On April 11, 2008, the DGPT approved the new RIO for dominant operators (Telkom, Telkomsel and the Company). The DGPT requires all domestic operators to amend their interconnection agreements in line with the approved new RIO starting April 1, 2008. On April 1, 2008, the Company implemented the new interconnection tariffs based on the approved RIO.

However, on December 31, 2010, theBadan Regulasi Telekomunikasi Indonesia (“BRTI” or Indonesian Telecommunications Regulatory Bureau) issued letter No. 227/BRTI/XII/2010 regarding the implementation of new interconnection tariffs based on the implementation of cost-based interconnection fees, which would be used by all telecommunications operators effective January 1, 2011. The Company has adopted the new tariffs starting January 1, 2011.

On June 27, 2011, the MOCIT issued Regulation No.16/PER/M.KOMINFO/06/2011 regarding the amendment of the Ministry of Transportation Decree No. 35 Year 2004 on implementation of local fixed wireless network with limited mobility, which encouraged the implementation of cost-based tariffs by all telecommunications operators effective July 1, 2011.

Prior to 2012, the interconnection for Short Message Services (“SMS”) applied the “Senders Keep All” scheme. Under this old scheme, the telecommunication operators may keep all of the revenue received from their subscribers from services of sending SMS to other operators without any interconnection cost paid to other operators. Starting June 1, 2012, BRTI issued letter No. 262/BRTI/XII/2011 replacing the previous “Senders Keep All” scheme with the new cost-based scheme. Under the new scheme, the telecommunication operators are obliged to pay interconnection cost with maximum amount of Rp23 (in full amount) for every SMS sent to other telecommunication operators.

Effective June 1, 2012, the Company has applied this new regulation.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

35.

INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING (continued)

2.

USO and Spectrum Frequency Fees

On January 16, 2009, the Government issued Regulation No. 7 Year 2009 increasing the USO development contribution from 0.75% to 1.25% and decreasing the concession fee from 1% to 0.50% of annual gross revenue (after deducting bad debts and interconnection charges) effective January 1, 2009.

On December 13, 2010, the President of the Republic of Indonesia issued PP No.76/2010 regarding the amendment of PP No.7/2009 on types and tariffs of non-tax state income imposed by the MOCIT. This regulation affects the computation method and payment of the spectrum fee allocated to the Company (800 Mhz, 900 Mhz and 1,800 Mhz frequency bands).

On July 26, 2013, the MOCIT issued Decree No. 21 Year 2013 on the Provision of Content Provider Services on Cellular Network and Fixed Local Wireless Network with Limited Mobility. The Decree regulates, among others, the cooperation between content provider carriers and telecommunication operators, roles and responsibilities of the content provider carriers and telecommunication operators, the type of contents allowed, service subscription mechanism, content offerings, protection for users, access number, content provider license, concession fee (Biaya Hak Penyelenggaraan/ BHP) and USO obligation, data storage, claims, dispute resolutions, supervision and monitoring and administrative sanctions. Under this new Decree, the content provider carriers are obliged to pay the USO and concession fee obligations in accordance with the regulations. The payments of the concession fee and USO obligations will be done by the content provider carriers through the telecommunication operators.

As of December 31, 2013, Decree No. 21 Year 2013 is not yet effective. Subsequently, on February 18, 2014, the MOCIT issued letter No. 94/DJPPI.3/PI.02.02/2/2014 regarding the notification for the extension of the transition period of Decree No. 21 Year 2013 from February 6, 2014 to August 6, 2014.  

3.

Revenue Sharing

Revenue from access and usage charges from international telecommunications traffic with telecommunications networks owned by more than one domestic telecommunications carrier which is not regulated by Decree No. 08/PER/M.KOMINFO/02.2006, is to be proportionally shared with each carrier, which proportion is to be bilaterally arranged between the carriers.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

36.

INTERCONNECTION AGREEMENTS

The Company (including Satelindo and IM3 until they were merged - Note 1e) has interconnection arrangements with domestic and overseas operators. Some significant interconnection agreements are as follows:

1.

Telkom

The following are significant interconnection agreements/transactions with Telkom:

a.

Fixed telecommunications services

On September 23, 2005, the Company and Telkom signed an agreement regarding the interconnection of local, long-distance and international fixed networks. The principal matters covered by the agreement are as follows:

·

Interconnection between the Company’s and Telkom’s local, long-distance and international fixed networks enables the Company’s fixed telecommunications service subscribers to make or receive calls to or from Telkom’s subscribers or international gateways.

·

The Company’s and Telkom’s international services are accessible and continuously open to each other’s fixed networks.

·

The Company and Telkom are responsible for their respective telecommunications facilities.

·

The compensation arrangement for the services provided is based on interconnection tariffs determined by both parties.

·

Each party handles subscriber billing and collection for the other party’s international calls service used by the other party’s subscribers. Each party has to pay the other party 1% of the collections made by the other party, plus the billing process expenses which are fixed at Rp82 per record of outgoing call as compensation for billing processing. Starting January 1, 2009, Telkom bills the Company service charge of Rp1,200 per minute of outgoing call.

On December 28, 2006, the Company entered into a memorandum of understanding
with Telkom applying the new interconnection rates under cost-based regime that were
effective starting January 1, 2007. This memorandum of understanding was replaced by an agreement dated December 18, 2007. This agreement was amended several times. The
latest amendment was dated December 20, 2011 to meet the requirement in the BRTI letter
No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of the new interconnection tariffs in 2011. The Company has adopted the new tariffs starting January 1, 2011.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

36.

INTERCONNECTION AGREEMENTS (continued)

1.

Telkom (continued)

b.

Cellular services

On December 1, 2005, the Company and Telkom signed an agreement regarding the interconnection between the Company’s cellular telecommunications network and Telkom’s fixed telecommunications network. Under this agreement, the interconnection between the Company’s cellular telecommunications network and Telkom’s fixed telecommunications network enables the Company’s cellular subscribers to make or receive calls to or from Telkom’s fixed telecommunications subscribers.

On December 28, 2006, the Company entered into a memorandum of understanding
with Telkom applying the new interconnection rates under cost-based regime that are effective starting January 1, 2007. This memorandum of understanding was replaced by an agreement dated December 18, 2007. This agreement was amended several times. The latest amendment was dated December 20, 2011 to meet the requirement in the BRTI letter No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariffs in 2011. The Company has adopted the new tariffs starting January 1, 2011.

On May 30, 2012, the Company and Telkom signed “Berita Acara Kesepakatan” to meet the requirement in the BRTI letter No. 262/BRTI/XII/2011 dated December 12, 2011 (Note 35) regarding the implementation of the new cost-based scheme for SMS interconnection for fixed telecommunications and cellular services which effective starting June 1, 2012.

2.

XL Axiata, PT Smartfren Telecom Tbk (previously PT Mobile-8 Telecom Tbk) (“Smartfren”), Hutchison, Axis and Telkomsel

The principal matters covered by the agreements with these operators are as follows:

·

The Company’s and Satelindo’s international gateway exchanges are interconnected with the mobile cellular telecommunications operators’ networks to make outgoing or receive incoming international calls through the Company’s and Satelindo’s international gateway exchanges.

The Company and Satelindo receive, as compensation for the interconnection, a portion of
the cellular telecommunications operators’ revenues from the related services that are made through the Company’s and Satelindo’s international gateway exchanges.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

36.

INTERCONNECTION AGREEMENTS (continued)

2.

XL Axiata, PT Smartfren Telecom Tbk (previously PT Mobile-8 Telecom Tbk) (“Smartfren”), Hutchison, Axis and Telkomsel (continued)

Satelindo and IM3 also have an agreement with the above operators for the interconnection of Satelindo’s and IM3’s GSM mobile cellular telecommunications network with the above operators’ network, enabling the above operators’ customers to make calls/send SMS to or receive calls/SMS from Satelindo’s and IM3’s customers.

The agreements are renewable annually.

The Company (including Satelindo and IM3 until they were merged) and the above operators still continue their business under the agreements by applying the original compensation formula, except for interconnection fee.

The agreements between the Company andeach of Telkomsel, XL Axiata, Hutchison, Axis and Smartfren have been amended several times, with the latest amendments dated May 28, May 29, June 1, May 29, 2012 and March 13, 2013 for Telkomsel, XL Axiata, Hutchison, Axis and Smartfren, respectively, to meet the requirement in the BRTI letter No. 262/BRTI/XII/2011 dated December 12, 2011 (Note 35) regarding the implementation of the new cost-based scheme for SMS interconnection which became effective starting June 1, 2012.

3.

PT Bakrie Telecom Tbk (“Bakrie Telecom”)

The principal matters covered by the latest amendment of the agreement dated June 10, 2009 are related to interconnection of the Company’s mobile cellular network and international gateway exchanges to Bakrie Telecom’s network, including SLI 009 network. Subsequently, the agreement with Bakrie Telecom was further amended on February 9, 2011 to meet the requirement in the BRTI letter No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariffs in 2011. The Company has adopted the new tariffs starting January 1, 2011.

On May 31, 2012, the Company and Bakrie Telecom signed “Berita Acara Kesepakatan” to meet the requirement in the BRTI letter No. 262/BRTI/XII/2011 dated December 12, 2011 (Note 35) regarding the implementation of the new cost-based scheme for SMS interconnection which became effective starting June 1, 2012.

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

36.

INTERCONNECTION AGREEMENTS (continued)

Net interconnection revenues (charges) from (to) major operators are as follows:

	Year ended December 31
	2013	2012
Telkom	59,890	71,434
Smartfren	5,461	10,255
XL Axiata	(92,447)	(81,665)
Telkomsel	(89,686)	(97,723)
Axis	(17,346)	(19,992)
Hutchison	(7,551)	27,198
Bakrie Telecom	(3,522)	(7,382)
Net charges	(145,201)	(97,875)

37.

SEGMENT INFORMATION

The Group manages and evaluates its operations in three major reportable segments: cellular, fixed telecommunications and MIDI. The operating segments are managed separately because each offers different services/products and serves different markets. The Group operates in one geographical area only, so no geographical information on segments is presented.

The cellular segment currently provides the network coverage in all major cities and population centers across Indonesia by using GSM 900, DCS 1800and 3G 2100 technology. Its primary service is the provision of voice and data transfer which is sold through post-paid and prepaid plans.

The fixed telecommunication segment is the provider of international long-distance services, fixed wireless services, Direct Long Distance (DLD) services and local fixed telephony services.

The MIDI segment offers products and services which include internet, high-speed point-to-point international and domestic digital leased line broadband and narrowband services, a high-performance packet-switching service and satellite transponder leasing and broadcasting services.

Refer to Notes 2k and 24 for the description of the type of products and services under each reporting segment.

No operating segments have been aggregated to form the above reportable operating segments.

Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Expenditures for segment assets represent the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. The Group’s financing (including financing cost and finance income) and income taxes are managed on a group basis and are not allocated to operating segments.

Operating segments are reported based on financial information determined in conformity with Indonesian Financial Accounting Standards (IFAS), which reporting is also consistent with the internal reporting provided to the chief operational decision maker. The chief operational decision maker is responsible for allocating resources and assessing performance of the operating segments, and has been identified as a steering committee that makes strategic decisions.

37.

SEGMENT INFORMATION (continued)

Consolidated information by industry segment follows:

	Major Segments
		Fixed		Segment
	Cellular	Telecommunications	MIDI	Total
2013
Revenues
Revenues from external customers	19,374,638	1,214,787	3,265,847	23,855,272
Inter-segment revenues	-	-	724,704	724,704
Total revenues	19,374,638	1,214,787	3,990,551	24,579,976
Inter-segment revenues elimination				(724,704)
Revenues - net				23,855,272
Expenses	18,153,802	1,486,404	2,797,422	22,437,628
Operating income	1,220,836	(271,617)	468,425	1,417,644
Gain on sale of towers				141,050
Gain on foreign exchange - net				224,518
Others - net				(273,996)
Operating profit				1,509,216
Income tax benefit - net				667,378
Gain on change in fair value of            derivatives - net				273,259
Interest income				107,193
Loss on foreign exchange - net				(3,011,410)
Financing cost				(2,212,095)
Loss for the year				(2,666,459)
Depreciation and amortization	7,561,378	523,183	873,832	8,958,393
Other Information
Segment assets	52,963,887	969,366	8,707,074	62,640,327
Unallocated assets				2,429,234
Inter-segment assets elimination				(10,548,670)
Assets - net				54,520,891
Segment liabilities	31,522,602	640,188	3,072,679	35,235,469
Unallocated liabilities				11,341,875
Inter-segment liabilities elimination				(8,574,051)
Liabilities - net				38,003,293
Capital expenditures	8,084,870	112,790	1,173,381	9,371,041

139 \* Arabic  \* MERGEFORMAT 139

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

37.

SEGMENT INFORMATION (continued)

Consolidated information by industry segment follows (continued):

	Major Segments
		Fixed		Segment
	Cellular	Telecommunications	MIDI	Total
2012
Revenues
Revenues from external customers	18,489,329	1,021,450	2,908,033	22,418,812
Inter-segment revenues	-	-	597,914	597,914
Total revenues	18,489,329	1,021,450	3,505,947	23,016,726
Inter-segment revenues elimination				(597,914)
Revenues - net				22,418,812
Expenses	16,473,013	1,296,127	2,382,450	20,151,590
Operating Income	2,016,316	(274,677)	525,583	2,267,222
Gain on sale of tower				1,183,963
Gain on foreign exchange - net				44,793
Others - net				(306,080)
Operating profit				3,189,898
Interest Income				133,544
Income tax expense - net				25,798
Loss on change in fair value of derivatives - net				4,964
Financing cost				(2,077,350)
Loss on foreign exchange - net				(789,438)
Profit for the year				487,416
Depreciation and amortization	7,078,187	415,410	779,227	8,272,824

Other Information
Segment assets	51,599,983	1,417,859	8,460,772	61,478,614
Unallocated assets				2,219,928
Inter-segment assets elimination				(8,473,481)
Assets - net				55,225,061
Segment liabilities	29,495,438	448,908	2,521,525	32,465,871
Unallocated liabilities				10,004,614
Inter-segment liabilities elimination				(6,640,808)
Liabilities - net				35,829,677
Capital expenditure	7,449,614	123,983	822,984	8,396,581

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

38.

FINANCIAL RISK MANAGMENT OBJECTIVES AND POLICIES

a.

Risk Management

The main risks arising from the Group’s financial instruments are interest rate risk, foreign exchange rate risk, equity price risk, credit risk and liquidity risk. The importance of managing these risks has significantly increased in light of the considerable change and volatility in both Indonesian and international financial markets. The Company’s Board of Directors reviews and approves the policies for managing these risks which are summarized below.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to its loans and bonds payable with floating interest rates.

The Company’s policies relating to interest rate risk are as follows:

(1)

Manage interest cost through a mix of fixed and variable rate debts. The Company evaluates the fixed to floating rate ratio of its loans and bonds payable in line with movements of relevant interest rates in the financial markets. Based on management’s assessment, new financing will be priced either on a fixed or floating rate basis.

(2)

Manage interest rate exposure on its loans and bonds payable by entering into interest rate swap contracts.

As of December 31, 2013 and 2012, more than 79% and 82%, respectively, of the Group’sdebts are fixed-rated.

Several interest rate swap contracts are entered into to hedge floating rate U.S. dollar debts. These contracts are accounted for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the year.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit or loss for the years ended December 31, 2013 and 2012 (through the impact on floating rate borrowings which is based on LIBOR for U.S. dollar borrowings and on JIBOR for rupiah borrowings).

		Year ended December 31
		2013	2012
Increase/decrease in basis points:
	U.S. dollar	4	11
	Rupiah	77	19
Effect on profit  or loss for the year:
	U.S. dollar	US$27 (equivalent to Rp329)	US$267 (equivalent to Rp2,584)
	Rupiah	Rp15,198	Rp4,535

38.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

a.

Risk Management (continued)

Interest rate risk (continued)

Management conducted a survey among the Group’s banks to determine the outlook of the LIBOR and JIBOR interest rates until the Group’s next reporting date of March 31, 2014 and 2013. The outlook is that the LIBOR and JIBOR interest rates may move 4 and 11 basis point higher or lower and 77and 19 basis point higher or lower, respectively, as compared to the interest rates at the end of the years ended December 31, 2013 and 2012, respectively.

If LIBOR interest rates were 4 and 11 basis point higher or lower than the market levels for the years ended December 31, 2013 and 2012, respectively, with all other variables held constant, the Group’s profit (loss) for the years ended and the consolidated equity would be (Rp2,759,956) higher and Rp760,966 lower or (Rp2,759,298) lower and Rp766,134 higher; Rp15,913,834 and Rp18,858,785 lower or Rp15,914,492 and Rp18,863,953 higher than the actual results for the years ended December 31, 2013 and 2012, respectively, mainly due to the higher or lower interest expense on floating rate borrowings.

If JIBOR interest rates were 77 and 19 basis point higher or lower than the market levels for the years ended December 31, 2013 and 2012, respectively , with all other variables held constant, the Group’s profit (loss) for the years ended and the consolidated equity would be (Rp2,774,825) higher and Rp759,015 lower or (Rp2,744,429) lower and Rp768,085 higher; Rp15,898,965 and Rp18,856,834 lower or Rp15,929,361 and Rp18,865,904 higher than the actual results for the years ended December 31, 2013 and 2012, respectively, mainly due to the higher or lower interest expense on floating rate borrowings.

Foreign exchange rate risk

Foreign exchange rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to exchange rate fluctuations results primarily from its U.S. dollar-denominated loans and bonds payable, accounts receivable, accrued expenses and procurement payable.

To manage foreign exchange rate risks, the Company entered into several cross currency swap and currency forward contracts and other permitted instruments, if considered necessary. These contracts are accounted for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the year.

The Group’s procurement payable is primarily denominated in foreign currencies payable to suppliers and contractors for the purchase and construction or installation of property and equipment, while a significant part of the Group’s accounts receivable represents Indonesian rupiah-denominated collectibles from domestic operators.

To the extent the Indonesian rupiah depreciated further from the exchange rates in effect at
December 31, 2013 and 2012, the Group’s obligations denominated in foreign currencies would increase in Indonesian rupiah terms. However, the increases in these obligations would be offset in part by increases in the values of foreign currency-denominated time deposits and accounts receivable. As of December 31, 2013 and 2012, 26.22% and 31.81%, respectively, of the Group’s U.S. dollar-denominated debts were covered by several currency forward contracts.

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

38.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

a.

Risk Management (continued)

Foreign exchange rate risk (continued)

The following table shows the Group’s consolidated U.S. dollar-denominated assets and liabilities as of December 31, 2013 and 2012:

	2013		2012
	U.S. Dollar	Rupiah *	U.S. Dollar	Rupiah *
Assets:
Cash and cash equivalents	83,487	1,017,623	249,279	2,410,529
Accounts receivable - trade	117,478	1,431,942	111,612	1,079,285
Derivative assets	16,045	195,569	7,203	69,654
Other current financial assets - net	227	2,762	488	4,719
Due from related parties	45	553	106	1,028
Other non-current financial assets - net	1,438	17,528	1,150	11,121
Total assets	218,720	2,665,977	369,838	3,576,336
Liabilities:
Accounts payable - trade	10,412	126,913	9,343	90,347
Procurement payable	81,220	989,989	141,102	1,364,458
Accrued expenses	46,170	562,764	46,424	448,918
Deposits from customers	2,696	32,866	2,478	23,962
Derivative liabilities	3,028	36,903	8,401	81,241
Other current financial liabilities	17,974	219,091	16,676	161,255
Due to related parties	1,552	18,915	2,685	25,968
Loans payable (including current maturities)	280,499	3,418,998	557,193	5,388,055
Bonds payable (including current maturities)	650,000	7,922,850	650,000	6,285,500
Obligation under finance lease	194,783	2,374,205	212,757	2,057,362
Other non-current financial liabilities	3,669	44,726	-	-
Total liabilities	1,292,003	15,748,220	1,647,059	15,927,066
Net liabilities position	1,073,283	13,082,243	1,277,221	12,350,730

*

The exchange rate used to translate the U.S. dollar amounts into rupiah were Rp12,189 to US$1 (in full amounts) and Rp9,670 to US$1 (in full amounts) as published by the Indonesian Central Bank as of December 31, 2013 and 2012, respectively.

The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar exchange rate, with all other variables held constant, of the Group’s consolidated profit (loss) for the years ended December 31, 2013 and 2012:

2013

2012

Change in U.S. dollar exchange rate	2.90%	1.83%
Effect on consolidated profit (loss) for the year	Rp284,152	Rp169,551

Management conducted a survey among the Group’s banks to determine the outlook of the U.S. dollar exchange rate until the Group’s next reporting date of March 31, 2014 and 2013. The outlook is that the U.S. dollar exchange rate may strengthen or weaken by 2.90% and 1.83% as compared to the exchange rate at December 31, 2013 and 2012, respectively.

If the U.S. dollar exchange rate strengthens or weakens by 2.90% and 1.83% as compared to the exchange rate as of December 31, 2013 and 2012, with all other variables held constant, the Group’s profit (loss) and consolidated equity for the years ended would be (Rp3,043,779) higher and Rp593,999 lower or (Rp2,475,475) lower and  Rp933,101 higher; Rp15,630,011 and Rp18,691,818 lower or Rp16,198,315 and Rp19,030,920 higher than the actual results as of December 31, 2013 and 2012, respectively, mainly due to the consolidated foreign exchange gain and loss on the transaction of U.S dollar denominated net liabilities.

38.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

a.

Risk Management (continued)

Equity price risk

The Group’s long-term investments consist primarily of minority investment in the equity of private Indonesian companies and equity of foreign companies. With respect to the Indonesian companies in which the Group has investments, the financial performance of such companies may be adversely affected by the economic conditions in Indonesia.

Credit risk

Credit risk is the risk that the Group will incur a loss arising from its customers, clients or counterparties that fail to discharge their contractual obligations. There are no significant concentrations of credit risk. The Group manages and controls this credit risk by setting limits on the amount of risk it is willing to accept for individual customers and by monitoring exposures in relation to such limits.

The Group trades only with recognized and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to reduce the exposure to bad debts. The Group place their cash and cash equivalents in a number of different financial institutions, including state-owned and internationally recognized banks because they have the most extensive branch networks in Indonesia and are considered to be financially sound banks.

The table below shows the maximum exposure to credit risk for the components of the  consolidated statement of financial position:

			Maximum Exposure (1)
			December 31, 2013	December 31, 2012
Loans and receivables:
	Cash and cash equivalents		2,233,532	3,917,236
	Accounts receivable
		Trade - net	2,268,339	2,038,719
		Others - net	16,294	22,441
	Other current financial assets - net		31,673	13,382
	Due from related parties - net		7,167	10,358
	Other non-current financial assets		163,645	173,400
Held-for-trading:
	Currency forward		195,569	39,747
	Cross currency swaps		-	29,907
Available-for-sale investments:
	Other non-current financial assets -		2,730
		other long-term investments - net		2,730
Total			4,918,949	6,247,920

(1) There are no collaterals held or other credit enhancements or offsetting arrangements that affect this maximum exposure.

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

38.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

a.

Risk Management (continued)

Liquidity risk

Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The Group’s liquidity requirements have historically arisen from the need to finance investments and capital expenditures related to the expansion of its telecommunications business. The Group’s telecommunications business requires substantial capital to construct and expand mobile and data network infrastructure and to fund operations, particularly during the network development stage.

Although the Group has substantial existing network infrastructure, the Group expects to incur additional capital expenditures primarily in order to focus cellular network development in areas it anticipates will be high-growth areas, as well as to enhance the quality and coverage of its existing network.

In the management of liquidity risk, the Group monitors and maintains a level of cash deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuation in cash flows. The Group also regularly evaluates the projected and actual cash flows, including its loan maturity profiles, and continuously assesses conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, debt capital and equity market issues.

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.

	Expected maturity as of December 31,
						Total
					2018	contractual
					and	cash		Interest		Carrying
	2014	2015	2016	2017	thereafter	flows		value		amount
December 31, 2013
Short-term loan	1,500,000	-	-	-	-	1,500,000	(151)		1,499,849
Accounts payable - trade	339,310	-	-	-	-	339,310	-		339,310
Procurement payable	3,064,287	-	-	-	-	3,064,287	-		3,064,287
Accrued expenses	2,107,467	-	-	-	-	2,107,467	-		2,107,467
Deposits from customers	49,335	-	-	-	-	49,335	-		49,335
Derivative liabilities	36,903	-	-	-	-	36,903	-		36,903
Other current financial liabilities	788,124	-	-	-	-	788,124	(425,676)		362,448
Due to related parties	-	33,301	-	-	-	33,301	-		33,301
Obligations under finance lease	-	771,409	770,925	763,186	2,821,359	5,126,879	(1,532,767)		3,594,112
Other non-current financial liabilities	11,181	50,294	11,181	11,181	-	83,837	(982)		82,855
Loans payable	2,443,408	1,593,408	1,206,344	634,897	990,941	6,868,998	(80,364)		6,788,634
Bonds payable	2,358,000	320,000	772,000	1,370,000	10,922,850	15,742,850	(101,333)		15,641,517
Total	12,698,015	2,768,412	2,760,450	2,779,264	14,735,150	35,741,291	(2,141,273)		33,600,018

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

38.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

a.

Risk Management (continued)

Liquidity risk (continued)

Expected maturity as of December 31,

Total

2017 and

contractual

Interest

Carrying

2013

2014

2015

2016

thereafter

cash flows

value

amount

December 31, 2012

Short-term loan

315,736

-

-

-

-

315,736

(16,207)299,529

Accounts

payable - trade

231,737

-

-

-

-

231,737

-231,737

Procurement payable

2,737,850

-

-

-

-

2,737,850

-2,737,850

Accrued expenses

1,961,285

-

-

-

-

1,961,285

- 1,961,285

Deposits from

customers

43,825

-

-

-

-

43,825

-43,825

Derivative liabilities

81,241

-

-

-

-

81,241

- 81,241

Other current financial

liabilities

670,834

-

-

-

-

670,834

(381,670)289,164

Due to related parties

-

42,789

-

-

-

42,789

-42,789

Obligation under

financial lease

-

622,020

622,020

622,020

2,827,500

4,693,560

(1,591,650)3,101,910

Other non-current

financial liabilities

-

71,592

4,588

-

-

76,180

(6,907) 69,273

Loans payable

2,924,722

1,793,139

856,839

654,973

830,089

7,059,762

(686,722) 6,373,040

Bonds payable

2,643,553

3,520,261

1,299,951

1,734,671

13,638,300

22,836,736

(7,521,054) 15,315,682

Total

11,610,783

6,049,801

2,783,398

3,011,664

17,295,889

40,751,535

(10,204,210)30,547,325

b.

Capital Management

The Group aims to achieve an optimal capital structure in pursuit of its business objectives, which include maintaining healthy capital ratios and strong credit ratings, and maximizing stockholder value.

Some of the Group’s debt instruments contain covenants that impose compliance with certain leverage ratios. In addition, the Company’s credit ratings from the international credit ratings agencies are based on its ability to remain within certain leverage ratios. The Group has complied with all externally imposed capital requirements.

Management monitors capital using several financial leverage measurements such as debt-to-equity ratio. The Group’s objective is to maintain its debt-to-equity ratio at a maximum of 2.50 as of December 31, 2013 and 2012.

As of December 31, 2013 and 2012, the Group’s debt-to-equity ratio accounts are as follows:

	December 31, 2013		December 31, 2012
	Loans and	Guaranteed	Loans and	Guaranteed
	Bonds Payables	Notes Due 2020	Bonds Payables	Notes Due 2020
Short-term loan	1,500,000	1,500,000	300,000	300,000
Loans and bonds payable - including current maturities	22,611,848	22,611,848	21,923,555	21,923,555
Obligation under finance lease	-	3,940,469	-	3,374,139
Total debts	24,111,848	28,052,317	22,223,555	25,597,694
Total equity	16,517,598	16,517,598	19,395,384	19,395,384
Debts-to-equity-ratio	1.46	1.70	1.15	1.32

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

38.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

c.

Collateral

Except as discussed in Notes 8 and 18 to the consolidated financial statements, there are no other significant terms and conditions associated with the use of collateral.

The Company did not hold any collateral as of December 31, 2013 and 2012.

39.

RECONCILIATION BETWEEN IFAS AND IFRS

Reconciliation/

NotesIFAS

ReclassificationIFRS

CONSOLIDATED

STATEMENT OF

FINANCIAL POSITION

As of December 31, 2013

ASSETS

CURRENT ASSETS

Cash and cash equivalents

2,233,532

-

2,233,532

Accounts receivable

Trade

Related parties - net of

allowance for impairment

632,203

-

632,203

Third parties - net of

allowance for impairment 1,636,136

-

1,636,136

Others - net of allowance

for impairment  

16,294

-

16,294

Inventories - net of allowance

for decline in value

36,004

-

36,004

Derivative assets

195,569

-

195,569

Advances

34,867

-

34,867

Prepaid taxes

2

218,749

(218,072

)

677

Prepaid frequency fee and licenses

1,757,586

-

1,757,586

Prepaid expenses - others

373,220

-

373,220

Other current financial assets - net

31,673

-

31,673

Other current assets

2

3,184

218,072

221,256

Total Current Assets

7,169,017

-

7,169,017

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

39. RECONCILIATION BETWEEN IFAS AND IFRS (continued)

Reconciliation /

NotesIFAS

ReclassificationIFRS

NON-CURRENT ASSETS

Due from related parties - net of

allowance for impairment      

7,167 

-

7,167

Deferred tax assets - net

1d

96,057 

5,796

101,853

Property and equipment - net

1a

42,190,111 

(115,191)

42,074,920

Goodwill and other

intangible assets - net

1b

1,362,600 

689,117

2,051,717

Long-term prepaid rentals -

net of current portion

810,354 

-

810,354

Long-term prepaid licenses -

net of current portion

200,186 

-

200,186

Long-term advances

92,162 

-

92,162

Long-term prepaid pension - net

of current portion

1d

81,826 

41,988

123,814

Long-term receivables

1d

12,838 

(2,592

)

10,246

Other non-current financial

assets - net

1,557,367 

-

1,557,367

Other non-current assets - net

941,206 

-

941,206

Total Non-current Assets

47,351,874 

619,118

47,970,992

TOTAL ASSETS

54,520,891 

619,118

55,140,009

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term loan

1,499,849 -

1,499,849

Accounts payable - trade

Related parties47,603 

-

47,603

Third parties291,707 

-

291,707

Procurement payable

3,064,287 

-

3,064,287

Taxes payable

2

89,260 

(73,923

)

15,337

Accrued expenses

2,107,467 

-

2,107,467

Unearned income

922,403 

-

922,403

Deposits from customers

49,335 

-

49,335

Derivative liabilities

36,903 

-

36,903

Current maturities of:

Loans payable 2,443,367 

-

2,443,367

1,329,175

-1,329,175

Bonds payable2,356,310 

-

2,356,310

1,329,175

-1,329,175

Other current financial

liabilities 362,448 

-

362,448

Other current liabilities

2

223,498 

73,923

297,421

Total Current Liabilities

13,494,437 

-

13,494,437

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

39. RECONCILIATION BETWEEN IFAS AND IFRS (continued)

Reconciliation /

NotesIFAS

ReclassificationIFRS

NON-CURRENT LIABILITIES

Due to related parties

33,301

-

33,301

Obligations under finance lease -

net of current maturities

3,594,112

-

3,594,112

Deferred tax liabilities - net

1b,1d

893,285

262,161

1,155,446

Loans payable - net of current

maturities

4,345,267

-

4,345,267

Bonds payable - net of current

maturities

13,285,207

-

13,285,207

Employee benefit obligations -

net of current portion

1d

1,046,414

(299,443

)

746,971

Other non-current financial liabilities

82,855

-

82,855

    Other non-current liabilities

1,228,415

-

1,228,415

Total Non-current Liabilities

24,508,856

(37,282

)

24,471,574

TOTAL LIABILITIES

38,003,293

(37,282

)

37,966,011

EQUITY

EQUITY ATTRIBUTABLE TO

OWNERS OF THE COMPANY

Capital stock - Rp100 par value

per A share and B share

Authorized - 1 A share and

19,999,999,999 B shares

Issued and fully paid - 1 A share

and 5,433,933,499 B shares

543,393

-543,393

-

1,546,587

Premium on capital stock

1,546,587

-

1,546,587

Retained earnings

Appropriated

134,446

-

134,446

Unappropriated

1a,1b,1c,1d

12,877,143

442,582

13,319,725

Difference in transactions of

equity changes in associated

companies/subsidiaries

404,104

-

404,104

Difference in foreign currency

translation

(5,210

)

-

(5,210

)

Unrealized changes in fair value of

available-for-sale investment

413,700

-

413,700

Other comprehensive income from

employee benefits

1d

-

221,936

221,936

Total Equity Attributable to

Owners of the Company

15,914,163

664,518

16,578,681

Non-controlling Interests

1a,1d

603,435

(8,118

)

595,317

TOTAL EQUITY

16,517,598

656,400

17,173,998

TOTAL LIABILITIES AND EQUITY

54,520,891

619,118

55,140,009

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

39. RECONCILIATION BETWEEN IFAS AND IFRS (continued)  

Reconciliation/

NotesIFAS

ReclassificationIFRS

CONSOLIDATED STATEMENT

OF COMPREHENSIVE INCOME

Year Ended December 31, 2013

REVENUES

Cellular

19,374,638

-

19,374,638

MIDI

1c

3,265,847

618

3,266,465

Fixed telecommunications

1,214,787

-

1,214,787

Total Revenues

23,855,272

618

23,855,890

EXPENSES (INCOME)

Cost of services

9,956,533

-

9,956,533

Depreciation and amortization

1a

8,958,393

11,243

8,969,636

Personnel

1d

1,727,594

6,849

1,734,443

General and administration

901,534

-

901,534

Marketing

893,574

-

893,574

Gain on foreign exchange - net

(224,518

)

-

(224,518)

Gain on tower sale (including

amortizationof deferred gain on

sale and leaseback of towers)

(141,050

)

-

(141,050)

Others - net

273,996

-

273,996

Net Expenses

22,346,056

18,092

22,364,148

OPERATING PROFIT

1,509,216

(17,474

)

1,491,742

Gain on change in fair value of

derivatives - net

273,259

-

273,259

Interest income

107,193

-

107,193

Loss on foreign exchange - net

(3,011,410

)

-

(3,011,410)

Financing cost

(2,212,095

)

-

(2,212,095)

Other Expenses - Net

(4,843,053

)

-

(4,843,053

)

LOSS BEFORE INCOME TAX

(3,333,837

)

(17,474

)(3,351,311

)

39. RECONCILIATION BETWEEN IFAS AND IFRS (continued)

Reconciliation/

NotesIFAS

ReclassificationIFRS

INCOME TAX BENEFIT (EXPENSE)

Current

(118,156

)

-

(118,156

)

Deferred

1c,1d

785,534

1,286

786,820

Income Tax Benefit - Net

667,378

1,286

668,664

LOSS FOR THE YEAR

(2,666,459

)

(16,188

)

(2,682,647

)

OTHER COMPREHENSIVE

INCOME(LOSS)

Unrealized changes in fair value

of available-for-sale investment

23,982

-

23,982

Difference in foreign currency

translation

226

-

226

Income tax effect

(1,836

)

-

(1,836

)

Remeasurement gains on

defined benefit plans  

1d

-

905,239

905,239

Income tax effect

-

(226,310)

(226,310)

Net

22,372

678,929

701,301

NET COMPREHENSIVE

LOSS FOR THE YEAR

(2,644,087

)

662,741

(1,981,346

)

PROFIT (LOSS) FOR THE YEAR

ATTRIBUTABLE TO:

Owners of  the Company

(2,781,999

)

(16,606)

(2,798,605

)

Non-controlling Interests

115,540

418

115,958

Net

(2,666,459

)

(16,188)

(2,682,647

)

OTHER COMPREHENSIVE

INCOME -NET OF TAX

ATTRIBUTABLE TO:

Owners of  the Company

22,372

675,241

697,613

Non-controlling Interests

-

3,688

3,688

Total

22,372

678,929

701,301

NET COMPREHENSIVE

INCOME(LOSS) FOR THE YEAR

ATTRIBUTABLE TO:

Owners of  the Company

(2,759,627

)

658,635

(2,100,992

)

Non-controlling Interests

115,540

4,106

119,646

Net

(2,644,087

)

662,741

(1,981,346

)

39. RECONCILIATION BETWEEN IFAS AND IFRS (continued)

The reconciliation between IFAS and IFRS has not had a material impact on the consolidated statements of cash flows.

1.

Reconciliation:

a.

Landrights

Under IFAS, landrights are stated at cost. Other expenses associated with the acquisition of the Government permit to use the land (i.e., notary fee, tax) should be amortized over the period the holder is expected to retain the landrights which, in the case of the Group, is an initial period ranging from approximately 20 to 30 years.

Before January 1, 2010, under IFRS as issued by the International Accounting Standards Board (IASB), the costs to acquire the landrights as well as other expenses associated with the acquisition were capitalized as prepaid landrights lease, and were amortized over the period of the right to use the land obtained from the Government, which ranged from 20 to 30 years.

Based on amendment to IAS 17, “Leases”, (as part of the Improvements Project), starting January 1, 2010, the Group classifies land leases as finance leases and presents them in the consolidated financial statements as part of property and equipment. The Group applied retrospectively IAS 17 amendment and amortized land leases over 50 years (i.e., over the initial lease term of 30 years plus one extension of 20 years).

b.

Goodwill

Before January 1, 2011, under IFAS, goodwill was amortized using the straight-line method over the useful life of the goodwill. Starting January 1, 2011, goodwill is no longer amortized but is tested for impairment annually (as at December 31) and when circumstances indicate the carrying value may be impaired. The change in accounting policy resulted from the revision of PSAK 22, “Business Combinations”, which is applied prospectively.

Under IFRS as issued by IASB, goodwill is not amortized but subjected to annual impairment test under IAS 36, “Impairment of Assets”. The carrying amount of goodwill in the opening financial position as of January 1, 2008 is stated as the carrying amount under IFAS as of that date.

c.

Revenue Recognition

Under IFAS, up to December 31, 2009 revenue from service connection is recognized as income at the time the connection takes place (for post-paid service) or at the time of activation of starter packs by customers (for prepaid service). Starting January 1, 2010, the activation component of starter package sales has been deferred and recognized as revenue over the expected average period of the customer relationship. The change in accounting policy resulted from the revocation of PSAK 35, “Accounting for Revenues from Telecommunication Services”, which was applied prospectively.

Under IFRS as issued by IASB, revenue from service connection should be deferred and recognized over the expected term of the customer relationship. For the years ended December 31, 2013 and 2012, there is no reconciliation adjustment for such service connection, except for the recognition ofincome from the balance of deferred income as of December 31, 2009 which is considered a reconciliation adjustment until the whole amount is considered earned.

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

39. RECONCILIATION BETWEEN IFAS AND IFRS (continued)

1.

Reconciliation (continued):

d.

Employee Benefits

Under IFAS, actuarial gains or losses are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed the greater of 10% of the present value of the defined benefit obligation or 10% of the fair value of plan assets, at that date. These gains or losses in excess of the 10% corridor are recognized on a straight-line basis over the expected average remaining working lives of the employees. The past service costs are recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits have already vested, following the introduction of changes to a pension plan, past service costs are recognized immediately.

Under IFRS as issued by IASB, the Group applied IAS 19 (Revised 2011) retrospectively in the current period in accordance with the transitional provisions set out in the revised standard. The opening statement of financial position of the earliest comparative period presented (January 1, 2012). IAS 19 (Revised 2011) changes include the following:

·

Eliminate the “corridor approach” permitted under the previous version of IAS 19.

·

Re-measurements, comprising of actuarial gains and losses and the return on plan assets (excluding net interest), are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur in order for the net pension asset or liability recognized in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.

·

Re-measurements are not reclassified to profit or loss in subsequent periods.

·

Past service costs are recognized in profit or loss on the earlier of: (i) the date of the plan amendment or curtailment, and (ii) the date that the Group recognizes restructuring-related costs. As a result, unvested past service costs can no longer be deferred and recognized over the future vesting period.

·

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognizes the following changes in the net defined benefit obligation under ‘personnel expense’ in consolidated statement of profit or loss (by function):

(i) service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements (ii) net interest expense or income.

1.

Reclassification:

Certain accounts were reclassified to conform with IFRS presentation requirements in the 2013 consolidated financial statements. The following discusses the significant reclassifications:

Under IFAS, prepaid taxes and taxes payable consist of receivables and payables related to Corporate Income Tax, VAT and Other Income Tax.

Under IFRS as issued by IASB, prepaid taxes and taxes payable include only domestic and foreign taxes which are based on taxable profits and withholding taxes, which are payable by a subsidiary, associate or joint venture on distributions to the reporting entity. All other taxes receivable or payable are recorded under other current assets or other current liabilities.

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

40.

EVENTS AFTER REPORTING PERIOD

a.

On January 3, 2014, the Company made the second drawdown of Rp300,000 from its Syndicated Revolving Time Loan facility with IIF and SMI (Note 18g).

b.

During January, February, March and April 2014, the Company entered into 5, 20, 4 and 3 currency forward contracts with several counter-parties with total notional amounts of US$75,000, US$370,000, US$72,000, and US$40,000, respectively.

c.

As of January 10, 21 and 27 and February 3 and 9, 2014, SKAGEN Funds, a stockholder, reported its ownership in the Company to be 5.50%, 5.47%, 5.46%, 5.43% and 5.42%, respectively, as stated in its letter to OJK on the same dates.

d.

On January 15, 2014, the Company sent a letter to OJK informing the latter about the updated status of the legal case in regard to the allegation of frequency 2.1 GHz misuse by IMM and the Company under a cooperation agreement on broadband internet services (Note 33i).

e.

On January 20 and February 4, 2014, March 4 and April 2, 2014, the Company received the ratings for its Guaranteed Notes Due 2020 from S&P, Moody’s and Fitch at BB+ (stable outlook), Ba1 (stable outlook), BBB (stable outlook), respectively.

On March 11, 2014, the Company received the rating from Pefindo for its local bonds and sukuk at_idAA₊ (stable outlook) and_idAA_+(sy) (stable outlook), respectively.

f.

On January 20, 2014, the Company received a letter from Mandiri informing the Company about the further increase in the interest rate of the Revolving Time Loan facility to 1-Month JIBOR + 2.00% per annum. The new interest rate is effective starting January 12, 2014 (Note 14).

g.

On January 23, 2014, the Company received a letter from BCA informing the Company about the further increase in the  interest rates of the Revolving Time Loan facility and Investment Credit Facility to 1-Month JIBOR + 2.25% per annum and 9.75%per annum, respectively. The new interest rates are effective starting February 28, 2014 (Notes 18c and 18e).

h.

On January 24, 2014, the Company paid the underpayment amounting to Rp110,413 and Rp97,132 of the 2007 and 2008 corporate income tax, respectively (Note 33b). On March 20, 2014, the Company submitted objection letters to the Tax Office regarding this correction on the Company’s 2007 and 2008 corporate income tax amounting to Rp110,413 and Rp97,132, respectively. As of the issuance date of the consolidated financial statements, the Company has not received any decision from the Tax Office on these objections.

i.

On January 30, 2014, BRTI issued a letter to all telecommunication operators, informing them of the details of the 2014 interconnection fee to be implemented by telecommunication operators in Indonesia.

j.

On February 25, 2014, the Company received a letter from BCA approving the extension of maturity of the Revolving Time Loan Facility up to February 10, 2015 (Note 18c).

147 \* Arabic  \* MERGEFORMAT 147

These consolidated financial statements are originally issued in the Indonesian language.

PT INDOSAT Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2013 and

for the Year Then Ended

 (Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

u

40.

EVENTS AFTER REPORTING PERIOD (continued)

k.

On February 28 and March 28, 2014, the Company paid the loan principal installments of SEK Credit Facility B and HSBC France’s COFACE and SINOSURE term facilities amounting to US$11,071.43 (Note 18b) and US$10,069.34 (Note 18d), respectively.  

l.

On March 14, 2014, the Company entered into an agreement with Merril Lynch, Singapore to sell the Company’s investment in 239,826,310 shares in Tower Bersama at Rp5,800 per share (Note 12a). The Company subsequently received the proceeds from the sale on March 19, 2014. Hence, the investment in Tower Bersama will be derecognized in the next financial year and the cumulative fair value gain of Rp413,700 recorded in other comprehensive income will be recycled toprofit or loss.

m.

During March 2014, the Company received SKPKBs from the DGT on 2010 income tax articles 21, 22, 23, 26, and 4(2) totaling Rp5,401, which were paid in April 2014.

n.

On March 26, 2014, the Company received a letter from the MOCIT informing the Company that itslicense to utilize the 150.5ELsatellite orbital slot will no longer be extended and such license utilization will be cease as of September 1, 2015 (Note 33d). On March 27, 2014, the Company submitted a letter to the MOCIT to request for clarification regarding the basis of its decision and the rules and regulations which the Company has purportedly failed to comply with. As the issuance date of the consolidated financial statements, the Company has not received any response from the MOCIT.

o.

On April 1, 2014, the Company received dividend income from its investment in ACPLamounting to US$396.8 (equivalent to Rp4,525).

p.

As of April 24, 2014, the prevailing exchange rate of the rupiah to U.S. dollar is Rp11,608 to US$1 (in full amounts), while as of December 31, 2013, the prevailing exchange rate was Rp12,189 to US$1 (in full amounts). Using the exchange rate as of April 24, 2014, the Group earned exchange gain amounting to approximately Rp623,577 (excluding the effect of revaluing derivative contracts on April 24, 2014) on the foreign currency liabilities, net of foreign currency assets, as of December 31, 2013 (Note 38).

The translation of the foreign currency liabilities, net of foreign currency assets, should not be construed as a representation that these foreign currency liabilities and assets have been, could have been, or could in the future be, converted into rupiah at the prevailing exchange rate of the rupiah to U.S. dollar as of December 31, 2013 or at any other rate of exchange.

The commitments for the capital expenditures denominated in foreign currencies as of
December 31, 2013 as disclosed in Note 33a are approximately Rp1,378,647 if translated at theprevailing exchange rate as of April 24, 2014.

147 \* Arabic  \* MERGEFORMAT 147

Appendix 1

PT INDOSAT Tbk

STATEMENT OF FINANCIAL POSITION

As of December 31, 2013

                             (Expressed in millions of rupiah, except share data)

As ofAs of

December 31,

December 31,

20132012

ASSETS

CURRENT ASSETS

Cash and cash equivalents

1,179,554

2,803,689

Accounts receivable

Trade

Related parties - net of allowance for

impairment of Rp19,144as of

December 31, 2013 (2012 : Rp38,030)

229,063

223,238

Third parties - net ofallowance for

impairment of Rp450,009 as of

December 31, 2013 (2012 : Rp493,480)

1,687,517

1,297,460

Others - net of allowance for impairment of

Rp35,388 as ofDecember 31, 2013

(2012 : Rp18,748)

15,801

19,643

Inventories - net of allowance for obsolescence of

Rp nil as of December 31, 2013

(2012 : Rp1,378)

34,596

51,192

Derivative assets

195,569

69,654

Advances

31,701

33,278

Prepaid taxes

196,609

284,671

Prepaid frequency fee and licenses

1,730,507

1,509,739

Prepaid expenses - other

332,727

305,624

Other current financial assets - net

2,936

5,058

Other current assets

244

244

Total Current Assets

5,636,824

6,603,490

147 \* Arabic  \* MERGEFORMAT 147

PT INDOSAT Tbk

STATEMENT OF FINANCIAL POSITION (continued)

As of December 31, 2013

(Expressed in millions of rupiah, except share data)

December 31,

December 31,

20132012

NON-CURRENT ASSETS

Due from related parties - net of allowance for

impairmentof Rp15

9,191

37,019

Property and equipment - net

41,058,148

41,017,251

Goodwill and other

intangible assets - net

1,334,8921,345,164

Long-term prepaid rentals -

net of current portion

806,155

751,046

Long-term prepaid licenses -

net of current portion

191,289

255,289

Long-term advances

78,104

31,607

Long-term prepaid pension - net

of current portion

47,948

58,905

Long-term receivables

12,838

17,959

Other non-current financial

assets - net

1,507,973

1,453,343

Other non-current assets - net

1,890,158

1,651,617

Total Non-current Assets

46,936,696

46,619,200

TOTAL ASSETS

52,573,520

53,222,690

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term loan

1,499,849

299,529

Accounts payable - trade

Related parties

210,306

48,966

Third parties

279,036

200,394

Procurement payable

2,880,756

2,590,857

Taxes payable

63,741

50,296

Accrued expenses

1,742,601

1,643,884

Unearned income

916,694

875,891

Deposits from customers

49,335

43,825

Derivative liabilities

36,903

81,241

Current maturities of:

Loans payable

2,443,367

2,669,218

Bonds payable

2,356,310

1,329,175

Other current financial

liabilities

346,694

252,619

Other current liabilities

217,994

200,894

Total Current Liabilities

13,043,586

10,286,789

147 \* Arabic  \* MERGEFORMAT 147

PT INDOSAT Tbk

STATEMENT OF FINANCIAL POSITION (continued)

As of December 31, 2013

(Expressed in millions of rupiah, except share data)

December 31,December 31,

20132012

NON-CURRENT LIABILITIES

Due to related parties

8,084,776

6,429,464

Obligations under finance lease

3,594,112

3,101,910

Deferred tax liabilities - net

644,315

1,476,999

Loans payable - net of current maturities

4,345,267

3,703,822

Bonds payable - net of current maturities

5,427,260

7,775,774

Employee benefit obligations -net of current portion

990,438

882,520

Other non-current financial liabilities

44,726

-

Other non-current liabilities

1,208,754

1,299,233

Total Non-current Liabilities

24,339,648

24,669,722

TOTAL LIABILITIES

37,383,234

34,956,511

EQUITY

Capital stock - Rp100 par value

per A share and B share

Authorized - 1 A share and

19,999,999,999 B shares

Issued and fully paid - 1 A share

and 5,433,933,499 B shares

543,393

543,393

Premium on capital stock

1,546,587

1,546,587

Retained earnings

Appropriated

134,446

134,446

Unappropriated

12,147,655

15,247,530

Difference in transactions of equity changes in associated

companies/subsidiaries

404,104

404,104

Difference in foreign currency translation

(619

)

(619)

Unrealized changes in fair value of

available-for-sale investment

413,700

389,718

Difference in transactions with entities under

common control

1,020

1,020

TOTAL EQUITY

15,190,286

18,266,179

TOTAL LIABILITIES AND EQUITY

52,573,520

53,222,690

147 \* Arabic  \* MERGEFORMAT 147

Appendix 2

PT INDOSAT Tbk

STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2013

                             (Expressed in millions of rupiah, except share data)

Year ended December 31

20132012

REVENUES

Cellular

19,409,806

18,535,365

Multimedia, Data Communication,Internet (“MIDI”)

1,889,658

1,484,649

Fixed telecommunications

1,200,800

1,001,552

Total Revenues

22,500,264

21,021,566

EXPENSES (INCOME)

Cost of services

9,838,920

8,633,393

Depreciation and amortization

8,660,518

8,017,048

Personnel

1,423,719

1,158,733

Marketing

842,293

875,224

General and administration

748,018

500,044

Gain on foreign exchange - net

(237,634

)

(44,934)

Gain on tower sale (including

amortization of deferred gain on sale

and leaseback of towers)

(141,050

)

(1,183,963)

Others - net

188,743

252,118

Net Expenses

21,323,527

18,207,663

OPERATING PROFIT

1,176,737

2,813,903

Gain on change in fair value of derivatives - net

273,259

4,964

Interest income

40,113

69,817

Loss on foreign exchange - net

(3,011,410

)

(789,438)

Financing cost

(2,221,380

)

(2,066,225)

Other Expenses - Net

(4,919,418

)

(2,780,882

)

PROFIT (LOSS) BEFORE INCOME TAX

(3,742,681

)

33,021

INCOME TAX BENEFIT (EXPENSE)

Current

-

(103,224

)

Deferred

830,385

311,510

Income Tax Benefit - Net

830,385

208,286

PROFIT (LOSS) FOR THE YEAR

(2,912,296

)

241,307

147 \* Arabic  \* MERGEFORMAT 147

PT INDOSAT Tbk

STATEMENT OF COMPREHENSIVE INCOME (continued)

For the Year Ended December 31, 2013

                             (Expressed in millions of rupiah, except share data)

Year ended December 31

_____________________________________________________________________

20132012

OTHER COMPREHENSIVE INCOME

Unrealized changes in fair value of available-for-

saleinvestment

23,982389,718

NET COMPREHENSIVE INCOME (LOSS) FOR THE YEAR

(2,888,314

)

631,025

BASIC AND DILUTED EARNINGS (LOSS)PER SHARE

ATTRIBUTABLE TOOWNERS OF THE COMPANY

(535.95)

44.41

BASICAND DILUTED EARNINGS (LOSS)PER ADS

(50 SHARES PER ADS)ATTRIBUTABLE TO

OWNERS OF THE COMPANY

(26,797.31)

2,220.37

147 \* Arabic  \* MERGEFORMAT 147

.

Appendix 3

PT INDOSAT Tbk

STATEMENT OF CHANGES IN EQUITY

 For the Year Ended December 31, 2013

(Expressed in millions of rupiah, except share data)

Description	Capital Stock - Issued and Fully Paid	Premium on Capital Stock	Retained Earnings		Difference in Transactions of Equity Changes in Associated Companies/ Subsidiaries	Difference in Foreign Currency Translation		Difference in Transactions with Entities under Common Control	Total
			Appropriated	Unappropriated			Unrealized Changes in Fair Value of Available-for-Sale Investment
Balance as of January 1, 2012	543,393	1,546,587	134,446	15,423,712	404,104	(619)	-	1,020	18,052,643
Unrealized changes in fair value of available-for-sale investment	-	-	-	-	-	-	389,718	-	389,718
Resolution during the Annual Stockholders’ General Meeting on May 14, 2012
Declaration of cash dividend	-	-	-	(417,489)	-	-	-	-	(417,489)
Profit for the year	-	-	-	241,307	-	-	-	-	241,307
Balance as of December 31, 2012	543,393	1,546,587	134,446	15,247,530	404,104	(619)	389,718	1,020	18,266,179

Balance as of January 1, 2013	543,393	1,546,587	134,446	15,247,530	404,104	(619)	389,718	1,020	18,266,179
Unrealized changes in fair value of available-for-sale investment	-	-	-	-	-	-	23,982	-	23,982
Resolution during the Annual Stockholders’ General Meeting on June 18, 2013
Declaration of cash dividend	-	-	-	(187,579)	-	-	-	-	(187,579)
Loss for the year	-	-	-	(2,912,296)	-	-	-	-	(2,912,296)
Balance as of December 31, 2013	543,393	1,546,587	134,446	12,147,655	404,104	(619)	413,700	1,020	15,190,286

147 \* Arabic  \* MERGEFORMAT 147

   Appendix 4

PT INDOSAT Tbk

STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2013

(Expressed in millions of rupiah, except share data)

Year ended December 31

20132012

CASH FLOWS FROM OPERATING ACTIVITIES

Cash received from:

Customers

22,058,397

20,635,014

Refunds of taxes

264,816

121,953

Settlement from currency forward contracts

134,477

116,147

Interest income

42,504

70,464

Settlement from currency swap contracts

26,149

34,410

Cash paid to/for:

Authorities, other operators, suppliers and others

(11,064,742

)

(11,231,433

)

Financing cost

(2,215,713

)

(2,035,630)

Employees

(1,153,756

)

(977,154)

Settlement of interest rate swap contracts

(32,000

)

-

Income taxes

(85,225

)

(251,665

)

Interest rate swap contracts

(17,853

)

(82,306

)

Swap cost from cross currency swap contract

(3,926

)

(39,697)

Net Cash Provided by Operating Activities

7,953,128

6,360,103

CASH FLOWS FROM INVESTINGACTIVITIES

Proceeds from sale of property and equipment

207,192

3,098,808

Cash dividend received from other long-term investment

53,141

-

Acquisitions of property and equipment

(8,842,836

)(5,438,310)

Acquisitions of intangible assets

-

(576

)

Net Cash Used in Investing Activities

(8,582,503

)

(2,340,078

)

CASH FLOWS FROM FINANCINGACTIVITIES

Proceeds from long-term loans

2,950,000

1,700,000

Proceeds from short-term loan

1,300,000

700,000

Repayment of long-term loans

(3,366,200)(5,433,443

)

Payment of bonds payable

(1,330,000)(200,000)

Cash dividend paid

(187,579)(417,489)

Repayment of short-term loans

(100,000)(1,900,000

)

Proceeds from bonds payable

-3,000,000

Net Cash Used in  Financing Activities

(733,779

)

(2,550,932

)

Net Foreign Exchange Differencesfrom

Cash and Cash Equivalents

(260,981

)30,143

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS

(1,624,135

)

1,499,236

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

2,803,689

1,304,453

CASH AND CASH EQUIVALENTS AT END OF YEAR

1,179,554

2,803,689

DETAILS OF CASH AND CASH EQUIVALENTS:

Time deposits with original maturities

of three months or lessand deposits on call

1,046,486

2,554,577

Cash on hand and in banks

133,068

249,112

Cash and cash equivalents as stated in the statement of

financial position

1,179,554

2,803,689

147 \* Arabic  \* MERGEFORMAT 147

  Appendix 5

PT INDOSAT Tbk

NOTES TO THE FINANCIAL STATEMENTS

As of December 31, 2013 and

For the Year then Ended

(Expressed in millions of rupiah, except share data)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation of Separate Financial Statements of the Parent Entity

The separate financial statements of the Parent Entityhave been prepared in accordance with PSAK 4 (Revised 2009), “Consolidated and Separate Financial Statements”, adopted onJanuary 1, 2011.

PSAK 4 (Revised 2009) provides that an entity choosing to present the separate Parent Entity financial statements can only present such financial statements as additional information to the consolidated financial statements. The separate financial statements are the financial statements prepared by the Parent Entity to record its investments in subsidiaries, associated Company and jointly controlled entities through direct equity ownership and not to report on the results of operations and net assets of these investees.

The accounting policies adopted in the preparation of the separate financial statements of the Parent Entity are consistent with those made in the preparation of the Group’s consolidated financial statements as disclosed in Note 2 to the consolidated financial statements, except for investments in subsidiaries and associated entities.

Investments in shares of subsidiaries and associated entity are recorded at cost. The Parent Entity recognizes dividends from subsidiaries and associated entities in the separate statement of comprehensive income when the right to receive the dividend is determined.

2.

INVESTMENTS IN SHARES OF SUBSIDIARIES AND ASSOCIATED COMPANY

The information regarding the Company's associated Companyisdisclosed in Note 13 to the consolidated financial statements.

.

As of December 31, 2013 and 2012, the Parent Entity has investments in shares in the following subsidiaries and associated Company:

December 31, 2013

Cost

Cost

Percentage

Acquisition

Acquisition

of

January 1,

December31,

Entity Name

Ownership

2013

Increase

Decrease

2013

Subsidiaries

IPBV

100.00%

23,862

-

-

23,862

IFB

          -*

22,377

-

(22,377

)

-

IIFB

          -*

10,447

-

(10,447

)

-

ISPL

100.00%

5,962

-

-

5,962

IMM

99.85%

277,974

-

-

277,974

SMT**

84.08%

134,709

16,549

-

151,258

Lintasarta

72.36%

543,296

-

-

543,296

Associated Company

PT Multi Media Asia (“M2A”)

26.67%

56,513

-

-

56,513

Allowance for impairment

(56,513)

-

-

(56,513)

Net

1,018,627

16,549

(32,824

)

1,002,352

* As of November 4, 2013, IFB and IIFB have been formally liquidated and deregistered from Netherlands’ chambers of commerce (see Note1d).

**  

On July 11, 2013, the Company made additional capital injection to SMT amounting to Rp16,549, resulting in the increase of the Company’s ownership in SMT from 72.54% to 84.08%.

147 \* Arabic  \* MERGEFORMAT 147

PT INDOSAT Tbk

NOTES TO THE FINANCIAL STATEMENTS

As of December 31, 2013 and

For the Year then Ended

(Expressed in millions of rupiah, except share data)

2.

INVESTMENTS IN SHARES OF SUBSIDIARIES AND ASSOCIATED COMPANY(continued)

As of December 31, 2013 and 2012, the Parent Entity has investments in shares in the following subsidiaries and associated Company (continued):

December 31, 2012

Cost

Cost

Percentage

Acquisition

Acquisition

of

January 1,

December31,

Entity Name

Ownership

2012

Increase

Decrease

2012

Subsidiaries

IPBV

100.00%

23,862

-

-

23,862

IFB

100.00%

22,377

-

-

22,377

IIFB

100.00%

10,447

-

-

10,447

ISPL

100.00%

5,962

-

-

5,962

IMM

99.85%

277,974

-

-

277,974

SMT

72.54%

134,709

-

-

134,709

Lintasarta

72.36%

543,296

-

-

543,296

Associated Company

PT Multi Media Asia (“M2A”)

26.67%

56,513

-

-

56,513

Allowance for impairment

(56,513)

-

-

(56,513)

Net

1,018,627

-

-

1,018,627

147 \* Arabic  \* MERGEFORMAT 147