Report of the Directors

As having previously been reported, the year 2007 was a great year for agribusiness industry and the period up to third quarter of 2008 was still a continuation of boom period for agribusiness industry, in which the prices of commodities still shown a trend of increase.

Unfortunately, in fourth quarter of 2008, global financial crisis occurred that has initiated the delayed world economic growth in which there had been decreasing demand on goods and drastically decreasing prices of commodities as well as weakening of Indonesian Rupiah against US Dollar. As to the latter, Rupiah was sharply depreciated during fourth quarter of 2008 and the average transaction for the given period at the level above Rp 11,000 per dollar. The Rupiah closed at Rp 10,950 per dollar on December 31, 2008, a decline of 16% compared to the closing rate as at the end of December 2007 of Rp 9,419 per dollar.

Because of the rate difference, the Company booked an unrealized forex loss Rp 49 billion and the net profit obtained in 2008 was only Rp 33 billion, a decline of 28% compared to the results achieved in 2007 and below the expected target of Rp 80 billion. That was because the net profit initially forecasted was based on an assumption that Rupiah was in the stable position against USD currency. If there was no Rupiah depreciation against USD currency, the net profit goal for the year 2008 would have been achieved.

In such a deteriorating economic condition, PT Budi Acid Jaya Tbk (the Company), as one of largest producer of tapioca starch, a product that contributes up to 65% to consolidated revenue, was still successful in increasing its sale during 2008 into Rp 1.55 trillion, an improvement of 15% over the result obtained in 2007. Realization of these sales almost reaches the original sales target of Rp 1.6 trillion.

During 2008, the Company continued its strategic policies that was started in previous year, namely efficiency (cost saving), improved utilization of production capacity and development of product with cassava as basic material.

In order to make the Company as “Integrated Cassava-Based Producer Implementing Green Environmental Concept”, the Company has performed the “Value Waste” program, in which the dregs of cassava are produced into citric acid, liquid waste is converted into electricity and solid waste is processed into organic fertilizer. During 2008, organic fertilizer had provided contribution to sale in the value of Rp 16 billion. Although this amount has not been significant, yet it showed a significant 75% increase over results achieved in 2007 of Rp 9 billion.

In relation to the implementation of Bio Gas Power Plant (PLTBG) development, in which the liquid waste of tapioca factory is processed into electricity in 8 locations of Company’s tapioca factories in Lampung, we, in this occasion, inform that this PLTBG development is still in the completion stage and during 2008 had not been able to operate due to technical obstacle, namely the developed micro bacteria had not been able to grow well and adequate granular has not been formed yet. Therefore, the expected gas has not been produced. However, this obstacle has presently been overcome and up to the first quarter of 2009, two (2) PLTBGs have been in operation and electrical energy efficiency program has been realized in 2009.

As explained previously, the above Green Environment PLTBG development complied to Clean Development Mechanism Project (CDM Project) in accordance with 1997 Kyoto Protocol Criteria, in which the Company may sell Credit Carbon in the form of CER (Certified Emission Reduction) to be issued by the UNFCCC (United Nation Framework Convention in Climate Change) to the Company. A PLTBG project located at Way Abung – Lampung has been registered at UNFCCC in 2007 and, on this occasion, we would like to report that seven (7) PLTBG projects have obtained approval from the State Ministry of Environment of Republic of Indonesia and is in the process of validation for registration at the UNFCCC.

With regard to the original plan of Company for developing Bio Ethanol factory in 2008, we would like to report that the development of this factory was suspended due to a 74% contraction in the crude oil price, from USD 148 / barrel to USD 38 / barrel as at the end of 2008. As additional information, Bio Ethanol made of cassava as basic material, besides being used in the alcohol industry, is also a mixed material of gasoline. Therefore, the price of Bio Ethanol has direct correlation with the price of fossil oil.

On June 19, 2008, the shareholders approved to buy back the shares which have been issued by the Company and which have been listed in the Indonesian Stock Exchange (based on Capital Market Supervisory Agency and Financial Institution - BAPEPAM and LK Regulation No. XI.B.2) at the maximum of 5 % of the total subscribed and fully-paid capital. During 2008, the Company has performed the buy-back in value of Rp 9.343 billion and it is recorded as “Treasury Stock” and presented as part of the Stockholders’ Equity while observing the market condition.

Based on BAPEPAM and LK regulation No. XI.B.3 issued on October 9, 2008 regarding “Buy Back of Shares of Public Company in the Potentially Market Crisis Condition”, in order to support the Indonesian Capital Market program, the Company’s management has decided to buy back the shares issued by the Company at the maximum of 19% from total shares which will be conducted from October 20, 2008 until January 19, 2009. During, 2008, the Company has performed buy-back in value of Rp 4.002 billion which is recorded as “Treasury Stock” and presented as part of the Stockholders’ Equity while observing the market condition.

In the current global financial crisis that will continue to prolong, the Company’s management remains optimistic for the year 2009. It is because in early 2009, two (2) PLTBGs have been operated and all remaining PLTBGs are expected to be operated gradually in the year 2009. In 2009, therefore, the Company has been able to realize the electrical energy consumption efficiency program that may increase the profit margin. In addition, the products manufactured by the Company constitute main material of other consumption products. Thus, the demand for Company’s products shall increase in line with the growing of world population. Therefore, we are optimistic that the Company prospect will remain positive in 2009.

Last but not least, we are very grateful to the shareholders, employees and all parties that have continuously provided their support and trust on us in performing our duties so that we may overcome the impact of global financial crisis as well as improve and maintain the Company’s performance from time to time.

Report of the Board of Commissioners

Global financial crisis with an impact on the delayed world economic growth and depreciated value of Rupiah against foreign exchange have caused collapsed to many companies and job severance occurring anywhere. We are grateful because our Company is able to face this crisis and manage to book a net profit of Rp 32.9 billion in 2008. The profit is down 28% compared to the year 2007 due to unrealized forex loss of Rp 49 billion. This result indicates commitment and endeavor taken by the management of the Company in facing the crisis.

In line with the vision of the Company “To Become an Integrated Cassava-Based Producer Implementing Green Environment Concept”, the Company has entered the completion stage of Bio Gas Power Plant (PLTBG) project development that convert liquid waste into electricity and improve the processing of solid waste into organic fertilizer that may increase the revenue of the Company. It is also a concrete measure having been taken by the Directors as a part of the Company’s Social Responsibility.

Based on the performance having been achieved by the Company and implementation of program that is well-balanced between environment, community and profitability (that is known as 3P Program: Planet, People and Profit), we may conclude that the Directors had properly managed the Company for the year 2008.

We are of the same opinion with the Directors that the Company has a bright business prospect because of increasing demand for the Company’s products in line with the increasing world population and be supported by the 3P Program performed by the Directors that will eventually provide an added value to the Company.

In order to supervise the corporate governance of the Company, an audit committee, under supervision from the Board of Commissioners, has been established.

Last of all, we are very thankful to the shareholders and all stakeholders having entrusted us to perform the supervisory function and having provided direction to the Directors.