On behalf of the Board of Directors, I would like to present UFS annual report and financial statements for the year ended 31 December 2011 "FY2011").

From an operation perspective, Group revenue increased by 35.1% from US$132.9 million in FY2010 to US$179.5 million in FY2011. The increase was a result of higher activity in the Group's Construction Division.

Gross profit increased by 62.8% to US$13.2 million in FY2011 contributed by the Group's Construction and Development Division, mainly due to the substantial completion of Green Meadows project and cost savings from Trillium project.

As part of the Group's effort to protect its forest concession, the Group received an income of US$8.0 million from third party for encroachment.

During the year, the Group recorded an impairment of US$24.5 million of its advances to PT Kiani Kertas. Under the scheme of arrangement ratified by the Jakarta Commercial Court in July 2011, the Group could only recover approximately US$22.7 million out of US$28.3 million over 20 years from 2013, and this amount was discounted using discounted cash flow to today's value as required by the accounting standards.

The Group also incurred a marked-to-market loss of US$6.9 million for the Group's forest concession.

FY2011 has been a challenging and an eventful year for the Company. When the share subscription agreement with Falcon Capital Global Holding Ltd lapsed in November 2010, the Company with the help of Argyle Street Management Limited, started searching for a white knight to help save the financially distressed UFS. On 12 January 2011, the Company and Asia Star Fund Ltd ("ASF") entered into a subscription agreement for the proposed subscription of 3,593,395,298 ordinary shares of S$0.05 each in the share capital of the Company (the "ASF Subscription") and a loan agreement for US$35,000,000 (the "Loan Agreement") to assist the Company to meet the debt demands from certain creditors and provide working capital for the Group. As part of the conditions precedent in the Loan Agreement, ASF nominated Messrs Eddy, Mochtar Suhadi and Henry Susanto to represent ASF on the UFS Board. Messrs Eddy and Mochtar resigned on 14 August 2011 due to their additional work responsibilities. At the request of UFS Board, Mr Henry Susanto has been assisting the Company in the operations of PT Hutan Rindang Banua and PT Mangium Anugerah Lestari. The Board would like to take this opportunity to thank Mr Henry Susanto for doing a great job.

In May 2011 and June 2011, Argyle Street Management Limited ("ASM"), a substantial shareholder with indirect interest of 13.28% in the capital of UFS, requested board seats and Chairmanship in the Company, with the objective of assisting the Management to complete the ASF Subscription expeditiously. As at the date of this report, ASM nominees hold three board seats in the Company, including the Chairmanship.

On 26 January 2012, the Company entered into a legally binding agreement, Head of Agreements ("HoA") with PT Dian Swastatika Sentosa Tbk ("DSS") in respect of the proposed acquisition by the Company for 3,941,166,500 shares representing 66.9998% of the total issued share capital of PT. Golden Energy Mines Tbk ("GEMS") from DSS. The purchase considerations of S$1,549,643,667 will be by way of issuance and allotment of 44,275,533,621 new ordinary shares of the Company at an issue price of S$0.035 per share ("Proposed Acquisition") which will represent approximately 92.7663% of the enlarged share capital of UFS. On 6 March 2012, GMR Coal Resources Pte Ltd ("GMR") which currently holds 30.0% of GEMS, gave a written indication of non-binding interest to the Company to enter into negotiations in respect of the Proposed Acquisition. The Company expects to enter into the tripartite definitive agreement with DSS and GMR by 30 June 2012. The completion of the Proposed Acquisition has been agreed to be on or before 31 December 2012 or otherwise agreed ("Acquisition Long-Stop Date"). In accordance to the HoA, the Company has extended the ASF Subscription long-stop date from 30 March 2012 to the earlier of the Acquisition Long-Stop Date or the termination of the Proposed Acquisition. The ASF Subscription will be terminated upon the completion of the Proposed Acquisition. The Company has also restructured the ASF Loan to allow ASF the option to be repaid by way of shares at S$0.05 per share in the capital of UFS or cash, or if in the event of default, repaid by shares only.

The ASF Loan will also be extended to be in line with the Acquisition Long-Stop Date.

GEMS is the holding company of several coal mining companies in Indonesia and was listed on the Indonesian Stock Exchange in November 2011. GEMS and its subsidiaries own thermal coal resources of more than 1.93 billion tons and thermal coal reserves of approximately 849 million tons. The Board strongly believes that the addition of GEMS group would result UFS becoming one of the largest market cap companies listed on SGX-ST which will increase UFS shareholder value as well as refocus UFS activities on coal mining.

I would like to end by thanking all stakeholders - my colleagues, the Management, and Staff, our Clients, our Business Partners, our Bankers and our Shareholders for their valuable support. We look forward to your continuous support to meeting the challenges.

Chan Kin
Non-Executive Chairman