CODE OF CORPORATE GOVERNANCE INA ENG 190517 … OF CORPORATE... · c. Decree of the State Minister of SOE No. Kep-100/MBU/2002 on Assessment of SOE Soundness Level. 5. Circular Letter

1

GOOD CORPORATE GOVERNANCE

CODE OF CORPORATE GOVERNANCE

Statement of Commitment to GCG Implementation

We, the Board of Commissioners and the Board of Directors of PT TIMAH (Persero)

Tbk, represent that we:

1. Always carry out the Board of Commissioners’ supervisory and advisory

functions and the Board of Directors’ company management function earnestly

with full responsibility based on GCG principles namely: Transparency,

Accountability, Responsibility, Independence and Fairness;

2. Apply all the provisions stipulated in the Code of Corporate Governance, Board

Manual, COC and other policies as well as the prevailing laws and regulations

that applicable and ensure that all policies of the Company contain GCG

principles;

3. Establish this GCG Guidelines as a standard that should be obeyed and become

the reference of the Board of Commissioners, Directors and Employees in the

Company’s operations in the form of regulations, decisions or policies in any sort;

4. Determine and commit to GCG principles implementation and continuously

enhance GCG practices.

Board of Commissioners

Inamerda Lebang

President Commissioner

Marwansyah Lolo Balia

Commissioner

Erfi Triassunu

Commissioner

Board of Directors

Sukrisno

President Director

Ahmad Rosidi

Director of Finance

Ahmad Subagja

Director of Operations

2

Bing Rosallo L. Tobing

Independent Commissioner

Suryadi Saman

Independent Commissioner

Purwijayanto

Director of Business Planning and Development

Dadang Mulyadi

Director of Commerce

Abrun Abubakar

Director of HR and General Affairs

TABLE OF CONTENTS

Statement of Commitment

Table of Contents

Legal Reference

Glossary of Terms

CHAPTER I : INTRODUCTION

A. HISTORY OF THE COMPANY

a. History of the Company

b. Business Field

B. BACKGROUND OF COGC ARRANGEMENT

C. PURPOSE AND OBJECTIVES

1. Purpose of COGC

2. Objectives of GCG Implementation

D. VISI, MISSION, AND CORPORATE VALUES

1. Vision

2. Mission

3

3. Corporate Values

CHAPTER II GOOD CORPORATE GOVERNANCE PRINCIPLES

A. TRANSPARENCY

B. ACCOUNTABILITY

C. RESPONSIBILITY

D. INDEPENDENCY

E. FAIRNESS

CHAPTER III ORGANS OF THE COMPANY

A. MAIN ORGANS

1. GMS

2. Board of Commissioners

3. Board of Directors

B. SUPPORTING ORGANS

1. Committees under the Board of Commissioners

2. Secretary to the Board of Commissioners

3. Corporate Secretary

4. Internal Audit Unit (IAU)

5. Relationship between Organs of the Company

CHAPTER IV: POLICIES OF THE COMPANY

A. GENERAL

1. Business Integrity

4

2. Financial Management and Accounting System

3. Internal Control

4. External Auditor

B. PARTICULARS

1. Risk Management

2. Corporate Social and Environmental Responsibility

3. Human Resources Management

4. Occupational Safety and Health Implementation and Environmental Protection

5. Quality Management

6. Code of Conduct

7. Affiliate Transaction

8. Conflict of Interest

9. Information Transparency and Confidentiality

10. Procurement of Goods and Services

11. Asset Management

12. Information System Management

13. Strategic Planning

14. Legal

15. Mining Business

16. Reporting

5

CHAPTER V : MANAGEMENT OF SUBSIDIARIES

A. GENERAL POLICY OF MANAGEMENT OF SUBSIDIARIES

B. APPOINTMENT AND DISMISSAL OF THE MANAGEMENT OF SUBSIDIARIES

C. EQUAL TREATMENT FOR SHAREHOLDERS

CHAPTER VI : MANAGEMENT OF RELATIONSHIP WITH STAKEHOLDERS

A. RELATIONSHIP OF THE COMPANY WITH PERSONNEL OF THE COMPANY

B. RELATIONSHIP OF THE COMPANY WITH CUSTOMERS

C. RELATIONSHIP OF THE COMPANY WITH SUPPLIERS

D. RELATIONSHIP OF THE COMPANY WITH CREDITORS

E. RELATIONSHIP OF THE COMPANY WITH SURROUNDING COMMUNITIES

CHAPTER VII : IMPLEMENTATION OF COGC

A. DISSEMINATION, IMPLEMENTATION AND EVALUATION

B. REPORTING OF VIOLATIONS

CHAPTER VII : CLOSURE

A. DATE OF ENFORCEMENT

B. EVALUATION AND ENHANCEMENT

6

LEGAL REFERENCE

This Code of Corporate Governance refers to the following stipulations:

1. Laws of the Republic of Indonesia, among others:

a. Law of the Republic of Indonesia No. 4 Year 2009 on Mining;

b. Law of the Republic of Indonesia No. 14 Year 2008 on Information Transparency;

c. Law of the Republic of Indonesia No. 11 Year 2008 on Electronic Information and

Transactions;

d. Law of the Republic of Indonesia No. 40 Year 2007 on Limited Liability Company;

e. Law of the Republic of Indonesia No. 19 Year 2003 on State-Owned Enterprises

(SOE);

f. Law of the Republic of Indonesia No. 20 Year 2001 on Amendment to Law No.

31 Year 1999 on Eradication of Criminal Acts of Corruption;

g. Law of the Republic of Indonesia No. 28 Year 1999 on Government Executives

who are Clean and Free from Corruption, Collusion, and Nepotism;

h. Law of the Republic of Indonesia No. 5 Year 1999 on Ban of Monopolistic

Practices and Unfair Business Competition;

i. Law of the Republic of Indonesia No. 8 Year 1995 on Capital Market.

2. Government Regulations, among others:

a. Government Regulation No. 45 Year 2005 on Establishment, Management,

Supervision and Dissolution of State-Owned Enterprises;

b. Government Regulation No. 24 Year 2012 on Amendment to the Amendment of

Government Regulation No. 23 Year 2010 on Mineral and Coal Mining Business

Activities.

7

3. Regulations of the State Minister of State-Owned Enterprises (SOE), among others:

a. Regulation of the State Minister of SOE No. PER-06/MBU/2012 on Amendment

to the Regulation of SOE No. PER-01/MBU/2012 on Conditions and Procedures

of Appointment and Discharge of SOE Board of Directors Members;

b. Regulation of the Minister of SOE No. PER-09/MBU/2012 on Amendment to

Regulation of the State Minister of SOE No. PER-01/MBU/2011 on

Implementation of Good Corporate Governance in SOE;

c. Regulation of the State Minister of SOE No. PER-12/MBU/2012 on Supporting

Organs of SOE Board of Commissioners / Supervisory Board;

d. Regulation of the State Minister of SOE No. PER-06/MBU/2011 on Utilization of

SOE Fixed Assets;

e. Regulation of the State Minister of SOE No. PER-02/MBU/2010 on Procedures of

SOE Fixed Assets Write-Off and Transfer.

4. Decrees of the State Minister of State-Owned Enterprises (SOE), among others:

a. Decree of the State Minister of SOE No. Kep-102/MBU/2002 on Corporate Long-

Term Plan (RJPP) Arrangement;

b. Decree of the State Minister of SOE No. Kep-101/MBU/2002 on Company

Business Plan (RKAP) Arrangement;

c. Decree of the State Minister of SOE No. Kep-100/MBU/2002 on Assessment of

SOE Soundness Level.

5. Circular Letter of the State Minister of SOE No. S-375/MBU.Wk/2011 on Policy of

the State Minister of SOE in SOE Stewardship and Oversight.

6. Regulations of the Capital Market Supervisory Agency and Financial Institutions

(Bapepam and LK) and Indonesia Stock Exchange (IDX), among others:

8

a. Regulation of Bapepam and LK No. VIII.G.7 on the Guidelines of Financial

Statements of Issuers or Public Companies, Attachment of Bapepam and LK

Chairman’s Decision No. Kep-347/BL/2012 dated June 25, 2012.

b. Regulation of Bapepam and LK No. X.E.2 on Material Transactions and

Changes of Main Business Activities, Attachment of Bapepam and LK

Chairman’s Decision No. Kep-614/BL/2011 dated November 28, 2011.

c. Regulation of Bapepam and LK No. X.E.1 on Affiliate Transactions and

Conflict of Interest of Certain Transactions, Attachment of Bapepam and LK

Chairman’s Decision No. Kep-412/BL/2009 dated November 25, 2009.

d. Regulation of Bapepam No. X.E.6 on Obligation to Submit Annual Report for

Issuers and Public Companies, Attachment of Bapepam Chairman’s Decision

No. Kep-134/bl/2011 dated December 7, 2006.

e. Regulation of Bapepam No. IX.I.6 on Board of Commissioners and Board of

Directors of Issuers and Public Companies, Attachment of Bapepam

Chairman’s Decision No. Kep-45/PM/2004 dated November 29, 2004.

f. Regulation of Bapepam No. IX.I.5 on Establishment and Work Guidelines of

Audit Committee, Attachment of Bapepam Chairman’s Decision No. Kep-

29/PM/2004 dated September 29, 2004.

g. Regulation of Bapepam No. VIII.G.11 on Board of Directors’ Responsibility for

Financial Statements, Attachment of Bapepam Chairman’s Decision No. Kep-

40/PM/2003 dated December 22, 2003.

h. Regulation of Bapepam No. IX.D.1 on Pre-emptive Rights, Attachment of

Bapepam Chairman’s Decision No. Kep-26/PM/2003 dated July 17, 2003.

i. Regulation of Bapepam No. X.K.1 on Information Disclosure that Should be

Immediately Announced to Public, Attachment of Bapepam Chairman’s

Decision No. Kep-86/PM/1996 dated January 24, 1996

j. Regulation of Bapepam No. IX.I.4 on Formation of Corporate Secretary,

Attachment of Bapepam Chairman’s Decision No. Kep-63/PM/1996 dated

January 17, 1996

9

7. Regulation No. 1-A on Listing of Shares and Equity Securities other than Shares

issued by Listed Companies, Attachment to the Decision of PT Bursa Efek

Jakarta Board of Directors No. Kep-305/BEJ/07-2004 dated July 19, 2004.

8. Articles of Association of PT Timah (Persero) Tbk based on the Deed No. 136

dated June 28, 2010 passed before Notary Imah Fatimah, SH and enacted by

the Minister of Law and Human Rights of the Republic of Indonesia No. AHU-

51352.AH.01.02.TAHUN 2010.

9. General Guidelines of Good Corporate Governance issued by the National

Committee of Governance Policy Year 2006.

GLOSSARY OF TERMS

1. Company with capital letter C is PT Timah (Persero) Tbk, while company with

small letter c refers to a company in general.

2. Organs of the Company are General Meeting of Shareholders, Board of

Commissioners and Board of Directors.

3. General Meeting of Shareholders (GMS) is an Organ of the Company which

owns the authority that is not granted to the Board of Commissioners and the

Board of Directors pursuant to prevailing laws and regulations.

4. Board of Commissioners is an Organ of the Company comprising all members

of the Board of Commissioners as a whole (a Board) tasked to conduct

supervision generally or specifically in accordance with the Articles of Association

as well as to impart advice to the Board of Directors.

5. Member of the Board of Commissioners is a member of the Board of

Commissioners as an individual (not as the Board).

6. Independent Commissioner is a member of the Board of Commissioners who

is not affiliated with the Board of Directors, fellow members of the Board of

Commissioners and the Controlling Shareholder, as well as free from business

10

relationship and other relationships that may affect his/her ability to act

independently or act solely for the interest of the Company.

7. Board of Directors is an Organ of the Company comprising all members of the

Board of Directors as a whole (a Board) which has authority and responsibility for

the Company’s stewardship for the interest of the Company, in accordance with

the purpose and objectives of the Company, and also for representing the

Company inside and outside of the courts in accordance with the Articles of

Association.

8. Member of the Board of Directors is a member of the Board of Directors as an

individual (not a Board).

9. Employees are the Employees of PT Timah (Persero) Tbk, i.e. all personnel

formally bound in an employment relationship with the Company, both permanent

employees and contractual employees in accordance with prevailing laws and

regulations, from the lowest level to the highest level, which is one level below

the Board of Directors.

10. Stakeholders are the parties with interest or concern in the Company, directly

and indirectly, namely Shareholders, Board of Commissioners, Board of

Directors, Employees, Government, Creditors and other parties with interest or

concern.

11. Audit Committee is a committee working professionally and independently

formed by the Board of Commissioners to assist and strengthen the function of

the Board of Commissioners in performing oversight function on the processes of

financial reporting, audit implementation, internal control, GCG implementation

and conducting special assignments from the Board of Commissioners.

12. Committees Supporting the Board of Commissioners are the Committees

formed and responsible to the Board of Commissioners for the purpose of

assisting implementation of the Board of Commissioners’ duties and functions to

foster and oversee the Company’s stewardship.

11

13. Internal Auditor is Internal Audit Unit, which is technical and structural unit

within the Company tasked to conduct audit and ensure that the Company’s

internal control can run effectively.

14. External Auditor is auditor from outside of the Company that is independent and

professional appointed to provide audit service and non-audit service to the

Company.

15. Subsidiary is a company of which (a) more than 50% of shares are owned by

the Company’ or (b) more than 50% of votes cast in its GMS are controlled by

the Company, or (c) company’s direction, as well as appointment and dismissal

of members of the Board of Directors and the Board of Commissioners are

controlled by the Company.

16. Conflict of Interest is a difference between economic interests of the Company

and economic interests of members of the Company’s Board of Directors, Board

of Commissioners, or Ultimate Shareholder, that may be detrimental to the

Company.

17. Mining is a part or the whole part of all activity stages for the purpose of

research, management and exploitation of mineral, tin, and coal comprising

general surveillance, exploration, feasibility study, construction, mining,

processing and refining, transportation and selling and post-mining.

18. Mining Business is an activity for the exploitation of mineral or coals of which

the activity stages comprising general surveillance, exploration, feasibility study,

construction, mining, processing and refining, transportation and selling and post-

mining.

19. Mining Business Permit is a permit to conduct mining business, hereinafter

referred to as “IUP”.

20. Transaction is an activity conducted for a certain purpose or activity in one

transaction or in a series. Transaction is conducted for the purpose of:1

1 Bapepam Regulation No. IX.E.I on Affiliate Transactions and Conflict of Interest of Certain Transactions, item 1

letter c.

12

a) Granting and/or receiving loans;

b) Acquiring, releasing, or using assets including for the purpose of giving a

guarantee;

c) Acquiring, releasing, or using services or marketable securities of Company

or Controlled Company; or

d) Entering into a contract with regard to the activities as referred to in point a),

b) and c).

21. Affiliate Transaction is Transaction conducted by the Company or Controlled

Company with Affiliates of the Company or Affiliates of members of the Board of

Directors, members of the Board of Commissioners, or Ultimate Shareholder of

the Company.2

22. Controlled Company is a company that is controlled directly or indirectly by the

Company.3

CHAPTER I

INTRODUCTION

A. HISTORY OF THE COMPANY

1. History of the Company

The history of national tin mining started from the nationalization of 3 (three) Dutch

companies in Bangka, Belitung and Singkep, namely Banka Tin Winning Bedrijf (BTW),

Gemeenschappelijke Mijnbouw Billiton Maatschappij (GMB) and NV. Tin Singkep

Exploitatie Maatschappij (NV. SITEM), each became a separate State Company

(“Perusahaan Negara”) in 1953-1058. In 1961, Badan Pimpinan Umum Perusahaan


letter d.


letter b.

13

Tambang Timah Negara (BPU Timah) was founded to consolidate the three State

Companies, and in 1968, the three State Companies were merged to become

“Perusahaan Negara (PN) Tambang Timah.

Based on Law No. 9 Year 1969 and Government Regulation No. 19 Year 1969, PN

Tambang Timah and Proyek Peleburan Timah Muntok were amalgamated into PT

Tambang Timah (Persero) under Notarial Deed of Imas Fatimah SH No. 1 dated 2

August 1976.

The world’s tin industry crisis resulting in the slump of tin prices since 1985 to hit the

lowest point in 1985 encouraged the Company to conduct company restructuring in

1991-1995, in the form of Regorganization programs consisting of relocation of the

Company’s Head Office to Pangkalpinang, reconstruction of principal and supporting

production equipment, as well as the disposal of assets and functions not related to the

Company’s core business.

The Company Restructuring helped to restore the Company’s soundness and

competitiveness, making the Company ready to conduct privatization through Initial

Public Offering (IPO) in 1995.

On October 19, 1995, PT Tambang Timah (Persero) conducted IPO and listed its

shares on the Jakarta Stock Exchange, the Surabaya Stock Exchange and the London

Stock Exchange. Since then, 35% of the Company’s shares are owned by Public

overseas and at home and 65% are owned by the State of the Republic of Indonesia.

The change to share ownership was then followed with an amendment to articles of

association and a change to the Company’s name to Limited Liability Company

(Persero) PT Timah Tbk or shortened as PT Timah Tbk as provided in Notarial Deed of

Imas Fatimah, SH No. 7 dated May 7, 1998.

In the quest of business expansion, in 1998 PT Timah Tbk reorganized and

classified similar competences into 3 (three) newly established subsidiaries: PT

Tambang Timah, PT Timah Industri, and PT Timah Eksplomin. With the establishment

of the subsidiaries, PT Timah has become a Holding Company.

Pursuant to the State-Owned Enterprise Law, in 2007 the Company amended its

articles of association and adopted a new name PT Timah (Persero) Tbk.

14

2. Business Field4

a. Main Business Activities

1) Engaging in mining business in general.

2) Engaging in industry and smelting related to mining business.

3) Engaging in trading, both the trade of its own products and the products of

other parties in mining business, export and import, interinsulair/inter-regions

and local trade, including non-physical trade.

4) Engaging in transportation business related to mining.

5) Engaging in service business such as exploration and exploitation,

consultancy in mining and other services in the mining sector.

b. Supporting Business Activities

Other than the main business activities, the Company may engage in the

supporting business activities for the purpose of optimization of its resources,

which covers:

1) Development of offices, residence, apartments, shopping centers, industrial

estates, warehousing, sports amenities, and provision of telecommunication

facilities.

2) Utilization of production tools, workshop facilities and infrastructure.

B. BACKGROUND OF COGC ARRANGEMENT

Management of the Company based on Good Corporate Governance (GCG)

principles is basically an effort to place GCG as rules and guidance for the

Company’s management in carrying out its business activities. GCG

implementation is necessary to make the Company resilient and survive in

addressing stringent competition. GCG is expected to become means to achieve

the Company’s vision, mission and objectives in proper manner.

4 Articles of Association of PT Timah (Persero) Tbk, Amendment, Article 3 Paragraph (2).

15

Limited Liability Company (Persero) PT Timah Tbk shortened as “PT Timah

(Persero) Tbk”, hereinafter referred to in as “the Company”, recognizes that a

consistent and systematic implementation of GCG is a must. GCG implementation

in the Company is expected to spur business development, promote accountability,

and realize Shareholders’ value in a long term without neglecting the interests of

other stakeholders.

To enhance the performance of and adherence to GCG principles, the Company

has arranged Code of Corporate Governance (COCG) that is expected to be

applied consistently, with a view to optimally make use of all values owned by the

parties with concern in the Company and create an economic relation pattern that is

mutually beneficial. COGC is a crystallization of all GCG rules, prevailing laws and

regulations, cultural values, vision and mission, and the best practices of GCG.

C. PURPOSE AND OBJECTIVES

1. Purpose

The COGC aims to become a reference for Shareholders, Board of

Commissioners, Board of Directors and all personnel in the Company in

implementing GCG within PT Timah (Persero) Tbk and Subsidiaries.

The Code is dynamic and may be adjusted along with business dynamics and

development of laws and regulations. Thus, this Code in evolutionary in

nature inline with changes in the strategic environment from time to time,

both internally and externally.

2. Objectives of GCG Implementation

The objectives of GCG implementation in PT Timah (Persero) Tbk are as

follows:

a. Maximizing the Company’s value for shareholders with due regard to the

interests of other stakeholders.

16

b. Improving the Company’s competitive advantages both nationwide and

internationally and encouraging the achievement of sustainability through

a management that is based on the principles of transparency,

independence, accountability, responsibility and equality and fairness.

c. Encouraging the Company’s management in a professional, transparent

and efficient way, as well as empowering function and increasing the

independence of each Organ.

d. Encouraging the Company’s Organs in making decisions and performing

actions based on high moral values and compliance with the applicable

legislation.

e. Controlling and directing relationship between Organs of the Company.

f. Fostering the awareness of the Company’s social responsibility to its

stakeholders and preservation of the surrounding environment.

g. Increasing the market’s confidence to spur investment flow and

sustainable development of national economy.

D. VISION, MISSION AND CORPORATE VALUES

VISION

Becoming a world-class mining company towards quality life.

MISSION

a. Optimizing corporate values, contributing to shareholders, and being socially

responsible.

b. Building competent human resources that possess integrity, creativity and

positive values.

c. Establishing harmonious relationships with related parties (stakeholders).

CORPORATE VALUES

In conducting its business, the entire elements of PT Timah (Persero) Tbk and

subsidiaries uphold:

17

INTEGRITY

Possessing honesty, responsibility for and consistency in all actions in achieving the

Company’s goals.

COMMITMENT

Able to fulfill agreements and promises with full responsibility.

OPEN

Easy to accept the inputs and able to adapt to any environmental changes that occur.

RATIONAL

Able to perform activities in a well-planned, organized manner with full consideration

and calculation.

VISIONARY

Having the ability to innovate and look ahead without space and time constraints.

CHAPTER II

GOOD CORPORATE GOVERNANCE PRINCIPLES

A. Transparency

Transparency principle is transparency in decision making process and in

disclosing relevant and material information regarding the Company.

The Company will comply with applicable legislation concerning information

transparency. Transparency also covers relevant matters and information

needed by public related to the Company’s products and operations which have

potential to affect stakeholders’ behaviors.

B. Accountability

Accountability principle is clarity of function, implementation and responsibility

of Company Organs so that the Company’s management can be carried out

effectively.

18

Accountability is related to the implementation of duties and authorities of a

personnel or work unit in performing the responsibility assigned by the Company.

The accountability covers description of the implementation of duties and

authorities, reporting of the implementation of duties and authorities, as well as

accountability for the activities in the implementation of the duties and authorities.

C. Responsibility

Responsibility principle is the compliance of the company management with

applicable legislation and the principles of healthy corporate.

D. Independency

Independency principle is a condition where the Company is managed

professionally without conflict of interest and influence/pressure of any party

which is in contrary with applicable legislation and the principles of healthy

corporate.

E. Fairness

Fairness principle is the fairness and equality in fulfilling the rights of

stakeholders arising from commitments and prevailing laws and regulations.

CHAPTER III

ORGANS OF THE COMPANY

The Company’s Organs, which consist of General Meeting of Shareholders, Board of

Commissioners, and Board of Directors (Main Organs of the Company), have important

roles in effective implementation of GCG. Organs of the Company should perform their

functions in accordance with prevailing regulations on the principle that each organ has

19

independency in performing duties, function and responsibility solely for the interest of

the Company.

A. MAIN ORGANS

1. General Meeting of Shareholders (GMS)

GMS is Organ of the Company that becomes a forum for the Shareholders to

make important decisions related to the shares owned in the Company with due

regard to stipulations in the Articles of Association and prevailing legislation.

a. Type of GMS

1) Annual GMS (AGMS), which is conducted every year no later within 6 (six)

months after the end of the Company’s fiscal year.5

AGMS covers the following agenda:

a) Endorsement of the Company’s annual accounts, annual report on the

Company’s condition and operations.

b) Determination of use of profit.

c) Appointment of external auditors registered in OJK

d) Filling the vacancy of members of the Board of Directors and the

Board of Commissioners (if necessary).

e) Resolve other matters that have been proposed for the meeting in

accordance with the Company’s Articles of Association and the

Company Law.

2) Extraordinary GMS (EGMS), which is a GMS that may be held any time

based on the need to establish or decide the matters that are not

resolved in the AGMS.

b. GMS Holding

GMS is held in accordance with the interests of the Company and with due

regard to the Articles of Association and Legislations, and with adequate

5 Articles of Association of PT Timah (Persero) Tbk, Article 12 Paragraph (1) and Company Law Article 78 Paragraph

(2)

20

preparations in order to make decisions that are valid, fair and transparent by

paying attention to matters of importance for the interests of the Company’s

business in the long term. The preparations include:

1) Venue and Organizer of GMS

a) GMS is held in the Company’s domicile or in the place where the

Company conducts its main activities or in the place where the

Company is registered.6

b) GMS of a Public Company can be held in the domicile of the

exchange on which the Company’s shares are listed.

c) The GMS venue as specified in point (a) and (b) should be located

within the territory of the Republic of Indonesia.

d) In the event all Shareholders are present and/or represented in the

GMS and all Shareholders approve to hold GMS with a certain

agenda, the GMS can be held anywhere with due regard to the

provision specified in point (c).7

e) The GMS as referred to in point (d) can make decision if the decision

is agreed with a unanimous vote. 8

f) GMS can also be conducted via teleconference, video conference or

through other electronic media that allows all GMS participants to see

and hear each other live and participate in the meeting.

g) GMS holding is the responsibility of the Board of Directors. In the

event the Board of Directors is not available, the GMS holding is

6 Articles of Association of PT Timah (Persero) Tbk, Article 14 Paragraph (1)

7 Company Law No. 40 Year 2007 Article 76 Paragraph (4)


21

performed by the Board of Commissioners or Shareholders in

accordance with legislation and the Company’s Articles of

Association.

h) Annual GMS may be held upon request of: 9

(1) The Board of Commissioners

(2) 1 (one) or more shareholders jointly representing 1/ 10 (one-tenth)

or more of the total shares with voting rights, unless stipulated in

smaller number by the Articles of Association.

i) Extraordinary GMS may be held upon written request of:10

(1) The Board of Commissioners

(2) Holder of the Series A Dwiwarna Share

(3) 1 (one) or more shareholders jointly with at least 1/ 10 (one-tenth)

of the total shares with voting rights.

2) GMS Announcement and Invitation

a) The Board of Directors should make GMS Invitation within no later

than 15 (fifteen) days as of the date when the request for GMS holding

is received.

b) GMS Invitation should be done at the latest 14 (fourteen) days before

the GMS date, without calculating the Invitation date and the GMS

date. 11




22

c) At the latest 14 (fourteen) days before the Invitation date, without

calculating the Announcement date and Invitation date, the party in

charge of GMS Invitation shall make announcement to public through

ads placement in at least 2 (two) daily newspapers in Indonesian

language, one of which is circulated nationwide and the other one is

circulated in the Company’s domicile or the domicile of the Stock

Exchange on which the Company’s shares are listed, and if deemed

necessary by the Board of Directors, in a daily newspaper in English

language, announcing that there will be a GMS invitation.12

d) GMS Invitation shall specify the day, date, time, venue and agenda of

the GMS, along with the announcement that the GMS materials will be

available at the Company’s office from the Invitation date up to the

GMS holding date.13

e) For a public company, prior to the GMS Invitation, there should be an

announcement that there will be GMS Invitation with due regard to the

capital market regulations in force.

3) Quorum, Voting Right and GMS Resolution

a) GMS can be held if attended by Shareholders representing at least ½

(one-half) of the total shares with valid voting rights issued by the

Company, unless otherwise stated in the Articles of Association.14

b) GMS aiming to amend the Articles of Association can be held if in the

GMS at least 2/3 (two-third) of the total shares with valid voting rights

are present or represented in the GMS and the decision is valid if

agreed by at least 2/3 (two-third) of the total votes issued, unless the

12

Articles of Association of PT Timah (Persero) Tbk, Article 13 Paragraph (2)



23

Articles of Association determines bigger quorum of attendance

and/or GMS decision making.

c) GMS to approve merger, amalgamation, takeover, or spin-off,

submission of application for the Company to be declared bankrupt,

extension of the Company’s, time frame and the Company’s

dissolution, can be held if in the GMS at least 3/4 (three-fourth) of the

total shares with valid voting rights are present or represented in the

GMS and the decision is valid if agreed by at least 3/4 (three-fourth) of

the total votes issued, unless the Articles of Association determines

bigger quorum of attendance and/or GMS decision making.

d) All decisions in GMS are adopted based on deliberations for

consensus.15

e) In case the mutual consensus is not achieved, then the decision shall

be adopted by voting upon the affirmative votes of based on a

majority of votes legally cast at the meeting. 16

f) Shareholders may also adopt valid resolutions without convening a

GMS if all Shareholders with voting rights agree the agenda submitted

in writing by signing the approval concerned.

g) Decision adopted in such a way mentioned in point (f) shall have the

same force as those legally adopted at a physical GMS.17

4) Minutes of GMS

a) In every GMS, minutes of GMS must be made and signed by the

GMS Chairman and at least 1 (one) of the Shareholder appointed

from and by the GMS participants.

b) Signature is not required if the minutes of GMS are poured in a

notarial deed.

15



17 Regulation of SOE Minister No. SOE No. PER-09/MBU/2012 on Amendment to Regulation of the State Minister of

SOE No. PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 7 Paragraph (2)

24

c) Minutes of GMS should contain at least time, agenda, participants,

opinions conveyed in the GMS and GMS decisions/resolutions.

d) Each of the Shareholders shall be entitled to have a copy of the

minutes of GMS.18

e) Original of the minutes of GMS should be kept by Corporate Secretary

as Company’s document.

c. Shareholders’ Rights

Shareholders shall have the rights in the Company that cannot be replaced/

substituted, namely:

1) Attend and cast a vote in GMS, in particular for the Persero Shareholders,

provided that one share shall only give shareholder the right to cast one

vote.19

2) Obtain material information about the Company in a timely, measurable

and regular manner.20

3) Obtain distribution of profit from the Company for Shareholders in the form

of dividends and remaining wealth resulted from liquidation proportionally

to the total shares owned.21

4) Pre-emptive rights issued by the Company.

5) Other rights provided in the Articles of Association and legislation in force.

d. GMS Authorities

GMS authorities are as follows:

18

Regulation of SOE Minister No. PER-09/MBU/2012 on Amendment to Regulation of the State Minister of SOE No.

PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 6 Paragraph (7)

19 Regulation of SOE Minister No. PER-09/MBU/2012 on Amendment to Regulation of the State Minister of SOE No.

PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 5 Paragraph (1) point (a)


PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 5 Paragraph (1) point (c)


PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 5 Paragraph (1) point (d)

25

1) Appoint and dismiss the Board of Commissioners and the Board of

Directors, including the establishment of Independent Commissioner in

accordance with the applicable regulations.

2) Determine Key Performance Indicators of the Board of Commissioners

based on the proposals of the Board of Commissioners.22

3) Determine the segregation of roles and responsibilities of each member of

the Board of Directors. In the event GMS does not make any

determination, the segregation will be set based on the Board’s

decision.23

4) Approve and certify the annual report comprising the balance sheets and

profit and loss statements, annual report on the situation and the

performance of the Company.

5) Establish the use of profit.24

6) Appoint Public Accountant registered in Bapepam dan LK.25

7) Establish the remuneration of the Board of Commissioners and the Board

of Directors.26 GMS authority to determine salaries and allowances for

the Board of Directors may be delegated to the Board of Commissioners

to be determined based on BOC meeting decision.27 Result of this BOC

determination should be reported to the GMS.

8) Decide the use of reserve funds, amendment to the Articles of

Association, company dissolution and liquidation.28

22

Regulation of SOE Minister No. PER-09/MBU/2012 on Amendment to Regulation of the State Minister of SOE No.

PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 15 Paragraph (1).

23 Articles of Association of PT Timah (Persero) Tbk, Amendment, Article 18 Paragraph (22)

24 Articles of Association of PT Timah (Persero) Tbk, Article 12 Paragraph (2) point (b)

25 Articles of Association of PT Timah (Persero) Tbk, Article 12 Paragraph (2) point (c)

26 Company Law No 40 Year 2007, Article 96 Paragraph (1) point (113)

27 Company Law No. 40 Year 2007, Article 96 Paragraph (2) and (3)

28 Articles of Association of PT Timah (Persero) Tbk, Article 25, 26 Paragraph (1), 28 Paragraph (1)

26

9) Make decision on merger, amalgamation and acquisition.29

10) Make decision on the following matters in the event the value of

transaction to be executed is material in accordance with the prevailing

criteria stipulated in the capital market legislation at the transaction date:

a) Buy and/or sell the shares issued by other companies in the capital

market.

b) Equity participation or release of equity participation in other

enterprises and run new companies that are not conducted through

the stock exchange.

c) Establish subsidiaries of the Company.

d) Enter into agreements and cooperation concerning licenses,

management and those of the sort with other entities or parties with

more than 1 (one) year contract period.

e) Transfer of fixed assets owned by the Company.

f) Write off of non-performing account receivables and inventories.

g) Bind the Company as guarantor (avalist) bearing financial

consequence.

h) Obtain or provide medium to long-term loans and obtain short-term

loans that are non-operational.

e. Shareholders’ Accountability

Shareholders’ Accountability, which constitutes framework, system and

procedures owned by shareholders, is as follows:

1) Shareholders must implement GCG in accordance with their authorities

and responsibilities.30

2) Each Shareholder must comply with the Articles of Association and all

decisions taken in GMS as well as the prevailing laws and regulations.

29



PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 11

27

3) Shareholders are not allowed to interfere with the operations of the

Company, which are the responsibility of the Board of Directors according

to the Articles of Association and the applicable laws and regulations.

4) Shareholders have responsibility for encouraging implementation of the

GCG principles in the Company’s management,

5) Shareholders also take on the responsibility for maintaining the continuity

of the Company’s business and achievement of the Company’s

objectives.

2. BOARD OF COMMISSIONERS

Board of Commissioners (“BOC”) is one of the Company’s Organs who are

tasked and responsible collectively to supervise and give advice to the Board of

Directors (“BOD”) as well as ensure that the Company has implemented GCG.

a. Qualifications31

Members of the Board of Commissioners must fulfill the following

requirements:

1) Have integrity, dedication, understanding of issues relating to the

management of the Company that related to one of the functions of

management, have adequate knowledge in the field of operations of the

Company and may provide enough time to carry out their duties and

other requirements based on legislation.

2) Qualified to take legal actions;

3) Have never been declared bankrupt or become a member of the Board of

Directors or Board of Commissioners was pleaded guilty or was

responsible for causing a company to be insolvent within 5 (five) years

prior to the appointment; and

31

Articles of Association of PT Timah (Persero) Tbk, Article 20 Paragraph (4) and (5)

28

4) has never been punished for committing criminal acts in financial sector

within 5 (five) years prior to the appointment;

b. Composition of the Board of Commissioners

Composition of the Board of Commissioners should be arranged in such a

way that enable effective, precise and fast decision making. In addition, the

Board of Commissioners is also required to act independently, in the sense

to perform their tasks objectively and free from pressure and interests of any

party, including in relation to each other and with the Board of Directors.

1) The Board of Commissioners consists of at least three (3) members with

the number determined by GMS according to the need.32

2) The Company has Independent Commissioner as provided by laws and

regulations in the Capital Market. At least 30% of BOC members are

Independent Commissioners33 as determined in their appointment.

c. Term of Office

1) Term of office of the Company’s Board of Commissioners members is 5

(five) years and may be reappointed upon the expiry of their term of office

for another 1 (one) term of office.

2) Members of the Board of Commissioners can be discharged by GMS

resolution at any time prior to the end of their term of office by mentioning

the reasons in accordance with the Articles of Association.

3) The term of office of a member of the Board of Commissioners shall

expire if:34

a) He is passed away;

32


33 Regulation No. 1-A on Listing of Shares and Equity Securities other than Shares issued by Listed Companies, III,

point III.I.4


29

b) His term of office ends;

c) He is dismissed by virtue of a resolution of the General Meeting of

Shareholders

d) He/she no longer meets the requirements of the prevailing regulation;

d. Independent Commissioners

1) At least 30% (thirty percent) of BOC membership are Independent

Commissioners35 as determined in their appointment.

2) Independent Commissioners should meet the following criteria:

a) Understand laws and regulations applicable in the Capital Market.

b) Do not have an affiliate relationship with the Ultimate Shareholder, the

Board of Directors members and/or fellow members of the Board of

Commissioners.36

c) Do not serve as member of the Board of Directors in affiliated

companies of PT Timah (Persero) Tbk;

d) Do not have financial, stewardship, share ownership, and/or family

relationships with fellow members of the Board of Commissioners,

Board of Directors members and/or Ultimate Shareholder or

relationship with the Company.37

e) Do not have contractual relationship with the Company as a former

member of the Board of Directors and the Board of Commissioners

and the Employees of the Company within a certain time;

f) Do not work with the Government, including ministries, non-ministerial

agencies and military and police officers within the past 3 (three) years.

35

Regulation No. 1-A on Listing of Shares and Equity Securities other than Shares issued by Listed Companies, III,

point III.I.4

36 Company Law No. 40 Year 2007, Article 120 Paragraph (2)



30

g) Do not work with the Company and its affiliates within the past 3

(three) years.

h) Do not have financial relationship, either directly or indirectly with the

Company or other companies that provide products or services to the

Company and their affiliates.

3) Independent Commissioner Nomination Procedure

a) The Board of Commissioners and / or the Committee under the Board

of Commissioners (through BOC) may submit the names proposed as

Independent Commissioner candidates to the GMS;

b) The number of proposed candidates is more than one;

c) In the nomination of an independent commissioner, the opinion of

Minority Shareholders should be considered, among others, in the

form of the right of Minority Shareholders to nominate an Independent

Commissioner as a form of protection against the interests of Minority

Shareholders and other Stakeholders;

d) Nomination mechanism can be made by announcement in the mass

media completed with agenda during the GMS announcement;

e) The nominated candidates are proposed to the GMS for selection and

approval.

e. Duties and Responsibilities of the Board of Commissioners

1) Conduct oversight on the BOD’s policies in managing the Company;38

2) Ensure that the Company has complied with all the regulations in force;

3) Provide advice to the Board of Directors, including on the

implementation of the Company’s Long-Term Plan, Work Plan and

Budget, Management Contracts, Articles of Association, General

Meeting of Shareholders and the legislation in force, for the benefit of the

38


31

Company and in accordance with the Company’s purpose and

objectives;39

4) Propose candidates for independent commissioner to the GMS;

5) Represent the interests of Shareholders in carrying out supevisory

activities, and assume accountability to the GMS;

6) Prepare the segregation of duties of BOC members in accordance with

the expertise and experience of each Member of BOC;40

7) Develop BOC’s annual work program and performance target and the

mechanism to review BOC performance, and report the results to

Shareholders;

8) Assess the feasibility of the Company's vision and mission and provide

corrective feedback regularly and convey it to BOD;

9) Review the implementation of the Company’s Risk Management and

Information Technology System;

10) Keep abreast of the development of the Company's activities, provide

opinions and advice to GMS/Shareholders on any matter of importance

to the Company’s stewardship;41

11) Provide a proposal regarding External Auditor to GMS and monitor the

implementation of the External Auditor’s assignment;

12) Participate actively in enhancing the Company’s image including through

effective communication with stakeholders;

13) Assess and report the Company’s performance periodically to

Shareholders;

14) Conduct an assessment of BOD performance in managing the

Company with clear criteria;

15) Report result of BOD performance evaluation to shareholders;

39



41 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter (b) point (iii)

32

16) Submit proposed candidates for new BOD Members to shareholders;

17) Provide relevant information to shareholders and other stakeholders

based on the applicable provisions in a timely, accurate, clear and

objective manner;

18) Monitor the effectiveness of GCG practices in the Company and make

report to GMS;

19) Obliged to make minutes of BOC meetings and keep a copy;42

20) Obliged to report to the Company regarding his share ownership and or

his family’s share ownership in the Company and other companies;43

21) Immediately report to GMS in the observance of declining performance

of the Company;44

22) BOC shall report to the GMS in the event the Company shows a

downward or anything else that is deemed necessary, along with advice

for remedial measures to be carried out.

f. Rights and Authorities of the Board of Commissioners

1) Check books, correspondences and other documents, and check cash for

verification purposes and other marketable instruments and wealth of the

Company; 45

2) Enter the yards, building and offices used or controlled by the Company;46

3) Ask Board of Directors and/or other officials under the Board of Directors

upon Board of Directors’ knowledge to attend BOC meeting;47

42

Company Law No. 40 Year 2007 Article 116 and Articles of Association of PT Timah (Persero) Tbk, Article 21

Paragraph (2) letter b point (vi)

43 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter b point (vii)

44 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter b point (iv)

45 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (i)

46 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (ii)

47 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (v)

33

4) Perform company stewardship under a certain condition for a certain

period of time pursuant to the Articles of Association;48

5) Attend BOD meetings and impart advice on the matters discussed;49

6) Perform other supervisory authorities that are not against the laws and

regulations, the Articles of Association and/or GMS resolutions;50

7) Use the service of an expert for a certain issue and certain period of time

at the Company’s cost, if deemed necessary, and appoint Secretary to

the Board of Commissioners;51

8) Suspend members of the Board of Directors pursuant to the Articles of

Association’s provisions;52

9) Have knowledge of all policies and actions undertaken and to be taken by

the Board of Directors;53

10) Entitled to form committees other than Audit Committee, if deemed

necessary, by taking into account of the Company’s ability;54

11) Authorized to make decisions inside and outside BOC meetings;

12) Give approval or auspice to the Board of Directors in committing certain

legal acts;

13) Have access to the Company’s information in a timely and complete

manner through BOD’s periodic reports, correspondences, BOC

meetings, and request for other information.

g. Board of Commissioners (BOC) Meeting

48

Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (ii)

49 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (x)

50 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (xi)

51 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (vi) and (ix)

52 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (vii)

53 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (iv)

54 Articles of Association of PT Timah (Persero) Tbk, Article 21 Paragraph (2) letter a point (viii)

34

1) Board of Commissioners meeting is a meeting held by the Board of

Commissioners and may be attended by the parties invited by the Board

of Commissioners.

2) All BOC Meetings are chaired by President Commissioner.55 In the event

President Commissioner is absent or unavailable, BOC meeting is

chaired by a Member of the Board of Commissioners appointed by

President Commissioner.56

3) Determination of Meeting Agenda

a) Meeting agenda is based on BOC Work Program or matters that are

deemed necessary;

b) Meeting material covers evaluation of the implementation of previous

BOC meetings.

4) Holding of Meeting

a) BOC convenes a meeting at least once a month, where BOC may

invite BOD to join.57

b) BOC can hold meetings any time outside the specified schedule at the

request of 1 (one) or several members of BOC, a request from the

Board of Directors; or written request of 1 (one) or several

shareholders representing at least 1/10 (one-tenth) of the total shares

with voting rights, by mentioning the matters to be discussed.58

c) BOC meeting is deemed valid if it is held in the Company’s domicile or

main place of business within the territory of the Republic of

Indonesia.59

55






35

d) The Board of Commissioners should establish code of conduct of the

Board of Commissioners.

e) Member of the Board of Commissioners who is absent in a meeting

can only be represented by another member of the Board of

Commissioners acting by virtue of a power of attorney.

5) Decision Making

a. BOC Meeting shall be law full and entitled to adopt binding resolutions

only if more than 1/2 (one-half) of the members of the Board of

Commissioners serving are present or represented at the meeting.60

b. All decisions of BOC meeting shall be adopted on the basis of mutual

consensus.61 In case the mutual consensus is not achieved, then the

resolution shall be adopted by voting upon the affirmative votes based

on a majority of votes legally cast at the meeting.62

c. In the event of a tie of votes, then the chairman of the meeting of the

Board of Commissioners shall have a casting vote; voting concerning

an individual shall be made by folded ballot paper.63

d. Non-valid votes shall be deemed to be non-existent and shall not be

counted in determining the number of vote cast.64

e. All BOC decisions shall be made in BOC meetings.65

f. The Board of Commissioners may also adopt a valid decision without

convening a meeting if the decision is approved by all members of the

60







36

Board of Commissioners in writing by the signing of the approval

concerned.

6) Minutes of Meeting

a) In every meeting of the Board of Commissioners, Minutes of Meeting

must be made; containing the matters discussed (including the

statement of disapproval/dissenting member of the Board of

Commissioners, if any) and matters that are decided. 66

b) Each member of the Board of Commissioners, either present or not

present at BOC meeting, is entitled to have a copy of the minutes of

meeting.67

c) Each member of the Board of Commissioners receives a copy of

minutes of BOC meeting after the meeting is concluded.

d) Original copy of minutes of all BOC meetings should be kept by the

Company and available if requested by each member of the Board of

Commissioners and the Board of Directors.68

e) The number of BOC meetings and attendance of each member of the

Board of Commissioners should be presented in the Company’s

Annual Report.69

h) Concurrent Position

To maintain the effectiveness and adequate time for the Board of

Commissioners to perform the role/function for the Company, members of

the Board of Commissioners:

66








37

1) are prohibited from holding concurrent position as members of the Board

of Directors in another SOE, Local Government Owned Enterprises and

Private Owned Enterprises, other positions that give rise to conflicts of

interest and or other positions in accordance with the provisions of the

legislation.

2) are prohibited from becoming members and officials of political parties

and/or candidates/members of the legislative.

3. BOARD OF DIRECTORS

Directors as an organ of the Company have duties and responsible collegially in

managing the Company. Duties implemented by each of Board of Directors

member is a collective responsibility.

a. Board of Directors’ Qualifications

The person who can be appointed as member of the Board of Directors shall

be:

1) Indonesian citizen who meets the qualifications specified by the

applicable legislation.

2) An individual who meets the following criteria: Expertise, integrity,

leadership, experience, honest, good behavior and has a high

dedication to promote and develop the Company.

3) An individual who is able to carry out legal actions and has never been

declared bankrupt or be a member of the Board of Directors or Board of

Commissioners found guilty of causing the company is declared

bankrupt or person ever punished for doing things that harm State

finances within 5 (five) years before appointment.70

4) Among the members of the Board of Directors and the Board of

Directors with Members of the Board of Commissioners should not be

70


38

related by blood to the third degree either vertically or horizontally to the

side or relationship by marriage (in law or law).71

5) An individual who has a good character and the ability to carry out the

task as well as possible in accordance with the position he/she

occupies.

6) An individual who does not represents the interests of certain political

parties.

7) Has passed the selection through fit and proper test conducted by a

team or professional institution.

8) Signs Management Contract at the early term of office and each

subsequent year.

b. Composition of the Board of Directors

1) Composition of the Board of Directors should be arranged in such a

way that enable effective, precise and fast decision making, and to act

independently, in the sense having no interest which can disrupt its

ability to execute its duties independently and critically.

2) The Company is managed and led by a Board of Directors which the

number of members is adjusted to the Company’s need provided that

there should be at least 3 (three) members of the Board of Directors,

one of which is President Director.72

c. Term of Office

1) Term of office of the Company’s Board of Directors members is 5 (five)

years as of the close of the GMS determining their appointment and may

be reappointed upon the expiry of their term of office for another 1 (one)

term of office.

71



39

2) Members of the Board of Directors can be discharged by GMS resolution

at any time prior to the end of their term of office by mentioning the

reasons in accordance with the Articles of Association.

3) The term of office of a member of the Board of Directors shall expire if:73

a) He is passed away;

b) His term of office ends;

c) He is dismissed by virtue of a resolution of the General Meeting of

Shareholders

d) He no longer meets the requirements of the prevailing regulations.

d. Duties and Responsibilities of the Board of Directors

1) Perform all actions relating to the management of the Company for the

interests and in accordance with the purposes and objectives of the

Company and represent the Company both within and outside the Court on

all matters and all the events with restrictions as set forth in the legislation,

Articles of Association and/or decisions of GMS.74

2) Each member of the Board of Directors with a good faith and responsibility

should carry out duties for the Company’s business and interest with due

regard to the prevailing legislation.75

3) In performing the duties members of the Board of Directors must comply

with the Articles of Association and legislation and is obliged to implement

the principles of professionalism, efficiency, transparency, independence,

accountability, responsibility and fairness.76

73


74 Articles of Association of PT Timah (Persero) Tbk, Amendment, Article 18 Paragraph (1)



40

4) Segregation of duties of each member of Board of Directors is determined

by the GMS. In the event GMS does not determine the said segregation of

duties, the segregation of duties of each member of Board of Directors is

determined based on Board of Directors decision.77

5) In performing duties, members of the Board of Directors should devote their

full energy, thoughts, attention and dedication to duties, obligations, and

achievement of the Company’s purpose and objectives.78

6) Prepare draft of Long-Term Business Plan which is a strategic plan that

includes goals and objectives of the Company that want to be achieved

within a period of 5 (five) years, signed together with the Board of

Commissioners.

7) Prepare the Company’s Work Plan and Budget and its amendments in a

timely manner for submission to the Board of Commissioners for approval

on the Board of Commissioners meeting within no later than 60 (sixty) days

before the new fiscal year starts.79

8) Prepare Annual Report as a form of accountability for the Company

stewardship as well as the Company’s financial documents referred to in

the Law on the Company Documents.80

9) Board of Directors must make Shareholder Register, Special Register,

Minutes of GMS and Minutes of BOD Meeting.81

10) Board of Directors must keep in the Company’s domicile, Shareholder

Register, Special Register, Minutes of GMS, Minutes of BOD Meeting,

77



79 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter b point (ii)

80 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter b point (iv)

81 Company Law No. 40 Year 2007 Article 100 and Articles of Association of PT Timah (Persero) Tbk, Article 18

Paragraph (2) letter a point (iii)

41

Annual Report, financial documents of the Company and other company

documents.82

11) Prepare Organizational Structure of the Company along with details of job

description.83

12) Members of the Board of Directors shall report to the Company regarding

its ownership and or family on the Company and other companies.

13) Announce audited Financial Statements after the ratification of the GMS.

14) Provide report on regular basis in time in accordance with applicable

regulations, as well as other reports whenever requested by the Board of

Commissioners.84

15) Prepare Financial Statements by Financial Accounting Standards and hand

over to the Public Accountants for auditing.85

16) Provide an explanation to the GMS regarding the Annual Report.86

17) The Board of Directors is fully responsible for management of the Company

according to the interests and objectives of the Company and representing the

Company in and out of court.87

18) Each member of the Board of Directors is fully responsible personally if

he/she is found guilty or in the negligence of implementing his/her duties for the

Company’s interest and business.88

19) The Board of Directors is mandatory to hold responsible for the performance

of duties to the GMS.

82

Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter b point (ix)

83 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (xi)

84 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (x)


86 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (vii)



42

20) The Board of Directors must ensure that the Company implements its social

and environmental responsibility and considering the interest of the various

stakeholders in accordance with the provisions of applicable laws and

legislation.

21) Perform other obligations in accordance with the provisions set forth in the

Articles of Association and set out in GMS based on legislation.89

e. Rights and Authorities of the Board of Directors

1) Establish policies for the Company’s stewardship.90

2) Receive remuneration in accordance with stipulations determined by the

GMS/Shareholders.

3) The Board of Directors shall be entitled to represent the Company within and

outside the Court of Justice and therefore is authorized to undertake all good

actions and deeds concerning stewardship and ownership and to bind the

Company to other parties and other parties to the Company, to the extent

stipulated in the Company’s Articles of Association and with due regard to laws

and regulations and stipulations applicable in the Capital Market.

4) Arrange the delegation of Board of Directors’ authorities to represent the

Company within and outside the Court of Justice to someone or several

members of Board of Directors designated for such or to someone or several

Employees of the Company either individually or collectively or to other people.91

5) Set stipulations concerning personnel matters in the Company including

establishment of salaries, pension or old age insurance and other remuneration

for the Company’s employees pursuant to prevailing legislation and GMS

decision.92

89

Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (i)

90 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (i)

91 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (ii)

92 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (iii)

43

6) Appoint and dismiss the Company’s employees pursuant to the Company’s

personnel regulations and prevailing legislation.93

7) Upon written request of the Shareholders, the Board of Directors shall give

permission to the Shareholders to check and obtain a copy of Shareholder

Register, Minutes of GMS and the Company’s books.

8) Conduct all actions and other measures concerning the Company’s wealth

ownership; bind the Company to other parties and other parties to the Company;

as well as represent the Company within and outside the Court of Justice

concerning all matters and events, to the extent stipulated in prevailing laws and

regulations, the Company’s Articles of Association and/or GMS resolution.94

f. Board of Directors Meeting

Board of Directors (BOD) meeting is a meeting held by the Board of Directors either

regularly scheduled or not. The meeting is conducted as a mechanism to make plans

and monitor implementation of the Company’s strategies and policies.

1) Determination of Meeting Agenda

a) Meeting agenda is based on BOD Work Program or matters that are deemed

necessary;

b) Meeting material covers evaluation of the implementation of previous BOD

meetings.

2) Holding of Meeting

a) BOD meeting is deemed valid if it is held in the Company’s domicile or main

place of business within the territory of the Republic of Indonesia.95

93

Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (iv)



44

b) Invitation to BOD Meeting shall be served by a member the Board of

Directors entitled to act for and on behalf of the Company within no later than

7 (seven) days prior to the BOD meeting date or sooner, i.e. 3 (three) days

in emergency situation without taking into account of the invitation date and

the meeting date.96 The meeting invitation should specify agenda, date, time,

and venue of the meeting.97

c) Prior meeting invitation is not required if all BOD members are present in the

meeting.

d) All BOD meetings shall be presided over by the President Director.98

e) In case President Director is absent or unable to attend, then the BOD

meeting shall be presided over by one member of the Board of Directors

appointed in writing by the President Director.99

f) In case the President Director does not make such appointment, then the

BOD meeting shall be presided over by one member of the Board of

Directors with longest period of office.100 If there are more than one members

of the Board of Directors with longest period of office, the BOD meeting shall

be presided over by the oldest amongst them.101

g) BOD meeting should be held on an ongoing basis, at least once in a month,

and the Board of Directors may invite the Board of Commissioners to join.102

h) BOD can hold meetings any time outside the specified schedule at the

request of 1 (one) or more members of the Board of Commissioners or

96





100 Articles of Association of PT Timah (Persero) Tbk, Article 18 Paragraph (2) letter a point (13)


102 Regulation of SOE Minister No. PER-09/MBU/2012 on Amendment to Regulation of the State Minister of SOE

No. PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 24 Paragraph (2).

45

shareholders representing at least 1/10 (one-tenth) of the total shares with

voting rights.103

i) The Board of Directors should establish BOD Meeting Procedure.104

j) The Board of Directors may invite the Board of Commissioners to join the

BOD meetings that are strategic in nature and need the Board of

Commissioners’ considerations.

3) Decision Making

a) BOD Meeting shall be law full and entitled to adopt binding resolutions only

if more than 1/2 (one-half) of the members of the Board of Directors serving

are present or represented at the meeting.

b) All decisions of BOD meeting shall be adopted on the basis of mutual

consensus. In case the mutual consensus is not achieved, then the

resolution shall be adopted by voting upon the affirmative votes based on a

majority of votes legally cast at the meeting. In the event of a tie of votes,

then the chairman of the BOD meeting shall have a casting vote with due

regard to stipulation regarding accountability; voting concerning an

individual shall be made by folded ballot paper.105

c) Each member of the Board of Directors present shall have the right to cast 1

(one) vote and 1 (one) additional vote for each other member of the Board

of Directors he represents.106 In the event member of the Board of Directors

is abstain, then the member of the Board of Directors should follow and also

assume the responsibility for the meeting decision.107

103




105 Articles of Association of PT Timah (Persero) Tbk, Article 19 Paragraph (17), (18), (20)



46

d) To vote in a decision making, a member of the Board of Directors may be

represented by 1 (one) fellow member of the Board of Directors based on a

written power of attorney specialized for that purpose.108 A member of the

Board of Directors can only be represented by 1 (one) fellow member of the

Board of Directors.109

e) Non-valid votes shall be deemed to be non-existent and shall not be

counted in determining the number of vote cast.110

4) Minutes of Meeting

a) In every BOD meeting, Minutes of Meeting must be made; containing the

matters discussed (including the statement of disapproval/dissenting

member of the Board of Directors if any) and things that are decided. A copy

of the Minutes should be submitted to the Board of Commissioners for their

information.111

b) Each member of the Board of Directors, either present or not present at

BOD meeting, shall be entitled to have a copy of the minutes of meeting.

c) Within 7 (seven) days after a BOD meeting is concluded, each member of

the Board of Directors shall receive a copy of minutes of the BOD meeting.

d) Original copy of minutes of all BOD meetings should be kept by the

Company and available if requested by each member of the Board of

Commissioners and the Board of Directors.

e) Decision may also be made outside BOD meeting provided that all

members of the Board of Directors have agreed on the manner and

materials decided.112

108






47

f) The number of BOD meetings and attendance of each member of the Board

of Directors should be presented in the Company’s Annual Report.

g. Concurrent Position113

Members of the Board of Commissioners are prohibited from holding other

positions listed below:

1) Member of the Board of Directors in another SOE, Local Government Owned

Enterprises and Private Owned Enterprises.

2) Other structural and functional positions in companies/institutions of central

government/local government.

3) Official of political parties and/or candidates/members of the legislative.

4) Other positions that give rise to conflicts of interest.

5) Other positions in accordance with the provisions of prevailing laws and

regulations.

B. SUPPORTING ORGANS

Supporting organs are Organs of the Company who help or become the hand

extension of the Company’s Main Organs in implementing GCG. Detailed

information of the functions and roles of the Company’s supporting organs in

implementing GCG is as follows:

1. Committees under the Board of Commissioners

In performing supervisory and advisory functions, the Board of Commissioners

must form Audit Committee. The Board of Commissioners may also Committees

other than Audit Committee or other Supporting Committees such as Risk

Management Monitoring Committee, Nomination and Remuneration Committee,

113


48

Business Development Committee, or other committees in accordance with the

development of prevailing laws and/or based on the need of the Company.

Further arrangement on the committees concerning their composition,

membership, duties and responsibilities, right and authorities is provided in a

charter that is an integral part of this Code of Corporate Governance.

a. Audit Committee

Audit Committee is a committee formed by the Board of Commissioners for

the purpose of assisting the Board in performing its duties and functions.114

Establishment of Audit Committee must be supported with Audit Committee

Charter.

Member of Audit Committee is appointed and dismissed by the Board of

Commissioners and reported to the General Meeting of Shareholders.115

2. Secretary to the Board of Commissioners

In order to help ensure smooth performance of its duties and responsibilities,

the Board of Commissioners has formed Secretariat to the Board of

Commissioners which assumes responsibility to the Board of Commissioners to

help ensure smooth performance of its duties in particular in secretarial activities,

among others:

a. Administer and keep documents of the Board of Commissioners.

b. Prepare meeting invitation and attend Board of Commissioners Meeting

as well as prepare Minutes of Meeting.

c. Other duties and responsibilities established by the Board of

Commissioners in accordance with prevailing laws and regulations.

114



49

3. Corporate Secretary

Corporate Secretary is Supporting Organ of the Board of Directors who

functions as a liaison officer between the Company and Shareholders and parties

with concerns on the Company with a view to give and distribute information

pertaining to the Company.

a. Function

1) Give information needed by the Board of Directors and Board of

Commissioners on an ongoing basis or upon request.

2) Serve as a liaison between the Company with the Financial

Supervisory Authority (OJK), Stock Exchange, Investors, Research

Analysts and Shareholders.

3) Serve as a liaison between the Board of Directors and the Board of

Commissioners and Shareholders.

4) Administer and keep documents of the Company, including but not

limited to Shareholders Register, Special Register, Minutes of BOD

Meetings, Minutes of BOC Meeting, and Minutes of GMS.

b. Position and Qualification

1) Corporate Secretary reports to the Board of Directors.

2) Corporate Secretary must have capability and quality understanding of

managerial, communication, interpersonal skill, corporate finance,

legal, laws and regulations;

c. Duties and Responsibilities

1) Organizing the Annual General Meeting of Shareholders (GMS);

2) Providing information required by the Stakeholders of the Company;

50

3) Maintaining relationships with institutional and individual investors,

analysts, stock brokers, investment banks, professionals, capital

market supporting institutions, other market participants, as well as the

media;

4) Implementing the Company’s compliance with the continuous

obligations at the capital market;

5) Complying with the obligations of reporting and information disclosure;

6) Organizing the Company’s actions in accordance with the applicable

legislations related to the Company’s business, as well as with the

regulations of the capital market and with the Company’s Articles of

Association;

7) Managing and updating the information regarding the Company

submitted to stakeholders, both in the Company’s website, newsletters,

and other media;

8) Organizing and keeping the Company’s documents, including

documents related to the GMS, Shareholders Register, and Special

Register concerning the Board of Directors, the Board of

Commissioners, and their families, both of the Company and the

subsidiaries, related to their share ownership, business relationships,

and other roles which may give rise to a conflict of interest within the

Company;

9) Providing advices and considerations to the Board of Directors for

issues related to the applicable regulations that govern the Company’s

business and the capital market; and

10) Conveying all relevant information to the Board of DIrectors on a

regular basis and to the Board of Commissioners upon request.

51

4. Internal Audit Unit

The Internal Audit Unit (IAU) is Supporting Organ under the President Director

which provides confidence and independent and objective consultancy in order to

increase the value of and improve the operations of the Company through a

systematic approach, by evaluating and increasing the efficacy of risk

management, control and corporate governance processes.

a. Function

IAU functions to monitor and directly responsible to President Director, and

therefore Head of SPI is appointed and dismissed by President Director with

the approval of the Board of Commissioners. IAU works in accordance with

Internal Audit Charter which is determined and approved by the Board of

Commissioners. IAU has functional relation with Audit Committee.

b. Position

1) Head of IAU is appointed and dismissed by the President Director with the

approval of the Board of Commissioners.

2) IAU is led by Head of IAU who directly reports to the President Director.

3) Head of IAU supervises several Internal Auditors who assists in the

implementation of oversight duties.

c. IAU Auditors

1) Total Auditors

The number of IAU Auditors should be adequate and adjusted to the load

of the works that become scope of their duties.

2) Requirements

An IAU Auditor should have:

52

a) Formal educational qualification: minimum 3-Year Diploma (D3)

b) Adequate technical competency in audit (audit skill) and general skills.

c) Understanding of the norms and code of ethics as Internal Auditor.

d) High integrity and objectivity.

e) Knowledge of and/or experience in the expertise of corporate

governance, risk management, and other skills supporting his duty

execution.

d. Duties and Responsibilities

IAU has duties and responsibilities as follows:

1) Implement audit in accordance with the set annual work program;

2) Make report of the execution of its duties to the President Director;

3) Carry out the activities to test the Company’s internal control system

reliability;

4) Monitor the follow-up of audit recommendations;

5) Provide input on procedures and control of the Company’s business

processes;

6) Provide feedback on the achievement of the Company’s business

strategy.

7) Ensure GCG implementation.

5. Inter-relation between Organs of the Company

Each organs of the Company has its own functions and authorities stipulated

by law. Respecting each other’s functions and authorities is the foundation the

Company has developed. Respecting each other’s functions and authorities is

53

expected to give rise to positive cooperation and synergy which will further

enhance GCG implementation.

The Company continues to encourage each Organ of the Company to perform

duties and functions by complying with prevailing laws and regulations aiming to

increase Shareholders’ values in the long term. To that end, the Company has

set policies concerning inter-relation between Organs of the Company as follows:

a. Each organ of the Company should act for the best interest of the Company.

b. Each organ of the Company should act based on togetherness for the

achievement of the Company’s objectives.

c. Each organ of the Company should appreciate each other and respect each

other’s function and roles.

d. Each organ of the Company should act in accordance with its own function

and roles as stipulated in the Company’s Articles of Association and

prevailing laws and regulations.

CHAPTER IV

COMPANY’S POLICIES

The Company’s Principal Policies are the main principles in supporting the processes of

corporate governance, management and stewardship of the Company.

A. GENERAL

1. Business Integrity

The Company’s business activities that are closely related to surrounding

communities and environment require an application of ethical standards. The

ethical standards are based on GCG principles and Corporate Culture known as

54

3K comprising of Kebersamaan (Togetherness), Keterbukaan (Openness) and

Kebersihan (Cleanliness).

The evolving business environment has made the Company realize of the

importance of taking on an active role as a corporate running its business

responsibly. The Company fully recognizes that good relationship with

stakeholders and increased values of Shareholders in the long term can be

achieved if business integrity is always maintained and enhanced in every

business activity of the Company. The Company always encourages Personnel

of the Company to adhere to the prevailing laws and regulations in performing

their functions in the Company.

2. Financial Management and Accounting System

The Company’s financial management should be carried out professionally

(in order, adhering to regulation and Company’s Business Plan, efficient,

effective, transparent, accountable, and responsible) by applying principle of

prudence, and reflecting management of balanced assets and liabilities.

Regulations and procedures related to management of finance both

revenues and expenses should be arranged and reviewed with due regard to

applicable accounting standards and prevailing legislation to reflect good

internal control system,

Financial Management is aimed at increasing the Company’s value through

implementation of work programs that are based on the principles of cost

awareness, profit oriented, good fund management and risks consideration.

PT Timah (Persero) Tbk has a policy to apply an accurate accounting system

to reflect financial transactions and changes to assets occurring. The Company

guarantees to record only real financial transactions. The financial transactions

have approved and recorded properly in the Company’s accounting system.

55

PT Timah (Persero) Tbk always makes sure that its accounting policies and

regulations shall always refer to Standard Financial Accounting Statement

(SFAS) arranged by the Indonesian Institute of Accountants. The Company’s

Financial Statements contain financial position, financial performance, equity

change, and cash flows, as well as notes of financial statements.

PT Timah (Persero) Tbk discloses in the Company’s Financial Statements

various information that is relevant for the use of financial statements in a proper

accurate manner in accordance with prevailing regulations.

The Company determines accounting standard policies as follows:

a. Always enhance accounting system pursuant to the Standard Financial

Accounting Statement (SFAS) arranged by the Indonesian Institute of

Accountants.

b. Each line of the Company responsible for financial functions should

understand and carry out the Company’s financial policies consistently.

c. Each line of the Company responsible for financial functions is prohibited

from recording false transactions in all journals.

d. Each line of the Company responsible for financial functions should treat all

financial information pursuant to the policy of Company’s information

classification as well as prevailing laws and regulations.

3. Internal Control

The Company’ in this case Board of Directors, must form Internal Control

System that is effective to safeguard the Company’s assets and investments,

compliance with prevailing laws and regulations and policies, and also to spur

efficiency and effectiveness of the Company’s operations, covering:

a. Internal control system environment within the Company that is carried out

with discipline and measurable, which consists of:

56

1) Integrity, ethical values, and employees’ competencies.

2) Management Philosophy and Style.

3) Ways of Implementation of Authorities and Responsibilities.

4) Human Resource Organization and Management.

5) Board of Directors’ attention and directives.

b. Business risk assessment, which is a process to identify, analyze, and assess

relevant risk management.

c. Control activities, which are actions carried out in a control process on the

Company’s activities in all levels and units in the Company’s organizational

structure, among others concerning authorities, authorization, verification,

reconciliation, work performance assessment, segregation of duties, and the

Company’s asset security.

d. Information and communication system, which is a process of presenting

reports on the Company’s operations and financial activities, as well as the

Company’s adherence to and compliance with prevailing laws and

regulations.

e. Monitoring, a process to assess quality of internal control system including

internal audit function in all levels and units in the Company’s organizational

structure in order to ensure an optimal implementation.

4. External Auditor

The Company needs External Auditor most notably in expressing an opinion

about fairness, in all material respects, the financial position, results of

operations, changes in equity and cash flows in accordance with generally

accepted accounting principles in Indonesia. Statement of the External Auditor

is an independent third party opinion on the fairness of financial statements

57

submitted to the Company's shareholders and other stakeholders regarding the

materials contained in those statements.

a. External Auditor determined by the GMS from the candidates nominated by

the Board of Commissioners based on the proposal of the Audit Committee,

to express an opinion on financial statements prepared by management. In

certain cases, the Company may appoint External Auditor to conduct an

assessment of important matters.

b. Selection of External Auditor is conducted through a transparent process.

c. Board of Commissioners through the Audit Committee process the

appointment of candidates for the External Auditor in accordance with the

provisions of the procurement of goods and services of the Company and if

necessary, may request assistance from the Board of Directors in the

appointment process.116

d. Committee through Board of Commissioners must furnish the GMS with

reasons of such nomination and amount of honorarium/fee proposed for the

external auditor.

e. In order to provide opinion on the Company’s financial statements, External

Auditor must carry out its duties as best as possible in accordance with the

standards and professional code of ethics.

f. Financial Statements are the responsibility of the Board of Directors. The

External Auditor has responsibility to provide opinion on the Financial

Statements.

g. The Company must make available all accounting records and supporting

data required by the External Auditor to enable the External Auditor provide

opinion on the fairness, adherence to principles, and appropriateness of the 116

Regulation of SOE Minister No. PER-09/MBU/2012 on Amendment to Regulation of the State Minister of SOE

No. PER-01/MBU/2011 on Implementation of Good Corporate Governance in SOE, Article 31 Paragraph (2)

58

Company’s Financial Statements with financial accounting standards

applicable in Indonesia.

h. Term and Condition of External Auditor

1) The External Auditor must be free from the influence of the Board of

Commissioners, Board of Directors, and other parties with concerns in

the Company.

2) The External Auditor must keep confidential all information obtained in the

course of duty implementation and after that in accordance with

prevailing laws and regulations unless provided otherwise.

i. Work relationship with External Auditor shall be provided in a work

agreement.

B. PARTICULARS

1. Risk Management

PT Timah (Persero) Tbk fully realizes that risk management is crucial

considering that mining industry is an industry highly exposed to the

occupational health and safety risk, environmental risk and business risk if it is

not properly managed. Risk Management System is developed to anticipate

possible occurrence of risks and increase the possibility to achieve the

Company’s objectives.

a. In the making of decisions and actions, the Board of Directors must consider

business risk.117

b. The Board of Directors is obliged to establish and implement enterprise risk

management in integrated manner as part of GCG implementation.118

117



59

c. Risk management may be implemented by:119

1) Establishing a separate work unit under the Board of Directors.

2) Assigning an existing work unit that is relevant to carry out risk

management function.

d. The Board of Directors must submit a report on the risk profile and risk

management in conjunction with the Company’s periodic report.120

e. The Risk Management System developed by the Company is an integrated

enterprise system based on information technology.

The Risk Management System applied by the Company covers:

a. Determination of Risk Context.

b. Risk Identification.

c. Risk Analysis.

d. Risk Evaluation.

e. Risk Handling.

f. Risk Communication and Consultancy.

g. Risk Monitoring and Review.

118







60

2. Corporate Social and Environmental Responsibility

a. Corporate Social Responsibility (CSR) is part of the Company’s vision to

provide added value for stakeholders in order to build synergy that is

positive, advanced and can grow together.

b. The Company is obliged and responsible by law, social, moral and ethics to

respect the interests of surrounding communities and the environment

bearing in mind that the Company’s success is inseparable from

harmonious, dynamic, mutually beneficial relationships with the surrounding

communities.

c. The Company should embody its social and environmental care and give

real contributions for the surrounding community development and

empowerment and the environment, most notably in the vicinity of the

Company’s operational centers and supporting premises.

d. Corporate social and environmental responsibility is an obligation of the

Company that is budgeted and calculated as cost of the Company and

should be carried out by taking into account of decency and fairness.

3. Human Resources Management

a. Human Resources (HR) Management is aimed at ensuring that the

Company always owns Human Resources who are superior and can be led

and moved to pursue the Company’s objectives.

b. In HR Management, the Company provides equal opportunity to all

employees to be able of fulfilling the Company’s business development

needs. This HR Management covers the processes of planning, fulfilling the

formation, selection and orientation, placement, development, transfer,

employee dismissal, welfare program, and balanced reward and punishment.

61

c. HR Management should take into account of the principles of efficiency,

effectiveness, transparency, and should have long-term insights in

accordance with the direction of the Company’s business activities.

4. Occupational Safety and Health Management and Environmental Protection

Occupational safety and health management is vital for the success of the

Company’s business activities. The Company puts in the first place occupational

safety and health as well as nature preservation resting on awareness that

excellent management of occupational safety and health and environmental

responsibility are very important for long-term success. The Company makes

attempt to take the right actions to prevent the occurrence of accidents and health

problems at work. The Company is very attentive to environmental problems and

impacts arising from its activities. Environmental impacts of the Company’s

activities are evaluated scientifically and related supervision and prevention actions

are taken. Through an effective management practice, the Company attempts to

guarantee occupational safety and health (OSH) of the employees minimize

negative impacts on the environment as well as create positive contributions to the

community.

To achieve the above objectives, PT Timah (Persero) Tbk is determined to:

a. Build a compliance foundation corresponding with OSH laws and regulations,

environmental protection, and voluntary commitment.

b. Prioritize sustainably improvement of various aspects related to OSH

performance and nature preservation.

c. Establish and review targets, assessment of OSH performance and nature

preservation by applying best practices that is appropriate with local condition.

d. Improve understanding of OSH and nature preservation matters that are related

to the Company’s business activities.

62

e. Incorporate OSH and nature preservation as an inseparable part of Company

Business Plan and Budget and Annual Report.

f. Invite employees’ participation as part of the effort to enhance OSH

implementation and nature preservation.

5. Quality Management

a. The Company applies quality management in all functions and levels based on

Standard Operating Procedures that can be effectively used to control product

and service quality so as to give assurance, safety, security and health for the

customers.

b. The Company always maintains and controls its product and service quality in

order to increase its competitiveness and deliver customer satisfaction.

c. Quality management system should always be developed along with changes in

the legislation, customers’ requirements and competitiveness enhancement.

6. Code of Conduct

Code of Conduct is a set of commitments which consists of the company's business

ethics arranged to form, regulate, and align the behaviors of all personnel of the

Company so as to produce consistent output that fits with the Company’s values in

achieving its vision and mission.

a. Healthy and Harmonious Relationship

The Company must regulate a healthy and harmonious relationship pattern

amongst all lines of the Company and with the Company’s stakeholders.

b. Political Involvement

The Company guarantees that all personnel of the Company are able to perform

their right to channel political aspirations. The Company provides no political

contribution and is not affiliated with any political party.

63

With regard to their political activities, all Personnel of the Company are obliged:

1) Not to take advantage of the Company’s name, assets, and potential for a

specific political purpose;

2) Not to make use of the Company’s name for or give contribution on behalf of

the Company to any political party;

3) Not to make any agreement, engagement, and statement, either directly or

indirectly, that may indicate that the Company has an attachment to any

political party;

4) Each activity to channel political aspirations should be conducted beyond

work hours and without using the Company’s attributes.

5) If anyone holds a position in a political party or political activity that disrupts

his duty implementation in the Company, he must resign from the Company.

6) Shall not conduct political activities either directly or indirectly within the

Company’s work environment.

7) Shall not be allowed to use attributes of any political party or social

community organization within the Company’s work environment.

c. Gratification and Donation

Granting and/or acceptance of Gifts, Souvenirs and Business Entertainment for a

purpose of social interaction and fostering a good relationship between the

Company and partners are fair and reasonable and can be justified without

creating a conflict of interest that could influence decision making in the

operations of the Company.

The Company prohibits the following actions:

1) Gratification

64

Gratification is the gift in a broad sense, including money, goods, rebate

(discount), commissions, interest-free loans, travel tickets, lodging, travel,

treatment free of charge, and other amenities. Gratuities are either carried out by

using electronic means or without electronic means.

Each of the Company's personnel is not permitted to receive gratification that

could influence in decision-making or associated with the position.

2) Bribery

Bribery is a gift or pledge to give to someone or official that can influence

decisions related to his/her position among others by doing or not doing

something in his post contrary to its obligations, to benefit the giver of bribes.

Bribery can be in the form of money, goods, and facilities giving or accepting the

post of the official's family or forms and other facilities that could become a

reward.

Each of the Company's personnel is not allowed to offer or accept bribes or

directly tell others to do so for the interests of the person concerned.

3) Improper Payments

Improper Payment is special payment practices, entertainment and support to

parties outside the Company in order to expedite the course of business of the

Company in excess of reasonableness/feasibility applicable in the business

world.

Each of the Company's personnel is not justified to practice the improper

payment to the parties outside of the Company or directly tell others to do so for

the interests of the parties concerned.

c) Compliance with Laws and Regulations

1) The Company’s Organs and Employees should comply with laws and

regulations and Company’s regulations.

65

2) The Board of Commissioners should ensure that the Company’s Board of

Directors and Employees implement laws and regulations and Company’s

regulations.

3) The Company should make a record of wealth, liabilities and capital properly

in accordance with the generally applied accounting principles.

d) Information Transparency and Confidentiality

1) Except requested by prevailing laws and regulations, Articles of Association

and the Company’s regulations, External Auditor, Internal Auditors, Audit

Committee and other Committees should keep confidential all information in

their possession during the course of duty performance. 121

2) The Company’s Board of Commissioners, Board of Directors, Shareholders

and Employees should keep confidential all information of the Company

pursuant to laws and regulations, Company’s regulations and prevalence in

the business.

3) Each of the Company’s Board of Commissioners, Board of Directors,

Shareholders and Employees is prohibited from abusing information about

the Company, including but not limited to information on the plans of

acquisition, merger and share buyback.

4) Each of the Company’s former Board of Commissioners, Board of Directors,

and Employees and Shareholders who have transferred their shares, is

prohibited from disclosing information classified as the Company’s

confidential information in their possession during term of office or becoming

shareholders in the Company, save and except the information is required by

law for investigation, or no longer classified as the Company’s confidential

information.

121



66

5) Information that is under laws and regulations and/or Company’s regulations

is classified as confidential information about the Company, must be kept

confidential under laws and regulations and/or Company’s regulations.122

g. Reporting of Violations and Protection for Informant

1) Mechanism to channel complaint/disclosure by Informant is basically

conducted formally through his direct superior, directorate and related

function. However, if the Informant views that such mechanism is not

effective and has doubt, the Informant may channel the complaint/disclosure

in writing to the Whistleblowing System (WBS).

2) The Informant should give early indication that is accountable.

3) The Informant may channel the complaint/disclosure in writing to the Person

in Charge of WBS.

4) The Company must give protection to the Informant and guarantee

confidentiality of his identity. Information about the Informant should be

properly documented and can only be the knowledge of the Person in Charge

of WBS.

7. Affiliate Transactions

In making affiliate transaction, all Personnel of the Company should be based

on the principles of transparency and accountability. The Company must also

report to Bapepam and LK and announce information of the affiliate transactions

to public as stipulated by prevailing laws and regulations. Reporting of affiliate

transactions is exceptional for:123

a. Remuneration, including salaries, pension contribution and/or special

benefits provided to members of the Board of Commissioners, members of

122



123 Regulation of Bapepam No. IX.E.I on Affiliate Transactions and Conflict of Interest of Certain Transactions item 2

letter c.

67

the Board of Directors, and ultimate shareholder if the ultimate shareholder

also serves as Employee, provided that total amount of the remuneration is

disclosed in the periodic financial reports.

b. On-going transactions that are already conducted before the Company’s

Initial Public Offering (IPO) or before the submission of statement of

registration as public company, under the following conditions:

1) The transactions are already fully disclosed in the IPO Prospectus or in

the information disclosure of statement of the registration as public

company; and

2) There is no change to the terms and conditions of the Transactions that is

detrimental to the Company.

c. On-going transactions conducted after the Company’s Initial Public Offering

(IPO) or after the submission of statement of registration as public company

become effective under the following conditions:

1) The initial transaction underlying the subsequent transactions has fulfilled

Bapepam and Lk regulations; and

2) There is no change to the terms and conditions of the Transactions that is

detrimental to the Company.

d. Transactions that are classified as main business activities of the Company

or the Controlled Companies.

e. Transactions that are supporting of main business activities of the Company

or the Controlled Companies.

8. Conflict of Interest

All Personnel of the Company must avoid conflicts of interest by:

a. Performing duties and obligations by giving priority to the Company’s

economic interests over personal economic interests or the economic

interests of family or other parties;

b. Not abusing the current position for personal interest or benefit, family and

other parties;

68

c. In terms of discussion and decision-making containing elements of conflict of

interest, the parties concerned are not allowed to participate;

d. Making a statement of not having conflict of interest on each decision made

and of having obeyed all the Company’s Code of Conduct each year, every

year for the Company’s personnel with decision-making authority;

e. Not having a business that is directly related to the Company’s activities.

f. Not taking advantage of confidential information and business data of the

Company for interests outside the Company;

g. Not holding any position in companies/other institutions that are about to do

and/or currently doing business with and are about to compete and/or

currently competing with the Company;

h. Not holding a job or profession outside the Company during working hours

and always disclosing and reporting all interests and/or activities outside of

the Company during normal business hours to superiors in stages to obtain a

permit.

Further stipulation of Affiliate Transactions and Conflict of Interests is arranged in

a separate policy that is an integral part of this Code of Corporate Governance.

9. Information Transparency and Confidentiality

In the implementation of information transparency and confidentiality, the

Company refers to a policy of information classification developed in accordance

with prevailing laws and regulations. Information that is classified non-

confidential can be published and accessed by public through the available

means and facility. The Company makes available and publish information that

should be immediately conveyed to the Shareholders and other stakeholders for

the purpose of quick decision making. One of the media to perform the

Company’s information disclosure is through the Company’s official website.

All Personnel of the Company are not allowed to commit acts that are

detrimental to the Company as a result of leaking of information in part or

entirely to the parties with no concerns.

69

10. Procurement of Goods and Services

The Company in running its business activities always maintains the

creation of fair competition pursuant to laws and regulations and upholds the

principles of effectiveness and efficiency, openness and competitiveness,

transparency, fairness/non-discrimination, and accountability. The development

of such procurement system is supported with adequate resources of

technology, resources, information, organization and human resources.

The Company’s good and service procurement system is implemented by

taking into account of the following:

1. Implemented consistently.

2. Reviewed periodically to check the adequacy of the system in place in order

to meet the principles of effectiveness and efficiency, openness and

competitiveness, transparency, fairness/non-discrimination, and

accountability.

3. Always prevent the occurrence of transactions bearing conflict of interests

and affiliate transactions by all Employees of the Company in the good and

service procurement system.

11. Asset Management

The Company carries out asset management based on the principle of the

highest and best use of the Company’s assets prudently with due regard to

prevailing laws and regulations. With this asset management, all information on

the Company’s assets can be obtained immediately and easily which gives

impact on the decision making process particularly with regard to the use and

optimization of assets.

Assets maintenance is conducted on schedule where the Company has work

plan and mechanism of asset maintenance to ensure the safety, reliability, and

proper administration of assets. High-risk assets are secured with insurance

70

protection. The Company also attempts to complete each asset with legal

document on the legalized ownership on the assets.

The Company identifies its assets and controls the documents on the assets

used by the Company or by other parties.

12. Information Technology Management

a. The Company develops information technology to facilitate decision making

processes in the Company in facing the changes of global situation,

technological changes, and product and services innovation which enable

the implementation of conservation of energy and other resources together

with nature conservation.

b. The Company applies and uses an integrated information technology to

support business processes in the quest of achieving the Company’s Vision,

Mission and Objectives.

c. The Company continuously adjusts the development of information

technology with its future needs, especially in the process of added value in

the largest scale in all lines of the Company’s operations.

d. The Company continuously safeguards its information technological assets,

adjusts information technological investments with the Company’s needs and

delivery of services in accordance with service level agreement to prevent

cessation of the Company's operations except in a force majeure.

e. The Company continuously makes evaluation of the information technology

in place to ensure continuity of business processes and cost efficiency of

information technological investments incurred.

13. Strategic Planning

a. Long-Term Corporate Plan

The Company sets Long-term Corporate Plan which contains target and

objectives to be achieved with a period of 5 (five) years. This Long-Term

71

Corporate Plan aims to make management of the Company run on the right

track in a proper manner.

The Long-Term Corporate Plan should at least cover:124

1) Evaluation of the previous Long-Term Corporate Plan.

2) The Company’s current position.

3) Assumptions used in making the Long-term Corporate Plan.

4) Establishment of mission, targets, strategies, policies, and long-term work

plans

b. Company’s Business Plan and Budget (CBP)

The Company prepares CBP as annual elaboration of Long-Term Corporate

Plan.

CBP should at least cover:125

1) Mission, business targets, business strategies, corporate policies, and

long-term work plans

2) Company’s Budget with details of budget of each program/activity.

3) Financial projections of the Company and Subsidiaries.

14. Legal

The Company’s legal process is conducted to ensure the Company’s legality

and business compliance with prevailing laws and regulations.

The Company’s legal reference comprises laws and regulations issued by

the Government of the Republic of Indonesia and other regulators either

applicable within the territory of the Republic of Indonesia or internationally.

Matters that should be taken into account in the Company’s legal processes

are as follows:

124





72

a. Safe documentation and transparent reporting by maintaining confidentiality

aspect so that the decision made can be justified.

b. Clear accountability of all Employees who have duties related to legal

process of the Company in accordance with their line of authority.

c. All Employees with duties related to legal process of the Company should be

free from all conflicts of interests and prioritize the Company’s interest.

d. Provision of services that can meet the needs of Shareholders, Board of

Commissioners, Board of Directors, and stakeholders of the Company in a

fair way.

e. Legal process undertaken by the Company is inline with implementation of

strategies that should guarantee that all legal risks are under the control of

the Board of Directors.

f. Clear arrangement of the provision of legal advices to the Board of

Commissioners, Board of Directors and Employees for the purpose of

compliance with prevailing laws and regulations as well as recommendations

on the legal actions required in the performance of their respective duties.

g. Clear calculation of all legal implications from agreements with other parties

in the corridor of legal risk management (legal risk tolerance) and upon the

knowledge of the Board of Commissioners and the Board of Directors of the

legal implications in accordance with their respective duties as stipulated in

the Company’s Articles of Association and prevailing laws and regulations.

h. In case of a court call or a call from other law enforcement agency, either as

witness or to give explanation on a case related to the Company, it is already

properly coordinated.

i. The use of a legal counsel/lawyer/notary to take care of legal process of the

Company and business units is already coordinated by considering the

aspect of cost and benefit for the Company.

73

15. Mining Business

The mining process is conducted by the Company by referring to the laws

and regulations related to mining operations as well as the principle of mineral

and energy resources conservation.

Mining business process should be performed by taking into account the

following matters:

a. Maintenance and protection of occupational safety and health and

environment should be prioritized in each process of mining operations.

b. Asset in the form of data and information regarding mining operations is

already protected and kept confidential, including the leak of data and

information to other parties which is a serious violation.

c. Strategy and objectives of mining operations which are clear and formal,

measureable in all mining operation activities inline with the Company’s

strategy and objective as a whole.

d. Phases of mining, processing, melting, refining are done without sacrificing

the Company’s long-term interest for sustainable profit and growth.

e. Marketing process is already coupled with adequate data on the market and

customer developments and proactively conducts market penetration to

market the Company’s products with a view to seek new markets.

f. Quality products according to the needs of customers by applying the

principles of on time, right quality, and quick response to meet customer

satisfaction.

g. Each cycle of the Company’s operations should have environmental

management system, mining closure and post mining.

h. Operations by outsourcing can be controlled to minimize risks and maximize

profit.

16. Reporting

Reporting is a written accountability on the implementation of an activity

during a certain period of time either routine or non-routine which contains

important events.

74

Reporting system should be supported with a reliable information system in

order to make a quality report, in the sense that it is easy to be understood,

relevant, accurate, real time, auditable and accountable.

a. Annual Report

1) The Board of Directors prepares Annual Report in accordance with

prevailing laws and regulations that is already audited by Public

Accountant registered in Bapepam and LK and signed by all members of

the Board of Directors and members of the Board of Commissioners to

be submitted to the GMS to be approved and enacted in the Annual

GMS.

2) Annual Report should at least contain:

a) Financial Statement comprising at least the balance sheet for the

fiscal year that is just ended in comparison to the previous year,

Income Statement for the said year, Cash Flows Report and Report

on the Equity Changes as well as Notes to the Financial Statements.

b) Report on the Company’s activities.

c) Report on the implementation of social and environmental corporate

responsibility.

d) Details of the problems arising during the fiscal year which have

affected the Company’s business activities.

e) Report on the supervisory duty performed by the Board of

Commissioners during the previous year.

f) Names on the Members of the Board of Directors and Members of the

Board of Commissioners.

g) Salaries and allowance for the Members of the Board of Directors and

salaries or honorarium and allowance for Members of the Board of

Commissioners.

75

b. Report to Bapepam and LK

1) Annual Report of the Company126

a) The Company submits annual report to the Capital Market and

Financial Institutions Supervisory Agency (Bapepam and LK) no later

than 4 (four) months as of the end of the fiscal year, in the total of 4

(four) exemplar copies and at least 1 original form.

b) In the event the annual report is already available for the shareholders

before the period of 4 (four) months as of the end of the fiscal year,

the said annual report must be submitted to Bapepam and LK at the

same time with the availability of the annual report for the

shareholders.

c) Annual report shall contain key financial data, Board of

Commissioners’ Report, Board of Directors’ Report, profile of the

Company, management discussion and analysis, corporate

governance, Board of Directors’ accountability for the financial

statements, and the audited financial statements.

2) Periodic Financial Reports

a) The Company is obliged to submit Periodic Financial Reports to

Bapepam and LK at least 2 (two) exemplars, one of which is in the

original form, along with a report in soft copy.

b) Periodic Financial Report is a complete financial report consisting of:

- Report of financial position (balance sheet)

- Report of comprehensive income/loss

- Report of equity changes

- Report of cash flows

- Report of financial positions at the beginning of comparative

periods, if the Issuer or Public Company applies an accounting

126

Regulation of Bapepam No. X.K.6 on Issuers and Public Companies’ Annual Report Submission Obligation

76

policy retrospectively, makes representation of financial accounts,

or reclassifies the accounts of the financial report, and

- Notes on the financial report

3) Annual Financial Statements

a) Annual financial statements must be presented in comparison to the

same period of the previous year.

b) Annual financial statements must be completed with Accountant’s

report for the purpose of audit on the financial statements.

c) Annual financial statements must be submitted to Bapepam and LK

and published to public at the latest on the third month after the date

of the annual financial statements.

4) Mid-Year Financial Report

a) Mid-year financial report must be presented in comparison to the same

period of the previous year, except for report of financial position

(balance sheet) as of the end of the mid-year period that should be

compared to financial position (balance sheet) as of the end of the

previous year.

b) Mid-year financial report must be submitted to Bapepam and LK and

published to public under the following period:

- at the latest the end of the first month after the date of the mid-year

financial report, if not completed with accountant’s report.

- at the latest the end of the second month after the date of the mid-

year financial report, if completed with accountant’s report for the

purpose of limited examination.

- at the latest the end of the third month after the date of the mid-

year financial report, if completed with accountant’s report for the

purpose of financial report audit.

5) Other reports pursuant to prevailing laws and regulations.

77

CHAPTER V

MANAGEMENT OF SUBSIDIARIES

A. GENERAL POLICY OF MANAGEMENT OF SUBSIDIARIES

1. Establishment of subsidiaries is for business development related to business

diversification, which is conducted in order to provide value added; a strategic

value that will eventually support the Company’s main business.

2. Performance of Subsidiaries is measured with Performance Indicators

consisting of financial aspect, operational aspect and administration aspect.

3. The Performance Indicators are based on the type of industry, captive market,

economic value added, and/or strategic value for the Company.

4. Decisions of the Subsidiaries’ GMS are directed in order not to be in contrary

with the Company’s Long-Term Corporate Plan, BCP and Articles of

Association.

5. Each Subsidiary is encouraged to be more advancing and independent so that it

does not only rely on the Company’s captive market.

6. Each transaction between the Company and its Subsidiary is made based on a

healthy business rule. The sale of a part of or the whole part of the Company’s

shares in a Subsidiary to other party is conducted for the purpose of: (1)

Improving the performances of the Company and the Subsidiary; (2) Obtaining

value added for the Company; (3) Minimizing loss/risks.

7. A Subsidiary engaging in the business in and/or related to natural resources

must perform corporate social responsibility.

8. Each Subsidiary should focus on a certain business field that becomes its

competence and optimize the use of resources in its possession.

9. The sale of a part of or the whole part of the Company’s shares in a Subsidiary to

other party is conducted for the purpose of improving the performances of the

Company and the Subsidiary; obtaining value added for the Company; and

minimizing loss/risks.

78

10. The shares in the Subsidiaries outside the Company’s share ownership should be

owned by other companies with good performance.

B. APPOINTMENT AND DISMISSAL OF SUBSIDIARIES’ MANAGEMENT

1. The Company’s Board of Directors establishes fit and proper test regulation for

the selection and determination of candidates for the Board of Directors and

Board of Commissioners in Subsidiaries.

2. Appointment and dismissal of members of the Board of Directors and Board of

Commissioners of the Company’s Subsidiaries are conducted through the GMS

of Subsidiaries, which then will be reported by the Company’s Board of Directors

to the Company’s Board of Commissioners.

3. Members of the Board of Directors and Board of Commissioners of the

Company’s Subsidiaries who are appointed should sign a management contract.

4. A candidate for the Board of Directors and Board of Commissioners of the

Company’s Subsidiaries should be free from all conflicts of interests such as

follows:

a. Conflict of interest with proxy of the Subsidiaries’ shareholders.

b. Conflict of interest as he is also proxy of the Subsidiaries’ shareholders

C. EQUAL TREATMENT TO THE SHAREHOLDERS,

1. In principle, there shall be equal treatment for the Shareholders of Subsidiaries,

for instance, in the submission of complete and accurate information on the

Subsidiaries.

2. Shareholders of Subsidiaries who own shares with similar qualifications should

be treated equitably without exception.

3. Each Shareholder of Subsidiaries is entitled to cast a vote in accordance with

classification and the number of shares owned.

79

CHAPTER VI

MANAGEMENT OF RELATIONSHIP WITH STAKEHOLDERS

A. RELATIONSHIP OF THE COMPANY WITH THE COMPANY’S PERSONNEL

Behavior of the Company’s Personnel is a specific response of each Personnel

of the Company to the daily work situation in the field, which results in the

achievement of the Company’s vision and business performance. In order to realize

quality relationship that is fair and able to spur intensity and quality of the Company’s

personnel’s participation, the Company will treat its Personnel in a fair manner as

members of the Company by doing the following:

1) Respect the right of the Company’s personnel and always involve the Company’s

Personnel in establishing the policy of Employee management consistently in

accordance with prevailing laws and regulations.

2) Disseminate all regulations, in particular new regulations, to all Personnel of the

Company.

3) Apply the systems of recruitment, selection, promotion, and career development

in a fair and consistent manner based on competency according to the

Company’s needs.

4) Create equal job opportunities to all Personnel of the Company regardless of

ethnicity, race, gender and religion.

5) Provide work environment that is healthy, safe and productive and maintain

occupational safety and health of the Employees.

6) Make efforts to promote the welfare of the Company’s Personnel in a fair, decent,

and transparent manner according to the Company’s performance and ability.

7) Give assessment, appreciation, and payment of remuneration based on

performance and competency of the Employees, either as corporate, in team

work, and as an individual.

8) Respect the creativity, innovation and, initiative of Employees that can give value

added to the Company.

80

B. RELATIONSHIP OF THE COMPANY WITH CUSTOMERS

The Company’s success depends on the creation of productive relationship with

customers based on integrity, professionalism, communication, and attitude to serve

according to the Company’s corporate values by doing the following:

(1) Develop quality services that meet customers’ expectations and establish long-

term relationship that is mutually beneficial.

(2) Maintain an excellent quality of products and services based on national and

international standards.

(3) Provide clear information on the Company’s products and services and make

available means of communications for the Customers.

C. RELATIONSHIP OF THE COMPANY WITH SUPPLIERS

1) Give equal treatment to all suppliers or vendors.

2) Procurement process of goods and services in the Company must be free from

Corruption, Collusion and Nepotism.

3) Do not influence each other, either directly or indirectly, which may give rise to

unfair competition and decreasing quality of procurement process of goods and

services and work results.

4) Prevent the occurrence of conflict of interest of the parties involved directly or

indirectly in the procurement process.

5) Carry out procurement process transparently, competitively, and fairly to get

Suppliers that meet the qualification requirements and accountable price.

6) Fulfill each other’s right and responsibility pursuant to the agreement that is

mutually agreed.

7) Establish a good communication with Suppliers including to follow-up complaints

and objections.

81

D. RELATIONSHIP OF THE COMPANY WITH CREDITORS

1) Make available actual and prospective information to prospective creditors.

2) Choose Creditors which have credibility and accountability, and is bona fide, free

from Corruption, Collusion and Nepotism by emphasizing the principle of

prudence, selectivity, competitiveness and fairness.

3) Providing information transparently on the use of funds to increase the creditors’

trust.

4) Fulfill the rights and obligations in accordance with agreements between the

Company and its Creditors.

E. RELATIONSHIP OF THE COMPANY WITH SURROUNDING COMMUNITIES

Fostering a good relationship with the community is a basic principle for the

Company’s long-term success. Therefore, the Company continuously makes efforts

to:

1) Respect values, norms, and culture of the communities surrounding the

Company’s areas of operations and realize a harmonious relationship with local

communities.

2) Maintain environmental sustainability and cleanliness.

3) Carry out Corporate Social Responsibility and environmental and community

development programs according to prevailing laws and regulations.

CHAPTER VII

COGC IMPLEMENTATION

A. DISSEMINATION, IMPLEMENTATION, EVALUATION

The Company conducts the phases of dissemination, implementation and

evaluation of Code of Corporate Governance (COGC) through an assessment by

82

an external party and self-assessment based on the Company’s need and

prevailing laws and regulations. Further phases of the activity are carried out by the

Company.

Dissemination activities are conducted to the Company’s internal and external

parties. Dissemination on the Company’s internal is emphasized on instilling GCG

understanding and the awareness and need of consistent implementation of GCG.

Dissemination to external party is aimed at giving the understanding work

procedures in the Company in accordance with GCG principles.

Implementation of COGC is carried out consistently and becomes the

responsibility of Director of Business Development.

B. REPORTING OF COGC VIOLATIONS

The Company gives opportunity to all Personnel of the Company to file a report

on an alleged breach/violation of COGC in person, by mail, complaint box, or other

media provided by the Company for the purpose of reporting COGC Violation. The

media is made available to convey an alleged violation of COGC and not for

personal complaints.

The informant’s identity should be specified clearly. The Company will give

reward for the informant if the reported violation is real. The Company will keep

confidential the informant’s identity, except if:

1. It is required in relation with report or investigation conducted by authorized

apparatus.

2. It is inline with the Company’s interest and the objectives of this COGC.

3. It is required by the Company to stand before the law

Arrangement of violation reporting system is further provided in a separate policy

(Whistleblowing System) which is an inseparable part of this COGC.

83

CHAPTER VIII

CLOSURE

A. DATE OF ENFORCEMENT

This COGC is enforced from the date of stipulation. This shall mean that all

Personnel of the Company as from the said date must comply with and use this

COGC.

B. EVALUATION AND ENHANCEMENT

1. The Company should conduct a quality assurance program to evaluate the

performance and gain adequate assurance that all Personnel of the Company

have performed their duties and responsibilities in accordance with the COGC

and the Objectives of the Company.

2. The Company must evaluate and enhance the COGC periodically in accordance

with the Company’s development and needs.