Good Corporate Governance

The Company is committed to implement Good Corporate Governance (GCG) in accordance with the provisions of prevailing laws and regulations in the Republic of Indonesia. Implementation of GCG will ensure transparency, accountability, business ethics and commitment to protect all stakeholders. GCG is not merely implemented as a mandatory legal obligation, more than that, it has become a corporate culture in line with the Company’s vision and mission.


GCG will also ensure that all corporate business activities will benefit not only the shareholders, but also other stakeholders including the communities living in the area surrounding the oil palm plantations. Implementation of GCG will also guarantee the Company’s compliance in conducting good and sustainable management of the environment.


Implementation of GCG according to principles that are in line with the Company’s vision and mission has become a joint responsibility of all the Company departments and the entire workforce of the Company. Hence, practicing GCG will guarantee the continuity of the Company’s business.


General Meeting of Shareholders (Annual General Meeting - AGM)

According to Law No. 40 of 2004 on Limited Liability Companies (Perseroan Terbatas/UU PT), the General Meeting of Shareholders or commonly referred to as Annual General Meeting (AGM) is an organ of the Company vested with authority not given to the Board of Directors or the Board of Commissioners within the limits as stipulated in the UU PPT and the Company’s Articles of Association. AGM plays an important role in a company. Through the AGM, shareholders make important decisions related to the Company, among others evaluating the performances of the Board of Commissioners and the Board of Directors, approve the Annual Report and approve strategic decisions related to corporate actions proposed by the Board of Directors/Shareholders neither intervene in the tasks, functions and authorities of the Board of Commissioners nor those of the Board of Directors.


On April 14, 2015, the Company held an AGM which adopted the following resolutions:

I. Approves and accepts the Company’s Annual Report for the financial year 2014, including validation of the Report on the Supervisory Duties of the Company’s Board of Commissioners and validation of the Company’s Consolidated Annual Report for the financial year 2014, which were audited by the Public Accountant Firm of Tanudiredja, Wibisana & Partners, as stated in their report dated February 20, 2015 with an Unqualified Opinion in all material respects.


II. Approves that the Company’s net profits of the financial year ending December 31, 2014 of Rp2,503,695,000,000 be used as follows:

a. (1) A sum of Rp 716 per share to be paid as cash dividend under deduction of the interim dividend of Rp 244 per share paid on October 28, 2014 leaving a balance of Rp 472 per share to be paid on May 15, 2015 to all shareholders of the Company whose names appear in the Company’s List of Shareholders on April 24, 2015 at 16.15 hrs Western Indonesian Time (WIB).


(2) Grants authority to the Board of Directors to pay out such dividends and undertake any necessary actions.



Payment of dividends shall be made under observation of any prevailing tax regulations, regulations of the Indonesia Stock Exchange and other capital market regulations and





b. The remaining balance to be entered in the books as the Company’s Retained Earnings.


III. 1. Appoints members of the Board of Commissioners and Board of Directors, with the following composition:


Board of Commissioners

President Commissioner : Prijono Sugiarto
Vice President Commissioner : Chiew Sin Cheok
Commissioner : Johannes Loman
Independent Commissioner
: Anugerah Pekerti
Independent Commissioner
: Soemadi Djoko Moerdjono Brotodiningrat


Board of Directors

President Director
: Widya Wiryawan
Director
: Bambang Palgoenadi
Director
: Joko Supriyono
Director : Juddy Arianto
Director : Jamal Abdul Nasser
Independent Director : Rudy


III.
2. A. Grants authority to the Board of Commissioners to determine the salaries and/or allowances of the members of the Board of Directors.


B. Resolves to grant all members of the Board of Commissioners annual honorarium of maximum Rp 1,900,000,000 before withheld income tax, effective from the closing of this AGM to the closing of the Shareholders AGM to be held in 2016 and grants authority to the Chairman of the Board of Commissioners to determine the distribution of said amount of honorarium among the members of the Board of Commissioners.


IV. Approves the amendments of Article 11 paragraph (4) and (5), Article 14 paragraph (1) and (5),

Article 15 paragraph (6) and (8), Article 21 paragraph (2), (3) and (5), Article 23 paragraph (10) and Article 29 of the Company’s Articles of Association in order to comply with the Regulations of the Financial Services Authority (Otoritas Jasa Keuangan/OJK) Number 32/POJK.04/2014 on Planning and Conducting Annual General Meeting of an Issuer (Emiten) or Public Listed Company; and Number 33/POJK.04/2014 on the Board of Directors an Board of Commissioners of an Issuer (Emiten) or Public Listed Company.


V. Approves to grant authority to the Board of Directors to:

1. Appoint one of the Public Accountant Firm in Indonesia, registered with the Financial Services


Authority (Otoritas Jasa Keuangan /OJK) to perform a financial audit of the Company over the financial year 2015; and

2. Determine the fee and other terms and conditions related to such appointment of the Public


Accountant Firm.



Annual General Meeting of Shareholders of PT Astra Agro Lestari Tbk on 14th April 2015, Jakarta



Board of Commissioners

The Board of Commissioners is one of the organs within the Company tasked with and responsible for performing supervision, both generally and specifically in accordance with the provisions of the Articles of Association and to provide advice to the Board of Directors.


In 2015, the Board of Commissioners issued a Board of Commissioners Charter which sets out the legal foundation and implementation of the Board of Commissioners’ task including its values, a description of its tasks, responsibilities and authority, procedures for meetings and decision-making and reporting.


Below are the duties and responsibilities of the Board of Commissioners:

1. Supervise and responsible for overseeing management policies and general management, both regarding the Company and the Company business, as well as providing advice to the Board of Directors.
2. Must examine and has the right to approve the Company’s working plan and budget submitted by the Board of Directors.
3. Conduct periodical meetings to discuss the Company’s performance related to the implementation of the Company’s strategic and working plans.
4. The Board of Commissioners has the right to enter buildings, offices and grounds used by the Company and has the right to examine Company records, documents and assets to perform its obligation and the Board of Commissioners also has the right to seek information from the Board of Directors related to Company as required by the Board of Commissioners to perform its duties.
5. In performing its supervisory duties, the Board of Commissioners may establish committees composed of one or more members of the Board of Commissioners and such committee shall answer to the Board of Commissioners.


In line with the provisions of the Company’s Articles of Association, for certain actions, the Board of Directors requires the approval from the Board of Commissioners.


As resolved during the Shareholders AGM in April 14, 2015, the Board of Commissioners shall be comprised of five persons, two of which are Independent Commissioners. Appointment and termination of the members’ term of office shall be resolved during the Shareholders AGM.


The Board of Commissioners presented an accountability report of the supervision on the Company’s management during the AGM on April 14, 2015. Until the end of its term of office, the Board of Commissioners has held 4 (four) Board of Commissioners meetings to discuss the Company’s performance in line with the strategic plan and working plans established by the Company’s Board of Directors for the relevant financial year. During each of these meetings, the Board of Commissioners also invited the Board of Directors and Audit Committee.


The Board of Commissioners held regular meetings to discuss the Company’s performance. In line with the Articles of Association, a Board of Commissioners’ Meeting is deemed valid and authorized to make binding decisions if half of the members of the Board of Commissioners are present or represented during the meeting. The Board of Commissioners and its members have full access to all information related to the Company.


Board of Directors

The Board of Directors is the executive organ that carries the duties and full responsibility to conduct business operations in the interest of the Company according to the Company’s vision, mission and strategy in line with Articles of Association. Members of the Board of Directors are appointed and terminated from office by the AGM.


In 2015, the Board of Director issued a Board of Director Charter which sets out the legal foundation and implementation of the Board of Director’ task including its values, a description of its tasks, responsibilities and authority, procedures for meetings and decision-making and reporting accountability reporting.


Below are the duties and responsibilities of the Board of Directors:

1. The Board of Directors is tasked to operate and responsible for managing the Company in the interest of the Company, in line with the vision and mission stipulated in the Articles of Association.
2. The Board of Directors represents the Company within as well as outside of the court.
3. The Board of Directors shall develop an annual working plan prior to the commencement of the following financial year to be submitted to the Board of Commissioners for examination and to obtain the latter’s approval.
4. The Board of Directors must submit to the AGM an annual report examined by the Board of Commissioners, within a period of maximum 6 (six) months after the end of the Company’s financial year.
5. The Board of Directors shall submit an accountability report to the AGM on the Company’s performance to the end of the financial year and shall answer any questions raised by shareholders during the AGM.


Board of Directors meeting is held regularly. The policy is in compliance with provisions of the Company Articles of Association and UU PT and finds its implementation in weekly Board of Directors meetings which took place 38 times during 2015.


In order to comply with the Indonesia Stock Exchange regulation No. I-A on Listing of Shares (Stock) and Equity-Type Securities Other Than Stock Issued by the Listed Company (Pencatatan Saham dan Efek Bersifat Ekuitas Selain Saham Yang diterbitkan Oleh Perusahaan Tercatat) (BEI Rule No. I-A), the AGM has appointed Rudy as an Independent Director.


Audit Committee

The Audit Committee is established by and answers to the Board of Commissioners. In the performance of its duties and responsibilities, the Audit Committee shall refer to the Audit Committee Charter established by the Board of Commissioners. Membership of the Audit Committee shall comprise three persons, one of whom shall be one of the Independent Commissioner who shall also concurrently the Chairman of the Audit Committee. The office term of the Audit Committee shall be 2 years.


The main function of the Audit Committee is to assist the Board of Commissioners in carrying out their supervisory function over the Company. The Audit Committee shall regularly meet with the Board of Directors and its ranks to evaluate the Company Performance and submit a report of its evaluation during each of the regular meetings with the Board of Commissioners. Reports on the accountability of the Audit Committee will be further elaborate in the Audit Committee Report.


In 2015, the Board of Commissioners has established the following composition of the Audit Committee:

Chairman : Soemadi Djoko Moerdjono Brotodiningrat
Member : Juliani Eliza Syaftari
Member : Ratna Wardhani


Nomination and Remuneration Committee

The Nomination and Remuneration Committee is established by and responsible to the Board of Commissioners. In the performance of its duties and responsibilities, the Nomination and Remuneration Committee shall refer to the Nomination and Remuneration Committee Charter established by the Board of Commissioners.


Membership of the Nomination and Remuneration Committee shall comprise three persons, one of whom shall be one of the Independent Commissioner who shall also concurrently the Chairman of the Nomination and Remuneration Committee. The office term of the Nomination and Remuneration Committee shall be 2 years.


The Nomination and Remuneration Committee assists the Board of Commissioners in performing its function of nominating and remunerating members of the Board of Directors and the Board of Commissioners. Reports on the accountability of the Nomination and Remuneration Committee will be further elaborate in the Nomination and Remuneration Committee Report.


In 2015, the Board of Commissioners has established the following composition of the Nomination and Remuneration Committee:

Chairman : Anugerah Pekerti
Member : Prijono Sugiarto
Member : Kokasih Mariana


Corporate Secretary

The Corporate Secretary is one of the functions within the Company given the task and responsibility to communicate with external parties such as the capital market authorities, the stock exchange authorities, investors and the public. The Corporate Secretary answers to the Board of Directors.


The function of Corporate Secretary shall include Company duties, relationship with investors and the public:

1. Acting as a representative of the Company in its relationship with all stakeholders in communicating the Company’s activities, especially those related to transparency of information.
2. Controlling the external and internal communication strategy management with all stakeholders to openly and responsibly disseminate Company news and build a positive image of the Company.
3. Ensuring the Company’s compliance with at laws of the financial market and UU PT, as well as laws related to its business.
4. Monitoring the development and changes of regulations in the financial market and UU PT, as well as laws related to the Company’s line of business and providing recommendations and input to the Board of Directors on the effect of these changes to the Company and the implementation within the Company.
5. Assist the Board of Directors and Board of Commissioners in the implementation of GCG.


The position of Corporate Secretary is held by Rudy who is also a duly appointed member of the Board of Directors.



Internal Audit

The Internal Audit is responsible for assisting the Board of Directors in evaluating of all of the Company’s business activities. The Internal Auditors also assist the Board of Directors in ensuring that Good Corporate Governance is implemented in every aspect of the Company’s organization. The Internal Auditors assist the Board of Directors in conducting the Company’s business efficiently and effectively in order to improve on the existing performance.


By virtue of the decree of the Chairman of Bapepam-LK No. KEP/496/BL/2008, the Internal Auditors must perform their duties according to the Internal Audit Charter which regulates the Internal Audit working system. In performing its tasks the Internal Auditors must be guided by the Risk Based Audit Method. This auditing method demands an internal control system test, efficiency and effectiveness of the Company’s business operations and compliance with prevailing laws and regulations.


Internal Auditors are partners of the Board of Commissioners, the Board of Directors and other stakeholders in order to achieve the Company’s objectives Periodically, the Internal Audit convenes routine meetings with the Audit Committee and holds discussions with all relevant divisions. The objective is to review and disseminate information of the Internal Audit team’s findings and recommend corrective measures to support the Company’s performance improvement.


Risk Management

The Company, whose main line of business is in oil palm plantations, will always face many business risks, the majority of which are among others external risks beyond the Company’s control. The business risks faced by the Company corresponds with the characteristic risks in the commodity sector, one of which is price fluctuations.


The Company analyzes all potential risks and subsequently formulates a control strategy or manages the risks. The objective of implementing risk management is:

1. To provide the Board of Directors and management with the necessary information on potential risks faced by the Company.
2. The available information will serve as the basis for the Board of Directors to take decisions relevant to the Company’s operational targets.
3. Assessment of risks inherent to every aspect of the Company’s business.
4. Implementation of risk management shall also become guidance for the Audit Committee in performing their tasks to evaluate and asses the Company’s governance.


Risk Profile

Below are several risks which have the potential of affecting the Company’s business operations:


1. Commodity Price Risks

The palm oil business is always influenced by price fluctuations as a result of fluctuating supply and demand on the international market. The higher the price, the higher the Company’s profits will be. On the other hand, the lower the price, the lower the profits with a potential of causing greater losses.


To anticipate this risk, the Company must ensure that the Crude Palm Oil (CPO) produced is of higher quality with a low production cost so as to maintain competitiveness in the market throughout the year.


2. Financial Risks

Financial risks may be caused by fluctuations on the international market and fluctuations in the currency exchange. But the Company and its subsidiaries enjoy an excellent liquidity which support the Company’s action plan and sustain the Company against possible fluctuations in the market. In addition, the banking industry is ready to extend funding facilities to the Company.


3. Operational Risks

Operational risks related to the labor management and fertilizing costs. As commonly known, labor and fertilizing costs are the two largest components in the Company’s business operations. Operational risks are anticipated by implementing a more efficient process of crop husbandry and improving the productivity of human resources by applying mechanization and automation.


4. Legal and Policy Risks

As a Company active in the palm oil industry, the Company is also facing legal and policy risks. Legal risks are risks arising in relation with fulfilling the legality aspects of the plantations managed by the Company. Whereas, policy risks are related to changes in policies in the palm oil industry, both policies of the national Government and the regional Government.


Legal risks related to the relationship between the Company and the community in the surroundings of the Company’s plantations. In maintaining a harmonious relationship between the Company and the community, the Company always ensures that the presence of its plantations must at all times provide a positive mutual benefit to the community. This scheme is brought through Corporate Social Responsibility programs.


5. Catastrophic Risks

Catastrophic risks are risks faced by the Company resulting from natural disasters such as flooding, land slides and earth quakes. Natural disasters can pose a business risk to the Company. Therefore, the management of the Company has designed measures to mitigate the risks of natural disasters, as well as anticipative efforts in the event such natural disasters occur.


Business Ethics

Business ethics is a system of values explicated from the corporate culture and adhered to by all components within the Company, from the Board of Directors, the management, to all employees. These Business ethics will become a reference for all components within the Company in their conduct with the environment, both internal and external. Including the conduct with stakeholders.


The Company always confirms its commitment to uphold business ethics at all times by complying with all prevailing laws and regulations prevailing in Indonesia. In its implementation, the Board of Directors together with the management and all employees always ensure that every aspect of the Company’s business shall adhere to the principles of Good Corporate Governance which cover such aspects as transparency, accountability, reasonability and full responsibility. Consistent implementation of business ethics will increase the Company’s value in the eyes of shareholders and other stakeholders.


In implementing business ethics, the Company will also avoid conflicts of interest within the Company, starting from the Board of Directors, the management and all of the employees. The Board of Directors, the entire management and all employees are prohibited from accepting remuneration in any form, from others who have either direct or indirect interests.


The Company also consistently and continuously communicates the Business Ethics Standards as well as Company values to all employees and all stakeholders. As such, Business Ethics Standards may become the reference in attitude and conduct of all components within the Company.


Corporate Supporting Professional Institutions

The Company and its subsidiaries assigned Corporate Supporting Professional Institutions to support its business activities, which include independent accountant, actuary, and rating agencies with total payments of approximately Rp 11.3 billion in 2015.


FAIR BUSINESS COMPETITION


During the period of 2011, the Company and other CPO producers were investigated by the Business Competition Supervisory Commission (KPPU). The investigation was related to allegation of cartel practices among CPO producers and cooking oil manufacturers. The charges were based on the KPPU analysis regarding high cooking oil prices during 2010 to 2011.

The charges were not proven during court proceedings. The Company has never committed any cartel practice of CPO and cooking oil price fixing. The surge in cooking oil prices was solely due to high demand, while at the same time the production capacity could not meet market demand.

STAKEHOLDERS


The Company's sustainability cannot be separated from the efforts to build and foster relationships with all stakeholders. The Company has identified its stakeholders and approach methods to continue maintaining harmonious relationships with them.