PT Tirta Mahakam Resources Tbk

Corporate Governance

Good Corporate Governance (GCG) is important for shareholders, creditors, staff as well as the Company itself. Therefore, a good relationship is needed among the board of commisioners, audit committee, board of directors and all of the staff in order to make Good Corporate Governance implemented well.

General Meeting of Shareholders

The General Meeting of Shareholders (GMS)  represents the highest body within the corporate structure. The GMS, among others, has the authority to appoint and dismiss the members of the Board of Commissioners (BOC) and the Board of Directors (BOD), approve changes to the Article of Association, endorse the Annual Report, approve plan to obtain and to use from funding activities, appoint the independent auditor, and determine remuneration given to the members of BOC and BOD.

Throughout 2014, the Company held one GMS and two Extraordinary GMS, respectively.

 The Board Of Commisioners

The BOC has the duty to oversee and advise the Directors on matters regarding corporate policies. The BOC continuously monitors the effectiveness of the Company’s policy and decision making process made by the BOD, including the execution of strategy to meet stakeholders’ expectations.

In order to implement their supervisory function effectively, the BOC is assisted by the Audit Committee, which provides routine reports to the BOC regarding matters related to the performance of the Company. Once the reports received from the Audit Committee, the BOC may invite members of the BOD for discussions on importance matters related to the operation of the Company or give advice to members of the BOD regarding these matters.

In order to support the effectiveness of the implementation of the tasks and responsibilities and accordance with the implementation of the Company’s compliance to the Financial Services Authority Regulation No.34/POJK.04/2014, the Board of Commissioners perform related functions of the Nomination and Remuneration Committee. This function is to develop the system, nomination and selection procedures for nominated members of the Board of Commissioners and Board of Directors, provide recommendations on the number of members of the Board of Commissioners and members of the Board of Directors as well as develop a system for remuneration for the Board of Commissioners and Directors

To date, the members of the BOC comprises of 3 Commissioners including the President Commissioner , Commissioner and Independent Commissioner. This composition of Independent Commissioner is in accordance with the implementation of compliance to the Circular Letter of the Head of Bapepam-LK No. SE-03/PM/2000 and the Capital Market’s regulation which require a publicly-listed company to have at least 30% Independence Commissioners within its Board.

In accordance with the Acticles of Association, the members of the BOC are elected for a period of 3 years and can be replaced before the expiry of their tenure.

 Timely if needed, The BOC conducts Board of Commissioners meetings to evaluate business target and to discuss all matters pertaining to the development of the Company.

The establishment of the remuneration of the BOC members is conducted in accordance with the Company’s Articles of Association, the remuneration of the Company’s Commissioners is decided in the GMS, which is below IDR 1 (one) billion a year.

 Directors

The BOD is fully responsible for prudent management of the Company and to comply with prevailing regulations in order to protect the interest of the Company and to operate in line with the purpose of the Company. The Directors whether individually or collectively must act with precision, prudence, and consider all aspects of a situation in carrying out their duties.

In conducting their duties and responsibilities, each member of the BOD is guided by the decisions of the General Shareholders Meeting, the Company’s Articles of Association, the decisions and directions of the BOC, the decisions and directions of the BOD, by the relevant regulations and regulatory governing the forestry and wood products industries, capital market regulation, other areas related to the Company’s activities, and by the principles of GCG.

To date, members of the Directors comprises of 3 (three) members, including the President Director, Director and Independent Director. This composition of Independent Director is in accordance with the implementation of the Decree of the Board of Directors of the Indonesia Stock Exchange No. Kep-00001 / BEI / 01-2014 regarding Amendment No. I-A About Registration of Shares and Equity In addition Shares Issued by Listed Companies

In accordance with the Acticles of Association, the members of the BOD are elected for a period of 3 years and can be replaced before the expiry of their tenure.

Timely if needed, the BOD conducts meeting to evaluate business target and to discuss all matters pertaining to the development of the Company.

The establishment of the remuneration of the BOD members is conducted in accordance with the Company’s Articles of Association, the remuneration of the Company’s Directors is decided in the GMS, which is below IDR 2 billion a year.

Audit Committee

The Audit Committe is appointed by and is responsible to the BOC. The primary duties of the Audit Committee are to assist the BOC in supervising the Company; to monitor and evaluate the financial reporting, to supervise the implementation of risk management and internal control, as well as audit works, and the implementation of good corporate governance within the Company.

As of December 31, 2014, the members of the Audit Committee were as follows:

Chairman              : Pohan Wijaya Po (Independent Commissioner)

Member                 :  Tio Lok Lay

Member                 :  Fugiandy Andershen.

The Audit Committee together with the external auditor have reviewed the Company’s Financial Statement which has been presented fairly and found there is no material improper presentation.

Report of the Audit Committee’s activities for 2014 such as follows:

1. Regarding Financial Reports, Projections and Other Financial Information.

The Financial Report for the year 2014 has been presented in accordance with established accounting standards in Indonesia, these are the Statement of Financial Accounting Standards (SFAS), and with the regulations and guidelines established by Capital Market and Financial Institution Supervisory Agency (BAPEPAM-LK).

Regarding the Company’s conduct of transactions with related parties as defined by SFAS No. 7, Definition of Related Parties, the nature and volume of significant transactions with related parties have been appropriately described in the Financial Report.

All of the information in the Company’s Financial Report for the year ending 31 December 2014 have been fully audited and verified.

2. The Company’s Compliance with Regulations Governing Capital Market and Other Relevant Regulations and Legislation.

The management of the Company, in their formulation of policies and in their other activities have fully complied with the regulations and stipulations of the Company’s Article of Association, with regulations and laws governing the capital market, including those promulgated by BAPEPAM-LK (OJK) and the Indonesian Stock Exchange(ISE), and with other regulations and legislation including but not limited to those governing Forestry and Industry sector.

3. Implementation of Examination by the Internal Auditor

The Audit Committee has examined the implementation of the planning program and the report of the internal auditor for 2014 and have concluded that these activities have been conducted appropriately and independently and demonstrate increased effectiveness in internal control procedures of  the Company.

The internal audit functions have examined all operational units, conducting both financial and operational audits of these units.

4. Risk Facing The Company and The Management of Risk by The Board of Directors in 2014.

Management has conducted appropriate assessments and anticipatory measures for potential risks facing the Company.

5. Complaints Presented by Shareholders and Stakeholders.

Throughout 2014, the Company did not receive complaints from Shareholders or other Stakeholders.

As a conclusion to the statements above, the Audit Committee is of the opinion that:

The Financial Reports for the year ended 31 December 2014 prepared by the Management of PT Tirta Mahakam Resources Tbk are in accordance with established principles of accounting in Indonesia;,

As the appointed Public Accountants acted independently and objectively in conducting their audit of the Financial Reports for the year ended 31 December 2014;

The Internal Audit Committee function has been implemented effectively.

The Management of the Company has implemented the principles of good corporate governance in accordance with regulations governing the capital market and other regulations promulgated by the government of Indonesia; and all of the decisions made at the General Shareholders Meeting, Commissioners’ meetings, and Directors’ meetings have been implemented appropriately.

This report has been presented in order to fulfill our obligations in our capacity as members of the Audit Committee to the Commissioners, and to comply with Bapepam-LK Regulation Number IX. 1.5, Lampiran Keputusan Ketua Bapepam Nomor Kep.643/BL/2012, 07 December 2012 regarding the Formulation and Establishment of Working Guidelines for Audit Committees

Internal Audit

The Company has established the Internal Audit unit in 2010 by Decree No. 02 / TMR / IV / 2010, which is a business unit whose activities providing assurance and consulting services independent and objective, which is designed to provide added value and encourage the improvement of company operations.

Internal audit activity helps the company achieve its objectives through a systematic and orderly approach to evaluate and improve the effectiveness of risk management, control and process Governace (governance).

Internal Audit Unit Responsible directly to the Managing Director, while the duties and responsibilities of the Internal Audit include:

1.   Develop and implement annual internal audit plan

2. Carry out checks on the course of the implementation of the internal control system applicable company procedures.

3. examination and assessment of the efficiency and effectiveness in finance, accounting, operations, human resources, marketing, information technology and other activities.

4.  Provide suggestions for improvements of information on the activities examined at all levels of management.

5.  Making the audit report and submit the report to the Director and the Board of Commissioner.

6.  Monitor, analyze and report on implementation of the improvements that have been suggested.

7. Access to all documents, records, personnel, and physical objects place on audit execution, to get the data and Opera relating to performance of its duties.

 During 2014 the Internal Audit has conducted audits with a focus on the production of plant operations.

 Name: Hendry Tan

Position: Head of Internal Audit

 Hendry Tan was appointed as Chairman of the Internal Audit of the company in 2013. Joined the company in 2010 as Accounting Manager. He graduated from the University of Andalas with a Bachelor of Economics in Accounting.

(upload Internal Audit Charter)

Corporate Secretary

Currently, the position of Corporate Secretary is held by Djohan Surja Putra since 2014.

The principal duties of the Corporate Secretary are:

To act as a facilitator between the Company and the regulatory authorities governing the capital markets, particularly Bapepam-LK, and the Indonesian Stock Exchange, where the Company’s shares are listed,

To ensure the dissemination of accurate, comprehensive information related to the Company’s conditions, circumstances and development to shareholders and all stakeholders at the appropriate time and place.

To provide input to the BOD to ensure that all actions and measures implemented by the board on behalf of the Company are in full compliance with the rules and regulations governing capital markets and with the stipulations of the Company’s Article of Association, and with all other relevant rules and regulations.

To ensure that the GMS, meetings of the BOD, and meetings of the BOC are held in a timely manner and to review all documentations are in accordance with the relevant regulations and with the principles of GCG.

BUSINESS RISK MANAGEMENT

Log Materials Supply  to Industry

Log materials purchased by the Company  depend on transportation infrastructure, which is strongly affected by weather conditions, thus effecting the delivery time to the factory.

Fluctuation of Rupiah

The company is selling its products 99% for exports and receipts from the sale of foreign currency, namely the U.S. dollar and Japan Yen, in 2014 dollar and Yen values ​​tend to be higher than the previous year, this gives the effect on the Company’s revenues are rising in acceptance of rupiah.

Destination Country’s Policy

The Company’s main market is for export, where its destination varies from USA, Japan and Europe and must have met standard of product and quality of the importer’s authority. The Company has attained certification such as: Japan Agricultural Standards (JAS), ISO 9001-2000, Forest Stewardship Council – Chain of Custody (FSC-COC) dan California Air Resources Board (CARB).

Country and Political Risks

Various actions and policies that may be undertaken by the Government affect the Company. These include uncertainties regarding the imports and exports tariff regulations, taxation policies, foreign exchange restrictions, changing political conditions and currency control.

Social and Environmental Risks

The Company’s are governed by several laws and regulations which relate to the social and environmental impact of the timber industry. Waste disposal and production process may potentially pollute the air, land and water. The Company ensures that the operation carry out International best practice in environmental safety standards and waste treatment facilities that comply with or exceed government requirements and regulations.

Insurance Coverage

In 2014, the Company has insured its inventories and fixed assets (except for land) against risk of fire, explosion, lighting and other natural disasters excluded earthquake, volcanic eruption and tsunami with coverage of US$ 28.000.000.

Capital Management

The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize shareholder value.

In addition, the Company is also required by the Corporate Law effective August 16, 2007 to contribute to and maintain a non-distributable reserve fund until the said reserve reaches 20% of the issued and fully paid share capital. This externally imposed capital requirements are considered by the Company at the Annual General Shareholders Meeting (“AGM”).

The Company manage its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to Shareholders, issue new shares or raise debt financing. No changes were made in the objective, policies or processes for the year 2014.

The Company’s policy is to maintain a healthy capital structure in order to secure access to finance at a reasonable cost.