Overview GCG

As a public listed company, The Company is committed to comply with all the prevailing laws and regulations and carry out best practices for creating a Company with sustainable growth. To this end, the Company consistently implements Good Corporate Governance principles including transparency, accountability, responsibility, independency and fairness consistently coupled with the development of corporate values. Thus, the quality of GCG implementation and the overall performance of the Company can be maximized. To ensure the implementation of GCG, the management has constructed the following steps:

Implementation of duties and responsibilities by the Board of Commissioners and Board of Directors.
Improvement of job completion and implementation of committees and working units to perform internal audits.
Implementation of the compliance function, as well as internal and external auditors.
Implementation of risk management, including internal control systems.
Transparency of Company's financial and non-financial condition.

Risk Management

Price Risk

The Company anticipated the risk of commodity price reductions by committing to conduct cost-efficiency measures in all sectors, especially in production cost. The Company also uses both longterm and spot contracts for coal sales. Volume risk is alleviated through high volume, long term sales contracts.

Foreign Currency

Foreign currency risk is a risk in which the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rate. The impact of exchange rate fluctuations on the Company and its subsidiaries is primarily derived from cash and cash equivalents, accounts receivable from the sale of foreign currencies and payables from additional mining project from some sub-contractors in foreign currencies. Company and its subsidiaries do not have a formal hedging policy for foreign currency exchange rate. However, the Company has natural hedges in the form of sales in USD contracts and USD deposits.

Interest Rate and Cash Flow Risk

Interest rate and cash flow risk is the risk in which the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has no debt other than bank loans to finance the purchase of heavy equipment, so the Company is not affected by the fluctuation of interest rate hikes.

Credit Risk

The credit risk faced by the Company and its subsidiaries is derived from loans to customers. To reduce this risk, the Company and its subsidiaries ensure sales of coal are only performed: (i) with reliable customers who are proven to have a good credit history (ii) requests of advance payment guarantees, especially for big customers, and (iii) having a legally binding agreement for coal sale transaction. It is the policy of the Company and its subsidiaries in which all the customers who will make purchases on credit basis should go through credit verification procedures. Moreover, the Company and its subsidiaries will cease distribution of all products to the customer as a result of defaulted payment. In addition, receivable balances are continuously monitored to reduce the possibility of uncollectible receivables. In relation to credit risk arising from other financial assets including cash and cash equivalents, short term investments and other noncurrent financial assets, the credit risk faced by the Company and its subsidiaries arises from the default of the counterparty. The Company and its subsidiaries have a policy to not put the investment in instruments that have a high credit risk and only put the investment in banks with high credit ratings.

Liquidity Risk

The Company and its subsidiaries manage their liquidity to be able to fund capital expenditures and repay maturing debt by maintaining sufficient cash and cash equivalents. The Company and its subsidiaries regularly evaluate cash flow and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives.

Capital Management

The main objective of capital management of the Company and its subsidiaries is to ensure the maintenance of a healthy capital ratio to support the business and maximize value for shareholders. The Company and its subsidiaries manage the capital structure and make adjustments, if needed, based on changing economic conditions. To maintain and adjust the capital structure, the Company and its subsidiaries may adjust the dividend payment to shareholders, issue new shares, or adjust the capital structure.

Ethics And Compliance

Code of Conduct

With the spirit of GCG, the Company has formulated and implemented corporate code of conduct and culture to serve as guidance both to the implementation of operational activities and in each decision making within the Company. The Board of Commissioners, Board of Directors and employees are committed to uphold values as well as comply with the Code of Conduct to ensure fair and balanced relations with all stakeholders including customers, business partners, communities where the company operates, regulators and society at large.

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Whistleblowing System

The Company endeavors to maintain ethical standards, morality and good behavior in all aspects of the business as part of the Company's commitment to implement good corporate governance (GCG). To this end, in 2013 the Company has set up a Whistleblowing System framework where the employees and external parties of the Company are given the opportunity to present information on the practices that allegedly distorted, mal - practice or abuse of authority occurred in the Company and ensure that the informer (whistleblower) will be guaranteed anonymity.

Each incoming report will be seen in order to determine the nature of the problem that actions will be taken for further investigation. If deemed necessary, the Committee may conduct their own investigation or may order an independent investigation agency to follow up on complaints received. The report on the complaint, the findings of the investigation and follow-up reports for the actions that have been taken will be submitted to the President Director.

Each record of all complaints received coupled with a report on the action taken will be documented by the person who serves as the Administrator. Notes will be made available to members of the Audit Committee upon their request. Furthermore, the Audit Committee shall maintain those records and report to the President Director as necessary.

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Eddy

Bumi Raya Group Building

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+62 21 633 3036 | +62 21 3952 5530