Good Corporate Governance

 

PT Ciputra Property Tbk is committed to implementing good corporate governance in order to enhance its performance as well as to allow clear accountability and responsibility, as mandated to all Ciputra Group. This commitment is made manifest as the foundation and solid foothold for the growth of the Company, to become one of the leading and prominent property companies in Indonesia.

 

 

The Company also ensures that the principles of corporate governance are embedded in its corporate culture. The objective of corporate governance enforcement is to create balance in managing the Company, and to avoid any potential misconduct. PT Ciputra Property Tbk has conducted systematic corporate governance practices in its business environment, applying them based on the oundation and principles of corporate governance as stipulated in the prevailing laws of Indonesia.

 

 

The management has set corporate governance as a

pattern of its intellectual thinking and work methods,

and as a basis to enable efficient and effective work

system adjusted to the business climate it faces, both

internally and externally.

 

 

The principles of corporate governance are:

1. Transparency,

which means being transparent in decision-making process and transparent in a disclosure of material and relevant information of the Company. This principle has been reflected in the decision making process at the Board of Directors meetings, at internal meetings with Management of the Company, or in meetings with the Board of Commissioners.

 

 

2. Independence,

which means conducting professional management without conflict of interest and influence or pressure from any party unsuitable with the regulation and principles of healthy corporate. In conducting its activities, the Company is managed according to the applicable rules and corporations principles without any coercion.

 

3. Accountability,

which means clarity of function, implementation and accountability of the organization that allows management to manage the Company effectively. In its implementation this has been reflected in a variety of fundamentals and references of the Company’s performance to the legislation.

4. Responsibility,

which means conformity in the management of the Company toward the legislation and the principles of a healthy corporation. In this case, all actions, conducts and performance of the Company should be able to be accounted for.

5. Fairness,

which means equal treatment in the fulfillment of stakeholders rights based on rules and regulations. It is conducted fairly by providing opportunities to the entire management.

 

 

As the basis of its corporate governance principles implementation, PT. Ciputra Property Tbk has established Audit Committee, Corporate Secretary and Internal Audit Department. The Company is actively monitors business risks and strives to anticipate and minimize risks in alignment with the applicable policies and strategies. The Company realized that its performance thus far has been attributable to strong implementation of good corporate governance and its ability in managing and mitigating its risks.

 

 

PT Ciputra Property Tbk has a strong belief to maintain and improve the implementation of corporate governance at all levels of the Company. Commitment to the implementation is actualized in the application of values and norms of corporate behavior, which must be adhered and applied in daily activities. In this case, the Company has acted very systematically, in order to apply efficiency in performing its best. In addition to responsibility, the Company continues to provide significant contribution to the community and environment by conducting social programs. Thus, the governance policy is functioning and is embedded into the Company.

 

 

The Company’s ability to implement good governance brought positive results and may be seen through the growing confidence from investors, increasing revenue and performance, and also by the Company’s acceptance of both local and international awards. The investors also have recognized the level of transparency and quality of information disclosure by the Company.

 

 

 

The Company has established key structures in implementing optimum corporate governance. As mandated by the governance structure and mechanisms which is: Based on the Law of the Republic of Indonesia No. 40/2007 on Limited

Companies (Corporate Law), the Company’s organs are the General Meeting of Shareholders (GMS), Board of Commissioners and Board of Directors. The administration of limited company adopts two-board system, namely the Board of Commissioners and the Board of Directors, which hold authority and responsibility as per their respective functions as mandated by the Articles of Association and the prevailing laws.

GENERAL MEETING OF SHAREHOLDERS

 

The General Meeting of Shareholders (GMS) is a supreme organ of the Company, acting as a forum for shareholders to take key decisions in regards to the Company, by upholding the provisions in the Company’s Articles of Associations and the prevailing regulations. GMS also holds the highest authority within the Company, whose resolutions are legally enforceable and binding in decision making. The GMS is held once a year.

 

The notification for the Annual GMS for the year 2013 (AGMS 2013) was submitted to the Financial Services Authority on 18 April 2013. The Notification and Summons to the Annual General Meeting of Shareholders of the Company were published on two Indonesian-language newspapers, namely Bisnis Indonesia and Koran Tempo on 26 April 2013 (Notification) and on 13 May 2013 (Summons).

 

 

 

The resolutions of the AGMS 2013 is as follows:

1. Approval of the annual report including the authorization of the financial statements and the report of supervision of the Board of Commissioners for the year ended 31 December 2012.

2. Determination of the utilization of net income.

3. Appointment of the public accountant to audit the Company’s financial statements for the year ended 31 December 2013.

4. Determination of the honorarium and benefits for the Board of Commissioners and the Board of Directors of the Company.

5. Submission of the accountability report on the use of the Company’s initial public offering proceeds for the year 2012.

BOARD OF COMMISSIONERS

 

Duties and Responsibilities of the Board of Commissioners

The Board of Commissioners is mandated to conduct supervision and assessment of the Board of Directors’ management, and to oversee the committees under the Board of Commissioners.

 

The Board of Commisioners is collectively responsible to the shareholders and is assigned to provide advice to the Board of Directors related to the policy in managing the Company, including planning and development, operations and budget, in accordance with the Company’s compliance to the Article of Association and the fulfillment of mandate and decisions at Annual GMS and Extraordinary GMS.

 

 

Composition & Independence of the Board of Commissioners

Pursuant to the Company’s Articles of Association, the Boards of Commissioners and Directors are appointed by Annual General Meeting of Shareholders for a period of 3 (three) years, and they may be reappointed. The Company currently has 5 (five) Commissioners, 2 (two) of whom are Independent Commissioners.

 

As at the end of 2013, the members of the Board of Commissioners are:

 

President Commissioner: DR. (HC) Ir. Ciputra

Commissioner: Dian Ciputra

Commissioner: Sandra Hendharto

Independent Commissioner: Henk Wangitan

Independent Commissioner: Thomas Bambang

 

The currently presiding members of the Board of Commissioners were appointed on 15 June 2012 at the 2012 AGMS, with a tenure that extends until the closing of the 2017 AGMS.

 

 

Meetings of the Board of Commissioners

Throughout 2013, the Board of Commissioners held 6 internal meetings, of which 5 were held together with the Audit Committee and the Risk Management Committee. All members of the Board of Commissioners attended all of the abovementioned meetings.

 

 

Competence Enhancement for the Board of Commissioners

In 2013 the Board of Commissioners did not participate in any competence enhancement programs.

 

 

Remuneration for the Board of Commissioners

See “Remuneration for the Board of Directors” section in the following subchapter.

BOARD OF DIRECTORS

 

Duties and Responsibilities of the Board of Directors

The Board of Directors holds full responsibility for the management of the Company in order to achieve its goals as mandated by the Articles of Association and the GMS. The Board of Directors also actively coordinates and cooperates with the management and all functions within the organization, and communicates the progress of the Company’s achievement of its strategy, to ensure that the policies are in line with the aims and objectives of the Company. In addition, the Board of Directors must also fulfill its social responsibility and meet the interests of the shareholders. The Board of Directors continues to promote a consistent good corporate governance implementation within the company. The Board of Directors performs independent duties without interference from other parties, which may lead into conflict of interest or conflict with the laws and Articles of Association of the Company.

 

 

Composition & Independence of the Board of Directors

Pursuant to the Company’s Articles of Association, the Boards of Commissioners and Directors are appointed by Annual General Meeting of Shareholders for a period of 3 (three) years, and they may be reappointed. The Company currently has 8 (eight) Directors, 1 (one) of whom acts as the President Director, and 2 (two) Unaffiliated Directors.

 

As at the end of 2013, the members of the Board of Directors are:

President Director: Candra Ciputra

Director: Budiarsa Sastrawinata

Director: Rini Ciputra Sastrawinata

Director: Harun Hajadi

Director: Junita Ciputra

Director: Cakra Ciputra

Unaffiliated Director: Ir. Artadinata Djangkar

Unaffiliated Director: Bing Sugiarto Chandra

 

The currently presiding members of the Board of Directors were appointed on 15 June 2012 at the 2012 AGMS, with a tenure that extends until the closing of the 2017 AGMS.

 

 

Meetings of the Board of Directors

Throughout 2013, the Board of Directors held 12 meetings, all of which were attended by all the members of the Board of Directors.

 

 

Competence Enhancement for the Board of Directors

In 2013 the Board of Directors did not participate in any competence enhancement programs.

 

 

Remuneration for the Board of Directors

Proposal for the remuneration for members of the Board of Commissioners and the Board of Directors of the Company is presented to the GMS by the Board of Commissioners, by taking into account the Company’s financial performance, fulfillment of reserves, individual performance, and long-term performance considerations.

 

In formulating this remuneration proposal, the Board of Commissioners also considers the analysis and recommendation from the Nomination and Remuneration Committee.

 

Remuneration for members of the Board of Commissioners and the Board of Directors of the Company in 2013 is detailed as follows:

 

 

Number of Members

Total Remuneration

Board of Commissioners

5

Rp 1,838,100,500

Board of Directors

8

Rp 13,460,299,838

Total

13

Rp 15,298,400,338

 

 

AUDIT COMMITTEE

 

The Audit Committee was established and appointed by the Board of Commissioners on November 8, 2007. Its main task is to assist the Board of Commissioners on fulfilling its supervision of the Board of Directors in carrying out the business plan and assess the adequacy of internal control systems, adequacy of the reporting and disclosure of financial statements, and other tasks as stated in the Audit Committee Charter.

 

The Audit Committee may conduct the examination or investigation as necessary, to ensure that the work program or strategy of the Board of Directors is in line with the vision, mission and plans that have been established.

 

In accordance with the Audit Committee Charter, the Audit Committee is responsible for reviewing:

·        

Financial Information issued by the Company, such as financial statements, projections and other Financial Information.

·        

Adherence to Capital Market regulations and other fields related to the Company’s activities.

·        

Work Plan and internal audit examination results and internal control effectiveness.

·        

Audit adequacy performed by an external auditor and provides opinion in the selection of the public accountant.

·        

Business risks toward the Company and implementation of risk management by the Board of Directors and management.

 

The Audit Committee is periodically evaluated, and necessary amendments might be done to ensure the Company’s compliance to regulations of OJK and other relevant regulations.

 

 

 

 

Independence of the Audit Committee

The Audit Committee was appointed by the Board of Commissioners and chaired by an Independent Commissioner, also as a Member of the Audit Committee. Members of the Audit Committee consists of at least 1 (one) Commissioner and at least two (2) other members from outside the Company.

 

In order to ensure its independence, members of the Audit Committee must:

·        

Possess integrity and ability according to their educational background and ability to communicate well

·        

Adhere to the Audit Committee Code of Conduct as established

·        

Not be part of the public accountant, law consultant, assessor, or other parties that have rendered services to the Company within the last one year

·        

Not own the Company’s shares either directly or indirectly

·        

Not be affiliated with the Company nor any member of the Board of Commissioners or the Board of Directors or the Majority Shareholder of the Company

·        

Not have any business relations either directly or indirectly with the activities related to the Company’s line of business

 

 

 

 

Authority of the Audit Committee

To perform its duties, the Audit Committee is entitled to:

·        

Access, freely and without limitations, the notes, records, employees, funds and other corporate assets and resources related to the implementation of their duties.

·        

Direct communication with relevant parties, including information, operations, finance and the Company‘s management.

·        

Undertake test or inspection to learn the location where necessary.

·        

Coordinate with Risk Management Committee.

·        

Upon approval from the Board of Commissioners, may seek input from professionals outside the Company relating to performance of duties at the expense of the Company.

 

 

Duties and Responsibilities of the Audit Committee

·        

The Audit Committee’s duties are:

·        

Create the Annual Work Program, to be approved by the Board of Commissioners.

·        

Evaluate implementation and the results of examination conducted by the Internal Audit Unit

·        

Assist the Board of Commissioners to ensure the effectiveness of the roles and duties of External Auditors.

·        

Evaluate the follow-up on findings from External Auditor.

·        

Review the effectiveness of internal control system of the Company.

·        

Provide recommendations on improvement of management control systems and practices.

·        

Provide advice and input on the issues raised by the Board of Commissioners.

·        

Review the Company’s compliance with laws and regulations relevant to the business activities of the Company.

 

 

 

Composition & Meetings of the Audit Committee

The term of service for the members of the Audit Committee is identical to that of the Board of Commissioners. Currently, the Audit Committee consists of the following three (3) members,including the Chairman, and is required to hold a general meeting at least once a year. In 2013, the Audit Committee held 5 (five) meetings.

 

Chairman: Thomas Bambang

Member: Lanny Bambang

Member: Melina Indrawati Sutandi

 

 

Report of the Audit Committee’s Activities in 2013

Through its meetings, in 2013 the Audit Committee conducted a number of activities, among others:

1. Presentation of the results of the audit of financial statements for FY2012 by the appointed public accountant

2. Presentation of the activities of Internal Audit

3. Presentation of the quarterly financial statements

4. Discussion of the plan to audit the financial statements for FY2013 by the appointed public accountant

 

 

Profile of the Audit Committee Members

 

Thomas Bambang

Chairman

See “Profiles of the Board of Commissioners” section in the chapter titled Company Profile.

 

Lanny Bambang

Member

Indonesian citizen, 53 years old. Appointed as member of the Audit Committee in June 2007. Graduated from Parahyangan Catholic University in 1982, and earned an MBA from IPPM in 1991. Starting her career at Bank Umum National since 1984, most recently serving as Senior Manager of Commercial Relations in 1997. Served as Director of Bank Ciputra from 1997 to 1999. Currently active in various social activities.

 

 

Melina Indrawati Sutandi

Member

Indonesian Citizen, 54 years old. Appointed as member of the Audit Committee on 16 July 2012. Graduated from Budi Luhur Computer School in 1983. Started her career at Bank Perniagaan Indonesia (BPI) in 1984. Worked at Bank Umum Nasional (BUN) in 1987 until 1993. Concurrently serves as Audit Committee Member of PT Ciputra Surya Tbk.

RISK MONITORING COMMITTEE

 

The Risk Monitoring Committee was established with the following vision and mission:

 

Vision: Managing risks to maximize the Company’s capability to achieve its business goals which lead to the maximization of corporate value and shareholders’ wealth.

 

Mission: Make manifest the Company’s vision by building a comprehensive risk management system and approach for anticipating, identifying, prioritizing, and managing material risks towards achieving the Company’s objectives.

 

 

The Risk Monitoring Committee is chaired by the Managing Director of Sub Holding Secretariat Committee, namely the Risk Manager.

 

Permanent members of the Risk Monitoring Committee are members of the Sub-holding Board of Directors/Project Directors, while the temporary members of this committee are General Managers of related projects and the Internal Audit.

 

The composition of the Risk Monitoring Committee as at 31 December 2013 was as follows:

1.      

Adi Subrata (50 years old, Financial Controller of Mal Ciputra Jakarta and Semarang, Citradream Budget Hotel) – Risk Management Officer

2.      

Usep Sugandi (49 years old, Chief Accounting Hotel Ciputra Jakarta) – Member

3.      

Sherly Setiany (33 years old, Financial and Accounting Manager of Mal Ciputra Jakarta) – Member

4.      

Veronica Ria Elyawati (43 years old, Head of Human Resources of Mal Ciputra Semarang) – Member

Setyoadhi Pratomo (48 years old, Head of Engineering of Hotel Ciputra Semarang) – Member

 

 

CORPORATE SECRETARY

 

The Corporate Secretary function is to conduct good corporate governance practices especially in relation to the information disclosure by the Company to all relevant stakeholders. The Corporate Secretary is also responsible for ensuring the Company’s compliance with the regulations issued by the OJK, Indonesia Stock Exchange, and other relevant parties, and for liaising the interaction between the Company and the general public.

 

The Corporate Secretary Division at PT Ciputra Property Tbk consists of the Compliance, Investor Relations, and Business Analyst departments. This division is headed by Ir. Artadinata Djangkar.

 

Ir. Artadinata Djangkar’s profile can be found in the “Profiles of the Board of Directors” section in the chapter titled Company Profile.

 

The Corporate Secretary Division conducted the following activities in 2013:

1.      

6 February 2013 – Press conference highlighting the achievements of the Company in 2012.

2.      

28 May 2013 – Post-AGMS press conference, on the resolutions of the AGMS.

3.      

26 June 2013 – Press conference on the opening of Mall & Office Ciputra World 1 Jakarta.

4.      

7 November 2013 – Analyst meeting held at JW Marriott Hotel, Kuningan.

5.      

20 November 2013 – Press conference on the launching of Office Tower 2 Ciputra World 1 Jakarta.

 

The Company provides ample access to information and corporate data as may be required by all relevant stakeholders via the following media:

-         

Website: www.ciputraproperty.com.

-         

Press Releases

-         

Press Conferences

-         

Advertorials

-         

Reports according to the Capital Market regulations

-         

via IDX

 

Investors and the general public may also obtain further information and explanation regarding the Company through e-mail at investor@ciputraproperty.com.

INTERNAL AUDIT

 

The Internal Audit Unit provides confidence through assurance and independent and objective consulting in order to increase the value and improve the Company’s operations, through systematic approach, by evaluating and improving the effectiveness of risk management, control and governance processes.

 

 

 

Duties and Responsibilities of the Internal Audit The following are Internal Audit Unit duties and responsibilities:

-         

Arrange and implement the Annual Internal Audit Plan;

-         

Test and evaluate the implementation of internal control and risk management system in accordance with the Company’s policy;

-         

Conduct inspection and assessment of the efficiency and effectiveness in finance, accounting, operations, human resources, marketing, information technology and other activities;

-         

Provide suggestions for objective improvement and information about activities that were checked on all managerial level;

-         

Compile audit report and submit to President Director and the Board of Commissioners;

-         

Monitor, analyze and report the follow-up on conduct of suggested improvements;

-         

Working closely with Audit Committee;

-         

Develop a program to evaluate quality of internal audit activities;

-         

Perform special inspections when required by the Company or subsidiaries.

 

The Internal Audit Unit ascertains that the risk management, control and management of the Company, which has been designed and implemented by management has been properly functioning, including that:

-         

Risks have been sufficiently identified and managed.

-         

Interactions with manager as it should.

-         

Important financial, managerial and operational information is accurate, reliable, and timely.

-         

Employee conduct has met the policies, standards, procedures, laws and regulations.

-         

Resources are acquired economically, used efficiently, and adequately protected.

-         

Programs, Plans, and Goals of the Company are achieved.

-         

Quality and continuous improvement is maintained in controlling the processes in the Company.

-         

Important rules and legislations affecting the Company are acknowledged and taken care of.

-         

Potential improvements over management control, profitability, and image of the Company can be obtained  during the audit process, and will be communicated to the appropriate management level.

 

The Internal Audit Unit may also serve as a problem-solving partner on the management and operational issues within the Company.

 

In order to carry out its duties, the Internal Audit has the following authority:

-         

To access all relevant information about the Company related to its duties and functions;

-         

To communicate directly with the Board of Directors, the Board of Commissioners, and/or the Audit Committee and member of the Board of Directors, the Board of Commissioners, and/or the Audit Committee;

-         

To hold regular and incidental meetings with the Board of Directors, the Board of Commissioners, and/or the Audit Committee;

-         

To coordinate audit activities with the activities of the external auditors;

-         

To allocate human resources, specify frequency, choose subjects, determine the scope of the task, and apply techniques required to accomplish audit objectives.

 

 

 

 

 

 

Structure and Position of the Internal Audit

The Internal Audit Unit is led by the Internal

Audit Head, who is appointed and dismissed by the President Director upon the approval of the Board of Commissioners. The President Director may dismiss the Internal Audit Head following the approval from the Board of Commissioners, should the Internal Audit Head do not qualify as an internal auditor, as set out in the Internal Audit Charter and or fail or not capable in carrying out his duties.

 

The Internal Audit Head is responsible to President Director. Auditors who serve in the Internal Audit Unit are responsible directly to the Internal Audit

Head. These auditors are not allowed to occupy other positions concurrently relating to the operational activities of the Company and its subsidiaries.

 

As at the end of 2013, the Internal Audit Head position is held by Martin Rahardja, an Indonesian Citizen with 34 years of age. He holds the Bachelor of Economics in Accounting degree from Tarumanagara University, Jakarta. He was appointed as Internal Audit Head on 3 December 2013. Prior to this, he worked as Assistant Manager Internal Audit at the Company.

 

Internal Audit Code of Conduct

Internal auditors are expected to apply and uphold the following principles:

1. Integrity

The integrity of internal auditors establishes trust and thus provides the basis for the belief on internal audit expertise.

2. Objectivity

Internal auditors exhibit the highest level of professional objectivity in gathering, evaluating, and communicating information concerning the activity or process being examined. Internal auditors prepare a balanced assessment of all relevant circumstances and are not unduly influenced by their own interests or by others in forming the judgment skills.

3. Confidentiality

Internal auditors respect the value and ownership of information they receive and do not disclose information without legitimate authority unless there is a lawful obligation or profession to do so.

4. Ability

Internal auditors apply the knowledge, skills, and experience required in conducting their internal audit task/services.

 

 

 

 

 

The code of conduct for the appropriate application of the above principles is as follows:

1. Integrity

-         

Conduct the taks by upholding honesty, diligent and responsible.

-         

Observe the law and give expected disclosures to the law and the profession.

-         

Be aware to avoid becoming part of any illegal activity or engage in actions that could eliminate trust in the profession of internal auditing or the internal audit department.

-         

Respect and contribute to the legal and ethical objectives of the Company.

2. Objectivity

-         

Not take part in any activity or relationship that may damage or any allegedly damage a fair and impartial assesment. This participation includes activities or relationships that may be contradictive to the interests of the Company.

-         

Not accept anything, which can damage or allegedly damage their professional judgment skills.

-         

Disclose all essential facts, which if not disclosed then possibly to change the reporting activities being observed.

3. Confidentiality

-         

Exercise caution in utilizing and protecting information, which obtained during assignment.

-         

Not use the information for any personal interest or in any manner against the law or would adversely affect the Company’s legal and ethical objectives.

4. Ability

-         

Only be involved in services in which they posses the knowledge, skills, and required experience.

-         

Perform internal audit services in accordance with the Standards of Professional Internal Auditing Practices.

-         

Continuously improve its ability and effectiveness as well as service quality.

 

 

 

 

 

 

 

 

 

Accountability and Activities of the Internal Audit in 2013

In 2013, the Internal Audit conducted its duties and exercised its responsibility to the President Director through the following achievements:

-         

Communicate the results of the annual review of adequacy and effectiveness of internal controls and risk management of the business operation conducted by the Company.

-         

Reporting important issues related to internal control of the Company/business unit, and provides corrective recommendation.

-         

Regularly deliver the status and results of Annual Audit Plan and adequacy of resource in the unit.

-         

Coordinate and cooperate with other existing control functions (audit committee, external auditors, and others).

-         

Ensure that the management complies to the policy of reporting of transactions of sales to the PPATK.

 

In 2013, the Internal Audit took up 19 projects, of which 11 were new ones, 1 was completed, and the remaining 7 were ongoing/existing projects.

 

The Internal Audit applies the risk-based audit approach at all times in auditing the Company’s operational activities. In 2014, the 6 projects of the Company that will be audited will be prioritized by the Internal Audit. To ensure the success of the audit process and ensure its audit quality, the Internal Audit has and will allocate the appropriate time and resources, and will foster strong coordination between superiors and subordinates in a consistent and integrated manner.

INTERNAL CONTROL SYSTEM

 

The Company has prepared and applied an Internal Control System in the form of a series of policies and

standard procedures in conducting daily operational as well as information system and reporting to support the management’s decisions. This System is continuously enhanced and is considered effective in controlling and minimizing existing risks.

 

The Internal Audit is charged to ensure that the Internal Control System has been well established and effectively conducted in every line of business, as aligned with the mission stated in Internal Audit Charter, which is to provide objective and independent measurement as well as providing consultative service on the effectiveness and adequacy of controlling, risk management, and corporate governance.

 

In 2013, the Internal Audit has applied the internal control system through the following activities:

-         

Compilation of the Annual Audit Plan both for business units and the head office and completed the entire audit assignments as planned;

-         

The audit scope covers examination and evaluation of internal controll system effectiveness and adequacy;

-         

The measurement on effectiveness and efficiency of finance, accounting, marketing, human resource, operational information technology, and other activities with risk-based audit approach, also detection of the possibility of violation or fraud;

-         

Provision of corrective recommendations on internal control system and discussion with the Board of Directors and related management;

-         

Monitoring of the follow-up on the agreed corrective actions;

-         

Preparation and reporting of the audit results along with the follow-up to the President Director;

-         

Reporting of the progress and results of the audit periodically and follow-up from the Board of Directors and the management to the Audit Committee and the Board of Commissioners

-         

Evaluation of the Internal Audit quality and completion of the audit program, technique, reporting system and improvement of the auditors’ competence.

RISK MANAGEMENT

 

The Company has taken an important step by establishing risk management and by integrating it with the multi-aspect approach known as the Enterprise Risk Management (ERM), which has been implemented since 2009. The risk management progress and results in 2013 were more heartening than in the previous year.

 

The Company’s risk management aims to manage risks that will be or are being faced to the Company. The method is to assess risks, develop strategies to address these risks, and mitigate these risks by employing or managing existing resources. Strategies that can be taken are diverse, namely by transferring the risks to another party, avoiding the risks, reducing the negative effects of risks, and hold some or all of consequences of a particular risk.

 

Traditional risk management focuses on the risks arising from physical or legal cause (such as a natural disaster or fire, death, and lawsuits). Financial risk management, on the other hand, focuses on risks that can be managed by utilizing financial instruments.

 

Risk management duties and functions include:

-         

Monitoring and mapping of risks

-         

Management of risk mitigation

-         

Evaluation of the results of risk mitigation

-         

Analysis of risk management performance

 

 

 

 

 

 

Risk Management Vision and Mission

Vision

Minimize risk by conducting maximum risk mitigation efforts to maintain the Company’s health

 

 

Mission

Manage risks that may occur in the property business.

Provide responsibility lesson for employees toward the business risk.

Increase stakeholders’ confidence toward the Company.

 

The goal of implementing risk management is to reduce different risks related to the selected field of business, at a level that is acceptable for the community. There are different types of threats that are caused by environment, technology, humans, organizations, and politics. On the other hand, implementation of risk management involves all means that are available to mankind, especially for risk management entities (people, staff, and organization).

 

The risks faced by the Company, among others, fluctuations in foreign currency exchange rates, are mitigated using money market instruments such as forward hedging, and others. The capital requirement is mitigated by signing a credit agreement with Bank Mandiri. Increases in the prices of building materials are mitigated by signing agreements with contractors and suppliers to bind the sale price.

 

A number of projects compiled the list of risks and mitigation actions in 2013, which are then filtered based on the priorities upon the approval of the project director. The risk map wil be viewed from the list. The next actions are mitigation and monitoring to reduce the risk level.

 

To minimize business risks, the Company strives to conduct a feasibility study on each project, create a work schedule, and also conduct regular analysis of performance of the project. In addition, to prepare new projects and continue to work closely with experts in respective field to create superior property products.

 

In the event of an incident, it must immediately be reported by the concerned project, whether it is ordinary and critical incident. Each incident shall be reported periodically. Risk maps and monitoring of risk levels continue to be enhanced, and further to be embedded in the corporate culture.

 

 

 

 

 

 

Risk Factors and Mitigation

In various aspects of business, the Company is constantly faced with various forms of risk. To that end, the Company strives to focus and continuously improve its effort and ability to manage risks. Anything that could potentially become a risk is classified and analysed thouroughly through the implementation of ERM, so as to prevent it from developing into a risk that will hinder the performance of the Company. The Company acts prudently and cautiously in managing its business against various risks inherent in the Company’s decisions and activities.

 

The following are the principal risks faced by the Company:

 

Risk of Land Availability

The Company has already set a plan for its business development, including land acquisition in various regions with high growth rates, such as in the central business areas of Jakarta. However, the Company often finds that there is a limitation in land availability. Any failure of its acquisition plans will impact on its strategic plan and may affect the Company’s financial and operational results in the

future.

 

Risk of Legal Certainty

The Company strives to obtain the Building Permits and development rights of the lands it has acquired. This is an absolute requirement from the legal aspect, as stated in the land laws. Failure to do so will potentially result in a dispute concerning the status of the land rights with the previous owners.

 

 

Risk of Property Fluctuation

The Indonesian property industry has cycles and is significantly influenced by changes in general and local economic conditions, such as high unemployment rates, availability of financing, interest rates, consumer confidence and demand for property products, both retail, office, hotel and residential. These conditions create risk. For instance, if the Company’s project is sold when the market is experiencing a downturn, this will affect the development, payment and other resources arranged far in advance. This kind of pressure surely will affect the business, financial condition, and the operational results of the Company.

 

 

 

Financial Risk of Financing

Property development activities require substantial capital investment. The Company may require additional or external financing to meet those needs. However, there is no guarantee of the availability of additional fnancing, both short term and long term. In the case that there is fund available, the terms of funding must be reviewed and ensured that they are  favorable to the Company’s conditions.

 

 

 

Risk of Competition

In recent years, property industry in Indonesia has been dominated by intense competition, not only among local property developers, but also theforeign developers. Increasing competition could result in increased costs for land acquisition, excess supply of land and the slow approval process for new property development from the authorities. These issues could adversely affect the Company’s operations and performance.

 

 

Economic Risks

The property industry faces an economic risk that includes factors, which, acting solely or collectively, may have a negative impact on the property industry. The fluctuation of Rupiah’s exchange rate against the US dollar, interest rates and inflation, do bear a major impact on the financial position of the Company, consumer purchasing power, consumer spending, and demand in the retail market.

 

Other Risks

The Company’s business activities may be affected by economic conditions, socio-political, natural disasters, terrorist attacks, fires, and other risks. To face and mitigate these risks, the Company takes various measurements; including to maintain quality and uniqueness of the property, insuring its main assets, actively seeking land for location of new development, seek funding either through banks or corporate action on the market to meet its potentially large need for capital injection, and a variety of other programs.

 

 

Risk Management Activities in 2013

In 2013 the Company hired an external consultant, APB Group, to help establish the Company’s Strategic Risk Profile. This was done in order to obtain a clearer picture of issues that will hinder the achievement of the Company’s strategic goals, especially in the housing sector, which remains the Company’s most substantially valuable sector.

 

This risk profiling activity employed two approaches, the bottom up and top down approaches, with the methods covering documentation review, interviews, discussions, rich picture diagram analysis, and the Ishikawa diagram.

 

This activity resulted in the categorization of the risks faced by the Company into four groups: operational risks, strategic risks, financial risks, and hazard risks, as well as the method to evaluate these risks and the comparison between the risks faced by the Company with those faced by its competitors in the housing sector.

 

In addition, the APB Group further provided the following recommendations on the Company’s risk management:

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Dissemination of risk management policy manual to the project level is required

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Implementation of risk parameters should be done in a more comprehensive manner

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Assessment on risk management implementation across all entities within the Ciputra Group should be performed

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Revisions to the risk management policy manual should be made in order to make it more aligned with real conditions in the projects of the Ciputra Group.

 

 

COMPLIANCE & WHISTLEBLOWING POLICY

 

 

The implementation of good corporate governance practices in the daily operations of the Company is aimed not only for ensuring its business continuity in the long run, but also for guaranteeing that all its activities are in alignment and within the boundaries set out by the laws and regulations prevailing in the jurisdiction of the Republic of Indonesia.

 

 

Material Litigations Faced by the Company

PT Ciputra Property Tbk and subsidiaries are not currently involved in any case and litigation in Indonesia and abroad, either in the form of a lawsuit or in settlement status with significant impact on our financial condition, revenues, assets and business sustainability of the Company and its Subsidiaries.

 

 

Whistleblowing System

As part of its compliance commitment, the Company has set up and implemented a whistleblowing system that is applicable and binding to all members of the Company, including the employees and its top management.

 

This whistleblowing system for reporting violations at work is implemented by the Company in order to safeguard its reputation and the stakeholders’ confidence in the Company. The complaints and recording procedures, part of this whistleblowing system, are conducted through a two-way communication with the Board of Directors. This is carried out consistently in each unit in the Company. Reports can be delivered both orally or in writing to the Board of Directors, with the procedures as follows:

 

Mechanism for reporting in writing:

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Address an official letter to the Company c.q. the Board of Commissioners, which can be delivered by hand, sent by facsimile, or mailed to the Company’s address, as follows:

PT Ciputra Property Tbk

Jl. Prof. Dr. Satrio Kav. 3-5

Jakarta 12940, Indonesia

Tel: (021) 29888898

Fax: (021) 29888899

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Written reports shall be completed with photocopies of the identity card and supporting documents, such as: documents related to the transactions and/or violations reported.

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Written reports without identification shall be completed with photocopies of the supporting documents, such as: documents related to the transactions and/or violations reported.

 

Stakeholders’ representations:

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When the report is filed by a stakeholder’s representative, in addition to the above documents,

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other documents should be supplied, such as the photocopy of the identity cards of the stakeholder filing the report and the stakeholder’s representative, and a power of attorney from said stakeholder to held by their representative, which states that said stakeholder has given the authority to the said representative to act for and on behalf of the stakeholder.

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If the stakeholder’s representative is an institution or a legal entity, a power of attorney should be attached to vouchsafe the representation of the reporting institution or the legal entity by the appointed party.

 

Receipt of whistleblowing report:

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The Company receives whistleblowing reports from stakeholders and/or their representatives both verbally and in writing.

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The Company provides explanation on the policies and procedures for completion of the whistleblowing report to the stakeholders and/or representatives submitting the report.

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The Company gives a receipt after receiving the submission.

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The recipient party of the whistleblowing report is the Board of Commissioners c.q. the Audit Committee.

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The mechanism for reporting violations is has been circulated to all stakeholders.

CODE OF CONDUCT

 

Code of Conduct is a set of corporate governance practices which explains the value and standards of business practice conducted by the Company and as a reference for every individual within the Company. At the same time, it provides explanation to the shareholders on the management of the Company.

 

Integrity is set as the cornerstone philosophy of the Company’s Code of Conduct. Integrity here means to uphold honesty, ethics, and morals at work, to create favorable work climate and optimize the value for shareholders in accordance with the Company’s vision and mission. These three statements are established as the Company’s corporate culture that will be turned into work ethic and bring about a positive image in the hearts of the individuals and public.

 

Key to successful implementation of this Code of Conduct is the cooperation and participation from all boards and employees. Every board member and employee of the Company has received a copy of the Code of Conduct. All chapters and rules in the Company’s Code of Conduct are applicable to all the individuals without exception. The Company will impose penalty for officials and employees who violate the rules that have been established in accordance with the Company Regulations and pertinent laws.

 

 

EMPLOYEE SHARE OWNERSHIP PROGRAM

 

 

The Company has not implemented any employee share ownership program.

 

EXTERNAL AUDITORS

 

The Annual General Meeting of Shareholders for FY2012 conducted on 28 May 2013 reached a resolution to appoint the Public Accountant Purwantono, Suherman & Surja (Ernst & Young) to audit the Company’s financial statements for the year 2013.

 

Previously, the Public Accountant Purwantono, Sarwoko & Sandjaja (Ernst and Young) audited the Company’s financial statements for the years ended 31 December 2011 and 2012.

 

The fee incurred by the Company and subsidiaries for the abovementioned audit by the public accountant in 2013 was Rp 1.31 billion.

 

Aside from the audit service as mentioned above, the public accountant did not render any other types of service to the Company.

 

The financial statements for the FY2013 of a number of Subsidiaries of the Company were audited by the Public Accountant Teramihardja, Pradhono & Chandra.