GUIDELINES CONFLICT OF INTEREST (COI) A …level under him who is responsible to receive, manage, and make a report related with the implementation of Conflict of Interest (CoI). 10.

GUIDELINES

1

GUIDELINES

CONFLICT OF INTEREST (COI)

A-002/N00300/2009-SO

PERTAMINA

COMPANY SECRETARY

GUIDELINES

2

FUNCTION:COMPLIANCE – COMPANY SECRETARY NUMBER REVISION EFFECTIVE DATE PAGE

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TITLE : CONFLICT OF INTEREST (COI)

CHAPTER I

GENERAL

In the business activities in general, it is inevitable that there is a relationship and

interaction between the parties either externally or externally which is of harmonious,

agreeable, and sustainable cooperation, and it shall adhere to the ethics and

principles of good corporate governance.

With regard to the business relationship, a situation that often occurs in the daily

working activities and is unavoidable, is conflict of interest between parties.

Therefore, to maintain a business relationship with customers, it is necessary to

regulate matters related with conflict of interest and its reporting

procedure/mechanism within Pertamina. It is important to make this a culture within

Pertamina, as a learning process for Pertamina employees to create Pertamina

employees who are respected, dignified, and highly reputable in the business

relationship with its customers.

A. PURPOSE

The Purpose of drafting this guidelines is to provide direction and reference

to all Pertamina employees relating with Conflict of Interest (CoI) within

Pertamina, in order to align with the principle of Good Corporate Governance

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(GCG), so as to encourage the practise of high business ethics, prevent fraud

and violation of code of conduct.

B. SCOPE

The scope of this guidelines is to govern matters related with ethics in Conflict

of Interest (CoI) and its reporting mechanism within Pertamina.

C. DEFINITION

1. Pertamina Employee means Board of Commissioners, Board of

Directors, Workers who work for and on behalf of Pertamina, and

personnel working within Pertamina including their family members

(core family consists of father, mother, and child(ren)).

2. Conflict of Interest means a situation where Pertamina Employee

who has power and authority, is having or allegedly having personal

interest in exercising his/her authority so as it may influence the quality

and performance he/she should deliver.

3. Gifts/Souvenirs means an object from receiving, giving, and request

in a broad sense, which includes receiving/giving/request of

money/equivalent to money, goods, rebate (discount), commission,

loan without interest, ticket for a trip, accommodation facility, tour and

travel, free medication, and other facilities. Such gifts/souvenirs are

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either received domestically or overseas and conducted electronically

or non-electronically.

4. Entertainment means anything either in the form of words, place,

goods, behavior that could be entertaining and pleasing. Generally,

entertainment could be in the form of an invitation for meal, music,

film, opera, drama, or in the form of games and even sport and tour.

5. Opinion of INDEPENDENT PARTY means an opinion from the party

outside the organization of the company designated by the company to

give an independent evaluation or legal opinion on a transaction plan,

for which an approval will be requested from the Shareholders at the

Extraordinary General Meeting of Shareholders (EGMS).

6. General Meeting of Shareholders (GMS) means a company organ

having an authority which is not given to the Board of Directors or

Board of Commissioners within the limit set forth in this law and/or

articles of association.

7. Reporting party means Pertamina employee either in the capacity of

Board of Commissioners, Board of Directors and worker who works for

and on behalf of Pertamina and personnel who works within Pertamina.

8. Direct Supervisor means the direct leader of a Pertamina Employee

who is at the minimum of Manager level at the Head Office, Division

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Head (or equivalent) of level III in an Operational Unit up to the Board

of Commissioners, President Director.

9, Local Chief Executive means President Commissioner and President

Director at the Head Office and General Manager at the Operational

Unit/Business Unit. The Chief Executive shall appoint an official one

level under him who is responsible to receive, manage, and make a

report related with the implementation of Conflict of Interest (CoI).

10. Chief Compliance Officer (CCO) means the official appointed by the

President Director who is responsible for the company’s compliance

program and makes sure that the Board of Commissioners, Board of

Directors, Management, and workers comply with the government,

company regulations and provisions and other applicable regulations

as well as organizational behavior according to the Business Ethics

Guideline and Code of Conduct of the company.

11. Good Corporate Governance (GCG) means the principle which

directs and controls the company in order to achieve a balance

between company power and authority in giving its accountability to the

shareholders in particular and stakeholders in general. Certainly, this

is meant a regulation of authority of Directors, Managers,

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Shareholders, and other parties who are involved in company

development within a particulary environment.

12. Pertamina’s Code of Conduct (CoC) means the guidelines

explaining the business ethics and Code of Conduct of Pertamina

Employees to implement the practice of good company governance.

13. Pertamina’s Code of Corporate Governance (CoCG) means the

guidelines explaining the structure and process used by the company

organ to improve business success and accountability in order to

create the value of shareholders for a long term by continuing to give

due regard to the interests of the other stakeholders.

14. Compliance Function means an organ under the Company Secretary

having the duty to implement development, enhancement, application

and enforcement of practices of Good Corporate Governance (GCG).

D. REFERENCE

1. Law No. 31 of 1999 and has been renewed by the Law No. 20 of 2001

on Corruption Eradication.

2. Law No. 19 of 2003 on State-owned Enterprises.

3. Law No. 40 of 2007 on Limited Liability Company.

4. Guidelines for Handling Conflict of Interest for State Administrators,

Corruption Eradication Commission of the Republic of Indonesia.

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5. Decree of the Minister of State-owned Enterprises (BUMN) No.KEP-

1117/M.MBI/2002 on the Implementation of the Practice of Good

Corporate Governance (Code of Corporate Governance (CoCG) of

Pertamina.

6. Code of Corporate Governance (CoCG) of Pertamina.

7. Guidelines for Business Ethics & Code of Conduct of Pertamina.

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CHAPTER II

CONFLICT OF INTEREST

A. BASIC PRINCIPLE

1. Personal, Family and or Group Conflict of Interest

Any Pertamina Employee beyond its family members (core family) who

due to their positions, finds a potential or condition/situation of Conflict

of Interest shall be PROHIBITED to continue the activities/perform

obligations of its position.

In the event of a potential or condition/situation of conflict of

interest, the Pertamina Employee shall be :

1) Prohibited to make a transaction and/or use the assets of the

company for personal, family or group interest;

2) Prohibited to receive and/or give a gift/benefit in any kind

of form related with its position in the company, from any

working partner, provider of goods and services as well as

competitor company, partner/working partner;

3) Prohibited to receive and/or give goods/parcel/money/

equivalent to money in any kind of form on a religious holiday;

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4) Prohibited to allow a working partner or third party to give

anything in any kind of form to a group of Pertamina employees

and/or beyond Pertamina employees.

5) Prohibited to receive refund and other personal benefits that

exceeds and or which is not their rights from a hotel or any party

while performing their duties or other matters that could create

potential conflict of interest;

6) Prohibited to be discriminative, unfair in order to make a certain

provider of goods/services, partner/working partner to win with

the intention to receive a fee for personal, family and or group

interest;

7) Prohibited to make use of confidential information and

company business data other than for company’s interest.

8) Prohibited to be involved directly or indirectly in the

management of competitor company and/or partner company or

other candidate partner.

9) Prohibited either directly or indirectly to intentionally participate

in contracting, procurement, or leasing, which at the time it is

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carried out, he/she is assigned, either wholly or partly, to

manage or supervise the work.

10) Make a statement on the Potential Conflict of Interest if having

family or blood relationship in the core family with the members

of Board of Directors and/or members of Board of

Commissioners.

In the event that a Pertamina Employee finds a condition of Conflict of Interest which

is not in accordance with the rules provided for in this guidelines, he/she shall, in

such a situation, MAKE A STATEMENT ON THE POTENTIAL CONFLICT OF

INTEREST, by giving an explanation about this policy and regulation to the direct

Supervisor or the local Chief Executive and third party and if necessary he/she may

pass on this regulation to a third party as part of the dissemination of this regulation.

2. Prioritizing Public Interest

1) Each Pertamina Employee shall observe the general principles of good

company governance in providing service to the communities.

2) In making a decision, each Pertamina Employee shall observe the

prevailing laws and regulations and policies without thinking of

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personal profit or affiliation with religion, occupation, parties or politics,

ethnicity and family.

3) Each Pertamina Employee shall not include the element of personal

interest in making a decision and taking action that may influence the

quality of its decision. If there is a conflict of interest, the Pertamina

Employee may not participate in making official decisions that may be

influenced by its personal interest and affiliation;

4) Each Pertamina Employee should prevent oneself from taking a

personal action which is benefited by ‘insider information’ or

information from insider due to its position, while this information is not

available for public;

5) Each Pertamina employee may not seek or receive profit illegally so

that it affects the performance of his/her duties. Each Pertamina

employee shall also not take any profit illegally from the position that

he/she has held, including obtaining certain information from that

position when the official concerned no longer holds that position.

3. Create Transparency in Handling and Supervising Conflict of Interest.

1) Each Pertamina Employee should be transparent over the job

performed. This obligation is not merely limited to comply with the laws

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and regulations but also adhere to the value of dis-interestedness,

impartiality, and integrity;

2) Personal interest and affiliation relationship of each Pertamina

Employee that may impede the performance of public duties should be

disclosed and declared in order that it can be controlled and handled

sufficiently;

3) Each Pertamina Employee shall report and follow up the complaint

from public regarding the occurrence of conflict of interest according to

the company regulations ;

4) Each Pertamina Employee should assure the consistency and

transparency in the settlement or handling process of conflict of interest

according to the existing legal framework;

4. Encourage Personal Accountability and Exemplary Attitude

1) Each Pertamina Employee shall maintain the integrity in order to be an

example for other Pertamina employees and the public ;

2) Each Pertamina Employee should be able to separate between

personal affairs and affairs of any Pertamina Employee in order to

prevent conflict of interest which would harm the company’s interest

should a conflict of interest occurs;

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3) Each Pertamina Employee should be responsible for settling any

conflict of interest that occurs.

4) Each Pertamina Employee should show a commitment and

professionalism in implementing the policy for handling conflict of

interest.

5. Create and Develop an Organizational Culture which is not Tolerating

Conflict of Interest.

1) Formulate and implement management policy and practise that

encourage an effective supervision and handling of conflict of interest;

2) Create a climate that encourages each Pertamina Employee to

disclose and discuss conflict of interest that occurs ;

3) Create a culture of open communication and encourage a continuous

dialogue regarding integrity.

4) Implement continuous giving direction and training to improve

understanding about the rules and code of ethics.

6. Conflict of Interest of the Company

Some types of conflict of interest which often occur and are faced by

Pertamina Employees among other things are :

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1) A situation that has caused an individual to receive gratification or

receive /give a gift over a decision/position;

2) A situation that has caused the use of assets of a position for

personal/group interest;

3) A situation that has caused confidential information of a

position/company to be used for personal/group interest;

4) Have several positions in a number of companies that have

direct/indirect relationship, either similar or different, as such it has

taken an advantage of a position for the interest of another position.

5) A situation where Pertamina Employee provides a special access to a

certain party for example in the recruitment of employees withut

following the proper procedure;

6) A situation that has caused a supervisory process not following the

procedure due to the influence or expectation from the supervised

party;

7) A situation where the authority for an assessment of a qualification

object where the object is the result of the assessor

8) A situation where there is an opportunity for abuse of position;

9) Post employment (in the form of trading influence, profession’s secret);

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10) A situation where a Pertamina Employee determines for self the

amount of salary/remuneration;

11) Moonlighting or outside employment (working outside his/her main job);

12) A situation to allow the use of discretion which is abusing the power.

Sources of reasons of conflict of interest among other things are :

1) Power and authority of Pertamina Employee;

2) Having a number of positions, namely the Pertamina Employee has two or

three positions so that he/she cannot perform his/her function professionally,

independently, and with accountability;

3) Affiliation relationship, namely the relationship that a Pertamina Employee has

with a certain party either by blood, by marriage, or friendship that may

influence his/her decision;

4) Gratification is giving in the broad sense that includes giving money, goods,

rebate, commission, loan without interest, ticket for a trip, accommodation

facility, tour and travel, free medication, and other facilities;

5) Weakness of an organizational system is a condition where there is a

constraint in achieving the objectives in exercising the authority of Pertamina

Employee due to the existing company rules, structure and culture.

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6) Vested interest is the desire/need of Pertamina Employee regarding

something personal.

In order to prevent potential Conflict of Interest in the company including that of

subsidiary companies and its affiliated companies in performing operational

activities, related with transaction plan, the company should :

1) Appoint independent parties to make an independent assessment on the

transaction plan for which an approval is requested from the Company

Shareholders during Extraordinary General Meeting of Shareholders (EGMS).

What is meant by opinion is the Opinion of an Independent Valuer on qualified

and fair opinon of the value of transaction plan for shareholders ;

2) Opinion of an Independent Legal Consultant that provides legal opinion on

the transaction of services as described pursuant to the applicable laws and

regulations in Indonesia.

In its Implementation, every Pertamina Employee shall be :

1) Prohibited to make a transaction and/or use company assets for personal,

family or group interest;

2) Prohibited to give a gift and/or entertainment in any kind of form which is

related with the company to civil servant, department, government/state

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apparatus, fellow working partner, provider of goods and services and

competitor company, partner/working partner with the intention to bribe and or

to give preference which should not have been received by the company

including giving goods/parcel/money/equivalent to money or in any kind of

form on religous holidays;

3) Prohibited to receive a gift and/or entertainment in any kind of form

which is related with the company from civil servant, department,

government/state apparatus, fellow working partner, provider of goods and

services and competitor company, partner/working partner with the intention

to bribe and or to give preference which should not have been received by the

person concerned including receiving goods/parcel/money/equivalent to

money or in any kind of form on religous holidays;

4) Prohibited to allow a working partner or third party to give something in any

kind of form to civil servant, department, government/state apparatus, fellow

working partner, provider of goods and services and competitor company,

partner/working partner with the intention that the company will get preference

which should not have been received by the company excessively.

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5) Prohibited to act discriminatively, unfairly to make certain provider of

goods/services, partner/working partner win, with the intention to receive a

fee for personal, family, or group interest;

6) Prohibited to use confidential information and business data of other

companies, third parties, or competitor companies for the interest of the

company, which is not according to the applicable regulation.

B. STAGES IN HANDLING CONFLICT OF INTEREST

1. In the formulation of policy framework in handling conflict of interest,

there are a number of main aspects which are inter-related and need to

be observed, namely :

1) Definition of conflict of interest which potentially jeopardizes the

integrity of the company and individual ;

2) Commitment of the management in applying the policy of

conflict of interest.

3) Proper understanding and awareness regarding conflict of

interest to support compliance in handling conflict of interest;

4) Adequate transparency of information related with handling

conflict of interest;

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5) Involvement of stakeholders in handling conflict of interest;

6) Monitoring and evaluation on the policy for handling conflict of

interest ;

7) Development and adjustment of policy and procedure for

handling conflict of interest based on the result of the above

monitoring and evaluation.

2. Identification of a Situation of Conflict of Interest

At this stage identification will be made on the situation which is

included under the category of conflict of interest. In this case, a clear

desription is required regarding the situation and affilliation relationsip

which has caused a conflict of interest according to the main duties and

functions of the relevant respective functions. Identification regarding a

situation of conflict of interest should be consistent with the basic idea

that there are numerous situations where personal interests and

affilliation relationship of each Pertamina employee may cause a

conflict of interest.

3. Formulation of Strategy for Handling Conflict of Interest

A policy on conflict of interest needs to be supported by an effective

strategy in the form of :

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1) Formulation of code of ethics ;

2) Training, direction, and counselling which provide practical

examples and steps to overcome situations of conflict of

interest;

3) Support of Compliance Function is in the form of :

a. Administrative support that guarantees the effectiveness

of the reporting process so that information can be

assessed properly and may continuously be updated;

b. Reporting and recording of personal interest is made in

the official documents in order that the concerned

Function could show how to identify and handle conflict of

interest;

4) Declaration of conflict of interest by the following methods :

a. Initial reporting or declaration (disclosure) regarding the

existence of conflict of interest which may be in conflict

with the performance of duties related with the position at

the time an individual is appointed as a Pertamina

Employee;

b. Further reporting or declaration if there is a change of

condition after the initial reporting and declaration ;

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c. Reporting includes detailed information to be able to

determine the level of conflict of interest and how to

handle it.

4. Preparation of a series of Actions to Handle Conflict of Interest

In order to handle conflict of interest, it is necessary to have a clear series of

actions when a Pertamina Employee is under a situation of conflict of interest.

Preparation for such actions is required as a further step after Pertamina

employee reports a situation of conflict of interest faced by him/her, as the

existence of the report does not guarantee that the Pertamina Employee has

overcome the situation of conflict of interest. Additionally, the preparation of

this action is also necessary when a conflict of interest has occurred despite

there is no report from the person concerned.

A series of actions that may be prepared as a further step in handling conflict

of interest which may be used as guidelines are :

1) Reducing conflict of interest of Pertamina Employee in his/her position;

2) Withdrawing oneself from the process of decision making where

Pertamina Employee has interests;

3) Limiting the access of Pertamina Employee on certain information if the

person concerned has interests;

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4) Transfer of Pertamina Employee to another position which does not

have conflict of interest;

5) Assigning to another employee, the duties and responsibilities of the

concerned Pertamina Employee;

6) Resignation of the Pertamina Employee from the position that has

caused conflict of interest;

7) Intensifying supervision towards the Pertamina Employee;

8) Giving a strict sanction to those violating it.

C. THE FACTORS SUPPORTING THE SUCCESS IN HANDLING CONFLICT

OF INTEREST.

1. Commitment and Exemplary Management

Management shall use its authority properly and correctly by

considering the interests of the company, communities, Pertamina

Employee, and various other factors.

2. Participation and Involvement of Pertamina Employee

Implementation of policy in preventing conflict of interest requires the

involvement of Pertamina Employee. The Pertamina Employees

should be aware of and understand about the issues of conflict of

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interest and should be able to anticipate and at the same time prevent

the occurrence of conflict of interest.

To encourage the participation and involvement of Pertamina

Employee, the followings may be carried out :

1) Publish the policy of conflict of interest;

2) Periodically remind Pertamina Employee regarding the policy of

conflict of interest;

3) Guarantee that the rules and procedures are easily accessible and

understood ;

4) Giving direction regarding how to handle conflict of interest;

5) Giving consultation assistance and advice to those who have not

understood the policy on handling conflict of interest, including external

parties who are related or dealing with the concerned institution.

3. Special Attention on Specific Matters

Special attention needs to be given to some specific matters deemed to be

high risk that have caused a situation of conflict of interest. The matters

that need to have special attention among others are :

1) Having a number of positions

2) Affiliation relationship

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3) Gratification

4) Additional job

5) Insider information

6) Involvement of procurement of goods and services

7) Demand of family and communities

8) Position in other organizations

9) Activity after tenure has been completed.

4. Preventive Measures

A number of preventive measures may be carried out to avoid a situation of

conflict of interest. As an example, the preventive measures related with

Pertamina Employee in a decision making are as follows :

1) The agenda of the meeting to be convened needs to be given to

the Pertamina Employee prior to the meeting in order that he/she

could identify and handle the situation of conflict of interest at the initial

stage;

2) Rules of order of the meeting with the procedure for withdrawing from

making a decision in the meeting should be available where the

Pertamina Employee is under a situation of conflict of interest.

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Such preventive measures will grow in a transparent culture of Pertamina,

where it is possible to discuss issues of conflict of interest freely among the

workers, representative of the workers and other parties that have concerns

over the issues of conflict of interest.

5. Enforcement of Policy on Conflict of Interest

Enforcement of Policy on Conflict of Interest is not easy. In order that the

policy is carried out effectively, it is necessary to have :

1) Sufficient sanction ;

2) Mechanism for identification to detect any breach of policy ;

3) Instrument for handling of conflict of interest is periodically updated ;

6. Monitoring and Evaluation

Policy on conflict of interest also needs to be monitored and evaluated

periodically in order it remains effective and relevant with the ever-changing

environment . If necessary, the policy is changed or aligned/adjusted with the

need then.

D. LIMITATION FOR PREVENTING CONFLICT OF INTEREST

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1. Pertamina Employee who receives a gift or promise, yet it is

known or reasonably alleged that the present or promise has been

given in order to do or not to do something in his/her position,

which is contrary to the his/her obligations;

2. Pertamina Employee who receives a gift, yet it is known or

reasonably alleged that the present is given as a result of or due to the

fact that he/she has carried out or not carried out something in his/her

position which is contrary to his/her obligations;

3. Pertamina Employee who with the intention of benefiting

himself/herself or other person, by violating the law, or by abusing his

power, forces someone to give something, pays, or receives payment

with reduction, or to do something for himself/herself.

Concerning the Conflict of Interest, every Pertamina Employee should :

1. Professionally avoid conflict of interest in any kind of form and personally

always give priority to the company’s interest over personal interest or that

of others ;

2. Must withdraw himself/herself from the decision making process if he or she is

under a position of conflict of interest ;

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3. Not make a transaction and/or use the asset of the company for personal,

family or group interest;

4. Not receive and/or give gift/benefit in any kind of form which is related to

his/her position in the company;

5. Not make use company confidential information and business data for

interest outside the company.

6. Not take advantage and use company’s copyright or trademark which may

harm the interest or impede the development of the company.

7. Not make an investment or business association with another party which

has business relationship with the company either directly or indirectly;

8. Not hold any position in another company/institution intending to and/or

having business relationship with the company as well as those intending to

be and/or in a competition with the company;

9. Not make use the position to give special treatment to the family, relatives,

group and/or other party at company’s expenses;

10. Do not give special treatment to the customer, supplier, business partner,

government, and/or other party other than those set forth in the policy of the

company;

11. Disclose and/or report any interests and/or activities outside the company

namely to the direct supervisor for the company workers, to the shareholders

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for the Board of Commissioners and to the Shareholders and Board of

Commissioners for the Board of Directors.

E. IMPLEMENTATION

To ensure that all workers of Pertamina and all third parties dealing with

Pertamina are aware of this guidelines, all relevant parties within Pertamina

are expected to :

1. Stipulating the provision regarding prohibition of Conflict of Interest in

every announcement in the process of procurement of goods/services

in the company;

2. Assigning Compliance Function and Public Relations Function in

Pertamina Operational Unit to continuously give information to all

workers as well as third/external parties regarding the existence of this

guidelines;

3. Assigning Procurement Function, Sales Function and other functions

within Pertamina that has working relationship with third parties to

inform or convey this Guidelines of Conflict of Interest to all relevant

parties in the supply chain within Pertamina (Providers of

Goods/Services, Agents, Distributors, Consultants, Auditors/Assessors

and Clients as well as other Stakeholders);

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4. Giving clear information to any party relating to the rules in this

guidelines;

5. Chief Compliance Officer monitors the implementation of this

guidelines and provides report periodically (once every 6 months) to

the President Director regarding its implementation including the

reports to be submitted in complying with this rule.

F. REPORTING PROCESS

Pertamina Employee or third party who are aware of the breach against the

rules in this guidelines, is requested to immediately report such a breach

according to the provisions applicable in the company or report through

Whistle Blowing System (WBS) System. The Company guarantees that the

reporting process made by Pertamina Employee or third party will be kept

confidential.

G. SANCTION ON VIOLATION

Violation against the provisions in this Guidelines for Conflict of Interest will

be imposed a sanction applicable in the company which will be under the

category of gross violation.

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Prepared by : Approved by :

Compliance Manager,

(signature)

Mardiani

Company Secretary,

(signature)

Toharso

Date : Date : 13-11-2009

GUIDELINES

31

I, SUSAN KUMAAT, MBA, a Certified and Sworn Translator by virtue of Jakarta Governor’s

Decree No. 1607/2008, dated 11 November 2004, do hereby certify that the foregoing is a

true and complete translation to the best of my knowledge and belief from Indonesian into

English.

I, H. Arfan Achyar, B.Eng, a Certified Translator by virtue of Himpunan Penerjemah

Indonesia’s Decree No. TSN/2013/1/02U/001, dated 23 February 2014, acting as the editor

for this document, do hereby certify that the foregoing is a true and complete translation to

the best of my knowledge and belief from Indonesian into English.

GUIDELINES CONFLICT OF INTEREST (COI) A …level under him who is responsible to receive, manage, and make a report related with the implementation of Conflict of Interest (CoI). 10.

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