Indocement has always placed a strong emphasis on best practice corporate governance that underlines transparency, accountability, responsibility, fairness and independence in the business conduct and operations of the Company.

Indocement engages Good Corporate Governance as a means to foster clear lines of authority and responsibility within an open environment in which integrity is expected to flourish and prevail at all times.

The key points of Indocement’s corporate governance policies and implementation are as follows:

• Clear and segregated roles and responsibilities of members of the Board of Commissioners and Directors.
• Focus on strategic direction and business plan.
• Proper business conduct.
• Transparent and fair dealings with stakeholders.
• Protection of minority shareholders’ rights.
• Emphasis on risk management and risk aversion.
• Enhanced operational oversight and control through the Audit Committee and the Internal Audit Services.
• Effective management information system for informed decisions.
• Timely and accurate disclosure and dissemination of material information to stakeholders, and
• Responsibility to social, environmental and developmental issues.

The Board of Commissioners (BOC) has the duty and responsibility of overseeing and advising the Directors on matters of corporate policies. The BOC continuously monitors the effectiveness of Company policy and decision making process by the Directors, including the execution of strategy to meet stakeholders’ expectations.

The broad duties and responsibilities of the BOC are set out comprehensively in the Company’s Articles of Associations.

The main ones are:

• Provide assessment and opinion to the General Meeting of Shareholders (GMS) with respect to the Company’s strategic goals and business plan, annual budgets,periodical financial and other reports by the Directors.
• Supervise the performance and results of operations of the Company against the business plan and annual budgets, and present its assessments and opinions to the GMS.
• Follow the progress of the Company and, in the case of a deteriorating performance, to report it at the first opportunity to the GMS and propose countermeasures.
• Undertake other supervisory duties as laid out by the GMS.
• Present the BOC’s report in the Annual General Meeting of Shareholders or at any time that is deemed necessary for the Company to undertake an Extraordinary General Meeting of Shareholders.

As of 31 December 2008, the Board of Commissioners comprised of seven Commissioners including the President Commissioner, two Vice President Commissioners, and three Independent Commissioners.

The Board of Directors (BOD) is fully responsible for managing the Company prudently and in accordance with prevailing regulations in the interest and in line with the objectives 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 and avoid situations where conflicts of interests may arise.

The broad duties and responsibilities of the Directors are set forth comprehensively in the Company’s Articles of Association. The main ones are:

• Determine the policies with respect to the governance and management of the Company
• Set Company objectives, strategies and budgetary plans periodically, and measure operating results on performances against those objectives, strategies and plans
• Set Company policies on employment, including policies on hiring and firing, remuneration, pension and other benefits
• Represent the Company in all of BOD activities with internal parties as well as all business dealings with external parties
• Undertake other activities, with respect to either management or ownership of the Company, as directed by meetings of the BOC and in line with prevailing rules and regulations

As of 31 December 2008, the Board of Directors of Indocement consisted of eight members including a President Director and a Vice President Director.

In the course of their duties, the Board of Directors meet internally on a regular basis or as needed from time to time. In 2008, the Board of Commissioners met four times and Board of Directors met three times respectively to evaluate business targets and discuss pertinent issues on the development of the Company.

The following table set forth the number of meetings of the Company’s Board of Commissioners, Board of Directors, Audit Committee and Compensation Committee meetings in 2008, and the level of attendance of each member.

The Company also holds monthly Executive Committee meeting, which are attended by Directors, to discuss the Company’s operational activities.

The Compensation Committee oversees the implementation of the Company’s policies on nomination and compensation plan of board members and senior management personnel.

Among other things, the Committee is responsible for:

• Assuring that members of the BOD and key management personnel of the Company are effectively compensated in terms of salaries and benefits, which are internally equitable and externally competitive.
• Recommending to the BOC of all compensation initiatives that affect the executive and non-executive members of the BOD including the President Director.
• Reviewing with the President Director all compensation for other key management personnel.
• Observing competitive practices and trends to determine the adequacy of the Company’s executive compensation package.
• Reviewing from time to time the adequacy of the Committee’s Charter of Association and recommending appropriate changes thereof.

Based on Circular Resolution of the Board of Commissioners No.: 004/Kpts/Kom/ITP/XII/2008, since 1 December 2008, the member of Compensation Committee is as follows:

One of the three members of the Compensation Committee, I Nyoman Tjager, is an Independent Commissioner. The Committee met once in 2008.

The total salaries and other compensation benefits paid to Board of Commissioners and Board of Directors amounted to IDR39 billion in 2008.

The Audit Committee provides professional and independent opinion to the Board of Commissioners with respect to reports and other matters presented by the Directors. In its formation, the Audit Committee is equipped with the Audit Committee Charter which describes roles and responsibilities of the Committee, as follows:

• Propose the appointment of an external auditor through a selection process.
• Evaluate the execution and results of the audits conducted by the Internal Audit Services as well as external auditors.
• Recommend the enhancement of the internal control system and its implementation.
• Review the procedures for information release from the Company.
• Identify matters requiring the attention of the Commissioners.

The composition of the Audit Committee is as follows:

The Committee met five times in 2008.

All three members of the Committee are independent of the majority shareholder of the Company.

Indocement has appointed the public accounting firm of Purwantono, Sarwoko and Sandjaja (a member firm of Ernst & Young Global) as external auditors of the Company’s financial statements for financial year of 2008. The external auditors perform their duties according to professional standards and ethics.
The above public accountant firm has audited the Company’s book since financial year 2006. The signing partner has signed the Company’s report since 2006.

Indocement fully understands the importance of an effective internal control system. The Internal Audit Division supports the Directors in undertaking the supervisory role of the Company’s operations. In 2008, the Internal Audit Services conducted audits on 23 business processes, resulting in more than 126 audit findings. These findings have been reported to the Board of Commissioners, which selected and forwarded several pertinent findings to the Board of Directors for further action.

The Corporate Secretary reports directly to the President Director. She is responsible for corporate communications concerning the performance of Indocement to shareholders, as well as managing media relations.

The Corporate Secretary is also responsible for corporate compliance, ensuring that the Company is updated and complies with all prevailing rules and regulations.

Indocement adheres to the principles of transparency and fairness in dissemination of material information about the Company to all stakeholders. Periodically, Indocement undertakes a public expose, press conferences, issues press releases, arranges site visits and publicizes the Company’s results of operations in several national dailies. The Company also publishes and submits the annual report and periodical financial statements to the Capital Market authorities.

The Employee Ethics Policy was issued based on Directors’ Decree No. 007/Kpts/Dir-ITP/V/2006 on 30 May 2006, in which the aim of this policy is to help employees understand and respect the ethical undertaking of duties and business conduct of Indocement, in order to uphold and respect the integrity of each individual both as a member of the Company and personally.

The Indocement Employee Ethics Policy represents a set of values, moral conduct and habits based on non discrimination by gender, race, religion, etc, and should be part of every individual and reflected in their attitude and professionalism in order to create added value for the Company and its stakeholders.

Pursuant to the implementation of the Employee Ethics Policy, each employee is required to sign a Statement Letter declaring their willingness to comply with the Employee Ethics Policy to the best of their ability, and a statement that ensures no conflict of interest exists with parties that have business ties with the Company.

In connection with the land litigation case that has been faced by Indocement since February 2004, on 4 February 2008, the Supreme Court voted against the motions of plaintiff based on decision letter No.: 1140K/Pdt/2006. For a more detailed account of this litigation case, see note 26 in the Notes to the Consolidated Financial Statements on page 175 of this annual report.

Indocement has developed a comprehensive risk management framework as an integral part of its business. Evaluative and anticipative measures at the earliest stage of a potential risk are the cornerstones of Indocement’s rigorous risk management process. The major risk categories of importance to Indocement are strategic, operational and finance. The indicators and parameters of all risk elements attributable to the risk categories have been and continue to be systematically identified and analyzed from time to time. The identified risk elements are then closely and constantly monitored at all levels of management. This highly organized and bottom-up approach to risk management provides reasonable assurances towards the business continuity and sustainability of Indocement as a going concern.