MATERIAL INFORMATION CONTAINING CONFLICTS OF …PT Kawasan Berikat Nusantara Ownership is Equally Bound Construction service PT Pelabuhan Indonesia I (Persero) Ownership is Equally

212 2018 Annual Report PT WIJAYA KARYA (Persero) Tbk.

QUANTUM TRANSFORMATIONFOR THE BEST OF THE NATION

PERFORMANCEHIGHLIGHTS

MANAGEMENTREPORT

MATERIAL INFORMATION CONTAINING CONFLICTS OF INTEREST AND/OR TRANSACTIONS WITH RELATED PARTIESREVIEW MECHANISM POLICY FOR TRANSACTIONS AND FULFILLMENT OF RELATED TERMS AND CONDITIONS The Company has a policy on transactions containing conflicts of interest and/or transactions with related parties. Material transactions are decided by the Board of Commissioners and are always carried out with due observance of the precautionary principle, and are in compliance with prevailing laws and regulations. In addition, material transactions must also be decided by the Board of Commissioners independently. During 2018 there were no violations of legislation related to transactions with related parties and there were no conflict of interest transactions.

FAIRNESS AND REASONS WHEN CONDUCTING TRANSACTIONS

All transactions carried out in 2018 were carried out fairly (Arm’s Length) and conformed to normal commercial requirements. The fairness of transactions with related parties, or containing conflicts of interest, has been done fairly according to the laws and regulations. The transactions were conducted on the basis of the needs of the Company and were free from any conflict of interest.

In relation to transactions with related parties, the Company and its Subsidiaries enter into transactions with related parties as defined in PSAK No. 7 “Related Party Disclosures” and Bapepam and LK Regulations No. KEP-347/BL/2012 dated June 25, 2012 regarding “Presentation and Disclosure of Financial Statements of Issuers or Public Companies”, and are defined as follows:

Related parties are persons or entities related to the Group (reporting entity)

a. A person or immediate family member has a relationship with the reporting entity if the person: i. Has control or joint control of the reporting

entity;

ii. Has significant influence over the reporting entity; or

iii. Is a key management personnel of the reporting entity or the parent of the reporting entity.

b. An entity is related to the reporting entity if it meets one of the following: i. The entity and the reporting entity are

members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

ii. One entity is an associate or joint venture of the another entity (or an associate or joint venture of a member of a business group, of which the other entity is a member);

iii. Both entities are joint ventures of the same third party;

iv. An entity is a joint venture of a third entity and the other entity is an associate of the third entity;

v. The entity is a post-employment benefit plan for the benefit of workers of one of the reporting entities or entities associated with the reporting entity. If the reporting entity is the entity that organizes the program, then the sponsoring employers are also related to the reporting entity;

vi. The entity is controlled or jointly controlled by persons identified in letters (a);

vii. Persons identified in (a) (i) has significant influence over the entity or key management personnel of the entity (or the parent of the entity); and

viii. An entity, or member of a group in which the entity is a part of that group, provides the services of key management personnel to the reporting entity or to the parent of the reporting entity.

Significant transactions with related parties, whether conducted under the same terms and conditions as those with third parties or not, are disclosed in the consolidated financial statements.

213PT WIJAYA KARYA (Persero) Tbk. Annual Report 2018

COMPANYPROFILE

MANAGEMENT DISCUSSION AND ANALYSIS

GOOD CORPORATEGOVERNANCE

CORPORATE SOCIALRESPONSIBILITY

NAME AND NATURE OF RELATIONSHIPS WITH RELATED PARTIES

Related parties are companies and individuals who have direct or indirect ownership or management relationships with the Company. The table below shows details of related parties with the Company and the nature of the transaction.

RELATIONSHIPS NAME

The summary of related parties with the Company is as follows.

Table of Related Parties

RELATED PARTIES NATURE OF RELATIONSHIP TRANSACTION TYPE

Bank Indonesia Ownership is Equally Bound Construction service

PT Bank Mandiri (Persero) Tbk. Ownership is Equally Bound Checking Account, Fund Loan

PT Bank Negara Indonesia (Persero) Tbk. Ownership is Equally Bound Checking Account, Fund Loan

PT Bank Rakyat Indonesia (Persero) Tbk. Ownership is Equally Bound Checking Account, Fund Loan

PT Bank Syariah Mandiri Ownership is Equally Bound Checking Account, Fund Loan

PT Bank Tabungan Negara (Persero) Tbk. Ownership is Equally Bound Checking Account, Fund Loan

PT Bank BRI Syariah Ownership is Equally Bound Checking Account

PT Bank BNI Syariah Ownership is Equally Bound Checking Account

PT Hutama Karya (Persero) Ownership is Equally Bound Construction service

PT Jasamarga Surabaya Mojokerto Ownership is Equally Bound Construction service

PT Antam (Persero) Tbk. Ownership is Equally Bound Construction service

PT Angkasa Pura Property Ownership is Equally Bound Construction service

PT PLN (Persero) Ownership is Equally Bound Construction service

PT PP (Persero) Tbk. Ownership is Equally Bound Construction service

PT Jasa Marga (Persero) Tbk. Ownership is Equally Bound Construction service

PT Waskita Karya (Persero) Tbk. Ownership is Equally Bound Construction service

PT Pelabuhan Indonesia IV (Persero) Ownership is Equally Bound Construction service

PT Pelabuhan Indonesia III (Persero) Ownership is Equally Bound Construction service




MANAGEMENTREPORT


PT Istaka Karya (Persero) Ownership is Equally Bound Construction service

BPJS Kesehatan Ownership is Equally Bound Construction service

PT Hutama Karya Infrastruktur Ownership is Equally Bound Construction service

PT Bukit Asam (Persero) Tbk. Ownership is Equally Bound Construction service

PT Adhi Karya (Persero) Tbk. Ownership is Equally Bound Construction service

PT Waskita Beton Precast Tbk. Ownership is Equally Bound Construction service

PT Boma Bisma Indra (Persero) Ownership is Equally Bound Construction service

PT Yodya Karya (Persero) Ownership is Equally Bound Construction service

PT Jasamarga Balikpapan Samarinda Ownership is Equally Bound Construction service

PT Indah Karya (Persero) Ownership is Equally Bound Construction service

PT Citra Marga Lintas Jabar Ownership is Equally Bound Construction service

PT Marga Sarana Jabar Ownership is Equally Bound Construction service

PT Kereta Cepat Indonesia China Ownership is Equally Bound Construction service

PT Angkasa Pura II (Persero) Ownership is Equally Bound Construction service

PT Kawasan Berikat Nusantara Ownership is Equally Bound Construction service

PT Pelabuhan Indonesia I (Persero) Ownership is Equally Bound Construction service

PT Sarana Multi Infrastruktur (Persero) Ownership is Equally Bound Construction service

PT Pindad (Persero) Ownership is Equally Bound Construction service

PT Semen Tonasa Indonesia (Persero) Ownership is Equally Bound Construction service

PT Pengembangan Pariwisata Indonesia (Persero) Ownership is Equally Bound Construction service

PT Bhanda Ghara Reksa (Persero) Ownership is Equally Bound Construction service

PT Pertamina (Persero) Ownership is Equally Bound Construction service

PLTD Ambon (Sewa Mesin) Ownership is Equally Bound Construction service

Koperasi Jasa Marga Indonesia Ownership is Equally Bound Construction service

PT Industri Nabati Lestari Ownership is Equally Bound Construction service


COMPANYPROFILE




NATURE OF RELATED PARTIES

The nature of the relationship with related parties is as follows: 1. The Government of the Republic of Indonesia through the Ministry of Finance is the main shareholder of the

Company. 2. All entities owned and controlled by the Ministry of Finance of the Government of the Republic of Indonesia

and entities in which the Ministry of Finance of the Government of the Republic of Indonesia has a significant influence: State-Owned Enterprises (SOEs).

3. Related parties whose principal shareholders are the same as the Group. 4. The Entity which is an associate company of the Group.5. The Entity which is a joint venture of the Group.6. Key management that includes members of the Board of Commissioners and Board of Directors of the

Company. 7. Wijaya Karya Pension Fund is an entity established by the Company to manage the Company ’s defined benefit

and contribution plans.

REALIZATION OF RELATED PARTY TRANSACTIONS

The transaction value along with its percentage of the total related revenues and expenses; and the amount of the balance and the percentage of the total assets or related liabilities has been disclosed in the Company ’s Audited Financial Report on page 158-163.


PT Jasamarga Kunciran Cengkareng Ownership is Equally Bound Construction service

Perusahaan Umum Percetakan Uang Republik Indonesia Ownership is Equally Bound Construction service

PT Nindya Karya (Persero) Ownership is Equally Bound Construction service

PT Indonesia Power Ownership is Equally Bound Construction service

PT Semen Padang Ownership is Equally Bound Construction service

PT Pilar Sinergi BUMN Indonesia Ownership is Equally Bound Construction service

PT Jakarta River City Ownership is Equally Bound Construction service

PT Makassar Coastal City Ownership is Equally Bound Construction service

PT Wijaya Karunia Realtindo Ownership is Equally Bound Construction service

PT Kereta Api Indonesia (Persero) Ownership is Equally Bound Construction service

Koperasi Karyawan WIKA Ownership is Equally Bound Construction service

Koperasi Karyawan Beton Makmur Ownership is Equally Bound Construction service




MANAGEMENTREPORT

CHANGES IN REGULATIONS AND THEIR IMPACT

The changes in regulations affecting the Company and the impact and response by the Company to the changes during 2018 were as follows.

REGULATION PRINCIPAL SUBJECT IMPACT ON THE COMPANY

Minister of SOE Regulation PER-02/MBU/7/2017 dated July 5, 2017 concerning Second Amendment to Minister of SOE Regulation PER-09/MBU/07/2015 concerning BUMN Partnership Program and Community Development Program (“Minister of SOE Regulation 02/2017”)

• To accelerate and empower micro and small economies, SOEs that implement the Partnership Program and/or Community Development Program can provide interest-free loans or grant funds from the Partnership Program to BUMNs in financial services specifically established (Special SOEs) to make capital loans and/or fostering micro and small businesses.

• In implementing the Permen, the GMS has authorized the Board of Commissioners by first obtaining written approval from the Series A Dwiwarna Shareholder.

In implementing the Partnership Program and/or Community Development Program in 2019 the Company will allocate the Partnership Program funds that will be donated to Special SOEs to make capital loans and/or coaching to micro and small businesses. In its implementation, the Company will register as a fee on the Company’s PKBL financial statements.


COMPANYPROFILE




CHANGES IN ACCOUNTING POLICIES

ADOPTION OF NEW AND REVISED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (“PSAK”) AND INTERPRETATION OF PSAK (“ISAK”)

Reasons for Implementation Changes in accounting policies and disclosures are made to comply with the applicable PSAK. In the current year, the Company has applied a number of amendments and interpretations of PSAK that are relevant to its operations and effective for the accounting period beginning on or after January 1, 2018.

Changes in New Financial Accounting Standards and Revisions (PSAK) and Interpretation of Financial Accounting Standards (ISAK) Amendments and adjustments to standards, as well as Interpretations of prevailing standards that are effective for periods which begins on or after January 1, 2019, with early application permitted, namely:

1. PSAK 22 (2018 Adjustment): “Business Combination”2. PSAK 24 (Amendment 2018): “Employee Benefits regarding Amendments, Kurtailmen or Settlement Programs”3. PSAK 26 (2018 Adjustment): “Loan Costs”4. PSAK 46 (2018 Adjustment): “Income Tax”5. PSAK 66 (2018 Adjustment): “Joint Arrangement”6. ISAK 33: “Foreign Exchange Transactions and Rewards in Advances”7. ISAK 34: “Uncertainty in the Deal of Income Tax”

New standards and amendments to standards that are effective for periods which begins on or after January 1, 2020, with early application permitted, namely:

1. PSAK 71: “Financial Instruments”2. PSAK 72: “Revenue from Contracts with Customers”3. PSAK 73: “Rent”4. PSAK 62 (Amendment 2017): “Insurance Contracts concerning Implementing PSAK 71: Financial Instruments

with PSAK 62: Insurance Contracts”5. PSAK 15 (Amendment 2017): “Investments in Associates and Joint Ventures on Long-term Interest in

Associated Entities and Joint Ventures”6. PSAK 71 (Amendment 2018): “Financial Instruments concerning the Feature of Accelerating Repayment with

Negative Compensation”

Until the date of the consolidated financial statements are authorized, the Company is still evaluating the potential impact of the adoption of new standards, amendments to standards and interpretations of these standards.

Impact of Changes In New Financial Accounting Standards and Revisions (PSAK) and Interpretation of Financial Accounting Standards (ISAK) The adoption of amendments and standard interpretations in 2018 had impact/no impact on the Company ’s consolidated financial performance or position. The impact of the 2018-2020 standards/adjustments and interpretation of the consolidated financial statements are still in the process of review by the Company.




MANAGEMENTREPORT

BUSINESS CONTINUITY INFORMATION

POTENTIAL SIGNIFICANT EVENTS INFLUENCING BUSINESS CONTINUITY

Based on the results of management’s assessment of the Company ’s ability to continue the business in the future, it can be concluded that the Company sees no potentially significant impact on the Company ’s business continuity.

MANAGEMENT ASSESSMENT OF POTENTIAL SIGNIFICANT EVENTS INFLUENCING TO BUSINESS CONTINUITY

Management regularly conducts evaluations and assessments on matters that have a significant effect on business continuity. The evaluation is carried out through a SWOT analysis comprising Strength and Weakness where this analysis looks at internal factors, as well as identifying factors externally through Opportunity and Threat aimed at assuming basic business continuity of the Company in the face of significant negative influences from changes in business conditions. The result of the SWOT analysis showed that there were no matters that had a significant effect on business continuity.

ASSUMPTIONS USED BY MANAGEMENT IN ITS ASSESSMENT

In conducting the assessment of the Company ’s ability to continue its business in the future, several assumptions and considerations were used. These assumptions and considerations included a SWOT analysis, financial performance, liquidity, solvency, profitability, internal issues and legal issues encountered, as well as micro and macroeconomic conditions at present and in the future.


COMPANYPROFILE




COMPANY SOUNDNESS LEVEL

Realization of the Company ’s soundness level in 2018 used calculations based on Minister of State-Owned Enterprises Decree Number: 100/MBU/2002 dated June 4, 2002 and were as follows.

The overall realization of the Company ’s health level score in 2018 was 81.75 higher than 80.25 in 2017 with aSOUND “AA”qualification.

NO DESCRIPTION WEIGHTREALIZATION

2018 2017

I Financial Aspect

1 Return on Equity/ROE (%) 20.00 18.00 14.00

2 Return on Investment/ROI (%) 15.00 6.00 6.00

3 Cash Ratio (%) 5.00 5.00 5.00

4 Current Ratio (%) 5.00 5.00 5.00

5 Collection Period (days) 5.00 4.50 4.50

6 Inventory Turnover (days) 5.00 5.00 5.00

7 Total Asset Turnover (%) 5.00 3.00 3.50

8 Shareholder’s Equity (%) 10.00 7.25 7.25

Total Financial Aspect 70.00 53.75 50.25

II Operational Aspect

1 Inovation 5.00 5.00 5.00

2 Customer Satisfaction Index 5.00 4.00 5.00

3 Productivity on Sales/HC Capability Index 5.00 4.00 5.00

Total Operational Aspect 15.00 13.00 15.00

III Administration Aspect

1 Audit Report 3.00 3.00 3.00

2 RKAP 3.00 3.00 3.00

3 Periodic Report 3.00 3.00 3.00

4 PKBL Performance

a. Effectiveness of Fund Disbursement 3.00 3.00 3.00

b. Collectability of Loans Disbursement 3.00 3.00 3.00

Total Administration Aspect 15.00 15.00 15.00

Total Score 100.00 81.75 80.25

Qualification AA AA

Health Level Healthy Healthy




MANAGEMENTREPORT

SUBSIDIARIES’PERFORMANCE

Up to 2018, the Company has 7 (seven) subsidiaries. An explanation of the subsidiaries is presented in the Profile section of this Annual Report. The Company only presents the performance of subsidiaries that have conducted Initial Public Offerings (IPO), while the performance of the subsidiary is presented as follows.

PT Wijaya Karya Beton Tbk. total assets in 2018 amounting to Rp8.8 trillion, an increase of 25.66%, compared to Rp7.7 trillion in 2017, while total liabilities in 2018 amounted to Rp5.7 trillion, an increase of 32.98%, compared to Rp4.32 trillion in 2017, and total equity in 2018 amounting to Rp3.14 trillion increased by 14.15% compared to Rp2.75 trillion in 2017.

Profit or Loss Statement

(in million Rupiah)

2018 2017 GROWTH

(RP) (RP) (RP) (%)

Revenues 6,930,628 5,362,263 1,568,365 29.25

Net Income 486,640 340,459 146,181 42.94

Revenue earned by PT Wijaya Karya Beton Tbk. in 2018 amounted to Rp6.93 trillion, an increase of 29.25%, compared to Rp5.36 trillion in 2017, while net income in 2018 amounted to Rp486.64 billion, an increase of 42.94%, compared to Rp340.46 billion in 2017.

PT WIJAYA KARYA BETON TBK.

Statement of Financial Position

(in million Rupiah)

2018 2017 GROWTH

(RP) (RP) (RP) (%)

Asset 8,881,778 7,067,976 1,813,802 25.66

Liabilities 5,744,966 4,320,041 1,424,925 32.98

Equity 3,136,812 2,747,935 388,877 14.15


COMPANYPROFILE




Profit or Loss Statement

(in million Rupiah)

2018 2017 GROWTH

(RP) (RP) (RP) (%)

Revenues 5,822,505 3,899,286 1,923,219 49.32

Net Income 444,499 295,746 148,753 50.30

PT Wijaya Karya Bangunan Gedung Tbk. total assets in 2018 amounting to Rp5.89 trillion, an increase of 27.83%, compared to Rp4.61 trillion in 2017, while total liabilities in 2018 amounted to Rp3.75 trillion, an increase of 30.00%, compared to Rp2.88 trillion in 2017, and total equity in 2018 amounting to Rp2.14 trillion, an increase of 23.96%, compared to Rp1.72 trillion in 2017.

Revenues earned by PT Wijaya Karya Bangunan Gedung in 2018 amounted to Rp5.82 trillion, an increase of 49.00%, compared to Rp3.90 trillion in 2017, while net income in 2018 amounted to Rp444.50 billion, an increase of 50.00%, compared to Rp295.75 billion in 2017.

PT WIJAYA KARYA BANGUNAN GEDUNG TBK.

Statement of Financial Position

(in million Rupiah)

2018 2017 GROWTH

(RP) (RP) (RP) (%)

Asset 5,890,230 4,607,728 1,282,502 27.83

Liabilities 3,753,472 2,883,989 869,482 30.00

Equity 2,136,828 1,723,739 413,089 23.96

224

250

258

277

280

289

Company Commitment in Implementing Corporate Governance and Governance Outcome

Corporate Governance Structure and Mechanism

Board of Commissioners

Board of Commissioners’ Perfomance Assessment

Frequency and Attendance Level of Board of Commissioners Meetings

Board of Directors

GOOD CORPORATE GOVERNANCEBoard of Directors’ Perfomance Assessment

Frequency And Attendance Level of Board Of Directors Meetings

Remuneration Policy of the Board of Commissioners and Directors

Audit Committee

Nomination, Remuneration and GCG Committee

Other Committee Under the Board of Commissioners

298

306

314

318

327

333

Risk Monitoring Function

Corporate Secretary

Internal Control Unit

Public Accountant

Risk Management

Internal Control System

Provision of Funds for Social Activities and/or Politics

Important Case

Access to Company Information and Data and Relations with Stakeholders

Code of Ethics

Whistleblowing System

Majority and Controlling Shareholder

Management of State Property Reports (LHKPN)

Prevention of Insider Transactions

Buyback Shares and Bonds

Corporate Governance Compliance According to Asean Corporate Governance Scorecard

334

335

337

344

346

350

355

356

358

360

366

368

369

370

371

372

Cilacap Steam Power Plant




MANAGEMENTREPORT

COMPANY COMMITMENT IN IMPLEMENTING CORPORATE GOVERNANCE AND GOVERNANCE OUTCOME

GOVERNANCE STRUCTURE GOVERNANCE PROCESS GOVERNANCE OUTCOME

- Main Organs - Supporting Organs - Infrastructure

- Fulfillment of Shareholders’ Rights and Equal Treatment to All Shareholders.

- Fulfillment of Stakeholder s’Rights. - Execution of the Board of Directors and Board

of Commissioners duties and responsibilities. - Transparency of the Company’s financial and

non financial condition.

- Optimized Company value so that it has strong competitiveness, both nationally and internationally.

- Encouraged the professional management of the Company professionally, efficiently and effectively and increased the independence of the Company’s bodies.

- Encouraged the Company bodies to make decisions and implement actions based on high moral values and in compliance with laws and regulations, as well as awareness of the Company’s corporate social responsibility towards stakeholders and environmental sustainability.

- Increased the Company’s contribution to the national economy.

- Improved the conducive climate towards national investment development.

BASIS FOR CORPORATE GOVERNANCE APPLICATION

The application of GCG in WIKA refers to the following provisions, namely:

1. 2007 Law Number 40 concerning Limited Liability Companies;

2. 2003 Law Number 19 concerning State Own Enterprises;

3. Republic of Indonesia Government Regulation Number 45 of 2001 concerning amendment to Government Regulation Number 12 of 1998 concerning Limited Liability Companies (Persero);

4. Minister of State-Owned Enterprises Regulation Number: PER-01/MBU/2011 dated August 1, 2011 concerning the Implementation of Good Corporate Governance in State-Owned Enterprises and amendment to Minister of State-Owned Enterprises Regulation No. PER-09/MBU/2012 dated July 6, 2012;

5. Secretary of the Ministry of State-Owned Enterprises Decree No. SK-16/S.MBU/2012 dated June 6, 2012 concerning the Indicators/Parameters for Evaluation of Good Corporate Governance in SOEs;

PT Wijaya Karya (Persero) Tbk. always upholds the implementation of Good Corporate Governance (GCG) principles. The Company strives to continue to maintain integrity and improve itself in the implementation of GCG commitments in order to achieve the goal of being an adaptive, sustainable and developing competitiveness business entity.

In order to protect the interests of shareholders and stakeholders, the Company ensures that all elements act in accordance with the ethical standards of behaving and doing business. To support these efforts, the Company established a governance structure, a corporate governance framework to regulate the relationship between the Company and its Shareholders, the Board of Commissioners, the Board of Directors and other stakeholders. By referring to this framework, the Company carries out the Governance Process and achieves Governance Outcome that supports financial health and the achievement of the Company ’s goals in accordance with stakeholder aspirations.

GOVERNANCE FRAMEWORK

WIKA’s commitment to applying corporate governance is embodied in the Corporate Governance Framework as follows:


COMPANYPROFILE




6. Financial Services Authority Regulation No. 8/POJK.04/2015 concerning Issuers or Public Company Web Sites;

7. Financial Services Authority Regulation No. 31/POJK.04/2015 concerning Disclosure of Material Information or Facts by Issuers or Public Companies;

8. Financial Services Authority Regulation No. 21/ POJK.04/2015 concerning the Implementation of GCG Guidelines.

In addition, to further streamline the implementation of GCG, the Company also reviews the best business practices that include:

1. Corporate Governance principles for Stated Owned Companies developed by the Organization for Economic Co-operation and Development (OECD); and

2. ASEAN Corporate Governance Scorecard.

3. GCG Implementation based on perception index from specific part regarding to corporate governance or Corporate Governance Perception Index (CGPI).

4. Assessment of excellence business implementation through the Superior Performance Appraisal Criteria (KPKU) especially for governance and leadership.

5. Indonesian GCG Guidelines developed by the National Committee on Governance Policy (KNKG) in 2006.

The internalization of the various laws and guidelines into the Company ’s internal policies is a commitment of the Board of Commissioners and the Board of Directors and all of the Company ’s human capital. The commitment to implementation of GCG is shown as follows.

Documents

MATERIAL INFORMATION CONTAINING CONFLICTS OF …PT Kawasan Berikat Nusantara Ownership is Equally Bound Construction service PT Pelabuhan Indonesia I (Persero) Ownership is Equally