Amendment to OJK Circular No. 19/SEOJK.04/2018 on Investment Manager Governance Implementation Reports

To:

1. Board of Directors of Islamic Investment Managers; and
2. Board of Directors of Investment Managers that have Sharia investment management units,

At their respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY OF THE REPUBLIC OF INDONESIA

NUMBER 9 /SEOJK.04/2023

CONCERNING AMENDMENT TO FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER NUMBER 19/SEOJK.04/2018 CONCERNING REPORTS ON THE IMPLEMENTATION OF INVESTMENT MANAGER GOVERNANCE

In carrying out the mandate of Article 63 of Financial Services Authority Regulation Number 10/POJK.04/2018 concerning the Implementation of Investment Manager Governance, the OJK has regulated provisions regarding the implementation of Investment Manager governance implementation reports in Financial Services Authority Circular Letter Number 19/SEOJK.04/2018.

Financial Services Authority Regulation Number 10/POJK.04/2018 concerning the Implementation of Investment Manager Governance has been amended by Financial Services Authority Regulation Number 2 of 2023 concerning Amendment to Financial Services Authority Regulation Number 10/POJK.04/2018 concerning the Implementation of Investment Manager Governance to regulate more clearly regarding the duties, responsibilities, and authority of the Sharia Supervisory Board. Furthermore, in order to enhance the role of the Sharia Supervisory Board in governance implementation, there is a need for assessment and weighting of the Sharia Supervisory Board and Sharia investment management units in the governance implementation reports of Islamic Investment Managers and Investment Managers that have Sharia investment management units.

In relation to this matter, it is necessary to amend Financial Services Authority Circular Letter Number 19/SEOJK.04/2018 concerning Reports on the Implementation of Investment Manager Governance through Financial Services Authority Circular Letter as follows:

• 2 - I. Several provisions in Financial Services Authority Circular Letter Number 19/SEOJK.04/2018 concerning Reports on the Implementation of Investment Manager Governance are amended as follows:

1. The provision in item III number 2 is amended, so that item III reads as follows:

III. GOVERNANCE IMPLEMENTATION REPORTS

Governance implementation reports must, at a minimum, include:

1. transparency;

2. self-assessment results regarding the implementation of Governance, consisting of work sheets and Composite Ratings contained in Appendix I which is an integral part of Financial Services Authority Circular Letter Number 19/SEOJK.04/2018 concerning Reports on the Implementation of Investment Manager Governance and Appendix IA which is an integral part of this Financial Services Authority Circular Letter; and

3. action plans contained in Appendix II which is an integral part of this Financial Services Authority Circular Letter, for Investment Managers who obtain Composite Rating 4 or 5.

4. Among the provisions in item IV number 1 letter b number 5) and number 6), 1 (one) item is inserted, namely item 5a), and item 1 letter f, number 3, and number 6 letter a are amended so that item IV reads as follows:

IV. TRANSPARENCY

Transparency as referred to in item III number 1 must, at a minimum, include:

1. disclosure of the form of Governance implementation, namely: a. commitment of shareholders and the General Meeting of Shareholders (GMS), at a minimum including:
   1. number and date of the Financial Services Authority approval letter regarding shareholder approval;
   2. date of summons and date of GMS implementation; and
   3. GMS decisions;

• 3 - b. implementation of duties and responsibilities of the Board of Directors, at a minimum including: 1) number, names, positions, number and date of the Financial Services Authority approval letter regarding the assessment of competence and propriety of Board of Directors members, date of appointment by GMS, term of office, nationality, domicile, proxy license for Securities Companies and/or Investment Manager proxy licenses held, work history in the last 5 (five) years, highest education, and professional titles; 2) implementation of duties and responsibilities of each Board of Directors member; 3) concurrent positions of Board of Directors members, if there are Board of Directors members with concurrent positions; 4) education and/or training attended regarding the enhancement of knowledge and understanding in order to assist in the implementation of duties of Board of Directors members; 5) policy and implementation of Board of Directors meetings including the number of meetings held in 1 (one) year and attendance of each Board of Directors member at each meeting; 5a) policy and implementation of Board of Directors meetings with the Sharia Supervisory Board including the number of meetings held in 1 (one) year, in the event there is a Sharia Supervisory Board; 6) implementation of activities that are recommendations from the Board of Commissioners and/or results of Financial Services Authority supervision; and 7) follow-up on matters requiring Board of Directors attention regarding recommendations from the risk management, compliance, internal audit functions, external audit findings, and results of Sharia Supervisory Board supervision in the event there is a Sharia Supervisory Board;

• 4 - c. implementation of duties and responsibilities of the Board of Commissioners, including: 1) number, names, positions, number and date of the Financial Services Authority approval letter regarding the assessment of competence and propriety of Board of Commissioners members, date of appointment by GMS, term of office, nationality, domicile, proxy license for Securities Companies held, work history in the last 5 (five) years, highest education, and professional titles; 2) concurrent positions of Board of Commissioners members, if there are Board of Commissioners members with concurrent positions; 3) education and/or training attended regarding the enhancement of knowledge and understanding in order to assist in the implementation of duties of Board of Commissioners members; 4) policy and implementation of Board of Commissioners meetings including the number of meetings held in 1 (one) year and attendance of each Board of Commissioners member at each meeting; 5) implementation of Board of Commissioners activities; 6) recommendations given by the Board of Commissioners to the Board of Directors; and 7) list of indications of violations of laws and regulations in the Financial Services Sector reported to the Financial Services Authority, if there are indications of violations reported to the Financial Services Authority; d. completeness and implementation of committee duties, there are committees formed by the Board of Directors and/or Board of Commissioners, at a minimum including: 1) structure, membership, and expertise of committee members; 2) duties and responsibilities of committees; 3) policy and implementation of committee meetings including the number of meetings held in 1 (one) year and attendance of each committee member at each meeting; 4) committee work programs and their realization in the fiscal year; and 5) committee charters;

• 5 - e. remuneration of the Board of Directors and Board of Commissioners, at a minimum including: 1) remuneration packages or policies established in the GMS, if there are packages or policies established in the GMS, at a minimum including: a) salary; b) honorarium; c) incentives; and/or d) allowances that are fixed and/or variable; and 2) the amount of remuneration for the Board of Directors and Board of Commissioners as well as the relationship between remuneration and the performance of the Investment Manager in 1 (one) year; f. Sharia Supervisory Board for Islamic Investment Managers or Investment Managers that have Sharia investment management units, including at a minimum: 1) number, names, and capital market Sharia expert licenses; 2) implementation of duties and responsibilities of the Sharia Supervisory Board including advice and suggestions from the Sharia Supervisory Board to the Board of Directors and Board of Commissioners; 3) concurrent positions of Sharia Supervisory Board members as Sharia Supervisory Board members, Board of Directors members, or other equivalent organs, officials, and employees at institutions or parties supervised by the Financial Services Authority, if there are Sharia Supervisory Board members with concurrent positions; 4) list of indications of violations of Sharia principle fulfillment, if there are indications of violations; and 5) the amount of remuneration for the Sharia Supervisory Board as well as the relationship between remuneration with risk,

• 6 - size, and complexity of the Investment Manager's business; g. business ethics, at a minimum including: 1) brief description of the implementation of duties of special work units or officials as persons responsible for the implementation of anti-money laundering and counter-terrorism financing programs which includes customer due diligence and enhanced due diligence; 2) main points of the Investment Manager's Code of Ethics applicable to all Board of Directors members, Board of Commissioners members, and employees or staff, and supporting organs; 3) implementation of Code of Ethics socialization and enforcement efforts; and 4) main points of guidelines binding each Board of Directors and Board of Commissioners member of the Investment Manager; h. conflicts of interest and transactions with Affiliates, at a minimum including: 1) main points of conflict of interest handling policy at a minimum containing the definition of conflict of interest, identification of matters constituting conflicts of interest, handling of conflicts of interest, as well as administration and documentation of conflicts of interest; and 2) conflicts of interest and/or transactions with Affiliates that occurred in the fiscal year, at a minimum covering the name and position of the party having the conflict of interest and/or transaction with the Affiliate, nature of the Affiliate relationship, name and position of the decision maker, type of transaction, transaction value, and notes; i. internal controls, at a minimum including: 1) risk management function, at a minimum including: a) coordinator of the risk management function who is a work unit leader, Board of Directors member, or official at a level below the Board of Directors who performs the risk management function; b) brief description of risk management policy including risk management strategy which covers risk identification, causes of risk emergence, likelihood of risk occurrence, risk implications, and steps taken in facing risks; and c) brief description of the results of the risk management function's duties; 2) compliance function, at a minimum including: a) coordinator of the compliance function who is a work unit leader, Board of Directors member, or official at a level below the Board of Directors who performs the compliance function; b) independence in the implementation of the compliance function's duties; c) compliance policy or strategy; d) charter binding the Investment Manager's function in writing; and e) brief description of the results of the compliance function's duties; 3) internal audit function, at a minimum including: a) coordinator of the internal audit function who is a work unit leader, Board of Directors member, or official at a level below the Board of Directors who performs the internal audit function; b) results of the internal audit function's duties; scope of internal audit work; c) structure or position of the internal audit function work unit; and d) brief description;

• 7 - j. Stewardship, at a minimum including: 1) brief description of monitoring activities against companies where the Investment Manager invests and where its managed funds are invested, covering among other financial factors such as periodic financial reports, and non-financial factors such as company strategy, risk management, and environmental, social, and governance (ESG); 2) information on having or not having an engagement policy, and brief description of engagement implementation against companies where the Investment Manager's managed funds are invested (investee company) such as written communication, email, or direct dialogue with the company. In the event the Investment Manager does not conduct engagement, the Investment Manager must provide a statement; and 3) information on having or not having a policy on the use of voting rights over share ownership against companies where the Investment Manager's managed funds are invested (investee company), available on the Website (link provided), including voting rights usage procedures that consider prudence, independence, and the interest of managing Client funds; k. main points of the violation reporting policy and Client complaint system, containing information at a minimum: 1) the Investment Manager's violation reporting and Client complaint policy; 2) implementation of the violation reporting system policy and handling of Client complaints by the responsible work unit or function in the fiscal year; and 3) Board of Directors and Board of Commissioners evaluation of the violation reporting and Client complaint policy; l. Website address; m. external auditor, containing information at a minimum:

• 8 - 1) effectiveness of the external auditor's duties, including comments or notes from the external auditor regarding the provision of data required by the external auditor, thereby enabling the external auditor to provide their opinion on the fairness, compliance, and suitability of the Investment Manager's financial reports with applicable audit standards; and 2) Public Accountants and Public Accounting Firms that have audited the Investment Manager's financial reports during the last 5 (five) years;

2. share ownership of Board of Directors and/or Board of Commissioners members, both directly and indirectly, which includes the type and number of share certificates at: a. the relevant Investment Manager; b. other Investment Managers; and c. Financial Service Institutions other than Investment Managers;
3. financial and/or family relationships of Board of Directors and Board of Commissioners members with other Board of Directors and/or Board of Commissioners members, Sharia Supervisory Board members, and/or shareholders of the Investment Manager;
4. type, number, and resolution efforts of internal deviations related to finance carried out by Board of Directors members, Board of Commissioners members, and employees, if there are internal deviations related to finance carried out by Board of Directors members, Board of Commissioners members, and employees, at a minimum including: a. internal deviations that have been resolved; b. internal deviations currently in the process of internal resolution; c. internal deviations for which resolution has not been attempted; and d. internal deviations that have been followed up through legal processes;

• 9 -

5. type, number, and resolution efforts of legal issues, both civil and criminal law, and have been submitted through legal processes, if there are resolution of legal issues, both civil and criminal law, and have been submitted through legal processes, at a minimum including: a. civil and/or criminal legal issues faced and have obtained permanent legal force; and b. civil and/or criminal legal issues faced and are still in the process of resolution; and

6. disclosure of other important matters, at a minimum including: a. resignation or dismissal of Board of Directors members, Board of Commissioners members, and Sharia Supervisory Board members; and b. company functions outsourced to other parties (outsourcing), if there are company functions outsourced to other parties.

7. Among item V number 3 and number 4, 2 (two) new items are inserted, namely items 3A and 3B, and item 5 letter a and number 11 are amended, so that item V reads as follows:

V. SELF-ASSESSMENT OF GOVERNANCE IMPLEMENTATION

1. Self-assessment is used as a benchmark to assess the extent to which the Investment Manager implements Governance based on Governance principles. Self-assessment is conducted in a structured and comprehensive manner regarding the adequacy of Governance implementation, so that the Investment Manager can immediately take strategic steps to improve weaknesses related to Governance in its company.
2. The Investment Manager conducts self-assessment of Governance implementation once in 1 (one) year for the period from January to December.

• 10 -

3. Self-assessment as referred to in item III number 2 is conducted against 13 (thirteen) Governance assessment factors based on the development of Governance principles, namely: a. implementation of duties and responsibilities of the Board of Directors; b. implementation of duties and responsibilities of the Board of Commissioners; c. completeness and implementation of committee duties if there are committees; d. risk management function; e. compliance function; f. internal audit function; g. external auditor; h. conflicts of interest and transactions with Affiliates; i. Stewardship; j. Business Plan; k. business ethics; l. violation reporting system and Client complaint system; and m. information openness.

3A. In addition to the Governance assessment factors as referred to in item 3, Islamic Investment Managers must add self-assessment regarding the implementation of duties and responsibilities of the Sharia Supervisory Board.

3B. In addition to the Governance assessment factors as referred to in item 3, Investment Managers that have Sharia investment management units must add self-assessment regarding the following Governance assessment factors: a. implementation of duties and responsibilities of the Sharia Supervisory Board; and b. implementation of duties of the Sharia investment management unit.

4. Self-assessment is formulated in work sheets containing a set of questions to assess the quality of Governance implementation.

• 11 -

5. The questions contained in the work sheets as referred to in item 4 are integrated into 3 (three) Governance assessment aspects, namely: a. Governance structure assessment, which aims to view the adequacy of Governance structure and infrastructure so that the process of implementing Governance principles produces outputs that meet the expectations of the Investment Manager's Stakeholders. Included in Governance structure are the Board of Directors, Board of Commissioners, Sharia Supervisory Board, Committees, and functions at the Investment Manager. Included in Governance infrastructure are the Investment Manager's policies and procedures and the main duties and functions (tupoksi) of each position in the organization; b. Governance process assessment aims to assess the effectiveness of the process of implementing Governance principles supported by the adequacy of Governance structure and infrastructure so as to produce outputs that meet the expectations of the Investment Manager's Stakeholders; and c. Governance output assessment aims to assess the quality of Governance outputs that meet the expectations of the Investment Manager's Stakeholders which are the results of the process of implementing Governance principles supported by adequacy of structure and infrastructure.

6. Assessment criteria for Governance structure, Governance process, and Governance output are interrelated, for example, there are problems in Governance structure such as the absence of risk management, compliance, and internal audit functions thereby causing weaknesses in the Governance process in the implementation of internal controls that deviate from regulations. Furthermore, weaknesses in the Governance process will impact Governance outputs in the form of business activities outside the acceptable risk profile, violations of laws and regulations, and/or high levels of deviation in the Investment Manager's operations. The Investment Manager must pay attention to whether those weaknesses, especially weaknesses that occur repeatedly, are material, and have a significant impact on the Investment Manager both currently and in the future.

• 12 -

7. The Investment Manager must prepare data and information used as the basis for compiling an analysis of the adequacy and effectiveness of Governance principle implementation and document it well. Data and information as referred to include all reports and documents disclosed in Item IV.

8. Governance self-assessment is conducted using 2 (two) types of questions, namely dichotomous (questions with Yes or No answers) and discrete (questions with answers in the form of a scale from Very Good to Poor). The value for each answer is as follows:

Dichotomous question type: a. check mark (√) in the Yes column has a value of 1: if the indicator has been fully implemented or fulfilled; or b. check mark (√) in the No column has a value of 0: if the indicator is fully not implemented or fulfilled.

Discrete question type: a. check mark (√) in the VG (Very Good) column has a value of 1: the indicator has been fully implemented or fulfilled; b. check mark (√) in the G (Good) column has a value of 0.75: the indicator is mostly implemented or fulfilled; c. check mark (√) in the FA (Fairly Good) column has a value of 0.5: if the indicator is partially implemented or fulfilled;

• 13 - d. check mark (√) in the PG (Poorly Good) column has a value of 0.25: if the indicator is mostly not implemented or fulfilled; or e. check mark (√) in the P (Poor) column has a value of 0: if the indicator is fully not implemented or fulfilled.

9. The notes column in the work sheet must be filled with reasons, basis for implementation, or other additional information that must be disclosed to support the answer on the assessment factor indicator.

10. To obtain the value for each factor, the Investment Manager uses the following formula:

Factor Value = (Sum of indicator values / Total indicators) x Factor weight x 100

Explanation: Factor Value: The result of dividing the sum of indicator values by the number of indicators and multiplied by the weight of each factor determined in this Financial Services Authority Circular Letter. Indicator Value: The number of indicators fulfilled by the Investment Manager in each assessment factor. Total Indicators: The total number of indicators in each assessment factor. Factor Weight: The weight value for each assessment factor established in this Financial Services Authority Circular Letter.

As an example: Calculating the factor value from the implementation of duties and responsibilities of the Board of Directors (structure: 11, process: 16, and output: 8). Investment Manager A answers as follows: a. Structure: From 11 indicators, the Investment Manager gives YES answers to 9 indicators, and NO answers to 2 indicators

• 14 - b. Process: From 16 indicators, the Investment Manager gives VERY GOOD answers to 10 indicators, FAIRLY GOOD answers to 4 indicators, and YES answers to 2 indicators c. Output: From 8 indicators, the Investment Manager gives VERY GOOD answers to 6 indicators, and 2 YES answers.

Then the calculation is as follows: Factor Value = {[(1x9)+(0x2)]+[(1x10)+(0,5x4)+(1x2)]+[(1x6)+(1x2)]} / 35 x 20% x 100 = 17.71

Thus, the Governance factor value from the implementation of duties and responsibilities of the Board of Directors is 17.71.

11. The weight of each factor is established as in the following table: a. for Investment Managers other than Islamic Investment Managers and Investment Managers that have Sharia investment management units

No. Factor Weight (%)

1. Implementation of duties and responsibilities of the Board of Directors 20
2. Implementation of duties and responsibilities of the Board of Commissioners 20
3. Completeness and implementation of committee duties (if any) 2.5
4. Risk management function 7.5
5. Compliance function 7.5
6. Internal audit function 7.5
7. External auditor 2.5
8. Conflicts of interest and transactions with affiliates 10
9. Stewardship 2.5
10. Business Plan 7.5
11. Business Ethics 5
12. Violation reporting system and si

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