Financial Services Authority Regulation Number 3/POJK.05/2015 Concerning Pension Fund Investments

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 3/POJK.05/2015
CONCERNING
PENSION FUND INVESTMENTS
BY THE GRACE OF GOD THE ALMIGHTY,
THE COMMISSIONER COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering: a. that with the increasing development of investment instruments in the money market, capital market, as well as other investment instruments in the real sector, it is necessary to provide adequate flexibility for pension funds to invest optimally while still observing the principle of prudence; b. that in order to support the success of pension program implementation, pension fund investment management must be conducted healthily and by maintaining a maturity balance between investments and liabilities;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Pension Fund Investments.
Recalling: 1. Law Number 11 of 1992 concerning Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 37, Supplement to the State Gazette of the Republic of Indonesia Number 3477);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
3. Government Regulation Number 76 of 1992 concerning Employer Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 120, Supplement to the State Gazette of the Republic of Indonesia Number 3507);
4. Government Regulation Number 77 of 1992 concerning Financial Institution Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 127, Supplement to the State Gazette of the Republic of Indonesia Number 3508);
DECIDING:
To Establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING PENSION FUND INVESTMENTS.
CHAPTER I
GENERAL PROVISIONS
Article 1

1. Pension Fund is a legal entity that manages and runs a program promising pension benefits as referred to in the law concerning pension funds.
2. Employer Pension Fund, hereinafter abbreviated as DPPK, is a Pension Fund formed by an individual or body employing employees, as the founder, to implement a defined benefit pension program or a defined contribution pension program, for the benefit of some or all of its employees as participants, and which creates obligations against the employer as referred to in the law concerning Pension Funds.
3. Financial Institution Pension Fund, hereinafter abbreviated as DPLK, is a Pension Fund formed by a bank or life insurance company to implement a defined contribution pension program for individuals, both employees and self-employed workers, which is separate from the DPPK for employees of the respective bank or life insurance company, as referred to in the law concerning Pension Funds.
4. Participant is every person who meets the requirements of the Pension Fund regulations as referred to in the law concerning Pension Funds.
5. Founder is:
   a. an individual or body forming a DPPK; b. a bank or life insurance company forming a DPLK, as referred to in the law concerning Pension Funds.
6. Supervisory Board is the supervisory board of the Pension Fund as referred to in the law concerning Pension Funds.
7. Management is the management of the Pension Fund as referred to in the law concerning Pension Funds.
8. Acting Management Official is an official from the DPLK Founder assigned to carry out operational activities of the DPLK.
9. Investment Directive is the investment policy and strategy established by the Founder or the Founder and Supervisory Board, which must serve as guidelines for the Management in implementing investments.
10. Government Securities are securities issued by the Government of the Republic of Indonesia, including state debt securities as referred to in the law concerning state debt securities and sharia state securities as referred to in the law concerning sharia state securities.
11. Mutual Fund is a vehicle used to gather funds from public investors to subsequently be invested in a securities portfolio by an investment manager as referred to in the law concerning the capital market.
12. Medium Term Notes, hereinafter abbreviated as MTN, are debt securities issued by companies and having a tenor of one to five years and registered at the Indonesia Central Securities Depository.
13. Repurchase Agreement, hereinafter called REPO, is a transaction selling securities with an agreement to buy them back at a specified time and price.
14. Bank is a business entity that gathers funds from the public in the form of deposits and channels them to the public in the form of loans and/or other forms to improve the living standards of the many people as referred to in the law concerning banking.
15. Stock Exchange is a party that organizes and provides systems and/or facilities to bring together offers to sell and buy securities from other parties with the aim of trading securities among them as referred to in the law concerning the capital market.
16. Investment Manager is a party whose business activities manage securities portfolios for clients or manage collective investment portfolios for a group of clients, except insurance companies, Pension Funds, and Banks that conduct their own business activities based on applicable legislation as referred to in the law concerning the capital market.
17. Custodian is a Bank that provides custody services as referred to in the law concerning Pension Funds.
18. Party is an individual or business entity, whether in the form of a legal entity or not, whether individually or collectively forming a group with affiliation relationships.
19. Affiliation is a relationship between Parties where:
    a. one Party has one or more directors or executive officers below the director level or commissioners, who also serve as directors or executive officers below the director level or commissioners on another Party; b. one Party has one or more directors or executive officers below the director level or commissioners, who have family relationships due to marriage or descent up to the second degree, either horizontally or vertically, who serve as directors or executive officers below the director level or commissioners on another Party;
    c. one Party has the authority to appoint or dismiss the board of directors or commissioners or equivalents of another Party; or
    d. one Party directly or indirectly controls, is controlled by, or is under the control of another Party, except for control by the Government of the Republic of Indonesia, which includes but is not limited to:

1. one Party holds at least 25% (twenty-five percent) of the shares of another Party or is the largest shareholder;
2. one Party is the largest creditor of the other Party;
3. one Party has voting rights in another Party exceeding 50% (fifty percent) based on an agreement; or
4. one Party can control operations, supervision, or decision-making, directly or indirectly, over the right to regulate and determine the financial and operational policies of another Party based on the articles of association, house rules, or agreements.

20. Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution free from interference by other parties that has the function, duties, and authority for regulation, supervision, examination, and investigation, as referred to in the law concerning the Financial Services Authority.
    CHAPTER II
    PENSION FUND INVESTMENTS
    First Section
    Types of Investments
    Article 2
    (1) Pension Funds are prohibited from placing investments, except in the following types of investments:
    a. savings accounts at Banks; b. call deposits at Banks;
    c. term deposits at Banks;
    d. deposit certificates at Banks; e. securities issued by Bank Indonesia; f. Government Securities; g. shares listed on the Stock Exchange in Indonesia; h. corporate bonds listed on the Stock Exchange in Indonesia;
    i. Mutual Funds consisting of:
21. Money Market Mutual Funds, Fixed Income Mutual Funds, Mixed Mutual Funds, and Equity Mutual Funds;
22. Protected Mutual Funds, Guaranteed Mutual Funds, and Index Mutual Funds;
23. Mutual Funds in the form of collective investment contracts for limited participation;
24. Mutual Funds whose shares or participation units are traded on the Stock Exchange in Indonesia;
    j. MTN; k. asset-backed securities;
    l. real estate investment funds in the form of collective investment contracts;
    m. options contracts and forward contracts for securities traded on the Stock Exchange in Indonesia; n. REPO; o. direct participation both in Indonesia and abroad; p. land in Indonesia; and/or q. buildings in Indonesia. (2) Types of Pension Fund investments as referred to in paragraph (1) also include types of investments using Sharia principles. (3) Regulations regarding the valuation basis for each type of investment as referred to in paragraphs (1) and (2) are regulated in an OJK Circular Letter. Second Section Pension Fund Investment Restrictions
    Article 3
    (1) Investments in corporate bonds listed on the Stock Exchange in Indonesia and asset-backed securities as referred to in Article 2 paragraph (1) letter h and letter k must be made in corporate bonds listed on the Stock Exchange in Indonesia and asset-backed securities that have an investment grade rating from a securities rating agency that has received a business license from OJK. (2) Investments in asset-backed securities and real estate investment funds in the form of collective investment contracts as referred to in Article 2 paragraph (1) letter k and letter l must be made in asset-backed securities and real estate investment funds in the form of collective investment contracts conducted through a public offering as regulated in capital market legislation.
    Article 4
    (1) Investments in options contracts and forward contracts for securities traded on the Stock Exchange in Indonesia as referred to in Article 2 paragraph (1) letter m:
    a. are prohibited for speculative purposes; and b. must be placed in short positions for hedging purposes over investments already owned by the Pension Fund.
    (2) Pension Funds must prepare a hedging strategy document before investing in options contracts and forward contracts for securities traded on the Stock Exchange in Indonesia.
    Article 5
    (1) Direct participation investments in Indonesia as referred to in Article 2 paragraph (1) letter o must be made in shares issued by limited liability companies established under Indonesian law, and such shares are not listed on the Stock Exchange in Indonesia or abroad. (2) In the event that a Pension Fund makes direct participation investments in Indonesia as referred to in paragraph (1) and becomes the largest shareholder or holds at least 25% (twenty-five percent) of the shares in a limited liability company, the Pension Fund must possess and exercise its rights to:
    a. place representatives in the membership of the board of commissioners of the limited liability company; and b. obtain unlimited access to all material information related to the entire company. (3) In the event that the shares owned by the Pension Fund in the limited liability company as referred to in paragraph (1) do not exceed 50% (fifty percent), the rights of the Pension Fund as referred to in paragraph (2) letters a and b must be stipulated in a written agreement with other shareholders of the limited liability company.
    Article 6
    (1) Pension Funds making investments in Mutual Funds in the form of collective investment contracts for limited participation as referred to in Article 2 paragraph (1) letter i number 3, investments in MTN as referred to in Article 2 paragraph (1) letter j, and investments in REPO as referred to in Article 2 paragraph (1) letter n must meet the following requirements:
    a. have a minimum investment amount of Rp200,000,000,000.00 (two hundred billion rupiah); b. the risk level based on assessment conducted by OJK is low-medium or low;
    c. have adequate risk management; and
    d. use the services of an investment advisor that has received a business license from OJK.
    (2) Investments in REPO as referred to in Article 2 paragraph (1) letter n must be made in REPOs meeting the following requirements:
    a. using standardized agreements by OJK; b. collateral type limited to Government Securities, securities issued by Bank Indonesia, and/or corporate bonds having an investment grade rating issued by a securities rating agency that has received a business license from OJK;
    c. tenor not exceeding 90 (ninety) days;
    d. REPO value at most 80% (eighty percent) of the market value of the pledged securities; and e. REPO transactions registered at the Indonesia Central Securities Depository or Bank Indonesia Scriptless Securities Settlement System (BI-S4).
    Article 7
    (1) Investments in land in Indonesia as referred to in Article 2 paragraph (1) letter p and/or buildings in Indonesia as referred to in Article 2 paragraph (1) letter q must:
    a. be equipped with land title certificates and/or building titles in the name of the Pension Fund; and b. generate income for the Pension Fund or increase in value due to construction, use, and/or management by third parties conducted through transactions based on prevailing market prices. (2) Transactions as referred to in paragraph (1) letter b must be based on a written agreement in the form of a notarial deed. (3) Investments in land and/or buildings in Indonesia are prohibited if the land and/or buildings are mortgaged, in dispute, and/or blocked by other parties.
    Article 8
    (1) Investments in Mutual Funds in the form of collective investment contracts for limited participation and MTN as referred to in Article 2 paragraph (1) letter i number 3 and letter j, respectively, are prohibited from exceeding 10% (ten percent) of the total Pension Fund investments. (2) Direct participation investments in Indonesia as referred to in Article 2 paragraph (1) letter o are prohibited from exceeding 15% (fifteen percent) of the total Pension Fund investments. (3) Pension Funds may make direct participation investments as referred to in paragraph (2) exceeding 15% (fifteen percent) of the total Pension Fund investments provided they are directed towards direct participation in limited liability companies operating in the financial services sector, subject to obtaining prior approval from OJK. (4) Further regulations regarding Pension Funds that can make direct participation investments exceeding 15% (fifteen percent) as referred to in paragraph (3) are regulated in an OJK Circular Letter. (5) Direct participation investments abroad as referred to in Article 2 paragraph (1) letter o must first obtain OJK approval and are prohibited from exceeding 5% (five percent) of the total Pension Fund investments. (6) Direct participation investments abroad as referred to in paragraph (5) are counted as assets for funding DPPK. (7) Further regulations regarding criteria and procedures for direct participation investments abroad as referred to in paragraph (5) are regulated in an OJK Circular Letter. (8) Investments in land and/or buildings in Indonesia as referred to in Article 2 paragraph (1) letter p and/or letter q are prohibited from exceeding 20% (twenty percent) of the total Pension Fund investments.
    Article 9
    (1) The total amount of investments as referred to in Article 2 paragraph (1) letters a through e, and letters g through o, with a single Party is prohibited from exceeding 20% (twenty percent) of the total Pension Fund investments. (2) All Pension Fund investments may be placed in Government Securities as referred to in Article 2 paragraph (1) letter f. (3) Without prejudice to the provisions as referred to in paragraph (1), the total amount of investments in MTN as referred to in Article 2 paragraph (1) letter j or direct participation both in Indonesia and abroad as referred to in Article 2 paragraph (1) letter o with a single Party is each prohibited from exceeding 10% (ten percent) of the total Pension Fund investments. (4) Regulations regarding limits on direct participation investments both in Indonesia and abroad with a single Party as referred to in paragraph (3) do not apply to direct participation in limited liability companies operating in the financial services sector. (5) Investments in MTN as referred to in Article 2 paragraph (1) letter j are prohibited from exceeding 10% (ten percent) of the MTN issuance volume. (6) Investments in MTN as referred to in Article 2 paragraph (1) letter j must meet the following criteria:
    a. MTN is registered at the Indonesia Central Securities Depository; b. MTN has a monitoring agent that has received a license as trustee from OJK; and
    c. MTN has an investment grade rating issued by a securities rating agency that has received a business license from OJK.
    (7) The total amount of investments with a single Party as referred to in paragraph (1) for Mutual Funds, asset-backed securities, and/or real estate investment funds in the form of collective investment contracts as referred to in Article 2 paragraph (1) letters i, k, and/or l refers to the participation in Mutual Funds, asset-backed securities, and/or real estate investment funds in the form of collective investment contracts managed by the same Investment Manager. (8) Without prejudice to the provisions as referred to in paragraph (1), investments in REPO as referred to in Article 2 paragraph (1) letter n for each counterparty are prohibited from exceeding 2% (two percent) of the total Pension Fund investments, and in total are prohibited from exceeding 5% (five percent) of the total Pension Fund investments. (9) DPPK located in areas where it is not possible to place assets in the form of term deposits, call deposits, and deposit certificates according to the provisions in paragraph (1) and where no other investment types are established in the Pension Fund Investment Directive, may place assets in the aforementioned investments in any Bank in that area exceeding the 20% (twenty percent) limit of the total Pension Fund investments, while still observing the principle of risk diversification.
    Article 10
    (1) All Pension Fund investments placed with:
    a. all Parties that experienced losses or failed to meet their financial obligations in the last fiscal year; b. direct participation both in Indonesia and abroad as referred to in Article 2 paragraph (1) letter o; and
    c. land and/or buildings in Indonesia as referred to in Article 2 paragraph (1) letters p and/or q,
    are prohibited from exceeding 40% (forty percent) of the total Pension Fund investments.
    (2) The provisions as referred to in paragraph (1) do not apply in the event that the Pension Fund has direct participation investments in Indonesia in limited liability companies operating in the financial services sector as referred to in Article 8 paragraph (3). (3) The provisions as referred to in paragraphs (1) and (2) still observe the limits on direct participation as referred to in Article 8 paragraphs (2) and (5), as well as limits on land and/or building investments as referred to in Article 8 paragraph (8).
    Article 11
    (1) Pension Funds are prohibited from conducting derivative transactions or holding derivative instruments, except:
    a. options contracts and forward contracts for securities traded on the Stock Exchange in Indonesia as referred to in Article 2 paragraph (1) letter m; b. derivative instruments obtained by the Pension Fund as instruments attached to Government Securities, shares, or corporate bonds listed on the Stock Exchange in Indonesia as referred to in Article 2 paragraph (1) letters f, g, and h; and
    c. derivative transactions for hedging investments in the form of Government Securities denominated in foreign currencies.
    (2) Pension Funds may sell derivative instruments attached to Government Securities, shares, or corporate bonds listed on the Stock Exchange in Indonesia as referred to in paragraph (1) letter b separately from the respective Government Securities, shares, or corporate bonds. (3) Derivative transactions as referred to in paragraph (1) letter c are conducted with counterparties that have at least an investment grade rating from a securities rating agency that has received a business license from OJK or from a securities rating agency recognized internationally. (4) Derivative transactions as referred to in paragraph (1) letter c must be reported to OJK no later than 7 (seven) working days from the date of the transaction. (5) Reports as referred to in paragraph (4) must be accompanied by at least:
    a. study results on the need for hedging; b. derivative transaction agreements; and
    c. proof of the counterparty's rating as referred to in paragraph (3).
    Article 12
    (1) In the event of a merger, consolidation, or takeover of Parties where the Pension Fund makes investments, and the amount of investment in the resulting Party after merger, consolidation, or takeover becomes larger than the placement limit with a single Party as referred to in Article 9, the Pension Fund's investment in the resulting Party after merger, consolidation, or takeover must be adjusted according to the provisions in Article 9 no later than 12 (twelve) months from the date of the merger, consolidation, or takeover. (2) Pension Funds are prohibited from making new investments in the resulting Party after merger, consolidation, or takeover as referred to in paragraph (1) until the adjustment is completed.
    Article 13
    (1) Regulations regarding investment limits as referred to in Article 3, Article 4 paragraph (1), Article 6, Article 8, Article 9, and Article 10 also apply to types of investments using Sharia principles. (2) Compliance...

(2) Compliance with investment limits as referred to in Article 3, Article 4 paragraph (1), Article 6, Article 8, Article 9, and Article 10 is determined at the time the investment placement is made.

(3) The investment amount in determining compliance as referred to in paragraph (2) takes into account the value of all investments owned by the Pension Fund based on the investment value as referred to in Article 2 paragraph (3).

(4) Proof of compliance with investment limits as referred to in paragraph (2) and paragraph (3) is the responsibility of the Board of Directors.

CHAPTER III
INVESTMENT MANAGEMENT OF PENSION FUNDS

Article 14

(1) The Board of Directors of the Employer-Sponsored Pension Fund (DPPK), DPPK employees specializing in investment, Acting Board of Directors, and DPLK employees specializing in investment must possess adequate competence in investment and/or risk management and must fulfill continuing requirements at least once within a period of one (1) year.

(2) The competence as referred to in paragraph (1) is demonstrated by proof of passing the investment and/or risk management certification exam issued by a professional certification body that has obtained a license from the body having authority as the occupational competency certification authority in accordance with applicable legislation.

(3) Fulfillment of the continuing requirements as referred to in paragraph (1) is done by:
a. attending seminars, workshops, or other similar activities; b. attending courses, training, or similar educational programs;
c. writing papers, articles, or other written works that are published; or
d. becoming a speaker in activities as referred to in letter a, becoming a teacher, or becoming an instructor in activities as referred to in letter b.

(4) Activities as referred to in paragraph (2) and paragraph (3) letters a, b, and d must be organized by:
a. financial services supervisory institutions inside and outside the country; b. financial services industry associations inside and outside the country;
c. universities inside and outside the country; or
d. training institutions that have obtained permits from competent authorities.

(5) DPPK must submit proof of fulfillment of continuing requirements for the Board of Directors and employees specializing in investment no later than the end of January of the following year.

(6) DPLK must submit proof of fulfillment of continuing requirements for the Acting Board of Directors and employees specializing in investment no later than the end of January of the following year.

(7) The Board of Directors of DPPK, DPPK employees specializing in investment, Acting Board of Directors, and DPLK employees specializing in investment must submit proof of passing as referred to in paragraph (2) to the OJK no later than December 31, 2015.

(8) If the deadline for submitting proof of fulfillment of continuing requirements as referred to in paragraph (5) and paragraph (6), as well as proof of passing as referred to in paragraph (7), falls on a holiday, the submission deadline is the next working day.

CHAPTER IV
INVESTMENT GUIDELINES FOR EMPLOYER-SPONSORED PENSION FUNDS

Article 15

(1) The Founder of DPPK, or the Founder and Supervisory Board of DPPK must establish Investment Guidelines.

(2) Investment Guidelines as referred to in paragraph (1) must at least contain the following:
a. quantitative investment return targets that must be achieved by the DPPK Board of Directors; b. maximum proportion limits of DPPK wealth that can be placed in each type of investment;
c. maximum proportion limits of DPPK wealth that can be placed in one Counterparty;
d. prohibited investment objects for DPPK wealth placement; e. minimum liquidity provisions for DPPK investment portfolios to support fund availability for pension benefit payments and DPPK operational costs; f. provisions containing the obligation to have standard operating procedures for investment and adequate studies for investment placement and divestment; g. supervision and reporting systems for investment management implementation; h. provisions regarding the use of experts, investment advisors, financial institutions, and other services used in investment management;
i. asset allocation strategies adjusted to the DPPK liability profile; and
j. sanctions that DPPK will impose on the DPPK Board of Directors for violations of investment provisions established in the Pension Fund Law and its implementing regulations.

(3) In the event that DPPK makes changes to the Investment Guidelines as referred to in paragraph (1) and paragraph (2), DPPK must report such changes to the OJK no later than 30 (thirty) days from the date the changes to the Investment Guidelines were established.

(4) In the event that the OJK requests DPPK to revise the Investment Guidelines to comply with legislation, DPPK must submit a report regarding such revisions to the OJK no later than 30 (thirty) days from the date the revisions to the Investment Guidelines were established.

(5) If the deadline for submitting reports on changes to the Investment Guidelines as referred to in paragraph (3) and submission of reports on revisions to the Investment Guidelines as referred to in paragraph (4) falls on a holiday, the submission deadline for the reports is the next working day.

CHAPTER V
BOARD OF DIRECTORS OBLIGATIONS IN MANAGING EMPLOYER-SPONSORED PENSION FUND INVESTMENTS

Article 16

(1) The DPPK Board of Directors must carry out investment management in accordance with the Investment Guidelines as referred to in Article 15.

(2) The DPPK Board of Directors must act professionally and prudently so that investment decisions taken are objective investment decisions, solely for the interests of Participants, DPPK, and/or the employer.

Article 17

(1) The DPPK Board of Directors must prepare an annual investment plan that at least contains:
a. plans for the composition of investment types; b. estimated investment return rates for each type of investment; and
c. considerations underlying the plan for the composition of investment types.

(2) The annual investment plan as referred to in paragraph (1) must be an elaboration of the Investment Guidelines and reflect the application of risk diversification principles and objective investment decisions as referred to in Article 16 paragraph (2).

Article 18

The use of services in DPPK investment management or the utilization of advice, suggestions, opinions, and other matters from third parties other than those established in the Investment Guidelines as referred to in Article 15 and the annual investment plan as referred to in Article 17 paragraph (1) which may influence the DPPK Board of Directors in making decisions or actions in the framework of implementing DPPK wealth management, does not reduce the Board of Directors' obligation to comply with applicable provisions in DPPK investment and does not eliminate the DPPK Board of Directors' responsibility for the implementation of said investment.

CHAPTER VI
TRANSFER OF INVESTMENT MANAGEMENT FOR EMPLOYER-SPONSORED PENSION FUNDS

Article 19

(1) DPPK investment management may be transferred to a financial institution having expertise in investment management as referred to in Article 30 paragraph (4) of Law Number 11 of 1992 concerning Pension Funds.

(2) DPPK investment management by financial institutions as referred to in paragraph (1) is prohibited from deviating from provisions of legislation in the field of Pension Funds.

(3) Financial institutions as referred to in paragraph (1) that are securities companies having permits to act as Investment Managers must meet the following requirements:
a. having a securities business permit to conduct activities as an Investment Manager from the OJK; b. not currently subject to administrative sanctions in the form of business activity restrictions, suspension of business activities, or revocation of business permits by the OJK;
c. able to manage investment portfolios in accordance with legislation in the field of Pension Fund investment;
d. having experience in managing Mutual Funds for at least 3 (three) years and having positive average performance for the Mutual Funds managed; and e. having functions as regulated in legislation in the field of capital markets regarding guidelines for the implementation of Investment Manager functions.

(4) The transfer of DPPK investment management to financial institutions as referred to in paragraph (1) must be made in a written agreement in the form of a notarial deed and refer to legislation in the field of capital markets.

(5) DPPK that transfers wealth management to financial institutions as referred to in paragraph (1) must entrust the transferred wealth to a Custodian appointed by the DPPK Founder and who does not have an Affiliation relationship with said financial institution.

(6) The transfer of wealth management as referred to in paragraph (1) does not reduce the responsibility of the DPPK Board of Directors.

CHAPTER VII
CONTROL OVER INVESTMENT MANAGEMENT OF PENSION FUNDS

First Section
Investment Reports

Article 20

(1) Pension Funds must submit to the OJK:
a. annual investment reports; and b. audit results of public accountants over the annual investment reports.

(2) The obligation to submit audit results of public accountants over annual investment reports as referred to in paragraph (1) letter b does not apply to DPPK that meet the following criteria:
a. during the fiscal year, DPPK investments consist only of time deposits at Banks, on-call deposits at Banks, deposit certificates at Banks, Government Securities, and/or securities issued by Bank Indonesia; and b. at the end of the fiscal year, the amount of DPPK investments is less than Rp100,000,000,000.00 (one hundred billion rupiah).

Article 21

(1) Annual investment reports as referred to in Article 20 paragraph (1) letter a must at least contain:
a. a statement from the Board of Directors regarding the compliance of the investment portfolio with:

1. provisions of legislation governing Pension Fund investment;
2. Investment Guidelines for DPPK; and
3. investment type choices by Participants for DPLK;
   b. a report on portfolio development and investment results of the Pension Fund; and
   c. an analysis regarding investment activities.

(2) Analysis regarding investment activities as referred to in paragraph (1) letter c must at least cover an evaluation of:
a. the implementation of risk diversification principles and objective investment decisions; b. the implementation of Board of Directors responsibilities as referred to in Article 13 paragraph (4);
c. investment compliance with Investment Guidelines provisions;
d. the amount and composition of investment portfolios for each investment package or type of investment offered by DPLK; and e. the amount and characteristics of investments in Parties having an Affiliation relationship with the Pension Fund.

(3) Audit results of public accountants over annual investment reports as referred to in Article 20 paragraph (1) letter b must contain:
a. the accountant's opinion on the Board of Directors' statement as referred to in paragraph (1) letter a; and b. a report on the annual investment report as referred to in paragraph (1).

(4) Pension Funds that submit audit results of public accountants over annual investment reports as referred to in paragraph (3) are deemed to have submitted annual investment reports as referred to in Article 20 paragraph (1) letter a.

(5) Further provisions regarding the form and structure of annual investment reports as referred to in paragraph (1) are regulated in an OJK Circular.

Article 22

For Pension Funds audited by the OJK in the 3 (three) month period before the end of the fiscal year, the public accountant's audit of annual investment reports as referred to in Article 20 paragraph (1) letter b may be conducted simultaneously with the audit of investment reports for the following fiscal year.

Article 23

The Board of Directors must submit annual investment reports and audit results of public accountants over annual investment reports as referred to in Article 20 paragraph (1) letter a and letter b to the Founder and Supervisory Board.

Second Section
Evaluation of Pension Fund Investment Performance

Article 24

(1) The Supervisory Board must evaluate the investment performance of the Pension Fund at least 2 (two) times for 1 (one) fiscal year.

(2) The evaluation as referred to in paragraph (1) is based on among others:
a. annual investment reports and audit results of public accountants over annual investment reports as referred to in Article 20 paragraph (1) letter a and letter b; and b. opinions and suggestions from Participants to the Founder, Supervisory Board, and Board of Directors regarding the development of portfolios and investment results of Pension Fund wealth.

(3) The evaluation as referred to in paragraph (1) must at least cover the reasonableness of the Board of Directors' reasons for explaining the discrepancy between Pension Fund investment performance and Investment Guidelines and annual investment plans.

(4) The Supervisory Board must submit semi-annual reports on the evaluation of Pension Fund investment performance to the OJK no later than 3 (three) months after the end of the semester.

(5) The Supervisory Board may propose to the Founder to impose sanctions on the Board of Directors if the results of the evaluation as referred to in paragraph (3) show that the Board of Directors' reasons for explaining the discrepancy between Pension Fund investment performance and Investment Guidelines and annual investment plans are not acceptable.

Third Section
Transparency of Pension Fund Investment Management

Article 25

(1) The Board of Directors must announce to Participants:
a. a summary of annual investment reports and audit results of public accountants over annual investment reports as referred to in Article 20 paragraph (1) letter a and letter b no later than 1 (one) month after submission to the OJK; and b. a summary of the Supervisory Board's evaluation results as referred to in Article 24 paragraph (1).

(2) The Board of Directors must establish procedures for Participants to submit opinions and suggestions as referred to in Article 24 paragraph (2) letter b.

CHAPTER VIII
REPORTING

Article 26

(1) Audit results of public accountants over annual investment reports as referred to in Article 20 paragraph (1) letter b must be submitted to the OJK simultaneously with the submission of audited annual financial reports.

(2) Pension Funds not required to submit audit results of public accountants over annual investment reports because they meet the criteria as referred to in Article 20 paragraph (2) must submit annual investment reports as referred to in Article 20 paragraph (1) letter a no later than 2 (two) months after the end of the Pension Fund's fiscal year.

(3) If the deadline for submitting audit results of public accountants over annual investment reports and annual investment reports as referred to in paragraph (1) and paragraph (2) falls on a holiday, the submission deadline for the reports is the next working day.

Article 27

(1) Submission of annual investment reports and audit results of public accountants over annual investment reports as referred to in Article 20 paragraph (1) must be done in the form of:
a. physical documents (hard copy); and b. electronic documents submitted via email or the OJK data communication network system.

(2) Further provisions regarding the procedures for submitting reports as referred to in paragraph (1) are regulated in an OJK Circular.

CHAPTER IX
SANCTION PROVISIONS

Article 28

(1) Pension Funds that do not comply with the provisions of Article 14 paragraph (1), Article 14 paragraph (5), Article 14 paragraph (6), Article 14 paragraph (8), Article 15 paragraph (1), Article 15 paragraph (2), Article 15 paragraph (3), Article 15 paragraph (4), Article 17, Article 20 paragraph (1), Article 23, Article 24 paragraph (1), Article 24 paragraph (4), Article 25, Article 26 paragraph (1), Article 26 paragraph (2), and Article 27 paragraph (1) shall be subject to administrative sanctions in the form of written reprimands.

(2) In the event that Pension Funds cannot comply with the provisions in Article 2 paragraph (1), Article 3, Article 4, Article 5, Article 6, Article 7, Article 8 paragraph (1), Article 8 paragraph (2), Article 8 paragraph (3), Article 8 paragraph (5), Article 8 paragraph (8), Article 9 paragraph (1), Article 9 paragraph (3), Article 9 paragraph (5), Article 9 paragraph (6), Article 9 paragraph (8), Article 10 paragraph (1), Article 11 paragraph (1), Article 11 paragraph (4), Article 11 paragraph (5), Article 12, Article 16, Article 19 paragraph (2), Article 19 paragraph (3), Article 19 paragraph (4), Article 19 paragraph (5), Article 21 paragraph (1), Article 21 paragraph (2), and Article 21 paragraph (3), the OJK shall submit a written notification to the Pension Fund to comply with the said provisions within a period of at most 40 (forty) working days calculated from the date of notification from the OJK.

(3) If the period as referred to in paragraph (2) has expired and the Pension Fund cannot comply with the provisions as referred to in Article 2 paragraph (1), Article 3, Article 4, Article 5, Article 6, Article 7, Article 8 paragraph (1), Article 8 paragraph (2), Article 8 paragraph (3), Article 8 paragraph (5), Article 8 paragraph (8), Article 9 paragraph (1), Article 9 paragraph (3), Article 9 paragraph (5), Article 9 paragraph (6), Article 9 paragraph (8), Article 10 paragraph (1), Article 11 paragraph (1), Article 11 paragraph (4), Article 11 paragraph (5), Article 12, Article 16, Article 19 paragraph (2), Article 19 paragraph (3), Article 19 paragraph (4), Article 19 paragraph (5), Article 21 paragraph (1), Article 21 paragraph (2), and Article 21 paragraph (3), then the relevant Pension Fund shall be subject to administrative sanctions in the form of written reprimands.

(4) The imposition of administrative sanctions in the form of written reprimands as referred to in paragraph (1) or paragraph (3) for each type of violation shall be imposed at most 3 (three) times consecutively with a period of at most 1 (one) month each.

(5) In the event that the OJK assesses that the type of violation committed cannot be resolved within the period as referred to in paragraph (4), the OJK may establish a longer period than 1 (one) month, provided that the said period is at most 1 (one) year.

(6) In the event that a Pension Fund has been subject to administrative sanctions up to the third written reprimand and has not yet resolved the cause of the sanctions, the OJK may provide additional sanctions in the form of:
a. termination of investment management by the financial institution; b. reduction of the risk assessment level score;
c. re-evaluation of competence and propriety for the Supervisory Board, Board of Directors, and/or Acting Board of Directors; and/or
d. issuance of written orders to the Founder to replace the Supervisory Board, Board of Directors, and/or Acting Board of Directors.

CHAPTER X
TRANSITIONAL PROVISIONS

Article 29

Provisions regarding the content and structure of annual investment reports of Pension Funds and regarding the preparation of financial reports and investment valuation bases for Pension Funds are declared to remain in force until the establishment of an OJK Circular as implementing provisions of this OJK Regulation.

CHAPTER XI
CLOSING PROVISIONS

Article 30

At the time this OJK Regulation comes into force, provisions regarding Pension Fund investment shall be subject to this OJK Regulation.

Article 31

This OJK Regulation comes into force on the date of its promulgation.

To ensure that everyone knows it, it is ordered to promulgate this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on March 31, 2015

CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,
Signed,
MULIAMAN D. HADAD

Promulgated in Jakarta on April 16, 2015

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Signed,
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 82

A copy in accordance with the original
Director of Legal Affairs I
Ministry of Law,
Signed,
Sudarmaji

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 3/POJK.05/2015
CONCERNING
PENSION FUND INVESTMENTS

I. GENERAL

Pension Funds are legal entities established with the purpose of ensuring income continuity for Participants when they reach retirement age. To achieve this goal, Pension Fund wealth must be managed healthily and professionally so that the pension program can be successfully implemented.

The process of globalization in the financial system and the rapid advancement in information technology as well as innovations in the financial sector have driven the creation of various types of investment instruments in the financial market. This provides opportunities and room for maneuver for investors, including Pension Funds, to implement better investment strategies so as to be able to obtain more optimal investment returns.

Pension Fund investment management must be conducted healthily and prudently. In managing their investments, Pension Funds must always maintain a maturity balance between investments and liabilities (asset-liability matching). This effort needs to be done so that in the short, medium, and long term, Pension Funds can meet benefit payment obligations to Participants. For this reason, Pension Funds need investment instruments that are short, medium, and long-term in nature while still prioritizing risk management aspects and good governance.

Pension Funds, as one of the sources of long-term financing, play a strategic role in supporting national economic growth, including in infrastructure development in Indonesia. This can be done by Pension Funds through investments in stocks, bonds, direct participation, land and buildings, and others.

Based on the above, it is necessary to regulate Pension Fund investments that can accommodate the needs of Pension Funds in achieving optimal investment returns, healthy asset-liability management, and increasing the role of Pension Funds in national economic development.

II. ARTICLE BY ARTICLE

Article 1

Clear enough.

Article 2

Paragraph (1)
Letter a

Clear enough.

Letter b

Clear enough.

Letter c

Clear enough.

Letter d

Clear enough.

Letter e

Clear enough.

Letter f

Clear enough.

Letter g

Clear enough.

Letter h

The type of corporate bonds referred to in this letter includes subordinated bonds/subdebt listed on the Indonesia Stock Exchange.

Letter i

Clear enough.

Letter j

This type of MTN investment can be included in the framework of infrastructure financing, venture capital, and other financing.

Letter k

Asset-backed securities include among others asset-backed securities from collective investment contracts and asset-backed securities in the form of participation certificates.

Letter l

Clear enough.

Letter m

Clear enough.

Letter n

Clear enough.

Letter o

Clear enough.

Letter p

Clear enough.

Letter q

Clear enough.

Paragraph (2)

Types of investments using Sharia principles as referred to in this paragraph include among others:
a. Sharia banking products as regulated in laws concerning Sharia banking, including Sharia savings and deposits; b. Sharia government securities (sukuk);
c. corporate sukuk;
d. Sharia mutual funds; e. Sharia asset-backed securities; f. Sharia real estate investment funds; and g. Sharia MTN.

Paragraph (3)

Provisions regulated in the OJK Circular are the basis for valuing each type of investment for financial and investment reporting of Pension Funds.

Article 3

Clear enough.

Article 3
It is clear enough.

Article 4
It is clear enough.

Article 5
Paragraph (1)
It is clear enough.
Paragraph (2)
Letter a
The placement of Pension Fund representatives in the membership of the Board of Commissioners of a limited liability company is to maintain and protect the interests of the Pension Fund as a shareholder. Letter b It is clear enough. Paragraph (3) It is clear enough.

Article 6
Paragraph (1)
Letter a
It is clear enough.
Letter b
It is clear enough.
Letter c
What is meant by having adequate risk management includes at least:
a. active supervision by the Management and Supervisory Board to carry out the management and supervision functions of the Pension Fund; b. adequacy of policies, procedures, and risk limit determinations;
c. adequacy of processes for risk identification, measurement, monitoring, and control;
d. risk management information systems; and e. internal control systems that are comprehensive.
Letter d
It is clear enough.
Paragraph (2)
It is clear enough.

Article 7
It is clear enough.

Article 8
It is clear enough.

Article 9
Paragraph (1)
It is clear enough.
Paragraph (2)
It is clear enough.
Paragraph (3)
It is clear enough.
Paragraph (4)
It is clear enough.
Paragraph (5)
It is clear enough.
Paragraph (6)
Letter a
It is clear enough.
Letter b
A monitoring agent is a party that performs functions as a trustee.
Such monitoring agents are intended to fulfill the principle of prudence for the Pension Fund in making investments in Medium-Term Notes (MTN).
Letter c
It is clear enough.
Paragraph (7) ...

Paragraph (7)
What is meant by managed by the same Investment Manager is, if the Pension Fund has investment types in Mutual Funds, asset-backed securities, and real estate investment funds that are managed by one or more Investment Managers, then the calculation of investment limits on one Party involves grouping the aforementioned investment types based on their Investment Manager. Example:
Pension Fund A has the following investment types:

Investment Type	Investment Manager	Fair Value of Investment
Mutual Fund 1	A	Rp100,000,000.00
Mutual Fund 2	B	Rp200,000,000.00
Asset-backed Security 1	A	Rp300,000,000.00
Asset-backed Security 2	C	Rp200,000,000.00
Real Estate Investment Fund 1	B	Rp200,000,000.00
Real Estate Investment Fund 2	A	Rp100,000,000.00

Based on the data above, the grouping based on Investment Manager is as follows:

Investment Manager	Investment Type	Fair Value of Investment
A	Mutual Fund 1	Rp100,000,000.00
	Asset-backed Security 1	Rp300,000,000.00
	Real Estate Investment Fund 2	Rp100,000,000.00
	Total	Rp500,000,000.00
B	Mutual Fund 2	Rp200,000,000.00
	Real Estate Investment Fund 1	Rp200,000,000.00
	Total	Rp400,000,000.00
C	Asset-backed Security 2	Rp200,000,000.00
	Total	Rp200,000,000.00

Paragraph (8)
It is clear enough.
Paragraph (9)
It is clear enough.

Article 10 ...

Article 10
It is clear enough.

Article 11
It is clear enough.

Article 12
It is clear enough.

Article 13
It is clear enough.

Article 14
Paragraph (1)
What is meant by the Management of the Pension Fund Management Board (DPPK) in this paragraph is at least the Chairman of the DPPK Management and DPPK Management members specializing in investments. Paragraph (2) It is clear enough. Paragraph (3) It is clear enough. Paragraph (4) It is clear enough. Paragraph (5) It is clear enough. Paragraph (6) It is clear enough. Paragraph (7) What is meant by the Management of the Pension Fund Management Board (DPPK) in this paragraph is at least the Chairman of the DPPK Management and DPPK Management members specializing in investments. Paragraph (8) It is clear enough.

Article 15 ...

Article 15
Paragraph (1)
Investment Instructions are established by the Founder for Pension Funds that administer defined benefit pension programs and are established by the Founder and the Supervisory Board for Pension Funds that administer defined contribution pension programs. Paragraph (2) Letter a. Investment return targets in Investment Instructions are set quantitatively and are long-term in nature, taking into account liabilities. Letter b. It is clear enough. Letter c. It is clear enough. Letter d. It is clear enough. Letter e. It is clear enough. Letter f. It is clear enough. Letter g. It is clear enough. Letter h. It is clear enough. Letter i. It is clear enough. Letter j. It is clear enough. Paragraph (3) It is clear enough. Paragraph (4) It is clear enough. Paragraph (5) It is clear enough.

Article 16 ...

Article 16
It is clear enough.

Article 17
It is clear enough.

Article 18
It is clear enough.

Article 19
Paragraph (1)
What is meant by financial institutions that have expertise in investment management includes, among others, securities companies that have licenses to act as Investment Managers. The transfer of DPPK investment management to Investment Managers is usually carried out based on fund management contracts as regulated in capital market legislation. Paragraph (2) It is clear enough. Paragraph (3) Letter a. It is clear enough. Letter b. It is clear enough. Letter c. It is clear enough. Letter d. The positive performance referred to is above the industry average for each type of investment, using the weighted average performance benchmark of Investment Managers in managing similar Mutual Funds. Letter e. It is clear enough. Paragraph (4) It is clear enough. Paragraph (5) ...

Paragraph (5)
It is clear enough.
Paragraph (6)
It is clear enough.

Article 20
It is clear enough.

Article 21
It is clear enough.

Article 22
It is clear enough.

Article 23
It is clear enough.

Article 24
It is clear enough.

Article 25
It is clear enough.

Article 26
It is clear enough.

Article 27
It is clear enough.

Article 28
Paragraph (1)
It is clear enough.
Paragraph (2)
It is clear enough.
Paragraph (3)
It is clear enough.
Paragraph (4)
It is clear enough.
Paragraph (5) ...

Paragraph (5)
It is clear enough.
Paragraph (6)
Letter a
It is clear enough.
Letter b
It is clear enough.
Letter c
The re-evaluation of the ability and propriety to be undergone by the Supervisory Board, Management, and/or Acting Management is a re-evaluation of ability and propriety after becoming the Supervisory Board, Management, and/or Acting Management as a sanction for violations committed by the Pension Fund against the provisions of this OJK Regulation. Letter d It is clear enough.

Article 29
It is clear enough.

Article 30
It is clear enough.

Article 31
It is clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5692