The Group is an Agri-Business company in Indonesia committed to the responsible management of its business operations in sustainable manner, by observing all environmental, social, and economic issues in all its operational activities.

This company policy is to be implemented as follows :

• To comply with all governmental laws and regulations relating to the company's operation

• To provide equal chance and opportunity for all employees to participate and to join in a labour organization / union and to develop their personal career in accordance with their ability.

• To protect the reproductive rights of employees, forbid the employment of underaged children, and to prevent incidents of sexual harassment in work place.

• To prevent any occurrences of environmental pollution, accidents and any occupational diseases by ensuring that environmental , health and safety considerations are integral at any stage of company activities and to continuously seek improvement in performance.

• To enforce a Zero Burning policy for land clearing during replanting and development of new plantations.

• To facilitate and to encourage energy conservation practices and to promote the recycling of all estate and mill by-products in all operational activities.

• To provide employment and new business opportunities for local communities in accordance with people and company capabilities and to develop adequate socio-economic plans through a Corporate Social Responsibility (CSR) programme.

• To maintain biodiversity and areas that have High Conservation Value (HCV) in the company's operational areas.

• To increase employees' knowledge and competence in environmental and occupational health and safety issues.

Advocating transparency to all stakeholders, the Group ensures that this policy is documented, reviewed and communicated to all employees, and implemented through clear action plans.

IndoAgri is committed to high standards of Corporate Social Responsibility ("CSR"). As a responsible operator IndoAgri places strong emphasis on the social impacts of its business operations. Plantations by their very nature have a strong social impact role to play, and need to integrate their social policies to the sustainable business model. The plantation business is a long term investment, and this goes hand in hand with the development of sound CSR practices.

IndoAgri engages with local communities to enhance literacy rates, sharpen skills and competitiveness, while improving the health and well being of both young and old.

In the process of implementing community development initiatives, our leaders have acquired new skills and knowledge that offer an appreciation of societal needs, and an enhanced ability to collaborate across profit and non-profit boundaries.

Our focused efforts over the past year include the following:

Education

In 2012, education was a chief priority in our efforts to uplift local population. Notable programmes included the development of learning and literacy centres; building and rehabilitating local schools; and offering vocational internships. IndoAgri also regularly contributes learning aids and teaching tools such as textbooks, furniture, science labs and computers; children of employees also receive free education.

Across several plantation locations, we launched Rumah Pintar or “Smart House”. Smart House consists of five learning centres, respectively dedicated to Books, Computers, Audio-Visual resources, Play and Crafts. The objective of Smart House is to spur creativity while enhancing literacy for both children and adults. The programme was jointly developed with the Solidarity of United Indonesia Cabinet Wives. To date, IndoAgri has launched five Smart Houses out of 20 planned. Smart Houses are currently in operation in Riau (two units), North Sumatra (one unit), West Kalimantan (one unit), and South Sulawesi (one unit).

In East Kalimantan, we drove a programme designed to improve literacy rates and provide facilities for reading. The Reading Centre BUNGA (Books for the Nations) programme provides books that support academic curricula for children, while creating spaces for them to browse and read. Recognising the fundamental need for effective schooling, we built a total of 13 grade schools, four junior high schools and three high schools in Riau, providing free education for our employees' children. Taking our efforts further, we provided support to a government-managed junior high school in West Kalimantan, and encouraged local educators with teaching awards across seven schools in West and East Kalimantan.

Finally, we took education into the field by offering vocational internships in our Riau estates, where learners were exposed to automotive and other technical expertise that would prove useful for eventual employment after graduation.

Improving Smallholder Livelihoods

In 2012, we focused on supporting plasma farmers by providing agronomic advice along with production management, administration and financial assistance. As a result, 36 farmers in the Riau area benefited from fertilisation and pest management education for oil palm and rubber cultivation. We also embarked on a training and a cultivation programme for freshwater fish farms. All in all, we administer around 83,000 hectares of oil palm and 4,000 hectares of rubber under the plasma scheme, and support around 50,000 plasma farmers for oil palm, rubber and sugar cane plantations.

Community Health

We take the health of our employees and their families very seriously. Local health clinics and hospitals are often too far away from our plantations to provide effective medical care. Therefore, we provide public health infrastructure by building medical clinics and emergency care units that extend their services to surrounding communities. For staff, additional assistance is provided in the form of medical allowance, routine check-ups and health insurance.

Employees are also covered under a social security programme (Jamsostek), which provides death, accident and retirement benefits. Supporting the UN's Millennium Development Goals (MDGs), the Group has a special programme for pregnant mothers, providing free immunisations, vitamins, diagnostic, medical and dental services in order to minimise infant mortality rates.

Infrastructure/Public Facilities

In 2012, we helped build and repair roads and bridges in Riau and Kalimantan, improving transportation networks and access for local communities. We also provided assistance in the development of public infrastructure, including the city park and local wet markets.

Religious Infrastructure

A key part of plantation infrastructure is the provision of places of worship such as mosques and churches for employees and families. This represents our efforts to remain culturally appropriate and sensitive to local faith practice in our surrounding communities. We also contribute to the building and repair of mosques and churches, and distribute Lebaran and Christmas packages to less advantaged families.

Sports & Youth, Arts & Culture

We contribute facilities for sports and recreation, and organise and/or sponsor local tournaments and musical and cultural performances to encourage community bonding and team spirit.

IndoAgri considers environmental compliance and protection to be an integral and critical part in the conduct of its operations and it is committed to achieving high standards of environmental management and sustainable production of crude palm oil.

Each of IndoAgri's oil palm plantations and processing plants operate according to stringent environmental management plans to regulate any environmental impact and monitor the production and disposal of waste products.

All of IndoAgri's oil palm plantations are located in Indonesia where the responsibility for environmental regulation and supervision lies with the Local Environmental Impact Management Agency (or Badan Pengendalian Dampak Lingkungan Daerah) ("BAPEDALDA"). The Indonesian government has the power to take action against Indonesian companies for failure to comply with its environmental and forestry regulations. The Indonesian government imposes fines and/or revokes the licences and concessions of non-compliant companies .

IndoAgri's principal environmental concerns relate to the discharge of effluent and waste resulting from the milling of FFB and the refining of edible oils, and land clearance for plantation development. IndoAgri has a zero burning policy for clearing its plantation land and intends to maintain such policy in its future development of plantation land. Hence IndoAgri adopts full mechanical methods to fell trees at replanting and land clearing and stacks them in order to create planting rows and intends to apply such methods, in relation to the development of existing plantation land as well as plantation land to be acquired by it in the future. IndoAgri is solely operating oil palm plantations and refineries and is not involved in clearing tropical rain forest for conversion to oil palm.

An example of IndoAgri's approach to environmental sustainability can be demonstrated by the use of barn owls to control rats. Rats are among the most prevalent pests in all oil palm plantations in Indonesia that are potentially very damaging and hence must be controlled estate wide on a regular basis. This is normally done using rodenticides. Rat baits containing powerful third generation anti-coagulant rodenticides are generally applied in a campaign of twice a year. These practices besides those of herbicides- and some insecticides-applications would introduce large amount of rather wide-spectrum chemicals into the eco-system.

The barn owl was introduced into the IndoAgri Plantations in 1997 to control rats and since the year 2000 rats in all of IndoAgri's plantations in Riau (57,000 Ha) have been effectively controlled using barn owls without resorting to any rodenticides. Therefore the population of rats in the field have since 2000 been maintained below economic damaging threshold. Our system and method are completely biological and incompatible with any usage of rodenticides even in a limited area and over a limited time period. We use zero rodenticides in all of IndoAgri plantations in Riau where the barn owl has established its population under a carefully monitored environment favouring their habitat for hunting rats and breeding activities. The barn owl has been breeding in those plantations producing around 10,000 new young birds every year at approximately 2,500 nest boxes distributed throughout the estates. We are expanding the use of barn owls to other estates, which in turn will reduce our overall use of rodenticides. The success story of rat control at IndoAgri using barn owl has been documented among others in the Proceedings of the ISP Conference, Kuala Lumpur, May 2000.

IndoAgri's internal environmental and social development policies emphasise and include the following elements:-

• Compliance with statutory and regulatory environmental standards;
• Commitment towards developing land for its oil palm plantations in accordance with Indonesian regulations including an active no-burn policy;
• Commitment towards managing its oil palm operations in a manner consistent with internationally recognised management practices; and
• Commitment towards improving community and social relations.

As a processor of palm oil, IndoAgri's operations are subject to various regulations by governmental agencies in Indonesia relating to production processes, waste removal procedures, storage and distribution. All of IndoAgri's processing plants have waste treatment equipment and internal environmental personnel to help monitor compliance with environmental standards and identify opportunities for improvement.

IndoAgri through its subsidiaries PT SIMP and PT PP London Sumatra Indonesia Tbk (Lonsum), is a member of the Roundtable on Sustainable Palm Oil (RSPO). IndoAgri believes its business operations are conducted in accordance with the RSPO's Principles and Criteria for Sustainable Palm Oil.

On 30th April, 2009, all of Lonsum's North Sumatra estates and factories as being producers of crude palm oil had been certified fully conforming to the RSPO's Principles & Criteria for sustainable palm oil production. The certificate from RSPO's independent accredited auditor, TÜV Nord, had been achieved through the two month audit in late 2008, which itself follows Lonsum four year journey to conformity. However, we acknowledge that this achievement is part of a never ending journey to ever higher standards of corporate social responsibility.

A positive development for this Division in 2012 was the attainment of RSPO certification for 53,000 tonnes of CPO at two estates and one oil palm mill in Riau. This brings the Group's total certified CPO production to approximately 248,000 tonnes (roughly 28% of 2012's total CPO output and total planted palm area), demonstrating our continued commitment to sustainable agriculture.