PT Perusahaan Perkebunan London Sumatra Indonesia Tbk : IndoAgri response on RAN letter 13th November 2020 to Various Stakeholder

Rainforest Action Network

For the attention of

Ginger Cassidy

Executive Director

15th December 2020: By e-mail

Dear Ms Cassidy,

Your letter dated 13th November 2020 to various banks and investment firms.

I refer to your letter dated 13th November 2020 to various stakeholders, which has been passed to us and sets out various allegations against PT Salim Ivomas Pratama Tbk ("SIMP") and PTPP London Sumatra Indonesia Tbk Ltd ("Lonsum"), both companies are listed on the Jakarta Stock Exchange. As listed companies both SIMP and Lonsum conduct their business activities responsibly, ethically and in full compliance with prevailing rules and regulations, and Indonesian Law, whilst fully respecting workers' rights. Given the significant factual errors and misrepresentations in your letter, we are responding with the facts.

Whilst you are fully aware that SIMP and its subsidiary Lonsum resigned from the RSPO on 8th February 2019 (see attached letter) you continue to claim that they were "ousted" in March 2019, whereas in fact we had already resigned by March 2019. Your statement is therefore both factually incorrect and misleading.

You also continue to refer to the RSPO allegation that Lonsum breached 10 Indonesian labour laws. In response to these allegations by RSPO we engaged a legal firm, Hiswara Bunjamin & Tandjung (in association with Herbert Smith Freehills - "HBT"), to conduct an independent legal review of these allegations, and to ensure that labour rights breaches are detected, reported and remedied. The findings of this review confirmed that Lonsum is in full compliance with Indonesian Labour laws. The report was sent to you in September 2019, and the report can be found at the following link.

http://indofoodagri.listedcompany.com/newsroom/independent_legal_review_confirms_PT_Lonsum_in _compliance_with_indonesian_labour_laws.pdf

You refer to statements by the labour union Serbundo as if they are meaningful. I would like to point out that as of 30th October 2020 Serbundo represents only 362 of our plantation workers, or less than 1% of our entire workforce. This union cannot fully represent our workforce as the remaining workers have independently and autonomously chosen to be represented by other unions. We have had union representation on our estates since 1973, with Serbundo joining in 2016, and we maintain a good relationship with our unions. I trust you will agree that the depth and variety of union membership in our workforce testify to the strength of our commitment to freedom of association as mandated in our policies and backed up by the full force of Indonesian law.

1. With respect to your assertions in points 1 to 9 in the annex to your letter, we confirm that Lonsum continues to comply with the applicable processes, regulations and laws of Indonesia in respect to all labour matters and resolves any disputes in accordance with applicable laws, whilst fully respecting workers' rights. Further details can be found in the appendix to this letter.

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2. The points raised in your letter of 13th November 2020 to various stakeholders continues to include factually false and misleading information and allegations. They are defamatory.

In light of the above, we object to your continued publication of any of these unsubstantiated allegations. If you persist in doing so, we expect you to also refer to our full response to your letter, failing which we reserve the right to make this response available to the public to provide a more complete and accurate statement of the facts.

Finally, we reserve all of our rights, including the right to take appropriate legal action against you, for any misinformation pertaining to our Companies, without further reference to you.

Yours faithfully

Muhammad Waras

Head of Sustainability

Indofood Agri Resources Ltd.

Cc	Herbert Smith Freehills
	Hiswara Bunjamin & Tandjung
	Recipients of RAN's letter of 13th November 2020

Appendix : Detailed response to the 9 allegations

Letters to Serbundo dated 4th November and 21st December 2019.

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Appendix: Detailed response to allegations of outstanding labour issues

1. Allegation: Union busting: Lonsum dismissed nearly 20 Serbundo officers in April, and its

management threatened to dismiss workers if they do not withdraw their membership from Serbundo, which would be a violation of the right to organize protected under Indonesian Trade Union Law. In June 2020, a palm oil worker reported to the North Sumatra Regional Police on allegations of criminal offence against the right to organize under Article 28 of the Workers/Labor Union Act of 2000. The investigation is ongoing.

Reply: We have a clear policy regarding freedom of association for all of our workers, as evidenced by 70% of our permanent workers being union members, and we enforce implementation of this policy in all our operations. We will not tolerate workers or managers who breach our policy, and in such cases we apply disciplinary sanctions. We remind all of our employees that they have the right to choose any labour union under the freedom of association stated in our internal memorandum No.016/HRD/C/VII/2018 which is available to all workers.

There are 362 Serbundo union members (less than 1% from our total workforce) registered in our operations as of 30th October 2020. Every employee has the freedom and right to choose their union membership. There has been no threat of prohibition of Serbundo membership. Without exception, we have resolved all labour issues through mediation with the workers or unions.

This is a summary of the 362 Serbundo Union members as at the end of October, their job function, and how long they have worked for us.

Summary of 362 Serbundo Members

Job Position	Years in Service	Total
1-5	>5 - 10	>10
Factory	8	12	17	37
Field Upkeep Worker	8	6	23	37
Harvest/Pruner	73	47	18	138
Security	13	13	5	31
Transport & Workshop	35	30	22	87
Administration/General	11	6	15	32
Total	148	114	100	362

We have received confirmatory statements from the various Manpower Departments, confirming there are no reports of outstanding labour cases, let alone any cases related to freedom of association in our estates.

2. Allegation: Arbitrary dismissal: According to records and interviews, 567 plantation workers affiliated with Serbundo were allegedly laid off between November 2019 and April 2020 for reasons of "efficiency/rationalization" without the approval of the Industrial Relations Dispute Body (Lembaga Perselisihan Hubungan Industrial) as mandated by Indonesian Labour Law. In at least two estates, Serbundo found that the company had hired new employees between December 2019 and August 2020 after workers were dismissed in this way, putting into question the

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company's reason for dismissal. Lonsum also refused to engage in bipartite negotiations with Serbundo to discuss alternative solutions to dismissal.

Reply: As is normal commercial practice in the plantation sector, we constantly review the requirement for labour based on standard ratios of employee requirements, productivity and job requirements. This is also impacted by field activities (including replanting programmes) and the crop yields. This can result in increasing or decreasing labour numbers as appropriate. When we have to lay off workers, it is related to requirements for their job function, not to union membership. We ensure that any process of cessation of employment or layoff complies with UU No. 13 tahun 2003 and that the process is in accordance with bipartite meetings between the company, employees and labour unions. Such mutual agreement is notified to the Local Manpower Department in every single case.

As part of our review of labour requirements and efficiency programmes in November 2019 and April 2020, there were 1,436 permanent workers laid off in Lonsum, of which 53 were members of Serbundo. The figure of 567 plantation workers who are members of Serbundo cannot be verified by us, because this may include temporary seasonal workers, who did not report their union membership to us. Of the 53 Serbundo members, 42 have signed a mutual agreement witnessed by the Serbundo Unit management, accepting the cessation of their employment and payment in accordance with Indonesian regulations. The remaining 11 are undertaking a settlement process through mediation and have brought the matter to the Industrial Relations Court. This is a normal procedure and Lonsum will follow the final decision of the Court.

3. Allegation: Severance pay: According to data collected by Serbundo union officers, of the 567 plantation workers, 477 workers that were employed as casual workers were laid off in circumstances where they were not provided with their entitled severance pay. The workers contend that their severance was contrary to their correct employment status as permanent employees and did not consider the full duration of their employment, with several having worked for Lonsum for over 20 years. The 4th November Industrial Relations Court ruling, referred to in our letter, confirmed all the temporary workers in the case to be permanently employed and ordered Lonsum to pay them severance pay.

Reply: The Company has paid the full severance pay in accordance with labour regulations (UU No 13 Tahun 2003 article 164, 156). Out of a total of 610 permanent employees who were laid off in North Sumatra (including 577 members of Serikat Pekerja Seluruh Indonesia "SPSI" union, 1 member of Serikat Pekerja Metal Indonesia "SPMI" union, 28 Serbundo union members and 4 with no Union affiliation) 98% agreed to the severance pay offered by the Company through bipartite agreement and the remaining 2% (11 Serbundo members) have taken the process to the Manpower Department and the Industrial Relations Court.

In line with the Ministerial Decree No. 100 of 2004, we do not pay severance pay to casual workers as their status is temporary, working less than 21 days in a month for seasonal jobs. This is clearly stated in the individual working agreements signed by every casual worker and acknowledged by the local labour agency.

Referring to the decision dated 4th November 2020, Lonsum has submitted an appeal with the Supreme Court (Mahkamah Agung) and we are waiting the final decision. This does not involve casual labour as stated in the allegation.

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