PERFORMANCE OVERVIEW 12 REPORT TO THE SHAREHOLDERS 19 GOOD CORPORATE GOVERNANCE 140

CONTENTS

3. COMPANY PROFILE 33

Company’s Name and Address 35 PGN’s Group Structure 36 Company History in Brief 38 Lines of Business 38 Business Activities 38 Product or Services Produce 39 Business Unit 44 Organization Structure 46 Vision and Mission 47 Corporate Culture 50 Proiles of The Board of Commissioners 52 Proiles of The Board of Directors 54 Human Resources 54 Proile and Number of Employees 54 Number of Employees Based on Employment Status 54 Number of Employees By Organizational Level 55 Number of PGN and Subsidiary Employees by Education Level in 2015 56 Competency Development 60 Expenses 61 Composition of Shareholders 62 5 or More Shares Ownership as per December 31, 2015 62 Information of Majority Shareholders 62 Shares Ownership by The Members of Board of Commissioners and The Board of Directors as per December 31, 2015 63 Information of Subsidiary and Afiliated Companies 65 PT Saka Energi Indonesia 66 PT Gagas Energi Indonesia 67 PT PGN LNG Indonesia 68 PT PGAS Telekomunikasi Nusantara 69 PT Transportasi Gas Indonesia 70 PT PGAS Solution 70 PT Permata Graha Nusantara 71 PT Kalimantan Jawa Gas 71 PT Nusantara Regas 72 Stock Listing Chronology 74 Chronology of Other Securities Listing and Securities Rating 76 Name and Address of Institution and Capital Market Supporting Professionals 76 Securities Administration Bureau 76 Public Accountant Firm 76 PT Pemeringkat Efek Indonesia PEFINDO 76 Standard Poor’s Rating Services 76 Moody’s Investors Services Singapore Pte. Ltd. Sdf 76 Fitch Ratings Singapore Pte. Ltd. 76 Indonesia Stock Exchange 76 PT Kustodian Sentral Efek Indonesia KSEI 78 Awards and Certiications 82 Name and Address of Area Sales, Subsidiaries and Afiliates Ofices 84 Signiicant Events 2015

4. MANAGEMENT ANALYSIS AND DISCUSSION 91

Review of The Operations per Business Segment 91 Proitability per Business Segment 93 TransmissionTransportation Business Segment 94 TransmissionTransportation Business Segment Operating Performance 95 TransmissionTransport Business Segment Revenue 95 DistributionTrading Business Segment 96 Category of Gas Commercial or Distribution Customer 97 DistributionTrading Business Segment Operating Performance 99 Customer Proile 99 Number of Customer 100 Gas Price Adjustment 101 DistributionTrading Business Segment Revenue 101 Oil and Gas Business Segment Operating Performance 101 Oil and Gas Business Segment Operating Performance 102 Oil and Gas Business Segment Revenue 103 Other Business Segment 103 Other Business Segment Operating Performace 106 Description of The Financial Performance 106 Net Revenue 107 Cost of Revenue 109 Gross Proit 109 Distribution and Transmission Expenses 109 General and Administrative Expenses 109 Other Income 109 Other Expenses 110 Impairment of Oil and Gas Properties 110 Operating Proit 111 Finance Income 111 Finance Cost 111 Impairment on Goodwill 111 Loss on Foreign Exchange - net 111 Loss on Change in Fair Value of Derivative - net 112 Share in Proit of the Joint Venture 112 Proit Before Income Tax Beneit Expense 112 Tax Expense - Net 112 Other Comprehensive Income After Tax 113 Proit for Year Attributable to The Owners of The Parent Entity 113 Proit for The Year Attributable to Non- controlling interests 113 Total Comprehensive Income for The Year Attributable to Owners of The Parent Entity 113 Total Comprehensive Income for The Year Attributable to Non-controlling Interest 114 Asset 114 Current Assets 116 Short Term Investments 117 Trade Receivables 117 Other Receivables 1-11 Intro Page

1. PERFORMANCE OVERVIEW 12

Financial Highlight 12 Consolidated Statement of Comprehensive Income 13 Consolidated Statement of Financial Position 13 Financial Ratios 13 Stock Data 12 Financial Ratios 12 PGAS Share Price Movement 2011 – 2015 14 PGAS Share Price 2015 14 PGAS Share Price 2014

2. REPORT TO THE SHAREHOLDERS 19

Report From The Board of Commissioners 23 Report From The Board of Directors 31 Statement Letter of The Members of The Board of Commissioners and The Board of Directors on Annual Report 2015 117 Current Maturity of Advances 118 Trade Receivables Long-Term 118 Other Long-Term Receivables 118 Investment in Shares of Stock 118 Fixed Assets 118 Exploration and Evaluation Assets 118 Oil and Gas Properties 118 Estimated Claims for Tax Refund 118 Goodwill and Other Intangible Assets 119 Liabilities 119 Trade Payables 119 Accrued Liabilities 120 Other Payables 120 Deferred Tax Liability 120 Long-Term Loans 121 Bonds Payables 121 Assets Abandonment and Restoration Obligations and Other Provisions 121 Equity 122 Cash Flow 122 Cash Flows From Operating Activities 122 Cash Flows From Investing Activities 122 Cash Flows From Financing Activities 123 Debt Service Ratio 123 Receivables Collectability 123 Capital Structure 124 SEI’s Syndicated Loan 124 Management Policy on Capital Structure 124 Material Commitments for Capital Investments 124 Realization of Capital Investment 124 Target Achievement in 2015 126 Next Year target 128 Material Information After the Reporting Year 128 Business Prospect 130 Marketing Aspects 130 Market Shares 130 Marketing Strategies 133 Dividend Distribution Policies 133 Employee Stock Ownership Program andor Management Stock Ownership Program ESOPMSOP 134 Public offering Use of Proceeds 134 Information on Material Transaction With A Conlict of Interests and Transaction With Afiliates 135 Change in Legislative Regulations 136 Change in Accounting Policies 137 Information on Business Sustainability

5. GOOD CORPORATE GOVERNANCE 140

Implementation of Corporate Governance 140 Corporate Governance Structure 141 General Meeting of Shareholders GMS 142 Implementation of Annual General Meeting of Shareholders 2015 143 Resolution and Realization of AGMS 2015 In April 6, 2015 147 Information of Major Shareholder and Control 148 Board of Commissioners 148 Responsibilities of Board of Commissioners 148 Board of Commissioners Guidelines and Code of Conduct 149 Training Program to Improve The Board of Commissioners Competencies 150 Independent Commissioners 150 Requisites Criteria of Independent Commissioners 150 Independency of Individual Members of Independent Commissioners 150 Board of Directors 151 Scope of Work and Responsibilities of The Individual Member of The Board of Directors 151 President Director 152 Director of Technology and Development 152 Director of Commerce 152 Director of Finance 153 Director of Human Resources and General Service 153 Director of Investment Planning and Risk Management 154 Board of Directors Guidelines and Code of Conduct 154 Training Programs to Improve The Board of Directors Competencies 155 Assessment of Boards of Commissioners and Board of Directors 155 Assessment Procedure for Board of Commissioners and Board of Directors Performance 155 Assessment Criteria for Board of Commissioners and Board of Directors Performance 155 Assessor 156 Good Corporate Governance Assessment 158 Diversity of Board of Commissioners and Board of Directors Composition 158 The Board of Commissioners and Board of Directors Remuneration Policy 158 Board of Commissioners Remuneration Determination Procedures 158 Board of Directors Remuneration Determination Procedures 158 Board of Commissioners Remuneration Structure 160 Board of Directors Remuneration Structure 161 Indicators for Board of Directors Remuneration Determination 161 Member Attendance Frequency of Board ofCommissioners Meeting, Board of Directors Meeting, and Board of Commissioners and Board of Directors Join Meeting 168 Afiliated Relationships Among The Members of Board of Commissioners, Board of Directors, and Major Shareholders andor Controlling Shareholders 169 Committees 169 Audit Committee 169 Composition of Audit Committee Members 170 Proile of Audit Committee Members 171 Independency of Audit Committee Members 172 Duties and Responsibilities of Audit Committee Members 172 Authority of Audit Committee 173 Audit Committee Activities 173 Audit Committee Member Meeting Attendance Frequency 174 Nomination, Remuneration and Good Corporate Governance Committee 174 Composition of The Nomination, Remuneration and Good Corporate Governance Committee Members 174 Proile of Nomination, Remuneration and GCG Committee Members 177 Independency of Nomination, Remuneration and GCG Committee Members 177 Duties and Responsibilities of Nomination, Remuneration and GCG Committee 177 Authority of Nomination, Remuneration and GCG Committee 177 Nomination, Remuneration and GCG Committee Activities 178 Nomination, Remuneration and GCG Committee Meetings Attendance Frequency 178 Board of Directors Succession Policy 179 Risk Management and Business Development Monitoring Committee 179 Composition of Risk Management and Business Development Monitoring Committee Members 180 Proile of Risk Management and Business Development Monitoring Committee Members 181 Independency of Risk Management and Business Development Monitoring Committee Members 181 Duties and Responsibilities of Risk Management and Business Development Monitoring Committee 181 Authority of Risk Management and Business Development Monitoring Committee 181 Risk Management and Business Development Monitoring Committee Activities 182 Risk Management and Business Development Monitoring Committee Meeting Attendance Frequency 183 Board of Commissioners 183 Legal Basis and Services Period 183 Proile of Board of Commissioners Secretary 183 Duties of Board of Commissioners Secretary 184 Corporate Secretary 184 Legal Basis and Service Period 184 Function of Corporate Secretary 184 Duties of Corporate Secretary 185 Corporate Secretary Activities in 2015 185 Proile of Corporate Secretary 185 Training Program to Improve Corporate Secretary Competencies 186 Information Disclosure 186 Internal Audit Division 186 Proile of Division Head Internal Audit 186 Internal Audit Division Personnel Numbers 187 Internal Audit Certiications and Trainings 187 Internal Audit Authority, Duties and Responsibilities as In Accordance With Internal Audit Charter Audit Charter 187 Authority of Internal Audit Division 188 Duties of Internal Audit Division 188 Responsibilities of Internal Audit Division 188 Position of Internal Audit Division in Company’s Structure 189 Organizational Structure and Position of Internal Audit Division 189 Internal Audit Division Activities in 2015 189 Implementation of Regular Audit and Shareholder’s Audit to Subsidiaries 189 Assistances to External Auditor 189 Appointment and Discharge of Division Head Internal Audit 190 Internal Control System 190 Conformity of Internal Control System and COSO 190 Evaluation to Internal Control System Effectiveness 190 Preparation of Company’s Financial Statement 191 Public Accountant 192 Risk Management 192 Organizational Structure of Division Risk Management 193 Duties of Risk Management 193 Implementation of Company Risk Management System 193 Information System of Company Risk Management 194 Evaluation of Risk Management System Effectiveness 194 Company Risks and Risk Management 195 Improving Risk Awareness Culture 196 Material Cases Involving PGN 201 Information on Administrative Sanctions 201 Access to Company’s Data and Information 202 Code of Conduct 202 Code of Conduct Principles 207 Code of Conduct Application to All Organizational Level 207 Dissemination of Code of Conduct 207 Implementation and Enforcement of Code of Conduct 207 Good Corporate Governance Guideline 207 Business Ethic and Work Ethic Guideline 207 Board Manual 207 Sanction for Violation of Code of Conduct 207 Violation of Code of Conduct and Sanctions on 2015 208 Whistleblowing System 209 Violation Reporting 210 Protection to Whistleblowers 211 Report Handling 212 Parties Managing Violation Report 213 Results of Report Handling 213 Reporting Through Whistleblowing System in 2015

6. CORPORATE SOCIAL AND ENVIRONMENTAL RESPONSIBILITY 218