SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PT BANK MANDIRI PERSERO AND SUBSIDIARIES Notes to the Consolidated Financial Statements Continued December 31, 2002 and 2001 Expressed in millions of Rupiah, unless otherwise stated - 12 -

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued

b. Principles of Consolidation Continued For consolidation purposes, the financial statements of the overseas branches and overseas subsidiary of Bank Mandiri are translated into Rupiah on the following basis: 1 Assets, liabilities, commitments and contingencies - using the middle rates as published by Bank Indonesia at the balance sheet date. 2 Revenues, expenses, gains and losses - using the average middle rates during each month in the financial reporting period. 3 Shareholder’s equity accounts - using historical rates. 4 Statements of cash flows - using the middle rates as published by Bank Indonesia at the balance sheet date, except for profit and loss statement balances which are translated using the average middle rates and shareholder’s equity balances which are translated using historical rates. The resulting net translation adjustment is presented as “Differences Arising from Translation of Foreign Currency Financial Statements” under the Shareholder’s Equity section of the consolidated balance sheets. c. Foreign Currency Transactions and Balances Bank Mandiri maintains its accounting records in Indonesian Rupiah. Transactions in currencies other than Rupiah are recorded at the prevailing rates of exchange in effect on the date of the transactions. At the balance sheet date, all foreign currency monetary assets and liabilities are translated into Rupiah at the closing rates on that date. The resulting gains or losses are credited or charged to the current year’s profit and loss. As of December 31, 2002 and 2001, the exchange rates used against the Rupiah were as follows amounts in full Rupiah: 2002 2001 US Dollar 1Rp 8,950 10,400 Deutsche Mark 1Rp 4,038 4,704 British Pound Sterling 1Rp 14,405 15,081 Japanese Yen 100Rp 7,542 7,918 Euro 1Rp 9,367 9,203 d. Transactions with Related Parties Bank Mandiri and its Subsidiaries enter into transactions with related parties. All significant transactions with related parties, whether or not conducted under similar terms and conditions as those with third parties, are disclosed in Note 57. Transactions between Bank Mandiri and its subsidiaries, with state- and region-ownedcontrolled entities including the Indonesian Bank Restructuring Agency “IBRA” and entities related to and controlled by IBRA as a result of the “bank and corporate restructuring program”, are not considered as transactions with related parties. e. Allowance for Possible Losses on Earning Assets and Commitments and Contingencies Earning assets consist of current accounts with other banks, placements with other banks, securities, Government Bonds, trade documents and other facilities, securities purchased with agreement to resell, derivative receivables, loans, acceptance receivables, investments in shares of stock, and commitments and contingencies with credit-related risk. PT BANK MANDIRI PERSERO AND SUBSIDIARIES Notes to the Consolidated Financial Statements Continued December 31, 2002 and 2001 Expressed in millions of Rupiah, unless otherwise stated - 13 -

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued