Income Tax SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated 33

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

y. Share Options The Bank has granted stock options to the Directors and Senior Management at certain levels and based on certain criteria under the Management Stock Option Plan MSOP. Stock compensation cost is calculated at the grant date using the fair value of the stock options and is recognized as part of salaries and employee benefits expense, over the vesting period of the stock options based on graded vesting. The accumulated stock compensation costs are recognized as ‘Share Options’ in the shareholders’ equity section. The fair value of the stock options granted is based on an independent actuary’s valuation report calculated using the Black-Scholes option pricing model.

z. Earning Per Share

Earnings per share is calculated by dividing the consolidated net profit at end of year with the weighted average number of shares issued and fully paid-up during the year. Net income used in calculating the basic earnings per share was Rp5,312,821 and Rp4,346,224 for the years ended December 31, 2008 and 2007, respectively. The weighted-average number of outstanding shares used in computing the basic earnings per share as of December 31, 2008 and 2007 totaled 20,874,991,622 shares and 20,717,958,049 shares, respectively. The weighted-average number of outstanding shares used in computing the basic earnings per share as of December 31, 2008 has been adjusted to reflect the changes in issued shares as a result of the conversion of share option Note 32. The weighted-average number of outstanding shares used in computing diluted earnings per share has been adjusted to reflect the changes in issued shares as a result of the conversion of share options Notes 31a and 32. The weighted-average number of outstanding shares used in computing the diluted earnings per share as of December 31, 2008 and 2007 totaled 20,929,439,763 shares and 20,863,423,441 shares, respectively. 2008 2007 The weighted-average shares - Basic 20,874,991,622 20,717,958,049 Adjustment on dilutive common shares: MSOP Stage I 4,225,205 17,423,024 MSOP Stage II 784,387 1,428,752 MSOP Stage III 49,438,549 126,613,616 The weighted-average number of outstanding shares - Dilutive 20,929,439,763 20,863,423,441 aa. Segment Information Bank Mandiri and its Subsidiaries have presented financial information by nature of business primary segment and by geographical area secondary segment. The primary segment is divided into banking, syariah banking, securities, insurance and others, while the secondary segment is divided into Indonesia domestic, Asia, West Europe, Pacific Cayman andor others Note 49.