CHANNELING LOANS 2002 12 Full Audited Financial Statements w Notes

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 - 133 -

57. RELATED PARTY TRANSACTIONS Continued

b. Significant transactions with the Government of the Republic of Indonesia • The Committee on Financial Sector Policy KKSK and the Minister of Finance approved and guaranteed the issuance of standby letters of credit and conversion of loans of PT Garuda Indonesia to Mandatory Convertible Bonds Notes 48 and 12B.g. • Government bonds held by the Bank amounting to Rp103,849,017 were reprofiled by the Government on November 20, 2002 Note 8. • The Bank paid Rp1,124,194 to the State Treasury representing 50 deposit in relation to an objection regarding the Bank’s 2000 corporate income tax assessment Notes 16 and 28c. • Return of additional paid-in capital of Rp129,685 Notes 8 and proposed return of Rp1,412,000 representing a portion of the excess of recapitalization Notes 33. c. Transfer of Certain Investments and Non-core Fixed Assets In 1999 certain investments in shares of stock and certain non-core fixed assets of Bank Mandiri were transferred to PT PIM and PT PHTM, related companies, respectively Notes 14 and 15. In 2002, the fixed assets of PHTM were transferred back to the Bank based on the shareholder’s resolution of PHTM dated June 14, 2002.

58. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES

a. Management Contract On April 8, 2000, a Management Contract was signed between the Government and Bank Mandiri in connection with the recapitalization of Bank Mandiri as described in Note 3. The Management Contract provides for, among others, the requirements and milestones to be fulfilled by Bank Mandiri in accordance with its Business Plan for the period to end of 2001, which include, the following: 1. Obligations to be fulfilled by Bank Mandiri, among others: • To use the Government Bonds to settle liabilities only and not for use in acquiring assets, except for Government Bonds classified as trading based on prevailing regulations. • To reduce overhead costs. • To settle unreconciledopen items and reconcile inter-branch transactions derived from the Merged Banks. • To conduct special audit of high risk and material un-reconciled open items. • To implement an automated monitoring system over the use of funds and liquidity of Bank Mandiri. • To implement a policy of reporting according to Bank Indonesia regulations. 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 - 134 -

58. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES Continued

a. Management Contract Continued • To take any action as required in respect of the Credit Portfolio to comply with Bank Indonesia’s requirements, especially for Legal Lending Limit LLL. • To agree to syndicate the current outstanding corporate loans that exceed Legal Lending Limit LLL and participate in syndication activities to support other banks in resolving Legal Lending Limit LLL problems. 1. Obligations to be fulfilled by Bank Mandiri, among others continued: • To agree to improve its Net Open Position based on the prevailing regulations and prepare a plan to acquire assets denominated in US Dollars. • To follow the agreement with the Minister of Finance to undertake actions needed to accelerate the privatization process of Bank Mandiri itself by issuing shares to the public. If Bank Mandiri defaults on its commitments as stipulated in the management contract, the consequences are: • Replacement of the Boards of Directors and Commissioners. • Adjustment of the milestones if the reasons for non-achievement are beyond the control of Bank Mandiri. 2. Management and Performance of Bank Mandiri, among others: • The Boards of Directors and Commissioners are required to perform their tasks conscientiously in line with the requirements prescribed in the Business Plan, Performance Plan and Performance Milestones. • The Compliance Director is required to undertake actions needed for Bank Mandiri to fully comply with Bank Indonesia regulations, prevailing laws, agreements, and commitments with Bank Indonesia and monitor the success of the implementation of the Bank Recapitalization Program based on the agreed Business Plan, without prejudice to the responsibilities of the Boards of Directors and Commissioners of Bank Mandiri. The results of this function’s activities should be submitted quarterly to the Minister of Finance not later than two 2 weeks after the end of each quarter. 3. Corporate Governance for Bank Mandiri, among others: • The Governance of Bank Mandiri is to be conducted by its Boards of Directors and Commissioners in accordance with the Articles of Association of Bank Mandiri and prevailing laws. • The members of the Boards of Directors and Commissioners must not have conflicts of interest in the decision making process involved in governing Bank Mandiri.