ECONOMIC CONDITIONS 2005 12 Full Audited Financial Statements w Notes

PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2005 and 2004 Expressed in millions of Rupiah, unless otherwise stated 137 60. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE BANK “INDONESIAN GAAP” AND INTERNATIONAL FINANCIAL REPORTING STANDARDS “IFRS” continued c. Derivative instruments continued separate measurement and recognition is required for indexation derivatives that are embedded in the hedge bonds. Originated loans under IFRS are characterized by assets for which the Bank provided the original funding and are not determined by the form of the instrument that results from the loan origination. d. Employee Benefits Under Indonesian GAAP, prior to December 31, 2004, the Bank recognized a provision for employee entitlements under Labor Law no. 132003 equal to the present value of the obligation as determined by actuarial reports in accordance with SFAS No. 57 - “Estimated Liabilities, Contingent Liabilities and Contingent Assets”. In October 2004, the Indonesian Institute of Accountants IAI published the revised PSAK 24 which is aligned with the accounting treatment for Employee Benefits with IAS 19- “Employee Benefits”. Therefore, upon the adoption of this revised standard on December 31, 2004, the accounting treatment for employee benefits are the same between IFRS and Indonesian GAAP. Under IFRS, Labor Law no. 132003 is accounted for as a defined benefit plan and as such it requires the actuary to use the projected unit credit method of actuarial valuation as mandated by IAS 19 - “Employee Benefits”. Further, under IFRS, past service cost is recognized on a straight-line basis over the average period until the benefits become vested and any actuarial gainloss resulting from differences between actuarial assumptions and what has actually occurred and changes in actuarial assumptions does not require amortization unless the change is more than a 10 corridor range of variation, in which event such excess is amortized over the remaining working lives of the employees. e. Loans Purchased from IBRA Under Indonesian GAAP, the difference between the outstanding loan principal and purchase price is booked as deferred income if the Bank enters into a new credit agreement with the borrower, and as an allowance for possible losses if the Bank does not enter into a new credit agreement with the borrower. The allowance for loan losses or deferred income is only adjusted once the Bank has recovered the original purchase price. Under IFRS, the difference between outstanding loan principal and purchase price is booked as deferred income for all loans purchased from IBRA. For performing loans, the deferred income is accreted into income over the life of the loan using the effective interest rate method in accordance with IAS No. 39 - “Financial Instruments: Recognition and Measurement”. For non-performing loans, the deferred income is only adjusted once the Bank has recovered the original purchase price. f. Premises and Equipment Under Indonesian GAAP, premises and equipment are stated at cost, except for certain premises and equipment used in operations that were revalued in 1979, 1987 and 2003 in accordance with Government regulations, less accumulated depreciation and amortization. Under IFRS, in accordance with IAS 16 - “Property, Plant and Equipment”, property, plant and equipment is continued to be carried at its cost less any accumulated depreciation, rather than at its revalued amount, due to the requirement of IAS 16 to perform the revaluations with “sufficient regularity”. g. Deferred Income Taxes The impact on deferred income taxes of the IFRS adjustments has been recognized in accordance with IAS 12 - “Income Taxes”. An effective tax rate of 30 has been applied. PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2005 and 2004 Expressed in millions of Rupiah, unless otherwise stated 138

61. RECONCILIATION OF NET INCOME AND SHAREHOLDERS’ EQUITY TO THE AMOUNTS DETERMINED UNDER IFRS

The following is a summary of the adjustments to shareholders’ equity as of December 31, 2005 and 2004 and net profit for the years then ended, which would be required if IFRS had been applied by Bank Mandiri instead of Indonesian GAAP in the preparation of its consolidated financial statements. Dec 31, Dec 31, 2005 2004 Shareholders’ equity as reported in the consolidated financial statements prepared under Indonesian GAAP 23,214,722 24,934,707 IFRS adjustments - increasedecrease due to: Allowance for possible losses on earning assets 1,170,791 1,509,761 Allowance for possible losses on commitments and contingencies 338,407 561,282 Employee benefits - - Accretion of deferred income arising from the purchase of loans from IBRA 56,097 65,143 De-recognition of revaluation of premises and equipment 2,747,181 2,772,609 Deferred income taxes 1,057,040 190,927 Net decrease in reported shareholders’ equity 2,466,428 445,496 Shareholders’ equity in accordance with IFRS 20,748,294 24,489,211 For the year For the year ended ended Dec 31, 2005 Dec 31, 2004 Net profit as reported in the consolidated financial statements prepared under Indonesian GAAP 603,369 5,255,631 IFRS adjustments - increasedecrease due to: Allowance for possible losses on earning assets 2,680,552 309,000 Allowance for possible losses on commitments and contingencies 222,875 70,147 Employee benefits - 25,185 Accretion of deferred income arising from the purchase of Ioans from IBRA 9,046 10,366 De-recognition of revaluation of premises and equipment 25,428 75,301 Deferred income taxes 860,686 38,400 Net decrease in reported net profit 2,008,267 89,601 Net lossprofit in accordance with IFRS 1,404,898 5,166,030 Net lossearnings per share Basic full amount 69.61 257.28 Diluted full amount 69.12 255.39