PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003, April 30, 2003 and December 31, 2002 Expressed in millions of Rupiah, unless otherwise stated
159
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 the end of 2001, which include, the following:
1. Obligations to be fulfilled by Bank Mandiri, among others: • To use Government Recapitalization Bonds to settle liabilities only and not for 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 a 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.
• 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 and participate in syndication activities to support other banks in resolving Legal
Lending Limit problems. • 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.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003, April 30, 2003 and December 31, 2002 Expressed in millions of Rupiah, unless otherwise stated
160
58. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
a. Management Contract continued 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.
The Management Contract LOI was effective through the later of 2001 or the completion of Bank’s IPO.
b. Transfer of Loans Below Rp5 billion and Loans Written-off Prior to Legal Merger and Related Recoveries to IBRA
Prior to the transfer of earning assets to IBRA as discussed in Note 58c, there was a joint decision dated March 31, 1999 between the Minister of Finance, IBRA and other directors of the legacy
banks agreeing to transfer only the loans with principal balances above Rp5 billion and supported by Article 2.1 of the Asset Transfer Agreement between the legacy banks and IBRA dated March
31, 1999, and Article 3.2 of the Addendum on Temporary Recapitalization Agreement dated December 28, 1999 agreeing to transfer only the loans with principal balances above Rp5 billion.
The total of loans written-off below Rp5 billion and loans written-off prior to the legal merger as of October 31, 1999 and July 31, 1999 which were supposed to be transferred to IBRA amounted to
Rp1,631,633 and Rp11,326,295, respectively. A part of loans written-off involving loans below Rp5 billion amounting to Rp357,000 were transferred to IBRA in 1999, 2000 and 2001.
In 2001 and 2002, there were several meetings between the Supreme Audit Board BPK, Minister of Finance, Minister of State-Owned Enterprises, Bank Indonesia BI and several State-Owned
Banks, including the Bank, to discuss the status of loans written-off involving loans below Rp5 billion and loans written-off prior to legal merger and related recoveries. BPK in its report requires
the Bank to return all recoveries before and after legal merger up to December 31, 2001 amounting to Rp2,385,791 to the Government.
