PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006 Expressed in millions of Rupiah, unless otherwise stated
48
10. DERIVATIVE RECEIVABLES AND PAYABLES continued
Interest Rate Swaps On April 17, 2003 Bank Mandiri entered into interest rate swap agreements with counterparty banks with
nominal values amounting to US125,000,000 full amount and US175,000,000 full amount, respectively. The underlying transaction is the Bank’s US300,000,000 full amount fixed interest rate
Medium-Term Note MTN issued in April 2003 Note 24. Under this transaction, the Bank receives semi- annual fixed interest at the rate of 7.00 per annum and pays semi-annual floating interest at the rate of
six-month LIBOR + 3.37 per annum until the maturity of the MTN on April 22, 2008. The six-month LIBOR interest is stated in arrears. These transactions qualify as hedging for accounting purposes.
The background and purpose of the issuance of the hedging instruments are related to interest rate risk management, whereby the Bank’s positive foreign currency interest rate gap position is exposed to
downward trends in interest rates in the following five years. The Bank decided to convert its MTN’s fixed interest rate into floating interest rates in order to mitigate the risks of a decrease in net interest margin.
As of December 31, 2007 and 2006 losses amounting to Rp5,008 and Rp51,512 as a result of the hedging fair value calculation have been off set against the gain from decrease of the MTNs, a hedged
item, based on the fair value calculations Note 24. Bank Mandiri entered into an interest rate swap agreement with nominal amount of US125,000,000 full
amount with counterparty bank in August 2002. The underlying transaction is the Bank’s US125,000,000 full amount fixed interest rate Subordinated Note issued in 2002 Note 29. Under the
transaction, the Bank receives semi-annual fixed interest at the rate of 10.625 per annum and pays semi-annual floating interest at the rate of six-month LIBOR + 6.19 per annum for a 5-year period. The
six-month LIBOR interest is stated in arrears. While the transaction is for the purpose of hedging the fixed rate coupon payments of the Subordinated Note with floating coupon payments, it does not qualify as a
hedging transaction for accounting purposes. This agreement expired on August 2, 2007. Cross Currency Swap
Bank Mandiri has entered into cross currency swap contracts, which are associated with the securities sold with agreements to repurchase with several counterparty banks. The contracts were initiated when
Bank Mandiri sold its Government Bonds to the counterparty banks and received Rupiah funds. These funds were used to settle the spot leg of the cross currency swaps and Bank Mandiri will then receive US
Dollar funds. On the settlement date, the Bank will receive Rupiah funds and pay US Dollar funds to the counterparty banks. Bank Mandiri is then obliged to use the Rupiah funds to repurchase the Government
Bonds previously sold to counterparty banks Notes 7 and 22.
A summary of the cross currency swap contracts is as follows:
Type of Buy
Sell Effective Date
Maturity Date Transactions
full amount full amount
November 3, 2004 November 3, 2009
Spot US25 million
Rp285,060 million Forward
Rp285,060 million US25 million
November 4, 2004 November 4, 2009
Spot US25 million
Rp284,062 million Forward
Rp284,062 million US25 million
May 18, 2005 May 18, 2010
Spot US25 million
Rp316,356 million Forward
Rp316,356 million US25 million
June 7, 2005 January 7, 2008
Spot US50 million
Rp617,500 million Forward
Rp617,500 million US50 million
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006 Expressed in millions of Rupiah, unless otherwise stated
49
10. DERIVATIVE RECEIVABLES AND PAYABLES continued
As of December 31, 2006, a summary of derivative transactions is as follows:
Notional Amount Fair Value
Derivative Derivative
Transactions Contract
Note 2k Receivables
Payables
Third parties
Foreign Exchange Related 1.
Forward - buy US Dollar
314,493 308,027
17 6,483
Others 398,874
389,757 4,028
13,145 2.
Forward - sell US Dollar
75,158 74,350
819 11
Others 90,661
91,551 248
1,138 3.
Swap - buy US Dollar
1,179,910 1,173,632
95 6,373
Others 1,069,095
1,080,094 13,319
2,320 4.
Swap - sell US Dollar
3,446,550 3,054,153
392,467 70
Others 49,967
49,697 296
26 5.
Option - buy US Dollar
406 406
- Others
1,218 1,218
- 6.
Option - sell US Dollar
408 -
408 Others
930 -
930 Interest Rate Related
1. Swap - Interest rate
US Dollar 62,095
- 62,095
Other 7,411
- 7,411
2. Forward Rate Agreement
US Dollar 2,487
2,074 413
Total 414,987
100,823 Less: Allowance for possible losses
4,260 -
410,727 100,823
As of December 31, 2007 and 2006, the collectibility of derivative receivables is as follows:
2007 2006
Current 340,451
414,987 Total
340,451 414,987
Less: Allowance for possible losses 3,800
4,260 Balance at end of year
336,651 410,727
Management believes that the allowance for possible losses on derivative receivables is adequate. Movements of allowance for possible losses on derivative receivables:
2007 2006
Balance at beginning of year 4,260
3,443 Reversalprovision during the year Note 36
467 874
Others 7
57
Balance at end of year 3,800
4,260
Includes effect of foreign exchange translation.
