Obtaining risk-free rate Crossed Check Against Other Information 12

31

1. Obtaining risk-free rate

 The definition of risk free rates would be Yield-To-Maturity YTM of both IDR and USD Indonesian government bonds.  There are a number of sources one can obtain Indonesian government bonds price information including: • Data information service such as Bloomberg • Indonesia Bond Pricing Authority IBPA • Indonesia Stock Exchange IDX 32 Indonesia Bond Pricing Authority Lembaga Penilaian Harga Efek  On Sept 19th 2007 Bapepam-LK Regulation had issued regulation No. V.C.3 regarding Bond Pricing AgencyLPHE. This regulation regulates the requirements on establishment and liabilities of the IBPA as an institution that conducts valuation on debt securities, Sukuk, and other securities in a way that objective, independent, credible, and accountable.  According to Bapepam-LK circular Normor: KEP-367BL2012, effective from 1 st January 2013, all mutual fund companies will be required to use the bond price information from IBPA LPHE for the evaluation of unit-price. 33 Information on IBPA website  The following is an example of information as at 23 July 2012 34 Getting the bond yield info from IBPA website 13 Bond Market Data 35 Getting the bond yield info from IBPA website 23 Daily MtM Price Yield 36 Getting the bond yield info from IBPA website 33 37 Indonesia Government Yield Curve Government Bond Indicies from IBPA – taken from IDX websit 38 Getting the bond yield info from IDX website 13 Informasi Pasar 39 Getting the bond yield info from IDX website 23 Indonesia Government Securities Yield Curve IGSYC 40 Getting the bond yield info from IDX website 33 41  We have checked the bond yield information against Bloomberg.

2. Crossed Check Against Other Information 12

42  The information is mostly consistent between Bloomberg and IBPA except for the longer date securities.  For longer dated securities, the yield quoted by Bloomberg is lower than those quoted by IBPA.  Considerations from previous slide: • Use 30 year interest rate • But can lead to very volatile results • Prescribed interest rate • But needs to be consistent with market reality • Smoothed interest rate • E.g. average 30 year rate for last 5 years, • E.g. extrapolation of yield curve • Needs to be accurately prescribed Crossed Check Against Other Information 22 43

2. Derivation of forward yield 13