bank mandiri (europe) ltd annual report 2009 annual report 2009.pdf · chairman’s statement 04 am...

Bank Mandiri (Europe) LtdAnnual Report 2009

Contents

Financial Highlights

Directors’ Report

Auditor’s Report

Profit and Loss Account

Notes to the Financial Statements

Board of Directors and Management

Chairman’s Statement

Statement of Directors’ Responsibilities

Corporate Profile and Services

Balance Sheet

Bank Mandiri Network

03

05

07

12

14

02

04

06

09

13

Inside Back Cover

02

Board of Directors and Management

Directors Gatut Subadio Chairman 10/11/05 20/02/09 Iman Nugroho Soeko Chairman 20/02/09 –

Ken Widjajanto Chief Executive 14/09/05 –

Mansyur Nasution Non-Executive Director 09/11/07 20/02/09

Suresh Gummalam Non-Executive Director 20/02/09 –

Patrick Quinn Non-Executive Director 31/05/07 –

John Williams Non-Executive Director 11/07/07 –

Management Ken Widjajanto Chief Executive

Rudy Hutagalung General Manager

Ajay Joshi Deputy General Manager

Steve Wansell Deputy General Manager

Brendan Battle Deputy General Manager

Company Secretary Ajay Joshi Deputy General Manager and Company Secretary

Auditors Ernst & Young LLP 1 More London Place London SE1 2AF

Registered Office 6 Thomas More Square Thomas More Street London E1W 1YW

Registration Number: 3793679

Appointed Resigned

03

Restated

2008US$ 000

2009US$ 000

2007US$ 000

2006US$ 000

2005US$ 000

Financial Highlights

Income Statement

Net interest incomeFees & commissions receivableOperating incomeOverhead expenses (1)Profit before tax & provisionsProvisions for bad debtsProvisions for commitments & contingenciesProfit/(Loss) before taxationTaxationProfit/(Loss) after taxation

Balance Sheet

Loans and advances to banksLoans and advances to customers (2)Debt securities (3)Total assets Deposits from banksCustomer accountsDebt securities in issueShareholder’s funds (4)

Ratios

Capital adequacy ratioTotal equity to total assetsReturn on average equityReturn on average assets (5)

8,4555,133

13,5887,4826,106

(82)-

6,188(1,822)

4,366

12,618196,421

50,779296,728171,348

49,561-

70,504

32.5%23.8%

9.2%1.9%

6,5383,839

10,3776,8063,5712,442

-1,129(351)

778

45,000111,157

40,146234,361120,346

39,722-

72,474

41.2%30.9%

1.6%1.6%

7,6924,867

12,5596,3996,160(662)

-6,822

(1,997)4,825

57,311158,467

52,829274,635141,938

60,981-

67,244

29.9%24.5%10.4%

2.7%

6,2983,7009,9986,4883,510

(2,032)-

5,542873

6,415

18,415115,371

74,731218,570104,913

37,28310,00062,827

36.3%28.4%10.7%

1.8%

4,9423,323 8,265 7,380

8853,2031,499

(3,817)-

(3,817)

32,63868,92972,377

179,694 73,00739,708

8,51455,457

51.9%31.0%-8.2%0.5%

(1) 2005 Includes exceptional costs in respect of: a Staff restructuring costs US$154k b Premises move costs of US$528k c Exceptional client administration and legal costs relating to a borrower in default US$377k(2) Net of specific provisions(3) Comparative after adoption of FRS26 to 2005(4) Shareholder’s funds restated for 2005 to include reserves of available–for–sale & hedge accounting(5) Excluding tax and bad debt provisions

Basis for Calculation of the Ratios • CapitalAdequacyRatio Capital adequacy ratio is calculated in line with the format prescribed by the Financial Services Authority • TotalEquitytoTotalAssets The total equity to total assets ratio is calculated by dividing the shareholders funds (see note 19) by the total assets after deducting specific provisions for bad debts. • ReturnonAverageEquity The return on average equity is calculated by dividing profit before tax by the average equity during the year. • ReturnonAverageAssets The return on average assets is calculated by dividing profit before tax and provisions for bad debts by the average total assets during the year.

Chairman’s Statement

04

am pleased to present the report and financial statements of Bank Mandiri (Europe) Limited for its tenth year as a wholly owned subsidiary of PT Bank Mandiri (Persero) Tbk,

Indonesia.

2009 continued to be a challenging year for the banking industry worldwide. Asset values remained depressed and wholesale funding remained contracted. Notwithstanding this continuing worldwide economic turmoil, the Bank still performed satisfactorily and we recorded operating income of US$10.4 million for the year, which was 23.5% lower than in 2008. Operating profits before provision adjustments and taxes of US$3.57 million were (41.5%) lower than in 2008 due to a larger proportionate reduction in Net Interest margin and Fee Income of 22.67% to US$6.5 million and 24.73% to US$3.7 million respectively. To compensate for this we managed to reduce our overheads by 8.72% to US$6.6 million. Net profits, after taxes and provision adjustments, were US$0.78 million in 2009 (US$4.36: 2008).

I am pleased to confirm that the Bank has no sub-prime mortgage exposure in its balance sheet and has never been involved in the sub-prime mortgage or securitisation market either directly or indirectly. Whilst the quality of the Bank’s credit portfolio has largely remained unaffected by the ‘credit crunch’, some of our customers have been affected by the economic turmoil of recent years. In view of the foregoing, total specific impairment provisions on our balance sheet now amount to US$2.25 million of which US$1.74 million were booked in 2009. Furthermore, on 10th February 2010 an impaired loan, with a net balance of US$11.3 million, was transferred to a fellow group company for cash proceeds of US$11.3 million. This demonstrates in a very real way the support that the parent group provides to the Bank.

As at 31st December 2009 our total balance sheet footings were US$234.4 million, which was 20.4% lower than at the end of 2008. The reduction was mainly due to the liquidation of a cash collateralised loan for US$50 million. Growth was slower than in prior years as, given the difficult market conditions, we continued to take a conservative approach to business and new lending activity was focused primarily on self liquidating trade finance business. Total loans and advances to banks and customers (including cash held by banks & excluding US$50 million cash collateralised loan) grew by 0.83% to US$192.2 million.

The Bank actively manages its assets and liabilities to ensure that business growth is supported by the appropriate level of funding and liquidity resources; more details as to the Bank’s liquidity management are contained in note 23 to the financial statements.

The Bank maintained adequate capital resources to support its business activities and our capital adequacy ratio measured in accordance with Basel 2 guidelines was 41.2%. This ratio is well above accepted industry norms and gives the Bank ample scope to further expand its business and profitability.

Mr. Gatut Subadio and Mr. Nasution retired from the Board during 2009. I wish Mr. Subadio well in his new position and would also like to thank him for the stewardship he provided during his tenure as Chairman. I would also like to thank Mr. Nasution for the guidance that he provided during his tenure as Non-Executive Director.Mr. Gummalam was appointed as Non-Executive Director during 2009 and I would like to welcome him to the Board.

It is an honour to be have been appointed Chairman of BMEL and I look forward to working with management and staff in fulfilling our business objectives and targets over the coming year. With the demonstrated support of our parent, I believe that the actions we have taken in 2009 will provide a solid foundation for us to build our business and I am optimistic that we will achieve growth in assets and profitability during 2010.

Finally, on behalf of the Board, I should like to express my gratitude to our customers and business counterparts for their continued support and custom over the past year and to my fellow directors, the executive management and, not least to the staff who have remained extremely professional, focused and committed for their hard work and dedication.

I

Iman Nugroho SoekoChairman

24th February 2010

Directors’ Report

The Directors present their Report and the Financial Statements for the year ended 31st December 2009.

Results and DividendsThe trading profit after tax for the year amounted to US$777,885.

The Directors do not recommend the payment of a dividend.

Principal Activities and Review of BusinessThe Bank is an authorised UK Bank under the Banking Act 1987 and carries on international corporate and

institutional banking business, which includes the following activities:

(1) Trade Finance.

(2) Ship Finance.

(3) Inter-bank Deposits.

(4) Current and Deposit Accounts.

(5) Purchase of Investment Securities, Marketable Securities and Secondary Market Debt.

Details of the Review of Business have been covered in the Chairman’s Statement.

Principal Risk UncertaintiesThe Board, in conjuction with Senior Management of the Bank, has established comprehensive policies and

procedures in order to manage and mitigate the risks and uncertainties facing the Bank and the on-going

implementation of such is monitored by management and through a robust and independent internal

audit fuction. More detail as the principal risks and uncertainties facing the Bank and the mitigation thereof

is contained in Note 23 to the Financial Statements.

By order of the Board

Ajay Joshi,Company Secretary

26th February 2010

05

Fixed AssetsDetails of the Bank’s fixed assets are shown in Note 12 to the financial statements.

Future DevelopmentsThe Directors aim is to maintain the management policies which have resulted in the Bank’s growth in

recent years. As per the Chairman’s statement, we expect that the Bank will be able to achieve growth and

profitability in the year ahead. The details of the directors who served during 2009 can be seen on page 2

of this report.

Subsequent EventsAn impaired loan, with a net balance of US$11.3 million, was transferred to a fellow group company for

cash proceeds of US$11.3 million on 10th February 2010.

On 19th February 2010, a borrower went into Administration. See note 27 for details.

Disclosure of Information to AuditorsAt the date of Board approval of this Report and Financial Statements for the year ended 31st December

2009, each of the Directors has confirmed that:

• asfarastheyareaware,therewasnorelevantauditinformationofwhichtheauditorswere

unaware; and,

• theyhavetakenallthestepsnecessaryasaDirectorinordertomakethemselvesawareofany

relevant audit information and to establish that the auditors have been made aware of that

information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of

the Companies Act 2006.

AuditorsErnst & Young LLP have indicated their willingness to continue in office as Company’s auditors. A resolution

proposing their re-appointment and giving authority to the directors to fix their remuneration will be

tabled at the next Annual General Meeting.

Statement of Directors’ Responsibilities

The directors are responsible for preparing the Director’s Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

06

• selectsuitableaccountingpoliciesandthenapplythemconsistently;

• makejudgmentsandaccountingestimatesthatarereasonableandprudent;

• statewhetherapplicableUKAccountingStandardshavebeenfollowed,subject to any material departures disclosed and

• preparethefinancialstatementsonthegoingconcernbasisunlessitis inappropriate to presume that the company will continue in business.

We have audited the financial statements of Bank Mandiri (Europe) Limited for the year ended 31st December 2009 which comprise the Profit and Loss Account, the Statement of Total Recognised Gains and Losses, the Balance Sheet, and the related notes 1 to 27. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsAs explained more fully in the Directors’ Responsibilities Statement set out on page 6, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statementsIn our opinion the financial statements: • giveatrueandfairviewofthestateofthecompany’s affairs as at 31 December 2009 and of its profit for the year then ended; • havebeenproperlypreparedinaccordancewith United Kingdom Generally Accepted Accounting Practice; and • havebeenpreparedinaccordancewiththe requirements of the Companies Act 2006.

Opinion on other matter prescribed by the CompaniesAct 2006In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequateaccountingrecordshavenotbeenkept,or returns adequate for our audit have not been received from branches not visited by us; or • thefinancialstatementsarenotinagreementwith the accounting records and returns; or • certaindisclosuresofdirectors’remunerationspecified by law are not made; or • wehavenotreceivedalltheinformationand explanations we require for our audit.

Emphasis of matterIn forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 27 to the financial statements concerning the company’s loan exposure to its customer that went into administration in 2010. The ultimate outcome of the matter cannot presently be determined, and no provision for any loss that may result has been made in the financial statements.

Ken EglintonSenior Statutory Auditor

for and on behalf of Ernst & Young LLP, Statutory AuditorLondon

Date: 26th February 2010

07

Auditor’s ReportIndependent

to the members of Bank Mandiri (Europe) Ltd

BMEL’s Services

Some of the principal products and

services we provide are listed below:

Import letter of credit and documentary collection

services;

Supplier credit financing;

Short-term refinancing loans under import letters

of credit;

Export letter of credit services (advising,

confirmation, negotiation, etc);

Bill discounting and forfaiting;

Contract bonding and guarantee facilities;

Ship financing;

Syndications.

Corporate Profile and Services

The bank that delivers Trade Finance and Shipping Solutions Worldwide“

BMEL’s Profile

Bank Mandiri (Europe) Limited (“BMEL”) was established on the 2nd August 1999 and is

a wholly owned subsidiary of Bank Mandiri, Indonesia.

When BMEL was established it took over the banking business of PT Bank Ekspor Impor

Indonesia (Persero), London Branch which had been based in London since 1992; and

previously since 1983 as a representative office.

BMEL is incorporated and licensed in the United Kingdom and is a British bank under

the regulation of the UK Financial Service Authority (FSA) and has a complement of

29 staff.

By virtue of its Indonesian ownership, BMEL can offer a more informed and pro-active

service in Indonesian related business than many of its competitors.

Although BMEL is Indonesian owned, its business activities are not restricted to

Indonesia and we like to consider BMEL, as the bank that delivers Trade Finance and

Shipping Solutions Worldwide.

BMEL’s primary business activities are trade finance and ship finance. BMEL is staffed

by a team of experienced banking professionals who are committed to providing an

efficient, informed and personal service.

The Bank has a wide network of correspondent banking contacts developed over

many years of servicing its customers’ needs throughout the world.

BMEL provides tailored financial solutions specific to individual client requirements

which assist in the timely settlement of transactions and can substantially benefit the

cash flow of our customers.

•

•

•

•

•••

•

”

09

Financial Statements

Profit and Loss Account

Statement of total recognised gains and losses

Bank Mandiri (Europe) Limited

for the year ended 31st December 2009


2009US$ 000

2008US$ 000

Notes

[3]

[5]

[6]

[12]

[10]

[4]

[8]

10,417

(3,879)

6,538

3,734

105

10,377

(6,640)

(166)

(2,442)

1,129

(351)

778

18,773

(10,318)

8,455

4,961

172

13,588

(7,274)

(208)

82

6,188

(1,822)

4,366

Interest receivable

Interest payable

Net interest income

Fees and commissions receivable

Other operating Income

Total operating income

Administrative expenses

Depreciation and amortisation

Provision for bad and doubtful debts

Profit on ordinary activities before tax

Tax charge

Profit on ordinary activities after tax

12

Profit for the financial year

Change in fair value of investment available for sale

Current UK Corporation tax charge on fair value of investment available for sale

Change in fair value of forward exchange contracts

Realised to profit and loss

Total recognised gains relating to the year

Total recognised gains since last annual report

The profit above is achieved from continued operations.The accompanying notes are an integral part of these financial statements.

2009US$ 000

2008US$ 000

778

354

(4)

52

790

1,970

1,970

4,366

(354)

(771)

19

3,260

Balance SheetBank Mandiri (Europe) Limited

as at 31st December 2009

Cash and money at call and deposits with central banks

Loans and advances to banks

Loans and advances to customers

Debt securities

Tangible fixed assets

Other assets prepayments and accrued income

Total assets

Deposits from banks

Customer accounts

Other liabilities, accruals and deferred income

Total liabilities excluding capital and other reserves

Contingent liabilities:

Guarantees and assets pledged as collateral security

The financial statements on pages 12 to 32 were approved by the Board of Directors on 26th February 2010 and are signed on its behalf by:

Ken Widjajanto,Chief Executive

The accompanying notes are an integral part of these financial statements.

Called up share capital

Cash flow hedge reserve

Available-for-sale reserve

Profit and loss account

Total shareholder’s funds - equity interests

Total liabilities and shareholder’s funds

[18]

[24]

[19]

[19]

49,000

52

15

23,407

72,474

234,361

49,000

(771)

(354)

22,629

70,504

296,728

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

[14]

[22]

31,598

12,618

196,421

50,779

318

4,994

296,728

171,348

49,561

5,315

226,224

8,545

36,068

45,000

111,157

40,146

206

1,784

234,361

120,346

39,722

1,819

161,887

3,986

ASSETS

LIABILITIES

MEMORANDUM ITEMS

SHAREHOLDER’S FUNDS

13

2009US$ 000

2008US$ 000

Notes

Notes to the Financial StatementsBank Mandiri (Europe) Limited


ACCOUNTING POLICIES1

The financial statements have been prepared under the historical cost basis of accounting except for available-for-sale investments and derivative financial instruments that have been measured at fair value and in accordance with the special provision of CA 2006, relating to banking companies, and in accordance with applicable accounting standards and with the Statements of Recommended Accounting Practice issued by the British Bankers’ Association.

The financial statements have been prepared in US Dollars, as this is the primary currency of the economic environment in which the Bank operates.

Under Financial Reporting Standard 1 (revised 1996) the Bank is exempt from the requirement to prepare a cash flow statement on the grounds that it is a wholly owned subsidiary of a parent undertaking that includes the Bank in its own published consolidated financial statements, which include a consolidated cashflow report.

Transactions or accruals in foreign currencies are recorded in the profit and loss account at the US Dollar rate of exchange applicable to the related month-end, such that all profits are ultimately booked in US dollars. Assets and liabilities denominated in foreign currencies are translated into US Dollars at the rates of exchange prevailing as at the Balance Sheet date. Both realised and unrealised foreign exchange gains and losses are recognised in the profit and loss account.

Fixed assets are included at cost less accumulated depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight line basis from the date of use over its estimated useful life as follows:-

The carrying values of the tangible fixed assets are reviewed

for impairment when events or changes in circumstances

indicate the carrying value may not be recoverable.

The Bank offers to its staff a money purchase arrangement.

The cost to the Bank is charged to the Profit and Loss

account as incurred.

The purchase or sale of financial assets, liabilities and

derivatives that require the delivery of assets within the

time frame generally established in the market place are

recognised on the trade date i.e. the date that the Bank

commits to purchase or sell the assets.

The classification of financial instruments at initial

recognition depends on the purpose for which the financial

instruments were acquired and their characteristics. All

financial instruments are measured initially at their fair

value less/plus any directly related costs.

The subsequent measurement of financial instruments depends on their classification as follows:

• LeaseholdImprovements 5years • ComputerHardware 3years • ComputerSoftware 3years • FurnitureandFixtures 5years • OfficeEquipment 3years • Motorvehicles 4years

The accounting policies, all of which, unless specifically stated, have been consistently applied throughout the year, are detailed below:

A Basis of preparation

B Cashflows

C Foreign currencies

D Fixed assets

E Pensions

F Financial Instruments

Held-to-maturity financial investmentsHeld-to-maturity financial instruments are those which carry fixed or determinable payments and have fixed maturities and which the Bank has the intention and ability to hold to maturity. After initial measurement, held-to-maturity financial investments are subsequently measured at amortised cost using the effective interest rate method less allowance for impairment. A component of debt securities is included in this category.

Available-for-sale financial investmentsFinancial investments classified as available-for-sale are measured at fair value. Unrealised gains and losses are recognised directly in equity in the ‘Available-for-sale reserve’. When the security is disposed of, the cumulative gain or loss previously recognised in equity is recognised in the profit and loss account. A component of debt securities is included in this category.

14

Date of recognition

Initial recognition of financial instruments

Subsequent measurement

Derecognition of financial assets and financial liabilities

Determination of fair value Available-for-sale financial investments

Loans and advances



ACCOUNTING POLICIES (Continued)1

Loans and advancesAfter initial measurement, loans and advances are subsequently measured at amortised cost using the effective interest rate method, less allowances for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortisation is included in ‘interest income’ in the profit and loss account.

A financial asset is derecognised where:

The determination of fair values of financial instruments is based upon quoted market prices or dealer price quotation for financial instruments traded in active markets.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

The Bank assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and the loss event has an impact on the estimated cash flows of the financial asset that can be reliably estimated.

For loans and advances carried at amortised cost, the Bank first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as thedifference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of specific provision, and the amount of the loss is recognised in the profit and loss account. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the associated specific provision are written-off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the specific provision. If a write-off is later recovered, the recovery is recognised in the profit and loss account.

G Impairment of financial assets

The rights to receive cash flows from the asset have expired; orThe Bank has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party; andEither (a) the Bank has transferred substantially all the risks and rewards of the asset, or (b) the Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

•

•

•

15

For available-for-sale financial investments, the Bank assesses at each balance sheet date whether there is objective evidence that an investment or a group of investments is impaired.

Debt instruments classified as available-for-sale, are assessed for impairment based on the same criteria as financial assets carried at amortised cost. Interest continues to be accrued at the original effective interest rate on the reduced carrying amount of the asset and is recorded as part of ‘interest receivable’. If, in a subsequent year, the fair value of the debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed through the profit and loss account.

The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has variable interest rate, the discount rate for measuring any impairment loss is the effective interest rate at the date at which the impairment occurs.



ACCOUNTING POLICIES (Continued)1

The Bank makes use of derivative financial instruments, i.e. forward foreign exchange contracts, to manage exposures to foreign currency risks, including exposures arising from forecast transactions. The derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value at market prices. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains and losses arising from changes in fair value on the derivatives during the year that do not qualify for hedge accounting and the ineffective portion of an effective hedge, are taken directly to the profit and loss account.

For the purpose of hedge accounting, the Bank uses forward foreign exchange contracts to hedge highly probable future sterling expenses. These hedges are classified as cash flow hedges.

Cash flow hedges which meet the criteria for hedge accounting are accounted as follows:

The effective portion of the gain or loss on the forward foreign exchange contracts is recognised directly in equityin the “Cash flow hedge reserve”, while any ineffective portion is recognised immediately in the profit and loss account. Cumulative gains or losses recognised in equity are transferred to the profit and loss account when the hedged future sterling expenses occur. If the forecast future sterling expenses are no longer expected to occur, any cumulative gain or loss previously recognised in the equity is transferred to the profit and loss account. If a forward foreign exchange contract is sold or terminated or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in equity remains in equity and is transferred to the profit and loss account when future sterling expenses occur.

Interest income is recognised in the profit and loss account as it accrues. Once the recorded value of a financial asset has been reduced due to an impairment loss, interest income continues to be recognised using the effective interest rate applied to the new carrying amount.

Interest expense is debited to the profit and loss account on an accruals basis.

Corporation tax payable, where applicable, is provided on taxable profits at the current UK tax rate.

Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred and recognised as an adjustment to the effective interest rate on the loan.

H Derivative financial instruments and hedge accounting

I Income recognition

J Taxation

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that the Directors consider it more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing difference can be deducted.

K Deferred Taxation

The Bank has taken advantage of the exemption in paragraph 3 (c) of FRS8, from disclosing transactions with related parties that are part of the Bank Mandiri Group, as consolidated financial statements are publicly available.

L Related Parties

Assets held under finance leases, which are leases where substantially all the risk and rewards of ownership of the asset have passed to the Bank, are capitalised in the balance sheet and depreciated over their useful lives. The capital elements of future obligations under the leases are included as liabilities in the balance sheet. The interest elements of the rental obligations are charged in the profit and loss account over the periods of the leases and represent a constant proportion of the balance of capital repayments outstanding.

Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term.

M Leasing

16

Initial recognition and subsequent measurement

Cash flow hedges



SEGMENTAL ANALYSIS

Segmental Information - By Class of BusinessThe Directors consider that the Bank does not have more than one class of business namely Corporate & Institutional Banking,

and therefore a disclosure by class of business has been deemed unneccessary.

Segmental Information - By Geographic Segment

Notes:(i) Geographic segments are based on the ultimate market risk to which the Bank is exposed.(ii) Operating expenses have been allocated to each geographic segment based on the percentage of income attributed to that segment.(iii) The Bank’s Capital is not directly attributed to business lines but its benefit is evenly distributed on the basis of assets employed within each respective segment.

2

UK & Europe Asia Others Intra-group TotalRegion:

Interest receivable

Interest payable

Net interest income / (Expenses)

Fees & commissions receivable

Net revenue / (Loss)

Operating expenses

Operating profit / (Loss) before provisions

Provisions for bad debts

Profit/(Loss) before taxation

Total assets employed

Total net assets/(liabilities)

3,858

(1,965)

1,893

1,575

3,468

(2,594)

874

-

874

86,110

41,041

7,906

(6,852)

1,054

2,850

3,904

(3,366)

537

-

537

92,167

(30,110)

6,226

(155)

6,071

2,054

8,125

(3,953)

4,172

(2,442)

1,730

99,130

22,066

9,979

(1,259)

8,720

2,172

10,892

(3,803)

7,089

82

7,171

173,300

101,192

316

(1,042)

(726)

162

(564)

(228)

(792)

-

(792)

49,090

35,634

17

(717)

(700)

48

(652)

(31)

(683)

-

(683)

31

(26,267)

215

(450)

(235)

63

(172)

(87)

(259)

-

(259)

31

(15,210)

10,417

(3,879)

6,538

3,839

10,377

(6,806)

3,571

(2,442)

1,129

234,361

72,474

18,773

(10,318)

8,455

5,133

13,588

(7,482)

6,106

82

6,188

296,728

70,504

673

(1,757)

(1,084)

48

(1,036)

(226)

(1,261)

-

(1,261)

31,230

14,633

2009US$000

2009US$000

2009US$000

2009US$000

2009US$000

2008US$000

2008US$000

2008US$000

2008US$000

2008US$000

• Duefrombanks

• DebtSecurities(includingavailableforsale)

• LoansandAdvancestocustomers

• LoansandAdvancestocustomerswithindicationsofimpairment

• Other

964

3,369

12,894

715

831

18,773

2008

US$ 000

59

2,877

7,035

143

303

10,417

2009

US$ 000INTEREST RECEIVABLE3

17

Is stated after charging: • Operatingleaserentals-Buildings

• Operatingleaserentals-OfficeEquipment

• Auditors’remunerationforauditwork

• OtherfeetoAuditors’-taxationsevices

324

46

147

18

331

43

137

19

PROFIT ON ORDINARY ACTIVITIES BEFORE TAX4

2008

US$ 000

2009

US$ 000



Staff Costs: • wagesandsalaries

• socialsecuritycosts

• pensioncosts[Note21]

• otherstaffcosts

Other administrative expenses

2,850

301

295

1,027

2,801

7,274

2,544

276

281

933

2,606

6,640

ADMINISTRATIVE EXPENSES


6

The average weekly number of employees during the year ended 31st December 2009 was 28 (2008-27).

Directors’ remuneration and other emoluments were:

Directors’ emoluments 837691

EMOLUMENTS OF DIRECTORS7

The emoluments of the highest paid director were US$ 565,000 - 12 month period, (2008 US$ 748,000). No director received benefits in the form of pension contributions during 2009 or 2008.

18

Foreign exchange profit 172105

OTHER OPERATING INCOME5

345

9

354

(3)

-

(3)

351

1,825

3

1,828

(5)

(1)

(6)

1,822

TAX ON PROFIT ON ORDINARY ACTIVITIES8

(a) Analysis of charge for the year:

Current Tax

Current year

Tax under provided in previous years

Total current tax charge

Deferred Tax

Current year

Adjustment in respect of prior periods

Total deferred tax charge




(d) Factors that may affect future tax charges:

At the year end, the Bank has a deferred tax asset of US$65,154 (2008: US$62,154). The asset arises in respect of capital allowances in excess of depreciation.

19

2008US$ 000

2009US$ 000TAX ON PROFIT ON ORDINARY ACTIVITIES

(e) Deferred Tax

The deferred tax asset included in the balance sheet and changes recorded in the income tax gain are as follows:

Provision at start of the yearPrior period adjustmentOther temporary differences

62-3

65

5615

62

(b) Tax included in Statement of total recognised gains & losses:Current TaxUK corporation tax

Total current tax charge

Deferred TaxDeferred Tax

Total tax charge

4

4

-

4

-

-

-

-

1,129

316

26

3

9

354

6,188

1,763

52

10

3

1,828

(c) Factors affecting tax charge for the year:

Profit on ordinary activities before tax

Corporation tax at 28% (2008 - 28.5%)

Effects of:-

Expenses not deductible for tax purposes

Capital allowances less than depreciation

Tax under provided in previous years

Current tax charge for the year

Loans and advances

Remaining maturity:

• Repayableondemand

Other loans and advances:

• Between3monthsand1year

LOANS AND ADVANCES TO BANKS 9

7,618

5,000

12,618

45,000

-

45,000

8



2008US$ 000

2009US$ 000


Remaining maturity:

• Repayableondemandorshortnotice

• 3monthsorless(excludingdemandoratshortnotice) • Between3monthsand1year • Between1yearand5years • Over5years

Less specific bad and doubtful debt provisions

Non-performing loans and advances to customers:

• Loansandadvancesbeforeprovisions

• Loansandadvancesafterprovisions

LOANS AND ADVANCES TO CUSTOMERS10

24,84683,98656,86919,42711,801

(508)

196,421

4,918

4,410

The Bank derives and manages its loan portfolio in a risk averse manner. The Directors have agreed that the customer portfolio will comprise principally of short-term self-liquidating trade finance exposures and medium term asset backed ship financing loans.

An impaired loan, with a net balance of US$11.3 million, was transferred to a fellow group company for cash proceeds of US$11.3 million on 10th February 2010.

20

The factors considered during impairment valuations of the loans and advances included future cash flows and collateral consisting of cash deposits and mortgaged/charged assets.

TradeFinance

2008US$ 000

ShippingPortfolio

2008US$ 000

Total2008

US$ 000

TradeFinance

2009US$ 000

ShippingPortfolio

2009US$ 000

Total2009

US$ 000

A reconciliation of the allowance for impairment losses for loans and advances by class is as follows:

As at 1st January 2009

Charges for the year

As at 31st December 2009

Individual Impairment

-1,805

1,805

1,805

1,805

508637

637

1,145

1,145

5082,442

2,442

2,950

2,950

-

-

-

-

-

-

-

711

-

(82)

(82)

(121)

508

508

711

-

(82)

(82)

(121)

508

508

As at 1st January 2008

Charges for the year

Recoveries

Amounts written off


Individual Impairment

33,64437,47420,57218,200

4,217

(2,950)

111,157

21,658

18,708



Investment securities:

• Publicsectorsecurities

• Otherdebtsecurities–banks

Investment securities:

• Listed

• Unlisted

Remaining maturity:

• 3monthsorless


• Between1yearand5years

• Over5years

• Floatingratenotes&fixedratenotes

• Commercialbillsdiscounted

22,162

28,617

50,779

32,174

18,605

50,779

14,834

8,744

27,201

-

50,779

32,174

18,605

50,779

22,162

-

22,162

22,162

-

22,162

-

-

22,162

-

22,162

32,573

18,605

51,178

-

28,617

28,617

10,012

18,605

28,617

14,834

8,744

5,039

-

28,617

17,610

22,536

40,146

12,053

28,093

40,146

17,610

22,536

40,146

12,240

20,346

7,560

-

40,146

17,591

22,536

40,127

12,053

-

12,053

12,053

-

12,053

-

10,050

2,003

-

12,053

-

28,093

28,093

5,557

22,536

28,093

12,240

10,296

5,557

-

28,093

Total

2008

US$ 000

2008

US$ 000

Fair value

Held–to–

maturity

2008

US$ 000

2008

US$ 000

Original cost

Available–

for–sale

2008

US$ 000

2009

US$ 000

Fair value

Total

2009

US$ 000

2009

US$ 000

Original cost

Held–to–

maturity

2009

US$ 000

Available–

for–sale

2009

US$ 000


DEBT SECURITIES711

Valuation:

Securities (floating and fixed rate notes) are purchased with the dual purpose of complying with the necessary statutory liquidity requirements, and to provide an even flow of fixed floating rate interest receipts. Bills are purchased primarily as a result of the Bank’s involvement in the discounting of letters of credit. Although some paper may be traded prior to maturity, it is not the Bank’s original intention to sell these assets and they are therefore funded accordingly. The Directors consider that the book value of commercial bills is not materially different from fair value, since this is intrinsically linked to a Libor plus margin pricing regime which is reasonably consistent throughout this market. The Bank intends to hold the securities listed under held-to-maturity until their final maturity.

21



Cost:

Balance as at 31st December 2008

Additions

Disposals

At 31st December 2009

Accumulated Depreciation:

Balance as at 31st December 2008

Charge for the year

Disposals

At 31st December 2009

Net book value at 31st December 2009

Net book value at 31st December 2008

Accrued interest receivable

Prepaid expenses

Deferred tax asset (Note 8e)

Forward foreign exhange contract - fair value (Note 24)

Other receivables

Assets and liabilities denominated in foreign currencies:

Denominated in US dollars

Denominated in currencies other than US dollars

Total assets

Denominated in US dollars

Denominated in currencies other than US dollars

Total liabilities excluding capital and other reserves

2,36254(4)

2,412

2,044166

(4)

2,206

206

318

2,203

245

62

-

2,484

4,994

267,252

29,476

296,728

196,348

29,876

226,224

307

2

-

309

255

25

-

280

29

52

clear

207,761

26,600

234,361

152,209

9,678

161,887

1,423

52

(4)

1,471

1,384

35

(4)

1,415

56

39

531

-

-

531

304

106

-

410

121

227

101

-

-

101

101

-

-

101

-

-

2009

Total

US$ 000

2008

US$ 000

Furniture,

fixtures and

fittings

US$ 000

2009

US$ 000

* Computer

and other

equipment

US$ 000

Leasehold

improve–

ments

US$ 000

Motor

vehicles

owned

US$ 000


TANGIBLE FIXED ASSETS12

OTHER ASSETS, PREPAYMENTS AND ACCRUED INCOME13

ASSETS AND LIABILITIES14

*Included in the above is the telephone system under finance lease which had a NBV of Nil (2008: Nil)

22

594

294

65

52

779

1,784



Repayable on demand

• 3monthsorless


• Between1yearand5years

Amounts include:

Due to group undertakings

Repayable on demand

• 3monthsorless

• 1yearorlessbutover3months

Accrued interest and expenses payable

UK corporation tax

Forward foreign exchange contracts - fair value (Note 24)

Other

Obligations under finance leases payable:

1 year or less

Less: future finance charges

Current Obligations

With agreed maturity dates or periods of notice, by remaining maturity of:

With agreed maturity dates or periods of notice, by remaining maturity of:

A total of US$1.24 million ( 2008 - US$4.07 million) of deposits are frozen and held as collateral against trade finance loan facilities.

1,344

95,000

35,004

40,000

171,348

14,000

49,561

-

-

49,561

2,685

1,352

771

493

5,301

15

(1)

14

14

14

5,315

1,303

80,000

28,043

11,000

120,346

25,000

39,722

-

-

39,722

1,398

136

-

285

1,819

-

-

-

-

-

1,819

2008US$ 000

2009US$ 000

DEPOSITS FROM BANKS

CUSTOMER ACCOUNTS

OTHER LIABILITIES, ACCRUALS AND DEFERRED INCOME

15

16

17

23





Authorised, issued, allotted and fully paid:

49,000,000 ordinary shares of US$1 each and 2 subscription shares of £1 each

Issued Share Capital

Retained profit for the year 1st January - 31st December 2009

Net addition to Shareholder’s Funds

Opening Shareholder’s Funds

Fair value of Cash Flow Hedge Reserve (Note 24)

Fair value of Available-For-Sale securities

Current UK Corporation charge on fair value Investment available for sale

Realised to Profit & Loss from Cash Flow Reserve & Available-for-sale-reserve

Closing Shareholder’s Funds

At the year end, cumulative commitments under non-cancellableoperating leases were:

• Within1year

• Between1and5years

49,000

-

4,366

4,366

67,244

(771)

(354)

-

19

70,504

65

150

215

51

104

155

49,000

-

778

778

70,504

52

354

(4)

790

72,474

362

321

683

308

-

308

2008US$ 000

2009US$ 000

2008US$ 000

Buildings

2009US$ 000

Buildings

2008US$ 000

Other

2009US$ 000

Other

CALLED UP SHARE CAPITAL

RECONCILIATION OF MOVEMENTS IN SHAREHOLDER’S FUNDS

OPERATING LEASE COMMITMENTS

PENSION COSTS

18

19

20

21

The Bank provides each of its employees with an individual money purchase pension arrangement which is administered by the Standard Life Assurance Company. The sums allocated into each individual’s pension fund are paid on a monthly basis, and the amounts are based on a scale linked to each staff member’s age and salary.

24



838

838

3,148

3,148

3,986

838

838

3,148

3,148

3,986

1,526

1,526

7,019

7,019

8,545

1,526

1,526

7,019

7,019

8,545

2009

US$ 000

Book value

2009

US$ 000

Fair value

2008

US$ 000

Book value

2008

US$ 000

Fair value


MEMORANDUM ITEMS22

CONTINGENT LIABILITIES:

Transaction-related:

Guarantees pledged

Trade-related:

Letters of credit issued

RISK MANAGEMENT723

The identification, measurement and containment of risk is integral to the management of our business. Our risk policies and procedures are regularly updated to meet changing business requirements, and to comply with best practice. Our parent company, PT Bank Mandiri (Persero) Tbk, conducts an in-depth review at least once a year of our loan portfolio and also conducts a review of our internal controls/procedures. Our Audit Committee is apprised of these and other developments throughout the year to ensure adequate controls are in place to meet our changing business requirements.

The Bank is firmly committed to the management of risk, recognising that sound internal risk management is essential to its prudent operation, particularly with the growing complexity, diversity and volatility of markets, facilitated by rapid advances in technology and communications. Risk management is given high priority throughout the Bank.

The Bank has strict controls and detailed procedures in place for the monitoring of the financial instruments employed in its business. Before any new financial instrument is employed by the Bank approval must be sought from the Bank’s Senior Management Committee and as part of this approval process the Senior Management Committee ensures that the Bank has the relevant expertise, adequate controls and operating procedures in place before the new financial instrument is initiated. Where it is deemed necessary product or sector limits are established and monitored such that excessive concentration risk is minimised.

The Bank’s Board of Directors, Asset and Liability Committee, Risk Committee and Audit Committee, assist in appraising market trends, economic and political developments, and providing strategic direction for all aspects of risk management.

Responsibility for risk management policies, limits, and the level of risk assumed, lies with the Board of Directors. The Board charges Senior Management with developing, presenting and implementing these policies and limits. The structure is designed to provide a reasonable degree of assurance that no single event, or contribution of events, will materially affect the wellbeing of the Bank.

A Risk Committee comprised of Senior Management plays a key role in the identification, evaluation and management of all risks. All credit and other new product decisions require direct Senior Management & Risk Committee approval. Management is supported by a comprehensive structure of independent controls, analysis and reporting processes.

A Risk Management and Control

25




Market risk refers to the uncertainty of future earnings, resulting from changes in interest rates, foreign exchange rates, market prices and volatility thereof. Senior Management constantly monitors market risk by a combination of reports and real time market information systems.

B Market Risk

An interest rate gap is a common measure of interest rate sensitivity (note 25). A liability gap occurs when more liabilities than assets are subject to rate changes during a prescribed future time period. Interest rate gaps are monitored by Senior Management & Asset and Liability Committee regularly.

Interest rate risk arises when there is a mis-match between positions which are subject to interest rate adjustments within a specific period. In the Bank’s funding/lending activities, fluctuations in interest rates are reflected in interest margins and earnings. Our interest rate risk profile is short term and liquid and the Directors therefore feel that risks have been minimised. Hedging techniques can be applied on a limited basis should the need arise.

The Bank does not actively trade in the foreign exchange markets on its own account, and foreign exchange swaps and forward foreign exchange contracts are committed for management of the Bank’s expenses and the Bank’s assets and liabilities.

Where possible the Bank matches its currency transactions. The majority of the asset and liability positions are denominated in US Dollars and therefore, in the opinion of the Directors, the level of currency risk is considered to be minimal.

Liquidity risk arises from fluctuations in cash flows. The liquidity risk management process ensures that the Bank is able to honour all of its financial commitments as they fall due. Liquidity is monitored daily through specialised reports provided to Senior Management against appropriate limits set by the Board of Directors and with reference to statutory requirements. In addition the Asset and Liability Committee and the Risk Committee review the liquidity position periodically. The Bank has access to a variety of funding sources including bank deposits, loan facilities, customer deposits and corporate trade finance deposits. Regular weekly reviews are conducted, via meetings of the Asset and Liability Committee, of these sources and requirements for perusal by Senior Management. In practice, the Bank operates well within its prescribed liquidity levels.

In the light of market conditions, at the present time, the Bank does not generally offer medium-term advances. As existing medium-term advances run off, they are being replaced by shorter-term advances. Management forecasts for the year ahead, even on the assumption that all bank lines that fall due are not replaced, demonstrate that, taking into account reasonably possible changes in market conditions, the Bank can meet all repayment obligations through its existing cash resources, scheduled repayment of advances and/or the sale of assets. There is no reliance on facilities being granted by the parent bank, although in practice such facilities are likely to be available if required

C Interest Rate Risk

D Currency Risk

RISK MANAGEMENT [Cont’d]723

The Bank has in place an extensive number of limit controls and management information systems to facilitate effective management overview. All limits are approved by the Board of Directors and are reviewed at least annually. Limit breaches, if any, are reported to the Chief Executive and Senior Management on a daily basis.

The following basic elements of sound risk management are applied to all financial risk instruments, including derivatives.

• ReviewbytheBoardofDirectorsandSenior Management.• Riskmanagementprocesseswithintegralproduct risk limits.• Measurementproceduresandinformationsystems.• Continuousriskmonitoringandfrequent management reporting.• Segregationofduties,comprehensiveinternal controls and audit procedures.

In the opinion of the Directors, the period end numerical disclosures are not materially unrepresentative of the entity’s position during the period or its agreed objectives, policies and strategies. In addition, the Directors have no plans, at the current time, to make any significant changes either to the product base or to the methods employed in the management and control of the above-mentioned risks.

This includes where appropriate:

E Liquidity Risk

26




27


Due to Banks

Customer Accounts

Other financial

Total financial liabilities


Due to Banks

Customer Accounts

Other financial


120,346

39,722

1,819

161,887

171,348

49,561

5,315

226,224

-

-

-

-

-

-

-

-

40,000

-

471

40,471

-

-

-

-

14,043

-

1,819

15,862

35,004

-

4,844

39,848

105,000

-

-

105,000

95,000 *

-

-

95,000

1,303

39,722

-

41,025

1,344

49,561

-

50,905

TotalUS$ 000

1 to 5years

US$ 000

Over5 years

US$ 000

3 to 12 monthsUS$ 000

Less than3 months

US$ 000

OnDemandUS$ 000

Analysis of financial liabilities by remaining contractual maturitiesThe table below summarises the maturity profile of the Bank’s financial liabilities as at 31st December 2009 based on contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Bank expects that many customers will not request repayment on the earliest date the Bank could be required to pay and the table does not reflect the expected cash flows indicated by the Bank’s deposit retention history.

* This amount includes cash collateral deposits of US$50 million



Guarantees




Guarantees



838

3,148

3,986

1,526

7,019

8,545

-

-

-

-

-

-

-

-

-

-

-

-

838

3,148

3,986

1,526

7,019

8,545

-

-

-

-

-

-

-

-

-

-

-

-

Ageing for Contingent liabilities





Operational Risk is the risk that deficiencies in information systems or internal controls result in unexpected business, financial and operating losses. Operational Risk is ultimately managed by the Board of Directors and is given the highest priority. Senior Management are charged with applying stringent procedures to mitigate risk of error, fraud, money laundering, and other irregularities. In addition, strong disaster recovery procedures have been formulated and are tested on at least a yearly basis. Internal Audit reviews the risk mitigation processes to ensure that these meet the organisation’s current needs and are being properly implemented and controlled.

The Bank uses a formal credit process to quantify and evaluate the risk of proposed credits, and to ensure appropriate returns for assuming risks. Relationship Managers undertake a full financial review of each client at least annually, so that the Bank remains aware of counterparties’ risk profiles. This analysis includes a review of previous historical financial data, future projections, industry reviews, broker reports and credit analysis techniques.

Securities, Letters of Credit, Guarantees and Off-Balance Sheet instruments are managed by the same process. Settlement and any other credit risks are restricted through product limits and counterparty netting agreements.

From time to time the Bank takes collateral to mitigate credit or transactional risks. The taking of collateral as security is governed by detailed policies and procedures and where necessary the security is registered and perfected in the relevant jurisdictions using legal counsel.

Controls are in place to constantly monitor the level of capital to ensure the Bank is able to meet its regulatory obligation on a daily basis. In doing so the Board of Directors believe that the interest of all stakeholders including customers and shareholders are fully protected. Account is taken of all potential events that could have an impact on capital.

Management have stress tested the Bank’s capital requirements. This stress testing takes into account reasonably likely developments in all of the above risks, the Board’s balance sheet management strategy and the deteriorating market conditions. This stress testing has demonstrated that the Bank is adequately capitalised to support the existing business and future plans.

F Operational Risk

H Credit Risk

G Capital Adequacy Risk


The table below shows the maximum exposure to credit risk for the components of the balance sheet, including derivatives. The maximum exposure is shown gross, before the effect of mitigation through use of master netting and collateral agreements.

Cash and money at call and deposits with central banks



Debt securities

Other assets prepayments and accrued income

Total

Contingent Liabilities

31,598

12,618

146,421

50,779

4,994

246,410

8,545

36,068

45,000

111,157

40,146

1,784

234,155

3,986

31,598

12,618

196,929

50,779

4,994

296,918

8,545

36,068

45,000

114,107

40,146

1,784

237,105

3,986

[09]

[10]

[11]

[13]

[22]

GrossMaximum exposure

2009US$ 000

Notes

GrossMaximum exposure

2008US$ 000

NetMaximum exposure

2009US$ 000

NetMaximum exposure

2008US$ 000

28





Risk concentrations of the maximum exposure to credit risk

Concentration of risk is managed by client/counterparty, by geographical region and industry sector. The maximum credit exposure to any non-bank client during has been within our prescribed LECB by the FSA of US$17.9 million before taking into account of collateral or other credit enhancements.

The Bank’s financial assets, before talking into account any collateral held or other credit enhancements can be analysed by the following geographical regions:

29

United Kingdom

Europe

Asia

North America

Total

126,152

13,880

132,500

24,386

296,918

85,931

1,429

99,510

50,234

237,105

2008

US$ 000

2009

US$ 000

An industry sector analysis of the Bank’s financial assets, before taking into account collateral held or other credit enhancements, is as follows:

Bank

Intergroup

Corporate Finance

Foodstuffs

Metals

Other

Pharmaceutical

Shipping

Sovereign debt

Total

72,833

-

22,162

28,075

66,783

28,511

8,537

55,325

14,692

296,918

109,142

-

12,053

23,534

14,576

16,583

7,886

41,905

11,426

237,105




TotalUS$ 000

LossUS$ 000

DoubtfulUS$ 000

SubStandardUS$ 000

SpecialMentionUS$ 000

CurrentUS$ 000

Neither past due nor

impairedPast due or individually impaired



Due from Banks

Loans and Advances

Intergroup

Total


Due from Banks

Loans and Advances

Other

Total

109,142

127,963

-

237,105

72,833

224,085

-

296,918

-

706

-

706

-

47

-

47

-

-

-

-

-

-

-

-

-

2,952

-

2,952

-

4,279

-

4,279

-

18,001

-

18,001

-

593

-

593

Credit Quality per class of financial assets:

109,142

106,304

-

215,446

72,833

219,166

-

291,999

30

Fair value of forward exchange contracts (Note 13)

Future sterling expenses in 2010 and the corresponding hedge instruments mature in 2009. Fair value of hedge instruments committed and completed in 2009 was US$492k included in Administrative Expenses (Note 6).

2009US$ 000

Fair Value

2008US$ 000

Fair Value

52 (771)

HEDGE ACCOUNTING - (Cash Flow Hedges)724




NON TRADING BOOK INTEREST RATE RISK725

The Bank does not have a trading book. However, interest rate exposure exists within its non-trading book. Instruments have been allocated to time bands by reference to the earlier of their next contractual interest rate repricing date and their maturity date.

As at 31st December 2009, interest rate risk comprised:

The above figures do not provide the exposure of the Bank to particular interest rates as they have been consolidated across all currencies. The majority of the Bank’s balance sheet is denominated in US Dollars, with only a minor element of currencies regarded as volatile. The Directors therefore consider that a further currency analysis of interest rate risk is not required.

45,000

111,157

40,146

38,058

234,361

120,346

39,722

72,474

1,819

234,361

-

-

-

-

(163)

38,058

37,895

-

-

72,474

1,819

74,293

(36,398)

-

-

-

12,000

-

12,000

-

-

-

-

-

12,000

36,398

-

-

-

-

-

-

-

-

-

-

-

24,398

-

1,336

10,446

-

11,782

14,043

-

-

-

14,043

(2,261)

24,398

45,000

109,821

17,863

-

172,684

106,303

39,722

-

-

146,025

26,559

26,659

TotalUS$ 000

Non–Int.bearingUS$ 000

1 year to5 years

US$ 000

6 months to 1 yearUS$ 000

3 months to 6 months

US$ 000

Less than3 months

US$ 000

Category of Asset/Liability



Debt securities

Other assets

Total assets

Deposits by banks

Customer accounts

Shareholder’s funds

Other liabilities

Total Liabilities & Shareholder’s Funds

Gap

Cumulative gap

31




ULTIMATE PARENT COMPANY

POST BALANCE SHEET EVENT

26

27

PT Bank Mandiri (Persero) Tbk, a part government owned bank incorporated in the Republic of Indonesia, is the immediate and

ultimate parent, and the ultimate controlling party of the Bank.

A borrower went into Administration on 19th February 2010. The amount due from this borrower as at the date of the signing

of the financial statements is US$ 9.936 million.

The registered address is:

Due to complexity surrounding the matter, lack of information and the short period of time since the appointment of the Administrator, the directors at the present time are unable to estimate an appropriate provision for the amount due as at 31st December 2009. It is however likely that a significant provision will be required in 2010.

Plaza MandiriJL. Gatot Subroto Kav 36–38Jakarta 12190Indonesia

The smallest and largest group in which the results of the Bank are consolidated is that headed by PT Bank Mandiri (Persero) Tbk. The consolidated financial statements of the group are available to the public at the Bank’s registered office.

32

NON TRADING BOOK INTEREST RATE RISK [Cont’d]25

As at 31st December 2008, interest rate risk comprised:

12,618

196,421

50,779

36,910

296,728

171,348

49,561

70,504

5,315

296,728

-

-

-

-

(256)

36,910

36,654

-

-

70,504

5,315

75,819

(39,165)

-

-

-

22,000

-

22,000

-

-

-

-

-

22,000

39,165

-

-

1,991

-

1,991

-

-

-

-

-

1,991

17,165

-

12,933

1,899

-

14,832

21,005

-

-

-

21,005

(6,173)

15,174

12,618

183,488

25,145

-

221,251

150,343

49,561

-

-

199,904

21,347

21,347

TotalUS$ 000

Non–Int.bearingUS$ 000

1 year to5 years

US$ 000

6 months to 1 yearUS$ 000

3 months to 6 months

US$ 000

Less than3 months

US$ 000

Category of Asset/Liability



Debt securities

Other assets

Total Assets

Deposits by banks

Customer accounts

Shareholder’s funds

Other liabilities

Total Liabilities & Shareholder’s Funds

Gap

Cumulative gap


Notes

PT BANK MANDIRI (PERSERO) TBKHEAD OFFICE

Plaza Mandiri

Jl. Jend. Gatot Subroto, Kay 36–38

Jakarta 12190, Indonesia

Tel : +62–21 526 5045, 526 5095

Fax : +62–21 526 5008, 526 5017

SWIFT : BMRIIDJA

Website : www.bankmandiri.co.id

HONG KONG BRANCH

7th Fl, Far East Finance Centre

16 Harcourt Road, Queensway

Hong Kong

Tel : + 852–2527–6611

Fax : + 852–2529–8131

SWIFT : BMRIHKHH

Website : www.bankmandirihk.com

SHANGHAI REPRESENTATIVE OFFICE

3401, Bank of China Tower

200 Yin Cheng (M) Road

Pudong New Area, Shanghai, 200120

People’s Republic of China

Tel : + 86–21–5037–2509

Fax : + 86–21–5037–2507

DILI BRANCH

Ave Presidente Nicolau Lobato No. 12,

Colmera, Dili – Timor Leste

Tel : + 670–331–7555 or

+ 670–331–7777

Fax : + 670–331–7444 or

+ 670–331–7190

SWIFT : BMRIIDJA

SINGAPORE BRANCH

3 Anson Road #12-01/02

Springleaf Tower

Singapore 079909

Tel : (65) 6213 5688

Fax : (65) 6438 3363

SWIFT : BMRISGSG

Website : www.ptbankmandiri.com.sg

CAYMAN ISLANDS BRANCH

Cardinal Plaza, 3rd Floor

#30 Cardinal Avenue

P0 Box 10198 APO

Grand Cayman, Cayman Islands

Tel : + 1–345–945–8891

Fax : + 1–345–945–8892

SWIFT : BMRIKYKY

Bank Mandiri Network

Bank Mandiri: Head Office, Jakarta

Bank Mandiri (Europe) Ltd

6 Thomas More SquareThomas More StreetLondon E1W 1YW

Tel : +44 (0)20 7553 8688Fax : +44 (0)20 7553 8699SWIFT : BMRIGB2L

www.bkmandiri.co.ukRegistered in London 3793679Authorised and regulated by the Financial Services Authority

bank mandiri (europe) ltd annual report 2009 annual report 2009.pdf · chairman’s statement 04 am...

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