CIRCULAR LETTER I. General Provisions

Transcription

1 No. 5/4/DPM Jakarta, March 21, 2003 CIRCULAR LETTER Subject: Procedures for Auction of Sovereign Debt Instruments on Primary Market In regard to the promulgation of Bank Indonesia Regulation Number 5/4/PBI/2003 dated March 21, 2003, concerning Issuance, Sale and Purchase, and Administration of Sovereign Debt Instruments (State Gazette of the Republic of Indonesia Number 38 of 2003, Supplement to the State Gazette Number 4278), it is deemed necessary to stipulate implementation regulations concerning Procedures for Auction of Sovereign Debt Instruments on the Primary Market. I. General Provisions 1. Sovereign Debt Instruments, hereinafter referred to as SDIs, issued and sold under auction on the Primary Market consist of the following: a. Treasury Bills, hereinafter referred to as TBs, comprising SDIs denominated in the Rupiah currency with a term of up to 12 (twelve) months, paying interest under the discount system; and b. Sovereign Bonds, hereinafter referred to as SBs, are SDIs denominated in the Rupiah currency with a term of more than 12 (twelve) months, paying coupons and/or interest under the discount system. 2. Parties eligible to buy SDIs on the Primary Market are natural persons, companies, joint businesses, associations, or organized groups. 3. Parties eligible to bid in SDI Auctions on the Primary Market, hereinafter referred to as Bidders, are Banks, Money Market Brokerage Companies, and Securities...

2 2 and Securities Companies appointed by the Minister of Finance of the Republic of Indonesia. 4. Buyers who are not Bidders shall place SDI bids through Bidders. 5. Bidding may be conducted by means of Competitive Bidding or by a combination of Competitive Bidding and Non-Competitive Bidding. 6. Competitive Bidding is the placing of bids stating volume and yield desired by the bidder. 7. Non-Competitive Bidding is the placing of bids stating the volume without the yield desired by the bidder. 8. The percentages for Competitive Bidding and Non-Competitive Bidding shall be determined prior to SDI Auction. In the event that Competitive Bidding exceeds the stipulated target while Non-Competitive Bidding falls short of the stipulated target, or vice-versa, allocation of percentages for Competitive Bidding and Non-Competitive Bidding may be adjusted to absorb the surplus or shortfall in either type of bidding. 9. Settlement of SDI Auction on the Primary Market shall be conducted subject to the following provisions: a. Settlement for TBs shall take place at one working day after the day of the SDI Auction (T+1); b. Settlement for SBs shall take place at 5 working days after announcement of the outcome of TB auction (T+5). 10. Buyers of SDIs are required to hold: a. a securities account at the Central Registry or a Sub-Registry for conducting settlement of the outcome of SDI Auction; b. a Rupiah demand deposit account at Bank Indonesia or to appoint a Bank for conducting fund settlement. 11. For the purpose...

3 3 11. For the purpose of settlement of the outcome of SDI Auction on the Primary Market, Bank Indonesia has the power to debit the Rupiah demand deposit account of a Bank at Bank Indonesia held by a winning bidder in the SDI Auction or of a Bank appointed for fund settlement. 12. Settlement of the outcome of SDI Auction consists of: a. Securities settlement Securities settlement is conducted by the Central Registry on a gross basis by crediting the securities accounts of SDI buyers in the Central Registry in the par value of the SDIs. b. Fund settlement Fund settlement is conducted by Bank Indonesia, c.q. Money Market Transaction Settlement Division, Directorate of Monetary Management, hereinafter referred to as the PTPU-DPM Division, on a gross or netting basis by debiting the Rupiah demand deposit accounts held at Bank Indonesia by winning bidders in the SDI Auction or the appointed Banks and by crediting the Government Rupiah demand deposit account at Bank Indonesia through the Bank Indonesia Real Time Gross Settlement System, hereinafter referred to as the BI-RTGS System, in the amount of the SDI Auction settlement price. II. SDI Auction Procedure A. Terms and Conditions 1. The SDI Auction is held on the basis of quantity targets, taking into account the discount rate or yield stated in the bids received. 2. Banks and Securities Companies may place bids in the SDI Auction for their own account and for the account of other parties, namely natural persons, companies, business partnerships, associations, or organized groups. 3. Money...

4 4 3. Money Market Brokerage Companies may only place bids in the SDI Auction for the account of other parties, namely natural persons, companies, business partnerships, associations, or organized groups. 4. In the event that a Bidder places an SDI bid for the Bidder s own account, the bid may be placed only by means of Competitive Bidding. 5. In the event that a Bidder places a bid for SDIs for the account of another party, namely a natural person, company, business partnership, association, or organized group, the bid may be placed by means of Competitive Bidding and/or Non-Competitive Bidding. 6. In the event that an SDI Auction is held, it shall be held on a Tuesday or on another working day if Tuesday falls on a public holiday. Any change in the SDI Auction schedule shall be announced by Bank Indonesia through the Money Market Information Center, hereinafter referred to as PIPU, and/or other facility as stipulated by Bank Indonesia. 7. The facility used for placement of SDI Auction bids shall be the Automatic Bidding System, hereinafter referred to as ABS, the Reuters Monitor Dealing System, hereinafter referred to as RMDS, or other facility as stipulated by Bank Indonesia, and shall be announced prior to the holding of the SDI Auction. 8. Bank Indonesia shall announced the planned quantity target of the auction, comprising an indicative target, no later than 1 (one) working day prior to the day of holding the SDI Auction through the PIPU and/or other facility as stipulated by Bank Indonesia. 9. In the event that the SDI Auction uses the ABS, the administrative requirements for Bidders are as follows: a. Bidders...

5 5 a. Bidders are required to submit the names of no more than 3 (three) authorized dealers for conducting SDI Auction transactions and the User Unique Identification, hereinafter referred to as UUID, for each of these authorized dealers. b. These administrative requirements for Bidders shall be conveyed to Bank Indonesia, c.q. Money Market Operations Division, Directorate of Monetary Management, hereinafter referred to as the OPU-DPM Division, Building B 10 th floor, Jl. M.H. Thamrin No. 2, Jakarta 10010, using a form according to the specimen in Appendix 1. c. In the event of any amendment in authorized dealer and/or UUID as referred to in letter a, the Bidder shall report the change to Bank Indonesia, c.q. OPU-DPM Division, using a form according to the specimen in Appendix 2. The report of amendment shall be submitted no later than 1 (one) working day prior to the day on which the dealer concerned conducts SDI Auction transactions. d. Bidders are required to maintain security in the use of UUIDs and be shall fully responsibility for any SDI Auction transactions submitted to Bank Indonesia. e. The procedure for holding of SDI Auctions using the ABS facility shall follow the mechanism in the ABS Standard Operating Procedure (SOP) as presented in Appendix 2a. 10. In the event that an SDI Auction is held using another facility, the administrative requirements and auction mechanism shall be stipulated by Bank Indonesia. B. Procedure...

6 6 B. Procedure for Holding SDI Auctions 1. Bank Indonesia shall announce the indicative target and date for holding the SDI Auction through the PIPU and/or other facility as stipulated by Bank Indonesia. 2. Announcement of planned SDI Auction shall state among others the following: a. time for holding the auction; b. indicative target offered; c. term of the SDIs; d. date of issue and date of maturity; e. currency; f. time of opening and closing of bidding; g. time of announcement of outcome of auction; h. settlement date; i. allocation for Non-Competitive Bidding in the event of holding a combination of Competitive Bidding and Non-Competitive Bidding; j. facility for placing of bids. 3. On the day on which the SDI Auction is held, Bidders shall place bids of quantity and discount rate or yield by maturity for Competitive Bidding or bids of quantity for Non-Competitive Bidding commencing from hours through hours Jakarta Time. 4. Bidders shall place their SDI bids with Bank Indonesia, c.q. OPU- DPM Division, subject to the following provisions concerning submission: a. Banks Bids shall be placed by: 1) the Head Office of the Bank if: a) domiciled...

7 7 a) domiciled in the working area of the Bank Indonesia Head Office; or b) domiciled in the working area of a Bank Indonesia Regional Office and not having a branch office in the working area of the Bank Indonesia Head Office. 2) a branch office of the Bank in the working area of the Bank Indonesia Head Office in the event that the Bank has its head office in the working area of a Bank Indonesia Regional Office. Such appointment of branch office of a Bank must be conveyed to Bank Indonesia, c.q. OPU-DPM Division, no later than 1 (one) working day prior to SDI Auction transactions and shall remain valid until a letter is issued for revocation of this appointment. b. Money Market Brokerage Company and Securities Company Bids shall be placed by the head offices of a Money Market Brokerage Company and Securities Company. 5. SDI Auction bids, which consist of quantity bids and bids of discount rate or yield by maturity, are subject to the following provisions: a. quantity bids shall be placed by each Bidder in no less than 1,000 (one thousand) units or Rp 1,000,000, (one billion Rupiahs), and thereafter in increments of 100 (one hundred) units or Rp 100,000, (one hundred million Rupiahs); b. bids placed by a Money Market Brokerage Company or Securities Company must be accompanied by direct confirmation from the Bank appointed as paying Bank for conducting fund settlement; c. the Bank referred to in letter b shall convey confirmation to Bank Indonesia c.q. the OPU-DPM Division, no later than 30 (thirty) minutes after closing of SDI Auction by means of the RMDS or telephone...

8 8 telephone confirmed by facsimile, using a form according to the specimen in Appendix 3. d. discount or yield bids shall be placed in increments of 0.01% (zero point zero one percent). 6. Bidders shall be responsible for the truthfulness of bidding data. 7. Any Bidder having placed a bid shall be prohibited from canceling the bid. C. Determination of Winning Bidders in the SDI Auction 1. The Minister of Finance of the Republic of Indonesia shall determine the outcome and winning bidders in SDI Auctions on the Primary Market. 2. The method applied for determining winning bidders in SDI Auctions shall be the Stop-Out Rate system, namely the sale of SDIs on the basis of the indicative target for SDIs to be sold by the Government. 3. The Stop-Out Rate, hereinafter referred to as SOR, is the highest discount rate or yield obtained in the SDI Auction on the Primary Market in order to achieve the indicative target for SDIs to be sold by the Government. The SOR shall be determined by the Minister of Finance of the Republic of Indonesia. 4. The price of winning bids in the SDI Auction shall be determined according to the multiple price method or uniform price method. 5. Price and quantity for each winning bidder in the auction shall be determined as follows: a. Multiple Price Method 1) Competitive Bidding i. In the event...

9 9 i. In the event that the discount rate or yield bids are lower than the SOR, Bidders shall receive all quantity bids placed for SDIs at the bidded discount rate or yield. ii. In the event that a discount rate or yield bid is equal to the SOR, Bidders may receive all or part of the quantity bids placed for SDIs calculated on a pro-rata basis at the bidded discount rate or yield. Sample calculations for determining the winning bidders in SDI Auction by the multiple price method are presented in Appendix 4. 2) Non-Competitive Bidding i. Prices of SDIs for winning bidders in the SDI Auction shall be determined on the basis of the weighted average price of the outcome of Competitive Bidding. ii. The quantity of SDIs for winning bidders shall be determined as follows: (1) In the event that total bids are less than the maximum allocation for non-competitive bidding, Bidders shall receive all quantities for which they placed bids. (2) In the event that total bids are greater than the maximum allocation for non-competitive bidding, Bidders shall receive a portion of quantities for which they placed bids, calculated on a pro-rata basis. b. Uniform Price Method 1) Competitive Bidding i. In the event that the discount rate or yield bids are lower than the SOR, Bidders shall receive all quantity bids placed for SDIs at the bidded discount rate or yield. ii. In the event...

10 10 ii. In the event that a discount rate or yield bid is equal to the SOR, the Bidders may receive all quantity bids placed for SDIs according to the weighted average price at the SOR or part of the quantity bids placed for SDIs calculated on a pro-rata basis. Sample calculations for determining the winning bidders in SDI Auction by the uniform price method are presented in Appendix 5. iii. The price for all winning bidders in the SDI Auction is the weighted average price for winning bidders in the SDI Auction in Competitive Bidding. 2) Non-Competitive Bidding i. The SDI price for all winning bidders in the SDI Auction under Non-Competitive Bidding is the weighted average price of the outcome of Competitive Bidding. ii. The quantity of SDIs for winning bidders in the SDI Auction shall be determined as follows: (1) In the event that total bids are less than the maximum allocation for non-competitive bidding, Bidders shall receive all quantities for which they placed bids. (2) In the event that total bids are greater than the maximum allocation for non-competitive bidding, Bidders shall receive a portion of quantities for which they placed bids, calculated on a pro-rata basis. 6. In the event that the bids placed result in a discount rate or yield beyond the bounds of reasonability, the Minister of Finance of the Republic of Indonesia may adjust the realized quantity of the SDI Auction or cancel the holding of the SDI Auction in its entirety. D. Announcement...

11 11 D. Announcement of Results of SDI Auction 1. Bank Indonesia shall announce the results of the SDI Auction on the ABS, PIPU, and/or other facility as stipulated by Bank Indonesia at the end of the day on which the SDI Auction is held. The announcement shall include at least the following: a. overall size of auction; b. weighted average discount rate or yield; c. highest and lowest bids for discount rate or yield. 2. Bank Indonesia shall announce the results of the SDI auction in the form of quantity and discount rate or yield to winning bidders in the SDI Auction by means of ABS, RMDS, or other facility as stipulated by Bank Indonesia at the end of the day on which the SDI Auction is held. 3. In the event that the Minister of Finance of the Republic of Indonesia rejects bids for the SDI Auction in all or in part, Bank Indonesia shall announce this cancellation. III. Calculation of Settlement Price for Result of SDI Auction 1. The term of SDIs shall be stated in number of days and calculated from the settlement date through the maturity date. 2. The day count for calculation of accrued interest shall be based on Actual per Actual (A/A). 3. The price for fund settlement shall be calculated as follows: a. For TBs: Settlement price = (Clean price per SDI unit, rounded to the nearest Rupiah) x (total SDI units in winning bids) a. For TBs...

12 12 b. For SBs using the coupon system: Settlement price = (Clean price per SB unit, rounded to the nearest Rupiah, plus accrued interest per SB unit, rounded to the nearest Rupiah) x (total SB units in winning bids) c. For SBs using the discount system (zero coupon bonds) Settlement price = (Clean price per SB unit, rounded to the nearest Rupiah) x (total SB units in winning bids) The formula for the price per unit for TBs and SBs is presented in the example in Appendix 6. IV. Procedures for Settlement and Ownership Registration of SDIs Settlement of SDI Auction and ownership registration of SDIs shall be conducted using procedures in accordance with the prevailing Bank Indonesia regulations concerning procedure for administration of SDIs. V. Cancellation of Transactions from Auction Results In the event that a winning bidder in an SDI Auction does not settle liabilities within the settlement deadline by reason of insufficient balance in the Rupiah demand deposit account of the Bank conducting fund settlement at Bank Indonesia, the entire result of the SDI Auction for which settlement is conducted through that Bank shall be void. VI. Imposition of Sanctions 1. In the event that a Bidder engages in Non-Competitive Bidding for the Bidder s own account, the Bidder shall be subject to sanctions comprising prohibition from bidding in 3 (three) consecutive SDI Auctions. 2. In regard to any cancellation of bids and cancellation of transactions as referred to in item V, the Bidder involved in the cancellation shall be subject...

13 13 subject to sanctions comprising prohibition from bidding in 3 (three) consecutive SDI Auctions. The provisions in this Circular Letter shall come into force on the date of its enactment. For the public to be informed, it is ordered that this Circular Letter be promulgated in the State Gazette of the Republic of Indonesia. Kindly be informed. BANK INDONESIA TARMIDEN SITORUS DIRECTOR OF MONETARY MANAGEMENT

14 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 1 List of Authorized Dealers for Conducting Transactions in Auctions of Sovereign Debt Instruments Using the Automatic Bidding System (ABS) Number:... Name of Bank/Money Market Brokerage Company/Securities Company List of authorized dealers for conducting SDI transactions using the ABS facility: No. Name Official Position UUID Authorized signature: This form shall be validated by an authorized officer acting in the name of the company in accordance with the Company Articles of Association/By- Laws, and affixed with the company seal.

15 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 2 Amendment to List of Authorized Dealers for Conducting Transactions in Auctions of Sovereign Debt Instruments Using the Automatic Bidding System (ABS) Number:... Name of Bank/Money Market Brokerage Company/Securities Company Former list of authorized dealers: No. Name Official Position UUID New list of authorized dealers: No. Name Official Position UUID Authorized signature: This form shall be validated by an authorized officer acting in the name of the company in accordance with the Company Articles of Association/By- Laws, and affixed with the company seal.

16 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 3 To: Bank Indonesia Directorate of Monetary Management c.q. Money Market Operations Division Building B 10 th floor Jl. M.H. Thamrin No. 2, Jakarta Subject: Confirmation of Bid for Sovereign Debt Instruments (SDIs) We hereby provide confirmation of bid for SDIs through the Bank/Money Market Brokerage Company/Securities Company: (Fill in name of Bank/Broker) for the SDI Auction on (date)... in the amount of Rp... (in words... Rupiahs). If our bid is accepted, settlement the SDI Auction may be conducted by debiting our Rupiah demand deposit account at Bank Indonesia No.... in the amount of the bids awarded in the SDI auction. Details of the bid placed by ourselves for SBIs are as follows: No. Category of SDIs Term Discount Rate/Yield Competitive Bidding Non- Competitive Bidding Total Bidding Total: This concludes our confirmation of bidding in the SDI auction. Thank you for your attention. Jakarta,... Name of Bank (due revenue stamp) (signed) Authorized officer.

17 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Sample Calculation of SDI Auction Result SOR with Multiple Price Indicative target: Rp 10 trillion Appendix 4 60% allocation for Competitive Bidding and 40% allocation for Non-Competitive Bidding Details of Competitive Bidding (Table -1): NO PAR VALUE CUMULATIVE BIDS CUMULATIVE (%) DISCOUNT (%) Weighted Average (%) PAR VALUE AWARDED RESULT CUMULATIVE Weighted average at ,250 2, cumulative 1,193 1, , Rp , ,000 4, trillion = 1,909 4, , % 239 4, ,500 6, ,432 6, , , , ,000 Details of Non-Competitive Bidding (Table -2): NO PAR VALUE BIDS CUMULATIVE CUMULATIVE (%) PAR VALUE AWARDED RESULT CUMULATIVE On the basis on the incoming bids, the Minister of Finance of the Republic of Indonesia sets the SOR at %.

18 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 4, cont d Total incoming bids exceed the Rp 10 trillion indicative target, in which 60% or Rp 6 trillion is allocated for Competitive Bidding and 40% or Rp 4 trillion for Non- Competitive Bidding. Total incoming bids exceed the indicative targets for both Competitive Bidding and Non-Competitive Bidding and therefore not all bidders are awarded their bids. The winning bidders are determined as follows: 1. For Bidders in Competitive Bidding Winning bidders are Bidders placing bids at discount rate or yield equal to or less than the SOR (stop-out rate), i.e., %. Accordingly, the winning bidders are Bidders placing bids at discount rate or yield equal to or less than %, namely bidders 1 through 8. Bidders 4 through 8 are awarded bids on a pro-rata basis according to the weighting of each bid against total bids for the % discount rate or yield. Details of amounts awarded pro-rata to bidders in Competitive Bidding are presented in the above right-hand table (Table-1). 2. For Bidders in Non-Competitive Bidding All Bidders in non-competitive bidding receive a yield of % or the weighted average awarded to bidders in competitive bidding. The size of SDIs received is based on pro-rata calculation. Details of amounts awarded pro-rata to Bidders in non-competitive bidding are presented in the above right-hand table (Table-2).

19 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 5 Sample Calculation of SDI Auction Result SOR with Uniform Price Indicative target: Rp 10 trillion 60% allocation for Competitive Bidding and 40% allocation for Non-Competitive Bidding Details of Competitive Bidding (Table -1): NO PAR VALUE CUMULATIVE BIDS CUMULATIVE (%) DISCOUNT (%) Weighted Average (%) PAR VALUE AWARDED RESULT CUMULATIVE Weighted average at ,250 2, cumulative 1,193 1, , Rp , ,000 4, trillion = 1,909 4, , % 239 4, ,500 6, ,432 6, , , , ,000 Details of Non-Competitive Bidding (Table -2): NO PAR VALUE BIDS CUMULATIVE CUMULATIVE (%) PAR VALUE AWARDED RESULT CUMULATIVE On the basis on the incoming bids, the Minister of Finance of the Republic of Indonesia sets the SOR at 14%.

20 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 5, cont d Total incoming bids exceed the Rp 10 trillion indicative target, in which 60% or Rp 6 trillion is allocated for Competitive Bidding and 40% or Rp 4 trillion for Non- Competitive Bidding. Total incoming bids exceed the indicative targets for both Competitive Bidding and Non-Competitive Bidding and therefore not all bidders are awarded their bids. The winning bidders are determined as follows: 1. For Bidders in Competitive Bidding Winning bidders are Bidders placing bids at discount rate or yield equal to or less than the SOR (stop-out rate), i.e., %. Accordingly, the winning bidders are Bidders placing bids at discount rate or yield equal to or less than %, namely bidders 1 through 8. However, the discount rate or yield won in the bidding is uniform, calculated on the basis of the weighted average of the auction with a cumulative total of Rp 6 trillion. In this case, bidders 1 through 8 are awarded bids at a uniform price of %. Details of amounts awarded pro-rata to bidders in Competitive Bidding are presented in the above right-hand table (Table-1). 2. For Bidders in Non-Competitive Bidding All Bidders in non-competitive bidding receive a yield of % or the weighted average awarded to bidders in competitive bidding. The size of SDIs received is based on pro-rata calculation. Details of amounts awarded pro-rata to Bidders in non-competitive bidding are presented in the above right-hand table (Table-2).

21 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 CALCULATION OF SETTLEMENT PRICE FOR TREASURY BILLS The Settlement Price per unit of Treasury Bills (TBs) is calculated as follows: P SPN N = 1 + i D 365 Appendix 6 in which, P SPN = Settlement Price per TB unit; N = par value of TBs per unit; i = Yield stated as percentage, up to 4 (four) decimal places; D = actual days calculated from 1 (one) day after Settlement date through maturity date. The Settlement Price is rounded to the nearest rupiah, with any amount less than or equal to 50 (fifty) cents rounded downwards to zero and any amount above 50 (fifty) cents rounded upwards to Rp 1.00 (one rupiah). Sample Calculation of TB Settlement Price On February 19, 2003, the Government issued TBs with par value per unit of Rp 1,000, (one million rupiahs). These TBs reach maturity on March 19, If the agreed Yield is % (twelve percent) and settlement is conducted on February 19, 2003, the Settlement Price per TB unit is calculated as follows: N = Rp1,000, (one million rupiahs); i D = 12.00% (twelve percent); = 28 (twenty-eight) days, i.e., actual days calculated from 1 (one) day after the settlement date (February 20, 2003) through maturity date (March 19, 2003);

22 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 6, cont d P SPN = Rp1,000, % 365 = Rp 990, Rp 990, The Settlement Price per SDI unit after rounding off is thus Rp 990, (nine hundred and ninety thousand eight hundred and seventy-eight rupiahs). CALCULATION OF SETTLEMENT PRICE FOR SOVEREIGN BONDS 1. Settlement Price for Coupon Sovereign Bonds The Settlement Price per unit of coupon Sovereign Bonds is as follows: Step 1: Clean price per unit is calculated as follows: P = 1 + i n N d F 1+ E N F + k 1 i 1 + n c n = d k 1+ E N c n a E in which accrued interest per unit is calculated as follows: AI c a = N n E Step 2: Settlement price per unit is calculated as follows: P K = P + AI II. Settlement Price for Zero Coupon Bonds The Settlement Price per unit of zero coupon bonds is calculated as follows:

23 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 6, cont d P Z = N ( 1+ i) D 365 in which, P K = Settlement Price per unit of coupon Sovereign Bonds; P Z = Settlement Price per unit of zero coupon bonds; P = clean price per unit of coupon Sovereign Bonds; AI = accrued interest per unit of coupon Sovereign Bonds; N = par value per unit of Sovereign Bonds; D = actual days calculated from 1 (one) day after Settlement date through maturity date; a = actual days calculated from 1 (one) day after date of commencement of coupon period through Settlement date. c = coupon rate; d = actual days calculated from 1 (one) day after Settlement date through next coupon payment date; E = actual days calculated from 1 (one) day after date of commencement of coupon period through next coupon payment date, during which the Settlement takes place; i = yield to maturity stated as percentage up to 2 (two) decimal places; k = 1, 2, 3,, F; F = total frequency of remaining coupon payments from the Settlement date through maturity date; n = frequency of coupon pyaments during one year. The clean price and accrued interest are each rounded to the nearest rupiah, with any amount less than or equal to 50 (fifty) cents rounded downwards to zero and any amount above 50 (fifty) cents rounded upwards to Rp 1.00 (one rupiah).

24 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 6, cont d Sample Calculation of Settlement Price for Coupon Bonds On February 19, 2003, the Government issued Sovereign Bonds at par value per unit of Rp 1,000, (one million rupiahs) and with a coupon rate of 12.00% (twelve percent) per annum. These Sovereign Bonds reach maturity on February 15, 2005, with coupons paid after each period on February15 and August 15 of each year. If the agreed yield to maturity is 12.50% (twelve point five zero percent) and Settlement takes place on February 19, 2003, the Settlement Price per unit of Sovereign Bonds is calculated by means of the following steps: N = Rp 1,000, (one million rupiahs); i = 12.50% (twelve point five zero percent); c = 12.00% (twelve percent); a = 4 (four) days, i.e., actual days calculated from 1 (one) day after the date of commencement of the coupon period (February 16, 2003) through Settlement date (February 19, 2003); d = 177 (one hundred and seventy-seven) days, i.e., actual days calculated from 1 (one) day after the Settlement date (February 20, 2003) through the next coupon payment date (August 15, 2003); E = 181 (one hundred and eighty-one) days, i.e., actual days calculated from 1 (one) day after the date of commencement of the coupon period through the next coupon payment date, during which the Settlement takes place (February 16, 2003, through August 15, 2003); n = 2 (two) times in one year (semiannually), i.e., each February 15 and August 15; F = 4 (four) times, i.e., number of coupon payments from the Settlement date through maturity date (February 19, 2003, through February 15, 2005);

25 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Step 1: Clean price per unit is calculated as follows: Appendix 6, cont d P = Rp 1,000, % Rp 1,000, % % % Rp1,000, % % Rp1,000, % % Rp1,000, % 4 Rp1,000, % 1+ 2 = Rp 785, Rp 206, Rp 1, = Rp 991, Rp 991, The clean price per unit of Sovereign Bonds after rounding off is thus Rp 991, (nine hundred and ninety-one thousand three hundred and ninety rupiahs). In which accrued interest per unit is calculated as follows: 12.00% 4 AI = Rp1,000, = Rp1, Rp1,326.00

26 Appendix to Circular Letter of Bank Indonesia No. 5/ /DPM dated March 21, 2003 Appendix 6, cont d Step 2: The Settlement Price per unit is calculated as follows: P K = Rp 991, Rp 1, = Rp 992, The Settlement Price per unit of Sovereign Bonds after rounding off is thus Rp 992, (nine hundred and ninety-two thousand seven hundred and sixteen rupiahs). Sample Calculation of Settlement Price for Zero Coupon Bonds On February 19, 2003, the Government issued Sovereign Bonds at par value per unit of Rp 1,000, (one million rupiahs). These Sovereign Bonds reach maturity on February 15, If the agreed yield to maturity is 12.50% (twelve point five zero percent) and Settlement takes place on February 19, 2003, the Settlement Price per unit of Sovereign Bonds is calculated as follows: N = Rp1,000, (one million rupiahs); i = 12.50% (twelve point five zero percent); D = 727 (seven hundred and twenty-seven) days, i.e., actual days commencing from 1 (one) day after Settlement date (February 20, 2003) through maturity date (February 15, 2005); Rp1,000, P Z = ( % ) = Rp 790, Rp790, The Settlement Price per unit of Sovereign Bonds after rounding off is thus Rp 790, (seven hundred and ninety thousand eight hundred and eighty-nine rupiahs).