WHAT DO MORE THAN 30 MILLION CUSTOMERS OF THE BEST BANK IN INDONESIA HAVE IN COMMON? THE SUPPORT OF OVER PERSONNEL 1,769 ATMs MORE THAN 5,400 OPERATING UNITS ANNUAL REPORT 2008 OVER 50 PRODUCTS AND SERVICES EXPERIENCE OF 113 YEARS SERVING CUSTOMERS FROM ALL WALKS OF LIFE Table of Contents 01 BRI in Brief and Milestones 88 Institutional Business 02 Vision, Mission, Objective & Company 90 International Business And Treasury Values 94 Risk Management 04 Financial Highlights 100 Human Resources Management 05 Information to Shareholders 104 Information Technology 11 Ratings of BRI in 2008 106 Network and Services 12 2008 Significant Events 108 Corporate Social Responsibility 14 Awards 2008 114 Profile of the Board of Commissioners 15 Thirty Million Customers of BRI, 118 Profile of the Board of Directors Growing and Prospering Over Time 123 Senior Managers 18 Report of the President Commissioner 125 Products and Services 21 Board of Commissioners 126 Networks 22 Report of the Board of Directors 128 BRI Network and Addresses 29 Board of Directors 144 Statement of Responsibility for Financial 30 Organisational Structure Reporting 34 Comparative Data between BRI and the 147 Financial Statements National Banking Sector 273 Subsidiary Company 36 Management Discussion and Analysis 274 Corporate Information of the Company’s Results of Operations 275 Contact Address and Financial Condition 44 Report on Corporate Governance 72 Press Release 2008 73 Corespondence with the Indonesia Stock Exchange in 2008 76 Business Target Achievements in 2008 76 Micro, Small and Medium Sized Business 82 Consumer Business 86 Commercial Business BRI in Brief and Milestones 1. Annual Report 2008 Bank Rakyat Indonesia PT Bank Rakyat Indonesia (Persero) Tbk. (“BRI” or the On November 10, 2003, BRI became a publicly held “Bank”) is one of the largest and oldest banks in Indonesia, company with the listing of 30% of its shares in what is founded on 16 December 1895. now the Indonesia Stock Exchange (IDX), with the ticker code of BBRI, which is currently part of the LQ45 equity Starting from an association that managed simple saving- index, making it one of the shares that are included in the and-loan fund of a Mosque for the local community, a measurement of the IDX composite shares price index, the small financial firm by the name of De Poerwokertosche Jakarta Composite Index (JCI). Hulp en Spaarbank der Inlandsche Hoofden was formed on that date in Purwokerto, Central Java, as the embryo During the past two years, through the committed efforts that would eventually evolve into Bank Rakyat Indonesia. and aggressive marketing programs throughout BRI’s vastly extensive branch network, BRI was able to grow Over time, the small firm that was the brainchild of Raden rapidly in terms of total assets, loans outstanding, third Aria Wiriaatmadja continued to flourish, meeting the party funds, profit from operations, with assets quality that needs of the community. Over the course of its existence, are well-maintained. the name of the firm had been changed several times, from the Hulp-en Spaarbank der Inlandsche Bestuurs As of 31 December 2008, the BRI’s customer base Ambtenareen to De Poerwokertosche Hulp Spaar-en reached approximately 30 million accounts that comprised Landbouw Credietbank (Volksbank), Centrale Kas Voor of individual customers, micro and small-scale businesses, Volkscredietwesen Algemene in 1912 and Algemene medium to large-scale businesses, and private as well as Volkscredietbank (AVB) in 1934. During the Japanese government institutions. The growth of credit was 41.36% occupation, AVB was changed into Syomin Ginko. in 2008, whereas third party funds grew by 21.70%. As at year-end 2008, BRI had more than 5,400 Operating Upon the independence of Indonesia, the Indonesian Units that comprised of Regional Offices, Branch Offices, Government changed the name back into Bank Rakyat Sub-branch Offices, Cash Offices, and BRI Units (Micro Indonesia (taken from Volksbank) on 22 February 1946. Outlets). In several of its Branch Offices, BRI also provides Based on Government Regulation No. 1 of 1946, BRI the BRI Priority service for preferred customers. became the first state-owned bank of the Government of the Republic of Indonesia. For its electronic banking network, BRI currently operates a proprietary network of 1,796 ATM plus more than 35,000 As a state-owned bank, BRI played a central role in ATM through the ATM LINK, ATM Bersama and ATM pursuing the vision of the government to develop the rural Prima networks, as well as the 24-hour phone banking and economy. In 1960, the government changed the name SMS Banking services. of BRI into Bank Koperasi Tani dan Nelayan (Farms and Fisheries Cooperative Bank). Pursuant to Law No. 21 of As of 31 December 2008, the Government of Indonesia 1968, the government restored the name of Bank Rakyat held 56.79% shares of BRI with the remaining shares Indonesia which by then had become a commercial bank, held by public investors. The shares capitalisation of BRI and pursuant to the Banking Law No. 7 of 1992, BRI as at year-end 2008 was Rp55.85 trillion, accounting for changed its name and legal entity into PT Bank Rakyat approximately 5.56% of the total market capitalization of Indonesia (Persero). With a focus on the Micro, Small the Indonesia Stock Exchange. and Medium Enterprise (MSME) segment, BRI has since inspired others to the MSME economic sector as the backbone of the national economy. Vision, Mission, Objective & Company Values 2. Annual Report 2008 Bank Rakyat Indonesia Vision To Become a Leading Commercial Bank that Always Prioritises Customer Satisfaction Mission To achieve the vision, BRI has decided on three missions that have to be undertaken, namely: • BRI provides the best banking operation by prioritising services for Micro, Small and Medium Businesses in order to support people’s economy. • BRI offers premium services to customers through a network that are spread all over Indonesia and supported by professional human resources who implement Good Corporate Governance. • BRI creates value and produces optimal benefits to all stakeholders. 3. Annual Report 2008 Bank Rakyat Indonesia Corporate Cultures Business Strategy BRI espouses the corporate values that form the BRI has formulated the Bank’s Business Plan for foundation for the thinking, action and behaviour of the period of 2009-2011, as parts of its long-term every individual at BRI, inherent in a corporate culture development plan. The business strategy of BRI in the and projecting a solid and strong character of the Bank. short and medium term is broken down as follows: These values are integrity, professionalism, customer • The business development of BRI that is supported satisfaction, leadership, and respect for the individual. by the increase in the quantity and quality of professional personnel, product features, services, As a publicly held company, BRI is fully committed and the support of an information technology to comply with all prevailing laws and regulations system that is reliable and for the following pertaining to banking and the capital markets. This applications: has induced BRI to always champion the cause - The growth of credit that focuses on the for prudential banking as well as the interests of financing of the MSME sectors while still stakeholders. adhering to prudential banking principles. - The growth of third party funds that are This commitment is also manifested in the form of dominated by low-cost funding with a minimum Corporate Governance as follows: composition 60%. • Intensifying the program to instil awareness of risk • Instilling a risk-aware culture and implementing a and a culture of compliance for every employee at micro management system that is effective among all BRI Operating Units. all the Operating Units of BRI. • Intensifying improvements to service quality in all • Strengthening of the Banks equity base to support Operating Units; business growth. • Extrapolating and monitoring each progress made • Expanding the service networks by adding Branch by the bank into an activities log book that are Offices, Sub-Branch Offices, Cash Offices, BRI easily measurable and accountable for all Operating Units as well as electronic channels, such as the Units; Automated Teller Machines (ATM), Cash Deposit • Implementing a policy of rewards and punishments Machines (CDM) and Electronic Data Capture that is firm and just. (EDC) in order to extend the reach of services. • Enhancing the marketing communications for each product and service category in line with the corporate marketing strategy such that BRI will also be able to increase its sales and create the corporate image of BRI in the public minds. Financial Highlights 4. Annual Report 2008 Bank Rakyat Indonesia (in trillion Rupiah, except earnings per share) 2008 2007 2006 2005 2004 Balance Sheets Total Assets 246.07 203.74 154.76 122.78 107.04 Total Earning Assets 228.78 169.09 139.04 111.48 97.96 Loans – Gross 161.11 113.97 90.28 75.53 62.37 Government Recapitalisation Bonds 16.35 18.22 18.45 17.72 22.69 Third Party Funds 201.54 165.60 124.47 97.05 82.40 - Demand Deposits 39.92 37.16 27.86 17.38 13.36 - Savings 88.08 72.30 58.31 49.37 44.57 - Time Deposits 73.54 56.14 38.30 30.29 24.47 Other Interest Bearing Liabilities 7.60 6.26 6.04 5.60 6.38 Equity 22.36 19.44 16.88 13.35 12.45 Profit/Loss Interest Income: - With Government Recap Bonds Interest 28.10 23.24 21.07 17.25 15.53 - Without Government Recap Bonds Interest 26.15 21.22 18.73 15.08 12.69 Net Interest