Interim Report - 18 of 21

RNS Number : 3144X

HSBC Holdings PLC

14 August 2009

 



15    Notes on the statement of cash flows

	Half-year to
	30 June     2009		30 June     2008		31 December     2008
	US$m		US$m		US$m
Non-cash items included in profit before tax
Depreciation, amortisation and impairment	1,153		1,766		11,601
Revaluations on investment property	43		(27)		119
Share-based payment expense	355		427		392
Loan impairment losses gross of recoveries	13,710		10,436		14,598
Provisions for liabilities and charges	368		107		484
Impairment of financial investments	872		418		1,361
Charge for defined benefit plans	(150)		234		256
Accretion of discounts and amortisation of premiums	(96)		(461)		(406)
	16,255		12,900		28,405
Change in operating assets
Change in prepayments and accrued income	1,311		2,294		1,884
Change in net trading securities and net derivatives	1,922		(29,675)		6,382
Change in loans and advances to banks	(28,458)		1,605		20,991
Change in loans and advances to customers	(9,279)		(76,452)		83,731
Change in financial assets designated at fair value	(4,946)		2,923		9,834
Change in other assets	2,171		(1,826)		(3,568)
	(37,279)		(101,131)		119,254
Change in operating liabilities
Change in accruals and deferred income	(2,264)		(4,219)		(1,950)
Change in deposits by banks	(937)		20,947		(23,985)
Change in customer accounts	46,291		63,277		(30,905)
Change in debt securities in issue	(23,494)		(16,522)		(50,630)
Change in financial liabilities designated at fair value	262		(181)		(15,171)
Change in other liabilities	2,388		6,093		(10,167)
	22,246		69,395		(132,808)
Cash and cash equivalents comprise
Cash and balances at central banks	56,368		13,473		52,396
Items in the course of collection from other banks	16,613		16,719		6,003
Loans and advances to banks of one month or less	157,856		244,608		165,066
Treasury bills, other bills and certificates of deposit  less than three months	36,866		28,067		62,639
Less: items in the course of transmission to other banks	(16,007)		(15,329)		(7,232)
	251,696		287,538		278,872
Interest and dividends
Interest paid	(16,696)		(31,752)		(28,590)
Interest received	36,975		53,945		53,074
Dividends received	835		1,339		537

16    Contingent liabilities, contractual commitments and guarantees

	At     30 June     2009		At     30 June     2008		At     31 December     2008
	US$m		US$m		US$m
Contingent liabilities and guarantees
Guarantees and irrevocable letters of credit pledged as collateral security	69,287		83,640		72,895
Other contingent liabilities	153		275		259
	69,440		83,915		73,154
Commitments
Documentary credits and short-term trade-related transactions	8,947		15,898		9,789
Forward asset purchases and forward forward deposits placed	1,966		1,380		197
Undrawn note issuing and revolving underwriting facilities	-		105		-
Undrawn formal standby facilities, credit lines and other commitments to lend	558,099		741,543		594,036
	569,012		758,926		604,022

The above table discloses the nominal principal amounts of contingent liabilities, commitments and guarantees; mainly credit-related instruments including both financial and non-financial guarantees and commitments to extend credit. Contingent liabilities arising from litigation against the Group are disclosed in Note 20. Nominal principal amounts represent the amounts at risk should contracts be fully drawn upon and clients default. The amount of the loan commitments shown above reflects, where relevant, the expected level of take-up of pre-approved loan offers made by mailshots to personal customers. As a significant proportion of guarantees and commitments is expected to expire without being drawn upon, the total of the nominal principal amounts is not representative of future liquidity requirements. 

Financial Services Compensation Scheme

The UK Financial Services Compensation Scheme ('FSCS') has provided compensation to consumers following the collapse of a number of deposit-takers such as Bradford & Bingley plc, Heritable Bank plc and Kaupthing Singer & Friedlander Limited. The compensation paid out to consumers is currently funded through loans from HM Treasury. HSBC Bank plc ('the bank') could be liable to pay a proportion of the outstanding borrowings that the FSCS has borrowed from HM Treasury which at 31 March 2009 stood at £18.2 billion (US$30 billion). The bank is also obligated to pay its share of forecast management expenses based on the bank's market share of deposits protected under the FSCS. As at 30 June 2009 the bank has provisions of £121 million (US$200 million) in respect of the share of forecast management expense, including interest costs, for the 2008/9, 2009/10 and 2010/11 levy years. This accrual is based on the bank's estimated share of total market protected deposits at 31 December 2007, 2008 and at 30 June 2009, respectively. However, the ultimate FSCS levy to the industry as a result of the 2008 collapses cannot currently be estimated reliably as it is dependent on various uncertain factors including the potential recoveries of assets by the FSCS and changes in the interest rate, the level of protected deposits and the population of FSCS members at the time.

17    Segmental analysis

Net operating income

	Europe		Hong     Kong		Rest of     Asia- Pacific 1		Middle      East1		North     America		Latin     America		Intra-    HSBC     items		Total
	US$m		US$m		US$m		US$m		US$m		US$m		US$m		US$m
Half-year to:
30 June 2009	9,541		4,441		3,478		978		652		3,067		(1,347)		20,810
30 June 2008	13,369		5,027		4,207		1,265		2,433		4,285		(1,169)		29,417
31 December 2008	13,556		4,362		3,922		1,124		1,951		3,736		(1,323)		27,328

Profit/(loss) before tax

	Europe		Hong     Kong		Rest of     Asia-      Pacific1		Middle      East1		North     America		Latin     America		Intra-    HSBC     items		Total
	US$m		US$m		US$m		US$m		US$m		US$m		US$m		US$m
Half-year to:
30 June 20092	2,976		2,501		2,022		643		(3,703)		580		-		5,019
30 June 2008	5,177		3,073		2,634		990		(2,893)		1,266		-		10,247
31 December 2008	5,692		2,388		2,088		756		(12,635)		771		-		(940)

Total assets

	Europe		Hong     Kong		Rest of     Asia-      Pacific1		Middle      East1		North     America		Latin     America		Intra-    HSBC     items		Total
	US$m		US$m		US$m		US$m		US$m		US$m		US$m		US$m
At 30 June 20092	1,324,687		413,107		217,794		48,601		494,778		107,515		(184,639)		2,421,843
At 30 June 2008	1,384,022		371,584		239,224		51,777		568,114		122,009		(190,052)		2,546,678
At 31 December 2008	1,392,049		414,484		225,573		50,952		596,302		102,946		(254,841)		2,527,465

1    Comparative information has been restated to reflect the geographical segmentation as at 30 June 2009.

2    Changes due to the rights issue are included within Europe (see Note 19). 

18    Goodwill impairment

It is HSBC's policy to test goodwill allocated to each cash generating unit ('CGU') for impairment as at 1 July each year. Goodwill is also tested for impairment whenever there is an indication that goodwill may be impaired. 

The allocation of goodwill to cash generating units ('CGU's) is described in Note 22 on page 409 of the Annual Report and Accounts 2008. 

Given the extraordinary market events experienced globally during 2008, HSBC performed an additional impairment test on all of the CGUs within the Group as at 31 December 2008. As at 30 June 2009, HSBC reviewed the current and expected performance of the CGUs to determine whether there was any indication of potential impairment of the goodwill allocated to them. As a result of this review, and with the economic outlook remaining uncertain, further additional impairment tests were performed for Personal Financial Services - Europe and Personal Financial Services - Latin America. No impairment of the goodwill allocated to these CGUs was identified.

The recoverable amount of the CGUs to which goodwill has been allocated was determined based on value in use ('VIU') at each respective testing date for 2008 and 2009.

The process of identifying and evaluating goodwill impairment is inherently uncertain because it requires significant management judgement in making a series of estimations, the results of which are highly sensitive to the assumptions used. 

The discount rate and the long-term growth rate are key assumptions in the VIU calculation, and the rates used are shown below.

	At 30 June 2009						At 31 December 2008
	Goodwill at     30 June     2009		Discount     rate		Nominal      growth rate      beyond     initial      cash flow      projections		Goodwill at     31 December     2008		Discount     rate		Nominal      growth rate      beyond     initial      cash flow      projections
	US$m		%		%		US$m		%		%
Cash generating unit
Personal Financial Services - Europe	4,507		9.0		3.5		4,422		10.0		3.5
Personal Financial Services - Latin  America	2,350		16.8		8.8		2,189		16.8		8.8
	6,857						6,611

Aggregate goodwill of US$15,927 million (31 December 2008: US$15,244 million) had been allocated to CGUs which were either not considered individually significant, or were considered individually significant but were not tested for impairment because there was no indication of impairment as at 30 June 2009.

The basis of the determination of the discount rates and nominal long-term growth rates applied and a discussion of the other key assumptions used in calculating the VIU of each CGU are included in Note 22 on page 409 of the Annual Report and Accounts 2008. Management considers that these remain appropriate and, in particular, that the discount rate used for Personal Financial Services - Latin America continues to be based on externally sourced rates. 

Based on the conditions at the reporting date, management determined that a reasonably possible change in any of the key assumptions would not cause an impairment to be recognised in respect of Personal Financial Services - Europe and Personal Financial Services - Latin America.

19    Rights issue

On 2 March 2009, HSBC Holdings announced its proposal to raise £12.5 billion (US$17.8 billion), net of expenses, by way of a fully underwritten rights issue. Under the proposal, HSBC offered its shareholders the opportunity to acquire 5 new ordinary shares for every 12 ordinary shares at a price of 254 pence per new ordinary share. For shareholders on the Hong Kong and Bermuda Overseas Branch Registers this offer was expressed in Hong Kong dollars and US dollars respectively, fixed at published exchange rates on 27 February 2009. The proposal was subject to authorisation by the shareholders which was obtained at a general meeting held on 19 March 2009. The offer period commenced on 20 March 2009 and closed for acceptance on 3 April 2009. Dealing in the new shares began on 6 April 2009.

Accounting treatment under IFRSs

Although HSBC Holdings' functional currency is the US dollar, the rights issue was substantially denominated in currencies other than US dollars, principally in sterling and Hong Kong dollars. Accordingly, under the requirements of IAS 32 paragraph 16(b)(ii), HSBC was not able to demonstrate that it was issuing a fixed number of shares for a fixed amount of cash, and would therefore be prohibited under IAS 32 from accounting for the offer of rights in shareholders' equity. Under IAS 32, therefore, the offer of rights would be treated as a derivative financial liability.

As a derivative financial liability, under IAS 39 the liability would have been measured at its fair value at inception of the offer on 20 March 2009, which is substantially the difference between the share price at that date and the issue price of 254 pence per new ordinary share. The corresponding entry on inception would have been made to shareholders' equity. Subsequently, the liability would have been re-measured at fair value with movements in fair value recognised in the income statement until the exercise of the rights, which were exercised by 3 April 2009. On the exercise of rights the liability would have been credited to shareholders' equity. If this accounting treatment was adopted by HSBC, a loss of US$4.7 billion would have been recognised in the income statement, which was primarily due to an increase in HSBC's share price between 20 March 2009 and 3 April 2009. There would have been no impact on the Group's or HSBC Holdings' shareholders' equity or HSBC Holdings' distributable reserves. The table below demonstrates the accounting entries for the rights issue under the accounting treatment required by IAS 32.

	Retained earnings US$m		Derivative liability US$m		Income statement US$m
Initial recognition of liability for offer of rights	(9,713)		9,713		-
Movement in fair value of rights	-		4,747		(4,747)
Exercise of rights	14,460		(14,460)		-
Transfer to retained earnings	(4,747)		-		4,747
Effect of rights issue on retained earnings	-

The following table shows the effect on HSBC's profit before tax, profit/(loss) for the period and profit/(loss) attributable to shareholders of the parent company if the offer of rights was classified as either a liability, as required by IAS 32, or an equity instrument, as reported.

	Half-year to 30 June 2009
	Liability     instrument		Equity     instrument     (as reported)
	US$m		US$m
Profit before tax	272		5,019
Profit/(loss) for the period	(1,014)		3,733
Profit/(loss) attributable to shareholders of the parent company	(1,400)		3,347

The following table shows the effect on HSBC's basic and diluted earnings per share if the rights issue was accounted for as either a liability or equity instrument:

	Half-year to 30 June 2009  Liability instrument						Half-year to 30 June 2009 Equity instrument (as reported)
	Loss1     US$m		Number     of      shares2  (millions)		Amount     per share     US$		Profit1     US$m		Number of      shares2  (millions)		Amount     per share     US$
Pre-rights issue	(1,534)		11,994		(0.13)		3,213		11,994		0.27
Effect of rights issue			3,359						3,359
Post-rights issue (basic)	(1,534)		15,353		(0.10)		3,213		15,353		0.21
Effect of dilutive ordinary shares			52						52
Post-rights issue (diluted)	(1,534)		15,405		(0.10)		3,213		15,405		0.21

1     Profit/(loss) attributable to shareholders of the parent company less dividends and coupons payable on preference shares and capital securities, respectively, that are classified as equity instruments.

2    Weighted average number of ordinary shares.

Future accounting developments

On 21 July 2009, following a recommendation from IFRIC that IAS 32 be urgently amended, the IASB discussed this matter. As a result of that meeting, the Directors expect that an Exposure Draft will be issued by the IASB to amend IAS 32, such that, if adopted, IAS 32 would require rights issues such as HSBC's rights issue to be accounted for as equity instruments rather than derivative financial liabilities. The Exposure Draft is expected to be published for comment in August 2009. If adopted, the resulting amendment to IAS 32 is expected to apply retrospectively, and is expected to be available for financial statements with periods ending 31 December 2009.

Fair presentation

In the opinion of the Directors, accounting for the rights issue in accordance with the requirements of IAS 32 as set out above would be so misleading that it would conflict with the objective of financial statements set out in the IASB's framework. The Directors concluded that the application of IAS 32 to the rights issue would not result in a fair representation of the transaction it purports to represent, and consequently would be likely to influence economic decisions made by users of the financial statements. The Directors therefore have concluded that compliance with this specific requirement would be so misleading that the interim consolidated financial statements would not present fairly the Group's financial position, financial performance and cash flows.

In making this determination, the Directors noted that the offer of rights had been made on equal terms, so far as legal requirements permit, to all ordinary shareholders in the currency in which their shares are denominated, and that in essence the transaction is one with existing ordinary shareholders, such that it would reasonably be expected to have no effect on the profit or loss attributable to ordinary shareholders for the accounting period. The principal factor which, under the requirements of IFRSs, determined the movement in the liability over the offer period was the movement in the HSBC share price; therefore the accounting treatment under IAS 32 would have resulted in amounts being recognised in the income statement in respect of a transaction with existing ordinary shareholders, and which are primarily caused by movements in the HSBC share price. Furthermore, the Directors noted that the financial effect of this accounting treatment is material in terms of its amount, and would cause a profit attributable to shareholders to become a loss attributable to shareholders. They therefore concluded that this was a fundamental consideration in understanding the financial performance of the Group, such that the interim consolidated financial statements prepared in accordance with the specific requirements of IAS 32 as set out above would not be fairly presented and would not give a true and fair view of the Group's financial position, financial performance and cash flows.

Accordingly, HSBC has accounted for the offer of rights as an equity instrument, and has therefore not reߛmeasured this instrument during the offer period. HSBC has therefore accounted for the offer of rights in the same way that IAS 32 would require for an offer of rights in new shares denominated in the functional currency of the issuer. Following the exercise of the rights and the allotment of new shares, the cash proceeds of the rights issue were recognised in shareholders' equity.

Share capital

Movement on HSBC Holdings share capital

	Number		US$m
At 1 January 2009	12,105,265,082		6,053
Shares issued in respect of rights issue	5,060,239,065		2,530
Shares issued under HSBC employee share plans	347,892		-
Shares issued in lieu of dividends	148,790,530		75
At 30 June 2009	17,314,642,569		8,658

Merger reserve

As part of the arrangement for the rights issue, HSBC Holdings entered into a share-for-share exchange with Chinnery Limited, thereby availing itself of Statutory Share Premium Relief under Section 612 of the Companies Act 2006. The nominal value of the new shares issued was credited to share capital and the remaining consideration was credited to the merger reserve and translated into US dollars at the foreign exchange rate on that date.

Share options and share awards

The Remuneration Committee agreed to make adjustments to all unexercised share options and share awards under HSBC's various share plans and share schemes as a consequence of the rights issue. The adjustments were based on the theoretical ex-rights price, which was considered to be the most appropriate methodology to reflect the rights issue. The adjustments under certain share plans and share schemes have been approved by the relevant tax authorities, where necessary.

20    Litigation

HSBC is party to legal actions in a number of jurisdictions including the UK, Hong Kong and the US, arising out of its normal business operations. HSBC considers that none of the actions is material, and none is expected to result in a significant adverse effect on the financial position of HSBC, either individually or in the aggregate. Management believes that adequate provisions have been made in respect of such litigation. HSBC has not disclosed any contingent liability associated with these legal actions because it is not practicable to do so, except as set out below. 

On 27 July 2007, the UK Office of Fair Trading ('OFT') issued High Court legal proceedings against a number of UK financial institutions, including HSBC Bank plc, to determine the legal status and enforceability of certain of the charges applied to their personal customers in relation to unauthorised overdrafts (the 'charges'). The OFT has been investigating the fairness of the charges. Pending the resolution of the proceedings, the Financial Services Authority ('FSA') has granted firms (including HSBC Bank plc) a waiver enabling them to place relevant complaints about the charges on hold and the County Courts have stayed all individual customer claims. 

Court judgements given to date have confirmed that HSBC Bank plc's current and historic charges do not constitute penalties but are capable of being tested for fairness. HSBC Bank plc (and all the other financial institutions involved in the legal proceedings) has appealed this latter finding to the House of Lords and that appeal took place from 23ߛ25 June 2009. Judgement is awaited. A wide range of outcomes of the legal proceedings is possible, depending upon the result of the appeal to the House of Lords and, if the charges are assessable, upon the outcome of the OFT's investigation and the Court's final assessment of the fairness of each charge across the period under review. 

Since July 2001, there have been a variety of charges applied by HSBC Bank plc across different charging periods under the then existing contractual arrangements. 

If, contrary to HSBC Bank plc's current assessment, a final decision is reached in the case that results in a liability for HSBC Bank plc, a large number of different outcomes is possible, each of which would have a different financial impact. Given that the OFT's investigation is ongoing, and that there is limited authority on how an assessment of fairness should be conducted and how any entitlement of customers to redress (following any finding of unfairness) should be calculated, HSBC Bank plc does not consider it practicable to provide a reliable estimate of the potential financial impact of an adverse decision. 

In both 'A Better Deal for Consumers', a White Paper presented to Parliament by the Secretary of State for Business Innovation and Skills on 2 July 2009, and 'Reforming Financial Markets', a White Paper presented to Parliament by the Chancellor of the Exchequer on 8 July 2009, specific reference was made to the OFT's case on bank charges which, it was noted, could take several years to resolve. In both Papers, the Government called on the regulators and the banks to explore whether there is a quicker way of resolving consumer complaints about the charges than pursuing further litigation, which would also provide the certainty that regulators and banks need.

HSBC Bank plc considers the charges to be and to have been fair, valid and enforceable, and intends strongly to defend its position through the Court process.

On 11 December 2008, Bernard L Madoff ('Madoff') was arrested and charged in the United States District Court for the Southern District of New York with one count of securities fraud. That same day, the US Securities and Exchange Commission ('SEC') filed securities fraud charges against Madoff and his firm Bernard L Madoff Investment Securities LLC ('Madoff Securities'), a broker dealer and investment advisor registered with the SEC. The criminal complaint and SEC complaint each alleged that Madoff had informed senior Madoff Securities employees, in substance, that his investment advisory business was a fraud. On 15 December 2008, on the application of the Securities Investor Protection Corporation, the United States District Court for the Southern District of New York appointed a trustee for the liquidation of the business of Madoff Securities, and removed the liquidation proceeding to the United States Bankruptcy Court for the Southern District of New York. On 9 February 2009, on Madoff's consent, the United States District Court for the Southern District of New York entered a partial judgement in the SEC action, permanently enjoining Madoff from violating certain antifraud provisions of the US securities laws, ordering Madoff to pay disgorgement, prejudgement interest and a civil penalty in amounts to be determined at a later time, and continuing certain other relief previously imposed, including a freeze on Madoff's assets. On 12 March 2009, Madoff pleaded guilty to 11 felony charges, including securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the SEC, and theft from an employee benefit plan. On 29 June 2009, Madoff was sentenced to 150 years in prison. The relevant US authorities are continuing their investigations into the fraud. There remains significant uncertainty as to the facts of the fraud and the total amount of assets that will ultimately be available for distribution by the Madoff Securities trustee.

Various non-US HSBC group companies provide custodial, administration and similar services to a number of funds incorporated outside the United States of America whose assets were invested with Madoff Securities. Based on information provided by Madoff Securities, as at 30 November 2008, the aggregate net asset value of these funds (which would include principal amounts invested and unrealised gains) was US$8.4 billion.

Proceedings concerning Madoff and Madoff Securities have been issued by different plaintiffs (including funds, fund investors, and the Madoff Securities trustee) in various jurisdictions against numerous defendants and HSBC expects further proceedings to be brought. Various HSBC group companies have been named as defendants in suits in the United States, Ireland, Luxembourg, and other jurisdictions. All of the cases where HSBC group companies are named as a defendant are at a very early stage. HSBC considers that it has good defenses to these claims and will continue to defend them vigorously. HSBC is unable reliably to estimate the liability, if any, that might arise as a result of such claims. 

Various HSBC group companies have also received requests for information from various regulatory and law enforcement authorities, and from the Madoff Securities trustee, in connection with the fraud by Madoff. HSBC group companies are co-operating with these requests for information.

21    Events after the balance sheet date

A second interim dividend for the financial year ending 31 December 2009 of US$0.08 per ordinary share (US$1,386 million) (2008: US$0.18 per ordinary share, US$2,161 million) was declared by the Directors after 30 June 2009. The second interim dividend will be payable on 7 October 2009 to holders of ordinary shares on the Register at the close of business on 21 August 2009. 

22    Interim Report 2009 and statutory accounts

The information in this Interim Report 2009 is unaudited and does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The Interim Report 2009 was approved by the Board of Directors on 3 August 2009. The statutory accounts for the year ended 31 December 2008 have been delivered to the Registrar of Companies in England and Wales in accordance with section 242 of the Companies Act 1985. The auditor has reported on those accounts. Its report     was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

Responsibility Statement

The Directors, the names of whom are set out on pages 193 to 197 of this Interim Report, confirm to the best of their knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU; 

• the Interim Management Report includes a fair review of the information required by: 

(a)     DTR 4.2.7R of the Disclosure Rules and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year ending 31 December 2009 and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(b)     DTR 4.2.8R of the Disclosure Rules and Transparency Rules, being related parties transactions that have taken place in the first six months of the financial year ending 31 December 2009 and that have materially affected the financial position or performance of HSBC during that period; and any changes in the related parties transactions described in the Annual Report 2008 that could do so.  

On behalf of the Board, S K Green Group Chairman

3 August 2009

Introduction

We have been engaged by HSBC Holdings plc ('the Company') to review the financial information for the six months ended 30 June 2009 set out on pages 199 to 231 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity and related notes including the section on fair values of financial instruments set out on pages 114 to 124. We have read the other information contained in the Interim Report 2009 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the financial information.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it this 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 for our review work, for this report, or for the conclusions we have reached. 

Directors' responsibilities

The Interim Report 2009 is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report 2009 in accordance with the DTR of the UK FSA. As disclosed in Note 1, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the EU. The financial information included in the Interim Report 2009 has been prepared in accordance with IAS 34 Interim Financial Reporting adopted by the EU.  

Our responsibility

Our responsibility is to express to the Company a conclusion on the financial information in the Interim Report 2009 based on our review. 

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards of Auditing (UK and Ireland) and consequently does not enable us to obtain an assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.  

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the Interim Report 2009 for the six months ended 30 June 2009 is not prepared in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.  

Brendan Nelson

For and on behalf of KPMG Audit Plc

Chartered Accountants

London, England

3 August 2009

 

END

 

 

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