Interim Results - Part 2

Standard Chartered PLC 08 August 2005 PART 2 STANDARD CHARTERED PLC - NOTES 1. Basis of Preparation On 1 January 2005, the Group adopted European Union (EU) endorsed International Financial Reporting Standards (IFRSs) and the next annual financial statements of the Group will be prepared in accordance with IFRSs adopted for use in the EU. The results for 2005 have been presented in accordance with IFRSs that have been endorsed and those that are expected to be endorsed by the end of the year. The comparative amounts have similarly been restated except that the Group has taken advantage of the transition rules of IFRS1, First-Time Adoption of International Financial Reporting Standards, to adopt IAS 32 and IAS 39 with effect from 1 January 2005. The Group has adopted the Amendment to IAS 39 Financial Instruments: Recognition and Measurement: The Fair Value Option' and Amendment to IAS19 Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures with effect from 1 January 2005, ahead of their effective dates, on the assumption that they will be endorsed by the EU. These interim financial statements comply with all current IFRSs as published by the IASB and have been prepared in accordance with IAS 34 Interim Financial Reporting on this basis. Additional information is set out in note 6 on page 47. 2. Taxation 6 months 6 months 6 months ended ended ended 30.06.05 30.06.04 31.12.04 $m $m $m Analysis of taxation charge in the period The charge for taxation based upon the profits for the period comprises: United Kingdom corporation tax at 30% (30 June 2004: 30%; 31 December 2004: 30%): Current tax on income for the period 158 190 217 Adjustments in respect of prior periods - - 18 Double taxation relief (150) (187) (170) Foreign tax: Current tax on income for the period 314 292 267 Adjustments in respect of prior periods (8) 8 (21) Total current tax 314 303 311 Deferred tax: Origination/reversal of temporary differences 53 28 (12) Tax on profits on ordinary activities 367 331 299 Effective tax rate 27.5% 29.9% 26.2% Overseas taxation includes taxation on Hong Kong profits of $78 million (30 June 2004: $45 million; 31 December 2004: $47 million) provided at a rate of 17.5 per cent (30 June 2004: 17.5 per cent; 31 December 2004: 17.5 per cent) on the profits assessable in Hong Kong. 3. Dividends on Ordinary Equity Shares The 2005 interim dividend of 18.94 cents per share will be paid in either sterling, Hong Kong dollars or US dollars on 14 October 2005 to shareholders on the UK register of members at the close of business on 19 August 2005 and to shareholders on the Hong Kong branch register of members at the opening of business in Hong Kong (9:00am Hong Kong time) on 19 August 2005. It is intended that shareholders will be able to elect to receive shares credited as fully paid instead of all or part of the interim cash dividend. Details of the dividend will be sent to shareholders on or around 2 September 2005. STANDARD CHARTERED PLC - NOTES 4. Earnings per Ordinary Share 6 months ended 30.06.05 Profit Weighted average Per $m number of share shares amount ('000) cents Basic earnings per ordinary share 956 1,279,432 74.7 Effect of dilutive potential ordinary shares: Convertible bonds 7 20,578 Options - 15,366 Diluted earnings per share 963 1,315,376 73.2 6 months ended 30.06.04 6 months ended 31.12.04 Profit Weighted average Per Profit Weighted average Per $m number of share $m number of share shares amount shares amount ('000) cents ('000) cents Basic earnings per 727 1,170,699 62.1 793 1,175,143 67.5 ordinary share Effect of dilutive potential ordinary shares: Convertible bonds 11 34,488 12 34,488 Options - 2,252 - 3,444 Diluted earnings per 738 1,207,439 61.1 805 1,213,075 66.3 share The Group measures earnings per share on a normalised basis. This differs from earnings defined in International Accounting Standard 3, Earnings per share. The table below provides a reconciliation. 6 months 6 months 6 months ended ended ended 30.06.05 30.06.04 31.12.04 $m $m $m Profit attributable to ordinary shareholders 956 727 793 Profit on sale of shares in - KorAm - (95) - - Bank of China - (36) - Premium and costs paid on repurchase of subordinated debt - 21 2 Costs of Hong Kong incorporation - 18 - Tsunami donation - - 5 Other impairment - 67 - 'One-off' items - (25) 7 Amortisation of intangible assets arising on business combinations 5 - - Profit less losses on disposal of investment securities held at cost - (28) (5) Profit on sale of property, plant and equipment - (4) - Profit on disposal of subsidiary undertakings - (4) - Other impairment 1 2 (1) Normalised earnings 962 668 794 Normalised earnings per ordinary share 75.2c 57.1c 67.5c EPS has grown by 32 per cent. With the adoption of IAS 39, the Group no longer normalises gains and losses on disposal of investment securities as these are now held in an available for sale portfolio at fair value. Had this policy been adopted in the first half of 2004 normalised earnings per share would have been 59.5 cents and EPS growth would have been 26 per cent. STANDARD CHARTERED PLC - NOTES 5. Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents comprises of the following balances with less than three months maturity from the date of acquisition. 30.06.05 30.06.04 31.12.04 $m $m $m Cash and balances with central banks* 5,667 3,447 3,960 Treasury bills and other eligible bills 4,686 2,924 3,665 Loans and advances to banks 13,769 10,750 10,345 Trading securities 6,507 7,198 6,053 Total 30,629 24,319 24,023 * Cash balances with central banks include certain amounts subjected to regulatory restrictions. 6. Transition to EU Endorsed IFRS EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated financial statements of the company, for the year ending 31 December 2005, be prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the EU ('adopted IFRSs'). This interim financial information has been prepared on the basis of the recognition and measurement requirements of IFRSs in issue that either are endorsed by the EU and effective (or available for early adoption) at 31 December 2005 or are expected to be endorsed and effective (or available for early adoption) at 31 December 2005, the Group's first annual reporting date at which it is required to use adopted IFRSs. Based on these adopted and unadopted IFRSs, the directors have made assumptions about the accounting policies expected to be applied, which are as set out below, when the first annual IFRS financial statements are prepared for the year ending 31 December 2005. In particular, the directors have assumed that the following IFRSs issued by the International Accounting Standards Board will be adopted by the EU in sufficient time that they will be available for use in the annual IFRS financial statements for the year ending 31 December 2005: - Amendment to IAS 19 Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures - Amendments to IAS 39 - Financial Instruments: Recognition and Measurement The Fair Value Option The adopted IFRSs that will be effective (or available for early adoption) in the annual financial statements for the year ending 31 December 2005 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 31 December 2005. Application of IFRS 1: First-time adoption of International Financial Reporting standards The Group's transition date is 1 January 2004. The Group prepared its opening IFRS balance sheet at that date. The reporting date of these interim consolidated financial statements is 30 June 2005. The Group's IFRS adoption date is 1 January 2005. In preparing these interim consolidated financial statements in accordance with IFRS 1, the Group has applied the mandatory exceptions and certain of the optional exemptions from full retrospective application of IFRS. Exemptions from full retrospective application elected by the Group The Group has elected to apply the following optional exemptions from full retrospective application. (a) Business combinations exemption The Group has applied the business combinations exemption in IFRS 1. It has not restated business combinations that took place prior to the 1 January 2004 transition date. (b) Fair value as deemed cost exemption The Group has elected to deem as cost certain items of property, plant and equipment held at valuation as at 1 January 2004. (d) Cumulative translation differences exemption The Group has elected to set the previously accumulated cumulative translation to zero at 1 January 2004. (e) Exemption from restatement of comparatives for IAS 32 and IAS 39 The Group elected to apply this exemption. It has applied previous UK GAAP rules to derivatives, financial assets and financial liabilities and to hedging relationships for the 2004 comparative information. The adjustments required for differences between UK GAAP and IAS 32 and IAS 39 have been determined and recognised at 1 January 2005. (f) Share-based payment transaction exemption As the Group has not previously published information regarding the fair value of employee rewards, it has been required to apply the share-based payment exemption. It applied IFRS 2 from 1 January 2004 to those equity settled share awards that were issued after 7 November 2002 but that have not vested by 1 January 2005. Exceptions from full retrospective application followed by the Group The Group has applied the following mandatory exceptions from retrospective application. (a) Derecognition of financial assets and liabilities exception Financial assets and liabilities derecognised before 1 January 2004 are not re- recognised under IFRS. The application of the exemption from restating comparatives for IAS 32 and IAS 39 means that the Group recognised from 1 January 2005 any financial assets and financial liabilities derecognised since 1 January 2004 that do not meet the IAS 39 derecognition criteria. Management did not chose to apply the IAS 39 derecognition criteria to an earlier date. (b) Estimates exception Estimates under IFRS at 1 January 2004 should be consistent with estimates made for the same date under previous UK GAAP, unless there is evidence that those estimates were in error. (c) Assets held for sale and discontinued operations exception Management has applied IFRS 5 prospectively from 1 January 2005. Any assets held for sale or discontinued operations are recognised in accordance with IFRS 5 only from 1 January 2005. Reconciliations between IFRS and UK GAAP The following reconciliations provide details of the impact of the transition on: - equity at 1 January 2004 (excluding IAS 32/39) - equity at 30 June 2004 (excluding IAS 32/39) - equity at 31 Dec 2004 (excluding IAS 32/39) - equity at 1 January 2005 (including IAS 32/39) - profit and loss 30 June 2004 (including IAS 32/39) - profit and loss 31 December 2004 (excl IAS 32/39) An explanation of the adjustments and the Group's accounting policies under IFRS is set out in the presentation and press release entitiled 'Standard Chartered PLC Results for 2004 Restated Under International Financial Reporting Standards' dated 12 May 2005. Copies of this document are available from the Group's website at: http://investors.standardchartered.com STANDARD CHARTERED PLC - NOTES Reconciliation of equity 01.01.04 Share Premises Own Retained Minority Total capital/ revaluation shares earnings interest equity premium and held in redemption ESOP reserve Trusts $m $m $m $m $m $m UK GAAP 3,768 (2) (60) 3,823 614 8,143 Dividends - - - 439 - 439 Fixed Assets - 81 - (84) - (3) Share options - - - (3) - (3) Consolidation - - - 25 6 31 Tax - (22) - (9) - (31) Other - - - (9) - (9) IFRS 3,768 57 (60) 4,182 620 8,567 30.06.04 Share Premises Own Retained Minority Total capital/ revaluation shares earnings interest equity premium and held in redemption ESOP reserve Trusts $m $m $m $m $m $m UK GAAP 3,778 - (74) 4,301 626 8,631 Dividends - - - 208 - 208 Goodwill - - - 21 - 21 Fixed Assets - 81 - (84) - (3) Share options - - - 10 - 10 Consolidations - - - 17 4 21 Tax - - - (4) - (4) Other - - - (22) - (22) IFRS 3,778 81 (74) 4,447 630 8,862 31.12.04 Share Premises Own Retained Minority Total capital/ revaluation shares earnings interest equity premium and held in redemption ESOP reserve Trusts $m $m $m $m $m $m UK GAAP 3,818 (5) (8) 4,630 956 9,391 Dividends - - - 532 - 532 Goodwill - - - 114 - 114 Fixed Assets - 81 - (84) - (3) Share options - - - 16 - 16 Consolidations - - - 27 8 35 Tax - - - (4) - (4) Other - - - (12) - (12) IFRS 3,818 76 (8) 5,219 964 10,069 STANDARD CHARTERED PLC - NOTES Share capital/ Other equity AFS Cash flow premium and instruments reserves hedge redemption reserve $m $m reserve $m $m IFRS (ex IAS 32/39) 3,818 - - - Debt/Equity (375) 994 - - Effective Yield - - - - Derivatives/hedging - - - 61 Asset classification/ - - 87 - fair values Other - - - - Impairment - - - - Tax - - (14) (19) IFRS 3,443 994 73 42 01.01.05 Premises Retained Minority Total revaluation earnings interest equity $m $m $m $m IFRS (ex IAS 32/39) 76 5,211 964 10,069 Debt/Equity - 20 - 639 Effective Yield - 109 - 109 Derivatives/hedging - 58 (4) 115 Asset classification/ fair - (27) - 60 values Other - (142) - (142) Impairment - 33 - 33 Tax - (55) - (88) IFRS 76 5,207 960 10,795 Reconciliation of profit and loss Profit attributable to shareholders 6 months 12 months ended ended 30.06.04 31.12.04 $m $m UK GAAP 746 1,479 Goodwill 21 114 Share options (12) (23) Consolidations 2 3 Tax 7 7 Other (8) (2) IFRS 756 1,578 7. Dealings in the Company's listed securities Neither the Company nor any of its subsidiaries has bought, sold or redeemed any securities of the Company listed on The Stock Exchange of Hong Kong Limited during the six months ended 30 June 2005. 8. Corporate Governance The Directors confirm that, throughout the period, the company has complied with the provisions of Appendix 14 of the Listing Rules of the Hong Kong Stock Exchange. The 2005 Interim Results have been reviewed by the Company's Audit and Risk Committee. 9. Interim Report and Statutory Accounts The information in this news release is unaudited and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act, 1985 (the Act). The 2005 Interim Report was approved by the Board of Directors on 8 August 2005. Statutory Accounts for the year ended 31 December 2004 have been delivered to the Registrar of Companies in England and Wales in accordance with Section 242 of the Act. The auditor has reported on those accounts: report was unqualified and do not contain a statement under section 237 (2) or (3) of the Act. This news release does not constitute the unaudited Interim financial information which is contained in the interim report. The unaudited Interim financial information has been reviewed by the Company's auditor, KPMG Audit Plc, in accordance with the guidance contained in the Bulletin 1999/4: review of interim financial information issued by the Auditing Practices Board. On the basis of its review, KPMG Audit Plc is not aware of any material modifications that should be made to the unaudited interim financial information as presented for the 6 months ended 30 June 2005 in the interim report. The full report of its review is included in the interim report. STANDARD CHARTERED PLC - ADDITIONAL INFORMATION (continued) Financial Calendar Ex-dividend date 17 August 2005 Record date 19 August 2005 Posting to shareholders of 2005 Interim Report 2 September 2005 Payment date - interim dividend on ordinary shares 14 October 2005 Copies of this statement are available from: Investor Relations, Standard Chartered PLC, 1 Aldermanbury Square, London, EC2V 7SB or from our website on http://investors.standardchartered.com For further information please contact: Tracy Clarke, Group Head of Corporate Affairs +44 20 7280 7708 Romy Murray, Head of Investor Relations +44 20 7280 7245 Ruth Naderer, Head of Investor Relations, Asia Pacific +852 2820 3075 Cindy Tang, Head of Media Relations +44 207 280 6170 The following information will be available on our website • A live webcast of the interim results analyst presentation (available from 10:45am BST) • A pre-recorded webcast and Q/A session of analyst presentation in London (available 1:00pm BST) • Interviews with Mervyn Davies, Group Chief Executive and Peter Sands, Group Finance Director available from 9:00am BST. • Slides for the Group's presentations (available after 1:00pm BST) Images of Standard Chartered are available for the media at www.newscast.co.uk Information regarding the Group's commitment to Corporate Responsibility is available at http://www.standardchartered.com/corporateresponsibility The 2005 Interim Report will be made available on the website of the Stock Exchange of Hong Kong and on our website www.standardchartered.com as soon as is practicable. This information is provided by RNS The company news service from the London Stock Exchange

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