12th May 2005 09:00
Standard Chartered PLC12 May 2005 PART 2 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL INFORMATION The following pro-forma financial information is provided to illustrate theeffects of IAS 39 'Financial instruments: Recognition and measurement' and IAS32 'Financial instruments: disclosure and presentation' that has been excludedfrom the restated 2004 results. It does not form part of the restated 2004results that will be presented as comparatives in the 2005 Interim Report. IAS32 and 39 will be applied from 1 January 2005, with corresponding adjustments toopening reserves. Basis of preparation This pro-forma financial information complies in full with IAS 32 and 39 asendorsed by the EU. Overview of IAS 32 and 39 IAS 32 and IAS 39 prescribe the accounting for, and financial reporting of,financial instruments. IAS 32 covers disclosure and presentation whilst IAS 39covers recognition and measurement. The principal changes from UK GAAP are: • reclassification between liabilities and shareholders' funds of certain subordinated securities and preference shares;• recording interest on a 'level yield' or 'effective yield' basis;• recording all derivatives at fair value on the balance sheet;• new classifications of assets and liabilities and related measurement requirements;• recording bad debt charges for time-value discount provisions and portfolio specific provisions; and• grossing up of the balance sheet for financial instruments no longer permitted to be netted. Explanation of pro-forma IAS 32 and 39 income statement and balance sheetadjustments 1. Debt/Equity classification UK GAAP: a) UK GAAP required that where there was an obligation to deliver economicbenefits, a financial instrument should be classified as a liability.Preference shares were required to be classified as a non-equity element ofshareholders' funds. b) Convertible debt should be recorded as a liability and the conversion toequity should not be anticipated. Interest was recorded at the coupon rate ofthe debt. IFRS: a) The IFRS definition of a liability is similar to UK GAAP but the legalobligation to deliver cash takes precedence over the judgements of substanceused under UK GAAP. Where an obligation to deliver cash can be avoided, aninstrument must be classified as equity. b) For convertible debt, the option to convert debt to equity is recognisedseparately from the host debt instrument. Convertible debt issued with a fixedconversion rate in a currency different to an entity's functional currencyshould be treated as a derivative liability and be fair valued at each periodend. A discount is created when the option element is separated from the hostdebt and interest is recognised on the liability element at a market rate ofinterest for similar debt that does not have an option to convert to equity. STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL INFORMATION (continued) Impact: a) The Group has reclassified £300 million 8.103 per cent Step-Up CallablePerpetual Trust Preferred Securities from liabilities to equity. £195 millionnon-cumulative irredeemable preference shares have been reclassified from equityto liabilities. £200 million 2022 step up notes have been reclassified fromliabilities to equity. The net effect is $566 million transfers fromliabilities to equity. A net interest expense of $45 million is treated as anappropriation of distributable reserves instead of being presented as aninterest expense. b) Interest expense for convertible debt has increased by $12 million. A fairvalue gain of $23 million was recorded on the conversion option derivativeelement. However, the Group's €575 million 4.5 per cent 2010 convertible noteswere called and repaid by the Group on 18 April 2005 so these effects will notrecur after that date. 2. Effective yield UK GAAP: Loan origination costs were generally expensed when incurred. Fees andcommissions receivable were spread over the expected life of a loan where insubstance they were part of the interest yield. Interest was recorded on anaccrual basis, including when customers pay a lower-than-market rate of interestfor a fixed period. IFRS: Interest is recognised on a 'level yield' basis, otherwise known as theeffective yield. This means that substantially all income and costs that areincremental and directly attributable to loan origination are capitalised andamortised to interest income over the expected life of the loan. Additionally,customer interest rate discounts are spread over the expected life of the loan.If the expected life of loans change, IFRS requires the recalculation of theamortisation. Any cumulative differences between the amount amortised and theamount that should have been amortised under the new expected life must berecorded in the income statement. The 'level yield' basis of interest recognition only changes the timing ofrecording loan origination income and expenses. It does not change the total netrevenue and related cash due to the Group. Impact: The effect of this change is that an additional $12 million has been recognisedas net interest income from amortising capitalised fee income and costs. Netfees and commission income has increased by $5 million due to capitalisation ofcurrent period fee income and costs. Retained earnings are increased by $109million, being the accumulated effect of capitalising costs from prior periodsin transition to IFRS. The rate of capitalisation of income and costs and amortisation will be affectedby the several factors, including the rate of growth in the business, changes inthe expected life of assets, and changes in products. STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL INFORMATION (continued) 3. Derivatives and hedging UK GAAP: UK GAAP permitted derivatives that had been designated as being held for hedgingpurposes to be accounted for in a manner similar to the hedged item. That is,interest from derivative contracts was accrued to net interest income (NII) andrevaluation to market or fair value was not required. All other derivativecontracts were recorded at fair value ('marked to market' or 'MTM') in otherassets and liabilities on the balance sheet. Gains and losses arising from the de-designation of a hedge relationship weredeferred and amortised to income over the original contractual period of thederivative or until the item formerly being hedged was sold, at which point thefull deferred amount was recognised in income. UK GAAP permitted assets and liabilities, and related income and expense, to benetted where there was a legal right of offset. IFRS: All derivatives must be recorded as assets or liabilities at their fair valueand presented in separate lines of the balance sheet. Accounting for changes infair values depends on the intended use of the derivative. All gains and lossesare recorded in the income statement unless it is a derivative contract that isdesignated as a hedge against variability of cash flows (known as a 'cash flowhedge'). In this case, the MTM gain or loss is recorded in a reserves accountuntil the change in cash flows of the underlying hedged item affects income, atwhich time it is transferred to the income statement. Gains and losses arising from the de-designation of a cash flow hedge remain inequity and are released to income in line with the formerly hedged item. Inrespect of fair value hedges that are sold or terminated, fair value adjustmentsmade to the underlying hedged item are amortised to income. IAS 39 has a very strict definition of a qualifying hedge relationship and therecognition of hedge ineffectiveness. This makes it more difficult to establishand maintain hedge accounting. Where hedge accounting is not achieved or fails,earnings volatility results. A description of the types of hedging is set out in Appendix 5, page 48. Under IAS 32, a financial asset and financial liability shall be offset, and thenet amount presented in the balance sheet, when an entity currently has alegally enforceable right to set off the recognised amounts and intends tosettle on a net basis. Impact: The accounting rules for fair valuing all derivatives is expected to cause somedegree of earnings volatility in the future. Hedging relationships (as definedby IAS 39) might not be established even when the economic intent is clearly tohedge e.g. when using derivatives to mitigate risk on a portfolio basis.Although the Group will aim to minimise this volatility, our priority will be toensure risk is managed effectively. During 2004 the Group was managing risk within the framework of accountingpermitted under UK GAAP. The Group has established new processes to evidencethe relationship between derivatives and items being hedged. STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL INFORMATION (continued) On this basis, the impact of IAS 39 for 2004 is to decrease net interest incomeby $6 million (from the net reversal of interest accruals), and reduce nettrading income by $4 million (to recognise the net fair value change ofderivatives that are not cash flow hedges). Costs increased by $44 million in2004 because certain foreign exchange hedge contracts taken out in 2002 and 2003did not meet transitional hedge accounting criteria. $7,592 million and $7,278million of derivative assets and liabilities have been transferred to separatederivative asset and liability lines on the face of the balance sheet.Additionally, $5,088 million and $4,746 million has been added to derivativeassets and liabilities representing the reversal of netting permitted under UKGAAP, and remeasurement. The Group's issued debt has been adjusted by $225million for fair value changes where fair value hedging has been achieved. Acash flow hedge reserve of $61 million has been created representing the totalchange in the fair value of cash flow hedge derivatives and hedged financialinstruments. 4. Asset classification and fair value UK GAAP: Under UK GAAP, non-trading assets and liabilities (including loans, debtsecurities, equity investments that are less than 20 per cent of the sharecapital of the issuing entity, and deposits) were recorded at cost (lessimpairment in the case of assets). Income was recognised on an accruals basis.Unrealised fair value gains and losses were not recorded on the balance sheet. Trading assets and liabilities were recorded at market value with gains andlosses from changes in market values being recorded in dealing profits. UK GAAP permitted assets and liabilities, and related income and expense, to benetted where there was a legal right of offset. IFRS: Under IAS 39 all financial assets are classified as either loans andreceivables, held to maturity (HTM), at fair value (either trading ordesignated), or available for sale (AFS): Loans and receivables: income is recognised on a level yield basis as noted in 2above. HTM: income is recognised on a level yield basis. At fair value: changes in fair values are recorded in net trading income. AFS: changes in fair values are recorded in reserves until either sold ormaturity, at which point realised gains or losses are transferred to the incomestatement. Where an AFS asset is designated in a fair value hedge relationship,unrealised gains and losses are recorded in income. Foreign exchange gains andlosses are recorded directly in income. Where there is objective evidence ofimpairment, the cumulative loss recognised in equity is transferred to theincome statement. Financial liabilities are classified as either at cost or, if they are fortrading purposes, at fair value. At present the European Union has prohibited the designation of non-tradingliabilities as held at fair value. The IASB is reviewing the criteria fordesignating non-trading assets and liabilities at fair value. This may changethe classification of certain assets and liabilities. STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL INFORMATION (continued) Netting is only permitted where there is an intention to settle on a net basisas well as having the legal right to do so. Impact: Upon transition at 1 January 2005, all loans and advances will be classified asloans and receivables, unless a loan was acquired with the intention to disposeof it in the short term, in which case a loan will be classified as trading.The majority of non-trading debt securities and equity investments will beclassified as AFS. Certain non-trading assets will be classified as held atfair value. A summary table of reclassification is set out in appendix 3J. Had this policy been applied in 2004 it would have resulted in a net decrease inincome of $2 million for 2004. Retained earnings at 31 December 2004 decreaseby $27 million and a new AFS reserve of $87 million is created. Assets and liabilities have increased by $1,121 million in respect of balancesthat had been netted under UK GAAP. 5. Impairment UK GAAP: UK GAAP required specific provisions to be made where the repayment of anidentified loan is in doubt. A general provision was held for the inherent riskof loss in a portfolio which, although not identified separately, was known fromexperience to be present. Interest was suspended when there was reasonabledoubt as to its collectability. IFRS: In addition to making a provision for incurred losses in a similar way to UKGAAP, IFRS requires the time it takes to collect recoverable cash to be recordedby way of a time-value discount provision. This provision unwinds to interestincome over the cash collection period. General provisions are not allowed but portfolio specific provisions arerequired. These portfolio provisions are based on flow rate and historic lossmethodology and are likely to fluctuate from period to period. Suspended interest is not relevant under IAS 39 as interest is recognised on therecoverable element of impaired loans (represented by the unwind of the discountnoted above). Impact: For 2004, additional revenue of $59 million is recognised from unwinding ofdiscounts and an element of interest that had been suspended under UK GAAP.Additional provision charges for impaired loans and advances of $76 million aremade for discounting and movements in portfolio specific provision. Equity isincreased and provisions are reduced from the reversal of the UK GAAP generalprovision, offset by IFRS provision requirements. The rate at which the new discount provisions are created during a period willdiffer from the rate that provisions created in previous periods unwind tointerest income. STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS SUMMARISED CONSOLIDATED BALANCE SHEETAs at 31 December 2004 Pro-forma Pro-forma IFRS IFRS 31.12.04 30.06.04 $m $m AssetsCash and balances at central banks 3,960 3,447Treasury bills and other eligible bills 5,302 6,535Loans and advances to banks 17,402 17,388Derivative financial instruments 12,680 7,849Loans and advances to customers 72,300 63,982Debt securities 33,101 29,096Equity shares 304 206Intangible fixed assets 2,353 2,154Property, plant and equipment 555 525Deferred tax assets 172 172Prepayments, accrued income and other assets 5,265 5,109Total assets 153,394 136,463 LiabilitiesDeposits by banks 15,814 17,118Derivative financial instruments 12,024 7,849Customer accounts 85,452 78,214Debt securities in issue 11,629 9,979Current tax liabilities 296 281Accruals, deferred income and other liabilities 10,886 8,014Subordinated liabilities: Undated loan capital 1,588 1,572 Dated loan capital 4,756 3,872Total liabilities 142,445 126,899 EquityShareholders' funds 9,989 9,055Minority interest 960 509Total equity 10,949 9,564Total equity and liabilities 153,394 136,463 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) SUMMARISED CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2004 Pro-forma Pro-forma Pro-forma 12 months 6 months 6 months ended ended ended 31.12.04 30.06.04 31.12.04 $m $m $m Interest and similar income 5,350 2,567 2,783Interest expense and similar charges (2,092) (1,005) (1,087)Net interest income 3,258 1,562 1,696Other finance income 10 3 7Fees and commissions income 1,589 779 810Fees and commissions expense (239) (111) (128)Net trading income 677 337 340Other operating income 205 175 30 2,232 1,180 1,052Total operating income 5,500 2,745 2,755 Administrative expenses: Staff (1,559) (793) (766) Premises (321) (158) (163) Other (770) (348) (422) Depreciation and amortisation (238) (123) (115)Total operating expenses (2,888) (1,422) (1,466) Operating profit before provisions 2,612 1,323 1,289Impairment losses on loans and advances (290) (137) (153)Amounts written off fixed asset investments (68) (69) 1Operating profit before taxation 2,254 1,117 1,137Taxation (624) (333) (291)Operating profit after taxation 1,630 784 846Minority interest (34) (16) (18) Profit for the period attributable to shareholders 1,596 768 828Dividends on other equity interests (103) (51) (52)Dividends on ordinary equity shares (630) (429) (201)Retained profit 863 288 575 Basic earnings per share 127.3c 61.2c 66.1cDiluted earnings per ordinary share 124.3c 60.1c 64.2c STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2004 Pro-forma Pro-forma 12 months 6 months ended ended 31.12.04 30.06.04 $m $m Cash flow from/(used in) operating activitiesOperating profit before taxation 2,254 1,117 Adjustment for items not involving cash flow or shown separately Depreciation and amortisation of premises and equipment 238 123 Gain on disposal of tangible fixed assets (4) (5) Gain on disposal of investment securities (164) (159) Amortisation of investments (41) 18 Gain on disposal of subsidiary undertakings - (4) Impairment losses on loans and advances 290 137 Amounts written off fixed asset investments 68 69 Debts written off, net of recoveries (481) (106) Increase(decrease) in accruals and deferred income 80 (156) Increase in prepayments and accrued income (256) (219) Net (increase)/decrease in mark to market adjustment (224) 519 Interest paid on subordinated loan capital 293 231 UK and overseas taxes paid (573) (271) Net cash inflow from trading activities 1,480 1,294 Net increase in cheques in the course of collection (45) (83) Net (increase)/decrease in treasury bills and other eligible bills (78) 52 Net (increase) in loans and advances to banks and customers (11,999) (6,927) Net increase in deposits from banks, customer accounts/debt securities in issue 15,004 12,103 Net increase in dealing securities (2,118) (286) Net increase/(decrease) in other accounts 3,037 (18) Net cash inflow from operating activities 5,281 6,135 Net cash flows from investing activities Purchase of tangible fixed assets (240) (95) Acquisition of subsidiaries, net of cash acquired (333) - Acquisition of treasury bills (9,188) (6,346) Acquisition of debt securities (75,353) (33,931) Acquisition of equity shares (121) (42) Disposal of subsidiaries, associated undertakings and branches 6 6 Disposal of tangible fixed assets 51 53 Disposal and maturity of treasury bills 10,778 5,363 Disposal and maturity of debt securities 71,482 31,788 Disposal of equity shares 356 352 Dividend paid on minority shareholders of subsidiary undertakings (17) (3) Net cash used in investing activities (2,579) (2,855) Net cash inflow from financing activities Interest paid on subordinated loan capital (293) (231) Gross proceeds from issue of subordinated loan capital 499 4 Repayment of subordinated liabilities (25) (21) Dividend paid on other equity interests (103) (51) Equity dividend paid to members of the company (587) (396) Net cash inflow from financing activities (509) (695) Net increase in cash and cash equivalents 2,193 2,585 Cash and cash equivalents at beginning of year 21,773 21,773 Effect of exchange rate changes on cash and cash equivalents 57 (39) Cash and cash equivalents at end of period 24,023 24,319 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the year ended 31 December 2004 Pro-forma Pro-forma Pro-forma 12 months 6 months 6 months ended ended ended 31.12.04 30.06.04 31.12.04 $m $m $m Operating profit after taxation 1,630 784 846Exchange translation differences 96 (66) 162Actuarial (loss)/gain on retirement benefits (5) 15 (20)Available for sale investments: Gain on revaluation of available for sale investments 11 (22) 33 Gain on revaluation of available for sale investments sold (145) (143) (2) Gain on revaluation of available for sale investments matured (1) 12 (13)Gain on revaluation of cashflow hedges 61 - 61Deferred tax on items taken directly to reserves 38 71 (33)Recognised income and expense for the period 1,685 651 1,034Attributable to:Equity holders of the parent 1,651 635 1,016Minority interest 34 16 18 1,685 651 1,034 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) RECONCILIATION OF SUMMARISED CONSOLIDATED BALANCE SHEETAt 31 December 2004 Audited IFRS Debt/ Effective Derivatives/ 31.12.04 Equity yield hedging $m $m $m $m AssetsCash and balances at central banks 3,960 - - -Treasury bills and eligible bills 4,425 - - -Loans and advances to banks 17,382 - - -Derivative financial instruments - - - 12,680Loans and advances to customers 72,159 - 123 -Debt securities 32,842 - - -Equity shares 253 - - -Intangible fixed assets 2,353 - - -Property, plant and equipment 555 - - -Deferred income tax assets 272 - - -Prepayments, accrued income andother assets 12,877 - (24) (7,592)Total assets 147,078 - 99 5,088 LiabilitiesDeposits by banks 15,814 - - -Derivative financial instruments - - - 12,024Customer accounts 85,458 - (6) -Debt securities in issue 11,627 - - 2Current tax liabilities 295 - - -Accruals, deferred income and otherliabilities 17,047 - (4) (7,278)Subordinated liabilities:Undated loan capital 1,588 - - -Dated loan capital 5,180 (649) - 225 Total liabilities and shareholders'funds 137,009 (649) (10) 4,973 EquityShare capital/premium and redemptionreserve 3,818 (375) - -Other equity instruments - 941 - -AFS reserve - - - -Cash flow hedge reserve - - - 61Premises revaluation 76 - - -Own shares in ESOP Trust (8) - - -Profit and loss account 5,219 83 109 58Minority interest 964 - - (4) Total equity 10,069 649 109 115 Asset Pro-forma classification/ IFRS fair values Impairment Tax 31.12.04 $m $m $m $m AssetsCash and balances at central banks - - - 3,960Treasury bills and eligible bills 877 - - 5,302Loans and advances to banks 20 - - 17,402Derivative financial instruments - - - 12,680Loans and advances to customers (26) 44 - 72,300Debt securities 259 - - 33,101Equity shares 51 - - 304Intangible fixed assets - - - 2,353Property, plant and equipment - - - 555Deferred income tax assets - - (100) 172 Prepayments, accrued income andother assets - 4 - 5,265Total assets 1,181 48 (100) 153,394 LiabilitiesDeposits by banks - - - 15,814Derivative financial instruments - - - 12,024Customer accounts - - - 85,452Debt securities in issue - - - 11,629Current tax liabilities - - 1 296Accruals, deferred income andother liabilities 1,121 1 (1) 10,886Subordinated liabilities:Undated loan capital - - - 1,588Dated loan capital - - - 4,756 Total liabilities andshareholders' funds 1,121 1 - 142,445 EquityShare capital/premium andredemption reserve - - - 3,443Other equity instruments - - - 941AFS reserve 87 - (14) 73Cash flow hedge reserve - - (19) 42Premises revaluation - - - 76Own shares in ESOP Trust - - - (8)Profit and loss account (27) 47 (67) 5,422Minority interest - - - 960 Total equity 60 47 (100) 10,949 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) RECONCILIATION OF SUMMARISED CONSOLIDATED BALANCE SHEETAt 30 June 2004 Reviewed IFRS Debt/ Effective Derivatives/ 30.06.04 Equity Yield Hedging $m $m $m $mAssetsCash and balances at central banks 3,447 - - -Treasury bills and eligible bills 5,978 - - -Loans and advances to banks 17,387 - - -Derivative financial instruments - - - 7,849Loans and advances to customers 63,743 - 120 -Debt securities 28,900 - - -Equity shares 179 - - -Intangible fixed assets 2,154 - - -Property, plant and equipment 525 - - -Deferred tax assets 251 - - -Prepayments, accrued income andother assets 10,084 - (34) (4,945) Total assets 132,648 - 86 2,904 LiabilitiesDeposits by banks 16,999 - - -Derivative financial instruments - 14 - 7,835Customer accounts 78,219 - (5) -Debt securities in issue 9,985 - - (6)Current tax liabilities 258 - - -Accruals, deferred income and otherliabilities 12,402 - (5) (5,140)Subordinated liabilities:Undated loan capital 1,572 - - -Dated loan capital 4,351 (621) - 142 Total liabilities 123,786 (607) (10) 2,831 EquityShare capital/premium and redemptionreserve 3,778 (354) - -Other equity instruments - 888 - -AFS reserve - - - -Cash flow hedge reserve - - - -Premises revaluation 81 - - -Own shares in ESOP Trust (74) - - -Retained earnings 4,447 73 96 75Minority interest 630 - - (2) Total equity 8,862 607 96 73 Asset Pro-forma classification/ IFRS fair values Impairment Tax 30.06.04 $m $m $m $m AssetsCash and balances at central banks - - - 3,447Treasury bills and eligible bills 557 - - 6,535Loans and advances to banks 1 - - 17,388Derivative financial instruments - - 7,849Loans and advances to customers 20 99 - 63,982Debt securities 196 - - 29,096Equity shares 27 - - 206Intangible fixed assets - - - 2,154Property, plant and equipment - - - 525Deferred tax assets - - (79) 172Prepayments, accrued income andother assets - 1 3 5,109 Total assets 801 100 (76) 136,463 LiabilitiesDeposits by banks 119 - - 17,118Derivative financial instruments - - - 7,849Customer accounts - - - 78,214Debt securities in issue - - - 9,979Current tax liabilities - - 23 281Accruals, deferred income andother liabilities 780 - (23) 8,014Subordinated liabilities:Undated loan capital - - - 1,572Dated loan capital - - - 3,872 Total liabilities 899 - - 126,899 EquityShare capital/premium andredemption reserve - - - 3,424Other equity instruments - - - 888AFS reserve 71 - (9) 62Cash flow hedge reserve - - - -Premises revaluation - - - 81Own shares in ESOP Trust - - - (74)Retained earnings (50) 100 (67) 4,674Minority interest (119) - - 509 Total equity (98) 100 (76) 9,564 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) RECONCILIATION OF INCOME STATEMENT For the year ended 31 December 2004 Audited IFRS 12 months ended Debt/ Effective Derivatives/ 31.12.04 Equity yield hedging $m $m $m $m Interest receivable and similarincome 5,312 - 11 (19)Interest expense and similarcharges (2,130) 33 1 13Net interest income 3,182 33 12 (6)Other finance income 10 - - -Fees and commissions income 1,614 - (38) -Fees and commissions expense (282) - 43 -Net trading income 651 23 - (4)Other operating income 207 - - (2) 2,190 23 5 (6) Total operating income 5,382 56 17 (12)Administrative expenses:Staff (1,559) - - -Premises (321) - - -Other (731) - 5 (44) Depreciation and amortisation (238) - - - Total operating expenses (2,849) - 5 (44) Operating profit before provisions 2,533 56 22 (56)Impairment losses on loans andadvances (214) - - -Amounts written off fixed assets (68) - - -Operating profit before taxation 2,251 56 22 (56)Taxation (630) - - -Operating profit after taxation 1,621 56 22 (56)Minority interest (43) - - -Profit for the period attributableto shareholders 1,578 56 22 (56)Dividends on other equity interests (58) (45) - -Dividends on ordinary equity shares (630) - - -Retained profit 890 11 22 (56) Pro-forma Asset 12 months classification/ ended fair values Impairment Tax 31.12.04 $m $m $m $m Interest receivable and similarincome - 46 - 5,350Interest expense and similarcharges (9) - - (2,092)Net interest income (9) 46 - 3,258Other finance income - - - 10Fees and commissions income - 13 - 1,589Fees and commissions expense - - - (239)Net trading income 7 - - 677Other operating income - - - 205 7 13 - 2,232 Total operating income (2) 59 - 5,500Administrative expenses:Staff - - - (1,559)Premises - - - (321)Other - - - (770) Depreciation and amortisation - - - (238) Total operating expenses - - - (2,888) Operating profit before provisions (2) 59 - 2,612Impairment losses on loans andadvances - (76) - (290)Amounts written off fixed assets - - - (68)Operating profit before taxation (2) (17) - 2,254Taxation - - 6 (624)Operating profit after taxation (2) (17) 6 1,630Minority interest 9 - - (34)Profit for the period attributableto shareholders 7 (17) 6 1,596Dividends on other equityinterests - - - (103)Dividends on ordinary equityshares - - - (630)Retained profit 7 (17) 6 863 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) RECONCILIATION OF INCOME STATEMENTFor six months ended 30 June 2004 Reviewed IFRS 6 months ended Debt/ Effective Derivatives/ 30.06.04 Equity yield Hedging $m $m $m $m Interest and similar income 2,568 - 5 (28)Interest expense and similarcharges (1,017) 16 1 (1)Net interest income 1,551 16 6 (29)Other finance income 3 - - -Fees and commissions income 793 - (18) -Fees and commissions expense (130) - 19 -Net trading income 333 8 - 5Other operating income 175 - - - 1,171 8 1 5 Total operating income 2,725 24 7 (24)Administrative expenses:Staff (793) - - -Premises (158) - - -Other (336) - 3 (15) Depreciation and amortisation (123) - - - Total operating expenses (1,410) - 3 (15) Operating profit before provisions 1,315 24 10 (39)Impairment losses on loans andadvances (139) - - -Income from joint venture - - - -Amounts written off fixed assets (69) - - -Operating profit before taxation 1,107 24 10 (39)Taxation (331) - - -Operating profit after taxation 776 24 10 (39)Minority interest (20) - - -Profit for the period attributableto shareholders 756 24 10 (39)Dividends on other equity interests (29) (22) - -Dividends on ordinary equity shares (429) - - -Retained profit 298 2 10 (39) Pro-forma Asset 6 months classification/ ended fair values Impairment Tax 30.06.04 $m $m $m $m Interest and similar income (4) 26 - 2,567Interest expense and similarcharges (4) - - (1,005) Net interest income (8) 26 - 1,562Other finance income - - - 3Fees and commissions income - 4 - 779Fees and commissions expense - - - (111)Net trading income (9) - - 337Other operating income - - - 175 (9) 4 - 1,180 Total operating income (17) 30 - 2,745Administrative expenses:Staff - - - (793)Premises - - - (158)Other - - - (348) Depreciation and amortisation - - - (123) Total operating expenses - - - (1,422) Operating profit before provisions (17) 30 - 1,323Impairment losses on loans andadvances - 2 - (137)Income from joint venture - - - -Amounts written off fixed assets - - - (69) Operating profit before taxation (17) 32 - 1,117Taxation - - (2) (333) Operating profit after taxation (17) 32 (2) 784Minority interest 4 - - (16) Profit for the period attributableto shareholders (13) 32 (2) 768Dividends on other equityinterests - - - (51)Dividends on ordinary equityshares - - - (429) Retained profit (13) 32 (2) 288 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) RECONCILIATION OF EQUITYAt 1 January 2004 Audited Asset Pro-forma IFRS Debt/ Effective Derivatives/ classification/ IFRS 01.01.04 equity yield hedging fair values Impairment Tax 01.01.04 $m $m $m $m $m $m $m $m EquityShare capital, share premium and redemption reserve 3,768 (349) - - - - - 3,419Other components of equity - 877 - - - - - 877AFS reserve - - - - 227 - (47) 180Cash flow/hedge reserve - - - - - - - -Premises revaluation 57 - - - - - - 57Own shares held in ESOP Trusts (60) - - - - - - (60)Retained earnings 4,182 72 86 114 (34) 59 (72) 4,407Minority interest 620 - - - (129) - - 491 8,567 600 86 114 64 59 (119) 9,371 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) SUMMARISED ASSET CLASSIFICATIONSAt 31 December 2004 and 30 June 2004 Designated Pro-forma Held to Available at 31.12.04 maturity Originated for sale Trading fair value Total $m $m $m $m $m $m Treasury bills and other eligible bills 57 - 3,881 1,120 244 5,302 Loans and advances to banks - 16,508 - 894 - 17,402Loans and advances to customers - 72,101 6 144 49 72,300Debt securities 983 343 26,272 3,894 1,609 33,101Equity shares - - 292 12 - 304 1,040 88,952 30,451 6,064 1,902 128,409 Designated Pro-forma Held to Available at 30.06.04 maturity Originated for sale Trading fair value Total $m $m $m $m $m $m Treasury bills and other 127 - 5,119 740 549 6,535eligible billsLoans and advances to banks - 15,910 - 1,478 - 17,388Loans and advances to - 63,694 - 288 - 63,982customersDebt securities 973 294 23,751 2,999 1,079 29,096Equity shares - - 206 - - 206 1,100 79,898 29,076 5,505 1,628 117,207 STANDARD CHARTERED PLC - PRO-FORMA FINANCIAL STATEMENTS (continued) SEGMENTAL INFORMATION BY GEOGRAPHIC SEGMENTFor the year ended 31 December 2004 Other Hong Asia Kong Singapore Malaysia Pacific IndiaAudited IFRS $m $m $m $m $m Operating income 1,406 513 270 825 466Operating expenses (658) (228) (145) (518) (252)Operating profit beforeprovision 748 285 125 307 214Charge for debts (125) (33) (2) (40) (22)Impairment/other - - - - 2Operating profit beforetaxation 623 252 123 267 194 IAS 32/39 adjustments Operating income 10 4 25 10 20Operating expenses (4) (4) (2) (6) (1)Operating profit beforeprovision 6 - 23 4 19Impairment losses on loansand 13 (4) (26) (35) (8)advancesImpairment/other - - - - -Operating profit beforetaxation 19 (4) (3) (31) 11 Pro-forma Operating income 1,416 517 295 835 486Operating expenses (662) (232) (147) (524) (253)Operating profit beforeprovision 754 285 148 311 233Impairment losses on loansand (112) (37) (28) (75) (30)advancesImpairment/other - - - - 2Operating profit beforetaxation 642 248 120 236 205 US, MESA UK & UAE Other Africa Group TotalAudited IFRS $m $m $m $m $m Operating income 271 377 584 670 5,382Operating expenses (100) (170) (360) (418) (2,849)Operating profit before 171 207 224 252 2,533Related Shares:
Standard Chartered