26th Mar 2007 08:30
Standard Chartered PLC26 March 2007 The following is the text of a regulatory announcement made in Hong Kong on 26March 2007: "CONTINUING CONNECTED TRANSACTIONS This announcement is being published pursuant to Rule 14A.47 of the Hong KongListing Rules. By virtue of its greater than 10 per cent stake in the Company (in holding a 12per cent stake) and the 20 per cent stake held by two of its associates in threeminor subsidiaries of the Company, Temasek, together with its associates, arerelated parties and connected persons of the Company for the purposes of the UKand Hong Kong Listing Rules respectively. The Rules are intended to ensure that there is no favourable treatment toTemasek as a substantial shareholder or to its associates to the detriment ofother shareholders of the Company. While the Company will ensure that this isthe case, the Board believes that strict compliance with the Listing Rules inrespect of transactions with Temasek/its associates would be impractical andunduly onerous and would, in fact, be to the detriment of Shareholders as awhole by unduly restricting the Group's business. Accordingly, the Company has sought and obtained Waivers from the Hong KongStock Exchange which would exempt the Company from strict compliance withcertain aspects of the Hong Kong Listing Rules and permit the continuance ofOngoing Banking Transactions with Temasek and its associates. These Waivers,and certain other matters relating to such transactions with Temasek and itsassociates, are granted subject to the approval of the Independent Shareholdersof the Company. Pursuant to Rule 14A.49, the Notice of Annual General Meeting 2007 to bedespatched to the Shareholders on or around 26 March 2007 contains details ofthe Resolutions to be proposed to consider and, if thought fit, approve thevarious Temasek-related matters at the Company's AGM to be held on 3 May 2007. An Independent Board Committee comprising independent non-executive directorshas been appointed to advise the Independent Shareholders in respect of theResolutions. An Independent Financial Adviser has also been appointed to makerecommendations to the Independent Board Committee and the IndependentShareholders on the fairness and reasonableness of the Resolutions and whetherthey are in the interests of the Company and the Shareholders as a whole. Temasek and its associates will abstain from voting at the AGM in respect of theResolutions. CONTINUING CONNECTED TRANSACTIONS Introduction By virtue of its greater than 10 per cent stake in the Company (in holding a 12per cent stake) and the 20 per cent stake held by two of its associates in threeminor subsidiaries of the Company, Temasek, together with its associates, arerelated parties and connected persons of the Company for the purposes of therelated party rules under the UK Listing Rules and the connected transactionrules under the Hong Kong Listing Rules respectively. This means that where anymember of the Group enters into a transaction with Temasek or any of itsassociates, the Company may, depending on the size or nature of the transaction,be required to comply with the reporting, announcement and independentshareholders' approval requirements of these Rules. The Rules are intended to ensure that there is no favourable treatment toTemasek as a substantial shareholder or to its associates to the detriment ofother shareholders of the Company. While the Company will ensure that this isthe case, the Board believes that strict compliance with the Hong Kong ListingRules in respect of transactions with Temasek/its associates would beimpractical and unduly onerous and would, in fact, be to the detriment ofShareholders as a whole by unduly restricting the Group's business.Accordingly, the Company is asking the Independent Shareholders to approve theWaivers which have been obtained from the Hong Kong Stock Exchange in thisrespect and also certain other matters relating to transactions with Temasek andits associates, which would exempt the Company from strict compliance withcertain aspects of the Hong Kong Listing Rules and permit the continuance ofcertain transactions with Temasek and its associates. Further details on theseWaivers and other related matters are given below. The related party rulesunder the UK Listing Rules are less onerous and the Company is able to complywith them without the same restriction to its business. Background on Temasek Temasek is a substantial investment company that has a diversified portfolio ofinvestments spanning various industries. The Group itself has substantialbanking and related businesses in many of the countries in which Temasek and itsassociates operate and the Group has entered into and would wish to continue toenter into an extensive number of banking and other financial servicestransactions with Temasek and its associates in the ordinary course of itsbusiness. Such transactions have been, and would continue to be, on normalcommercial terms or on terms that are fair and reasonable and in the interestsof the Group and Shareholders as a whole. Our imperative from a businessperspective is not to impede these dealings but to establish a process whichallows such ordinary course business transactions to continue on the same basisas before Temasek became a substantial shareholder of the Company and to developthis business as opportunities may arise, so far as this would be in the Group'sinterest. Waiver from strict compliance with the reporting and annual review requirementsof the Hong Kong Listing Rules in respect of Ongoing Banking Transactions withTemasek associates that the Company has not been able to identify Under the Hong Kong Listing Rules, the definition of "associate" extends toTemasek's holding company, subsidiary companies and 30 per cent investeecompanies ("30 per cent investee companies") and subsidiaries, holdingcompanies, fellow subsidiaries of such holding companies and 30 per centinvestee companies of such 30 per cent investee companies. Given Temasek's diversified portfolio of investments and the extent of thedefinition of "associate" under the Hong Kong Listing Rules, the Company hasbeen liaising directly with Temasek in order to ascertain which companies areTemasek "associates" within the Listing Rules definitions. Based on the mostrecent information received, there are in excess of 1,200 subsidiaries which areassociates of Temasek (i.e. not including the 30 per cent investee companies orthe subsidiaries, holding companies, fellow subsidiaries of such holdingcompanies or 30 per cent investee companies of such 30 per cent investeecompanies included within the Hong Kong Listing Rules definition). Temasek does not maintain details of all of its "associates" as defined by theHong Kong Listing Rules, nor is there any legal or other obligation on it to doso. Therefore, as a practical matter, it has not been and will not be possiblefor the Company to identify every single Temasek associate (which could beseveral thousand companies), particularly those that are more distantly relatedto Temasek such as the subsidiaries, holding companies, fellow subsidiaries ofsuch holding companies and 30 per cent investee companies of its 30 per centinvestee companies. However, the Company is maintaining and will continue tomaintain a list of associates of Temasek from the sources set out in thefollowing paragraph, in order to identify related party transactions andconnected transactions with such associates. In view of the difficulty of identifying all of the Temasek's associates, theCompany has been granted a Waiver by the Hong Kong Stock Exchange (conditionalon Independent Shareholder approval and for a period of three years ending 3 May2010) from strict compliance with the reporting and annual review requirementsof Chapter 14A of the Hong Kong Listing Rules in respect of the Ongoing BankingTransactions with associates of Temasek that the Company has not been able toidentify, despite having applied all reasonable efforts to identify suchassociates. This is on the basis that the Company will endeavour to identifyTemasek associates utilising the following sources: • a list of associates provided by Temasek that, in respect of itssubsidiaries, will be updated on a quarterly basis, and that, in respect of theother associates which it identifies, will be updated on an annual basis; • press announcements made by Temasek (Temasek has agreed to add theCompany to its list of recipients of these); • the Company's own records of ownership of its clients that aremaintained for credit control purposes; • a global survey of the Company's Wholesale Bank's corporaterelationship managers to identify (and with a request to them to remain vigilantto identify) corporate clients where Temasek has an effective stake of 30 percent or more in a current Wholesale Bank client; • information which the Company may otherwise have from its dealingswith Temasek and its associates or its knowledge in the market; and • information from press articles from any of the Company's existinginternal media reporting systems. Further, transactions with Temasek and its associates have been and willcontinue to be on normal commercial terms or on terms that are fair andreasonable and in the interests of the Group and the Shareholders taken as awhole. This is assured by the following processes and requirements within theGroup: • client-facing staff are required to maximise profits and minimise riskat all times; • credit risk controls and transaction monitoring by the Group aredesigned to prevent business being done at rates or prices that are noteconomically profitable to the Group, or, in the case of market transactions,that are effected at off-market rates; • transactions with Temasek and its associates have been and willcontinue to be subject to the same credit approval processes as before the timethey became connected persons of the Company; • all transactions involving credit exposure are subject to limits oncredit risk taken set by risk officers located in the businesses but withseparate reporting lines to the Group Chief Risk Officer (who reports to theGroup Executive Director for Risk). Significant exposures are reviewed andapproved centrally through a Group or regional level credit committee. Also,internal controls on credit exposure require, amongst other things, an annualreview and approval of credit exposures to individual client groups such asTemasek or its associates. All risk officers and credit committees areaccountable to the Group Chief Risk Officer and are governed by policies laiddown by the Group Risk Committee; and • any procurement services sought from Temasek or its associates willfollow the standard Supplier Management Framework process, applied to assist theGroup in identifying suppliers which offer the best value in terms of pricing,quality and expertise. Consistent with the purpose of the connected transaction rules and in line withthe Company's running of its business, there has been no favourable treatmentafforded to Temasek or any of its associates since 20 July 2006 and transactionswith Temasek and its associates have at all times been, and will continue to be,undertaken on normal commercial terms or on terms that are fair and reasonableand in the interests of the Group and the Shareholders taken as a whole. Further details of the Ongoing Banking Transactions are set out below. Written agreements Under Rule 14A.35(1) of the Hong Kong Listing Rules, any relevant member of theGroup would be required to enter into a fixed-term written agreement withTemasek or its associates (as the case may be) in relation to non-exemptcontinuing connected transactions, including any Ongoing Banking Transactions.Such written agreement would be required to (a) be for a fixed period (notexceeding 3 years, except in special circumstances); (b) provide that normalcommercial terms would apply to such transactions; and (c) set out how thepayments to be made in respect of such transactions would be calculated.However, it would be unduly burdensome to require the Company to enter into awritten agreement with Temasek and its associates given the extensive number ofassociates and also the fact that Temasek does not exercise management controlover a large number of them and would not be able to undertake to procurecompliance by its associates with the terms of any such written agreement.Notwithstanding the fact that there will be no fixed-term written agreement inplace in accordance with Rule 14A.35(1), there will of course be a contract(which may be written, oral or through course of conduct) between the relevantmember of the Group and the client/counterparty, being Temasek or one of itsassociates, governing the individual transactions. Therefore, conditional on approval by the Independent Shareholders of theCompany, the Hong Kong Stock Exchange has granted a Waiver from compliance withthe requirement to enter into a fixed-term written agreement with Temasek andeach of its associates in respect of the Ongoing Banking Transactions for aperiod of three years ending 3 May 2010. The Waiver was requested and grantedon the basis that it is not practicable for the Company to enter into suchagreements with Temasek given the vast number of Temasek associates and the factthat Temasek does not exercise management control over a large number of suchassociates. The Company has assured the Hong Kong Stock Exchange that such transactions withTemasek and its associates will always be entered into on normal commercialterms or on terms that are fair and reasonable and in the interests of the Groupand the Shareholders taken as a whole. Further details of the Ongoing Banking Transactions are set out below. Ongoing Banking Transactions The Ongoing Banking Transactions constitute continuing connected transactionswithin the meaning of Chapter 14A of the Hong Kong Listing Rules. Set out beloware details of such Ongoing Banking Transactions entered into or which may beentered into between members of the Group and Temasek or its associates in theordinary and usual course of business and on normal commercial terms (and withreference to prevailing market rates) or in accordance with the practicecommonly adopted in the market (where applicable). The Company proposes to seek ratification of the past Ongoing BankingTransactions entered into between the Group and Temasek and its associates untilthe date of the AGM. It is proposed that this resolution would go back to thedate when Temasek acquired its greater than 10 per cent stake in the Company on20 July 2006, since which time the Company has been seeking waivers from theHong Kong Stock Exchange in respect of the Ongoing Banking Transactions (and theother matters that will be covered by the other Resolutions). These Waivers, asnow granted, moving forward are subject to approval by the IndependentShareholders, and relate to Ongoing Banking Transactions with Temasek and itsassociates for the three-year period from the AGM. However, the Company alsoproposes to seek Independent Shareholder ratification in respect of suchtransactions entered into from 20 July 2006 until the date of the AGM.Consistent with the purpose of the connected transaction rules and in line withthe Company's running of its business, there has been no favourable treatmentafforded to Temasek or any of its associates since 20 July 2006 and suchtransactions with such persons have at all times been undertaken on normalcommercial terms. Data on such Ongoing Banking Transactions between the Group and Temasek and itsassociates is provided for the period from 20 July 2006 until 31 December 2006as indicated below. The Company will also seek approval for such Ongoing Banking Transactions for aperiod of three years from the date of the AGM i.e. until 3 May 2010 (which isconsistent with the maximum fixed period for non-exempt continuing connectedtransactions under Rule 14A.35(1) of the Hong Kong Listing Rules), as well asapproval for the Waiver (which, if Temasek remains a connected person of theCompany, will need to be renewed every three years) from strict compliance withthe requirement to set a maximum aggregate annual value or a "cap" for each ofthese transactions with Temasek and its associates. As explained above,consistent with the purpose of the connected transaction rules and in line withthe Company's running of its business, there will be no favourable treatmentafforded to Temasek or its associates and transactions with such persons willcontinue to be undertaken on normal commercial terms. During the Relevant Period, there have not been any Physical Commodities DealingTransactions, Underwriting Transactions, Fund Management Services, InsuranceTransactions or Brokerage Services, all as set out below, with Temasek or any ofits associates. However, these types of transactions are in the ordinary andusual course of business of the Group and may become increasingly important tothe Group in the near future. Accordingly, the Company proposes to seekIndependent Shareholder approval for these types of transactions which may alsobe undertaken with Temasek or its associates in future. Each of the Ongoing Banking Transactions, including those as set out in thepreceding paragraph above, is or potentially will be carried out frequently, ona regular basis and where Temasek or any of its associates, as a client, willneed or expect the transaction to be executed or the service to be providedquickly. This is the very nature of such business. In respect of each of the Ongoing Banking Transactions described below,references to "associates" of Temasek are to such associates of Temasek as theCompany is able to identify using all reasonable efforts in the manner describedabove. Furthermore, information on volumes and values of transactions withTemasek and its associates in respect of Ongoing Banking Transactions during theRelevant Period (as applicable) include all transactions during such period withany entity that was an associate of Temasek at any time during the period evenif they have since ceased to be an associate of Temasek. Foreign Exchange TransactionsMembers of the Group enter into spot, forward and foreign exchange swapcontracts with counterparties and clients, including Temasek and its associates,for the purpose of foreign exchange risk management and in response tocustomer-driven transactions. The value of outstanding Foreign Exchange Transactions between the Group andTemasek and its associates as at 31 December 2006 was US$1,119 million. In theRelevant Period, the Group entered into 2,650 Foreign Exchange Transactions witha total of 44 companies which are associates of Temasek (as well as Temasekitself). Derivatives Transactions The Group enters into over-the-counter derivatives transactions with clients andcounterparties, including Temasek and its associates, which include swaps,forwards, options and combinations thereof on foreign exchange, interest rates,commodities, credit risk, bonds, equities and any other classes of underlyingprices, rates, indices or instruments. The Derivatives Transactions are enteredinto for a variety of reasons, including to allow Temasek and its associates tohedge their exposure to an underlying asset class or for the purpose of taking arisk position in relation to that underlying asset class. The notional amount of the outstanding Derivatives Transactions between theGroup and Temasek and its associates as at 31 December 2006 was US$2,555million. In the Relevant Period, the Group entered into 755 DerivativesTransactions with a total of 16 companies which are associates of Temasek. Capital Markets Dealing Transactions As part of its ordinary and usual course of business, the Group enters intocapital markets dealing transactions with clients and counterparties, includingTemasek and its associates, which include (but are not limited to) sales,purchases and participations of securities, loans and other financialinstruments issued by independent third parties or by a member of the Group orby Temasek or any of its associates. From the Group's perspective, the CapitalMarkets Dealing Transactions are secondary market transactions for tradingpurposes. The value of the Capital Markets Dealing Transactions between the Group andTemasek and its associates in the Relevant Period was US$709 million. Inaddition, in the Relevant Period, the Group entered into 125 Capital MarketsDealing Transactions with a total of 13 companies which are associates ofTemasek. Physical Commodity Dealing Transactions In the ordinary and usual course of its business, members of the Group deal inphysical commodities with clients and counterparties, which may include Temasekor any of its associates. Most of these transactions relate to financingtransactions, such as inventory finance in which a member of the Group takestitle to the relevant commodities, and have the benefit of the financialassistance exemptions in the Hong Kong Listing Rules. However, transactionsentered into for hedging purposes in connection with commodity derivatives andsome other transactions in physical commodities are not connected with afinancing and are not, therefore, exempt under the Hong Kong Listing Rules. Although the Group has not entered into any such transactions with Temasek orits associates during the Relevant Period, physical commodity dealingtransactions are part of the ordinary and usual course of business of the Group. It is possible, therefore, that the Group may enter into such transactionswith Temasek and any of its associates in the future and, accordingly, PhysicalCommodity Dealing Transactions have been included in the definition of OngoingBanking Transactions for which Independent Shareholder approval is being sought. Underwriting Transactions In the ordinary and usual course of its business, members of the Group act as anunderwriter on issues of equity securities by clients, which may include Temasekor any of its associates. This would include underwriting issues of shares(including preference shares), convertible equity securities and warrants orsimilar rights to subscribe or purchase shares or convertible equity securities. This would also involve the payment by the Temasek issuer to the Group of anunderwriting fee and, in the event that the issue of securities is not fullysubscribed, may involve the relevant member of the Group acquiring a portion ofthe equity securities under the underwriting arrangements. Any such securitiesacquired will be held on the relevant member of the Group's trading book but, inaccordance with internal guidelines, will be sold on to an independent thirdparty at the earliest opportunity. Although the Group has not entered into any such transactions with Temasek orits associates during the Relevant Period, underwriting transactions are part ofthe ordinary and usual course of business of the Group. It is possible,therefore, that the Group may enter into such transactions with Temasek and anyof its associates in the future and, accordingly, Underwriting Transactions havebeen included in the definition of Ongoing Banking Transactions for whichIndependent Shareholder approval is being sought. Financial Assistance Transactions by Non-Banking Subsidiaries Under the Hong Kong Listing Rules, certain financial assistance transactionsentered into by banking companies which are duly licensed or authorised underthe Banking Ordinance or under appropriate overseas legislation or authority areexempt from the connected transaction requirements of the Hong Kong ListingRules (Rule 14A.65). However, there may be circumstances where a Non-BankingSubsidiary provides financial assistance in the ordinary course of its businessto Temasek or its associates. Accordingly, Independent Shareholder approval isalso being sought (on the basis that the financial assistance exemptions underthe Hong Kong Listing Rules are ordinarily not available to such companies) toallow the Non-Banking Subsidiaries to continue to enter into FinancialAssistance Transactions with Temasek and its associates as part of theirordinary course of business. The Financial Assistance Transactions with clients and counterparties, includingTemasek and its associates, include granting credit, lending money, providingsecurity for or guaranteeing a loan. The value of the Financial AssistanceTransactions between the Non-Banking Subsidiaries within the Group and Temasekand its associates in the Relevant Period was US$14 million. In addition, inthe Relevant Period, the Non-Banking Subsidiaries within the Group entered intoone Financial Assistance Transaction with one company which is an associate ofTemasek. Secured Financial Assistance Transactions Under the Hong Kong Listing Rules, certain financial assistance transactions areexempt from the connected transaction requirements of the Hong Kong ListingRules. However, there may be circumstances where a member of the Group isrequired to grant security, in the form of margin, collateral or similararrangements in connection with financial assistance provided by Temasek or anyof its associates, in the ordinary and usual course of its business and onnormal commercial terms. For example, as part of repurchase, reverse repurchaseor stock borrowing and lending transactions. In these circumstances, thefinancial assistance exemption under Rule 14A.65(4) is not available to therelevant member of the Group. Accordingly, Independent Shareholder approval isbeing sought to allow the Group to continue to enter into financial assistancetransactions even where such margin, collateral or other security is required tobe granted by the Group as part of its ordinary course of business. Moreinformation on such margin and collateral arrangements is set out below in thesection headed "Margin arrangements for OTC foreign exchange, derivatives, repoand stock lending transactions". Fund Management Services The Group provides fund management services to clients and, in the future, mayreceive fund management services from third parties, which may include Temasekand its associates, including the provision of discretionary fund and assetmanagement services. This would involve the payment by Temasek or any of itsassociates to the Group (and vice versa where Temasek or its associates isproviding services to the Group) of fees and commission with reference toprevailing market rates. Although the Group has not entered into any such transactions with Temasek orits associates during the Relevant Period, fund management services are part ofthe ordinary and usual course of business of the Group. It is possible,therefore, that the Group may enter into such transactions with Temasek and anyof its associates in the future and, accordingly, Fund Management Services havebeen included in the definition of Ongoing Banking Transactions for whichIndependent Shareholder approval is being sought. Securities Services The Group provides securities services to clients including Temasek and itsassociates which includes the provision of custody, escrow agency, receivingbank, trustee, transfer agency, paying agency and funds administration services,derivatives clearing services and facilities for custody clients to lend theirsecurities. The fee income in relation to the Securities Services provided to Temasek andits associates in the Relevant Period was US$2 million. In addition, duringthat period, the Group provided Securities Services to 13 companies which areassociates of Temasek. Cash Management Services The Group provides cash management services to clients including Temasek and itsassociates, which include account services (payments and collections) to enableclients to operate their current, savings and other accounts, liquiditymanagement services (allowing clients to optimise interest earned from creditbalances and to minimise interest charged on debit balances across a number ofthe client's accounts by transferring balances at the end of each day to asingle master account ("sweeping") or by notionally aggregating the balances ("pooling") for the purpose of calculating the interest on the net balance of theclient) and clearing services. The gross revenue from Cash Management Services provided to Temasek and itsassociates in the Relevant Period was US$1 million. During that period, theGroup provided Cash Management Services to 93 companies which are associates ofTemasek. Trade Services The Group offers a wide range of trade finance products to clients includingTemasek and its associates involving lending or other extensions of credit,including issuing, confirming, negotiating and discounting letters of credit;negotiating and discounting trade bills; import finance; export and pre-exportfinance; shipping guarantees; performance guarantees and letters of indemnity.However, the Group also participates in some transactions and provides someservices that do not involve credit exposure, such as export bills collection,advising of letters of credit, document preparation, processing and checkingservices, and safekeeping of documents. These non-credit services are generallyprovided to the same clients that use the Group's credit products, whichincludes Temasek and its associates, and are often provided as part of anoverall banking package. The gross revenue from Trade Services provided to Temasek and its associates inthe Relevant Period was US$1 million. Trade Services were provided to 19companies which are associates of Temasek during that period. Advisory and Arranging Services The Group provides advisory and arranging services, in particular corporatefinance advisory services, arranging and advising on loans from third partylenders and public and private placements of securities (where the Group doesnot participate as lender, underwriter or subscriber) to clients includingTemasek and its associates. The fee income from the Advisory and Arranging Services provided to twocompanies which are associates of Temasek in the Relevant Period was US$0.2million. Brokerage Services In the ordinary and usual course of its dealing businesses members of the Groupuse brokerage services from brokers, which may include associates of Temasek. Although the Group has not entered into any such transactions with Temasek orits associates during the Relevant Period, the Group uses brokerage services inits ordinary and usual course of business. It is possible, therefore, that theGroup may enter into such transactions with Temasek and any of its associates inthe future and, accordingly, Brokerage Services have been included in thedefinition of Ongoing Banking Transactions for which Independent Shareholderapproval is being sought. Insurance Transactions In the ordinary and usual course of its business, members of the Group purchaseinsurance cover against credit, political and event risks, which may includeinsurance cover from Temasek or its associates. Although the Group has not entered into any such transactions with Temasek orits associates during the Relevant Period, insurance transactions are part ofthe ordinary and usual course of business of the Group. It is possible,therefore, that the Group may enter into such transactions with Temasek and anyof its associates in the future and, accordingly, Insurance Transactions havebeen included in the definition of Ongoing Banking Transactions for whichIndependent Shareholder approval is being sought. Margin arrangements for OTC foreign exchange, derivatives, repo and stocklending transactions The Group, in line with most international banks, uses the ISDA master agreementto govern most of its "over-the-counter" or "OTC" transactions in foreignexchange and derivatives, the Global Master Repurchase Agreement to govern mostof its repurchase and reverse repurchase transactions and the Securities LendingAgreement to govern most of its stock borrowing and lending transactions. Thesemaster agreements are bilateral agreements designed to govern a course ofdealing in a wide range of OTC transactions, and one of their primary purposesis to reduce the credit exposure inherent in the underlying transactions byproviding for the netting of the close out values of transactions in the eventof a default or failure of one of the parties. In order to reduce credit exposure further, banks will often include in theirmaster agreements a Credit Support Annex (CSA) unless the master agreementitself already provides for the parties to post collateral with each other.This would normally be in the form of cash or securities, in order to reduce thecredit exposure of one party to the other represented by the net mark-to-marketvalue of transactions between them at any given time. The obligation to postcollateral is usually mutual and the amount of collateral posted will vary overtime with changes in the net mark-to-market value of transactions outstanding. Collateral arrangements through master agreements or CSAs are a very commonfeature of and inherent part of the overall transactions between banks andbetween banks and corporates, including foreign exchange, derivatives,repurchase and reverse repurchase, and stock borrowing and lending transactions. From time to time, the Group may have collateral arrangements in place with anumber of Temasek associates as well as Temasek itself. The transactions withTemasek and its associates that are governed by a master agreement and CSA willeither constitute "financial assistance" provided by the Group to Temasek or itsassociates, which may be exempt under Rules 14A.65 to 14A.66 of the Hong KongListing Rules, or will be subject to Independent Shareholder approval as OngoingBanking Transactions. The Company proposes to seek ratification of margin, collateral and othersimilar arrangements entered into with Temasek and its associates in connectionwith the Ongoing Banking Transactions from 20 July 2006 until the date of theAGM. The Company will also seek approval for such margin, collateral and othersimilar arrangements in connection with the Ongoing Banking Transactions withTemasek and its associates for a period of three years from the date of the AGMi.e. until 3 May 2010 (which is consistent with the maximum fixed period fornon-exempt continuing connected transactions under Rule 14A.35(1) of the HongKong Listing Rules). Annual cap Pursuant to the Hong Kong Listing Rules, the Company is required to set amaximum aggregate annual value or a "cap" for each of the Ongoing BankingTransactions with Temasek and its associates. The Hong Kong Stock Exchange hasgranted a Waiver (conditional on Independent Shareholder approval, which willneed to be renewed every three years if Temasek remains a connected person ofthe Company) from strict compliance with this requirement on the basis of (butnot limited to) the following: (a) since each of the Ongoing Banking Transactions is entered into in theordinary and usual course of business of the Group, the volume and aggregatevalue of each of these transactions varies from time to time and from year toyear depending on a number of factors including (but not limited to) whichcompanies constitute associates of Temasek, the range of banking products andservices offered by the Group, and fluctuations in financial markets andeconomic conditions. In addition, given the volume and size of each of thesetransactions, it would be difficult and impracticable to estimate and set amaximum aggregate annual value for each of the transactions. Furthermore,references to previous figures for each of these transactions may not be a fairindication as to the expected value of the transactions for the next threeyears; (b) in respect of some of the Ongoing Banking Transactions, such as ForeignExchange Transactions, Derivatives Transactions, Capital Markets DealingTransactions and certain Secured Financial Assistance Transactions, these aregenerally entered into in response to customer demand, are sensitive to marketrates and require execution in a very short time frame. If the relevanttransactions were to exceed the maximum aggregate annual value, the obligationto seek independent shareholder approval in accordance with Chapter 14A of theHong Kong Listing Rules would cause significant delay to such transactions and,as such, the Group would not be able to provide a responsive service to Temasekand its associates. This would, in turn, significantly limit the existingoperations and potential business growth of the Group to the detriment of theCompany and its Shareholders as a whole; and (c) all of the Ongoing Banking Transactions with Temasek and its associates are,and will continue to be, entered into on an arm's length basis or on terms thatare fair and reasonable and in the interests of the Group and the Shareholderstaken as a whole. The Company will also seek approval of the Waiver that no maximum aggregateannual value or "cap" be imposed on the Ongoing Banking Transactions in respectof such transactions for the three-year period ending 3 May 2010. REASONS FOR THE ONGOING CONNECTED TRANSACTIONS The directors (including the independent non-executive directors) consider thateach of the Ongoing Banking Transactions has been or will be entered into in theordinary course of business of the Group and on normal commercial terms or onterms that are fair and reasonable so far as the Independent Shareholders areconcerned and are in the interests of the Group and the Shareholders taken as awhole. The directors also consider it to be in the interests of the Group toengage in the Ongoing Banking Transactions with Temasek and its associates aseach of such transactions is beneficial to the business and profitability of theGroup. INFORMATION ON THE COMPANY AND TEMASEK The Company The Company is listed on both the London Stock Exchange and the Hong Kong StockExchange and is consistently ranked in the top 25 among FTSE-100 companies bymarket capitalisation. Standard Chartered has a history of over 150 years in banking and operates inmany of the world's fastest-growing markets with an extensive global network ofover 1,400 branches (including subsidiaries, associates and joint ventures) inover 50 countries in the Asia Pacific Region, South Asia, the Middle East,Africa, the United Kingdom and the Americas. As one of the world's most international banks, Standard Chartered employsalmost 60,000 people, representing over 100 nationalities, worldwide. Thisdiversity lies at the heart of the Standard Chartered's values and supports itsgrowth as the world increasingly becomes one market. Standard Chartered derives over 90 per cent of profits from Asia, Africa and theMiddle East. Temasek Temasek is an Asia investment company headquartered in Singapore with aportfolio of investments that is concentrated principally in Singapore, Asia andthe OECD economies. Temasek manages a diversified portfolio of S$129 billion(approximately HK$660.47 billion) spanning various industries includingtelecommunications and media, financial services, property, transportation andlogistics, energy and resources, infrastructure, engineering and technology, andbioscience and healthcare. The number of subsidiaries of Temasek is in excessof 1,200 companies (which include Temasek wholly-owned investment vehicles,subsidiaries in Temasek's portfolio and their subsidiaries). These companies aremanaged by their respective management teams and guided by their boards ofdirectors and operate independently of each other. Temasek does not involveitself in the daily commercial or operational decisions of its investeecompanies, but as part of its overall portfolio management may choose toincrease, consolidate or divest its shareholdings in these companies from timeto time. Temasek also actively invests in new companies for growth anddiversification of its portfolio. Temasek is wholly-owned by the SingaporeGovernment through the Minister for Finance (Incorporated). DESPATCH OF NOTICE OF ANNUAL GENERAL MEETING 2007 An Independent Board Committee comprising Mr R H P Markham, Mr J F T Dundas, MrR Markland and Lord Turner, all being independent non-executive directors, hasbeen appointed to advise the Independent Shareholders in respect of theResolutions to be proposed at the AGM in relation to Temasek and its associates,including the Ongoing Banking Transactions. An Independent Financial Adviser,Commerzbank AG, has been appointed to make recommendations to the IndependentBoard Committee and the Independent Shareholders on the fairness andreasonableness of the Resolutions and whether they are in the interests of theCompany and the Shareholders as a whole. The Notice of Annual General Meeting2007 containing, amongst other things, (1) further information on the OngoingBanking Transactions, (2) the recommendation of the Independent Board Committee,(3) the recommendation of the Independent Financial Adviser, and (4) the noticeof AGM at which ordinary resolutions will be proposed to consider and, ifthought fit, approve the various Temasek-related matters, will be dispatched tothe Shareholders on or around 26 March 2007. Temasek and its associates willabstain from voting at the AGM in respect of the Resolutions. DEFINITIONS In this Announcement, unless the context otherwise requires, the following wordsand phrases have the following meanings:-"Advisory and Arranging the advisory and arranging services transactions entered into, or to be enteredServices" into (as the context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading "Advisory and Arranging Services" "AGM" the annual general meeting of the Company to be held on 3 May 2007 "associates" has the meaning ascribed thereto under the Hong Kong Listing Rules "Banking Ordinance" the Banking Ordinance (Cap.155 of the Laws of Hong Kong) "Board" the board of directors of the Company "Brokerage Services" the brokerage services transactions entered into, or to be entered into (as the context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Brokerage Services" "Capital Markets the capital markets dealing transactions entered into, or to be entered into (as Dealing Transactions the context requires), between (a) members of the Group and (b) Temasek or any of " its associates from time to time, details of which are set out under the heading " Capital Markets Dealing Transactions" "Cash Management the cash management services transactions entered into, or to be entered into (as Services" the context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Cash Management Services" "Company" Standard Chartered PLC "Continuing has the meaning ascribed thereto under the Hong Kong Listing Rules and includes Connected transactions contemplated under the Ongoing Banking Transactions Transactions" "Derivatives the derivatives transactions entered into, or to be entered into (as the context Transactions" requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Derivatives Transactions" "directors" the directors of the Company whose names are set out below "financial has the meaning ascribed to "financial assistance" under the Hong Kong Listing assistance" Rules and includes granting credit, lending money, providing security for or guaranteeing a loan by any member of the Group "Financial has the meaning ascribed to "financial assistance" under the Hong Kong Listing Assistance Rules and includes granting credit, lending money, providing security for or Transactions" guaranteeing a loan by Non-Banking Subsidiaries to Temasek or any of its associates from time to time "Foreign Exchange the foreign exchange transactions entered into, or to be entered into (as the Transactions" context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Foreign Exchange Transactions" "Fund Management the fund management services transactions entered into, or to be entered into (as Services" the context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Fund Management Services" "Group" the Company and its subsidiaries "Hong Kong Listing The Rules Governing the Listing of Securities on the Hong Kong Stock Exchange Rules" "Hong Kong Stock The Stock Exchange of Hong Kong Limited Exchange" "Independent Board the independent committee of the independent non-executive directors of the Committee" Company comprising Mr R H P Markham, Mr J F T Dundas, Ms R Markland and Lord Turner formed to advise the Independent Shareholders in respect of the Resolutions "Independent Commerzbank AG (acting through its Hong Kong Branch), a licensed bank under the Financial Adviser" Banking Ordinance and an authorised financial institution under the SFO to carry out types 1, 4 and 6 regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders "Independent Shareholders other than Temasek and its associates Shareholders" "Insurance transactions involving one or more members of the Group purchasing insurance cover Transactions" from Temasek or any of its associates from time to time, details of which are set out under the heading "Insurance Transactions" "Non-Banking subsidiaries of the Company that are not licensed or authorised to conduct banking Subsidiaries" business under the Banking Ordinance or under appropriate overseas legislation or authority "normal commercial has the meaning ascribed thereto under the Hong Kong Listing Rules terms" "Ongoing Banking include the Advisory and Arranging Services, the Brokerage Services, the Capital Transactions" Markets Dealing Transactions, the Cash Management Services, the Derivatives Transactions, the Financial Assistance Transactions, the Foreign Exchange Transactions, the Fund Management Services, the Insurance Transactions, the Physical Commodity Dealing Transactions, the Secured Financial Assistance Transactions, the Securities Services, the Trade Services and the Underwriting Transactions "Physical Commodity the physical commodity dealing transactions entered into, or to be entered into Dealing Transactions (as the context requires), between (a) members of the Group and (b) Temasek or any " of its associates from time to time, details of which are set out under the heading "Physical Commodity Dealing Transactions" "Relevant Period" the period from when Temasek acquired its greater than 10 per cent stake in the Company on 20 July 2006 until the Company's most recent financial year end on 31 December 2006 "Resolutions" the ordinary resolutions relating to Ongoing Banking Transactions with Temasek and its associates to be considered at the AGM "Rules" the Hong Kong Listing Rules and the UK Listing Rules "Secured Financial financial assistance transactions where security over the assets of a Group Assistance company is provided to Temasek or any of its associates from time to time in Transactions" respect of the financial assistance, details of which are set out under the heading "Secured Financial Assistance Transactions" "Securities Services the securities services transactions entered into, or to be entered into (as the " context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Securities Services" "SFO" the Securities and Futures Ordinance (Cap.571 of the Laws of Hong Kong) "Shareholders" holders of the Shares "Shares" ordinary shares of US$0.50 each in the share capital of the Company "Temasek" Temasek Holdings (Private) Limited "Trade Services" the trade services transactions entered into, or to be entered into (as the context requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Trade Services" "UK Listing Rules" the UK Listing Rules, which are part of the Financial Services Authority's UKLA Sourcebook "Underwriting the underwriting transactions entered into, or to be entered into (as the context Transactions" requires), between (a) members of the Group and (b) Temasek or any of its associates from time to time, details of which are set out under the heading " Underwriting Transactions" "Waivers" the waivers from strict compliance with: (a) Rules 14A.37 to 14A.40 and 14A.45 of the Hong Kong Listing Rules in relation to the reporting and annual review requirements for the Ongoing Banking Transactions with associates of Temasek that the Company has not been able to identify; and (b) Rules 14A.35(1) and (2) of the Hong Kong Listing Rules in relation to the entering into written agreements and setting annual caps for the Ongoing Banking Transactions with Temasek and its associates, granted by the Hong Kong Stock Exchange on 16 March 2007 By Order of the Board C Burns Group Company Secretary Hong Kong, 26 March 2007 As of the date of this announcement, the Board of Directors of the Companycomprises: Chairman: Mr Evan Mervyn Davies, CBE Executive Directors: Mr Peter Alexander Sands; Mr Michael Bernard DeNoma; Mr Richard Henry Meddings;Mr Kaikhushru Shiavax Nargolwala; and Independent Non-Executive Directors: Sir CK Chow; Mr James Frederick Trevor Dundas; Ms Valerie Frances Gooding, CBE;Mr Rudolph Harold Peter Markham; Ms Ruth Markland; Mr Paul David Skinner; MrOliver Henry James Stocken; and Lord Adair Turner." END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Standard Chartered