Standard Chartered PLC — Interim / Quarterly Report 2014

Aug 6, 2014

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RNS Number : 3932O Standard Chartered PLC 06 August 2014  Condensed consolidated interim income statement For the six months ended 30 June 2014 6 months ended 6 months ended 6 months ended Notes 30.06.14 30.06.13 31.12.13 $million $million $million Interest income 8,603 8,914 8,679 Interest expense (2,999) (3,316) (3,121) Net interest income 5,604 5,598 5,558 Fees and commission income 2,284 2,338 2,243 Fees and commission expense (223) (243) (237) Net trading income 3 954 1,685 829 Other operating income 4 635 610 396 Non-interest income 3,650 4,390 3,231 Operating income 9,254 9,988 8,789 Staff costs 5 (3,454) (3,397) (3,173) Premises costs 5 (441) (426) (451) General administrative expenses 5 (875) (860) (1,172) Depreciation and amortisation 6 (313) (351) (363) Operating expenses (5,083) (5,034) (5,159) Operating profit before impairment losses and taxation 4,171 4,954 3,630 Impairment losses on loans and advances and other credit risk provisions 7 (846) (730) (887) Other impairment Goodwill impairment 8 - (1,000) - Other 8 (185) (11) (118) Profit from associates and joint ventures 113 112 114 Profit before taxation 3,253 3,325 2,739 Taxation 9 (849) (1,089) (775) Profit for the period 2,404 2,236 1,964 Profit attributable to: Non-controlling interests 26 44 55 55 Parent company shareholders 2,360 2,181 1,909 Profit for the period 2,404 2,236 1,964 cents cents cents Earnings per share: Basic earnings per ordinary share 11 94.6 88.1 76.5 Diluted earnings per ordinary share 11 94.0 87.3 75.7 Dividends per ordinary share: Interim dividend declared 10 28.80 - - Interim dividend paid 10 - 28.80 - Final dividend paid 10 - - 57.20 $million $million $million Total dividend: Total interim dividend payable 1 710 - - Total interim dividend (paid 17 October 2013) - 696 - Total final dividend (paid 14 May 2014) - - 1,385 1 Dividend declared/payable represents the interim dividend as declared by the Board of Directors on 6 August 2014 and is expected to be paid on 20 October 2014. This dividend does not represent a liability to the Group at 30 June 2014 and is a non-adjusting event as defined by IAS 10 Events after the reporting period Condensed consolidated interim statement of comprehensive income For the six months ended 30 June 2014 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 Notes $million $million $million Profit for the period 2,404 2,236 1,964 Other comprehensive income: Items that will not be reclassified to Income statement: Actuarial (losses)/gains on retirement benefit obligations 24 (70) 44 35 Items that may be reclassified subsequently to Income statement: Exchange differences on translation of foreign operations: Net gains/(losses) taken to equity 358 (1,112) (94) Net (losses)/gains on net investment hedges (58) 81 (116) Share of other comprehensive income from associates and joint ventures 6 (3) (12) Available-for-sale investments: Net valuation gains/(losses) taken to equity 278 (115) 286 Reclassified to income statement (249) (210) (38) Cash flow hedges: Net gains/(losses) taken to equity 67 (161) 78 Reclassified to income statement 3 (2) 8 Taxation relating to components of other comprehensive income (30) 64 (30) Other comprehensive income for the period, net of taxation 305 (1,414) 117 Total comprehensive income for the period 2,709 822 2,081 Total comprehensive income attributable to: Non-controlling interests 26 29 39 40 Parent company shareholders 2,680 783 2,041 2,709 822 2,081 Condensed consolidated interim balance sheet As at 30 June 2014 Notes 30.06.14 30.06.13 31.12.13 $million $million $million Assets Cash and balances at central banks 12, 28 62,182 57,621 54,534 Financial assets held at fair value through profit or loss 12, 13 36,497 28,135 29,335 Derivative financial instruments 12, 14 48,105 54,548 61,802 Loans and advances to banks 12, 15 87,324 73,305 83,702 Loans and advances to customers 12, 16 299,209 285,353 290,708 Investment securities 12, 17 100,907 94,812 102,716 Other assets 12, 18 37,084 38,041 33,570 Current tax assets 290 198 234 Prepayments and accrued income 2,807 2,687 2,510 Interests in associates and joint ventures 1,932 1,819 1,767 Goodwill and intangible assets 20 6,200 5,943 6,070 Property, plant and equipment 6,967 6,759 6,903 Deferred tax assets 634 736 529 Total assets 690,138 649,957 674,380 Liabilities Deposits by banks 2, 12 49,189 45,012 43,517 Customer accounts 2, 12 380,609 371,314 381,066 Financial liabilities held at fair value through profit or loss 12, 13 26,916 22,456 23,030 Derivative financial instruments 12, 14 47,785 53,781 61,236 Debt securities in issue 12, 21 71,272 58,690 64,589 Other liabilities 12, 22 34,006 28,719 27,338 Current tax liabilities 1,162 1,286 1,050 Accruals and deferred income 5,154 4,212 4,668 Subordinated liabilities and other borrowed funds 12, 23 24,691 18,393 20,397 Deferred tax liabilities 218 178 176 Provisions for liabilities and charges 102 147 107 Retirement benefit obligations 24 472 411 365 Total liabilities 641,576 604,599 627,539 Equity Share capital 25 1,235 1,212 1,214 Reserves 47,042 43,556 45,032 Total parent company shareholders' equity 48,277 44,768 46,246 Non-controlling interests 26 285 590 595 Total equity 48,562 45,358 46,841 Total equity and liabilities 690,138 649,957 674,380 Standard Chartered PLC Condensed consolidated interim statement of changes in equity For the six months ended 30 June 2014 Share capital Share premium account Capital and capital redemption reserve1 Merger reserve Available-for-sale reserve Cash flow hedge reserve Translation reserve Retained earnings Parent company shareholders equity Non-controlling interests Total $million $million $million $million $million $million $million $million $million $million $million At 1 January 2013 1,207 5,476 18 12,421 478 81 (885) 26,566 45,362 693 46,055 Profit for the period - - - - - - - 2,181 2,181 55 2,236 Other comprehensive income - - - - (277) (132) (1,023) 342 (1,398) (16) (1,414) Distributions - - - - - - - - - (38) (38) Shares issued, net of expenses 4 17 - - - - - - 21 - 21 Net own shares adjustment - - - - - - - (129) (129) - (129) Share option expense, net of taxation - - - - - - - 103 103 - 103 Capitalised on scrip dividend 1 (1) - - - - - - - - - Dividends, net of scrip - - - - - - - (1,372) (1,372) - (1,372) Other decreases3 - - - - - - - - - (104) (104) At 30 June 2013 1,212 5,492 18 12,421 201 (51) (1,908) 27,383 44,768 590 45,358 Profit for the period - - - - - - - 1,909 1,909 55 1,964 Other comprehensive income - - - - 245 66 (198) 192 132 (15) 117 Distributions - - - - - - - - - (39) (39) Shares issued, net of expenses 1 2 - - - - - - 3 - 3 Net own shares adjustment - - - - - - - 5 5 - 5 Share option expense, net of taxation - - - - - - - 137 137 - 137 Capitalised on scrip dividend 1 (1) - - - - - - - - - Dividends, net of scrip - - - - - - - (696) (696) - (696) Other (decreases)/ increases - - - - - - - (12) (12) 4 (8) At 31 December 2013 1,214 5,493 18 12,421 446 15 (2,106) 28,745 46,246 595 46,841 Profit for the period - - - - - - - 2,360 2,360 44 2,404 Other comprehensive income - - - - (5) 59 323 (57)2 320 (15) 305 Distributions - - - - - - - - - (47) (47) Shares issued, net of expenses 3 6 - - - - - - 9 - 9 Net own shares adjustment - - - - - - - (89) (89) - (89) Share option expense, net of taxation - - - - - - - 135 135 - 135 Capitalised on scrip dividend 18 (18) - - - - - - - - - Dividends, net of scrip - - - - - - - (718) (718) - (718) Other increases/(decreases)4 - - - - - - - 14 14 (292) (278) At 30 June 2014 1,235 5,481 18 12,421 441 74 (1,783) 30,390 48,277 285 48,562 1 Includes capital reserve of $5 million and capital redemption reserve of $13 million 2 For the period ended 30 June 2014, comprises actuarial loss, net of taxation and non-controlling interests of $57 million (30 June 2013: gain of $37 million and 31 December 2013: gain of $21 million) and share of comprehensive income from associates and joint ventures of $nil million (30 June 2013: $(3) million and 31 December 2013: $(2) million) 3 Relate to the impact of losing control in a subsidiary after divesting from the company 4 Further details are available in note 26 Standard Chartered PLC Condensed consolidated interim cash flow statement For the six months ended 30 June 2014 6 months ended 6 months ended 6 months ended Notes 30.06.14 30.06.13 31.12.13 $million $million $million Cash flows from operating activities Profit before taxation 3,253 3,325 2,739 Adjustments for: Non-cash items and other adjustments included within income statement 27 1,540 2,041 2,080 Change in operating assets 27 (1,024) (35,770) (8,374) Change in operating liabilities 27 7,835 26,942 18,310 Contributions to defined benefit schemes (25) (77) (91) UK and overseas taxes paid (832) (836) (880) Net cash from/(used in) operating activities 10,747 (4,375) 13,784 Net cash flows from investing activities Purchase of property, plant and equipment (74) (89) (116) Disposal of property, plant and equipment 21 54 102 Acquisition of associates and joint ventures, net of cash acquired - - (46) Purchase of investment securities (93,521) (72,839) (70,049) Disposal and maturity of investment securities 96,450 74,828 62,335 Dividends received from associates and joint ventures 11 4 1 Net cash from/(used in) investing activities 2,887 1,958 (7,773) Net cash flows from financing activities Issue of ordinary and preference share capital, net of expenses 9 21 3 Purchase of own shares (105) (154) - Exercise of share options through ESOP 16 25 5 Interest paid on subordinated liabilities (530) (492) (321) Gross proceeds from issue of subordinated liabilities 4,056 2,750 2,698 Repayment of subordinated liabilities (285) (1,689) (927) Repayment to non-controlling interests (300) (104) - Interest paid on senior debts (408) (500) (63) Gross proceeds from issue of senior debts 3,394 4,252 2,564 Repayment of senior debts (4,255) (2,406) (1,324) Dividends paid to non-controlling interests and preference shareholders, net of scrip (97) (88) (90) Dividends paid to ordinary shareholders, net of scrip (668) (1,322) (645) Net cash from financing activities 827 293 1,900 Net increase/(decrease) in cash and cash equivalents 14,461 (2,124) 7,911 Cash and cash equivalents at beginning of the period 84,156 79,518 76,491 Effect of exchange rate movements on cash and cash equivalents 224 (903) (246) Cash and cash equivalents at end of the period 28 98,841 76,491 84,156 Standard Chartered PLC - Notes 1. Basis of preparation The Group consolidated interim financial statements consolidate those of Standard Chartered PLC (the Company) and its subsidiaries (together referred to as the Group) and equity account the Group's interest in associates and jointly controlled entities. These interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (FCA) and with IAS 34 Interim Financial Reporting as adopted by the European Union (EU). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at, and for, the year ended 31 December 2013, which were prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the EU. The Risk Review and Capital sections form part of these interim financial statements as set out on page 28 and page 86. These interim financial statements were approved by the Board of Directors on 6 August 2014. The Directors have assessed the ability of the Group to continue as a going concern. The Directors confirm they are satisfied that the Group has adequate resources to continue in business for the foreseeable future. For this reason the Group continues to adopt the "going concern" basis of accounting for preparing financial statements. Except as noted below, the accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its consolidated financial statements as at, and for, the year ended 31 December 2013. The following accounting standards and amendments have been endorsed by the EU. Accounting standards adopted for reporting periods beginning 1 January 2014 Amendment to IAS 32 Financial Instruments: Presentation clarifies the requirements for offsetting financial assets and liabilities and addresses inconsistencies noted in current practice when applying the offsetting criteria in IAS 32. These amendments require retrospective application. Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27), requires entities meeting the definition of an investment entity to not consolidate its subsidiaries or apply IFRS 3 Business Combinations when it obtains control of another entity. These amendments have been endorsed by EU and do not have a material impact on the Group. IFRIC 21 Levies, an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, provides guidance when to recognise a liability for a levy imposed by a Government. IFRIC 21 identifies the obligating event for the recognition of a liability. If that obligating event occurs over a period of time, the levy is recognised proportionately. If it is a triggered by a minimum threshold, the liability is recognised when that threshold is reached. The impact of this Interpretation on the Group was not significant. Amendments to IAS 39 Financial Instruments: Recognition and Measurement: Novation of Derivatives and Continuation of Hedge Accounting clarifies that there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met. The amendments did not have a significant impact on the Group's financial statements. Amendments to IAS 36 Impairment of Assets modifies the disclosure of information relating to the recoverable amount of impaired assets, particularly if that amount is based on fair value less costs of disposal. The amendments did not have a significant impact on the Group's financial statements. New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for periods beginning after 1 January 2015 and have not been applied in preparing these consolidated financial statements. These include: IFRS 15 Revenue from contracts with customers which outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance. IFRS 15 is effective for reporting periods beginning on or after 1 January 2017, with earlier application permitted. The EU has not yet endorsed this standard. The Group is yet to assess IFRS 15's full impact but it is not expected to be significant. IFRS 9 Financial Instruments which will replace IAS 39 and is effective for periods on or after 1 January 2018. IFRS 9 has three main components; Classification and Measurement, Impairment and Hedge accounting. The EU has not yet endorsed this standard. The Group is yet to assess IFRS 9's full impact. Significant judgements The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and key sources of uncertainty were the same as those applied to the consolidated financial statements as at, and for, the year ended 31 December 2013. A summary of the Group's significant accounting policies will be included in the 2014 Annual Report and Account. Prior period restatements In January 2014 the Group announced a change to its organisation structure. In accordance with IFRS 8, Segmental reporting, the presentation of the Group's interim results have been updated to reflect the Group's new client segments - Corporate & Institutional, Commercial, Private Banking and Retail. While these restatements affect the reported results of the divisions that comprise the Group's business, it has no impact on the Group's overall income statement, balance sheet or reported metrics. Change in accounting estimates During the period the Group changed the useful economic life of technology assets from 3 to 5 years to better reflect the extended life of these assets. The change in accounting estimate has reduced amortisation costs for the 6 month period ended 30 June 2014 by $52 million relative to 30 June 2013. The expected full year impact is estimated to reduce by $110 million relative to 31 December 2013. 2. Segmental Information The Group is organised on a worldwide basis for management and reporting purposes into four client segments: Corporate and Institutional, Commercial, Private Banking and Retail. The products offered to these client segments are summarised under 'Income by product' below. The focus is on broadening and deepening the relationship with clients, rather than maximising a particular product line. Hence the Group evaluates segmental performance based on overall profit or loss before taxation (excluding corporate items not allocated) and not individual product profitability. Product revenue information is used as a way of assessing client needs and trends in the market place. The strategies adopted by the client segments need to be adapted to local market and regulatory requirements, which is the responsibility of country management teams. While not the primary driver of the business, country performance is an important part of the Group's structure and is also used to evaluate performance and reward staff. Corporate items not allocated are not aggregated into the client segments because of the one-off nature of these items. The Group's entity-wide disclosure which includes profit before tax, net interest margin and structure of the Group's deposits comprises geographic areas, classified by the location of the customer, except for Financial Market products which are classified by the location of the dealer. Transactions between the client segments and geographic areas are carried out on an arms length basis. Apart from the entities that have been acquired in the last two years, Group central expenses have been distributed between the client segments and geographic areas in proportion to their direct costs, and the benefit of the Group's capital has been distributed between segments in proportion to their average risk weighted assets. In the year in which an acquisition is made, the Group does not charge or allocate the benefit of the Group's capital. The distribution of central expenses is phased in over two years, based on the estimate of central management costs associated with the acquisition. Operating profit by client segment 30.06.14 Corporate and Institutional Commercial Private Banking Retail Total reportable Segments Corporate items not allocated Total $million $million $million $million $million $million $million Internal income (8) 11 (14) 11 - - - Net interest income 2,986 365 187 2,066 5,604 - 5,604 Non-interest income1 2,341 240 141 928 3,650 - 3,650 Operating income 5,319 616 314 3,005 9,254 - 9,254 Operating expenses (2,546) (362) (227) (1,948) (5,083) - (5,083) Operating profit before impairment losses and taxation 2,773 254 87 1,057 4,171 - 4,171 Impairment losses on loans and advances and other credit risk provisions (266) (100) - (480) (846) - (846) Other impairment (169) - (16) - (185) - (185) Profit from associates and joint ventures 90 11 - 12 113 - 113 Profit before taxation 2,428 165 71 589 3,253 - 3,253 Total assets employed 469,769 35,641 25,631 151,973 683,014 7,124 690,138 Of which: Loans to customers3 168,348 17,632 18,134 100,947 305,061 - 305,061 Total liabilities employed 414,709 43,261 37,554 144,672 640,196 1,380 641,576 Of which: Customer accounts 211,357 31,431 30,606 117,129 390,523 - 390,523 Other segment items: Capital expenditure2 362 35 12 51 460 - 460 Depreciation 146 5 1 55 207 - 207 Interests in associates and joint ventures 1,137 459 20 316 1,932 - 1,932 Amortisation of intangible assets 73 3 2 28 106 - 106 1 Non-interest income includes an own credit adjustment of $(15) million 2 Includes capital expenditure $216 million in respect of operating lease asset 3 The analysis is based on the location of the customers rather than booking location of the loan Standard Chartered PLC - Notes continued 2. Segmental Information continued Operating profit by client segment continued 30.06.13 Corporate and Institutional Commercial Private Banking Retail Total reportable Segments Corporate items not allocated Total $million $million $million $million $million $million $million Internal income (32) 19 (22) 35 - - - Net interest income 2,947 378 173 2,100 5,598 - 5,598 Non-interest income1 2,899 415 150 926 4,390 - 4,390 Operating income 5,814 812 301 3,061 9,988 - 9,988 Operating expenses (2,500) (374) (213) (1,947) (5,034) - (5,034) Operating profit before impairment losses and taxation 3,314 438 88 1,114 4,954 - 4,954 Impairment losses on loans and advances and other credit risk provisions (197) (43) (8) (482) (730) - (730) Other impairment Goodwill impairment2 - - - - - (1,000) (1,000) Other impairment (28) 14 - 3 (11) - (11) Profit from associates and joint ventures 79 17 1 15 112 - 112 Profit before taxation 3,168 426 81 650 4,325 (1,000) 3,325 Total assets employed 441,257 33,834 20,464 147,525 643,080 6,877 649,957 Of which: Loans to customers4 158,461 17,338 14,681 101,313 291,793 - 291,793 Total liabilities employed 387,884 43,429 35,349 136,473 603,135 1,464 604,599 Of which: Customer accounts 206,125 31,883 30,275 112,502 380,785 - 380,785 Other segment items: Capital expenditure3 561 31 7 93 692 - 692 Depreciation 145 6 - 62 213 - 213 Interests in associates and joint ventures 965 472 36 346 1,819 - 1,819 Amortisation of intangible assets 91 7 4 36 138 - 138 1 Non-interest income includes an own credit adjustment of $237 million 2 Relates to goodwill impairment charge on the Korea business 3 Includes capital expenditure of $434 million in respect of operating lease assets 4 The analysis is based on the location of the customers rather than booking location of the loan 2. Segmental Information continued 31.12.13 Corporate and Institutional Commercial Private Banking Retail Total reportable segments Corporate items not allocated Total $million $million $million $million $million $million $million Internal income (21) 16 (22) 27 - - - Net interest income 2,922 387 176 2,073 5,558 - 5,558 Non-interest income1 2,047 296 131 757 3,231 - 3,231 Operating income 4,948 699 285 2,857 8,789 - 8,789 Operating expenses (2,454) (357) (194) (1,919) (4,924) (235) (5,159) Operating profit before impairment losses and taxation 2,494 342 91 938 3,865 (235) 3,630 Impairment losses on loans and advances and other credit risk provisions (291) (114) - (482) (887) - (887) Other impairment (85) (27) - (6) (118) - (118) Profit from associates and joint ventures 77 20 1 16 114 - 114 Profit before taxation 2,195 221 92 466 2,974- (235) 2,739 Total assets employed 456,068 35,729 23,637 152,113 667,547 6,833 674,380 Of which: Loans to customers3 160,906 17,802 17,159 100,148 296,015 - 296,015 Total liabilities employed 404,097 45,845 38,191 138,180 626,313 1,226 627,539 Of which: Customer accounts 211,051 33,705 32,212 114,003 390,971 - 390,971 Other segment items: Capital expenditure2 592 46 4 117 759 - 759 Depreciation 150 5 - 65 220 - 220 Interests in associates and joint ventures 982 417 36 332 1,767 - 1,767 Amortisation of intangible assets 83 7 4 49 143 - 143 1 Non-interest income includes an own credit adjustment of $(131) million 2 Includes capital expenditure of $440 million in respect of operating lease assets 3 The analysis is based on the location of the customers rather than booking location of the loan The following table details entity-wide operating income by product: 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Transaction Banking 1,918 1,964 1,947 Trade 999 1,042 1,027 Cash Management and Custody 919 922 920 Financial Markets1 1,765 2,449 1,513 Corporate Finance 1,241 1,238 1,281 Wealth Management 817 755 694 Retail Products 2,435 2,588 2,458 Cards, Personal Loans and Unsecured Lending 1,315 1,401 1,387 Deposits 598 605 588 Mortgage & Auto 474 519 478 Other Retail Products 48 63 5 Others 1,078 994 896 Asset and Liability Management 420 305 243 Lending and Portfolio Management 529 522 543 Principal Finance 129 167 110 Total operating income 9,254 9,988 8,789 1 Includes $(15) million (June 2013: $237 million and December 2013: $(131) million) relating to an own credit adjustment 2. Segmental Information continued Operating profit by geographic regions and key countries Entity-wide information The Group manages its reportable client segments on a global basis. The Group's operations are based in the eight main geographic regions presented below, information is also provided for key countries the Group operates. The UK is the home country of the Company. 30.06.14 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total $million $million $million $million $million $million $million $million $million Internal income 9 (38) 17 48 53 43 1 (133) - Net interest income 1,506 631 624 1,101 471 484 195 592 5,604 Fees and commissions income, net 646 114 143 489 216 201 168 84 2,061 Net trading income 456 (31) 118 130 158 107 37 (21) 954 - Underlying 423 (31) 118 157 158 107 37 - 969 - Own credit adjustment 33 - - (27) - - - (21) (15) Other operating income 201 33 57 125 53 43 13 110 635 Operating income 2,818 709 959 1,893 951 878 414 632 9,254 Operating expenses (1,410) (616) (379) (1,030) (482) (467) (300) (399) (5,083) Operating profit before impairment losses and taxation 1,408 93 580 863 469 411 114 233 4,171 Impairment losses on loans and advances and other credit risk provisions (212) (209) (61) (215) (27) (94) - (28) (846) Other impairment (95) - - (3) - - - (87) (185) Profit from associates and joint ventures 84 - - 29 - - - - 113 Profit/(loss) before taxation 1,185 (116) 519 674 442 317 114 118 3,253 Total assets employed3 209,019 68,880 38,617 158,437 43,056 27,788 68,228 146,430 Of which: Loans to customers2 95,848 29,626 24,324 86,561 23,941 13,766 11,277 19,718 Capital expenditure1 237 14 16 155 7 17 1 13 460 30.06.14 Hong Kong Singapore Korea India UAE China UK $million $million $million $million $million $million $million Net interest income 948 589 568 520 316 420 394 Fees and commissions income, net 511 299 105 108 138 62 56 Net trading income 396 61 (35) 86 103 10 (30) - Underlying 364 81 (36) 86 103 9 (9) - Own credit adjustment 32 (20) 1 - - 1 (21) Other operating income 169 66 32 45 39 24 94 Operating income 2,024 1,015 670 759 596 516 514 Operating expenses (866) (551) (587) (308) (286) (371) (308) Operating profit before impairment losses and taxation 1,158 464 83 451 310 145 206 Impairment losses on loans and advances and other credit risk provisions (163) (28) (209) (56) (21) (35) (26) Other impairment (95) (1) - - - - (87) Profit from associates and joint ventures - - - - - 84 - Profit/(loss) before taxation 900 435 (126) 395 289 194 93 Total assets employed3 151,672 117,708 57,397 33,101 27,890 36,819 146,612 Of which: Loans to customers2 66,979 61,481 28,835 21,415 15,256 16,467 16,441 Capital expenditure 230 144 14 14 1 3 10 1 Includes capital expenditure in Hong Kong of $216 million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles including any post-acquisition additions made by the acquired entities 2 The analysis is based on the location of the customers rather than booking location of the loan 3 Includes intra-group assets 2. Segmental Information continued Operating profit by geographic regions and key countries continued Entity-wide information 30.06.13 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total $million $million $million $million $million $million $million $million $million Internal income 43 (36) 47 41 48 63 (1) (205) - Net interest income 1,412 663 625 1,112 469 489 189 639 5,598 Fees and commissions income, net 563 143 168 506 220 201 176 118 2,095 Net trading income 518 69 126 399 198 99 72 204 1,685 - Underlying 511 67 126 306 198 99 72 69 1,448 - Own credit adjustment 7 2 - 93 - - - 135 237 Other operating income 130 99 133 121 36 1 7 83 610 Operating income 2,666 938 1,099 2,179 971 853 443 839 9,988 Operating expenses (1,384) (585) (425) (1,069) (493) (421) (278) (379) (5,034) Operating profit before impairment losses and taxation 1,282 353 674 1,110 478 432 165 460 4,954 Impairment losses on loans and advances and other credit risk provisions (127) (193) (117) (172) (34) (75) (7) (5) (730) Other impairment 6 (1,019) - 1 - - - 1 (1,011) Profit from associates and joint ventures 73 - - 38 - - - 1 112 Profit/(loss) before taxation 1,234 (859) 557 977 444 357 158 457 3,325 Total assets employed3 192,557 66,232 40,799 152,220 42,540 23,589 68,772 134,511 Of which: Loans to customers2 86,411 32,587 26,109 82,259 23,322 12,600 9,286 19,219 Capital expenditure1 463 8 18 158 7 19 2 17 692 30.06.13 Hong Kong Singapore Korea India UAE China UK $million $million $million $million $million $million $million Net interest income 911 533 609 558 325 381 376 Fees and commissions income, net 434 290 132 140 153 67 88 Net Trading income 444 233 60 90 129 20 182 - Underlying 442 169 58 90 129 15 47 - Own credit adjustment 2 64 2 - - 5 135 Other operating income 142 131 99 120 24 (15) 55 Operating income 1,931 1,187 900 908 631 453 701 Operating expenses (826) (614) (549) (356) (290) (383) (297) Operating profit before impairment losses and taxation 1,105 573 351 552 341 70 404 Impairment losses on loans and advances and other credit risks provisions (70) (39) (193) (113) (17) (27) (3) Other impairment (2) 10 (1,019) - - 6 1 Profit from associates and joint ventures - - - - - 73 1 Profit/(loss) before taxation 1,033 544 (861) 439 324 122 403 Total assets employed3 140,620 108,411 56,477 35,935 26,870 31,551 131,128 Of which: Loans to customers2 57,645 55,334 31,681 23,512 14,657 16,293 16,071 Capital expenditure 448 143 9 10 2 14 17 1 Includes capital expenditure in Hong Kong of $434 million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles including any post-acquisition additions made by the acquired entities 2 The analysis is based on the location of the customers rather than booking location of the loan 3 Includes intra-group assets 2. Segmental Information continued Operating profit by geographic regions and key countries continued Entity-wide information 31.12.13 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total $million $million $million $million $million $million $million $million $million Internal income 42 (37) 10 42 48 66 5 (176) - Net interest income 1,450 649 642 1,063 479 503 204 568 5,558 Fees and commissions income, net 566 112 158 470 199 216 180 105 2,006 Net trading income 276 19 98 198 140 85 24 (11) 829 - Underlying 284 19 98 246 140 85 24 64 960 - Own credit adjustment (8) - - (48) - - - (75) (131) Other operating income 197 (40) 33 104 28 28 2 44 396 Operating income 2,531 703 941 1,877 894 898 415 530 8,789 Operating expenses (1,388) (601) (398) (1,006) (467) (441) (258) (600) (5,159) Operating profit before impairment losses and taxation 1,143 102 543 871 427 457 157 (70) 3,630 Impairment losses on loans and advances and other credit risk provisions (115) (234) (98) (224) (13) (195) (4) (4) (887) Other impairment (5) (10) (105) 1 - - - 1 (118) Profit from associates and joint ventures 73 - - 40 - - - 1 114 Profit/(loss) before taxation 1,096 (142) 340 688 414 262 153 (72) 2,739 Total assets employed3 206,332 67,159 39,700 159,346 42,430 24,892 71,380 134,249 Of which: Loans to customers2 89,846 30,618 25,608 82,852 23,535 13,122 10,429 20,005 Capital expenditure 1 481 20 13 186 4 26 3 26 759 31.12.13 Hong Kong Singapore Korea India UAE China UK $million $million $million $million $million $million $million Net interest income 924 539 590 534 327 407 331 Fees and commissions income, net 441 289 104 124 138 62 73 Net trading income 278 78 13 69 104 (33) (21) - Underlying income 280 113 14 69 104 (27) 54 - Own credit adjustment (2) (35) (1) - - (6) (75) Other operating income 151 39 (43) 28 22 44 26 Operating income 1,794 945 664 755 591 480 409 Operating expenses (840) (515) (571) (328) (283) (370) (515) Operating profit before impairment losses and taxation 954 430 93 427 308 110 (106) Impairment losses on loans and advances and other credit risk provisions (65) (49) (234) (82) (35) (31) (3) Other impairment (2) - (10) (105) - (2) 1 Profit from associates and joint ventures - - - - - 73 1 Profit/(loss) before taxation 887 381 (151) 240 273 150 (107) Total assets employed3 149,318 115,561 55,921 34,470 28,813 35,128 132,162 Of which: Loans to customers2 61,173 57,540 29,760 22,767 15,734 15,489 16,543 Capital expenditure 457 177 18 16 1 12 24 1 Includes capital expenditure in Hong Kong of $440 million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles including any post-acquisition additions made by the acquired entities 2 The analysis is based on the location of the customers rather than booking location of the loan 3 Includes intra-group assets 2. Segmental Information continued Net interest margin and yield 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Net interest margin (%) 2.1 2.2 2.1 Net interest yield (%) 2.0 2.1 2.0 Average interest-earning assets 543,173 512,250 530,172 Average interest-bearing liabilities 512,566 477,113 499,699 Net interest margin by geography 30.06.14 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Intra-group/ tax assets Total $million $million $million $million $million $million $million $million $million $million Average interest-earning assets 173,336 58,554 32,663 125,702 35,524 22,652 63,303 89,870 (58,431) 543,173 Net interest income 1,517 594 643 1,154 522 530 196 448 - 5,604 Net interest margin (%) 1.8 2.0 4.0 1.9 3.0 4.7 0.6 1.0 - 2.1 30.06.13 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Intra-group/ tax assets Total $million $million $million $million $million $million $million $million $million $million Average interest-earning assets 158,644 58,121 34,436 123,006 35,072 21,137 55,596 80,733 (54,495) 512,250 Net interest income 1,453 628 673 1,157 519 554 188 426 - 5,598 Net interest margin (%) 1.8 2.2 3.9 1.9 3.0 5.3 0.7 1.1 - 2.2 31.12.13 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Intra-group/ tax assets Total $million $million $million $million $million $million $million $million $million $million Average interest-earning assets 166,369 57,500 32,967 123,922 35,771 19,013 63,558 86,799 (55,727) 530,172 Net interest income 1,494 612 653 1,113 527 569 208 382 - 5,558 Net interest margin (%) 1.8 2.1 3.9 1.8 2.9 5.9 0.6 0.9 - 2.1 2. Segmental Information continued Deposits structure by geographic regions and key countries The following tables set out the structure of the Group's deposits by principal geographic regions and key countries: 30.06.14 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total $million $million $million $million $million $million $million $million $million Non-interest bearing current and demand accounts 12,156 318 2,927 9,826 10,038 6,401 2,814 2,523 47,003 Interest bearing current accounts and savings deposits 75,679 21,401 2,777 41,637 4,605 2,635 20,737 20,347 189,818 Time deposits 58,498 15,690 8,971 51,386 10,996 3,370 11,316 32,063 192,290 Other deposits 2,687 1,036 809 2,206 374 129 466 4,080 11,787 Total 149,020 38,445 15,484 105,055 26,013 12,535 35,333 59,013 440,898 Deposits by banks 8,670 4,472 501 7,096 1,777 822 18,128 8,909 50,375 Customer accounts 140,350 33,973 14,983 97,959 24,236 11,713 17,205 50,104 390,523 149,020 38,445 15,484 105,055 26,013 12,535 35,333 59,013 440,898 Debt securities in issue: Senior debt 1,465 3,856 - - 53 6 - 19,203 24,583 Other debt securities 5,657 7,521 39 3,662 - 136 16,205 22,521 55,741 Subordinated liabilities and other borrowed funds 1,712 366 - - 25 50 - 22,538 24,691 Total 157,854 50,188 15,523 108,717 26,091 12,727 51,538 123,275 545,913 The above table includes financial instruments held at fair value (see note12). 30.06.14 Hong Kong Singapore Korea India UAE China UK $million $million $million $million $million $million $million Non-interest bearing current and demand accounts 11,286 7,733 61 2,193 6,785 723 450 Interest bearing current accounts and savings deposits 59,216 32,188 20,065 1,679 2,065 7,024 18,361 Time deposits 37,230 41,151 11,698 7,620 9,393 13,179 29,283 Other deposits 569 1,298 445 615 331 2,107 4,080 Total 108,301 82,370 32,269 12,107 18,574 23,033 52,174 Deposits by banks 4,413 5,217 1,426 405 1,479 3,772 8,074 Customer accounts 103,888 77,153 30,843 11,702 17,095 19,261 44,100 108,301 82,370 32,269 12,107 18,574 23,033 52,174 Debt securities in issue: Senior debt 10 - 3,856 - - 818 19,202 Other debt securities 4,862 3,392 3,829 39 - - 22,521 Subordinated liabilities and other borrowed funds 1,377 - 365 - - - 22,538 Total 114,550 85,762 40,319 12,146 18,574 23,851 116,435 2. Segmental Information continued Deposits structure by geographic regions and key countries continued 30.06.13 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total $million $million $million $million $million $million $million $million $million Non-interest bearing current and demand accounts 10,088 297 2,985 10,004 8,922 3,626 2,745 5,197 43,864 Interest bearing current accounts and savings deposits 71,346 19,207 2,618 41,990 4,072 3,101 14,730 14,967 172,031 Time deposits 59,951 18,221 7,968 47,173 10,649 4,149 14,015 41,121 203,247 Other deposits 1,218 596 1,830 1,012 244 169 - 1,964 7,033 Total 142,603 38,321 15,401 100,179 23,887 11,045 31,490 63,249 426,175 Deposits by banks 6,548 4,545 496 4,890 1,514 611 15,777 11,009 45,390 Customer accounts 136,055 33,776 14,905 95,289 22,373 10,434 15,713 52,240 380,785 142,603 38,321 15,401 100,179 23,887 11,045 31,490 63,249 426,175 Debt securities in issue: Senior debt 2,442 3,625 - - 69 6 - 15,606 21,748 Other debt securities 2,509 6,306 75 3,737 - 242 15,603 15,304 43,776 Subordinated liabilities and other borrowed funds 1,707 587 - - 25 50 - 16,024 18,393 Total 149,261 48,839 15,476 103,916 23,981 11,343 47,093 110,183 510,092 The above table includes financial instruments held at fair value (see note 12) 30.06.13 Hong Kong Singapore Korea India UAE China UK $million $million $million $million $million $million $million Non-interest bearing current and demand accounts 9,277 7,486 63 2,198 6,236 676 3,118 Interest bearing current accounts and savings deposits 55,767 32,741 17,927 1,686 1,689 6,900 12,952 Time deposits 37,982 35,413 13,705 6,609 8,615 12,667 38,173 Other deposits 1,165 158 565 1,707 173 49 1,964 Total 104,191 75,798 32,260 12,200 16,713 20,292 56,207 Deposits by banks 3,788 2,505 2,493 474 1,142 1,772 10,440 Customer accounts 100,403 73,293 29,767 11,726 15,571 18,520 45,767 104,191 75,798 32,260 12,200 16,713 20,292 56,207 Debt securities in issue: Senior debt 408 - 3,625 - - 815 15,606 Other debt securities 1,915 2,767 3,717 75 - - 15,295 Subordinated liabilities and other borrowed funds 1,370 - 586 - - - 16,012 Total 107,884 78,565 40,188 12,275 16,713 21,107 103,120 2. Segmental Information continued Deposits structure by geographic regions and key countries continued 31.12.13 Greater China North East Asia South Asia ASEAN MENAP Africa Americas Europe Total $million $million $million $million $million $million $million $million $million Non-interest bearing current and demand accounts 10,022 409 3,093 10,815 9,696 5,465 3,513 2,469 45,482 Interest bearing current accounts and savings deposits 77,075 20,258 2,484 40,253 3,915 2,429 18,173 16,572 181,159 Time deposits 62,479 16,090 9,119 49,198 11,197 3,985 10,825 37,249 200,142 Other deposits 351 1,023 1,364 2,426 181 207 - 3,162 8,714 Total 149,927 37,780 16,060 102,692 24,989 12,086 32,511 59,452 435,497 Deposits by banks 4,652 3,719 542 6,917 1,491 566 17,739 8,900 44,526 Customer accounts 145,275 34,061 15,518 95,775 23,498 11,520 14,772 50,552 390,971 149,927 37,780 16,060 102,692 24,989 12,086 32,511 59,452 435,497 Debt securities in issue: Senior debt 2,187 4,094 - - 53 6 - 18,839 25,179 Other debt securities 2,848 6,069 46 2,961 - 214 14,450 19,645 46,233 Subordinated liabilities and other borrowed funds 1,696 635 - - 24 51 - 17,991 20,397 Total 156,658 48,578 16,106 105,653 25,066 12,357 46,961 115,927 527,306 The above table includes financial instruments held at fair value (see note 12) 31.12.13 Hong Kong Singapore Korea India UAE China UK $million $million $million $million $million $million $million Non-interest bearing current and demand accounts 9,166 8,654 50 2,314 6,835 696 988 Interest bearing current accounts and savings deposits 59,348 30,851 19,157 1,604 1,709 7,813 14,484 Time deposits 39,476 38,020 12,096 7,606 9,255 13,321 34,004 Other deposits 214 1,482 541 1,241 145 129 3,153 Total 108,204 79,007 31,844 12,765 17,944 21,959 52,629 Deposits by banks 2,091 4,792 1,479 457 1,180 1,888 8,309 Customer accounts 106,113 74,215 30,365 12,308 16,764 20,071 44,320 108,204 79,007 31,844 12,765 17,944 21,959 52,629 Debt securities in issue: Senior debt 144 - 4,094 - - 818 18,839 Other debt securities 2,167 2,621 3,215 46 - - 19,645 Subordinated liabilities and other borrowed funds 1,359 - 635 - - - 17,991 Total 111,874 81,628 39,788 12,811 17,944 22,777 109,104 3. Net trading income 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 2 31.12.13 2 $million $million $million Gains less losses on instruments held for trading: Foreign currency1 58 563 555 Trading securities 146 (544) 341 Interest rate derivatives 871 997 (108) Credit and other derivatives (35) 420 213 1,040 1,436 1,001 Gains less losses from fair value hedging: Gains less losses from fair value hedged items (280) 818 489 Gains less losses from fair value hedged instruments 267 (819) (503) (13) (1) (14) Gains less losses on instruments designated at fair value: Financial assets designated at fair value through profit or loss (7) 47 50 Financial liabilities designated at fair value through profit or loss (382) 163 9 Own credit adjustment (15) 237 (131) Derivatives managed with financial instruments designated at fair value through profit or loss 331 (197) (86) (73) 250 (158) 954 1,685 829 1 Includes foreign currency gains and losses arising on the translation of foreign currency monetary assets and liabilities 2 Amounts reclassified for consistent presentation Gains less losses on instruments held for trading is presented by product type. Gains or losses on certain trading securities are offset by gains or losses within interest rate derivatives and credit and other derivatives. 4. Other operating income 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Other operating income includes: Gains less losses on disposal of financial instruments: Available-for-sale 249 210 38 Loans and receivables 2 5 - Dividend income 64 64 40 Rental income from operating lease assets 247 239 246 Gain on disposal of property, plant and equipment 19 31 71 Fair value loss on business classified as held for sale (5) - (49) 5. Operating expenses 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Staff costs: Wages and salaries 2,596 2,574 2,408 Social security costs 89 84 76 Other pension costs (note 24) 170 168 168 Share based payment costs 143 154 110 Other staff costs 456 417 411 3,454 3,397 3,173 Variable compensation is included within wages and salaries. Other staff costs primarily include training and travel costs. 5. Operating expenses continued The following tables summarise the number of employees within the Group: Business Support services Total At 30 June 2014 48,794 39,892 88,686 Average for the 6 months ended 30 June 2014 47,564 39,827 87,391 Business Support services Total At 30 June 2013 48,545 39,645 88,190 Average for the 6 months ended 30 June 2013 49,621 39,569 89,190 Business Support services Total At 31 December 2013 46,892 39,748 86,640 Average for the 6 months ended 31 December 2013 47,618 39,698 87,316 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Premises and equipment expenses: Rental of premises 230 220 220 Other premises and equipment costs 199 193 222 Rental of computers and equipment 12 13 9 441 426 451 General administrative expenses: UK bank levy - - 235 Other general administrative expenses 875 860 937 875 860 1,172 The UK bank levy is applied on the chargeable equities and liabilities on the Group's consolidated balance sheet. Key exclusions from chargeable equities and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting. The rate of the levy for 2014 is 0.156 per cent for chargeable short-term liabilities, with a lower rate of 0.078 per cent generally applied to chargeable equity and long-term liabilities (i.e. liabilities with a remaining maturity greater than one year). The rate for 2013 was 0.13 per cent for qualifying liabilities, with a long-term rate of 0.065 per cent. Under current accounting requirements, the UK bank levy is only recognised in the financial statements on 31 December each year. The Group estimates that the liability in respect of 2014 would be between $350 million and $380 million. If the UK bank levy had been included in these interim financial statements, based on the estimated year end liabilities the impact would be as follows: 30.06.14 30.06.14 (Excluding UK bank Levy) UK bank Levy Impact (Including UK bank Levy) Profit before tax ($million) 3,253 (183) 3,070 Normalised earnings per share (cents) 96.5 (7.5) 89.0 Normalised return on equity (per cent) 10.4 (0.8) 9.6 6. Depreciation and amortisation 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Premises 49 54 54 Equipment: Operating lease assets 107 100 106 Others 51 59 60 Intangibles: Software 85 108 118 Acquired on business combinations 21 30 25 313 351 363 7. Impairment losses on loans and advances and other credit risk provisions The following table reconciles the charge for impairment provisions on loans and advances to the total impairment charge and other credit risk provision: 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Net charge against profit on loans and advances: Individual impairment charge 819 692 905 Portfolio impairment charge/(release) 28 34 (19) 847 726 886 Provisions release related to credit commitments (1) - - Impairment charges relating to debt securities classified as loans and receivables - 4 1 846 730 887 An analysis of impairment provisions by geography and client segments is set out within the Risk review on page 50. 8. Other impairment 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Impairment losses on available-for-sale financial assets: - Asset backed securities - (1) (1) - Other debt securities 55 2 54 - Equity shares 4 39 51 59 40 104 Impairment of associates 16 - - Impairment of goodwill - 1,000 - Impairment of commodity assets 113 - - Other - - 14 188 1,040 118 Recovery of impairment on disposal of instruments1 (3) (29) - 185 1,011 118 1 Relates to investment securities sold during the period which had impairment provisions raised against them in previous periods 9. Taxation Analysis of taxation charge in the period: 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million The charge for taxation based upon the profits for the period comprises: Current tax: United Kingdom corporation tax at 21.5 per cent (30 June 2013 and 31 December 2013: 23.25 per cent): Current tax on income for the period 53 136 3 Adjustments in respect of prior periods (including double taxation relief) (3) (2) (1) Double taxation relief (4) (5) (4) Foreign tax: Current tax on income for the period 873 961 633 Adjustments in respect of prior periods (5) - (37) 914 1,090 594 Deferred tax: Origination of temporary differences (50) (11) 176 Adjustments in respect of prior periods (15) 10 5 (65) (1) 181 Tax on profits on ordinary activities 849 1,089 775 Effective tax rate 26.1% 32.8% 28.3% The UK corporation tax rate was reduced from 23 per cent to 21 per cent with an effective date of 1 April 2014, giving a blended 21.5 per cent for the year. Foreign taxation includes current taxation on Hong Kong profits of $113 million (30 June 2013: $134 million, 31 December 2013: $108 million) provided at a rate of 16.5 per cent (30 June 2013 and 31 December 2013: 16.5 per cent) on the profits assessable in Hong Kong. Deferred taxation includes origination/reversal of temporary differences on Hong Kong profits of $(1) million (30 June 2013: $(2) million, 31 December 2013: $3 million) provided at a rate of 16.5 per cent (30 June 2013 and 31 December 2013: 16.5 per cent) on the profits assessable to Hong Kong. 10. Dividends Ordinary equity shares 30.06.14 30.06.13 31.12.13 cents per share $million cents per share $million cents per share $million 2013/2012 Final dividend declared and paid during the period1 57.20 1,385 56.77 1,366 - - 2013 Interim dividend declared and paid during the period1 - - - - 28.80 696 57.20 1,385 56.77 1,366 28.80 696 1 The amounts are gross of scrip adjustments The amounts in the table above reflect the actual dividend per share declared and paid to shareholders in 2014 and 2013. Interim dividends on ordinary equity shares are recorded in the period in which they are declared and, in respect of the final dividend, have been approved by the shareholders. Accordingly, the final ordinary equity share dividends set out above relate to the respective prior years. The 2013 interim dividend of 28.80 cents per ordinary share ($696 million) was paid to eligible shareholders on 17 October 2013 and the final dividend of 57.20 cents per ordinary share ($1,385 million) was paid to eligible shareholders on 14 May 2014. 2014 recommended interim dividend The 2014 interim dividend of 28.80 cents per share ($710 million) will be paid in either pounds sterling, Hong Kong dollars or US dollars on 20 October 2014 to shareholders on the UK register of members at the close of business in the UK (10:00 pm London time) on 15 August 2014, and to shareholders on the Hong Kong branch register of members at the opening of business in Hong Kong (9:00 am Hong Kong time) on 15 August 2014. The 2014 interim dividend will be paid in Indian rupees on 20 October 2014 to Indian Depository Receipt holders on the Indian register at the close of business in India on 14 August 2014. It is intended that shareholders on the UK register and Hong Kong branch register will be able to elect to receive shares credited as fully paid instead of all or part of the final cash dividend. Details of the dividend arrangements will be sent to shareholders on or around 5 September 2014. Indian Depository Receipt holders will receive their dividend in Indian rupees only. 10. Dividends continued Preference shares 30.06.14 30.06.13 31.12.13 $million $million $million Non-cumulative irredeemable preference shares: 7 3/8 per cent preference shares of £1 each1 6 6 5 8 1/4 per cent preference shares of £1 each1 6 6 7 Non-cumulative redeemable preference shares: 8.125 per cent preference shares of $5 each1,3 - 38 37 7.014 per cent preference shares of $5 each2 26 26 27 6.409 per cent preference shares of $5 each2 24 24 24 1 Dividends on these preference shares are treated as interest expense and accrued accordingly 2 Dividends on those preference shares classified as equity are recorded in the period in which they are declared 3 These preference shares were redeemed on 27 November 2013 11. Earnings per ordinary share 6 months ended 30.06.14 6 months ended 30.06.13 Profit1 Weighted average number of shares Per share amount Profit1 Weighted average number of shares Per share amount $million ('000) cents $million ('000) cents Basic earnings per ordinary share 2,310 2,441,899 94.6 2,131 2,418,845 88.1 Effect of dilutive potential ordinary shares: Options2 - 16,259 - - 22,637 - Diluted earnings per ordinary share 2,310 2,458,158 94.0 2,131 2,441,482 87.3 6 months ended 31.12.13 Profit1 Weighted average number of shares Per share amount $million ('000) cents Basic earnings per ordinary share 1,858 2,429,428 76.5 Effect of dilutive potential ordinary shares: Options2 - 25,833 - Diluted earnings per ordinary share 1,858 2,455,261 75.7 1 The profit amounts represent the profit attributable to ordinary shareholders, which is profit for the year after non-controlling interest and the declaration of dividends payable to the holders of the non-cumulative redeemable preference shares classified as equity (see note 10) 2 The impact of anti-dilutive options has been excluded from this amount as required by IAS 33 There were no ordinary shares issued after the balance sheet date that would have significantly affected the number of ordinary shares used in the above calculation had they been issued prior to the end of the balance sheet date. 11. Earnings per ordinary share continued The Group measures earnings per share on a normalised basis. This differs from earnings defined in IAS 33 Earnings per share. The table below provides a reconciliation: 30.06.14 30.06.13 31.12.13 $million $million $million Operating income as reported 9,254 9,988 8,789 Items normalised: Fair value movements on own credit adjustment 15 (237) 131 Gain on disposal of property (19) (20) (57) Fair value loss on business classified as held for sale 5 - 49 1 (257) 123 Normalised operating income 9,255 9,731 8,912 Operating expenses as reported (5,083) (5,034) (5,159) Items normalised: Amortisation of intangible assets arising on business combinations 21 30 25 Normalised operating expenses (5,062) (5,004) (5,134) Other impairment as reported (185) (1,011) (118) Items normalised: Impairment of associates 16 - - Impairment of property - - 9 Impairment of goodwill - 1,000 - 16 1,000 9 Normalised other impairment (169) (11) (109) Taxation as reported (849) (1,089) (775) Tax on normalised items 2 9 45 (14) Normalised taxation (840) (1,044) (789) Profit as reported1 2,310 2,131 1,858 Items normalised as above: Operating income 1 (257) 123 Operating expenses 21 30 25 Other impairment 16 1,000 9 Taxation 9 45 (14) 47 818 143 Normalised profit 2,357 2,949 2,001 Normalised basic earnings per ordinary share (cents) 96.5 121.9 82.4 Normalised diluted earnings per ordinary share (cents) 95.9 120.8 81.5 1 The profit amounts represent the profit attributable to ordinary shareholders, which is profit for the year after non-controlling interest and the declaration of dividends payable to the holders of the non-cumulative redeemable preference shares classified as equity (see note 10) 2 No tax is included in respect of the impairment of goodwill as no tax relief is available 12. Financial instruments Classification Financial assets are classified between four measurement categories: held at fair value through profit or loss (comprising trading and designated), available-for-sale, loans and receivables and held-to-maturity; and two measurement categories for financial liabilities: held at fair value through profit or loss (comprising trading and designated) and amortised cost. Instruments are classified in the balance sheet in accordance with their legal form, except for instruments that are held for trading purposes and those that the Group has designated to hold at fair value through the profit and loss account. The latter are combined on the face of the balance sheet and disclosed as financial assets or liabilities held at fair value through profit or loss. The Group's classification of its principal financial assets and liabilities is summarised in the table below: Assets at fair value Assets at amortised cost Assets Trading Derivatives held for hedging Designated at fair value through profit or loss Available- for-sale Loans and receivables Held-to- maturity Non-financial assets Total $million $million $million $million $million $million $million $million Cash and balances at central banks - - - - 62,182 - - 62,182 Financial assets held at fair value through profit or loss Loans and advances to banks1 3,843 - 253 - - - - 4,096 Loans and advances to customers1 4,695 - 1,157 - - - - 5,852 Treasury bills and other eligible bills 3,307 - - - - - - 3,307 Debt securities 19,282 - - - - - - 19,282 Equity shares 3,134 - 826 - - - - 3,960 34,261 - 2,236 - - - - 36,497 Derivative financial instruments 45,756 2,349 - - - - - 48,105 Loans and advances to banks1 - - - - 87,324 - - 87,324 Loans and advances to customers1 - - - - 299,209 - - 299,209 Investment securities Treasury bills and other eligible bills - - - 22,928 - 30 - 22,958 Debt securities - - - 72,792 2,556 66 - 75,414 Equity shares - - - 2,535 - - - 2,535 - - - 98,255 2,556 96 - 100,907 Other assets - - - - 29,886 - 7,198 37,084 Total at 30 June 2014 80,017 2,349 2,236 98,255 481,157 96 7,198 671,308 Cash and balances at central banks - - - - 57,621 - - 57,621 Financial assets held at fair value through profit or loss Loans and advances to banks1 1,278 - 297 - - - - 1,575 Loans and advances to customers1 6,257 - 183 - - - - 6,440 Treasury bills and other eligible bills 3,380 - - - - - - 3,380 Debt securities 13,516 - 368 - - - - 13,884 Equity shares 2,316 - 540 - - - - 2,856 26,747 - 1,388 - - - - 28,135 Derivative financial instruments 53,114 1,434 - - - - - 54,548 Loans and advances to banks1 - - - - 73,305 - - 73,305 Loans and advances to customers1 - - - - 285,353 - - 285,353 Investment securities Treasury bills and other eligible bills - - - 22,370 - - - 22,370 Debt securities - - - 65,793 3,946 - - 69,739 Equity shares - - - 2,703 - - - 2,703 - - - 90,866 3,946 - - 94,812 Other assets - - - - 32,446 - 5,595 38,041 Total at 30 June 2013 79,861 1,434 1,388 90,866 452,671 - 5,595 631,815 1 Further analysed in Risk review on pages 28 to 83 12. Financial instruments continued Classification continued Assets at fair value Assets at amortised cost Assets Trading Derivatives held for hedging Designated at fair value through profit or loss Available- for-sale Loans and receivables Held-to- maturity Non-financial assets Total $million $million $million $million $million $million $million $million Cash and balances at central banks - - - - 54,534 - - 54,534 Financial assets held at fair value through profit or loss Loans and advances to banks1 2,221 - 246 - - - - 2,467 Loans and advances to customers1 4,411 - 896 - - - - 5,307 Treasury bills and other eligible bills 5,161 - - - - - - 5,161 Debt securities 12,407 - 292 - - - - 12,699 Equity shares 2,932 - 769 - - - - 3,701 27,132 - 2,203 - - - - 29,335 Derivative financial instruments 59,765 2,037 - - - - - 61,802 Loans and advances to banks1 - - - - 83,702 - - 83,702 Loans and advances to customers1 - - - - 290,708 - - 290,708 Investment securities Treasury bills and other eligible bills - - - 26,243 - - - 26,243 Debt securities - - - 70,546 2,828 - - 73,374 Equity shares - - - 3,099 - - - 3,099 - - - 99,888 2,828 - - 102,716 Other assets - - - - 27,435 - 6,135 33,570 Total at 31 December 2013 86,897 2,037 2,203 99,888 459,207 - 6,135 656,367 1 Further analysed in Risk review on pages 28 to 83 Liabilities at fair value Liabilities Trading Derivatives held for hedging Designated at fair value through profit or loss Amortised cost Non-financial liabilities Total $million $million $million $million $million $million Financial liabilities held at fair value through profit or loss Deposits by banks - - 1,186 - - 1,186 Customer accounts - - 9,914 - - 9,914 Debt securities in issue - - 9,052 - - 9,052 Short positions 6,764 - - - - 6,764 6,764 - 20,152 - - 26,916 Derivative financial instruments 47,117 668 - - - 47,785 Deposits by banks - - - 49,189 - 49,189 Customer accounts - - - 380,609 - 380,609 Debt securities in issue - - - 71,272 - 71,272 Other liabilities - - - 32,387 1,619 34,006 Subordinated liabilities and other borrowed funds - - - 24,691 - 24,691 Total at 30 June 2014 53,881 668 20,152 558,148 1,619 634,468 12. Financial instruments continued Classification continued Liabilities at fair value Liabilities Trading Derivatives held for hedging Designated at fair value through profit or loss Amortised cost Non-financial liabilities Total $million $million $million $million $million $million Financial liabilities held at fair value through profit or loss Deposits by banks - - 378 - - 378 Customer accounts - - 9,471 - - 9,471 Debt securities in issue - - 6,834 - - 6,834 Short positions 5,773 - - - - 5,773 5,773 - 16,683 - - 22,456 Derivative financial instruments 52,757 1,024 - - - 53,781 Deposits by banks - - - 45,012 - 45,012 Customer accounts - - - 371,314 - 371,314 Debt securities in issue - - - 58,690 - 58,690 Other liabilities - - - 27,405 1,314 28,719 Subordinated liabilities and other borrowed funds - - - 18,393 - 18,393 Total at 30 June 2013 58,530 1,024 16,683 520,814 1,314 598,365 Financial liabilities held at fair value through profit or loss Deposits by banks - - 1,009 - - 1,009 Customer accounts - - 9,905 - - 9,905 Debt securities in issue - - 6,823 - - 6,823 Short positions 5,293 - - - - 5,293 5,293 - 17,737 - - 23,030 Derivative financial instruments 60,322 914 - - - 61,236 Deposits by banks - - - 43,517 - 43,517 Customer accounts - - - 381,066 - 381,066 Debt securities in issue - - - 64,589 - 64,589 Other liabilities - - - 26,008 1,330 27,338 Subordinated liabilities and other borrowed funds - - - 20,397 - 20,397 Total at 31 December 2013 65,615 914 17,737 535,577 1,330 621,173 Details on valuation and levelling, together with descriptions of the main types of financial instruments in each level are set out in the Group's 2013 Annual report. There have been no significant changes from that detailed in the Annual report. For instruments classified as level 2 or level 3 fair value adjustments are also made to system valuations to arrive at fair value in accordance with the accounting requirements. In total, the Group has made $420 million (30 June 2013: $372 million, 31 December 2013: $421 million) of valuation adjustments in determining fair value for financial assets and financial liabilities. Valuation adjustments 30.06.14 30.06.13 31.12.13 Bid-offer 73 81 69 Credit1 165 135 187 Model 14 16 15 Funding 80 63 84 Others (including Day 1) 88 77 66 Total 420 372 421 1 Includes own debit valuation adjustments on derivatives 12. Financial instruments continued Valuation hierarchy continued The following tables show the classification of financial instruments held at fair value into the valuation hierarchy set out above as at 30 June 2014, 30 June 2013 and 31 December 2013. Level 1 Level 2 Level 3 Total Assets $million $million $million $million Financial instruments held at fair value through profit or loss Loans and advances to banks 253 3,843 - 4,096 Loans and advances to customers - 5,002 850 5,852 Treasury bills and other eligible bills 3,116 191 - 3,307 Debt securities 9,886 9,210 186 19,282 Of which: Government bonds 9,570 1,659 - 11,229 Issued by corporates other than financial institutions 54 3,449 168 3,671 Issued by financial institutions 262 4,102 18 4,382 Equity shares 3,258 - 702 3,960 Derivative financial instruments 557 47,014 534 48,105 Of which: Foreign exchange 63 29,557 352 29,972 Interest rate - 14,540 62 14,602 Commodity 493 2,171 - 2,664 Credit - 557 11 568 Equity and stock index 1 189 109 299 Investment securities Treasury bills and other eligible bills 19,223 3,697 8 22,928 Debt securities 27,738 44,393 661 72,792 Of which: Government bonds 16,176 6,200 81 22,457 Issued by corporates other than financial institutions 8,751 8,740 482 17,973 Issued by financial institutions 2,811 29,453 98 32,362 Equity shares 1,576 15 944 2,535 Total at 30 June 2014 65,607 113,365 3,885 182,857 Liabilities Financial instruments held at fair value through profit or loss Deposits by banks - 1,186 - 1,186 Customer accounts - 9,911 3 9,914 Debt securities in issue - 8,976 76 9,052 Short positions 6,192 572 - 6,764 Derivative financial instruments 641 46,784 360 47,785 Of which: Foreign exchange 70 29,816 301 30,187 Interest rate - 14,159 18 14,177 Commodity 568 1,012 - 1,580 Credit - 1,414 1 1,415 Equity and stock index 3 383 40 426 Total at 30 June 2014 6,833 67,429 439 74,701 There are no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period. 12. Financial instruments continued Valuation hierarchy continued Level 1 Level 2 Level 3 Total Assets $million $million $million $million Financial instruments held at fair value through profit or loss Loans and advances to banks 297 1,278 - 1,575 Loans and advances to customers 136 5,804 500 6,440 Treasury bills and other eligible bills 3,225 155 - 3,380 Debt securities 6,928 6,799 157 13,884 Of which: Government bonds 6,720 1,434 3 8,157 Issued by corporates other than financial institutions 136 3,307 154 3,597 Issued by financial institutions 72 2,058 - 2,130 Equity shares 2,133 - 723 2,856 Derivative financial instruments 463 53,451 634 54,548 Of which: Foreign exchange 130 33,787 387 34,304 Interest rate - 16,093 38 16,131 Commodity 331 2,502 - 2,833 Credit - 872 13 885 Equity and stock index 2 197 196 395 Investment securities Treasury bills and other eligible bills 16,553 5,789 28 22,370 Debt securities 21,684 43,525 584 65,793 Of which: Government bonds 13,282 5,551 66 18,899 Issued by corporates other than financial institutions 5,075 8,157 476 13,708 Issued by financial institutions 3,327 29,817 42 33,186 Equity shares 1,239 9 1,455 2,703 Total at 30 June 2013 52,658 116,810 4,081 173,549 Liabilities Financial instruments held at fair value through profit or loss Deposits by banks - 378 - 378 Customer accounts - 9,471 - 9,471 Debt securities in issue - 6,579 255 6,834 Short positions 5,197 576 - 5,773 Derivative financial instruments 652 52,711 418 53,781 Of which: Foreign exchange 244 33,865 326 34,435 Interest rate - 15,516 25 15,541 Commodity 405 1,690 - 2,095 Credit - 1,178 14 1,192 Equity and stock index 3 462 53 518 Total at 30 June 2013 5,849 69,715 673 76,237 There are no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period. 12. Financial instruments continued Valuation hierarchy continued Level 1 Level 2 Level 3 Total Assets $million $million $million $million Financial instruments held at fair value through profit or loss Loans and advances to banks 244 2,223 - 2,467 Loans and advances to customers - 4,587 720 5,307 Treasury bills and other eligible bills 4,904 257 - 5,161 Debt securities 6,596 5,944 159 12,699 Of which: Government bonds 6,396 1,220 - 7,616 Issued by corporates other than financial institutions 79 3,211 159 3,449 Issued by financial institutions 121 1,513 - 1,634 Equity shares 2,797 - 904 3,701 Derivative financial instruments 323 60,881 598 61,802 Of which: Foreign exchange 56 41,942 366 42,364 Interest rate - 16,013 53 16,066 Commodity 267 2,104 - 2,371 Credit - 573 13 586 Equity and stock index - 249 166 415 Investment securities Treasury bills and other eligible bills 22,701 3,523 19 26,243 Debt securities 24,445 45,493 608 70,546 Of which: Government bonds 14,513 5,451 64 20,028 Issued by corporates other than financial institutions 6,480 7,314 493 14,287 Issued by financial institutions 3,452 32,728 51 36,231 Equity shares 1,635 8 1,456 3,099 Total at 31 December 2013 63,645 122,916 4,464 191,025 Liabilities Financial instruments held at fair value through profit or loss Deposits by banks - 1,009 - 1,009 Customer accounts - 9,897 8 9,905 Debt securities in issue 7 6,777 39 6,823 Short positions 4,917 376 - 5,293 Derivative financial instruments 420 60,375 441 61,236 Of which: Foreign exchange 84 41,738 315 42,137 Interest rate - 15,863 24 15,887 Commodity 336 1,500 - 1,836 Credit - 874 - 874 Equity and stock index - 400 102 502 Total at 31 December 2013 5,344 78,434 488 84,266 There are no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period. 12. Financial instruments continued Level 3 movement tables - Financial assets Held at fair value through profit or loss Derivative financial instruments Investment securities Assets Loans and advances to customers Debt securities Equity shares Treasury Bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million At 1 January 2014 720 159 904 598 19 608 1,456 4,464 Total (losses)/gains recognised in income statement (44) 3 (22) 19 - (37) 126 45 Total gains/(losses) recognised in other comprehensive income - - - - - 2 (89) (87) Purchases 11 27 34 6 - 38 5 121 Sales - (4) (65) (1) - (26) (558) (654) Settlements (27) (4) - (87) (11) (13) - (142) Transfers out (15) - (149) (3) - (71) - (238) Transfers in 205 5 - 2 - 160 4 376 At 30 June 2014 850 186 702 534 8 661 944 3,885 Total (losses)/gains recognised in the income statement relating to assets held at 30 June 2014 (33) - (6) 19 - - - (20) Held at fair value through profit or loss Derivative financial instruments Investment securities Assets Loans and advances to customers Debt securities Equity shares Treasury Bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million At 1 January 2013 910 176 1,125 486 58 396 1,958 5,109 Total gains/(losses) recognised in income statement - 4 (14) 80 - - 59 129 Total losses recognised in other comprehensive income - - - - - (34) (134) (168) Purchases - 1 64 68 15 232 3 383 Sales - (23) (451) (2) - (40) (408) (924) Settlements (83) (2) - (34) - (87) (4) (210) Transfers out (327) - (1) (1) (45) (19) (19) (412) Transfers in - 1 - 37 - 136 - 174 At 30 June 2013 500 157 723 634 28 584 1,455 4,081 Total (losses)/gains recognised in the income statement relating to assets held at 30 June 2013 - - (74) 114 - - - 40 Held at fair value through profit or loss Derivative financial instruments Investment securities Assets Loans and advances to customers Debt securities Equity shares Treasury bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million At 1 July 2013 500 157 723 634 28 584 1,455 4,081 Total (losses)/gains recognised in income statement (89) 59 31 (43) - (18) (8) (68) Total gains recognised in other comprehensive income - - - - - 11 88 99 Purchases - 17 200 18 (15) (226) 116 110 Sales - (7) (51) (9) (36) (19) (38) (160) Settlements (20) (36) - (16) (3) (13) 4 (84) Transfers out 327 (44) 1 - 45 (37) (161) 131 Transfers in 2 13 - 14 - 326 - 355 At 31 December 2013 720 159 904 598 19 608 1,456 4,464 Total (losses)/gains recognised in the income statement relating to assets held at 31 December 2013 (86) 3 16 24 - - 3 (40) Transfers in during the period primarily relate to investment in structured notes, corporate debt securities and loans and advances where the valuation parameters become unobservable during the period. Transfers out during the period primarily relate to certain equity loans and advances and corporate debt securities where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2 financial assets. 12. Financial instruments continued Level 3 movement tables - Financial liabilities 30.06.14 30.06.13 Liabilities Customer accounts Debt securities in issue Derivative financial instruments Total Customer accounts Debt securities in issue Derivative financial instruments Total $million $million $million $million $million $million $million $million At 1 January 8 39 441 488 - 114 563 677 Total losses/(gains) recognised in income statement - 1 (13) (12) - (39) (53) (92) Issues - 21 4 25 - 320 6 326 Settlements (5) (16) (72) (93) - (134) (86) (220) Transfers out - - - - - (12) (33) (45) Transfers in - 31 - 31 - 6 21 27 At 30 June 3 76 360 439 - 255 418 673 Total losses/(gains) recognised in the income statement relating to liabilities held at the end of the period - - 15 15 - (16) 6 (10) 31.12.13 Liabilities Customer accounts Debt securities in issue Derivative financial instruments Total $million $million $million $million At 1 July - 255 418 673 Total (gains)/losses recognised in income statement - 42 107 149 Issues 9 186 (5) 190 Settlements (3) (356) (58) (417) Transfers out - (87) - (87) Transfers in 2 (1) (21) (20) At 31 December 8 39 441 488 Total losses recognised in the income statement relating to liabilities held at the end of the period - 4 37 41 Transfers in during the period primarily relate to certain financial instruments for which parameters became unobservable during the period. Transfers out during the period primarily relate to certain financial instruments where the valuation parameters became observable during the period and were transferred to Level 2 financial liabilities. 12. Financial instruments continued The following tables present the Group's primary level 3 financial instruments which are held at the fair value. The table also present the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and the weighted average of those inputs: Value at 30 June 2014 Instrument Assets $million Liabilities $million Principal valuation technique Significant unobservable inputs Range1 Weighted average2 Loans and advances to/from customers 850 3 Comparable pricing Yield 4.1% to 19.9% 11.5% Debt securities 524 - Comparable pricing Yield 5.6% to 44.4% 10.6% Internal pricing model Equity correlation -35.0% to 97.0% N/A Asset backed securities 242 - Discounted cash flows Yield 0.4% to 3.3% 1.2% Discounted cash flows Discount Margin 15.5% 15.5% Government bonds 89 - Discounted cash flows Yield 2.4% to 14.1% 4.7% Debt securities in issue - 76 Discounted cash flows Credit correlation 80% 80% Internal pricing model Equity correlation -35.0% to 97.0% N/A Derivative financial instruments of which Foreign exchange 352 301 Option pricing model Foreign exchange option implied volatility 0.7% to 8.5% 3.4% Interest rate 62 18 Discounted cash flows Interest rate curves 0.1% to 11.4% 8.7% Spread option model Interest rate correlation 97.9% to 98.3% 98.1% Credit 11 1 Discounted cash flows Credit correlation 80% 80% Discounted cash flows Credit spreads 0.4% to 2.0% 1.0% Option pricing model Bond price volatility 24% 24% Equity 109 40 Internal pricing model Equity correlation -35.0% to 97.0% N/A Equity shares 1,646 - Comparable pricing EV/EBITDA multiples 9.1x to 21.0x 9.3x (includes private equity P/B multiples 1.0x to 3.5x 2.2x investments) P/E multiples 14.3x to 19.0x 16.1x Liquidity discount 10.0% to 30.0% 14.7% Total 3,885 439 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group's Level 3 financial instruments as at 30 June 2014. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group's Level 3 financial instruments 2 Weighted average for non-derivative financial instruments have been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator 12. Financial instruments continued The following section describes the significant unobservable inputs identified in the valuation technique table. Comparable pricing Comparable pricing refers to the method where valuation is done by calculating an implied yield from the price of a similar comparable observable instrument. The comparable instrument for a private equity investment is a comparable listed company. The comparable instrument in case of bonds is a similar comparable but observable bond. This may involve adjusting the yield to derive a value for the unobservable instrument. EV/EBITDA ratio multiples This is theratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA), EV is the aggregate market capitalisation and debt minus the cash and cash equivalents. An increase in EV/EBITDA multiple in isolation will result in a favourable movement in the fair value of the unlisted firm. P/E and P/B multiples Price Earnings multiple is the ratio of the Market Capitalisation to the Net Income after tax. Price to Book multiple is the ratio of the Market Capitalisation to the Book Value. The multiples are determined from multiples of listed comparables, which are observable. An increase in P/E multiple or P/B multiple will result in a favourable movement in the fair value of the unlisted firm. Yield Yield is the interest rate that is used to discount the future cash-flows in a discounted cash-flow model. Correlation Correlation is the measure of how movement in one variable influences the movement in another variable. Credit correlation generally refers to the factor that describes the relationship between the probability of individual entities to default on obligations and the joint probability of multiple entities to default on obligations. Similarly, equity correlation is the correlation between two equity instruments. An interest rate correlation refers to the correlation between two swap rates. FX correlation represents the correlation between two different exchange rates. Liquidity discount A liquidity discount is primarily applied to unlisted firms to reflect the fact that these stocks are not actively traded. An increase in liquidity discount in isolation will result in unfavourable movement in the fair value of the unlisted firm. Volatility Volatility represents an estimate of how much a particular instrument, parameter or Index will change in value over time. Volatilities are generally implied from the observed option prices. For certain instruments, volatility may change with strike and maturity profile of the option. Credit Spreads Credit Spreads represent the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. 12. Financial instruments continued Sensitivities in respect of the fair values of level 3 assets and liabilities Where the fair value of financial instruments are measured using valuation techniques that incorporate one or more significant inputs which are based on unobservable market data, we apply a 10 per cent increase or decrease on the values of these unobservable parameter inputs, to generate a range of reasonably possible alternative valuations in accordance with the requirements of IFRS 7. The percentage shift is determined by statistical analyses performed on a set of reference prices, which included certain equity indices, credit indices and volatility indices, based on the composition of our Level 3 assets. Favourable and unfavourable changes are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. This Level 3 sensitivity analysis assumes a one way market move and does not consider offsets for hedges. Held at fair value through profit or loss Available-for-sale Favourable Unfavourable Favourable Unfavourable Net exposure Changes Changes Net exposure Changes Changes $million $million $million $million $million $million Financial instruments held at fair value Debt securities 186 189 183 661 697 624 Equity shares 702 772 630 944 1,038 851 Loan and advances 847 878 821 - - - Treasury Bills - - - 8 8 8 Derivative financial instruments 174 238 107 - - - Debt securities in issue (76) (71) (80) - - - At 30 June 2014 1,833 2,006 1,661 1,613 1,744 1,483 Financial instruments held at fair value Debt securities 157 160 154 584 587 579 Equity shares 723 796 650 1,455 1,628 1,282 Loan and advances 500 511 489 - - - Treasury Bills - - - 28 28 28 Derivative financial instruments 216 276 164 - - - Debt securities in issue (255) (255) (255) - - - At 30 June 2013 1,341 1,488 1,202 2,067 2,243 1,889 Financial instruments held at fair value Debt securities 159 162 156 608 628 587 Equity shares 904 996 815 1,456 1,602 1,310 Loan and advances 712 734 683 - - - Treasury Bills - - - 19 19 19 Derivative financial instruments 157 269 111 - - - Debt securities in issue (39) (39) (39) - - - At 31 December 2013 1,893 2,122 1,726 2,083 2,249 1,916 12. Financial instruments continued Valuation of financial instruments measured at amortised cost on a recurring basis The valuation techniques used to establish the Group's fair values are consistent with those used to calculate the fair values of financial instruments carried at fair value. The fair values calculated are for disclosure purposes only and do not have any impact on the Group's reported financial performance or position. The fair values calculated by the Group may be different from the actual amount that will be received/paid on the settlement or maturity of the financial instrument. As certain categories of financial instruments are not traded there is a significant level of management judgement involved in calculating the fair values. Details of the basis used by the Group to establish fair values of amortised cost financial instruments and their valuation hierarchy can be found in the Group's 2013 Annual report. There have been no significant changes from that detailed in the Annual report. The following table summarises the carrying amounts and incorporates the Group's estimate of fair values of those financial assets and liabilities not presented on the Group's balance sheet at fair value. The fair values in the table below may be different from the actual amount that will be received/paid on the settlement or maturity of the financial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available. Carrying value Fair Value $million $million Assets Cash and balances at central banks1 62,182 62,182 Loans and advances to banks 87,324 87,139 Loans and advances to customers 299,209 298,818 Investment securities 2,652 2,689 Other assets1 29,886 26,129 At 30 June 2014 481,253 476,957 Liabilities Deposits by banks 49,189 49,045 Customer accounts 380,609 380,740 Debt securities in issue 71,272 71,993 Subordinated liabilities and other borrowed funds 24,691 25,183 Other liabilities1 24,162 22,994 At 30 June 2014 549,923 477,962 1 The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently 30.06.13 31.12.13 Carrying value Fair value Carrying value Fair value $million $million $million $million Assets Cash and balances at central banks1 57,621 57,621 54,534 54,534 Loans and advances to banks 73,305 73,201 83,702 83,585 Loans and advances to customers 285,353 284,803 290,708 290,476 Investment securities 3,946 3,625 2,828 2,885 Other assets1 30,123 30,123 26,351 26,350 450,348 449,373 458,123 457,830 Liabilities Deposits by banks 45,012 45,011 43,517 43,518 Customer accounts 371,314 370,709 381,066 381,292 Debt securities in issue 58,690 58,820 64,589 64,688 Subordinated liabilities and other borrowed funds 18,393 18,116 20,397 20,499 Other liabilities1 23,526 23,526 21,894 21,901 516,935 516,182 531,463 531,898 1 The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently 12. Financial instruments continued Reclassification of financial assets In 2008 the Group reclassified certain non-derivative financial assets classified as held for trading into the available-for-sale (AFS) category as these were no longer considered to be held for the purpose of selling or repurchasing in the near term. At the time of transfer, the Group identified the rare circumstances permitting such a transfer as the impact of the credit crisis in financial markets, particularly from the beginning of 2008, which significantly impacted the liquidity in certain markets. The Group also reclassified certain eligible financial assets from trading and available-for-sale categories to loans and receivables where the Group had the intent and ability to hold the reclassified assets for the foreseeable future or until maturity. There have been no reclassifications since 2008. The following tables provide details of the remaining balances of assets reclassified during 2008: If assets had not been reclassified, fair value gains from 1 January 2014 to 30 June 2014 that would have been recognised within For assets reclassified: Carrying amount at 30 June 2014 Fair value at 30 June 2014 Income AFS reserve Income recognised in income statement Effective interest rate at date of reclassification Estimated amounts of expected cash flows $million $million $million $million $million % $million From trading to AFS 50 50 31 - - 7.7 135 From trading to loans and receivables 130 130 6 - 4 6.3 149 From AFS to loans and receivables 307 331 - 7 13 5.5 401 487 511 9 7 17 Of which asset backed securities: reclassified to AFS 50 50 31 - - reclassified to loans and receivables 409 436 6 7 14 1 Post reclassification, the gain is recognised within the available-for-sale reserve If assets had not been reclassified, fair value gains from 1 January 2013 to 30 June 2013 that would have been recognised within For assets reclassified: Carrying amount at 30 June 2013 Fair value at 30 June 2013 Income AFS reserve Income recognised in income statement Effective interest rate at date of reclassification Estimated amounts of expected cash flows $million $million $million $million $million % $million From trading to AFS 98 98 241 - 2 6.2 187 From trading to loans and receivables 273 240 22 - 4 6.2 297 From AFS to loans and receivables 558 592 - 19 11 5.4 714 929 930 46 19 17 Of which asset backed securities: reclassified to AFS 82 82 111 - 2 reclassified to loans and receivables 796 817 9 19 14 1 Post reclassification, the gain is recognised within the available-for-sale reserve If assets had not been reclassified, fair value gains from 1 July 2013 to 31 December 2013 that would have been recognised within For assets reclassified: Carrying amount at 31 December 2013 Fair value at 31 December 2013 Income AFS reserve Income recognised in income statement Effective interest rate at date of reclassification Estimated amounts of expected cash flows $million $million $million $million $million % $million From trading to AFS 46 46 51 - 6 8.8 123 From trading to loans and receivables 183 179 20 - 12 6.2 214 From AFS to loans and receivables 486 520 - 12 21 5.5 626 715 745 25 12 39 Of which asset backed securities: reclassified to AFS 46 46 71 - 6 reclassified to loans and receivables 614 647 - 33 33 1 Post reclassification, the gain is recognised within the available-for-sale reserve 12. Financial instruments continued Transfers of financial assets Transfers where financial assets are not derecognised Repurchase transactions The Group enters into collateralised repurchase agreements (repos) and securities borrowing and lending transactions. These transactions typically entitle the Group and its counterparties to have recourse to assets similar to those provided as collateral in the event of a default. Securities sold subject to repos continue to be recognised on the balance sheet as the Group retains substantially the associated risk and rewards of the securities. The counterparty liability is included in deposits by banks or customer accounts, as appropriate. Assets sold under repurchase agreements are considered encumbered as the group cannot pledge these to obtain funding. The table below sets out the financial assets provided by the Group as collateral for repurchase transactions: Fair value through profit and loss Available for sale Loans and receivables Total Collateral pledged against repurchase agreements $million $million $million $million On balance sheet Treasury bills and other eligible bills 489 199 - 688 Debt securities 1,779 3,129 89 4,997 Loan and advances to banks and customers - - 3,934 3,934 Off balance sheet Repledged collateral received 362 - 652 1,014 At 30 June 2014 2,630 3,328 4,923 10,633 Balance sheet liabilities - Repurchase agreements Deposits by banks 7,828 Customer accounts 1,454 At 30 June 2014 9,282 Fair value through profit and loss Available for sale Loans and receivables Total Collateral pledged against repurchase agreements $million $million $million $million On balance sheet Treasury bills and other eligible bills 18 815 - 833 Debt securities 215 2,200 - 2,415 Loan and advances to banks and customers - - 1,665 1,665 Off balance sheet Repledged collateral received 291 - 870 1,161 At 30 June 2013 524 3,015 2,535 6,074 Balance sheet liabilities - Repurchase agreements Deposits by banks 2,989 Customer accounts 1,407 At 30 June 2013 4,396 Fair value through profit and loss Available for sale Loans and receivables Total Collateral pledged against repurchase agreements $million $million $million $million On balance sheet Treasury bills and other eligible bills 391 256 - 647 Debt securities 1,706 1,163 - 2,869 Loan and advances to banks and customers - - 2,714 2,714 Off balance sheet Repledged collateral received 257 - 1,547 1,804 At 31 December 2013 2,354 1,419 4,261 8,034 Balance sheet liabilities - Repurchase agreements Deposits by banks 4,330 Customer accounts 1,732 At 31 December 2013 6,062 12. Financial instruments continued Repurchase and reverse repurchase agreements The Group also undertakes reverse repurchase (reverse repo) lending agreements with counterparties typically financial institutions in exchange for collateral. Reverse repo agreements entitle the Group to have recourse to assets similar to those received as collateral in the event of a default. In addition the Group also obtains collateral on terms that permit the Group to repledge or resell the collateral to others. The Group does not recognise the securities bought under reverse repos as collateral on its balance sheet as the Group is not substantially entitled to the risks and rewards associated with those assets and instead recognises the lending as loans and advances to banks or customers, as appropriate. The Group's reverse repos at 30 June 2014, 30 June 2013 and 31 December 2013 are set out in the table below: Balance sheet assets - Reverse repurchase agreements 30.06.14 30.06.13 31.12.13 $million $million $million Loans and advances to banks 15,288 6,139 12,887 Loans and advances to customers 5,617 3,637 4,538 20,905 9,776 17,425 Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are: 30.06.14 30.06.13 31.12.13 $million $million $million Securities and collateral received (at fair value) 21,530 9,832 17,835 Securities and collateral which can be repledged or sold (at fair value) 17,029 8,710 15,906 Thereof repledged/transferred to others for financing activities, to satisfy commitments under short sale transactions or liabilities under sale and repurchase agreements (at fair value) 1,014 1,161 1,804 Securitisation transactions The Group has also entered into a number of securitisation transactions where the underlying loans and advances have been transferred to Structured Entities (SEs) that are fully consolidated by the Group. As a result, the Group continues to recognise the assets on its balance sheet, together with the associated liability instruments issued by the SEs. The holders of the liability instruments have recourse only to the assets transferred to the SEs. The following table sets out the carrying value and fair value of the assets transferred and the carrying value and fair value of the associated liabilities at 30 June 2014, 30 June 2013 and 31 December 2013 respectively. 30.06.14 30.06.13 31.12.13 Carrying value Fair value Carrying value Fair value Carrying value Fair value $million $million $million $million $million $million Loans and advances to customers 696 694 1,034 1,032 779 778 Securitisation liability 378 378 833 833 502 502 Net 318 316 201 199 277 276 The Group did not undertake any transactions that required the recognition of an asset representing continuing involvement in financial assets. 12. Financial instruments continued Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements Impact of offset in the balance sheet In accordance with IAS 32 Financial Instruments: Presentation the Group is permitted to offset assets and liabilities and present these net on the Group's balance sheet, only if there is a legally enforceable right to set off and the Group intends to settle on a net basis or realise the asset and liability simultaneously. Amounts not offset in the balance sheet In practice the Group is able to offset assets and liabilities which do not meet the IAS 32 netting criteria set out above. Such arrangements include master netting arrangements for derivatives and global master repurchase agreements for repurchase and reverse repurchase transactions. These agreements generally allow that all outstanding transactions with a particular counterparty can be offset but only in the event of default or other predetermined events. In addition the Group also receives and pledges readily realisable collateral for derivative transactions to cover net exposure in the event of a default. Under repurchase and reverse repurchase agreements the Group pledges (legally sell) and obtain (legally purchase) respectively, highly liquid assets which can be sold in the event of a default. The following tables set out the following: Impact of netting on the balance sheet - This comprises derivative transactions settled through an enforceable netting agreement where we have the intent and ability to settle net and which are offset on the balance sheet. Related amounts not offset in the balance sheet. This comprises: · Financial instruments not offset in the balance sheet, but covered by an enforceable netting arrangement. This comprises master netting arrangements held against derivative financial instruments and excludes the effect of over collateralisation · Financial collateral - This comprises cash collateral pledged and received for derivative financial instruments and collateral bought and sold for reverse repurchase and repurchase agreements respectively and excludes the effect of over collateralisation 30.06.14 Related amount not offset in the balance sheet Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet Financial instruments Financial collateral Net amount $million $million $million $million $million $million Assets Derivative financial instruments 54,373 (6,268) 48,105 (34,437) (3,961) 9,707 Reverse repurchase agreements 20,905 - 20,905 - (20,905) - At 30 June 2014 75,278 (6,268) 69,010 (34,437) (24,866) 9,707 Liabilities Derivative financial instruments 54,053 (6,268) 47,785 (34,437) (6,205) 7,143 Sale and repurchase liabilities 9,282 - 9,282 - (9,282) - At 30 June 2014 63,335 (6,268) 57,067 (34,437) (15,487) 7,143 30.06.13 Related amount not offset in the balance sheet Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet Financial instruments Financial Collateral Net amount $million $million $million $million $million $million Assets Derivative financial instruments 59,650 (5,102) 54,548 (37,379) (3,241) 13,928 Reverse repurchase agreements 9,776 - 9,776 - (9,776) - At 30 June 2013 69,426 (5,102) 64,324 (37,379) (13,017) 13,928 Liabilities Derivative financial instruments 58,883 (5,102) 53,781 (37,379) (7,563) 8,839 Sale and repurchase liabilities 4,396 - 4,396 - (4,396) - At 30 June 2013 63,279 (5,102) 58,177 (37,379) (11,959) 8,839 12. Financial instruments continued Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements Amounts not offset in the balance sheet continued 31.12.13 Related amount not offset in the balance sheet Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet Financial instruments Financial collateral Net amount $million $million $million $million $million $million Assets Derivative financial instruments 67,369 (5,567) 61,802 (46,242) (5,147) 10,413 Reverse repurchase agreements 17,425 - 17,425 - (17,425) - At 31 December 2013 84,794 (5,567) 79,227 (46,242) (22,572) 10,413 Liabilities Derivative financial instruments 66,803 (5,567) 61,236 (46,242) (9,240) 5,754 Sale and repurchase liabilities 6,062 - 6,062 - (6,062) - At 31 December 2013 72,865 (5,567) 67,298 (46,242) (15,302) 5,754 13. Financial instruments held at fair value through profit or loss Loans and advances held at fair value through profit or loss The maximum exposure to credit risk for loans designated at fair value through profit or loss was $1,410 million (30 June 2013: $480 million and 31 December 2013: $1,142 million). The net fair value loss on loans and advances to customers designated at fair value through profit or loss was $(130.6) million (30 June 2013: $2.1 million, 31 December 2013: $(3.3) million). Of this, $nil million (30 June 2013: $nil million, 31 December 2013: $nil million) relates to changes in credit risk. The cumulative fair value movement relating to changes in credit risk was $3.4 million (30 June 2013: $3.4 million, 31 December 2013: $3.4 million). The changes in fair value attributable to credit risk has been determined by comparing fair value movements in risk-free bonds with similar maturities to the changes in fair value of loans designated at fair value through profit or loss. Debt securities, equity shares and treasury bills held at fair value through profit or loss 30.06.14 Debt Securities Equity Shares Treasury bills Total $million $million $million $million Issued by public bodies: Government securities 11,339 Other public sector securities 41 11,380 Issued by banks: Certificates of deposit 2,693 Other debt securities 1,017 3,710 Issued by corporate entities and other issuers: Other debt securities 4,192 Total debt securities 19,282 Of which: Listed on a recognised UK exchange 175 - - 175 Listed elsewhere 10,262 3,013 1,646 14,921 Unlisted 8,845 947 1,661 11,453 19,282 3,960 3,307 26,549 Market value of listed securities 10,437 3,013 1,646 15,096 30.06.13 Debt Securities Equity Shares Treasury bills Total $million $million $million $million Issued by public bodies: Government securities 8,455 Other public sector securities 80 8,535 Issued by banks: Certificates of deposit 164 Other debt securities 547 711 Issued by corporate entities and other issuers: Other debt securities 4,638 Total debt securities 13,884 Of which: Listed on a recognised UK exchange 320 23 - 343 Listed elsewhere 8,871 2,110 1,474 12,455 Unlisted 4,693 723 1,906 7,322 13,884 2,856 3,380 20,120 Market value of listed securities 9,191 2,133 1,474 12,798 13. Financial instruments held at fair value through profit or loss continued Debt securities, equity shares and treasury bills held at fair value through profit or loss continued 31.12.13 Debt Securities Equity Shares Treasury bills Total $million $million $million $million Issued by public bodies: Government securities 7,763 Other public sector securities 76 7,839 Issued by banks: Certificates of deposit 292 Other debt securities 457 749 Issued by corporate entities and other issuers: Other debt securities 4,111 Total debt securities 12,699 Of which: Listed on a recognised UK exchange 144 21 - 165 Listed elsewhere 8,017 2,741 1,646 12,404 Unlisted 4,538 939 3,515 8,992 12,699 3,701 5,161 21,561 Market value of listed securities 8,161 2,762 1,646 12,569 Financial liabilities held at fair value through profit or loss The net fair value gain on liabilities designated at fair value through profit or loss was $397 million for the period (30 June 2013: gain of $400 million, 31 December 2013: loss of $304 million). Of this, $32 million (30 June 2013: $nil million, 31 December 2013: $106 million relates to changes in credit risk. The cumulative fair value movement relating to changes in credit risk was a loss of $63.6 million (30 June 2013: $10 million, 31 December 2013: $95.6 million). The change in fair value attributable to credit risk was determined by comparing fair value movements in risk-free debt instruments with similar maturities, to the changes in fair value of liabilities designated at fair value through profit or loss. 14. Derivative financial instruments The tables below analyse the notional principal amounts and the positive and negative fair values of the Group's derivative financial instruments. Notional principal amounts are the amount of principal underlying the contract at the reporting date. 30.06.14 30.06.13 Total derivatives Notional principal amounts Assets Liabilities Notional principal amounts Assets Liabilities $million $million $million $million $million $million Foreign exchange derivative contracts: Forward foreign exchange contracts 1,550,176 11,429 12,554 1,358,712 17,260 17,543 Currency swaps and options 1,186,857 18,543 17,633 1,067,827 17,044 16,892 Exchange traded futures and options 90 - - 8,747 - - 2,737,123 29,972 30,187 2,435,286 34,304 34,435 Interest rate derivative contracts: Swaps 2,155,533 13,833 13,580 1,438,134 15,176 14,840 Forward rate agreements and options 190,101 769 597 85,468 955 701 Exchange traded futures and options 1,026,331 - - 1,046,902 - - 3,371,965 14,602 14,177 2,570,504 16,131 15,541 Credit derivative contracts 39,413 568 1,415 57,696 885 1,192 Equity and stock index options 16,173 299 426 16,753 395 518 Commodity derivative contracts 204,630 2,664 1,580 163,113 2,833 2,095 Total derivatives 6,369,304 48,105 47,785 5,243,352 54,548 53,781 31.12.13 Total derivatives Notional principal amounts Assets Liabilities $million $million $million Foreign exchange derivative contracts: Forward foreign exchange contracts 1,303,103 17,213 17,490 Currency swaps and options 1,086,784 25,151 24,647 Exchange traded futures and options 340 - - 2,390,227 42,364 42,137 Interest rate derivative contracts: Swaps 1,974,451 15,295 15,241 Forward rate agreements and options 236,646 771 646 Exchange traded futures and options 694,212 - - 2,905,309 16,066 15,887 Credit derivative contracts 40,981 586 874 Equity and stock index options 15,684 415 502 Commodity derivative contracts 162,858 2,371 1,836 Total derivatives 5,515,059 61,802 61,236 The Group limits exposure to credit losses in the event of default by entering into master netting agreements with certain market counterparties. As required by IAS 32, exposures are not presented net in these accounts as in the ordinary course of business they are not intended to be settled net. Details of the amounts available for offset can be found in the Risk review on page 38. The Derivatives and Hedging sections of the Risk review on page 71 explain the Group's risk management of derivative contracts and application of hedging. 14. Derivative financial instruments continued Derivatives held for hedging Hedge accounting is applied to derivatives and hedged items when the criteria under IAS 39 have been met. The tables below list the types of derivatives that the Group holds for hedge accounting. 30.06.14 30.06.13 Notional principal amounts Assets Liabilities Notional principal amounts Assets Liabilities $million $million $million $million $million $million Derivatives designated as fair value hedges: Interest rate swaps 47,431 842 426 35,639 857 498 Forward foreign exchange contracts 218 5 4 369 - 6 Currency swaps 24,216 1,408 134 18,436 482 409 71,865 2,255 564 54,444 1,339 913 Derivatives designated as cash flow hedges: Interest rate swaps 15,067 20 15 16,504 21 25 Forward foreign exchange contracts 2,617 58 14 3,636 1 78 Currency swaps 6,658 16 12 7,106 16 8 24,342 94 41 27,246 38 111 Derivatives designated as net investment hedges: Forward foreign exchange contracts 1,048 - 63 1,042 57 - Total derivatives held for hedging 97,255 2,349 668 82,732 1,434 1,024 31.12.13 Notional principal amounts Assets Liabilities $million $million $million Derivatives designated as fair value hedges: Interest rate swaps 41,598 756 589 Forward foreign exchange contracts 199 7 - Currency swaps 22,026 1,190 169 63,823 1,953 758 Derivatives designated as cash flow hedges: Interest rate swaps 20,564 22 19 Forward foreign exchange contracts 2,150 42 38 Currency swaps 7,169 20 15 29,883 84 72 Derivatives designated as net investment hedges: Forward foreign exchange contracts 981 - 84 Total derivatives held for hedging 94,687 2,037 914 15. Loans and advances to banks 30.06.14 30.06.13 31.12.13 $million $million $million Loans and advances to banks 91,526 74,982 86,271 Individual impairment provision (104) (100) (100) Portfolio impairment provision (2) (2) (2) 91,420 74,880 86,169 Of which: loans and advances held at fair value through profit or loss (note 12) (4,096) (1,575) (2,467) 87,324 73,305 83,702 Analysis of loans and advances to banks by geography as set out in the Risk review on page 42 16. Loans and advances to customers 30.06.14 30.06.13 31.12.13 $million $million $million Loans and advances to customers 308,814 294,963 299,460 Individual impairment provision (3,021) (2,433) (2,749) Portfolio impairment provision (732) (737) (696) 305,061 291,793 296,015 Of which: loans and advances held at fair value through profit or loss (note 12) (5,852) (6,440) (5,307) 299,209 285,353 290,708 The Group has outstanding residential mortgages and loans to Korea residents of $12.2 billion (30 June 2013: $13.9 billion, 31 December 2013: $12.8 billion) and Hong Kong residents of $24.7 billion (30 June 2013: $22.9 billion, 31 December 2013: $23.4 billion). Analysis of loans and advances to customers by geography and client segments and related impairment provisions as set out within the Risk review on pages 42 to 56. 17. Investment securities 30.06.14 Debt securities Held-to- maturity Available- for-sale Loans and receivables Equity shares Treasury bills Total $million $million $million $million $million $million Issued by public bodies: Government securities 24 27,949 - Other public sector securities - 974 - 24 28,923 - Issued by banks: Certificates of deposit - 7,662 - Other debt securities - 21,846 16 - 29,508 16 Issued by corporate entities and other issuers: Other debt securities 42 14,361 2,540 Total debt securities 66 72,792 2,556 Of which: Listed on a recognised UK exchange - 5,841 1001 70 - 6,011 Listed elsewhere - 28,148 3111 1,512 10,081 40,052 Unlisted 66 38,803 2,145 953 12,877 54,844 66 72,792 2,556 2,535 22,958 100,907 Market value of listed securities - 33,989 411 1,582 10,081 46,063 1 These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid 17. Investment securities continued 30.06.13 Debt securities Held-to- maturity Available- for-sale Loans and receivables Equity shares Treasury bills Total $million $million $million $million $million $million Issued by public bodies: Government securities - 24,300 - Other public sector securities - 543 - - 24,843 - Issued by banks: Certificates of deposit - 5,510 - Other debt securities - 23,193 50 - 28,703 50 Issued by corporate entities and other issuers : Other debt securities - 12,247 3,896 Total debt securities - 65,793 3,946 Of which: Listed on a recognised UK exchange - 4,978 1811 67 - 5,226 Listed elsewhere - 24,556 3851 1,164 9,786 35,891 Unlisted - 36,259 3,380 1,472 12,584 53,695 - 65,793 3,946 2,703 22,370 94,812 Market value of listed securities - 29,534 580 1,231 9,786 41,131 1 These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid 31.12.13 Debt securities Held-to- maturity Available- for-sale Loans and receivables Equity shares Treasury bills Total $million $million $million $million $million $million Issued by public bodies: Government securities - 26,111 - Other public sector securities - 928 - - 27,039 - Issued by banks: Certificates of deposit - 6,476 - Other debt securities - 24,897 49 - 31,373 49 Issued by corporate entities and other issuers: Other debt securities - 12,134 2,779 Total debt securities - 70,546 2,828 Of which: Listed on a recognised UK exchange - 5,563 1131 65 - 5,741 Listed elsewhere - 26,091 6191 1,545 10,480 38,735 Unlisted - 38,892 2,096 1,489 15,763 58,240 - 70,546 2,828 3,099 26,243 102,716 Market value of listed securities - 31,654 732 1,610 10,480 44,476 1 These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid 17. Investment securities continued The change in the carrying amount of investment securities comprised: 30.06.14 30.06.13 Debt securities Equity shares Treasury bills Total Debt securities Equity shares Treasury bills Total $million $million $million $million $million $million $million $million Balances held at 1 January 73,374 3,099 26,243 102,716 69,207 3,278 26,740 99,225 Exchange translation differences 298 8 289 595 (1,554) (16) (859) (2,429) Additions 64,897 77 28,547 93,521 52,917 82 19,840 72,839 Maturities and disposals (63,465) (703) (32,282) (96,450) (50,832) (498) (23,498) (74,828) Impairment, net of recoveries on disposal (52) (4) - (56) (5) (10) 1 (14) Changes in fair value (including the effect of fair value hedging) 315 58 19 392 18 (133) (6) (121) Amortisation of discounts and premiums 47 - 142 189 (12) - 152 140 Balances held at 30 June 75,414 2,535 22,958 100,907 69,739 2,703 22,370 94,812 31.12.13 Debt securities Equity shares Treasury bills Total $million $million $million $million Balances held at 1 July 69,739 2,703 22,370 94,812 Exchange translation differences (280) 7 293 20 Additions 40,219 133 29,697 70,049 Maturities and disposals (36,122) (35) (26,178) (62,335) Impairment, net of recoveries on disposal (54) (51) (1) (106) Changes in fair value (including the effect of fair value hedging) (109) 342 (23) 210 Amortisation of discounts and premiums (19) - 85 66 Balances held at 31 December 73,374 3,099 26,243 102,716 The analysis of unamortised premiums and unamortised discounts on debt securities and income on equity shares held for investment purposes is provided below: 30.06.14 30.06.13 31.12.13 $million $million $million Debt securities: Unamortised premiums 507 589 605 Unamortised discounts 278 229 425 Income from listed equity shares 51 47 20 Income from unlisted equity shares 13 17 20 18. Other assets 30.06.14 30.06.13 31.12.13 $million $million $million Financial assets held at amortised cost (note 12) Hong Kong SAR Government certificates of indebtedness (note 22)1 4,652 4,341 4,460 Cash collateral 6,205 7,563 9,240 Acceptances and endorsements 5,326 5,320 5,501 Unsettled trades and other financial assets 13,703 15,222 8,234 29,886 32,446 27,435 Non-financial assets Commodities 5,046 4,516 3,965 Assets held for sale2 1,477 16 1,623 Other assets 675 1,063 547 Total other assets 37,084 38,041 33,570 1 The Hong Kong SAR Government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued 2 Includes assets held for sale of $1,414 million (December 2013: $1,563 million) in respect of the Group's realignment of the business in Korea. The disposal group consists of Standard Chartered Capital (Korea) Company Limited and Standard Chartered Savings Bank Korea Company Limited. The Group announced its intention to dispose these businesses on 14 June 2014 and expects to conclude the transaction before the end of 2014. 19. Business Combinations 2014 acquisitions There have been no acquisitions during the period. 2013 acquisitions On 2 December 2013 the Group completed the acquisition of the South African custody and trustee business of Absa Bank for a consideration of $36 million recognising goodwill of $16 million. The net assets acquired primarily comprised customer relationships that have been recognised as intangible assets of the Group. Goodwill arising on the acquisition is attributable to the synergies expected to arise from their integration with the Group. The primary reason for this acquisition was to enhance capability. 20. Goodwill and intangible assets 30.06.14 30.06.13 Goodwill Acquired intangibles Software Total Goodwill Acquired intangibles Software Total $million $million $million $million $million $million $million $million Cost at 30 June 5,269 685 1,236 7,190 6,169 650 976 7,795 Provision for amortisation - (559) (431) (990) - (499) (353) (852) Impairment charge - - - - (1,000) - - (1,000) Net book value at 30 June 5,269 126 805 6,200 5,169 151 623 5,943 31.12.13 Goodwill Acquired intangibles Software Total $million $million $million $million Cost at 31 December 5,207 678 1,103 6,988 Provision for amortisation - (530) (388) (918) Net book value at 31 December 5,207 148 715 6,070 The Group performs an annual goodwill impairment review in September each year, and at each reporting date, assesses whether there is any objective evidence of impairment. For the purposes of impairment testing, goodwill is allocated at the date of acquisition to a cash-generating unit (CGU). Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. The recoverable amounts for all CGUs were measured based on value-in-use. The key assumptions used in determining the recoverable amounts are set out in note 26 of the Group's 2013 Annual Report and Accounts. At 30 June 2014, we assessed whether there was an objective evidence of impairment of goodwill, and this assessment did not indicate any goodwill impairment. It continues to be possible that certain scenarios (to which Korea is more sensitive than other CGUs) could be construed where a combination of a material change in the discount rate coupled with a reduction in current business plan forecasts or the GDP growth rate, would potentially result in the carrying amount of the goodwill exceeding the recoverable amount in the future. 21. Debt securities in issue 30.06.14 30.06.13 Certificates of deposit of $100,000 or more Other debt securities in issue Total Certificates of deposit of $100,000 or more Other debt securities in issue Total $million $million $million $million $million $million Debt securities in issue 25,984 45,288 71,272 22,097 36,593 58,690 Debt securities in issue included within: Financial liabilities held at fair value through profit or loss (note 12) 138 8,914 9,052 156 6,678 6,834 Total debt securities in issue 26,122 54,202 80,324 22,253 43,271 65,524 31.12.13 Certificates of deposit of $100,000 or more Other debt securities in issue Total $million $million $million Debt securities in issue 21,082 43,507 64,589 Debt securities in issue included within: Financial liabilities held at fair value through profit or loss (note 12) 141 6,682 6,823 Total debt securities in issue 21,223 50,189 71,412 22. Other liabilities 30.06.14 30.06.13 31.12.13 $million $million $million Financial liabilities held at amortised cost (note 12) Notes in circulation1 4,652 4,341 4,460 Acceptances and endorsements 5,356 5,269 5,501 Cash collateral 3,961 3,241 5,147 Unsettled trades and other financial liabilities 18,418 14,554 10,900 32,387 27,405 26,008 Non-financial liabilities Cash-settled share based payments 60 74 73 Liabilities held for sale2 298 - 344 Other liabilities 1,261 1,240 913 Total other liabilities 34,006 28,719 27,338 1 Hong Kong currency notes in circulation of $4,652 million (30 June 2013: $4,341 million, 31 December 2013: $4,460 million) which are secured by the government of Hong Kong SAR certificates of indebtedness of the same amount included in other assets (note 18) 2 Liabilities held for sale of $298 million (December 2013: $344 million) is in respect of the Group's realignment of the business in Korea, the disposal group consists of Standard Chartered Capital (Korea) Company Limited and Standard Chartered Savings Bank Korea Company Limited. The assets are disclosed in note 18 23. Subordinated liabilities and other borrowed funds 30.06.14 USD GBP Euro Others Total $million $million $million $million $million Fixed rate subordinated debt 11,944 5,515 4,543 2,360 24,362 Floating rate subordinated debt 238 52 - 39 329 Total 12,182 5,567 4,543 2,399 24,691 30.06.13 USD GBP Euro Others Total $million $million $million $million $million Fixed rate subordinated debt 9,766 3,709 2,577 2,018 18,070 Floating rate subordinated debt 238 46 - 39 323 Total 10,004 3,755 2,577 2,057 18,393 31.12.13 USD GBP Euro Others Total $million $million $million $million $million Fixed rate subordinated debt 9,663 3,922 4,426 2,060 20,071 Floating rate subordinated debt 238 50 - 38 326 Total 9,901 3,972 4,426 2,098 20,397 All subordinated liabilities are unsecured, unguaranteed and subordinated to the claims of other creditors including without limitation, customer deposits and deposits by banks. The Group has the right to settle these debt instruments in certain circumstances as set out in the contractual agreements. Issuances On 23 January 2014, Standard Chartered PLC (the Company) issued SGD700 million 4.4 per cent fixed interest rate notes due January 2026. On 26 March 2014, the Company issued $2 billion 5.7 per cent fixed interest rate notes due March 2044. On 6 June 2014, the Company issued £900 million 5.125 per cent fixed interest rate notes due June 2034. Redemptions On 13 March 2014, Standard Chartered Bank Korea Limited exercised its right to redeem its KRW300 billion 7.05 per cent subordinated debt in full on the first optional call date. 24. Retirement benefit obligations Retirement benefit obligations comprise: 30.06.14 30.06.13 31.12.13 $million $million $million Total market value of assets 2,671 2,302 2,585 Present value of the schemes' liabilities (3,119) (2,696) (2,926) Defined benefit schemes obligation (448) (394) (341) Defined contribution schemes obligation (24) (17) (24) Net obligation (472) (411) (365) Retirement benefit charge comprises: 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 $million $million $million Defined benefit schemes 56 58 61 Defined contribution schemes 114 110 107 Charge against profit (note 5) 170 168 168 The pension cost for defined benefit schemes was: 6 months ended 30.06.14 6 months ended 30.06.13 6 months ended 31.12.13 $million $million $million Current service cost and administrative expenses 49 50 50 Past service cost and curtailments - - 4 Interest income on pension scheme assets (53) (46) (47) Interest on pension scheme liabilities 60 54 54 Total charge to profit before deduction of tax 56 58 61 Return on plan assets excluding interest income (22) (11) (58) Loss/(gain) on liabilities 92 (33) 23 Total loss/(gain) recognised directly in statement of comprehensive income before tax 70 (44) (35) Deferred taxation (14) 6 15 Total loss/(gains) after tax 56 (38) (20) 25. Share capital, reserves and own shares Number of ordinary shares Ordinary share capital Preference share capital Total millions $million $million $million At 1 January 2013 2,413 1,207 - 1,207 Capitalised on scrip dividend 2 1 - 1 Shares issued 9 4 - 4 At 30 June 2013 2,424 1,212 - 1,212 Capitalised on scrip dividend 2 1 - 1 Shares issued 1 1 - 1 At 31 December 2013 2,427 1,214 - 1,214 Capitalised on scrip dividend 36 18 - 18 Shares issued 7 3 - 3 At 30 June 2014 2,470 1,235 - 1,235 2014 On 14 May 2014, the Company issued 36,260,040 new ordinary shares instead of the 2013 final dividend. During the period 6,480,832 shares were issued under employee share plans at prices between nil and 1,463 pence. 2013 On 13 May 2013, the Company issued 1,727,682 new ordinary shares instead of the 2012 final dividend and on 17 October 2013 the Company issued 2,081,685 new ordinary shares instead of the 2013 interim dividend. During the year 10,542,375 new ordinary shares were issued under employee share plans at prices between nil and 1,463 pence. 25. Share Capital, reserves and own shares continued Own shares Bedell Cristin Trustees Limited is trustee of both the 1995 Employees' Share Ownership Plan Trust (the 1995 Trust), which is an employee benefit trust used in conjunction with some of the Group's employee share schemes, and of the Standard Chartered 2004 Employee Benefit Trust (the 2004 Trust) which is an employee benefit trust used in conjunction with the Group's deferred bonus plan. The trustee has agreed to satisfy a number of awards made under the employee share schemes, the deferred bonus arrangements and fixed pay allowances delivered in shares through the relevant employee benefit trust. As part of these arrangements, Group companies fund the trusts, from time to time, to enable the trustee to acquire shares to satisfy these awards. All shares have been acquired through the London Stock Exchange. Except as disclosed, 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 period. Details of the shares purchased and held by the trusts are set out below. 1995 Trust 2004 Trust Total Number of shares 30.06.14 30.06.13 31.12.13 30.06.14 30.06.13 31.12.13 30.06.14 30.06.13 31.12.13 Shares purchased during period 4,090,094 4,855,145 - 1,050,401 790,829 - 5,140,495 5,645,974 - Market value of shares purchased ($ million) 84 133 - 21 21 - 105 154 - Shares held at end of period 5,392,574 5,866,347 5,575,821 5,807 141,160 141,160 5,398,381 6,007,507 5,716,981 Maximum number of shares held during period 8,591,232 7,278,439 6,007,507 26. Non-controlling interests $300m 7.267% Hybrid Tier 1 securities Other non-controlling interests Total $million $million $million At 1 January 2013 320 373 693 Expenses in equity attributable to non-controlling interests - (16) (16) Other profits attributable to non-controlling interests 11 44 55 Comprehensive income for the period 11 28 39 Distributions (11) (27) (38) Other decreases - (104) (104) At 30 June 2013 320 270 590 Income in equity attributable to non-controlling interests - (15) (15) Other profits attributable to non-controlling interests 11 44 55 Comprehensive income for the period 11 29 40 Distributions (11) (28) (39) Other increases - 4 4 At 31 December 2013 320 275 595 Expense in equity attributable to non-controlling interests - (15) (15) Other profits attributable to non-controlling interests 4 40 44 Comprehensive income for the period 4 25 29 Distributions (11) (36) (47) Other (decreases)/increase (313) 21 (292) At 30 June 2014 - 285 285 The $300 million 7.267% Hybrid Tier 1 securities issued by Standard Chartered Bank Korea Limited, a wholly owned subsidiary of the Group were redeemed during the year. The Group had no interest in the securities 27. Cash flow statement Adjustment for non-cash items and other adjustments included within the income statement 30.06.14 30.06.13 31.12.13 $million $million $million Amortisation of discounts and premiums of investment securities (189) (140) (66) Interest expense on subordinated liabilities 384 330 325 Interest expense on senior debt liabilities 231 217 275 Other non-cash items (including own credit adjustment) (8) (161) 334 Pension costs for defined benefit schemes 56 58 61 Share based payment costs 143 108 156 UK bank levy - - 55 Impairment losses on loans and advances and other credit risk provisions 846 730 887 Other impairment 185 1,011 118 Loss on business classified as held for sale 5 - 49 Profit from associates and joint ventures (113) (112) (114) 1,540 2,041 2,080 Change in operating assets 30.06.14 30.06.13 31.12.13 $million $million $million Decrease/(increase) in derivative financial instruments 14,048 (5,858) (7,207) (Increase)/decrease in debt securities, treasury bills and equity shares held at fair value through profit or loss (3,376) 547 4,673 Net increase in loans and advances to banks and customers (6,491) (19,520) (10,398) (Increase)/decrease in prepayments and accrued income (287) (188) 180 (Increase)/decrease in other assets (4,918) (10,751) 4,378 (1,024) (35,770) (8,374) Change in operating liabilities 30.06.14 30.06.13 31.12.13 $million $million $million (Decrease)/increase in derivative financial instruments (13,821) 7,430 7,374 Net increase in deposits from banks, customer accounts, debt securities in issue, Hong Kong notes in circulation and short positions 14,529 16,243 12,753 Increase/(decrease) in accruals and deferred income 452 (504) 465 Increase/(decrease) in other liabilities 6,675 3,773 (2,282) 7,835 26,942 18,310 28. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash, on demand and overnight balances with central banks (unless restricted) and balances with less than three months maturity from the date of acquisition, including: treasury bills and other eligible bills, loans and advances to banks, and short-term government securities. The following balances with less than three months maturity from the date of acquisition have been identified by the Group as being cash and cash equivalents. Restricted balances comprise minimum balances required to be held at central banks. 30.06.14 30.06.13 31.12.13 $million $million $million Cash and balances at central banks 62,182 57,621 54,534 Less restricted balances (10,557) (9,663) (9,946) Treasury bills and other eligible bills 7,191 1,331 6,561 Loans and advances to banks 35,906 24,551 29,509 Trading securities 4,119 2,651 3,498 98,841 76,491 84,156 29. Restatement of prior periods In January 2014 the Group announced a change to its organisation structure effective 1 April 2014. In accordance with IFRS 8 Segmental reporting, the presentation of the Group's interim results have been updated to reflect the Group's new client segments - Corporate and Institutional, Commercial, Private Banking and Retail. On 29 May 2014, the Group announced the restated segmental information for Half Year and Full Year 2013 under the new client segments and global product groups and the new geographic regions. The table below shows the changes in these accounts to the restatements announced for the new client segments to enhance the comparability of information presented. While these restatements affect the reported results of the divisions that comprise the Group's business, it has no impact on the Group's overall income statement, balance sheet or reported metrics. 30.06.13 Corporate and Institutional Commercial Private Banking Retail Total reportable Segments Corporate items not allocated Total $million $million $million $million $million $million $million Loans to customers - as announced 157,398 18,396 14,754 101,245 291,793 - 291,793 Loans to customers - as restated 158,461 17,338 14,681 101,313 291,793 - 291,793 Restatement 1,063 (1,058) (73) 68 - - - Total assets employed - as announced 441,203 33,760 20,464 147,496 642,923 7,034 649,957 Total assets employed - as restated 441,257 33,834 20,464 147,525 643,080 6,877 649,957 Restatement 54 74 - 29 157 (157) - 31.12.13 Corporate and Institutional Commercial Private Banking Retail Total reportable Segments Corporate items not allocated Total $million $million $million $million $million $million $million Loans to customers - as announced 159,894 19,025 17,208 99,888 296,015 - 296,015 Loans to customers - as restated 160,906 17,802 17,159 100,148 296,015 - 296,015 Restatement 1,012 (1,223) (49) 260 - - - 30. Contingent liabilities and commitments The table below shows the contract or underlying principal amounts and risk-weighted amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk. 30.06.14 30.06.13 31.12.13 $million $million $million Contingent liabilities Guarantees and irrevocable letters of credit 36,409 38,061 36,936 Other contingent liabilities 8,973 9,533 10,002 45,382 47,594 46,938 Commitments Documentary credits and short term trade-related transactions 8,160 8,171 7,409 Forward asset purchases and forward deposits placed 26 852 459 Undrawn formal standby facilities, credit lines and other commitments to lend: One year and over 43,617 43,894 43,294 Less than one year 15,466 15,941 17,983 Unconditionally cancellable 111,080 116,441 123,481 178,349 185,299 192,626 The Group's share of contingent liabilities and commitments relating to joint venture is $353 million (June 2013: $358 million, December 2013: $388 million). Contingent liabilities Where the Group undertakes to make a payment on behalf of its customers for guarantees issued such as for performance bonds or as irrevocable letters of credit as part of the Group's transaction banking business for which an obligation to make a payment has not arisen at the reporting date those are included in these financial statements as contingent liabilities. Other contingent liabilities primarily include revocable letters of credit and bonds issued on behalf of customers to customs officials, for bids or offers and as shipping guarantees. Commitments Where the Group has confirmed its intention to provide funds to a customer or on behalf of a customer in the form of loans, overdrafts, future guarantees whether cancellable or not or letters of credit and the Group has not made payments at the balance sheet date, those instruments are included in these financial statement as commitments. 31. Legal and regulatory matters The Group seeks to comply with all applicable laws and regulations, but may be subject to regulatory actions and investigations across our markets, the outcome of which are generally difficult to predict and can be material to the Group. Further details on regulatory compliance, reviews, request for information, investigation and risk of fraud and other criminal acts are set out in pages 30 and 31 of the Risk Review. In addition to these matters, the Group receives legal claims against it in a number of jurisdictions arising in the normal course of business. The Group considers none of these claims as material. Where appropriate, the Group recognises a provision for liabilities when it is probable that an outflow of economic resources embodying economic benefits will be required and for which a reliable estimate can be made of the obligation. 32. Post balance sheet events There are no post balance sheet events to disclose. 33. Related party transactions Directors, connected persons or officers As at 30 June 2014, Standard Chartered Bank had created a charge over $74 million (30 June 2013: $55 million; 31 December 2013: $60 million) of cash assets in favour of the independent trustee of its employer financed retirement benefit scheme. Other than those disclosed in the accounts, there were no material transactions, arrangements or agreements outstanding for any director, connected person or officer of the Company which have to be disclosed under the Act, the rules of the UK Listing Authority or the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the 'Hong Kong Listing Rules'). Associates The Group has loans and advances to China Bohai Bank of $1 million at 30 June 2014 (30 June 2013: $16 million; 31 December 2013: $20 million) and amounts payable of $17 million (30 June 2013: $14 million; 31 December 2013: $20 million). Except as disclosed, the Group did not have any other amounts due to or from associate investments. Joint ventures The Group has loans and advances to PT Bank Permata Tbk totalling $17 million at 30 June 2014 (30 June 2013: $23 million; 31 December 2013: $31 million), and deposits of $43 million (30 June 2013: $61 million; 31 December 2013: $31 million). The Group has an investment in subordinated debt issued by PT Bank Permata Tbk of $114 million (30 June 2013: $128 million and 31 December 2013: $114 million). 34. Statutory accounts The information in this half year report is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This document was approved by the Board on 6 August 2014. The statutory accounts for the year ended 31 December 2013 have been reported by the Company's auditors and delivered to the Registrar of Companies in England and Wales. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006. 35. Corporate governance The directors confirm that, throughout the period, the Company has complied with the code provisions set out in the Corporate Governance Code contained in Appendix 14 of the Hong Kong Listing Rules. The directors also confirm that the announcement of these results has been reviewed by the Company's Audit Committee. The Company confirms that it has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than the required standard set out in Appendix 10 of the Hong Kong Listing Rules and that the directors of the Company have complied with this code of conduct throughout the period. As previously announced Mr Richard Meddings stepped down from the Board as Group Finance Director on 30 June 2014, Mr Andy Halford was appointed as Group Finance Director on 1 July 2014 and Dr Byron Grote joined the Board as an Independent Non-Executive Director on 1 July 2014. Since 31 December 2013 the membership of a number of committees has changed resulting in a change in the emolument of a number of Independent Non-Executive Directors. A list of the committee's membership can be found at www.sc.com. In compliance with Rule 13.51B(1) of the Hong Kong Listing Rules, Mr Naguib Kheraj was appointed as a member of the Audit and Risk Committees on 1 January 2014 and to the Nomination Committee and Chairman of the Audit Committee on 1 May 2014. Mrs Christine Hodgson was appointed to the Brand and Values Committee on 1 February 2014 and to the Audit Committee on 1 May 2014. Dr Lars Thunell was appointed to the Audit Committee and Chairman of the Risk Committee on 1 April 2014 and to the Nomination Committee on 1 May 2014. Dr Byron Grote was appointed to the Audit and Brand and Values Committees with effect from 1 July 2014. The fee for sitting on the Audit, Brand and Values, Remuneration and Risk Committees is GBP 30,000 per committee, a member of the Nomination Committee receives a fee of GBP 15,000 and the fee for Chairing the Audit or Risk Committee is GBP 70,000. In compliance with Rule 13.51B (1) of the Hong Kong Listing Rules, the Company confirms that Mr Jaspal Bindra, Group Executive Director and Chief Executive Officer, Asia was appointed as an Independent Non-Executive Director of Reckitt Benckiser Group plc with effect from 1 July 2014 and that Sir John Peace, Chairman stepped down from the Board of Experian plc with effect from 16 July 2014. 36. UK and Hong Kong accounting requirements As required by the Hong Kong Listing Rules, an explanation of the differences in accounting practices between EU endorsed IFRS and Hong Kong Financial Reporting Standards is required to be disclosed. There would be no significant differences had these accounts been prepared in accordance with Hong Kong Financial Reporting Standards. EU endorsed IFRS may differ from IFRSs published by the International Accounting Standards Board if a standard has not been endorsed by the EU. Standard Chartered PLC - Statement of directors' responsibilities We confirm that to the best of our knowledge: · the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; · the interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. By order of the Board A Halford Group Finance Director 6 August 2014 Independent review report by KPMG Audit Plc to Standard Chartered PLC Introduction We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 set out on pages 97 to 151, which comprises the condensed consolidated interim balance sheet, the condensed consolidated interim income statement, the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim statement of changes in equity, the condensed consolidated interim cash flow statement, and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. John Hughes for and on behalf of KPMG Audit Plc Chartered Accountants London 6 August 2014 Standard Chartered PLC - Additional information A. Remuneration Performance and reward philosophy and principles Our approach to performance, reward and benefits supports and drives our business strategy and reinforces our values in the context of a clearly articulated risk appetite. Our approach: • supports a strong performance-oriented culture, ensuring that individual reward and incentives relate directly to: (i) the performance and behaviour of the individual (ii) the performance of the business; and (iii) the interests of shareholders • ensures a competitive reward package that reflects our international nature and enable us to attract, retain and motivate our employees • reflects the fact that many of our employees bring international experience and expertise, and we recruit from a global marketplace • encourages an appropriate mix of fixed and variable compensation based on (i) the individual's responsibility and (ii) the individual's risk profile and that of the business Total remuneration is typically delivered via a combination of base salary and benefits plus variable compensation. Consistent with our pay for performance culture, our discretionary variable compensation incentives play an integral role in enabling us to recognise and reward superior performance and behaviour that support our values. B. Group Share Plans 2011 Standard Chartered Share Plan (the '2011 Plan') Approved by shareholders in May 2011 this is the Group's main share plan, applicable to all employees with the flexibility to provide a variety of award types. The 2011 Plan is designed to deliver performance shares, deferred awards and restricted shares, giving us sufficient flexibility to meet the challenges of the changing regulatory and competitive environment. Share awards are a key part of both executive directors' and senior management's variable compensation and their significance as a proportion of total remuneration is one of the strongest indicators of our commitment to pay for sustainable performance ensuring there is an appropriate return for the risk taken and that the measure is aligned with the Group's risk appetite. Performance shares are subject to a combination of three performance measures: total shareholder return (TSR), earnings per share (EPS) and return on risk - weighted assets (RoRWA). The weighting between the three elements is split equally, one - third of the award depending on each measure, assessed independently. Performance share awards for executive directors for years up to and including 2013 are subject to an annual limit of 400 per cent of base salary in face value terms and delivered as nil cost options. Deferred awards are used to deliver the deferred portion of annual performance awards, in line with both market practice and the requirements of the PRA. For 2013 awards, these are subject to a three year deferral period, vesting equally one third on each of the first, second and third anniversaries. These awards are not subject to an annual limit to ensure that regulatory requirements relating to deferral levels can be met and in line with market practice of our competitors. Deferred awards will not be subject to any further performance criteria, although the Group's claw back policy will apply. Restricted share awards which are made as part of a buy-out are provided as restricted shares under the 2011 Plan. These awards typically vest in equal instalments on the second and the third anniversaries of the award date. In line with similar plans operated by our competitors, restricted share awards are not subject to an annual limit and do not have any performance conditions. The remaining life of the plan during which new awards can be made is seven years. 2000 Executive Share Option Scheme ('2000 ESOS') - now closed to new grants The Group previously operated the 2000 ESOS for executive directors and selected senior managers. Executive share options to purchase ordinary shares in Standard Chartered PLC were exercisable after the third, but before the tenth, anniversary of the date of grant subject to EPS performance criteria being satisfied. The exercise price per share is the share price at the date of grant. There are no outstanding awards under this plan. 2001 Performance Share Plan ('2001 PSP') - now closed to new grants The Group's previous plan for delivering performance shares was the 2001 PSP and there remain outstanding vested awards. Under the 2001 PSP half the award is dependent upon TSR performance and the balance is subject to a target of defined EPS growth. Both measures use the same three-year period and are assessed independently. 2006 Restricted Share Scheme ('2006 RSS')/ 2007 Supplementary Restricted Share Scheme ('2007 SRSS') The Group's previous plans for delivering restricted shares were the 2006 RSS and 2007 SRSS both now replaced by the 2011 Plan. There remain outstanding vested awards under these plans. Awards were generally in the form of nil cost options and do not have any performance conditions. Generally deferred restricted share awards vest equally over three years and for non-deferred awards half vests two years after the date of grant and the balance after three years. No further awards will be granted under the 2006 RSS and 2007 SRSS. All Employee Sharesave Plan (2004 International Sharesave, 2004 UK Sharesave and 2013 Sharesave) Under the Sharesave plans, employees have the choice of opening a savings contract. Within a period of six months after the third or fifth anniversary, as appropriate, employees may purchase ordinary shares in the Company at a discount of up to 20 per cent on the share price at the date of invitation. There are no performance conditions attached to options granted under the Sharesave plans. In some countries in which the Group operates, it is not possible to operate Sharesave plans, typically due to securities law and regulatory restrictions. In these countries the Group offers an equivalent cash-based plan to its employees. The 2004 Sharesave plans are now closed and no further awards will be granted under these plans. The Standard Chartered 2013 Sharesave Plan was approved by Shareholders in May 2013 and all future sharesave invitations are made under this plan. The remaining life of the 2013 Sharesave Plan is nine years. Valuation of options Details of the valuation models used in determining the fair values of options granted under the Group's share plans are detailed in the Group's 2013 Annual Report and Accounts. Reconciliation of option movements for the 6 months to 30 June 2014 2011 Plan 1 PSP 1 RSS 1 SRSS 1 ESOS2 Weighted average exercise price (£) Sharesave Weighted average exercise price (£) Performance Shares Deferred / Restricted shares Outstanding at 1 January 13,315,596 15,493,384 535,629 7,091,740 980,352 36,156 7.89 14,596,338 11.62 Granted 4,815,9793 8,322,1924 - 147,9425 - - - - - Lapsed (2,693,436) (246,168) (1,321) (172,442) (3,299) - - (2,172,978) 13.42 Exercised (827,481) (4,818,051) (248,260) (4,291,332) (261,880) (36,156) 7.89 (313,403) 10.82 Outstanding at 30 June 14,610,658 18,751,357 286,048 2,775,908 715,173 - - 12,109,957 11.31 Exercisable at 30 June 463,702 1,628,033 286,048 2,775,908 715,173 - - - - Range of exercise prices (£) - - - - - - - 10.65 to 14.63 - Intrinsic value of vested but not exercised options ($ million) 0.3 2.1 0.6 3.4 0.7 - - - - Weighted average contractual remaining life (years) 8.6 5.9 4.1 2.9 2.4 - - 1.9 - Weighted average share price for options exercised during the period (£) 12.74 12.29 12.77 12.47 12.39 12.57 - 12.99 - 1 Employers do not contribute towards the cost of these awards 2 The closing balance in the 2013 accounts was understated by 12,547 shares and the opening balance for 2014 has been restated 3 4,687,363 granted on 13 March 2014 and 128,616 granted on 18 June 2014 4 268,035 granted on 11 March 2014, 7,969,321 granted on 13 March 2014, 81,432 granted on 18 June 2014, 263 granted on 19 June 2014, 3,101 granted on 20 June 2014 and 40 granted on 22 June 2014 5 Granted on 10 March 2014 and relates to notional dividend applied to unvested portion of awards C. Non-Executive Directors' interests in ordinary shares1, 2, 3 as at 30 June 2014 At 1 January 2014 total interests Personal interests Family interests At 30 June 2014 total interests Chairman : Sir John Peace 7,543 18,185 - 18,185 Independent non-executive directors : O P Bhatt 2,000 2,000 - 2,000 Dr K M Campbell4 2,000 - - - Dr L C Y Cheung 2,000 2,000 - 2,000 J F T Dundas5 3,141 3,141 - 3,141 C Hodgson 2,000 2,000 - 2,000 N Kheraj6 - 2,000 - 2,000 S J Lowth 10,313 10,561 - 10,561 R H P Markham5 4,390 4,390 - 4,390 R Markland 3,978 4,093 - 4,093 J G H Paynter 10,000 12,500 - 12,500 Dr Han Seung-soo KBE 2,465 2,536 - 2,536 P D Skinner 16,005 16,467 - 16,467 O H J Stocken 17,915 17,915 17,915 Dr L H Thunell 6,411 6,598 - 6,598 1 The beneficial interests of directors and their families in the ordinary shares of the Company are set out above. The directors do not have any non-beneficial interests in the Company's shares 2 No director had an interest in the Company's preference shares or loan stock, nor the shares or loan stocks of any subsidiary or associated undertaking of the Group 3 No director had any corporate interests in the Company's ordinary shares 4 Shareholders approved to disapply the shareholding qualification in relation to Dr Kurt Campbell at the Company's 2014 Annual General Meeting 5 Jamie Dundas and Rudy Markham stepped down from the Board on 1 May 2014. Their total interests represent their holding as at 1 May 2014 6 Naguib Kheraj joined the Board on 1 January 2014 Share awards Sharesave Director Plan Grant date As at 1 January 2014 Exercise Price (Pence) Exercised Lapsed As at 30 June 2014 Period of exercise P A Sands Sharesave 01-Oct-12 789 1,140 - - 789 2015-2016 S P Bertamini1 Sharesave 09-Oct-09 1,405 1,104 - - 1,405 2014-2015 J S Bindra Sharesave 09-Oct-09 1,407 1,104 - - 1,407 2014-2015 R H Meddings2 Sharesave 04-Oct-10 614 1,463 - 614 - 2013-2014 R H Meddings3 Sharesave 09-Oct-13 764 1,178 - 764 - 2016-2017 1 Steve Bertamini stepped down from the Board on 31 March 2014. Figures shown are as at 31 March 2014 2 The Group's share price remained below the 2010 Sharesave exercise price throughout the six month exercise period. Unexercised awards lapsed and savings contributions were returned following the end of the exercise period 3 Richard Meddings stepped down from the Board on 30 June 2014. Savings contract terminated and savings returned following withdrawal from the Plan Share awards continued Scheme interest awarded during the year Director Scheme Face Value (GBP)1 Percentage vesting at threshold2 Number of shares3,4 Performance period end date5 P A Sands PSA 2,504,517 30% 201,166 31-Dec-16 DRSA 905,240 100% 72,710 N/A S P Bertamini6 PSA 1,291,488 30% 103,734 31-Dec-16 DRSA 452,620 100% 36,355 N/A J S Bindra PSA 1,363,910 30% 109,551 31-Dec-16 DRSA 506,939 100% 40,718 N/A R H Meddings7 PSA 1,689,789 30% 135,726 31-Dec-16 DRSA 624,617 100% 50,170 N/A A M G Rees PSA 2,413,993 30% 193,895 31-Dec-16 DRSA 2,353,648 100% 189,048 N/A V Shankar PSA 1,538,920 30% 123,608 31-Dec-16 DRSA 539,521 100% 43,335 N/A 1 Face value calculated based on share value at date of grant 13 March 2014 GBP 12.45 2 DRSA are not subject to performance conditions 3 DRSA are subject to notional dividend payments at the date of vesting 4 DRSA were awarded in respect of 2013 performance and part of 2013 total variable compensation decisions disclosed in the 2013 Annual Report and Accounts 5 PSA are exercisable between 2017 and 2024 and DRSA are exercisable between 2015 and 2021with the exception of Steve Bertamini whose conditional rights are automatically exercised on vesting 6 Steve Bertamini stepped down from the Board on 31 March 2014 7 Richard Meddings stepped down from the Board on 30 June 2014 Executive Directors' Shareholdings Additional shares from unvested awards Director Shareholding Requirement as at 30 June 2014 Shares held beneficially as at 30 June 20141 Met requirements as at 30 June 2014 Fixed Pay Allowance Shares beneficially held2 Vested but unexercised awards as at 30 June 2014 Subject to deferral but not performance conditions Subject to performance conditions P A Sands 250,000 293,846 Met 14,621 - 150,269 626,622 S P Bertamini3 120,000 126,490 Met - - 79,049 373,656 J S Bindra 150,000 187,0954 Met 12,257 - 82,529 329,856 R H Meddings5 120,000 132,686 Met - 48,022 103,353 425,355 A M G Rees 200,000 200,835 Met 13,292 56,197 410,646 537,129 V Shankar 150,000 150,539 Met 14,421 - 100,483 323,355 1 Excludes shares received from Fixed Pay Allowance 2 Fixed Pay Allowance Shares are beneficially held by each Director but do not count immediately for the purposes of the meeting their shareholding requirement 3 Steve Bertamini stepped down from the Board on 31 March 2014. Figures shown are as at 31 March 2014 4 153,000 of these shares are subject to a charge from 28 December 2011 5 Richard Meddings stepped down from the Board on 30 June 2014. Figures shown are as at 30 June 2014 D. Share price information The middle market price of an ordinary share at the close of business on 30 June 2014 was 1,194 pence. The share price range during the first half of 2014 was 1,184.50 pence to 1,360 pence (based on the closing middle market prices). E. Substantial shareholders The Company and its shareholders have been granted partial exemption from the disclosure requirements under Part XV of the Securities and Futures Ordinance (SFO). As a result of this exemption, shareholders no longer have an obligation under the SFO to notify the Company of substantial shareholding interests, and the Company is no longer required to maintain a register of interests of substantial shareholders under section 336 of the SFO. The Company is, however, required to file with The Stock Exchange of Hong Kong Limited any disclosure of interests made in the UK. F. Code for Financial Reporting Disclosure The British Bankers' Association Code for Financial Reporting Disclosure sets out five disclosure principles together with supporting guidance. The principles are that UK banks will: provide high quality, meaningful and decision useful disclosures; review and enhance their financial instrument disclosures for key areas of interest; assess the applicability and relevance of good practice recommendations to their disclosures acknowledging the importance of such guidance; seek to enhance the comparability of financial statement disclosures across the UK banking sector; and clearly differentiate in their annual reports between information that is audited and information that is unaudited. The Group's interim financial statements for the six months ended 30 June 2014 have been prepared in accordance with the Code's principles. G. Shareholder information 2014 interim dividend Ex-dividend date 13 August 2014 Record date for dividend 15 August 2014 Dividend payment date 20 October 2014 2014 final dividend (provisional only) Results and dividend announcement date 3 March 2015 Preference shares Next half-yearly dividend 7 3/8 per cent Non-Cumulative Irredeemable preference shares of £1 each 1 October 2014 8 ¼ per cent Non-Cumulative Irredeemable preference shares of £1 each 1 October 2014 6.409 per cent Non-Cumulative preference shares of $5 each 30 July 2014 7.014 per cent Non-Cumulative preference shares of $5 each 30 July 2014 Previous dividend payments (not adjusted for rights issue) Dividend and financial year Payment date Dividend per ordinary share Cost of one new ordinary share under the share dividend scheme Interim 2003 10 October 2003 15.51c/9.3625p/HK$1.205 £8.597/$14.242 Final 2003 14 May 2004 36.49c/20.5277p/HK$2.8448 £8.905/$15.830 Interim 2004 8 October 2004 17.06c/9.4851p/HK$1.3303 £9.546/$17.16958 Final 2004 13 May 2005 40.44c/21.145p/HK$3.15156 £9.384/$17.947 Interim 2005 14 October 2005 18.94c/10.7437p/HK$1.46911 £11.878/$21.3578 Final 2005 12 May 2006 45.06c/24.9055p/HK$3.49343 £14.2760/$24.77885 Interim 2006 11 October 2006 20.83c/11.14409p/HK$1.622699 £13.2360/$25.03589 Final 2006 11 May 2007 50.21c/25.17397p/HK$3.926106 £14.2140/$27.42591 Interim 2007 10 October 2007 23.12c/11.39043p/HK$1.794713 £15.2560/$30.17637 Final 2007 16 May 2008 56.23c/28.33485p/HK$4.380092 £16.2420/$32.78447 Interim 2008 9 October 2008 25.67c/13.96133p/HK$1.995046 £14.00/$26.0148 Final 2008 15 May 2009 42.32c/28.4693p/HK$3.279597 £8.342/$11.7405 Interim 2009 8 October 2009 21.23c/13.25177p/HK$1.645304 £13.876/$22.799 Final 2009 13 May 2010 44.80c/29.54233p/HK$3.478306 £17.351/$26.252 Interim 2010 5 October 2010 23.35c/14.71618p/HK$1.811274/INR0.984124 £17.394/$27.190 Final 2010 11 May 2011 46.45c/28.2725p/HK$3.623404/INR1.9975170 £15.994/$25.649 Interim 2011 7 October 2011 24.75c/15.81958125p/HK$1.928909813/INR1.13797125 £14.127/$23.140 Final 2011 15 May 2012 51.25c/31.63032125p/HK$3.9776083375/INR2.6667015 £15.723/$24.634 Interim 2012 11 October 2012 27.23c/16.799630190p/HK$2.111362463/INR1.349803950 £13.417/$21.041 Final 2012 14 May 2013 56.77c/36.5649893p/HK$4.4048756997/INR2.976283575 £17.40/$26.28792 Interim 2013 17 October 2013 28.80c/17.8880256p/HK$2.233204992/INR1.6813 £15.362/$24.07379 Final 2013 14 May 2014 57.20c/33.9211444p/HK$4.43464736/INR3.354626 £11.949/$19.815 * The INR dividend is per Indian Depository Receipt ShareCare ShareCare is available to shareholders on the Company's UK register who have a UK address and bank account, and allows you to hold your Standard Chartered shares in a nominee account. Your shares will be held in electronic form so you will no longer have to worry about keeping your share certificates safe. If you join ShareCare you will still be invited to attend the Company's AGM and you will still receive your dividend at the same time as everyone else. ShareCare is free to join and there are no annual fees to pay. If you would like to receive more information please visit our website at: http://investors.sc.com/en/resource.cfm or contact the shareholder helpline on 0870 702 0138. Donating shares to ShareGift Shareholders who have a small number of shares often find it uneconomical to sell them. An alternative is to consider donating them to the charity ShareGift (registered charity 1052686), which collects donations of unwanted shares until there are enough to sell and uses the proceeds to support UK charities. Further information can be obtained from the Company's Registrars or from ShareGift on 020 7930 3737 or from www.sharegift.org. There is no implication for Capital Gains Tax (no gain no loss) when you donate shares to charity and UK tax payers may be able to claim income tax relief on the value of their donation. Bankers' Automated Clearing System (BACS) Dividends can be paid straight into your bank or building society account. Please register online at www.investorcentre.co.uk or contact our registrar for a mandate form. Registrars and shareholder enquiries If you have any enquiries relating to your shareholding and you hold your shares on the United Kingdom register, please contact our registrar Computershare Investor Services PLC at The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ, or contact the shareholder helpline on 0870 702 0138. If you hold your shares on the Hong Kong branch register and you have enquiries, please contact Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong. You can check your shareholding at: www.computershare.com/hk/investors. If you hold Indian Depository Receipts and you have enquiries, please contact Karvy Computershare Private Limited, 17-24, Vithalrao Nagar, Madhapur, Hyderabad 500 001, India. Chinese translation If you would like a Chinese version of this Half year report, please contact: Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong. 本半年報告之中文譯本可向香港中央證券登記有限公司索取，地址：香港灣仔皇后大道東183號合和中心17M樓。 Shareholders on the Hong Kong branch register who have asked to receive corporate communications in either Chinese or English can change this election by contacting Computershare. If there is a dispute between any translation and the English version of this Half year report, the English text shall prevail. Taxation Information on taxation applying to dividends paid to you if you are a shareholder in the United Kingdom, Hong Kong and the United States will be sent to you with your dividend documents. H. Convenience translation of selected financial statements into Indian Rupees In compliance with clause 37(3) of Indian Depository Receipts Listing agreement, the condensed consolidated interim financial statements on pages 97 to 101 are presented in Indian rupees (INR) using a US dollar / Indian rupee exchange rate of 60.0933 as at 30 June 2014 as published by Reserve Bank of India. Amounts have been translated using the said exchange rate including totals and sub-totals and any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Condensed consolidated interim income statement (Translated to INR) For the six months ended 30 June 2014 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 Rs. million Rs. million Rs. million Interest income 516,983 535,672 521,550 Interest expense (180,220) (199,269) (187,551) Net interest income 336,763 336,402 333,999 Fees and commission income 137,253 140,498 134,789 Fees and commission expense (13,401) (14,603) (14,242) Net trading income 57,329 101,257 49,817 Other operating income 38,159 36,657 23,797 Non-interest income 219,341 263,810 194,161 Operating income 556,103 600,212 528,160 Staff costs (207,562) (204,137) (190,676) Premises costs (26,501) (25,600) (27,102) General administrative expenses (52,582) (51,680) (70,429) Depreciation and amortisation (18,809) (21,093) (21,814) Operating expenses (305,454) (302,510) (310,021) Operating profit before impairment losses and taxation 250,649 297,702 218,139 Impairment losses on loans and advances and other credit risk provisions (50,839) (43,868) (53,303) Other impairment Goodwill impairment - (60,093) - Other (11,117) (661) (7,091) Profit from associates and joint ventures 6,791 6,730 6,851 Profit before taxation 195,484 199,810 164,596 Taxation (51,019) (65,442) (46,572) Profit for the period 144,464 134,369 118,023 Profit attributable to: Non-controlling interests 2,644 3,305 3,305 Parent company shareholders 141,820 131,063 114,718 Profit for the period 144,464 134,369 118,023 Rupees Rupees Rupees Earnings per share: Basic earnings per ordinary share 56.8 52.9 46.0 Diluted earnings per ordinary share 56.5 52.5 45.5 Dividends per ordinary share: Interim dividend declared 17.31 - - Interim dividend paid - 17.31 - Final dividend paid - - 34.37 Rs. million Rs. million Rs. million Total dividend: Total interim dividend payable 42,666 - - Total interim dividend (paid 17 October 2013) - 41,825 - Total final dividend (paid 15 May 2014) - - 83,229 Condensed consolidated interim statement of comprehensive income (Translated to INR) For the six months ended 30 June 2014 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 Rs.million Rs.million Rs.million Profit for the period 144,464 134,369 118,023 Other comprehensive income : Items that will not be reclassified to Income statement: Actuarial (losses)/gains on retirement benefit obligations (4,207) 2,644 2,103 Items that may be reclassified subsequently to Income statement: Exchange differences on translation of foreign operations: Net gains/(losses) taken to equity 21,513 (66,824) (5,649) Net (losses)/gains on net investment hedges (3,485) 4,868 (6,971) Share of other comprehensive income from associates and joint ventures 361 (180) (721) Available-for-sale investments: Net valuation gains/(losses) taken to equity 16,706 (6,911) 17,187 Reclassified to income statement (14,963) (12,620) (2,284) Cash flow hedges: Net gains/(losses) taken to equity 4,026 (9,675) 4,687 Reclassified to income statement 180 (120) 481 Taxation relating to components of other comprehensive income (1,803) 3,846 (1,803) Other comprehensive income for the period, net of taxation 18,328 (84,972) 7,031 Total comprehensive income for the period 162,793 49,397 125,054 Total comprehensive income attributable to: Non-controlling interests 1,743 2,344 2,404 Parent company shareholders 161,050 47,053 122,650 162,793 49,397 125,054 Condensed consolidated interim balance sheet (Translated to INR) As at 30 June 2014 30.06.14 30.06.13 31.12.13 Rs.million Rs.million Rs.million Assets Cash and balances at central banks 3,736,722 3,462,636 3,277,128 Financial assets held at fair value through profit or loss 2,193,225 1,690,725 1,762,837 Derivative financial instruments 2,890,788 3,277,969 3,713,886 Loans and advances to banks 5,247,587 4,405,139 5,029,929 Loans and advances to customers 17,980,456 17,147,803 17,469,603 Investment securities 6,063,835 5,697,566 6,172,543 Other assets 2,228,500 2,286,009 2,017,332 Current tax assets 17,427 11,898 14,062 Prepayments and accrued income 168,682 161,471 150,834 Interests in associates and joint ventures 116,100 109,310 106,185 Goodwill and intangible assets 372,578 357,134 364,766 Property, plant and equipment 418,670 406,171 414,824 Deferred tax assets 38,099 44,229 31,789 Total assets 41,472,670 39,058,061 40,525,720 Liabilities Deposits by banks 2,955,929 2,704,920 2,615,080 Customer accounts 22,872,051 22,313,484 22,899,513 Financial liabilities held at fair value through profit or loss 1,617,471 1,349,455 1,383,949 Derivative financial instruments 2,871,558 3,231,878 3,679,873 Debt securities in issue 4,282,970 3,526,876 3,881,366 Other liabilities 2,043,533 1,725,819 1,642,831 Current tax liabilities 69,828 77,280 63,098 Accruals and deferred income 309,721 253,113 280,516 Subordinated liabilities and other borrowed funds 1,483,764 1,105,296 1,225,723 Deferred tax liabilities 13,100 10,697 10,576 Provisions for liabilities and charges 6,130 8,834 6,430 Retirement benefit obligations 28,364 24,698 21,934 Total liabilities 38,554,419 36,332,349 37,710,889 Equity Share capital 74,215 72,833 72,953 Reserves 2,826,909 2,617,424 2,706,121 Total parent company shareholders' equity 2,901,124 2,690,257 2,779,075 Non-controlling interests 17,127 35,455 35,756 Total equity 2,918,251 2,725,712 2,814,830 Total equity and liabilities 41,472,670 39,058,061 40,525,720 Condensed consolidated interim statement of changes in equity (Translated to INR) For the six months ended 30 June 2014 Share capital Share premium account Capital and Capital redemption reserve1 Merger reserve Available -for-sale reserve Cash flow hedge reserve Translation reserve Retained earnings Parent company shareholders equity Non-controlling interests Total Rs.million Rs.million Rs.million Rs.million Rs.million Rs.million Rs.million Rs.million Rs.million Rs.million Rs.million At 1 January 2013 72,533 329,071 1,082 746,419 28,725 4,868 (53,183) 1,596,439 2,725,952 41,645 2,767,597 Profit for the period - - - - - - - 131,063 131,063 3,305 134,369 Other comprehensive income - - - - (16,646) (7,932) (61,475) 2,0432 (84,010) (961) (84,972) Distributions - - - - - - - - - (2,284) (2,284) Shares issued, net of expenses 240 1,022 - - - - - - 1,262 - 1,262 Net own shares adjustment - - - - - - - (7,752) (7,752) - (7,752) Share option expense, net of taxation - - - - - - - 6,190 6,190 - 6,190 Capitalised on scrip dividend 60 (60) - - - - - - - - - Dividends, net of scrip - - - - - - - (82,448) (82,448) - (82,448) Other decreases3 - - - - - - - - - (6,250) (6,250) At 30 June 2013 72,833 330,032 1,082 746,419 12,079 (3,065) (114,658) 1,645,535 2,690,257 35,455 2,725,712 Profit for the period - - - - - - - 114,718 114,718 3,305 118,023 Other comprehensive income - - - - 14,723 3,966 (11,898) 1,1422 7,932 (901) 7,031 Distributions - - - - - - - - - (2,344) (2,344) Shares issued, net of expenses 60 120 - - - - - - 180 - 180 Net own shares adjustment - - - - - - - 300 300 - 300 Share option expense, net of taxation - - - - - - - 8,233 8,233 - 8,233 Capitalised on scrip dividend 60 (60) - - - - - - - - - Dividends, net of scrip - - - - - - - (41,825) (41,825) - (41,825) Other (decreases)/increases - - - - - - - (721) (721) 240 (481) At 31 December 2013 72,953 330,092 1,082 746,419 26,802 901 (126,556) 1,727,382 2,779,075 35,756 2,814,830 Profit for the period - - - - - - - 141,820 141,820 2,644 144,464 Other comprehensive income - - - - (300) 3,546 19,410 (3,425)2 19,230 (901) 18,328 Distributions - - - - - - - - - (2,824) (2,824) Shares issued, net of expenses 180 361 - - - - - - 541 - 541 Net own shares adjustment - - - - - - - (5,348) (5,348) - (5,348) Share option expense, net of taxation - - - - - - - 8,113 8,113 - 8,113 Capitalised on scrip dividend 1,082 (1,082) - - - - - - - - - Dividends, net of scrip - - - - - - - (43,147) (43,147) - (43,147) Other increases/(decreases)4 - - - - - - - 841 841 (17,547) (16,706) At 30 June 2014 74,215 329,371 1,082 746,419 26,501 4,447 (107,146) 1,826,235 2,901,124 17,127 2,918,251 1 Includes capital reserve of Rs.300 million and capital redemption reserve of Rs.781 million 2 For the period ended 30 June 2014, comprises actuarial loss, net of taxation and non-controlling interests of Rs.3,425 million (30 June 2013: gain of Rs.2,223 million and 31 December 2013:gain of Rs 1,262 million) and share of comprehensive income from associates and joint ventures of Rs.nil million (30 June 2013: Rs.(180) million and 31 December 2013: Rs.(120) million) 3 Relate to the impact of losing control in a subsidiary after divesting from the company 4 Relate to the redemption of $300 million 7.267% Hybrid Tier 1 securities issued by Standard Chartered Bank Korea Limited Condensed consolidated interim cash flow statement (Translated to INR) For the six months ended 30 June 2014 6 months ended 6 months ended 6 months ended 30.06.14 30.06.13 31.12.13 Rs.million Rs.million Rs.million Cash flows from operating activities Profit before taxation 195,484 199,810 164,596 Adjustments for: Non-cash items and other adjustments included within income statement 92,544 122,650 124,994 Change in operating assets (61,536) (2,149,537) (503,221) Change in operating liabilities 470,831 1,619,034 1,100,308 Contributions to defined benefit schemes (1,502) (4,627) (5,468) UK and overseas taxes paid (49,998) (50,238) (52,882) Net cash from/(used in) operating activities 645,823 (262,908) 828,326 Net cash flows from investing activities Purchase of property, plant and equipment (4,447) (5,348) (6,971) Disposal of property, plant and equipment 1,262 3,245 6,130 Acquisition of associates and joint ventures, net of cash acquired - - (2,764) Purchase of investment securities (5,619,986) (4,377,136) (4,209,476) Disposal and maturity of investment securities 5,795,999 4,496,661 3,745,916 Dividends received from associates and joint ventures 661 240 60 Net cash from/(used in) investing activities 173,489 117,663 (467,105) Net cash flows from financing activities Issue of ordinary and preference share capital, net of expenses 541 1,262 180 Purchase of own shares (6,310) (9,254) - Exercise of share options through ESOP 961 1,502 300 Interest paid on subordinated liabilities (31,849) (29,566) (19,290) Gross proceeds from issue of subordinated liabilities 243,738 165,257 162,132 Repayment of subordinated liabilities (17,127) (101,498) (55,706) Repayment to non-controlling interests (18,028) (6,250) - Interest paid on senior debts (24,518) (30,047) (3,786) Gross proceeds from issue of senior debts 203,957 255,517 154,079 Repayment of senior debts (255,697) (144,584) (79,564) Dividends paid to non-controlling interests and preference shareholders, net of scrip (5,829) (5,288) (5,408) Dividends paid to ordinary shareholders, net of scrip (40,142) (79,443) (38,760) Net cash from financing activities 49,697 17,607 114,177 Net increase/(decrease) in cash and cash equivalents 869,009 (127,638) 475,398 Cash and cash equivalents at beginning of the period 5,057,212 4,778,499 4,596,597 Effect of exchange rate movements on cash and cash equivalents 13,461 (54,264) (14,783) Cash and cash equivalents at end of the period 5,939,682 4,596,597 5,057,212 I. Summary of significant differences between Indian GAAP and IFRS The consolidated financial statements of the Group for the period ended 30 June 2014 with comparatives as at 30 June 2013 and 31 December 2013 are prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the European Union. IFRS differs in certain significant respects from Indian Generally Accepted Accounting Principles (GAAP). Such differences involve methods for measuring the amounts shown in the financial statements of the Group, as well as additional disclosures required by Indian GAAP. Set out below are descriptions of certain accounting differences between IFRS and Indian GAAP that could have a significant effect on profit attributable to parent company shareholders for the period ended 30 June 2014, 31 December 2013 and 30 June 2013 and total parent company shareholders' equity as at the same date. This section does not provide a comprehensive analysis of such differences. In particular, this description considers only those Indian GAAP pronouncements for which adoption or application is required in financial statements for period ended on or prior to 30 June 2014. The Group has not quantified the effect of differences between IFRS and Indian GAAP, nor prepared consolidated financial statements under Indian GAAP, nor undertaken a reconciliation of IFRS and Indian GAAP financial statements. Had the Group undertaken any such quantification or preparation or reconciliation, other potentially significant accounting and disclosure differences may have come to its attention which are not identified below. Accordingly, the Group does not provide any assurance that the differences identified below represent all the principal differences between IFRS and Indian GAAP relating to the Group. Furthermore, no attempt has been made to identify future differences between IFRS and Indian GAAP. In making an investment decision, potential investors should consult their own professional advisers for an understanding of the differences between IFRS and Indian GAAP and how those differences may have affected the financial results of the Group. The summary does not purport to be complete and is subject and qualified in its entirety by reference to the pronouncements of the International Accounting Standards Board (IASB), together with the pronouncements of the Indian accounting profession. Changes in accounting policy IFRS (IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors) Changes in accounting policy are applied retrospectively. Comparatives are restated and the effect of period(s) not presented is adjusted against opening retained earnings of the earliest year presented. Policy changes made on the adoption of a new standard are made in accordance with that standard's transitional provisions. Indian GAAP (AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies) The cumulative amount of the change is included in the income statement for the period in which the change is made except as specified in certain standards (transitional provision) where the change during the transition period resulting from adoption of the standard has to be adjusted against opening retained earnings and the impact disclosed. Where a change in accounting policy has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such an amount is not ascertainable this fact should be indicated. Functional and presentation currency IFRS (IAS 21 The Effects of Changes in Foreign Exchange Rates) An entity may present its financial statements in any currency (or currencies). If the presentation currency differs from the entity's functional currency, it translates its results and financial position into the presentation currency. Assets and liabilities are translated at the closing rate at the date of that statement of financial position. Income statement items are translated at the exchange rate at the date of transaction or at average rates. The functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the Group is US dollars. Indian GAAP (AS 11 The Effects of Changes in Foreign Exchange Rates) There is no concept of functional or presentation currency. Entities in India have to prepare their financial statements in Indian rupees. Consolidation IFRS (IFRS 10 Consolidation of Financial Statements) Entities are consolidated when the Group controls an entity. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. This includes entities where control is not derived through voting rights such as structured entities. Indian GAAP (AS 21 Consolidated Financial Statements) Guidance is based on the power through the ability to govern the financial and operating policies of an entity so as to obtain benefits while not taking into consideration potential voting rights. Indian GAAP (Consolidated of Structured Entities) No specific guidance. I. Summary of significant differences between Indian GAAP and IFRS continued Business combinations IFRS (IFRS 3 Business Combinations) All business combinations are treated as acquisitions. Assets, liabilities and contingent liabilities acquired are measured at their fair values. Pooling of interest method is prohibited. For acquisitions occurring on or after 1 January 2004, IFRS 3 'Business Combinations' (IFRS 3) requires that, when assessing the value of the assets of an acquired entity, certain identifiable intangible assets must be recognised and if considered to have a finite life, amortised through the income statement over an appropriate period. As the Group has not applied IFRS 3, or its predecessor IAS 22, to transactions that occurred before 1 January 2004, no intangible assets, other than goodwill, were recognised on acquisitions prior to that date. Adjustments to provisional fair values are permitted provided those adjustments are made within 12 months from the date of acquisition, with a corresponding adjustment to goodwill. After re-assessment of respective fair values of net assets acquired, any excess of acquirer's interest in the net fair values of acquirer's identifiable assets is recognised immediately in the income statement. Where less than 100 per cent of an entity is acquired, non-controlling interests are stated at their proportion of the fair value of the identifiable net assets and contingent liabilities acquired. Indian GAAP (AS 14 Accounting for Amalgamations) Treatment of a business combination depends on whether the acquired entity is held as a subsidiary, whether it is an amalgamation or whether it is an acquisition of a business. For an entity acquired and held as a subsidiary, the business combination is accounted for as an acquisition. The assets and liabilities acquired are incorporated at their existing carrying amounts. For an amalgamation of an entity, either pooling of interests or acquisition accounting may be used. The assets and liabilities amalgamated are incorporated at their existing carrying amounts or, alternatively, if acquisition accounting is adopted, the consideration can be allocated to individual identifiable assets (which may include intangible assets) and liabilities on the basis of their fair values. Adjustments to the value of acquired or amalgamated balances are not permitted after initial recognition. Any excess of acquirer's interest in the net fair values of acquirer's identifiable assets is recognised as capital reserve, which is neither amortised nor available for distribution to shareholders. However, in case of an amalgamation accounted under the purchase method, the fair value of intangible assets with no active market is reduced to the extent of capital reserve, if any, arising on the amalgamation. Minority interests arising on the acquisition of a subsidiary are recognised at their share of the historical book value. Goodwill IFRS (IFRS 3 Business Combinations and IAS 38 Intangible Assets) IFRS 3 requires that goodwill arising on all acquisitions by the Group and associated undertakings is capitalised but not amortised and is subject to an annual review for impairment. Under the transitional provisions of IFRS 1, the Group has not applied IFRS 3, or its predecessor IAS 22, to transactions that occurred before 1 January 2004, the date of transition to IFRS. Accordingly, goodwill previously written off to reserves, as permitted under UK GAAP until the implementation of FRS 10 'Goodwill and intangible assets' in 1998, has not been reinstated nor will it be written back on disposal. Amortisation of goodwill that has been charged up to 31 December 2003 has not been reversed and the deemed carrying value of the goodwill on transition to IFRS is equal to the net book value as at 31 December 2003. Goodwill is tested annually for impairment. Any impairment losses recognised may not be reversed in subsequent accounting periods. Indian GAAP (AS 14 Accounting for Amalgamations and AS 26 Intangible Assets) Goodwill arising for amalgamations is capitalised and amortised over useful life not exceeding five years, unless a longer period can be justified. For goodwill arising on acquisition of a subsidiary or a business, there is no specific guidance - in practice there is either no amortisation or amortisation not exceeding 10 years. Goodwill is reviewed for impairment whenever an indicator of impairment exists. Impairment losses recognised may be reversed under exceptional circumstances only in subsequent accounting periods through the income statement. Acquired and internally generated intangible assets IFRS (IAS 38 Intangible Assets) Intangible assets are recognised if the specific criteria are met. Assets with a finite useful life are amortised on a systematic basis over their useful life. An asset with an indefinite useful life and which is not yet available for use should be tested for impairment annually. Indian GAAP (AS 26 Intangible Assets) Intangible assets are capitalised if specific criteria are met and are amortised over their useful life, generally not exceeding 10 years. The recoverable amount of an intangible asset that is not available for use or is being amortised over a period exceeding 10 years should be reviewed at least at each financial year-end even if there is no indication that the asset is impaired. I. Summary of significant differences between Indian GAAP and IFRS continued Property, plant and equipment IFRS (IAS 16 Property, Plant and Equipment, IAS 23 Borrowing Costs and IAS 39 Financial instruments - recognition and measurement) Fixed assets are recorded at cost or revalued amounts. Under the transition rules of IFRS 1, the Group elected to freeze the value of all its properties held for its own use at their 1 January 2004 valuations, their 'deemed cost' under IFRS. They will not be revalued in the future. Foreign exchange gains or losses relating to the procurement of property, plant and equipment, under very restrictive conditions, can be capitalised as part of the asset. Depreciation is recorded over the asset's estimated useful life. The residual value and the useful life of an asset and the depreciation method shall be reviewed at least at each financial year-end. The Group has the option to capitalise borrowing costs incurred during the period that the asset is getting ready for its intended use. Indian GAAP (AS 10 Fixed Assets, AS 16 Borrowing Cost and AS 6 Depreciation Accounting) Fixed assets are recorded at historical costs or revalued amounts. Relevant borrowing costs are capitalised if certain criteria in AS-16 are met. Depreciation is recorded over the asset's useful life. Schedule II (Part C) of the Companies Act 2013 and Banking Regulations prescribe minimum rates of depreciation and these are typically used as the basis for determining useful life. Recognition and measurement of financial instruments IFRS (IAS 39 Financial Instruments: Recognition and Measurement) IAS 39 requires all financial instruments to be initially measured at their fair value, which is usually to be the transaction price. In those cases where the initial fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immediately in the income statement but is amortised to the income statement until the inputs become observable, the transaction matures or is terminated. At the time of initial recognition, IAS 39 requires all financial assets to be classified as either: • Held at fair value through profit or loss (as a trading instrument or as designated by management), with realised and unrealised gains or losses reflected in profit or loss • Available for-sale at fair value, with unrealised gains and losses reflected in shareholders' equity, and recycled to the income statement when the asset is sold or is impaired • Held-to-maturity at amortised cost, where there is the intent and the ability to hold them to maturity • As loans and receivables at amortised cost At the time of initial recognition, IAS 39 requires all financial liabilities to be classified as either: • Held at fair value through profit or loss (as a trading instrument or as designated by management), with realised and unrealised gains or losses reflected in profit or loss • At amortised cost A financial asset or financial liability, other than one held for trading, can be designated as being held at fair value through profit or loss if it meets the criteria set out below: • The designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis • A group of financial assets and/or liabilities is managed and its performance evaluated on a fair value basis, or • Assets or liabilities include embedded derivatives and such derivatives are not recognised separately The designation of a financial instrument as held at fair value through profit or loss is irrevocable in respect of the financial instruments to which it relates. Subsequent to initial recognition instruments cannot be classified into or out of this category. Changes in the fair value of available for sale financial assets resulting from movements in foreign currency exchange rates are included in the income statement as exchange differences. Foreign currency exchange movements for available for sale equity securities is recognised in reserves. For banks, there is guidance on measurement and accounting of IRS and FRA entered onto for hedging purposes. Indian GAAP (AS 13 Investments) AS 13 requires Investments to be categorised as follows: • Current investments, which are those readily realisable and intended to be held for less than one year, are carried at the lower of cost and fair value, with changes in fair value taken directly to profit or loss; • Long term investments, which are those investments not classified as current, are carried at cost unless there is a permanent diminution in value, in which case a provision for diminution is required to be made by the entity. For investments, Reserve Banking India (RBI) outlines similar classifications to IFRS, but the classification criteria and measurement requirements differ from those set out in IFRS. Financial liabilities are usually carried at cost. There is no ability to designate instruments at fair value. AS 30 provides guidance on classification criteria and measurement requirements, however this is not mandatory. I. Summary of significant differences between Indian GAAP and IFRS continued Derivatives IFRS (IAS 39 Financial Instruments: Recognition and Measurement) IAS 39 requires that all derivatives be recognised on balance sheet at fair value. Changes in the fair value of derivatives that are not hedges are reported in the income statement. Changes in the fair value of derivatives that are designated as hedges are either offset against the change in fair value of the hedged asset or liability through earnings or recognised directly in equity until the hedged item is recognised in earnings, depending on the nature of the hedge. The ineffective portion of the hedge's change in fair value is immediately recognised in earnings. A derivative may only be classified as a hedge if an entity meets stringent qualifying criteria in respect of documentation and hedge effectiveness. IAS 39 requires the separation of derivatives embedded in a financial instrument if it is not deemed to be closely related to the economic characteristics of the underlying host instrument. Indian GAAP Foreign exchange contracts held for trading or speculative purposes are carried at fair value, with gains and losses recognised in the income statement. In the absence of specific guidance, equity options are carried at the lower of cost or market value. There is no specific guidance on hedge accounting since Accounting Standard 30 is not mandatory. However, requirements of AS 30 with respect to hedge accounting are largely similar to that of IAS 39. Impairment of financial assets IFRS (IAS 39 Financial Instruments: Recognition and Measurement) At each balance sheet date, an assessment is made as to whether there is any objective evidence of impairment. A financial asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment. Assets held at amortised cost If objective evidence of impairment exists, an assessment is made to determine what, if any, impairment loss should be recognised. The impairment loss is the difference between the asset's carrying amount and its estimated recoverable amount. The recoverable amount is determined based on the present value of expected future cash flows, discounted at the instrument's original effective interest rate, either individually or collectively. Individually assessed assets for which there is no objective evidence of impairment are collectively assessed for impairment. Available-for-sale assets If objective evidence of impairment exists, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any previously recognised impairment) is removed from equity and recognised in the income statement. Market recoveries leading to a reversal of an impairment provision for available-for-sale debt securities are recognised in the income statement. Impairment losses for equity instruments classified as available-for-sale are not permitted to be reversed through profit or loss. Indian GAAP (AS 13 Investments) Held to maturity (HTM) investments are written down when there is a decline in fair value which is deemed to be other than temporary. Impairments may be reversed through the income statement in subsequent periods if the investment rises in value, or the reasons for the impairment no longer exist. In accordance with RBI regulations, in respect of Available for sale (AFS) investments, impairments are required to be reversed through Investment Reserve Account (equity reserve) if the investment rises in value or the reasons for the impairment no longer exist. For loans and advances, the RBI regulations additionally require banks to hold provisions in respect of standard assets and for specific country risk exposures. Derecognition of financial assets IFRS (IAS 39 Financial Instruments: Recognition and Measurement) A financial asset is derecognised if substantially all the risks and rewards of ownership have been transferred. If substantially all the risks and rewards have not been transferred, the asset will continue to be recognised to the extent of any continuing involvement. Indian GAAP (RBI Guidelines on Securitisation of Standard Assets) There is limited guidance on derecognition of financial assets. Securitised financial assets can only be derecognised if the originator has surrendered control over the assets. Control is not surrendered where the securitised assets are not beyond the reach of the creditors of the originator or where the transferee does not have the right to pledge, sell, transfer or exchange the securitised asset for its own benefit, or where there is an option entitles the originator to repurchase the financial assets transferred under a securitisation transaction from the transferee. I. Summary of significant differences between Indian GAAP and IFRS continued Liabilities and equity IFRS (IAS 39 Financial Instruments: Recognition and Measurement) A financial instrument is classified as a liability where there is a contractual obligation to deliver either cash or another financial asset to the holder of that instrument, regardless of the manner in which the contractual obligation will be settled. Preference shares, which carry a mandatory coupon or are redeemable on a specific date or at the option of the shareholder are classified as financial liabilities and are presented in other borrowed funds. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis using the effective interest method. Indian GAAP Classification is based on the legal form rather than substance. Provisions for liabilities and charges IFRS (IAS 37 Provisions, Contingents Liabilities and Contingent Assets) The amount recognised as a provision is the best estimate at the balance sheet date of the expenditure required to settle the obligation, discounted using a pre-tax market discount rate if the effect is material. Indian GAAP (AS 29 Provisions, Contingents Liabilities and Contingent Assets) Provisions are recognised and measured on a similar basis to IFRS, except that discounting is not permitted. Pension obligations IFRS (IAS 19 Employee Benefits) The discount rate to be used for determining defined benefit obligations is established by reference to market yields at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of the post employment benefit obligations. Actuarial gains or losses are recognised in "Other Comprehensive Income" (retained earnings). Under the transitional provisions of IFRS 1 'First time adoption of International Financial Reporting Standards' (IFRS 1) and in accordance with IAS 19, the Group elected to record all actuarial gains and losses on the pension surplus or deficit in the year in which they occur within the 'Consolidated statement of comprehensive income'. Indian GAAP (AS 15 Employee Benefits) The discount rate to be used for determining defined benefit obligations is established by reference to market yields at the balance sheet date on government bonds. The expected return on plan assets is based on market expectation for the returns over the entire life of the related obligation. Actuarial gains or losses are recognised immediately in the statement of income. Under the transitional provisions of IFRS 1 'First time adoption of International Financial Reporting Standards' (IFRS 1) and in accordance with IAS 19, the Group elected to record all actuarial gains and losses on the pension surplus or deficit in the year in which they occur within the 'Consolidated statement of comprehensive income'. Share based compensation IFRS IFRS 2 'Share based payment' requires that all share-based payments are accounted for using a fair value method. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. For equity-settled awards, the total amount to be expensed over the vesting period must be determined by reference to the fair value of the options granted (determined using an option pricing model), excluding the impact of any non-market vesting conditions (for example, profitability and growth targets). Non-market vesting conditions must be included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. Cash-settled awards must be revalued at each balance sheet date on an intrinsic value basis (being the difference between the market price of the share at the measurement date and the exercise price) with any changes in fair value charged or credited to staff costs in the income statement. Deferred tax is recognised based on the intrinsic value of the award and is recorded in the income statement if the tax deduction is less than or equal to the cumulative share-based compensation expense or equity if the tax deduction exceeds the cumulative expense. I. Summary of significant differences between Indian GAAP and IFRS continued Indian GAAP Entities may either follow the intrinsic value method or the fair value method for determining the costs of benefits arising from share based compensation plans. Although the fair value approach is recommended, entities may use the intrinsic value method and provide fair value disclosures. Deferred tax is not recognised as it is not considered to represent a timing difference. Entities are also permitted the option of recognising the related compensation cost over the service period for the entire award (that is, over the service period of the last separately vesting portion of the award), provided that the amount of compensation cost recognised at any date at least equals the fair value of the vested portion of the award at that date. Deferred Taxation IFRS (IAS 12 Income Taxes) Deferred tax is determined based on temporary differences, being the difference between the carrying amount and tax base of assets and liabilities, subject to certain exceptions. Deferred tax assets are recognised if it is probable (more likely than not) that sufficient future taxable profits will be available to utilise to deferred tax assets. Indian GAAP (AS 22 Accounting for Taxes on Income) Deferred tax is determined based on timing differences, being the difference between accounting income and taxable income for a period that is capable of reversal in one or more subsequent periods. Deferred tax assets are recognised where it is probable that future taxable profit will be available against which the temporary differences can be utilised. Interest income and expense IFRS (IAS 18 Revenue) Interest income and expense is recognised in the income statement using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Indian GAAP (AS 9 Revenue Recognition) In the absence of a specific effective interest rate requirement, premiums and discounts are usually amortised on a straight line basis over the term of the instrument. Dividends IFRS (IAS 10 Events After Balance Sheet date) Dividends to holders of equity instruments, when proposed or declared after the balance sheet date, should not be recognised as a liability on the balance sheet date. A company however is required to disclose the amount of dividends that were proposed or declared after the balance sheet date but before the financial statements were authorised for issue. Indian GAAP Dividends are reflected in the financial statements of the year to which they relate even if proposed or approved after the year end. Standard Chartered PLC - Glossary Additional Value Adjustment See "Prudent valuation adjustment" Additional Tier 1 Capital Additional Tier 1 Capital consists of Instruments issued by the bank and related share premium that meet the criteria for inclusion in Additional Tier 1 capital (and are not included in Common Equity Tier 1/(CET1), and. Regulatory adjustments required in the calculation of AT1 Capital. Advances-to-deposits ratio The ratio of total loans and advances to customers relative to total customer deposits. A low advances-to-deposits ratio demonstrates that customer deposits exceed customer loans resulting from emphasis placed on generating a high level of stable funding from customers. Asset Backed Securities (ABS) Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and in the case of Collateralised Debt Obligations (CDOs), the reference pool may be ABS. Advanced Internal Rating Based (AIRB) approach The AIRB approach under the Basel II framework is used to calculate credit risk capital based on the Group's own estimates of certain parameters. ASEAN Association of South East Asian Nations (ASEAN) which includes the Group's operation in Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. Attributable profit to ordinary shareholders Profit for the year after non-controlling interests and the declaration of dividends on preference shares classified as equity. Basel II The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 in the form of the 'International Convergence of Capital Measurement and Capital Standards'. Basel 2.5 In 2009 the European Commission proposed further changes to CRD 3 to address the lessons of the financial crisis. These changes reflected international developments and follow the agreements reached by the Basel Committee on Banking Supervision (BCBS). They included higher capital requirements for re-securitisations, upgrading disclosure standards for securitisation exposures and strengthening market risk capital requirements. Basel III In December 2010, the BCBS issued the Basel III rules text, which were updated in June 2011, and represents the details of strengthened global regulatory standards on bank capital adequacy and liquidity. The new requirements will be phased in and fully implemented by 1 January 2019. Basis point (bps) One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent. Used in quoting movements in interest rates or yields on securities. BIPRU The PRA's Prudential Sourcebook for Banks, Building Societies and Investment Firms. CAD2 An amendment to Capital Adequacy Directive that gives national regulators the discretion to permit firms to use their own value at risk model for calculating capital requirements subject to certain criteria. Capital resources Sum of Tier 1 and Tier 2 capital after regulatory adjustments. Collateralised Debt Obligations (CDOs) Securities issued by a third party which reference ABS and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets. Collateralised Loan Obligation (CLO) A security backed by the repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches). Collectively assessed loan impairment provisions Also known as portfolio impairment provisions. Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant and to cover losses which have been incurred but have not yet been identified at the balance sheet date. Typically Retail clients are assessed on a portfolio basis. Commercial Mortgage Backed Securities (CMBS) Securities that represent interests in a pool of commercial mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). Commercial Paper (CP) An unsecured promissory note issued to finance short-term credit needs. It specifies the face amount paid to investors on the maturity date. Commercial real estate Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets. Common Equity Tier 1 capital Common Equity Tier 1 capital consists of the common shares issued by the bank and related share premium, retained earnings, accumulated other comprehensive income and other disclosed reserves, eligible non-controlling interests and regulatory adjustments required in the calculation of Common Equity Tier 1. Constant currency Constant currency change is derived by applying a simple translation of the previous period functional currency number in each entity using the current average and period end US dollar exchange rates to the income statement and balance sheet respectively. Contractual maturity Contractual maturity refers to the final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal will be repaid and interest is due to be paid. Core Tier 1 Capital Core Tier 1 capital comprises called-up ordinary share capital and eligible reserves plus non-controlling interests, less goodwill and other intangible assets and deductions relating to excess expected losses over eligible provisions and securitisation positions as specified by the UK's PRA. Core Tier 1 Capital ratio Core Tier 1 capital as a percentage of risk weighted assets. Counterparty credit risk The risk that a counterparty defaults before satisfying its obligations under a contract. Cost to income ratio Represents the proportion of total operating expenses to total operating income. Cover ratio Represents the extent to which non-performing loans are covered by impairment allowances. Covered bonds Debt securities backed by a portfolio of mortgages that are segregated from the issuer's other assets solely for the benefit of the holders of the covered bonds. CRD 3 See Basel 2.5 CRD IV Represents the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) that implement the Basel III proposals in Europe. Credit Conversion Factor (CCF) Either prescribed by BIPRU or modelled by the bank, an estimate of the amount the Group expects a customer to have down further on a facility limit at the point of default. Credit Default Swaps (CDSs) A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency. Credit institutions An institution whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account. Credit risk mitigation (CRM) Credit risk mitigation is a process to mitigate potential credit losses from any given account, customer or portfolio by using a range of tools such as collateral, netting agreements, credit insurance, credit derivatives and other guarantees. Credit risk spread The credit spread is the yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to take on a lower credit quality. Credit valuation adjustments (CVA) An adjustment to fair value primarily in respect of derivative contracts that reflects the possibility that the counterparty may default such that the Group would not receive the full market value of the transactions. Customer deposits Money deposited by all individuals and companies which are not credit institutions including securities sold under Repo. Such funds are recorded as liabilities in the Group's balance sheet under Customer accounts. Debt restructuring This is when the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as debt or interest charge reduction. Debt securities Debt securities are assets on the Group's balance sheet and represent certificates of indebtedness of credit institutions, public bodies or other undertakings excluding those issued by central banks. Debt securities in issue Debt securities in issue are transferrable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group and include certificates of deposits. Delinquency A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as 'Arrears'. Deposits by banks Deposits by banks comprise amounts owed to other domestic or foreign credit institutions by the Group including securities sold under Repo. Dividend per share Represents the entitlement of each shareholder in the share of the profits of the company. Calculated in the lowest unit of currency in which the shares are quoted. Effective tax rate (ETR) The tax on profits on ordinary activities as a percentage of profit on ordinary activities before taxation. Expected loss (EL) The Group measure of anticipated loss for exposures captured under an internal ratings based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of anticipated loss based on Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), with a one-year time horizon. Exposures Credit exposures represent the amount lent to a customer, together with undrawn commitments. Exposure at default (EAD) The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty's default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit. External Credit Assessment Institutions (ECAI) For the Standardised Approach to credit risk for sovereigns, corporates and institutions, external ratings are used to assign risk-weights. These external ratings must come from PRA approved rating agencies, known as External Credit Assessment Institutions (ECAI); namely Moody's, Standard & Poor's and Fitch. Eurozone Represents the 17 European Union countries that have adopted the euro as their common currency. The 17 countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain. Forbearance Forbearance takes place when a concession is made to the contractual terms of a loan in response to an obligor's financial liabilities. Foundation Internal Ratings Based Approach A method of calculating credit risk capital requirements using internal PD models but with supervisory estimates of LGD and conversion factors for the calculation of EAD. Free Deliveries A transaction in which securities, foreign currencies or commodities have been paid for before receiving them or where securities, foreign currencies or commodities have been delivered before receiving payment for them. Funded/unfunded exposures Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where there is a commitment to provide future funding is made but funds have been released / not released. General Prudential Sourcebook(GENPRU) The PRA's General Prudential Sourcebook for Banks, Building Societies, Insurers and Investment Firms. Guaranteed mortgages Mortgages for which there is a guarantor to provide the lender a certain level of financial security in the event of default of the borrower. High Quality Liquid Assets (HQLA) Assets that are unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. These include, for example, cash and claims on central governments and central banks. The Basel 3 Rules require this ratio to be at least 100% and it's expected to apply from 2015. Impaired loans Loans where individual identified impairment provisions have been raised and also include loans which are collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing. Impairment allowances Impairment allowances are a provision held on the balance sheet as a result of the raising of a charge against profit for the incurred loss. An impairment allowance may either be identified or unidentified and individual (specific) or collective (portfolio). Individual liquidity guidance Guidance given to the Group about the amount, quality and funding profile of liquidity resources that the PRA has asked the Group to maintain. Individually assessed loan impairment provisions Also known as specific impairment provisions. Impairment is measured individually for assets that are individually significant to the Group. Typically assets within the Corporate and Institutional client segment of the Group are assessed individually. Innovative Tier 1 Capital Innovative Tier 1 capital consists of instruments which incorporate certain features, the effect of which is to weaken (but only marginally) the key characteristics of Tier 1 capital (that is, fully subordinated, perpetual and non-cumulative). Innovative Tier 1 capital is subject to a limit of 15 per cent of total Tier 1 capital. Internal Ratings Based (IRB) approach The IRB approach is used to calculate risk weighted assets in accordance with the Basel Capital Accord where capital requirements are based on a firm's own estimates of certain parameters. Internal Capital Adequacy Assessment Process (ICAAP) A requirement on institutions under Pillar 2 of the Basel II framework to undertake a comprehensive assessment of their risks and to determine the appropriate amounts of capital to be held against these risks where other mitigants are not available. Internal Model Approach (IMA) The approach used to calculate market risk capital and RWA with an internal market risk model approved by the PRA under the terms of CRD IV/CRR. Formerly referred to as CAD2. Interest rate risk (IRR) Interest rate risk arises due to the investment of equity and reserves into rate-sensitive assets, as well as some tenor mismatches between debt issuance and placements. Investment grade A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB. Jaws The rate of income growth less the rate of expense growth, expressed as positive jaws when income growth exceeds expense growth (and vice versa for negative jaws). Leveraged finance Loans or other financing agreements provided to companies whose overall level of debt is high in relation to their cash flow (net debt: EBITDA (earnings before interest tax, depreciation and amortisation)) typically arising from private equity sponsor led acquisitions of the businesses concerned. Leverage ratio A ratio introduced under CRD IV that compares Tier 1 capital to total exposures, including certain exposures held off balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk based backstop measure. Liquidity and credit enhancements Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over-collateralisation. Liquidity enhancement makes funds available if required, for other reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper. Liquid asset buffer These assets include high quality government or central bank securities, certain deposits with central banks and securities issued by designated multilateral development banks to meet the PRA's requirement for liquidity. Liquid asset ratio Ratio of total liquid assets to total assets. Liquid assets comprise cash (less restricted balances), net interbank, treasury bills and debt securities less illiquid securities. Liquid cover ratio (LCR) A short-term liquidity measure that considers a 30 day period of liquidity stress Loans and advances This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument. An example of a loan product is a home loan. Loans to banks Amounts loaned to credit institutions including securities bought under Reverse repo. Loans to individuals Money loaned to individuals rather than institutions. The loans may be for car or home purchases, medical care, home repair, holidays, and other consumer uses. Loan-to-value ratio The loan-to-value ratio is a mathematical calculation which expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower. Loans past due Loans on which payments have been due for up to a maximum of 90 days including those on which partial payments are being made. Loss given default (LGD) LGD is the percentage of an exposure that a lender expects to lose in the event of obligor default. Master netting agreement An agreement between two counterparties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or termination of, any one contract. Mezzanine capital Financing that combines debt and equity characteristics. For example, a loan that also confers some profit participation to the lender. Mortgage Backed Securities (MBS) Securities that represent interests in a group of mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). Mortgage related assets Assets which are referenced to underlying mortgages. Medium term notes (MTNs) Corporate notes continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years. Net asset value per share Ratio of net assets (total assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period. Net interest income The difference between interest received on assets and interest paid on liabilities. Net interest margin The margin is expressed as net interest income divided by average interest earning assets. Net interest yield Interest income divided by average interest earning assets less interest expense divided by average interest bearing liabilities. Net Stable Funding Ratio (NSFR) The ratio of available stable funding to required stable funding over a one year time horizon, assuming a stressed scenario. It is a longer term liquidity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one year time horizon Non-performing loans A non performing loan is any loan that is more than 90 days past due or is otherwise individually impaired, other than a loan which is: - renegotiated before 90 days past due, and on which no default in interest payments or loss of principal is expected; or - renegotiated at or after 90 days past due, but on which there has been no default in interest or principal payments for more than 180 days since renegotiation, and against which no loss of principal is expected. Normalised earnings Profit attributable to ordinary shareholders adjusted for profits or losses of a capital nature; amounts consequent to investment transactions driven by strategic intent; and other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period. Over the counter (OTC) derivatives A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation models. Pre-provision profit Operating profit before impairment losses and taxation. Private equity investments Equity securities in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. Probability of default (PD) PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an obligation. Profit attributable to ordinary shareholders Profit for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity. Prudent Valuation Adjustment A deduction from common equity tier 1 capital, to reflect the difference between fair value and prudent value positions, where the application of prudent results in a lower absolute carrying value than recognised in the financial statements. Renegotiated loans Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. Such assets will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset and are defined as forborne loans. In other cases, renegotiation may lead to a new agreement, which would be treated as a new loan. Repo/Reverse repo A repurchase agreement or repo is a short term funding agreements which allow a borrower to sell a financial asset, such as ABS or Government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement or reverse repo. Residential mortgage A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a Home loan. Residential Mortgage Backed Securities (RMBS) Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). Return on equity Represents the ratio of the current year's profit available for distribution to ordinary shareholders to the weighted average ordinary shareholders equity for the reporting period. Risks-not-in-VaR (RNIV) A framework for identifying and quantifying marginal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a far-tail risk or the necessary historical market data not being available. Risk weighted assets A measure of a bank's assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the FSA. Seasoning The emergence of credit loss patterns in portfolio over time. Secured (fully and partially) A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of origination. All other secured loans are considered to be partly secured. Securitisation Securitisation is a process by which debt instruments are aggregated into a pool, which is used to back new securities. A company sells assets to a special purpose entity (SPE) who then issues securities backed by the assets based on their value. This allows the credit quality of the assets to be separated from the credit rating of the original company and transfers risk to external investors. Senior debt Senior debt, frequently issued in the form of senior notes, is debt that takes priority over other unsecured or otherwise more "junior" debt owed by the issuer. Senior debt has greater seniority in the issuer's capital structure after subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment. Sovereign exposures Exposures to central governments and central government departments, central banks and entities owned or guaranteed by the aforementioned. Sovereign exposures as defined by the European Banking Authority include only exposures to central governments. Standardised approach In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to the gross income of eight specified business lines. Stressed value at risk A regulatory market risk measure based on potential market movements for a continuous one-year period of stress for a trading portfolio. Structured finance /notes A structured note is an investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency. Subordinated liabilities Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer. Sub-prime Sub-prime is defined as loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgements and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default. Tangible net asset value per share Ratio of parent shareholders' equity less preference shares classified as equity and goodwill and intangible assets to the number of ordinary shares outstanding at the end of the reporting period. Tier 1 capital Tier 1 capital comprises Core Tier 1 capital plus innovative Tier 1 securities and preference shares and tax on excess expected losses less material holdings in credit or financial institutions. Tier 1 capital ratio Tier 1 capital as a percentage of risk weighted assets. Tier 2 capital Tier 2 capital comprises qualifying subordinated liabilities, allowable portfolio impairment provision and unrealised gains in the eligible revaluation reserves arising from the fair valuation of equity instruments held as available-for-sale. UK bank levy A levy that applies to certain UK banks and the UK operations of foreign banks from 1 January 2011. The levy is payable each year based on a percentage of the chargeable liabilities of the Group as at 31 December. Value at Risk (VaR) Value at Risk is an estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level of 97.5 per cent. Working profit Operating profit before impairment losses and taxation. Write downs After an advance has been identified as impaired and is subject to an impairment allowance, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write downs will occur when and to the extent that, the whole or part of a debt is considered irrecoverable. Standard Chartered PLC - Financial calendar Financial Calendar Ex-dividend date 13 August 2014 Record date 15 August 2014 Expected posting to shareholders of 2014 Half Year Report 5 September 2014 Payment date - interim dividend on ordinary shares 20 October 2014 Copies of this statement are available from: Investor Relations, Standard Chartered PLC, 1 Basinghall Avenue, London, EC2V 5DD or from our website on http://investors.sc.com For further information please contact: Stephen Atkinson, Group Head, Corporate Affairs +44 20 7885 7245 James Hopkinson, Global Head, Investor Relations +44 20 7885 7151 Edwin Hui, Head of Investor Relations, Asia +852 2820 3050 Uttam Hazarika, Manager, Investor Relations, India +91 22 61158643 Tim Baxter, Global Head, Communications +44 20 7885 5573 The following information for the Half Year Results 2014 will be available on our website: The video interviews with Peter Sands, Group Chief Executive and Andy Halford, Group Finance Director The analyst presentation in pdf format The webcast of the live analyst presentation in London with Q&A A podcast of the analyst presentation Images of Standard Chartered are available for the media at http://www.sc.com/global/mc/plib/directors_p01.html Information regarding the Group's commitment to Sustainability is available at http://www.sc.com/sustainability Forward looking statements It is possible that this document could or may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. The Group undertakes no obligation to revise or update any forward looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise. Disclaimer The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933 (the "U.S. Securities Act") and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. No public offering of the Placing Shares will be made in the United States. Standard Chartered PLC - Index Page Page Assets at fair value through profit or loss 136 Industry concentration in loans and advances 43 Asset backed securities 63 Investment securities 140 Balance sheet 99 Liabilities at fair value through profit or loss 137 Business combinations 143 Liquidity risk 72 Capital base and ratios 86 Loan impairment coverage ratio 51 Cash and cash equivalents 148 Loans and advances 140 Cash flow statement 101 Loans maturity analysis 45 Contingent liabilities and commitments 149 Loans portfolio analysis 41 Country cross-border risk 66 Market risk 67 Credit risk 34 Non-controlling interests 147 Customer accounts 110 Normalised earnings 118 Debt securities in issue 144 Operational risk 84 Deposits by banks 110 Other assets 142 Depreciation and amortisation 114 Other impairment 115 Derivatives 138 Other liabilities 144 Dividends 116 Other operating income 113 Earnings per share 117 Principal uncertainties 29 Eurozone 64 Remuneration 154 Financial calendar 178 Reputational risk 85 Financial Review: Restatement of prior periods 149 · Group summary 10 Retirement benefit obligations 146 · Client segment and products 12 Risk management framework 31 Financial instruments: Risk weighted assets 93 · Classification 119 Segmental and entity-wide information: · Valuation 121 · By client segment 103 · Instruments carried at amortised cost 130 · By geography 106 · Reclassification 131 · Net interest margin and yield 109 Financial review of Group: · By structure of deposits 110 Operating income and profit 11 Share capital 146 Group summary consolidated balance sheet 26 Shares held by share scheme trust 147 Glossary 172 Statement of changes in equity 100 Goodwill and intangible assets 143 Statement of comprehensive income 98 Hedging 139 Subordinated liabilities 145 Highlights 1 Summary of results 3 Impairment losses on loans and advances: Taxation 116 · Total individual impairment 56 Trading income 113 · Impairment by geography 50 Income statement 97 Indian Listing additional information: · Condensed financial statements in Indian Rupees 161 · Significant differences between Indian GAAP and IFRS 166 This information is provided by RNS The company news service from the London Stock Exchange END IR GIGDIXGGBGSL