Standardbank Cover.indd - Standard Bank - Investor Relations

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Standard Bank Group Analysis of financial results for the year ended 31 December 2012 • Perpetual preference shares issued by SBG for the purposes of financing the transaction are classified as equity. Dividends paid on the perpetual preference shares are accounted on declaration and not on an accrual basis. The normalised adjustment: • recognises a loan asset by reversing the elimination of the redeemable preference shares against equity • accrues for preference dividends receivable on the loan asset within interest income • adds back the number of shares held by the black participants to the weighted number of shares in issue, for purposes of calculating normalised per share ratios • adjusts dividends declared on perpetual preference shares to an accrual basis. In December 2007, the group obtained financing, external to SBG, for a portion of the financing provided to the SPEs. As a result, the negative empowerment reserve was reduced by the value of the external financing obtained of R1 billion, and a proportion of the SBG shares held by the SPEs (24,7 million shares) are no longer deemed to be treasury shares for accounting purposes. In March 2008, 11.1% of the Tutuwa participants’ shares were sold to the ICBC with the proceeds being partly utilised for the repayment of their preference share liability, thereby releasing a further 11,0 million ordinary shares previously deemed by IFRS to be treasury shares. Group shares held for the benefit of policyholders or to facilitate client trading activities The group acquires or sells short shares in SBG for two distinct business reasons: • Group companies’ shares held by Liberty are invested for the risk and reward of its policyholders, not its shareholders, and consequently the group’s shareholders are exposed to an insignificant portion of the fair value changes on these shares. • The group enters into transactions in its own shares to facilitate client trading activities. As part of its normal trading operations, the group offers clients trading positions over listed shares, including its own shares. In order to hedge the risk on these trades, the group buys or sells short its own shares in the market. The group’s shareholders are therefore exposed to an insignificant portion of the fair value changes on these shares. Group shares held for the benefit of policyholders or to facilitate client trading activities Policyholders’ liabilities and client trading positions relating to SBG shares recognised in full SBG Cost of SBG shares deducted/added from/to equity in terms of IFRS. Fair value movements in the SBG share price, including dividends, are not recognised in the IFRS income statement SBG subsidiaries Client transactions Policyholders’ benefits offered to clients Exposure to client transactions Liberty Liability to policyholders linked to returns on portfolios that include SBG shares Offsetting transaction resulting in position in SBG shares Investment in a portfolio of shares, including SBG shares, on behalf of policyholders Financial instruments offered to clients linked to a share price or index Subsidiaries in banking operations Exposure to movements in share price or index resulting from client trading activities Investment in shares that offset client trading positions, including SBG shares sold short or held long 23
Group results in brief Segmental reporting Income statement analysis Balance sheet analysis Capital management Key banking legal entity information Other information and restatements Shareholder information Explanation of principal differences between normalised and IFRS results continued In terms of IAS 32 Financial Instruments: Presentation (IAS 32), trades by subsidiaries in the group’s shares held on behalf of policyholders and group share exposures to facilitate client trading activities are deemed to be treasury shares for accounting purposes. The accounting consequences in the consolidated IFRS group financial statements are: • the cost price of shares purchased by subsidiaries as well as any funds received by subsidiaries from selling the group’s shares short are deducted from or added to ordinary shareholders’ equity and non-controlling interest respectively in the group’s financial statements • all the fair value movements are eliminated from the income statement, reserves and non-controlling interests where applicable • dividends received on group shares are eliminated against dividends paid. No corresponding adjustment is made to the policyholders’ liabilities or trading positions with clients. As a result, the application of IAS 32 gives rise to a mismatch in the overall equity and income statement of the group. The liability to policyholders and client trading positions, along with the change in policyholders’ liabilities and profit or loss recognised on the client trading positions, is therefore not eliminated, even though the corresponding interest in the group’s shares is eliminated and treated as treasury shares acquired or issued. With regard to the group shares held for the benefit of Liberty policyholders, the weighted average number of shares in issue for per share figures is calculated by deducting the full number of group shares held (100%), not the IFRS effective 54.4% owned by the group, as IAS 33 Earnings per Share does not contemplate non-controlling interest portions of treasury shares. This treatment exaggerates the reduction in the weighted average number of shares used to calculate per share ratios. For purposes of calculating the normalised results, the adjustments described above are reversed, and the group shares held on behalf of policyholders and to facilitate client trading activities are treated as issued to parties external to the group. The impact of the normalised adjustments on the issued and weighted number of shares is provided on page 12. Adjustments to IFRS results Banking activities Rm Headline earnings Liberty Rm Standard Bank Group Rm Ordinary shareholders’ equity Standard Bank Group Rm IFRS – 2012 12 781 1 883 14 664 110 370 Tutuwa initiative 213 33 246 3 127 Shares exposures held to facilitate client trading activities (17) (17) (92) Group shares held for the benefit of Liberty policyholders 117 117 500 Normalised – 2012 12 977 2 033 15 010 113 905 IFRS – 2011 11 965 1 435 13 400 99 042 Tutuwa initiative 206 35 241 2 941 Shares exposures held to facilitate client trading activities (94) Group shares held for the benefit of Liberty policyholders (42) (42) 634 Normalised – 2011 12 171 1 428 13 599 102 523 24
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Standardbank Cover.indd - Standard Bank - Investor Relations

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