standard bank annual report 2004 - the vault standard bank annual report | pg 1 standard bank group...

2004Annual report

01 Standard Bank Group at a glance

02 2004 Recognition

03 Our vision and values

04 Financial objectives

05 2004 Group review

08 Black Ownership Initiative

10 Economic review

12 Group overview

14 Business unit reviews

26 Board of directors

28 Corporate governance

32 Corporate governance – remuneration

38 Risk management

51 Financial review

66 Seven-year review

72 Financial definitions

73 Annual financial statements

75 Report of the independent auditors

76 Directors’ responsibility for financial reporting

77 Directors’ report

80 Balance sheet

81 Income statement

82 Statement of changes in shareholders’ funds

84 Cash flow statement

85 Accounting policies

94 Notes to the annual financial statements

147 Standard Bank Group Limited – company annual

financial statements

151 Annexure A – currency balance sheet

152 Annexure B – subsidiaries

156 Annexure C – associates and joint ventures

158 Annexure D – group share incentive scheme

159 Abridged financial statements of principal

banking subsidiary

160 Average balance sheet and interest rates

162 International representation

165 Shareholders’ information

166 Chairman’s letter to shareholders

168 Notice to members

175 Proxy form

178 Directorate

179 Shareholders’ diary

179 Analysis of shareholders

180 Instrument codes

180 Credit ratings

Contact details

Contents

Interim and final

Profit and dividend announcement | Financialresults presentation | Analysis of

financial results

Financial results2004

2004 Sustainability report

Interim and final

Profit and dividend announcement | Financialresults presentation | Analysis of

financial results

Financial results2004

2004 Sustainability report

Following feedback from shareholders on difficulties in receiving bulky annual reports, Standard Bank has included the sustainability report on a Windows compatible interactive CD-Rom attached above.

For completeness, a CD-Rom containing additional financial information on the group’s interim and final financial results is also included.

Suggested system requirements: 64Mb RAM16bit colour800 X 600 screen resolution

Should readers of the annual report wish to receive printed versions of the above, please contact the group secretary as detailed on the back cover.

Standard Bank annual report | pg 1

Standard Bank Group at a glance

Results Things to know

• ROE increased from 22,9% to 26,4% (24,5% 1)

• Headline earnings grew by 21,8% (21,4% 1) to R7 648 million (R7 621 million 1)

• Headline earnings per ordinary share of 578,7 cents (566,3 cents 1), 22,9% (20,3% 1) higher

• The credit loss ratio improved from 0,91% to 0,43%

• Total dividends declared grew by 53,3% to 231,5 cents per share, a reduced dividend cover ratio of 2,5 times

• 39 080 employees including Liberty Life, 31 905 in South Africa

• Represented in 38 countries with an emerging markets focus

• 741 branches in South Africa, 234 in the rest of Africa

• 3 289 ATMs in South Africa, 314 in the rest of Africa

• R616 billion in assets

• Market capitalisation R89 billion, US$16 billion

Credit ratings

The summarised credit ratings for The Standard Bank of

South Africa Limited (SBSA) are detailed below:

Standard Bank ratings Long-term Outlook

Fitch Ratings (June 2004)

Foreign currency BBB Positive

Local currency A- Positive

National AA+(zaf) Stable

Moody’s Investors Services (January 2005) public information rating

Bank deposit rating Baa1 Stable

Financial strength rating C+

Standard & Poor’s (November 2004) public information rating

Local currency BBBpi1 Results normalised to reflect legal substance of Black Ownership Initiative.

Refer page 57 for explanation.

0

100

200

300

400

500

600

1998 2001 20031999 2000 2002 2004N 1

Headline earnings and dividends per share

Dividends per share

Headline EPS

ROE

cents

5

10

15

20

25

30

35%

Headline earnings, dividends per share and return on equity (ROE)

Standard Bank Group

Domestic Banking Rest of Africa (Africa)

Stanlib

International Liberty Life

Corporate and Investment Banking

Retail Banking

Summarised group structure

The Banker magazine• Emerging Markets Bank of the Year

• Africa Bank of the Year

• Best bank in:

• South Africa

• Botswana

• Lesotho

• Swaziland

• Uganda

• Zimbabwe

• Ranked 116 (2003: 125) in the world based on Tier I capital

Euromoney magazine• Best bank in sub-Saharan Africa

• Best bank in:

• South Africa

• Namibia

• Swaziland

• Uganda

Ernst & Young excellence in corporate reporting• Standard Bank’s 2003 annual report 4th in the top 100 JSE listed companies

Forbes magazine• World’s leading companies measured by a composite ranking of sales, profits, assets and market value

• Standard Bank ranked 280

JSE socially responsible investment index• Standard Bank one of 51 companies to be recognised as being socially

responsible

The Financial Mail• Standard Bank’s website 12th in the top 100 JSE listed company websites in South Africa

Investor Relations magazine• Winner:

• Grand Prix for Best Overall Investor Relations

• Best Corporate Governance

• Best Investment Community Meetings

• Highly commended:

• Best Investor Relations Officer

• Best Annual Report

• Best Investor Relations by a CEO or CFO

2004 Recognition

pg 2 | 2004 Recognition


Our vision and values

Vision |

For the past five years, Standard Bank has been focusing on operational efficiencies and making the bank “Simpler. Better. Faster”. During the last year we have developed a new vision statement for the group. Having determined the vision, we agreed a set of values consistent with this broad strategy. Some of our values have been tried and tested over decades, but some are new. The values support our vision and are at the heart of what Standard Bank really stands for.

» We are committed to making a real difference to financial services in South Africa and other emerging markets.

» We will ensure long-term sustainability by harmonising the needs of our customers, our people and our shareholders and by being relevant to the societies in which we operate.

» We will only succeed if we are able to attract, retain, develop and deploy teams of people with energy, passion and skills.

Values | » Serving our customers.

We do everything in our power to ensure that we provide our customers with the products, services and solutions to suit their needs, provided that everything we do for them is based on sound business principles.

» Growing our people. We encourage and help our people to develop to their full potential, and measure our leaders on how well they

grow and challenge the people they lead.

» Delivering to our shareholders. We understand that we earn the right to exist by providing appropriate long-term returns to our shareholders.

We try extremely hard to meet our various targets and deliver on our commitments.

» Being proactive. We strive to stay ahead by anticipating rather than reacting, but our actions are always carefully considered.

» Working in teams. We, and all aspects of our work, are interdependent. We appreciate that, as teams, we can achieve much greater

things than as individuals. We value teams within and across business units, divisions and countries.

» Guarding against arrogance. We have confidence in our ability to achieve ambitious goals and we celebrate success, but we must never allow

ourselves to become arrogant.

» Respecting each other. We have the highest regard for the dignity of all people. We respect each other and what Standard Bank stands

for. We recognise that there are corresponding obligations associated with our individual rights.

» Upholding the highest levels of integrity. Our entire business model is based on trust and integrity as perceived by our stakeholders, especially our

customers.

pg 4 | Financial objectives

Performance against 2004 objectives

2004 Actual %

2004 Normalised 1 %

2004 Objective %

Return on equity 26,4 24,5 20

Headline earnings per share growth (HEPS) 22,9 20,3 14,3 2

Cost-to-income ratio 57,5 56,0

Credit loss ratio 0,43 <1,00

Financial objectives

0

5

10

15

20

25

30

1998 2001 20031999 2000 2002

Return on equity

Target

Actual

%

2004N 10

5

10

15

20

25

30

1998 2001 20031999 2000 2002

Headline earnings per share growth

Target

Actual

Average domestic CPIX

%

2004N 1

Medium-term objectives

Normalised return on equity 1 of 22,5%

Normalised headline earnings per share 1 growth to exceed domestic inflation (CPIX) by 10 percentage points

Cost-to-income ratio to be at or better than 55,5% in 2005 with a continuous improvement over the medium term

Credit losses to be contained within 0,75% of average advances (2005) and to remain less than 1,00% over the medium term

As disclosed in each annual report. Assumed target of CPIX plus 10%.

1 ROE and HEPS growth normalised to reflect legal substance of Black Ownership Initiative. Refer page 57 for explanation.

2 Average CPIX for 2004 of 4,3% + 10,0%.

Derek Cooper, chairman

Standard Bank Group has once again met its stated financial objectives of strong real earnings growth and returns on shareholder equity. The group’s credit risk indicators showed further improvements on the satisfactory levels achieved for 2003, reflecting benign conditions and the continued efforts of management to improve credit risk processes across the group.

The group’s broad strategy is to continue building a portfolio of growth options in financial services in developing economies. We concentrate our efforts in three main areas: retail banking (in South Africa and Africa), wholesale banking (in South Africa, Africa and other emerging markets) and wealth management (in South Africa through our holding in Liberty Life and Stanlib, and internationally).

Within the South African operations of the group, Retail Banking’s pleasing performance resulted from ongoing operational improvement and enhanced customer focus, which enabled this division to benefit from the buoyant economic conditions. The lower average prime rate resulted in lower net interest income generated from capital and transactional deposit balances. This impact was however offset by strong advances growth.

Corporate and Investment Banking experienced exceptional growth in advisory and transactional revenue, improved trading activity and a strong increase in investment gains.

We continued to enhance our presence on the African continent through further expansion of retail product offerings, the introduction of executive banking suites in 12 countries and enhancement of our business banking platforms.

The focus of our international operations on emerging markets outside of the African continent embraces most financial aspects of the global commodity value chain, debt securities origination and trading, foreign exchange intermediation, and private client asset management.

Headline earnings of International were 7% lower in US dollars following the exceptional performance of the prior year. Provisioning for specific credit losses partly offset strong performances by most product areas and major regions which benefited from increased customer flows.

Liberty Life, the major component of our wealth management activities, increased headline earnings by 32%. Highlights of Liberty Life’s results were improved investment returns and strong growth in new business. During 2004, the much strengthened management team focused on improving customer service and cost control. The proposed acquisition of Capital Alliance, if successful, is expected to achieve efficiencies in due course, which should benefit policyholders and shareholders alike.

2004 Group review

In 2004, Standard Bank Group benefited from a generally more favourable macroeconomic environment. South Africa, the group’s most important market, is currently experiencing the benefits of 10 years of sound fiscal and monetary policies which have resulted in lower inflation and interest rates. Together with sustained business confidence, this positive shift has enabled the South African banking industry to boost asset growth and experience a lower incidence of credit default. Outside South Africa, positive economic conditions were experienced in most markets in which the group operates.

Jacko Maree, chief executive


pg 6 | 2004 Group review

2004 Group rerview continued

Capital and dividend coverIncreased returns on equity over recent years, disciplined focus on risk-weighted asset growth and the introduction of secondary and tertiary capital have resulted in strong group capital levels. Despite the fact that dividend cover has been gradually reduced over the past three years, it has become increasingly evident that a further reduction in dividend cover is appropriate. The group’s dividend cover has accordingly been adjusted to a cover of 2,5 times for the 2004 year, calculated on headline earnings per share. Depending on business growth, acquisition activity and the projected impact of Basel II, this cover has the potential to be reduced further. It must however be appreciated that the advent of fair value accounting has significantly increased the likelihood of volatility in reported earnings and consequently the board may adjust dividend cover to avoid significant distortions in absolute dividends declared.

Implementing the Financial Sector CharterThe implementation of the Financial Sector Charter (the charter) has been a key priority in 2004 for all domestic business units. Standard Bank remains committed to making a meaningful contribution to transforming the financial sector, whilst balancing our commitments to shareholders and customers.

The board sub-committee charged with monitoring progress against the charter objectives is satisfied with the progress to date. The 2008 targets present a substantial challenge in terms of innovation and expansion of our business, but we are confident that these targets will be met.

Black Ownership InitiativeIn line with both the spirit and terms of the charter, Standard Bank concluded its Black Ownership Initiative during the last quarter of 2004. An effective 10% interest in our South African banking operations, equivalent to approximately 7,5% of the issued ordinary share capital of Standard Bank, was acquired by a broad-based grouping comprising the following:

• black strategic partners (Tutuwa Consortium), being Safika and Shanduka (previously MCI), led by Saki Macozoma and Cyril Ramaphosa respectively (40%);

• current as well as future black employees of Standard Bank Group as defined in the charter, including black non-executive directors (40%); and

• a trust to be made up of regional business and community groupings (20%).

Liberty Life concluded a similar transaction. We are particularly pleased that we have been able to include the group’s 3 430 South African black managers in this initiative and believe that this will benefit the group in the future.

Foreign entrants to the South African banking sector

It seems likely that foreign banks will enter the South African retail and commercial banking industry in a more meaningful way. This is confirmation that South Africa’s policies have created a stable macroeconomic environment which is being recognised internationally.

The board considered the possible benefits of a partnership with a foreign bank or becoming part of an international banking group but does not believe that either option will add significantly to the group’s stand-alone growth prospects. Standard Bank intends to remain headquartered in the Johannesburg central business district with our primary listing on the JSE Securities Exchange South Africa.

Corporate governance and directorate

The group remains committed to maintaining high standards of corporate governance. This is demonstrated by our continuing compliance with the requirements of the Code of Corporate Practices and Conduct (King Code), including our commitment to advancing the principles and practices of sustainable development. The corporate governance over-view, starting on page 28 of this report, and our 2004 sustainability report provide a concise update of our governance commitments and undertakings.

We appointed two new non-executive directors during the year and one subsequent to 31 December 2004. We are confident that Cyril Ramaphosa, Martin Shaw and Mamphela Ramphele will, with their extensive abilities and experience, further strengthen our board. Robin Plumbridge and Chris Stals will be retiring from the board at our forthcoming annual general meeting. Robin Plumbridge has served as a member, and then chairman, of both the group audit and group risk management committees for many years. Chris Stals served on the group risk management committee. We thank them for their commitment and contribution to the board and particularly to the contribution they have made to the development of the group’s high standards of risk management.

Sustainability reporting

This year we have issued a separate sustainability report. Through this comprehensive overview of Standard Bank’s wider contribution to the economic, social and environmental arenas, we aim to keep our stakeholders informed of our current sustainability policies and practices, as well as some of our future plans. The report now includes our International operations.


ProspectsContinued focus on operational excellence and customer service, together with the current positive domestic economic conditions, are expected to sustain consumer business growth through 2005, albeit at a slower rate. Corporate business activity is expected to increase given the potential for growth in infrastructural and empowerment financing business.

The group will continue to increase the contribution from its operations in the rest of Africa, through extracting efficiencies and the roll-out of retail and commercial banking products proven in South Africa. Increased economic development and organic business growth across the African continent should provide ample opportunities for financial intermediation in the years ahead.

Whilst the markets in which International operates continue to enjoy good growth, the level of competition in developing economies has increased and margins remain under pressure. International has made significant strides in enhancing its franchise and upgrading its IT, support and risk structures, providing a good platform for growth off a well established network.

The group will be adopting International Financial Reporting Standards (IFRS) in 2005. Accounting standards continue to be subject to vigorous debate and sometimes changing interpretation. In particular, uncertainties remain around the interpretation of the basis of credit impairment quantification and accounting for the equity settled component of empowerment initiatives, both of which could impact the group’s 2005 results. Details are contained in the financial review on page 59.

We believe economic conditions in the countries in which we operate are unlikely to repeat the rapid improvement of 2004. Taking the above factors into account we remain confident that the group’s quality of staff and diverse spread of businesses should continue to produce returns to shareholders in line with our published objectives. Standard Bank Group’s principal financial objectives for 2005 are a return on equity of 22,5%, revised upwards from 20%, and headline earnings per share growth of domestic inflation (CPIX) plus 10 percentage points.

Appreciating our peopleMore than any other single factor, the quality of our leaders and employees will determine the group’s longer-term future. We believe our culture of maintaining high professional standards, accountability and the determination to deliver and excel will set us apart from our competitors.

We thank all our people sincerely for their energy and hard work, without which we could not have delivered these results.

ConclusionFive years have passed since the failed hostile bid to take over Standard Bank and we believe we are a substantially different and better company as a result. We have injected new talent into our business and re-energised our teams. We have significantly re-examined the way we do business in our retail bank and we have worked diligently to better align our products and processes with our customers’ needs. In 2004, we developed a new vision statement for the group and agreed a set of values to guide us into the future.

We remain alert to the risks of complacency given the enhanced performance of the group in favourable economic conditions. We assure our shareholders that we will constantly seek new growth opportunities in emerging markets, ever-mindful of our desire to maintain a healthy balance between risk and reward.

AcknowledgementsOn behalf of the directors and staff of Standard Bank worldwide, we thank all our shareholders, customers, suppliers and our many other stakeholders for their valued support and goodwill throughout 2004. We look forward to building our stakeholder relations in the year ahead with the firm conviction that we can all grow and prosper together through mutually beneficial partnerships.

Jacko Maree Derek Cooper Chief executive Chairman

Priorities for 2005

• achieve the group’s financial objectives;

• meet the commitments of the charter in South Africa;

• further increase the customer segment focus by proactively identifying and satisfying the demands of our customers in Retail Banking;

• continue to grow our business in Africa, organically through the enhancement of our product offerings, and actively explore chosen markets for acquisition opportunities;

• grow balance sheet lending in Corporate and Investment Banking with particular focus on infrastructure spending and empowerment financing; and

• enhance return on shareholder capital in International.

pg 8 | Black Ownership Initiative

The introduction of direct black share ownership to Standard Bank Group

The Standard Bank Group (SBG or Standard Bank) is firmly committed to black economic empowerment (BEE) in South Africa and believes that meaningful participation by black people, as defined in the Financial Sector Charter (the charter), in the mainstream economy is essential to strengthening and sustaining South Africa’s economic and democratic structures.

The transaction described below enables SBG to meet the ownership requirements set out in the charter. The charter scorecard provides an objective and broad-based set of indicators for measuring a financial institution’s success in meeting the objectives of the charter. One of the terms of the charter is that, in order for a financial institution to earn the full 12 points allocated in the scorecard to direct ownership, 10% of the equity in its South African operations, together with control over all of the voting rights attaching to that equity interest, must be held by black people by 2010. Precedent to this is the requirement that 33% of the members of the board of directors of the financial institution must be black.

SBG announced its Black Ownership Initiative worth about R4,3 billion on 15 July 2004. Liberty Life also obtained approval from its shareholders for a similarly structured transaction valued at approximately R1,3 billion.

Participants to the transactionThe Black Ownership Initiative participants (collectively referred to as the black participants) comprise:

The black partners

Safika

Safika is an empowerment investment holding company with investments in communication, information technology, human capital, natural resources and financial services.

Safika currently partners the group in Stanlib, where it leads a consortium that holds an interest of 25,2% in Stanlib.

The effective shareholders of Safika are: Moss Ngoasheng (20%); Vuli Cuba (20%); Saki Macozoma (20%); Marc Ber (10%); Soto Ndukwana (5%); and Richard Chauke (5%). Standard Bank has made an offer for 20% of the shares in Safika earmarked for strategic shareholders. This offer is subject to approval by the Competition Commission and completion of the final agreements.

Saki Macozoma is a member of the board of SBG and Liberty Life and chairman of the board of Stanlib.

Black Ownership Initiative

Other Standard

Bank ordinary shareholders

Black Ownership Initiative General Staff Scheme

Tutuwa Consortium

Shanduka

Safika

Community

Trust

Black Managers’

Trusts

General Staff Trust

Strat Co 1

Strat Co 2

Comm Co

Staff Co 1, Staff Co 2

and Staff Co 3

Black

employees

Other

employees

Standard Bank Group

1,20% 1,79% 1,49% 2,89% 0,10%

100% 100% 100% 100%

92,4%

Shareholding structure immediately following the transaction

The simplified shareholding structure of Standard Bank Group subsequent to the transaction is set out below:

0,13%

Ordinary shares Preference share financing

7,47%


Shanduka (formerly Millennium Consolidated Investments)

Shanduka is a black-owned and managed investment holding company founded by Cyril Ramaphosa, James Motlatsi and several black professionals. Shanduka has investments in the resources, property, industrial and financial sectors. Shanduka’s principals have been active participants in the BEE landscape in South Africa since 1996.

The shareholders of Shanduka are: the Ramaphosa family (33%); management and staff (22%); James Motlasi and other individuals (10%); Standard Bank (15%); Investec Limited (15%); and community trusts (5%).

Cyril Ramaphosa is a member of the board of SBG.

The black employees

SBG believes that one of the most effective ways to achieve broad-based empowerment is to empower its black staff. The black employees under the Black Ownership Initiative comprise two categories:

• About 2 500 managerial black employees who are the beneficiaries of a trust that purchased about 38,9 million SBG ordinary shares. The group also believes that it is important for its present and future black non-executive directors to participate in the Black Ownership Initiative. It has accordingly been agreed that SBG’s black non-executive directors benefit under the Black Managers’ Trust upon similar terms and conditions as those upon which the black managers benefit. Adv Kgomotso Moroka, Thulani Gcabashe and Chris Nissen have accepted allocations of 125 000 SBG ordinary shares each. For reasons of good corporate governance these, and any possible future allocations, are subject to specific shareholder approval. A recommendation is being made to shareholders that Dr Mamphela Ramphele, a non-executive director appointed on 17 March 2005, also participates.

• non-managerial black employees who were awarded with about 1,3 million SBG ordinary shares at no cost to employees through a bonus allocation of 100 SBG shares each. A similar bonus allocation has been made to all group employees worldwide who did not form part of the Black Ownership Initiative or who were not participants in the SBG share incentive scheme. This is referred to as the General Staff Scheme.

The community and regional businesses

Beneficiaries of this trust will consist of various regional business and community empowerment groupings facilitating further broad-based empowerment.

Structure of the transactionThe group facilitated the Black Ownership Initiative through the buy-back of SBG ordinary shares from shareholders. Each ordinary shareholder disposed of 76 ordinary shares for every 1 000 ordinary shares held in Standard Bank, at R40,50 per share. This represented a discount of 4,71%, at the time of the

announcement, to the Standard Bank closing share price on Friday, 9 July 2004 of R42,50. This discount, amounting to an effective cost of 15 cents per share to the SBG ordinary shareholders, was considered important for the sustainability of the initiative.

The Black Ownership Initiative is financed through fixed-rate redeemable preference shares with a 20-year term. The redemption profile of such preference shares is dependent on the future dividend stream of SBG, thus further enhancing the sustainability of the Black Ownership Initiative as it is not linked to the performance of the SBG share price.

At the time of the transaction, 10% of SBG’s South African banking operations was valued at approximately R4,3 billion and was equivalent to approximately 7,54% of the issued ordinary share capital of SBG. After deducting the value of the Andisa Capital (Proprietary) Limited empowerment transaction previously concluded from this valuation, the requirements reduced to 7,47% of the issued ordinary share capital of SBG. The black participants together hold 100,5 million SBG ordinary shares whose value was equivalent to 10% of SBG’s South African banking operations at the time of the transaction.

Economic costStandard Bank estimated the total economic cost of the Black Ownership Initiative and the General Staff Scheme using recog-nised financial risk pricing methodologies and assumptions, to be R1 605 million as at 9 July 2004. This translated to 2,8% of the market capitalisation of SBG based on the closing ordinary share price of R42,50 per share on that date. JPMorgan performed an independent review of this estimation.

Including the economic cost relating to the Liberty Life scheme, the economic cost for SBG increased to R1 716 million. This translated to 3,0% of the market capitalisation of the group based on the closing SBG ordinary share price of R42,50 per share on 9 July 2004.

The accounting treatment of the transaction is detailed in the financial review on page 57.

Approval for the transactionThe approval process was as follows:

• a scheme of arrangement whereby SBG ordinary shares were repurchased by special purpose entities (SPVs) owned by SBG was approved by 98,1% of scheme members present and voting either in person or by proxy at the scheme meeting held on 13 September 2004;

• a special resolution approving the acquisition by these SPVs of the SBG ordinary shares in the form of a buy-back was approved by 97,4% of ordinary shareholders present or represented by proxy in a general meeting held on 13 September 2004; and

• on 22 September 2004 the High Court sanctioned the scheme in terms of the Companies Act.

pg 10 | Economic review

Economic review

Extraordinary conditions prevailed in 2004The global economy experienced an extraordinary 2004 by growing at its quickest pace in almost two decades. Emerging markets flourished in an unprecedented manner, and Africa’s economy expanded at twice the annual average rate of the last 20 years. In a rare showing, world growth was synchronised, with all major economic regions contributing positively to the largely robust global performance.

The world benefited from a buoyant trade cycle and responsive monetary and fiscal policies in many markets. The slide in the US dollar was not overly disruptive and China continued to expand vigorously and avoided the hard landing some commentators and analysts had anticipated. Economies that rely principally on resource extraction benefited from strong demand and high prices.

The rise in crude oil prices to record levels and the unrelenting geopolitical frictions in certain regions failed to blight growth prospects. In addition, in an intriguing development, more than half of the world’s population went to the polls in 2004 to participate in major national elections.

Slowdowns for major economiesIn 2005, however, world economic growth is expected to slow. From the estimated 5% expansion in 2004, measured by purchasing power metric, a slowdown to about 3,8% is anticipated. This slowdown will be driven mainly by the United States of America (USA) and China. In the USA, the combination of a softer business cycle and further attempts to return short-term interest rates to a semblance of normality will restrain USA economic growth. Consumer spending is expected to ease from its recent levels of exuberance. In China, a mixture of administrative controls and market incentives will set the tone for a slowdown from the comparatively bullish performance of recent years.

A relapse in the economies of Japan and the European Union (EU) is daunting. The deterioration in its external environment is likely to restrain Japan’s exports and curtail business investment. Consumer confidence may also fall as a result of concerns about job security. In the EU, the impact of high oil prices and the strong euro is eroding regional companies’ profitability and causing them to downscale new investments. Domestic production in the EU is also being impacted by lower-cost imports from outside the union area.

Challenges face emerging economiesEmerging economies will also find the global environment more challenging in 2005. The slip in global growth, an easing trade cycle, higher interest rates and lower commodity prices will test the resilience of emerging markets. Those with high debt burdens will be especially vulnerable. Latin America and emerging Europe are on course to achieve modest growth among the emerging regions in 2005.

In contrast, Africa may grow more rapidly in 2005. The International Monetary Fund (IMF) forecasts economic growth of 5,4% for Africa, which is almost one percentage point higher than the 4,5% real growth achieved in 2004. This augurs well for furthering such pan-African political and economic initiatives as the New Partnership for Africa’s Development (Nepad). Many economies are harnessing the benefits of higher resource prices, including those for crude oil, coal, base metals and precious metals. The decline in brinkmanship across states and regions in Africa is also fostering an environment more conducive to sustained wealth creation. The political landscape is increasingly being defined by issue-based contests, with political candidates ticketing on vital national issues.

The end to quota restrictions in Western textile markets, however, raises near- and longer-term challenges for Africa. The end to the Multi-Fibre Agreement in January 2005 presents China with the opportunity to raise its share of exports to developed markets and, in the process, displace many African and other developing economies. This is an area where China has a competitive edge.

Positive outlook for South AfricaThe South African economy grew by almost 3,7% in 2004 and may expand by more than 4,0% this year. Healthy business and government finances coupled with sound household fundamentals will allow for sustained, strong cyclical performance. The contribution to overall economic growth by consumers was exceedingly robust in 2004 and, while growth in spending will slow this year, it is likely that the absolute level of consumer participation will remain firm. Households will be assisted by above-inflation pay rises, low nominal interest rates, substantial social welfare transfers from the government and the wealth-effect of buoyant asset prices.

Formal sector employment growth, albeit gradual, and the increased participation of black people in the mainstream economy should also add a supportive structural undertone to overall household consumption in an expanding economy.

Consumers relied increasingly on debt-financed consumption in 2004. The higher levels of household debt relative to income, however, do not suggest heightened default risk. Instead, the comparatively low levels of interest rates compared with previous years appear to have enhanced debt affordability and, combined with the likelihood of diminished variability in short-term interest rates in 2005, this is likely to increase consumers’ capacity to service their loans. Noteworthy is the persistent decline in insolvencies in the current cycle. In addition, the appetite for debt may be tempered slightly in 2005 because much of the stimulus from the precipitous fall in interest rates in 2003 may already have been absorbed by the economy.

The South African government’s fiscal stance is mildly expansionary and increased institutional capacity should allow for greater policy traction. Consequently, the state should


prove to be a stabilising force in the overall growth dynamic and this should encourage further new business investment. South African companies, in general, are showing a tendency to boost productive capacity. Some hesitancy, however, may creep into production plans in the face of reduced demand from export markets and the rand’s continuing relative strength.

In summary, the South African economy is underpinned by a healthy internal growth dynamic, although the likelihood of persistent rand strength and the global economic slowdown pose some challenges. Emerging economies, generally, will also find the weakness in the developed world discouraging. Africa is harnessing the benefit of increased demand for commodities and a more hopeful political climate: accelerated growth is forecast in 2005.

This outlook, however, comes with a few important caveats:

• first, the dollar may continue to slide, but it should not collapse or weaken severely;

• second, China’s economy may slow, but it should not crash; and

• third, the quest for rebalancing global growth should not come at the expense of the US growth locomotive.

These risks, if they materialise, could rapidly turn a thus far virtuous global growth cycle into a vicious one, and could lead to a considerable slowdown in global growth in 2005, with consequences for several years thereafter.

The South African economy is underpinned by a healthy internal growth dynamic, although the likelihood of persistent rand strength and the global economic slowdown pose some challenges.

Real GDP growth

0

1

2

3

4

5

6

7

2001 20032000 20021998 2005F

%

1999

World

Emerging markets

Africa

2004E

Source: World Economic Outlook – September 2004 IMFE – estimate F – forecast

0

1

2

3

4

5

6

7

1998 2001 20031999 2000 2002 2005F

Domestic spending and interest rates

Gross domestic expenditure (GDE)

Prime rate

GDE %

2004-1

0

1

2

3

4

5

6

7

0

3

6

9

12

15

18

21

24

Source: SA Reserve Bank F – forecast

Prime rate %

Group overview

Africa

Retail, commercial and investment banking services in 16 African countries outside South Africa.

Retail Banking

Banking, investment, insurance and other financial services to individual customers and small- to medium-sized enterprises throughout South Africa.

01 Tina Eboka | 45 Corporate affairsBS Applied Mathematics (New York), BS Textile Engineering (Philadelphia), MBA (Philadelphia), SEP (Harvard) Joined the group 2005, appointed to exco 2005

02 Arnold Gain | 50 Group credit BCom (Hons) (Cape Town) Joined the group 1994, appointed to exco 2005 03 Ben Kruger | 45 Managing director, Corporate and Investment Banking BCom (Hons) (Pretoria), CA (SA), AMP (Harvard) Joined the group 1985, appointed to exco 2000

04 Rob Leith | 42

Chief executive, International BCom (Hons) (Cape Town), CA (SA) Joined the group 1991, appointed to exco 2003

05 Chris Lombard | 58

Leadership development and training BA (Hons) (Stellenbosch), PMD (Harvard) Joined the group 1978, appointed to exco 1995

06 Jacko Maree | 49

Group chief executiveBCom (Stellenbosch), MA (Oxford), PMD (Harvard) Joined the group 1980, appointed to exco 1995

07 David Munro | 34 Deputy managing director, Corporate and Investment Banking BCom (PGDA) (Cape Town), CA (SA), AMPC (Harvard)

Joined the group 1996, appointed to exco 2004

2004 2003

Headline earnings (Rm) 3 158 2 476

ROE (%) 36,8 35,2

Cost-to-income ratio (%) 61,3 60,9

Credit loss ratio (%) 0,59 1,10

Net advances (Rm) 151 354 112 751

Headline earnings contribution (%)

41

39

2004 2003

Headline earnings (Rm) 634 489

ROE (%) 30,3 28,3



Net advances (Rm) 11 805 10 674


8

8

Group executive committee (exco)

01 02 03 04 05 06 07

Headline earnings contributionby business unit (%)

58

35

92

41

Corporate and Investment

Banking 35% (2003: 34%)

International 9% (2003: 14%)

Stanlib and other 2% (2003: 1%)

Africa 8% (2003: 8%)

Liberty Life 5% (2003: 4%)

Retail 41% (2003: 39%)Headline earnings contributionby business unit (%)

58

35

92

41


Banking 35% (2003: 34%)



Africa 8% (2003: 8%)


Retail 41% (2003: 39%)

Headline earnings contributionby business unit (%)

58

35

92

41


Banking 35% (2003: 34%)



Africa 8% (2003: 8%)


Retail 41% (2003: 39%)

pg 12 | Group overview

Corporate and Investment Banking

Commercial and investment banking services in South Africa to corporates, foreign banks and international counterparties.

International

Investment banking activities focused on developing markets and natural resources, and private client banking through offices in 21 countries outside Africa.

Liberty Life

Life insurance and asset management activities through SBG’s investment in Liberty Holdings Limited and Liberty Group Limited.

08 Sipho Ngidi | 49Corporate human resources BAdmin (Zululand), BCom (Hons) (Natal) Joined the group 2001, appointed to exco 2001

09 Dipak Patel | 41

Public sector banking MBA (Wits), MSc (London) Joined the group 2002, appointed to exco 2003

10 Simon Ridley | 49 Finance BCom (Natal), CA (SA), AMP (Oxford) Joined the group 1999, appointed to exco 2002

11 Myles Ruck | 49

Chief executive, Liberty Life BBus Sc (Cape Town), PMD (Harvard) Joined the group 1985, appointed to exco 1996

12 Paul Smith | 50

Group risk BCom (Natal), CA (SA) Joined the group 1997, appointed to exco 1999

13 Sim Tshabalala | 37

Managing director, Africa BA LLB (Rhodes), LLM (University of Notre Dame USA), H Dip Tax (Wits) Joined the group 2000, appointed to exco 2001

14 Peter Wharton-Hood | 39

Managing director, Retail Banking BCom (Hons) (Wits), CA (SA) Joined the group 1997, appointed to exco 1999

2004 2003


ROE (%) 35,8 29,4





35

34

2004 2003

Headline earnings (Rm) 685 866

ROE (%) 12,8 14,7





9

14

08 09 10 11 12 13 14

2004 2003


Headline earnings attributable to Standard Bank (Rm)

350

270

Profit for the year (Rm) 1 1 804 1 162

Total embedded value (Rm) 1 16 867 15 817


5

4

1 Liberty Life as published


Retail Banking in South Africa

What we achieved in 2004Retail Banking increased its segment focus leading to improved customer acquisition, particularly in segments where we were not well represented. More focus was also placed on the unbanked market. The high asset growth led to market share improvements in most products. Retail Banking continued to invest in the distribution network, both physical and electronic.

Home loans

The home loans business not only benefited from favourable economic conditions, which saw house prices increase by 32%, but also from improved marketing and sales efforts, enabling Standard Bank to grow its share of new business. The number of mortgage registrations rose by 37%. Internal origination channels accounted for 38% of new business and good relationships with home-loan originators and estate agents continued. Home loans has a comparatively young book, with 39% of the book being written in 2004, resulting in a relatively low "fall-off" of the book compared with our competitors. All of these factors contributed to a gain in market share.

Customer retention strategies and operational processing were two major focus areas in 2004. Sixty-six percent of new loan applications are now turned around in seven days, a marked improvement on the 51% reported at the beginning of 2003.

The average size of a home loan written in 2004 was R350 000. The average loan-to-value ratio of the home loan book is 69% and the average instalment-to-income ratio is approximately 20%.

Vehicle and asset finance

The vehicle and asset finance business performed well and achieved a 31% growth in the number of new deals against a 22% growth in industry sales of new vehicles. Growth in the non-motor book was below expectation and is receiving

attention. The vehicle and asset finance sales force is the only Standard Bank sales team that is not integrated into the branch network. This status is set to change in 2005 and should, in time, provide opportunities to increase growth and improve customer interaction with the bank.

Card

The card business continued to receive strong support from the branch network and turnover increased by 25%. The number of credit card transactions rose by 15%. For stores with Standard Bank card terminals, credit card sales increased by 17% and the number of transactions increased by 16%. The card business has upgraded its information technology platform to improve transactability and information management.

Other lending

The 17% balance growth in overdrafts, revolving credits and medium-term loans was due to an increase in new customers, a higher demand for credit, an increased penetration of our existing customer base and general process improvements. Non-performing loan ratios continued to decline as a result of improved credit processes and a favourable credit environment.

Transaction and savings

The transactional business achieved strong year-on-year growth of 12% in the number of personal and business current accounts. Transactional volumes on current accounts rose by 8%. The number of EPlan accounts increased by 12%, to 3,1 million active accounts. EPlan is a simple transactions-based account aimed at the convenience banking market. The number of Maestro users increased by 43%, with volumes increasing by 80%. Maestro is a simple card-based payment system that allows customers to make electronic payments directly from their accounts to retailers. Standard Bank now accounts for more Maestro transactions than the rest of the South African banking sector

pg 14 | Business unit reviews

Business unit reviews | Retail Banking

Financial highlights

» Headline earnings up 28%.

» Financial performance continued to be boosted by better-than-expected growth in advances; strong customer acquisition; improved customer retention; and lower credit loss ratios.

» Net interest income was impacted by a compression of margins due to lower interest rates; an increased reliance on more costly wholesale funding; offset to some extent by the good growth in advances.

» Credit losses decreased as a result of lower loss ratios experienced combined with lower probability of future defaults as a result of the favourable interest rate environment; and improved collection strategies.

» Non-interest revenue improved as a result of strong fee income growth following increased transaction volumes; and increased bancassurance business and lower loss ratios in the short-term insurance business.

» Costs increased due to an increase in processing expenses in line with increased transaction volumes and new legislation; additional IT spend on hardware maintenance and ATMs; and higher incentive payments to staff.

combined. The Standard Bank cheque card achieved a 66%

growth in the number of cards and the number of transactions

increased by 180%.

Together with the growth in savings and investment deposit

accounts, market share gains of approximately 1% were

achieved in retail deposits.

Key product analysis

Balance 2004 Rbn

Balance

growth (%)

Balance

2003 Rbn

Assets

Home loans 92 43 64

Vehicle and asset finance 34 21 28

Other lending 20 18 17

Credit card 8 35 6

Liabilities

Current accounts 27 17 23

Investment deposits 33 6 31

Savings 15 7 14

EPlan 5 25 4

Credit

Credit performance improved across all products and was

assisted by an improved environment in South Africa. Retail

credit has continued its strong focus on maintaining credit

quality by:

• enhancing credit scorecards and data inputs by improving the

quality and scope of underlying data sources which results in

an improvement in predictive capability;

• improving collections operations and capability through

an improvement in early identification and rehabilitation

of delinquent accounts processes, a focus on risk-based

collections and an elevated focus on after-write-off

recoveries; and

• investing in automated decision support technologies,

including a new collections system to facilitate collections at

an enterprise level.

Operations and infrastructure

Increases in account and transactional volumes, as well as the

impact of compliance with two new acts in South Africa – the

Financial Advisory and Intermediary Services (FAIS) Act and

the anti-money laundering Financial Intelligence Centre Act

(FICA), presented some challenges during the year. Despite

these demands, customer satisfaction ratings were maintained.

The CUSSATS survey performed by an independent research

company rated Standard Bank first in customer satisfaction

ratings in South Africa. The Customer Evaluation of Branch

Service (CEBS) score, performed by an independent third

party, confirmed that our service ratings were maintained

during the year.

Retail Banking achieved its sales targets in all major product areas. A positive attitude and high energy levels continued to permeate through the bank’s branch network.

Direct distribution channels were bolstered through the installation of 192 new ATMs. A 9% increase in ATM-based transactions was recorded. Call volumes to the bank’s customer contact centre increased by 15% and new Internet banking registrations rose by 24%. The volume of Internet-based transactions increased by 45%.

Cash transaction volumes were up 7% to slightly more than R20 billion of deposits and withdrawals processed monthly. Security around cash in transit was increased and an increas-ing proportion of our cash-in-transit activity was outsourced to SBV, a specialist banking industry service provider. An industry model has been developed for clearing cash to and from retailers in shopping centres. In line with an expected decline in paper-based transations, cheque volumes declined by 13% to just over 4 million cheques per month. Cheque-processing infrastructure has been successfully rationalised, including a reduction in headcount of 18%. Approval has been received from the Competitions Commission to develop a shared cheque-processing infrastructure with ABSA. The first phase of the proposed model has been piloted and proved viable.

During the year, 19 “Bank in a Box” units were installed. This distribution mechanism is a cost effective, quick deployment, relocatable, prefabricated point of representation. It uses modern, broadband satellite technology for communication. This makes it effective for testing new markets, especially in areas with limited infrastructure like urban townships and deep rural districts where banking services are not readily available.

2004 2003

ATMs 3 289 3 097

Total points of representation 741 708

Branches 171 167

Service centres 414 397

Bank in a Box 19 –

AutoBank E 137 144

Charter product initiatives

Retail Banking initiatives linked to the charter all made encouraging progress. Since launching the low-cost Mzansi banking account in October, Standard Bank had opened approximately 90 000 new Mzansi BlueAccounts with com-bined balances of R26 million by year end.

The Standard Bank Mzansi BlueAccount is in line with the banking industry’s cooperative initiative to bring affordable banking to South Africa’s unbanked individuals. Mzansi BlueAccount is a simple, affordable transmission account. The pricing of the account is based on what an unbanked customer will find affordable, and operates on a pay-per-transaction basis. The account carries no monthly fee and


offers one free deposit and one free balance enquiry a month. Debit order facilities are not offered on the account. Interest is earned on the account at a rate which depends on the balance in the account.

One of the account’s main benefits is that customers can use other banks’ ATMs at no extra fee. Previously unbanked people account for more than 93% of the total Mzansi accounts.

Retail Banking also established a specialist low-income housing business unit to focus on the home-ownership requirements of households earning between R1 500 and R7 500 a month. This new initiative is aimed at providing qualifying households with mortgage loans, pension-backed loans and unsecured housing finance. It will also focus on providing development finance for rental and private ownership, as well as wholesale funding to small and medium enterprises in the low-income market.

Joint ventures and alliances

The Standard Bank collaboration agreement with Barclaycard is working well and the account base doubled in 2004. The African Bank Investments Limited (ABIL) business continues to gain ground and the outstanding loan book was R568 million at year

end (2003: R380 million). On the securitisation front, the SA Home Loans relationship is working well in terms of both profitability and the origination of new business.

Wealth management in South Africa

What we achieved in 2004Bancassurance commission from simple embedded assurance products increased by 37%. The complex intermediary business improved, with first-year commission income increasing by 19% (2003: 1%), assisted by the improved performance in equity markets. The transition to FAIS-compliance has been completed.

Embedded

products

Commission

received

Number of

policies

Penetration

Funeral +40% +24% 22% (2003: 19%)

Home loan +42% +23% 17% (2003: 15%)

Personal loan +50% +24% 62% (2003: 54%)

In the short-term underwriting business, policy volumes grew 15% and the overall loss ratio improved to 51% (2003: 56%).


Retail Banking continued

Focus areas for 2005

In the year ahead, Retail Banking will focus on:

• improving its segment focus in order to further expand the customer base and market share by understanding the life-cycle of a customer and providing relevant products;

• renovating and expanding infrastructure;

• meeting the commitments of the charter: understanding the growth potential of low-income housing and black SMEs;

• renewing the vehicle and asset finance focus on the non-motor sector, and better integrating this business into the branch network;

• growing the retail deposit base; and

• closely monitoring compliance with established and new legislation.

Retail Banking increased its segment focus leading to improved customer acquisition. Significant asset growth led to market share improvements in the majority of products. Investment in our distribution network continued.


Developments in Africa

Integration with Retail Banking and Corporate and

Investment Banking

The Africa business continued to align its retail and wholesale

operations with its counterparts in South Africa. The integration

process has included an organisational shift towards operating

in a matrix structure in which the Africa retail operation works

closely with Retail Banking and the Africa wholesale banking

operation reports directly to Corporate and Investment

Banking from a functional perspective. The segmentation of

the Africa customer base into retail and wholesale customers

has been completed successfully.

This integration process is resulting in improvements in

all core areas of banking, such as governance, risk manage-

ment, product development and support, technology and

human resources development. Africa is thus benefiting

from the extensive knowledge and experience of the South

African operations.

Integration of new acquisitions

The acquisitions made in Botswana and Mozambique in 2003

have been successfully integrated. The phased process of

converting branches in Uganda and Malawi to comply with

Standard Bank corporate identity was also completed during

the year.

The business continues to seek strategic acquisitions,

particularly in markets where the group has an established

presence that is small relative to the overall market

opportunity; most notably in Nigeria, Kenya, Ghana and

Tanzania. The Africa business is also looking to enter new

markets, such as Angola, where we believe significant

opportunities exist.

Retail Banking in Africa

What we achieved in 2004The business has developed service and product propositions for several retail segments, including business banking, executive banking and salaried customers.

Business development is focused primarily on implementing products and services to meet the needs of these chosen segments.

The 2004 year saw the introduction of cross-border transactability, instant card issue, credit and debit cards, asset-based finance and enhanced payment systems.

Sales and service drive

To reduce its reliance on interest income, the business has implemented several complementary initiatives to increase fee-based revenue. A strong sales and service drive enabled significant increases in the number of customer and transactional volumes. This commitment has been helped by the introduction of uniform pricing policies, philosophies and processes.

The Africa business introduced integrated sales and marketing campaigns in several countries in an effort to expand the customer base and promote product cross-selling. Sales-people and teams were incentivised to stimulate the sales drive, which led to a 35% growth in the account base to more than 1,6 million accounts. The business also introduced an independent service measurement tool, CEBS, successfully used by Retail Banking in South Africa, to measure and record customer rating of service quality.

An adapted South African bancassurance model was implemented in phases throughout the African retail banking operations. In Namibia, for example, the bank introduced the South African bancassurance model, which offers simple

Business unit reviews | Africa


» Headline earnings in rand up 30%.

» Improved earnings growth despite continued rand strength and declining interest rates.

» Good local currency earnings growth achieved in Uganda, Ghana, Zambia, Kenya, and Mauritius.

» Net interest income has been impacted by declining interest rates resulting in margin pressure in the Common Monetary Area operations as well as Zambia, Malawi, Tanzania, Ghana and Zimbabwe.

» Increased fee and commission income was largely driven by retail initiatives which resulted in increased transaction volumes and account numbers, coupled with improved pricing and a reduction in revenue leakages.

» Credit provisioning benefited from recoveries in Uganda and Kenya, and lower provisioning requirements in Botswana and Namibia due to improved credit discipline. These benefits were partly offset by increased provisioning in Ghana, Nigeria, Zambia and Malawi.

» The inclusion of the acquisitions in Mozambique and Botswana for a full year boosted growth in headline earnings by 5%.

» High operating costs were incurred for branch refurbishments, IT systems rollout and increased central support functions to support the Africa growth strategy.


embedded products through a relationship with Liberty Active (previously Charter Life). In all other countries where the business offers retail banking, except Malawi, the group maintains a bancassurance joint venture with Alexander Forbes, which offers credit life products to loan customers.

The programme to expand and upgrade our distribution net-work continued. The business added another eight points of representation in its branch network, which totalled 234 by year end. The ATM network was increased from 211 machines in December 2003 to 314 by year end. The business imple-mented an instant card issuing facility at 109 branches in 12 countries. It also completed an aggressive campaign to upgrade and revamp outlets in several countries as they did not conform to minimum levels of service, process and appearance.

The Africa business has also been working to standardise all banking policies, procedures, processes and systems across its network. This work is ongoing with continued focus on creating a common operating platform across all points of representation. In addition, the business introduced routine control assessments to improve compliance with mandatory procedures.

Wholesale Banking in Africa

What we achieved in 2004The focus on growing interest margins and effective asset and liability management continued. Interest rates in Africa have been declining steadily as a result of more prudent monetary and fiscal management by many African governments. In order to maintain the historical margins achieved, the Africa business has placed greater emphasis on lowering the cost of funds by increasing its efforts in the government and international

organisation segments, and by sourcing low-cost liabilities through improving transactional service offerings (cash management, trade and electronic banking).

The Africa wholesale banking business has been building its capacity to lend, particularly in the areas of asset-based finance and trade finance. The introduction of integrated credit processes with Corporate and Investment Banking will improve credit approval efficiency. The implementation of sophisticated systems will result in more efficient balance sheet and margin management across our African operations.

The Africa wholesale banking operation increased its treasury revenues by building a more focused and better motivated treasury sales team. A similar version of the successful Corporate and Investment Banking treasury sales model was implemented. This model supports dedicated sales resources in growing customer foreign exchange flows through the group’s various African banks. This model was implemented in several countries, including Botswana, Kenya, Lesotho and Namibia.

During 2004, the collaboration between International, Corporate and Investment Banking and Africa culminated in the provision of a US$120 million loan facility and associated retail banking facilities for the development of the Kansanshi copper mine located in Solwezi, Zambia. The loan was provided in two tranches, with a US$60 million commercial tranche arranged by International and a US$60 million Export Credit Agency tranche arranged by Corporate and Investment Banking. Stanbic Bank Zambia established a branch at Solwezi to cater for the needs of the mine’s employees and other residents located in the remote Solwezi region. The mine is currently in ramp-up mode in anticipation that it will produce in excess of 110 000 tonnes of copper in 2005.


In the year ahead, the Africa business will focus on:

• building its customer base through aggressive sales and service campaigns;

• enhancing its wholesale banking customer service model, embedding its investment banking origination model and further building its transactional services capability;

• continuing to standardise processes and systems;

• improving process efficiency and productivity to contain costs;

• enhancing risk systems to improve risk management capabilities; and

• searching for select acquisition opportunities in key markets.

Africa continued

Africa continued to align its retail and wholesale operations with its counterparts in South Africa.


Business unit reviews | Corporate and Investment Banking


» Headline earnings increased by 24%.

» All major business units contributed positively.

» Financial performance was boosted by strong growth in non-interest revenue, as well as a lower net charge for credit losses.

» Net interest income was negatively impacted by lower interest rates, resulting in a 1% reduction in net interest income overall.

» Credit losses were maintained at very low levels resulting in a second year of net recoveries.

» Fee and commission revenue grew mainly due to strong growth in advisory and transactional revenue.

» Trading revenue ended the year 36% up primarily due to good performances in debt securities and foreign exchange.

» Investment revenue increased as a result of property and private equity investment gains.

» Staff costs increased in line with performance.

Wholesale Banking in South Africa

What we achieved in 2004All areas of Corporate and Investment Banking performed well in 2004, with a well-balanced mix of income arising from net interest income, trading revenue, and fee and other income. Stong focus on capital and operating costs saw return on equity increasing to 35,8% and the cost-to-income ratio decreasing to below 44%.

Income contribution

2004%

2003

%

2002

%

2001

%

2000

%

Net interest 35 41 38 35 35

Trading 26 22 29 33 32

Fee and other 39 37 33 32 33

Global markets

Global markets houses the division’s customer driven financial markets and treasury activities.

Foreign exchange trading profit was higher due to volatility in the currency market, which created greater opportunities in 2004. Standard Bank is the pre-eminent market maker in rand products and enjoys a large market share. Proprietary risk is balanced with significant sales flows from domestic clients, as well as international and regional banks. The business maintains a 24-hour trading and client service capability through London, New York and Hong Kong.

Commodity trading performance was subdued in the

absence of major gold hedging opportunities. The desk

continues to focus on growth opportunities in the base

metals, agriculture and energy sectors.

The money market, bond and associated interest rate

derivative trading businesses performed well under difficult

market conditions. This resulted from increased competition

and subdued client activity, given a stable interest rate

environment. Profits from equity derivative trading were also

well up on 2003 in a market characterised by a marked

increase in competition and diminishing margins.

There was record issuance of corporate and securitised debt

in 2004 with some R28 billion being raised in the capital

market. In this environment, the debt origination and

securitisation desks both performed well by executing a

record number of transactions.

Corporate and Investment Banking enjoys a substantial market

share in capital markets and continually seeks to enhance its

vanilla and structured product delivery to its clients.

The Corporate and Investment Banking business featured

prominently in both the 2004 Risk magazine and the

PricewaterhouseCoopers (PwC) banking surveys.

Risk magazine rand survey:

• no. 1 – rand interest rate swaps 2-10 years

• no. 1 – rand interest rate long dated swaps 10+ years

• no. 1 – USD/ZAR currency options

• no. 2 – rand interest rate swaps 0-2 years


Corporate and Investment Banking continued

PwC banking survey:

• no. 1 – capital markets (foreign exchange, bonds and derivatives)

• no. 1 – warrants issuance

• no. 1 – primary dealer in government bonds for 2004 fiscal year

• no. 1 – primary markets issuance

Banking and trade finance

Margin revenue was negatively impacted by an environment of low interest rates, subdued corporate credit demand, narrowing credit spreads and a competitive market. Continued focus on the quality of assets, however, resulted in an excellent year for credit recoveries. The lower interest rate cycle assisted clients previously in default, resulting in high levels of recoveries and further improvement in the credit loss ratio, which declined from 0,31% in 2003 to 0,05% in 2004.

As a result of a strong focus on transactional business, volumes continued to grow, as well as new business being won, including Amalgamated Beverage Industries, Telkom and the KwaZulu-Natal Provincial Government. Online transactional volumes increased by 15%. The 7% increase in import and export banking service volumes enabled international trade services to increase fee and commission revenue.

Standard Bank became a shareholder and active settlement member of CLS Bank during the last quarter of 2004 when the South African rand joined the global currency settlement utility. This brings to 71 the number of commercial and invest-ment banks that are shareholders of CLS Bank. CLS Bank links 15 of the world’s central banks and many of the world’s leading financial institutions. There are now 15 settlement currencies in the CLS fold of which the South African rand, together with the New Zealand dollar, the Hong Kong dollar and the Korean won were approved by the CLS Bank board on 30 November 2004 and subsequently became eligible settle-ment currencies on 6 December 2004. On 15 December 2004 a peak value of US$3,68 trillion equivalent settled through the system.

Settling transactions through CLS effectively reduces settlement risk from our global interbank foreign exchange

transactions. The aim is to benefit from additional exchange and related business and associated capital cost reductions. It is also expected that more transaction capacity will be available within current counterparty limits. This is due to reduced counterparty risk as settlement occurs continuously.

Assets under custody increased to more than R1 trillion with large market shares in equities, bonds, securities lending and trustee services. The custody business was top-rated in the Global Custodian fall edition placing Standard Bank amongst the best sub-custodians in developed markets around the world, and was the highest rated custodian in South Africa in the fall edition of GSCS (Global Securities Consulting Services) Benchmarks 2004.

Structured debt and property finance

This operation mandated and concluded several large asset-based financing transactions. Standard Bank acted as mandated lead arranger of the commercial debt tranche for the Sasol Natural Gas Project, one of the biggest gas and infrastructure deals in Africa, with a total project cost of US$1,2 billion. Standard Bank also acted as global advisor and arranger for Celtel Kenya Limited. The syndicated loan tranche of the facility (slightly more than KSH6 billion or about US$75 million) is the largest single debt fundraising ever conducted in the Kenyan market.

Standard Bank acted as joint lead advisor and arranger on Incwala Resources’ acquisition of an 18% shareholding in Lonmin Platinum – a transaction valued at about US$500 million – to create a new black economic empowerment company in the South African platinum mining industry. This transaction was voted ‘Deal of the Year’ in the annual survey of South Africa’s corporate finance activity conducted by the research publication, DealMakers.

With support from the Export Credit Insurance Corporation of South Africa, Standard Bank was responsible for 60% of the total investments made under the export credit scheme during 2003 and 2004.

Property finance enjoyed good growth in its commercial mortgage lending book and a number of profitable realisations. Listed property investments performed exceptionally well with growth in value exceeding 40%.



In the year ahead, Corporate and Investment Banking will focus on:

• growing balance-sheet lending;

• maintaining an unrelenting customer focus;

• strengthening transactional capabilities and pursuing new investment banking opportunities;

• replacing realised private equity and property equity positions;

• arranging and financing infrastructure upgrades and refurbishments in South Africa and other parts of Africa; and

• capitalising on opportunities arising from implementation of the charter.

Standard Bank became a shareholder and active settlement member of CLS Bank during the last quarter of 2004 when the South African rand joined the global currency settlement utility.

Corporate finance and investments

Major milestones for the corporate finance and investments operation included:

• implementing the Standard Bank Group and Liberty Life black empowerment transactions;

• the formation of Incwala;

• concluding the Konkola Copper Mines transaction; and

• the listing of Peermont Global.

The increased activity has led to higher advisory billings. A number of equity realisations were achieved during the

course of the year and favourable equity market conditions prevailed for valuations of investment portfolios.

The acquisition finance group, comprising a highly specialised team providing tailor made acquisition funding structures, was established during the first quarter and concluded a number of large and complex deals.

Investment for growth

Significant further investments were made in information technology, processing capability, risk management systems and staff. These investments are critical to support future growth of the business.

Wholesale banking in emerging markets

What we achieved in 2004International’s investment banking operation in emerging markets reported satisfactory results for the year, with US dollar earnings marginally below budget. International made significant progress in advancing and strengthening its business franchise and operating platform. International took major strides to:

• further enhance its product range;

• deepen its regional penetration; and

• upgrade its information technology, support and risk structures.

These achievements are critical to the future growth of the business.

Global markets

The global markets division, housing International’s customer-driven capital markets and treasury activities, generated strong growth.

Interest rate trading and foreign exchange activities recorded increased volumes, aided by a strong customer focus and increasing geographic diversity. The Brazilian, Turkish and Russian operations all performed strongly.

Credit trading businesses produced a record performance, benefiting from increased customer flows and the delivery of higher-value customised credit derivative products to clients. The debt origination and customer financing businesses also performed well, despite strong competition and relatively tight spreads.

The principal trading business generated weaker results than reported in 2003 with a good performance by the fixed-income unit partly offset by losses in the equity derivatives principal trading unit, leading to the latter’s closure during the year.

Resource banking

The resource banking division enjoyed a strong operating

performance, with particularly good results from the metals

trading businesses and the structured commodity finance units.

The base metals business again reported significantly increased

revenues, driven by strong growth in client activity aided by

sustained price rises and increased volatility in most metals. The

precious metals business delivered satisfactory results, despite a

continued reduction in forward hedging by gold producers.

The energy business continued its development by reinforcing

its market position in a number of specific industry sectors. The

structured commodity finance business, including both energy

financing and metals financing, reported satisfactory growth.

The division’s net results were, however, adversely impacted by

credit losses suffered during the year within the precious metals

and energy businesses.

Banking and trade finance

The banking division delivered an encouraging performance

with revenues up significantly on 2003. The specialised finance

business closed several high-profile acquisition financings,

including the first Russian acquisition financing seen in

international markets. The business broadened its presence in

Turkey, Asia, Russia and Central America.

The telecommunications finance business reported further

strong results, consolidating its position as the pre-eminent tele-

communications financial advisory and financing team in Africa,

while also establishing a presence in the greater Russian region

(the Commonwealth of Independent States, CIS).

The distribution group also performed well, placing more than

US$8 billion of syndicated loans, trade finance and forfaiting

paper. With Standard Bank acknowledged as a market leader in

arranging and placing debt in emerging markets, the year saw

International arrange and successfully close 45 syndicated

financings for emerging market borrowers, located primarily in

Eastern Europe, the CIS, the Middle East, Asia and Africa.


Business unit reviews | International


» Headline earnings down 7% in US dollars and 21% in rand, off a high base in the previous year.

» All principal product areas and major regions performed well, benefiting from strong customer flows, increased client focus and enhancement to product range.

» Global markets, metals trading and asset management businesses, in particular, achieved strong performances.

» Margin pressure was experienced in a competitive emerging markets environment.

» Additional provisions were raised against mining and energy exposures.



In the year ahead, International will concentrate on:

• sustaining the focus on our existing core product areas and key geographic regions;

• enhancing return on shareholder capital by combining ongoing revenue growth, improved resource utilisation and greater capital efficiency;

• expanding banking capabilities in Hong Kong, Russia and Brazil;

• deepening regional penetration in other geographic markets;

• further enhancing customer focus by increasing the effectiveness and value of the bank’s customer relationships;

• continuing to upgrade the information technology, support and risk infrastructures; and

• further developing and expanding the quality of talent.

Wealth management

What we achieved in 2004International’s wealth management business, including asset management and private client services, continued to develop. The private banking operations comprising the Standard Bank Offshore Group performed in line with 2003, with margin pressure continuing due to the low

interest rate environment. The emerging markets business continued to advance the regional penetration of its private client activities across the international network.

The asset management business again reported strong growth, with third-party assets under management exceeding US$3 billion. Good investment performances were achieved across the range of funds.

International’s wholesale banking operation in emerging markets made significant progress in advancing and strengthening its business franchise and operating platform.


Business unit reviews | Liberty Life


» Headline earnings increased by 32%.

» Both policyholders and shareholders benefited from the strong growth enjoyed by South African investment markets in general, particularly during the second half of the year.

» Indexed new business grew by 10% over 2003, from R3,8 billion to R4,2 billion, while the value of new business increased from R609 million to R815 million.

» Overall new business margins for the year grew to 24%, due largely to the increased volume of risk business sold during the year.

» Net cash flows from insurance operations were positive at R3,6 billion.

» Expense increases were contained within the actuarial assumption of annual growth of 5%, and embedded value grew by 17%.

» Capital adequacy requirement ratio remained strong at 2,1 times.

» The total dividend for the year was 13% up.

Wealth management in South Africa

What we achieved in 2004


In November 2004 Liberty Life concluded a R1,3 billion Black Ownership Initiative, involving the sale of ordinary shares equivalent to 10% of the value of its South African operations to a broad based empowerment grouping headed up by Safika and Shanduka. Significantly, 40% of the shares made available in this deal were acquired by a trust for the benefit of current and future black management of Liberty. All other staff members who were not participants in the black management scheme or any other staff incentive scheme were given 100 shares in Liberty. This participation in ownership, together with the existing staff share incentive schemes means that the staff of Liberty now have an interest in approximately 7% of the group’s share capital which should align their interests closely to those of the wider body of Liberty shareholders.

Acquisition of Capital Alliance

In December it was announced that Liberty Life intended mak-ing an offer to acquire the entire listed shareholding of Capital Alliance Holdings Limited. The offer was subject to a number of conditions precedent, most of which have been met. Should the deal be sanctioned by the court, the merger of the two busi-nesses is expected to deliver positive synergies – generating efficiencies of scale, reduced costs in certain areas and some revenue enhancement. Calculations show that the deal will be immediately earnings accretive.

Capital management

Having concluded the Black Ownership Initiative, the associated capital impairment of R1,3 billion has been determined. In spite of this impairment, Liberty Life remained healthily capitalised at year end. The conclusion of the Capital Alliance transaction will reduce Liberty’s capital adequacy ratio to approximately

1,6 times. The Capital Management Committee within Liberty has also been actively exploring the allocation and mix of its capital, and as early as June last year made application to the Financial Services Board for permission to issue a subordinated bond which would count towards its capital adequacy requirement cover. If successful, Liberty intends to raise between R1,0 and R2,0 billion of debt which will be used to fund the group’s working capital requirements.

Liberty Active (formerly Charter Life)

For some 15 years Charter Life has been the principal bancassurance vehicle for Liberty Life and Standard Bank and it has enjoyed considerable success and rapid growth. As early as 1999, Charter Life indicated it would aggressively enter the lower end of the assurance and investment market. During the course of 2004 a structured plan to “build” a way into that market was finally drawn up and doors were opened for business as Liberty Active early in 2005. Early indications are promising.

Cost reductions and customer service

Focus on these two vital areas of Liberty Life’s business continues. For the second year in a row cost increases were managed to within actuarial assumptions. Liberty will continue to spend money where it is important to provide professional products and services to its stakeholders, so as to deliver top class service in an industry that is not renowned for it.

Operational performance

New individual single premiums increased by 28% to R8 700 million with CPI Plus, Excelsior risk profiled and property portfolios being the most favoured asset classes for investment products. New individual recurring premiums grew by 7% to R2 674 million, with the rate of growth being negatively impacted by the discontinuance of the Medical Lifestyle and Medical Lifestyle Plus product sales in the first quarter of 2004.


In the first full year, Lifestyle Protector risk product sales amounted to R494 million.

New corporate single premiums decreased by 18% to R1 582 million while stronger sales in the second half of 2004 resulted in new recurring corporate premiums increasing by 12%.

Support from independent brokers continued in 2004 with individual new business sales increasing by 17% to R4 344 million, despite the discontinuance of the Medical Lifestyle and Medical Lifestyle Plus products, which were widely distributed by this channel.

The bancassurance relationship with Standard Bank contin-ued to yield significant benefits, with individual new business premiums increasing by 35% to R3 557 million in 2004. New corporate premiums doubled year on year, but remain disap-pointing given the opportunities that should exist within Standard Bank’s client base. The sales model for corporate benefits was restructured towards the end of 2004 with a view to improving sales from this channel. Bancassurance sales now comprise 26% of total new business.

Cooperation with Standard Bank

In addition to the long standing bancassurance venture, Liberty Life has also been exploring other avenues for cooperation with Standard Bank, particularly on the expense side of the income statement. To this end an agreement to

outsource much of its information technology requirements to the bank was concluded.

Stanlib

Stanlib is a vital part of Liberty Life’s business – both from an asset management and profit contribution aspect. The turn-around in profitability at Stanlib in 2004 was encouraging as was the continued improvement in investment performance.

The charter

Liberty is making significant strides towards meeting its commitments under the charter and should meet the requirements of the charter in full and on time.

Opportunities

Exciting opportunities exist for the year ahead. Liberty Life will be restructuring its business into a front office/back office model in order to achieve better efficiencies. The acquisition of Capital Alliance should enable Liberty Life to reach its “simplification” objective sooner as Capital Alliance has successfully integrated nine closed policyholders’ funds in the last five years.

Real growth in earnings, embedded value and dividends is anticipated in 2005, but will, to some extent, depend on investment markets continuing to perform well in 2005. The acquisition of Capital Alliance will achieve the aim of generating efficiencies in due course which should benefit policyholders and shareholders alike.

Both policyholders and shareholders benefited from the strong growth enjoyed by South African investment markets in general, particularly during the second half of the year.


In the year ahead Liberty Life will focus on:

• developing new products;

• structuring and managing capital;

• integrating Capital Alliance;

• managing Liberty Active’s entrance into a new market; and

• people, service and costs.

Board of directors

01 Doug Band | 60 1

BCom (Wits), CA (SA) Appointed: 1997

Directorships: Standard Bank Group, The Standard Bank of South Africa, MTN Group, MTN International, Stanlib, Tiger Brands, The Bidvest Group

Member: Africa credit committee, black ownership initiative committee, directors’ affairs committee, group audit committee, group credit committee, group remuneration committee

02 Elisabeth Bradley | 66 2

BSc (Free State), MSc (London) Appointed: 1986

Directorships: Standard Bank Group, The Standard Bank of South Africa, AngloGold Ashanti, Metair Investments (chairman), Rosebank Hotel, Sasol, The Tongaat-Hulett Group, The Winkler Hotel, Toyota SA (chairman), Wesco Investments (chairman)

Member: Black ownership initiative committee, directors’ affairs committee, group audit committee

03 Derek Cooper | 64 2 CA (SA) Appointed: 1993

Directorships: Standard Bank Group (chairman), The Standard Bank of South Africa (chairman), Business Unity South Africa (BUSA) (vice president corporate), Liberty Group (chairman), Liberty Holdings (chairman), Reunert (chairman), Standard Bank London, The South Africa Foundation (president)

Member: Africa credit committee, black ownership initiative committee (chairman), directors’ affairs committee (chairman), group credit committee (chairman), group remuneration committee, group risk management committee, group transformation committee

04 Trevor Evans | 60 2

BSc (Rhodes), Executive Programme (Marketing) (Cape Town), Executive Programme (Stanford) Appointed: 2003

Directorships: Standard Bank Group, The Standard Bank of South Africa, Nampak (chairman)

Member: Group remuneration committee

05 Thulani Gcabashe | 47 2

BA (Botswana and Swaziland), Masters in Urban and Regional Planning (Ball State) Appointed: 2003

Directorships: Standard Bank Group, The Standard Bank of South Africa, Eskom Enterprises (chairman), Eskom Holdings (chief executive)

06 Buddy Hawton | 67 2

FCIS (Natal) Appointed: 1995

Directorships: Standard Bank Group, The Standard Bank of South Africa, Allied Electronics Corporation, City Lodge Hotels, International Resorts, Liberty Group, Liberty Holdings, Nampak, Royale Resorts Holdings (chairman), Sun Hotels International, Sun International (chairman), Stanlib, Woolworths Holdings (chairman)

Member: Group remuneration committee (chairman), group risk management committee

07 Sir Paul Judge | 55 2,4

MA (Cambridge), MBA (Pennsylvania) Appointed: 2003

Directorships: Standard Bank Group, The Standard Bank of South Africa, Schroder Income Growth Fund, Tempur-Pedic International

08 Saki Macozoma | 47 1

BA (Unisa), BA (Honours) (Boston) Appointed: 1998

Directorships: Standard Bank Group, The Standard Bank of South Africa, Andisa Capital (chairman), Business Trust (co-chairman), Hertz Rent a Car (chairman), Liberty Group, Liberty Holdings, Lliso Consulting (chairman), Murray and Roberts Holdings, New Africa Investments, Safika Holdings (deputy chairman), Stanlib (chairman), Tutuwa Strategic Holdings 2, VW South Africa

Member: Allocation committee (chairman), directors’ affairs committee, group audit committee, group credit committee, group remuneration committee, group risk management committee, group transformation committee (chairman)

09 Jacko Maree | 49 3

BCom (Stellenbosch), MA (Oxford), PMD (Harvard) Appointed: 1997

Directorships: Standard Bank Group (chief executive), The Standard Bank of South Africa (chief executive), International Monetary Conference, Liberty Group, Liberty Holdings, Stanbic Africa Holdings, Standard Bank London (chairman), Standard International Holdings

Member: Africa credit committee, allocation committee, black ownership initiative committee, group credit committee, group executive committee (chairman), group transformation committee

10 Rick Menell | 49 2

MA (Cambridge), MSc (Stanford) Appointed: 1997

Directorships: Standard Bank Group, The Standard Bank of South Africa, African Rainbow Minerals (deputy chairman), Harmony Gold Mining Company (deputy chairman), Mutual & Federal, National Business Initiative, SA Tourism (chairman), Village Main Reef Gold Mining (chairman)

Member: Group remuneration committee, group risk management committee

pg 26 | Board of directors

01 02 03 04 05 06 07 0908 10

11 Kgomotso Moroka | 50 2

BProc (University of the North), LLB (Wits) Appointed: 2003

Directorships: Standard Bank Group, The Standard Bank of South Africa, Electronic Media Network (M-Net), Gobodo Forensic & Investigative Accounting (chairman), Landbank, Schindler Lifts SA, South African Breweries

12 Chris Nissen | 46 2

BA Hons, MA Humanities (Cape Town), Diploma in Theology Appointed: 2003

Directorships: Standard Bank Group, The Standard Bank of South Africa, Boschendal (chairman), Namibian Fishing Industries (chairman), Randgold & Exploration Company, Sea Harvest Corporation (chairman), Tiger Brands, Umoya Holdings, Woolworths

Member: Group transformation committee

13 Robin Plumbridge | 69 2

MA (Oxford), LLD (hc) (Rhodes) Appointed: 1980

Directorships: Standard Bank Group, The Standard Bank of South Africa, Newmont Mining Corporation USA

Member: Group audit committee (chairman), group risk management committee (chairman)

14 Cyril Ramaphosa | 52 1

BProc (Unisa) Appointed: 2004

Directorships: Standard Bank Group, The Standard Bank of South Africa, Alexander Forbes, Johnnic Holdings (chairman), Macsteel Holdings, MTN Group (chairman), MTN International (chairman), SAB Miller, SASRIA, Shanduka Group (chairman), The Bidvest Group (chairman), Tutuwa Strategic Holdings 1

15 Mamphela Ramphele | 57 2

BCom (Unisa), MBCHB (Natal), PhD (Cape Town) Appointed: 2005

Directorships: Standard Bank Group, The Standard Bank of South Africa, African Wildlife Foundation, Circle Capital Ventures (chairman), Mellon Foundation, Nelson Mandela Foundation, Rockefeller Foundation, The Nelson Mandela Children’s Trust

16 Myles Ruck | 49 3

BBus Sc (UCT), PMD (Harvard) Appointed: 2002

Directorships: Standard Bank Group, The Standard Bank of South Africa, Liberty Group (chief executive), Liberty Holdings (chief executive), Standard Bank London, Standard Bank Offshore Group, Stanlib

Member: Africa credit committee (chairman), group credit committee, group executive committee

17 Martin Shaw | 66 2

CA (SA) Appointed: 2004

Directorships: Standard Bank Group, The Standard Bank of South Africa, Illovo Sugar, JD Group, Liberty Group, Liberty Holdings, Murray & Roberts, Pretoria Portland Cement, Reunert

Member: Group audit committee, group risk management committee

18 Sir Robert Smith | 60 2,4

CA and Fellow of the Institute of Bankers in Scotland, Honorary Degrees (Edinburgh, Glasgow, Paisley) Appointed: 2003

Directorships: Standard Bank Group, The Standard Bank of South Africa, Aegon UK, Inchmarmock, Scottish and Southern Energy (chairman), The Weir Group (chairman)

19 Chris Stals | 69 2

BCom, MCom, DCom (Pretoria) Appointed: 2000

Directorships: Standard Bank Group, The Standard Bank of South Africa

Member: Group risk management committee

20 Conrad Strauss | 69 2

BA, PhD (Rhodes), MS (Cornell), AMP (Harvard), FIBSA, DEcon (hc) (Rhodes), DSc (hc) (Pretoria) Appointed: 1984

Directorships: Standard Bank Group, The Standard Bank of South Africa, African Oxygen, Sasol, The Hans Merensky Foundation


1 Non-executive director2 Independent non-executive director3 Executive director4 British

11 12 14 15 17 18 1913 16 20

pg 28 | Corporate governance

The group has a governance framework covering all of its operations and this provides guidance to the structure of governance frameworks of subsidiary entities.

The listed entity is Standard Bank Group Limited. The Standard Bank of South Africa Limited is the only major subsidiary of the group as defined in terms of the JSE Securities Exchange South Africa (JSE) Listings Requirements. It is also the entity through which domestic banking operations are conducted.

Liberty Life is a subsidiary of the group and adheres to its own regulatory requirements as set out in its annual report. Stanlib has its own governance framework, which is overseen by Liberty Life.

Codes and regulations

The group complied with applicable legislation, regulations, standards and codes. The board continually monitors regulatory compliance. It has processes in place to ensure compliance with the principles and recommendations set out in the Code of Banking Practice (the code). Compliance with the code was audited by the group’s internal audit function. The satisfactory findings were confirmed by an independent firm of auditors.

Board and directors 1

The board is responsible for the overall corporate governance of the group, ensuring that appropriate practices are in place.

The board has established a number of committees that assist it in fulfilling its stated objectives. Each committee’s role and responsibilities are set out in terms of agreed mandates which are reviewed annually to ensure they remain relevant.

All board and committee members have access to company information and resources (including access to external legal advice at the group’s expense) to assist them in fulfilling their responsibilities.

The key terms of reference in the board mandate include the following:

• agree the group’s objectives, strategies, and plans to achieve these;

• determine the terms of reference and procedures of all board committees;

• ensure an effective risk management process exists and is maintained;

• review and monitor the performance of the chief executive and the executive team;

• approve the remuneration to be paid to non-executive directors on the board and committees based on recommendations made by the group remuneration committee, subject to shareholder approval;

• ensure an adequate budget and planning process exists, that performance is measured against budgets and plans, and approve annual budgets for the group;

• approve, among other things, significant acquisitions, mergers, take overs, divestments of operating companies, equity investments and new strategic alliances by the company or its subsidiaries;

• consider and approve any significant changes proposed in accounting policy;

• consider and approve the annual and interim financial statements, and consider whether the group is a going concern;

• have ultimate responsibility for systems of financial, operational and internal controls, the adequacy and review of which will be delegated to subcommittees, and the board will ensure that reporting on these issues is adequate;

• have ultimate responsibility for regulatory compliance and ensure that reporting to the board is comprehensive;

• ensure balanced and understandable reporting to shareholders; and

• specifically agree matters reserved for the decision of the board, including those that may affect subcommittees.

Corporate governance

Standard Bank Group remains committed to the practice of good corporate governance in all aspects of its operations. The group has complied with the Code of Corporate Practices and Conduct (King Code) during the period under review.

Unitary board

Chairman independent non-executive director

13 independent

non-executive directors

2executive directors

3non-

executive directors

1 Dr Mamphela Ramphele was appointed to the board on 17 March 2005, post the date of the report, and has therefore not been included in the details relating to the board of directors. She is classified as an independent non-executive director.

StrategyThe board is responsible to the group’s shareholders for its overall strategy and direction and annually devotes a meeting to this subject.

AppointmentsDuring 2004, two directors were appointed in terms of the agreed nominations policy. The nominations policy is re-viewed annually and is in line with Banks Act and JSE Listings Requirements.

Delegation of authorityThe board delegates certain oversight functions to its committees, but retains ultimate responsibility for these activities. In addition, the board has specifically delegated authority to the chief executive to manage the business and affairs of the group. This is done by way of a structured process that is monitored through the group secretary’s office.

Chairman and chief executiveThe role of the chairman and chief executive remain separate and distinct. The chairman of the board is an independent non-executive director.

The performance of the chairman and chief executive are appraised by the board annually.

Board effectivenessThe group is led by a majority of independent board members who, by their skills and diversity, contribute to the efficient running of the board. There are no shadow directors on the board.

The board is focused on continued improvements to its effectiveness.

During the period under review the board tested its effective-ness by a self-assessment process conducted through the means of a questionnaire. Feedback was analysed and discussed at a session, convened for this purpose, following on from the March meeting. The basis for analysis was an examination of board structure, process and effectiveness. The results of the analysis will be used to further improve board functioning. In addition, the directors’ affairs committee annually considers an assessment of the performance of boards and committees against their respective mandates. An independent firm of auditors reviews the assessment and reports to the directors’ affairs committee. Further, an annual assessment of corporate governance performance against the objectives, as required in terms of Regulation 38 of the Banks Act, was conducted. The board materially achieved the corporate governance objectives it set for itself.

Reports prepared by management in respect of the group’s operations are regularly considered and these, together with


Board of directors at 31 December 2004 Mar May Jul Aug Oct Dec

D E Cooper (chairman) 1 4 4 4 4 4 4

D D B Band 2 4 4 4 4 4 4

E Bradley 1 4 4 A 4 4 4

T Evans 1 4 4 4 4 4 4

T S Gcabashe 1 4 A A 4 4 A

D A Hawton 1 4 4 4 4 4 4

Sir Paul Judge 1 4 4 4 4 4 4

S J Macozoma 2 4 4 R A 4 4

J H Maree 3 4 4 4 4 4 4

R P Menell 1 4 4 4 4 4 4

K D Moroka 1 4 A A 4 4 4

A C Nissen 1 4 4 4 4 4 4

R A Plumbridge 1 4 4 4 4 4 4

M C Ramaphosa 2,4 – – – – 4 5 4

M J D Ruck 3 4 4 4 4 4 4

M J Shaw 1,6 – – – 4 4 4

Sir Robert Smith 1 4 4 4 4 4 4

C L Stals 1 4 4 4 4 4 4

C B Strauss 1 4 4 4 4 A 4

1 Independent non-executive director. R = Recused 4 = Attendance A = Apology2 Non-executive director.3 Executive director.4 Appointed on 1 November 2004.5 Attended by invitation.6 Appointed on 22 July 2004.

Membership and attendance

the reporting structures, facilitate the efficient and effective operation of the governance framework.

Induction and trainingAppropriate induction is in place for new directors to properly introduce them to the group and its operations. This involves the provision of a governance manual together with a detailed programme of one-on-one meetings with management. In addition, the board is provided with information to enable it to remain up to date on industry and relevant market developments on an ongoing basis.

Board meetingsThe board scheduled quarterly meetings together with a meeting focused on strategy during the year. Additional meetings are held whenever deemed necessary and one such meeting was called in July 2004.

Board committees

The board ensures that committees operate in an effective manner. The group has established a number of board committees. Each committee's role and responsibility is set out in terms of agreed mandates and assists the board in performing its role. The committees include the following:

Group risk management committee The role of this committee is to provide an independent and objective oversight of risk management within the group. Among other oversight functions, the committee reviews management reports detailing the adequacy and overall effectiveness of the risk function. It also reviews the acceptability of the group's risk profile. Further details on risk management in the group are set out in the risk management report commencing on page 38.

Membership and attendance 1

Member Mar May Aug Nov

R A Plumbridge (chairman)

4 4 4 4

D E Cooper 4 4 4 4

D A Hawton 4 4 4 4

R P Menell 4 4 A 4

M J Shaw 2 – – 4 4

C L Stals 4 4 4 4

1 S J Macozoma was appointed with effect from 1 January 2005.

2 Appointed 22 July 2004.

4 = Attendance A = Apology

Group audit committeeThe role of this committee is to review the group’s financial position and make recommendations to the board on all financial matters including but not limited to:

• providing procedures for appointing external auditors and reviewing audit plans against risk profiles across the group;

• reviewing the group’s internal audit plan and monitoring the risk of the various audit areas;

• meeting with external auditors to discuss audit findings and with the internal auditors to consider detailed internal audit reports and recommendations for the improvement of the group’s system of internal controls;

• reviewing capital adequacy and dividend policy;

• reviewing any significant differences of opinion between auditors and management;

• assisting the board in discharging its duties relating to the safeguarding of assets and evaluation of risk management and other internal control frameworks within the group;

• ensuring compliance with all applicable legal, regulatory and accounting standards and contributing to a climate of discipline and control, which will reduce the opportunity for fraud within the group;

• ensuring that adequate financial reporting systems are established;

• overseeing and monitoring the relationship between management and internal audit; and

• monitoring the ethical conduct of the group through the reporting of the forensics team.

The committee considers the minutes of subsidiary and divisional audit committees, including London and Offshore group audit committees, Liberty Life actuarial and audit committee, Stanlib audit and risk committee and reports from audit committees of African banks within the group.

Martin Shaw, who serves on the Liberty Life boards and is the chairman of the Liberty Life actuarial and audit committee and risk committee, was appointed to the committee during the year. Alan Romanis, who chairs the Stanlib audit committee and had been co-opted to the group audit committee, has resigned from the committee.

Non-executive directors who participate in the Black Ownership Initiative will not be eligible to be appointed as chairman of the group audit committee while funding for the initiative remains outstanding.

In line with the requirements of the King Code, the chairman of the group audit committee attended the annual general meeting (AGM) to answer any questions that may have been asked.


Member Feb Mar May Aug Nov

R A Plumbridge (chairman)

4 4 4 4 4

D D B Band 4 4 4 4 4

E Bradley 4 4 4 4 4

A Romanis 2 4 4 4 4 4

M J Shaw 3 – – – 4 4


2 Resigned 31 December 2004.3 Appointed 22 July 2004.

4 = Attendance

Corporate governance continued



Group credit committeeThe role of this committee is to ensure that effective credit governance is in place throughout the group and to ensure that management adequately measures, monitors and controls credit risk. The Africa credit committee is also constituted as a board committee and has, as one of its roles, the approval of large exposures as required in terms of banking regulations.


Member Feb May Aug Nov

D E Cooper (chairman)

4 4 4 4

D D B Band 4 4 4 4

A G Gain 4 4 4 4

C Lombard 4 4 4 4

J H Maree 4 4 4 4

S P Ridley 4 A 4 4

M J D Ruck 4 4 4 4

P J Smith 4 4 4 4



Directors’ affairs committeeThe role of this committee is to review matters relating to corporate governance, including the composition of the board and the appointment of directors to ensure that the board is able to fulfil its mandated obligations. The committee further assists the board in its determination and evaluation of the adequacy and appropriateness of the corporate governance structures and practices in the group. The committee consists of only non-executive directors, as required by the Banks Act.

The committee sets criteria for the nomination of board directors, committee members and group subsidiary directors. Various discussions relating to succession plans for executive and non-executive directors were held during the course of the year.


Member May Nov

D E Cooper (chairman) 4 4

D D B Band 4 4

E Bradley 4 A

S J Macozoma 4 4


Transformation committeeThe role of the transformation committee is to develop and maintain appropriate policies and guide transformation initiatives within the group. The committee also monitors the implementation of policies, practices and procedures to ensure compliance with current and evolving legislation and related regulations in South Africa with particular reference to the charter.


Member Feb Jun Sep Nov

S J Macozoma (chairman)

4 4 4 4

D E Cooper 4 4 4 4

J H Maree 4 4 4 A

A C Nissen 4 4 A 4


Black ownership initiative committeeThe black ownership initiative committee was introduced during the year to consider and approve share awards to black managers and qualifying black non-executive directors as recommended by the allocation committee. The allocation committee, a management committee chaired by a non-executive director (Saki Macozoma), recommend allocations for approval by the black ownership initiative committee. Awards to qualifying black non-executive directors were subject to shareholder approval, which was granted in December 2004.


Member Aug Nov

D E Cooper (chairman) 4 4

D D B Band 4 4

E Bradley 4 4

J H Maree 4 4

4 = Attendance

Remuneration committeeThe committee determines the group’s remuneration policy and remuneration strategy. Further detail on this committee’s role and membership is set out in the remuneration review on page 32.

Group secretaryThe group secretary is responsible to the board and provides guidance to the directors on their responsibilities.

Directors have unlimited access to the group secretary where they require advice to assist them in discharging their duties.

The information needs of the directors are assessed to ensure they are provided with relevant and adequate information to enable them to fulfil their responsibilities.

Going concernAt the interim reporting stage, the group audit committee confirmed that the conclusion reached at the 2003 year end that the group was a going concern still applied, and the directors adopted the going concern basis in the preparation of the interim financial statements. Consideration was also given to the requirement to have the interim results audited and this was deemed unnecessary.

At year end the group continued to adopt the going concern basis in preparing the annual financial statements. The directors have documented the basis for their conclusion and have adequate reason to believe that the group has sufficient resources to continue operating as a going concern in the foreseeable future.

Dealing in securities

The group is committed to conducting business profession-ally and ethically. Policies are in place with respect to dealing in securities by employees and directors in the group. A per-sonal account trading policy and directors' dealing policy are in place to prohibit employees and directors from dealing in securities when they are in the possession of price-sensitive information that is generally not available to the public. Deal-ing is further restricted during defined closed periods which are from 1 June to the publication of the interim results and from 1 December to the publication of the final results.

The permission of the group chairman or, in his absence, the group chief executive is required when directors wish to deal in securities, including warrants and debt instruments, and listed subsidiary securities.

Sustainability

The sustainability report now appears as a separate publication and has been included in electronic format with this report. It can also be accessed on the website: www.standardbank.co.za. Printed copies of the report can be requested from the group secretary.

Ethics and organisational integrity

Ethical conduct plays an integral part of the group’s day-to-day operations. Policies, guidelines, performance measurements, and leadership development are in place to ensure ethical conduct is integral to the culture of the group.

Directors disclose any material interests they may have and recuse themselves from any discussion relating to any of their interests.

The code of ethics is made available to all staff through the intranet site.

The group has adopted a new vision and redefined the values to which it aspires. Full details can be found on page 3.

Election funding

In March 2004, the group announced a departure from its policy of not making political donations. In recognition of South Africa’s tenth anniversary of democracy, R5 million was donated towards funding the national election. The allocation of the money was based on the Independent Electoral Commission's formula of funding parties in proportion to their representation in South Africa's National Parliament. Fifty percent of the donation was distributed to political parties according to their representation in Parliament prior to South Africa's general election. The remaining 50% was distributed according to the same formula based on the representation post the April 2004 election.

Remuneration

Remuneration philosophy As a business that creates sustainable growth predominantly through its people, we are deeply committed to ensuring our remuneration philosophy emphasises the value of people to the organisation. This is an ever-increasing focus in an environment where scarcity of skilled resources is an issue.

Bearing this in mind, the board continues to lay the foundation for a remuneration philosophy in line with approved strategy and objectives. This philosophy aims to maintain an appropriate balance between employee and shareholder interests.

It is essential that the group attracts and retains the talent required to achieve its objectives. Staff motivation is regarded as a critical success factor for the group. Short-term incentives are viewed as a strong driver to competitiveness and goal attainment. All short-term incentives are delivery orientated. This means that a significant portion of top management employee cost is variable against profit attainment and ensures commitment to medium- and long-term goals.

Remuneration governance

Board responsibility

The board is assisted in fulfilling its responsibility by the group remuneration committee (remco). The committee operates in terms of an agreed mandate approved annually by the board. The board, on recommendation from remco, in some instances refers matters to shareholders for approval, for example board and committee fees.

Subsidiaries and group operations

• International

Standard Bank London (SBL) operates within a regulatory environment that requires it to have its own remuneration committee that considers remuneration issues. The committee has a mandate, approved by remco, which accords with the group remuneration philosophy. This committee, chaired by an independent non-executive director of the SBL board, reviews remuneration practices in the group’s international operations based on best practice within those jurisdictions. Certain items considered by the committee are subject to final approval by remco.

• Africa

The remuneration of executive management in African countries outside South Africa is reviewed and approved by remco. Where appropriate and relevant, group practices are adopted across all of these operations.

• Liberty Life

The Liberty Life board determines remuneration philosophy and practices for Liberty Life. It has an established remuneration committee that monitors the implementation of practices within that group. This committee also performs an oversight function for the Stanlib remuneration committee.




Remco operationAn independent non-executive director chairs remco. He also chairs the Liberty Life and Stanlib remuneration committees to ensure consistency across group operations. The committee membership has a majority of independent non-executive directors with the relevant skills and experience to perform their duties.

The key terms of reference for remco include the following:

• reviewing group remuneration strategy and policy;

• determining remuneration of executive directors, the chairman and non-executive directors. The chairman and non-executives’ remuneration are subject to the approval of the shareholders;

• considering the guaranteed remuneration and annual performance bonus and pension incentive of the highest-paid executive managers in the group, excluding Liberty Life executives and directors, together with average percentage cost of increases to the guaranteed remuneration of executive management across the group, and consideration of long- and short-term incentives;

• agreeing incentive schemes across the group and awards in terms of the schemes;

• ensuring adequacy of retirement funding and healthcare benefits;

• agreeing the compulsory employee benefits applicable to all levels and categories of employees in the group, notably retirement funding and healthcare benefits; and

• reviewing the performance measures to be used for purposes of annual incentive payments for all employees and approving criteria for participation and the applicable terms.

Three meetings were held during the year.


Member Feb Nov

D A Hawton (chairman) 4 4 4

D D B Band 4 4 4

D E Cooper 4 4 4

T Evans 4 4 4

R P Menell 4 4 4


4 = Attendance

The chief executive attends meetings by invitation. Other executive management are invited to attend where appropriate.

No individual, whether a non-executive director, executive director or management, is present when his or her remuneration is discussed.

With regard to remuneration of non-executive directors, competitor and market data is reviewed by remco, which makes proposals to the board. The board then reviews the proposals and makes recommendations to shareholders for approval at the AGM.

Non-executive directors receive fixed fees for service on boards and board committees. The directors do not receive long-term incentives. In 2005, shareholders approved the allocation of 125 000 shares each to qualifying black non-executive directors in terms of the group’s Black Ownership Initiative. The recipients were Thulani Gcabashe, Kgomotso Moroka and Chris Nissen.

The remuneration of the chairman and chief executive is set by remco based on an assessment of their individual performance conducted by the board.

In line with other employees, the remuneration of the chief executive includes a basic guaranteed package, together with an incentive component comprising both short- and long-term incentives.

Terms of serviceIn terms of the articles of association, non-executive directors are required to retire at the age of 70. Directors are appointed by the shareholders at the AGM. Interim board appointments are allowed, in terms of the articles of association, between AGMs. Those appointees are required to retire at the next AGM where their appointment will be confirmed by the shareholders. In addition, one-third of the directors are required to retire at each AGM and may offer themselves for re-election. If supported by the board, and as recommended by the directors’ affairs committee, the board then proposes their re-election to the shareholders. Executive directors are not subject to the rotational requirements of the articles of association.

Jacko Maree is required to give six month’s notice of resignation as part of his terms of employment and Myles Ruck has a three month notice period in terms of his contract of employment with Liberty Life.

Remuneration structureThe critical components of employee remuneration are:

• Guaranteed amount

All levels of employees receive a fixed guaranteed amount of remuneration. In South Africa, the managerial remuneration approach is based on a total cost to company (CTC) philosophy. CTC comprises a fixed cash portion, compulsory benefits (medical aid and retirement fund membership) and optional benefits. Remuneration of non-managers is based on a basic salary plus benefits (medical aid, retirement fund membership, housing benefit and a travel allowance for select levels).

Outside South Africa, basic packages are benchmarked against local conditions and competitor data in each jurisdiction.

The guaranteed amount, as a proportion of total remuneration, has been reduced over time with the emphasis on increasing the proportion of performance-related payments. This is premised on the need to sustain performance to achieve objectives, and to reward individual contribution.

• Short-term incentives

Short-term incentives are premised on achieving stipulated annual goals.

All non-managers in South Africa participate in the non-managerial bonus scheme (value sharing). The bonus is contingent on the attainment of group financial and yearly specific targets (set in terms of budgetary goals, based on group strategy). For the past three years, these have included customer service objectives.

All managers in South Africa participate in the managerial bonus and pension incentive scheme (bonus scheme). Individual awards are based on a combination of business unit performance, job level and individual performance. In keeping with the remuneration philosophy, the bonus scheme gives high-performing managers the opportunity to earn total remuneration in line with the philosophy to attract and retain talent.

The chief executive’s bonus is subject to an assessment by the remuneration committee of performance against various criteria. The criteria are weighted such that approximately 70% applies to financial performance of the group and 30% applies to qualitative aspects of performance.

Similar remuneration philosophies are applied in both the International and Africa operations.

• Long-term incentives

It is essential that the group retains key individuals for the longer term. Long-term incentives are designed to ensure the alignment of the longer term objectives of relevant stakeholders.

• Group share incentive scheme (GSIS)

The purpose of the GSIS is to promote an alignment of interest between the company and its subsidiaries and their respective employees, to attract new, skilled and competent personnel and retain their services.

Options granted to executive directors and employees are in terms of the following rules:

• the specific grant is not subject to prior shareholder approval as shareholder approval for the scheme has already been granted;

• no options are issued at a pricing discount nor can they be repriced; and

• the directors have the discretion to vary the vesting periods.

The table below sets out the various options used. The majority of options are granted in terms of the “A” vesting period.

Vesting category

Year

%

Expiry

A 3, 4, 5 50, 75, 100 10 years

B 5, 6, 7 50, 75, 100 10 years

C 2, 3, 4 50, 75, 100 10 years

• Equity growth scheme

As a result of changes in domestic tax legislation, the board has reconsidered the structure of the current GSIS and is proposing a revised scheme to shareholders. The basis for participation, award and vesting will remain the same as the current scheme. Please see the notice to members on page 168 for details of the proposed scheme.

• Shadow schemes

In addition to the GSIS, there are other schemes to provide longer-term benefits targeted at a small number of specialist investment banking staff both in South Africa and internationally. They provide a cash incentive to select employees based on the relevant business unit’s performance and valuation.

• Retention agreements

As part of the group’s ongoing strategy to attract and retain certain highly mobile employees, the group continues selectively to enter into agreements in terms of which a retention payment is made with terms and conditions for repayment should any such individual leave before the expiry of stipulated periods. Jacko Maree is not subject to a retention agreement. Myles Ruck has a retention agreement with Liberty Life.

Remuneration for 2004The remuneration and fees received by the directors for 2004 are set out on pages 35 to 37, together with share options granted to, and gains made by, executive directors during the year.

Further details of the GSIS are contained in Annexure D on page 158 of the annual report.




Share options

Director’s

name

Balance of

options as

at 1 Jan

2004

Number

of options

allocated in

2004

Issue

date

Number

of options

exercised

during the

year

Balance

of options

as at

31 Dec

2004

Number of

options

Issue

date

Issue

price

Vesting

category Expiry date

Standard Bank Group Limited options

J H Maree 1 990 000 500 000 11-03-2004 740 000 1 750 000 250 000 15-03-2000 25,00 A 15-03-2010

975 000 13-03-2001 31,90 A 13-03-2011

25 000 23-05-2001 33,50 A 23-05-2011

500 000 11-03-2004 40,65 C 11-03-2014

M J D Ruck 1 059 900 – N/A 553 000 506 900 10 000 01-09-1997 20,50 B 01-09-2007

75 000 30-11-1998 14,15 B 30-11-2008

10 000 14-04-1999 17,15 B 14-04-2009

53 900 1 15-03-2000 25,00 – 30-11-2008

5 000 1 15-03-2000 25,00 – 14-04-2009

41 300 1 27-11-2000 26,40 – 30-11-2008

1 700 1 27-11-2000 26,40 – 14-04-2009

60 000 13-03-2001 31,90 A 13-03-2011

250 000 13-03-2002 27,80 A 13-03-2012

Liberty Life options

M J D Ruck 166 000 200 000 15-03-2004 – 366 000 166 000 02-06-2003 48,50 31-03-2013

200 000 15-03-2004 54,25 31-03-2014

Gains on the exercise of share options 2

Number of

options Issue date Issue price

(R)

Exercise date

Exercise/market

price

(R)

Gain 2004

(R)

Standard Bank Group Limited options

J H Maree 9 000 04-09-1995 12,50 30-04-2004 40,99 256 410

91 000 04-09-1995 12,50 28-04-2004 41,80 2 666 300

200 000 02-09-1996 17,10 30-04-2004 40,99 4 778 000

50 000 01-09-1997 20,50 11-11-2004 57,63 1 856 500

40 000 31-08-1998 13,50 09-11-2004 59,00 1 820 000

100 000 14-04-1999 17,15 11-11-2004 57,63 4 048 000

80 000 08-09-1999 18,00 09-11-2004 59,00 3 280 000

170 000 08-09-1999 18,00 10-11-2004 58,63 6 907 100

M J D Ruck 150 000 02-09-1996 17,10 31-03-2004 42,00 3 735 000

30 000 01-09-1997 20,50 31-03-2004 42,00 645 000

10 000 31-08-1998 13,50 31-03-2004 41,34 278 400

70 000 30-11-1998 14,15 31-03-2004 41,34 1 903 300

55 000 30-11-1998 14,15 22-09-2004 48,27 1 876 600

40 000 14-04-1999 17,15 22-09-2004 48,27 1 244 800

57 500 15-03-2000 25,00 31-03-2004 41,34 939 550

59 600 15-03-2000 25,00 22-09-2004 48,60 1 406 560

44 000 27-11-2000 26,40 31-03-2004 41,34 657 360

36 900 27-11-2000 26,40 22-09-2004 48,60 819 180

39 118 060

1 101 900 of M J D Ruck’s share options have further conditions attached to them in terms of the Standard Corporate and Merchant Bank (SCMB) Shadow Share Scheme. His last allocation in terms of this scheme was on 27 November 2000.

2 Gains included under emoluments on page 36.



Directors’ emoluments 2004Services as

directors of

Standard

Bank Group

and its

subsidiaries

Cash portion

of package

Bonus and

pension

incentives/

performance

related

payments 1Expense

allowance

Other

benefits

Pension

contributions

Otherwise in

connection

with the

affairs of

SBG and its

subsidiaries

Total

annual

remuneration

Gains on

exercise

of share

options and

other related

payments

Total

emoluments

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Executive directors

J H Maree 3 540 9 065 168 566 13 339 25 612 38 951

M J D Ruck 348 3 047 5 040 306 303 9 044 15 086 2 24 130

Total 348 6 587 14 105 – 474 869 – 22 383 40 698 63 081

Non-executive directors

D E Cooper

(chairman) 33 378 32 3 410 3 410

D D B Band 3 367 2 549 2 916 2 916

E Bradley 242 242 242

T Evans 202 202 202

T S Gcabashe 162 162 162

D A Hawton 3 529 529 529

Sir Paul Judge 482 482 482

S J Macozoma 3 1 568 1 568 1 568

R P Menell 248 248 248

K D Moroka 162 162 162

A C Nissen 196 196 196

R A Plumbridge 438 84 522 522

M C Ramaphosa 4 28 28 28

M J Shaw 3,5 357 357 357

Sir Robert Smith 482 482 482

C L Stals 208 208 208

C B Strauss 162 162 162

Total 9 211 – – – – – 2 665 11 876 – 11 876

Total 9 559 6 587 14 105 – 474 869 2 665 34 259 40 698 74 957

1 In order to align incentive awards with the performance to which they relate, bonuses above reflect the amounts accrued in respect of each year as opposed to the amounts paid.

2 Of this amount R1 580 000 relates to the exercise of participation rights under the SCMB Shadow Share Scheme.3 Amounts include payments made by operating subsidiaries of Standard Bank, Liberty Life and Stanlib.4 Appointed 1 November 2004.5 Appointed 22 July 2004.


Directors’ emoluments 2003Services as

directors of

Standard

Bank Group

and its

subsidiaries

Cash portion

of package

Bonus and

pension

incentives/

performance

related

payments 1Expense

allowance

Other

benefits

Pension

contributions

Otherwise in

connection

with the

affairs of

SBG and its

subsidiaries

Total

annual

remuneration

Gains on

exercise

of share

options and

other related

payments

Total

emoluments

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Executive directors

R C Andersen 3 1 012 1 400 77 57 231 2 777 2 777

J H Maree 3 615 6 948 1 152 581 11 297 1 911 13 208

M J D Ruck 182 2 564 5 800 4 1 288 310 9 145 8 131 2 17 276

Total 182 7 191 14 148 79 497 1 122 – 23 219 10 042 33 261


D E Cooper (chairman) 5 3 202 18 24 3 244 3 244

D D B Band 5 310 2 369 2 679 2 679

E Bradley 6 186 186 186

T Evans 7 90 90 90

T S Gcabashe 7 70 70 70

D A Hawton 5 479 479 479

Sir Paul Judge 7 235 235 235

E A G Mackay 8 125 125 125

S J Macozoma 245 245 245

R P Menell 215 215 215

K D Moroka 7 70 12 82 82

A C Nissen 7 85 85 85

R A Plumbridge 380 48 428 428

Sir Robert Smith 7 235 235 235

C L Stals 180 180 180

C B Strauss 140 3 143 143

E P Theron 9 90 2 92 92

Total 6 337 – – 2 21 – 2 453 8 813 – 8 813

Total 6 519 7 191 14 148 81 518 1 122 2 453 32 032 10 042 42 074

1 In order to align incentive awards with the performance to which they relate, the performance-related payments above reflect the amounts accrued in respect of each year as opposed to the amounts paid.

2 Of this amount R4 282 000 relates to the excercise of participation rights under the SCMB Shadow Share Scheme.3 Retired 31 May 2003.4 R2,8 million was a bonus and pension incentive paid by Standard Bank for services rendered to 31 May 2003 and R3 million was a sign-on bonus with retention

conditions paid by Liberty Life.5 Amounts include payments made by operating subsidiaries of Standard Bank, Liberty Life and Stanlib.6 Individual not recipient of fees – fees paid to company.7 Appointed 1 July 2003.8 Resigned 18 June 2003.9 Retired 19 May 2003.

pg 38 | Risk management

Risk management

The effective management of risk in a diverse and complex organisation such as Standard Bank Group requires a strong risk management culture. Our culture ensures that sound commer-cial decisions are taken to adequately balance reward and risk.

Approach to risk management

The group follows a risk management approach that balances strong oversight at group level with independent risk management structures within the business units. The risk management framework is based on four main building blocks: risk governance and ownership; risk management culture and capability; risk assurance; and risk reporting.

Risk governance and ownership• A risk governance structure is in place to ensure independent

oversight of all business activities. It begins with the board of directors (the board). The directors review and agree the type and level of risk the group is willing to take in the pursuit of business.

• Risk ownership is clearly defined in, and between, the business units and the centralised risk functions.

Risk management culture and capability• Continuous training, development and awareness

programmes are followed in the group.

• Policies are formally documented and approved.

• Risk identification and measurement are performed across the group using defined methodologies which are tailored, where appropriate, to the requirements of the individual business units.

Risk assuranceIn addition to the assurance provided by management through various reports tabled at risk committees and the

board, the group’s internal audit department gives the board independent assurance that risk is appropriately managed through regular audits of areas across the group.

Risk reporting

The group risk management committee receives regular reports from management covering its assessment of the significant risks and the effectiveness of the systems and controls used to manage these risks.

Risk governance and ownership

Risk governance structure

In response to the nature, complexity and risk inherent in the group’s activities, a robust risk governance structure is in place to ensure adequate oversight.

Role of the board of directors

Risk management and oversight begins with the board. The directors review and accept the level of risk appetite, given the group’s goals in pursuit of growth. The board has delegated its risk-related responsibilities primarily to three committees, the group risk management committee, the group audit committee and the group credit committee, with each committee focusing on different aspects of risk management. The composition and functions of these committees are described in the corporate governance report commencing on page 28.

Role of group risk

The group risk function exists to develop, communicate and oversee the policies and processes for managing risks across the group. The director, group risk, reports directly to the group chief executive.

During 2004, the position of director, group credit, also reporting to the group chief executive, was created to

Risk management

The primary objective of the group risk function is to develop, communicate and oversee the processes for managing risks across the Standard Bank Group.

Contents

Risk management

Approach to risk management

Risk governance and ownership

Risk management culture and capability

• Credit risk

• Market risk

• Liquidity risk

• Compliance risk

• Operational risk

• Reputational risk

• Insurance-related risks

• The Basel Capital Accord

Risk assurance

Risk reporting

further strengthen and optimise credit risk management across the group.

The risk management functions of the business units report to their respective business unit heads, and have functional reporting lines to the directors of group risk and group credit.

Group risk managementThe director, group risk, is responsible for:

• establishing standards for the measurement, approval, reporting and management of risk;

• developing and coordinating risk policies, strategies and practices;

• reviewing major risk exposures and concentrations, and understanding the business risk profiles throughout the group; and

• reporting on the state of risk and risk practices to executive management, the group risk management committee, group credit committee, group audit committee and regulatory authorities where applicable.

Group creditThe director, group credit, is responsible for:

• optimising and aligning credit risk practices across the group; and

• communicating and enforcing group credit risk limits through attendance at all senior business unit credit committees.

Decentralised business unit risk functionsThe independent risk managers at the business unit level are responsible for:

• developing and implementing risk policies and procedures specific to their business unit’s risk;

• measuring and evaluating the business unit risk, both on a specific and portfolio level;

• submitting decisions above their level of authority to appropriate committees;

• reporting on the state of risk and risk practices to business unit management and to subsidiary risk, group audit, group credit and other committees; and

• reporting risks to group risk for oversight and consolidation.

Group internal auditGroup internal audit independently audits the adequacy and effectiveness of the group’s risk management, control and governance processes. The director, group internal audit, has unrestricted access to the chief executive and chairmen of the group audit committee and the board. All internal auditors in the group report either directly or functionally to group internal audit.

Group complianceThe group considers compliance with the spirit and letter of applicable laws, regulations, supervisory requirements and

codes as integral to its business processes. Group compliance reports to the director, group risk, but also has unrestricted access to the chief executive and the chairmen of the group audit committee and board.

Group legalLegal risk is the risk of potential financial loss or reputational damage caused by a failure to protect vested rights or abide by legal obligations. Legal practitioners in each business unit risk management team primarily manage legal risk. The group legal department regularly communicates with these legal practitioners to ensure all major legal matters are identified timeously and addressed in an appropriate manner.

Group secretarial services Group secretarial services (GSS) manages the group’s corpo-rate governance framework and is responsible for ensuring that the processes and procedures by which the group are managed and controlled are designed to promote good governance. By keeping abreast of all material developments in regulations and best practices globally, GSS ensures the highest standards of corporate governance are maintained. This includes sustainability reporting, which is featured as a stand-alone report this year, as well as the responsibility for the administration of the group share scheme and for co-ordinating the line implementation of the charter.

Risk management culture and capability

A culture of risk management has been established through-out the bank through numerous awareness programmes and training both within the business units and at a group level. In addition, recruitment of high-calibre staff has ensured a strong risk management capability in the group.

Major risks Risks to which the group is exposed can be classified into seven major categories:

• credit risk arising from customer or counterparty non-performance or default;

• market risk – the risk of a decrease in the market value of a portfolio of financial instruments caused by an adverse move in market variables such as equity, bond and commodity prices, currency exchange rates, interest rates, credit spreads and implied volatilities on all of the above;

• liquidity risk – the risk that any of the banks in the group have insufficient funds or marketable assets available to fulfil their future cash flow obligations on time;

• compliance risk – the risk of regulatory censure as a result of non-compliance with any statutory requirements of central or local government, including regulations imposed by regulators of the various banks and the various financial exchanges through which we operate;

• operational risk resulting from inadequate or failed internal processes, people and systems or from external events;


• reputational risk – the risk of damaging the group’s image,

which may impair its ability to retain and generate business;

and

• insurance-related risks unique to the business of insurance,

including investment and underwriting risks. The group is

exposed to insurance-related risks through its effective

27% shareholding in Liberty Life and its short-term

insurance activities.

It is, however, common for extreme losses in financial

institutions to be caused by a combination of risks acting in

concert. It is therefore important to ensure risk types are not

managed in isolation, but within a holistic approach. This is

one of the key reasons for our structural design whereby we

manage risks together within the business units, with the

group function exercising coordination and control.

Credit risk

Credit risk management

In lending transactions, credit risk arises through potential

non-performance by counterparties on facilities utilised. These

facilities typically take the form of loans and advances, the

advancement of securities and contracts to support customer

obligations such as letters of credit and guarantees.

In trading activities, credit losses arise due to potential non-

performance by a counterparty on trading-related financial

obligations. There are three components to such credit risk:

• settlement risk – the risk arises in transactions involving

the exchange of values when the group must honour its

obligations to deliver without first being able to determine

that the group has received the countervalue;

• pre-settlement risk – the risk arises from the potential non-

performance by a counterparty to a derivative obligation.

The group is exposed to the loss of value through the cost of

replacing the transaction which is no longer at market rates;

and

• issuer risk – the risk that the issuer of a debt instrument

defaults on a particular principal payment or set of payments

due under the instrument.

Market risk and credit risk overlap in traded credit products,

including debt instruments and credit derivatives. Issuer

concentration and default risks are managed by the

group through the credit and country risk processes and

market price sensitivity through market risk processes.

Approach to managing credit risk

Credit risk is managed in a governance structure supported

by clearly defined mandates and delegated authorities. The

group credit committee delegates authority to the African

and Offshore credit committees for the approval of credit

proposals. These committees further delegate authority within

their limits. The delegated authorities are documented and

take into consideration the various levels of credit quality per

portfolio, exposure limits, and committee representation.


Risk management continued

Responsibilities

Ensures that effective credit governance is in place and reviews the credit portfolio against the group’s appetite for credit risk.

Approval of credit proposals and the active management of individual portfolios by:

• reviewing risk trends and related provisioning;

• monitoring problem exposures and reviewing large exposures; and

• monitoring portfolio exposures and trends.

Approval of country limits and active management of portfolios through:

• regular review of countries;

• monitoring and management of watch-listed country exposures; and

• monitoring portfolio exposures and trends.

Group credit committee

Offshore credit committee

International

Country risk committee,

London

Country risk committee,

Johannesburg

African credit committee

South AfricaAfrica

Credit risk committee structure


Credit risk management in the decentralised

business units

Wholesale banking activities

Credit exposure to corporates and financial institutions is usually in the form of short- and long-term loans and advances, advancement of securities and contracts to support customer obligations, such as letters of credit and guarantees, and exposures created through derivative contracts. In these sectors, credit risk is managed through a close working relationship between the counterparty, the customer relationship team and an independent credit officer. Credit decisions are based on an in-depth knowledge of the counterparty and the industry in which it operates, including an assessment of the creditworthiness of the counterparty based on a review of audited financial information and underlying risk parameters.

The group believes the use of sophisticated credit rating modelling techniques, combined with an in-depth knowledge and understanding of each customer, is essential in assessing the credit risk of each counterparty with whom it deals. To this end, a common credit rating framework has been developed to house credit-rating models for each counterparty type. The probabilities of default produced from these models are an important component of the formal credit assessment process for both new, and existing business. In addition, these models form the basis for continual monitoring of changes in credit quality. The validation and ongoing enhancement of the predictive qualities of these models will remain a focus area. In order to apply advanced credit management practices, initiatives include the enhancement of default management and collateral management systems. Together these initiatives will allow the group to understand and manage the inherent risk dynamics of the credit portfolio more effectively, and prepare itself for Basel II.

Retail banking activities

In Retail, credit exposures comprise lending to individuals in the form of mortgage loans, credit card facilities, personal loans, overdrafts and asset finance facilities, as well as lending to small- and medium-sized businesses.

The underlying method for credit extension is determined by the nature of the product and the strength of historical data available. In the case of individuals, and selected small- and medium-sized businesses, application and behavioural scoring techniques are widely applied throughout the credit life cycle. In all other cases conventional and intuitive methods are applied to loans with decisions taken in a centralised environment strategically placed within provinces, countries and regions.

A diverse range of performance analysis techniques is applied across product sets in recognition of differing asset and maturity profiles. Defaulting accounts receive prompt attention, and in instances where loss is anticipated, they are handled centrally by collection functions, organised by

product. Collections are a key component of the credit cycle and the underlying philosophy is to collect appropriately and promptly, using available technologies as the principal driver.

The various credit portfolios are monitored regularly to evaluate the level of risk assumed against expected risk levels.

Provisions for non-performing loans (banking book)

Specific provisions for credit losses relating to corporate and financial institution counterparties are raised on a case-by-case basis and take into account expected recoveries and the timing of such recoveries.

In the retail environment, specific provisions for credit losses are raised and are based on predetermined rules, which take into consideration the number of days an account has been in arrears and past loss experience.

Domestically, non-performing loans as a percentage of total book have continued to decrease across most business units. This was due mainly to the good economic environment and continued management focus on credit granting and collection processes.

Non-performing loans for Africa have continued to decrease following an intense focus on collection activities. International non-performing loans have also decreased due to increased management focus on recoveries.

Provisions for performing loans

The group has adopted an approach to calculating the provisions on the performing book that is consistent with the requirements of the South African accounting standard on financial instruments, AC 133. There is a constant process of refinement as credit modelling is enhanced and additional data becomes available.

Country risk

Country risk represents the risk of loss arising when political or economic conditions or events in a particular country reduce the ability of counterparties in that country to meet their financial obligations to the group.

Country risk is monitored through a continuous review of economic and political data by the country risk team based in Johannesburg and London. The group uses its extensive network of representative offices and subsidiaries, travels to key countries and uses external sources of information to assess each country where it has exposure.

A country-rating model is used across the group to determine the relative ranking of each country. The internal model is continuously updated to reflect economic and political changes to individual countries. The results of this process are compared with those of reputable rating agencies in order to validate the consistency of the risk model.



Loans and advances categorised according to the SARB regulatory definitions

Total Non-performing loans Performing loans

2004 (Rm)

Sub-standard

Doubtful

Loss

Total

Special mention

Standard

Retail Banking 153 079 1 142 1 101 321 2 564 2 380 148 135


Banking 61 787 505 97 43 645 19 61 123

Other domestic operations 42 – – 42 42 – –

Domestic Banking 214 908 1 647 1 198 406 3 251 2 399 209 258

International 34 005 124 192 135 451 442 33 112

Africa 12 029 95 36 77 208 344 11 477

Other 8 – – – – – 8

Gross loans and advances 260 950 1 866 1 426 618 3 910 3 185 253 855

Percentage of total book 100% 0,7% 0,6% 0,2% 1,5% 1,2% 97,3%

Domestic Banking 100% 0,8% 0,5% 0,2% 1,5% 1,1% 97,4%

International, Africa and other 100% 0,5% 0,5% 0,4% 1,4% 1,7% 96,9%

2003 (Rm)

Retail Banking 114 428 1 228 1 191 312 2 731 2 361 109 336

Corporate and Investment Banking 55 667 633 215 321 1 169 92 54 406

Other domestic operations 74 – – 50 50 – 24

Domestic Banking 170 169 1 861 1 406 683 3 950 2 453 163 766

International 43 025 310 277 26 613 839 41 573

Africa 11 024 83 59 108 250 237 10 537

Other 65 – – – – – 65

Gross loans and advances 224 283 2 254 1 742 817 4 813 3 529 215 941

Percentage of total book 100% 1,0% 0,8% 0,3% 2,1% 1,6% 96,3%

Domestic Banking 100% 1,1% 0,8% 0,4% 2,3% 1,5% 96,2%

International, Africa and other 100% 0,7% 0,6% 0,3% 1,6% 2,0% 96,4%

For the purpose of this analysis, intra-group loans and advances are eliminated against individual business units. Industry and geographical segmental analysis of loans and advances can be found in note 7 on page 107.

South African Reserve Bank (SARB) criteria for classification of loans and advances

Standard Items that are fully current and the full repayment of the contractual principal and interest amounts

are expected.

Special mention Items where the loan is performing but evidence exists that the borrower is experiencing

difficulties. Ultimate loss is not expected but could occur if adverse conditions persist.

Sub-standard 1 Items that show underlying well defined weaknesses that could lead to probable loss if not

corrected.

Doubtful 1 Items which are considered to be impaired, but are not yet considered final losses because of some

pending factors which may strengthen the quality of the items.

Loss 1 Items which are considered to be uncollectable and where the realisation of collateral and

institution of legal proceedings have been unsuccessful.

1 Classified as non-performing for accounting purposes.

Credit exposure related to derivative financial instruments (Rm)

Current credit exposure Potential credit exposure

2004 2003 2004 2003

Foreign exchange contracts

Less than one year 6 126 4 659 9 218 10 555

One to five years 1 100 1 388 1 718 4 226

More than five years 415 1 064 769 1 860

Interest rate contracts

Less than one year 563 1 245 8 727 12 756

One to five years 1 691 2 801 11 630 3 614

More than five years 887 6 216 24 821 14 200

Commodities and other

Less than one year 2 475 7 803 6 642 10 296

One to five years 911 2 320 2 107 2 889

More than five years 869 813 347 1 587

Total 15 037 28 309 65 979 61 983

Africa’s exposures have not been included in the above table because the amounts involved on a relative basis are considered to be immaterial.


Credit risk on trading activities (trading book)

The group enters into forward, swap and option contracts,

both exchange-traded and over-the-counter, on a range of

underlying instruments. Counterparties to these contracts

may be companies, other financial institutions or market

professionals. The contracts enable both the group and its

customers to manage foreign exchange, interest rate,

credit, commodity, precious metal and equity risks.

To the extent that a derivative contract requires performance by

the counterparty at a future date, it may create credit risk for the

group. This is mitigated by master-netting agreements, such as

International Swaps and Derivatives Association (ISDA) agree-

ments, between the group and its counterparties, which permit

the offset of amounts due from and to a counterparty in the

event of default. Master-netting agreements are enforceable

in the jurisdictions of most of our major counterparties.

Non-performing loans (NPLs) per business unit

Gross NPLs

Securities and

expected recoveries

Net after securities

and expected

recoveries Provisions for NPLs

Gross provision

coverage

2004

Rm

2003Rm

2004

Rm

2003Rm

2004

Rm

2003Rm

2004

Rm

2003Rm

2004

Rm

2003

Rm

Domestic Banking 3 251 3 950 1 776 2 434 1 475 1 516 1 475 1 516 45% 38%

Retail Banking 2 564 2 731 1 406 1 592 1 158 1 139 1 158 1 139 45% 42%

Mortgage advances 1 375 1 749 913 1 307 462 442 462 442 34% 25%

Card debtors 104 81 30 35 74 46 74 46 71% 57%

Instalment finance 463 290 226 126 237 164 237 164 51% 57%

Retail branches 622 611 237 124 385 487 385 487 62% 80%


Banking 645 1 169 366 842 279 327 279 327 43% 28%

Other domestic operations 42 50 4 – 38 50 38 50 90% 100%

International 451 613 4 255 447 358 447 358 99% 58%

Africa 208 250 19 104 189 146 189 146 91% 58%

Total group NPLs 3 910 4 813 1 799 2 793 2 111 2 020 2 111 2 020 54% 42%

Staff home loan impairment i.t.o. accounting standard AC 133 92 104

Provisions for country risk 64 74

Credit risk inherent in other asset classes 68 220

Total provisions against NPLs 2 335 2 418

For detailed segmental analysis of provisions for non-performing loans by industry and geographical area refer to note 8 on page 108.

Entering into collateral arrangements with many of our counterparties provides further protection against default.

Credit risk exposure on derivatives is measured in terms of both current and potential exposure:

• Current credit exposure represents the loss to the group assuming the customer defaults at the time the exposure is being measured.

• Potential future credit exposure represents an estimate of the potential loss to the group, based on regulatory principles, assuming the counterparty defaults at some future date over the remaining term of the transaction.

Lower counterparty risk requirements arising from a

stronger rand, and changes in the application of South

African counterparty netting requirements, reduced current

credit exposures.

Market risk

Market risk management

Market risk exists wherever the group has trading, banking or

investment positions as principal. Major exposures to market

risk occur in markets served by formal financial exchanges

and over-the-counter markets, in South Africa, Africa and



-400

-350

-300

-250

-200

-150

-100

-50

0

50

100

Income of trading units and value-at-risk

Profit and loss

Normal VaR (including diversification benefit)

Stress test (including diversification benefit)

Rm

Jan Dec2004

The graph shows the VaR model to be conservative, which is due to not all diversification benefits being taken and a level of prudency in the construction of the VaR model.During 2004, the profit on two desks were reclassified from the trading book to the banking book. These profits were included in the 2003 table resulting in the opening value of the stressed test graph above deviating from the numbers shown in 2003.

All the income results were within the predictive capability for the VaR model. The graph shows the frequency distribution of daily profit and loss values during 2004. It indicates to what degree the realised profit and loss distribution deviates from a normal (symmetrical) distribution. In this case the distribution is shown to be skewed to the right. The graph details that a profit of R7,5 million was realised on the majority of trading days (28 days).

0

5

10

15

20

25

30

Distribution of income of trading units 2004

-55

-45

-40

-35

-25

-15

10

15

20

30

35

45

50

Freq

uenc

y o

f tr

adin

g d

ays

Rm

0

-50

-30

-20

-10 -5 5

25

40

55


internationally. These exposures arise from both customer-

driven business and from proprietary positions.

Approach to managing market risk

Market risk exposure on trading positions and capital funds

Market risk exposures as a result of trading activities are

contained within the group’s three wholesale trading

operations. For Domestic Banking and Stanbic Africa, the

board grants general authority to take on market risk exposure

to the Africa asset and liability committee (ALCO), which is

chaired by the chief executive. The managing director of

Stanbic Africa chairs the Stanbic Africa ALCO, which also

reports through to the Africa ALCO. For International, general

authority is granted to the Standard Bank London ALCO. A

Standard Bank London executive director chairs this committee

and it coordinates and delegates responsibility to the ALCO of

each of the Standard International Holding bank subsidiaries.

The group manages market risk through risk limits. The group

uses a range of risk measurement methodologies and tools to

establish limits, including Value at Risk (VaR), stress testing,

loss triggers and traditional risk management measures.

Trading book value-at-risk analysis

Market variable Normal VaR 2

Regulatory

capital 4 Stress VaR 3

2004 (Rm) Maximum 1 Minimum 1 Average 31 Dec 31 Dec Maximum 1 Minimum 1 Average 31 Dec

Credit derivatives 46,0 10,5 33,3 29,0 1 146,1 223,0 96,4 156,4 140,6

Equities – other 38,4 1,9 10,8 2,2 3,5 202,6 10,3 57,1 11,4

Foreign interest rate and foreign exchange 32,4 6,3 17,9 11,0 347,1 122,2 39,2 86,9 58,5

Energy 25,5 0,1 5,4 19,0 136,0 134,9 0,8 28,3 100,1

Interest rates – SA 25,1 5,6 12,1 5,8 223,3 171,6 23,7 67,1 34,9

Equities – SA 12,3 – 0,9 5,0 79,2 97,9 – 25,6 79,0

Base metals 9,0 0,3 3,5 2,4 380,5 47,5 1,8 18,7 12,5

Precious metals 8,5 2,7 5,3 4,4 110,6 69,2 13,8 37,2 27,2

Commodities 1,7 – 0,2 0,1 – 5,1 0,1 0,7 0,2

Diversification benefit (45,9) (37,8) (257,9) (238,7)

Aggregate 65,3 28,4 43,5 41,1 2 426,3 333,2 141,7 220,1 225,7

2003 (Rm)

Credit derivatives 17,1 7,6 11,4 8,6 297,8 98,1 14,3 46,3 30,6

Equities – other 22,3 13,0 18,8 19,7 61,9 117,7 68,7 99,5 103,9

Foreign interest rate and foreign exchange 36,6 5,1 13,7 12,6 357,0 274,2 33,9 83,5 104,7

Energy 9,5 1,5 4,1 3,5 77,7 50,4 7,9 21,5 18,7

Interest rates – SA 85,2 19,8 45,6 20,7 271,6 674,7 134,8 360,6 152,6

Equities – SA 34,7 – 8,7 – 114,4 91,9 – 26,5 –

Base metals 14,1 0,8 5,0 6,2 168,8 74,5 4,2 26,4 32,6

Precious metals 7,8 3,3 4,9 5,3 53,4 113,7 13,3 56,8 40,7

Commodities 1,3 0,1 0,3 0,1 – 3,5 0,2 0,9 0,3

Emerging market debt 38,8 11,2 18,9 21,0 160,8 205,2 59,1 99,8 110,8

High yield/distressed debt 1,2 – 0,8 – 18,7 6,5 2,2 4,1 –

Diversification benefit (59,6) (50,6) (336,3) (288,8)

Aggregate 102,1 45,9 72,6 47,1 1 582,1 739,4 289,0 489,6 306,1

1 The maximum (and minimum) VaR figures reported for each market variable did not necessarily occur on the same days. As a result, the aggregate VaR will not equal the sum of the individual market VaR values, and it is inappropriate to ascribe a diversification effect to VaR when these VaR values may have occurred on different dates.

2 Normal VaR is based on a holding period of one day and a confidence interval of 95%.3 Stress VaR is based on a holding period of between 10 and 20 days and a confidence interval of 99,7%.4 Regulatory capital reflects only position risk. Counterparty and large exposures are not included as these relate to credit risk. The increase from 31 December 2003 was

mainly due to an increase in the regulatory capital charge for credit trading in London.

The group generally uses the historical VaR approach to derive quantitative measures, specifically for market risk under normal market conditions. While VaR, calculated daily, provides an indication of possible losses under normal market conditions, the group supplements VaR with stress tests. The stress testing takes into account potential event risks that characterise the markets in which the group trades.

The group back-tests its VaR models to verify the predictive ability of the VaR calculations. Back-testing compares the daily profit and losses under a buy and hold assumption with the estimates forecasted using VaR models. Loss triggers are designed to contain daily, monthly and year-to-date losses for individual business units by enforcing management interven-tion at predetermined loss levels. Other basic risk measures specific to individual business units are used. These measures include permissible instruments, concentration of exposures, gap limits and maximum tenor.

The table on the previous page shows the aggregated historical VaR calculations for the group’s international and domestic operations in the markets in which the group holds trading positions. The minimum and maximum VaR amounts show the bands in which the values fluctuated during the periods specified. The group calculates historical VaR with a holding period of one day and a confidence interval of 95%.

Market risk management units, independent of trading operations and accountable to business unit ALCOs, monitor market risk exposures due to trading activities. These units monitor exposures and respective excesses daily, and report monthly to ALCO and quarterly to the group risk management committee.

Market risk on equity investments

Equity management committees approve investments in listed and unlisted entities in an approval limit framework. Market risk on investments is managed in accordance with the purpose and strategic benefits of such investments, rather than purely on mark to market considerations. Periodic reviews and reassessments are undertaken.

Market risk exposure on banking positions and capital funds

Banking-related market risk exposure is primarily due to structural interest rate risk arising from the differing repricing characteristics of banking assets and liabilities. Structural interest rate risk, which is the potential adverse effect of interest rate movements on net interest income, is transferred to, and managed by, the group’s three major treasury operations. The transfer of interest rate risks to treasury operations has the dual purpose of reducing the risk to an acceptable level according to the group’s risk appetite, and enhancing net interest income. Changes to the interest rate profile are achieved mainly by using derivatives, particularly interest rate swaps, where the shape of the yield curve and the group’s own view of interest rates are used as guidelines.

Independent asset and liability management (ALM) functions monitor exposures to interest rate risk. Banking-related interest rate risk in the group’s Domestic Banking and Africa operations is monitored by separate ALM functions in Johannesburg. In International’s treasury, banking-related interest rate risk, which is primarily in US dollar and sterling, is managed on an integrated basis together with the trading book interest rate risk. The Standard Bank London ALCO oversees this.



Repricing analysis of assets, liabilities and shareholders’ funds (Rm)

Banking operations in South Africa 2004

Call-3 months

4-6 months

7-12 months

Over 12 months

Non-rate sensitive Total

Total assets 244 344 6 255 6 264 12 928 111 896 381 687

Total liabilities and shareholders’ funds 223 693 5 798 3 804 12 070 136 322 381 687

Interest rate sensitivity gap 20 651 457 2 460 858 (24 426) –

Cumulative interest rate sensitivity gap 20 651 21 108 23 568 24 426 – –

Cumulative interest rate sensitivity gap as percentage of total assets 5,4% 5,5% 6,2% 6,4%

2003

Total assets 188 585 5 224 5 658 13 832 104 516 317 815

Total liabilities and shareholders’ funds 165 435 4 369 4 071 18 936 125 004 317 815

Interest rate sensitivity gap 23 150 855 1 587 (5 104) (20 488) –

Cumulative interest rate sensitivity gap 23 150 24 005 25 592 20 488 – –

Cumulative interest rate sensitivity gap as percentage of total assets 7,3% 7,6% 8,1% 6,4%

All assets, liabilities and derivative instruments are placed in gap intervals based on their repricing characteristics. Assets and liabilities for which no specific contractual repricing or maturity dates exist are placed in gap intervals based on management’s judgement and statistical analysis, as applicable, based on the most likely repricing behaviour.


The largest banking positions of the group reside in Domestic Banking. The main analytical techniques used to measure banking book interest rate risk in Domestic Banking are forward-looking dynamic scenario analyses and static repricing gap analyses, which measure interest rate risk at a point in time. The results obtained from analytical techniques assist the group in evaluating the optimal hedging and yield-enhancing strategies on a risk-return basis.

Interest rate risk exposure on banking positions

Comparing the repricing gap as at December 2003 with December 2004 (refer to repricing analysis of assets, liabilities and shareholders’ funds), it is evident that the asset sensitivity has reduced. The group remains asset-sensitive and is therefore exposed to interest rate reductions. For Domestic Banking operations, every 1% reduction in interest rates is forecast to result in an adverse annualised income impact of R260 million, which represents 2,56% of net domestic interest income for a projected twelve-month period.

Liquidity risk

Liquidity risk management

The nature of banking, investment and trading activities results in a continuous exposure to liquidity risks. Liquidity obligations arise from requirements to repay deposits, advance committed funds, and make interest and other ex-pense payments. Sound liquidity management is crucial in protecting the group’s depositor base, maintaining market confidence and ensuring future growth.

Approach to managing liquidity

Several elements are regarded as fundamental in the management of liquidity. These include:

• maintenance of a structurally sound balance sheet with restricted mismatches between anticipated inflows and outflows within different time buckets;

• maintenance of a portfolio of liquid and marketable assets over and above prudential requirements;

• effective daily and forecast cash flow management;

• implementation of long-term funding strategies;

• diversification of funding; and

• adequate contingency plans.

The cumulative impact of the various parameters giving rise to liquidity risk is monitored weekly or monthly by the group’s ALCOs.

Structural requirements

Structural liquidity guidelines are set to restrict the mismatch between inflows (assets) and outflows (liabilities) in different time buckets. Guidelines issued by the

Financial Services Authority (FSA) in the United Kingdom are adopted to constrain asset versus liability mismatches on a maturity ladder.

By way of illustration, the one-month mismatch guideline set by the FSA is a maximum net liability outflow of 5,0%, taking behavioural profiles of despositors and borrowers into account. During 2004, the average one-month liquidity gap as a percentage of total liabilities was 4,4% for Domestic Banking and – 23,3% (that is, a net inflow) for International. These liquidity gaps are within FSA guidelines.

Domestic Banking also observes a ratio of long-term funding, defined as those deposits where the remaining term to maturity exceeds six months, to total funding. The ratio has actively been increased from 10,9% in December 2003 to 15,8% in December 2004, thus further enhancing a structurally sound balance sheet. This ratio was 13,8% for International in December 2004.

Liquid and marketable assets

The group uses various liquid and marketable assets, as well as repurchase and reverse repurchase agreements to manage its short-term liquidity. The South African Reserve Bank’s acquisition of foreign exchange reserves has had a considerable impact on the South African money market during 2004. These acquisitions have expanded money market liquidity and the central bank has had to use liquidity-draining instruments to offset the flows. By December 2004, the central bank’s outstanding reverse repurchase and debenture transactions totalled R20,3 billion, R12,4 billion higher than the December 2003 balance. At December 2004, Domestic Banking’s participation in reverse repurchase and debenture transactions amounted to R300 million and R2,4 billion, respectively.

The group held liquid assets above the required statutory ratio for managing both liquidity risk and interest rate risk. The average amount of surplus liquid assets in domestic operations was R3,5 billion in 2004 (R3,2 billion in 2003).

Cash flow management and long-term funding

strategies

In retaining and generating adequate funding, the group has implemented cash-flow management strategies where limits have been set on the maximum net outflow of funds for specified periods.

The daily management of funding is achieved by monitoring future cash flows to ensure cash requirements can be met. Monitoring and reporting take the form of cash flow projections, particularly over a short-term horizon. In addition, the group is committed to maintaining and increasing its core deposits and improving the long-term maturity profile of the deposit portfolio.

Further funding strategies, based on forecast balance sheet structures, are used to anticipate and proactively plan for future funding and liquidity requirements.



Diversity of funding

Funding diversification and the constant monitoring of depositor concentrations are other key elements of liquidity management. Diversification is maintained across counterparty, instrument and term. To ensure the group does not place undue reliance on a single entity as a funding source, it sets a limit to the amount of deposits it will accept from any one entity, and depositor concentrations are reviewed at monthly ALCO meetings.

Contingency plans

The liquidity framework incorporates contingency planning and the identification of alternative sources of funding to ensure commitments can be met in the event of general market disruption or adverse economic conditions.

Compliance risk

Compliance risk management

The group compliance function is included within the wider group risk management function. It assists management to identify, and comply with, all statutory, regulatory and supervisory requirements.

The group follows a decentralised approach to compliance risk management and, as such, compliance officers have been appointed in all the business units and group services. These compliance officers report to both the governance structures of the respective business units, as well as to group compliance.

Due to the geographical spread of its operations, the group is subject to wide-ranging supervisory and regulatory regimes. Accordingly, the group’s relationships with these regulators are of paramount importance, specifically the relationship with the bank supervision department of the South African Reserve Bank. The group follows a policy of constructive engagement with regulators.

Approach to managing compliance risk

The group manages compliance risk through the following key activities:

• training of staff and other impacted stakeholders to create awareness of the impact and responsibilities related to legislative requirements;

• monitoring compliance with legislative requirements; and

• providing assurance that the risks relating to regulatory requirements are identified, understood and effectively managed.

Several significant new regulatory developments impacted on the group domestically and internationally during the year. The most significant developments occurred in South Africa with the introduction of the Financial Intelligence Centre Act (FICA) to counter money laundering, as well as the Financial Advisory and Intermediary Services (FAIS) Act, which regulates the provision of advice to customers.

Money laundering control

A group money-laundering control policy, which includes the group standards, has been adopted and implemented throughout the group. The group standards address the following:

• identifying customers;

• keeping effective records;

• reporting suspicious or unusual transactions;

• training and awareness requirements; and

• monitoring and managing information.

Subsidiaries elsewhere follow the higher of group or local requirements.

The Financial Advisory and Intermediary Services

(FAIS) Act

The FAIS Act came into effect in South Africa on 30 September 2004. Comprehensive plans regarding implementation, training and accreditation were rolled out to comply with the requirements of the Act. These included:

• categorising staff members into representatives and non-representatives and clarifying who may and may not provide advice to clients;

• categorising products falling within the scope of the Act; and

• submitting licence applications to the Financial Services Board.

Awareness was created among staff members and other stakeholders through training and internal media.

Operational risk

Operational risk management

The group recognises operational risk, inclusive of information risk and business continuity, as a significant risk category and manages it within acceptable levels. The group continues to develop and expand its guidelines, standards, methodologies and systems in order to enhance the management of operational risk. This challenge is heightened by the proposed Basel II capital adequacy regulations, which will impose a capital charge for operational risk and will come into effect at the end of 2007. The group has opted to use the standardised approach, as defined in Basel II, to calculate its capital charge for operational risk.

Approach to managing operational risk

To support this, we have established sound practices, including:

• an independent group function that facilitates consistent practices and processes across the group;

• decentralised operational risk management functions within the business units that proactively identify and


mitigate risks, measure control effectiveness and losses, as well as report on operational risk;

• policies and procedures to sustain effective risk management practices;

• tools to support effective management of operational risk, including:

• risk and control self-assessment (RCSA), an internally driven analysis of risks and controls that determines the risk profile of the business units and the group;

• a centralised loss event database to record material operational risk incidents and actual losses;

• use of risk indicators to provide management with early-warning signals on potential operational risk exposures in order to initiate preventative action; and

• ongoing assessment of the effects of changes in the regulatory environment and acquisition of skills and knowledge of best practice to ensure the group’s own endeavours are most appropriate for the environment.

Risk information generated from these processes is used to assist business units to optimise controls and avoid or mitigate losses. It also provides support for business decisions through a balanced focus on risk and return in decision making and through ongoing staff awareness.

Insurance, in general, is a component of the management of operational risk and, where appropriate, insurance cover is purchased to mitigate potential losses associated with such risks. The group maintains a comprehensive insurance programme as additional protection against potential losses from fraud, theft, loss of physical assets and professional liability claims.

Business continuity management (BCM)

The group has shifted its focus from a reliance on paper-based business continuity plans to a more practical approach where simulations are the major driver. These simulations rehearse a business unit’s executive management structure through to its operational staff ensuring preparedness for unforeseen events. All mission-critical business areas were exposed to simulations in 2004.

A comprehensive framework for managing business con-tinuity and the maturity of the governance structures has also helped to enhance the group’s business continuity capability.

Information risk management (IRM)

Information risk is defined as the possibility of losses or damage being caused to a business as a result of breach in the confidentiality, integrity or availability of the group’s information. Information risk management includes the practices and procedures necessary to ensure the secure use of information resources by reducing the possibility of harm. The group’s objective is an organisational culture in which everyone is an information risk manager and where management of information risk is embedded in the management philosophy and work ethics.

Reputational risk

Reputational risk management

The group manages reputational risk through its evaluation and control of the major risk types as set out above. In addition, there is an open communication culture that allows for all issues to be appropriately dealt with in a timely manner.

Insurance related risks

Responsibility for risk management

Liberty Life has a separate risk management function to oversee the processes for identifying, evaluating and managing its risks, including the development of policies that are specific to the insurance business. A risk committee, under the chairmanship of an independent non-executive director and accountable to the Liberty Life board of directors, meets quarterly to consider the adequacy and effectiveness of risk management within Liberty Life.

Liberty Life’s risk management philosophy is aligned to that of the Standard Bank Group. The significant risks unique to Liberty Life are:

• investment risk – the risk that the investment returns on policyholders’ assets will not be sufficient to cover contractual investment performance guarantees and reasonable policyholders’ benefit expectations;

• underwriting risk – the risk that the actual exposure to mortality, disability and medical risks in respect of policyholders’ benefits will exceed prudent expectations of future exposure;

• claims risk – the risk that Liberty Life will incur excessive mortality and morbidity losses on any group of policies; and

• capital adequacy risk – the risk that there will be insufficient reserves to provide for adverse variations in actual future experience as compared with that which has been assumed in the calculation of policyholders’ liabilities.

A comprehensive description of the management of these risks is included in Liberty Life’s annual report.

The Basel Capital Accord

During June 2004, the Bank of International Settlement released the final Basel II Capital Adequacy Framework (Basel II). The revision to the capital accord focuses mainly on improvements in the quantification and management of credit and operational risks, enhancements to the supervisory review process and more extensive disclosure of risk. Basel II aims to encourage banks, through lower capital requirements, to improve their risk management processes.

The South African Reserve Bank has announced that the South African implementation dates of the new capital adequacy framework will be 1 January 2008, with banks



and the regulator evaluating the impact of the new framework on the capital requirements and risk management processes during a parallel run to be conducted for one year prior to implementation (that is, commencing on 1 January 2007).

Several projects are in progress in the banking entities across the group to ensure the Basel II risk management principles are incorporated in the day-to-day risk management functions across the group, and to ensure that the optimal benefit is obtained through compliance with the new regulations. The projects are mainly in the areas of credit risk rating, collateral management, operational risk methodologies and risk systems.

The Basel II programme of projects is managed through a group-wide governance structure, which includes dedicated Basel II coordinators and business unit level Basel II steering committees. The primary function of this structure is to oversee projects and provide monthly updates to senior management and the board.

Risk assurance

At the group risk management committee meetings, man-agement provide assurance to the board with regards to the adequacy and effectiveness of the risk management systems and processes.

Group internal auditThe group internal audit function operates under a mandate from the group audit committee and has the authority to determine the scope and extent of work to be performed. It assists executive management in meeting their business objectives by examining the group’s activities, assessing the risks involved and evaluating the adequacy and effectiveness of processes, systems and controls to manage these risks. Material or significant control weaknesses and planned management remedial actions are reported to the group audit committee and to subsidiary audit committees.

Forensic servicesForensic services is an independent specialised capability housed within group internal audit. The director, forensic services, operates under a specific mandate from the group audit committee. The primary focus is to ensure that the threat of fraud to which the group is exposed is adequately addressed across all entities.

The department’s strategic approach focuses on fraud risk, fraud prevention, detection, investigation and whistle-blowing activities. The group maintains a zero-tolerance approach towards fraud and dishonesty.

Risk reporting

The group undertakes regular risk reporting to the numerous risk committees according to their respective mandates and authority levels. Monthly reporting includes the review of portfolios of the business units and progress on specific projects within the group.

Overview of financial results

Standard Bank Group once again met its primary financial objectives of strong real earnings growth and an attractive return on shareholder equity. Headline earnings increased by 22% to R7 648 million and a return on equity of 26,4% was achieved. The accounting treatment of the group’s Black Ownership Initiative implemented in 2004 impacts favourably on these financial measures. Excluding this effect, headline EPS increased by 20% and return on equity was 24,5%.

These results were achieved in positive economic environments in most markets in which we operate. The South African economy, which represents the group’s most important market, continued to improve: Inflation (measured by CPIX) reduced to an average of 4,3% (2003: 6,8%), interest rates reduced by a further 50 basis points and the rand continued to strengthen against the currencies of our main trading partners. The consumer sector benefited from lower interest rates and buoyant spending patterns persisted throughout 2004. The rand’s appreciation has had a mixed effect across the different sectors of the South African economy. Importers and the general public are benefiting from reduced prices on imported goods while many exporters continue to find it difficult to maintain earnings levels.

Within the domestic operations of the group, Retail Banking’s 28% increase in headline earnings resulted from good all-round operational performance and enhanced customer focus, coupled with the buoyant economic conditions. The lower average prime rate resulted in lower net interest income generated from deposit balances, but this impact was offset by strong advances growth. A 600 basis point reduction in interest

rates over the past two years has resulted in strengthening

demand for credit together with continued improvements in

domestic credit loss experience. Furthermore, a significant

increase in retail transaction volumes boosted growth in non-

interest revenue.

Corporate and Investment Banking increased headline earnings

by 24%. This performance was achieved through exceptional

growth in advisory and transactional revenue, improved trading

performances and a strong increase in investment revenues as a

maturing private equity portfolio continued to produce results.

Net interest income was negatively impacted by lower interest

rates, which reduced interest income earned on allocated capital

and corporate transactional balances. The lower interest rate

cycle did, however, assist the financial recovery of clients

previously in default, resulting in high levels of credit recoveries

and further improvement in the credit loss ratio.

International’s headline earnings was 7% lower in US dollars

following the exceptional performance of the prior year, and

was marginally below its budget. Most principal product areas

and all major regions performed well, benefiting from strong

customer flows and increased product delivery. The adverse

impact of the stronger rand contributed to consolidated rand

earnings from this entity being down by 21%.

The group’s presence in Africa is expanding. Earnings from

Africa, excluding South Africa, grew by 30% to R634 million.

This result was supported by increased activity levels off a

larger customer base assisted by the acquisition of operations

in Mozambique and Botswana.


Financial review

For the year under review the group achieved three of its four stated objectives. The achievement of these results was assisted by a positive economic environment. Low interest rates placed pressure on interest margins, but benefited domestic loan growth and credit loss experience.

Contents

Overview of financial results

Key factors impacting the results

• Black Ownership Initiative

• Lower domestic interest rates

• Strong rand

• Improved equity markets

Performance against objectives

Income statement analysis

Balance sheet analysis

• Banking assets

• Shareholders’ funds

Liberty Life

Dividends

Accounting policies

Accounting for the Black Ownership Initiative

Anticipated changes in accounting standards

Capital adequacy and allocation

Group finance focus for 2005

This report analyses the financial performance of the group and provides insight into the various factors influencing the group’s financial results and financial position as detailed in the financial statements. A longer-term historic analysis of the group’s results is detailed in the seven-year review on pages 66 to 71. Financial ratios commonly used in the banking industry are defined on page 72.

Liberty Life increased headline earnings by 32%, with headline earnings attributable to Standard Bank Group increasing by 30%. Highlights of Liberty Life’s results were improved investment returns and strong growth in new business.

The group’s key financial highlights were:

• return on equity increased from 22,9% to 26,4% (24,5% normalised);

• headline earnings grew by 22% to R7 648 million (21% normalised);

• headline earnings per share of 578,7 cents, 23% higher (20% normalised);

• the cost-to-income ratio deteriorated from 56,2% to 57,5%;

• the credit loss ratio improved from 0,91% to 0,43%;

• dividend cover reduced from 3,1 to 2,5 times; and

• total dividends declared grew by 53% to 231,5 cents per share.

Key factors impacting the results

• Black Ownership Initiative

The group concluded its black ownership initiative, termed Tutuwa, which was approved by shareholders in September 2004. In terms of the accounting treatment, the preference share capital provided to the empowerment participants is not recognised as an asset and consequently no income is accrued. The Tier I preference share capital raised to help fund the transaction is classified as equity, with the associated preference dividends only accounted for in 2005, when declared. The funding cost of these

preference shares is therefore also not accounted for

in 2004.

Normalised headline earnings

The normalised financial information below adjusts headline

earnings for preference dividends receivable and payable

currently excluded. On a normalised basis, the key ratios are

as follows:

Normalised Disclosed


Headline earnings growth (%) 21 22

Headline earnings per share

(cents) 566,3 578,7

Headline earnings per

share growth (%) 20 23

Further details of the accounting treatment and calculation

of normalised headline earnings are discussed under

Accounting for the Black Ownership Initiative on page 57.

• Lower domestic interest rates

The benign interest rate environment led to continued

improvement in credit loss experience, with provisions for

both non-performing and performing loans reducing. Asset

growth accelerated in this environment: mortgage lending,

card debtors, and instalment finance within Retail Banking

generated loan growth of 43%, 35% and 21% respectively.

This strong asset growth partly offset the negative impact

of lower interest rates on net interest margins. The resulting

consumer boom has caused a general increase in the level of

economic activity and related increases in transaction volumes

across the bank.

pg 52 | Financial review

Financial review continued

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

1998 2001 20031999 2000 2002 2004N 1

Standard Bank operations

Liberty Life

CAGR – Standard Bank Group 24%Standard Bank operations 26%Rm

Headline earnings

1 Headline earnings normalised to reflect legal substance of

Black Ownership Initiative, refer page 57 for explanation.

Domestic prime interest rate

10

11

12

13

14

15

16

17

18

Jan Dec

Prime interest rate 2003

Prime interest rate 2004

%


• Strong rand The rand appreciated against most currencies in 2004. The

rand appreciated 16% against the dollar during 2004 to end the year on R5,63/USD. The average rate, used to translate the dollar earnings from International, reduced by 15%. The stronger rand reduced the translation reserve by R1,3 billion, after hedging gains.

In the domestic market, the stronger rand placed strain on earnings of exporters, and although this impact was cushioned by higher commodity prices in the case of most resource-based customers, demand for corporate credit was subdued.

• Improved equity markets Taking a lead from heightened global economic activity,

domestic and other equity markets reflected positive growth for the year. This growth positively impacted on asset-based fees earned in the wealth management and life insurance entities, as well as fair value adjustments in equity portfolios across the group.

Performance against objectives

The group’s achievements against objectives for the past seven years, as well as the actual performance against these objectives, are reflected on page 4 of the annual report. For the year under review, the group achieved three of its four stated objectives:

• ROE: The group considers ROE a key measure in evaluating its overall financial performance and is committed to produce adequate and sustainable returns to shareholders. The group achieved a ROE of 26,4%, normalised 24,5%, compared with the objective of 20%.

• Headline earnings: The group’s objective is to produce growth in headline earnings per share that exceeds domestic inflation (CPIX) by 10%. Headline earnings per share increased by 23% compared with the objective of 14,3% based on average CPIX of 4,3%.

• Cost-to-income ratio: This objective was not achieved in 2004. The group aimed to be at or better than 56%, compared with the achieved ratio of 57,5%. Unchanged net interest income coupled with 12% cost growth were the primary reasons for the increased cost-to-income ratio. Cost growth was impacted by a variety of factors, including business volumes, continued enhancement of the group’s IT systems capability and staff incentivisation and retention. It remains the group’s objective to improve its cost-to-income ratio over time, but without compromising opportunities of increasing returns to shareholders.

• Provisions for credit losses: The group has for several years set a medium-term objective to contain credit losses to 1% of loans and advances. The group achieved this objective for the first time in 2003 and accordingly maintained the objective at 1%. In 2004, the group achieved a credit loss ratio of 0,43% (2003: 0,91%). Despite the favourable interest rate environment, this outcome was significantly better than expected.

• 2005 objectives: The group reviews these objectives annually, and where appropriate in light of the economic climate, revises the objectives. The revised objectives are reflected on page 4.

Income statement analysis

Net interest income (NII)

2004 2003

Growth in NII (%) 0 9

Net interest margin – group (%) 3,06 3,46

Net interest margin –

Domestic Banking (%) 3,39 3,68

As mentioned in the group’s 2003 prospects statement, significant domestic margin compression was expected to occur as a result of the 387 basis point reduction in the average prime interest rate from that of the comparative period. Lower interest was earned on shareholders’ funds, and reduced interest margins on transactional deposits such as current account credit balances. Further margin compression was caused by increased reliance on wholesale funding as retail deposits grew at a slower pace than retail assets. Strong asset growth in all domestic retail lending categories helped offset this margin reduction. The reduction in net interest income was also impacted by the scaling down of International’s bond portfolio previously held as a banking asset, and its transfer in late 2003 to the trading book.

Despite the significantly lower margins, net interest income remained unchanged following strong loan growth of 34% in Retail Banking.

Group net interest margin

0,5

1,5

2,5

3,5

4,5

5,5

1998 2001 20031999 2000 2002 2004

Net interest margin before provisions

Net interest margin after provisions

%

Provisions for credit losses

2004 2003

Change in the provision

charge (%) (43) (5)


Balance sheet provisions as

a % of gross loans and

advances (%) 1,45 1,74

Gross NPLs (Rm) 3 910 4 813

Gross coverage ratio (%) 54 42

The group’s credit loss experience and associated ratios have all improved significantly over the past six years, as can be seen in the consistent reduction in the non-performing loans (NPLs) to total advances from a high of 5,1% in 1998 to 1,5% in 2004 (2003: 2,1%). The reduction in the overall charge for credit losses for 2004 reflects the effect of a 26% decrease in the charge for non-performing loans and a minimal charge against performing loans.

Domestically, the South African economy is at the low point of the current interest rate cycle and consequently, the group’s credit loss ratio has reduced from 1,60% in 1998 to 0,91% in 2003, with further improvements in 2004. Given the decline in both historical and expected future default rates, provisioning levels for domestic performing loans were generally lower despite the strong growth in the retail lending book. The parameters used in International to estimate potential losses inherent in its performing portfolio were re-assessed and this resulted in a reduction in its provision requirements.

With respect to non-performing loans, the provisioning charge in Domestic Banking reduced by R255 million or 27% as a result of lower levels of non-performing loans

following enhanced collection strategies, recoveries of retail and corporate loans previously impaired and higher property security values. Non-performing loans to total advances in Domestic Banking reduced from 2,3% in 2003 to 1,5% in 2004. In International, provisions for non-performing loans were increased to cover emerging market exposures in energy and mining. Africa’s credit losses were reduced by recoveries of amounts written off in previous years.

The improvements in the credit ratios are to some degree flattered by the strong growth in the underlying loan books, but they nevertheless reflect the continued efforts of management to improve credit risk processes across the group.

Non-interest revenue (NIR)

2004 2003

Growth in NIR (%) 18 12

NIR as a % of total income (%) 56,8 52,8

The growth in NIR was a combination of fees and commission revenue up 24%, other sources of non-interest revenue up 36% and the level of trading revenue remaining unchanged.

Higher transaction volumes and asset-based fees contributed to fee and commission growth across all business units. Retail Banking, in particular, benefited from increased transaction volumes from existing clients, an increase in its customer base, higher fee revenue from insurance broking and financial consulting, and focused pricing strategies. Corporate and Investment Banking increased fee revenue through higher business volumes in debt origination, corporate finance and electronic banking while International benefited from higher fees from asset management and structured finance activities. Fee revenue in Africa gained from a general review of pricing strategies and an increased customer base.



0

1

2

3

4

5

6

1998 2001 20031999 2000 2002 2004

Credit loss history (as a percentage ofloans and advances)

NPLs

Balance sheet provisions

Credit loss ratio

%

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

1998 2001 20031999 2000 2002 2004

Non-interest revenue

CAGR – 19%


Non-interest revenue to total income

Rm

30

35

40

45

50

55

60

65

70%


Trading revenue grew by 36% in Corporate and Investment Banking following an improved performance in debt securities and a sustained performance from forex off an already high base. This was however offset by the impact of the stronger rand exchange rate on trading revenue of International and its high base given the exceptional performance in 2003. International’s 2004 trading revenue benefited from growth in debt securities and forex trading, partly offset by a disappointing performance in equity derivatives principal trading, which activity has since been discontinued.

Growth in other revenue resulted mainly from gains on private equity investments, increased property income and an improved underwriting result from the group’s short-term insurance operation.

Operating expenses

2004 2003

Growth in Domestic Banking (%) 16 13

Growth in International and

Africa (rand %) 4 (4)

Growth in total operating

expenses (%) 12 8


Staff costs and other operating expenses both increased by 12%. Headcount increased by 2% to cope with increased business volumes, new products launched, compliance with new regulations and the consolidation of operations in Mozambique and Botswana. Staff costs per employee increased by 10%. The group is gradually increasing the variable component of remuneration to more closely align remuneration to the performance of the group. The performance-based element of remuneration was adjusted to reflect the strong domestic results and improved customer

service ratings. The group has also increased provisions for

potential pension obligations by R150 million and staff costs

were further increased by R127 million to finance the general

staff scheme within the group’s Black Ownership Initiative.

Growth in other operating expenses originated mainly from

Retail Banking, 11% and Africa, 28%. IT costs increased due to

increased systems development and a more conservative

depreciation policy on desktop computers. In line with

the increased business volumes, most direct operating

expense categories increased accordingly. Premises costs

increased following scheduled refurbishment of parts of the

branch network. Africa’s growth mainly resulted from the

consolidation of Mozambique, previously equity accounted,

and costs relating to a new head office in Uganda.

Taxation

2004 2003

Effective tax rate (%) 28,2 31,0

Effective direct income tax rate (%) 24,4 26,6

Effective indirect tax rate (%) 3,8 4,4

The direct tax rate reduced following an increase in non-

taxable income from wholesale activities and settlements

with revenue authorities in the previous year not repeated. In

terms of new accounting requirements, Secondary Tax on

Companies (STC) credits resulting from dividends received

exceeding dividends paid, are accounted for as a deferred tax

asset. The reduction in tax resulting from this change was

R47 million (2003: R32 million).

The lower ratio of NII to total income reduced the ratio of

non-taxable value added tax (VAT) supplies to total supplies,

resulting in relatively lower irrecoverable VAT and a reduction

in indirect tax.

Balance sheet analysis

Banking assets

2004 2003

Growth in total banking

assets (%) 14 44

Growth in total banking assets

– excluding derivative assets (%) 12 14

Growth in loans and

advances (%) 17 23

Growth in ordinary shareholders’

funds (%) 1 11

Net asset value per share (cents) 2 322 2 154

Growth in assets occurred in Retail Banking, 34%, and Africa,

14%, while International grew by 13% in dollar terms.

Total banking assets increased by R61 billion on the previous

year. Loan growth accelerated in the domestic low interest

rate environment and was up 27%, particularly in the following

key lending product categories:

0

5

10

15

20

25

30

1998 2001 20031999 2000 2002 2004

Cost and income growth

Total income growth

Total cost growth

Cost-to-income ratio

52

54

56

58

60

62

64Growth % Ratio %

• mortgage loans, which were 40% higher, reflected growth in both volume and value terms assisted by the improved sales processes and a buoyant residential property market;

• instalment finance, which was 20% up, mainly as a result of volume growth in motor vehicle sales; and

• card debtor balances, which were 40% higher as a result of increased consumer spending, improved card issuing processes, and better than expected volumes from the Barclaycard joint venture.

Strong focus continues to be placed on the quality of all new loans granted.

Although not a specific objective of the group, domestic market share was gained in mortgage lending, 25,8% (2003: 22,9%) and credit card debtors, 32,8% (2003: 28,8%). Instalment finance declined marginally from 22,3% in 2003 to 22,1% in 2004.

Domestic corporate lending remained subdued with growth restricted to 12% in line with the group’s strategy of not pursuing low-margin corporate lending business. The rand value of foreign currency lending reduced and the stronger rand slowed demand for credit by exporters.

Shareholders’ fundsOrdinary shareholders’ funds grew by 1% to R29 billion. Excluding the impairment arising from the Black Ownership Initiative of R4 billion, the increase amounted to 16%.

Liberty Life

Liberty Life grew its new business premiums by 15% to R13 440 million while improving the new business margin to 24%. Net cash inflows from insurance operations remained strong at R3 640 million. Management expenses increased by 5% to R1 928 million on a comparable basis. Embedded value

per share increased by 17% to R67,25 and the capital position of Liberty Life remained strong, with capital covering the requirement 2,1 times.

Liberty Life’s equity-accounted earnings from Stanlib is separately included in Standard Bank’s operations as part of the consolidation of Stanlib into the group’s results. Liberty Life’s published earnings have accordingly been adjusted to exclude all earnings relating to Stanlib.

Liberty Life has made an offer to purchase the entire issued share capital of Capital Alliance Holdings Limited for R3 billion. A court hearing to sanction the scheme of acquisition is set for 12 April 2005.

Dividends

2004 2003

Dividend cover (times) 2,5 3,1

Growth in dividends

per share (%) 53 22

Dividend yield (%) 3,5 3,9

Sustained high returns on equity over recent years, disciplined focus on risk-weighted assets and the introduction of secondary and tertiary forms of capital have resulted in strong group capital adequacy levels. This is despite substantial domestic asset growth and expansion in International and Africa. Earnings retention has been gradually reduced over the past three years with dividend cover declining from 3,3 to an originally planned cover ratio of 3,0 times for 2004. It has, however, become increasingly evident that a still lower level of earnings retention is appropriate over the medium term. A recent circular (19/2004) issued by the South African Reserve Bank, which clarifies the future regulatory approach to Tier I capital, has also informed the group’s view on earnings



12

14

16

18

20

22

24

26

28

30

32

34

Mortgage advances

Credit card

Instalment finance

Other loans and advances

Market share movement

2001 20032000 2002 2004

%

Dividends per share

CAGR – 28%

0

30

60

90

120

150

180

210

240

1998 2001 20031999 2000 2002

cents

2004


retention. The group’s dividend policy is accordingly adjusted to a cover of 2,5 times for the 2004 year, calculated on headline earnings per share. Depending on business growth, acquisition activity and the projected impact of Basel II, this cover may potentially be reduced further, but this will be reviewed annually. The advent of fair value accounting has significantly increased the likelihood of volatility in reported earnings. In the case of extreme volatility, the group may adjust the dividend cover to avoid significant changes in absolute dividends declared.

The above policy will also apply to interim dividends.

As a result of the reduced dividend cover a final dividend of 181,0 cents has been declared, thereby bringing the total dividend for the year to 231,5 cents, an increase of 53%.

Accounting policies

Basis of preparationThe financial statements have been prepared under the historical cost basis, as modified by the revaluation of financial instruments classified as instruments available-for-sale, held at fair value, held for trading or derivative instruments, as well as investment and owner-occupied properties in the group’s insurance operations.

The accounting policies comply in all material respects with South African Statements of Generally Accepted Accounting Practice (GAAP), as well as with the South African Companies Act of 1973.

Changes in accounting policiesThese accounting policies are consistent with those applied in 2003 except for the adoption of AC 501, Accounting for Secondary Tax on Companies (STC), with effect from 1 January 2004. As required by this new interpretation, a deferred tax asset is recognised for unused STC credits to the extent that the group expects that it will utilise the credits to reduce its STC liability in future. No deferred tax asset was previously recognised on unused STC credits. The impact of adopting AC 501 is as follows:

2004 2003

Rm Rm

Balance sheet (opening balance)

Increase in retained earnings and

increase in deferred tax asset

included in other assets 176 144

Income statement

Reduction in tax and increase

in earnings 47 32

Balance sheet (closing balance)

Increase in retained earnings and

increase in deferred tax asset

included in other assets 223 176

The 2003 amounts have been restated accordingly.

Accounting for the Black Ownership Initiative

On 15 July 2004 the group announced it was selling an effective 10% interest in its South African banking operations to a broad-based grouping of black entities (Tutuwa). The transaction enables the group to meet the ownership requirements set out in the Financial Sector Charter. The details of the transaction are set out on pages 8 to 9.

Accounting treatment

The accounting treatment described below, determined in consultation with the group’s joint auditors, complies with GAAP and International Financial Reporting Standards (IFRS).

In summary, the group subscribed for 8,5% redeemable cumulative preference shares issued by special purpose vehicles (SPVs) controlled by Standard Bank Group (SBG). The initial repurchase of SBG shares by the SPVs is treated as a reduction in the group’s equity. Subsequent to the repurchase of the SBG shares, the SPVs containing these shares were sold to the black participants. The capital and dividends on the preference shares are repayable from future ordinary dividends received on SBG shares. As a result of SBG’s right to receive its own dividends back in the form of preference dividends and capital on the preference shares, the subsequent sale of the SPVs and consequent delivery of the SBG shares to the black participants (although legally effected) is not accounted for as a disposal. The preference share investment in the SPVs is not accounted for as an asset. Accordingly, the preference share asset is effectively eliminated against equity as a debit empowerment reserve.

This accounting treatment recognises that the SBG ordinary shares owned by the SPVs are effectively not serviced through dividend payments as these ordinary dividends are returned to SBG in the form of a preference dividend receivable from the SPVs. This treatment will be applied until full redemption, or third-party financing, of the preference shares.

The transaction is therefore accounted for as a derivative equity-linked instrument which will, on future exercise in the form of third-party financing or redemption, result in accounting for the delivery of the SBG shares to the black participants. The equity-linked instrument is accounted for at the value of the initial consideration received which amounted to nil. As a consequence of the above, the accounting treatment followed is:

• the 8,5% redeemable, cumulative preference shares issued by the SPVs and subscribed for by SBG are not recognised as financial assets, but eliminated against equity;

• the preference dividends received from the SPVs are eliminated against the ordinary dividends paid on the SBG shares held by the SPVs; and

• for purposes of calculating earnings per share, the weighted average number of shares in issue is reduced by the number of shares held by those SPVs that have been sold to the black participants. The shares will be restored on full redemption of the preference shares, or to the extent that the preference share capital is financed by a third party.

Normalised earnings

The accounting treatment of the Tutuwa transaction, in cer-tain respects, departs from its legal and economic substance. Following requests from the investment community, normal-ised results reflecting the legal substance are also disclosed. In terms of the normalised results, the preference shares issued by the black participants to the group are accounted for as an asset and the associated dividends recognised as income.

Non-redeemable preference shares were issued by the group on 7 July 2004 to finance the original buy-back of ordinary

shares for the Tutuwa transaction. The half-yearly dividends payable on these preference shares can only be recognised on declaration (March 2005), but have been included as an adjustment to determine normalised earnings.

This impact is reflected in the table below. This practice will be continued in 2005 where the impact of the Tutuwa transaction will be greater due to the fact that it will have been in operation for a full year.



Results normalised for the Tutuwa transaction

Income statement Headline earningsattributable to ordinary

shareholdersRm

Earnings attributable toordinary shareholders

Rm

Standard Bank Group as disclosed 7 648 7 741

Adjustment:

– Dividend payable on perpetual preference shares 1 (114) (114)

– Dividends receivable on 8,5% cumulative redeemable preference shares 2 87 87

Standard Bank Group normalised 7 621 7 714

Balance sheet Net assetvalue

Rm

Average ordinary equity

Rm

Standard Bank Group as disclosed 29 087 28 961

Adjustment:

– 8,5% cumulative redeemable preference shares 3 4 246 2 123

Standard Bank Group normalised 33 333 31 084

Weighted average number of shares No. of ordinaryshares

Thousands

Fully diluted no. ofordinary shares

Thousands

Standard Bank Group as disclosed 1 321 666 1 360 178

Adjustment:

– Effect of Tutuwa already included in dilution (9 227)

– SBG shares held by Tutuwa SPVs 4 24 120 24 120

Standard Bank Group normalised 1 345 786 1 375 071

Financial ratios Normalised As disclosed

Headline earnings per share (cents) 566,3 578,7

Growth in headline earnings per share (%) 20 23

Earnings per share (cents) 573,2 585,7

Growth in earnings per share (%) 20 23

Net asset value per share (cents) 2 465 2 322

Price-to-book (times) 2,7 3,1

Return on equity (%) 24,5 26,41 In terms of GAAP, dividends on non-cumulative, non-redeemable preference shares are only accounted for when declared. The dividend on the preference shares

issued by SBG, calculated at not less than 70% of prime, was only declared at the March 2005 board meeting and will therefore only be accounted for in 2005. This adjustment accrues for six months of preference dividends payable, from the date of issue on 3 July 2004.

2 The Tutuwa SPV 8,5% preference shares subscribed for by SBG are not recognised as an asset, and consequently the preference dividend accrual is not accounted for. This adjustment is to accrue for preference dividends receivable for three months. A similar adjustment has been made for Liberty Life.

3 In terms of the required accounting treatment, the asset for the 8,5% preference shares is debited against equity as the dividends and capital redemptions are settled by the receipt of SBG dividends, which is a circular cash flow. The adjustment is to reflect these preference shares as an asset (includes Liberty Life effective portion).

4 The delivery of the repurchased SBG shares to the Tutuwa SPVs is not accounted for until the redemption or third-party financing of the 8,5% preference shares. The number of shares for purposes of EPS calculations, is therefore reduced until delivery is recognised. The adjustment reflects the delivery and legal ownership of the shares consistant with the reinstatement of the preference share asset, refer (3).


Application of IFRS 2

Current application

IFRS 2, the accounting standard on share-based payments, requires that, from 1 January 2005, an expense be booked in the income statement if an equity transfer occurs at terms below market value. An underlying requirement in the statement is that an entity should receive a good or service in return for equity.

In consultation with the group’s joint auditors, locally and internationally, the group concluded that, in considering the applicability of current interpretations of IFRS 2, the SBG Black Ownership Initiative is not regarded as a “good” or a “service” as envisaged by the standard. The transaction was performed for a purpose other than the payment for goods or services supplied to SBG and the requirements of IFRS 2 are therefore not considered to be applicable. No IFRS 2 expense is therefore required to be recognised in the income statement.

New developments

Following local debate on the accounting for black ownership initiative transactions, the South African Institute of Chartered Accountants issued an exposure draft, Preliminary Views on Accounting for Black Economic Empowerment (BEE) transactions, ED 189, which discusses whether black ownership initiatives should form part of IFRS 2. ED 189 contained two diverse views on the accounting treatment.

Under the first view expressed in ED 189, the issue of the equity-linked instrument to black participants will be accounted for as an equity-settled share-based payment transaction. The fair value of the equity linked instruments on grant date will be determined and recognised as an expense in the income statement over the vesting period, with a corresponding increase in a separate reserve class within equity. The second view in ED 189 corresponds with the accounting treatment currently followed by the group.

Subsequent to the commencement of the South African process to clarify the applicability of IFRS 2 to black ownership initiatives, the International Financial Reporting Interpretations Committee (IFRIC) has agreed to give guidance on the issue of whether the receipt of goods or services is required for an equity transaction to be accounted for in terms of IFRS 2.

Current indications are that it is likely that the view expressed in the draft IFRIC interpretation will be that the receipt of goods or services is not the prime determinant for a trans-action to be accounted for in terms of IFRS 2. This would result in the group having to account for an expense for the Black Ownership Initiative in terms of IFRS 2. Comments on the draft interpretation could however change this view.

Vesting of shares

In light of these new developments, it becomes relevant to assess the vesting conditions of the shares as IFRS 2 is only applicable to any instrument that has not vested by 31 December 2004. The equity linked instruments issued in terms of the Tutuwa transaction vest as follows:

Instruments with immediate vesting before 31 December 2004:

• shares allocated to the Tutuwa Consortium (40%); and

• shares allocated to the community and regional business trust (20%).

Instruments vesting over a service period ending 31 December 2010:

• shares allocated to black managers and non-executive directors (40%).

Should the eventual interpretation deem the group’s trans-action to be within the scope of IFRS 2, the fair value of the equity linked instruments issued in terms of the black man-agers scheme will be accounted for as a share-based payment over the vesting period. This would result in a total estimated expense of between R272 million and R388 million accounted for over a vesting period ending 31 December 2010.

Anticipated changes in accounting standards

Improvements to current standards and compliance with IFRSIn common with all companies listed on the JSE Securities Exchange, Standard Bank Group will comply with IFRS from 1 January 2005. The South African standards are currently closely aligned with IFRS. The last amendments to align South African standards with IFRS and further amendments and improve-ments to IFRS will be effective from 2005. The more significant implications on the group’s results following the adoption of the revised IFRS, are expected to be the following:

Share-based Payments (IFRS 2)Options and rights issued to staff in terms of the group’s share incentive schemes will be accounted for in accordance with IFRS 2, effective from 1 January 2005. IFRS 2 will be applied retrospectively for all options granted after 7 November 2002 that have not vested on the effective date, 31 December 2004. IFRS 2 requires the recognition of an expense equal to the fair value of options or rights granted to employees. The fair value will be expensed over the vesting period based on the services received from these employees. The estimated vesting value of options granted to employees amounted to R149 million in 2004 (2003: R133 million). These options will be expensed over a vesting period of between three and five years. The restatement to the 2004 results is expected to amount to a cost of approximately R71 million.

Provisions for performing loansIn terms of the current statement, Financial Instruments: Recognition and Measurement, AC 133, provisions for credit losses should be made if it is probable that an entity will not be able to collect all amounts due according to the contractual terms of the loan. The local interpretation of this standard was that a performing loan provision should be raised if the present value of expected future cash flows, discounted at the original effective interest rate of the loans in the performing loan portfolio, is less than its carrying value.

As part of the IFRS improvements project effective from 1 January 2005, IAS 39 (the international equivalent of AC 133) was amended. In terms of the revised statement an impair-ment loss can only be accounted for if a loss event has occurred after initial recognition of the asset but before the balance sheet date (incurred loss model). This accounting treatment is expected to result in a reduction in provisions for performing loans. It is likely that the reduction in the provision resulting from the change would be accounted for as a change in accounting policy, with any adjustment in the provisions for performing loans accounted for in opening reserves and not in the income statement.

Depreciation of properties In terms of the revised statement Property, Plant and Equipment, IAS 16, effective 1 January 2005, the residual value of property and equipment should be revalued at each balance sheet date. Annual increases in property values will result in an annual upward adjustment of the residual values of buildings. Depreciation charges should therefore reduce as residual values are adjusted upwards, and should cease where the carrying value equals the residual value.

The carrying value of buildings that were previously fully depreciated will be partially re-instated to reflect the residual value at the time when the carrying value equalled the revalued residual value. These changes are effective from 1 January 2005 and are expected to be treated as a change in accounting policy in opening reserves. The annual depreciation charge relating to property is expected to be lower following this accounting policy change.

GoodwillIn terms of the new statement on Business Combinations (IFRS 3), goodwill can no longer be amortised, but should be allocated to each cash-generating unit and annually tested for impairment. The revised statement will be adopted on 1 January 2005.

Capital adequacy and allocation

The group manages its capital base to achieve a balance between maintaining prudent capital ratios to support business growth and depositor confidence, and the objective to provide competitive returns to shareholders.

Regulatory capitalThe group is subject to regulation and supervision by a number of South African and international regulators.

The 25 banks in the group are required to meet minimum capital requirements of regulators in those countries in which they operate. Banking regulations are generally based on the guidelines developed by the Basel Committee under the auspices of the Bank for International Settlement. In addition to the requirements of host country regulators, all banking operations are also expected to comply with the capital adequacy requirements in terms of South

African banking regulations. As a consequence, the group’s individual banking operations are capitalised at the higher capital adequacy levels in terms of either host country or South African requirements.

The capital adequacy ratio, which reflects the capital strength of an entity compared with the minimum regulatory requirement, is calculated by dividing capital by risk- weighted assets.

Capital is split into three tiers. Tier I (primary capital) represents the permanent forms of capital such as share capital, share premium and retained earnings. Perpetual, non-cumulative preference shares also qualify as tier I capital. Tier II (secondary capital) includes medium-term to long-term subordinated debt capital, revaluation reserves and general debt provisions. Tier III (tertiary capital) represents short-dated subordinated debt instruments to support a bank’s trading activities.

Risk-weighted assets are determined by applying prescribed risk weightings to on- and off-balance sheet exposures according to the relative credit risk of the counterparty. Included in overall risk-weighted assets is a notional risk weighting for market risks, counterparty risks and large exposure risks relating to trading activity.

The use of non-equity forms of regulatory capital plays an important part in the capital management process of the group’s banking activities:

• Domestically, Standard Bank of South Africa (SBSA) had R1 billion of tier III capital bonds which matured on 15 February 2005. R2,7 billion tier II capital bonds are eligible to be called for early redemption during June and December 2005 (subject to the prior written approval of the Registrar of Banks). As part of a refinancing programme and also in reaction to strong growth in risk-weighted assets, SBSA availed itself of the opportunities presented by favourable market conditions and issued R2 billion tier II bonds at a favourable issue spread of 95 basis points over R153 government bonds in November 2004.

• Internationally, Standard International Holdings raised $100 million in tier II bonds in July 2004 at a spread of 250 basis points over LIBOR. This issue was part of a strategy to improve the gearing of the regulatory capital base of the group’s London based operations. As a consequence, $75 million of capital invested by the group in International was returned to the pool of strategic capital at the end of the 2004 financial year.

The implementation of the Tutuwa transaction was preceded by raising R3 billion of non-redeemable, non-cumulative, non-participating preference shares paying dividends at a rate of not less than 70% of prime overdraft rates. In addition, R1,2 billion of capital surplus to operating requirements was used as part of the Tutuwa transaction.

The group’s insurance operations based in South Africa are regulated by the Financial Services Board. The capital requirement is calculated by the statutory actuary in terms of the guidance notes issued by the Actuarial Society of



South Africa. Consistent with the group’s focus on optimising

capital utilisation and shareholder value, Liberty Life similarly

has an ongoing process to review its capital structure.

Capital adequacy ratios

The group’s capital adequacy ratio increased to 15,4% from

14,9% at December 2003, above the weighted average

regulatory requirement of 10,5% for the 25 banks across the

group. Tier I capital adequacy remained constant due to

strong profit growth, offset by strong risk-weighted asset

growth and a net utilisation of tier I capital for Tutuwa

amounting to R1,2 billion. The reduction in dividend cover

will be a factor in limiting future increases in primary capital

adequacy. The increase in total capital adequacy mainly

arose from the net increase in tier II capital referred to

earlier and is likely to be of a temporary nature in view of

the planned early redemption of tier II capital in 2005.

As part of the group’s capital planning process, group target

capital adequacy levels have been set as follows – group

primary capital adequacy: 9% to 10%; and group total capital

adequacy: 13% to 14%. In addition, a broad mix of: 60%

ordinary shareholder funds, 10% other forms of primary

capital such as preference shares, and 30% tier II and tier III

capital instruments is targeted. Future capital management

activities will take place against the background of these

guidelines and the demands on capital arising from the

group’s operating requirements.

Liberty Life is well capitalised with a capital adequacy cover of 2,1 times (2003: 2,6 times) the minimum regulatory capital requirement (CAR). This reduction mainly arises as a consequence of Tutuwa. Post the acquisition of Capital Alliance, the CAR ratio is expected to be approximately 1,6 times. Liberty Life’s long-term CAR ratio target is 1,7 times, with a floor of 1,5 times.

Economic capital Allocation of economic capital to business units and the determination of appropriate returns are important components in a comprehensive approach to optimise capital utilisation and to create shareholder value.

The allocation of economic capital is managed as a joint process between group risk and group finance divisions. The quantification of risks undertaken by individual business units is a key driver in the economic capital allocation process. Economic capital is defined as the higher of risk or regulatory capital requirements.

Return on equity based on economic capital allocations forms part of a balanced set of business unit financial performance indicators, which are monitored regularly. Cost of equity and weighted average cost of capital estimates are calculated for all the markets in which the group operates to serve as objective performance benchmarks and investment criteria.

Currency profile of shareholders’ funds

A significant proportion of the group’s activities is based outside South Africa. The group’s plans for acquisitions also lie predominantly outside South Africa. As a consequence, 35% (2003: 35%) of the group’s shareholders’ funds are foreign currency denominated; 8% (2003: 7%) is deployed in African operations and 27% (2003: 28%) supports International or is held as surplus capital for future expansion. Following the conversion of Standard International Holdings to a US dollar-based entity at the end of 2003, most of the group’s foreign capital outside Africa is potentially exposed to US dollar currency movements.

Appropriate hedging strategies were implemented to mitigate the overweight position of the US dollar in the group’s foreign capital base in favour of a more balanced spread of exposures to US dollar, sterling and euro. Before accounting for currency hedging initiatives, 16% (2003: 25%) of the group’s shareholders’ funds was exposed to US dollar, 5% (2003: 3%) to sterling, and 6% (2003: 0%) to euro. After hedging, the main non-rand currency exposures of shareholders’ funds are 8% (2003: 18%) US dollar, 13% (2003: 10%) sterling and 6% (2003: 0%) euro.

Given the group’s presence in many countries, its shareholders’ funds will always be exposed to currency movements. Current South African Reserve Bank exchange control rules do not allow for the hedging of foreign currency risks on external capital into rand. Accordingly, the group’s currency hedging is limited to movements within the basket of external currencies.


0

2

4

6

8

10

12

14

16

18

1998 2001 20031999 2000 2002 2004

Regulatory capital

Primary capital

Secondary capital

Tertiary capital

Required capital

%



Regulatory capital and risk-weighted assets

Regulatory capital2004

Rm2003

Rm

Ordinary shareholders’ equity 29 087 28 835

Minority interest 335 494

Perpetual preference shares 2 983 –

Impairments and other (382) (1 046)

Tier I capital 32 023 28 283

Preference share capital 8 8

Tier II bonds 8 042 5 722

Provisions for performing loans 1 036 1 349

Revaluation reserve 243 110

Tier II capital 9 329 7 189

Tier III capital 1 282 1 334

Total capital 42 634 36 806

Risk-weighted assets (year-end balances)

On-balance sheet 212 733 171 817

Off-balance sheet 15 742 14 052

Trading activity notional assets 37 188 51 066

Standard Bank operations 265 663 236 935

Liberty Life notional assets 11 666 10 090

Standard Bank Group 277 329 247 025

Capital adequacy ratios and targets

Effective group constraint (including buffers) %

SARBregulatoryconstraint

%Target

%2004

%2003

%

Standard Bank Group

Total capital adequacy ratio 13,2 10,0 13,0 to 14,0 15,4 14,9

Banking operations capital adequacy 15,1 14,4

Aggregate regulatory capital requirement 1 10,5 10,5

Tier I capital adequacy ratio 9,3 6,0 9,0 to 10,0 11,5 11,5

Preference shares as % of Tier I 20,0 9,3 –

Tier II and Tier III as % of Tier I 100,0 33,1 30,1

Ordinary equity as % of capital 60,0 68,1 76,8

Preference shares as % of capital 10,0 7,0 –

Tier II and Tier III as % of capital 30,0 24,9 23,2

Liberty Life (calculated in terms of the Long-term Insurance Act) (times covered) 1,7 2,1 2,6

1 Capital adequacy requirements in excess of 10% in banks operating in other jurisdictions in terms of local requirements gives rise to a higher aggregate regulatory requirement.


Capital adequacy of banking subsidiaries

Primary

capital

%

Secondary

capital

%

Tertiary

capital

%

2004

Total

capital

%

Primary

capital

%

Secondary

capital

%

Tertiary

capital

%

2003

Total

capital

%

Host

require-

ment

%

Standard Bank Group 11,5 3,4 0,5 15,4 11,5 2,9 0,5 14,9

Domestic Banking

The Standard Bank of South Africa 9,1 3,8 0,5 13,4 8,5 3,4 0,6 12,5 10

International

Standard International Holdings,

incorporating: 8,2 6,1 0,8 15,1 8,3 6,1 0,9 15,3 12

– Standard Bank London

– Standard Bank Asia

– Standard Merchant Bank Asia

– Banco Standard de Investimentos

– ZAO Standard Bank

Standard Bank Isle of Man 7,1 4,4 – 11,5 9,0 6,2 – 15,2 10

Standard Bank Jersey 9,5 2,5 – 12,0 10,2 2,9 – 13,1 10

Africa

Lesotho Bank (1999) 21,9 0,7 – 22,6 28,0 0,4 – 28,4 8

Standard Bank Lesotho 10,0 0,5 – 10,5 24,6 0,5 – 25,1 8

Stanbic Bank Botswana 11,9 4,1 – 16,0 8,7 8,7 – 17,4 15

Stanbic Bank Congo 10,8 – – 10,8 – – – – 10

Stanbic Bank Ghana 16,8 – – 16,8 27,6 – – 27,6 6

Stanbic Bank Kenya 19,8 – – 19,8 14,5 – – 14,5 12

Stanbic Bank Malawi 14,8 4,9 – 19,7 20,2 4,6 – 24,8 10

Standard Bank Mauritius 17,6 0,6 – 18,2 19,3 0,5 – 19,8 10

Standard Bank Mozambique 18,4 – – 18,4 8

Standard Bank Namibia 9,0 3,8 – 12,8 6,9 4,5 – 11,4 10

Stanbic Bank Nigeria 26,8 0,3 – 27,1 18,3 0,3 – 18,6 10

Standard Bank Swaziland 7,7 0,8 – 8,5 7,6 1,5 – 9,1 8

Stanbic Bank Tanzania 8,8 0,8 – 9,6 12,5 – – 12,5 8

Stanbic Bank Uganda 17,3 0,5 – 17,8 12,0 1,2 – 13,2 12

Stanbic Bank Zambia 18,6 0,1 – 18,7 17,9 0,1 – 18,0 10

Stanbic Bank Zimbabwe 15,3 3,7 – 19,0 13,3 8,6 – 21,9 10



Analysis of risk-weighted assets

2004 2004 2003 2003

Unweighted Risk-weighted Unweighted Risk-weighted

assets assets assets assets

Rm Rm Rm Rm

On-balance sheet assets

Domestic Banking 391 637 180 360 326 581 139 543

International 106 932 15 207 112 064 18 620

Africa 25 274 14 641 22 264 11 867

Stanlib and central funding (including group

eliminations) (18 033) 2 525 (16 538) 1 787

505 810 212 733 444 371 171 817

Off-balance sheet assets

Domestic Banking 12 462 10 577

International 1 449 2 010

Africa 1 831 1 380

Central funding – 85

15 742 14 052

Trading notional assets

Domestic Banking 14 264 29 305


37 188 51 066

Standard Bank operations 505 810 265 663 444 371 236 935

Liberty Life 109 767 11 666 96 195 10 090

Standard Bank Group 615 577 277 329 540 566 247 025

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

500 000

550 000

Risk-weighted assets

Total assets

Standard Bank operations’ risk-weighted assetstrend (closing balances)

2001 20032000 2002 2004

Rm


Group finance focus for 2005

High quality financial information is key to decisions made by the group’s management, regulators, investors and other parties. The group’s finance function therefore aims to maintain a disciplined and responsible approach to financial reporting to ensure informed decision making by all users. In addition to the finance function’s responsibility for financial planning and control, and as business partner to the group’s business units, the following matters will receive focus in 2005:

• management of capital in terms of both equity and debt capital;

• preparation for compliance with the Basel Capital Accord from 2008;

• implementation of IFRS; and

• implemention of reporting processes required to comply with the charter.

The group’s financial objectives are set out on page 4. In order to attain these targets, management of the group’s capital in the most efficient manner remains a key objective in creating shareholder wealth on a sustainable basis.

Total Rand Dollar Sterling Euro Other

Closing currency exposure Rm Rm Rm Rm RmZAR linked

RmVarious

Rm

2003 underlying exposure 28 835 18 672 7 164 900 – 704 1 395

Currency profile changes due to

hedging strategies – (1 956) 1 956

2003 actual exposures 28 835 18 672 5 208 2 856 – 704 1 395

2004 exposures excluding hedging

activities 29 087 18 912 6 085 1 886 – 768 1 436

Conversion of portion of Central

funding to Euro – (1 347) (472) 1 819

2004 underlying exposures 29 087 18 912 4 738 1 414 1 819 768 1 436

Currency profile changes due to

hedging strategies – (2 402) 2 402

2004 actual exposures 29 087 18 912 2 336 3 816 1 819 768 1 436

Closing currency profile of shareholders’ funds % % % % % % %

2003 before hedging 100 65 25 3 2 5

2003 after hedging 100 65 18 10 2 5

2004 before hedging 100 65 16 5 6 3 5

2004 after hedging 100 65 8 13 6 3 5

Closing shareholders’ funds exposure to currencies

Seven-year review

Consolidated balance sheet

2004US$m

2004UK£m

2004€m

CAGR 1

%2004

Rm

Assets

Standard Bank operations 89 842 46 748 66 033 21 505 810

Cash and short-term negotiable securities 9 312 4 846 6 844 14 52 424

Trading assets 5 707 2 970 4 195 53 32 130

Investment securities 3 488 1 815 2 564 31 19 640

Loans and advances 45 676 23 767 33 571 14 257 154

Derivative and other assets 24 996 13 006 18 372 54 140 729

Interest in associates and joint ventures 51 26 37 286

Goodwill and other intangible assets 85 44 63 479

Property and equipment 527 274 387 2 2 968

Liberty Life 2 19 497 10 145 14 330 10 109 767

Current assets 820 427 603 5 4 616

Investments 18 551 9 652 13 634 10 104 442

Goodwill and other intangible assets 65 34 48 366

Equipment and furniture 61 32 45 4 343

Total assets 109 339 56 893 80 363 25 615 577

Equity and liabilities

Liabilities 102 489 53 329 75 328 26 577 013

Standard Bank operations 84 530 43 984 62 128 22 475 900

Deposit and current accounts 56 220 29 254 41 321 15 316 516

Derivative, trading and other liabilities 26 624 13 853 19 568 53 149 891

Subordinated bonds 1 686 877 1 239 91 9 493

Liberty Life 2 17 959 9 345 13 200 11 101 113

Other liabilities 544 283 400 8 3 064

Convertible bonds – – – –

Policyholders’ liabilities 17 415 9 062 12 800 12 98 049

Capital and reserves 5 698 2 965 4 188 16 32 078

Ordinary shareholders’ funds 5 167 2 689 3 798 14 29 087

Preference share capital and premium 531 276 390 2 991

Minority interest 1 152 599 847 6 486

Total equity and liabilities 109 339 56 893 80 363 25 615 577

1 CAGR refers to compound annual growth rate based on rand amounts for the period 1998 to 2004 (Liberty Life – 1999 to 2004).2 Liberty Life became a subsidiary with effect from 1 January 1999.

Figures included in the seven-year review have been restated where necessary to provide a meaningful comparison of performance over the period.

pg 66 | Seven-year review

2003

Rm

2002

Rm

2001

Rm

2000

Rm

1999

Rm

1998

Rm

Assets

Standard Bank operations 444 371 307 592 306 196 209 337 185 087 160 713

Cash and short-term negotiable securities 44 099 48 218 43 544 31 111 32 155 24 025

Trading assets 33 488 26 578 23 346 9 186 5 249 2 523

Investment securities 20 057 18 649 23 490 7 355 7 703 3 925

Loans and advances 220 375 178 925 176 604 136 895 118 647 114 143

Derivative and other assets 122 263 31 364 35 573 21 766 18 491 10 716

Interest in associates and joint ventures 541 276 187 100 65 2 733

Goodwill and other intangible assets 508 671 714 216 – –

Property and equipment 3 040 2 911 2 738 2 708 2 777 2 648

Liberty Life 2 96 195 85 761 89 038 75 643 68 866

Current assets 3 687 3 754 2 979 3 694 3 694

Investments 91 868 81 491 85 531 71 476 64 877

Goodwill and other intangible assets 277 194 175 172 7

Equipment and furniture 363 322 353 301 288

Total assets 540 566 393 353 395 234 284 980 253 953 160 713


Liabilities 505 302 361 293 363 568 259 864 232 874 147 604


Deposit and current accounts 272 677 239 715 237 006 168 845 155 536 135 660

Derivative, trading and other liabilities 137 785 37 145 39 789 21 342 17 463 11 750

Subordinated bonds 7 056 6 754 5 899 3 457 35 194

Liberty Life 2 87 784 77 679 80 874 66 220 59 840

Other liabilities 2 444 2 136 2 082 2 254 2 090

Convertible bonds 1 500 1 947 2 874 1 828 1 566

Policyholders’ liabilities 83 840 73 596 75 918 62 138 56 184

Capital and reserves 28 843 26 062 25 693 18 300 14 584 13 050

Ordinary shareholders’ funds 28 835 26 054 25 685 18 292 14 576 13 042

Preference share capital and premium 8 8 8 8 8 8

Minority interest 6 421 5 998 5 973 6 816 6 495 59

Total equity and liabilities 540 566 393 353 395 234 284 980 253 953 160 713


Seven-year review continued

Consolidated income statement

2004US$m

2004UK£m

2004€m

CAGR 1

%2004

Rm


Net interest income before provisions for credit losses 1 778 970 1 430 11 11 451

Provisions for credit losses 163 89 131 (9) 1 048

Net interest income 1 615 881 1 299 16 10 403

Non-interest revenue 2 337 1 275 1 879 19 15 048

Income from operations 3 952 2 156 3 178 18 25 451

Operating expenses 2 369 1 291 1 902 14 15 242

Net income from operations 1 583 865 1 276 27 10 209

Goodwill amortisation (15) (8) (12) (98)

Exceptional items 2 1 1 12

Income from associates and joint ventures 15 8 12 97

Income before tax 1 585 866 1 277 25 10 220

Indirect tax expense 60 33 49 15 389

Income before direct tax expense 1 525 833 1 228 25 9 831

Direct income tax expense 386 211 311 31 2 489

Income after tax 1 139 622 917 24 7 342

Attributable to minorities 20 11 16 127

Standard Bank profit for the year 1 119 611 901 23 7 215

Liberty Life 2

Net income from operations 326 178 260 2 097

Realised investment gains/(losses) attributable

to shareholders’ assets 93 51 75 598

Goodwill amortisation (2) (1) (1) (12)

Income before tax 417 228 334 2 683

Direct income tax expense 140 76 112 900

Income after tax 277 152 222 1 783

Attributable to minorities 195 107 157 1 257

Liberty Life profit for the year 82 45 65 526

Group profit for the year 1 201 656 966 25 7 741

Headline earnings 1 188 648 955 24 7 648

Average exchange rates during 2004:

US$ – 6,44 (2003: 7,55)

UK£ – 11,80 (2003: 12,32)

@ – 8,01 (2003: 8,52)

1 CAGR refers to compound annual growth rate based on rand amounts for the period 1998 to 2004.2 Liberty Life became a subsidiary with effect from 1 January 1999.


2003

Rm

2002

Rm

2001

Rm

2000

Rm

1999

Rm

1998

Rm


Net interest income before provisions for credit losses 11 437 10 520 8 177 7 229 6 761 5 972

Provisions for credit losses 1 848 1 955 1 603 1 406 1 527 1 804

Net interest income 9 589 8 565 6 574 5 823 5 234 4 168

Non-interest revenue 12 790 11 448 9 135 7 430 6 500 5 225

Income from operations 22 379 20 013 15 709 13 253 11 734 9 393

Operating expenses 13 608 12 587 9 940 8 618 8 198 6 946

Net income from operations 8 771 7 426 5 769 4 635 3 536 2 447

Goodwill amortisation (173) (151) (65) – (67) (36)

Exceptional items 144 – – (37) 54 19

Income from associates and joint ventures 102 96 49 16 10 295

Income before tax 8 844 7 371 5 753 4 614 3 533 2 725

Indirect tax expense 388 382 309 341 381 164

Income before direct tax expense 8 456 6 989 5 444 4 273 3 152 2 561

Direct income tax expense 2 353 2 053 1 447 993 668 501

Income after tax 6 103 4 936 3 997 3 280 2 484 2 060

Attributable to minorities 104 122 77 68 31 8

Standard Bank profit for the year 5 999 4 814 3 920 3 212 2 453 2 052

Liberty Life 2

Net income from operations 1 713 1 369 2 130 1 880 2 431

Realised investment gains/(losses) attributable

to shareholders’ assets 471 (363) 1 102 (782) 577

Goodwill amortisation (78) (14) (16) (7) –

Income before tax 2 106 992 3 216 1 091 3 008


Income after tax 1 283 624 2 093 634 2 159

Attributable to minorities 904 441 1 488 447 1 522

Liberty Life profit for the year 379 183 605 187 637

Group profit for the year 6 378 4 997 4 525 3 399 3 090 2 052

Headline earnings 6 280 5 263 4 419 3 673 2 892 2 059


Seven-year review continued

Statistics, returns and capital adequacy

CAGR 1

% 2004 2003 2002 2001 2000 1999 1998

Standard Bank Group

Share statistics

Number of ordinary shares

in issue (thousands)

– weighted average 1 321 666 2 1 334 099 1 328 192 1 318 696 1 295 841 1 277 018 1 158 005

– end of period 1 252 918 2 1 338 730 1 331 078 1 324 938 1 309 179 1 279 313 1 158 693

Dividend cover (times) 2,5 3,1 3,2 3,3 3,3 3,3 3,4

Dividend yield (%) 3,5 3,9 4,1 3,3 2,8 2,7 2,9

Earnings yield (%) 8,8 12,0 13,1 10,7 9,3 8,9 9,9

Price earnings ratio (times) 11,4 8,3 7,6 9,3 10,8 11,3 10,1

Price-to-book (times) 3,1 1,8 1,5 1,6 2,2 2,2 1,6

Share price (cents) – high 6 750 3 960 3 810 3 605 3 120 2 650 3 290

– low 3 686 2 650 2 595 2 600 2 000 1 590 1 035

– closing 24 6 580 3 918 3 015 3 120 3 050 2 555 1 800

Number of shares traded

(thousands) 892 633 908 179 673 703 511 549 434 756 401 884 222 159

Turnover in shares traded (%) 66,0 67,8 50,6 38,6 33,2 31,4 19,2

Market capitalisation (Rm) 27 88 969 52 451 40 132 41 338 39 930 32 686 20 856

Share statistics per ordinary share (cents)

Earnings 22 585,7 478,1 376,2 343,1 262,3 242,0 177,2

Headline earnings 22 578,7 470,7 396,3 335,1 283,4 226,5 177,8

Dividends 28 231,5 151,0 124,0 102,0 85,0 68,0 53,0

Net asset value 13 2 322 2 154 1 957 1 939 1 397 1 139 1 126

Selected returns (%)

Return on equity 26,4 22,9 20,3 20,1 22,4 20,9 17,4

Return on risk-weighted assets 3,0 2,6 2,3 2,3 2,4 2,1 1,7

Exchange rates at 31 December

US$ (1) 5,63 6,68 8,58 12,00 7,57 6,16 5,89

UK£ 2 10,82 11,95 13,82 17,45 11,30 9,92 9,63

Euro 7,66 8,42 9,01 10,68 7,10 6,17 n/a

1 CAGR refers to compound annual growth rate based on rand amounts for the period 1998 to 2004.2 Adjusted for shares issued in terms of Black Ownership Initiative.


CAGR 1

% 2004 2003 2002 2001 2000 1999 1998

Capital adequacy

Risk-weighted assets (Rm) 14 277 329 247 025 235 047 227 490 164 800 144 946 125 407

Primary capital (Rm) 16 32 023 28 283 25 669 25 182 18 330 14 647 13 101

Total capital (Rm) 20 42 634 36 806 33 702 32 311 23 153 17 124 14 488

Primary capital to risk-weighted

assets (%) 11,5 11,5 10,9 11,1 11,1 10,1 10,5

Total capital to risk-weighted

assets (%) 15,4 14,9 14,3 14,2 14,0 11,8 11,6

Market indicators at 31 December

Prime overdraft rate (%) 11,00 11,50 17,00 13,00 14,50 15,50 23,00

JSE All Share Index – closing 17 12 657 10 387 9 277 10 457 8 164 8 357 5 016

JSE Banks Index – closing 15 22 975 14 153 12 035 12 812 13 697 12 482 9 778

Standard Bank operations 2

Selected returns and ratios

Headline earnings (Rm) 26 7 298 6 010 4 965 3 985 3 249 2 428 1 795

Return on equity (%) 27,6 24,0 21,2 19,9 22,1 20,7 18,4

Return on risk-weighted assets (%) 2,9 2,6 2,3 2,1 2,2 1,8 1,6

Average ordinary shareholders’

funds to average total assets (%) 5,6 6,6 7,6 7,8 7,5 6,8 6,6

Net interest margin (%) 3,06 3,46 3,22 3,31 3,77 3,94 4,02

Non-interest income to total income (%) 56,8 52,8 52,1 52,8 50,7 49,0 46,7

Cost-to-income ratio (%) 57,5 56,2 57,3 57,4 58,8 61,8 62,0

Credit loss ratio (%) 0,43 0,91 1,08 1,00 1,07 1,28 1,60

Effective tax rate (%) 28,2 31,0 33,0 30,5 28,9 31,4 24,4

Headline earnings per

employee (rand) 203 741 171 548 143 876 120 444 107 175 74 394 56 503

Number of employees at year end 35 820 35 034 34 509 33 086 30 315 32 637 31 768

1 CAGR refers to compound annual growth rate based on rand amounts for the period 1998 to 2004.2 Standard Bank Group excluding Liberty Life.


Standard Bank Group

CAGR (%)Compound annual growth rate.

Dividend cover (times)Headline earnings per share divided by ordinary dividends per share.

Dividends per share (cents)Total ordinary dividends declared per share in respect of the year.

Dividend yield (%)Dividends per share as a percentage of the closing share price.

Earnings attributable to ordinary shareholders (Rm)Profit for the year attributable to ordinary shareholders, calculated as profit for the year less dividends on non-redeemable, non-cumulative, non-participating preference shares declared before year end.

Earnings per share (EPS) (cents)Earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue.

Earnings yield (%)Headline earnings per share as a percentage of the closing share price.

Headline earnings (Rm)Earnings attributable to ordinary shareholders excluding goodwill amortisation, capital profits and losses, and profits and losses on available-for-sale financial instruments.

Headline earnings per share (HEPS) (cents)Headline earnings divided by the weighted average number of ordinary shares in issue.

Net asset value (Rm)Equity attributable to ordinary shareholders.

Net asset value per share (cents)Net asset value divided by the number of ordinary shares in issue at year end.

Normalised resultsThe financial results and ratios restated on a legal substance basis to adjust accounting anomalies on preference dividends receivable and payable relating to the group’s Black Ownership Initiative.

Price earnings ratio (times)Closing share price divided by headline earnings per share.

Price-to-book (times)Market capitalisation divided by net asset value.

Profit for the year (Rm)Annual income statement profit attributable to ordinary and preference shareholders.

Return on equity (ROE) (%)Headline earnings as a percentage of average ordinary shareholders’ funds.

Shares in issue (number)Number of ordinary shares in issue at year end after deducting ordinary shares issued in terms of the Black Ownership Initiative transaction, on which dividends are retained to settle the preference share obligation.

TutuwaTutuwa is the group’s Black Ownership Initiative transaction entered into in terms of the Financial Sector Charter.

Weighted average number of shares (number)Weighted average number of ordinary shares in issue after deducting ordinary shares issued in terms of the Black Ownership Initiative transaction, on which dividends are retained to settle the preference share obligation.


Cost-to-income ratio (%)Operating expenses as a percentage of total income, before deducting provisions for credit losses.

Credit loss ratio (%)Total provisions for credit losses per the income statement as a percentage of average gross loans and advances.

Effective tax rate (%)Direct and indirect tax as a percentage of income before tax.

Gross coverage ratio (%)Non-performing loan provisions as a percentage of gross non-performing loans.

Net interest margin (%)Net interest income as a percentage of average total assets, excluding derivative assets.

Non-interest revenue to total income (%)Non-interest revenue as a percentage of total income, before deducting provisions for credit losses.

Non-performing loan provisions (Rm)Provisions for specific identified credit losses, net of the present value of estimated recoveries.

Performing loan provisions (Rm)Provisions for unidentified credit losses inherent in the performing loan book.

Return on equity (ROE) (%)Headline earnings, excluding income from Liberty Life, as a percentage of average ordinary shareholders’ funds, after deducting capital relating to Liberty Life.

Return on risk-weighted assets (%)Headline earnings, excluding income from Liberty Life, as a percentage of average risk-weighted assets of the banking operations.

Financial definitions

pg 72 | Financial definitions

Annual financial statements

75 Report of the independent auditors

76 Directors’ responsibility for financial reporting

77 Directors’ report

80 Balance sheet

81 Income statement

82 Statement of changes in shareholders’ funds


85 Accounting policies

94 Notes to the annual financial statements (Refer to next page for detailed index)

147 Standard Bank Group Limited – company annual financial statements

151 Annexure A – currency balance sheet

152 Annexure B – subsidiaries

156 Annexure C – associates and joint ventures

158 Annexure D – group share incentive scheme

Additional information

159 Abridged financial statements of principal banking subsidiary

160 Average balance sheet and interest rates

162 International representation


Notes to the annual financial statements

Page Note

Standard Bank Group

94 1 Segment reporting


99 2 Cash and balances with banks 99 3 Short-term negotiable securities 99 4 Derivative instruments 104 5 Trading assets 105 6 Investment securities 106 7 Loans and advances 108 8 Provisions for credit losses 109 9 Other assets 109 10 Interest in associates and joint ventures 110 11 Goodwill and other intangible assets 111 12 Property and equipment

Liberty Life

113 13 Current assets 113 14 Investments 115 15 Goodwill and other intangible assets 117 16 Equipment and furniture


118 17 Trading liabilities 118 18 Deposit and current accounts 119 19 Other liabilities and provisions 121 20 Subordinated bonds

Liberty Life

122 21 Other liabilities 122 22 Convertible bonds 123 23 Policyholders’ liabilities

Standard Bank Group

124 24 Share capital 126 25 Empowerment reserve 127 26 Contingent liabilities and commitments


128 27 Supplementary income statement information

Liberty Life

131 28 Supplementary income statement information

Standard Bank Group

133 29 Supplementary income statement information 136 30 Tax 138 31 Cash flow statement notes 141 32 Change in accounting policy and prior year reclassifications 142 33 Third party funds under management 142 34 Related party transactions 143 35 Pensions and other post-retirement benefits

pg 74 | Annual financial statements

To the members of Standard Bank Group Limited

We have audited the annual financial statements of the group

and company set out on pages 77 to 158 for the year ended

31 December 2004. These financial statements are the

responsibility of the company’s directors. Our responsibility is

to express an opinion on these financial statements based on

our audit.

Scope

We conducted our audit in accordance with statements of

South African Auditing Standards. Those standards require

that we plan and perform the audit to obtain reasonable

assurance that the financial statements are free of material

misstatement.

An audit includes:

• examining, on a test basis, evidence supporting the amounts

and disclosures in the financial statements;

• assessing the accounting principles used and significant

estimates made by management; and

• evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our

opinion.

Audit opinion

In our opinion the financial statements fairly present, in all

material respects, the financial position of the group and

company at 31 December 2004 and the results of their

operations and cash flows for the year then ended in

accordance with South African Statements of Generally

Accepted Accounting Practice and in the manner required by

the Companies Act in South Africa.

Report of the independent auditors

KPMG Inc. Registered Accountants and Auditors Chartered Accountants (SA)

PricewaterhouseCoopers Inc. Registered Accountants and Auditors Chartered Accountants (SA)

Johannesburg 8 March 2005


Directors’ responsibility for financial reporting

In accordance with Companies Act requirements, the

directors are responsible for the preparation of the annual

financial statements which conform with South African

Statements and Interpretations of Generally Accepted

Accounting Practice and which fairly present the state of

affairs of the group and the company as at the end of the

financial year, and the net income and cash flows for that

period, in terms of those statements.

It is the responsibility of the independent auditors to report

on the fair presentation of the financial statements.

The directors are ultimately responsible for the internal

controls. Management enables the directors to meet these

responsibilities. Standards and systems of internal control are

designed and implemented by management to provide

reasonable assurance as to the integrity and reliability of the

financial statements and to adequately safeguard, verify and

maintain accountability for group assets. Accounting policies

supported by judgements, estimates, and assumptions which

comply with South African Statements of Generally Accepted

Accounting Practice, are applied on a consistent and going

concern basis. Systems and controls include the proper

delegation of responsibilities within a clearly defined

framework, effective accounting procedures and adequate

segregation of duties.

Systems and controls are monitored throughout the group.

Greater detail of such, including the operation of the internal

audit function, is provided in the corporate governance and

risk management sections of the report starting on pages 28

and 38 respectively.

Based on the information and explanations given by

management and the internal and external auditors, the

directors are of the opinion that the accounting controls are

adequate and that the financial records may be relied upon

for preparing the financial statements and maintaining

accountability for the group’s assets and liabilities. Nothing

has come to the attention of the directors to indicate that any

breakdown in the functioning of these controls, resulting in

material loss to the group, has occurred during the year and

up to the date of this report. The directors have a reasonable

expectation that the company and the group have adequate

resources to continue in operational existence for the

foreseeable future. For this reason, they continue to adopt

the going concern basis in preparing the financial statements.

The financial statements which appear on pages 77 to 158,

were approved by the board of directors on 8 March 2005 and

signed on its behalf by

Group secretary’s certification

Compliance with Companies Act 61 of 1973

In terms of the Companies Act 61 of 1973 (the Act), and for the year ended 31 December 2004, I certify that Standard Bank Group

Limited has lodged all returns required by the Act with the Registrar of Companies and that all such returns are true, correct and

up to date.

Derek Cooper

Chairman

Loren Wulfsohn

Group secretary

8 March 2005

Jacko Maree

Chief executive


Directors’ report | for the year ended 31 December 2004

Principal activities

Standard Bank Group Limited is the holding company for the

interests of the Standard Bank Group.

Group results

A general review of the business and operations of major

subsidiaries is given in the 2004 group review and business

unit reviews commencing on pages 5 and 14 respectively.

A financial review on the results of the Standard Bank Group

for the year is given on pages 51 to 65.

Property and equipment

There was no change in the nature of the fixed assets of the

group or in the policy regarding their use during the year.

Share capital

Ordinary shares

During the year, 13 378 700 ordinary shares (2003: 7 651 200 ordinary

shares) were issued in terms of the group share incentive scheme.

Preference shares

During the year, 30 000 000 non-redeemable, non-cumulative,

non-participating preference shares of R0,01 each were issued

at a premium of R99,99 per share.


Standard Bank Group sold an effective 10% interest in its South

African banking operations, in a transaction worth approximately

R4,3 billion, to a broad-based grouping of black entities, which

is referred to as the Black Ownership Initiative, consisting of:

• Safika Holdings (Proprietary) Limited (Safika) and Shanduka

Resources (Proprietary) Limited (Shanduka) known as the

Tutuwa Consortium;

• the Community Trust, a trust formed for the benefit of

regional business and community groupings;

• the Managers’ Trusts, trusts formed for the benefit of Standard

Bank’s current and future black managers and non-executive

directors; and

• black employees who were awarded Standard Bank Group

shares at no cost in terms of the General Staff Scheme.

Liberty Life concluded a similar transaction.

Further details of the Black Ownership Initiative can be found

on page 8.

Directors’ interest in shares

At the date of this report, the directors held, directly and

indirectly, interests in the company’s ordinary issued share

capital as reflected in the table below:

Ordinary shares Second preference shares

Director Beneficial Non-beneficial BeneficialNon-

beneficial

2004 2003 2004 2003 2004 2004

D D B Band 11 017 11 921 – – 9 406 –

E Bradley 262 258 283 786 391 467 423 599 1 559 30 000

D E Cooper – – 13 243 14 330 – 1 140

T Evans 4 273 2 624 – – 7 817 –

T S Gcabashe 1 125 000 – – – – –

D A Hawton 11 977 12 960 – – – –

Sir Paul Judge – – – – – –

S J Macozoma 2 – – – – 1 140 –

J H Maree 174 001 145 000 – – 1 559 1 279

R P Menell – – – – – –

Adv K D Moroka 1 125 554 600 – – 1 000 –

A C Nissen 1 125 000 – – – – –

R A Plumbridge 94 289 102 029 – – – –

M C Ramaphosa 3 2 495 N/A – N/A – –

M J D Ruck 340 647 188 609 – – 1 559 –

M J Shaw – N/A – N/A – –

Sir Robert Smith – – – – – –

Dr C L Stals – – – – 1 279 –

Dr C B Strauss 113 717 123 052 – – – –

Total 1 390 228 870 581 404 710 437 929 25 319 32 419

1 Includes an allocation of 125 000 shares in terms of the Tutuwa Management Trust – special conditions apply for qualifying black non-executive directors.2 S J Macozoma has a 20% interest in Safika which acquired 24 132 911 shares in terms of the Black Ownership Initiative. His interest in Safika is not large enough to

qualify as an associate in terms of JSE Listing Requirements.3 M C Ramaphosa has a 33% interest in Shanduka which acquired 16 088 608 shares in terms of the Black Ownership Initiative. His interest in Shanduka is not large

enough to qualify as an associate in terms of JSE Listing Requirements.

N/A Appointed during 2004.


Directors’ report continued

Elisabeth Bradley, in her capacity as trustee of a testamentary

trust, has an indirect non-beneficial interest in 47 000

6,5% preference shares issued by the company.

The company has not been informed of any changes in these

holdings at the date of this report.

Group share incentive scheme

Information on options granted to executive directors under

the group share incentive scheme is given in the remuneration

review on page 35. Details of options granted to all employees

under the group share incentive scheme are given in

Annexure D on page 158.

Directors’ emoluments

Directors’ emoluments are disclosed on page 36. Information

relating to the determination of directors’ emoluments, share

option allocations and related matters are contained in the

remuneration review commencing on page 32.

Shareholder analysis

The analysis of ordinary shareholders is given on page 179.

Shareholders at the close of the financial year, holding

beneficial interests in excess of 5% of the issued share capital,

determined from the share register and investigations

conducted on our behalf, were as follows:

% held

Old Mutual Group 12,2%

Public Investment Commissioner 11,6%

Distribution to ordinary shareholders

Interim

On 17 August 2004, an interim dividend of 50,5 cents per

share (2003: 41,5 cents) was declared to shareholders recorded

at the close of business on 10 September 2004 and paid on

13 September 2004.

Final

On 8 March 2005, a final dividend of 181,0 cents per share

(2003: 109,5 cents) was declared to shareholders recorded

at the close of business on 15 April 2005, to be paid on

18 April 2005.

Distribution to preference shareholders

6,5% first cumulative preference shares

Interim

On 17 August 2004, an interim dividend of 3,25 cents per

share (2003: 3,25 cents) was declared to shareholders recorded

at the close of business on 10 September 2004 and paid on

13 September 2004.

Final


(2003: 3,25 cents) was declared to shareholders recorded at

the close of business on 8 April 2005 to be paid on 11 April 2005.

Non-redeemable, non-cumulative, non-participating

preference shares


was declared to shareholders recorded at the close of business

on 8 April 2005 to be paid on 11 April 2005.

Directorate

The directorate is listed on page 178.

The following changes in directorate have taken place since

the last annual report.

Standard Bank Group Limited

Appointments

M J Shaw as director 22 July 2004

M C Ramaphosa as director 1 November 2004

The Standard Bank of South Africa Limited

Appointments

M J Shaw as director 22 July 2004

M C Ramaphosa as director 1 November 2004

Liberty Holdings Limited

Resignation

M Rapp as director 31 December 2004

Liberty Group Limited

Resignation

M Rapp as director 31 December 2004

Group secretary and registered office

The group secretary is Loren Wulfsohn. The address of the group

secretary is that of the registered office, 9th floor, Standard Bank

Centre, 5 Simmonds Street, Johannesburg, 2001.

Restructuring and acquisitions during the year

There were no major restructuring exercises or acquisitions

during the year. On 1 December 2004, Liberty Life announced

its proposed acquisition of Capital Alliance Holdings Limited

(CAHL), a South African Life Insurance group listed on the JSE

Securities Exchange SA. In terms of the proposal, Liberty Life

intends to make an offer to acquire, for an amount of

R3 billion, all the shares in the issued share capital of CAHL

other than those already held by Liberty Life and Capital

Alliance Special Finance (Proprietary) Limited (a wholly-owned

subsidiary of CAHL). Further details of the proposal can be

found in the 2004 Liberty Life annual report.

Management by third parties

A company in which Doug Band, a director of Standard Bank

Group, has a beneficial interest, provided consulting and

certain management services to the capital investment

division of The Standard Bank of South Africa Limited. The

services will no longer continue after 31 December 2004.

There are no other businesses of the company or its


subsidiaries that have been managed by a third party, or a

company in which a director held an interest.

Subsidiaries, associates and joint ventures

The interests in subsidiary, associated and joint venture

companies, where considered material in the light of the

group’s financial position and results, are set out in Annexure

B on page 152, and Annexure C on page 156 respectively.

Special resolutions during the year

Group companies passed the following resolutions during

the year for the purposes indicated:

Amendments to memoranda and articles

of association:

Increase in the authorised share capital:

• Standard Bank Group Limited (non-redeemable, non-

cumulative, non-participating preference shares);

• The Standard Bank of South Africa Limited;

• Stanbic Bank Kenya Limited;

• Stanbic Bank Zimbabwe Limited;

• Standard Resources Limited;

• ZAO Standard Bank; and

• Banco Standard de Investimentos SA.

Name changes:

• Standard Insurance Limited from Stanbic Insurance Limited;

• Standard Bank Trust Company (Cayman) Limited from Minden

Trust (Cayman) Limited;

• Standard Bank s.a.r.l. Mozambique – from Banco Standard

Totta Moçambique s.a.r.l. (Mozambique);

• Standard Bank (Mauritius) Limited from Standard Bank

(Mauritius) Offshore Banking Unit Limited; and

• SBBL Limited from Investec Bank Botswana Limited.

Other:

• SML Limited:

Amendments to the articles of association converting the

currency of the issued and the authorised share capital from

US dollars into euros;

• SMT Limited:

Amendments to the articles of association converting the

currency of the issued and the authorised share capital from

US dollars into sterling;

• Zambia Venture Capital Fund Limited:

Amendments to the company’s memorandum and articles of

association reducing the company’s share premium account;

and

• Stanbic Bank Zimbabwe Limited:

Authorising the issue of bonus shares out of retained

earnings at a premium.

Authority to repurchase securities by company or

subsidiaries

• Standard Bank Group Limited;

• Liberty Holdings Limited; and

• Liberty Group Limited.


• Standard Bank Group Limited

A special resolution approving the acquisition of ordinary

shares by Tutuwa Strategic Holdings 1 (Proprietary) Limited,

Tutuwa Strategic Holdings 2 (Proprietary) Limited, Tutuwa

Community Holdings (Proprietary) Limited, Tutuwa Staff

Holdings 1 (Proprietary) Limited, Tutuwa Staff Holdings 2

(Proprietary) Limited and Tutuwa Staff Holdings 3

(Proprietary) Limited (at the time subsidiaries of the group)

in terms of section 89 of the Companies Act, 61 of 1973, as

amended.

• Liberty Group Limited

A special resolution approving the repurchase of shares in

terms of the Scheme of arrangement in terms of section 331

of the Companies Act, 61 of 1973, as amended, between

Liberty Group Limited, various Liberty subsidiaries and the

ordinary shareholders in Liberty Life.

Contracts

Saki Macozoma, a director of the company, has a shareholding

of 20% in Safika which is a member of three different consortia

that were party to the Andisa, Stanlib and the Tutuwa

transactions. Safika holds effective interests of 14,79% of

Andisa Capital, 12,75% of Stanlib, 1,78% of Standard Bank and

2,24% of Liberty Group.

Cyril Ramaphosa, a director of the company, has a 33%

shareholding in Shanduka, which is a member of the Tutuwa

consortium. Shanduka holds an effective interest of 1,19% of

Standard Bank and 1,49% of Liberty Group.

Insurance

The group protects itself against banker’s comprehensive

crime and professional indemnity by carrying R30 million for

its own account, whereafter the risks are fully insured up to

R1,5 billion.

Events subsequent to balance sheet date

There is no material fact or circumstance that has occurred

between the balance sheet date and the date of this report.


Balance sheet | at 31 December 2004

Group

Note

2004Rm

2003

Rm

Assets


Cash and balances with banks 2 31 384 22 081

Short-term negotiable securities 3 21 040 22 018

Derivative assets 4 124 235 104 723

Trading assets 5 32 130 33 488

Investment securities 6 19 640 20 057

Loans and advances 7 257 154 220 375

Other assets 9 16 494 17 540

Interest in associates and joint ventures 10 286 541

Goodwill and other intangible assets 11 479 508

Property and equipment 12 2 968 3 040

Liberty Life 109 767 96 195

Current assets 13 4 616 3 687

Investments 14 104 442 91 868

Goodwill and other intangible assets 15 366 277

Equipment and furniture 16 343 363

Total assets 615 577 540 566


Liabilities 577 013 505 302


Derivative liabilities 4 116 214 98 634

Trading liabilities 17 14 410 18 162

Deposit and current accounts 18 316 516 272 677

Other liabilities and provisions 19 19 267 20 989

Subordinated bonds 20 9 493 7 056

Liberty Life 101 113 87 784

Other liabilities 21 3 064 2 444

Convertible bonds 22 – 1 500

Policyholders’ liabilities 23 98 049 83 840

Capital and reserves 32 078 28 843

Ordinary shareholders’ funds 29 087 28 835

Share capital and premium 24 2 676 2 407

Reserves 26 411 26 428

Preference share capital and premium 24 2 991 8

Minority interest 6 486 6 421

Total equity and liabilities 615 577 540 566


Income statement | for the year ended 31 December 2004

Group

Note

2004Rm

2003

Rm


Interest income 27.1 35 206 36 796

Interest expense 27.2 23 755 25 359

Net interest income before provisions for credit losses 11 451 11 437

Provisions for credit losses 27.3 1 048 1 848

Net interest income 10 403 9 589

Non-interest revenue 27.4 15 048 12 790

Income from operations 25 451 22 379

Operating expenses 15 242 13 608

Staff costs 27.5 8 499 7 581

Other operating expenses 27.6 6 743 6 027

Net income from operations 10 209 8 771

Goodwill amortisation 11.2 (98) (173)

Exceptional items 29.3 12 144

Income from associates and joint ventures 10 97 102

Income before tax 10 220 8 844

Indirect tax expense 30.1 389 388

Income before direct tax expense 9 831 8 456

Direct income tax expense 30.1 2 489 2 353

Income after tax 7 342 6 103

Attributable to minorities 127 104

Standard Bank profit for the year 7 215 5 999

Liberty Life


Realised investment gains attributable to shareholders’ assets 598 471

Goodwill amortisation and impairment (12) (78)


Direct income tax expense 30.2 900 823

Income after tax 28.1 1 783 1 283

Attributable to minorities 1 257 904

Liberty Life profit for the year 526 379

Group profit for the year 7 741 6 378

Headline earnings per share (cents) 29.4 578,7 470,7

Fully diluted headline earnings per share (cents) 29.4 562,3 464,9

Earnings per share (cents) 29.4 585,7 478,1

Fully diluted earnings per share (cents) 29.4 569,1 472,2

Dividends per share (cents) 29.2 231,5 151,0


Statement of changes in shareholders’ funds | for the year ended 31 December 2004

Note

Ordinaryshare capitaland premium

Rm

Empowermentreserve

Rm

Translationreserve

Rm

Hedge ofnet investment

reserveRm

Balance at 1 January 2003 as previously reported 2 274 2 347 –

Change in accounting policy 32

Restated balance at 1 January 2003 2 274 2 347 –

Items accounted for directly in reserves (1 934) 68

– Currency translation differences (1 934)

– Hedge of net investments – net fair value

gains 68

– Cash flow hedges – net fair value gains

– Mark-to-market of available-for-sale assets

– Unrealised investment gains/(losses)

attributable to shareholders’ funds

Realised investment gains attributable to

shareholders’ funds recycled to the income

statement on disposal

Issue of share capital and share premium 133

Profit for the year

Dividends paid 29.2

Balance at 31 December 2003 2 407 413 68

Balance at 1 January 2004 2 407 – 413 68

Reallocation of reserves

Items accounted for directly in reserves (1 396) 88

– Currency translation differences (1 396)

– Hedge of net investments – net fair value

gains 88

– Cash flow hedges – net fair value losses

– Mark-to-market of available-for-sale-assets

– Unrealised investment gains attributable to

shareholders’ funds

Realised investment gains attributable to

shareholders’ funds recycled to income

statement on disposal

Impairment resulting from Black Ownership

Initiative 25 (4 360)

Unrecognised profit on sale of subsidiary shares 25 114

Issue of share capital and share premium 269

Share issue and repurchase costs

Profit for the year

Dividends paid 29.2

Balance at 31 December 2004 2 676 (4 246) (983) 156

All balances are stated net of any applicable tax and minorities.1 No statutory general credit risk reserve is required as the current provisions exceed the SARB prudential credit risk requirements. The reserve amounting to

R184 million at 31 December 2003, has now been included in retained earnings.


Cash flowhedgingreserve

Rm

Available-for-sale

revaluationreserve

Rm

Revaluationand other

reservesRm

Retainedearnings 1

Rm

Ordinaryshareholders’

fundsRm

Preferenceshare capitaland premium

Rm

Totalcapital and

reservesRm

20 370 257 20 552 25 820 8 25 828

144 144 144

20 370 257 20 696 25 964 8 25 972

3 80 (26) (1 809) (1 809)

(1 934) (1 934)

68 68

3 3 3

12 12 12

68 (26) 42 42

(78) (78) (78)

133 133

6 378 6 378 6 378

(1 753) (1 753) (1 753)

23 372 231 25 321 28 835 8 28 843

23 372 231 25 321 28 835 8 28 843

21 112 (7) (126) – –

(5) 153 (1 160) (1 160)

(1 396) (1 396)

88 88

(5) (5) (5)

29 29 29

124 124 124

(138) (7) (145) (145)

(4 360) (4 360)

114 114

269 3 000 3 269

(57) (57) (17) (74)

7 741 7 741 7 741

(2 150) (2 150) (2 150)

39 499 217 30 729 29 087 2 991 32 078


Cash flow statement | for the year ended 31 December 2004

Group

Note

2004Rm

2003

Rm

Operating activities

Cash receipts from customers 31.2 72 754 70 762

Cash paid to customers, employees and suppliers 31.3 (58 983) (56 126)

Dividends received 31.4 2 219 1 962

Net cash flows from operating activities 31.1 15 990 16 598

Changes in operating funds

Increase in income-earning assets 31.5 (48 318) (66 992)

Increase in deposits, other liabilities and provisions 31.6 52 106 62 094

Net cash flows from/(used in) operating funds 3 788 (4 898)

Tax paid 31.7 (2 882) (2 855)

Investing activities

Capital expenditure on – property (89) (222)

– equipment, furniture and vehicles (1 094) (1 308)

– intangible assets (142) (365)

Proceeds from sale of – property 104 370

– equipment, furniture and vehicles 194 231

Net purchase/(sale) of investment and owner-occupied properties 306 (112)

Proceeds from sale of shares in business operations 26 208

Net increase in marketable securities by insurance operations (1 082) (4 240)

Investment in subsidiaries 31.8 1 688 (137)

Net disposal of other investments 647 –

Investment in associates – (237)

Net cash flows from/(used in) investing activities 558 (5 812)

Financing activities

Proceeds from issue of share capital to shareholders 3 252 133

Proceeds from issue of share capital to minorities 8 39

Repayment of convertible debentures (1 541) –

Net Black Ownership Initiative transaction payment (4 885) –

Black Ownership Initiative transaction payment (5 341) –

Proceeds received by Liberty Holdings 456 –

Increase in subordinated bonds 2 627 440

Dividends paid 31.9 (3 042) (2 371)

Net cash flows used in financing activities (3 581) (1 759)

Effects of exchange rate changes on cash and cash equivalents (4 402) (5 321)

Net increase/(decrease) in cash and cash equivalents 9 471 (4 047)

Cash and cash equivalents at beginning of the year 44 445 48 492

Cash and cash equivalents at end of the year 31.10 53 916 44 445


Accounting policies

The principal accounting policies adopted in the preparation

of these financial statements are set out below.

The accounting policies are consistent with those adopted

in the previous year, except for changes made as a result of

the adoption of the new accounting statement on Secondary

Tax on Companies (STC), AC 501, and the transitional

requirements of the accounting statement on Business

Combinations, AC 140.

In terms of AC 501 a deferred tax asset is recognised on STC

credits to the extent that it is probable that dividends will be

declared against which unused STC credits can be utilised.

Deferred tax assets were not previously raised on STC credits.

AC 140 prohibits the amortisation of goodwill on acquisitions

after 31 March 2004. Goodwill arising on acquisitions on or after

1 January 2000 but before or on 31 March 2004 is amortised over

its estimated useful life, not exceeding 20 years.

The impact on the financial results and position of the group

following the adoption of these statements is detailed in note

32 on page 141. Comparative financial information has been

restated to recognise a deferred tax asset for STC credits.

Due to the specialised nature of banking and life insurance

businesses, the accounting policies appropriate to each

business, where required, are separately detailed below.

1 Basis of preparation

These consolidated financial statements are prepared in

accordance with, and comply with, South African Statements

of Generally Accepted Accounting Practice (GAAP) and the

South African Companies Act of 1973. The consolidated

financial statements are prepared in accordance with the

going concern principle under the historical cost basis as

modified by the revaluation of financial instruments classified

as instruments available-for-sale, held-for-trading, instruments

held at fair value, derivative instruments and Liberty Life’s

investments and owner-occupied properties.

All monetary figures appearing in the financial statements,

unless otherwise indicated, are stated in millions of rands (Rm).

2 Basis of consolidation

The financial statements of subsidiaries are consolidated from

the date on which the group acquires effective control, up to

the date that such effective control ceases. For this purpose,

subsidiaries are companies over which the group, directly or

indirectly, has the ability to control the financial and operating

activities so as to obtain the benefits from their activities.

Special purpose entities, including securitisation vehicles, are

consolidated when the substance of the relationship between

the group and the special purpose entity indicates that the

group effectively controls the entity.

Subsidiaries are excluded from consolidation when control is

intended to be temporary due to the subsidiary being

acquired and held exclusively with a view to its subsequent

disposal in the near future. These subsidiaries are treated as

investments as described in accounting policy number 5.

Inter-company transactions, balances and unrealised gains

and losses within banking and insurance operations are

eliminated on consolidation. Investments in Standard Bank

Group and Liberty Holdings products and shares through

policyholders’ assets have been disclosed as related party

balances.

Where appropriate, accounting policies of subsidiaries conform

to the policies adopted by the group.

Investments in subsidiaries and associates are accounted for

at cost in the company accounts. The carrying amounts of

these investments are reviewed annually and written down for

impairment where considered necessary.

3 Foreign currency translations

Foreign entities

Foreign entities are operations of which the activities are not

an integral part of those of the reporting enterprise.

Assets and liabilities of foreign entities are translated into

South African rands at year-end exchange rates. Capital and

reserves are translated at historical rates. Goodwill on the

balance sheets of foreign entities is treated as an asset of the

foreign entity and translated at closing rates at balance sheet

date. Income statement items are translated at the weighted

average exchange rates for the year.

Translation differences arising from foreign entities are taken

directly to equity. On disposal of foreign entities, such

translation differences are recognised in the income

statement as part of the profit or loss on disposal.

All foreign operations have been accounted for as foreign

entities in Standard Bank operations as their activities are not

an integral part of the reporting entity.

Integrated foreign operations

Integrated foreign operations are operations of which the

activities are an integral part of those of the reporting

enterprise. Non-monetary assets and liabilities of these

operations are translated into South African rands at rates of

exchange ruling at the transaction date. Monetary assets and

liabilities of these operations are translated into South African

rands at rates of exchange ruling at the balance sheet date.

Income and expenditure of integrated foreign operations are

translated into South African rands at the weighted average

rate of exchange during the year.

Translation differences arising from the translation of

integrated foreign operations are accounted for in accordance

with the treatment of the underlying instrument.

Transactions and balances

Foreign currency transactions are accounted for at the

exchange rates prevailing at the date of the transactions.

Gains and losses resulting from the settlement of such

transactions and from the translation of monetary assets and

liabilities denominated in foreign currencies are recognised in


the income statement. Such balances are translated at year-

end exchange rates.

Translation differences on available-for-sale financial assets

are recognised in equity until disposal.

4 Cash and balances with banks

Cash and balances with banks comprise coins and bank notes,

and balances with central and other banks.

5 Short-term negotiable securities, trading assets and investment securities

Recognition and measurement

Financial assets are held for liquidity, investment, trading or

hedging purposes. All financial assets are measured initially

at cost including transaction costs. These financial assets are

recognised on the date the group commits to purchase the

assets (trade date) and are derecognised when the group no

longer has control over the assets. Gains or losses on disposal

are determined using the average costing method.

Classification

Management determines the appropriate classification of

financial assets on acquisition.

Originated

Short-term negotiable securities and investment securities

originated by the group are financial assets that are created

by the group by providing money directly to a debtor, other

than those that are originated with the intent to be sold

immediately or in the short-term. Financial assets classified

as originated by the group are carried at amortised cost,

using the effective yield method, less any provisions for

impairment.

Held-to-maturity

Short-term negotiable securities and investment securities

with fixed maturity, where management has both the intent

and the ability to hold the securities to maturity, are classified

as held-to-maturity. Financial assets classified as held-to-

maturity by the group are carried at amortised cost, using the

effective yield method, less any provisions for impairment.

Trading

Financial assets that the group holds for short-term profit

taking are classified as assets held for trading. Subsequent to

initial recognition, trading assets are measured at fair value.

All related realised and unrealised gains and losses arising

from the change in fair value of trading assets are included in

trading income in the income statement. Interest earned and

dividends received while holding trading assets are included

in trading revenue.

Held at fair value

In terms of AC 133, an accounting option exists to carry any

financial asset at fair value. Where the group has elected

this option, these financial assets are classified as assets held

at fair value and subsequent to initial recognition, are carried

at fair value. All related realised and unrealised gains and

losses arising from the change in fair value of these financial

assets are included in interest income for all dated financial

assets and in other revenue for all undated financial assets.

Such classification is not changed subsequent to initial

recognition.

Available-for-sale

Financial assets that are not held for trading purposes,

originated by the group or held-to-maturity, are classified as

available-for-sale assets. Unrealised gains or losses arising

from the changes in the fair value of available-for-sale assets

are recognised in equity. On disposal of available-for-sale

assets, the fair value adjustments accumulated in equity are

recognised in the income statement.

Liberty Life policyholders’ and shareholders’ assets

At initial recognition, management determines the

appropriate designation of financial assets attributable to

shareholders’ or policyholders. Policyholders’ financial assets

are classified as financial assets held at fair value through the

income statement. Shareholders’ financial assets, other than

those which specifically qualify as held-for-trading financial

assets, held-to-maturity assets or loans and receivables

originated by the entity, are classified as available-for-sale.

All gains and losses arising from a change in fair value or on

disposal are shown as attributable to shareholders’ or

policyholders’ funds as appropriate. Due to the fact that

policyholders’ assets back policyholders’ liabilities, the

gains or losses are subsequently transferred to or from

policyholders’ liabilities.

Fair value

The fair value of trading assets, financial assets held at fair

value and available-for-sale assets are based on quoted bid

prices, excluding transaction costs. Fair values for unquoted

equity financial assets are estimated using applicable fair

value models. If a quoted bid price is not available for dated

financial assets, the fair value is estimated using pricing

models or discounted cash flow techniques.

Where pricing models are used, inputs are based on market-

related measures at the balance sheet date. Where discounted

cash flow techniques are used, estimated future cash flows

are based on management’s best estimates and the discount

rate is a market-related rate at the balance sheet date for a

financial asset with similar terms and conditions.

If specific circumstances occur that disqualify a financial

asset from continuing to be accounted for at amortised cost,

the difference between amortised cost and fair value is

accounted for in the period in which it arises in the income

statement, if the financial asset is reclassified as a trading

asset or held at fair value. The difference is accounted for in

equity if the financial asset is reclassified as an available-for-

sale instrument.

Accounting policies continued


Impairment

A review for impairment indicators is carried out at each

financial year end. If impairment indicators are present, an

impairment test is carried out. A financial asset is impaired if

its carrying amount is greater than its estimated recoverable

amount. The recoverable amount of a financial asset measured

at fair value is the quoted market price for quoted instruments.

For unquoted instruments, the recoverable amount is the

present value of expected cash flows discounted at the

current market rate of interest for a similar financial asset, or at

the original effective interest rate in the case of assets carried

at amortised cost.

Where an available-for-sale asset which has been remeasured

to fair value directly through equity is impaired, and a loss on

the financial asset was previously recognised directly in

equity, the cumulative net loss that had been recognised

in equity is transferred to the income statement and is

recognised as part of the impairment loss.

Where an available-for-sale asset is impaired, and an increase

in the fair value of the financial asset was previously recognised

in equity, the increase in fair value of the financial asset

recognised in equity is reversed to the income statement to

the extent that the asset is impaired and recognised as part of

the impairment loss.

Any additional impairment loss is recognised in the income

statement. If in a subsequent period, the amount relating

to an impairment loss decreases and the decrease can be

linked objectively to an event occurring after the write-

down, the write-down is reversed through the income

statement.

6 Repurchase and resale agreements and lending of securities

Securities sold subject to linked repurchase agreements are

retained in the financial statements as trading or investment

securities and valued in terms of accounting policy number 5.

The liability to the counterparty is included under deposit

and current accounts.

Securities purchased under agreements to resell are recorded

as loans granted under resale agreements and included under

loans and advances to other banks or clients as appropriate.

The difference between the sale and repurchase price is

treated as interest and accrued over the life of the repurchase

agreement using the effective yield method.

Securities lent to counterparties are retained in the financial

statements and are classified and measured in accordance with

accounting policy number 5. Securities borrowed are not

recognised in the financial statements unless these are sold to

third parties. In these cases, the obligation to return the securities

borrowed is recorded at fair value as a trading liability.

Income and expenses arising from the securities borrowing

and lending business are recognised on an accrual basis over

the period of the transactions.

7 Derivative financial instruments

A derivative is a financial instrument whose value changes in

response to an underlying variable, that requires little or no

initial investment and that is settled at a future date. All

derivatives are accounted for as trading instruments unless

they meet the criteria for hedge accounting. Derivatives are

initially recognised at cost, including transaction costs, and

subsequently remeasured to fair value. Fair values are

obtained from quoted market prices, dealer price quotations,

discounted cash flow models, and option pricing models

which consider current market and contractual prices for the

underlying instruments as well as time value of money.

All derivative instruments of the group are carried as assets

when the fair value is positive and as liabilities when the fair

value is negative, subject to offsetting principles as described

in accounting policy number 22. Realised and unrealised gains

and losses are recognised in the income statement.

Embedded derivatives included in hybrid instruments are

treated as separate derivatives when their risks and characteristics

are not closely related to those of the host contract and the host

contract is not carried at fair value with fair value changes

recognised in the income statement. Where separated from the

host contracts, embedded derivatives are accounted for and

measured at fair value with any gains or losses from the change

in fair value included in the income statement. The host contracts

are accounted for and measured applying the rules of the

relevant category of that financial instrument.

8 Hedge accounting

On the date that a derivative contract is designated as a

hedging instrument, the group designates the derivative as

either:

• a hedge of the fair value of a recognised asset or liability (fair

value hedge); or

• a hedge of future cash flow attributable to a recognised

asset or liability, a forecast transaction or a firm commitment

(cash flow hedge); or

• a hedge of a net investment in a foreign entity.

A hedging relationship exists where:

• at the inception of the hedge there is formal documentation

of the hedge;

• the hedge is expected to be highly effective;

• the effectiveness of the hedge can be reliably measured;

• the hedge is highly effective throughout the reporting

period; and

• for a hedge of a forecast transaction, the transaction is highly

probable and presents an exposure to variations in cash

flows that could ultimately affect net profit.

Hedge accounting requires that the hedging instrument be

measured at fair value. The fair value of a derivative hedging

instrument is calculated in the same manner as the fair value

of a trading instrument.


Where a hedge relationship is designated as a fair value

hedge, the hedged item is stated at fair value in respect of the

risk being hedged. Gains or losses on the remeasurement of

both the fair value hedge and the hedged item are recognised

in the income statement. Fair value adjustments relating to

the hedged instrument are allocated to the same income

statement category as the related hedged item.

The effective portion of changes in the fair value of

derivatives that are cash flow hedges are recognised in

equity. The ineffective part of any gain or loss is recognised

in the income statement. Where a forecast transaction or

firm commitment results in the recognition of an asset,

liability, income or expense, the cumulative gains or losses

previously deferred in equity are transferred from equity

and included in the initial measurement of the cost of the

asset, liability, income or expense.

When a hedging instrument or hedge relationship is terminated,

but the hedged transaction is still expected to occur, the

cumulative gains or losses recognised in equity remain in

equity and are recognised in accordance with the above

policy. If the hedged transaction is no longer expected to

occur, the cumulative gains or losses recognised in equity are

immediately recognised in the income statement and are

classified as trading revenue.

Where considered appropriate, the group hedges net

investments in foreign entities using derivative instruments.

For such hedges, the foreign exchange difference arising on

the hedging instrument and relating to the effective portion

of the hedge, is recognised directly in equity. Any ineffective

portion is immediately recognised in the income statement. On

the disposal of a foreign entity, the cumulative gains or losses

relating to the effective portion of the hedge are recognised in

the income statement as part of the profit or loss on disposal.

9 Loans and advances

Loans and advances originated by the group are classified as

originated loans and advances. Purchased loans that the

group has the intent and ability to hold to maturity are

classified as held-to-maturity assets, all other purchased loans

are classified as held at fair value assets. Originated loans and

loans held-to-maturity are accounted for at amortised cost.

Origination transaction costs and origination fees received

are capitalised to the value of the loan and amortised through

interest income. Where the group has elected to classify and

account for any loan at fair value, the movement in the fair

value is accounted for in the income statement as interest

income.

10 Provisions for credit losses

Advances and other assets are stated after the deduction of

provisions for loan impairments. Advances and other assets

are reviewed at each balance sheet date to determine whether

there is objective evidence of impairment. If any such

impairment indicators signify that it is probable that the group

will be unable to collect all amounts due, a provision for

impairment is made to reduce the carrying amount of the

asset to its estimated recoverable amount.

Provisions for non-performing loans, covering identified

doubtful debts, are based on periodic evaluations of advances

and take account of past loss experience, economic conditions

and changes in the nature and level of risk exposure.

Retail loans and advances are considered non-performing

when amounts are due and unpaid for three months.

Corporate loans are analysed on a case-by-case basis taking

into account breaches of key loan conditions.

When a loan carried at amortised cost has been identified as

impaired or the interest earned is not at a market-related rate,

the carrying amount of the loan is reduced to an amount

equal to the present value of expected future cash flows,

discounted at the original effective interest rate of the loan.

The resulting loss is accounted for as a provision for loan

impairment in the income statement.

Subsequent to impairment, the effects of discounting unwind

over time as interest income, based on the original effective

interest rate.

Portfolio provisions for the impairment of performing loans

cover losses which, although not yet specifically identified,

are present in any portfolio of bank advances based on historic

loss patterns.

Increases in the provisions for loan impairments and any sub-

sequent reversals thereof, or recoveries of amounts previously

impaired, are reflected in the income statement. Advances are

written off using specific provisions for loan impairments once all

reasonable attempts at collection have been made and there is

no realistic prospect of recovering outstanding amounts.

11 Assets leased to clients and instalment sale contracts – lessor accounting

Lease and instalment sale contracts are regarded as financing

transactions, with rentals and instalments receivable, less

unearned finance charges, being included in loans and

advances on the balance sheet.

Finance charges earned are computed using the effective

interest rate method. The benefits arising from investment

allowances on assets leased to clients are accounted for in tax.

12 Interest in associates and joint ventures

Associates

An associate is an entity, not being a subsidiary, in which an

investment is held and over whose financial and operating

policies the group is able to exercise significant influence.

These investments are accounted for by means of the equity

method. Equity accounting involves recognising the group’s

share of the associate’s profit or loss for the year in the income

statement. This method is applied from the date on which the

enterprise becomes an associate, up to the date on which it

ceases to be an associate.



Where an investment is acquired and held exclusively with a

view to its disposal in the near future, it is not accounted for

under the equity method. These investments are accounted

for on the basis set out in accounting policy number 5.

Jointly controlled entities

A jointly controlled entity is a contractual arrangement that

establishes joint control over the economic activity of an entity.

The group’s interests in jointly controlled entities are

accounted for using the equity method.

Interests in associates and jointly controlled entities are

carried in the balance sheet at an amount that reflects the

group’s share of the net assets of the associate or jointly

controlled entity and includes the unamortised portion of

goodwill on acquisitions after 1 January 2000.

Inter-company profits and losses are eliminated in determining

the group’s share of equity accounted profits.

Jointly controlled assets

Jointly controlled assets are assets contributed or acquired

for the purpose of a joint venture. Each venturer has control

over its share of future economic benefits through its share in

the jointly controlled assets. The group recognises its share of

the jointly controlled assets, liabilities, income and expenses

in respect of its interest in the joint venture.

13 Goodwill

Goodwill represents the excess of the cost of an acquisition

over the fair value of the group’s share of the net assets of the

acquired subsidiary, associate or joint venture at the date of

acquisition.

Goodwill arising on the acquisition of subsidiaries, associates

or joint ventures occurring on or after 1 January 2000, is

reported in the balance sheet as an intangible asset.

Goodwill arising on acquisitions on or after 1 January 2000

but before or on 31 March 2004 is amortised using the straight-

line method over its estimated useful life, not exceeding

20 years and is carried at cost less any accumulated

amortisation. The carrying amount of goodwill is reviewed

annually and written down for impairment where considered

necessary. Negative goodwill relating to identifiable expected

losses is recognised in the income statement when the future

losses or expenses are recognised.

Goodwill arising on acquisitions with an agreement date after

31 March 2004 is not amortised, but allocated to cash generating

units and tested annually for impairment. Cash generating units

are the smallest identifiable groups of assets that generate cash

inflows that are largely independent of the cash inflows from

other assets or groups of assets. An impairment loss is recognised

if the carrying amount of a cash generating unit exceeds its

recoverable amount. Negative goodwill is recognised as income

in the period in which it arises.

14 Intangible assets

Computer software

Generally, costs associated with developing computer

software programs are recognised as an expense as incurred.

However, strategic information technology development

costs that are clearly associated with an identifiable and

unique system, which will be controlled by the group and

have a probable benefit exceeding one year, are recognised

as intangible assets.

Computer software costs recognised as assets are amortised

on the straight-line basis at rates appropriate to the expected

useful lives of the assets, not exceeding five years, and are

carried at cost less any accumulated amortisation and any

accumulated impairment losses. The carrying amount of

capitalised computer software is reviewed annually and is

written down when the carrying amount exceeds the

recoverable amount.

Present value of in-force life insurance business

acquired

Where a portfolio of life insurance business is acquired, the

present value is recognised as an asset and is amortised in the

income statement on the straight-line basis at rates

appropriate to the expected useful life of the asset. The

present value of in-force life insurance business acquired is

carried in the balance sheet at cost less any accumulated

amortisation and impairment losses.

15 Property and equipment

Investment properties are held to earn rentals and for capital

appreciation, whereas owner-occupied properties are held for

use in the supply of services or for administrative purposes, or

in the case of Liberty Life, they may also be held for earning

rentals or capital appreciation for the benefit of policyholders.

Equipment, furniture, vehicles and other tangible assets are

stated at cost less accumulated depreciation and are

depreciated on the straight-line basis over the estimated

useful lives of the assets to expected residual values. The

carrying value of assets is reviewed regularly to assess whether

there is any indication of impairment and where the carrying

amounts of assets are greater than their recoverable amounts,

the assets are written down to these recoverable amounts.

The recoverable amount is the greater of the net selling price

of the asset or the value in use. Depreciation and impairment

losses are included in the income statement.

Maintenance and repairs, which neither materially add to the

value of assets nor appreciably prolong their useful lives, are

charged against income. Gains and losses on disposal of

assets are included in the income statement.



Freehold buildings are classified as owner-occupied

properties and accounted for in terms of the cost method.

These buildings are depreciated on the straight-line basis

over their estimated useful lives, not exceeding 40 years. The

freehold land portion is not depreciated.

Leasehold buildings are depreciated over the period of the

lease or over such lesser period as is considered appropriate.

The estimated useful lives of tangible assets are as follows:

Property – not exceeding 40 years

Computer equipment – 3 to 5 years (2003: 5 years)

Motor vehicles – 5 years

Office equipment – 5 to 8 years

Furniture and fittings – 5 to 13 years

Capitalised leased assets – over the shorter of the lease term

or its useful life

Liberty Life

Both investment properties and owner-occupied properties

are reflected at a valuation based on fair value at balance

sheet date, which is determined annually by independent

registered professional valuators. The fair value is based on

the open market net rentals for each property. Investment

properties are not subject to depreciation, whereas

accumulated depreciation relating to owner-occupied

properties is eliminated against the gross carrying amount of

the assets, and the net amount restated to the revalued

amount of the asset. Where properties are partly held to earn

rentals or for capital appreciation and partly held for use in

the production or supply of goods or services or for

administration purposes, the properties are accounted for in

proportion to their use. Properties under development are

reflected at cost.

Unrealised gains or losses arising on the valuation of

completed properties and realised gains or losses on disposal

of properties are included in the income statement as

investment returns and are shown as attributable to

policyholders’ or shareholders’ funds as appropriate. Any

revaluation gains or losses on the revaluation of owner-

occupied properties are taken directly to revaluation and

other reserves.

The expected useful lives of other tangible assets are as

follows:

Office furniture – not exceeding 10 years

Computer equipment – not exceeding 5 years

16 Convertible bonds

Convertible bonds issued by the group are valued at cost

net of amortised bond issue expenses. The expenses

incurred are amortised over the period of the bonds. The fair

value of the liability component, at initial recognition, is

calculated using a market interest rate for an equivalent

non-convertible bond. The residual amount, representing

the value of the equity component, is included within

shareholders’ equity.

17 Lessee accounting

Leases, where the group assumes substantially all the benefits

and risks of ownership, are classified as finance leases. Finance

leases are capitalised at the lower of the fair value of the

leased asset and the present value of the minimum lease

payments. Lease payments are separated using the effective

interest rate method to identify the finance cost, which is

charged against income over the lease period, and the capital

repayment which reduces the liability to the lessor.

Leases of assets are classified as operating leases if the lessor

effectively retains all the risks and benefits. Payments made

under operating leases are charged to the income statement

on a straight-line basis over the period of the lease.

18 Provision for leave pay

Employee benefits in the form of annual leave entitlements

are provided for when they accrue to employees with reference

to services rendered up to the balance sheet date.

19 Other provisions

Provisions are recognised when the group has a present legal

or constructive obligation as a result of past events and it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable

estimate of the amount of the obligation can be made.

When the effect of discounting is material, provisions are

discounted using a pre-tax discount rate that reflects current

market assessments of the time value of money and, where

appropriate, the risks specific to the liability.

20 Tax

Normal tax

Income tax and capital gains tax on the profit or loss for the

year comprise current and deferred tax and represent the

expected tax payable on taxable income for the year, using

tax rates enacted at the balance sheet date, and any

adjustments to tax payable in respect of previous years.

Deferred income tax and deferred capital gains tax are

provided for on the comprehensive basis, using the balance

sheet liability method, for all temporary differences arising

between the tax bases of assets and liabilities and their

carrying values for financial reporting purposes, using tax

rates enacted at the balance sheet date.

Deferred tax assets are recognised to the extent that it is

probable that future taxable income will be available against

which the unused tax losses can be utilised. Deferred tax

assets and liabilities are not discounted.

Deferred tax relating to fair value re-measurements of

available-for-sale assets and cash flow hedges which are

charged or credited directly to equity, is also charged

or credited directly to equity and is subsequently recognised



in the income statement together with the deferred gain

or loss.

Secondary tax on companies (STC)

To the extent that it is probable that dividends will be declared

against which unused STC credits can be utilised, a deferred

tax asset is recognised for STC credits.

The STC effect of dividends paid on equity instruments is

recognised in the period in which the company declares the

dividend. For financial instruments that are classified as

liabilities, the STC relating to any contractual payments is

accrued in the same period as the interest accrual.

Indirect tax

Indirect taxes, including non-recoverable value added tax

(VAT), regional service council (RSC) levies, skills development

levies and other duties for banking operations, are separately

disclosed in the income statement.

21 Policyholders’ liabilities

Policyholders’ contracts that do not transfer significant

insurance risk are carried in the financial statements at fair

value, with changes in fair value being accounted for in the

income statement. These contracts are disclosed in the notes

to the balance sheet as policyholders’ liabilities under

investment contracts. The premiums and benefit payments

relating to these investment contracts have been excluded

from the income statement and accounted for directly as part

of the liability as inflows or payments. Fees earned from these

contracts are disclosed separately.

All policyholders’ contracts that transfer significant insurance

risk are classified as insurance contracts. These contracts are

valued in terms of the financial soundness valuation (FSV)

basis contained in PGN104 issued by the Actuarial Society of

South Africa and are reflected as policyholders’ liabilities

under insurance contracts.

Liberty Life’s statutory actuary calculates the liabilities under

insurance contracts and investment contracts annually at the

balance sheet date in accordance with prevailing legislation,

Generally Accepted Actuarial Standards in South Africa and

GAAP as appropriate. The transfers and fair value adjustments

to policyholders’ liabilities reflected in the notes to the

financial statements represent the increase or decrease in

liabilities, including provisions for policyholders’ bonuses, net

adjustments to policyholders’ bonus stabilisation reserves

and net adjustments to margins held within policyholders’

liabilities.

22 Offsetting

Financial assets and liabilities are offset and the net amount

reported on the balance sheet when there is a legally

enforceable right to set-off the recognised amount and there

is an intention to settle on a net basis, or to realise the asset

and settle the liability simultaneously.

23 Equity

Re-acquired equity instruments

Where companies within the group purchase the reporting

entity’s equity instruments, the consideration paid is deducted

from total shareholders’ equity as treasury shares until

they are cancelled. Where such shares are subsequently

sold or re-issued, any consideration received is included in

shareholders’ equity.

Preference shares

Preference shares in issue, which carry a cumulative coupon

and are redeemable, are classified as debt. All other

preference shares in issue are classified as equity.

Share issue costs

Incremental external costs directly attributable to a transaction

that increases or decreases equity is deducted from equity,

net of related tax. All other share issue costs are expensed

immediately.

Dividends on ordinary shares

Dividends are recognised in the period in which they are

declared. Dividends declared after balance sheet date are

disclosed in the dividends note.

24 Equity-linked transactions

Equity compensation plans

Consideration received for shares issued in terms of the group

share incentive scheme is credited to share capital (par value)

and the surplus, net of any transaction costs, is credited to

share premium. No compensation cost is recognised on the

issue of equity rights.

Equity participation plans

Where participants use dividends on ordinary shares to repay

a purchase consideration for an acquisition of an entity’s

ordinary equity, the outstanding purchase consideration

receivable is not recognised as an asset but is recognised as a

reduction in equity as it represents cash flows generated by

the entity in the form of the return of ordinary dividends.

Equity will be re-instated in future to the extent that the

purchase consideration is not backed by the reporting

entity’s equity.

Consideration paid to acquire the reporting entity’s

equity instruments for purposes of the Black Ownership

Initiative transaction is therefore recognised as a reduction

in equity. The amount receivable from the black participants

resulting from the legal transfer of those equity instruments

is not recognised as an asset on the basis that it will

be recovered from ordinary dividend cash flows generated

by the group.


25 Revenue and expenditure

Revenues described below represent the most appropriate

equivalent of turnover.


Revenue is derived substantially from the business of banking

and related activities and comprises net interest income and

non-interest revenue.

Net interest income

Interest income and expenses are recognised in the income

statement for all interest-bearing instruments on an accrual

basis using the effective yield method. Where financial assets

have been impaired, interest income continues to be

recognised on the impaired value, based on the original

effective interest rate. Net interest income includes fair value

adjustments on interest-bearing financial instruments held at

fair value, excluding financial instruments held for trading.

Dividends received on lending activities are included in

interest income.

External expenses incurred directly as a result of bringing

margin-yielding assets on balance sheet are amortised

through interest income over the life of the asset.


Non-interest revenue includes dividends from investments,

fees and commission from banking, insurance and related

transactions, net revenue from exchange and securities

trading and net gains on the realisation or revaluation of

investment banking assets.

Dividends are recognised in the period in which right to

receipt is established. Scrip dividends are recognised as

dividends received to the extent that they compare to cash

dividends in a similar entity, after considering the purpose of

the scrip dividends. Fees and commission are recognised

when the related service is performed.

Liberty Life

Revenue is derived substantially from the business of insurance

and related activities and comprises premium, investment

and other income.

Premium income

Premiums, other than in respect of the Lifestyle series of

policies and group schemes, are recognised in the income

statement when due. Premiums in respect of the Lifestyle

series of policies are recognised in the income statement on a

receipts basis. Premiums receivable in respect of group

schemes are recognised when there is reasonable assurance

of collection in terms of the policy contract. Premium income

is shown net of reinsurance. From 1 January 2003, inflows on

investment contracts are excluded from premium income.

Policy fees

Service fees on investment contracts are recognised on an

accrual basis when the services are rendered.

Investment income

Investment income comprises income from financial services

activities, net rental income from properties, interest and

dividends. Dividends are recognised when the right to receive

payment is established. Interest and other investment income

are accounted for on an accrual basis. Net rental income

comprises rental income net of property expenses. Rental

income in respect of owner-occupied properties is eliminated

on consolidation.

Claims and policyholder benefits

Provisions are made in the policyholders’ liabilities under

insurance contracts for the estimated cost of claims

outstanding at the end of the year, including those incurred

but not reported at that date. Outstanding claims and benefit

payments are stated net of reinsurance.

Commissions

Commissions, comprising commissions on new insurance

and investment policies along with renewal commissions,

as well as expenses related thereto, including bonuses

payable and the company’s contribution to agents’ pension

and medical aid funds, are shown net of reinsurance

commission received. Commissions relating to unearned

premiums are deferred in liabilities on insurance policies

and accounted for in the same period in which those

premiums are accounted for.

New business costs

New business costs are recognised when incurred and their

recovery is provided for in the calculation of actuarial liabilities

in accordance with Generally Accepted Actuarial Standards.

26 Post-retirement benefits

The group operates a number of defined contribution plans,

based on a percentage of pensionable earnings funded by

both employer companies and employees, the assets of which

are generally held in separate trustee-administered funds.

Contributions to these plans are charged to the income

statement in the period to which they relate.

The group also operates a number of defined benefit funds,

with membership generally limited to employees who were

in the employment of the various companies at specified

dates. These funds are governed by the Pension Funds Act

1956. Employer companies contribute to the cost of benefits

taking account of the recommendations of the actuaries.

Statutory actuarial valuations are required every three years

using the projected unit credit method. Interim valuations

are also performed annually at the balance sheet date.

These obligations are measured at the present value of

the estimated future cash outflows using interest rates of



government bonds with maturity dates that approximate the

expected maturity of the obligations.

The group’s current service costs to the defined benefit funds

are recognised as expenses in the current year. Past service

costs, experience adjustments and the effect of changes in

actuarial assumptions are recognised as expenses or income

in the current year to the extent that they relate to retired

employees or past service. For active employees, these items

are recognised as expenses or income systematically over a

period not exceeding the expected remaining service period

of employees.

The group operates a number of unfunded post-retirement

medical aid schemes, with membership limited to employees

who were retired or in the employment of the various

companies at specified dates and complying with specific

criteria. For past service, the group recognises and provides

for the actuarially determined present value of post-retirement

medical aid employer contributions on an accrual basis using

the projected unit credit method. Independent qualified

actuaries carry out valuations of these obligations.

Unrecognised actuarial gains or losses are accounted for over

a period not exceeding the remaining working life of active

employees.


Cash flows arising in operating funds are stated after excluding

the impact of foreign currency translation differences on asset

and liability classes.

28 Segment reporting

A segment is a distinguishable component of the group

engaged in providing products or services within a particular

economic environment, which is subject to risks and rewards

that are different from those of other segments.

Segments with a majority of income earned from external

clients and whose total income, operating profit or total

assets are 10% or more of the group total, are reported

separately. Transactions between segments are priced at

market-related rates.

29 Comparative figures

Where necessary, comparative figures have been reclassified

to conform with changes in presentation in the current year.

Details of reclassifications are provided in note 32.


Notes to the annual financial statements | for the year ended 31 December 2004

Domestic Banking

1 Segment reporting – 2004Retail

BankingRm

Corporate andInvestment

BankingRm

Otherdomestic

operationsRm

TotalRm

Interest income 14 774 20 178 (3 749) 31 203

Interest expense 7 421 18 101 (3 639) 21 883

Net interest income before provisions for credit losses 7 353 2 077 (110) 9 320

Provisions for credit losses 787 31 (13) 805

Net interest income 6 566 2 046 (97) 8 515

Non-interest revenue 6 637 3 854 (5) 10 486

Fees and commission revenue 6 300 1 263 78 7 641

Trading revenue – 1 516 (51) 1 465

Other revenue 337 1 075 (32) 1 380

Income from operations 13 203 5 900 (102) 19 001

Operating expenses 8 576 2 549 (130) 10 995

Staff costs 3 043 1 299 1 587 5 929

Other operating expenses 5 533 1 250 (1 717) 5 066

Net income from operations 4 627 3 351 28 8 006

Goodwill amortisation – – – –

Exceptional items (23) – 15 (8)

Income from associates and joint ventures 87 10 – 97

Income before tax 4 691 3 361 43 8 095

Indirect tax expense 184 50 86 320

Income before direct tax

– Standard Bank operations 4 507 3 311 (43) 7 775

– Liberty Life

Direct income tax expense 1 369 655 (86) 1 938

Income after tax 3 138 2 656 43 5 837

Attributable to minorities – – – –


Headline earnings 3 158 2 656 28 5 842

Return on equity (%) 36,8 35,8 32,3

Cost-to-income ratio (%) 61,3 43,0 55,5

Net interest margin (%) 5,52 1,54 3,39

Credit loss ratio (%) 0,59 0,05 0,41

Total assets 154 205 229 397 8 035 391 637

Total liabilities 144 555 221 882 5 588 372 025

Average ordinary equity 8 593 7 420 2 064 18 077

Interest in associates and joint ventures 114 132 – 246

Capital expenditure 397 134 256 787

Depreciation and amortisation 309 76 340 725

Impairments 14 – 13 27

Number of employees 18 855 3 075 6 178 28 108


International Africa StanlibCentral funding

Standard Bankoperations

LibertyLife

Standard BankGroup

Rm Rm Rm Rm Rm Rm Rm

2 225 2 406 65 (693) 35 206 35 206

1 664 896 109 (797) 23 755 23 755

561 1 510 (44) 104 11 451 11 451

146 43 – 54 1 048 1 048

415 1 467 (44) 50 10 403 10 403

2 741 1 154 707 (40) 15 048 15 048

805 804 662 (45) 9 867 9 867

1 936 298 38 48 3 785 3 785

– 52 7 (43) 1 396 1 396

3 156 2 621 663 10 25 451 25 451

2 273 1 607 443 (76) 15 242 15 242

1 567 746 231 26 8 499 8 499

706 861 212 (102) 6 743 6 743

883 1 014 220 86 10 209 10 209

(36) (35) – (27) (98) (98)

– 19 – 1 12 12

– – – – 97 97

847 998 220 60 10 220 10 220

7 50 – 12 389 389

840 948 220 48 9 831 9 831

2 683 2 683

191 266 97 (3) 2 489 900 3 389

649 682 123 51 7 342 1 783 9 125

– 64 64 (1) 127 1 257 1 384

649 618 59 52 7 215 526 7 741

685 634 59 78 7 298 350 7 648

12,8 30,3 36,0 27,6 14,0 26,4

68,8 60,3 66,8 57,5 57,5

0,57 6,04 3,06 3,06

0,37 0,37 0,43 0,43

106 932 25 274 1 863 (19 896) 505 810 109 767 615 577

102 830 22 786 1 581 (23 322) 475 900 101 113 577 013

5 344 2 092 164 791 26 468 2 493 28 961

– – 2 38 286 – 286

60 263 16 – 1 126 236 1 362

87 154 25 26 1 017 186 1 203

– – – – 27 6 33

1 376 5 799 537 – 35 820 3 260 39 080


Notes to the annual financial statements continued

Domestic Banking

1 Segment reporting – 2003 RetailBanking

Rm

Corporate andInvestment

BankingRm

Otherdomestic

operationsRm

TotalRm

Interest income 15 200 24 159 (6 924) 32 435

Interest expense 8 425 22 062 (6 740) 23 747

Net interest income before provisions for credit losses 6 775 2 097 (184) 8 688

Provisions for credit losses 1 128 177 7 1 312

Net interest income 5 647 1 920 (191) 7 376

Non-interest revenue 5 618 3 037 52 8 707

Fees and commission revenue 5 321 1 107 5 6 433

Trading revenue – 1 111 (7) 1 104

Other revenue 297 819 54 1 170

Income from operations 11 265 4 957 (139) 16 083

Operating expenses 7 552 2 301 (375) 9 478

Staff costs 2 584 1 092 1 294 4 970

Other operating expenses 4 968 1 209 (1 669) 4 508

Net income from operations 3 713 2 656 236 6 605

Goodwill amortisation (4) – (67) (71)

Exceptional items (13) 44 170 201

Income from associates and joint ventures 28 41 – 69

Income before tax 3 724 2 741 339 6 804

Indirect tax expense 156 77 92 325

Income before direct tax

– Standard Bank operations 3 568 2 664 247 6 479

– Liberty Life


Income after tax 2 464 2 201 84 4 749

Attributable to minorities – 17 – 17


Headline earnings 2 476 2 140 (14) 4 602

Return on equity (%) 35,2 29,4 31,3

Cost-to-income ratio (%) 60,9 44,8 54,5

Net interest margin (%) 6,63 1,67 3,68

Credit loss ratio (%) 1,10 0,31 0,83

Total assets 114 775 202 977 8 829 326 581

Total liabilities 107 240 195 407 6 906 309 553

Average ordinary equity 7 038 7 279 406 14 723

Interest in associates and joint ventures 63 196 – 259

Capital expenditure 543 290 356 1 189

Depreciation and amortisation 241 67 406 714

Impairments 38 – 55 93

Number of employees 18 206 2 987 6 494 27 687


International Africa StanlibCentral funding

Standard Bankoperations

LibertyLife

Standard BankGroup

Rm Rm Rm Rm Rm Rm Rm

2 228 2 463 102 (432) 36 796 36 796

1 134 1 042 55 (619) 25 359 25 359

1 094 1 421 47 187 11 437 11 437

317 172 – 47 1 848 1 848

777 1 249 47 140 9 589 9 589

2 842 884 515 (158) 12 790 12 790

606 629 474 (158) 7 984 7 984

2 232 221 39 183 3 779 3 779

4 34 2 (183) 1 027 1 027

3 619 2 133 562 (18) 22 379 22 379

2 407 1 319 458 (54) 13 608 13 608

1 725 645 227 14 7 581 7 581

682 674 231 (68) 6 027 6 027

1 212 814 104 36 8 771 8 771

(29) (27) – (46) (173) (173)

– (57) 6 (6) 144 144

– 33 – – 102 102

1 183 763 110 (16) 8 844 8 844

17 35 1 10 388 388

1 166 728 109 (26) 8 456 8 456

2 106 2 106

329 250 32 12 2 353 823 3 176

837 478 77 (38) 6 103 1 283 7 386

– 55 31 1 104 904 1 008

837 423 46 (39) 5 999 379 6 378

866 489 40 13 6 010 270 6 280

14,7 28,3 16,5 24,0 11,1 22,9

61,2 57,2 81,5 56,2 56,2

1,21 6,72 3,46 3,46

0,78 1,71 0,91 0,91

112 064 22 264 1 341 (17 879) 444 371 96 195 540 566

107 711 20 485 1 176 (21 407) 417 518 87 784 505 302

5 910 1 727 243 2 400 25 003 2 442 27 445

– 231 4 47 541 – 541

41 254 30 – 1 514 399 1 913

95 124 25 46 1 004 176 1 180

– 64 – – 157 67 224

1 318 5 488 541 – 35 034 3 399 38 433



1 Segment reporting continued

The principal business units in the group are as follows:

Business unit Scope of operations

Domestic Banking Represents mainly banking operations in South Africa and consists of:

Retail Banking Banking, investment, insurance and other financial services to individual customers and small-

to medium-sized enterprises.


Banking

Commercial and investment banking services in South Africa to corporates, foreign banks

and international counterparties.

Other domestic operations Support functions to business units and advisory services.

International Investment banking activities focused on developing markets and natural resources,

and private banking through offices in 21 countries outside Africa.

Africa Retail, commercial and investment banking services in Botswana, Democratic Republic of

Congo, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia,

Nigeria, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.

Stanlib Management of institutional and retail funds and investment portfolios, and provision

and marketing of a wide range of financial products to mainly retail clients.

Central funding Consolidation unit housing group investments and funding initiatives, central costs

and group eliminations.

Liberty Life Life insurance and asset management activities through Standard Bank Group’s investment

in Liberty Holdings Limited and Liberty Group Limited.

Where reporting responsibility for individual divisions within business units changes, the segmental analysis is reclassified

accordingly.

During the year the capital management policy was revised to allocate minimum tier I capital to domestic business units based

on 8,5% of risk-weighted assets, including capital adequacy buffers. The 2003 domestic segmental balances have been restated

to account for this change effective 1 January 2003.



2004Rm

2003

Rm

2 Cash and balances with banks

Coins and bank notes 4 055 4 371

Balances with central banks 7 384 3 882

Balances with other banks 19 945 13 828

31 384 22 081

3 Short-term negotiable securities

Originated by the entity 103 2 251

Held at fair value 20 937 19 767

21 040 22 018

4 Derivative instruments

All derivatives are classified as either derivatives held for trading or derivatives held for hedging.

4.1 Fair values

The fair value of a derivative financial instrument represents the present value of the positive or negative cash flows, which would

have occurred if the rights and obligations arising from that instrument were closed out in an orderly market place transaction at

year end.

4.2 Notional amount

The gross notional amount is the sum of the absolute value of all bought and sold contracts. The amount cannot be used to assess

the market risk associated with the position and should be used only as a means of assessing the group’s participation in derivative

contracts.




< 1 year2004

Rm

Maturity analysisof net fair value

1 – 5 years2004

Rm

> 5 years2004

Rm

4.3 Derivative assets and liabilitiesDerivatives held for tradingForeign exchange derivatives 3 157 (506) (461)Forwards 1 980 361 64Futures (12) (49) –Options 1 189 (818) (525)

Interest rate derivatives 4 610 805 497Bonds and options 31 26 (447)Caps and floors 16 56 –Future options 41 27 2Forwards 42 76 –Swaps 4 492 600 942Swaptions (12) 20 –

Commodity derivatives 563 (141) 15Forwards 465 (67) 8Futures 1 – –Options 97 (74) 7

Credit derivatives 392 46 (10)Credit default swaps 89 46 (10)Total return swaps 303 – –

Equity derivatives (250) (76) (35)Forwards 41 – –Futures 6 – –Index options (295) (127) (52)Options 7 27 8Swaps (5) 18 9Other (4) 6 –

Total derivative assets/(liabilities) held for trading 8 472 128 6

Derivatives held for hedgingDerivatives designated as fair value hedges (1 390) 591 644Currency futures 4 – –Interest rate swaps (1 422) 580 643Cross currency interest rate swaps 28 11 1

Derivatives designated as cash flow hedges – (25) 2Currency swaps – (22) 2Interest rate swaps – (3) –

Derivatives designated as fair value portfolio hedges – interest rate swaps (541) 37 85

Derivatives designated as hedges of net investments in subsidiaries 12 – –Currency options – – –Forward exchange contracts 12 – –Swaps – – –

Total derivative assets/(liabilities) held for hedging (1 919) 603 731Total derivative assets/(liabilities) 6 553 731 737


Net fair value2004

Rm

Fair valueof assets

2004Rm

Fair valueof liabilities

2004Rm

Contract/notionalamount

2004Rm

Net fair

value

2003

Rm

Fair value

of assets

2003

Rm

Fair value

of liabilities

2003

Rm

Contract/

notional

amount

2003

Rm

2 190 24 131 (21 941) 366 580 (81) 24 737 (24 818) 636 1162 405 17 418 (15 013) 255 647 349 19 330 (18 981) 501 444

(61) 384 (445) 11 860 (395) 442 (837) 20 208(154) 6 329 (6 483) 99 073 (35) 4 965 (5 000) 114 464

5 912 74 767 (68 855) 2 639 374 2 186 53 713 (51 527) 2 674 995(390) 1 386 (1 776) 115 010 (165) 1 534 (1 699) 78 136

72 177 (105) 38 686 26 161 (135) 44 59670 112 (42) 60 202 – – – –

118 998 (880) 540 557 (423) 1 597 (2 020) 1 093 3216 034 72 028 (65 994) 1 880 426 2 742 50 393 (47 651) 1 394 925

8 66 (58) 4 493 6 28 (22) 64 017

437 18 731 (18 294) 351 411 296 17 947 (17 651) 419 863406 14 362 (13 956) 251 038 218 16 177 (15 959) 334 825

1 1 – 100 (3) – (3) 10830 4 368 (4 338) 100 273 81 1 770 (1 689) 84 930

428 580 (152) 16 262 186 1 494 (1 308) 30 820125 276 (151) 15 067 (2) 1 061 (1 063) 27 246303 304 (1) 1 195 188 433 (245) 3 574

(361) 1 607 (1 968) 117 605 2 033 4 541 (2 508) 519 72541 44 (3) 239 221 241 (20) 158 3606 19 (13) 79 907 4 5 (1) 10 042

(474) 1 078 (1 552) 31 224 – – – –42 427 (385) 4 803 1 521 3 607 (2 086) 350 81622 37 (15) 1 426 12 34 (22) 5012 2 – 6 275 654 (379) 6

8 606 119 816 (111 210) 3 491 232 4 620 102 432 (97 812) 4 281 519

(155) 3 550 (3 705) 54 394 1 377 2 199 (822) 28 3924 4 – 603 – – – –

(199) 3 506 (3 705) 53 132 1 377 2 199 (822) 28 39240 40 – 659 – – – –

(23) 96 (119) 821 27 27 – 1 550(20) 49 (69) 21 27 27 – 1 550(3) 47 (50) 800 – – – –

(419) 761 (1 180) 3 200 – – – –

12 12 – 1 839 65 65 – 958– – – – 45 45 – 668

12 12 – 1 839 4 4 – 161– – – – 16 16 – 129

(585) 4 419 (5 004) 60 254 1 469 2 291 (822) 30 9008 021 124 235 (116 214) 3 551 486 6 089 104 723 (98 634) 4 312 419




4.4 Use and measurement of derivative instruments

In the normal course of business, the group enters into a variety of derivative transactions. Derivative financial instruments are

entered into for trading purposes and for hedging foreign exchange and interest rate exposures. Derivative instruments used by

the group in both trading and hedging activities include futures, forwards, options, swaps and other similar types of instruments

based on foreign exchange rates, interest rates, credit risk and the prices of commodities and equities.

The risks associated with derivative instruments are monitored in the same manner as for the underlying instruments. Risks are

also measured across the product range in order to take into account possible correlations.

The fair value of all derivatives is recognised on the balance sheet and is only netted to the extent that a legal right of set-off exists

and there is an intention to settle on a net basis.

Swaps are transactions in which two parties exchange cash flows on a specified notional amount for a predetermined period. The

major types of swap transactions undertaken by the group are as follows:

• Interest rate swap contracts generally entail the contractual exchange of fixed and floating rate interest payments in a single

currency, based on a notional amount and an interest reference rate.

• Cross currency interest rate swaps involve the exchange of interest payments based on two different currency principal balances

and interest reference rates and generally also entail exchange of principal amounts at the start and/or end of the contract.

• Credit default swaps are the most common form of credit derivative, under which the party buying protection makes one or

more payments to the party selling protection during the life of the swap in exchange for an undertaking by the seller to make a

payment to the buyer following a credit event, as defined in the contract, with respect to a third party.

• Total return swaps are contracts in which one party (the total return payer) transfers the economic risks and rewards associated

with an underlying asset to another counterparty (the total return receiver). The transfer of risk and rewards is affected by way of

an exchange of cash flows that mirror changes in the value of the underlying asset and any income derived therefrom.

Options are contractual agreements under which the seller (writer) grants the purchaser the right, but not the obligation, either

to buy (call option) or to sell (put option) by or at a set date, a specified amount of a financial instrument or commodity at a

predetermined price. The seller receives a premium from the purchaser for this right. Options may be traded over-the-counter

(OTC) or on a regulated exchange.

Forwards and futures are contractual obligations to buy or sell financial instruments or commodities on a future date at a

specified price. Forward contracts are tailor-made agreements that are transacted between counterparties in the OTC market,

whereas futures are standardised contracts transacted on regulated exchanges.

4.5 Derivatives held for trading

The group trades derivative instruments on behalf of customers and for its own positions. The group transacts derivative contracts

to address customer demands both as a market maker in the wholesale markets and in structuring tailored derivatives for

customers. The group also takes proprietary positions for its own account. Trading derivative products include the following

derivative instruments:

4.5.1 Foreign exchange derivatives

Foreign exchange derivatives are used to hedge foreign currency risks on behalf of customers and for the group’s own positions.

Foreign exchange derivatives primarily consist of forward exchange contracts, foreign exchange futures, and foreign exchange

options.




4.5.2 Interest rate derivatives

Interest rate derivatives are used to modify the volatility and interest rate characteristics of interest-earning assets and interest-

bearing liabilities on behalf of customers and for the group’s own positions. Interest rate derivatives primarily consist of bonds and

options, caps and floors, future options, forwards, swaps and swaptions.

4.5.3 Commodity derivatives

Commodity derivatives are used to address customer commodity demands and to take proprietary positions for the group’s own

account. Commodity derivatives primarily consist of forwards, futures and options.

4.5.4 Credit derivatives

Credit derivatives are used to hedge the credit risk from one counterparty to another and manage the credit exposure to selected

counterparties on behalf of customers and for the group’s own positions. Credit derivatives primarily consist of credit default

swaps and total return swaps.

4.5.5 Equity derivatives

Equity derivatives are used to transact customer equity derivative requirements and to take proprietary positions for the group’s

own account. Equity derivatives primarily consist of either option or forward transactions and include futures, index options,

swaps and warrants.

4.6 Derivatives held for hedging

The group enters into derivative transactions, which are designated and qualify as either fair value, cash flow, or net investment

hedges for recognised assets or liabilities or forecasted transactions. Derivatives held for hedging consist of:

4.6.1 Derivatives designated as fair value hedges

The group’s fair value hedges principally consist of currency futures, interest rate swaps and cross currency interest rate swaps

that are used to protect against changes in market interest rates and currencies.

4.6.2 Derivatives designated as cash flow hedges

The group uses currency swaps and interest rate swaps to protect against changes in cash flows of certain variable rate debt

issues. The group applies hedge accounting for its non-trading interest rate risk by analysing expected cash flows on a group

basis. The objective is to protect against changes in future interest cash flows resulting from the impact of changes in market

interest rates.

4.6.3 Derivatives designated as fair value portfolio hedges

The group uses interest rate swaps for the portfolio hedge of interest rate risk.

4.6.4 Derivatives designated as hedges of net investments in subsidiaries

The objective of a hedge of net investments in subsidiaries is to limit the risk of a decline in net asset value of the investment in a

foreign entity brought about by changes in exchange rates. To limit the risk, currency options, forward exchange contracts and

swaps have been purchased where considered appropriate.



2004Rm

2003

Rm

5 Trading assets

Listed 19 403 23 096

– Securities of, or guaranteed by, the South African Government 3 004 6 504

– Other 16 399 16 592

Unlisted 12 727 10 392

32 130 33 488

Dated assets 27 896 28 934

Undated assets 4 234 4 554

32 130 33 488

Maturity analysis

The maturities represent periods to contractual redemption of the trading assets

recorded.

– Redeemable on demand 2 798 2 056

– Maturing within 1 month 2 279 6 128

– Maturing after 1 month but within 6 months 7 836 5 311

– Maturing after 6 months but within 12 months 3 746 2 398

– Maturing after 12 months 11 237 13 041

– Undated assets 4 234 4 554

32 130 33 488

Repurchase commitments

Trading assets include securities sold subject to repurchase commitments amounting to R4 899 million at 31 December 2004

(2003: R10 117 million).

Redemption value

Dated trading assets had a redemption value at 31 December 2004 of R31 455 million (2003: R34 481 million).

Directors’ valuation

The directors’ valuation of unlisted investments is equal to the carrying value. All unlisted investments were valued at 31 December 2004.



2004Rm

2003

Rm

6 Investment securities

Listed 15 176 17 827

– Securities of, or guaranteed by, the South African Government 13 940 15 016

– Other 1 236 2 811

Unlisted 4 464 2 230

19 640 20 057

Comprising:

Investment securities held at fair value 13 961 11 383

Investment securities available-for-sale 560 2 071

Investment securities held-to-maturity 5 119 6 603

19 640 20 057

Dated securities 14 408 18 216

Undated securities 5 232 1 841

19 640 20 057

Maturity analysis

The maturities represent periods to contractual redemption of the investment

securities recorded.

– Redeemable on demand 1 197 435

– Maturing within 1 month 53 614


– Maturing after 6 months but within 12 months 747 806


– Undated securities 5 232 1 841

19 640 20 057

Valuation

Held at fair value and available-for-sale investment securities are carried at fair value. The fair value of held-to-maturity investments

at 31 December 2004 is R5 476 million (2003: R6 796 million).

Repurchase commitments

Investment securities include securities sold subject to repurchase commitments amounting to R2 148 million at 31 December 2004

(2003: R2 441 million).

Redemption value

Dated investment securities had a redemption value at 31 December 2004 of R14 122 million (2003: R18 298 million).

Investment registers

Registers of investment securities are available for inspection by members, or their authorised agents, at the registered offices of

the company and its subsidiaries.


The directors’ valuation of unlisted investments is equal to the carrying value. All unlisted investments were valued at 31 December 2004.




7 Loans and advances

The group extends advances to the personal, commercial and corporate sectors as well as to the public sector. Advances made

to individuals are mostly in the form of mortgages, instalment credit, overdrafts and credit card borrowings. A significant portion

of the group’s advances to commercial and corporate borrowers consists of advances made to companies engaged in

manufacturing, finance and service industries.

2004Rm

2003

Rm

7.1 Loans and advances net of provisions for credit losses

Loans and advances originated by the group 258 222 223 128

Loans and advances to banks

– Call loans 3 636 6 736

– Loans granted under resale agreements 10 329 16 176

Loans and advances to customers

– Loans and overdrafts 87 122 78 965

– Card debtors 7 854 5 600

– Mortgage lending 107 267 77 456

– Instalment finance 34 844 28 500

– Loans granted under resale agreements 6 918 7 223

– Trade, other bills and bankers’ acceptances 252 2 472

Loans and advances held-to-maturity


– Instalment finance 689 1 155

Loans and advances held at fair value 2 039 –

Loans and advances to banks

– Call loans 138 –

– Loans granted under resale agreements 503 –


– Mortgage lending 1 398 –

260 950 224 283

Provisions for credit losses (note 8) (3 796) (3 908)

257 154 220 375

Loans and advances include net positive fair value adjustments of R1 150 million (2003: R506 million) relating to originated

loans and advances which were subject to specific hedging relationships and were therefore fair valued only for the risk subject

to hedging.



2004Rm

2003

Rm

Maturity analysis

The maturity analysis is based on the remaining periods to contractual maturity

from year end.

– Redeemable on demand 29 501 20 832





260 950 224 283

Segmental analysis – industry

Agriculture 7 325 4 646

Construction 3 912 1 636

Electricity 1 215 2 215

Finance, real estate and other business services 55 237 67 143

Individuals 124 819 83 590

Manufacturing 16 456 12 297

Mining 4 679 4 670

Other services 34 305 34 854

Transport 7 878 9 038

Wholesale 5 124 4 194

260 950 224 283

2004 2004 2003 2003

% Rm % Rm

Segmental analysis – geographic area

The following table sets out the distribution of the group’s

loans and advances by geographic area where the loans

are recorded. The geographic spread of loans and

advances within the various regions of South Africa closely

follows the demographic and economic activities within

the country.

South Africa 77 201 808 69 153 767

Africa 5 12 030 5 11 023

International 18 47 112 26 59 493

100 260 950 100 224 283

7.2 Unearned finance charges deducted from

instalment sale and finance leases

(accounting policy 11) 6 967 6 058




2004Rm

2003

Rm

8 Provisions for credit losses

Balance at beginning of the year 3 908 3 505

Acquisition resulting in an associate becoming a subsidiary 32 –

Credit losses written off (1 122) (1 218)

Discount element recognised in interest income (258) (353)

Net provisions raised and released (note 27.3) 1 425 2 117

Exchange and other movements (189) (143)

Balance at end of the year 3 796 3 908

Comprising:

Provisions for non-performing loans 2 335 2 418

Provisions for performing loans 1 461 1 490

3 796 3 908

Segmental analysis of provisions against non-performing loans – industry

Agriculture 51 96

Construction 39 38

Electricity 1 2

Finance, real estate and other business services 367 388

Individuals 848 684

Manufacturing 184 188

Mining 244 447

Other services 458 442

Transport 24 25

Wholesale 119 108

2 335 2 418

2004 2004 2003 2003

% Rm % Rm

Segmental analysis of provisions for non-performing loans – geographic area

The following table sets out the distribution of the group’s

provisions against non-performing loans by geographic

area where the loans are recorded.

South Africa 65 1 527 65 1 580

Africa 12 278 10 241


100 2 335 100 2 418



2004Rm

2003

Rm

9 Other assets

Trading settlement assets 6 297 8 208

Items in the course of collection 639 736

Accrued interest 2 741 2 746

Current tax assets 537 221

Deferred tax (note 19.2) 547 582

Other debtors 5 733 5 047

16 494 17 540

10 Interest in associates and joint ventures

Carrying value at beginning of the year 541 276

Share of profit 97 102

Acquisition resulting in an associate becoming a subsidiary (231) –

Net (disposals)/acquisitions (31) 237

Goodwill amortised (note 11.2) (10) (39)

Distribution of profit (80) (35)

Carrying value at end of the year 286 541

Comprising:

Cost of investments 290 510

Share of reserves 90 130

Goodwill amortised (94) (99)

286 541


The directors’ valuation of the investments in associates and joint ventures is R400 million (2003: R642 million).

Associates and joint ventures and the group’s interests therein are listed in Annexure C on page 156.




2004Rm

2003

Rm

11 Goodwill and other intangible assets

Goodwill (note 11.1) 237 262

Other intangible assets (note 11.3) 242 246

479 508

11.1 Goodwill

Goodwill on acquisition of subsidiaries

Cost at beginning of the year 485 532

Acquisitions 86 135

At acquisition fair value adjustments 5 3

Disposals – (151)

Exchange movements (43) (34)

Cost at end of the year 533 485

Accumulated amortisation at beginning of the year (223) (151)

Acquisitions (8) –

Amortisation (note 11.2) (88) (134)

Disposals – 50

Exchange movements 23 12

Accumulated amortisation at end of the year (296) (223)

Net goodwill 237 262

Grossgoodwill

Rm

2004Amortisation

periodNet

goodwillRm

2003

Net

goodwill

Rm

Comprising:

Stanlib Limited 70 10 years 49 56

Triskelion Trust Company Limited 41 5 years 33 45

Standard Bank s.a.r.l. Mozambique 80 5 years 60 –

Melville Douglas Investment

Management (Proprietary) Limited 98 5 years 25 47

Standard Bank Asia Limited 74 5 years 25 41

Stanbic Bank Limited (Malawi) 65 5 years 20 36

Stanbic Bank Uganda Limited 15 5 years 6 10

Standard Yatirim Menkul Kiymetler A.S. 2 5 years 1 1

SBBL Limited 24 5 years 18 26

Stanlib (Swaziland) Unit Trust Management

Company Limited (2) 1 year – –

Erf 224 Edenburg (Proprietary) Limited 17 – – –

Grand Central Shopping Centre (Proprietary) Limited 15 – – –

Gleneagles Retail Centre (Proprietary) Limited 34 – – –

533 237 262



2004Rm

2003

Rm

11.2 Goodwill amortisation

Goodwill amortisation on acquisition of subsidiaries (note 11.1) (88) (134)

Goodwill amortisation on acquisition of associates (note 10) (10) (39)

(98) (173)

11.3 Other intangible assets

Computer software


Additions 79 159

Acquisition resulting in an associate becoming a subsidiary 51 –

Assets decommissioned (36) (171)

Exchange movements (6) (15)



Acquisition resulting in an associate becoming a subsidiary (29) –

Amortisation (89) (82)

Impairments (12) (116)

Assets decommissioned 35 171

Exchange movements 3 10


Net other intangible assets 242 246

Cost

Rm

2004

Accumulated

depreciation

Rm

Net book

value

Rm

Cost

Rm

2003

Accumulated

depreciation

Rm

Net book

value

Rm

12 Property and equipment

12.1 Summary

Property

Freehold 938 322 616 944 296 648

Leasehold 180 82 98 197 80 117

1 118 404 714 1 141 376 765

Equipment

Computer equipment 2 718 1 501 1 217 2 607 1 289 1 318

Motor vehicles 644 287 357 452 110 342

Office equipment 317 164 153 260 97 163

Furniture and fittings 1 142 615 527 1 006 554 452

4 821 2 567 2 254 4 325 2 050 2 275

5 939 2 971 2 968 5 466 2 426 3 040




2003

Net book

value

Rm

Additions 1

Rm

Disposals

Rm

Impairments

Rm

Depreciation

Rm

Exchange

movements

Rm

2004

Net book

value

Rm

12.2 Movement

Property

Freehold 648 69 (44) (13) (21) (23) 616

Leasehold 117 20 (20) – (15) (4) 98

765 89 (64) (13) (36) (27) 714

Equipment

Computer equipment 1 318 526 (29) (2) (560) (36) 1 217

Motor vehicles 342 203 (78) – (105) (5) 357

Office equipment 163 55 (9) – (38) (18) 153

Furniture and fittings 452 211 (29) – (91) (16) 527

2 275 995 (145) (2) (794) (75) 2 254

3 040 1 084 (209) (15) (830) (102) 2 968

2002

Net book

value

Rm

Additions

Rm

Disposals

Rm

Impairments

Rm

Depreciation

Rm

Exchange

movements

Rm

2003

Net book

value

Rm

Property

Freehold 651 200 (113) (41) (25) (24) 648

Leasehold 152 22 (19) – (16) (22) 117

803 222 (132) (41) (41) (46) 765

Equipment

Computer equipment 1 205 695 (88) – (475) (19) 1 318

Motor vehicles 349 192 (85) – (109) (5) 342

Office equipment 120 103 (19) – (34) (7) 163

Furniture and fittings 427 143 (15) – (89) (14) 452

Capitalised leased assets 7 – (5) – (1) (1) –

2 108 1 133 (212) – (708) (46) 2 275

2 911 1 355 (344) (41) (749) (92) 3 040

1 Additions include an amount of R37 million arising from an acquisition resulting in an associate becoming a subsidiary.

12.3 Valuation

The open market value of freehold property, based on valuations undertaken during 2004 by valuers registered under the

Valuers Act 1982, was estimated at R1 150 million (2003: R1 074 million). Registers of property are available for inspection by

members, or their authorised agents, at the registered offices of the company and its subsidiaries. Valuation was generally in

terms of the investment method whereby net income is capitalised having regard to tenancy, location and the physical nature of

the property.


Liberty Life

2004Rm

2003

Rm

13 Current assets

Net outstanding premiums, accrued investment income and other debtors 3 123 3 341

Cash and balances with banks 1 492 346

Deferred tax (note 21.2) 1 –

4 616 3 687

14 Investments

14.1 Summary

Marketable securities 85 543 72 963

Government, municipal and utility stocks (note 14.2) 13 328 12 687

Debentures (note 14.2) 6 280 4 910

Listed equities 49 962 42 062

Derivatives 156 132

Unit trusts 15 817 13 172

Funds on deposit 4 624 3 533

Other investments 14 275 15 372

Financial assets 3 548 4 923

– Unlisted equities 2 016 2 067

– Mortgages and loans 664 788

– Deposits and money market securities 29 1 454

– Insurance policies 839 614

Non-financial assets 10 727 10 449

– Investment properties (note 14.3) 9 970 9 724

– Owner-occupied properties (note 14.4) 757 725

Total investments 104 442 91 868



Liberty Life

2004Rm

2003

Rm

Marketable securities comprise:


Held for trading 174 479

Available-for-sale 3 015 3 669

85 543 72 963

Financial assets comprise:


Held for trading 3 –

Available-for-sale 815 2 542

Originated by the entity 313 323

3 548 4 923

14.2 Maturity profile of government, municipal and utility stocks and debentures

Maturing within 1 year 2 315 207

Maturing after 1 year but within 5 years 7 350 7 522

Maturing after 5 years but within 10 years 3 377 4 431

Maturing after 10 years 6 566 5 437

19 608 17 597

Equity scrip lending activities at the balance sheet date is R nil million (2003 : R563 million).

Other investments include an amount of R nil million (2003: R398 million) representing

forward sales of equities in terms of agreements entered into with appropriately accredited

institutions.

Details of listed and unlisted investments are recorded in registers which may be inspected

by members, or their duly authorised agents, at Liberty Life’s registered office.

14.3 Investment properties

Completed properties

Open-market value at beginning of the year 9 724 8 872

Capitalised subsequent expenditure 190 51

Disposals (466) (147)

Reclassifications (39) (45)

Revaluations 561 675

Transfers from properties under development – 318

Open-market value at end of the year 9 970 9 724

Properties under development

Cost at beginning of the year – 104

Capitalised subsequent expenditure – 214

Transfers to completed properties – (318)

Cost at end of the year – –

Total investment properties 9 970 9 724


Liberty Life

2004Rm

2003

Rm

Comprising:

Office buildings 1 228 1 336

Shopping malls 7 099 6 839

Hotels 1 333 1 218

Other 310 331

9 970 9 724

14.4 Owner-occupied properties

Open-market value at beginning of the year 725 625

Capitalised subsequent expenditure 37 18

Disposals (26) –

Revaluations (18) 37

Reclassifications 39 45

Open-market value at end of the year 757 725

Carrying amount that would have been included in the financial statements had owner-

occupied properties been carried at cost less accumulated depreciation 189 141

Investment and owner-occupied properties were independently valued as at 31 December 2004

by a professional valuer registered with the South African Council for the Property Valuers

Profession and a member of the Institute of Valuers of South Africa.

Details of property investments are recorded in registers, which may be inspected by

members or their duly authorised agents, at Liberty Life’s registered office.

Owner-occupied properties are carried at fair value as the majority of properties are held

to match policyholders’ liabilities.

15 Goodwill and other intangible assets

Goodwill (note 15.1) 163 81

Other intangible assets (note 15.2) 203 196

366 277

15.1 Goodwill


Acquisitions 103 –

Disposals (9) –




Impairments – (63)


Net goodwill 163 81



Liberty Life

Grossgoodwill

Rm

2004Amortisation

periodNet

goodwillRm

2003

Net

goodwill

Rm

Comprising:

Liberty Group Limited 1, 2 94 94 –

Liberty Ermitage Jersey Limited 119 10 years 69 81

Hightree Financial Services Limited 68 – –

281 163 81

1 The net goodwill resulting from acquisition of additional shares by Liberty Holdings Limited in Liberty Group Limited and subsequent partial disposal of the shares in terms of the Black Ownership Initiative.

2 The goodwill is subject to an annual impairment test in terms of the revised accounting statement on business combinations, (accounting policy 13).

2004Rm

2003

Rm

15.2 Other intangible assets


Additions 63 206

Disposals – (7)




Impairments (6) (4)

Disposals – 3


Net other intangibles 203 196

Gross otherintangibles

Rm

2004Amortisation

periodRm

Net otherintangibles

Rm

2003

Net other

intangibles

Rm

Comprising:

Computer software 263 5 years 94 74

Present value of in-force life insurance business acquired 133 10 years 109 122

396 203 196


Liberty Life

Cost

Rm

2004

Accumulated

depreciation

Rm

Net book

value

Rm

Cost

Rm

2003

Accumulated

depreciation

Rm

Net book

value

Rm

16 Equipment and furniture

16.1 Summary

Office furniture, computer equipment

and other tangible assets 1 055 712 343 1 075 712 363

2003Net book

valueRm

AdditionsRm

DisposalsRm

DepreciationRm

Exchangemovements

Rm

2004Net book

valueRm

16.2 Movement


and other tangible assets 363 136 (31) (124) (1) 343

2002

Net book

value

Rm

Additions

Rm

Disposals

Rm

Depreciation

Rm

Exchange

movements

Rm

2003

Net book

value

Rm


and other tangible assets 322 175 (12) (123) 1 363

Computer equipment and office furniture represent 76% (2003: 82%) of the total net book value.




2004Rm

2003

Rm

17 Trading liabilities

Listed 8 734 14 306

Unlisted 5 676 3 856

14 410 18 162

Dated liabilities 11 137 11 959

Undated liabilities 3 273 6 203

14 410 18 162

18 Deposit and current accounts

Deposit products include cheque accounts, savings accounts, call and notice deposits,

fixed deposits and negotiable certificates of deposit. The repricing maturities analysis for

banking operations in South Africa for December 2004 is disclosed on page 46.

Deposit and current accounts at amortised cost 308 520 272 677

Deposits and loans from banks

– Deposits from banks and central banks 15 758 16 915

– Deposits from banks under repurchase agreements 7 773 9 649

Customers’ current accounts 93 304 89 658

Customers’ savings accounts 26 781 22 411

Other deposits and loan accounts 134 823 117 149

Negotiable certificates of deposit 26 363 11 071

Customer deposits received under repurchase agreements 3 718 5 824

Deposit and current accounts held at fair value 7 996 –

Deposits and loans from banks

– Deposits from banks and central banks 5 695 –

– Deposits from banks under repurchase agreements 6 –

Customer deposit accounts 2 295 –

316 516 272 677

Deposit and current accounts were increased by fair value adjustments of R2 166 million

(2003: R555 million) relating to deposit and current accounts which were subject to specific

hedging relationships and were therefore only fair valued for the risk subject to hedging.

Maturity analysis

The maturity analysis is based on the remaining periods to contractual maturity from year end.

– Repayable on demand 171 934 148 399





316 516 272 677



Segmental analysis – geographic areaThe following table sets out the distribution of the group’s deposit and current accounts by geographic area. The geographic

spread of deposit and current accounts within the various regions of South Africa closely follows the demographic and economic

activities within the country.

2004%

2004Rm

2003

%

2003

Rm

South Africa 79 250 137 75 203 351

Africa 6 20 517 6 17 189

International 15 45 862 19 52 137

100 316 516 100 272 677

2004Rm

2003

Rm

19 Other liabilities and provisions

19.1 Summary

Trading settlement liabilities 1 644 2 871

Items in the course of transmission 974 1 459

Accrued interest 6 042 6 388

Current tax liabilities 843 453

Deferred tax (note 19.2) 2 564 2 373

Provisions for post-retirement benefits (note 19.4) 777 572

Other liabilities and provisions 6 423 6 873

19 267 20 989

19.2 Deferred tax analysis

Accrued interest 38 23

Assessed losses (79) (79)

Assets on lease 208 407

Depreciation 112 67

Derivatives 1 761 1 713

Fair value adjustments of financial instruments 96 (2)

Provisions for credit losses (463) (604)

Post-retirement benefits (233) (172)

Secondary tax on companies (223) (176)

Other differences 800 614

Deferred tax closing balance 2 017 1 791

Deferred tax liability 2 564 2 373

Deferred tax asset (547) (582)




2004Rm

2003

Rm

19.3 Deferred tax reconciliation


Change in accounting policy – (144)

Restated balance at 1 January 2004 1 791 1 641

Various categories of originating/(reversing) temporary differences for the year: 226 150

Accrued interest 15 (148)

Assessed losses – 17

Assets on lease (199) (26)

Depreciation 45 (117)

Derivatives 48 578

Fair value adjustments of financial instruments 98 55

Provisions for credit losses 141 (245)

Post-retirement benefits contributions (61) (70)


Other differences 186 138


Subsequent to year end a final dividend of 181,0 cents per shares was declared

(2003: 109,5 cents). This declaration will result in a Secondary Tax on Companies

charge of R306 million (2003: R184 million).

19.4 Provisions for post-retirement benefits

Balance at beginning of the year 572 347

Net provisions raised 205 225

Balance at end of the year 777 572

Details on post-retirement medical benefits are provided in note 35 on page 143.



Carrying value*2004

Rm

Nominalvalue2004

Rm

Carrying

value*

2003

Rm

Nominal

value

2003

Rm

20 Subordinated bonds

Unsecured, subordinated, redeemable

Qualifying as secondary capital in terms of applicable

banking legislation: 8 211 8 042 5 722 5 593

– Redeemable in 2010 (SBK 1) 1 1 219 1 200 1 263 1 200


– Redeemable in 2010 3 563 563 668 668

– Redeemable in 2011 4 150 150 150 150

– Redeemable in 2013 5 66 66 75 75


– Redeemable in 2014 7 563 563 – –

– Redeemable in 2016 (SBK 5) 8 2 084 2 000 – –

Qualifying as tertiary capital in terms of applicable

banking legislation: 1 282 1 282 1 334 1 334


– Redeemable in 2005 10 282 282 334 334

9 493 9 324 7 056 6 927

* The difference of R169 million (2003: R129 million) between the carrying value and nominal value represents subordinated bonds fair valued for interest rate risk as the hedge items in interest rate hedging relationships. Certain hedge relationships expired during the prior year and the fair value adjustment is now amortised over the remaining life of the bonds.

1 15,5% bonds issued in rands and paying a fixed semi-annual coupon. The bonds carry an option to be called at their nominal amount on 1 June 2005 or on any interest payment date thereafter. After this option date, the coupon switches to floating at the Johannesburg interbank agreed rate plus 260 basis points, until maturity on 1 June 2010.

2 13,75% bonds issued in rands and paying a fixed semi-annual coupon. The bonds carry an option to be called at their nominal amount on 2 December 2005 or on any interest payment date thereafter. After this option date, the coupon switches to floating at the Johannesburg interbank agreed rate plus 217 basis points, until maturity on 2 December 2010.

3 Bonds issued in US dollars (US$100 million) and paying interest at a floating rate equal to the aggregate of 3% per annum and the offered rate for three-month US dollar deposits in the London interbank market. The bonds carry an option to be called at their nominal amount on 25 November 2005 or on any interest payment date thereafter. After this option date, the coupon switches to the aggregate of 3,5% per annum and the offered rate for three-month US dollar deposits in the London interbank market, until maturity on 24 November 2010.

4 12% bonds issued in Namibian dollars (N$150 million) and paying a fixed semi-annual coupon. The bonds carry an option to be called at their nominal amount on 20 November 2006 or on any interest payment date thereafter. After this option date, the coupon switches to the bid yield rate for the Republic of Namibia GC10 12% Bond plus 280 basis points, until maturity on 20 November 2011.

5 Bonds issued in Botswana Pula (BP50 million) and paying interest at a floating rate equal to 125 basis points over three-month Botswana Certificates. The bonds convert into preference shares in the event that Stanbic Bank Botswana eliminates its net worth. After 12 December 2008, the coupon switches to 200 basis points over three-month Botswana Certificates, until maturity on 12 December 2013.

6 11,25% bonds issued in rands and paying a fixed semi-annual coupon. The bonds carry an option to be called at their nominal amount on 31 October 2008 or on any interest payment date thereafter. After this option date, the coupon switches to floating at the average mid-market yield rate per annum for three-month ZAR deposits plus 209 basis points, until maturity on 31 October 2013.

7 Bonds issued in US dollars (US$100 million) bearing interest from issue date 14 July 2004 to 15 July 2009 at a floating rate equal to the aggregate of 2,5% per annum and the offered rate for three month U.S. dollar deposits in the London interbank market. The bonds carry an option to be redeemed in full at their nominal amount on or after 15 July 2009. After this option date, the coupon switches to a rate per annum equal to the aggregate of 3% per annum and the offered rate for three month U.S. dollar deposits in the London interbank market, until maturity on 14 July 2014.

8 9,5% bonds issued in rands and paying a fixed annual coupon. The bonds carry an option to be called at their nominal amount on 17 November 2011 or on any interest payment date thereafter. After this option date, the coupon rate switches to a 3 month floating Johannesburg interbank agreed rate plus 162 basis points, until maturity on 17 November 2016.

9 12,5% bonds issued in rands and paying a fixed semi-annual coupon. The due date for payment of any principal or interest in respect of the bonds may be deferred if so requested by the Registrar of Banks, subject to any conditions as may be prescribed by the Registrar of Banks. The bonds were redeemed on 15 February 2005.

10 Bonds issued in US dollars (US$50 million) and paying interest at a floating rate equal to the aggregate of 2,75% per annum and the offered rate for three-month US dollar deposits in the London interbank market. The bonds were redeemed on 21 February 2005.



Liberty Life

2004Rm

2003

Rm

21 Other liabilities

21.1 Summary

Outstanding claims, policyholders’ benefits and other liabilities 2 010 1 778

Provisions 87 74

Current tax liabilities 171 124

Deferred tax (note 21.2) 636 313

Post-retirement medical aid (note 35.4) 160 155

3 064 2 444

21.2 Deferred tax reconciliation


Net temporary differences 322 127


Deferred tax liability 636 313

Deferred tax asset (note 13) (1) –

Comprising:

Net prepaid commission accruals 19 (15)

Unrealised gains on shareholders’ investments 239 77

Unrealised gains on policyholders’ investments 392 266

Provisions (15) (15)

635 313

22 Convertible bonds

6,5% Liblife International B.V. 2004

Nominal value (US$ nil million (2003: US$238,5 million)) – 1 582

Unamortised bond issue costs – (3)

– 1 579

Liability component – 1 500

Equity component – shareholders’ portion – 23

Equity component – attributable to minorities – 56

All the holders of US$ 238,5 million 6,5% convertible bonds, which were issued by the subsidiary Liblife International B.V. in July 1994,

elected to be repaid in cash at 30 September 2004. A total of R1 541 million was paid by Liberty Life out of shareholders’ funds.


Liberty Life

2004Rm

2003

Rm

23 Policyholders’ liabilities

Policyholders’ liabilities under investment contracts


Fair value adjustments 4 056 2 824

Service fee income from investment contracts (652) (449)

Gross fund flows from investment contracts 1 180 1 165

– Inflows 8 439 6 103

– Payments (7 259) (4 938)


Policyholders’ liabilities under insurance contracts


Transfer to policyholders’ liabilities 9 625 6 573


Total policyholders’ liabilities 98 049 83 840

Gross policyholders’ liabilities under insurance contracts 66 392 56 681

Insurance policyholders’ liabilities reinsured (471) (385)

Net policyholders’ liabilities under insurance contracts 65 921 56 296



Standard Bank Group

2004Rm

2003

Rm

24 Share capital

24.1 Authorised

1 750 000 000 (2003: 1 750 000 000) ordinary shares of 10 cents each 175 175

8 000 000 (2003: 8 000 000) 6,5% first cumulative preference shares of R1 each 8 8

1 000 000 000 (2003: nil) non-redeemable, non-cumulative, non-participating preference

shares of R0,01 each 10 –

193 183

24.2 Issued

Ordinary shares 2 676 2 407

1 352 108 367 (2003: 1 338 729 667) ordinary shares of 10 cents each 135 134

Ordinary share premium 2 541 2 273

A premium of R268 million (2003: R132 million) was raised on the allotment and issue

during the year of 13 378 700 ordinary shares (2003: 7 651 200)

Preference shares 2 991 8

8 000 000 (2003: 8 000 000) 6,5% first cumulative preference shares of R1 each 8 8

30 000 000 (2003: nil) non-redeemable, non-cumulative, non-participating preference

shares of R0,01 each – –

Preference share premium 2 983 –

A premium of R3 000 million (2003: R nil) was raised on the allotment and issue during

the year of 30 000 000 non-redeemable, non-cumulative, non-participating preference

shares. Share issue costs of R17 million have been written off against the share premium

account.

5 667 2 415

The non-redeemable, non-cumulative, non-participating preference shares are entitled to an annual dividend, if declared, payable

in two semi-annual instalments of not less than 70% of the prime rate multiplied by the subscription price of R100 per share.


Standard Bank Group

2004Rm

2003

Rm

24.3 Unissued shares

262 680 796 (2003: 277 397 366) ordinary shares of 10 cents each, of which 133 872 967

(2003: 133 107 847) are under the general authority of the directors which authority

expires at the annual general meeting to be held on 25 May 2005. 26 28

135 210 837 (2003: 133 872 967) ordinary shares of 10 cents each are reserved to

meet the requirements of the group share incentive scheme in terms of the

authority vested in the directors by members’ resolution dated 20 May 2004. 14 13

970 000 000 (2003: nil) non-redeemable, non-cumulative, non-participating

preference share of R0,01 each are under the general authority of the directors

which authority expires at the annual general meeting to be held on 25 May 2005. 10 –

50 41

24.4 Interest of directors in the capital of the company

The directors’ interests are listed on pages 35 and 77.

Number of shares as at 31 December

Beneficial ordinary shares 1 390 228 870 581

Beneficial non-redeemable, non-cumulative, non-participating preference shares 25 319 –

Options 2 256 900 3 049 900

24.5 Group share incentive scheme

The number of options available to be granted under the terms of the group share incentive scheme as at the end of the year was

55 300 684 (2003: 51 926 045).

During the year, 13 378 700 (2003: 7 651 200) ordinary shares were issued to persons who exercised their options under the group

share incentive scheme. Additional options over 15 235 800 (2003: 18 177 200) ordinary shares were granted during the year in

terms of the scheme and 3 893 869 (2003: 5 421 749) options were surrendered.

The group share incentive scheme reconciliation is given in Annexure D on page 158.



Standard Bank Group

No. of

preference

shares

Issue price

per share (R)

2004Rm

2003

Rm

25 Empowerment reserve

As discussed on page 8, Standard Bank Group and Liberty Life

entered into a series of transactions whereby investments totalling

R4 017 million and R1 251 million respectively, were made in

cumulative redeemable preference shares.

Standard Bank preference share investment in:

Shanduka – Tutuwa Strategic Holdings 1 (Proprietary) Limited 1 651 589 1 000 652 –

Safika – Tutuwa Strategic Holdings 2 (Proprietary) Limited 1 977 383 1 000 977 –

Black Managers’ Trust – Staff Holdings 1-3 (Proprietary) Limited 1 1 573 746 1 000 1 574

The Community Trust – Community Holdings (Proprietary) Limited 1 814 486 1 000 814 –

Standard Bank operations investment 4 017 –

Liberty Life investment 1 251 –

Total investment 5 268 –

Attributable to minorities of Liberty Life (908) –

Empowerment reserve 4 360 –

Unrecognised profit on sale attributable to Standard Bank Group (114)

Liberty Holdings – unrecognised profit on sale of shares in

subsidiary (208) –

Attributable to minorities 94 –

Standard Bank Group empowerment reserve 4 246 –


The preference shares owned by Standard Bank attract dividends at 8,5% per annum, whilst those owned by Liberty Life accrue

dividends at 65% of the Standard Bank prime lending rate. The dividend obligation of the preference shares compounds on each

date the issuing company receives a dividend from Standard Bank or Liberty Life respectively. The legal accrual of the preference

dividend does not result in an accounting entry but effectively lengthens the repayment period. At year end the accumulated

obligation, including accrued dividends, was R4 100 million for Standard Bank and R1 264 million for Liberty Life.

The preference shares do not meet the definition of a financial asset in terms of GAAP and therefore the preference shares are

treated as a reduction of equity and are stated in the analysis of equity as a debit empowerment reserve. This will apply until third

party financing or full redemption of the preference shares. On receipt of preference share dividends these will be credited

directly to reserves. The profit realised by Liberty Holdings as a result of the buy-back of shares by Liberty Group is not recognised

as the sale of SPVs to the black participants is not accounted for. As the preference share capital is repaid by the black participants,

Liberty Holdings will recognise the profit over the repayment term.

For the purposes of the earnings per share calculation the weighted average number of company shares in issue is reduced by

the number of shares held by the empowerment companies directly funded by the proceeds received from the preference shares

(refer note 29.4).

The group will be adopting IFRS 2, Share-based Payments, from 1 January 2005. In accordance with this statement, equity settled

transactions need to be valued at the grant date. The group is of the opinion that the Black Ownership Initiative does not fall

within the scope of IFRS 2. However, there is an ongoing debate as to whether a good or service is required for IFRS 2 to apply to

equity settled transactions. The International Financial Reporting Interpretations Committee (IFRIC) is in the process of concluding

on these principles. The conclusion reached by IFRIC will determine whether the group’s Black Ownership Initiative transactions

must be accounted for in terms of IFRS 2.

Standard Bank has estimated the value of a Standard Bank Group instrument, as described on page 57, to be between R7 and R10

as at 4 October 2004, the day the SPVs had acquired the shares to perform the transaction. Should IFRS 2 apply, a total expense

relating to the Black Managers’ Trusts, ranging between R272 million and R388 million, will be accounted for over the vesting

period ending on 31 December 2010.

1 The above SPVs owned 99 190 197 ordinary shares of Standard Bank Group on 31 December 2004.

Standard Bank Group

2004Rm

2003

Rm

26 Contingent liabilities and commitments

26.1 Contingent liabilities

Letters of credit 4 827 4 920

Guarantees 17 520 16 562

Irrevocable unutilised facilities 18 497 14 887

40 844 36 369

No material losses are anticipated as a result of these transactions.

26.2 Capital commitments

Capital Alliance Holdings Limited Acquisition 1 3 094 –

Contracted capital expenditure 664 215

Capital expenditure authorised but not yet contracted 438 505

4 196 720

1 The board of Liberty Group has approved the purchase of the entire issued share capital of Capital Alliance Holdings Limited for a total amount of R3,1 billion. Full details of the transaction are contained in the Liberty Group directors’ report.

The capital expenditure will be funded from the group’s internal resources.

26.3 Operating lease commitments

The future minimum payments under non-cancellable operating leases are as follows:

Properties

Within 1 year 162 129

After 1 year but within 5 years 634 619

After 5 years 893 908

1 689 1 656

Equipment

Within 1 year 25 10

After 1 year but within 5 years 24 64

After 5 years 3 3

52 77




2004Rm

2003

Rm

27 Supplementary income statement information

27.1 Interest income

Interest on loans and advances and short-term funds 30 911 32 210

Interest on investment securities 3 394 3 559

Discount element recognised from provisions for credit losses 258 353

Fair value adjustments on dated financial instruments 51 (10)

Dividends on dated, unlisted investment securities 592 684

35 206 36 796

27.2 Interest expense

Current accounts 386 627

Savings and deposit accounts 3 235 3 242

Market bid accounts 9 583 12 081

Foreign finance creditors 249 199

Subordinated bonds 916 834

Other interest-bearing liabilities 9 386 8 376

23 755 25 359

27.3 Provisions for credit losses

Net provisions raised and released (note 8) 1 425 2 117

Recoveries (377) (269)

1 048 1 848

Comprising:

Provisions for non-performing loans 1 041 1 398

Provisions for performing loans 7 450

1 048 1 848



2004Rm

2003

Rm

27.4 Non-interest revenue

Fees and commission revenue 9 867 7 984

Point of representation fees 4 371 3 502

Card-based commission 1 437 1 189

Knowledge-based fees and commission 1 255 935

Electronic banking fees 706 599

Insurance: fees and commission 422 340

Foreign currency service fees 472 405

Documentation and administration fees 265 261

Other 939 753

Trading revenue 3 785 3 779

Foreign exchange 1 647 1 420

Debt securities 1 294 976

Commodities 779 944

Equities 38 388

Other 27 51

Other revenue 1 396 1 027

Banking and other 436 361

Property related revenue 541 322

Insurance: underwriting and bancassurance profit 419 344

15 048 12 790

27.5 Staff costs

Salaries and allowances 8 073 7 175

Retirement benefit costs 426 406

8 499 7 581




2004Rm

2003

Rm

27.6 Other operating expenses

Amortisation – intangible assets (note 11.3) 89 82

Auditors’ remuneration 69 63

Audit fees

– Current year 43 39

– Prior year 1 –

Fees for other services 25 24

Depreciation (note 12.2) 830 749

Property

– Freehold 21 25

– Leasehold 15 16

Equipment

– Computer equipment 1 560 475

– Motor vehicles 105 109

– Office equipment 38 34

– Furniture and fittings 91 89

– Capitalised leased assets – 1

Operating lease charges 591 499

Properties 537 461

Equipment 54 38

Premises 563 549

Professional fees 459 569

Managerial 23 18

Technical and other 436 551

(Profit)/loss on disposal of fixed assets (27) 8

Other expenses 4 169 3 508

6 743 6 027

1 During the year the estimated life of desktop computers was reduced from 5 years to 4 years. This has resulted in an additional charge of R100 million for the year.


Liberty Life

2004Rm

2003

Rm


28.1 Income after tax

Income after tax is arrived at as follows:

Operating profit from insurance operations 929 719

Revenue 12 767 12 468

Investment returns attributable to policyholders' funds 15 866 10 115

Policyholders’ benefits under insurance contracts (9 655) (8 687)

Management expenses (1 668) (1 526)

Commission expenses (1 920) (1 614)

Fair value adjustments to policyholders’ liabilities under investment contracts (4 056) (2 824)

Transfer to policyholders’ liabilities under insurance contracts (9 625) (6 573)

Tax (780) (640)

Operating profit from shareholders’ funds 380 291

Gross operating income from financial services operations 391 299

Investment income attributable to shareholders’ assets and financial services

operations 424 421

Investment gains attributable to shareholders’ assets held for trading 48 64

Management expenses (373) (335)

Tax (110) (158)

Preference dividend in subsidiary (102) (95)

Realised investment gains attributable to shareholders’ assets 588 446

Investment gains attributable to shareholders’ assets before tax 598 471

Capital gains tax attributable to shareholders’ investment gains (10) (25)

Goodwill amortisation and impairment (12) (78)

1 783 1 283



Liberty Life

2004Rm

2003

Rm

28.2 Management expenses

Management expenses include the following:

Amortisation – intangible assets 50 38

Auditors’ remuneration 14 12

Current year audit fees 11 9

Fees for other services 3 3

Consultancy fees 48 52

Actuarial – 1

Other 48 51

Defined benefit pension fund contributions 14 10

Defined contribution provident fund contributions 62 59

Depreciation 1 112 110

Fixtures, furniture and fittings 23 22

Computer equipment 68 73

Computer software 6 4

Office equipment and office machines 6 6

Motor vehicles 9 5

Impairment losses – intangible assets 6 4

Operating lease charges 43 47

Loss/(profit) on disposal of fixed assets 13 (5)

Indirect tax expense 262 239

– Financial services levy 5 9

– Non-recoverable value added tax 234 207

– Regional services council levies 23 13

– Stamp duty – 10

1 Depreciation of R12 million (2003: R13 million) has been netted off against income from investment property (hotel operations), accounting for the difference between depreciation in management expenses and tangible assets (refer note 16.2).


Standard Bank Group

2004Rm

2003

Rm


29.1 Emoluments of Standard Bank Group directors

Executive directors

Emoluments of directors in respect of services rendered:

While directors of Standard Bank Group

– as directors of subsidiary companies 22 23

– otherwise in connection with the affairs of Standard Bank Group or its subsidiaries 1 41 10


Emoluments of directors in respect of services rendered:

As directors of Standard Bank Group 4 4

While directors of Standard Bank Group

– as directors of subsidiary companies 5 3

– otherwise in connection with the affairs of Standard Bank Group or its subsidiaries 3 2

Pensions of past directors 1 1

76 43

1 Including gains on exercise of options and other related payments.

Details of directors’ emoluments are given on page 36.

29.2 Dividends

Ordinary shares

2003 final No. 69 of 109,5 cents per share (2002: 90,0 cents per share), paid on

13 April 2004 to shareholders registered on 8 April 2004 1 469 1 199

Interim No. 70 of 50,5 cents per share (2003: 41,5 cents per share), paid on

13 September 2004 to shareholders registered on 10 September 2004 681 554

2 150 1 753

A final dividend No. 71 of 181,0 cents per share, payable on 18 April 2005 was declared to shareholders, registered on 15 April 2005,

bringing the total dividends declared in respect of 2004 to 231,5 cents per share (2003: 151,0 cents).

Preference shares

6,5% first cumulative preference shares:

No. 70 of 3,25 cents per share (2003: 3,25 cents) paid on 13 September 2004 to shareholders registered on 10 September 2004.

No. 71 of 3,25 cents per share (2003: 3,25 cents) payable on 11 April 2005 to shareholders registered on 8 April 2005.

Non-redeemable, non-cumulative, non-participating preference shares:

Dividend No. 1 of 379,34 cents per share, payable on 11 April 2005 to shareholders registered on 8 April 2005.



Standard Bank Group

2004Rm

2003

Rm

29.3 Headline earnings

Group profit for the year 7 741 6 378

Standard Bank profit adjusted for:

Goodwill amortisation 98 173

Exceptional items (12) (144)

– Profit on sale of properties and equipment (44) (238)

– Impairment of properties and equipment 15 41

– Impairment of intangibles 12 116

– Loss/(profit) on sale of businesses and divisions 5 (57)

– Other capital profits – (6)

Tax on the above items (3) (18)

Liberty Life profit adjusted for:

Adjustments before tax (179) (117)

– Goodwill amortisation and impairments 12 78

– Investment gains attributable to shareholders’ assets (598) (471)

– Attributable to minorities 407 276

Tax on the above items 3 8

– Capital gains tax 10 25

– Attributable to minorities (7) (17)

7 648 6 280


Standard Bank Group

2004 2003

29.4 Earnings per share

The calculations of headline earnings and earnings per share and fully diluted

headline earnings and fully diluted earnings per share are as follows:

Earnings based on weighted average shares in issue


Earnings (Rm) 7 741 6 378

Weighted average number of ordinary shares in issue (number of shares)

Weighted average number of ordinary shares in issue before adjustment 1 345 785 610 1 334 098 578

Adjusted for shares issued in terms of Black Ownership Initiative (24 120 021) –

1 321 665 589 1 334 098 578

Headline earnings per share (cents) 578,7 470,7

Earnings per share (cents) 585,7 478,1

Fully diluted earnings

Weighted average number of ordinary shares in issue (number of shares) 1 321 665 589 1 334 098 578

Dilution from shares eligible for issue in terms of the group share incentive scheme

(number of shares) 29 285 427 16 708 169

Volume trade-weighted value of one ordinary share during the year (R) 45,58 31,66

Value of shares traded in the year (R’000) 40 687 747 28 751 308

Number of shares traded in the year (’000) 892 633 908 179

Average exercise price for shares under option (R) 28,78 24,00

Total exercise value of outstanding in-the-money share options (R’000) 2 286 741 1 657 176

Total number of in-the-money share options outstanding (’000) 79 454 69 058

Dilution from shares in issue in terms of the Black Ownership Initiative (number of shares) 9 226 995 –

Volume trade-weighted value of one ordinary share during the year (R) 45,58 –

Effective strike price of a SBG share in terms of the Black Ownership Initiative (R) 41,34 –

Number of SBG shares held by the Black Ownership Initiative special purpose vehicles (’000) 99 190 –

Fully diluted weighted average number of ordinary shares in issue (number of shares) 1 360 178 011 1 350 806 747

Fully diluted headline earnings per share (cents) 562,3 464,9

Fully diluted earnings per share (cents) 569,1 472,2



Standard Bank Group

2004Rm

2003

Rm

30 Tax

30.1 Standard Bank operations

Indirect tax expense

Regional services council levies 87 90

Value added tax 281 264

Duties (5) 16

Skills development levy (net of recoveries) 26 18

389 388

Direct income tax expense

Current year 2 444 2 390

– South African normal tax 1 989 1 466

– South African deferred tax 38 286

– Secondary tax on companies (deferred tax) (47) (32)

– Foreign normal and withholding tax 237 755

– Foreign deferred tax 227 (85)

Prior years 45 (37)

– South African normal taxation 19 17

– South African deferred taxation 8 (7)

– Foreign normal and withholding tax 18 (37)

– Foreign deferred tax – (10)

2 489 2 353

Total tax expense 2 878 2 741

South African tax rate reconciliation (%)

The tax charge for the year as a percentage of income before tax 28 31

Regional services council levies and stamp duties (1) (1)

Value added tax (3) (3)

Duties, STC and skills development levy – –

Tax relating to prior years – –

Net tax charge 24 27

The charge for the year has been reduced/(increased) as a consequence of:

– Dividends received 3 3

– Other non-taxable income 3 3

– Other permanent differences – (3)

Standard rate of South African tax 30 30

Future tax relief

The group has estimated tax losses of R261 million (2003: R264 million) which are available for set-off against future taxable

income. These amounts were utilised to reduce the deferred tax balance.


Standard Bank Group

2004Rm

2003

Rm

30.2 Liberty Life

Normal tax 527 388

Current year 526 411

Prior year (34) (8)

Deferred tax 35 (15)

South African capital gains tax 184 169

Current year 58 6

Deferred tax 126 163

Other related South African taxes 175 237

Retirement fund tax 101 150

Secondary tax on companies 74 87

Foreign tax 4 4

Capital gains tax attributable to shareholders’

investment gains 10 25

Attributable to Standard Bank 3 8

Attributable to minorities 7 17

900 823

Comprising:

Tax attributable to life insurance operations 780 640

Tax attributable to shareholders’ funds 110 158

Capital gains tax attributable to shareholders’ investment gains 10 25

900 823

Future tax relief

Liberty Life has estimated tax losses attributable to shareholders’ funds of R154 million (2003: R212 million) which are available for

set-off against future taxable income.



Standard Bank Group

2004Rm

2003

Rm

31 Cash flow statement notes

31.1 Reconciliation of net income from operations to net cash flows from operating activities


Adjusted for:

Amortisation of bond issue costs 43 6

Amortisation of fixed interest securities – 127

Amortisation of intangible assets 139 120

Depreciation – property and equipment 954 872

Discount element recognised from provisions for credit losses (258) (353)

Dividends from associates 80 35

Fair value adjustments on dated financial instruments (51) 10

Impairments 6 4

Indirect tax expense (389) (388)

Investment gains attributable to policyholders’ liabilities (11 728) (6 508)

Investment surpluses attributable to shareholders (32) –

(Profit)/loss on sale of equipment and furniture (14) 3

Provisions for credit losses 1 048 1 848

Provisions for post-retirement benefits 205 225

Transfers to policyholders’ liabilities 13 681 10 113

Net cash flows from operating activities 15 990 16 598

31.2 Cash receipts from customers

Interest income 36 934 38 107

Fees and commission revenue 9 867 7 984

Trading and other revenue 25 953 24 671

72 754 70 762

31.3 Cash paid to customers, employees and suppliers

Interest expense (23 797) (25 494)

Total operating expenses (including indirect tax expense) (35 186) (30 632)

(58 983) (56 126)

31.4 Dividends received

Dividends from investment securities and preference shares 2 139 1 927

Dividends from associates 80 35

2 219 1 962


Standard Bank Group

2004Rm

2003

Rm

31.5 Increase in income-earning assets

Net derivative assets (1 850) (1 046)

Trading assets (2 990) (10 144)

Investment securities 204 (2 389)

Loans and advances (45 137) (55 449)

Other assets 1 455 2 036

(48 318) (66 992)

31.6 Increase in deposits, other liabilities and provisions

Customers’ current, savings and other deposits,

and deposits and loans from banks 42 364 44 959

Deposits received under repurchase agreements (2 100) 5 645

Negotiable certificates of deposit 15 292 2 357

Trading liabilities (2 113) 6 726

Other liabilities and provisions (1 337) 2 407

52 106 62 094

31.7 Tax paid

Amounts unpaid at beginning of the year (356) (334)

Direct income tax per the income statement (3 003) (2 877)

Amounts unpaid at end of the year 477 356

(2 882) (2 855)



Standard Bank Group

2004Rm

2003

Rm

31.8 Investment in subsidiaries

Net cash cost of acquisition of subsidiaries 1 606 (132)

Effects of exchange rate changes 82 (5)

1 688 (137)

Comprising:

Cash and cash equivalents (1 606) (51)

Investment securities (21) (125)

Loans and advances (303) (538)

Other assets (23) (290)

Intangible assets (22) –

Property and equipment (37) –

Total assets acquired (2 012) (1 004)

Deposit and current accounts 1 797 561

Other liabilities and provisions 56 395

Net asset value (159) (48)

Minority interests 6 –

Net assets acquired (153) (48)

Goodwill (78) (135)

Carrying amount previously accounted for as an associate 231 –

Cash consideration – (183)

Less: cash and cash equivalents acquired 1 606 51

Net cash purchase price 1 606 (132)

Effects of exchange rate changes 82 (5)

1 688 (137)

31.9 Dividends paid

Amounts unpaid at beginning of the year – –

Dividends to ordinary shareholders (2 150) (1 753)

Dividends to minority shareholders in subsidiaries (892) (618)

Amounts unpaid at end of the year – –

(3 042) (2 371)

31.10 Cash and cash equivalents

Cash and balances with banks 31 384 22 081

Short-term negotiable securities 21 040 22 018

Liberty Life: cash and balances with banks (note 13) 1 492 346

53 916 44 445


Standard Bank Group

2004Rm

2003

Rm

32 Change in accounting policy and prior year reclassifications

The effects of the change in accounting policy are as follows:

32.1 Restatements to the opening balance of reserves

Balance sheet (opening balance)Increase in retained earnings and increase in deferred tax asset included in other assets 176 144

Income statement

Reduction in tax and increase in earnings 47 32

Balance sheet (closing balance)Increase in retained earnings and increase in deferred tax asset included in other assets 223 176

32.2 Effect on current period incomeEffect of adopting AC 501 on income before tax – –

Tax 47 32

Attributable to minorities – –

47 32

In terms of the requirements of AC 501, the interpretation has been applied on a retrospective

basis and consequently the 2003 results have been restated.

32.3 Prior year reclassifications, restatements and change in accounting policyBalance

previously

disclosed

Rm

Reclassification

of properties

book 1

Rm

Reclassification

of trading

assets 2

Rm

STC 3

Rm

Balance

reclassified

Rm

Effect on assets

Trading assets 31 811 (570) 2 247 33 488

Investment securities 19 487 570 20 057

Other assets 19 611 (2 247) 176 17 540

– – 176

Effect on equity and liabilities

Capital and reserves 28 667 176 28 843

1 Reclassification of the investment in listed property stock to investment securities as these investments are not actively traded.2 Reclassification of structured debt finance trades from other assets to trading assets.3 Recognition of a deferred tax asset for secondary tax on companies in terms of AC 501.

Statement of changes in shareholders’ fundsAs noted in the statement of changes in shareholders’ funds and reported in the Liberty Life annual financial statements, there

has been a reallocation between retained earnings and the cashflow hedging, available-for-sale and revaluation and other

reserves to correct the allocation on initial implementation of AC 133.

Cash flow statementThe cash flow statement has been restated to further allocate the effect of foreign exchange movements between various balance

sheet items.

Emoluments of Standard Bank Group directorsThe 2003 disclosure relating to gains on exercise of share options and other related payments was restated to include amounts

omitted with respect to payments made to Myles Ruck under the SCMB Shadow Share Scheme amounting to R4 282 000.

Third party funds under managementThe prior year number was restated to exclude unit trusts where the group acts as a trustee only, and not as the fund manager.



Standard Bank Group

2004Rm

2003

Rm

33 Third party funds under management

Members of the group provide discretionary and non-discretionary investment management

services to institutional and private investors. Commissions and fees earned in respect of trust

and management activities, and asset management activities performed are included in the

income statement. Assets managed on behalf of third parties include:

Asset management 81 927 70 354

Fund management 196 018 136 479

277 945 206 833

Geographical area

Africa (including Stanlib) 176 266 143 538


277 945 206 833

34 Related party transactions

34.1 Associates and joint ventures

During the year, the company and its subsidiaries, in the ordinary course of business, entered into various non-material transactions

with associates and joint ventures. These transactions occurred under terms that are not more favourable than those arranged

with third parties. Details of investments in and income from associate and joint venture entities are disclosed in note 10 and Annexure

C on pages 109 and 156 respectively.

Standard Bank paid South African Home Loans (Proprietary) Limited R69 million for origination, management and performance fees.

34.2 Subsidiaries

Details of interests in subsidiaries are disclosed in note 36 and Annexure B on pages 149 and 152 respectively. Transactions between

subsidiaries are conducted in the ordinary course of business at arm’s length.

Inter-company transactions, balances and unrealised surpluses and deficits within banking and insurance operations are eliminated

on consolidation.

Transactions between Standard Bank operations and Liberty Life are summarised as follows:

Bancassurance

In terms of the joint venture agreement with Liberty Life and Liberty Active Limited, Standard Bank Group accrued R131 million

(2003: R129 million) in respect of embedded products profits and complex products embedded value. The amounts accrued are

expected to realise in future periods with R102 million (2003: R95 million) to be received in the coming year. In addition, fees and

commission revenue were earned by Standard Bank operations in respect of bancassurance activities.

Asset management fees

Asset management fees of R138 million (2003: R98 million) were paid by Liberty Group Limited and Liberty Active, and R20 million

(2003: R12 million) were paid by The Standard Bank Retirement Fund to Stanlib Asset Management Limited. Stanlib Asset Management

Limited manages R72 billion (2003: R59 billion) on the policyholders’ assets of Liberty Group Limited and Liberty Active.

Banking arrangements and forward exchange contracts

At 31 December 2004, Liberty Life held cash and cash equivalents of R358 million (2003: R273 million) as well as term deposits and

money market securities to the value of R1 599 million (2003: R673 million) with Standard Bank. In addition, money market deposits

of R628 million (2003: Rnil) were held by Stanlib. These deposits were made in the normal course of business at prevailing market

rates. No unrealised profits or losses existed at year end between Standard Bank operations and Liberty Life. All Liberty Ermitage

Jersey Limited’s forward exchange contracts are placed with The Standard Bank of South Africa Limited.


Standard Bank Group

Short-term bridging finance was provided by Standard Bank Group Limited to Liberty Holdings Limited (Libhold) in anticipation

of Libhold receiving the proceeds from Liberty Life’s Black Ownership Initiative. The purpose of the finance was to enable Libhold

to maintain a controlling shareholding in Liberty Life following the share buy back in terms of this initiative. The loan was settled

prior to year end.

Policyholders’ assets

Liberty Life and Liberty Life Active Limited invest policyholders’ funds from time to time in securities issued by its holding

companies, Standard Bank Group Limited and Liberty Holdings Limited. These assets are acquired at market rates specifically to

back policyholders’ liabilities and are therefore not eliminated on consolidation.

At 31 December 2004, Liberty Group policyholders’ assets included investments in Standard Bank Group listed shares with a market

value of R3 244 million and listed preference shares with a market value of R128 million; and investments in Liberty Holdings Limited

with a market value of R459 million. This represented a 3,7% holding in Standard Bank Group Limited’s issued share capital and a 0,1%

holding in the listed preference shares; and a 5,4% holding in the issued share capital of Liberty Holdings Limited.

Liberty Group policyholders’ assets also held unsecured quoted debentures in Standard Bank Group Limited with a value of

R1 477 million.

Outsourcing of IT services

With effect from 1 October 2004, Liberty Life partially outsourced its IT services to Standard Bank. The outsourcing will result in

an estimated payment of R30 million per annum to Standard Bank.

34.3 Directors

Details relating to directors’ emoluments and shareholdings in the company are disclosed in the remuneration review and the

directors’ report on pages 35 to 37 and 77 respectively.

34.4 Empowerment deals

Mr Saki Macozoma, a director of Safika Holdings (Proprietary) Limited (Safika), is a director of Standard Bank and Liberty Life.

Safika has entered into empowerment deals with the group. At year end Safika owned 12,75% of Stanlib, 14,79% of Andisa Capital,

1,78% of Standard Bank Group and 2,24% of Liberty Group Limited.

Mr Cyril Rhamaphosa, a director of Shanduka Resources (Proprietary) Limited (Shanduka), is a director of Standard Bank. Shanduka

has entered into empowerment deals with the group. At year end Shanduka owned 1,19% of Standard Bank Group and 1,49% of

Liberty Group Limited.

34.5 Shareholders

The principal shareholders of the company are detailed in the directors’ report on page 78.

2004Rm

2003

Rm

35 Pensions and other post-retirement benefits


Amounts recognised in the balance sheet (note 19.4)

Retirement fund (note 35.1) 354 180

Post-retirement healthcare benefits (note 35.2) 423 392

– Provider Fund 21 21

– Other 402 371

777 572



Standard Bank Group

35.1 Retirement funding

Membership of the principal fund, the Standard Bank Group Retirement Fund (SBGRF) exceeds 95% of Standard Bank operations’

permanent staff in South Africa. The fund, one of the largest in South Africa, is a trustee-administered defined contribution fund

governed by the Pension Funds Act, 1956. Member-elected trustees represent 50% of the trustee board. The assets of the fund

are held independently of the group’s assets.

The fund is subject to statutory financial review by actuaries at an interval of not more than three years. As a result of delays in

relevant regulations and pension fund guidelines being published in late 2004, the Financial Services Board (FSB) approved an

extension in submitting the 31 December 2001 valuation, which has now been submitted.

Employees who were members of the fund on 31 December 1994, have guaranteed benefits available under the rules of

the defined benefit fund. A specific liability has been recognised within the fund to provide for guaranteed benefits which

may arise under the rules of the scheme. New members from 1 January 1995 participate only in the benefits of the defined

contribution fund.

As reported last year, the employer received approval from the FSB to create an employer surplus account which at 31 December 2004

amounted to R122 million (2003: R338 million). At 31 December 2004, the valuation of the fund, the determination of its financial

position and the determination of any shortfall or surplus position are still to be finalised and approved by the Registrar of Pension

Funds in terms of the Pension Fund Second Amendment Act, 39 of 2001. Consequently no account has been taken of any potential

shortfall or surplus.

The majority of employees in South Africa who are not members of the SBGRF are members of two other funds designed for their

occupational groups. Employees in territories beyond South African jurisdiction are members of either defined contribution or

defined benefit plans governed by legislation in their respective countries.

2004Rm

2003

Rm

The amounts recognised in the balance sheet in respect of the retirement fund are determined as follows:

Present value of unfunded obligations 13 146 10 174

Fair value of plan assets (13 232) (10 512)

Surplus (86) (338)

Unrecognised actuarial gains 440 518

Included in other liabilities and provisions in the balance sheet 354 180

Unrecognised actuarial gains or losses are deferred and recognised in the income

statement over a period not exceeding the estimated service lives of the employees.

The amounts recognised in the income statement are determined as follows:

Current service cost 270 204

Interest cost 1 025 1 086

Expected return on plan assets (1 087) (1 109)

Net actuarial gain recognised in the year (27) –

Included in staff costs 181 181

Movement in the liability recognised in the balance sheet

Balance at beginning of the year 180 –

Income statement charge 181 181

Contributions paid (7) (1)



Standard Bank Group

35.2 Post-retirement healthcare benefits

The bank provides the following post-retirement healthcare benefits to its employees:

Provider Fund

A post-retirement healthcare benefit fund provides eligible employees, who were employed in South Africa on 1 March 2000 with

a lump sum benefit on retirement enabling them to purchase an annuity to be applied towards their post-retirement healthcare

costs. This benefit is pre-funded in a provident fund. Any shortfall in the payment to be made by these employees towards their

healthcare costs subsequent to retirement is not the responsibility of the bank. The last actuarial valuation was performed on

1 March 2001 and reflected an excess in the fund.

The group received approval from the Financial Services Board to transfer the excess to an employer reserve.

Other

The largest portion of this liability represents a South African post-retirement healthcare benefit commitment that covers all

employees who went on retirement before 1 March 2000. The liability is unfunded and is valued every year using the projected

unit credit method. The latest full actuarial valuation was performed on 31 December 2002.

2004Rm

2003Rm

The amounts recognised in the balance sheet in respect of post-retirement healthcare benefits are determined as follows:

Present value of unfunded obligations 1 155 901

Fair value of plan assets (846) (652)

Unfunded obligation 309 249

Unrecognised actuarial gains 114 143

Included in other liabilities and provisions in the balance sheet 423 392

The amounts recognised in the income statement are determined as follows:

Current service cost 55 24

Interest cost 89 105

Expected return on plan assets (70) (54)

Net actuarial gain recognised in the year (3) –

Included in staff costs 71 75

Movement in the liability recognised in the balance sheet


Income statement charge 71 75

Contributions paid (40) (30)




Standard Bank Group

The principal actuarial assumptions used for accounting purposes were:

Retirement fund %

Provider Fund %

Other%

Discount rate 8,5 8,5 9,5

Return on investments 9,5 9,0

Salary/benefit inflation 5,0 6,0

CPI inflation 4,0 4,0 5,0

Medical inflation 7,0

Remaining service life of employees 16 20

Liberty Life

35.3 Pension fund

The defined benefit pension scheme, closed to new employees from 1 March 2001, is governed by the Pension Funds Act, 1956.

With effect from 1 March 2001, approximately 85% of staff members, representing approximately 70% of the active member

liability, accepted an offer to convert their retirement plans from defined benefit to defined contribution. This resulted in a net

transfer of R124 million from the defined benefit to the defined contribution fund.

The actuarial present value of funded obligations of the defined benefit pension fund as at 31 December 2004 was R561 million

(2003: R513 million). The value of plan assets at 31 December 2004 was R1 093 million (2003: R901 million). No asset is recognised

in respect of the surplus as the apportionment still needs to be approved by the Registrar of Pension Funds in terms of the

Pension Fund Second Amendment Act, 39 of 2001. The latest full actuarial valuation was performed on 1 January 2003.

35.4 Post-retirement medical aid

For past service, Liberty recognises and provides for the actuarially determined present value of post-retirement medical aid

employer contribution on an accrual basis.

A net liability of R160 million (2003: R155 million) has been recognised in the balance sheet in respect of this commitment.

The principal actuarial assumptions used for accounting purposes were:

Defined benefit

pension fund

%

Post retirement

medical aid %

Discount rate 7,0 13,0

Return on investments 7,0 13,0

Salary/benefit inflation 5,0

Medical inflation 11,0


Company

Note

2004Rm

2003

Rm

Balance sheet

at 31 December 2004

Assets

Investment securities 8 8

Current tax asset 112 93

Deferred tax asset 173 114

Other assets 14 14

Interest in subsidiaries 36 16 713 13 186

Interest in associate 37 131 131

Total assets 17 151 13 546


Liabilities


Capital and reserves 17 117 13 518

Share capital and premium 24.2 5 667 2 415

Reserves 11 450 11 103


Income statement

for the year ended 31 December 2004

Dividends from subsidiaries 6 524 2 509

Interest income 54 22

Total income 6 578 2 531

Operating expenses 51 10


Exceptional items 38 – (53)


Indirect tax expense 39 11 11

Income before direct tax 6 516 2 457

Direct income tax expense 39 2 130

Profit for the year 6 514 2 327

Standard Bank Group Limited | company annual financial statements


Company

Note

2004Rm

2003

Rm

Cash flow statement


Net cash flows from operating activities 40.1 6 527 2 521

Interest income 54 22

Interest and other expenses (51) (10)

Dividends received 6 524 2 509

Net cash flows from operating funds

Increase in other liabilities and provisions 40.2 6 10

Tax paid 40.3 (91) (97)

Net cash used in investing activities (3 527) (814)

Interest in subsidiaries 40.4 (3 527) (793)

Interest in associates 37 – (21)

Net cash flows used in financing activities (2 915) (1 620)

Proceeds from issue of share capital 3 252 133

Black Ownership Initiative transaction payment (4 017) –

Dividends paid 40.5 (2 150) (1 753)

Net increase in cash and cash equivalents – –

Cash and cash equivalents at beginning of the year – –

Cash and cash equivalents at end of the year – –

Statement of changes in shareholders’ funds


Note

Share capital

and premium

Rm

Revaluation

reserve

Rm

Empowerment

reserve

Rm

Retained

earnings

Rm

Total

Rm

Balance at 1 January 2003 2 282 3 100 – 7 354 12 736

Change in accounting policy 1 75 75

Restated balance at 1 January 2003 2 282 3 100 – 7 429 12 811


Dividends paid 29.2 (1 753) (1 753)

Issue of share capital and share premium 133 133

Balance at 31 December 2003 2 415 3 100 – 8 003 13 518

Balance at 1 January 2004 2 415 3 100 – 8 003 13 518

Impairment resulting from Black

Ownership Initiative 25 (4 017) (4 017)

Issue of share capital and share premium 3 269 3 269

Share issue cost (17) (17)


Dividends paid 29.2 (2 150) (2 150)

Balance at 31 December 2004 5 667 3 100 (4 017) 12 367 17 117

1 Relates to STC deferred tax asset recognised as required by AC 501.

Company annual financial statements continued


Company

2004Rm

2003

Rm

Notes to the company annual financial statements


36 Interest in subsidiaries

Shares at cost 17 257 13 572

Indebtedness to the company 531 548

17 788 14 120

Indebtedness by the company (1 075) (934)

16 713 13 186

Subsidiaries and investments and loans therein are listed in Annexure B on pages 152 to 155.

37 Interest in associate

Carrying value at beginning of the year 131 110

Net acquisitions – 21

Carrying value at end of the year 131 131


The directors’ valuation of the investments in associates is R131 million (2003: R131 million).

The interest in associate represents the investment in South African Home Loans

(Proprietary) Limited refer Annexure C on page 156.

38 Exceptional items

Loss on disposal of share in subsidiary – (53)

39 Tax

Indirect tax expense

Regional services council levies 9 9

Value added tax 2 2

11 11

Direct income tax expense

South African normal tax 17 165

Foreign and withholding taxes 44 5


Deferred tax – (1)

2 130

Total tax expense 13 141


Company

2004Rm

2003

Rm

South African tax rate reconciliation (%)

The tax charge for the year as a percentage of income before tax – 6

The charge for the year has been reduced as a consequence of:

– Dividends received 30 24

Standard rate of South African tax 30 30


40.1 Reconciliation of net income from operations to cash flows from operating activities


Adjusted for:

– Loss on sale of subsidiary – 53

Cash flows from operating activities 6 527 2 521

40.2 Increase in other liabilities and provisions


40.3 Tax paid

Amounts prepaid at beginning of the year 93 176

Income statement charge (72) (180)

Amounts prepaid at end of the year (112) (93)

(91) (97)

40.4 Interest in subsidiaries

Cost of acquisition of subsidiaries net of disposal (3 685) (1 299)

Movement in net indebtedness 158 506

(3 527) (793)

40.5 Dividends paid

Amounts unpaid at beginning of the year – –

Dividends paid to ordinary shareholders (2 150) (1 753)

Amounts unpaid at end of the year – –

(2 150) (1 753)

Company annual financial statements continued


Annexure A | currency balance sheet

Standard Bank Group

2004

RandRm

UK£Rm

US$Rm

€

RmOther

RmTotal

Rm

Assets


Cash and balances with banks 2 831 8 153 14 340 874 5 186 31 384

Short-term negotiable securities 16 605 – – – 4 435 21 040

Derivative assets 99 415 407 23 681 249 483 124 235

Trading assets 6 863 737 12 879 7 312 4 339 32 130

Investment securities 18 722 52 246 – 620 19 640

Loans and advances 213 287 2 099 27 797 2 259 11 712 257 154

Other assets 11 530 184 3 105 441 1 234 16 494

Interest in associates and joint ventures 280 – – – 6 286

Goodwill and other intangible assets 348 71 – – 60 479

Property and equipment 2 339 33 56 – 540 2 968

Liberty Life 1 109 363 217 178 9 – 109 767

Total assets 481 583 11 953 82 282 11 144 28 615 615 577

Liabilities


Derivative liabilities 93 346 364 21 584 404 516 116 214

Trading liabilities 4 647 26 7 023 458 2 256 14 410

Deposit and current accounts 244 094 9 979 36 270 5 968 20 205 316 516

Other liabilities and provisions 14 704 377 2 608 167 1 411 19 267

Subordinated bonds 8 019 – 1 408 – 66 9 493

Liberty Life 1 101 106 5 – 2 – 101 113

Total liabilities 465 916 10 751 68 893 6 999 24 454 577 013

Net assets including minority interest 15 667 1 202 13 389 4 145 4 161 38 564

Net off-balance sheet currency position 17 094 604 (5 298) (7 053) (5 347) –

Net open foreign currency position 32 761 1 806 8 091 (2 908) (1 186) 38 564

2003

Rand

Rm

UK£

Rm

US$

Rm

€

RmOther

Rm

Total

Rm

Net open foreign currency position 33 906 4 240 (1 200) (1 492) (391) 35 063

1 Only the exposure of Liberty Life’s shareholders’ assets and liabilities is reflected in foreign currencies.


Annexure B | subsidiaries

Notes: This diagram depicts principal subsidiaries only. The holding in subsidiaries is 100% unless otherwise indicated.

1 Liberty Group and Liberty Holdings are consolidated in terms of the SBG percentage holding, based on shares issued on the JSE.

Standard Bank Group

The Standard Bank of South Africa

Stanbic Africa HoldingsStandard International

HoldingsLiberty Group (50,17%) 1

effective 27,4%

Liberty Holdings (54,65%) 1

Melville Douglas

Investment Management

Standard Executors and

Trustees

Standard Insurance

Stanvest

Stanbic Bank Botswana

Stanbic Bank Congo

Stanbic Bank Ghana (97%)

Stanbic Bank

Kenya (96%)

Stanbic Bank Limited,

Malawi (60%)

Stanbic Bank Nigeria

(93%)

Stanbic Bank Tanzania

Stanbic Bank

Uganda (90%)

Stanbic Bank Zambia

Stanbic Bank Zimbabwe

Stanbic Finance

Zimbabwe

Standard Bank Mauritius

Standard Bank s.a.r.l

Mozambique (96%)

UK Standard Bank London

Asia Standard Bank Asia

Standard London

(Asia) SB

Standard Merchant

Bank (Asia)

USA Standard Americas

Standard New York

Standard New York

Securities

Brazil Banco Standard de

Investimentos

Russia

ZAO Standard Bank

Turkey Standard Yatirim

Liberty Active

Liberty Ermitage Jersey

Liberty Group Properties

SBIC InternationalStandard Bank Offshore Group

(37,4%) Stanlib (37,4%) effective 47,65%

Stanlib Asset

Management

Stanlib Collective

Investments

Stanlib Multi-Manager

Stanlib Wealth

Management

British Virgin Islands SBIC Finance

SML

Isle of Man Stanbic International

Insurance

Standard Finance (IOM)

Jersey Standard Bank Fund

Administration Jersey

Standard Bank Jersey

Standard Bank Offshore

Trust Company Jersey

Isle of Man Standard Bank Isle

of Man

Mauritius Standard Bank Trust

Company (Mauritius)

British Virgin Islands Melville Douglas

International

Blue Bond Investments

Diners Club (SA)

Standard Bank

Insurance Brokers

Lesotho Bank (1999) (70%)

Standard Bank Lesotho

Standard Bank Namibia

Standard Bank

Swaziland (65%)


Effectiveholding

Book valueof shares

Netindebtedness

Nature ofoperation

Issuedcapital

Rm2004

%2003

%

2004Rm

2003

Rm

2004Rm

2003

Rm

Standard Bank Group will ensure that, except in the case of political risk, its banking subsidiaries, and its principal non-banking subsidiaries denoted by #, are able to meet their contractual liabilities.

Banking subsidiaries

Banco Standard de Investimentos S.A. (Brazil) 1 Investment bank ** 100 100

Lesotho Bank (1999) Limited (Lesotho) 1 Commercial bank 35 70 70

Stanbic Bank Limited (Malawi), formally Commercial Bank of Malawi Limited 1 Commercial bank 13 60 60

Stanbic Bank Botswana Limited (Botswana) 1 Commercial bank 31 100 100

Stanbic Bank Congo s.a.r.l. (D R Congo) 1 Commercial bank ** 100 100

Stanbic Bank Ghana Limited (Ghana) 1 Commercial bank 78 97 97

Stanbic Bank Kenya Limited (Kenya) 1 Commercial bank 149 96 95

Stanbic Bank Nigeria Limited (Nigeria) 1 Commercial bank 62 93 93

Stanbic Bank Tanzania Limited (Tanzania) 1 Commercial bank 13 100 100

Stanbic Bank Uganda Limited (Uganda) 1 Commercial bank 21 90 90

Stanbic Bank Zambia Limited (Zambia) 1 Commercial bank 21 100 100

Stanbic Bank Zimbabwe Limited (Zimbabwe) 1 Commercial bank 55 100 100

Stanbic Finance Zimbabwe Limited (Zimbabwe) 1 Finance company 10 100 100

Standard Bank Asia Limited (Hong Kong) 1 Merchant bank 587 100 100

Standard Bank Isle of Man Limited (Isle of Man) 1 Merchant bank 25 100 100

Standard Bank Jersey Limited (Jersey) 1 Merchant bank 25 100 100

Standard Bank Lesotho Limited (Lesotho) Commercial bank 17 100 100 13 13

Standard Bank London Limited (United Kingdom) 2 Merchant bank 1 160 100 100 929 929

Standard Bank Mauritius (Mauritius) 1 Commercial bank 226 100 100

Standard Bank Namibia Limited (Namibia) Commercial bank 2 100 100 444 9

Standard Bank s.a.r.l. Mozambique 5 Commercial bank ** 96

Standard Bank Swaziland Limited (Swaziland) Commercial bank 9 65 65 56 56 20 16

Standard Merchant Bank (Asia) Limited (Singapore) 1 Merchant bank ** 100 100

The Standard Bank of South Africa Limited Commercial bank 60 100 100 8 014 5 514 (202) (28)

ZAO Standard Bank (Russia) 1 Investment bank ** 100 100


Effectiveholding

Book valueof shares

Netindebtedness

Nature ofoperation

Issuedcapital

Rm2004

%2003

%

2004Rm

2003

Rm

2004Rm

2003

Rm

Non-banking subsidiaries

Allisier Investments (Pty) Limited 1 Investment holding company ** 100 100

Andisa Securities (Pty) Limited 1 Stockbrokers ** 100 100

Blue Bond Investments Limited 1 Participation mortgage bond finance ** 100 100

Blue Titanium Conduit 3 Asset backed commercial paper conduit

Diners Club (S.A.) (Pty) Limited 1# Travel and entertainment card ** 100 100

Erf 224 Edenburg (Pty) Limited 1 Property owning and investing company ** 100 100

Gleneagles Retail Centre (Pty) Limited 1

Property owning and investing company ** 100 100

Grand Central Shopping Centre (Pty) Limited 1

Property owning company ** 100 100

Liberty Group Limited 1,4 Insurance company 28 27 30

Liberty Holdings Limited 4 Insurance holding company 14 55 55 2 304 2 304

Melville Douglas International (British Virgin Islands) 1# Portfolio management ** 100 100

Melville Douglas Investment Management (Pty) Limited # Portfolio management ** 100 100 53 53

SBIC Finance Limited (British Virgin Islands) 1 Project finance ** 100 100

SBIC International Limited (British Virgin Islands)

Investment holding company ** 100 100 4 038 3 630

SBIC Investments S.A. (Luxembourg) 1#

Investment holding company 287 100 100

SML Limited (British Virgin Islands) 1 Investment holdingcompany

** 100 100

SMT Limited (British Virgin Islands) 1 Investment holdingcompany

** 100 100

Stanbic Africa Holdings Limited (United Kingdom) 2

Investment holding company 158 100 100 500 118

Standard Bank Insurance Brokers Namibia (Pty) Limited 1 Insurance company ** 100 100

Standard Insurance Limited # Short-term insurance 15 100 100 30 30

Stanbic International Insurance Limited (Isle of Man) 1 Insurance company 1 100 100

Standard Americas, Inc (USA) 1# Trading company ** 100 100

Standard Aval sro (Czech Republic) 1 Trade and other finance ** 100 100

Standard Bank Fund Administration Jersey Limited (Jersey) 1# Fund administration ** 100 100

Standard Bank Insurance Brokers (Pty) Limited 1# Insurance broking ** 100 100

Standard Bank London Holdings Plc (United Kingdom) 1


Standard Bank Manx Holdings Limited (Isle of Man) 1


Annexure B – subsidiaries continued


Effectiveholding

Book valueof shares

Netindebtedness

Nature ofoperation

Issuedcapital

Rm2004

%2003

%

2004Rm

2003

Rm

2004Rm

2003

Rm

Standard Bank Offshore Group Limited (Jersey) 2


Standard Bank Offshore Trust Company (Jersey) Limited (Jersey) 1# Trust company 2 100 100

Standard Bank Stockbrokers (Isle of Man) Limited (Isle of Man) 1# Stockbrokers 3 100 100

Standard Bank Trust Company (Isle of Man) Limited (Isle of Man) 1# Trust company 1 100 100

Standard Bank Trust Company (Mauritius) Limited (Mauritius) 1# Trust company ** 100 100

Standard Commodities (Asia) Limited (Hong Kong) 1 Commodities trading ** 100 100

Standard Executors and Trustees Limited 1# Trust company ** 100 100

Standard Finance (Isle of Man) Limited (Isle of Man) 1# Finance company ** 100 100

Standard International Holdings S.A. (Luxembourg) 2#


Standard London (Asia) Limited (Hong Kong) 1 Investment company 78 100 100

Standard London (Asia) Sendirian Berhad (Malaysia) 1 Introducing broker 1 100 100

Standard New York Securities, Inc (USA) 1# Securities broker/dealer ** 100 100

Standard New York, Inc (USA) 1# Investment holding company ** 100 100

Standard Resources (China) Limited 1 Trading company 1 100

Standard Risk and Treasury Management Services (Pty) Limited 1

Risk and treasury management services ** 100 100

Standard Yatirim Menkul Kiymetler A.S. (Turkey) 1# Securities broker/dealer 41 100 100

Stanlib Limited 2 Wealth and asset management ** 48 49 687 683 28 2

Stanvest (Pty) Limited 2 Investment holding company 1 100 100

Triskelion Trust Company Limited 1 Trust company 3 100 100

Miscellaneous Finance companies 100 100 41 85 (390) (376)

17 257 13 572 (544) (386)

The issued share capital of foreign subsidiaries has been stated in the above table at their rand equivalents at the rates of exchange ruling on the dates of provision of capital. Detailed information is not given in respect of subsidiaries which are not material to the financial position of the group, including those acquired through realisation of securities held by banking companies.

1 Held indirectly.2 Effective holding comprises direct and indirect holdings.3 Special purpose entity, no shareholding.4 Listed on the JSE.5 Accounted for as an associate in 2003.

** Issued share capital less than R1 million.


Annexure C | associates and joint ventures

EduLoan (Proprietary)

Limited

Standard Bank s.a.r.l. Mozambique 1

South African Home Loans

(Proprietary) Limited

Ownership structure Associate Associate Associate

Nature of business Student loans Banking Finance

Year end December December February

Date to which equity accounted 31 December 2004 31 December 2004 31 December 2004

2004 2003 2004 2003 2004 2003

Effective holding 45% 45% – 96% 43% 43%

Rm Rm Rm Rm Rm Rm

Carrying value 30 26 – 231 48 47

Gross goodwill 2 2 – 74 131 131

Net goodwill 1 2 – 67 38 47

Directors’ valuation 30 26 – 231 131 131

Balance sheet

Non-current assets 26 10 – 93 9 525 4 556

Current assets 164 150 – 1 932 492 101

Non-current liabilities (54) (61) – (47) (8 876) (402)

Current liabilities (73) (62) – (1 806) (978) (4 183)

Loans to entity – – – – 2 493 256

Income statement

Attributable income 5 – – 33 10 –

JR163 Investments (Proprietary) Limited

Andisa Capital (Proprietary) Limited

Mathomo Group Limited

Ownership structure Associate Associate Associate

Nature of business Photographic equipment Securities trading Retailer

Year end April December September


2004 2003 2004 2003 2004 2003

Effective holding 30% 30% 49% 49% 26% 41%

Rm Rm Rm Rm Rm Rm

Carrying value 66 108 (31) (17) 29 42

Gross goodwill – – – – – –

Net goodwill – – – – – –

Directors’ valuation 66 108 – – 29 42

Balance sheet

Non-current assets 293 355 309 54 19 16

Current assets 138 169 120 142 98 98

Non-current liabilities (23) (38) (328) (37) (23) (34)

Current liabilities (73) (59) (166) (181) (82) (66)

Loans to entity – 5 55 53 – –

Income statement

Attributable income 8 37 (14) (17) (1) 6

1 Following final approval of the acquisition by the Mozambique authority, the entity is accounted for as a subsidiary.


The Standard Bank African Bank partnership

Other associates Other joint ventures

Ownership structure Joint venture Associate Joint venture

Nature of business Banking Various Various

Year end September Various Various


2004 2003 2004 2003 2004 2003

Effective holding 60% 60% Various Various Various Various

Rm Rm Rm Rm Rm Rm

Carrying value 69 29 68 69 7 6

Gross goodwill – – – 12 – –

Net goodwill – – – 4 – –

Directors’ valuation 69 29 68 69 7 6

Balance sheet

Non-current assets 568 380 135 181 1 267

Current assets 32 15 453 307 41 50

Non-current liabilities (445) (254) (117) (118) – (272)

Current liabilities (18) (22) (286) (174) (29) (39)

Loans to entity 209 119 – 42 – –

Income statement

Attributable income 68 29 17 14 4 –

Total associates and joint ventures

2004 2003

Rm Rm

Carrying value 286 541

Gross goodwill 1 133 219

Net goodwill 39 120

Directors’ valuation 400 642

Balance sheet

Non-current assets 10 876 5 912

Current assets 1 538 2 964

Non-current liabilities (9 866) (1 263)

Current liabilities (1 705) (6 592)

Loans to entity 2 757 475

Income statement

Attributable income 97 102

1 Goodwill on associates and joint ventures is amortised over 5 years.


Annexure D | group share incentive scheme

Option price range (cents) Number Number

2004 2004 2003

Group share incentive scheme reconciliation

Options outstanding at beginning of the year 81 946 922 76 842 671

Granted 1 (3 970 – 6 200) 15 235 800 18 177 200

Exercised (1 080 – 3 415) (13 378 700) (7 651 200)

Lapsed (1 250 – 4 075) (3 893 869) (5 421 749)

Options outstanding at end of the year 79 910 153 81 946 922

The following options granted to employees, including executive directors, had not been exercised at 31 December 2004:

Number of ordinary shares Option price range (cents)

Weighted average price(cents)

Option expiry period

735 000 1 250 – 2 500 1 369 Year to 31 December 2005

950 100 1 710 – 3 190 2 692 Year to 31 December 2006

1 785 800 1 830 – 3 200 2 096 Year to 31 December 2007

9 621 036 1 350 – 2 890 2 070 Year to 31 December 2008

3 884 900 1 715 – 2 640 1 828 Year to 31 December 2009

7 610 417 2 205 – 2 950 2 542 Year to 31 December 2010

11 102 100 2 770 – 3 590 3 187 Year to 31 December 2011

13 220 700 2 725 – 3 620 2 794 Year to 31 December 2012

16 310 200 2 715 – 3 485 2 797 Year to 31 December 2013

14 689 900 3 970 – 6 200 4 111 Year to 31 December 2014

79 910 153

1 The options granted during the year which are expected to vest, have an estimated fair value of R149 million (2003: R133 million).


Abridged financial statements | of principal banking subsidiary

The Standard Bank of South Africa Limited

2004Rm

2003

Rm

Balance sheet

at 31 December

AssetsCash and balances with banks 8 750 8 201

Short-term negotiable securities 16 045 15 160

Derivative assets 97 619 79 573

Trading assets 6 545 9 068

Investment securities 16 110 14 566

Loans and advances 201 225 153 345

Other assets 6 828 7 995

Interest in group companies, associates and joint ventures 29 517 30 587

Intangible assets 205 209

Property and equipment 2 069 2 149

Total assets 384 913 320 853

Equity and liabilitiesLiabilities

Derivative liabilities 92 349 73 701

Trading liabilities 1 860 4 757

Deposit and current accounts 244 423 198 982

Other liabilities and provisions 13 137 13 062

Subordinated bonds 7 869 5 830

Liabilities to group companies 7 078 9 284

Total liabilities 366 716 305 616

Share capital 60 60

Share premium 8 137 5 643

Reserves 10 000 9 534

Total capital and reserves 18 197 15 237


Income statement

for the year ended 31 December

Interest income 30 677 31 517

Interest expense 21 130 22 652

Net interest income before provisions for credit losses 9 547 8 865

Provisions for credit losses 851 1 341

Net interest income 8 696 7 524

Non-interest revenue 9 345 7 672

Income from operations 18 041 15 196

Operating expenses 10 651 9 210


Goodwill amortisation – (4)

Exceptional items (8) 114

Income from associates and joint ventures 79 32


Indirect tax expense 316 325

Income before direct tax 7 145 5 803

Direct income tax expense 1 707 1 570



Average balance sheet and interest rates | domestic average balance sheet and margin analysis

31 December 2004

Assets

Non-interestearning

Rm

Interestearning

Rm

Totalaveragebalance

RmInterest

Rm

Averagerate

%Cash and balances with banks 6 494 15 283 21 777 248 1,14Short-term negotiable securities – 15 532 15 532 1 278 8,23Trading assets 9 008 – 9 008 – –Investment securities 2 436 12 660 15 096 1 271 8,42Loans and advances 3 387 191 165 194 552 20 449 10,51– Mortgage lending 1 424 87 045 88 469 8 804 9,95– Instalment finance 392 30 289 30 681 3 585 11,68– Other term lending 361 40 516 40 877 4 979 12,18

– Foreign currency lending – 7 541 7 541 276 3,66

– Other loans 1 210 25 774 26 984 2 805 10,40Funding provided to trading book – – – 1 334 –Other assets 19 862 – 19 862 (56) (0,28)Interest in associates and joint ventures 203 – 203 – –Goodwill and other intangible assets 57 – 57 – –Property and equipment 2 459 – 2 459 – –Total average assets and interest excluding derivative

assets and before provisions for credit losses 43 906 234 640 278 546 24 524 8,80

Provisions for credit losses (3 281) – (3 281) 18 (0,55)

Total average assets and interest excluding derivative assets 40 625 234 640 275 265 24 542 8,92

Derivative assets 74 415 – 74 415

Total average assets and interest 115 040 234 640 349 680 24 542

Liabilities

Non–interestbearing

Rm

Interestbearing

Rm

Totalaveragebalance

RmInterest

Rm

Averagerate

%

Trading liabilities 9 236 – 9 236 – –

Deposit and current accounts 2 343 227 054 229 397 14 395 6,28

– Overnight deposits – 111 938 111 938 5 301 4,74

– Term deposits 2 072 90 522 92 594 7 554 8,16

– Foreign currency funding – 12 720 12 720 226 1,78

– Other 271 11 874 12 145 1 314 10,82

Other liabilities and provisions 16 108 – 16 108 – –

Subordinated bonds – 6 036 6 036 827 13,70

Capital and reserves 18 555 – 18 555 – –

Total average liabilities, equity and interest excluding

derivative liabilities 46 242 233 090 279 332 15 222 5,45

Derivative liabilities 70 348 – 70 348

Total average liabilities, equity and interest 116 590 233 090 349 680 15 222

Margin on total average assets excluding derivative assets 40 625 234 640 275 265 9 320 3,39

Margin on total average loans and advances 3 387 191 165 194 552 9 320 4,79

Margin on average interest earning assets – 234 640 234 640 9 320 3,97

The table sets out daily average balances for the assets, liabilities and equity of Domestic Banking for the year indicated. For interest bearing assets and interest bearing liabilities, the table reflects the amount of interest earned or paid and the average rate of interest. The average rate represents interest income or expense as a percentage of the corresponding average balance.

pg 160 | Additional information

31 December 2003

Assets

Non-

interest

earning

Rm

Interest

earning

Rm

Total

average

balance

Rm

Interest

Rm

Average

rate

%Cash and balances with banks 5 568 21 057 26 625 474 1,78Short-term negotiable securities – 10 401 10 401 1 267 12,18Trading assets 9 532 – 9 532 – –Investment securities 1 815 13 800 15 615 1 508 9,66Loans and advances 2 922 153 968 156 890 20 940 13,35– Mortgage lending 1 061 63 680 64 741 9 020 13,93– Instalment finance 258 24 973 25 231 3 758 14,89– Other term lending 601 33 316 33 917 4 083 12,04

– Foreign currency lending – 7 487 7 487 272 3,63

– Other loans 1 002 24 512 25 514 3 807 14,92Funding provided to trading book – – – 2 295 –Other assets 17 470 – 17 470 (6) (0,03)Interest in associates and joint ventures 163 – 163 – –Goodwill and other intangible assets 70 – 70 – –Property and equipment 2 607 – 2 607 – –Total average assets and interest excluding derivative

assets and before provisions for credit losses 40 147 199 226 239 373 26 478 11,06

Provisions for credit losses (3 082) – (3 082) 16 (0,52)

Total average assets and interest excluding derivative assets 37 065 199 226 236 291 26 494 11,21

Derivative assets 67 772 – 67 772

Total average assets and interest 104 837 199 226 304 063 26 494

Liabilities

Non-

interest

bearing

Rm

Interest

bearing

Rm

Total

average

balance

Rm

Interest

Rm

Average

rate

%

Trading liabilities 6 136 – 6 136 – –

Deposit and current accounts 3 592 193 228 196 820 17 041 8,66

– Overnight deposits – 94 474 94 474 7 230 7,65

– Term deposits 3 592 75 545 79 137 8 513 10,76

– Foreign currency funding – 13 223 13 223 183 1,38

– Other – 9 986 9 986 1 115 11,17

Other liabilities and provisions 14 727 – 14 727 – –

Subordinated bonds – 5 830 5 830 765 13,12

Capital and reserves 14 692 – 14 692 – –

Total average liabilities, equity and interest excluding

derivative liabilities 39 147 199 058 238 205 17 806 7,47

Derivative liabilities 65 858 – 65 858

Total average liabilities, equity and interest 105 005 199 058 304 063 17 806

Margin on total average assets excluding derivative assets 37 065 199 226 236 291 8 688 3,68

Margin on total average loans and advances 2 922 153 968 156 890 8 688 5,54

Margin on average interest earning assets – 199 226 199 226 8 688 4,36


International representation

Standard Bank Group LimitedReg No. 1969/017128/06Registered office 9th Floor Standard Bank Centre 5 Simmonds Street Johannesburg 2001 PO Box 7725 Johannesburg 2000 Telephone: (2711) 636-9111 Facsimile: (2711) 636-4207 e-mail: [email protected] website: http://www.standardbank.co.za

ArgentinaStandard Bank London Limited – Representative office Torre Alem Plaza Av. L.N. Alem 855, 22nd Floor C1001AAD Buenos Aires Argentina

F Canzani – Representative

AustraliaStandard Bank London Limited – Representative office Level 42 Gateway 1 Macquarie Place Sydney NSW 2000 Australia

K Russell – Representative

BotswanaStanbic Bank Botswana Limited Ist Floor Stanbic House Off Machel Drive Fairground Private Bag 00168 Gaborone Botswana

D W Kennedy – Managing director

BrazilBanco Standard de Investimentos S.A. Edificio Plaza Iguatemi Av. Brigadeiro Faria Lima 2277, 12º andar – J Paulistano 01452-000 São Paulo Brazil

F Solferini – Director

Standard Bank London Limited – Representative officeEdificio Plaza Iguatemi Av. Brigadeiro Faria Lima 2277, 12˚ andar – J Paulistano 01452-000 São Paulo

Brazil

F Solferini – Representative

ChinaStandard Resources (China) Limited 15th Floor, HSBC Tower 101 Yin Cheng East Road Pudong New Area Shanghai 200120 The People’s Republic of China

W Liu – Contact

Standard Bank London Limited – Representative office15th Floor, HSBC Tower 101 Yin Cheng East Road Pudong New Area Shanghai 200120 The People’s Republic of China

V Yu – Representative

Czech RepublicStandard Aval sro Americká 16 120 00, Praha 2 Czech Republic

P Mosna – Director

Democratic Republic of CongoStanbic Bank Congo s.a.r.lAvenue de la Mongala No 12BP 16297Kinshasa 1Democratic Republic of Congo

L Nallet – Managing director

GhanaStanbic Bank Ghana Limited Valco Trust House Castle Road, Ridge Accra Ghana PO Box CT 2344 Cantonments Accra Ghana

J Mabon – Managing director

Hong KongStandard Bank Asia Limited 36th Floor Two Pacific Place 88 Queensway Hong Kong

M J Wilde – Chief executive

IranStandard Bank London Limited –Representative office 114 Khaled Eslamboli Avenue Tehran 15167 Iran

M A Kadjar – Representative

ItalyStandard Bank London Limited – Representative office Largo Treves, 5 20121 Milan Italy

U Forasassi – Contact

KenyaStanbic Bank Kenya Limited Kenyatta Avenue PO Box 30550 Nairobi Kenya

P S Odera – Managing director

LesothoStandard Bank Lesotho Limited1st FloorBank BuildingKingswayTown CentrePO Box 115Maseru 100Lesotho

C G Addis – Managing director designate

Lesotho Bank (1999) LimitedCentral ServicesLesotho Bank BuildingKingswayPO Box 1053Maseru 100Lesotho

C G Addis – Managing director designate

˘

˘


MadagascarUnion Commercial Bank S.A. Rue Solombavambahoaka Frantsay 77 Antsahavola (101) PO Box 197 Antananarivo Madagascar

H Fleurot – Chief executive

MalawiStanbic Bank Limited Cnr. Victoria Avenue and Glyn Jones Roads PO Box 1111 Blantyre Malawi

W le Roux – Acting managing director

Malaysia Standard London (Asia) Sdn Bhd Level 32, Suite B, Menara Maxis Kuala Lumpur City Centre 50088 Kuala Lumpur Malaysia

W L Chay – Director

MauritiusStandard Bank (Mauritius) Limited Suite 505, 5th floor, Barkly Wharf Caudan Waterfront Port Louis Mauritius

M J J R Rey – Managing director

MexicoStandard Bank London Limited – Representative office Campos Eliseos 345 Edificio Omega Piso 5 (5th Floor) Col. Chapultepec Polanco 11560 Mexico City, DF Mexico

F Hernandez Lozano – Representative

Mozambique Standard Bank s.a.r.l. MozambiquePraça 25 de Junho No 1 PO Box 2086 Maputo Moçambique

C Ramalho – Managing director

NamibiaStandard Bank Namibia Limited 5th floor, Standard Bank Centre Cnr Post Street Mall & Werner List Street PO Box 3327 Windhoek Namibia

T Mberirua – Managing director

NigeriaStanbic Bank Nigeria Limited Plot 688 Amodu Tijani Street Victoria Island Lagos PO Box 54747 Falomo Ikoyi Lagos Nigeria

M A Weeks – Managing director

PeruStandard Bank London Limited –Representative office Edificio Fundación Oficina 702 Av. José Pardo 513 Lima 18 Peru

L Saenz – Representative

RomaniaStandard Bank London Limited – Representative office 71-75 Dr. Staicovici Street Forum 2000 Office Building, 6th floor Sector 5 Bucharest Romania

R Deac – Representative

Russian FederationZAO Standard Bank Business Centre ‘Mokhovaya’ 4/7 Vozdvizhenka St., Bldg. 2 Moscow 125009 Russian Federation

P Hurley – Chief executive

Standard Bank London Limited – Representative officeBusiness Centre ‘Mokhovaya’ 4/7 Vozdvizhenka St., Bldg. 2 Moscow 125009 Russian Federation

S Thomas – Representative

SingaporeStandard Merchant Bank (Asia) Limited 80 Raffles Place No. 55-02 UOB Plaza 1 Singapore 048624

J H Saw – Managing director

The Standard Bank of South Africa Limited - Representative office80 Raffles Place No. 55-02 UOB Plaza 1 Singapore 048624

J H Saw – Representative

SwazilandStandard Bank Swaziland Limited Standard House PO Box A294 Swazi Plaza Mbabane Swaziland

M P Lubbe – Managing director

TaiwanThe Standard Bank of South Africa Limited – Taipei branch 134th Floor, No 218 Section 2 Dunhua South Road Taipei City 106 Taiwan The People’s Republic of China

M Swo – General manager

TanzaniaStanbic Bank Tanzania LimitedStanbic CentreCorner Kinondoni and Ali Hassan Mwiniyi RoadsPO Box 72647Dar es SalaamTanzania

P J C Olivier – Managing director

TurkeyStandard Yatirim Menkul Kiymetler A.S. Baltalimani Cad. No:4 Ressam Sevket Dag Yals 34450 Rumelihisari Sariyer Istanbul Turkey

M Talayhan – Director

˛ ˘


International representation continued

Standard Bank London Limited – Representative officeBaltalimani Cad. No:4 Ressam Sevket Dag Yals 34450 Rumelihisari Sariyer Istanbul Turkey

M Talayhan – Representative

UgandaStanbic Bank Uganda Limited Plot 17 Hannington Road Kampala PO Box 7131 Kampala Uganda

K Mbathi – Managing director

United Arab EmiratesStandard Bank London Limited – Representative office Emirates Towers 16th Floor PO Box 504904 Dubai United Arab Emirates

J D Rhodes – Representative

United KingdomStandard Bank London Limited5th FloorCannon Bridge House25 Dowgate HillLondonEC4R 2SBEnglandUnited Kingdom

J H Maree – ChairmanR A G Leith – Chief executive

The Standard Bank of South Africa Limited – Representative office5th Floor Cannon Bridge House 25 Dowgate Hill London EC4R 2SB England United Kingdom

Keith Thompson – Representative

United States of AmericaStandard New York, Inc. Standard Americas, Inc. Standard New York Securities, Inc. 19th Floor 320 Park Avenue New York N.Y. 10022 USA

W S Dorson – Managing director

Standard New York Securities, Inc., – Miami branchStandard Americas, Inc., – Miami BranchSuite 3200 1001 Brickell Bay Drive Miami Florida 33131 USA

P Wallin – Head of office

The Standard Bank of South Africa Limited - Representative office19th Floor 320 Park Avenue New York N.Y. 10022 USA

A Strutt – Representative

ZambiaStanbic Bank Zambia Limited 6th Floor Woodgate House Cairo Road PO Box 31955 Lusaka Zambia

L Kalala – Managing director

ZimbabweStanbic Bank Zimbabwe Limited Stanbic Centre 59 Samora Machel Avenue PO Box 300 Harare Zimbabwe

P Nyandoro – Managing director

Standard Bank Offshore Group Limited

I G Gibson – Chief executive

JerseyStandard Bank Jersey LimitedPO Box 583 47-49 La Motte Street St Helier Jersey JE4 8XR Channel Islands

I G Gibson – Chief executive

Isle of ManStandard Bank Isle of Man Limited Standard Bank House One Circular Road Douglas Isle of Man IM1 1SB

K Foden – Director

MauritiusStandard Bank Trust Company (Mauritius) Limited Les Jamalacs Building Vieux Conseil Street Port Louis Mauritius

R Natho – Director

˛ ˘


Shareholders’ information

166 Chairman’s letter to shareholders

168 Notice to members

175 Proxy form

178 Directorate

179 Shareholders’ diary

179 Analysis of shareholders

180 Instrument codes

180 Credit ratings


Dear shareholder

The annual general meeting (AGM) of Standard Bank Group

Limited will be held in the H P de Villiers Auditorium, Standard

Bank Centre, 6 Simmonds Street, Johannesburg on

Wednesday, 25 May 2005 at 9.30am. This letter explains the

business to be conducted at the meeting.

The annual report for the year ended 31 December 2004 will

also be available on the website at www.standardbank.co.za.

Explanatory note on resolutions

Resolution 1

Receive and adopt the annual financial statements for the

financial year ended 31 December 2004 – this is ordinary

business and there are no special items to bring to the

attention of the shareholders.

Resolution 2

Approve the non-executive directors’ fees for 2005 – in

resolutions 2.1 to 2.10, in line with the King Code, you are

asked to approve the fees for non-executive directors for

2005. The fees are considered by the remuneration committee

to be in line with market trends and have been recommended

by the board.

Resolutions 3.1 to 3.8

Elect directors – reappoint those directors who retire by

rotation and those directors who were appointed for the first

time since the previous AGM and offer themselves for re-

election. Abridged curriculum vitae are included in the notice.

Resolution 4.1

Approve the participation by Dr Mamphela Ramphele in

Tutuwa Managers Trust 1 – in terms of the Black Ownership

Initiative, Standard Bank Group proposed that qualifying

black non-executive directors should be beneficiaries of the

Managers Trusts. The directors propose that, subject to the

election of Dr Ramphele as a director of the company, she

be offered 125 000 Standard Bank Group ordinary shares

acquired by Tutuwa Managers Trust 1.

Resolution 4.2

Approve Standard Bank Equity Growth Scheme (the Scheme)

– the directors of the company propose that a new share

incentive scheme, for the benefit of employees and executive

directors of Standard Bank Group be adopted. The principal

terms of the proposed scheme are contained in Appendix 1

to the notice.

In addition, the directors of the company propose that,

subject to the approval of shareholders, the award of rights

to employees under the Scheme in anticipation of the

approval of the Scheme (from 8 March 2005 until the date

of the approval of the Scheme), at an amount equal to the

closing price of an ordinary share on the JSE Securities

Exchange South Africa on the trading day preceding the

day on which the relevant award was made, be approved.

These rights were awarded at the same time as awards

under the existing Standard Bank Group Share Incentive

Scheme were made with the intention that they be

calculated on a similar basis and at the time that these

awards are ordinarily made.

Resolution 4.3

Standard Bank Equity Growth Scheme – control of shares –

this resolution provides the directors with the ability to allot

and issue shares for the practical functioning of the Standard

Bank Equity Growth Scheme.

Resolution 4.4

Group Share Incentive Scheme (GSIS) – amendment. This

resolution amends the terms of the GSIS to apply the limit that

pertained to the maximum number of ordinary shares that can be

acquired by an individual, to include both schemes and to limit

the number of shares available for the operation of the schemes:

4.4.1 the maximum number of ordinary shares that can be

acquired by an individual employee in terms of the

Group Share Incentive Scheme and the Standard Bank

Equity Growth Scheme shall not exceed 2,5% of the

maximum number of shares reserved for the Group

Share Incentive Scheme and the Standard Bank Equity

Growth Scheme as set out in 4.4.2 below; and

Chairman’s letter to shareholders

pg 166 | Chairman’s letter to shareholders

4.4.2 the maximum number of ordinary shares that can be

reserved for the Group Share Incentive Scheme and

the Standard Bank Equity Growth Scheme cannot exceed

135 210 837 ordinary shares, which amounts to 10% of

the issued ordinary share capital of the company on

31 December 2004.

Resolution 4.5

Group Share Incentive Scheme – control of shares. This

resolution provides the directors with the ability to allot and

issue shares for the practical functioning of the Group Share

Incentive Scheme.

Resolution 4.6

Control of unissued ordinary shares – this resolution provides

the directors with the ability to allot and issue ordinary shares,

other than those required for the Standard Bank Equity

Growth Scheme and the Group Share Incentive Scheme,

during the course of the year, up to a maximum of 5% of the

ordinary shares in issue at 31 December 2004.

Resolution 4.7

Control of unissued preference shares – this resolution provides

the directors with the ability to allot and issue non-redeemable,

non-cumulative, non-participating preference shares.

Resolution 4.8

General authority to make payments to shareholders – this

resolution permits the directors to make payments to

shareholders in terms of section 5.85(b) of the JSE Securities

Exchange South Africa Listing Requirements, subject to

compliance with the Companies Act and provided such

payment(s) in any one financial year do not exceed 20% of the

company’s issued share capital. Any such payments would be

made on a pro rata basis to all shareholders. The articles of

association permit such payment.

Special resolution

This is a renewal of the authority given by shareholders at the

previous AGM and will allow the repurchase of the company's

securities by the company or any subsidiary during the course

of the year.

Attendance at the annual general meeting

Details of the time and venue of the meeting appear at the

top of this letter. I encourage you to attend and vote your

shares at the AGM. If you are not able to attend, I would urge

you to complete the proxy form in accordance with the

instructions and return it to the address indicated.

If you have dematerialised your shares on STRATE you must

submit your proxy or voting instructions to your CSDP or

broker. You will need to contact them regarding their particular

cut-off time for votes to be lodged with us. If you wish to

attend the meeting, you will have to approach your CSDP or

broker to provide you with the necessary authority in terms of

the agreement that you have entered into with them.

I look forward to welcoming you at the AGM.

Derek Cooper

Chairman

17 March 2005


Notice is hereby given that the 36th annual general meeting

of Standard Bank Group Limited (“Standard Bank Group” or

“the Company”) will be held in the H P de Villiers Auditorium,

Standard Bank Centre, 6 Simmonds Street, Johannesburg on

Wednesday, 25 May 2005 at 9.30am, for the following

business:

Ordinary resolutions

1 To receive and adopt the annual financial statements for

the year ended 31 December 2004, including the reports

of the directors and auditors.

2 To approve the proposed fees payable to the non-executive

directors for 2005 1:

2.1 Chairman of Standard Bank Group – R2 464 105 per

annum 2.

2.2 Director of Standard Bank Group – R100 000 per

annum.

2.3 International director of Standard Bank Group –

£24 000 per annum.

2.4 Group credit committee:

Member – R10 000 per meeting.

2.5 Directors’ affairs committee:

Member – R22 000 per annum.

2.6 Group risk management committee:

Chairman – R114 000 per annum;


2.7 Group remuneration committee:



2.8 Transformation committee:



2.9 Group audit committee:



2.10 Ad hoc meeting attendance 3 – R10 000 per

meeting.

3 To elect directors in place of those retiring in accordance

with the provisions of the Company’s articles of association.

Messrs D E Cooper, S J Macozoma, R P Menell, and

Dr C B Strauss as well as Mrs E Bradley, retire by rotation

while Messrs M J Shaw and M C Ramaphosa and

Dr M A Ramphele are required to retire at the annual

general meeting following their appointment. All being

eligible offer themselves for re-election. Mr R A Plumbridge

and Dr C L Stals retire at the conclusion of this meeting.

All the abovementioned non-executive directors, with the

exception of Messrs S J Macozoma and M C Ramaphosa,

are independent.

Details of these directors are as follows:

3.1 Elisabeth Bradley

Age: 66

Appointed: 1986

Educational qualifications:

BSc (Free State) MSc (London)

Directorships: Standard Bank Group, The Standard

Bank of South Africa, AngloGold

Ashanti, Metair Investments (chairman),

Rosebank Hotel, Sasol, The Tongaat-

Hulett Group, The Winkler Hotel,

Toyota SA (chairman), Wesco

Investments (chairman)

Member: Black ownership initiative committee,

directors’ affairs committee, group

audit committee

3.2 Derek Cooper

Age: 64

Appointed: 1993


CA (SA)

Directorships: Standard Bank Group (chairman),

The Standard Bank of South Africa

(chairman), Business Unity South

Africa (BUSA) (vice president

corporate), Liberty Group

(chairman), Liberty Holdings

(chairman), Reunert (chairman),

Standard Bank London, The South

Africa Foundation (president)

Member: Africa credit committee,

black ownership initiative committee

(chairman), directors’ affairs

committee (chairman), group credit

committee (chairman), group

remuneration committee, group risk

management committee, group

transformation committee

Notice to members

pg 168 | Notice to members

1 1 March 2005 to 28 February 2006.2 Standard Bank Group chairman’s fees include the board, subsidiary board

and all committee memberships but do not include fees for Liberty Holdings Limited, Liberty Group Limited or Standard Bank London Limited. The chairman is currently the chairman of the black ownership initiative, director’s affairs and group credit committees and is a member of the Africa credit, group remuneration, group risk management and group transformation committees.

3 Fee per meeting for attendance by non-executive directors or persons acting in an alternate capacity (not a member of the committee). The same fee is applicable to all committees where attendance is on an ad hoc or alternate capacity.

3.3 Saki Macozoma

Age: 47

Appointed: 1998


BA (Unisa), BA (Hons) (Boston)


Bank of South Africa, Andisa Capital

(chairman), Business Trust (co-chairman),

Hertz Rent a Car (chairman), Liberty

Group, Liberty Holdings, Lliso

Consulting (chairman), Murray and

Roberts Holdings, New Africa

Investments, Safika Holdings (deputy

chairman), Stanlib (chairman), Tutuwa

Strategic Holdings 2, VW South Africa

Member: Allocation committee (chairman),

directors’ affairs committee, group

audit committee, group credit

committee, group remuneration

committee, group risk management

committee, group transformation

committee (chairman)

3.4 Rick Menell

Age: 49

Appointed: 1997


MA (Cambridge), MSc (Stanford)


Bank of South Africa, African Rainbow

Minerals (deputy chairman), Harmony

Gold Mining Company (deputy

chairman), Mutual & Federal, National

Business Initiative, SA Tourism

(chairman), Village Main Reef Gold

Mining (chairman)

Member: Group remuneration committee, group

risk management committee

3.5 Cyril Ramaphosa

Age: 52

Appointed: 2004


BProc (Unisa)


Bank of South Africa, Alexander

Forbes, Johnnic Holdings (chairman),

Macsteel Holdings, MTN Group

(chairman), MTN International

(chairman), SAB Miller, SASRIA,

Shanduka Group (chairman), The

Bidvest Group (chairman), Tutuwa

Strategic Holdings 1

3.6 Mamphela Ramphele

Age: 57

Appointed: 2005

Educational qualifications: BCom (Unisa), MBCHB (Natal),

PhD (Cape Town)


Bank of South Africa, African

Wildlife Foundation, Circle Capital

Ventures (chairman), Mellon

Foundation, Nelson Mandela

Foundation, Rockefeller Foundation,

The Nelson Mandela Children's

Trust

3.7 Martin Shaw

Age: 66

Appointed: 2004


CA (SA)


Bank of South Africa, Illovo Sugar,

JD Group, Liberty Group, Liberty

Holdings, Murray & Roberts,

Pretoria Portland Cement, Reunert

Member: Group audit committee, group risk

management committee

3.8 Conrad Strauss

Age: 69

Appointed: 1984

Educational qualifications: BA, PhD (Rhodes), MS (Cornell),

AMP (Harvard), FIBSA, DEcon (hc)

(Rhodes), DSc (hc) (Pretoria)


Bank of South Africa, African

Oxygen, Sasol, The Hans Merensky

Foundation


4 To consider and if deemed fit to pass, with or without

modification, the following resolutions as ordinary

resolutions:

4.1 Standard Bank Group facilitated the conclusion of

various agreements, which resulted in the acquisition

of an effective 10% interest in its South African

banking operations by a broad-based grouping of

black entities, which is referred to as “the Black

Ownership Initiative”, consisting of the Tutuwa

Consortium, The Community Trust (a trust formed

for the benefit of local business leaders and

established community and charitable organisations

in the different regions of South Africa), the

Managers Trusts (trusts formed for the benefit of

Standard Bank Group’s current and future black

managers) and black employees.

In terms of the Black Ownership Initiative, Standard

Bank Group proposed that black non-executive

directors should be beneficiaries of the Managers

Trusts. Shareholders approved the allocation of

shares to three qualifying black non-executive

directors on 6 December 2004. Similarly, it is now

being proposed that Dr Mamphela Ramphele be

offered 125 000 Standard Bank Group ordinary

shares acquired by the Managers Trust, subject to

similar terms and conditions as the black managers.

"Resolved as an ordinary resolution that, subject to

the reappointment of Mamphela Aletta Ramphele

("Ramphele") as a director of the Company, the

participation by Ramphele in the Tutuwa Managers

Trust 1 (Masters reference number IT 7153/2004) as

a beneficiary in respect of a maximum of 125 000

Standard Bank Group ordinary shares be and is

hereby approved.”

4.2 The directors of the Company consider it to be in

the best interests of the Company that a further

share incentive scheme be adopted so as to ensure

that appropriate incentives are granted to employees

and executive directors of the Company and its

subsidiaries to encourage and motivate continued

growth and profitability within the Standard Bank

Group and to promote the retention of the group’s

employees.

The principal terms of the proposed Standard Bank

Equity Growth Scheme are contained in Appendix 1

to this notice.

The directors propose that, subject to the approval

of shareholders, a new share incentive scheme for

the benefit of employees and executive directors of

Standard Bank Group be adopted.

“Resolved as an ordinary resolution that the Standard

Bank Equity Growth Scheme (“the Scheme”), a copy

of which was tabled at the meeting at which this

ordinary resolution was passed and initialled by the

Chairman of the meeting for purposes of identification

(a summary of the principal terms of the Scheme is

Appendix 1 to the notice of general meeting dated

17 March 2005), be and is hereby approved and that

the directors of the Company be and are hereby

authorised to take all such steps as may be necessary

for the establishment and carrying into effect of the

Scheme, including the allotment and issue of ordinary

shares in the capital of the Company on the terms

and conditions set out in the Scheme, to participants

of the Scheme, including directors of the Company,

and, notwithstanding the provisions of the Scheme,

the award of rights to employees under the Scheme

in anticipation of and conditional on the approval of

the Scheme (from 8 March 2005 until the date of the

approval of the Scheme), at an amount equal to the

closing price of an ordinary share on the JSE

Securities Exchange South Africa on the trading day

preceding the day on which the relevant award was

made, be and is hereby approved.”

4.3 “Resolved that all the ordinary shares required for

the purpose of carrying out the terms of the Standard

Bank Equity Growth Scheme (“the Scheme”), be

and are hereby specifically placed under the control

of the directors, who be and are hereby authorised

to allot and issue those shares in terms of the

Scheme.”

4.4 “Resolved that, subject to the passing of resolution

number 4.2, the Standard Ban k Group Share Incentive

Scheme (“the Scheme”) be amended by:

4.4.1 deleting clause 3.1 and inserting the following new

clause 3.1:

‘3.1 The aggregate number of fully paid ordinary

shares which any one employee may acquire in

terms of the Incentive Scheme and the Standard

Bank Equity Growth Scheme shall not exceed

2,5% of the number of shares reserved for the

Incentive Scheme and the Standard Bank Equity

Growth Scheme in terms of clause 3.2 below’

4.4.2 deleting the first sentence of clause 3.2 and inserting

a new first sentence into clause 3.2 and by inserting

the word “reserved” after the words “ordinary shares”

in the second sentence and inserting a reference in

the second sentence of clause 3.2 to the Standard

Bank Equity Growth Scheme, so that clause 3.2 will

read as follows:

‘3.2 The aggregate number of unissued ordinary

shares which may be reserved from time to

time for the Incentive Scheme and the

Standard Bank Equity Growth Scheme shall

not exceed 135 210 837 (one hundred and

thirty five million, two hundred and ten

thousand, eight hundred and thirty seven)

ordinary shares, which amounts to 10% of the

issued ordinary share capital of the company

on 31 December 2004. For the purposes of

determining the aggregate number of

ordinary shares reserved for the Incentive


Notice to members continued

Scheme and the Standard Bank Equity

Growth Scheme, any ordinary shares:

3.2.1 in respect of which an option has been

exercised, whether in part or in full, and in

respect of which the purchase consideration

has been paid to the company in full; or

3.2.2 which are the subject of an expired or

terminated option;

shall cease to be counted in that aggregate.’”

4.5 “Resolved that all the ordinary shares required for

the purpose of carrying out the terms of the Standard

Bank Group Share Incentive Scheme (“the Scheme”),

other than those which have specifically been

appropriated for the Scheme in terms of ordinary

resolutions duly passed at previous annual general

meetings of the Company, be and are hereby

specifically placed under the control of the directors,

who be and are hereby authorised to allot and issue

those shares in terms of the Scheme.”

4.6 “Resolved as an ordinary resolution that the unissued

ordinary shares in the authorised share capital of the

Company (other than those specifically identified in

ordinary resolutions number 4.3 and 4.5), be and are

hereby placed under the control of the directors of

the Company who are authorised to allot and issue

the ordinary shares at their discretion until the next

annual general meeting of the Company, subject to

the provisions of the Companies Act, 61 of 1973, as

amended, the Banks Act, 94 of 1990, as amended

and the Listings Requirements of the JSE Securities

Exchange South Africa subject to the aggregate

number of ordinary shares able to be allotted and

issued in terms of this resolution being limited to

five percent of the number of ordinary shares in

issue at 31 December 2004.”

4.7 “Resolved as an ordinary resolution that the unissued

non-redeemable, non-cumulative, non-participating

preference shares (“the Preference Shares”) in the

authorised share capital of the Company, be and are

hereby placed under the control of the directors of

the Company who are authorised to allot and issue

the Preference Shares at their discretion until the

next annual general meeting of the Company,

subject to the provisions of the Companies Act, 61

of 1973, as amended, the Banks Act, 94 of 1990, as

amended and the Listings Requirements of the JSE

Securities Exchange South Africa.”

4.8 “Resolved that, subject to the provisions of the

Companies Act 61 of 1973, as amended, (“the

Companies Act”) the Banks Act 94 of 1990, as

amended, and the Listings Requirements of the JSE

Securities Exchange South Africa (“the Listings

Requirements”), the directors of the Company be

and are hereby authorised and given a renewable

general authority to make payments to shareholders

in terms of section 5.85(b) of the Listings

Requirements, subject to the following conditions –

(a) payments to shareholders in terms of this

resolution shall be made in terms of section 90 of

the Companies Act and be made pro rata to all

shareholders;

(b) in any one financial year, payments to

shareholders in terms of this resolution shall not

exceed a maximum of 20% of the Company’s

issued share capital, including reserves but

excluding minority interests, and re-valuations

of assets and intangible assets that are not

supported by a valuation by an independent

professional expert acceptable to the JSE

Securities Exchange South Africa prepared

within the last six months, measured as at the

beginning of such financial year; and

(c) this general authority to make payments to

shareholders shall be valid until the next annual

general meeting of the Company or for 15 months

from the date of this resolution, whichever period

is the shorter.”

The directors of the Company are of the opinion

that, taking into consideration the effect of the

maximum payment in terms of this authority:

– the Company and the group would be in a position

to repay its debts in the ordinary course of

business for a period of 12 months after the date

of the notice of this annual general meeting (“the

next year”);

– the assets of the Company and group, fairly valued

in accordance with Generally Accepted Accounting

Practice, would be in excess of the liabilities of

the Company and the group for the next year;

and

– the share capital and reserves of the Company

and the group for the next year will be adequate.

The purpose of this general authority is to authorise

the Company’s directors to return excess cash

resources to shareholders on a pro rata basis.

Special resolution

5 To consider and if deemed fit, to pass, with or without

modification, the following resolution as a special

resolution:

The directors of the Company intend, if the circumstances

are appropriate, to implement a repurchase of the

Company’s ordinary shares as permitted in terms of the

Companies Act, 61 of 1973, as amended (“the Companies

Act”) and the Listings Requirements of the JSE Securities

Exchange South Africa (“the Listings Requirements”)

either by the Company or one of its subsidiaries.

The reason for and effect of this special resolution is to

generally approve, in terms of section 85(2) of the

Companies Act and, in terms of section 89 of the

Companies Act, the acquisition by the Company and/or a


subsidiary of the Company, of ordinary shares issued by it

subject to the Listings Requirements.

The directors of the Company are of the opinion that,

taking into consideration the maximum number of ordinary

shares that could be repurchased:

– the Company and the group would be in a position to

repay its debts in the ordinary course of business for a

period of 12 months after the date of the notice of this

annual general meeting (“the next year”);

– the assets of the Company and group, fairly valued in

accordance with South African Statements of Generally

Accepted Accounting Practice, would be in excess of

the liabilities of the Company and the group for the next

year; and

– the share capital and reserves of the Company and the

group for the next year will be adequate.

“Resolved as a special resolution that the Company

approves, as a general approval in terms of section 85(2)

of the Companies Act 61 of 1973, as amended,

(“the Companies Act”), the acquisition by the Company

and, in terms of section 89 of the Companies Act, the

acquisition by any subsidiary of the Company from time to

time, of such number of ordinary shares issued by the

Company and at such price and on such other terms and

conditions as the directors may from time to time determine,

subject to the following requirements of the Companies

Act and the Listings Requirements of the JSE Securities

Exchange South Africa (“the Listings Requirements”):

– the authority shall be valid only until the next annual

general meeting of the Company or 15 months from the

date on which this resolution is passed, whichever is the

earlier;

– any such acquisition will be implemented through the

order book operated by the trading system of the JSE

Securities Exchange South Africa and done without any

prior understanding or arrangement between the

Company and the counterparty (reported trades being

prohibited);

– the acquisition must be authorised by the Company’s

articles of association;

– the authority is limited to the purchase of a maximum of

20% of the Company’s issued ordinary share capital in

any one financial year;

– acquisition must not be made at a price more than 10%

above the weighted average of the market value for the

ordinary shares of the Company for the five business

days immediately preceding the date of acquisition;

– the Company may only appoint one agent to effect any

repurchase(s) on the Company’s behalf;

– the Company may only acquire its ordinary shares if,

after such acquisition, it still complies with the

shareholder spread requirements as set out in the

Listings Requirements;

– the acquisition may not take place during a prohibited

period (as defined in the Listings Requirements); and

– in the case of an acquisition by a subsidiary of the

Company, the authority shall be valid only if –

– the subsidiary is authorised by its articles of

association;

– the shareholders of the subsidiary have passed a

special resolution authorising the acquisition; and

– the number of shares to be acquired is not more than

10% in the aggregate of the number of issued shares

of the Company.”

Notes in regard to other Listings Requirements applying to ordinary resolutions 4.1 to 4.8 and to the special resolution

1 Details of directors

Directors details as required by the Listings Requirements

of the JSE Securities Exchange South Africa (“the Listings

Requirements”) are set out on pages 26 and 27 of the

annual report that accompanies this notice of annual

general meeting (“the annual report”).

2 Directors’ responsibility statement

The directors, whose names are given on pages 26 and 27

of the annual report, collectively and individually accept

full responsibility for the accuracy of the information given

in these notes 1–8 and certify that, to the best of their

knowledge and belief, there are no facts that have been

omitted which would make any statement in these notes

1-8 false or misleading, and that all reasonable enquiries to

ascertain such facts have been made and that the notice

contains all information required by law and the Listings

Requirements.

3 Interests of directors

The interests of the directors in the share capital of the

Company are set out on page 77 of the annual report.

4 Major shareholders

Details of major shareholders of the Company are set out

on page 179 of the annual report.

5 Share capital of the Company

Details of the share capital of the Company are set out on

page 124 of the annual report.

6 Material change

There has been no material change in the financial or

trading position of the Company and its subsidiaries since

the date of publication of the Company’s annual results on

9 March 2005.

7 Litigation

The Company and its subsidiaries are not, and have not in

the 12 months preceding the date of this notice of annual

general meeting been involved in any legal or arbitration

proceedings which may have or have had a material effect

on the financial position of the Company and its subsidiaries,

Notice to members continued



nor is the Company aware of any such proceedings that are

pending or threatened.

8 Summary of Standard Bank Equity Growth Scheme

A summary of the principal terms of the Standard Bank

Equity Growth Scheme (“the Scheme”) is Appendix 1 to

the notice of general meeting and a copy of the Scheme is

available for inspection at the Company’s registered office

until the date of the annual general meeting.

Standard Bank Group shareholders holding certificated

shares and shareholders of the Company who have

dematerialised their shares and have elected own-name

registration in the sub-register maintained by the CSDP, may

attend, speak and vote at the annual general meeting or may

appoint one or more proxies (who need not be shareholders

of the Company) to attend, speak and vote at the annual

general meeting on behalf of the such shareholder. A proxy

form is attached to this notice of annual general meeting.

Duly completed proxy forms must be returned to the transfer

secretaries of Standard Bank Group or the registered office of

the Company to the addresses set out below, to be received

by not later than 9.30am on Tuesday, 24 May 2005.

Standard Bank Group shareholders who have dematerialised

their shares through a CSDP or broker and who have not

elected own-name registration in the sub-register maintained

by a CSDP and who wish to attend the annual general meeting,

should instruct their CSDP or broker to issue them with the

necessary authority to attend. If they do not wish to attend

the annual general meeting, they may provide their CSDP or

broker with their voting instructions in terms of the custody

agreement entered into between such shareholders and their

CSDP or broker.

By order of the board

L Wulfsohn

Group secretary

17 March 2005

Registered office

9th floor

Standard Bank Centre

5 Simmonds Street

Johannesburg, 2001

(PO Box 7725, Johannesburg, 2000)

Fax No. +27 11 636 4207

Transfer secretaries in South Africa

Computershare Investor Services 2004 (Proprietary) Limited

Ground Floor

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)

Fax No. +27 11 370 5390

Transfer secretaries in Namibia

Transfer Secretaries (Proprietary) Limited

Shop 12, Kaiserkrone Centre

Post Street Mall

Windhoek

(PO Box 2401, Windhoek)

Fax No. +264 61 248 531


Appendix 1

Summary of the principal terms of the Standard Bank Equity

Growth Scheme (“the Scheme”)

1 As a result of recent developments in the accounting and

taxation treatment of employee share incentive schemes,

Standard Bank Group Limited (“the Company”) believes

that it is in the interests of stakeholders to introduce a new

employee incentive scheme. The Scheme is to be

established for employees of the Company, its subsidiaries

and associates, (excluding Liberty Holdings Limited and its

subsidiaries), and has a similar effect on shareholders to

the current employee incentive scheme.

2 The aggregate number of unissued ordinary shares in the

Company (“the Shares”) which may be reserved for the

Scheme and the Standard Bank Group Share Incentive

Scheme will not exceed 135 210 837, which amounts to 10%

of the issued ordinary share capital of the Company on

31 December 2004. No employee is entitled to acquire in

excess of 2,5% of this number of Shares in terms of the

Scheme and the Standard Bank Group Share Incentive

Scheme.

3 In terms of the Scheme, the board of directors of the

Company, acting upon the request of an employer

company within Standard Bank Group, will award rights to

participating employees. These rights will have an award

price equal to the closing price of a Share on the day

preceding the award. Typically 50% of the rights awarded

will vest 3 (three) years after the date of an award to an

employee, a further 25% of the rights awarded will vest

4 (four) years after the date of the award, and the balance

will vest 5 (five) years after that date. The board of directors

of the Company shall have the power to vary these vesting

periods, and the exercise period referred to in paragraph

4 below, and shall also have the power to declare that all

rights awarded to employees shall vest in the event of a

change of control of the Company.

4 After the rights awarded to an employee have vested,

that employee would be entitled to exercise his rights.

The exercise price in respect of a right would be the

closing price of a Share on the JSE Securities Exchange

South Africa on the trading day immediately prior to the

day on which the right is exercised. The benefit due to

an employee on exercise of his rights will be calculated

by subtracting the award price of those rights from the

exercise price of those rights and multiplying the

difference by the number of rights which are exercised

by the employee. The value of the benefit due to the

employee would then be divided by the abovementioned

share price in order to obtain the number of ordinary

Shares to be received by the employee. Employees are

only entitled to receive their benefits in the form of

ordinary Shares.

5 The rights awarded to employees who leave the employ

of the employer company within Standard Bank Group

for any reason whatsoever prior to the rights vesting in

accordance with the Scheme will lapse, subject to the

discretion of the board of directors of the Company.

6 The award of rights does not entitle an employee to any

rights in respect of the ordinary Shares, until ordinary

Shares are delivered to the employee pursuant to the

calculation of the benefit due to him upon such exercise.

In the event of a reorganisation or a transaction that has

an effect on the capital of the Company, the benefits

due to an employee may be adjusted, as determined by

the auditors of the Company, in order to ensure that both

the employee and the Company are not prejudiced. No

material aspect of the Scheme may be amended without

the approval of the shareholders of the Company.

Standard Bank Group Limited

(Registration number 1969/017128/06)

(“the Company”)

JSE share code: SBK

NSX share code: SNB

ISIN: ZAE000057378

For use only by Standard Bank Group Limited shareholders holding share certificates and shareholders who have dematerialised their share certificates and have elected “own-name” registration through a Central Securities Depository Participant (“CSDP”) or broker, at the annual general meeting of the Company to be held at 9.30am on Wednesday, 25 May 2005.

If you are a shareholder entitled to attend and vote at the abovementioned annual general meeting you can appoint

a proxy to attend, vote and speak in your stead. A proxy need not be a shareholder of the Company.

If you are a shareholder and have dematerialised your share certificates through a CSDP or broker, and have not

selected own-name registration in the sub-register maintained by a CSDP, you must not complete this form of proxy

but must instruct your CSDP or broker to issue you with the necessary authority to attend the annual general meeting,

or if you do not wish to attend, you may provide your CSDP or broker with your voting instructions in terms of the

custody agreement entered into with your CSDP or broker.

I/We (Name in block letters)

of (Address in block letters)

being a shareholder(s) and the holder(s) of ordinary shares of 10 cents each and entitled to

vote hereby appoint (see note 1)

1. or, failing him/her

2. or, failing him/her

the Chairman of the annual general meeting,

as my/our proxy to vote for me/us and on my/our behalf at the annual general meeting of shareholders to be held at

9.30am on Wednesday, 25 May 2005, in the HP de Villiers Auditorium, Standard Bank Centre, 6 Simmonds Street,

Johannesburg, and at any adjournment thereof as follows:

Proxy form

Number of votes

For* Against* Abstain*

Ordinary resolution to:

1 Adopt annual financial statements

2 Remuneration: Approve non-executive directors’ fees (2005):

2.1 Standard Bank group chairman

2.2 Standard Bank group director

2.3 Standard Bank group international director

2.4 Group credit committee

2.5 Directors’ affairs committee

2.6 Group risk management committee

2.7 Group remuneration committee

2.8 Transformation committee

2.9 Group audit committee

2.10 Ad hoc meeting attendance


*Insert a cross or tick or number of votes. If no options are marked, the proxy can vote as he/she deems fit.

pg 176 | Proxy form

Proxy form continued

Number of votes

For* Against* Abstain*

3 To elect directors:

3.1 Elisabeth Bradley

3.2 Derek Cooper

3.3 Saki Macozoma

3.4 Rick Menell

3.5 Cyril Ramaphosa

3.6 Mamphela Ramphele

3.7 Martin Shaw

3.8 Conrad Strauss

4 Ordinary resolution to:

4.1 approve the participation by Mamphela Ramphele as a

beneficiary of Tutuwa Managers Trust 1

4.2 approve the Standard Bank Equity Growth Scheme

4.3 place shares for the Standard Bank Equity Growth Scheme under

control of directors

4.4 approve the amendment to the Group Share Incentive Scheme

4.5 place shares for the Group Share Incentive Scheme under control

of directors

4.6 place unissued ordinary shares under control of directors

4.7 place unissued preference shares under control of directors

4.8 give directors general authority to make payments to

shareholders in terms of section 5.85(b) of the JSE Securities

Exchange South Africa Listings requirements

5 Special resolution to: give general authority until the next annual general meeting for

the Company or subsidiaries to repurchase the Company's shares

Signed at on 2005

Signature

Assisted by (where applicable) (state capacity and full name)

Please provide contact details: Tel: ( )

Fax: ( )

e-mail:

Please read the notes on the opposite page.

*Insert a cross or tick or number of votes. If no options are marked, the proxy can vote as he/she deems fit.


Notes

1 A shareholder may insert the name of a proxy or the names of two alternative proxies of his/her choice in the space provided.

The person whose name stands first on the proxy form and who is present at the annual general meeting will be entitled to act

as proxy to the exclusion of those whose names follow.

2 To be effective, completed proxy forms must be lodged by no later than 9.30am on Tuesday, 24 May 2005 with either transfer

secretaries or the registered office.

Transfer secretaries:

South Africa: Namibia:

Computershare Investor Services 2004 (Pty) Ltd, Transfer Secretaries (Pty) Limited,

Ground Floor, 70 Marshall Street, Shop 12, Kaiserkrone Centre,

Johannesburg Post Street Mall, Windhoek

PO Box 61051, Marshalltown, 2107 PO Box 2401, Windhoek

fax number +27 11 370 5390 fax number +264 61 248 531

Registered office:

9th Floor, Standard Bank Centre

5 Simmonds Street, Johannesburg

PO Box 7725, Johannesburg, 2000

fax number +27 11 636 4207

3 The completion and lodging of this form of proxy will not preclude the relevant ordinary shareholder from attending the annual

general meeting and speaking and voting in person thereat instead of the proxy.

4 The Chairman of the annual general meeting may accept or reject any proxy form which is completed and/or received other

than in compliance with these notes.

5 The signatories must initial any alteration to this proxy form, other than the deletion of alternatives.

6 Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be

attached to this proxy form unless previously recorded by the Company.

7 Where there are joint holders of ordinary shares:

(a) any one holder may sign the proxy form; and

(b) the vote of the senior ordinary shareholder (for that purpose seniority will be determined by the order in which the names

of the ordinary shareholders who tender a vote (whether in person or by proxy) appear in the Company’s register) will be

accepted as to the exclusion of the vote(s) of the other joint shareholders.

8 All beneficial shareholders of ordinary shares who have dematerialised their shares through a CSDP or broker, other than those

shareholders who have elected to dematerialise their shares in “own-name” registrations, must provide their CSDP or broker

with their voting instructions. Voting instructions must reach the CSDP or broker in sufficient time to allow the CSDP or broker

to advise the company or its transfer secretaries of this instruction by no later than 9.30am on Tuesday, 24 May 2005. We

recommend that you contact your CSDP or broker to ascertain their deadline for submission.

If you have dematerialised your shares and wish to attend the meeting in person, you may do so by requesting your CSDP or

broker to issue you with a letter of representation in terms of the custody agreement entered into with your CSDP or broker.

Letters of representation must be lodged with the Company’s transfer secretaries or at the registered office of the Company

by no later than 9.30am on Tuesday, 24 May 2005. We recommend that you contact your CSDP or broker to ascertain their

deadline for submission.

Shareholders who hold certificated shares and shareholders who have dematerialised their shares in “own-name” registrations,

must lodge their completed proxy forms with the Company’s transfer secretaries or at the registered office of the Company by

not later than 9.30am on Tuesday, 24 May 2005.

pg 178 | Directorate

Standard Bank Group

Limited

D E Cooper Chairman

J H Maree 1 Chief executive

D D B Band

E Bradley

T Evans

T S Gcabashe

D A Hawton

Sir Paul Judge 3

S J Macozoma

R P Menell

Adv K D Moroka

A C Nissen

R A Plumbridge

M C Ramaphosa

Dr M A Ramphele 4

M J D Ruck 1

M J Shaw

Sir Robert Smith 3

Dr C L Stals

Dr C B Strauss

1 Executive director.2 Alternate to MJD Ruck.3 British.4 Appointed 17 March 2005.5 American.

The Standard Bank of

South Africa Limited

D E Cooper Chairman

J H Maree 1 Chief executive

D D B Band

E Bradley

T Evans

T S Gcabashe

D A Hawton

Sir Paul Judge 3

S J Macozoma

R P Menell

Adv K D Moroka

A C Nissen

R A Plumbridge

M C Ramaphosa

Dr M A Ramphele 4

M J D Ruck 1

M J Shaw

Sir Robert Smith 3

Dr C L Stals

Dr C B Strauss

Standard Bank London

Limited

J H Maree Chairman

R A G Leith 1,3 Chief executive

M J Botha 1,3

D P H Burgess 3

D E Cooper

W S Dorson 1,5

D Feld 1,5

I G Gibson 1,3

N J Holden 1,3

B J Kruger 2

R M Mansell-Jones 3

J M K Pearson 1,3

M J D Ruck

C J Sheridan 3

T R Smeeton 3

B A Ursell 3

T G Wheeler 1,3

M J Wilde 1,3

Liberty Holdings Limited

D E Cooper Chairman

M J D Ruck 1 Chief executive

A W B Band

D A Hawton

S J Macozoma

J H Maree

Prof L Patel

A Romanis 3

M J Shaw

Dr S P Sibisi

Liberty Group Limited

D E Cooper Chairman

M J D Ruck 1 Chief executive

H I Appelbaum 1

A W B Band

D A Hawton

S J Macozoma

J H Maree

Prof L Patel

A Romanis 3

M J Shaw

Dr S P Sibisi

Directorate


Shareholders’ diary

2004 financial yearAnnual general meeting 25 May 2005

2005 financial yearFinancial year end 31 December

Reports

Interim report and declaration of interim dividend August 2005Summarised annual financial statements and declaration of final dividend March 2006Publication of annual report April 2006

Dividend payments

Ordinary shares: Interim September 2005 Final April 20066,5% first cumulative preference shares: Six months ending 30 June 2005 September 2005 Six months ending 31 December 2005 April 2006Non-redeemable, non-cumulative, non-participating preference shares: Six months ending 30 June 2005 September 2005 Six months ending 31 December 2005 April 2006

Annual general meeting May 2006

Analysis of shareholders

Ten major shareholders 1 December 2004 December 2003

Numberof shares(million)

%holding

Number

of shares

(million)

%

holdingOld Mutual Group 165,6 12,2 185,0 13,8Public Investment Commissioner 156,7 11,6 168,1 12,6Tutuwa Group 102,3 7,6– Staff 42,0 3,1– Other 60,3 4,5Liberty Group 2 49,4 3,7 63,0 4,7Sanlam Group 48,0 3,5 57,2 4,3Investment Solutions 38,9 2,9 43,6 3,3Transnet Pension Fund 15,3 1,1 33,8 2,5Metlife 14,8 1,1 19,2 1,4Eskom Pension Fund 14,6 1,1 14,2 1,0

605,6 44,8 584,1 43,6

Spread of ordinary shareholdersPublic 3 959,7 71,0 964,4 72,0

Non-public 392,4 29,0 374,3 28,0

– Directors of Standard Bank and its subsidiaries 1,9 0,1 1,9 0,1

– Old Mutual Group 165,6 12,2 185,0 13,8

– Public Investment Commissioner 156,7 11,6 168,1 12,6

– Standard Bank and Liberty Group retirement funds 5,5 0,4 18,8 1,4

– Tutuwa schemes 4 62,1 4,6 – –

– Associates 0,6 0,1 0,5 0,1

1 352,1 100,0 1 338,7 100,0

International shareholders held 20,9% (2003: 18,2%) of the group’s shares.1 Beneficial holdings determined from the share register and investigations conducted on the group’s behalf in terms of S140A of the Companies Act.2 Policyholders’ funds.3 As per section 4.25 of the JSE Listings Requirements.4 Tutuwa schemes for purposes of shareholder spread excludes Tutuwa Strategic Holdings 1 (Proprietary) Limited (1,20%) and Tutuwa Strategic Holdings 2 (Proprietary)

Limited (1,79%).

pg 180 | Instrument codes and credit ratings

Credit ratings

The latest credit ratings for The Standard Bank of South Africa Limited (SBSA) are detailed below:

Standard Bank ratings Short-term Long-term Outlook

Fitch Ratings (June 2004)

Foreign currency F3 BBB Positive

Local currency A- Positive

National F1+(zaf) AA+(zaf) Stable

Moody’s Investors Services (January 2005) public information rating

Bank deposit rating P-2 Baa1 Stable

Financial strength rating C+

Standard & Poor’s (November 2004) public information rating

Local currency BBBpi

RSA Sovereign ratings: Foreign currency

Fitch Ratings BBB

Moody’s Investors Services Baa1

Standard & Poor’s BBB

RSA Sovereign ratings: Local currency

Fitch Ratings A-

Moody’s Investors Services A2

Standard & Poor’s A

JSE Securities Exchange Namibian Stock Exchange (NSX) Bond Exchange of South Africa

Ordinary shares Ordinary shares Subordinated debt

Share code: SBK Share code: SNB SBK 1: ZAG000016569

ISIN code: ZAE000057378 ISIN code: ZAE000057378 SBK 2: ZAG000017955

6,5% first cumulative preference shares SBK 3: ZAG000018086

Share code: SBKP SBK 4: ZAG000019597

ISIN code: ZAE000038881 SBK 5: ZAG000023078

Non-redeemable non-cumulative

preference share Senior bond

Share code: SBPP SBS1: ZAG000023235

ISIN code: ZAE000056339

Instrument codes

www.standardbank.co.za

SBSA 701219 3/05

Contact details

Chief financial officer

Simon Ridley

Telephone:

+27 11 636 3756

e-mail:

[email protected]

Registered address

9th Floor

Standard Bank Centre

5 Simmonds Street

Johannesburg, 2001

PO Box 7725

Johannesburg

2000

Group secretary

Loren Wulfsohn

Telephone:

+27 11 636 5119

e-mail:

[email protected]

Contact details

Telephone:

+27 11 636 9111

Fax:

+27 11 636 4207

e-mail:

Shareholder queries:

[email protected]

Customer queries:

[email protected]

Director, investor relations

Kim Howard

Telephone:

+27 11 636 7811

e-mail:

[email protected]

Design: Studio fiveProduction and layout: Standard Bank

Printing: Ultra Litho

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