Standard ^ Chartered
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Annual Report 2010
Leading the way in Ghana
Here for good Standard Chartered Ghana has continued to deliver consistent, diverse and sustained growth while investing to underpin future momentum and building balance sheet resilience
Financial highlights
Operating income Normalised return on equity Earnings per share GH0218m 37% GH03.75
2OO9:GH0183m I 2OO8:GH0117m 2009:36% 12008: 37% 2009: GH02.99 I 2008: GH01.89
Total assets Proft before taxation Dividend per share GH01,668m GH 0101.5m GH01.27
2OO9:GH01,404m I 2OO8:GH0985m 2009: GH084m I 2OO8:GH043m 2009: GH02.47 I 2008: GH01.50
Non-financial highlights
employees Nationalities Branches 986 11 21 2009:8001 2008:760 2009:12 1 2008:11 2009: 2112008:19
Operational highlights
• Record income and operating profit for the fifth successive year, • The Bank's strong capital position further strengthened despite ongoing margin compression and the enhanced following a successful rights issue competition in the market • Market share gains in multiple products driven by strong • Broad based and diversified sources of income growth in both volume and activity levels Consumer and Wholesale Banking • Separated the Audit and Risk Committee, established a • Conscious decision to invest to underpin future growth in both Governance Committee. businesses • Launch of new brand promise, Here for good: Here for • Disciplined and proactive approach to risk management with people, Here for progress and Here for the long run loan impairment falling reasonably
3 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Corporate governance Financial statements and notes
Country review 38 Corporate Information 44 Independent Auditor's Report 01 2010 Highlights 39 Board of directors 45 Statement of Comprehensive Income 02 Contents 41 Senior Management 46 Statement of Financial Position 04 Notice and Agenda 43 Report of the directors 47 Statement of Changes in Equity 06 Five-Year Financial Summary 49 Statement of Cash Flows 07 Chairman's Statement 50 Notes to the Financial Statements 09 Chief Executive's review 90 Form of Proxy 13 Our Organisation 14 Our Approach
Operating and financial review 15 Standard Chartered Ghana in 2010 17 Consumer Banking 21 Wholesale Banking 25 People 29 Sustainability 35 Risk review
About Standard Chartered Bank Ghana
Consumer Banking Wholesale Banking Standard Chartered Ghana Helps meet the evolving financial needs Helps corporate and institutional clients We are headquartered in Accra and of Private, Small and Medium-sized facilitate trade and finance across the have operated for over 115 years in the Enterprises (SMEs), Priority and world's fastest-growing markets, country's dynamic economic segments, Personal banking customers across our leveraging our solutions and a delivery leading the way in Ghana. franchise. Our customer-focused and footprint spanning our cross-border service approach enables our staff to network. We are at the heart of Our income and profit streams are offer solutions from an innovative range international trade flows, offering the highly diversified with the Bank now of products and services to build knowledge of a local bank with the delivering over GH0100 million in stronger relationships with our capabilities of an international financial operating profit. customers. institution.
www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 02 Standard w Chartered
Can a bank really stand for something? Can it balance its ambition with its conscience? To do what it must. Not what it can. As not everything in life that counts can be counted. Can it not only look at the profit it makes but how it makes that profit? And stand beside people, not above them. Where every solution depends on each person. Simply by doing good, can a bank in fact be great? In the many places we call home, our purpose remains the same. To be here for people. Here for progress. Here for the long run. Here for good.
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Notice and Agenda
Notice is hereby given that the Annual General Meeting of Standard Chartered Bank Ghana Limited will be held at the National Theatre, Accra (opposite the Efua Sutherland Children's Park) on Tuesday, 26th April, 2011 at 11.00am for the ordinary business of the Company.
Agenda
1. To receive the reports of the directors and auditors, the balance sheet as at 31st December 2010 together with the profit and loss and income surplus accounts for the year ended on that date
2. To declare a dividend.
3. To elect directors in place of those retiring.
4. To approve directors' remuneration.
5. To approve the remuneration of the auditors.
6. To approve the issuing of bonus shares
7. To approve an increase in the number of authorised shares of the company
8. To terminate the appointment of current auditors and appoint another in accordance with the directives of our Regulators
A member of the Company entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member.
A form of proxy is attached.
Dated the 10th day of February, 2011 BY ORDER OF THE BOARD
Dawn Kwesi Zaney (Board Secretary)
www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 6 Standard Chartered
Can a bank really stand for something? Can it balance its ambition with its conscience? To do what it must. Not what it can. As not everything in life that counts can be counted. Can it not only look at the profit it makes but how it makes that profit? And stand beside people, not above them. Where every solution depends on each person. Simply by doing good, can a bank in fact be great? In the many places we call home, our purpose remains the same. To be here for people. Here for progress. Here for the long run. Here for good.
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Five-Year Financial Summary
2006 2007 2008 2009 2010 GH Interest income 76,053 94,866 110,402 155,492 213,941 Interest expense (18,349) (30,727) (34,134) (36,073) (61,193) Net interest income 57,704 64,139 76,268 119,419 152,748 Commissions and fees 18,651 19,125 22,765 37,192 42,360 Other operating income 8,554 9,468 18,082 25,889 22,917 Operating Income 84,909 92,732 117,115 182,500 218,025 Total operating expenses (39,741) (47,770) (71,568) (83,712) (102,936) Impairment loss 1,452 (1,794) (1,707) (15,074) (13,576) Operating Profit 46,620 43,168 43,840 83,714 101,513 Other income 2 6 - - - Profit before taxation 46,622 43,174 43,840 83,714 101,513 Taxation (15,874) (10,136) (10,653) (26,217) (29,305) Profit for the Year 30,748 33,038 33,187 57,497 72,208 Transfer to Statutory and other Reserve (4,065) (6,098) (4,413) (14,231) (47,668) Transfer to Retained Earnings 26,683 26,940 28,774 43,266 24,540 Shareholders' Equity 80,636 88,394 89,461 159,578 195,981 Total Assets 711,011 773,737 984,944 1,404,213 1,667,882 Total Deposits 445,544 534,840 742,290 833,084 1,092,442 Loans & Advances 239,918 287,069 460,338 408,538 467,152 GH4 GH4 GH4 GH4 GH<|: Earnings per share 1.75 1.88 1.89 2.99 3.75 Proposed Final Dividend per share 1.30 1.45 1.50 2.47 1.27 Return on Assets (PAT/Total Assets) 4% 4% 3% 4% 4% Return on Equity (PAT/Equity) 38% 37% 37% 36% 37% Capital Adequacy ratio 15% 17% 12% 22% 16% Cost/Income Ratio 47% 52% 61% 46% 47% www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 8 Chairman's statement Poised for further growth Poised for further growth I am delighted to report that 2010 was another year of record income and profits. Against an uncertain global recovery and despite increased competition in the banking sector, Standard Chartered Bank Ghana continued to perform strongly. Our performance in 2010 once again demonstrates our ability to deliver substantial, sustained value for our shareholders. • Income increased 19 per cent to GH0 218.03 million • Profit before tax rose 21 per cent to GH0 101.51 million • Basic earnings per share climbed 25 per cent to GH0 3.75 On the back of this, the Board is proposing an annual dividend of GH0 1.27 per share. Our commitment to invest in people, systems and products paid off as we were able to quickly adapt to a lower inflationary and declining interest rate environment. We were the first bank to lower our base rate by 400 basis points from 29.5 per cent in December 2009 to 25.5 per cent in February 2010. We continue to support the Government of Ghana's efforts to increase financial institutions' responsiveness to changes in interest rates, though structural challenges remain. "2010 was another year of great performance. We have demonstrated we have the right Standard Chartered Bank Ghana continues to play a key and growing role in the Ghanaian economy. A study we commissioned to assess our socio-economic strategy, the right culture and the right business impact on the country revealed that our activities in Ghana increased jobs and locations to deliver constant and sustained the overall output of the economy. During 2009, the direct, indirect and induced value to our shareholders". impact of our operations and onshore financing contributed 2.6 per cent of Ghana's GDP. The bank's activities supported a total of 156,000 jobs in the country, or around 1.5 per cent of Ghana's active workforce, clearly showing that beyond our corporate social initiatives, our business also contributes meaningfully to Ghana's development. Economic Review 2010 Basic earnings per share On the local front, the year 2010 will be remembered as a watershed year for Ghana and Standard Chartered Bank Ghana. Several milestones increased Ghana's international profile as an investment destination during the year. Of GH03.75 particular significance was the rebasing of Ghana's GDP and the first production of crude oil in commercial quantities ("First Oil") from the Jubilee Field. Standard 2009: GH02.99 I 2008: GH01.89 Chartered Bank Ghana will be positioning itself to ensure that our customers and shareholders benefit from the opportunities these events will bring. Dividend per share The rebasing of GDP from a base year of 1993 to a base year of 2006 resulted in an upward revision of 2009 GDP from GH0 24bn to GH0 45bn. This implies that Ghana is now a lower middle-income country based on current population GH01.27 figures. The rebasing also indicated that the Ghanaian economy has made the 2009: GH02.47 I 2008: GH01.50 transition to becoming a service economy, with services accounting for 49.5 per cent of GDP, Agriculture, 31.7 per cent and Industry, 18.9 per cent of the new 2009 GDP respectively (35.1 per cent, 37.7 per cent and 27.2 per cent respectively in old measurement). Ghana's economy largely stabilized in 2010, having overcome significant challenges including large fiscal deficits and inflation of over 20 per cent from 2009. Provisional Real Gross Domestic Product was estimated to grow at 6.6 per cent during the year compared to 4.7 per cent in 2009. We expect real GDP growth in 2011 to exceed 12 per cent, driven by royalty and tax revenues from crude oil production and higher levels of investment by government and businesses. 07 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review The Cedi stabilized against the three major trading currencies during Executive Officer, Mr. Andrew Okai as new Head of Consumer Banking the year while inflation decreased significantly to 9.5 per cent at year and Mr. Ahmad Bilal Pirzadah as new Head of Origination and Client end. International reserves are projected to increase to US$3.8bn from Coverage. US$3.2bn in 2009, and with the incremental inflow from crude oil Let me take this opportunity to welcome Mr. J. Kweku Bedu-Addo as revenues, we expect the perennial shortage of dollars in the Ghanaian the new Chief Executive Officer of Standard Chartered Ghana financial system to be largely mitigated. following the departure of Mr. Hemen Shah to pursue interests outside Economic Outlook 2011 the Bank. Prior to his current role, Mr. Bedu-Addo was Standard Chartered Bank's Area Head of Origination and Client Coverage, West The outlook for Ghana's economy remains favourable, with an Africa and will remain an Executive Director of the Bank. With Mr. expectation of significant growth in GDP this year due to crude oil Bedu-Addo's deep understanding of the business and of the Ghanaian exports. We expect other sectors of Ghana's diversified economy to market, I am even more confident of the bright future ahead for also contribute strongly to growth: telecommunications, construction, Standard Chartered Ghana. financial services, and tourism will play a large role in the Ghanaian economy in 2011. Budgeted Government expenditure on infrastructure, I also welcome to the board, Mr. Andrew Okai, who takes over as Head education and public services will also have an expansionary impact of Consumer Banking following the resignation of Mr. Francis Mills- on the economy. Robertson. Mr. Okai also brings a wide range of experience and success from within Standard Chartered Bank and in various Performance of the Bank capacities, and I look forward to him taking this segment of our Robust demand for Ghana's key exports and near double digit business to a higher level. economic growth in the latter half of 2010 created significant financing I am pleased to announce that Mr. Ahmad Bilal Pirzadah, former Head opportunities for our Wholesale Business. We also witnessed several of Structured Trade Finance, United Arab Emirates, will be replacing clients see a positive turnaround in their business relative to 2009, and Mr. Bedu-Addo as Head of Origination and Client Coverage for Ghana we expect the current trend of double digit revenue growth to continue as well as an Executive Director. I am confident that Mr. Pirzadah, with in 2011. We have sharpened our focus on the customer and developed his deep understanding of Standard Chartered Bank products, will be mechanisms to better understand their needs. able to leverage his prior experiences to take our Ghana franchise to a In Ghana and across all our markets, we are committed to being 'Here new level. for Good'. We have a powerful culture, with a pervasive sense of The Board has accepted Mr. Samuel Daisie's departure from the board shared values and shared stories. Standard Chartered is committed to after 21 years of dedicated service. His contribution towards the building a sustainable business as a bank, simultaneously creating transformation of this Bank over the years has been significant and the value for our shareholders, supporting our clients and customers and Board will miss his rich legacy. contributing to the communities in which we live. Outlook for 2011 Our performance in 2010 reflects the continued success of our business model. Once again we have demonstrated our determination The prospects for our business are looking ever brighter. The political to stand by our customers and clients using our capital and liquidity and economic environment remained stable despite relative instability strength to support them in good and bad times. Our total lending to in some neighbouring countries. Our business is more aligned with our customers and clients increased by nearly GH0 59 million, over 14 per client base, and we are well positioned to take advantage of the cent. We continue to lend to key sectors of the economy such as expected growth in the coming years. We continue to invest in telecommunications, trading companies, oil and gas, and small and systems, people, products and communities. The Board supports the medium-sized enterprises. strategy and momentum that management has built up in the past year as well as the relevant oversight structures that have been put in place. Governance In conclusion, 2010 was another year of great performance. We have In line with good corporate governance, we have made changes to our demonstrated that we have the right strategy, the right culture and the Board structure by separating the Audit and Risk Committee into two right business model to deliver consistent and sustained value for our different committees. The two committees are now chaired by different shareholders. We enter 2011 in excellent shape and with strong growth individuals. This will enhance our internal risk management capabilities momentum. and ensure that Standard Chartered Bank continues to improve its systems and processes. We remained in compliance with local regulatory requirements and the local regulator has expressed satisfaction with the Board's processes and strategic management function. New Board Appointments I am proud to announce three additions to the management committee Ishmael Yamson Chairman of Standard Chartered: Mr. J. Kweku Bedu-Addo as new Chief 24 February 2011 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 08 Chief Executive's review Consistent and long-term growth My appointment as Chief Executive Officer fills me with a deep sense of pride and privilege. I joined Standard Chartered Bank Ghana in 2000 as a Relationship Manager with the then Corporate Banking Department and was appointed Chief Executive Officer in 2010. Having come through the ranks, I view my appointment not as a private achievement but as a testament to the values of this great institution. I would like to express my appreciation to my colleagues, the Board and clients and customers for the support, goodwill and cooperation I have enjoyed so far. I will continue to build on the progress my predecessors have made in addition to focusing on building an institution that is anchored on three main pillars; a leadership culture, a service culture and a performance culture. I am confident that this approach will strengthen and sustain our continued growth as an institution to the benefit of all our stakeholders; the "I have no doubt that the clarity and shareholders, employees, customers, regulators and the consistency of our strategy, our discipline community. in sticking to it, and unwavering commitment to our distinctive culture and values have This year's results represent our fifth consecutive year of record been crucial to our continued success" income and profits. Our performance is not a bounce-back or recovery story but one of consistent delivery based on diverse and sustained growth. Over the last five years, we have delivered an average annual revenue growth of 27 per cent. In 2010, we recorded a solid performance of 26 per cent growth in profit after tax. We are well placed in Ghana's most attractive segments, winning market share, growing income and profits and creating value for our shareholders. A consistent strategy Much of what drives the Standard Chartered Ghana story remains constant. Our strategy remains unchanged and our aspiration remains the same - we want to be the best international Bank, leading the way in Ghana. We are putting even greater focus on our clients and customers, on building deep and long-standing relationships, on improving the quality of our service and solutions. We continue to be obsessed with the basics of banking - balancing the pursuit of growth with disciplined management of costs and risks, keeping a firm grip on liquidity and capital. We continue to focus on culture and values, on the way we work together across our business locations, products and segments, combining deep local knowledge with global capability. These fundamentals underscore everything the Bank does and everything we stand for as a Bank. 11 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Chief Executive's review For further information you can also visit www.standardchartered.com/gh Here for good Here for good illustrates the bank's commitment to being a positive force in its markets. It underlines our distinctive approach to international banking and creates a strong platform for continued growth I have no doubt that the clarity and The outlook for Ghana's economy remains hospitals and delivered equipment and consistency of our strategy, our discipline in favourable, with an expectation of significant technical support to two eye clinics in Tarkwa sticking to it and unwavering commitment to growth in GDP this year due to the and Sefwi Wiawso. These facilities will our distinctive culture and values have been commencement of oil production. provide high quality eye care to over crucial to our continued success. But it would Nonetheless, the sustainability of Ghana's 1,500,000 people in the two regions who do be a mistake to think this means we haven't growth will depend in part on external factors not have access to healthcare. changed. Standard Chartered today is very such as prices of commodities like gold and different from the organization I joined in cocoa and currency and money market Under a group-wide initiative called Living 2000. We entered that year having made a volatility and consistency in internal economic with HIV/AIDS (LwHIV), our team directly little over GH015.4m in pre-tax profits and policies. educated close to 4,000 people on HIV/AIDS some 586 staff. Fast forward to 2010 and we and impacted some 25,735 people with the have a bigger and more diversified franchise Here for good HIV message. Through the efforts of our which delivered record pre-tax profits of dedicated staff, Ghana was one of the only six GH0101 m and with a staff strength of almost While our story remains consistent, the Bank countries that represented the Bank at the 1000 people. This has been a decade of in Ghana and indeed the whole Standard 2010 Global Business Coalition conference in remarkable progress and returns to Chartered Group continued to evolve rapidly Washington DC, USA on HIV/AIDS, shareholders. during 2010. One of the most visible changes in 2010 was the launch of Here for good, our Tuberculosis and Malaria. brand promise, which captures the essence of Economic Outlook who we are. We are a Bank that sticks by its The year under review also saw the release of clients and customers through good and bad In 2010, the global economy showed a Group report on the Social and Economic times; a Bank that always tries to do the right continued recovery, especially among Impact of Standard Chartered Ghana. The thing. We are committed to having a positive developing countries. Several developed study was conducted independently by a impact on the broader economy and on the markets however are still implementing team of researchers led by Prof. Ethan communities in which we live and work. Here economic reform programmes as a result of Kapstein of INSEAD following an initiative by for good resonates with staff, clients and the 2008-2009 financial crises. There was a the Standard Chartered Group to assess the customers and other stakeholders because continuing shift in the balance of global contribution of the Bank to Ghana's economy. it's true, because it's simple and because it's economic power, with emerging powers like The study revealed that the Bank contributed powerful. It's a benchmark that people will China, India and Brazil playing a more about 2.6 per cent to Ghana's gross economic hold us to but that is the point. significant role in the global economy. China product (GDP) and about 1.5 per cent to officially became the world's second largest Ghana's employment generation. Other economy in 2010. With the increasing Sustainability impacts included the contribution of about 40 purchasing power of the middle class in per cent of the total financing that made China, the country will be an attractive market In Standard Chartered Bank, we are committed to being a force for good in the Ghana's oil production a reality. for many countries and its growth will in turn, communities in which we live and work. drive demand for goods and sen/ices. Standard Chartered Bank Ghana was Wholesale Banking recognised as the "Most Socially Responsible In 2010, our Wholesale Banking business Back home, Ghana's national accounts were Bank" in the Ghana Banking Awards in July once again demonstrated its leadership rebased from 1993 to 2006 to better reflect 2010. In partnership with Sightsavers and the position by delivering robust performance. the size and distribution of the economy. This Ministry of Health, we provided four newly Our focus on deepening client relationships resulted in a 60 per cent increase in the size constructed eye care clinics, fully equipped and intimate knowledge of our target market of the economy, with the services sector now with surgeries and other eye care facilities in sectors led to our remarkable success in the being the largest sector and accounting for Asamankese, Nkawkwaw, Suhum and year under review. By leveraging our 49.5 per cent of GDP. Ghana was therefore Donkorkrom. In the Western Region of international platform and broad product declared a lower middle income country on Ghana, we have also partnered with ranges, we delivered a solid operating the basis of this adjustment. Operation Eyesight Universal and the Ministry of Health to commission two surgical units at performance in 2010. the Bibiani and Takoradi Government www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 10 We executed a number of industry firsts in 2010 which included the US$ 50million Fixed Rate Multi-currency Receivables-backed Notes Purchase facility for a commodity client. We were also very instrumental in the landmark commodity hedge executed on behalf of the Government of Ghana to mitigate the impact of high fuel prices on the domestic economy. This was a high profile deal as it was the first of its kind by a government entity in West Africa. Standard Chartered Bank established itself as the premier financier in the oil and gas industry, reflecting our track record in other "Our focused commitment to improving the emerging markets where we play a lead role classroom experience for young children has in project finance. We were proud to see Tullow Oil and Kosmos Energy deliver First delivered significant benefits to the Oil on the back of innovative financing that we education sector and supported the arranged to fund investments in the development of the Jubilee Field. government's call for help to be channeled Standard Chartered Bank also acquired the into this sector" Barclays Custodial Service business in 2010. As a result, we are able to provide a complete suite of investor services products to our clients. This serves to complement our existing Transaction Banking and Financial Markets capabilities, enabling us to offer holistic solutions to our investor clients. Consumer Banking Our Consumer Banking business, in 2010, saw the continuation of the transformational journey of driving a more consumer-centric approach to business. To this end, we launched our Customer Charter month during which we examined initiatives to improve customer satisfaction by focusing on delivering friendly, fast, accurate sen/ice, solutions to their financial needs and recognition of their overall banking relationship. During 2010, we also refurbished 7 branches: Osu, Korle Dudor, Tudu, Opeibea, Tema, Tamale, and Kejetia to first class standards, 13 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Chief Executive's review and we implemented Quick Account Opening faster turnaround time on customer deepening our wholesale banking initiative in 6 branches in our bid to provide transactions and improved customer relationships with our core clients by fast and accurate service as part of our service. An archival online record keeping continuing to provide market leading customer charter promises. feature on the platform improves our audit solutions and products. Our clients are trail of transaction flow and allows robust increasingly becoming aware of and tracking of customer documents and a We also rolled out new products and services appreciative of the breadth of our product sophisticated transaction risk monitoring to the market by launching the Priority offering and the depth of our technical framework. As our business continues to Banking Service in June 2010 and introduced knowledge in adding value to their grow, upgrade plans are in progress to the Visa Gold and the Visa Infinite cards for businesses. We are focused on remaining ensure we conduct business on the most the first time onto the Ghanaian market which well-positioned to meet their needs across a modern platforms which will support have since attracted very positive feedback range of products from working capital business growth and ultimately improve our from our customers. We also launched management to structured solutions, customer service capabilities. Employee Banking during 2010, which was corporate finance, capital markets and aimed at strengthening the existing financial markets solutions. relationships with our corporate clients by People offering their staff convenience in our banking We remain committed to ensuring that the The Consumer Banking transformation services through a dedicated and responsive Bank is a Great Place to Work. In 2010, we journey remains on track, beginning to team of relationship managers. consolidated our gains under the 'Good to deliver results and we expect to see the Great' campaign, leveraging on our culture business consolidate further in 2011. A key Our Small and Medium-sized Enterprise and values as a unique differentiator in aspect of this journey is the leveraging of business underwent some restructuring driving performance and service excellence. cross-sell opportunities between the during 2010 and we believe it is well We made several key appointments from Consumer Bank and the Wholesale Bank. positioned for growth in 2011. While the our diverse talent pipeline and redoubled We will continue to focus on our key Wealth Management business was impacted our focus on building strong leadership segments, staying true to the pillar of our by margin compression, Bancassurance capability. We will continue to invest in the business model: customer-centricity. A flourished with noticeable increase in development of our people and premises cornerstone of our strategy remains the customer penetration. Overall, our Consumer while creating an enabling environment in expansion of usage of alternate channels. Banking business performed strongly during which creativity and ingenuity can flourish. the last quarter of the year, and we expect In conclusion, let me assure you that we that to continue in 2011. We anticipate further Challenges and Prospects for 2011 believe firmly in the risk appetite we have consolidation of the change journey we During 2010, the lag effects of the determined as a Bank for this market, the embarked on in 2010. slowdown in the global economy from 2008, growth path we have embarked upon to with the attendant tightening of market fulfil our risk appetite, the capable men and Technology terms and conditions eventually made its women to drive this agenda and finally Infrastructure in the bank continues to way through our market. These external robust systems and controls regime to improve. Our Group standard core banking e- conditions together with the equally tight support our growth ambitions. BBS platform has enabled significant conditions locally meant that some of our The Bank enters 2011 in great shape. We business growth in Ghana and customer clients became distressed under such have a clear strategy which we will stick to. satisfaction. In order to support business circumstances. Not surprisingly therefore, We have an increasing powerful brand. We growth, our data centre hardware has been the level of impaired assets in our books have a strong balance sheet. replaced with higher capacity modern also went up during the year. However, we equipment. are confident of the outcome of our work out solutions with some of these distressed In 2010, we piloted a Group standard clients, the benefits of which we will begin to workflow and imaging platform system in >& at> see in due course. Ghana. The successful implementation of this J. Kweku Bedu-Addo led to a roll out throughout the Standard Chief Executive Chartered Group. This platform has enabled Looking forward into 2011, we will continue 24 February 2011 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 14 Our organisation A One Bank culture Standard Chartered - Here for good Group and Country At Group and Country level we: • set overall corporate strategy • ensure we are true to our values • provide strong governance • continue our commitment to a sustainable business • manage our capital • deliver to all our key stakeholders including goverments, regulators, shareholders and communities • manage our financial performance • build corporate brand Consumer Banking Wholesale Banking Our objective is to: Our objective is to: • provide fast, friendly and accurate service • become the core bank to more of our clients, deepening and • provide solutions to financial needs broadening relationships in our key markets • provide recognition and reward the overall • build scale in our local markets and increase cross- banking relationship border opportunities across our network • become the bank that customers recommend to • maintain a strong balance sheet to support our existing friends and colleagues clients Our markets Operating in growth markets with a focus on teia, Africa • deep local knowledge and the Middle East, we have: • a history of commitment • strong local governance • strong cross-border capability 13 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Our approach A strategy for sustainable performance Our strategic intent Our brand promise To be the world's best international bank Here for good a healthy global economy needs international Here for good represents our commitment to three banks to: core pillars: facilitate trade across our markets people - our long-standing relationships and focus on enable our multinaltional clients to customers and clients conduct complex business transactions progress - the way we conduct ourselves service the needs of an increasingly long run - our footprint and heritage international consumer base How we deliver: our strategic pillars Clear geographic focus on Asia, Africa and the Distinctive culture and values Middle East Our unique culture and values are a source of significant We have an unequivocal focus on these fast growing advantage. They reassure clients in a market where trust economies in which we have, or can achieve, a clear and ethics have re-emerged as critical, underpinning our competitive advantage supported by superior insight One Bank approach, attracting our relationships with and deep local relationships stakeholders such as regulators and governments Scale positions in significant local markets Conservative and disciplined on risk, capital and liquidity We believe in combining global capabilities with local scale. This is becoming an ever-stronger competitive We regard balance sheet as a cornerstone of our business imperative in our markets. We want to be considered model and strategy and are prepared to sacrifice income to important to the banking system in our key geographies achieve and protect this One Bank with two strong businesses actively reinforcing each other Organic growth the primary driver for our strategy and value creation We operate as One Bank with two major businesses, Wholesale Banking and Consumer Banking, working We believe that organic growth drives the greatest value effectively together creation for our shareholders. Where we cannot grow organically, or cannot do so within a reasonable time frame, we will explore acquisitions that reinforce our core strategy Client relationship, rather than a product driven approach We focus on capabilities around client needs, rather than seeking a rapid return on products or building product silos Supported by our ways of working As One Bank, leveraging the synergies between our With an ongoing commitment to sustainable business businesses and geographies practices, upholding high standards of corporate governance social responsibility, environmental protection and employee diversity www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 16 Standard Chartered Ghana in 2010 Continuing growth and record profits Focus on the basics of banking. Key performance We have never lost sight of these key disciplines: Operating income GH0 218m 1. Liquidity 2009: GH0183m I 2006: GH0 117m We have continued with our conservative approach to liquidity management and further enhanced liquidity Profit before taxation driven by very good levels of deposit growth GH0 101.5m 2009: GH0 84m I 2008: GH043m 2. Capital We continue to remain committed to our capital strength Our priorities in 2011 3. Risk • We will remain disciplined in the execution Risk management continues to be proactive and focused of our strategy, continuing to be well placed in segments that have strong growth prospects • Both businesses will continue their focus 4. Costs on being more important for our customers and clients. Costs will be managed to We continue to pace investments to drive future income ensure alignment with income momentum and to create further investment capacity • We will continue with our focus on proactive balance sheet management We will remain committed to capital and liquidity strength 15 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review The Bank in 2010 "The Bank has continued to perform consistently, delivering another record performance in 2010. We continue to focus on diversified sources of income growth and a strong capital and liquidity base to enable us to position for continued growth in 2011." Sanjay Rughani Executive Director, Finance A record performance and We have continued to improve on our performance. Effective liquidity and overall risk management structure. capital management remain a priority for continued growth despite Having taken credit risk charge, some us. As we clearly focus in managing growing competition. With resulting from past large deals impacted inherent risks in our business while diverse income streams, by global crisis, we continue to build generating sustainable earnings and quality assets to sustain and support our maintaining cost discipline, we are well selective investments to future strategy. placed and prepared to capture the underpin growth, together growth opportunities that are available in the market. with a strong and liquid Late in the year 2010, we acquired the balance sheet, the Bank is custody business from Barclays Bank. This enables us to not only align to the well positioned with Standard Chartered Bank Groups continued positive growth securities services network but also provides us with a unique opportunity to prospects enhance our product suit for our clients and maximize value from the emerging market. Performance Summary: The Bank has delivered another record Our approach to maximizing the wealth performance as our Operating income of our investors is a key highlight as our (Profit before tax) which is up 21 per cent business continues with high persistence crossed the GH01OOm mark. The year earnings which are clearly reflected in under review continued to show an our stock price. This again, is confirmed impressive diversified performance as in the buildup in our Earnings Per Share our profit after tax increased by 26 (EPS) which grew from GHS 2.99 in percent although we had to cut our base 2009 to GHS 3.75 to 2010. Currently, rate by 750 basis points from 29.5 with the highest stock price on the percent at the beginning of the year to 22 Ghana Stock Exchange, it is imperative percent in December as against the that our focus remains in having the right bench monetary policy rate which mixture of assets and liabilities to experienced a 450 basis points drop optimize on all market opportunities. from 18 per cent to 13.5 percent during the same period. Partnering with the regulatory authorities and ensuring we play within the rules in Whilst managing costs effectively, the the market is of paramount interest to us. Bank also consciously continued to The directive to increase our issued invest in both businesses to underpin its shares to 100 million is currently under future growth. Key investments in 2010 consideration and we shall achieve this include refurbishment of 7 of our key requirement established by the Ghana branches, enhanced technological Stock Exchange in due course. systems and platforms, investing in new business lines, talent building and The Bank continues to grow its core retention, and investing in the brand. areas of the balance sheet to sustain its www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 16 Consumer Banking On track and delivering in an exciting market "Consumer Banking finished 2010 in a strong position, well placed to deliver sustained growth and to weather current and future challenges with good headroom to grow" Andrew Okai Executive Director, Consumer Banking Our strategy Key highlights Our strategy is based on three pillars: Operating income • A unique business model with a focus on key value (GH0 million) segments 37 , 41 55 75 • Providing distinctive customer focused value propositions • Maintaining back to basics focus on cost, efficiency, risk and liquidity Our priorities in 2011 2006 2007 2008 2009 2010 • Continue to implement and embed our customer-focused transformation designed to drive sustainable competitive e-Statement penetration (%) advantage • Increase mix of online channel usage and customer acquisition 56 • Maintain balance sheet and assets under management growth momentum • Drive standardization to improve service, productivity and the control environment • Maintain disciplined risk, cost and performance management 2008 I 2009 I 2010 17 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Consumer Banking Strategy working Consumer Banking delivered strong early results as it stepped up its transition from a product-led to a customer-focused organization in 2010. We Defining Bespoke Banking finished the year with positive relative performance in a very competitive market; all key In recent times, Ghana has The Priority Banking proposition is elements of the Bank's new strategy are in play attracted attention and a high level built on the four principle pillars: with a healthy and growing balance sheet of recognition on the international Privileged Service, Unique Benefits, coupled with good traction in key customer stage and has become a beacon of Expert Solutions and International metrics. economic proficiency within sub- Banking Services. Despite increased competition and continuing Sahara Africa. margin compression, our tight focus on the foundations of good banking and customer A Priority Banking customer has needs enabled Consumer Banking to grow Ghana's ever improving prospects access to an exclusive banking centre market share and gain momentum. This drove a and the rapid transformation of the and a dedicated relationship 22 per cent increase in deposits and 13 per cent society to middle income status has manager, who offers financial advice year-on-year increase in personal loans. thrown up a discernable need - to optimize the management of their While we continued to pace investments and customers who require more wealth. manage costs, improved performance allowed sophisticated, bespoke solutions for us to invest to sharpen customer service, their hard earned wealth. Provision of this world-class service enhance our distribution network, hire more front-line staff and increase spending on coupled with the offering of Visa's marketing. For example, according to the most most prestigious card, the Visa Infinite recent Global Competitiveness Report Card brings to Priority customers Consumer Banking finished 2010 in a strong of the World Economic Forum - exclusive banking analogous to their position, well placed to deliver sustained growth 2009/2010, at least 1,000,000 status. and to weather current and future challenges with good headroom to grow in this market in Ghanaians have US$18,000 in 2011. investable assets. This segment of customers will definitely be under- Focusing on customers served with regular banking solutions. In 2010, we focused on redefining our customers' experience and providing them with To this effect Standard Chartered more value. We delivered this by developing and strengthening distinctive customer value Ghana, which is ever cognizant of the proposition for Priority, Small and Medium-sized specific needs of our customers has enterprises (SMEs) and Personal Banking introduced banking services, customers. tailor-made to meet the needs of this segment; Priority Banking We completed the roll out of our new Priority Banking offering and continued hiring Priority Banking Relationship Managers to support the double-digit increase in income and number of Priority customers. Standard Chartered achieved another major milestone in Ghana by becoming the first bank to offer the full suite of Premium Visa cards with the launch of our prestigious Gold and Infinite cards. This further enhances customers' convenience in the country and abroad when they travel. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 18 In the first quarter, we launched our Customer Charter (The Charter), which is central to achieving our aspiration of becoming the bank customers recommend to friends, family and colleagues. More than 30 workshops were held to embed the Charter and its focus on giving customers superior service, solving their financial needs and rewarding their relationship with us. Across the bank, our First Call Resolution rate improved, customers' satisfaction to complaints resolution improved by 19 per cent, and we increased the number of products sold per customer. We also materially improved turnaround time for account opening and personal loan products. In the last quarter of 2010, we launched Quick Account Opening where we open accounts for new customers and deliver their buffer cheque book and Visa Electron Card within 25 minutes. The service is being piloted in 14 branches and will be extended to all branches by the end of the first quarter of 2011. Investing for sustainable growth A world class interface with customers As we gained momentum, we released additional investment to strengthen key areas and accelerate the pace of our Increasingly, customers are standards comparable to any transformation. We continued to improve our distribution network taking advantage of various self- across the globe. In these refurbishing seven branches and upgrading all our ATMs. service platforms to conduct refurbished branches, there are We invested heavily in training to improve customer service routine banking transactions. no barriers between customers levels and ensured that we met our customers' needs. Internet, mobile, ATMs and and staff. The shop front is open phone banking can take care of and bright allowing for more Our Remote Banking capability was further reinforced having most basic banking needs and transparency and closer contact actively migrated 56 per cent of our customers to electronic more and more consumers are with our staff. statement in lieu of paper. This was equivalent to 10,000 trees saved and contributed significantly to Standard Chartered's using these channels for day-to- global initiative to save trees and thus improve our environment. day banking necessities. In addition to the attractive ambiance and comfortable Performance in 2010 However, research shows that furniture, customers also have Volume growth was strong but overall profitability was impacted when it comes to doing use of the Bank's conference negatively by margin compression occasioned by the improving something significant, such as room facilities for their own macroeconomic environment and falling interest rates. However, taking a business loan or meetings. There is also a warm the more benign credit environment provided opportunities for choosing an investment, and friendly Service Ambassador asset growth. customers still prefer to meet to make customers' experience Personal Banking delivered strong performance particularly in the face-to-face with a relationship rich and fulfilling. fourth quarter and served as a growth leader for our retail manager at a branch. In the light business. Wealth Management was impacted by a margin drop of this, banks are starting to use while Bancassurance delivered an appreciable increase in branches more to give customers Through this, we aim to customer penetration. The Small and Medium Enterprise advice and provide a wider range significantly deepen our business portfolio was restructured in 2010 and this has placed it of products rather than as a relationship with our customers in a stronger position to deliver growth in 2011. transaction centre. To succeed in ensuring that we delight them with our quality service and the Overall, the Consumer Banking business performed strongly this refined role and remain during the last quarter of the year and we expect the trend to variety of superior products in our relevant to customers, banks are continue in 2011. We anticipate further consolidation of the suite. The way we see it, banks investing more to make their transformation journey we embarked on last year, setting the need to work at fitting into banking halls sleek, elegant and tone for a generally positive outlook for the business. gorgeously attractive. people's lives, not making them fit into ours. Our goal is to be the Looking ahead bank customers recommend to We see opportunities for continued asset growth, expansion of As a market leader, Standard their friends, family and colleagues our product reach and further diversification of our product suite. Chartered has started embarking We will continue to focus on our key segments staying true to the on refurbishing its branches to pillars of our business model - customer centricity, focused participation model and solid banking basics. A cornerstone of our strategy remains an expansion in the use of our alternate channels by our customers to enhance convenience. We will further leverage the cross sell opportunities between Consumer and Wholesale banking. As our transformation journey continues, we expect the business to consolidate and expand in 2011 and beyond. 19 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Standard Chartered ^ Whatfe your Priority? PRIORITY The best solutions are those that work around you. No matter what your priorities are, we make it a point to meet your needs: Banking • Dedicated relationship teams • Visa Infinite Debit Card • Exclusive Priority Banking Centres • Household recognition for your family • Global Priority Banking access Visit our world class Priority Banking Centres at Opeibea Branch or our Priority Lounges at designated Branches. Speak to our Relationship Managers today, or call +233 (302) 740125 for more details. Here for good # priority.standardchartered.com/gh Wholesale Banking Clients - at the centre of everything we do "We continue to provide our clients with risk management "Here for good and sustainable lending continue to be the solutions to minimize the impact of external shocks on their main drive in delivering solutions to our clients. Our strong businesses. Our balance sheet remains very healthy and performance and growth is hinged on our strategy to provide value added solutions to our clients, propelling we maintained our focus on sustaining a very strong them to reach their growth ambitions whilst increasing liquidity position, enabling us to cater to the increasing shareholder value." needs of our clientele and outperform the competition." Mayokun Ayibade Ahmad Bilal Pirzadah Area Head, Global Markets, West Africa Executive Director, Origination and Client Coverage Our strategy Key highlights Operating Income Client income as % of total income Become the core bank to more of our clients (Gh+t million) Build scale and increase cross-border capabilities to bettersupport our clients'needs 136 50% 2009: 64% Maintain our strong balance sheet to support our 106 existing clients 62 I 2008 I 2009 I 2010 Income from Top 50 Clients Our Priorities 2011 • Deepen ourclient relationships by increasing ouroffering 56.8 of client solutions for our key client segments • Manage our costs, capital, risk and balance sheet to 49.6 maximise our ability to support our clients • Leverage our brand, people and diversity in culture to serve our clients and outperform the competition 2009 2010 21 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Wholesale Banking Consistent strategy drives growth Diversifying our support A key driver of the success achieved by the Wholesale Bank in 2010 was its commitment The Cocoa industry continues to Using our extensive capabilities to the strategy of deepening client be the backbone of the economy and product offerings, the Bank relationships and focusing on the basics of banking. This allowed us to sustain the high and the importance of this sector was able to structure dual performance achieved in 2009 and deliver and its associated funding needs currency funding at highly another year of record breaking financial continue to be on the increase. competitive rates. performance in 2010. With Total Revenues of Standard Chartered Bank GH0 137.8m and a record Trading Profit of continues to support this industry As a result, the client was able to GH0 66.3m, the Wholesale Bank once again by providing a wide range of lower its interest cost and at the led the way in the market both in terms of financial solutions. same time raise its profile by profitability and the delivery of a diverse range accessing a wide range of of solutions to our clients. These In 2010, Standard Chartered investors. accomplishments were realised through the Bank provided a specific and collective efforts of our team of seasoned structured solution to one of our professionals who leveraged the Standard key cocoa buying companies. Chartered network to deliver exceptional This solution was in response to sen/ice and products to our clients. the clients need for funding at a Commercial Banking Foundation price which was competitive to that prevailing on the market. Our primary focus was on providing customized solutions to cater to our clients' unique and quickly evolving needs, and by choosing to extend our core client base across the key sectors of the economy, we cemented our position as the key solutions provider in the industry. The Wholesale Bank continues to carve a niche for itself in the financial sector demonstrating an intimate knowledge of our target market segments and thus enabling Standard Chartered to become the bank of choice for tailor made solutions. A broader set of solutions powering our business We continue to increase the depth and breadth of our capabilities as we anticipate needs and provide solutions to our clients'. Whilst the traditional Commercial Banking products such as Cash Management and Trade Sen/ices remained the 'bread and butter' of our business, it was our endeavour to replicate the more sophisticated solutions offered across the Standard Chartered Group to our local clients that contributed to our success in 2010. Loan Syndications, Debt and Capital Markets solutions, Structured Trade Finance, and Financial Market solutions relating to Commodity, Interest Rates and Currency Risk Management, have served to complement our existing Transaction Banking and Financial Markets capabilities. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 24 Business review Wholesale Banking In 2010 the Wholesale bank was able to execute market leading transactions and enhanced our product delivery capabilities. An example of which was a USS 50 million Fixed Rate Multi-currency Receivables-backed Note used by one of our Agri-clients to expand their participation in the 2010/2011 Cocoa season. We enhanced our Straight2Bank platform with the 'Trade Tl' product, enabling clients to set up Letters of Credit online and also launched the 'Virtual Account', a service provided to clients to facilitate the easy reconciliation of transactions on their accounts. We launched the 'RMB Trade Account', and in so doing are able to offer services to facilitate cross-border RMB settlement between Ghana and China. The Bank also acquired a Custodial Service Renminbi - anticipating trends and growing solutions business in 2010, and by capturing this for our clients investment opportunity, the Bank is now able to deliver a superior and comprehensive suite With its rapid growth and the trade relations with Chinese of investor service products to our venerated internalisation of the Renminbi counterparties or had clients. (RMB) China's impact is prospective trade relations with increasingly being felt on the China. The event was well The Client Journey African continent and in Ghana in received and in all 80 clients particular. were in attendance. Our willingness to go the extra mile to ensure our solutions meet our clients' needs was Standard Chartered Bank Today the Bank is able to offer demonstrated in the execution of a milestone demonstrated its commitment to our clients doing business with Commodity hedge program for the expand our product capabilities China more transparent pricing Government of Ghana to mitigate the impact to meet the needs created by as well as access to a wider of high fuel prices on the domestic economy. China's growth by launching the Supplier base in China. Our We also continue to support the local financial RMB Trade Settlement Account. capabilities include the ability to sector by playing a thought-leadership role in the development of the Bond and Foreign facilitate Cross Border Trade In 2008, the Chinese Exchange markets. Settlement, RMB Exchange Risk Government began the process Management and the use of the of Globalising the Reminbi In 2011 we expect to see sustained growth in Straight2Bank electronic platform (RMB), the main objective of both the economy and the Wholesale Bank to exchange instructions relating which was to make cross border business. We remain true to our strategy of to RMB activities. trade settlement in RMB a reality. deepening client relationships, delivering tailored solutions and products as well as Standard Chartered Bank was Through our 150 years of ensuring a structurally healthy balance sheet involved in this project and in operating experience in China, and liquidity position to serve the needs of our January 2010 became the first our expertise and understanding clientele. This approach has enabled us to international Bank to facilitate a of the Chinese market and its outperform our competitors in the industry and cross-border RMB settlement related regulatory requirements, will remain the cornerstone of our business in between Korea and China. 2011. SCB has been able to deliver to our clients a distinctive trade As a Bank, we are excited about solution. We will continue to the many benefits the focus on this emerging market globalization of the RMB could segment and endeavor to deliver offer to our Ghanaian clients who solutions to our clients to trade with business entities in facilitate doing business in China. On Friday 29 October China. 2010, Standard Chartered Ghana launched the RMB Trade Account through a Seminar targeting clients who either had 23 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Standard Cg Chartered Knowledge. Experience. Network. The Right Combination. A Rare Commodity. With a worldwide presence that spans over 70 countries, Standard Chartered is well-positioned in the emerging trade and investment corridors across Asia, Africa and the Middle East. What's more, we have the right combination of knowledge, experience and network to meet the diverse needs of our client. Partner with the bank whose experience is as broad as our reach. Let our expertise power your ambition. Here for good www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 24 People Focusing on our culture and values to drive engagement In 2010, our people strategy remained consistent and focused on sustainable high performance Our highlights in 2010 Our priorities in 2011 • Increase our focus on attracting and retaining talented • Increased the engagement of our employees, employees in our market by offering more opportunities moving from 4.09 to 4.27 on a scale of 1 to 5 in our for training and development. annual Gallup Q12 Employee Engagement Survey • Enhance our distinctive culture by giving our • Maintained an impressive retention record for employees practical guidance on how to live our values leaders and high-performing individuals, with an and establishing an even closer link between values and reward average attrition rate of less than 7 per cent. • We implemented a new transparent online system Embed our Here for good brand promise into the tools for managing individual performance. we use for recruiting new staff and helping them adapt to our ways of working • Our investment in learning and development greatly increased by over 500 per cent from Build on our efforts to ensure that we offer our employees competitive rewards, while complying with GH0105,251 in 2009 to GH£ 563,096 in 2010. evolving regulation and maintaining control of cost and risk • To proactively manage our regulatory requirements; ensuring that our People processes reinforce our values and support the achievement of our business goals 25 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review People Training leaders in finance Standard Chartered puts significant effort into developing leadership capabilities in this market. communities where we operate; our focus on Our approach consistently doing the right thing and acting We employ almost 1000 people, representing responsibly. It has raised the bar on how we 11 nationalities, working across our various demonstrate our values through our everyday businesses. We pride ourselves on being a business activity. This year, we have stepped up truly diverse organisation, combining an by embedding our values further into our international footprint with in-depth local processes for managing individual performance. understanding. Our sense of shared values For example, we have established a clearer link helps us feel and behave as one team across between performance and reward and how our our business functions. Wherever we are, our people live our values. Using our new online ambition remains one and the same: to work performance management system, all our in partnership with our clients to provide employees are asked to assess their own solutions that meet their needs. This unique performance against our values. This Employees culture is a strong competitive advantage for assessment is then reviewed by their line the Bank. manager as part of the basis for determining 986 their annual reward. Focusing on our culture and values Number of nationalities Our distinctive culture is the reason why clients Building our leadership capabilities and customers choose to bank with us. It is why represented globally In the last two years, our leadership population employees want to join us and stay with us. Our has grown over 17 per cent and 83 per cent of five core values are at the heart of our culture. At new leaders recruited last year came from inside 11 all times we aspire to be: the Bank. This indicates the level of effort we put into developing our leadership capabilities Courageous - standing up for what across the business. Proportion of new leaders we believe is right recruited internally Responsive - delivering thoughtful, We have a strong focus on developing a robust timely solutions leadership pipeline capable of driving sustained business performance in line with our Here for 83% International - valuing diversity and good strategy. We encourage leadership collaborating as a team development programmes and other forums to Creative - continuously improving the support their personal development. In 2010, over 60 of our managers benefited from Great Female representation way we work Manager and other leadership development Trustworthy - being reliable, open programmes. We also revamped one-on-one 49% and honest coaching for the senior management and top end talent. Our brand promise, Here for good, reaches out to all our stakeholders, including our employees, through a simple and compelling promise. It says Our succession planning process in 2010 who we are, what we stand for and what makes focused on the 25 top roles in the organization. us different. We made 10 appointments at senior management level, 7 of which were from the Here for good captures our genuine commitment local talent pool. We also continue to enrich our to our customers and clients, our staff and the talent diversity from within and outside the communities where we operate; our focus on www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 28 People Group. 4 of our staff also went out on inclusiveness score from 4.27 to 4.41 on a scale what makes it different from competitors. Our International assignments in various parts of the of 1 to 5. score in this area was 4.70 on a scale of 1 to 5. Group. Further, we launched the Africa Future Leaders Programme; a regional programme that Performance and reward In 2011, to strengthen our employer brand even is aimed at accelerating development for our Our performance and reward policies are further, we will be reviewing our people middle level managers. 8 our key managers are designed to drive our business strategy. The processes, starting with how we attract and on the pilot programme. Bank is committed to an extremely high level of recruitment websites and update our selection governance. The Global Performance tools, including how we interview for senior Management system launched in 2009 has Growing our employee engagement roles.select new employees. We will refresh our greatly enabled our managers and employees to recruitment websites and update our selection The commitment of our employers is set and monitor performance objectives in a fundamental to our business success. We track timely and effective manner. The quality and tools, including how we interview for senior roles. our employee engagement annually, using the clarity of objectives have also improved Our sound performance during the financial Gallup Organization's Q12 Employee significantly as managers and employees take crisis significantly strengthened our Engagement survey. In 2010, the survey showed advantage of the system to refine and discuss objectives in a more efficient environment. attractiveness as a prospective employer. a significant increase from 4.09 to 4.27 on a We actively encourage international mobility, for scale of 1 to 5.The increment was due in part to example through our International Graduate a planned effort to strengthen our management Managing performance is core to our success as Programme and targeted talent programmes across regions. culture. an organization and the performance management system enables us to raise These programmes support our growth while We also play an important role in coaching and standards of delivery at the individual and helping to develop our junior talent by giving training line managers to build engagement and corporate level. A strong performance and them international experience early on in their make a positive contribution in making Standard development culture provides the environment careers. Chartered Bank a 'Great Place to Work'. for continuous growth and development for our Every employee is encouraged to generate ideas people. Summary and action plans that will help improve the work In 2010, our people strategy remained consistent and focused on sustainable high performance. environment. The culture of performance excellence is We delivered on our objectives, by further supported by a robust reward and recognition increasing our employee engagement, by Anchored on our values, the engagement fora structure. We encourage long-term performance strengthening our leadership capabilities and by rewarding our employees not only for what they promote open and honest communication within and have structured our compensation packages deliver, but also for how they deliver it. and across the organization. They also build a to reinforce this longer- term outlook. strong sense of accountability and ownership for Supported by the launch of our brand promise, productivity and performance. Strengthening our employer brand Here for good, we renewed our focus on culture and values, enhancing our distinct competitive We rely on our employees to keep our brand advantage. The launch of our 'Here for Good' Enabling Diversity and Inclusion promise to be Here for good in their interactions brand promise served to differentiate us from Diversity and Inclusion (D&l) is an integral part of with each other, with customers, with clients and other banks in terms of what we do and how we our values and forms and inherent part of our with communities. In 2010, to support the launch do it, thus, creating a distinct competitive brand and culture. We strive to offer all our of Here for good, we articulated clearly what the advantage. people an inclusive and supportive environment brand promise means for our employees, by in which they feel valued and appreciated for outlining both what we offer our people and what who they are and what they bring to the Bank. we expect in return. Our annual employee This year, in our annual employee engagement engagement survey showed a high degree of survey, we achieved an increase in our understanding of what our brand stands for and 27 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Standard Cg Chartered Experience. A rare commodity. With over 150 years of experience, Standard Chartered is well-positioned in the emerging trade and investment corridors across Asia, Africa and the Middle East. Partner with the bank whose experience is as broad as its reach. Here for good www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 28 Sustainability Our social and economic impact We believe that by doing things the right way, banks can be a powerful force for good The last few years have been testament to clear and consistent strategy to be the best Standard Chartered's unwavering international bank, leading the way in Ghana; commitment to sustainability. Through the we have a distinctive culture with strong, financial crisis we have stood firm in our shared values; and we remain committed to commitment to building a sustainable shared values; and we remain committed to business as a bank, delivering value to our building a sustainable business, creating long- customers and shareholders whilst term value for our shareholders, working in contributing to the communities in which we partnership with our clients and customers, live and work. and having a positive social and economic impact in the communities we live and work. In 2010, we made a vital contribution to economic growth, we continued to place our sustainability agenda at the core of the way we do business; we stepped up our efforts to measure our impact on this market and we invested more in our communities. /jl iSy*? J. Kweku Bedu-Addo We retained the "Most Socially Responsible Chief Executive Bank" award at the Ghana Banking Awards in July. We passionately believe that by doing things the right way banks can be powerful contributors to economic progress in societies. We aim to have a positive impact in three ways: by contributing to the real economy; by promoting sustainable finance; and by leading the way in our communities. We're proud of what we have achieved in 2010, proud of where we're going. We have a 29 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Sustainability Seeing is Believing Schools' Desk Project Through this initiative to tackle avoidable Our contribution to Ghana's educational blindness we have brought benefit to over sector is mainly through this project which is a million people across the country. helping nurture the country's future generation of leaders. Our approach Our priorities in 2011 We believe that a bank can be about more than the profits * Build on our work to measure our social and it makes. As an international financial institution, by doing economic impact things the right way, we can have a positive social and economic impact on the markets where we operate. We * Increase our employee volunteering days to 600, including targeted skills-based volunteering remain committed to building a sustainable business, simultaneously creating value for our shareholders, * Arrange for all existing and new Consumer Banking supporting our clients and customers and contributing to employees to complete eLearning on our the communities where we live and work. Customer Charter * Roll out sustainable finance training to Wholesale Banking employees * Sustain momentum in employee engagement, focusing on our culture and values * Reduce annual paper consumption per full-time employee from 30kg to 25kg * Continue to reduce our energy and water consumption in line with our long-term targets. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 30 Sustainability Sustainable finance is fundamental to our aim of creating long-term value for our shareholders while having a positive impact on communities Key highlights No. of employees who undertook training (including contract staff) 11 28,264 nationalities represented Access 247 accounts opened 951 1106 1141 across our business from 2007 to 2010 7200 eye care units commissioned dual desks distributed under the in 2010 Schools Desk Project 56% 37,500 of Consumer Banking trees planted between 2008 2009 2010 statements delivered 2008 and 2010 electronically 1,228,665 25.735 Long Lasting Insecticide people nave been educated Treated Nets (LLITNs) on HIV/AIDS distributed between 2007-2010 73% decrease in Consumer Banking 565 complaints volunteering days taken up by staff in 2010 31 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Sustainability Responsible selling and marketing Access to finance By focusing on clients' real needs, we are With appropriate access to finance, the able to deliver well tailored solutions to agricultural sector can make a significant match their aspirations contribution to Ghana's development Contributing to the real economy Standard Chartered Ghana was also a employees, strengthening our screening We believe that by doing things the right pioneer in the roll-out of e-Zwich in 2008, a systems, and ensuring that our policies way, banks can be a powerful force for new universal electronic payments and procedures are comprehensive and good in society. Our aim is to promote technology, made mandatory by the Bank up-to-date. sustainable growth in the real economy, of Ghana to increase security on card through our core business of banking. transaction by ensuring that all banks in The vigilance of our employees is Ghana use a common biometric payment paramount to our success in fighting Millions of people across our footprint are card system. Standard Chartered Ghana financial crime in all its forms. This year we either unbanked or severely under-served upgraded its technology in response to this trained over 700 people in anti-money by financial institutions, restricting their initiative. Between August 2008 and July laundering procedures. Our internal economic activity. Widening the access 2010, the Bank placed almost 45,000 'Speaking Up' programme is has been to finance is a core part of our strategy to customers onto the e-Zwich platform. launched in Ghana and is available to staff have a positive impact on communities through the Internet and by telephone .We focus on offering relevant products Responsible selling and marketing and services that we understand fully to We focus on clients and customers, not Promoting sustainable finance clients and customers with whom we have products. Our determination to treat clients Sustainable finance is fundamental to our deep relationships. and customers fairly and respond to their aim of creating long term value for our real needs is firmly embedded in our shareholders while having a positive Financial crime can erode the positive responsible selling and marketing impact on communities. Our approach is to contribution of banking to the real economy practices. manage the environmental, social and and affect our business performance. We governance risk that come with our have a long-standing commitment to In 2010, we rolled out our Consumer financing decisions, working with our preventing our products and services from Banking's customer charter, our clients to encourage progress towards being used for criminal financing activity. commitment to needs based selling and international standards. service excellence. We have also Access to finance decreased the number of Consumer Our sustainability risk management Our efforts to deliver financial services to Banking complaints by 73 per cent. framework was first established in the unbanked section of the population has 1997.This year, we focused on embedding been through our continued support to In Wholesale Banking, we maintained our more deeply into our financing, while Small and Medium-sized Enterprises focus on deepening our client relationships expanding it to cover more areas. Our 14 (SMEs), which are key drivers of growth and investing in staff training to ensure that position statements - including a new and employment in our market and our employees fully understand the statement on water added this year guide microfinance institutions. products we sell. We aim to be the core our approach to providing financial services to clients who operate in sensitive Microfinance is key to our aim of extending bank for more of our clients, providing relevant solutions for their needs, from business sectors or face specific issues. basic banking services to more people. commercial banking to strategic solutions. Together with our commitment to the Through the structures provided by Equator Principles on project finance, the microfinance institutions we are able to We demonstrated that we continue to statements provide the bedrock of our indirectly extend basic banking sen/ices to stand by our clients when times get tough, sustainability risk management approach. more people. In this way, the Bank plays a using our capital and liquidity to support To ensure that our standards are applied vital role in enabling lower income them. robustly across our markets, we have customers to expand their opportunities, refined the tools we use to evaluate our demonstrating the role that a major bank Tackling financial crime clients' performance. can play in financial deepening through We are committed to combating money forging effective partnerships with other laundering, terrorist financing, fraud, We recognize that as a responsible institutions. bribery, and market abuse. To guard financier we should not confine against the risk of financial crime within our We also continue to attract the unbanked sustainability risk management to a narrow business, we focus on training our using innovative products like Access247, range of products. While the industry norm www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 32 Sustainability To create long-term value for our shareholders, we must help address some of the critical environmental and social issues that affect the communities where we live and work is to follow the Equator Principles on project finance only, we have extended our environmental, social and governance standards to lending, debt and equity advisory and principal finance transactions. Our determination to promote sustainable finance means we also work hard to capture the opportunities represented by the renewable energy and environmental finance sector. Leading the way in communities To create long-term value for our shareholders, we must help address some of the critical environmental and social issues that affect the communities where we live and work. Our people are crucial to this effort. We take seriously our operational impact on the environment and empower our employees to help minimize our footprint through their everyday Our impact in Ghana Highlights of the study include: business activity. Our community - Case Study on Socio Economic Impact investment programmes focus on of Standard Chartered in Ghana. • Contributing to the economy: our generating high social returns and impact amounted to US$400 million of strengthening the economic health of our We want to have a positive social and value-added in 2009, equivalent to markets. economic impact on the communities where 2.6 per cent of Ghana's GDP we operate. This year we commissioned an Great place to work independent study of our impact in Ghana - • Connecting Ghana to world markets: the first in a series of such studies to help us we lent US$193 million as trade loans Our people are crucial to the delivery of understand our contribution and how we can in 2009 our sustainable business model. In our deepen it. continuous drive to make the Bank a great • Supporting SME growth: we provided place to work, we focus on attracting the In 2009, we provided Ghanaian businesses, US$17.2 million to SMEs in 2009 best from across our footprint and consumers and government agencies with enhancing employee engagement. For us nearly US$900 million of financing more than • Generating employment: our activities high performance is not just about any other commercial bank. But our contribution supported around 156,000 jobs in generating large profits, it is also about goes far beyond the provision of credit. 2009, approximately 1.5 per cent of living our values, demonstrating the many Ghana's workforce ways that we are Here for good. Since As an international bank, we help support 2001, we have measured our employee Ghana's economy by using our global footprint • Delivering financial innovation: we engagement through an internal annual to increase trade and investment flows; we were the first bank to provide survey, The Gallup Organisation's Q12 support clients in reaching international commodity, interest rate and Employee Engagement Survey. This year environmental, social and governance currency hedging saw a significant increase moving us from standards; we spur innovation through the launch of new products; we improve access to 4.09 in 2009 to 4.27 in 2010 on a scale of • Developing human capital: four finance; and we provide world-class employment 1 to 5.We also progressed on our targets banking CEOs in Ghana are alumni opportunities and training. for diversity and inclusion ensuring of Standard Chartered employees continue to feel valued and For further information you can visit appreciated for who they are. www.standardchartered.com 33 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Sustainability Employee Volunteering Protecting the environment Employee volunteers help build a fence wall A beach cleaning exercise to help reduce to provide a secure environment for school plastic waste and generally ensure a children in a basic school in Accra. healthy environment along our coastline. Protecting the environment Region specifically in Asamankese, Nets for Life initiative in the Eastern We operate in a country vulnerable to Nkawkaw, Donkorkrom and Suhum which Region of Ghana .Through this environmental challenges, including the will bring benefit to over one million campaign, 1050,000 Long Lasting effects of climate change. Rather than people. Insecticide Treated Nets (LLITNS) have simply continuing current business been distributed in various communities in practices we work to inspire and In the Western Region we have provided the country. encourage our employees, clients and two eye surgical units at Takoradi and customers to minimize their environmental Bibiani and delivered equipment and Under Reading for Growth, the Bank in footprints. This strategy is supported by technical support to two other eye clinics in partnership with the nation's leading Print the Standard Chartered Group Tarkwa and Sefwi Wiawso which has Media House, Graphic Communications Environment Committee and implemented brought benefit to over 300,000 people. Group Limited distributes 10 copies of through our country team led by a Country Junior Graphic to selected deprived Environment Coordinator and a network of Under our Living with HIV initiative schools across Ghana weekly. This seeks Environment champions. (LwHIV), we refurbished nine wards and to encourage reading among students. also donated medical equipment to the The project was initiated in 2007 and the In our continuous response to the global Korle-Bu Fevers Unit as our way of first phase ended in 2010. The Phase II call to reduce carbon dioxide in the delivering on an earlier commitment made has taken off and will end in 2012 with environment, the Bank partnered the by the Group CEO, Peter Sands when he additional 50 schools receiving 10 copies Ministry of Environment to plant a total of visited Ghana in 2010. Into its second of Junior Graphic weekly. 18,400 trees. The Deputy Minister for decade, LwHIV (our workplace HIV Environment, Dr. Omani Boamah education programme) continues to make Employee volunteering is at the heart of delivered a talk to staff on recycling as part great impact in stemming the spread of our commitment to play an active role in of World Environment Day Celebrations. HIV. Working through a team of dedicated tackling the challenges faced by We have established Environmental Clubs staff volunteers and partnerships, we have disadvantaged populations. In 2010 staff in 10 schools in Ablekuma South and been able to deliver HIV education to over took advantage of the Bank's Employee Central Districts in Accra. 40,648 people in Ghana. Volunteering Policy to engage in a number of volunteering activities in our Clean Country We shall continue to migrate our best in communities. In all a total of 565 Over the years Standard Chartered Ghana class workplace HIV programme to other volunteering days were taken by staff to Staff have been engaged in clean-up corporate entities under the umbrella of undertake activities ranging from beach activities in the bank's communities as part the Ghana Business Coalition against cleaning, painting and cleaning of of employee volunteering. Activities HIV/AIDS. hospitals and schools, building of fence include de-silting of drains and clearing of wall for a deprived school, tree planting, plastic waste. In 2010, our staff helped in In partnership with the Ghana Education assisting in the screening of patients in cleaning the La Pleasure Beach Resort Service, Phase II of our Schools Desk need of eye care, career counseling for the and the Mother Theresa Orphanage in Project has been launched and under this youth, distribution of treated nets for Tema. initiative we are distributing 6600 desks to malaria prevention and HIV awareness 66 deprived schools across the country creation. Community Investment over a three year period. This translates This year we made great strides in into 22 schools a year. The Schools Desk expanding our community investment Project has been very successful in programmes and in some cases helping address the classroom furniture exceeding- our targets. Seeing is Believing challenge of deprived schools across the is a global collaboration to tackle avoidable country. blindness across our markets. In Ghana under our SIB initiative we partnered the We joined forced with five other partners Ministry of Health and the Ghana Health including the National Malaria Control Service as well as Sightsavers to build and Programme and the Ministry of Health to commission four eye clinics in the Eastern launch the "Hang up" campaign under the www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 36 Risk review Managing risk responsibly Standard Chartered Ghana has a diversified portfolio. We have a robust risk governance structure and an experienced risk team. Our balance sheet and liquidity remain strong Risk Profile Principal uncertainties Diversifed portfolio • Deteriorating macro economic conditions Our lending portfolio is diversified across a wide range • Exchange rate movements of products, industries and customer segments, which • Fraud serves to mitigate risk • Financial Markets dislocation Strong liquidity position • We have strong advances-to-deposits ratio • Our customer deposit base is diversified by type and maturity • We have a substantial portfolio of liquid assets that can be realized if a liquidity stress occurs Robust risk governance structure and experienced senior team • We have a clear statement of risk appetite that is approved by the Board and sets the risk parameters within which our businesses operate • We have a very experienced risk management framework that assigns accountability and responsibility for the management and control of risk 35 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Business review Risk review Risk overview Risk management framework The ALCO is responsible for the 2010 saw an upturn in the global economy Effective risk management is fundamental to management of capital ratios and the but the pace of recovery has been irregular; being able to generate profits consistently establishment of, and compliance with, however, growth in our market has been and sustainably and is, thus, a central part of policies relating to balance sheet buoyant. the financial and operational management of management, including management of Standard Chartered Bank Ghana Limited. our liquidity, capital adequacy and Our proactive approach to risk management Through our risk management framework we structural foreign exchange rate risk. enabled us to take steps early on in the manage enterprise-wide risks, with the global financial crisis of 2008-09 to reshape objective of maximising risk-adjusted returns The Executive Risk Committee (ERC) is our portfolios and tighten underwriting while remaining within our risk appetite. responsible for the management of all standards, which helped to mitigate the risks, other than those delegated by the impact of market turbulence on our Our risk principles Management Committee to the Asset and performance. In 2010, we have maintained As part of this framework, we use a set of Liability Committee (ALCO) and the our cautious stance. Our balance sheet and principles that describe the risk management Pensions Executive Committee. The ERC liquidity have remained strong throughout culture we wish to sustain: balancing risk is responsible for the establishment of, the year, and we are well positioned for and reward: and compliance with, policies relating to 2011. risk is taken in support of the requirements of credit risk, country cross-border risk, our stakeholders, in line with our strategy market risk, operational risk, regulatory Standard Chartered Bank Ghana has a and within our risk appetite risk and reputational risk. The ERC also defined risk appetite, approved by the Board, defines the Bank's overall risk which is an expression of the amount of risk Responsibility: it is the responsibility of all management framework. we are prepared to take and plays a central employees to ensure that risk-taking is role in the development of our strategic plans disciplined and focused. We take account of The Pensions Executive Committee is and policy. We also regularly conduct stress our social, environmental and ethical responsible for the management of tests to ensure that we are operating within responsibilities in taking risk to produce a pension risk. Members of both the ERC our approved risk appetite. Our lending return and ALCO are also members of the portfolio is diversified across a wide range of Management Committee. The ERC is products, industries and customer segments, Accountability: risk is taken only within chaired by the Country Chief Risk Officer which serves to mitigate risk. agreed authorities and where there is (CCRO). The ALCO is chaired by the appropriate infrastructure and resource. All Chief Executive Officer (CEO). Risk limits Our cross-border asset exposure is risk-taking must be transparent, controlled and risk exposure approval authority diversified and reflects our strategic focus on and reported frameworks are set by the ERC in respect our core businesses and customer of credit risk, country cross-border risk segments. Approximately 70 per cent of our Anticipation: we seek to anticipate future and market risk. The ALCO sets the loans and advances to customers are of risks and maximise awareness of all risks approval authority framework in respect of short maturity. Market risk is tightly liquidity risk. Risk approval authorities monitored using Value at Risk (VaR) Competitive advantage: we seek may be exercised by risk committees or methodologies complemented by sensitivity competitive advantage through efficient and authorised individuals. measures, gross nominal limits and effective risk management and control management action triggers at a detailed The committee governance structure Risk governance portfolio level. This is supplemented with ensures that risk-taking authority and risk The ultimate responsibility for setting the extensive stress testing, which takes account management policies are cascaded down Bank's risk appetite and for the effective of more extreme price movements. from the Board through to the appropriate management of risk rests with the Board of functional, country-level committees Standard Chartered Bank Ghana. In line with Our liquidity in 2010 benefitted from through the Management Committee. best practice, the Board has approved the continued good inflows of customer deposits, Acting within an authority delegated by segregation of board-level governance which helped us to maintain a adequate the Board, the Board Risk Committee responsibilities of audit and risk. As a result advances-to-deposits ratio. Liquidity will (BRC), whose members are all non- the Audit and Risk Committee (ARC) has continue to be deployed to support growth executive directors of Standard Chartered been segregated into The Board Audit opportunities in our business segments. We Bank Ghana, reviews specific risk areas Committee (BAC) and Board Risk manage multi-currency liquidity in a manner and monitors the activities of the ERC and Committee (BRC) with distinctive that ensures that we can meet all short-term ALCO. funding requirements and that our balance responsibilities and accountabilities. sheet remains structurally sound. The BRC receives regular reports on risk Executive responsibility for risk management management, including portfolio trends, is held by the Management Committee Risk management policies and standards, adherence with which comprises the executive directors and The management of risk lies at the heart of internal controls, regulatory compliance, other senior managers of Standard Standard Chartered Ghana's business. One liquidity and capital adequacy, and is Chartered Bank Ghana. The Management of the main risks we incur arises from authorised to investigate or seek any Committee delegates' authority for the extending credit to customers through our information relating to an activity within its management of risk to three key committees: trading and lending operations. Beyond terms of reference. credit risk, we are also exposed to a range of other risk types such as country cross- 1. The Assets and Liability Committee border, market, liquidity, operational, (ALCO). regulatory, pension, reputational and other 2. The Executive Risk Committee risks which are inherent to our strategy, (ERC). product range and client coverage. 3. The Pensions Executive Committee (PEC) www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 36 Business review Risk review Risk Governance Structure Country Operational Risk Early Alert Group Special Assets Management Committee (CORC) Committee /Problem Accounts Committee 37 Standard Chartered Ghana Annual Report 2010 Corporate Information BOARD OF DIRECTORS Ishmael Yamson (Chairman) Kweku Bedu-Addo (Chief Executive Officer) Sanjay Rughani (Executive Director, Finance) Andrew Okai (Executive Director - Consumer Banking) appointed 1 December 2010 Frederick William Lee (Non-Executive Director) Felicia Gbesemete (Independent Non-Executive Director) Herbert Morrison (Independent Non-Executive Director) Ahmad Pirzadah (Executive Director - Origination and Client Coverage) appointed 10 March 2011 Francis Mills-Robertson (Executive Director - Consumer Banking) resigned 15 July 2010 Hemen Shah (Chief Executive Officer) resigned 12 August 2010 Samuel Daisie (Non-Executive Director) resigned 31 March 2011 SECRETARY Dawn Kwesi Zaney AUDITORS KPMG Chartered Accountants Marlin House 13 Yiyiwa Drive P O Box GP 242, Accra SOLICITORS Bentsi-Enchill Letsa & Ankomah 1st Floor Teachers' Hall Complex Education Loop (Off Barnes Road) Adabraka, Accra P O Box GP 1632 Accra - Ghana REGISTRARS NTHC Limited Martco House P O Box 9593 Airport- Accra REGISTERED OFFICE Standard Chartered Bank Building High Street P O Box 768 Accra www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 38 Board ^ A of directors f^- f IA 1. Ishmael Yamson 2. J. Kweku Bedu-Addo 3. Herbert Morrison Chairman Chief Executive Officer Non-Executive Director Appointed to the Board on 1 February 2005. Appointed to the Board on 30 January 2009. Appointed to the Board on 4 May 2009. He is Former Chief Executive of Unilever Ghana and Before his appointment, he was the Executive Managing Partner of Morrison and Associates, current Chairman of the Board of Unilever. He is a Director for Origination and Client Coverage in a firm of Chartered Accountants, Tax and member of the President's Economic Advisory Standard Chartered Bank Ghana. He also held Management Consultants. Council and also Chairman of the Board of the the position of Program Director for Origination Ghana Investment Promotion Council. and Client Coverage in Standard Chartered Bank Singapore and has also served on the Board of the Bank in Zambia. 39 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Corporate governance Board of directors 4. Sanjay Rughani 5. Frederick William Lee 6. Felicia Gbesemete Executive Director, Finance Non-Executive Director Non-Executive Director Appointed to the Board on 26 January 2007. Appointed to the Board on 30 January 2009. Appointed to the Board on 4 May 2009. She is a Before his appointment, he held the position He is currently the Regional Head of Global lawyer and a founding Partner and Director of of Executive Director for Finance in Standard Markets for Standard Chartered in Africa. He Lexconsult. Chartered Bank Tanzania and prior to that he previously held the positions of co-head was the Regional Finance Manager for Africa Wholesale Banking and Regional Head of Financial Markets in the Middle East, Pakistan and Africa at Standard Chartered. 7. Andrew Okai 8. Ahmad Pirzadah 9. Dawn Kwesi Zaney Executive Director, Consumer Banking Executive Director Board Secretary Appointed to the Board on 1 December 2010. Appointed to the Board on 10 March 2011. Appointed to the Board in October 1997. He is Before his appointment, he was involved with Before his appointment, he was Managing also the Area Head, Legal, West Africa with strategy and corporate governance in the Director and Regional Head for Structured responsibility for SCB Ghana, Sierra Leone, office of the Chief Executive in Hong Kong. Trade Finance and Financing Solutions in Gambia and Cote D'lvoire. He has also served in various capacities in Dubai and prior to that He was Head of Wholesale Banking, Consumer Banking and Corporate Relationship in Bahrain. General Management divisions in different locations within the Standard Chartered Group. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 40 Senior Management Management Committee The Ghana Management Committee as of March 1 2011, comprises the executive directors of Standard Chartered Bank Ghana Limited, the Area Head of Legal, West Africa (and also the Board Secretary) and the following senior executives: 1. Harry Dankyi 2. Mayokun Ajibade 3. Nana Araba Abban Harry joined Standard Chartered in 2002. He is Mayokun joined Standard Chartered in 2002. He Naana joined Standard Chartered in 1999. She Head of Audit, Ghana & West Africa and has is Area Head, Global Markets, West Africa. Prior is Head, Consumer Banking Operations, SSC direct responsibility for all audit related issues to his appointment, he was the Regional Head of Africa & Governance and SSC .West Africa. across Ghana and West Africa. Product of Product Development, Global Markets Prior to her appointment she was the Value Prior to joining Standard Chartered, Harry Africa. Centre General Manager for Unsecured worked as a Financial Accountant and a Mayokun is responsible for Global Markets Lending, SCB Ghana. She is a member of SCB Treasury Officer for the Volta River Authority business in Ghana, Cote D'voire, Sierra Leone, Group's Women's council. (VRA). Cameroon and Gambia and is co-Head of the Wholesale Bank business in SCB Ghana 4. Henry Dodoo-Amoo 5. Nii Okai Nunoo 6. Emmanuel Mayaki Henry joined Standard Chartered Bank in May Nii joined Standard Chartered in 2006. He is Emmanuel joined Standard Chartered in 2006. 1978. He is Country Chief Risk Officer, Ghana Area Head, Corporate Affairs, West Africa and He is the Chief Information Officer, Ghana and and Senior Credit Officer, West Africa. Henry has direct responsibility across West Africa for Area Head, GTO, West Africa and oversees has executive responsibility for risk developing and protecting relationships with the Consumer and Wholesale Banking Operations management in Ghana and has held similar Bank's key stakeholders in order to build and Unit. Emmanuel manages the bank's positions in South Africa. enhance the reputation of the Bank as one automation and system enhancement related which can deliver long term shareholder value projects and oversees the development of the whilst being a force-for-good. Prior to his right technology framework or architecture for appointment, he was the Head of Public Affairs, Ghana. for The Coca-Cola Bottling Company of Ghana Ltd. 7. Lucy Kimani Lucy joined Standard Chartered in 1988. She is the Head of Human Resources responsible for developing , reviewing, establishing and recommending Human Resources policies and procedures to enable SCB Ghana deliver its business strategy. Prior to her appointment, she was the senior relationship manager for Wholesale Bank, SCB Kenya. Lucy ensures that the HR structure is aligned to business needs; HR productivity, HR headcount and cost are optimal. 41 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Corporate governance Corporate governance Report of the Directors to the members of Standard Chartered Bank Ghana Limited The Directors in submitting to the shareholders their report and financial statements of the Bank for the year ended 31 December 2010 report as follows: Directors' responsibility for the financial statements The Bank's Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Code, 1963 (Act 179), and the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act, 2007 (Act 738); and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Directors have made an assessment of the company's ability to continue as a going concern and have no reason to believe that the business will not be a going concern in the year ahead. Financial Statement and Dividend GH0'OOO Profitfortheyearended31 December2010 before taxation was 101,513 from which is deducted taxation of (29,305) giving a profit for the year after taxation of 72,208 Less: Transfer to Statutory Reserve Fund and Other Reserves of (47,668) leaving a balance of 24,540 to which is added balance on Retained Earnings (Income Surplus Account) brought forward (excluding balance on Statutory Reserve Fund and Other Reserves) of 57,339 giving a cumulative amount available for distribution of 81,879 out of which was paid afinal dividend for 2009 of GH02.47 per share for ordinary shares and GH0O.O5 per share for March 2010 and GH0O.O8 per share for September 2010 for preference shares amounting to (49,830) leaving a balance on the Retained Earnings (Income Surplus Account) carried forward of 32,049 The Directors are recommending a dividend of GH01.27 per share for ordinary shares amounting to GH024.5 million. In accordance with Section 29(c) of the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act, 2007 (Act 738), a cumulative amount of GH046,43O,OOO has been set aside to a Statutory Reserve Fund from the Retained Earnings (Income Surplus Account). Nature of Business The Bank is licensed to carry out universal Banking business in Ghana. There was no change in the nature of the Bank's business during the year. Holding company The Bank is a subsidiary of the Standard Chartered Holdings (Africa) B. V., a company incorporated in The Netherlands. Subsidiary The Bank acquired a new subsidiary Standard Chartered Ghana Nominees Limited during the year in addition to its existing subsidiary, Standard Chartered Investment Services Limited. Both subsidiaries did not carry out operational activities during the year. The subsidiaries' financial statements have not been consolidated with that of the parent as the Directors are of the opinion that they are insignificant and would present no real value to members. Approval of the Financial Statements The financial statements of the Bank, as indicated above, were approved by the Board of Directors on 10th February 2011 and were signed on their behalf by 43 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Independent Auditor's Report to the members of Standard Chartered Bank Ghana Limited Report on the Financial Statements We have audited the financial statements of Standard Chartered Bank Ghana Limited which comprise the statement of financial position at 31 December 2010, the statements of comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes as set out on pages 45 to 89 Directors' Responsibility for the Financial Statements The Bank's Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Code, 1963 (Act 179), and the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act, 2007 (Act 738); and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Standard Chartered Bank Ghana Limited at 31 December 2010, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Code, 1963 (Act 179), and the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act, 2007 (Act 738). Report on Other Legal and Regulatory Requirements Compliance with the requirements of Section 133 of the Companies Code, 1963 (Act 179), and Section 78 of the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act, 2007 (Act 738). We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit. In our opinion, proper books of account have been kept, and the statements of financial position, and comprehensive income are in agreement with the books of account. The Bank's transactions were within its powers, and the Bank complied with the relevant provisions of the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act, 2007 (Act 738). CHARTERED ACCOUNTANTS 13 YIYIWA DRIVE, ABELENKPE P. O. BOX GP242 ACCRA 24 February 2011 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 46 Statement of Comprehensive Income For the year ended 31 December 2010 2010 2009 Notes GH*'000 GHfOOO Interest Income 8 213,941 155,492 Interest Expense 9 (61,193) (36,073) Net Interest Income 152,748 119,419 Net Fees and Commission Income 10 42,360 37,192 Other Operating Income 12 22,917 25,889 Operating Income 218,025 182,500 Operating expenses 13 (102,936) (83,712) Operating profit before impairment loss and taxation 115,089 98,788 Impairment loss 15 (13,576) (15,074) Proft before taxation 101,513 83,714 Taxation - Corporate Tax (24,229) (24,124) National Fiscal Stabilization Levy 170) (5,076) (2,093) Profit for the Year 170i) 72,208 57,497 Other Comprehensive Income Net change in fair value of available for sale financial assets: Gains/(Losses) recognised directly in equity 18,349 10,183 Net amount transferred to the income statement (4,324) (5,091) Other comprehensive income 14,025 5,092 Total comprehensive income for the year 86,233 62,589 Basic earnings per share (Ghana Cedi per share) 38 3.75 2.99 Diluted earnings per share (Ghana Cedi per share) 38 3.75 2.99 45 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Statement of Financial Position For the year ended 31 December 2010 2010 2009 GHfOOO GH#'000 Notes Assets Cash and Balances with Bank of Ghana 19 139,669 281,509 Short-Term Government Securities 200) 57,619 121,375 Due from Other Banks and Financial Institutions 21 374,482 130,189 Loans and Advances 22 467,152 408,538 Other Assets 25 89,660 84,791 1,128,582 1,026,402 Medium-Term Investments in Other Securities 20 (ii) 510,463 359,138 Equity Investment 20 (III) 100 100 Property and Equipment 23 19,414 15,590 Intangible Assets 24 9,323 — Deferred Taxation 18 — 2,983 Total Assets 1,667,882 1,404,213 Liabilities Customer Deposits 27 1,092,442 833,084 Due to Other Banks and Financial Institutions 28 196 11,435 Provisions 31 48,103 27,387 Borrowing 32 252,863 275,516 Interest Payable and Other Liabilities 30 69,744 90,597 Taxation 17 (ii) 3,210 6,616 1,466,558 1,244,635 Deferred Taxation 18 5,343 — Total Liabilities 1,471,901 1,244,635 Shareholders' Funds Stated Capital 33 (i) 61,131 61,131 Retained Earnings 33 (ii) 32,049 57,339 Statutory Reserve Fund 33 (iii) 46,430 37,404 Credit Risk Reserve 33 (iv) 29,319 — 3,704 Other Reserves 33 (v) 27,052 Total Shareholders' Funds 195,981 159,578 Total Liabilities and Shareholders' Funds 1,667,882 1,404, 213 Net Assets Value per Share (Ghana Cedis per share) 10.2 8.3 These financial statements were approved by the Board of Directors on 10 February 2011 and signed on its behalf by: * ji mk J. Kweku Bedu-Ado Director DFCWTOR www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 Statement of Changes in Equity For the year ended 31 December 2010 Share Retained Statutory Credit Risk Other Total Capital Earnings Reserve Reserve Reserves Equity GHfOOO GH?000 GHfOOO GH0'OOO GHfOOO GHfOOO Balance at 1 January 2010 61,131 57,339 37,404 - 3,704 159,578 Total comprehensive income for the year Profit for the year - 72,208 - - - 72,208 Other comprehensive income net of income tax Gains recognised directly in equity - - - - 18,349 18,349 Net amount transferred to the income statement (4,324) (4,324) Total other comprehensive income - - - - 14,025 14,025 Total comprehensive income for the year 72,208 14,025 86,233 Regulatory and other reserves Transfer to statutory reserve - (9,026) 9,026 - Transfer to credit risk reserve (29,319) 29,319 Transfer to other reserves (9,323) 9,323 Total transfers to and from reserves - (47,668) 9,026 29,319 9,323 - Transactions with owners recorded directly in equity Contributions by and distributions to Owners - - - - Dividends to shareholders (49,830) (49,830) Total contributions by and distributions to owners - (49,830) - - - (49,830) Balance at 31 December 2010 61,131 32,049 46,430 29,319 27,052 195,981 47 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Statement of Changes in Equity For the year ended 31 December 2009 Share Retained Statutory Credit Risk Other Total Capital Earnings Reserve Reserve Reserves Equity GHfOOO GH?000 GH?000 GH?000 GH?000 GH?000 Balance at 1 January 2009 13,131 43,162 30,217 4,339 (1,388) 89,461 Total comprehensive income for the year Profit for the year 57,497 - - - 57,497 Other comprehensive income net of income tax Gains recognised directly in equity - - - 10,183 10,183 Net amount transferred to the income statement (5,091) (5,091) Total other comprehensive income - - - 5,092 5,092 Total comprehensive income for the year 57,497 - - 5,092 62,589 Regulatory and other reserves Transfer to statutory reserve (7,187) 7,187 Transfer to other reserves (7,044) 7,044 Releases from reserves (4,339) (7,044) (11,383) Total transfers to and from reserves (14,231) 7,187 (4,339) - (11,383) Transactions with owners recorded directly in equity Contributions by and distributions to owners Additions to share capital 48,000 - - - 48,000 Dividends to shareholders (29,089) (29,089) Total contributions by and distributions to owners 48,000 (29,089) - - - 18,911 Balance at 31 December 2009 61,131 57,339 37,404 - 3,704 159,578 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 48 Statement of Changesin Equity For the year ended 31 December 2010 2010 2009 GH?000 GHfOOO Profit before tax for the period 101,513 83,714 Adjustments for: Depreciation and amortisation 2,026 1,543 Net interest income (152,748) (119,419) Impairment on financial assets 13,576 15,074 Gain on sale of investment - (370) (35,633) (19,458) Change in investment other than those held for the purpose of trading (11,675) (248,626) Change in investments held for trading (57,194) (84,502) Change in loans and advances (72,190) 36,726 Change in other assets (4,869) 8,741 Change in customer deposits 259,358 90,794 Change in amounts due to other banks (11,239) 1,417 Change in interest payable, other liabilities (20,853) (6,111) Change in provisions 20,716 10,827 Change in borrowing (22,653) 246,865 Interest income 213,941 155,492 Interest expense (61,193) (36,073) 196,516 156,092 Income tax paid (22,544) (25,075) Tax adjustments (6,516) - Net cash from operating activities 167,456 131,017 Cash flows from investing activities Purchase of property and equipment (5,850) (4,125) Acquisition of intangible asset (9,323) - Proceeds from sale of investment - 1,605 Net cash used in investing activities (15,173) (2,520) Cash flows from financing activities Dividends paid (49,830) (29,089) Proceeds from rights issue - 48,000 Net cash (used in) /from financing activities (49,830) 18,911 Net increase in cash and cash equivalents 102,453 147,408 Analysis of changes in cash and cash equivalents during the year Cash and cash equivalents at 1 January 411,698 264,290 Net increase in cash and cash equivalents 102,453 147,408 Cash and cash equivalents at 31 December 514,151 411,698 Analysis of cash and cash equivalents during the year Cash and balances with Bank of Ghana 139,669 281,509 Nostro account balances 52,286 2,475 Items in course of collection 17,614 27,423 Placement with other Banks 304,582 100,291 514,151 411,698 49 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the Financial Statement For the year ended 31 December 2010 1. REPORTING ENTITY Standard Chartered Bank Ghana Limited is a Bank incorporated in Ghana. The address and registered office of the Bank can be found on page 38 of the annual report. The Bank operates with a universal Banking license that allows it to undertake Banking and related activities. 2. BASIS OF PREPARATION a. Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations as issued by the International Accounting Standards Board (IASB). b. Basis of measurement The financial statements are presented in Ghana cedis which is the Bank's functional currency. They are prepared on the historical cost basis except for the following assets and liabilities that are stated at their fair value: derivative financial instruments, financial instruments at fair value through profit or loss and financial instruments classified as available-for-sale. c. Use of estimates and judgement The preparation of financial statements in conformity with IFRS requires management to make judgement, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgement about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on amounts recognised in the financial statements are described in notes 3h (ix), 3h (xi), 3h (xii) 35 and 43. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements by the Bank. a. Basis of Consolidation (i) Business combinations Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred to the Bank. Control is the power to govern the financial and operating policies of entity so as to obtain benefits from its activities. The Bank measures goodwill as the fair value of the consideration transferred including the recognised amount of any controlling interest in the acquiree less the net recognised amount of identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase is recognised immediately in profit or loss. The Bank elects on a transaction by transaction basis whether to measure non-controlling interest at the fair value or its proportionate share of the recognised amount of the identifiable net assets at the acquisition date. Transaction costs other than those associated with the issue of debt or equity securities that the bank incurs in connection with a business are expensed as incurred. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 52 Notes to the financial statements contd. (ii) Subsidiaries Subsidiaries are all entities including special purpose entities over which the Bank has the power to directly or indirectly govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which the bank effectively obtains control. They are de-consolidated from the date that control ceases. Subsidiaries that are considered insignificant are not consolidated and the Bank's interests in those subsidiaries are classified as long term investments. (iii) Investments in subsidiaries, associates and joint ventures Investments in subsidiaries, associates and Joint Ventures are held at cost less impairment and dividends from pre-acquisition profits received, b. Revenue Recognition Interest income and expense on available-for-sale assets and financial assets and liabilities held at amortised cost, are recognised in the income statement using the effective interest method. Gains and losses arising from changes in the fair value of financial assets and liabilities held at fair value through profit or loss, as well as any interest receivable or payable, is included in the income statement in the period in which they arise. Gains and losses arising from changes in the fair value of available-for-sale financial assets, other than foreign exchange gains and losses from monetary items, are recognised directly in equity, until the financial asset is derecognised or impaired at which time the cumulative gain or loss previously recognised in equity is recognised in the income statement. Dividends are recognised in the income statement when the Bank's right to receive payment is established. c. Interest Income and Expense Interest income and expense is recognised in the income statement using the effective interest method. The effective interest rate is the rate that discounts estimated future receipts or payments through the expected life of the financial instruments or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. The effective interest rate is established on initial recognition of the financial asset or liability and is not revised subsequently when calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees received or paid between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Transactions costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability. When a financial asset or a group of similar financial assets have been written down as a result of impairment, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income and expense on financial assets and liabilities held at fair value through profit or loss is recognised in the income statement in the period they arise. d. Fees and Commissions Fees and commission income and expenses that are an integral part of the effective interest rate on financial instruments are included in the measurement of the effective interest rate. Other fees and commission income, including account sen/icing fees, investment management fees, sales commission, placement and arrangement fees and syndication fees are recognised as the related services are performed. Other fees and commission expense relates mainly to transaction and service fees, which are expensed as the services are received. e. Other Operating Income Other operating income comprises other income including gains or losses arising on fair value changes in trading assets and liabilities, derecognised available for sale financial assets, and foreign exchange differences. f. Foreign Currency Foreign currency transactions are translated into the Bank's functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Non-monetary assets and liabilities are translated at historical exchange rates if held at historical cost or exchange rates at the date the fair value was determined if held at fair value, and the resulting foreign exchange gains and losses are recognised in the income statement or shareholders' equity as appropriate. 51 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes g. Leases (i) Classification Leases that the Bank assumes substantially all the risks and rewards of ownership of the underlying asset are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and present value of the minimum lease payments. Subsequent to initial recognition, the leased asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are classified as operating leases. (ii) Lease payments Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. Minimum lease payments made under finance leases are apportioned between the finance expense and a reduction of the outstanding lease liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. h. Financial Assets and Liabilities (i) Categorisation of financial assets and liabilities The Bank classifies its financial assets in the following categories: financial assets held at fair value through profit or loss; loans and receivables and available-for-sale financial assets. Financial liabilities are classified as either held at fair value through profit or loss, or at amortised cost. Management determines the categorisation of its financial assets and liabilities at initial recognition. (ii) Financial assets and liabilities held at fair value through profit or loss This category has two sub-categories: financial assets and liabilities held for trading, and those designated at fair value through profit or loss at inception. Afinancial asset or liability is classified as trading if acquired principally for the purpose of selling in the short term. Financial assets and liabilities may be designated at fair value through profit or loss when the designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis, or a group of financial assets and/or liabilities is managed and its performance evaluated on a fair value basis. (iii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. (iv) Available for sale financial assets Available-for-sale assets are those non-derivative financial assets that are designated as available for sale or are not classified as financial assets at fair value through profit or loss, loans and receivable and held to maturity. (v) Financial liabilities measured at amortised cost This relates to all other liabilities that are not designated at fair value through profit or loss. (vi) Initial recognition Purchases and sales of financial assets and liabilities held at fair value through profit or loss, available for sale financial assets and liabilities are recognised on trade- date (the date the Bank commits to purchase or sell the asset). Loans and receivables are recognised when cash is advanced to customers or borrowers. Financial assets and liabilities are initially recognised at fair value plus directly attributable transaction cost except for those that are classified at fair value through profit or loss. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 54 Notes to the financial statements contd. (vii) Subsequent measurement Available for sale financial assets are subsequently measured at fair value with the resulting changes recognised in equity. The fair value changes on available for sale financial assets are recycled to the income statement when the underlying asset is sold, matured or derecognised. Financial assets and liabilities classified as at fair value through profit or loss are subsequently measured at fair value with the resulting changes recognised in income. Loans and receivables and other liabilities are subsequently carried at amortised cost using the effective interest method, less impairment loss. (viii). Derecognition Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or where the Bank has transferred substantially all the risks and rewards of ownership. Any interest in the transferred financial assets that is created or retained by the Bank is recognised as a separate asset or liability. Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expire. (ix) Fair value measurement The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:' Level 1: Quoted market price (unadjusted) in an active market for an identical instrument. Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The determination of fair values of quoted financial assets and financial liabilities in active markets are based on quoted market prices or dealer price quotations. If the market for a financial asset or financial liability is not actively traded, the Bank establishes fair value by using valuation techniques. These techniques include the use of arms' length transactions, discounted cash flow analysis, and valuation models and techniques commonly used by market participants. For complex instruments such as swaps, the Bank uses proprietary models, which usually are developed from recognised valuation models. Some or all of the inputs into these models may be derived from market prices or rates or are estimates based on assumptions. The value produced by a model or other valuation technique may be adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Management believes that these valuation adjustments are necessary and appropriate to fairly state financial instruments carried at fair value on the balance sheet. (x) Offsetting Financial assets and liabilities are set off and the net amount presented in the balance sheet when, and only when, the Bank has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Bank's trading activity. (xi) Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. (xii) Identification and measurement of impairment. The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets are impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a "loss event"), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. 53 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan and other observable data that suggests adverse changes in the payment status of the borrower. The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised, are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on a loan and receivable has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. If a loan and receivable has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure, less cost for obtaining and selling the collateral, whether or not foreclosure is probable. For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e. on the basis of the Bank's grading process which considers asset type, industry, geographical location, collateral type, past due status and other relevant factors). These characteristics are relevant to the estimation of future cash flows for group of such assets being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based, and to remove the effects of conditions in the historical period that do not exist currently. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement. Impairment losses on available-for-sale financial assets are recognised by transferring the difference between the amortised acquisition cost and current fair value out of equity to the income statement. When a subsequent event causes the impairment loss on an available for sale financial asset to decrease, the impairment loss is reversed through the income statement. However, any subsequent recovery in the fair value of an impaired available for sale financial asset is recognised directly in equity. I. Derivative Financial Instruments Derivative contracts are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Fair values may be obtained from quoted market prices in active markets, recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The fair value changes in the derivative are recognised in the income statement. j. Cash and Cash Equivalents Cash and cash equivalents include notes and coins on hand, unrestricted balances held with the Central Bank and highly liquid financial assets with maturities less than three months. Cash and cash equivalents are carried at amortised cost in the balance sheet. k. Investment Securities This comprises investments in short-term Government securities and medium term investments in Government and other securities such as treasury bills and bonds. Investments in securities are categorised as available-for-sale financial assets and carried in the balance sheet at fair values. I. Loans and Receivables This is mainly made up of placements and overnight deposits with Banks and other financial institutions and loans and advances to customers. Loans and receivables are carried in the balance sheet at amortised cost, i.e. gross receivable less impairment allowance, m. Property and Equipment (i) Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use." Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components)". www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 56 Notes to the financial statements contd. (ii) Subsequent costs The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item if it is probable that future economic benefits embodied within the part will flow to the Bank and its cost can be measured reliably. The costs of the day-to-day servicing of property and equipment are recognised in the income statement as incurred. (iii) Depreciation Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. Leased assets are depreciated overtheir useful lives. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows: Buildings - 50 years Leasehold improvements - life of lease up to 50 years IT equipment and vehicles - 3-5years Fixtures and fittings - 5-10 years Depreciation methods, useful lives and residual values are reassessed at the reporting date. Gains and losses on disposal of property and equipment are determined by comparing proceeds from disposal with the carrying amounts of property and equipment and are recognised in the income statement as other income. n. Intangible Assets (i) Software Software acquired by the Bank is stated at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation is recognised in the income statement on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimated useful life of software is three to five years. (ii) Goodwill Goodwill represents the fair value of the consideration transferred including the recognised amount of any controlling interest in the business acquired less the net recognised amount of the identifiable assets acquired and liabilities assumed all measured as of the acquisition date. When the excess is negative, a bargain purchase is recognised immediately in profit or loss. Goodwill on acquisition of a business is included in 'Intangible assets'. Goodwill included in intangible assets is assessed at each balance sheet date for impairment and carried at cost less any accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing. Cash generating units represent the lowest level within the Bank at which the goodwill is monitored for internal management purposes. These are smaller than the Bank's reportable segments (as set out in note 7) as the Bank views its reportable segments on a global basis. Note 24 sets out the major cash generating units to which goodwill has been allocated. (iii) Other Intangible Assets Other intangible assets that are acquired by the Bank and have finite useful lives are recognised at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenses excluding expenses on internally generated goodwill and brands is recognised in profit and loss as incurred. Amortisation is based on the cost of the asset less its residual value. Amortisation is recognised in profit and loss on a straight line basis over the life span of the asset. The current estimated useful life is 8 years. 55 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes o. Taxation Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. p. Deferred Taxation Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at tax rates that are expected to be applied to the temporary differences when they reverse, based on laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. q. Post Balance Sheet Events Events subsequent to the balance sheet date are reflected in the financial statements only to the extent that they relate to the year under consideration and the effect is material. r. Dividend Dividend income is recognised when the right to receive income is established. Dividend payable is recognised as a liability in the period in which they are declared. s. Deposits, Amounts due to Banks and Borrowings This is mainly made up of customer deposit accounts, overnight placements by Banks and other financial institutions and medium term borrowings. They are categorised as other financial liabilities carried in the balance sheet at amortised cost. t. Provisions A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. u. Financial Guarantees Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantees are initially recognised at their fair value, and the fair value is amortised over the life of the financial guarantee. The financial guarantees are subsequently carried at the higher of the amortised amount and the present value of any expected payment (when a payment under the guarantee has become probable). v. Employee Benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement when they are due. (ii) Defined benefit plans The Bank's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and any unrecognised past service costs. The discount rate is the yield at the reporting date on a long-dated instrument on the Ghana market. The calculation is performed using the projected unit credit method. Changes in the fair value of the plan liabilities are recognised in the income statement. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 58 Notes to the financial statements contd. Actuarial gains and losses on the plan are recognised in the income statement. (Hi) Termination benefits Termination benefits are recognised as an expense when the Bank is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary redundancies are recognised if the Bank has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted and the number of acceptances can be estimated reliably. (iv) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Bank has a present legal or constructive obligation to pay this amount as a result of past sen/ice provided by the employee and the obligation can be estimated reliably. w. Impairment on Non-financial Assets The carrying amount of the Bank's non-financial assets other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessment of the time value of money and risks specific to the asset. Impairment losses are recognised in the income statement. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. x. Share Capital (i) Ordinary shares Ordinary shares are classified as equity. (ii) Preference share capital Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Bank's option, and any dividends are discretionary. Preference share capital is classified as a liability if it does not meet the definition of equity. y. Earnings perShare The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the number of ordinary shares outstanding during the period. The Bank has no convertible notes and share options, which could potentially dilute its EPS and therefore the Bank's Basic and diluted EPS are essentially the same. z. Segment Reporting. A segment is a distinguishable component of the Bank that is engaged either in providing products or sen/ices (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Bank's primary format for segment reporting is based on business segments. 57 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes aa. Share Based Payment Transactions Employees of the Bank participate in share based payment transactions with the Bank's parent company. The parent allocates cost to the Bank representing the fair value of the share based payments attributable to the employees of the Bank. The allocated cost is recognised as an expense in each period. ab. New Standards and Interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2010, and have not been applied in preparing these financial statements. These are disclosed as follows: IFRIC19 Extinguishing Financial Liabilities with Equity Instalments This interpretation provides guidance on the accounting for debt for equity swaps. This amendment is effective for the financial reporting period commencing on or after 1 July 2010 IAS 24 Related Party Disclosures (Revised2009) The revised IAS 24 Related Party Disclosures amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. This standard is effective for financial reporting periods commencing on or after 1 January 2011 IFRS 9 Financial Instruments Standard issued November 2009 (IFRS 9 (2009) IFRS 9 (2009) is the first standard issued as part of a wider project to replace IAS 39. IFRS 9 (2009) retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply. Prior periods need not be restated if an entity adopts the standard for financial reporting periods commencing before 1 January 2012. This standard is effective for financial reporting periods commencing on or after 1 January 2013. Standard issued October 2010 (IFRS 9 (2010) IFRS 9 (2010) adds the requirements related to the classification and measurement of financial liabilities, and derecognition of financial assets and liabilities to the version issued in November 2009. It also includes those paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as the requirements of IFRIC 9 Reassessment of Embedded Derivatives. Below is a summary of amendments/improvements to standards and interpretations that are not yet effective: Amendments/improvements Effective date IAS 32 !AS 32 Financial Inslrumonts: P to sanation: 1 February 2010 Qassilication of Righti issues IFRS 1 IFRS I Fi rs:- time Adaption ot In\e r r. at ion aJ 1 July £010, Financial Reporting Standards - Limited Exemption Torn Comparative IFRS 7 Di solos mes far Fr^t-time Adopters www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 58 Notes to the financial statements contd. Standard issued October 2010 (IFRS 9 (2010)) Am e ndm e n Is fi m prov eme n ts Effective date IFRS 3 IFRS o Bus ness Conb ration $ 1 Jul v 2010 IAS 27 IAS 27 C on sol i talc- d a^cl Separate ^.mnfiial t July 201 0 State merits IFRIC 14 IAS 19 - The Li.Tiit oo a Defined Benefit Assets, I January 2011 Minimum Fund™ Ren u re rne nts and iheir Interact or IFRS 1 IFRS 1 Flrst-trne Adoption of IFRSs 1 January' 2011 !FRS 7 IFRS 7 Financial H-sturnents: Disclosures 1 January 2011 IAS 1 IAS 1 Presental :on o'Financial Statements 1 January 2011 IAS 34 IAS 34-Men TI Fvnancia Reco'tina I January/ 201 1 IFRIC 13 IFRIC 13 Customer Loyalty Programmes 1 January 2011 IFRS 7 IFRS 7 Disclosures Transfers at Financial Assets 1 July 2011 IFRS 1 IFRS 1 Severe Hyper irlatiorr and Removal cf Fixed 1 July 2011 Dates for First-Lme Adopted IAS 12 IAS 12 Decree Tax Recovery of Unoe-lyna Assets t Jar.uarv' 201 2 59 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes 4. NON - PERFORMING LOANS RATIO Percentage of gross non-performing loans ("substandard to loss") to total credit/advances portfolio (gross) 12% (2009:10%). 5. CONTINGENT LIABILITIES AND COMMITMENTS 2010 2009 GHfOOO GH0-OOO (i) Contingent Liabilities • Pending Legal Suits 1,176 520 (ii) Commitments for Capital Expenditure There was no commitment for capital expenditure at the balance sheet date and at 31 December 2009. (iii) Unsecured Contingent Liabilities and Commitments 2010 2009 GH£'000 GHfOOO • This relates to commitments for trade letters of credit and guarantees. 209,274 134,077 6. SOCIAL RESPONSIBILITY COST An amount of GH0143,559 (2009: GH0126,975) was spent as part of under the Bank's social responsibility program. 7. SEGMENTAL REPORTING Segmental information is presented in respect of the Bank's business segments. The Bank is organised into two main business segments: Wholesale Banking and Consumer Banking. Some of the Bank's corporate costs are managed centrally and standardised basis are used to allocate these costs to the business segments on a reasonable basis. 2010 Class of Business Consumer Wholesale Banking Banking Unallocated Total GH£'000 GHfOOO GHfOOO GH£'000 Net Interest Income 59,484 91,248 2,016 152,748 Non Funded Income 20,094 45,183 65,277 Operating Income 79,578 136,431 2,016 218,025 Operating Expenses (47,049) (53,871) (2,016) (102,936) Operating profit before Impairment Loss and Taxation 32,529 82,560 - 115,089 Impairment Loss (4,887) (8,689) - (13,576) Profit before taxation 27,642 73,871 - 101,513 Total Assets 107,354 880,455 680,073 1,667,882 Total Liabilities 625,559 719,815 126,527 1,471,901 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 62 Notes to the financial statements contd. 2009 Class of Business Consumer Wholesale Banking Banking Unallocated Total GH£'000 GH£'000 GH£'000 GH£'000 Net Interest Income 55,500 62,200 1,719 119,419 Non Funded Income 19,700 43,400 (19) 63,081 Operating Income 75,200 105,600 1,700 182,500 Operating Expenses (44,300) (45,400) 5,988 (83,712) Operating profit before Impairment Loss and Taxation 30,900 60,200 7,688 98,788 Impairment Loss (4,400) (10,674) - (15,074) Profit before taxation 26,500 49,526 7,688 83,714 Total Assets 119,000 867,800 417,413 1,404,213 Total Liabilities 513,605 334,200 396,830 1,244,635 8. INTEREST INCOME (i) Classification 2010 2009 GH?000 GHfOOO Placements, Special Deposits 17,925 9,427 Investment Securities 107,140 52,768 Loans and Advances 88,876 93,297 213,941 155,492 (ii) Cateqorisation Financial assets held at fair value through profit and loss: Held for Trading 10,079 34,047 Available for Sale Instruments 98,923 18,721 Loans and Receivables 104,939 102,724 213,941 155,492 Included in interest income on loans and receivable is a total amount of GH0Nil (2009: GH0Nil) accrued on impaired financial assets. 9. INTEREST EXPENSE 2010 2009 GHfOOO GHfOOO Current Accounts 300 128 Time and other Deposit 14,026 13,548 Overnight and Call Account 7,321 6,984 Borrowings 39,546 15,413 61,193 36,073 Total interest expense on financial liabilities held at amortised cost was GH061,193,000 (2009: GH036,O73,OOO). 61 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 10. NET FEES AND COMMISSION INCOME 2010 2009 GH0'OOO GH0'OOO Fees and Commission Income [Note 10(1)] 47,676 39,481 Fees and Commission Expense [Note 10(ii)] (5,316) (2,289) Net Fees and Commission Income 42,360 37,192 (i). Fee and commission income Customer account serving fees 13,186 11,683 Letters of credit issued 2,491 5,294 Others 31,999 22,504 Total Fees and Commission income 47,676 39,481 (ii). Fee and commission expense Inter -Bank transaction fees (5,316) (2,289) Fees and commission income and expenses disclosed above are fees other than those included in determining the effective interest rate on financial instruments. 11. OTHER INCOME Other income for the year was GH0Nil (2009: GHtfNil). 12. OTHER OPERATING INCOME 2010 2009 GHfOOO GHfOOO Gains on Foreign Exchange 22,917 25,889 13. OPERATING EXPENSES Staff Costs (Note 14) 55,156 39,527 Advertising and Marketing 1,161 927 Administrative 29,373 28,999 Training 652 383 Depreciation and Amortisation 2,026 1,543 Directors' Emoluments 1,240 1,752 Auditors' Remuneration 120 98 Donations and Sponsorship 144 301 Others 13,064 10,182 102,936 83,712 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 64 Notes to the financial statements contd. 14. STAFF COST 2010 2009 GHfOOO GHfOOO Wages, Salaries, Bonus and Allowances 47,293 32,680 Social Security Cost 2,764 2,042 Pension and Retirement Benefit 1,482 1,168 Severance Pay - 1,087 Other Staff Cost 3,617 2,550 55,156 39,527 The average number of persons employed by the Bank during the year was 986 (2009:800). Included in this figure is staff of 198 (2009:182) who work at the Shared Service Centre for processing transactions of six (6) countries in West Africa. For the purpose of analysis, about 55% of transactions processed are for the Ghana Office. The maximum amount due from staff during the year was GH® 39,909,000 15. IMPAIRMENT LOSS 2010 2009 GHfOOO GH?000 Impairment Loss 13,576 15,074 16. FINANCIAL INSTRUMENTS CLASSIFICATION SUMMARY Financial instruments are classified along four recognition principles: held at fair value through profit or loss (comprising trading and designated), available-for-sale, held-to-maturity and loans and receivables. These categories of financial instruments have been combined for presentation on the face of the statement of financial position. 16a The Bank's classification of its principal financial assets and liabilities are summarised below: Designated at fair value Total through profit Available Loans & Carrying Fair Note Trading or Loss for Sale Receivables Amount Value GH0'OOO GH0'OOO GHfOOO GHfOOO GH0'OOO GHfOOO Cash and balances with with Bank of Ghana 19 139,669 139,669 139,669 Gov't Securities 20 156,774 411,308 568,082 568,082 Due from other Banks and financial institutions 21 374,482 374,482 374,482 Loans and Advances 22 467,152 467,152 467,152 Equity Investment 20 100 100 100 Total at 31/12/10 156,774 411,408 981,303 1,549,485 1,549,485 Cash and balances with with Bank of Ghana 19 - - 281,509 281,509 281,509 Gov't Securities 20 99,580 380,933 - 480,513 480,513 Due from other Banks and financial institutions 21 - - 130,189 130,189 130,189 Loans and Advances 22 - - 408,538 408,538 408,538 Equity Investment 20 - 100 - 100 100 Total at 31/12/09 99,580 381,033 820,236 1,300,849 1,300,849 63 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. Financial Designated Liabilities at fair value Measured at Total through profit Amortised Carrying Fair Note Trading or Loss Cost Amount Value GH?000 GH?000 GHfOOO GHfOOO GH?000 Financial Liabilities Customer Deposits 27 - - 1,092,442 1,092,442 1,092,442 Due to other Banks and financial institutions 28 - - 196 196 196 Other Liabilities 30 2,109 - - 2,109 2,109 Borrowings 32 - - 252,863 252,863 252,863 Total at 31/12/10 2,109 - 1,345,501 1,347,610 1,347,610 Customer Deposits 27 - - 833,084 833,084 833,084 Due to other Banks and financial institutions 28 - - 11,435 11,435 11,435 Other Liabilities 30 4,794 - - 4,794 4,794 Borrowings 32 - - 275,516 275,516 275,516 Total at 31/12/09 4,794 - 1,120,035 1,124,829 1,124,829 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 64 Notes to the financial statements contd. 16b Fair value hierarchy as defined under Note 3(h-(ix)) analysis The table below analyses financial instruments measured at fair value at the end of the reporting period by the level in fair value hierarchy, into which the fair value measurement is categorised. LeveM Level 2 Level 3 Total Note GHfOOO GHfOOO GHfOOO GHfOOO 2010 Government Securities 20 - 568,082 - 568,082 Equity Investment 20 - - 100 100 Total at 31/12/10 - 568,082 100 568,182 2009 Government Securities 20 480,513 480,513 Equity Investment 20 100 100 Total at 31/12/09 480,513 100 480,613 2010 30 2,109 2,109 2009 Other Liabilities 30 4,794 4,794 The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy: Equity Investments GHfOOO 2010 Balance at 1 January and at 31 December 100 2009 Balance at 1 January and at 31 December 1,335 Sale of instrument (1,235) Balance at 31 December 100 There were no gains or losses recognised in the statement of comprehensive income relating to assets disclosed in the above table for the period ending 31 December 2010 (2009 GH0 370,000). 17. TAXATION (I) Income tax expense 2010 2009 Note GHfOOO GH0'OOO Current Tax 17(111) 20,578 29,240 Deferred Tax 18 3,651 (5,116) 24,229 24,124 65 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. (ii) Taxation Payable Payments Balance at during Charge for Adjust- Balance at 1/1/10 the year the year ment 31/12/10 GHfOOO GH?000 GH?000 GH0OOO GHfOOO Income Tax:- 2005 to 2009 5,310 (1,245) (5,210) (1,145) 2010 (20,285) 20,578 293 5,310 (21,530) 20,578 (5,210) (852) National Fiscal Stabilisation Levy 1,306 (1,014) 5,076 (1,306) 4,062 6,616 (22,544) 25,654 (6,516) 3,210 (iii) Reconciliation of Effective Tax Rate Analysis of tax charge in the year: 2010 2009 GHfOOO GHfOOO The charge for taxation based upon the profits for the year comprises: Current tax on income for the year 20,578 27,640 Adjustments in respect of prior periods 1,600 Total current tax 20,578 29,240 Deferred tax: Charge/(Reversal) of temporary differences 3,651 (5,116) Tax on profits on ordinary activities 24,229 24,124 Effective tax rate 23.9% 28.8% The differences are explained below: 2010 2009 GHfOOO GHfOOO Profit before tax 101,513 83,714 Tax at 25% (2009:25%) 25,378 20,928 Non-deductible expenses 7,152 8,117 Tax exempt revenues (3,131) (996) Capital allowances (813) (409) Under provision in previous years 1,600 Deferred taxes 3,651 (5,116) Impairment losses (8,008) Current tax charge 24,229 24,124 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 66 Notes to the financial statements contd. (iii) Reconciliation of Effective Tax Rate (cont'd) The income tax for the year is based on a tax rate of 25% on profit before tax. Tax liabilities up to 2004 have been agreed with the Ghana Revenue Authority. The remaining liabilities are subject to the agreement of the Ghana Revenue Authority National Fiscal Stabilisation Levy is a levy introduced by the Government as a charge on profit before tax effective July 2009. The rate applicable to the bank is 5%. (iv) Tax Recognised Directly in Equity Current tax credit/charge on available-for-sale assets for the year was Nil (2009: Nil). 18. DEFERRED TAXATION 2010 2009 GH£'000 GHl'OOO Balance at 1 January (2,983) 898 Charge/Released for the year 3,651 (5,116) Others (Note 33(v)) 4,675 1,235 Balance at 31 December 5,343 (2,983) (i) Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: 2010 2009 Assets Liabilities Net Assets Liabilities Net GH£'000 GH?000 GH?000 GHfOOO GHfOOO GHfOOO Property and equipment - 2,628 2,628 - 2,272 2,272 Portfolio impairment (3,393) (3,393) (3,832) - (3,832) Unrealised gains on trading investments - 3,065 3,065 - 933 933 Available for sale assets - 5,910 5,910 - 1,235 1,235 Provisions (2,867) (2,867) (3,591) - (3,591) Net tax liabilities/(assets) (6,260) 11,603 5,343 (7,423) 4,440 (2,983) Included in deferred taxes are amounts of GH05,910,000. (2009: GH01,235,000) recognised directly in equity in respect of mark to market valuation on available for sale financial assets. 19. CASH AND BALANCES WITH BANK OF GHANA 2010 2009 GHfOOO GH£'000 Cash on Hand 33,349 27,702 Balances with Bank of Ghana 106,320 253,807 139,669 281,509 67 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 20. INVESTMENTS (i) Short-Term Government Securities 2010 2009 GH0'OOO GH0'OOO Short-Term Investments 57,619 121,375 Short-term Government Securities comprises of Ghana Government fixed and floating rate instruments. The floating rate instruments are benchmarked against the 91 day Treasury Bill rate plus a markup. (ii) Government Securities 2010 2009 GHl'OOO GHl'OOO 510,463 359,138 Government Bonds These are fixed and floating Government of Ghana Bonds maturing 2011 and 2013. The floating rate instruments are bench marked against the 91 day Treasury Bill rate plus a markup. (iii) Equity Investment 2010 2009 GHfOOO GHfOOO 100 100 Investment in Subsidiaries Investment in subsidiaries represents the Bank's equity interest in Standard Chartered Investment Sen/ices Limited, and Standard Chartered Ghana Nominees Limited, wholly owned subsidiaries. 21. DUE FROM OTHER BANKS AND FINANCIAL INSTITUTIONS 2010 2009 GHfOOO GHfOOO Nostra Account Balances 52,286 2,475 Items in course of Collection 17,614 27,423 Placement with other Banks 304,582 100,291 374,482 130,189 22. LOANS AND ADVANCES i. Analysis by Type 2010 2009 GHfOOO GHfOOO Overdrafts 255,079 162,812 Term Loans 238,598 272,017 Gross Loans and Advances 493,677 434,829 Impairment Allowance (26,525) (26,291) Net Loans and Advances 467,152 408,538 The above constitutes loans and advances (including credit bills negotiated) to customers and staff. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 68 Notes to the financial statements contd. ii. Impairment Allowance 2010 2009 GH?000 GHfOOO Specific 22,083 7,121 Portfolio 4,442 19,170 26,525 26,291 iii. Key ratios on Loans and Advances a. Loan loss provision ratio was 5% (2009: 6%). b. Gross non-performing loan ratio was 12 % (2009:10%). c. Ratio of fifty (50) largest exposure (gross funded and non-funded) to total exposures was 65% (2009:42%). iv. Analysis by Business Segments 2010 2009 GH?000 GHfOOO Agriculture, Forestry and Fishing 7,212 7,703 Mining and Quarrying 3,306 2,211 Manufacturing 179,801 89,062 Construction 8,716 9,338 Electricity, Gas and Water 7,806 7,600 Commerce and Finance 212,159 259,256 Transport, Storage and Communication 14,947 6,242 Services 19,460 19,900 Miscellaneous 40,270 33,517 Gross Loans and Advances 493,677 434,829 Impairment Allowance (26,525) (26,291) Net Loans and Advances 467,152 408,538 v. Analysis by Type of Customer 2010 2009 GH£'000 GH£'000 Individuals 108,853 38,567 Private Enterprises 322,159 345,232 Joint Private and State Enterprises 19,120 17,513 Public Institutions 3,275 - Staff 40,270 33,517 Gross Loans and Advances 493,677 434,829 Impairment Allowance (26,525) (26,291) Net Loans and Advances 467,152 408,538 69 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 23. PROPERTY AND EQUIPMENT Assets in course Land and Furniture & Motor of Construction Buildings Computers Equipment Vehicles Total GHfOOO GHfOOO GHfOOO GHfOOO GHfOOO GHfOOO Cost Balance at 1/1/10 2,661 13,065 12,471 5,230 379 33,806 Additions 4,382 731 103 609 25 5,850 Transfers (6,879) 3,948 145 2,786 - - Balance at 31/12/10 164 17,744 12,719 8,625 404 39,656 Depreciation Balance at 1/1/10 - 3,552 10,920 3,559 185 18,216 Charge for the year - 698 667 597 64 2,026 Balance at 31/12/10 - 4,250 11,587 4,156 249 20,242 Carrying amount Balance at 31/12/10 164 13,494 1,132 4,469 155 19,414 Cost Balance at 1/1/09 692 11,643 9,493 5,048 175 27,051 Additions 1,969 1,422 348 182 204 4,125 Reclassification - - 2,630 - - 2,630 Balance at 31/12/09 2,661 13,065 12,471 5,230 379 33,806 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 70 Notes to the financial statements contd. 23. PROPERTY AND EQUIPMENT Assets in course Land and Furniture & Motor of Construction Buildings Computers Equipment Vehicles Total GH£'000 GHfOOO GH^'OOO GHfOOO GH£'000 GHfOOO Depreciation Balance at 1/1/09 3,033 7,733 3,127 170 14,063 Charge for the year 519 557 432 15 1,523 Reclassification 2,630 2,630 Balance at 31/12/09 - 3,552 10,920 3,559 185 18,216 Carrying amount Balance at 31/12/09 2,661 9,513 1,551 1,671 194 15,590 Non cancellable operating lease rentals are payable as follows: 2010 2009 GHfOOO GHfOOO Less than one year 228 123 Between one and 5 years 257 410 More than 5 years 1,196 1,272 1,681 1,805 24. INTANGIBLE ASSETS Other Intangibles Software Total GH£000 GH£000 GH^OOO At Cost Balance at 1/1/10 378 378 Acquisition 9,323 9,323 Balance at 31/12/10 9,323 378 9,701 Provision for Amortisation Balance at 1/1/10 378 378 Amortisation for the year Balance at 31/12/10 378 378 Carrying Amount 9,323 9,323 71 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. Other Intangibles Software Total GH£000 GH0OOO GHffOOO At Cost Balance at 1/1/09 - 3,008 3,008 Reclassification - (2,630) (2,630) Balance at 31/12/09 - 378 378 Provision for Amortisation Balance at 1/1/09 - 2,988 2,988 Amortisation for the period - 20 20 Reclassification - (2,630) (2,630) Balance at 31/12/09 - 378 378 Carrying Amount Goodwill The goodwill arising on acquisition of the intangible asset was GH0nil. All recoverable amounts were measured based on value in use. The key assumptions and approach to determining value in use calculations, as set out below, are solely estimates for the purposes of assessing impairment on acquired goodwill. The calculation for the custody business unit uses cash flow projections based on budgets and forecasts by management covering a four year period. Management forecasts projected revenue growth rates which are in line with past performance and management's expectation of what the performance should be after the takeover. The cash flows are discounted using a pre-tax discount rate which reflects current market rates appropriate to the cash generating unit. Management believes that reasonable possible change in any of the key assumptions on which the recoverable amounts have been based would not cause the carrying amounts to exceed their recoverable amount. Other Intangibles Other intangibles relates to the fair value of the acquired custody business of Barclays Bank Ghana Limited. This intangible asset would be amortised over a period of 8 years Software This relates to the cost of purchased software. 25. OTHER ASSETS 2010 2009 GH0-OOO GH?000 Accounts Receivable and Prepayments 56,716 47,679 Accrued Interest Receivable 31,141 16,846 Impersonal Accounts 1,803 20,266 89,660 84,791 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 74 Notes to the financial statements contd. 26. DERIVATIVES Included in other liabilities are fair values of cross currency swaps of GH02,108,887 (2009: GH04,794,OOO). The fair value movement on these derivatives are recognised in the income statement. 27. CUSTOMER DEPOSIT AND CURRENT ACCOUNTS 2010 2009 GH^'OOO GH^'OOO Current Accounts 618,550 418,112 Time Deposit 85,507 66,781 Savings Deposit 287,595 248,145 Call Deposit 100,790 100,046 1,092,442 833,084 Analysis by Type of Depositors Individuals and other Private Enterprises 1,091,106 830,896 Public Enterprises 1,336 2,188 1,092,442 833,084 Ratio of twenty largest depositors to total deposit is 22% (2009:20%). 28. DUE TO OTHER BANKS AND FINANCIAL INSTITUTIONS 2010 2009 GHfOOO GH^'OOO Inter-Bank Balance - 5,000 Nostro Account Balances 196 6,435 196 11,435 73 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 29. DIVIDENDS 2010 2009 GHfOOO GH£'000 Ordinary Dividend 47,550 26,394 Preference Dividend 2,280 2,695 49,830 29,089 Payments during the year (49,830) (29,089) Balance at 31 December The Directors are recommending a dividend of GH01.27 per share for ordinary shares (2009: GH02.47 per share) amounting to GH024.5million (2009: GH047.6 million). 30. INTEREST PAYABLE AND OTHER LIABILITIES 2010 2009 GHfOOO GHI'000 Accrued Interest Payable 3,015 3,185 Other Creditors and Accruals 64,620 82,618 Others (Note 26) 2,109 4,794 69,744 90,597 31. PROVISIONS Staff related Others Total GH£'000 GH£'000 GH£'000 Balance at 1 January 6,082 21,305 27,387 Charged to Income Statement 171,924 35,613 207,537 178,006 56,918 234,924 Utilised during the year (167,550) (19,271) (186,821) Balance at 31 December 10,456 37,647 48,103 Staff related This relates to provisions made for staff related obligations that exist at the year end. Others This comprises provisions made for various operational obligations during the year. These are expected to be utilised during the year 2011. Provisions include retired staff medical benefit of GH0762.516 (2009: GH0762.516). www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 76 Notes to the financial statements contd. 32. BORROWING 2010 2009 GH0OOO GH0OOO Intra-Group 237,362 265,796 Short-term Loan 15,501 9,720 252,863 275,516 The short -term loan represents borrowing on the local market. The applicable interest rates are bench marked against the 91 -day Treasury Bill rate. 33. CAPITALAND RESERVES (i) Share Capital (Stated Capital) 2010 2009 No of Shares Proceeds No of Shares Proceeds '000 GH0OOO '000 GH0OOO (a). Ordinary Shares Authorised No. of Ordinary Shares of no par value 100,000 100,000 Issued and Fully Paid Issued for Cash Consideration 5,655 48,001 5,655 48,001 Transferred from Income Surplus Account 13,596 4,040 13,596 4,040 19,251 52,041 19,251 52,041 (b). Preference Shares Issued and Fully Paid No. of Preference Shares 17,486 9,090 17,486 9,090 Total Share Capital 61,131 61,131 There is no share in treasury and no call or installment unpaid on any share. The preference shares are irredeemable and non-cumulative with respect to dividend payments. (ii) Retained Earnings (Income Surplus Account) This represents the residual of cumulative annual profits that are available for distribution to shareholders. 75 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. (iii) Statutory Reserve This represents amounts set aside as a non-distributable reserve from annual profits in accordance with section 29 of the Banking Act, 2004 (Act 673) and guidelines from the Central Bank which gives specific dispensation to all banks for the 2009 and 2010 financial years. (iv) Credit Risk Reserve This represents amounts set aside from the retained earnings account to meet the minimum requirements of statutory impairment allowance for non- performing loans and advances. (v) Other Reserves This comprises the following: 2010 2009 GHfOOO GH0'OOO Marked -to- market gains on available for sale securities 23,639 4,939 Deferred taxes recognised directly in equity (5,910) (1,235) Amount relating to intangible asset 9,323 27,052 3,704 34. RELATED PARTY TRANSACTIONS (i) Parent and ultimate controlling party The Bank is a subsidiary of Standard Chartered Holdings (Africa) B.V and its ultimate parent company is Standard Chartered PLC. (ii) Transactions with Directors, Officers and other Employees The following are loan balances due from related parties: 2010 2009 GHfOOO GH£'000 Directors 361 759 Officers and other Employees 39,909 32,758 40,270 33,517 Interest rates charged on balances outstanding from related parties are lower than the bank's market rate for similar products. This is due to the risk inherent in these products. Mortgages and secured loans granted are secured over property of the respective borrowers. Other balances are not secured and no guarantees have been obtained No impairment losses have been recorded against balances outstanding during the period with Directors, Officers and Employees and no specific allowance has been made for impairment losses on balances with these persons at the period end Key management personnel compensation forthe period comprised: 2010 2009 GHfOOO GH?000 Short-term employee benefits 837 410 Share-based payment transactions 1,506 1,520 2,343 2,692 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 76 Notes to the financial statements contd. iii. Associated Companies Amounts due from associated companies at the balance date sheet were as follows: 2010 2009 GH0OOO GH0OOO Nostras 51,919 2,130 Inter Bank advances 139,582 41,291 191,501 43,421 Amounts due to associated companies at the balance sheet date were as follows: Short -term borrowing 237,362 265,796 Other creditors outstanding 196 6,435 237,558 272,231 iv. Management and Technical Services Fees The Bank has a number of agreements with its parent company, two of which have been approved by the Ghana Investment Promotion Council (GIPC). Total charges made in respect of these agreements amounted to GH03,894,813 (2009: GH?299,095) The Bank has three (3) other agreements with the SCB Group under the Technology Transfer Regulation (LI1547) of Ghana which are pending approval by the GIPC. The bank has made provisions relating to charges on these totaling GH03O,85O,526 (2009: GH013,874,849). These charges are, however, not due for settlement until the agreements are approved by GIPC. v. Share based Payments Included in staff cost is an amount of GH01,505,732 (2009: GH01,520,000) payable to the Holding Company in respect of value of equity settled share based payments allocated to employees of the Bank on a group arrangement basis. 35. FINANCIAL RISK MANAGEMENT (i) Introduction and Overview The Bank has exposure to the following risks from its use of financial instruments: credit risk liquidity risk market risks operational risks. This note presents information about the Bank's exposure to each of the above risks, the Bank's objectives, policies and processes for measuring and managing risk, and the Bank's management of capital. Risk Management Framework The Board of Directors have overall responsibility for the establishment and oversight of the Bank's risk management framework. The Board has established the Asset and Liability Management committee (ALCO), Credit Committee and the Country Operational Risk Group (CORG), which are responsible for developing and monitoring the Bank's risk management policies in their specified areas. All these committees include members of the Bank's Management Committee and report regularly to the Board of Directors on their activities. 77 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. The Bank's risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank, through its training and management standards and procedures, has developed a disciplined and constructive control environment, in which all employees understand their roles and obligations. The Bank's Audit Risk Committee (ARCO) is responsible for monitoring compliance with the Bank's risk management policies and procedures, and reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank. This committee is assisted in these functions by a risk management structure in all the units of the Bank which ensures a consistent assessment of risk management controls and procedures. (ii) Credit Risk Credit Risk Management Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Bank's loans and advances to customers and other Banks and investment securities. The Credit Committee (CC), a sub-committee of the board has responsibility for credit risk issues. Procedures for managing credit risk are determined at the business levels with specific policies and procedures being adapted to different risk environment and business goals. Risk officers are located in the business to maximise the efficiency of decision making. The businesses working with the Risk Officers take responsibility for managing pricing for risk, portfolio diversification and overall asset quality within the requirements of Bank's standards, policies and business strategy. Wholesale Banking Within the Wholesale Banking business, a numerical grading system of 1-14 with 1 being the highest quality is used for quantifying the risk associated with a counterparty. The grading is based on a probability of default measure, with customers analysed against a range of quantitative and qualitative measures. Expected Loss is used for further assessment of individual exposures and portfolio analysis. There is clear segregation of duties with loan applications being prepared separately from the approval. Consumer Banking For consumer Banking standard credit application forms are generally used to process and approve loans. As with Wholesale Banking, origination and approval roles are segregated. Problem Credit Management and Provisioning Consumer Banking An account is considered to be in default when payment is not received on the due date. Accounts that are overdue by more than 30 days are considered delinquent. These accounts are closely monitored and subject to a collections process. The process used for raising provisions is dependent on the product. For mortgages, individual impairment provisions ("IIP") are generally raised at 150 days past due based on the difference between the outstanding amount of the loan and the present value of the estimated future cash flows. For unsecured products, individual provisions are raised for the entire outstanding amount at 150 days past due. For all products where there is certainty of impairment, such as cases involving Bankruptcy, fraud and death, the loss recognition process is accelerated. A portfolio impairment provision ("PIP") is held to cover the inherent risk of losses, which although not identified, are known through experience to be present in the loan portfolio. PIP covers both performing loans and loans overdue for less than 150 days. The provision is set with reference to past experience using flow rate methodology, as well as taking account of judgmental factors such as the economic and business environment and the trends in a range of portfolio indicators. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 78 Notes to the financial statements contd. Wholesale Banking In Wholesale Banking, accounts or portfolios are placed on Early Alert when they display signs of weakness. Such accounts and portfolios are subject to a dedicated process with oversight involving Senior Risk Officers and Group Special Asset Management ("GSAM"). Account plans are re- evaluated and remedial actions are agreed and monitored until complete. Remedial actions include, but are not limited to, exposure reduction, security enhancement, exit of the account or immediate movement of the account into the control of GSAM, the specialist recovery unit. Loans are designated as impaired and considered non-performing where recognised weakness indicates that full payment of either interest or principal becomes questionable. Impaired accounts are managed by GSAM, which is independent of the main businesses of the Bank. Where any amount is considered uncollectible, an individual impairment provision is raised, being the difference between the loan carrying amount and the present value of estimated future cash flows. In any decision relating to the raising of provisions, the Bank attempts to balance economic conditions, local knowledge and experience, and the results of independent asset reviews. Where it is considered that there is no realistic prospect of recovering an element of an account against which an impairment provision has been raised, than that amount will be written off. A portfolio impairment provision is held to cover the inherent risk of losses, which although not identified, are known through experience to be present in any loan portfolio. In Wholesale Banking, the portfolio impairment provision is set with reference to past experience using loss rates, and judgmental factors such as the economic environment and the trends in key portfolio indicators. Set out below is an analysis of various credit exposures. Analysis by credit grade of loans and advances Loans and Receivables 2010 2009 GH?000 GH?000 Impaired loans Individually impaired 73,917 48,609 Allowance for impairment (22,083) (7,121) Impaired loans, net of individual provisions 51,834 41,488 Past due up to 30 days 129,864 285 Past due 31-60 days 3,318 568 Past due 61-90 days 1,573 - Past due 91-120 days 934 10,985 Past due 121-150 days 1,316 7,189 Past due more than 150 days 12,018 26,133 149,023 45,160 Loans neither past due nor impaired Credit grading 1-12 or equivalent 270,737 341,060 Less: Portfolio impairment provision (4,442) (19,170) 415,318 367,050 Total net loans 467,152 408,538 Analysis of credit concentration risk The concentration of loans and advances by business segment and customer types are disclosed in Note 22 (iv) and 22 (v) respectively. Investment securities are held largely in Government instruments. 79 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 35. FINANCIAL RISK MANAGEMENT (CONT'D) Maximum credit exposure At 31 December 2010, the maximum credit risk exposure of the Bank in the event of other parties failing to perform their obligations is detailed below. No account has been taken of any collateral held and the maximum exposure to loss is considered to be the instruments' balance sheet carrying amount or, for non-derivative off-balance sheet transactions, their contractual nominal amounts. 2010 2009 GH^'000 GHfOOO Placements with other Banks 304,582 100,291 Loans and Advances 467,152 408,538 Unsecured Contingent Liabilities and Commitments 209,274 134,077 981,008 642,906 Fair value of collateral held The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property, other registered securities over assets, and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed as impaired. An estimate of the fair value of collateral and other security enhancements held against financial assets is shown below Loans and Receivables 2010 2009 GHfOOO GH?000 Against impaired assets 25,079 29,657 Against past due but not impaired assets 44,039 26,615 69,118 56,272 (iii) Liquidity Risk The Bank defines liquidity risk as the risk that the Bank will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. It is the policy of the Bank to maintain adequate liquidity at all times, and for all currencies. Hence the Bank aims to be in a position to meet all obligations, to repay depositors, to fulfil commitments to lend and to meet any other commitments. Liquidity risk management is governed by the Bank's Asset and Liability Management Committee (ALCO), which is chaired by the Chief Executive Officer. ALCO is responsible for both statutory and prudential liquidity. These responsibilities include the provision of authorities, policies and procedures. ALCO has primary responsibility for compliance with regulations and Bank policy and maintaining a liquidity crisis contingency plan. A substantial portion of the Bank's assets are funded by customer deposits made up of current and savings accounts and other deposits. These customer deposits, which are widely diversified by type and maturity, represent a stable source of funds. Lending is normally funded by liabilities in the same currency. The Bank also maintains significant levels of marketable securities either for compliance with local statutory requirements or as prudential investments of surplus funds. ALCO oversees the structural foreign exchange and interest rate exposures that arise within the Bank. These responsibilities are managed through the provision of authorities, policies and procedures that are co-ordinated by ALCO. Compliance with Bank ratios is also monitored by ALCO. An analysis of various maturities of the Bank's assets and liabilities is provided below. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 80 Notes to the financial statements contd. Maturities of assets and liabilities 0-3 months 3-6 months 6-12months over 1 year 2010 2009 GHfOOO GH0'OOO GH0'OOO GH?000 GHfOOO GH0'OOO Assets Cash and Balances with Bank of Ghana 139,669 - - - 139,669 281,509 Short-Term Government Securities 57,580 39 - - 57,619 121,375 Due from other Banks and Financial Institutions 313,285 61,197 - - 374,482 130,189 Loans and Advances 66,616 216,996 64,602 118,938 467,152 408,538 Investment in Subsidiaries - - - 100 100 100 Other Assets - 89,660 - - 89,660 84,791 Government Bonds 41 - 222,367 288,055 510,463 359,138 Property, Plant and Equipment - - - 19,414 19,414 15,590 Intangible Assets - - - 9,323 9,323 - Deferred Tax - - - - - 2,983 Total Assets 577,191 367,892 286,969 435,830 1,667,882 1,404,213 Liabilities Non Derivative: Customer Deposits 193,068 748,070 67,666 83,638 1,092,442 833,084 Due to other Banks and Financial Institutions 196 - - 196 11,435 Interest Payables and other Liabilities - 67,635 - - 67,635 85,803 Taxation - - 3,210 - 3,210 6,616 Deferred Tax - - - 5,343 5,343 - Borrowings 237,978 14,885 - - 252,863 275,516 Provisions - - 48,103 - 48,103 27,387 Derivative - - - 2,109 2,109 4,794 Total Liabilities 431,242 830,590 118,979 91,090 1,471,901 1,244,635 Net liquidity Gap Total Assets 577,191 367,892 286,969 435,830 1,667,882 1,404,213 Total Liabilities 431,242 830,590 118,979 91,090 1,471,901 1,244,635 Net Liquidity Gap 145,949 (462,698) 167,990 344,740 195,981 159,578 81 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 35. FINANCIAL RISK MANAGEMENT (CONT'D) (iv) Market Risks Management of Market Risk The Bank recognises market risk as the exposure created by potential changes in market prices and rates, such as interest rates, equity prices and foreign exchange rates. The Bank is exposed to market risk arising principally from customer driven transactions. Market risk is governed by the Bank's Market Risk unit which is supervised by ALCO, and which agrees policies, procedures and levels of risk appetite in terms of Value at Risk ("VaR"). The unit provides market risk oversight and guidance on policy setting. Policies cover both the trading and non- trading books of the Bank. The non trading book is defined as the Banking book. Limits are proposed by the businesses within the terms of agreed policy. The unit also approves the limits within delegated authorities and monitors exposures against these limits. Additional limits are placed on specific instruments and currency concentrations where appropriate. Sensitivity measures are used in addition to VaR as risk management tools. VaR models are back tested against actual results to ensure pre-determined levels of accuracy are maintained. The Bank's Market Risk unit complements the VaR measurement by regularly stress testing market risk exposures to highlight potential risks that may arise from extreme market events that are rare but plausible. Stress testing is an integral part of the market risk management framework and considers both historical market events and forward looking scenarios. Ad hoc scenarios are also prepared reflecting specific market conditions. A consistent stress testing methodology is applied to trading and non-trading books. Stress scenarios are regularly updated to reflect changes in risk profile and economic events. The unit has responsibility for reviewing stress exposures and, where necessary, enforcing reductions in overall market risk exposure. It also considers stress testing results as part of its supervision of risk appetite. The stress test methodology assumes that management action would be limited during a stress event, reflecting the decrease in liquidity that often occurs. Contingency plans are in place and can be relied on in place of any liquidity crisis. The Bank also has a liquidity crisis management committee which also monitors the application of its policies. The Bank has not identified any limitations of the VaR methodology. Foreign Exchange Exposure The Bank's foreign exchange exposures comprise trading and non-trading foreign currency translation exposures. Foreign exchange exposures are principally derived from customer driven transactions. Concentration of foreign currency denominated assets and liabilities are disclosed in note 36. Sensitivity Analysis A 5% strengthening of the cedi against the following currencies at 31 December 2010 would have impacted equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2009. Sensitivity analysis Effect in cedis Profit or loss GHfOOO 31 December 2010 USD (748) GBP (433) EUR (5) Others 18 31 December2009 USD (1,941) GBP (668) Others 7 A best case scenario 5% weakening of the Ghana cedi against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 82 Notes to the financial statements contd. Interest Rate Exposure The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. ALCO is the monitoring body for compliance with these limits and is assisted by the Bank's Market Risk unit in its day-to-day monitoring activities. The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Bank's financial assets and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include a 100 basis point (bp) parallel fall or rise in market interest rates. A change of a 100 basis points in interest rates at the reporting date would have impacted equity and profit or loss by the amounts shown below 100 bp 100 bp Increase Decrease GHfOOO GHfOOO 31 December 2010 Interest Income impact 14,096 (14,096) Interest Expense impact (7,280) 7,280 Net impact 6,816 (6,816) 100 bp 100 bp Increase Decrease GH?000 GH?000 31 December 2009 Interest Income impact 1,555 (1,555) Interest Expense impact (361) 361 Net impact 1,194 (1,194) (ii) Operational Risks Operational risk is the risk of direct or indirect loss due to an event or action resulting from the failure of internal processes, people and systems, or from external events. The Bank seeks to ensure that key operational risks are managed in a timely and effective manner through a framework of policies, procedures and tools to identify assess, monitor, control and report such risks. 83 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. The Bank's Country Operational Risk Group (CORG) has been established to supervise and direct the management of operational risks across the Bank. CORG is also responsible for ensuring adequate and appropriate policies, and procedures are in place for the identification, assessment, monitoring, control and reporting of operational risks. The CORG is responsible for establishing and maintaining the overall operational risk framework and for monitoring the Banks key operational risk exposures. This unit is supported by Wholesale Banking and Consumer Banking Operational Risk units. These units are responsible for ensuring compliance with policies and procedures in the business, monitoring key operational risk exposures, and the provisions of guidance to the respective business areas on operational risk. (vi) Compliance and Regulatory Risk Compliance and Regulatory risk includes the risk of non-compliance with regulatory requirements. The Bank's compliance and Regulatory Risk function is responsible for establishing and maintaining an appropriate framework of the Banks compliance policies and procedures. Compliance with such policies and procedures is the responsibility of all managers. (vii) Capital Management The Central Bank sets and monitors capital requirements for the Bank. Under the guidelines of the Central Bank, the Bank is required to maintain a prescribed ratio of total capital to total risk-weighted assets. The Bank's capital is analysed into two tiers: Tier 1 capital, which includes ordinary paid up share capital, permanent preference shares and disclosed reserves, after deducting some assets such as investments in capital of other Banks and financial institutions. Tier 2 capital, which includes some reserves such as the element of the fair value reserve relating to unrealised gains on equity instruments classified as available-for-sale. Various limits are applied to elements of the capital base, and other assets are given various classifications such as claims on government, claims on the Central Bank and contingent liabilities and risk-weighted assets are determined according to specified requirements that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. The Bank's policy is to maintain a strong capital base so as to maintain investor, and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders' return is also taken into consideration, and the Bank recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. The Bank has complied with all externally imposed capital requirements throughout the year. There has been no material changes in the Bank's management of capital during the year. 36. CONCENTRATION OF GHANACEDI EQUIVALENT OF FOREIGN CURRENCY DENOMINATED ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS USD GBP EUR Others 2010 2009 GHfOOO GHfOOO GHl'OOO GHfOOO GHfOOO GH?000 Assets Cash and Balances with Bank of Ghana 69,994 9,697 4,532 118 84,341 204,380 Due from other Banks and Financial Institutions 46,843 1,901 3,805 617 53,166 13,865 Loans and Advances 128,432 4,355 30,732 _ 163,519 158,354 Other Assets 37,137 312 25 - 37,474 109,305 Total Assets 282,406 16,265 39,094 735 338,500 485,904 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 84 Notes to the financial statements contd. USD GBP EUR Others 2010 2009 GH0'OOO GHI'000 GHfOOO GH^'000 GH?000 GH0'OOO Liabilities Customer Deposits 572,604 24,847 37,754 13 635,218 521,278 Due to other Banks and Financial Institutions 54 80 2 60 196 6,435 Interest Payable and Other Liabilities 13,998 621 1,157 259 16,035 6,575 Total Liabilities 586,656 25,548 38,913 332 651,449 534,288 Net-on Balance Sheet Position (304,250) (9,283) 181 403 (312,949) (48,384) Off-Balance Sheet Credits And Commitments 172,032 440 26,727 160 199,359 107,964 At 31 December 2009 Total Assets 405,617 30,185 48,908 1,194 485,904 Total Liabilities 444,445 43,539 45,247 1,057 534,288 Net-on Balance Sheet Position (38,828) (13,354) 3,661 137 (48,384) Off-balance Sheet Credit And Commitments 113,871 883 7,682 142 122,578 37. DIRECTORS'SHAREHOLDING The Directors named below held the following number of shares in the Bank as at 31 December 2010: Ordinary Shares 2010 2009 Ishmael Yamson 2,000 2,000 38. NUMBER OF SHARES IN ISSUE (i) Dividend and net assets per share Dividend and net assets per share are based on 19,251,214 (2009:19,251,214) ordinary shares in issue during the year. (ii) Basic and diluted earnings per share The calculation of basic and diluted earnings per share at 31 December 2010 was based on the profit attributable to ordinary shareholders of GH072,2O8,OOO (2009: GH057,497,OOO) and 19,251,214 (2009:19,251,214) shares in issue. 85 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 39. NUMBER OF SHAREHOLDERS The company had 4,967 ordinary and 998 preference shareholders at 31 December 2010 distributed as follows: (i) Ordinary Shares Number of Range of shares Shareholders Holding Percentage 1 -1,000 4,629 869,567 4.52 1,001 -5,000 256 539,328 2.80 5,001 -10,000 49 369,279 1.92 Over 10,000 33 17,473,040 90.76 4,967 19,251,214 100.00 (ii) Preference Shares Number of Range of shares Shareholders Holding Percentage 1 -1,000 794 283,896 1.62 1,001 -5,000 152 339,861 1.94 5,001-10,000 16 112,124 0.64 Over 10,000 36 16,750,202 95.80 998 17,486,083 100.00 40. EMPLOYEE BENEFITS (i) Defined Contribution Plans (a) Social Security Under a national pension scheme, the Bank contributes 13% of employee's basic salary to the Social Security and National Insurance Trust (SSNIT) for employee pensions. The Bank's obligation is limited to the relevant contributions, and these have been recognised in the financial statements. The pension liabilities and obligations, however, rest with SSNIT. (b) Provident Fund The Bank has a provident fund scheme for staff under which the Bank contributes 7% of staff basic salary. The Bank's obligations under the plan is limited to the relevant contributions and these have been recognised in the financial statements. (ii) Defined Benefit Scheme Retired Staff Medical Plan The Bank has a scheme to pay the medical cost of some retired staff and their spouses from the date of retirement till death. Under the scheme, the Bank pays the medical cost of eligible persons with a cost cap of GH05OO per person. The scheme is accounted for as a defined benefit plan. The total provision carried in the balance sheet in respect of this scheme was GH0762,516 (2009: GH0762,516). www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 88 Notes to the financial statements contd. 41. DETAILS OF SHAREHOLDERS AT 31 DECEMBER 2010 (i) Details of 20 Largest Ordinary Shareholders at 31 December 2010 Name of Number of Percentage (%) Shareholder Shares held holding Standard Chartered Holdings (Africa) BV 13,363,516 69.42 Social Security & National Insurance Trust 2,761,102 14.34 SCBN/SSB TST X71 AX71 6169E 400,304 2.08 SCBN/RBC Dexia Investor Services Trust 165,000 0.86 Teachers Fund 95,047 0.49 SCBN / EPACK Investment Fund Limited 91,868 0.48 Ghana Union Assurance Co Limited 72,464 0.38 Council for University of Ghana. Endowment 60,390 0.31 SSNIT SOS Fund 38,835 0.20 Edward Kojo Amoma Anim -Addo 36,008 0.19 SCBN/SSB Eaton Vance Tax -Managed Emerging Market 34,600 0.18 BBGN/Unilever Ghana Managers Pension Fund 31,922 0.17 SCBN/ELAC Policyholders Fund 28,031 0.15 SCBN/Barclays Mauritius Re Deut Victorie Africa Index II 24,511 0.13 SCBN/SSB Eaton Vance Structured Emerging Mari 24,700 0.13 University of Science & Technology 24,750 0.13 Enterprise Insurance Co. Limited 24,249 0.13 Government of Ghana 21,102 0.11 SCBN/Barclays Mauritius Re Deut Victoire Africa I 19,579 0.10 SCBN/Unil Ghana Provident Fund 19,263 0.10 17,337,241 90.08 87 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Financial statements and notes Notes to the financial statements contd. 41. DETAILS OF SHAREHOLDERS AT 31 DECEMBER 2010 (CONT'D) (ii) Details of 20 Largest Preference Shareholders at 31 December 2010 Name of Number of Percentage (%) Shareholder Shares held holding Standard Chartered Holdings (Africa) BV 15,220,598 87.04 Barton Kwaku Glymin Jnr. 364,775 2.09 SSNIT SOS Fund 307,692 1.76 Edward K Amoma Anim-Addo 106,806 0.61 Ghana Union Assurance Co Limited 99,351 0.57 Norbert Kwasivi Kudjawu 68,775 0.39 Ophelia F. Akosa-Bempah 54,150 0.31 Glymin Barton Kwaku 44,544 0.25 Kwaku Akosah- Bempah 40,654 0.23 SCBN/Barclays Mauritius Re Africa Opp. Fund LP. 28,568 0.16 Clifford Aryee 25,000 0.14 Ebenezer Magnus Boye 25,000 0.14 Afedo Moses Kwasi 20,450 0.12 E3A Holdings Company Limited 20,661 0.12 Anthony Minkah 20,268 0.12 Safo Kwakye Eddie 20,000 0.11 Edem Yankson 20,000 0.11 John Percival Awuku Nyako 20,000 0.11 SIC - FSL/SIC Staff Provident Fund 19,231 0.11 SIC - Insurance Company Limited 19,231 0.11 16,545,754 94.60 www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 90 Financial statements and notes Notes to the financial statements contd. 42. COMPARATIVE INFORMATION The comparative financial information, where considered necessary, have been reclassified to achieve consistency with presentation of current year figures. (i) Restatement of maturity of Government securities The Bank reviewed its presentation of Government Securities as follows: Government Securities and Bonds Restated 2009 2009 GHfOOO GHfOOO Short - Term Government Securities 165,307 121,375 Government Bonds 315,206 359,139 Since the restatement only impacts presentation and disclosure aspects, there is no impact on earnings per share. 43. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The following sets out the Bank's basis of establishing fair values of the financial instruments disclosed under note 16. Cash and balances at Central Bank The fair value of floating rate placements and overnight deposits is their carrying amounts. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using the prevailing money-market rates for debts with a similar credit risk and remaining maturity. Loans and advances to customers Loans and advances are net of allowance for impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value. Investment securities Investment securities with observable market prices, including debt are fair valued using that information. Equity instruments held that do not have observable market data to reliably estimate their fair values are presented at cost. Debt securities that do not have observable market data are fair valued by either discounting cash flows using the prevailing market rates for debts with a similar credit risk and remaining maturity or using quoted market prices for securities with similar credit, maturity and yield characteristics. Deposits and borrowings The estimated fair value of deposits with no stated maturity is the amount repayable on demand. The estimated fair value of fixed interest bearing deposits and other borrowings without quoted market prices is based on discounting cash flows using the prevailing market rates for debts with a similar credit risk and remaining maturity. Debt securities in issue subordinated liabilities and other borrowed funds The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current market related yield curve appropriate for the remaining term of maturity. Derivatives The fair value of derivatives is based on discounted cash flows of using observable market quotes of similar credit risk and maturity. Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Form of Proxy (Block Capitals Please) Of being Member/Members of STANDARD CHARTERED BANK GHANA LIMITED hereby appoint Of or failing him the duly appointed Chairman of the Meeting, as my/our Proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 11.00 am on Tuesday, 26th day of April, 2010 and at every adjournment thereof. Please indicate with an X in the spaces below how you wish your votes to be cast. RESOLUTION FOR AGAINST 1. Declaring a Dividend 2. Re-electing the following Directors - Mr. Andrew Fening Okai - Mr. Ahmad Pirzadah 3. Approving Directors' Remuneration 4. Approving the Remuneration of the Auditors 5. Approving the issue of bonus shares 6. Approving increase in the number of authorized shares of the company. 7. Approving the termination of current auditors and appointing another in accordance with the directives of our Regulators Signed day of 2010 Signature cut here cut here IMPORTANT: Before posting the Form of Proxy above, please tear off this part and retain it - see over. If you wish to insert in the blank space on the form the name of any person, whether a Member of the company or not, who will attend the meeting and vote on your behalf, you may do so; if you do not insert a name, the Chairman of the Meeting will vote on your behalf. If this Form is returned without any indication as to how the person appointed a proxy shall vote, he will exercise his discretion as to how he votes or whether he abstains from voting. To be valid, this Form must be completed and must reach the Registered Office of the Company not less than 48 hours before the time fixed for holding the Meeting or adjourned Meeting. This Form is only to be completed if you will NOT attend the Meeting www.standardchartered.com/gh Standard Chartered Ghana Annual Report 2010 90 PLEASE AFFIX Lit STAMP tr LD HI cc HERE x Lit X D o LL o CO o CC HI LL C/3 The Secretary Standard Chartered Bank, Ghana Limited Head Office P. 0. Box 768, Accra THIRD FOLD HERE CUT HERE CUT HERE IMPORTANT: A person attending the meeting should not produce this form 91 Standard Chartered Ghana Annual Report 2010 www.standardchartered.com/gh Standard Chartered To secure your future, you want to maximize the growth potential of your savings. That's why Standard Chartered Fixed Deposit Account is just right for you. Whether you want to save towards your dream home, your children's education or any other future investments, we help you grow your savings with guaranteed high returns. Call us today on 0302 740100 or email us at [email protected] to find out more. Here for good standardchartered.com/gh