The Merger

The Merger "We are going to take the advantage of the opportunity as the combined network of products and services will reduce our costs with higher per client lending limits,". (Zahid Rahim, chief executive, SCBP)The British-based bank Standard Chartered has bought the Grindlays network of branches in South Asia and the Middle East. It has paid the Australia and New Zealand Banking group (ANZ) $1.3bn in cash. The development makes Standard Chartered one of the biggest banks in the region. Standard Chartered has a long-established presence across Asia, but this move means it is now competing to be the biggest foreign bank in several countries, including India, Pakistan and Bangladesh. Strengthening position This is Standard's biggest takeover yet, and chief executive Rana Talwar said this would probably be the last one in South Asia. Instead it will be looking to strengthen its position in important East Asian markets including Taiwan and Thailand. That in itself is a sign of how far the bank has now come. Since the appointment of Indianborn Mr. Talwar in 1998, the bank has focused on Asia's recovering economies. ANZ pulls out Grindlays is a respected name across the region with most of its 870,000 customers in India - its network of branches in villages means it is more like an Indian bank than a foreign one. But in recent years ANZ has struggled to squeeze out profits, after making heavy provisions for bad debts. However, Standard Chartered said that Grindlays made around $100m in the past few years. Analysts say ANZ is getting a decent price for what had been a problem business. In return the move allows ANZ to focus more on markets closer to home. As for consumers they will see one less big competitor among the foreign banks - but the takeover underlines Standard Chartered's commitment to being a dominant force in the region. Standard Chartered Bank concludes integration process in Pakistan Standard Chartered Bank, in a landmark transaction, acquired the Grindlays operations in the Middle East and South Asia, from the ANZ Banking Group on 31st July 2000. Since then, the process of integration has been in progress in terms of aligning the systems and processes of the two banks.Standard Chartered Bank is pleased to announce that all aspects of this exercise have been successfully accomplished and with the formal amalgamation approval from the State Bank of Pakistan, the Pakistan operations of Grindlays have been amalgamated with Standard Chartered Bank. As a result, the amalgamated entity will be known as Standard Chartered Bank, effective December 1, 2002.In Pakistan, Standard Chartered is the largest foreign bank and the only one with a presence in every province. Customers of the Bank can enjoy access to a wide network of 21 branches and over 120 ATMs across Pakistan.“The merger of Grindlays with Standard Chartered Bank will create the premier international bank in Pakistan and put us in a position to deliver significant benefits in terms of network, products and customer service”, said Azhar Hamid, Chief Executive, Standard Chartered Pakistan. He also placed on record, "the exceptional level of support and encouragement from the

State Bank of Pakistan during the integration process."“The significant value that the Grindlays franchise has brought to the Standard Chartered Banking Group was clearly reflected in our annual results for the year 2001-2002 and Pakistan is now a key market for growth within the Group”, he added.The two banks will begin to operate as a single legal entity under a new corporate identity, the logo of which has been incorporated across all branches in Pakistan. The Bank's new logo has been changed to invigorate the brand, making it distinctive and appealing to our customers. In essence, it reflects the Bank's most desirable Brand proposition, “The Right Partner”.Mr. Azhar Hamid added, "A true partnership is based upon shared goals, as well as a deep and underlying trust. We believe that how we are seen and how we act are key factors in keeping and strengthening our relationships with our customers. Our new logo reflects the values, which underpin our future development and progress. Over the ensuring weeks, all our branches, ATMs, advertisements, stationery and marketing material will start to use our new identity."Standard Chartered Group And First Grindlays Modaraba (FGM)The Standard Chartered Group is a London based international bank, focused on emerging markets of Asia, the Middle East, Africa and Latin America, with a network of over 600 offices in more than 56 countries and assets of approximately USD 90 billion. In Pakistan, the Group comprises of Standard Chartered Bank and Standard Chartered Grindlays Bank, the largest foreign banking group of the country, with a total 21 branches nationwide. The Standard Chartered Group has 100% management control of FGM which is one of the largest leasing entities in the country with gross leased assets of over Rs. 3.5 billion. FGM maintains the highest entity rating in the modaraba sector of A2 which signifies a modaraba in outstanding financial condition with a consistent record of above average performance.COM scheme of FGM has been formulated within parameters laid down by the Religious Board and has been specifically approved by the Securities and Exchange Commission of Pakistan. These certificates are similar to certificates of investments of leasing companies with maturities ranging from 3 months to 5 years. For only Rs.10,000 you can invest in COMs directly from FGM or across 21 Standard Chartered Bank (SCB) or Standard Chartered Grindlays Bank (SCGB) branches without even opening an account. COMs pay profits quarterly and the certificate is transferable and encashable at any time. These transfer and encashable features are similar to those found in shares of a company and make COMs extremely liquid.A certain percentage of total profits (stated on the face of each certificate) is shared by FGM's certificate holders (shareholders) and the COM holders. The profit (and also the encashed/matured principle) can be credited to any SCB or SCGB account on a quarterly basis or if the investor does not have an account with these banks the profit cheque is delivered to the investor's address.The COM scheme affords many safeguards to its investors like, disclosure of credit rating on all offer for sale and advertising materials, publication of quarterly profit and loss account in two national dailies for the information of COM holders, premature encashment at any time, appointment of a Trustee (A.F.Fergusons & Co.) to oversee the use of a Redemption Reserve Fund created for premature encashment and strict reporting

requirement of the SECP.FGM's web site (www.grindlays modaraba.com) contains inter-alia, full terms and conditions of the COM scheme. 3 In December 2002, the integration process has been completed. Now both the banks are operating under the name of Standard Chartered Bank having 21 branches of Pakistan. Mission Statement Our aim is constantly to provide world class service for our customers, deliver value for our shareholders and make Standard Chartered a great place to work for our employee.

The acquisition of Grindlays will: • • • • • •

create the premier international banking business in the Middle East and South Asia combine two strong and complementary consumer banking franchises to build the leading consumer bank in the region strengthen the corporate banking franchise through greater focus on multinational and large local companies increase opportunities for the continuing development of internet banking products in markets that offer enormous potential add to the strength of Standard Chartered's management resources achieve significant synergies through operating efficiencies and revenue enhancements."

Mr Talwar continued "This acquisition is completely in line with our stated strategy and is a significant step towards our objective of becoming the world's leading emerging markets bank. It also emphasises our commitment to develop our business in the Middle East and South Asia. "Good economic growth rates are forecast in India and across the region and we believe that this is the right time to invest. This is an excellent opportunity to acquire a well-managed, quality business at the right price. It will position us to take advantage as the region, with its rapidly growing middle class, opens up to ecommerce and new banking products. "The move follows our recent acquisitions of the UBS international trade finance business and Nakornthon Bank in Thailand, both of which have been successfully integrated into Standard Chartered. We will continue to pursue opportunities to develop our unique franchise." ANZ, Chief Executive Officer, John McFarlane, said the transaction is strategically attractive for both organisations and a win-win for ANZ and Standard Chartered. The sale is a good outcome for shareholders, customers and staff of both banks,¡¨ Mr McFarlane said.

"For ANZ, the sale generates immediate value for our shareholders. For Standard Chartered, it creates the leading international bank in the Middle East and South Asia and it will benefit from the growth and synergies the integrated platform will bring," Mr. McFarlane said. Mr. McFarlane paid special tribute to Grindlays management and staff. "The outcome and the attractiveness of Grindlays to Standard Chartered reflect both the hard work and dedication of current and former staff in the region. The new larger business will offer our local staff enhanced opportunities." Standard Chartered has 57 branches in nine countries in the region. Operating profit before provisions of US$130 (¢G82) million was generated in the year ended 31 December 1999. Grindlays has extensive coverage across the region where it offers a wide range of banking services to nearly one million customers through 116 branches in thirteen countries. It focuses on providing trade finance and cash management to major local and multinational companies and supplying retail and credit card services to its personal customers. For the year ended 30 September 1999, Grindlays, together with the private banking business being acquired, produced profits after tax of US$89 (¢G56) million. Adjusted for different provisioning policies of Standard Chartered and various non-recurring items, the profit after tax was US$75 (¢G47) million. Annualised profits after tax for the six months ended 31 March 2000, adjusted on an equivalent basis, produces a price earnings ratio of 12.9 times. The net assets to be acquired are approximately US$590 (¢G373) million representing a multiple of 2.3 times book value. Standard Chartered believes that after three years, the acquisition will realise ongoing synergies of US$110 (¢G70) million each year. The one-off costs of achieving these cost and revenue benefits are estimated to be approximately US$160 (¢G101) million in aggregate over the first three years following completion of the acquisition. Through a co-operation agreement with Standard Chartered, ANZ will be able to provide trade related banking services to its customers through Grindlays. It will also enter into a further co-operation agreement with Standard Chartered so as to provide project finance and corporate advisory services to clients in the region. ANZ will provide Standard Chartered with indemnities on credit matters and on litigation including the National Housing Bank matter.

The consideration will be paid in cash from existing resources. Completion is expected in the third quarter of 2000, subject to regulatory approvals.