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FirstRand - Audited Results for the year ended 30 June 2003

Release Date: 16/09/2003 07:10
Code(s): FSR
Wrap Text

FirstRand - Audited Results for the year ended 30 June 2003 FirstRand Registration No: 1966/010753/06 Share code: FSR ISIN: ZAE000014973 ("FSR") NSX Share Code: FST Audited Results for the year ended 30 June 2003 Additional information available at: www.firstrand.co.za 5th consecutive year of superior growth Since the creation of FirstRand in 1998 the diversified earnings base of the group has delivered core headline earnings growth at a compound rate of 20% per annum, to double from R2.5 billion in 1999 to R5.1 billion in 2003. Post-AC133 Pre-AC133 Headline earnings (%) +3 -4 Core headline earnings (%) +30 +23 Dividend per share (%) +23 +23 Total assets under management or administration (R billion) 490.3 489.2 Core headline earnings (R million) "99 2 516 "00 2 954 "01 3 450 "02 4 186 "03 5 151 Dividends per share (cents) "99 15.50 "00 19.00 "01 23.75 "02 28.50 "03 35.00 Net asset value (R million) "99 11 133 "00 12 757 "01 15 366 "02 19 084 "03 22 286 Introduction This abridged report relates to the consolidated financial results of FirstRand Limited and its wholly owned subsidiaries, FirstRand Bank Holdings Limited ("the Banking Group") and Momentum Group Limited ("the Insurance Group"). A detailed report on the operations of the Group will be circulated to shareholders and is available on the company website - www.firstrand.co.za. Operating environment These pleasing results were produced in a challenging operating environment characterised by the following: High South African interest rates resulted in an improvement in margins. This, together with growth in retail deposits, had a favourable impact on the endowment effect of the Banking Group. However, the high interest rates dampened the demand for credit. A strengthening Rand resulted in a lower Rand value for foreign-sourced fee income and substantial translation losses. Poor and uncertain equity markets continued their negative trend during the year under review: - In South Africa, the JSE ALSI 40 index declined by 25% over the year; and - In global markets the MSCI World Index declined by 2.5% (in US Dollar terms). The declining investment markets impacted negatively on the demand for single premium investment products offered by the Insurance Group. Consequently, growth in total assets and fee income of the Group"s life insurance and asset management subsidiaries was constrained. The demand for credit by large corporations in South Africa remained subdued. While still above the long-term historic averages, corporate defaults in the USA improved towards the end of the year. This resulted in a lower loss from Rand Merchant Bank"s investment in Collateralised Debt Obligation ("CDO") portfolios. The regulatory environment remains demanding. The implementation of the Financial Advisors and Intermediary Services Act, the Financial Intelligence Centre Act and the imminent introduction of the Financial Services Charter continues to occupy considerable executive time. Financial overview It is now five years since the formation of FirstRand in 1998. During this period the merged group has undergone fundamental change as the FirstRand Business Philosophy was implemented. The aim of creating an integrated financial services group structured with critical mass to take advantage of the blurring of boundaries in financial services and the convergence of products and services between banking, insurance and asset management has been achieved. The success of this philosophy is now manifest in a group recognised for the excellence of its people and its distinctively branded products and services. The diversified earnings base of the FirstRand Group has seen core headline and headline earnings grow at a compound growth rate of 20% per annum, with core headline earnings doubling from R2 516 million in 1999 to R5 151 million in 2003. Earnings The FirstRand Group produced excellent results for the year ended 30 June 2003. Virtually all business units contributed to the growth in core headline earnings per share of 23% (pre-AC133). Notwithstanding the fact that international private banking and the asset management activities showed a significant decline in profits as a result of low interest rates in international markets and the poor performance of both local and international investment markets, the rest of the Group, particularly retail banking, more than made up their decline in profits. Headline earnings (post-AC133), after translation losses of R532 million (2002: R548 million gain) increased by 3% from R4 734 million (86.9 cents per share) to R4 897 million (89.9 cents per share). On a pre-AC133 basis, headline earnings decreased by 4%. Core headline earnings per share (pre-AC133), which exclude translation gains and losses, increased by 23% from 76.9 cents per share to 94.5 cents per share. After incorporating AC133 the increase amounted to 30% (99.6 cents per share). In April 2003 FirstRand authorised the listing of 15 017 941 ordinary shares as the result of the conversion of "A" variable rate, redeemable convertible preference shares in terms of the FirstRand OutPerformance Share Incentive Scheme. This resulted in a dilution of 0.28% for the Group"s existing shareholders. This dilution had a negligible effect on earnings per share in respect of the year to June 2003. Dividends A final dividend of R1 010 million representing 18.5 cents per share has been declared, bringing the total dividend for the year to R1 909 million, or 35 cents per share (2002: 28.5 cents per share). This represents an increase of 23% in the total dividend per share over the prior year and is in line with core headline earnings growth. Capital management Capital raising by FirstRand In order to facilitate the reorganisation of the Insurance Group and the underwriting of the Discovery Holdings Limited ("Discovery") claw-back offer, the FirstRand Group issued R1 405 million of redeemable cumulative preference shares ("the preference shares"), in two tranches on 15 and 30 July 2003. Of the amount raised, approximately half was applied to the Discovery capitalisation. This issue of the preference shares by FirstRand enabled it to raise the requisite capital cost-effectively and to optimally allocate it between the Insurance Group, Discovery and the Banking Group. Insurance Group reorganisation The Insurance Group initiated a detailed evaluation of its capital management programme, and as a result, achieved the following objectives: A more appropriate asset composition in the shareholders" portfolio in order to meet the Financial Services Board"s (FSB) new valuation regulations relating to subsidiary companies and to optimise return on capital. The transfer of Momentum Life"s investment of 62% in Discovery to FirstRand (effective 1 July 2003) in exchange for cash, which resulted in a reduction in Momentum Life"s Capital Adequacy Requirement ("CAR"). This was the first step in their capital management programme. Limiting asset concentration risk in the Momentum Life shareholders" portfolio and applying a more prudent investment policy; and An appropriate investment mandate for shareholders" capital, backing CAR, invested in cash or near cash instruments. Following the above restructuring, Momentum Life"s CAR cover has remained at 2 times, which is within the targeted range set by its board. The Insurance Group now has a more robust capital structure, with reduced concentration risk and volatility in its shareholders" portfolio. Strategic initiatives During the year the Group implemented a number of strategic initiatives. International activities - During the first half of the financial year, FNB Namibia announced its intention to take over the operations of Swabou Bank in a transaction involving an exchange of shares. The acquisition has been formally approved by the Namibian authorities and is effective from 1 July 2003. The transaction, which is earnings-enhancing, reduces FirstRand"s shareholding in FNB Namibia from 78% to 60%. - Discovery announced in March 2003 that its US based health operation, Destiny Health, had signed favourable distribution agreements with Guardian Life Assurance Company of America and Tufts Health Plan of Boston, Massachusetts. - In July 2003 FirstRand announced its intention to dispose of its interest in its international banking operation, Ansbacher (UK). This disposal will allow the Banking Group to re-deploy approximately GBP100 million of capital which is currently delivering sub-optimal returns. The asset management operations which form part of Ansbacher will be retained. Black economic empowerment - Momentum Employee Benefits has, subsequent to year-end, announced a partnership with the Mine Workers Investment Company ("MIC"). In terms of the agreement two business units, namely Momentum Life"s trade union retirement fund administration business and Momentum Actuaries and Consultants will be transferred into a new company, Lekana Employee Benefit Solutions, in which MIC will acquire a 30% interest. The remaining business units comprising risk management and small schemes administration will now form part of Momentum"s Life operations. - In response to the reporting demands likely to be placed on the Group upon the advent of the Financial Services Charter, an empowerment unit has been established to proactively promote and monitor progress across the Group with regard to the Charter. Brand rationalisation - Ansbacher Private Bank and Origin merged their back office operations in October 2002. In February 2003, the positioning of the Group"s private banking operations was taken a step further when the combined operation was renamed RMB Private Bank. The Group"s international multi-manager operations which were formerly marketed under the Ansbacher brand, will in future be marketed under the RMB brand with the Momentum brand being used for the local multi-manager operations. Review of operations To facilitate comparison with the prior year, this review concentrates on core headline earnings (all pre-AC133). Banking Group The Banking Group had an excellent year and increased core headline earnings by 26%. The Banking Group contributed 78% of FirstRand"s total core headline earnings. Highlights of the Banking Group"s results include: Good domestic advances growth in the retail and medium corporate markets. Excellent growth in net interest income of 36% as a result of improved overall margins including the positive endowment effect of higher interest rates on FirstRand Bank"s larger capital base. Strengthening of margins from 4.33% to 4.81%. The scale benefits resulting from the mortgage and deposit books acquired from Saambou Bank and BOE towards the end of the previous financial year. Rand-denominated advances growth of 12.5%. Improvement of the non-performing loan book and a much lower charge in respect of the Banking Group"s investment in its CDO portfolio. Increases in transactional revenue as a result of stronger new business growth. These were reduced to a limited extent by: Lower trading profits after the exceptional profit earned in the 2002 financial year. A disappointing performance from international private banking. An increase in the average tax rate from 19.5% to 21.6%. Insurance Group The Insurance Group results, which reflect growth in core headline earnings per share of 10%, are particularly gratifying if viewed against the backdrop of the poor performance of international and local equity markets. Features of these results include: Very strong growth in recurring life, investment and health insurance premiums. Satisfactory levels of single premium growth in difficult investment markets. Continued operating efficiency gains. Strong growth in the embedded value of new business in respect of life, investment and health insurance business. A restoration of margins in the employee benefits risk business. A decline in fee income from international and local asset management activities. Significantly improved returns on Momentum"s shareholder portfolio following a move to cash. Segmental analysis Retail +27% The Retail businesses had an excellent year and their earnings now account for 45% of the FirstRand Group"s total core headline earnings. FNB Retail showed excellent results which were driven by pleasing domestic advances and deposit growth and an improvement in the interest margin. Transactional income grew by 13.9% following volume and limited price increases. eBucks.com recorded a maiden profit. FNB HomeLoans benefited from strong new business growth and the acquisitions made in the prior year. Non-performing mortgage loans showed a slight increase in the face of the high interest rate environment. WesBank achieved record new business results with the new advances exceeding R24 billion in the year under review. Increased competition resulted in margin squeeze. As a result of WesBank"s collaboration with FNB Corporate, excellent progress was made in sourcing new corporate business. The Group"s African subsidiaries in Namibia, Botswana and Swaziland again produced satisfactory results. FNB Namibia paid a special dividend of N$190 million thereby returning surplus capital to shareholders. OUTsurance enjoyed another outstanding year, benefiting from their relationship with FNB HomeLoans. FirstLink also benefited from Group collaboration. Corporate +12% Rand Merchant Bank"s Equities Trading, Special Projects and Private Equity divisions all enjoyed an excellent year contributing to pre-tax profit growth of 18%. Losses in respect of the CDO portfolio were substantially down on the previous year. Unrealised profits in the private equity portfolio are R699 million. FNB Corporate achieved excellent results despite poor demand for credit from large corporates, increasing profit before tax by 27%. Deposit margins improved significantly and there was an increase in the volume of transactions. Satisfactory advances growth of 19% was achieved in the medium corporate market. Non-performing loans decreased by 50%. Momentum Employee Benefits managed to restore their underwriting margins in respect of their group risk business. FirstRand Asset Management"s results were disappointing after being negatively impacted by the loss of funds under management, the poor performance of international and local equity markets, and closure costs related to the cessation of sales of certain retail investment products. Relative investment performance has improved significantly in the period under review. Momentum +15% Momentum Life"s individual life business performed well in a difficult market. The growth in single premium new business (+9%) was subdued, but recurring premium new business growth of 27% reflected the success of new risk and investment products launched during the year. Poor investment markets and high interest rates are impacting on the performance of all life assurance companies, but relative to its peers, Momentum Life had a good year. Steady progress continues to be made with the multi-manager business both locally and abroad. RMB Private Bank +69% The recently merged private banking operations of Origin and Ansbacher trading as RMB Private Bank, achieved both good advances and deposit growth. Ansbacher (UK) (>100%) Ansbacher (UK)"s results disappointed and were in part due to poor international credit markets and low interest rates. Substantial losses were incurred in respect of international banking. A decision has been taken to find a new strategic shareholder for this business. Discovery Holdings +42% Discovery Health continued to grow market share as a result of strong new business growth (+26%) in its existing market. New business at Discovery Life increased by 60% and operating profit, including the return on shareholder funds increased from R11 million to R114 million. Destiny in the US incurred further start-up losses of R169 million which were in line with expectations. A successful rights issue took place in July 2003. The proceeds will be used to refinance the international operation and to fund local expansion. The Discovery Group"s embedded value increased by 47% to R4 868 million. Capital Centre +73% The Banking Group"s income on capital benefited from high local interest rates. These gains were partly dampened by low rates earned on international capital. Increased provisioning for certain corporate debts which was made in the previous year, was not repeated in the year under review. Momentum"s shareholder portfolio increased earnings by 37% as a result of restructuring activities. Disclosure philosophy and accounting policies Following the positive report on corporate governance practices of the South African banking industry by Advocate Myburgh and an internal review of FirstRand Bank"s practices, the bank"s governance structures and charters have, where appropriate, been standardised across the Group. The Group is committed to the highest standard of corporate governance, and in this regard strives to provide reports which are transparent, timeous and accurate. This profit statement has been prepared in compliance with the Listings Requirements of the JSE Securities Exchange South Africa. The financial statements to which this profit statement relates were audited by PricewaterhouseCoopers Inc. A copy of their unqualified audit opinion is available for inspection at the registered office of FirstRand Limited. The pre-AC133 results included in this announcement have been reviewed by PricewaterhouseCoopers Inc. A copy of their unqualified review opinion is available for inspection at the registered office of FirstRand Limited. The accounting policies of the Group comply in all material respects with statements of South African GAAP and the Companies Act of 1973. These accounting policies are consistent with those applied during the year to 30 June 2002 with the exception of the introduction of AC133 and Discovery"s treatment of deferred acquisition costs. Annual general meeting The sixth annual general meeting of shareholders of FirstRand Limited will be held on 2 December 2003 in the Auditorium, 18th Floor, 1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton at 09:30. Prospects We are cautiously optimistic about the prospects of an improved economic outlook in the year ahead. A lower interest rate environment will benefit growth and increase the likelihood of a favourable movement in the stock market. This will be conducive to good new business growth across all business units in the year ahead. The benefits of a lower interest rate environment which include an anticipated increase in the demand for credit and a lower level of bad debt provisioning will, to an extent be offset by lower margins. Fortunately the Group implemented hedging strategies to protect the endowment margins over the short to medium term. Significantly improved results are expected from the Group"s local and international asset management activities after a disappointing year. The proposed disposal of Ansbacher (UK), in whole or in part, is expected to free underperforming capital currently held offshore. Companies such as Discovery, OUTsurance, eBucks.com and RMB Private Bank, which are all entrepreneurial, new ventures started in the last ten years, are expected to continue to grow strongly and provide a meaningful enhancement to the Group"s overall earnings growth rate. It is anticipated that the Financial Services Charter will be published towards the end of 2003 and is to be welcomed. This follows months of discussions and negotiations between interested parties. The publication will remove uncertainty which has surrounded the financial services industry in recent times. The Group"s strong brands, proven ability to attract talented people and the deeply embedded FirstRand business philosophy, remain the pillars on which the Group relies to maintain its minimum targeted 10% real growth rate. For and on behalf of the board GT Ferreira LL Dippenaar Chairman Chief Executive Sandton 16 September 2003 Final dividend declaration Notice is hereby given that a final dividend of 18.5 cents per ordinary share has been declared on 16 September 2003 in respect of the year ended 30 June 2003. The last day to trade in these shares on a cum dividend basis will be 17 October 2003 and the first day to trade ex dividend will be 20 October 2003. The record date will be 24 October 2003 and the payment date is 27 October 2003. Shareholders may not dematerialise or rematerialise their share certificates between 20 October 2003 and 24 October both days inclusive. By order of the Board AH Arnott Company Secretary 16 September 2003 Directors GT Ferreira (Chairman), LL Dippenaar (CEO), BH Adams, VW Bartlett, DJA Craig (British), DM Falck, PM Goss, PK Harris, MW King, MC Ramaphosa, KC Shubane, BJ van der Ross, Dr F van Zyl Slabbert, RA Williams Secretary and registered office AH Arnott BCom, CA(SA) 17th Floor, 1 Merchant Place, corner of Fredman Drive and Rivonia Road, Sandton, 2196. Postal address PO Box 786273, Sandton, 2146 Telephone: +27 11 282-1808, Telefax: +27 11 282-8065 Web address: www.firstrand.co.za Sponsor Rand Merchant Bank (A Division of FiratBank Bank Limited) Corporate Finance 1 Merchant Place, corner of Fredman Drive and Rivonia Road, Sandton, 2196 Transfer secretaries: Computershare Limited 70 Marshall Street, Johannesburg Transfer Secretaries (Pty) Limited P O Box 2401 Windhoek Namibia Basis of presentation For a proper appreciation of the results presented in this report, two matters are highlighted separately in the accompanying analysis of results. AC133 - Fair value accounting FirstRand is the first major South African financial services group to present a full year"s financial results in accordance with the requirements of a new statement of Generally Accepted Accounting Practice "AC133 - Financial Instruments: Recognition and Measurement". This standard introduces the concept of "fair value" accounting for financial instruments, which form the core of the Group"s businesses. The concept and the accounting standards, both locally (AC133) and internationally (IAS39), are still the subject of considerable debate and likely to evolve further over time. AC133 is prospective in nature, in that it does not provide for the re-statement of prior year comparatives, but instead relies on complex transitional provisions which affect the opening balances at the beginning of the reporting period. In the Banking Group, the implementation of AC133 has a material impact on headline earnings and net asset value per share. In the Insurance Group, the implementation of AC133 has necessitated the classification of policyholder contracts between insurance contracts and investment contracts. Insurance contracts continue to be valued and disclosed in terms of the Financial Soundness Valuation (FSV) basis. Investment contracts are accounted for at fair value. The net effect of the implementation of AC133 on earnings is not material. The impact of AC133 on opening balances is analysed in the statement of changes in equity. FirstRand believes that the impact of AC133 is best highlighted by presenting supplementary pre-AC133 accounts for the current year reflecting the position before the application of AC133. Accordingly, these financial results are shown both before and after the implementation of AC133 to facilitate a meaningful interpretation of the results for the year to 30 June 2003. The impact of AC133 on core headline earnings may be highlighted as follows: % change
Year ended 30 June R million from 2002 2002 (pre-AC 133) 4 186 - 2003 (pre-AC 133) 5 151 +23 2003 (post-AC 133) 5 429 +30 ED168, an AC133 interpretation, has been issued by the South African Institute of Chartered Accountants and is currently open for comment. Changes in this statement may effect the Banking Group"s results. FirstRand is of the opinion that: The results incorporating the impact of AC133 should be seen as the basis against which future performance should be measured. The change in accounting practice resulting from AC133 is likely to lead to increased volatility in reported earnings in the future and will place a greater emphasis over the longer term on growth in net asset values. The results for the year, prior to adopting AC133, are a more appropriate basis to evaluate the Group"s 2003 performance against the prior year. Consequently, except where stated otherwise, the commentary that follows uses this basis as a starting point. Translation gains and losses Announcements relating to FirstRand"s financial results during the last two years have highlighted the impact of translation gains and losses. In this report translation gains and losses have again been separately identified. Gains and losses relating to independent businesses are reflected in the balance sheet. Those relating to integrated business are shown in the income statement. Translation losses and gains reflected in the financial statements over the last two years were as follows: Pre-AC133 R milions 2003 2002 Total translation (loss)/gain (1 152) 1 153 Reflected on balance sheet (547) 605 Income statement for the year ended 30 June 2003 2002 Audited Reviewed Audited R million Post-AC133 Pre-AC133 Actual Banking operations Interest income 26 293 26 301 18 721 Interest expenditure (17 189) (17 567) (12 304) Net interest income before impairment of advances 9 104 8 734 6 417 Impairment of advances (1 478) (1 367) (1 705) Net interest income after 7 626 7 367 4 712 impairment of advances Non-interest income 7 123 6 913 8 319 Net income from operations 14 749 14 280 13 031 Operating expenditure (9 537) (9 538) (8 378) Income from operations 5 212 4 742 4 653 Share of earnings of associated companies 494 484 368 Income before indirect taxation 5 706 5 226 5 021 Indirect taxation (346) (346) (281) Income before direct taxation 5 360 4 880 4 740 Direct taxation (1 308) (1 186) (818) Income after taxation 4 052 3 694 3 922 Earnings attributable to outside (278) (277) (182) shareholders Earnings from banking operations 3 774 3 417 3 740 Insurance operations Group operating profit after taxation 604 610 635 Net premium income 10 527 18 557 19 245 Investment income 3 399 5 707 5 838 Policy fees on investment 178 - - contracts Policyholder benefits (7 312) (13 990) (17 393) Marketing and administration expenses (3 084) (3 084) (2 563) Impairment of goodwill (242) (242) (210) Commissions (1 043) (1 218) (938) Direct taxation (468) (572) (594) Indirect taxation (125) (138) (131) Realised and unrealised (764) (1 608) 2 844 investment surpluses Earnings attributable to (138) (136) (100) outside shareholders Transfer to policyholder liabilities under insurance contacts (324) (2 666) (5 363) Investment income on the shareholders" portfolio 250 250 176 Interest, dividends and net rentals 288 288 195 Taxation on investment income (38) (38) (19) Earnings from insurance operations 854 860 811 FirstRand Limited (39) (39) (61) Management expenses (27) (27) (7) Secondary tax on companies (12) (12) (54) Goodwill amortised - intergroup 5 5 5 Earnings attributable to ordinary shareholders 4 594 4 243 4 495 Earnings per share (cents) 84.3 77.9 82.5 Diluted earnings per share (cents) 83.2 76.8 82.5 Core headline earnings per share (cents) 99.6 94.5 76.9 Headline earnings per share (cents) 89.9 83.4 86.9 Return on average equity (based on core headline earnings) (%) 27.8 27.2 26.1 Return on average equity (based on headline earnings) (%) 23.7 22.7 27.5 Number of shares in issue (million) 5 460.3 5 460.3 5 445.3 Weighted average number of shares in issue (million) 5 448.2 5 448.2 5 445.3 Weighted average number of shares for diluted earnings per share (million) 5 524.1 5 524.1 5 445.3 Final 18.5 18.5 15.0 Total 35.0 35.0 28.5 Headline earnings reconciliation for the year ended 30 June 2003 2002 % change
Audited Reviewed Audited Pre-AC133 R million Post-AC133 Pre-AC133 Actual on Actual Attributable earnings Banking Group 3 774 3 417 3 740 (9) Insurance Group 854 860 811 6 Goodwill amortised - intergroup 5 5 5 - 4 633 4 282 4 556 (6)
FirstRand Limited (39) (39) (61) (36) Earnings attributable to ordinary shareholders 4 594 4 243 4 495 (6) Add: Amortisation of goodwill 82 82 58 Add:Impairment of goodwill 242 242 210 Add:Loss on disposal of assets 31 31 31 Less: Profit on sale of subsidiaries - - (32) Less: Abnormal profit on release of reserves - Discovery (52) (52) (28) Headline earnings 4 897 4 546 4 734 (4) Translation losses/(gains) 532 605 (548) >100 Core headline earnings 5 429 5 151 4 186 23 Summarised cash flow statement for the year ended 30 June 2003 2002 Audited Audited
R million Post-AC133 Actual Cash flows from operating activities Cash generated by operations 13 469 15 367 Working capital changes 5 865 (3 098) Cash inflow from operations 19 334 12 269 Taxation paid (1 332) (1 412) Dividends paid (1 715) (1 416) Net cash inflow from operating activities 16 287 9 441 Net cash (outflow)/inflow from investment activities (9 140) 4 092 Net cash (outflow)/inflow from financing activities (298) 482 Net increase in cash and cash equivalents 6 849 14 015 Cash and cash equivalents at beginning of year 38 239 16 293 Cash and cash equivalents acquired - 7 931 Cash and cash equivalents at end of year 45 088 38 239 Assets under management at 30 June 2003 2002 Audited Reviewed Audited R million Post-AC133 Pre-AC133 Actual Holding company 997 997 1 158 Banking Group 303 915 302 179 281 774 Insurance Group 90 781 91 421 91 834 Total on balance sheet assets 395 693 394 597 374 766 Off-balance sheet assets managed or administered on behalf of clients 94 568 94 568 98 328 Total assets under management or administration 490 261 489 165 473 094 Balance sheet as at 30 June 2003 2002 Audited Reviewed Audited
R million Post-AC133 Pre-AC133 Actual Assets Banking operations 257 926 256 408 246 337 Cash and short-term funds 29 252 29 252 24 784 Advances 189 626 189 533 175 161 - Originated 135 062 - Held-to-maturity 9 753 - Available for sale 7 406 - Trading 40 707 - Less: Impairments (3 302) Investment securities and other investments 36 645 35 220 44 654 Financial instruments held for trading 11 379 Investment securities 25 266 - Held-to-maturity 1 220 - Available for sale 21 208 - At elected fair value 2 838 Non-recourse investments 2 403 2 403 1 738 Insurance operations 76 297 76 891 73 832 Funds on deposit 15 836 15 836 13 455 Government and public authority stocks 12 575 12 575 9 842 Debentures and other loans 10 759 10 887 7 541 Policy loans 581 581 580 Equity investments 33 793 34 259 39 510 Investment properties 2 753 2 753 2 904 Current assets 8 926 9 182 10 619 Loans 686 686 934 Investments in associated companies 2 458 2 318 1 736 Derivative financial instruments 43 879 43 833 35 057 Deferred taxation assets 981 739 1 264 Intangible assets 472 472 942 Property and equipment 4 068 4 068 4 045 Total assets 395 693 394 597 374 766 Shareholders" equity and liabilities Deposits and current accounts 186 031 186 129 201 404 Non-recourse deposits 2 403 2 403 1 738 Current liabilities 17 335 17 209 13 954 Provisions 1 092 1 094 926 Taxation 1 430 1 418 508 Derivative financial instruments 46 657 46 983 37 215 Short trading positions 33 881 33 807 16 799 Deferred taxation liabilities 1 944 1 342 2 204 Retirement funding liabilities 1 293 1 293 1 211 Debentures and long-term liabilities 4 645 4 630 5 164 Life insurance funds 75 551 76 154 73 519 Policyholder liabilities under insurance contracts 38 975 76 154 73 519 Policyholder liabilities under investment contracts 36 576 - - Total liabilities 372 262 372 462 354 642 Outside shareholders" interests 1 145 1 148 1 040 Share capital and share premium 8 487 8 487 8 487 Reserves 13 799 12 500 10 597 Total shareholders" equity and liabilities 395 693 394 597 374 766 Statement of changes in equity for the year ended 30 June Total Non- share- Share Share Retained distributable holders"
R million capital premium earnings reserves funds Balance at 1 July 2001 As previously stated 56 9 539 6 533 457 16 585 - Reclassification of preference shares (1) (1 107) - - (1 108) - Change in accounting policy - deferred acquisition costs - - (111) - (111) Restated balance as at 1 1 July 2001 55 8 432 6 422 457 5 366 Currency translation differences - - - 604 604 Revaluation of investments - - - 60 60 Non-distributable reserves of associated companies - - - 12 12 Movement in other reserves - - - (37) (37) Earnings attributable to shareholders - - 4 495 - 4 495 Dividends - - (1 416) - (1 416) Transfer (to)/from reserves - - (36) 36 - Balance at 30 June 2002 55 8 432 9 465 1 132 19 084 Balance at 1 July 2002 55 8 432 9 465 1 132 19 084 AC133 adjustments to opening balance - - (482) 555 73 Adjusted opening balance 55 8 432 8 983 1 687 19 157 AC133 adjustments to current year - - - 823 823 Currency translation differences - - - (575) (575) Movement in other reserves - - - 2 2 Earnings attributable to shareholders - - 4 594 - 4 594 Dividends - - (1 715) - (1 715) Transfer (to)/from reserves - - (96) 96 - Balance at 30 June 2003 55 8 432 11 766 2 033 22 286 Sources of profit for the year ended 30 June Pre-AC133
R million 2003 % 2002 % Retail 2 301 44.7 1 809 43.2 FNB Retail 1 339 26.0 9623 23.0 WesBank 535 10.4 503 12.0 African subsidiaries 312 6.1 288 6.9 OUTsurance & FirstLink 115 2.2 564 1.3 Corporate 1 606 31.2 1 436 34.3 Rand Merchant Bank 803 15.6 677 16.2 FNB Corporate 549 10.7 424 10.1 FirstRand Asset Management 125 2.4 228 5.4 Momentum Employee Benefits 129 2.5 107 2.6 Wealth 398 7.7 430 10.3 Momentum 441 8.6 382 9.1 FNB Trust Services 20 0.4 24 0.6 RMB Private Bank 27 0.5 16 0.4 Ansbacher (UK) (90) (1.8) 8 0.2 Discovery Holdings 166 3.2 117 2.8 Capital 680 13.2 394 9.4 Capital centre - Banking Group 458 8.9 265 3,4 6.3 Investment income on shareholders" portfolio - Momentum 261 5.1 190 4.6 FirstRand Limited (39) (0.8) (61) (1.5) Core headline earnings1 5 151 100.0 4 186 100.0 Notes: 1. Core headline earnings exclude foreign currency translation losses or gains. 2. Taxation relating to the Banking Group has been allocated across the Bank"s operating divisions on a pro rata basis. 3. These figures have been restated to reflect a transfer of R26 million profit from Capital Centre in respect of acquisitions made in the previous financial year. 4. Interest calculated on capital allocated to the Capital Centre has been re- allocated to the appropriate short-term insurance centers First National Bank Momentum Wesbank eBucks.com Discovery Outsurance Rand Merchant Bank Date: 16/09/2003 07:10:55 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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