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FirstRand - Application of new interpretation of accounting standards FIRSTRAND LIMITED (Incorporated in the Republic of South Africa) (Registration number: 1966/010753/06) ISIN: ZAE000066304 Share Code (JSE): FSR Share Code (NSX): FST ("FirstRand" or "the Company") IMPACT OF SOUTH AFRICAN INSTITITUTE OF CHARTERED ACCOUNTANTS ISSUE 8 OF CIRCULAR 7/2002 ("HEADLINE EARNINGS") IN RESPECT OF THE FINANCIAL YEAR ENDING 30 JUNE 2005 AND THE SIX MONTHS ENDING 31 DECEMBER 2005 In terms of International Financial Reporting Standards ("IFRS"), and specifically IAS 28 - "Investment in Associates", investors in private equity or venture capital associate companies may elect to either equity account or fair value associate investments. As part of its conversion to IFRS, FirstRand Limited ("FirstRand") elected to equity account for its private equity associate investments. On 4 May 2006, the Accounting Practices Committee, ("APC") of the South African Institute of Chartered Accountants ("SAICA") published Issue 8 of Circular 7/2002 - "Headline Earnings". In terms of the change to this Circular, profits or losses on the realisation of all equity accounted private equity or venture capital investments are to be excluded from the calculation of headline earnings. FirstRand regards private equity to be a core component of its investment banking business. Accordingly, FirstRand does not agree with the interpretation by the APC with respect to equity accounted private equity investments. FirstRand believes that the interpretation contradicts the intention in calculating headline earnings, which exclude profits and losses on disposal of businesses, in the context of a private equity business. It should also be noted the APC and SAICA are currently researching the usefulness of headline earnings as a measure of a company"s performance and its relevance in the light of the increased emphasis which accounting standards place on fair value. The new interpretation will impact headline earnings and headline earnings per share going forward. It does not impact on the Group"s normalised headline earnings or normalised headline earnings per share. In addition to the disclosure of headline earnings as required by SAICA, FirstRand will continue to disclose normalised headline earnings and normalised headline earnings per share information, which includes the profits or losses on disposal of private equity investments. FirstRand will continue with its policy of using normalised headline earnings as the basis for dividend payments. The impact of the new interpretation on the audited headline earnings and fully diluted headline earnings per share for the year ended 30 June 2005, and on the unaudited headline earnings and fully diluted headline earnings per share for the six-month periods ended 31 December 2004 and 31 December 2005, as previously reported in terms of IFRS, is set out below: Audited Unaudited Unaudited
Year ended Six months Six months 30 June 2005 ended ended 31 December 31 December 2005 2004
Headline earnings 7,129 3,930 3,351 attributable to ordinary shareholders (R million) Reversal of private equity (406) (294) (173) realisations (R million) Adjusted headline earnings 6,723 3,636 3,178 attributable to ordinary shareholders (R million) Weighted number of shares in 5,199,864,205 5,110,500,465 5,248,299,168 issue Diluted weighted number of 5,268,867,564 5,250,590,002 5,320,482,215 shares in issue Headline earnings per share - 137.1 76.9 63.8 as previously reported (cents) Headline earnings per share - 129.3 71.2 60.5 adjusted (cents) Fully diluted headline 135.3 74.8 62.9 earnings per share - as previously reported (cents) Fully diluted headline 127.6 69.2 59.6 earnings per share - adjusted (cents) The financial information above has not been reviewed and reported on by the Company"s auditors. Sandton 4 May 2006 Sponsor RAND MERCHANT BANK (A division of FirstRand Bank Limited Date: 04/05/2006 04:10:32 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
