FIRSTRAND COMPANY FIRSTRAND COMPANY

Transcription

1 FIRSTRAND COMPANY A N N U A L F I N A N C I A L S TAT E M E N T S FIRSTRAND COMPANY

2 Statement of comprehensive income for the year ended 30 June Notes Continuing operations Interest and similar income Interest expense and similar charges 2 (4) (4) Net interest income 6 18 Non interest income fees and commissions gains less losses from investment securities Income from operations Operating expenses 4 (100) (56) Income before tax Tax 5 (4) (2) Profit for the year from continuing operations Discontinued operations Loss attributable to discontinued operations (100) Profit for the year Other comprehensive income Total comprehensive income for the year Attributable to: Equity holders of the Company Non cumulative non redeemable preference shares Total comprehensive income for the year

3 Statement of financial position as at 30 June Notes ASSETS Cash and short term funds Loans and accounts receivable 8 * Investment in subsidiaries Property and equipment * * Deferred tax asset 10 3 Non current asset held for sale Total assets EQUITY AND LIABILITIES Liabilities Creditors and accruals Tax liability * * Provisions Long term liabilities 15 5 Total liabilities Equity Capital and reserves attributable to equity holders Ordinary shares Share premium Reserves Non cumulative non redeemable preference shares Total equity Total equity and liabilities * Less than R FIRSTRAND ANNUAL REPORT

4 Statement of changes in equity Ordinary share capital and ordinary shareholders funds Share capital (Note 14) Share premium (Note 14) Retained earnings Balance at 1 July Conversion of convertible redeemable preference shares * (1) Total comprehensive income for the year Ordinary dividends (4 073) Preference dividends Share based payment reserve Balance at 30 June Balance at 1 July Total comprehensive income for the year Ordinary dividends (3 157) Preference dividends Share based payment reserve 4 Balance at 30 June * Less than R

5 Ordinary share capital and ordinary shareholders funds Share based payment reserve Capital redemption reserve Total ordinary shareholders funds Non cumulative preference share capital (Note 14) Perpetual preference shareholders funds Non cumulative preference share premium (Note 14) Total preference shareholders funds Total equity * (1) (1) (4 073) (4 073) (464) (464) (464) * * (3 157) (3 157) (344) (344) (344) (108) (104) (104) * FIRSTRAND ANNUAL REPORT

6 Statement of cash flows for the year end 30 June Notes CASH FLOWS FROM OPERATING ACTIVITIES Cash generated by operations Working capital changes Net cash flows from operating activities Interest received Interest paid (4) (4) Tax paid 17.3 (7) (31) Net cash inflow from operating activities CASH FLOWS FROM INVESTMENT ACTIVITIES Increase in investment in subsidiaries (320) (470) Redemption of preference share investment in subsidiary 25 Loan (to)/from subsidiaries (109) 8 Net cash outflow from investment activities (429) (437) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long term debt (2) Dividends paid 17.4 (3 501) (4 537) Net cash outflow from financing activities (3 501) (4 539) Increase in cash and cash equivalents 5 8 Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

7 Notes to the annual financial statements for the year ended 30 June 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The annual financial statements of FirstRand Limited ( FirstRand ) are prepared according to the same accounting policies used in preparing the consolidated financial statements of the Group. For detailed accounting policies refer to pages 232 to 258 of this report. Amortised cost Total 2 ANALYSIS OF INTEREST INCOME AND EXPENSE Interest and similar income Cash and short term funds Interest and similar income Interest expense an similar charges Borrowed funds 4 4 Interest expense an similar charges Amortised cost Total Interest and similar income Cash and short term funds "A" preference share dividends received * * Interest and similar income Interest expense and similar charges Borrowed funds 4 4 A preference share dividends paid * * Interest expense an similar charges 4 4 * Less than R ANALYSIS OF NON INTEREST INCOME Fees and commissions Fees from subsidiaries^ Other fees * * Total fees and commissions Gains less losses from investment activities Dividends received from subsidiaries unlisted shares Ordinary dividends^ Preference dividends^ Total gains less losses from investment activities Total non interest income ^ Non interest income relates to non financial assets and liabilities. * Less than R FIRSTRAND ANNUAL REPORT

8 Notes to the annual financial statements / continued for the year ended 30 June OPERATING EXPENSES Advertising and marketing 2 2 Annual reports 7 9 Auditors remuneration audit fees 4 3 fees for other services prior year under provision Depreciation motor vehicles * * Directors fees paid 5 5 Direct staff costs salaries, wages and allowances contributions to employee benefit funds 2 2 share based payment expense refer note other 2 * Travel 2 2 Investor relations 7 5 Rental charges property 1 3 furniture and equipment 1 1 Professional fees paid to subsidiaries 6 Professional fees 3 Corporate memberships 1 1 Indirect tax value added tax 3 1 Other TAX Total operating expenses * Less than R South African normal taxation Normal tax current year 1 5 Deferred current year 3 South African secondary taxation on companies ("STC") (3) Total tax charge 4 2 Actual 2010 % 2009 % Tax rate reconciliation Effective rate of taxation 4 Total tax has been affected by: Dividends received Non deductible expenses (17) Secondary taxation on companies ( STC ) credits (3) Standard rate of taxation

9 6 ANALYSIS OF ASSETS AND LIABILITIES BY CATEGORY Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The principal accounting policies on page 232 to page 258 describe how the classes of financial instruments are measured and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities in the statement of financial position per category of financial instrument to which they are assigned and therefore by measurement basis: 2010 Financial liabilities at amortised cost Loans and receivables Non financial assets and liabilities Total ASSETS Cash and short term funds Investment in subsidiaries Non current asset held for sale Total assets LIABILITIES Creditors and accruals Tax liability * * Provisions Long term liabilities 5 5 Total liabilities Financial liabilities at amortised cost Loans and receivables Non financial assets and liabilities Total ASSETS Cash and short term funds Loans and accounts receivable * * Investment in subsidiaries Property and equipment * * Deferred tax asset 3 3 Total assets LIABILITIES Creditors and accruals Tax liability * * Provisions 4 4 Total liabilities * Less than R FIRSTRAND ANNUAL REPORT

10 Notes to the annual financial statements / continued for the year ended 30 June CASH AND SHORT TERM FUNDS Balances with other banks Cash and short term funds The carrying value for cash and short term funds approximates the fair value. 8 LOANS AND ACCOUNTS RECEIVABLES Receivables Sundry debtors * Total receivables * Total loans and accounts receivable * * Less than R At the reporting date all loans and accounts receivables are considered to be neither past due nor impaired. The carrying value of loans and accounts receivable approximates the fair value. 9 INVESTMENT IN SUBSIDIARIES Investment of holding company Effective percentage holding Amounts owing by/(to) subsidiaries Shares at net carrying amount Investment through equity settle share incentive schemes 2010 % 2009 % Banking Group FirstRand Bank Holdings Limited ( FRBH ) Ordinary shares Non redeemable preference shares Momentum Momentum Group Limited Ordinary shares Non redeemable preference shares FirstRand Investment Holdings (Pty) Limited Ordinary shares FirstRand Empowerment Trust Investment through equity settled share incentive scheme Total Total interest in subsidiary

11 INVESTMENT IN SUBSIDIARIES continued Carrying amount at the beginning of the year Movement for the year: Increase in investment in FirstRand Banking Group Increase in investment in FirstRand Investment Holdings (Pty) Limited 34 Redemption of redeemable preference shares in FirstRand Investment Holdings (Pty) Limited (25) Investment in Momentum Group Limited classified as non current asset held for sale (5 133) Carrying amount at the end of the year The following share trusts are controlled by FirstRand Limited: Momentum Life Assurers Limited share trust Southern Life Association Limited share scheme First National Bank share purchase/option scheme FirstRand Limited share trust FirstRand staff assistance trust FirstRand black employee trust FirstRand black non executive directors trust The carrying amount of these investments is R nil DEFERRED TAX Deferred tax asset Tax effects of temporary differences between tax and book value for: Deferred tax asset Opening balance 3 STC credits (3) 3 Closing balance 3 Movement on deferred tax account is as follows: Opening balance 3 Charge to the income statement (3) 3 Closing balance 3 Deferred income tax assets and liabilities are offset when the income taxes relate to the same fiscal authority and there is a right to offset at settlement. If the total reserves of R7 884 million as at 30 June 2010 (2009: R7 590 million) were to be declared as dividends, the secondary tax impact at a rate of 10% would be R788 million (2009: R759 million). FIRSTRAND ANNUAL REPORT

12 Notes to the annual financial statements / continued for the year ended 30 June CREDITORS and accruals Unclaimed dividends Sundry creditors Loan from FirstRand Empowerment Trust * * Total creditors and accruals * Less than R The carrying value of creditors and accruals approximates their fair value at year end. 12 PROVISIONS Staff related provisions* Opening balance 2 1 Additional provisions created 11 1 Utilised during the year (1) Closing balance 12 2 * Staff related provision mainly consists of provision for leave pay and staff bonuses. Audit fees Opening balance 2 5 Additional provisions created 4 3 Unused amounts reversed (1) (1) Utilised during the year (3) (5) Closing balance 2 2 Total provisions

13 2010 Carrying amount Current Non current 13 CURRENT/NON CURRENT SPLIT OF AMOUNTS RECOGNISED ON THE STATEMENT OF FINANCIAL POSITION ASSETS Cash and short term funds Investment in subsidiaries Non current asset held for sale Total assets LIABILITIES Creditors and accruals Provisions Tax liability * * Long term liabilities 5 5 Total liabilities Carrying amount Current Non current ASSETS Cash and short term funds Loans and accounts receivable * * Investment in subsidiaries Property and equipment * * Deferred tax asset 3 3 Total assets LIABILITIES Creditors and accruals Provisions 4 4 Tax liability * * Total liabilities 63 * 63 FIRSTRAND ANNUAL REPORT

14 Notes to the annual financial statements / continued for the year ended 30 June 2010 Number of ordinary shares Number of A preference shares** 14 SHARE CAPITAL AND SHARE PREMIUM Authorised Number of shares Issued Ordinary shares Opening balance Closing balance "A" preference shares Opening balance Closing balance "B" preference shares Opening balance B1 preference shares incorporated as B preference shares effective 4 January 2010 Closing balance "B1" preference shares Opening balance B1 preference shares incorporated as B preference shares effective 4 January 2010 Closing balance Total issued share capital and share premium closing balance Analysis of total issued share capital at the end of the year Ordinary issued share capital at end of year as above (1 cent each) B variable rate non cumulative non redeemable preference shares (1 cent each) Total issued share capital and share premium closing balance Disclosed on the face of the statement of financial position Ordinary share capital and share premium Non cumulative non redeemable preference shares Total issued share capital and share premium closing balance * Less than R ** The A preference shares are not listed. The A preference shares are variable rate, non cumulative, non redeemable preference shares. *** The B1 preference shares. 1 The C preference shares are variable rate, convertible, non cumulative redeemable preference shares. 2 The D preference shares are variable rate, cumulative redeemable preference shares. 420

15 2010 Number of B preference shares*** Number of C preference shares 1 Number of D preference shares 2 Share capital Share premium Total * * * ( ) * (1 527) (1 527) * FIRSTRAND ANNUAL REPORT

16 Notes to the annual financial statements / continued for the year ended 30 June 2009 Number of ordinary shares Number of A preference shares** 14 SHARE CAPITAL AND SHARE PREMIUM continued Authorised Number of shares Issued Ordinary shares Opening balance Conversion of convertible redeemable preference shares Closing balance "A" preference shares Opening balance Redeemed during the year ( ) Converted during the year ( ) Closing balance "B" preference shares Opening balance Closing balance "B1" preference shares Opening balance Closing balance Total issued share capital and share premium closing balance Analysis of total issued share capital at the end of the year Ordinary issued share capital at end of year as above (1 cent each) B variable rate non cumulative non redeemable preference shares (1 cent each) B1 variable rate non cumulative non redeemable preference shares (1 cent each) Total issued share capital and share premium closing balance Disclosed on the face of the statement of financial position Ordinary share capital and share premium Non cumulative non redeemable preference shares Total issued share capital and share premium closing balance * Less than R ** The A preference shares are not listed. 1 The C preference shares are variable rate, convertible, non cumulative redeemable preference shares. 2 The D preference shares are variable rate, cumulative redeemable preference shares. 422

17 2009 Number of B preference shares Number of C preference shares 1 Number of D preference shares 2 Share capital Share premium Total * (1) (1) * * (21) (21) * (1) (1) * * * * FIRSTRAND ANNUAL REPORT

18 Notes to the annual financial statements / continued for the year ended 30 June SHARE BASED PAYMENT For a detail description of share option schemes and trusts in which FirstRand Limited participates refer to note 33 of the Group annual report. The income statement charge for share based payments is as follows: FirstRand share incentive scheme (1) 1 FirstRand black non executive directors trust 1 1 FirstRand share appreciation right scheme 5 (2) Conditional share plan 11 Forfeitable share plan * Total share based payment expense 16 Share based payment liability Opening balance 2 Income statement charge 5 (2) Total share based payment liability 5 * Less than R DIVIDENDS Ordinary dividends An interim dividend of cents (2009: cents) per share was declared on 8 March 2010 in respect of the six months ended 31 December A final dividend of cents (2009: 22.00) per share was declared on 13 September 2010 in respect of the six months ended 30 June Total ordinary dividends declared for the year B preference shares An interim dividend of cents (2009: cents) per share was declared on 27 January 2010 in respect of the six months ended 31 December A final dividend of cents (2009: cents) per share was declared on 5 August 2010 in respect of the six months ended 30 June B1 preference shares* An interim dividend of cents per share was declared on 23 February 2009 in respect of the six months ended 31 December A final dividend of cents per share was declared on 25 August 2009 in respect of the six months ended 30 June Total preference dividends declared for the year Total provisions 14 4 * The B1 preference shares were incorporated with the B preference shares effective 4 January

19 CASH flow information 17.1 Cash generated by operations Net income before tax attributable to shareholders Adjustment for non cash items 32 5 Interest received (10) (22) Interest paid 4 4 Cash generated by operations Working capital changes Decrease in loans and accounts receivable 27 Decrease in creditors and accruals 15 (27) Net working capital changes Tax paid Tax payable and deferred tax at beginning of the year (3) (26) Charge to income statement (4) (2) Tax payable and deferred tax at the end of the year (3) Tax paid (7) (31) 17.4 Dividends paid Ordinary dividends Final dividend paid on: 19 October 2009 in respect of the year ended 30 June 2009 (1 240) 27 October 2008 in respect of the year ended 30 June 2008 (2 156) Interim dividend paid on: 6 April 2010 in respect of the period ended 31 December 2009 (1 917) 6 April 2009 in respect of the period ended 31 December 2008 (1 917) Ordinary dividends paid (3 157) (4 073) Preference dividends on "B" preference shares Final dividend paid on: 31 August 2009 in respect of the year ended 30 June 2009 (127) 25 August 2008 in respect of the year ended 30 June 2008 (153) Interim dividend paid on: 22 February 2010 in respect of the period ended 31 December 2009 (154) 23 February 2009 in respect of the period ended 31 December 2008 (156) Preference dividends on "B1" preference shares* Final dividend declared on: 31 August 2009 in respect of the year ended 30 June 2009 (63) 25 August 2008 in respect of the year ended 30 June 2008 (77) Interim dividend declared on: 23 February 2009 in respect of the period ended 31 December 2008 (78) Preference dividends paid (344) (464) Total dividends paid (3 501) (4 537) * The B1 preference shares were incorporated with the B preference shares effective 4 January FIRSTRAND ANNUAL REPORT

20 Notes to the annual financial statements / continued for the year ended 30 June RELATED PARTIES FirstRand Limited defines related parties as: The parent company Associate companies Joint ventures Post retirement benefit funds (Pension Funds) Key management personnel are the FirstRand board of directors and the FirstRand executive committee Key management personnel includes close family members of key management personnel. Close family members are those family members who may be expected to influence, or be influenced by that individual in dealings with the Group. This may include: Enterprises which are controlled by these individuals through their majority shareholding or their role as chairman and/or chief executive officer in those companies. The principal shareholder of the FirstRand Limited is RMB Holdings Limited, incorporated in South Africa. During the current year FirstRand Limited did not enter directly into transactions with its parent company Subsidiaries Details of interest in subsidiaries as well as loan account balances are disclosed in note Details of transactions with relevant related parties appear below: Interest received Fees and commissions earned 26 Dividends received Key management personnel Please refer to page 400 for detailed disclosure. 19 EVENTS AFTER REPORTING PERIOD Refer to directors report for detailed events after reporting period. 20 CONTINGENT LIABILITIES FirstRand Limited provides put options to holders of certain debt instruments issued by its subsidiaries. The term of put option determines that in the instance where the subsidiaries default on the terms of debt instrument agreements, the capital amount of the debt and any accrued dividend will be repaid by FirstRand Limited. At 30 June 2010 no instance of default by a subsidiary had occurred. 426

21 Definitions Companies Act Companies Act of 1973 Dividend cover Normalised earnings per share divided by dividend per share. Diluted normalised earnings per share. National Credit Act ( NCA ) National Credit Act, No 34 of 2005 Net asset value () Net asset value per share (cents) Net income after capital charge ( NIACC ) Normalised earnings attributable to ordinary shareholders divided by the weighted average number of shares including treasury shares adjusted for potential dilution effect of Outperformance scheme. Equity attributable to ordinary shareholders. Equity attributable to ordinary shareholders divided by number of issued ordinary shares. Normalised earnings less the cost of equity times the average ordinary shareholders equity and reserves. Normalised earnings () The Group believes normalised earnings more accurately reflect operational performance. Headline earnings are adjusted to take into account non operational and accounting anomalies. Refer to page 33 for a detailed description of normalised earnings. Normalised earnings per share (cents) Price earnings ratio (times) Price to book (times) Return on equity ( ROE ) Shares in issue (number) Weighted average number of ordinary shares (number) Banking Group Normalised earnings attributable to ordinary shareholders divided by the weighted average number of share including treasury shares. Closing price on 30 June divided by basic normalised earnings per share. Market capitalisation divided by normalised net asset value. Normalised earnings divided by average normalised ordinary shareholders equity. Number of ordinary shares listed on the JSE. The weighted average number of ordinary shares in issue during the year as listed on the JSE. Bank s Act Capital adequacy ratio ( CAR ) Cost to income ratio (%) Exposure at default ( EAD ) Loss given default ( LGD ) Probability of default ( PD ) Risk weighted assets () Banks Act, No 94 of 1990 as amended Capital divided by risk weighted assets. Operating expenses excluding indirect taxes expressed as a percentage of total income including share of profit from associates and joint ventures. Exposure at default is defined as the gross exposure of a facility upon default of a counterparty. The loss given default is defined as the economic loss that will be suffered on an exposure following default of the counterparty, expressed as a percentage of the amount outstanding at the time of default. The probability of default is the probability than a counterparty will default within the next year and considers the ability and willingness of the counterparty to repay. Prescribed risk weightings relative to the credit risk of counterparty, operational risk, market risk, equity investment risk and other risk multiplied by on and off balance sheet assets. Momentum Group Capital adequacy ratio ( CAR ) Deferred revenue liability ( DRL ) The amount by which the Financial Services Board requires an insurer s assets to exceed it liabilities. The assets, liabilities and capital adequacy requirement must be calculated using a method which meets the Financial Services Board s requirements. A DRL is recognised in respect of fees paid at the inception of a contract by a policyholder which are directly attributable to a contract. The DRL is then released to revenue as the investment management services are provided, over the expected duration of the contract, as a constant percentage of the expected gross profit margin (including investment income) arising from the contract. FIRSTRAND ANNUAL REPORT

22 Definitions / continued Discretionary participation featured ( DPF ) Embedded Value Present value of in-force ( PVIF ) A DPF entitles the policyholder to receive, as a supplement to guaranteed benefits, additional benefits or bonuses. The embedded value is defined as: the shareholders net worth, which includes subsidiaries and associates at the directors valuations; plus the present value of future profits less the opportunity cost of capital in respect of the in-force insurance business. The value of the in-force insurance business is calculated as the present value of the projected stream of future after tax profits at the calculation date. The opportunity cost of capital reflects the fact that the expected long term investment return on the assets backing the capital adequacy requirements is less than the return assumed to be required by the shareholders, as reflected by the risk discount rate. PVIF is determined by estimating the net present value of future cash flows from contracts in-force at the date of acquisition. 428

23 Abbreviations AIRB Advanced Internal Ratings Based approach FSB Financial Service Board ALCO Asset and liability management committee FSV Financial Soundness Valuation AMA Advance Measurement Approach FTP Funds transfer pricing ASSA Actuarial Society of South Africa GCRM Banking Group credit risk management ATM Automated teller machine GIA Group internal audit function BCBS The Basel Committee on Banking Supervision IBNR Incurred but not reported BEE Black Economic Empowerment ICAAP Internal Capital Adequacy Assessment Process BPRMF Business performance and risk management framework IFRIC International Financial Reporting Interpretations Committee BSA Bonus stabilisation account IFRS International Financial Reporting Standards BSM Balance Sheet Management IIA Institute of Internal Audit CAGR (%) Compound annual growth rate IRB Internal rating based approach CCF Credit conversion factors INVESCO Investment committee CEO Chief executive officer IRRBB Interet rate risk in the banking book CFO Chief financial officer ISDA International Swaps and Derivative Association CGT Capital gains tax ISMA International Securities Market Association CIS Corporate Social Investment JSE Johannesburg Stock Exchange COO Chief operating officer KPI Key performance indicators CPIX Consumer Price Index LCR Liquidity coverage ratio CRMF Credit risk management framework LGD Loss given default CSA Credit Support Annexes LRMF Liquidity risk management framework CV Curriculum Vitae LTV Loan to value DAC Deferred acquisition cost MIRC Market and investment risk committee DPF Discretionary participation features NIACC Net income after capital charge DRL Deferred revenue liability NII Net interest income EAD Exposure at default NIR Non interest revenue EL Expected loss Nitro 1 Nitro Securitisation 1 (Pty) Limited ERM Enterprise Risk Management Nitro 1 Plc Nitro International Securitisation Company 1 Plc ESG Environmental, social and governance risks Nitro 2 Nitro Securitisation 2 (Pty) Limited ETL Expected tail loss NOFP Net open foreign position FICC Fixed income, currency and commodities business NPL Non performing loans FNB First National Bank NSFR Net stable funding ratio FRB FirstRand Bank Limited ORC Operational risk committee FRBG FirstRand Bank Supersegment ORMF Operational risk management framework FRBH FirstRand Bank Holdings Limited PD Probability of default FRIE FirstRand Ireland Plc PE Price earnings FRIN FirstRand India PGN Professional Guidance Note FRIHL FirstRand Investment Holdings (Pty) Limited PIT Point In Time FSA Financial Services Authority' PVIF Present value of in-force FIRSTRAND ANNUAL REPORT

24 Definitions / continued QIS RCC RCSA RERIT RMB ROE RRM RWA S&P SARB SENS SME SPE STC TSA TTC UK US VaR WACC(%) Basel Quantitative Impact Study Risk, Compliance and Capital committee Risk and control self assessments Risk effectiveness reports for IT Rand Merchant Bank Return on equity Regulatory risk management Risk weighted assets Standard and Poor South African Reserve Bank Stock Exchange News Service Small and medium enterprise Special purpose entity Secondary tax on companies The Standard Based approach Through the cycle United Kingdom United States Value at risk Weighted average cost of capital 430