RNS Number:0891L
National Australia Bank Ld
14 May 2003
Appendix 4B (Rules 4.1, 4.3)
Half yearly/preliminary final report
Introduced 30/6/2002
Name of entity: National Australia Bank Limited (the "Company")
A reference in this Appendix 4B to the "Group" is a reference to the Company
and its controlled entities.
ABN or equivalent company reference Half Yearly Preliminary Final Half year/ Financial Year Ended
('Current Period')
ABN 12 004 044 937 (x) ( ) 31-Mar-03
For announcement to the market
Extracts from this report for announcement to the market $m
Revenues from ordinary activities (item 1.1) down 30 % to 11,355
Profit (loss) from ordinary activities after tax attributable to down 17 % to 1,867
members (item 1.22)
Profit (loss) from extraordinary items after tax attributable to nil
members
Net profit (loss) for the period attributable to members (item down 17 % to 1,867
1.11)
Dividends (distributions)
Amount Franked
per amount
security per
security
Interim dividend (item 15.6) 80 cents 100 %
Previous corresponding period (item 15.7) 72 cents 100 %
Record date for determining entitlements to the dividend (see item 15.2) 13 June 2003
Brief explanation of any of the figures reported above and short details of any
bonus or cash issue or other item(s) of importance not
previously released to the market:
The previous corresponding period includes a contribution from SR Investment,
Inc. and its wholly owned subsidiary HomeSide
Lending, Inc (HomeSide), which was sold effective 1 October 2002.
The reduction in net profit attributable to members has been impacted by the
sale of HomeSide ($107 million) and the adverse
movement in the revaluation profit / (loss) (the excess of net market value over
net assets of life insurance controlled entities) of
$609 million ($442 million after tax).
Excluding the impact of these, net profit attributable to members has increased
from the prior corresponding period.
The reduction in revenues from ordinary activities reflects the matters above,
together with lower life insurance income and the
inclusion of proceeds from the sale of the operating assets of HomeSide in the
prior corresponding period.
For further details refer to the half-yearly results announcement 2003.
This half-yearly report is to be read in conjunction with the 2002 annual
financial report. All currency amounts are expressed in
Australian dollars unless otherwise stated.
1
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Consolidated statement of financial performance
Current Previous
period - $m corresponding
period - $m
1.1 Revenues from ordinary activities (see items 1.23 - 1.25) 11,355 16,177
1.2 Expenses from ordinary activities (see items 1.26 & 1.27) 8,792 13,056
1.5 Profit (loss) from ordinary activities before tax 2,563 3,121
1.6 Income tax on ordinary activities 686 858
1.7 Profit (loss) from ordinary activities after tax 1,877 2,263
1.8 Profit (loss) from extraordinary items after tax - -
1.9 Net profit (loss) 1,877 2,263
1.10 Net profit (loss) attributable to outside equity interests 10 7
1.11 Net profit (loss) for the period attributable to members 1,867 2,256
Non-owner transaction changes in equity
1.12 Increase (decrease) in revaluation reserves - (16 )
1.13 Net exchange differences recognised in equity (852 ) (937 )
1.14 Other revenue, expense and initial adjustments recognised directly in equity
Net increase in retained profits on initial adoption of:
AASB 1044 "Provisions, Contingent Liabilities and Contingent Assets 1,151 -
"
1.15 Initial adjustments from UIG transitional provisions - -
1.16 Total transactions and adjustments recognised directly in equity (items 1.12 299 (953 )
- 1.15)
1.17 Total changes in equity not resulting from transactions with owners as owners 2,166 1,303
Earnings per security (EPS)
Current Previous
period corresponding
period
1.18 Basic EPS 116.3 139.0
1.19 Diluted EPS 114.2 135.9
Notes to the consolidated statement of financial performance
Profit (loss) from ordinary activities attributable to members
Current Previous
period - $m corresponding
period - $m
1.20 Profit (loss) from ordinary activities after tax (item 1.7) 1,877 2,263
1.21 Less (plus) outside equity interests 10 7
1.22 Profit (loss) from ordinary activities after tax attributable to 1,867 2,256
members
2
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Revenue and expenses from ordinary activities
Current Previous
period - $m corresponding
period - $m
Revenue (items 1.23 - 1.25)
Interest income
Loans to customers 7,539 6,806
Marketable debt securities 796 702
Other financial institutions 216 279
Other interest (116 ) 498
8,435 8,285
Life insurance income
Premium and related revenue 503 482
Investment revenue 224 2,181
727 2,663
Other banking and financial services income
Dividends received from other entities 18 16
Profit on sale of property, plant and equipment 13 7
Loan fees from banking 705 657
Money transfer fees 510 499
Trading income 318 276
Foreign exchange income 7 2
Fees and commissions 735 667
Proceeds from sale of operating assets - 2,299
Other income 126 165
2,432 4,588
Mortgage servicing and origination revenue
Net mortgage servicing fees - 80
Net mortgage origination revenue - 191
- 271
Movement in the excess of net market value over net assets of life insurance (239 ) 370
controlled entities
Total revenue 11,355 16,177
Expenses (items 1.26 & 1.27)
Interest expense
Deposits and other borrowings 3,481 3,446
Other financial institutions 772 613
Bonds, notes and subordinated debt 358 525
Other debt issues 78 98
4,689 4,682
Life insurance expenses
Claims expense 513 417
Change in policy liabilities (250 ) 1,581
Policy acquisition and maintenance expense 344 385
Investment management fees 39 38
Other life insurance-related expenses - 2
646 2,423
3
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Current Previous
period - $m corresponding
period - $m
Personnel expenses
Salaries 1,206 1,280
Related personnel expenses
Superannuation 112 67
Payroll tax 85 77
Fringe benefits tax 18 28
Charge to provide for
Annual leave 17 (1 )
Long service leave and retiring allowances 23 23
Performance based compensation 107 99
Restructuring costs 3 9
Other expenses 136 168
Significant restructuring costs
Termination benefits - 16
1,707 1,766
Occupancy expenses
Depreciation of buildings and amortisation of leasehold assets 36 42
Operating lease rental expense 143 134
Maintenance and repairs 39 38
Electricity, water and rates 45 44
Other expenses 21 24
284 282
General expenses
Depreciation and amortisation of plant and equipment 161 169
Loss on sale of property, plant and equipment 4 3
Operating lease rental expense 28 27
Charge to provide for
Non-lending losses and contingencies 23 36
Diminution in value of shares in entities - (1 )
Fees and commissions 77 60
Communications, postage and stationery 204 245
Computer equipment and software 111 112
Advertising 95 87
Professional fees 137 193
Travel 29 22
Freight and Cartage 17 28
Carrying value of operating assets sold - 2,219
Motor vehicle expenses 18 15
Other expenses 191 215
Significant restructuring costs - 8
1,095 3,438
Amortisation of goodwill
Australia 1 1
Great Britain and Irish banks 32 31
Bank of New Zealand 16 16
49 48
Charge to provide for doubtful debts
General 322 417
Total expenses 8,792 13,056
Capitalised outlays
Interest costs capitalised in asset values - -
1.28
Outlays capitalised in intangibles (unless arising from an acquisition of a - -
1.29 business)
4
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Consolidated retained profits
Current period Previous
- corresponding
$m period - $m
1.30 Retained profits at the beginning of the financial period 11,148 10,337
1.31 Net profit (loss) attributable to members (item 1.11) 1,867 2,256
1.32 Net transfers (to) and from reserves 246 (7 )
1.33 Net effect of changes in accounting policies
Net increase in retained profits on initial adoption of:
AASB 1044 "Provisions, Contingent Liabilities and Contingent 1,151 -
Assets"
1.34 Dividends and other equity distributions paid or payable (1,188 ) (1,170 )
1.35 Retained profits at the end of the financial period 13,224 11,416
Intangible and extraordinary items
Consolidated - current period
Before tax - Related tax - Related Amount (after
$m $m outside tax)
equity attributable
interests - to members -
$m $m
2.1 Amortisation of goodwill 49 - - 49
2.2 Amortisation of other intangibles - - - -
2.3 Total amortisation of intangibles 49 - - 49
2.4 Extraordinary items - - - -
2.5 Total extraordinary items - - - -
5
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Consolidated statement of financial position
Lines 4.1 to 4.36
At end of As shown in As in last
current last half-
period annual report yearly report
$m $m $m
Assets
Cash assets 6,060 6,294 8,423
Due from other financial institutions 13,760 15,876 18,816
Due from customers on acceptances 20,677 19,474 20,317
Trading securities 21,414 19,590 17,131
Trading derivatives 25,228 12,128 12,838
Available for sale securities 5,005 6,192 6,213
Investment securities 10,925 13,541 10,556
Investments relating to life insurance business 30,278 31,012 32,865
Loans and advances 242,612 231,300 207,636
Mortgage loans held for sale 12 85 101
Mortgage servicing rights - 1,794 6,044
Shares in entities and other securities 1,186 1,199 1,114
Regulatory deposits 180 129 334
Property, plant and equipment 2,493 2,640 2,558
Income tax assets 1,213 1,292 1,194
Goodwill 787 775 828
Other assets 12,366 14,066 14,669
Total Assets 394,196 377,387 361,637
Liabilities
Due to other financial institutions 49,722 43,279 41,194
Liability on acceptances 20,677 19,474 20,317
Trading derivatives 24,821 12,000 12,384
Deposits and other borrowings 207,040 206,864 190,627
Life insurance policy liabilities 30,206 30,425 32,056
Income tax liabilities 1,255 1,609 2,045
Provisions 1,251 2,809 2,202
Bonds, notes and subordinated debt 18,933 22,192 22,499
Other debt issues 1,808 1,866 1,926
Other liabilities 14,668 13,618 12,936
Total Liabilities 370,381 354,136 338,186
Net Assets 23,815 23,251 23,451
Equity
Contributed equity 9,052 9,931 10,486
Reserves 1,254 2,105 1,480
Retained profits 13,224 11,148 11,416
Equity attributable to members of the parent entity 23,530 23,184 23,382
Outside equity interest in controlled entities 285 67 69
Total Equity 23,815 23,251 23,451
Preference capital included as part of equity 2,675 2,675 2,675
attributable to members of the parent entity
6
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Consolidated statement of cash flows
Lines 7.1 to 7.27
Current Previous
period - $m corresponding
period - $m
Cash inflows (outflows) from operating activities:
Interest received 8,275 7,768
Interest paid (5,035 ) (4,830 )
Dividends received 18 16
Fees and other income received 2,337 3,434
Life insurance
Premiums received 2,935 5,664
Investment and other revenue received 861 1,575
Policy payments (2,612 ) (5,008 )
Fees and commissions paid (515 ) (205 )
Personnel expenses paid (1,667 ) (1,744 )
Occupancy expenses paid (249 ) (240 )
General expenses paid (1,189 ) (1,517 )
Income tax paid (928 ) (972 )
Goods and services tax paid (35 ) (26 )
Net decrease/(increase) in trading securities (1,839 ) 2,499
Net decrease/(increase) in mortgage loans held for sale 65 1,318
Net cash provided by operating activities 422 7,732
Cash inflows (outflows) from investing activities:
Movement in investment securities
Purchases (22,527 ) (16,985 )
Proceeds on maturity 24,085 16,149
Movement in available for sale securities
Purchases (9,062 ) (8,447 )
Proceeds on sale 25 19
Proceeds on maturity 9,613 8,385
Net decrease/(increase) in investments relating to life insurance business 52 (1,376 )
Net increase in loans and advances (18,794 ) (8,555 )
Net decrease in shares in entities and other securities 14 298
Payments for mortgage servicing rights - (610 )
Payments for property, plant and equipment (190 ) (206 )
Proceeds from the sale of operating assets - 2,299
Net proceeds from sale of property, plant and equipment 60 168
Net increase in regulatory deposits (60 ) (246 )
Net decrease in other assets 3,050 5,400
Net cash used in investing activities (13,734 ) (3,707 )
Cash inflows (outflows) from financing activities:
Net increase in deposits and other borrowings 7,124 7,748
Net proceeds from bonds, notes and subordinated debt 2,934 9,134
Repayment of bonds, notes and subordinated debt (4,839 ) (9,501 )
Payments from provisions (240 ) (162 )
Net proceeds from the issue of ordinary shares 59 107
Payments made under on-market buy-back of ordinary shares (1,025 ) (573 )
Dividends paid (1,106 ) (781 )
Net decrease in other liabilities (429 ) (7,161 )
Net cash provided by/(used in) financing activities 2,478 (1,189 )
Net increase/(decrease) in cash and cash equivalents (10,834 ) 2,836
Cash and cash equivalents at beginning of year (21,109 ) (18,408 )
Effects of exchange rate changes on balance of cash held in foreign currencies 2,041 1,617
Cash and cash equivalents at end of period: (29,902 ) (13,955 )
Attributable to operating business (31,156 ) (14,837 )
Attributable to statutory funds 1,254 882
7
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Non-cash financing and investing activities
Details of financing and investing transactions which have had a material effect
on consolidated assets and liabilities but did not involve cash flows as
follows:
Current Previous
period - $m corresponding
period - $m
New Share Issues:
Dividend reinvestment plan 84 242
Bonus share plan 56 44
Movement in assets under finance lease (6 ) (11 )
Reconciliation of cash
Lines 8.1 to 8.5
Reconciliation of cash at the end of the period (as shown in the consolidated
statement of cash flows) to the related items in the accounts is as follows:
Current Previous
period - $m corresponding
period - $m
Cash assets 6,060 8,423
Due from other financial institutions 13,760 18,816
Due to other financial institutions (49,722 ) (41,194 )
Total cash at end of period (29,902 ) (13,955 )
Other notes to the financial statements
Ratios
Current Previous
period corresponding
period
Profit before tax / revenue
9.1 Consolidated profit (loss) from ordinary activities before tax (item 1.5) as a 22.6 % 19.3 %
percentage of revenue (item 1.1)
Profit after tax / equity interests
9.2 Consolidated net profit (loss from ordinary activities after tax attributable 17.0 % 20.9 %
to members (item 1.11) as a percentage of equity (similarly attributable) at
the end of the period (item 4.37)
Earnings per security (EPS)
Current Previous
period corresponding
period
Basic Diluted Basic Diluted
10 Details of basic and diluted EPS reported
separately in accordance with paragraphs 9 and 18
of AASB 1027: Earnings Per Share are as follows:
Earnings ($m)
Net profit attributable to members of the company 1,867 1,867 2,256 2,256
Distributions on other equity instruments (94 ) (94 ) (95 ) (95 )
Potential dilutive adjustments
Exchangeable capital units - 48 - 54
Adjusted earnings (1) 1,773 1,821 2,161 2,215
Weighted average ordinary shares (no. '000)
Weighted average ordinary shares 1,524,226 1,524,226 1,555,105 1,555,105
Potential dilutive ordinary shares
Options - 5,105 - 7,888
Partly paid ordinary shares - 560 - 848
Exchangeable capital units - 65,460 - 65,460
Total weighted average ordinary shares (1) 1,524,226 1,595,351 1,555,105 1,629,301
Earnings per share (cents) (1) 116.3 114.2 139.0 135.9
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(1) Diluted earnings per share for the March 2002 half-year has been restated to
correct numerical errors in potential dilutive adjustments.
Diluted earnings per share previously disclosed was 134.2 cents.
8
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NTA backing
Current period Previous
corresponding
period
11.1 Net tangible asset backing per ordinary security $ 9.98 $ 9.12
Discontinuing operations
12.1 Discontinuing operations
Whilst not meeting the technical definition of a discontinuing operation in AASB
1042 "Discontinuing Operations", the following information is
relevant to understand the financial performance of the Group.
On 27 August 2002, the Group entered into a contract for the sale of SR
Investment, Inc. (which was the direct holding company of HomeSide Lending, Inc.
at the time of the sale) to Washington Mutual Bank, FA. This transaction settled
on 1 October 2002, and loss of control occurred on this date. The loss on sale
of $15m before tax was recognised in the year ended 30 September 2002.
Control gained over entities having material effect
National Australia Bank Limited did not gain control over any entities which had
a material effect on the Group during the half-year ended 31 March 2003 or the
previous corresponding period.
13.1 Name of entity (or group of entities) n/a
13.2 Consolidated profit (loss) from ordinary activities and extraordinary items n/a
after tax of the entity (or group of entities) since the date in the current
period on which control was acquired
13.3 Date from which such profit has been calculated n/a
13.4 Profit (loss) from ordinary activities and extraordinary items after tax of the n/a
entity (or group of entities) for the whole of the previous corresponding period
Loss of control of entities having material effect
14.1 Name of entity (or group of entities) SR Investment, Inc. and its wholly owned
subsidiary HomeSide Lending, Inc.
14.2 Consolidated profit (loss) from ordinary activities and $nil
extraordinary items after tax of the entity (or group of
entities) for the current period to the date of loss of
control
14.3 Date to which the profit (loss) in item 14.2 has been 1 October, 2002
calculated
14.4 Consolidated profit (loss) from ordinary activities and $107m
extraordinary items after tax of the entity (or group of
entities) while controlled during the whole of the previous
corresponding period
14.5 Contribution to consolidated profit (loss) from ordinary Refer 12.1, above
activities and extraordinary items from sale of interest
leading to loss of control
9
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Dividends
15.1 Date the dividend is payable 2 July 2003
15.2 Record date to determine entitlements to the dividend (distribution) (ie, on 13 June 2003
the basis of proper instruments of transfer received by 5.00 pm if securities
are not CHESS approved, or security holding balances established by 5.00pm or
such later time permitted by SCH Business Rules if securities are CHESS
approved)
Amount per security
Amount Franked Amount per
per amount per security of
security security at foreign
30% tax source
dividend
cents
(Half yearly and preliminary final
reports)
15.6 Interim dividend: Current year 80 100 % 0 %
15.7 Previous year 72 100 % 0 %
Half yearly report - interim dividend (distribution) on all securities
Current Previous
period - $m corresponding
period - $m
15.10 Ordinary securities 1,205 1,115
15.11 Preference securities 94 95
15.12 Other equity instruments - -
15.13 Total 1,299 1,210
The dividend or distribution plans shown below are in operation.
The dividend is paid in cash or part of a dividend plan. Cash dividends are paid
by way of:
a) Cash or
b) Direct credit
Dividend plans on offer are:
a) Dividend Reinvestment Plan;
b) Bonus Share Plan; and
c) United Kingdom Dividend Plan (this enables a UK domiciled shareholder to
receive either a dividend in GB Pounds or shares via the UK Dividend Plan).
The last date for receipt of election notices for the dividend or distribution
plans:
13 June 2003
5pm (Melbourne time)
10
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Details of aggregate share of profits (losses) of associates
Lines 16.1 to 16.7
Associates are accounted for utilising the cost method with only dividends
received or receivable recognised in profit and loss. The financial impact of
this method does not differ significantly from accounting for Associates under
the equity method for the Group.
Material interests in entities which are not controlled entities
Lines 17.1 to 17.4
There are no material interests in entities which are not controlled entities.
Issued and quoted securities at end of current period
Lines 18.1 to 18.12
Category of securities Total Number Issue Price Amount paid
Number Quoted per security up per
(dollars) security
(dollars)
18.1 Preference Shares
Trust Units Exchangeable for Preferred 36,008,000 - not required not required
Shares
(TrUEPrSSM) preference shares (1)
National Income Securities stapled 20,000,000 20,000,000 not required not required
debt/preference shares (2)
18.2 Preference shares issued during the - - - -
current period
18.3 Ordinary Shares
Fully paid 1,509,591,211 1,509,591,211 not required not required
Partly paid 15,730 $ 4.72 $ 0.25
Partly paid 21,180 $ 4.25 $ 0.25
Partly paid 30,500 $ 5.54 $ 0.25
Partly paid 49,920 $ 5.56 $ 0.25
Partly paid 76,744 $ 6.15 $ 0.25
Partly paid 112,385 $ 9.07 $ 0.25
Partly paid 145,080 $ 10.97 $ 0.25
Partly paid 186,180 $ 10.83 $ 0.25
Partly paid 147,059 $ 11.03 $ 0.25
Total Partly paid 784,778
18.4 Changes during current period
Fully paid ordinary shares issued
during the current period
Executive Share Option Plan no. 2 819,500 819,500 $ 19.90 $ 19.90
Executive Share Option Plan no. 2 75,000 75,000 $ 23.34 $ 23.34
Dividend Reinvestment Plan 2,547,522 2,547,522 $ 32.42 $ 32.42
UK Dividend Plan 20,099 20,099 $ 32.42 $ 32.42
Bonus Share Plan 1,742,343 1,742,343 $ 32.42 $ 32.42
Share Purchase Plan 1,315,630 1,315,630 $ 32.42 $ 32.42
Staff Share Allocation Plan 1,064,790 1,064,790 $ 31.89 $ 31.89
Staff Share Ownership Plan 7,457 7,457 $ 29.23 $ 29.23
Staff Share Ownership Plan 20,628 20,628 $ 31.89 $ 31.89
Staff Share Ownership Plan 92,015 92,015 $ 32.37 $ 32.37
Staff Share Ownership Plan 279,799 279,799 $ 33.13 $ 33.13
7,984,783 7,984,783
11
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Total Number Issue Price Amount paid
Number Quoted per security up per security
(dollars) (dollars)
Paying up of partly paid ordinary shares 3,800 3,800 $ 4.72 $ 4.72
4,980 4,980 $ 4.25 $ 4.25
8,600 8,600 $ 5.54 $ 5.54
9,920 9,920 $ 5.56 $ 5.56
13,585 13,585 $ 6.15 $ 6.15
18,310 18,310 $ 9.07 $ 9.07
25,707 25,707 $ 10.97 $ 10.97
26,317 26,317 $ 10.83 $ 10.83
23,509 23,509 $ 11.03 $ 11.03
134,728 134,728
Fully paid ordinary shares bought back on-market during the current period
Total Purchase Total Purchase
Number Price (*) Number Price (1)
(1,111,000 ) $ 32.56 (300,000 ) $ 32.38
(1,000,000 ) $ 32.79 (650,000 ) $ 32.05
(1,225,500 ) $ 33.13 (650,000 ) $ 31.96
(1,040,600 ) $ 32.58 (500,000 ) $ 31.76
(630,000 ) $ 33.13 (650,000 ) $ 31.48
(700,000 ) $ 33.44 (400,000 ) $ 31.64
(860,000 ) $ 32.96 (300,000 ) $ 31.69
(700,000 ) $ 33.26 (550,000 ) $ 31.30
(1,120,000 ) $ 32.76 (350,000 ) $ 31.11
(568,636 ) $ 32.97 (700,000 ) $ 30.45
(415,000 ) $ 33.05 (565,000 ) $ 30.30
(609,263 ) $ 33.03 (350,000 ) $ 30.33
(360,000 ) $ 33.30 (300,000 ) $ 30.21
(700,000 ) $ 33.06 (550,000 ) $ 29.71
(550,000 ) $ 33.19 (600,000 ) $ 29.13
(800,000 ) $ 32.51 (300,000 ) $ 29.09
(890,000 ) $ 31.94 (350,000 ) $ 29.52
(580,000 ) $ 31.87 (262,000 ) $ 29.22
(534,484 ) $ 31.65 (500,000 ) $ 29.10
(380,000 ) $ 31.16 (300,000 ) $ 28.71
(300,000 ) $ 31.47 (200,000 ) $ 29.61
(205,000 ) $ 31.98 (450,000 ) $ 29.21
(237,850 ) $ 32.41 (147,682 ) $ 29.12
(70,000 ) $ 32.47 (315,000 ) $ 29.21
(300,000 ) $ 32.75 (320,000 ) $ 29.38
(230,000 ) $ 32.60 (225,000 ) $ 29.22
(142,669 ) $ 32.39 (300,000 ) $ 29.18
(487,000 ) $ 32.23 (465,000 ) $ 28.83
(270,000 ) $ 32.15 (159,773 ) $ 29.15
(30,000 ) $ 32.12 (335,000 ) $ 28.95
(540,000 ) $ 32.15 (463,867 ) $ 28.52
(150,000 ) $ 32.23 (490,000 ) $ 28.56
(300,000 ) $ 32.49 (261,473 ) $ 28.74
(550,000 ) $ 32.22 (265,000 ) $ 30.94
(86,881 ) $ 32.40 (250,000 ) $ 30.81
(32,448,678 )
--------------------
(*) The purchase price is the daily weighted average of the Company's
ordinary shares that were purchased. The highest price paid was $33.70 and the
lowest price paid was $28.40.
18.5 Convertible Debt Securities Nil
18.6 Changes during current period Nil
12
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Category of securities Total Number Exercise Expiry
Number Quoted Price Date
Options
Held under National Australia Bank Executive Share Option
Plan No.2 ("ESOP No. 2")
(refer pages 128 and 130 of the 2002 annual financial
report)
18.7 Unexercised options at the beginning of the current
period
839,500 - $ 19.90 25-Feb-2003
12,295,000 - $ 28.23 18-Mar-2004
120,000 - $ 23.34 5-Aug-2004
9,978,500 - $ 21.29 24-Mar-2008
777,500 - $ 24.89 27-Sep-2008
11,383,500 - $ 27.85 22-Mar-2009
1,162,500 - $ 28.87 13-Sep-2009
11,261,000 - $ 36.14 13-Jun-2010
18.8 Issued during the current period
ESOP No. 2 5,978,750 - $ 30.46 20-Mar-2011
Performance Rights* 1,519,832 - Refer note ** 20-Mar-2011
18.9 Exercised during the current period
(819,500 ) - $ 19.90 25-Feb-2003
(75,000 ) - $ 23.34 5-Aug-2004
18.10 Options expired during the current period
(20,000 ) - $ 19.90 25-Feb-2003
(22,500 ) - $ 21.29 24-Mar-2008
(10,000 ) - $ 24.89 27-Sep-2008
(28,500 ) - $ 27.85 22-Mar-2009
(1,500 ) - $ 28.87 13-Sep-2009
(79,500 ) - $ 36.14 13-Jun-2010
Unexercised options at the end of the period
ESOP No. 2 52,739,750 - - -
Performance Rights* 1,519,832 - - -
18.11 Debentures -
18.12 Unsecured notes $ m
Bonds, notes and subordinated debt
Company 18,279
Group 18,933
Exchangeable capital units (3)
Group 1,262
Other debt issues
Company 414
Group 546
--------------------
* Performance rights are issued under the Performance Rights Plan approved
at the Company's annual general meeting held on 19 December 2002 Terms
of the Plan are explained in the notice of that meeting.
** The total exercise price payable on the exercise of any performance rights
by a holder on a particular day will be $1.00, irrespective of the number of
rights exercised on that day.
13
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Issued and Quoted securities at end of current period (continued)
(1) On 30 September 1998, a total of 32,008,000 fully paid non-converting
non-cumulative preference shares of the Company with a liquidation preference of
US$12.50 per share (TrUEPrSSM preference shares) were issued to a depositary in
connection with an issue of 16,004,000 Trust Units Exchangeable for Preferred
SharesTM (TrUEPrS) by the NAB Exchangeable Preferred Trust, a Delaware business
trust that is not controlled by the Company. The underwriters with respect to
the TrUEPrS issue subsequently exercised an option resulting in a further
issuance of 2,000,000 TrUEPrS (and accordingly, in the issue of a further
4,000,000 TrUEPrS preference shares).
The holders of TrUEPrS receive distributions quarterly in arrears at the rate of
8% per annum on a non-cumulative basis. On 31 December 2047, or the earlier
occurrence of certain other exchange events, the holders of TrUEPrS can be
required to exchange their TrUEPrS for American depositary shares representing
TrUEPrS preference shares, or for cash in some limited circumstances. Until that
time, the TrUEPrS preference shares do not pay dividends. After such an exchange
event occurs, the TrUEPrS preference shares will automatically convert into
non-cumulative preference shares of the company paying a dividend of 8% per
annum, if declared.
If a dividend is not paid on the TrUEPrS preference shares, the Company cannot,
in certain circumstances, pay distributions, redeem, buy back or reduce capital
on any other shares of the Company that rank equally with or junior to the
TrUEPrS preference shares.
Holders of the TrUEPrS preference shares are entitled to vote together with the
holders of ordinary shares in the Company (to the extent that these shareholders
are entitled to vote) on the basis of one vote per TrUEPrS preference share on a
limited number of matters including any proposal to wind-up the Company or any
proposal to affect the rights attaching to the TrUEPrS preference shares.
The TrUEPrS preference shares are redeemable, in certain limited circumstances,
prior to the fifth anniversary of their issue date, and after the fifth
anniversary of the issue date, at the Company's election at a redemption
price of US$12.50 plus accrued dividends, if any. The terms of the TrUEPrS
preference shares also provide, subject to certain conditions, for a reduction
of the share capital of the TrUEPrS preference shares of US$12.49, followed by a
redemption of the outstanding share capital attributed to those shares of
US$0.01, and for holders to accept a buy-back offer, if made by the Company at a
price of US$12.50 plus accrued dividends, if any, for each TrUEPrS preference
share.
In a winding-up of the Company, holders of TrUEPrS preference shares will
generally rank equally with the holders of other preference shares and will rank
for return of capital on the TrUEPrS preference shares in priority to ordinary
shareholders. After certain exchange events occur (as referred to above),
TrUEPrS preference shares will rank in priority to ordinary shares and equally
with other preference shares as to dividends. Presently, the Company's
other preference shares consist of the preference shares issued in connection
with National Income Securities, which are described below. Preference shares
may also be issued by the Company in connection with its exchangeable capital
units.
TrUEPrSSM is a service mark of Merrill Lynch & Co., Inc.
(2) On 29 June 1999, the Company issued 20 million National Income Securities
(NIS) at A$100 each. These securities are stapled securities, comprising one
fully paid note of A$100 issued by the Company through its New York branch and
one unpaid preference share issued by the Company (NIS preference share). The
amount unpaid on an NIS preference share will become due in certain limited
circumstances, such as if an event of default occurs. If the amount unpaid on an
NIS preference share becomes due, the holder can, and must, transfer to the
Company the note stapled to that NIS preference share. The transfer of the note
to the Company will satisfy the holder's obligation to pay up the amount
on the NIS preference share. The holder will then hold a fully paid NIS
preference share.
Each holder of NIS is entitled to non-cumulative distributions based on a rate
equal to the Australian 90 day bank bill rate plus 1.25% per annum, payable
quarterly in arrears commencing on 15 August 1999. A minimum interest rate of at
least 6% per annum was payable until 15 May 2000. Holders of NIS preference
shares are not entitled to dividends until the NIS preference shares become
fully paid. If the NIS preference shares become fully paid, holders will
receive, if declared, a dividend calculated at the same rate and payable on the
same basis as for the NIS.
If a dividend is not paid on the NIS preference shares, the Company cannot, in
certain circumstances, pay distributions, redeem, buy back or reduce capital on
any other shares of the Company that rank equally with or junior to the NIS
preference shares.
Holders of the NIS preference shares are entitled to vote together with the
holders of ordinary shares in the Company (to the extent that these shareholders
are entitled to vote) on the basis of one vote per NIS preference share on a
limited number of matters including any proposal to wind-up the Company or any
proposal to affect the rights attaching to the NIS preference shares.
With the prior consent of the Australian Prudential Regulation Authority, the
Company may redeem each note for A$100 (plus any accrued distributions) and buy
back or cancel the NIS preference share stapled to the note for no
consideration. This may take place at any time after the fifth anniversary of
the issue date of the NIS or earlier in certain limited circumstances.
NIS have no maturity date, are quoted on the stock market of Australian Stock
Exchange Limited and on winding-up of the Company will rank for a return of
capital behind all deposit liabilities and creditors of the Company, but ahead
of ordinary shareholders. In a winding-up of the Company, the holders of fully
paid NIS preference shares issued in connection with the NIS will generally rank
equally with the holders of other preference shares of the Company with the same
number with respect to priority on payment in a winding-up (as specified in
accordance with the Company's constitution), and will rank for a return
of capital on the NIS preference shares in priority to the holders of ordinary
shares. Presently, the only other class of preference shares on issue are the
preference shares issued in connection with the TrUEPrS, which are described
above, and which rank equally with the NIS preference shares with respect to
priority on payment in a winding-up. Preference shares may also be issued by
the Company in connection with the exchangeable capital units.
(3) On 19 March 1997, National Australia Capital Securities (UK) PLC, a
controlled entity, received funds following the issue of 40 million exchangeable
capital units at US$25 each with a cumulative return of 7 7/8% per annum. Under
the terms of the exchangeable capital units, the Company has the option to
require the exchange of all, but not part, of the exchangeable capital units at
any time for 7 7/8% convertible non-cumulative preference shares of the Company.
Holders of the exchangeable capital units or the convertible non-cumulative
preference shares have the option at any time to exchange their holdings for
ordinary shares of the Company initially at the rate of 1.6365 ordinary shares
per exchangeable capital unit or convertible non-cumulative preference share,
subject to anti-dilution provisions.
As a result of a holder of exchangeable capital units exercising the option to
exchange their holdings for ordinary shares of the Company, the number of
exchangeable capital units at 31 March 2003 is 39,999,800.
The Company has the right to redeem all or part of the exchangeable capital
units or redeem all or part of the convertible non-cumulative preference shares
under a special offer at any time after 19 March 2007, with the prior consent of
APRA.
14
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Segment information
The following segment information is disclosed in accordance with Australian
Accounting Standards AASB 1005 "Segment Reporting" (AASB 1005),
AASB 1029 "Interim Financial Reporting" (AASB 1029) and US
accounting standard, Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information
" (SFAS 131). For the purposes of this note, a business/operating
segment is defined as a component of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker, or decision making group, in assessing performance.
The Group results are based on the business segments as reviewed separately by
the chief operating decision maker, the Managing Director and Chief Executive
Officer, as well as other members of senior management.
The Group's business is organised into five major operating segments:
Financial Services Australia, Financial Services Europe, Financial Services New
Zealand, Corporate & Institutional Banking (formerly known as Wholesale
Financial Services), and Wealth Management. Financial Services Australia,
Europe and New Zealand are the retailing arms of the Group and provide a full
range of financial services to customers. These Financial Services businesses
are managed on a regional basis across Australia, Europe, and New Zealand.
Corporate & Institutional Banking is responsible for the Group's
relationships with large corporations, institutions, supranationals and
government bodies worldwide. It comprises Corporate Banking, Markets,
Specialised Finance, Financial Institutions Group, Custodian Services and a
Support Services unit. Wealth Management manages a diverse portfolio of
financial services businesses, comprising Investments, Insurance and Other
(Private Bank & Distribution). The Group's 'Other'
business segment includes Finance, Technology, Group Funding, People and
Culture, Risk Management, Corporate Development and Office of the CEO, and are
not considered to be separate reportable operating segments under SFAS 131.
Revenues and expenses directly associated with each business segment are
included in determining their result. Transactions between business segments
are based on agreed recharges between segments operating within the same country
and are at arm's length between segments operating in different
countries.
Comparatives for the previous corresponding period have been restated to reflect
the current basis of business segmentation.
The following changes to business segments were made in the 2003 half-year:
(a) The New Zealand and European capital management units were previously
reported in Financial Services New Zealand and Financial Services Europe
business units respectively. In the 2003 half-year, these units were
transferred to Group Funding (part of Other) to ensure consistency of capital
allocation methodology across business units.
(b) European asset and liability management activities were previously managed
as part of Corporate & Institutional Banking and have now been transferred to
Financial Services Europe.
(c) An update of the cost allocation model was undertaken as part of the Group
's 2003 planning process. This resulted in refinement of cost
allocations between Other and Financial Services Australia.
The 2002 half-year business segment results and total assets have been restated
to reflect these changes.
Business segments
Current period Financial Financial Financial Corporate & Wealth Other Inter-segment Total
Services Services Services Institutional Management $m eliminations Group
Australia Europe New Banking $m $m $m
$m (1) Zealand $m
$m $m
Net interest 1,710 1,239 328 434 54 (19 ) - 3,746
income
Non-interest 919 431 161 511 854 44 - 2,920
income
Inter-segment 31 72 6 (6 ) - 12 (115 ) -
revenue
Total revenue 2,660 1,742 495 939 908 37 (115 ) 6,666
Other expenses 1,378 1,025 251 328 976 145 - 4,103
Inter-segment (7 ) 14 9 69 65 (35 ) (115 ) -
expenses
Total expenses 1,371 1,039 260 397 1,041 110 (115 ) 4,103
Profit from 1,289 703 235 542 (133 ) (73 ) - 2,563
ordinary
activities
before tax
Income tax 386 226 77 126 (95 ) (34 ) - 686
expense
Net profit 903 477 158 416 (38 ) (39 ) - 1,877
Outside equity - - - 4 6 - - 10
interest
Net profit 903 477 158 412 (44 ) (39 ) - 1,867
attributable to
members of the
Company
Total assets 133,617 65,916 24,916 156,479 44,370 31,936 (63,038 ) 394,196
15
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Previous Financial Financial Financial Corporate & Wealth Other (2) Inter-segment Total
corresponding Services Services Services Institutional Management $m eliminations Group
period Australia Europe New Banking $m $m $m
$m (1) Zealand $m
$m $m
Net interest income 1,630 1,232 257 546 56 (118 ) - 3,603
Non-interest income 825 442 135 437 3,419 2,634 - 7,892
Inter-segment revenue 35 83 2 (9 ) 2 11 (124 ) -
Total revenue 2,490 1,757 394 974 3,477 2,527 (124 ) 11,495
Significant expenses (3) 3 - - 9 5 7 - 24
Other expenses 1,280 1,043 209 439 2,709 2,670 - 8,350
Inter-segment expenses (16 ) 16 10 75 46 (7 ) (124 ) -
Total expenses 1,267 1,059 219 523 2,760 2,670 (124 ) 8,374
Profit from ordinary 1,223 698 175 451 717 (143 ) - 3,121
activities before tax
Income tax expense 355 228 59 81 265 (130 ) - 858
Net profit 868 470 116 370 452 (13 ) - 2,263
Outside equity - - - - 7 - - 7
interest
Net profit 868 470 116 370 445 (13 ) - 2,256
attributable to
members of the company
Total assets 115,436 65,467 21,620 142,043 46,268 23,528 (52,725 ) 361,637
--------------------
(1) Includes the results of Vivid for the half-years ended 31 March 2003 and
2002.
(2) Includes the net profit of HomeSide for the half-year ended 31 March 2002,
of $107 million and total assets of $7,346 million.
(3) Restructuring costs relating to termination benefits of $16m and other
restructuring costs of $8m have been reclassified as significant items in the
2002 half-year comparatives to accord with the classification made in the 2002
annual financial report and Appendix 4B Preliminary Financial Report for the
financial year ended 30 September 2002. These amounts were previously
classified as other expenses for the purposes of the segment note for the
half-year ended 31 March 2002.
16
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Comments by directors
Comments on the following matters are required by ASX or, in relation to the
half-yearly report, by AASB 1029 "Interim Financial Reporting".
The comments do not take the place of the directors' report and
statement (as required by the Corporations Act) and may be incorporated into the
directors report and statement. For both half-yearly and preliminary final
reports, if there are no comments in a section, state NIL. If there is
insufficient space to comment, attach notes to this report.
19.1 Basis of financial report preparation
This report is a general purpose financial report prepared in accordance with
the listing rules and AASB 1029 "Interim Financial Reporting".
It should be read in conjunction with the last annual report and any
announcements to the market made by the Company during the period.
This report is National Australia Bank Limited's half-year financial
report for the purpose of complying with Australian Accounting Standard AASB
1029 "Interim Financial Reporting". The half-year financial
report does not include all notes of the type normally included within the
annual report and therefore cannnot be expected to provide as full an
understanding of the financial performance, financial position and investing
activities of the economic entity as the full financial report. The half-year
financial report should be read in conjunction with the annual report as at 30
September 2002.
The half-year financial report has been prepared in accordance with the
requirements of the Corporations Act 2001, the recognition and measurement
requirements of applicable accounting standards and Urgent Issues Group
Consensus Views.
The accounting policies adopted in this report are consistent with those applied
in the annual financial report as at 30 September 2002, except for the change in
accounting policy as disclosed at item 19.5.
19.2 Material factors affecting the revenues and expenses of the economic
entity for the current period.
Nil
19.3 A description of each event since the end of the current period which has
had a material effect and is not related to matters already reported elsewhere
in this Appendix or in attachments, with financial effect quantified (if
possible).
Nil
19.4 Franking credits available and prospects for paying fully or partly
franked dividends for at least the next year.
With effect from 1 July 2002, Australian tax law requires companies to maintain
franking accounts on a tax paid basis.
The franking credits available to the Group at 31 March 2003, after allowing for
tax payable in respect of the current reporting period's profits that
will be subject to Australian income tax, the payment of the interim dividend,
and the receipt of dividends recognised as receivable at balance date, are
estimated to be $nil (2002: $nil). The interim dividend for the year ending 30
September 2003 will be fully franked based on franking credits expected to arise
in the tax year ending 30 June 2004.
The extent to which future dividends will be franked will depend on a number of
factors including the level of the Group's profits that will be subject
to Australian income tax and any future changes to Australia's business
tax system (including the dividend imputation system) as a result of the Federal
Government's tax reform initiatives.
19.5 Unless disclosed below, the accounting policies, estimation methods and
measurement bases used in this report are the same as those used in the last
annual report. Any changes in accounting policies, estimation methods and
measurement bases since the last annual report are disclosed as follows.
(Disclose changes and differences in the half yearly report in accordance with
AASB 1029: Interim Financial Reporting. Disclose changes in accounting policies
in the preliminary final report in accordance with AASB 1001: Accounting
Policies - Disclosure).
The Group has adopted the new accounting standard AASB 1044 "Provisions,
Contingent Liabilities and Contingent Assets" for the first time from 1
October 2002. Provisions for dividends are now recognised at the time the
dividends are declared, determined or publicly recommended. Previously, the
Group recognised a provision for dividend in the reporting period to which the
dividend related, even though the dividend was declared or announced after the
end of that reporting period.
The effect of this change in accounting policy has been to increase opening
retained profits and decrease provision for dividends by $1,151 million.
There was no impact on net profit or basic and diluted earnings per share for
the half-year ended 31 March 2003.
19.6 Revisions in estimates of amounts reported in previous interim periods.
For half yearly reports the nature and amount of revisions in estimates of
amounts reported in previous annual reports if those revisions have a material
effect in this half year.
Nil
19.7 Changes in contingent liabilities or assets. For half yearly reports,
changes in contingent liabilities and contingent assets since the last annual
report.
There have been no material changes in contingent liabilities or assets since
those disclosed in the 2002 annual financial report.
17
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Compliance statement
This report has been prepared in accordance with AASB Standards, other AASB
authoritative pronouncements and Urgent Issues Group Consensus Views.
This report, and the accounts upon which the report is based (if separate), use
the same accounting policies.
This report does give a true and fair view of the matters disclosed.
This report is based on accounts to which one of the following applies.
(Tick one)
( ) The accounts have been audited.
( ) The accounts are in the process of being audited or subject to review.
(x) The accounts have been subject to review.
( ) The accounts have not yet been audited or reviewed.
If the audit report or review by the auditor is not attached, details of any
qualifications are attached.
The entity has a formally constituted audit committee.
Sign here: Date: 14 May 2003
(Company Secretary)
Print name: Garry F. Nolan
18
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Directors' Declaration
The Directors of National Australia Bank Limited declare that:
a) the financial statements, and the notes thereto, as set out on pages 1 to
18, comply with accounting standards and the Corporations Act 2001;
b) the financial statements and notes thereto give a true and fair view of
the financial position as at 31 March 2003, and of the performance of the Group
for the half year ended 31 March 2003; and
c) in the opinion of the directors, at the date of this declaration, there
are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
Dated at Melbourne this 14th day of May 2003 and signed in accordance with a
resolution of the Board of Directors.
DCK Allen FJ Cicutto
Chairman Managing Director
Independent review report to the members of National Australia Bank Limited
We have reviewed the financial report of National Australia Bank Limited for the
half year ended 31 March 2003, in the form of the half -yearly report pursuant
to rule 4.1 of the Australian Stock Exchange Listing Rules, consisting of the
statement of financial performance, statement of financial position, statement
of cash flows, accompanying notes set out on pages 1 to 18, and the directors
' declaration.
The financial report includes the consolidated financial statements of the Group
comprising the Company and the entities it controlled at the end of the
half-year or from time to time during the half-year. The Company's
directors are responsible for the financial report.
We have performed an independent review of the financial report in order to
state whether, on the basis of procedures described, anything has come to our
attention that would indicate that the financial report is not presented fairly
in accordance with Accounting Standard AASB1029 "Interim Financial
Reporting" and other mandatory professional reporting requirements and
statutory requirements, so as to present a view which is consistent with our
understanding of the Group's financial position and performance as
represented by the results of its operations and its cash flows, and in order
for the Company to lodge the financial report with the Australian Securities and
Investments Commission.
Our review has been conducted in accordance with Australian Auditing Standards
applicable to review engagements. The review is limited primarily to inquiries
of company personnel and analytical procedures applied to the financial data.
Our review has not involved a study and evaluation of internal accounting
controls, tests of accounting records or tests of responses to inquiries by
obtaining corroborative evidence from inspection, observation or confirmation.
The procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance is less than given in an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion.
Statement
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half-year financial report of National
Australia Bank Limited is not in accordance with:
(a) the Corporations Act 2001, including:
i) giving a true and fair view of the Group's financial position as at 31 March 2003, and of its
performance for the half-year ended on that date; and
ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) other mandatory professional reporting requirements in Australia.
KPMG
Melbourne
PJ Matthey, Partner
14th May 2003
19
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Report of the directors
The directors of National Australia Bank Limited (hereinafter referred to as the
'Company') present their report of the Group, being the Company
and its controlled entities, for the half-year ended 31 March 2003 and the
independent auditors' review report thereon.
Directors
The Board has power to appoint persons as directors to fill any vacancies.
Other than the Managing Director, one third of the directors (or the nearest
number to but not exceeding one third) are required to retire by rotation at
each annual general meeting, together with any other director not in such
one-third who has held office for three years or more and any directors
appointed during the year to fill any vacancies. Both the directors retiring by
rotation and any newly appointed directors are eligible to stand for
re-election.
Directors in office at the date of this report are:
DCK Allen (Chairman) KJ Moss
FJ Cicutto GA Tomlinson
JB Clark ED Tweddell
PJB Duncan CM Walter
GJ Kraehe
Dividends
The Directors have declared an interim dividend of 80 cents per ordinary share,
fully franked, payable on 2 July 2003.
The extent to which future dividends will be franked, for Australian taxation
purposes, will depend on a number of factors including the proportion of the
Group's profits that will be subject to Australian income tax and any
future changes to Australia's business tax system as a result of the
Australian Government's tax reform initiatives.
Rounding of amounts
Pursuant to Class Order 98/100 made by the Australian Securities and Investments
Commission on 10 July 1998, the Company has rounded off amounts in this report
and the accompanying financial statements to the nearest million dollars, except
where indicated.
Group's results
The net profit attributable to members of the Company for the Group for the
half-year ended 31 March 2003 was $1,867 million, 17% lower than the March 2002
half year.
Review of operations
The previous corresponding period includes a contribution from SR Investment,
Inc. and its wholly owned subsidiary HomeSide Lending, Inc (HomeSide), which was
sold effective 1 October 2002.
The reduction in net profit attributable to members to $1,867 million, has been
impacted by the sale of HomeSide ($107 million) and the adverse movement in the
revaluation profit/(loss) (the excess of net market value over net assets of
life insurance controlled entities) of $609 million ($442 million after tax).
Excluding the impact of these, net profit attributable to members has increased
from the prior corresponding period.
The reduction in revenues from ordinary activities reflects the matters above,
together with lower life insurance income and the inclusion of proceeds from the
sale of the operating assets of HomeSide in the prior corresponding period.
Net interest income (interest income less interest expense) increased 4% to
$3,746 million. This was impacted by strong volume growth, particularly in
Australia and New Zealand, partially offset by a fall in the net interest
margin.
The reduction in expenses from ordinary activities reflects lower life insurance
expenses, lower expenses due to the sale of HomeSide and the inclusion of the
carrying value of the HomeSide operating assets sold in the prior corresponding
period.
The reduction in expenses has also been impacted by a fall in the charge to
provide for doubtful debts. The charge in the prior corresponding period was
impacted by a number of large corporate exposures.
The interim dividend per share has increased 8 cents to 80 cents, fully-franked.
Total assets have grown 4.5% from 30 September 2002 to $394,196 million at 31
March 2003. This was primarily driven by a 4.9% increase in loans and advances,
as a result of volume growth particularly in relation to housing growth in the
Australian and New Zealand retail banking operations. Net assets have increased
2.4% to $23,815 million.
Signed in accordance with a resolution of the directors.
DCK Allen FJ Cicutto
Chairman Managing Director
14 May, 2003
20
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