RNS Number:5004S
National Australia Bank Ld
26 November 2003
PART 4(A)
Group Company
2003 2002 2003 2002
$m $m $m $m
Unlisted - Overseas
Securities of or guaranteed by New Zealand Government 351 296 - -
Private corporations/other financial institutions' 290 1,591 170 146
certificates of deposit
Private corporations/other financial institutions' bonds 96 92 - -
Other government bonds and securities 22 39 - -
Private corporations/other financial institutions' commercial 120 113 120 113
paper
Private corporations/other financial institutions' 43 36 43 36
medium-term notes
Private corporations/other financial institutions' promissory 163 156 - -
notes
Other securities - 14 - 5
Total unlisted trading securities 1,085 2,337 333 300
Total trading securities 23,724 19,590 22,952 17,471
13 Available for sale securities
Listed - Australia
Private corporations/other financial institutions' bonds 186 - 186 -
Private corporations/other financial institutions' floating 183 - 183 -
rate notes
Other securities 1,078 - 1,078 -
1,447 - 1,447 -
Listed - Overseas
Securities of or guaranteed by UK/Irish governments 3 4 - -
Private corporations/other financial institutions' 2,873 4,581 2,873 4,581
certificates of deposit/bills
Private corporations/other financial institutions' bonds 201 100 201 100
Other securities - 5 - -
3,077 4,690 3,074 4,681
Total listed available for sale securities 4,524 4,690 4,521 4,681
Unlisted - Overseas
Private corporations/other financial institutions' 208 214 208 214
certificates of deposit/bills
Private corporations/other financial institutions' bonds 662 66 662 66
Other government treasury notes 56 67 56 67
Private corporations/other financial institutions' commercial 700 659 700 659
paper
Private corporations/other financial institutions' 356 463 356 463
medium-term notes
Other securities 7 33 - -
Total unlisted available for sale securities 1,989 1,502 1,982 1,469
Total available for sale securities 6,513 6,192 6,503 6,150
Market value information
Listed - Australia
Private corporations/other financial institutions' bonds 187 - 187 -
Private corporations/other financial institutions' floating 184 - 184 -
rate notes
Other securities 1,077 - 1,077 -
1,448 - 1,448 -
Listed - Overseas
Securities of or guaranteed by UK/Irish governments 3 4 - -
Private corporations/other financial institutions' 2,873 4,581 2,873 4,581
certificates of deposit/bills
Private corporations/other financial institutions' bonds 201 100 201 100
Other securities - 5 - -
3,077 4,690 3,074 4,681
Total listed available for sale securities at market value 4,525 4,690 4,522 4,681
107
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Group Company
2003 2002 2003 2002
$m $m $m $m
Unlisted - Overseas
Private corporations/other financial institutions' 208 214 208 214
certificates of deposit/bills
Private corporations/other financial institutions' bonds 662 66 662 66
Other government treasury notes 56 67 56 67
Private corporations/other financial institutions' commercial 700 659 700 659
paper
Private corporations/other financial institutions' 356 463 356 463
medium-term notes
Other securities 7 33 - -
Total unlisted available for sale securities at market value 1,989 1,502 1,982 1,469
Total available for sale securities at market value 6,514 6,192 6,504 6,150
The following table reconciles gross unrealised profits and losses of the
Group's holdings of available for sale securities for each year below, as at
September 30:
2003 2002
Amortised Gross Gross Market Amortised Gross Gross Market
cost unrealised unrealised value cost unrealised unrealised value
profits losses profits losses
$m $m $m $m $m $m $m $m
Securities of or guaranteed 3 - - 3 4 - - 4
by UK/Irish governments
Private corporations/other 3,081 - - 3,081 4,795 - - 4,795
financial institutions'
certificates of deposit/
bills
Private corporations/other 1,049 1 - 1,050 166 - - 166
financial institutions'
bonds
Other government treasury 56 - - 56 67 - - 67
notes
Private corporations/other 700 - - 700 659 - - 659
financial institutions'
commercial paper
Private corporations/other 356 - - 356 463 - - 463
financial institutions'
medium-term notes
Private corporations/other 183 1 - 184 - - - -
financial institutions'
floating rate notes
Other securities 1,085 - (1 ) 1,084 38 - - 38
Total 6,513 2 (1 ) 6,514 6,192 - - 6,192
Maturities of available for sale securities
The following table analyses the maturity of the Group's holdings of available
for sale securities at September 30, 2003:
0 to 1 1 to 5 5 to 10 Over 10
year year(s) years years
yield yield yield yield
pa pa pa pa
$m $m $m $m
Australia
Private corporations/other 13 7.7 % 173 5.8 % - - - -
financial institutions'
bonds
Private corporations/other - - 183 4.9 % - - - -
financial institutions'
floating rate notes
Other securities 245 5.3 % 833 5.2 % - - - -
258 1,189 - -
108
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0 to 1 1 to 5 5 to 10 Over 10
year year(s) years years
yield yield yield yield
pa pa pa pa
$m $m $m $m
Overseas
Securities of or guaranteed - - - - - - 3 5.2 %
by UK/Irish governments
Private corporations/other 3,081 1.5 % - - - - - -
financial institutions'
certificates of deposit/
bills
Private corporations/other 358 4.5 % 487 5.5 % 18 5.6 % - -
financial institutions'
bonds
Other government treasury 56 0.2 % - - - - - -
notes
Private corporations/other 700 1.4 % - - - - - -
financial institutions'
commercial paper
Private corporations/other 356 3.9 % - - - - - -
financial institutions'
medium-term notes
Other securities 7 - - - - - - -
4,558 487 18 3
Total maturities at carrying 4,816 1,676 18 3
value
Total maturities at market 4,816 1,677 18 3
value
Proceeds from maturities of available for sale securities during 2003 were
$13,500 million (2002: $14,543 million, 2001: $15,247 million). Proceeds from
sale of available for sale securities during 2003 were $3 million (2002: $90
million, 2001: $26 million). Gross profits of $nil (2002: $nil, 2001: $nil) and
gross losses of $nil (2002: $1 million, 2001: $nil) were realised on sale during
2003.
14 Investment securities
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Listed - Australia
Securities of Australian and semi-government 26 25 26 26 25
authorities
Private corporations/other financial 49 - - 49 -
institutions' bonds
Other securities 298 427 - 298 427
373 452 26 373 452
Listed - Overseas
Securities of or guaranteed by UK/Irish 139 366 377 - -
governments (1)
US treasury and other US Government agencies 11 13 25 11 13
Private corporations/other financial 2,367 6,059 2,972 2,367 6,059
institutions' certificates of deposit/bills
Private corporations/other financial 1,540 718 798 268 408
institutions' bonds
Other government bonds and securities (1) 214 29 30 - 29
Other government treasury notes 148 12 - 148 12
Private corporations/other financial 278 2,038 838 278 2,038
institutions' commercial paper
Private corporations/other financial - 15 255 - 15
institutions' floating rate notes
Other securities 12 68 41 12 68
4,709 9,318 5,336 3,084 8,642
Total listed investment securities 5,082 9,770 5,362 3,457 9,094
Unlisted - Overseas
Securities of or guaranteed by New Zealand 719 550 9 - -
Government
Private corporations' Eurobonds 17 21 657 17 21
Private corporations/other financial 147 259 38 - -
institutions' certificates of deposit/bills
Private corporations/other financial 2,446 2,138 3,225 41 -
institutions' bonds
Other government bonds and securities - - 702 - -
Other central banks bonds and securities - - 93 - -
Private corporations/other financial 83 243 - - -
institutions' promissory notes
Other securities 153 560 611 153 529
Total unlisted investment securities 3,565 3,771 5,335 211 550
Total investment securities 8,647 13,541 10,697 3,668 9,644
109
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--------------------
(1) $308 million (2002: $363 million, 2001: $372 million) of securities
have been pledged as security for borrowings of the Group and are therefore
subject to restrictions regarding sale until the pledge is released.
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Market value information
Listed - Australia
Securities of Australian and semi-government 26 26 26 26 26
authorities
Private corporations/other financial 52 - - 52 -
institutions' bonds
Other securities 298 427 - 298 427
376 453 26 376 453
Listed - Overseas
Securities of or guaranteed by UK/Irish 147 366 383 - -
governments
US Treasury and other US Government agencies 11 13 25 11 13
Private corporations/other financial 2,398 6,066 2,980 2,398 6,066
institutions' certificates of deposit/bills
Private corporations/other financial 1,564 743 800 268 409
institutions' bonds
Other government bonds and securities 216 29 30 - 29
Other government treasury notes 148 12 - 148 12
Private corporations/other financial 292 2,042 841 292 2,042
institutions' commercial paper
Private corporations/other financial - 15 256 - 15
institutions' floating rate notes
Other securities 12 68 71 12 68
4,788 9,354 5,386 3,129 8,654
Total listed investment securities at market 5,164 9,807 5,412 3,505 9,107
value
Unlisted - Overseas
Securities of or guaranteed by UK/Irish - - 9 - -
governments
Securities of or guaranteed by New Zealand 719 550 657 - -
Government
Private corporations' Eurobonds 17 20 - 17 20
Private corporations/other financial 147 259 38 - -
institutions' certificates of deposit/bills
Private corporations/other financial 2,446 2,130 3,197 41 -
institutions' bonds
Other government bonds and securities - - 703 - -
Other central banks bonds and securities - - 93 - -
Private corporations/other financial 83 243 - - -
institutions' promissory notes
Other securities 153 561 611 153 530
Total unlisted investment securities at market 3,565 3,763 5,308 211 550
value
Total investment securities at market value 8,729 13,570 10,720 3,716 9,657
110
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The following table reconciles gross unrealised profits and losses of the
Group's holdings of investment securities for the years shown below as at
September 30:
2003 2002
Amortised Gross Gross Market Amortised Gross Gross Market
cost unrealised unrealised value cost unrealised unrealised value
profits losses profits losses
$m $m $m $m $m $m $m $m
Securities of Australian 26 - - 26 25 1 - 26
and semi- government
authorities
Securities of or 139 8 - 147 366 - - 366
guaranteed by UK/Irish
governments
Securities of or 719 - - 719 550 - - 550
guaranteed by New Zealand
Government
US Treasury and other US 11 - - 11 13 - - 13
Government agencies
Private corporations' 17 - - 17 21 - (1 ) 20
Eurobonds
Private corporations/other 2,514 35 (4 ) 2,545 6,318 7 - 6,325
financial institutions'
certificates of deposit/
bills
Private corporations/other 4,035 27 - 4,062 2,856 17 - 2,873
financial institutions'
bonds
Other government bonds and 214 2 - 216 29 - - 29
securities
Other government treasury 148 - - 148 12 - - 12
notes
Private corporations/other 278 14 - 292 2,038 4 - 2,042
financial institutions'
commercial paper
Private corporations/other - - - - 15 - - 15
financial institutions'
floating rate notes
Private corporations/other 83 - - 83 243 - - 243
financial institutions'
promissory notes
Other securities 463 2 (2 ) 463 1,055 1 - 1,056
Total 8,647 88 (6 ) 8,729 13,541 30 (1 ) 13,570
Maturities of investment securities
The following table analyses the maturity of the Group's holdings of investment
securities at September 30, 2003:
0 to 1 1 to 5 5 to 10 Over 10
year year(s) years years
yield yield yield yield
pa pa pa pa
$m $m $m $m
Australia
Securities of Australian and 26 7.7 % - - - - - -
semi - government
authorities
Private corporations/other - - 49 6.1 % - - - -
financial institutions'
bonds
Other securities 89 2.2 % 209 7.2 % - - - -
115 258 - -
111
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0 to 1 1 to 5 5 to 10 Over 10
year year(s) years years
yield yield yield yield
pa pa pa pa
$m $m $m $m
Overseas
Securities of or guaranteed 3 - 136 3.3 % - - - -
by UK/Irish governments
Securities of or guaranteed 719 5.3 % - - - - - -
by New Zealand Government
US Treasury and other US 11 1.2 % - - - - - -
Government agencies
Private corporations' - - 17 2.8 % - - - -
Eurobonds
Private corporations/other 2,514 2.3 % - - - - - -
financial institutions'
certificates of deposit/
bills
Private corporations/other 730 5.5 % 2,618 5.9 % 638 4.2 % - -
financial institutions'
bonds
Other government bonds and - - 214 5.1 % - - - -
securities
Other government treasury 105 2.0 % 43 2.3 % - - - -
notes
Private corporations/other 278 3.2 % - - - - - -
financial institutions'
commercial paper
Private corporations/other 83 6.0 % - - - - - -
financial institutions'
promissory notes
Other securities 165 2.4 % - - - - - -
4,608 3,028 638
Total maturities at carrying 4,723 3,286 638
value
Total maturities at market 4,769 3,310 650
value
Proceeds from maturities of investment securities during 2003 were $18,578
million (2002: $37,434 million, 2001: $30,828 million). The majority of those
relate to the maturity of short-dated investment securities. Proceeds from the
sale of investment securities during 2003 were $18 million (2002: $nil, 2001:
$nil). Gross profits were $1 million (2002: $nil, 2001: $nil) and $nil gross
losses (2002: $nil, 2001: $nil) were realised on sale during 2003. This related
to the sale of a single investment security due to a significant unforseeable
change in circumstance that changed the intent with regard to this particular
debt security without calling into question the Group's intent and ability to
hold other investment securities to maturity in the future.
15 Investments relating to life insurance business
Group Company
2003 2002 2003 2002
$m $m $m $m
Equity security investments
Direct 6,993 11,401 - -
Indirect 23,406 10,578 - -
30,399 21,979 - -
Debt security investments
Interest-earning securities
National government 702 2,174 - -
Other public sector 523 852 - -
Private sector 3,904 5,457 - -
5,129 8,483 - -
Properties
Direct 117 - - -
Indirect 201 278 - -
318 278 - -
Other investments - 272 - -
Total investments relating to life insurance 35,846 31,012 - -
business
Direct investments refer to investments that are held directly with the issuer
of the investment. Indirect investments refer to investments that are held
through unit trusts or similar investment vehicles.
Included within investments relating to life insurance business are investments
held in the statutory funds of the Group's Australian life insurance business
which can only be used within the restrictions imposed under the Life Insurance
Act 1995 (Cth). The main restrictions are that the assets in a fund can only be
used to meet the liabilities and expenses of the fund, to acquire investments to
further the business of the fund or as distributions when solvency and capital
adequacy requirements are met. Participating policyholders can receive a
distribution when solvency requirements are met, whilst shareholders can only
112
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receive a distribution when the higher level of capital adequacy requirements is
met. Investment assets held in statutory funds are not available for use by
other parts of the Group's business (refer to notes 1(p) and 2).
16 Loans and advances
Group Company
2003 2002 2003 2002
$m $m $m $m
Australia
Overdrafts 4,810 5,023 4,810 5,023
Credit card outstandings 3,850 3,525 3,850 3,525
Market rate advances 100 165 100 165
Lease finance 7,504 6,929 7,334 6,800
Housing loans 83,018 68,461 83,018 68,461
Other term lending 34,556 30,710 34,444 30,524
Equity participation in leveraged leases 92 239 92 239
Redeemable preference share finance 79 - - -
Other lending 7,059 5,833 6,639 5,469
141,068 120,885 140,287 120,206
Overseas
Overdrafts 12,395 13,742 4,901 4,535
Credit card outstandings 2,759 3,059 - -
Market rate advances 88 - - -
Bills discounted - 39 - -
Lease finance 7,381 8,714 31 43
Housing loans 28,469 27,615 123 105
Other term lending (1) 39,674 43,372 5,293 6,457
Redeemable preference share finance 1,763 1,831 - -
Other lending (1) 18,535 16,427 17,490 14,631
111,064 114,799 27,838 25,771
Total gross loans and advances 252,132 235,684 168,125 145,977
Deduct: Unearned income (1,933 ) (1,914 ) (1,006 ) (992 )
Provision for doubtful debts (refer to (2,240 ) (2,470 ) (1,373 ) (1,378 )
note 17)
Total net loans and advances 247,959 231,300 165,746 143,607
Leasing receivables included in lease finance
net of unearned income:
Current 1,943 2,427 273 475
Non-current 11,702 12,240 6,320 5,737
Total leasing receivables included in lease 13,645 14,667 6,593 6,212
finance
--------------------
(1) The 2002 comparatives have been restated to reflect the
reclassification of reverse repurchase agreements from other term lending to
other lending.
The diversification and size of the Group are such that its lending is widely
spread both geographically and in terms of the types of industries served. In
accordance with SEC guidelines, the following table shows comparative year-end
detail of the loan portfolio for each of the last five years ended September 30.
The table also demonstrates the concentration of credit risk by industry with
the maximum credit risk represented by the carrying values less provision for
doubtful debts.
Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Australia
Government and public authorities 498 1,588 425 478 1,270
Agriculture, forestry and fishing 5,368 4,890 5,251 5,329 5,039
Financial, investment and insurance 6,053 3,053 4,807 4,656 5,006
Real estate - construction 1,935 1,807 1,941 1,661 1,637
Manufacturing 2,630 2,034 3,263 2,268 2,714
Real estate - mortgage 83,018 68,461 55,629 48,719 41,968
Instalment loans to individuals and 12,473 11,352 9,850 8,223 8,098
other personal lending (including
credit cards)
Lease financing 7,596 7,168 7,073 6,929 6,522
Other commercial and industrial (1) 21,497 20,532 18,550 19,001 13,956
141,068 120,885 106,789 97,264 86,210
113
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Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Overseas
Government and public authorities 1,011 1,435 1,382 1,590 821
Agriculture, forestry and fishing 5,718 6,002 5,473 5,099 4,608
Financial, investment and insurance 24,417 22,123 12,335 12,065 8,906
Real estate - construction 2,511 3,273 3,312 3,061 1,862
Manufacturing 6,233 6,745 6,476 7,446 6,536
Real estate - mortgage 28,469 27,615 26,010 22,611 19,978
Instalment loans to individuals and 13,059 13,294 12,903 12,012 10,443
other personal lending (including
credit cards)
Lease financing 7,381 8,714 8,703 7,448 5,478
Other commercial and industrial (1) 22,265 25,598 29,051 31,400 24,878
111,064 114,799 105,645 102,732 83,510
Total gross loans and advances 252,132 235,684 212,434 199,996 169,720
Deduct: Unearned income (1,933 ) (1,914 ) (1,922 ) (1,812 ) (1,587 )
Provision for doubtful debts (2,240 ) (2,470 ) (2,715 ) (2,692 ) (2,513 )
(refer to note 17)
Total net loans and advances 247,959 231,300 207,797 195,492 165,620
--------------------
(1) At September 30, 2003, there were no concentrations of other
commercial and industrial loans exceeding 10% of total loans and advances.
Concentrations of credit risk by geographical location are based on the
geographical location of the office in which the loans or advances are booked.
The amounts shown are net of unearned income and provision for doubtful debts:
Australia 138,823 118,674 104,354 94,986 84,046
Europe 74,333 76,058 70,335 57,388 44,319
New Zealand 27,752 25,557 23,847 20,466 20,097
United States 3,550 7,108 4,555 19,323 14,111
Asia 3,501 3,903 4,706 3,329 3,047
Total net loans and advances 247,959 231,300 207,797 195,492 165,620
The following tables show the maturity distribution of loans and advances to
customers and interest rate sensitivity of such loans and advances for the Group
as at September 30, 2003:
Group
0 to 1 1 to 5 Over 5 Total
year (1) year(s) years
$m $m $m $m
Maturity distribution of loans and advances
Australia
Government and public authorities 201 149 148 498
Agriculture, forestry and fishing 3,406 1,422 540 5,368
Financial, investment and insurance 3,999 1,505 549 6,053
Real estate - construction 1,135 242 558 1,935
Manufacturing 1,734 591 305 2,630
Real estate - mortgage 20,355 4,201 58,462 83,018
Instalment loans to individuals and other 3,158 9,032 283 12,473
personal lending (including credit cards)
Lease financing 726 6,418 452 7,596
Other commercial and industrial 12,166 4,710 4,621 21,497
46,880 28,270 65,918 141,068
114
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Group
0 to 1 1 to 5 Over 5 Total
year (1) year(s) years
$m $m $m $m
Overseas
Government and public authorities 648 261 102 1,011
Agriculture, forestry and fishing 2,772 1,227 1,719 5,718
Financial, investment and insurance 20,163 3,340 914 24,417
Real estate - construction 1,314 953 244 2,511
Manufacturing 2,526 2,171 1,536 6,233
Real estate - mortgage 3,501 3,946 21,022 28,469
Instalment loans to individuals and other 7,973 3,276 1,810 13,059
personal lending (including credit cards)
Lease financing 1,657 2,453 3,271 7,381
Other commercial and industrial 9,868 7,579 4,818 22,265
50,422 25,206 35,436 111,064
Total gross loans and advances 97,302 53,476 101,354 252,132
Interest rate sensitivity of loans and advances
Variable interest rates (2)
Australia 27,171 6,164 46,904 80,239
Overseas 20,819 12,765 20,598 54,182
Fixed interest rates
Australia 19,709 22,106 19,014 60,829
Overseas 29,603 12,441 14,838 56,882
Total gross loans and advances 97,302 53,476 101,354 252,132
--------------------
(1) Overdrafts are not subject to a repayment schedule. Due to their
characteristics, overdrafts are categorised as due within one year.
(2) For a range of credit products that the Company classifies as
variable, the Company is required to give a period of notice before a change in
the applicable interest rate is effective.
Securitisation of loans
During the year ended September 30, 2001, the Group securitised Australian loans
amounting to $1,924 million through its HomeSide Mortgage Securities Trust
2001-1 securitisation program. No loans were securitised during the 2003 year.
Outstanding securitised loans of the program totalled $585 million as at
September 30, 2003 (2002: $929 million). The securities issued by the program
do not represent liabilities of the Company or the Group. Neither the Company
nor the Group stands behind the capital value or performance of securities or
assets of the program except to the limited extent provided in the transaction
documents for the program through the provision of arm's length services and
facilities (refer to note 1(gg)). The Company and the Group do not guarantee
the payment of interest or repayment of principal due on the securities. The
Company and the Group are not obliged to support any losses that may be suffered
by the investors and do not intend to provide such support. The Company and the
Group have no obligation to repurchase any of the securitised loans other than
in limited circumstances.
17 Provision for doubtful debts
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Specific provision for doubtful debts 463 553 586 321 369
General provision for doubtful debts 1,793 2,022 2,207 1,062 1,113
Total provision for doubtful debts 2,256 2,575 2,793 1,383 1,482
Deduct: Specific provision for 16 105 78 10 104
off-balance sheet credit-related
commitments (1)
Net provision for doubtful debts 2,240 2,470 2,715 1,373 1,378
(refer to note 16)
--------------------
(1) The specific provision for off-balance sheet credit-related
commitments is shown as a liability in the financial report (refer to note 30).
115
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Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Reconciliation of movements in
provisions for doubtful debts
Specific provision
Balance at beginning of year 553 586 471 369 348
Transfer from general provision 746 788 748 417 417
Provision of foreign controlled - - (58 ) - -
entity sold
Bad debts written off (1,015 ) (985 ) (738 ) (527 ) (468 )
Bad debts recovered 217 171 151 73 66
Foreign currency translation and (38 ) (7 ) 12 (11 ) 6
consolidation adjustments
Balance at end of year 463 553 586 321 369
General provision
Balance at beginning of year 2,022 2,207 2,238 1,113 1,277
Transfer to specific provision (746 ) (788 ) (748 ) (417 ) (417 )
Provision of foreign controlled - (70 ) (336 ) - -
entity sold
Charge to profit and loss account 633 697 989 373 259
Foreign currency translation and (116 ) (24 ) 64 (7 ) (6 )
consolidation adjustments
Balance at end of year 1,793 2,022 2,207 1,062 1,113
Total provision for doubtful debts 2,256 2,575 2,793 1,383 1,482
Provision for doubtful debt ratios
Specific provision as a percentage of
risk-weighted assets
On-balance sheet exposures 0.18 % 0.18 % 0.20 %
Off-balance sheet credit-related 0.01 % 0.04 % 0.03 %
commitments
Specific provision for doubtful debts 0.19 % 0.22 % 0.23 %
as a percentage of risk-weighted
assets
Total provision for doubtful debts as 0.89 % 1.04 % 1.08 %
a percentage of risk-weighted assets
Bad debts written off as a percentage 0.33 % 0.38 % 0.29 %
of average loans and advances (1)
--------------------
(1) Refer to note 40 for average loans and advances.
Specific provision for doubtful debts by industry category
The following table provides an analysis of the Group's specific provision for
doubtful debts including off-balance sheet exposures by industry category for
each of the five years ended September 30:
Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Australia
Agriculture, forestry and fishing 71 75 34 24 46
Financial, investment and insurance 2 - 13 2 50
Real estate - construction 3 3 5 8 14
Manufacturing - 7 15 34 76
Real estate - mortgage 9 3 - - 2
Instalment loans to individuals and 7 3 14 46 21
other personal lending (including
credit cards)
Lease financing - 12 8 9 8
Other commercial and industrial 164 217 253 89 17
256 320 342 212 234
116
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Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Overseas
Agriculture, forestry and fishing 10 22 14 15 12
Financial, investment and insurance - - 2 2 4
Real estate - construction 3 2 2 8 11
Manufacturing 2 1 24 48 44
Real estate - mortgage 4 5 6 7 7
Instalment loans to individuals and 74 84 111 60 50
other personal lending (including
credit cards)
Lease financing 10 9 10 8 9
Other commercial and industrial 104 110 75 111 103
207 233 244 259 240
Total specific provision for doubtful 463 553 586 471 474
debts
General provision for doubtful debts by industry category
The following table provides an analysis of the Group's general provision for
doubtful debts including off-balance sheet exposures by industry category for
each of the five years, ended September 30:
Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Australia
Agriculture, forestry and fishing 33 46 69 50 40
Financial, investment and insurance 36 10 8 67 63
Real estate - construction 99 40 32 30 21
Manufacturing 48 75 120 90 80
Real estate - mortgage 34 21 62 166 172
Instalment loans to individuals and 157 205 184 155 174
other personal lending (including
credit cards)
Lease financing 60 63 94 89 50
Other commercial and industrial 488 512 571 410 395
955 972 1,140 1,057 995
Overseas
Agriculture, forestry and fishing 52 48 31 25 14
Financial, investment and insurance 14 7 6 21 8
Real estate - construction 107 98 46 95 26
Manufacturing 52 47 56 77 38
Real estate - mortgage 9 19 72 90 59
Instalment loans to individuals and 269 382 339 188 60
other personal lending (including
credit cards)
Lease financing 23 31 41 44 21
Other commercial and industrial 312 418 476 641 834
838 1,050 1,067 1,181 1,060
Total general provision for doubtful 1,793 2,022 2,207 2,238 2,055
debts
117
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Bad debts written off and bad debts recovered by industry category
The following table provides an analysis of bad debts written off and bad debts
recovered by industry category for each of the five years ended September 30.
For further information, refer to asset quality disclosures in note 18.
Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Bad debts written off
Australia
Agriculture, forestry and fishing 7 24 9 27 7
Financial, investment and insurance 4 17 9 26 5
Real estate - construction 5 8 8 14 8
Manufacturing 14 10 29 56 30
Real estate - mortgage 4 7 8 7 10
Instalment loans to individuals and 175 144 109 72 112
other personal lending (including
credit cards)
Lease financing 124 19 32 16 8
Other commercial and industrial 157 136 108 34 60
490 365 312 252 240
Overseas
Agriculture, forestry and fishing 18 3 7 4 8
Financial, investment and insurance - 2 - 6 6
Real estate - construction 4 16 9 16 11
Manufacturing 31 35 27 30 44
Real estate - mortgage 1 2 2 3 7
Instalment loans to individuals and 340 386 289 206 200
other personal lending (including
credit cards)
Lease financing 14 11 9 11 6
Other commercial and industrial 117 165 83 129 105
525 620 426 405 387
Total bad debts written off 1,015 985 738 657 627
Bad debts recovered
Australia
Agriculture, forestry and fishing 1 3 1 1 3
Financial, investment and insurance 1 - 7 4 7
Real estate - construction - 1 - 1 1
Manufacturing 1 2 1 2 3
Real estate - mortgage 2 1 1 1 1
Instalment loans to individuals and 60 43 40 41 33
other personal lending (including
credit cards)
Lease financing 3 3 3 1 1
Other commercial and industrial 2 9 6 30 14
70 62 59 81 63
Overseas
Agriculture, forestry and fishing - - - - 1
Financial, investment and insurance - 4 5 11 5
Real estate - construction 1 - - 1 1
Manufacturing - - - 16 15
Real estate - mortgage - - - - 1
Instalment loans to individuals and 102 83 56 62 56
other personal lending (including
credit cards)
Lease financing - - - - 2
Other commercial and industrial 44 22 31 53 61
147 109 92 143 142
Total bad debts recovered 217 171 151 224 205
118
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18 Asset quality disclosures
The following table provides an analysis of the asset quality of the Group's
impaired loans and advances for each of the last five years ended September 30.
Gross amounts have been prepared without regard to security available for such
loans and advances. The inclusion of past due loans and restructured loans in
both tables does not necessarily indicate that such loans are doubtful. Refer
to note 1(q) for a description of the Group's accounting policy for provision
for doubtful debts and asset quality.
Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Non-accrual loans (1)(2)
Gross
Australia 658 888 959 568 644
Overseas 721 702 773 899 926
1,379 1,590 1,732 1,467 1,570
Specific provision for doubtful debts
Australia 238 299 325 196 226
Overseas 184 201 203 246 231
422 500 528 442 457
Net
Australia 420 589 634 372 418
Overseas 537 501 570 653 695
Total net non-accrual loans 957 1,090 1,204 1,025 1,113
Restructured loans
Australia - 6 4 4 -
Overseas - - - - 3
Total restructured loans - 6 4 4 3
Assets acquired through security
enforcement
Real estate
Overseas - - - 8 8
- - - 8 8
Other assets
Overseas 2 3 4 5 5
2 3 4 5 5
Total assets acquired through 2 3 4 13 13
security enforcement
Total impaired assets
Gross
Australia 658 894 963 572 644
Overseas 723 705 777 912 942
1,381 1,599 1,740 1,484 1,586
Specific provision for doubtful debts
Australia 238 299 325 196 226
Overseas 184 201 203 246 231
422 500 528 442 457
Net
Australia 420 595 638 376 418
Overseas 539 504 574 666 711
Total net impaired assets 959 1,099 1,212 1,042 1,129
--------------------
(1) Includes loans amounting to $98 million gross, $70 million net (2002:
$137 million gross, $93 million net, 2001: $170 million gross, $124 million net,
2000: $252 million gross, $182 million net, 1999: $124 million gross, $86
million net) where some concerns exist as to the ongoing ability of the
borrowers to comply with existing loan terms, but on which no principal or
interest payments are contractually past due.
(2) Includes off-balance sheet credit-related commitments amounting to $37
million gross, $21 million net (2002: $138 million gross, $33 million net, 2001:
$219 million gross, $141 million net, 2000: $33 million gross, $16 million net,
1999: $40 million gross, $24 million net).
119
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The following table provides information regarding loans past due 90 days or
more:
Group
2003 2002 2001 2000 1999
$m $m $m $m $m
Accruing loans past due 90 days or more with adequate
security
Australia 61 29 48 39 22
Overseas (1) 45 254 286 68 74
Total accruing loans past due 90 days or more with adequate 106 283 334 107 96
security
--------------------
(1) The 2002 and 2001 comparatives have been restated to reflect revised
treatment. The previously reported amounts were 2002: $49 million and 2001: $54
million.
Accruing portfolio facilities past due 90 to 180 days
Gross
Australia 30 37 35 23 27
Overseas 34 46 83 36 29
64 83 118 59 56
Specific provision for doubtful debts
Australia 18 22 18 15 9
Overseas 23 31 40 14 8
41 53 58 29 17
Net
Australia 12 15 17 8 18
Overseas 11 15 43 22 21
Total net accruing portfolio facilities past due 90 to 180 23 30 60 30 39
days
Further analysis of non-accrual loans at year end and interest income received
and foregone under the APRA asset quality disclosure guidelines is as follows
for the Group, for each of the last three years ended September 30:
2003 2002 2001
Gross Specific Net Gross Specific Net Gross Specific Net
provision provision provision
$m $m $m $m $m $m $m $m $m
Non-accrual loans
with provisions and:
No performance
Australia 382 223 159 449 275 174 502 299 203
Overseas 495 162 333 458 178 280 495 180 315
877 385 492 907 453 454 997 479 518
Partial performance
Australia - - - - - - - - -
Overseas 3 1 2 4 1 3 6 2 4
3 1 2 4 1 3 6 2 4
Full performance
Australia 35 15 20 74 24 50 119 26 93
Overseas 73 21 52 68 22 46 54 21 33
108 36 72 142 46 96 173 47 126
Non-accrual loans
without provisions
and:
No performance
Australia 194 - 194 329 - 329 303 - 303
Overseas 131 - 131 142 - 142 206 - 206
325 - 325 471 - 471 509 - 509
Full performance
Australia 47 - 47 36 - 36 35 - 35
Overseas 19 - 19 30 - 30 12 - 12
66 - 66 66 - 66 47 - 47
Total non-accrual 1,379 422 957 1,590 500 1,090 1,732 528 1,204
loans
120
--------------------------------------------------------------------------------
Group
2003 2002 2001
$m $m $m
Interest income received and foregone
Interest and other income received and taken to the profit and
loss account on non-accrual loans and restructured loans
Australia 8 11 12
Overseas 1 5 4
9 16 16
Net interest and other income foregone on non-accrual loans and
restructured loans
Australia 65 63 54
Overseas 31 29 40
96 92 94
Additional information in respect of impaired assets
Fair value of security (1)
Non-accrual loans
Australia 345 440 420
Overseas 457 448 515
802 888 935
Loans newly classified into impaired asset categories during the
year
Australia 619 965 1,154
Overseas 754 526 403
1,373 1,491 1,557
--------------------
(1) Fair value of security is the amount for which that security could be
exchanged between a knowledgeable, willing buyer and a knowledgeable, willing
seller in an arm's length transaction. Amounts of security held in excess of
the outstanding balance of individual non-accrual or restructured loans are not
included in this table.
19 Mortgage servicing rights
Group Company
2003 2002 2003 2002
$m $m $m $m
Opening balance 1,794 5,445 - -
Additions - 671 - -
Disposals (1,794 ) (397 ) - -
Deferred hedge gains applied - (2,219 ) - -
Amortisation - (1,193 ) - -
Foreign currency translation adjustments - (513 ) - -
Total mortgage servicing rights - 1,794 - -
On October 1, 2002, the Group sold SR Investment, Inc. (the parent entity of
HomeSide US) which included the sale of all mortgage servicing rights and
associated derivative financial instruments used to hedge mortgage servicing
rights (refer to note 5(a)(i)).
20 Shares in controlled entities, joint venture entities and other securities
Shares in controlled entities
At cost - - 11,721 11,581
Deduct: Provision for diminution in value - - (114 ) (114 )
- - 11,607 11,467
Interests in joint venture entities 675 60 - -
Shares in other entities
At cost 827 608 668 485
Deduct: Provision for diminution in value (57 ) (70 ) (25 ) (26 )
770 538 643 459
Units in unlisted trusts (at cost) - 601 - -
Total shares in controlled entities, joint 1,445 1,199 12,250 11,926
venture entities and other securities
121
--------------------------------------------------------------------------------
Group Company
2003 2002 2003 2002
$m $m $m $m
Market value information
Shares in other entities 1,195 942 1,068 783
Units in unlisted trusts - 601 - -
Total shares in entities and other securities at 1,195 1,543 1,068 783
market value
Interests in joint venture entities
Name Principal Joint venture Ownership Investment
activity reporting date and voting carrying amount
interest $m
Tokenhouse Partnership Investment September 30 50 % 619
Dark City Partnership Investment September 30 50 % 22
Matrix Film Investment Investment September 30 50 % 34
Partnership
The Group's share of the joint venture entities' results consists of:
Group
2003 2002
$m $m
Revenues from ordinary activities 7 6
Expenses from ordinary activities (4 ) (4 )
Profit from ordinary activities before income tax 3 2
expense
Income tax expense relating to ordinary activities - -
Net profit - accounted for using the equity method 3 2
The Group's share of the joint venture entities' assets and liabilities consists
of:
Investment securities 619 -
Other investments 51 55
Other assets 5 5
Total assets 675 60
Total liabilities - -
The Group's share of the joint venture entities' post-acquisition profits
consists of:
Share of the joint venture entities' accumulated (13 ) (9 )
losses at beginning of year
Share of the joint venture entities' net profit 3 2
Distributions from joint venture entities (7 ) (6 )
Share of the joint venture entities' accumulated (17 ) (13 )
losses at end of year
Movements in the Group's carrying amount of the joint venture entities consists
of:
Carrying amount at beginning of year 60 64
Investments in joint venture entities acquired 619 -
Share of the joint venture entities' net profit 3 2
Distributions from joint venture entities (7 ) (6 )
Carrying amount at end of year 675 60
21 Regulatory deposits
Group Company
2003 2002 2003 2002
$m $m $m $m
Central banks overseas 225 129 93 38
Total regulatory deposits 225 129 93 38
122
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22 Property, plant and equipment
Group Company
2003 2002 2003 2002
$m $m $m $m
Land and buildings
Freehold
At cost (acquired subsequent to previous valuation date) 27 25 - -
At directors' valuation 470 546 23 32
Leasehold
At cost (acquired subsequent to previous valuation date) 19 20 17 20
At directors' valuation 80 93 - -
Deduct: Accumulated depreciation and amortisation on (22 ) (21 ) (5 ) (4 )
buildings
574 663 35 48
Leasehold improvements
At cost 784 764 569 544
Deduct: Accumulated amortisation (402 ) (380 ) (292 ) (270 )
382 384 277 274
Furniture, fixtures and fittings and other equipment
At cost 745 793 118 120
Under finance lease 18 25 - -
Deduct: Accumulated depreciation and amortisation (460 ) (469 ) (88 ) (86 )
303 349 30 34
Data processing equipment
At cost 1,409 1,498 684 681
Under finance lease 28 32 6 7
Deduct: Accumulated depreciation and amortisation (1,153 ) (1,170 ) (520 ) (481 )
284 360 170 207
Application software
At cost 1,262 1,054 853 740
Deduct: Accumulated amortisation (307 ) (170 ) (199 ) (102 )
955 884 654 638
Total property, plant and equipment 2,498 2,640 1,166 1,201
Reconciliations of movements in property, plant and
equipment
Land and buildings
Balance at beginning of year 663 833 48 60
Additions 20 34 - 4
Net amount of revaluation increments less decrements (1) 9 9 - (3 )
Disposals (35 ) (152 ) (9 ) (11 )
Depreciation and amortisation (15 ) (22 ) (2 ) (1 )
Net foreign currency movements arising from (68 ) (19 ) (2 ) (1 )
self-sustaining foreign operations
Sale of operating assets (2) - (20 ) - -
Balance at end of year 574 663 35 48
Leasehold improvements
Balance at beginning of year 384 390 274 276
Additions 87 68 65 39
Disposals (26 ) (6 ) (25 ) (3 )
Amortisation (52 ) (57 ) (37 ) (38 )
Net foreign currency movements arising from (11 ) (4 ) (1 ) -
self-sustaining foreign operations
Sale of operating assets (2) - (7 ) - -
Balance at end of year 382 384 276 274
123
--------------------------------------------------------------------------------
Group Company
2003 2002 2003 2002
$m $m $m $m
Furniture, fixtures and fittings and other equipment
Balance at beginning of year 349 329 34 36
Additions 35 125 8 9
Disposals (3) (2 ) (5 ) (2 ) (1 )
Depreciation and amortisation (58 ) (72 ) (9 ) (9 )
Net foreign currency movements arising from (21 ) (6 ) (1 ) (1 )
self-sustaining foreign operations
Sale of operating assets (2) - (22 ) - -
Balance at end of year 303 349 30 34
Data processing equipment
Balance at beginning of year 360 477 207 265
Additions 88 184 60 78
Disposals (3) (24 ) (101 ) (19 ) (38 )
Depreciation and amortisation (124 ) (162 ) (77 ) (97 )
Net foreign currency movements arising from (16 ) (10 ) (1 ) (1 )
self-sustaining foreign operations
Sale of operating assets (2) - (28 ) - -
Balance at end of year 284 360 170 207
Application software
Balance at beginning of year 884 840 638 540
Additions 304 380 165 254
Disposals (3)(4) (59 ) (147 ) (49 ) (103 )
Amortisation (152 ) (106 ) (100 ) (53 )
Net foreign currency movements arising from (22 ) (13 ) - -
self-sustaining foreign operations
Sale of operating assets (2) - (70 ) - -
Balance at end of year 955 884 654 638
--------------------
(1) The fair values of freehold and leasehold land and buildings have been
determined by independent valuations. Such valuations were performed on an open
market basis, being the amounts for which the assets could be exchanged between
a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's
length transaction at the valuation date (refer to note 1(u)).
(2) The operating assets of HomeSide US were sold on March 1, 2002 (refer
to notes 4 and 5(b)).
(3) Disposals include amounts written off as part of the restructuring
initiative of $132 million during 2002 (refer to note 5(a)).
(4) Includes write-off of redundant components of the Integrated Systems
Implementation application software assets of $54 million during 2002 (refer to
note 5(a)).
23 Income tax assets
Future income tax benefits 1,203 1,292 679 741
Total income tax assets 1,203 1,292 679 741
Future income tax benefits comprise:
Specific provision for doubtful debts 106 93 109 98
General provision for doubtful debts 545 608 322 337
Other provisions 450 533 232 267
Statutory funds 80 4 - -
Tax losses 22 54 16 39
Total future income tax benefits 1,203 1,292 679 741
Future income tax benefits not brought to
account
Future income tax benefits have not been brought
to account for the following items as
realisation of the benefits is not regarded as
virtually certain:
Capital gains tax losses (1) 1,893 1,110 - -
Income tax losses 55 - - -
Timing differences 19 - - -
124
--------------------------------------------------------------------------------
--------------------
(1) Includes maximum Australian and US capital gains tax losses in
relation to the sale of SR Investment, Inc. and the return of capital.
These future income tax benefits will only be obtained if:
* future assessable income is derived of a nature and an amount
sufficient to enable the benefit to be realised;
* the conditions for deductibility imposed by tax legislation
continue to be complied with; and
* no changes in tax legislation adversely affect the Group in
realising the benefit.
Australia's tax consolidation legislation has now been enacted allowing certain
corporate groups to elect to consolidate for Australian income tax purposes. At
the date of signing this annual financial report, the Company had not made the
decision to elect to consolidate for income tax purposes. On this basis, the
Group has applied Australian Urgent Issues Group Abstract UIG 39 "Effect of
Proposed Tax Consolidation Legislation on Deferred Tax Balances". There was no
impact on the Company's or Group's future income tax benefits as at September
30, 2003 from the expected application of the tax consolidation legislation on
the Australian tax-consolidated group. Refer also to note 59.
24 Goodwill
Group Company
2003 2002 2003 2002
$m $m $m $m
At cost 2,431 2,368 - -
Deduct: Accumulated amortisation (1,691 ) (1,593 ) - -
Total goodwill 740 775 - -
25 Other assets
Accrued interest receivable 1,312 2,242 740 744
Prepayments 137 1,594 37 122
Receivables under contracts of sale 31 4 - -
Receivables from liquidator (1) 17 32 17 32
Mortgage loans held for sale 18 85 - -
Excess of net market value over net assets of 5,061 5,174 - -
life insurance controlled entities
Other life insurance assets (2)
Accrued income receivable 48 127 - -
Outstanding premiums receivable 75 85 - -
Unsettled investment transactions 87 481 - -
Other 118 167 - -
Prepaid pension costs 616 689 - -
Other (3) 2,530 3,471 529 1,137
Total other assets 10,050 14,151 1,323 2,035
--------------------
(1) Represents the liquidators' estimate of the net return from entities
placed in voluntary liquidation. Movements in the estimated net return other
than liquidators' distributions are recognised in the profit and loss account.
(2) Refer to note 1(p) for restrictions on assets of the life insurance
business.
(3) Includes securities sold but not yet settled, and accrued fees
receivable.
Excess of net market value over net assets of life insurance controlled entities
Life insurance entities within the Group are required to value their investments
in controlled entities at market value, with components of the change in the
excess of net market value over net assets reflected on the Group's statement of
financial performance (refer to note 1(p)). Valuations shown are directors'
valuations. The valuations used are based on discounted cash flow valuations
prepared by Tillinghast-Towers Perrin, using, for Australian and New Zealand
entities, risk discount rates specified by the directors.
125
--------------------------------------------------------------------------------
The following table analyses the excess of net market value over net assets of
National Australia Financial Management Limited's (NAFiM) controlled entities as
at September 30 for the years shown. These controlled entities include MLC
Limited, MLC Lifetime Company Limited and overseas life insurance entities. The
net market value and net assets of NAFiM are not included in this table.
Group 2003 Group 2002
Net Net Excess of Net Net Excess of
market assets net market market assets net market
value (1) value over value (1) value over
net assets net assets
$m $m $m $m $m $m
Insurance 2,785 695 2,090 2,444 444 2,000
Investments 3,707 768 2,939 3,847 694 3,153
Other 141 109 32 184 163 21
Total 6,633 1,572 5,061 6,475 1,301 5,174
--------------------
(1) Significant assumptions used in the valuation basis underlying the directors' valuations include:
* the valuations are based on the present value of estimated after-tax distributable profits together
with the present value of 70% of attaching imputation credits in the case of Australian and New
Zealand entities;
* present values have been determined at the following risk discount rates:
2003 2002
Life insurance business within Australia 11.0 % 11.0 %
Investment business within Australia 11.0-12.0 % 11.0-12.0 %
Business written in British pounds within the UK 10.0 % 10.0 %
Business written in NZ dollars within New Zealand 11.3-12.5 % 11.8-12.8 %
Life insurance business written in US dollars within Indonesia 12.5 % 12.5 %
Life insurance business written in Indonesian rupiah within 17.0 % 20.5 %
Indonesia
Life insurance business written in US dollars within Hong Kong 12.5 % 12.5 %
Life insurance business written in Hong Kong dollars within Hong 12.5 % 12.5 %
Kong
Life insurance business written in Thai baht within Thailand n/a n/a ; and
* in the case of the life insurance entities, the value of future new business has been determined by
applying a multiplier to the value of one year's sales. The average multipliers used were as
follows:
Life insurance business in Australia 9.1 10.1
Investment business within Australia 9.1 8.7
Business written in British pounds within the UK n/a n/a
MLC (Hong Kong) Limited 9.0 9.0
PT MLC Life Indonesia 4.0 4.6
Business written in NZ dollars within New Zealand 6.8 8.1
Advance MLC Assurance Co. Limited n/a n/a.
The following table provides an explanation of the changes in the Group's excess
of net market value over net assets of NAFiM's controlled entities from 2002 to
2003:
Increase Increase/ Total
in (decrease) in increase/
value of value of (decrease) in
in force future new excess of
business business net market
value over
net assets
$m $m $m
Insurance 54 36 90
Investments 146 (360 ) (214 )
Other 11 - 11
Total 211 (324 ) (113 )
126
--------------------------------------------------------------------------------
26 Due to other financial institutions
Group Company
2003 2002 2003 2002
$m $m $m $m
Australia
Interest-bearing 2,630 3,171 2,627 3,171
Non-interest-bearing 37 26 37 26
2,667 3,197 2,664 3,197
Overseas
Interest-bearing 42,107 39,839 38,512 36,558
Non-interest-bearing 354 243 290 228
42,461 40,082 38,802 36,786
Total due to other financial institutions 45,128 43,279 41,466 39,983
27 Deposits and other borrowings
Australia
Deposits
Deposits not bearing interest 5,724 4,973 5,724 4,973
On-demand and short-term deposits (1) 48,428 40,378 48,428 40,379
Certificates of deposit 15,902 13,361 15,825 13,282
Term deposits 26,653 25,870 26,546 25,763
Borrowings 17,754 10,308 17,753 10,306
114,461 94,890 114,276 94,703
Overseas
Deposits
Deposits not bearing interest 7,329 8,699 530 686
On-demand and short-term deposits (1) 38,804 45,333 5,143 6,711
Certificates of deposit 15,299 22,739 11,929 20,243
Term deposits 28,764 27,442 12,774 12,542
Borrowings 5,489 7,761 31 -
95,685 111,974 30,407 40,182
Total deposits and other borrowings 210,146 206,864 144,683 134,885
--------------------
(1) Deposits available on demand or lodged for periods of less than 30 days.
Funds are derived from well-diversified resources spread over the following
geographic locations. Concentrations of deposits and other borrowings by
geographical location are based on the geographical location of the office in
which the deposits and other borrowings are recognised.
Australia 114,461 94,890
Europe 57,628 73,176
New Zealand 22,260 20,901
United States 11,828 14,282
Asia 3,969 3,615
Total deposits and other borrowings 210,146 206,864
Maturities of deposits
The following table shows the maturity profile of the Group's certificates of
deposit and time deposits issued with a value of $100,000 or more at September
30, 2003:
0 to 3 3 to 6 6 to 12 Over 12 Total
month(s) months months months
$m $m $m $m $m
Australia
Certificates of deposit 13,178 1,010 673 1,038 15,899
Time deposits 16,990 1,460 901 285 19,636
30,168 2,470 1,574 1,323 35,535
127
--------------------------------------------------------------------------------
0 to 3 3 to 6 6 to 12 Over 12 Total
month(s) months months months
$m $m $m $m $m
Overseas
Certificates of deposit 8,789 3,689 1,908 913 15,299
Time deposits 20,724 2,451 1,507 1,120 25,802
29,513 6,140 3,415 2,033 41,101
Total certificates of deposit and 59,681 8,610 4,989 3,356 76,636
time deposits
Short-term borrowings
Short-term borrowings of the Group include the commercial paper programs of the
Company, National Australia Funding (Delaware), Inc., HomeSide US (for 2001
only) and Bank of New Zealand. The following table sets forth information
concerning the Group's commercial paper programs for each of the last three
years ended September 30:
Group
2003 2002 2001
$m $m $m
Commercial paper (1)
Balance outstanding at balance date 14,555 11,167 8,616
Maximum outstanding at any month end 16,621 15,455 19,681
Approximate average amount outstanding during the year 10,867 9,678 13,965
Approximate weighted average interest rate on
Balance outstanding at balance date (per annum) 1.6 % 2.2 % 7.7 %
Average amount outstanding during the year (per annum) 2.1 % 2.5 % 4.7 %
--------------------
(1) The 2002 and 2001 years include the commercial paper programs of the
Company. These programs were not included for the purpose of this table in
those years. The balance outstanding of the Company's programs as at September
30, 2002 and September 30, 2001 was $4,076 million and $3,651 million
respectively.
28 Life insurance policy liabilities
Group Company
2003 2002 2003 2002
$m $m $m $m
Business valued by projection method
Value of future policy benefits 5,375 5,051 - -
Future bonuses 523 698 - -
Value of future expenses 1,078 831 - -
Future profit margins 1,442 714 - -
Value of future premiums (5,352 ) (3,726 ) - -
Total business valued by projection method 3,066 3,568 - -
Business valued by accumulation method
Value of future policy benefits 29,784 27,268 - -
Future charges for acquisition costs (541 ) (536 ) - -
Total business valued by accumulation method 29,243 26,732 - -
Unvested policyholder benefits 148 125 - -
Total policy liabilities (1) 32,457 30,425 - -
--------------------
(1) Included in the above policy liabilities are capital guarantees of
$4,328 million (2002: $4,303 million) provided on annuity products, money
invested in the cash options of investment-linked business, whole of life and
endowment policies and investment account policies.
The calculation of policy liabilities is subject to various actuarial
assumptions which are summarised in note 57. All policy liabilities relate to
the business conducted in the statutory funds, including international life
insurance funds, and will be settled from the assets of each statutory fund
(refer to note 1(z)).
128
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29 Income tax liabilities
Group Company
2003 2002 2003 2002
$m $m $m $m
Provision for income tax 725 689 319 520
Provision for deferred income tax 812 920 243 294
Total income tax liabilities 1,537 1,609 562 814
Provision for deferred income tax comprises:
Lease finance 85 107 70 92
Leveraged leasing 74 74 73 74
Depreciation 90 85 30 29
Statutory funds 16 (59 ) - -
Other timing differences 547 713 70 99
Total provision for deferred income tax 812 920 243 294
30 Provisions
Final dividend (1) - 1,151 - 1,151
Employee entitlements 574 528 476 450
Non-lending losses 174 146 111 113
Restructuring costs (2) 159 347 78 191
Specific provision for off-balance sheet 16 105 10 104
credit-related commitments
Other 339 532 93 114
Total provisions 1,262 2,809 768 2,123
Provision for restructuring costs comprises:
Termination benefits and outplacement 96 236 29 120
Occupancy 46 86 35 51
Other 17 25 14 20
Total provision for restructuring costs 159 347 78 191
--------------------
(1) There is no provision for final dividend in respect of the year ended
September 30, 2003 as a result of a change in accounting policy. The Group has
adopted the new Australian Accounting Standard AASB 1044 "Provisions, Contingent
Liabilities and Contingent Assets" for the first time from October 1, 2002.
Provision 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.
(2) Refer to note 5(a) for further details regarding significant
restructuring costs.
Reconciliations of movements in provisions
Final dividend
Balance at beginning of year 1,151 1,054 1,151 1,054
Adjustment on adoption of AASB 1044 "Provisions, (1,151 ) - (1,151 ) -
Contingent Liabilities and Contingent Assets"
Provision 2,255 2,266 2,255 2,266
Payments (2,255 ) (2,089 ) (2,255 ) (2,089 )
Provision no longer required - (80 ) - (80 )
Balance at end of year - 1,151 - 1,151
Non-lending losses
Balance at beginning of year 146 84 113 53
Provision 100 182 34 109
Payments (49 ) (120 ) (36 ) (49 )
Provision no longer required (23 ) - - -
Balance at end of year 174 146 111 113
129
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Group Company
2003 2002 2003 2002
$m $m $m $m
Restructuring costs
Balance at beginning of year 347 111 191 78
Provision - 295 - 155
Payments (164 ) (47 ) (110 ) (30 )
Provision no longer required (24 ) (12 ) (3 ) (12 )
Balance at end of year 159 347 78 191
Specific provision for off-balance sheet
credit-related commitments (1)
Balance at beginning of year 105 78 104 76
Provision 13 45 8 45
Provision no longer required (102 ) (18 ) (102 ) (17 )
Balance at end of year 16 105 10 104
Other
Balance at beginning of year 532 587 114 46
Provision 34 102 1 85
Payments (60 ) (36 ) (22 ) (15 )
Sale of foreign controlled entity (2) (28 ) - - -
Provision no longer required (139 ) (121 ) - (2 )
Balance at end of year 339 532 93 114
--------------------
(1) Movements in the specific provision for off-balance sheet credit
related commitments represent transfers to or from the provision for doubtful
debts.
(2) Relates to the sale of SR Investment, Inc. on October 1, 2002 (refer
to note 5(a)).
31 Bonds, notes and subordinated debt
Medium-term notes 16,685 15,907 16,685 14,556
Other senior notes 614 90 - 90
Subordinated medium-term notes 5,289 5,662 5,289 5,662
Other subordinated notes 130 530 130 530
Total bonds, notes and subordinated debt 22,718 22,189 22,104 20,838
Net premiums and deferred gains/(losses) (11 ) 3 (11 ) 3
Total net bonds, notes and subordinated debt 22,707 22,192 22,093 20,841
The maturity analysis of bonds, notes and subordinated debt based on remaining
maturity is set out in note 41.
Medium-term notes
The Group operates a number of medium-term notes programs:
* under the Euro mediumterm notes program of the Company, notes
may be issued up to an aggregate amount of US$15.0 billion for terms of three
months or more. At September 30, 2003, the Company had US$12.1 billion
outstanding under this program;
* under the US medium-term notes program of the Company, an
additional US$3.0 billion to US$5.0 billion. As at September 30, 2003, the
Company had US$2.0 billion outstanding under this program;
* under the US medium-term notes program through the Company's
New York branch, notes may be issued up to an aggregate amount of US$1.0 billion
for terms of nine months or more. At September 30, 2003, the Company had no
outstanding issues under this program; and
* under the HomeSide US medium-term notes program, notes were
issued up to an aggregate amount of US$3.6 billion for terms of nine months or
more. At September 30, 2003, the Group had no outstanding issues under this
program. On October 1, 2002, the Group sold SR Investment, Inc. (the parent
entity of HomeSide US) which included the sale of all outstanding medium-term
notes under this issue (refer to note 5(a)(i)).
130
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Group Company
2003 2002 2003 2002
$m $m $m $m
Outstanding medium-term notes issued by the
Group pursuant to medium-term notes programs at
September 30 were as follows:
AUD Euro medium-term notes (1) 2,785 1,025 2,785 1,025
EUR Euro medium-term notes (1) 1,111 1,719 1,111 1,719
GBP Euro medium-term notes (1) 2,701 2,304 2,701 2,304
HKD Euro medium-term notes (1) 1,303 1,483 1,303 1,483
JPY Euro medium-term notes (1) 536 310 536 310
NZD Euro medium-term notes (1) 668 692 668 692
SGD Euro medium-term notes (1) 94 166 94 166
USD Euro medium-term notes (1) 7,382 6,734 7,382 6,734
NOK Euro medium-term notes (1) 105 123 105 123
USD medium-term notes (2) - 1,351 - -
Total medium-term notes 16,685 15,907 16,685 14,556
--------------------
(1) Notes issued under the Company's Euro medium-term notes program.
(2) Notes issued under the Group's US medium-term notes programs through
HomeSide Lending, Inc. Under the HomeSide US medium-term notes program, notes
were issued up to an aggregate amount of US$3.6 billion for terms of nine months
or more. On October 1, 2002, the Group sold SR Investment, Inc (the parent
entity of HomeSide US), which included the sale of all outstanding medium-term
notes under this issue (refer to note 5(a)(i)).
Other senior notes
The Group has conducted a number of stand-alone note issues.
Outstanding other senior notes issued by the Group under stand-alone programs as
at September 30 were as follows:
LUF 2,000m 6.875% notes due 30/12/2002(1) - 90 - 90
GBP 250m structured finance bond issue due 3/09 614 - - -
/2008
Total other senior notes 614 90 - 90
--------------------
(1) Notes issued under the Company's stand-alone notes programs.
Subordinated notes
Certain notes are subordinated in right of payment to the claims of depositors
and all other creditors of the Company. Subordinated notes with an original
maturity of at least five years constitute Tier 2 capital as defined by APRA for
capital adequacy purposes.
Subordinated medium-term notes
Subordinated notes have been issued under the Euro medium-term notes and the US
medium-term notes programs of the Company, described above.
Outstanding subordinated medium-term notes issued by the Company under
medium-term notes programs as at September 30 were as follows:
USD subordinated Euro medium-term notes (1)
USD 30m subordinated Euro medium-term notes due - 55 - 55
20/11/2007 (3)
USD 200m subordinated Euro medium-term notes - 368 - 368
due 23/01/2008 (3)
USD 300m subordinated Euro medium-term notes 441 - 441 -
due 12/03/2008
USD 150m subordinated Euro medium-term notes - 276 - 276
due 15/09/2008 (3)
USD 100m subordinated Euro medium-term notes 147 184 147 184
due 15/06/2009
USD 200m subordinated Euro medium-term notes 294 368 294 368
due 8/05/2011
USD 300m subordinated Euro medium-term notes 441 - 441 -
due 29/08/2013
USD subordinated medium-term notes (2)
USD 400m subordinated medium-term notes due - 735 - 735
10/12/2007 (3)
USD 400m subordinated medium-term notes due 588 735 588 735
10/12/2007
USD 700m subordinated medium-term notes due 1,029 1,287 1,029 1,287
19/05/2010
USD 900m subordinated medium-term notes due 1,322 1,654 1,322 1,654
19/05/2010
EUR subordinated Euro medium-term notes (1)
EUR 600m subordinated Euro medium term notes 1,027 - 1,027 -
due 4/06/2015
Total subordinated medium-term notes 5,289 5,662 5,289 5,662
--------------------
(1) Notes issued under the Company's Euro medium-term notes program.
131
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(2) Notes issued under the Company's US medium-term notes program.
(3) The call options to redeem these subordinated medium-term notes were
exercised during 2003. The notes were redeemed in full.
Other subordinated notes
The Company has conducted a number of stand-alone subordinated note issues.
Outstanding other subordinated notes issued by the Company under stand-alone
programs as at September 30 were as follows:
Group Company
2003 2002 2003 2002
$m $m $m $m
AUD 22m subordinated floating rate notes due 22 22 22 22
8/06/2004 (1)
AUD 25m subordinated floating rate notes due 25 25 25 25
8/06/2006 (1)
AUD 250m subordinated floating rate notes due - 250 - 250
25/11/2007 (2)
AUD 150m 6.25% subordinated notes due 25/11/2007 - 150 - 150
(2)
AUD 40m subordinated floating rate notes due 40 43 40 43
8/06/2008 (1)
AUD 3m subordinated floating rate notes due 3 - 3 -
8/06/2010
AUD 20m 7.5% subordinated notes due 15/12/2027 20 20 20 20
AUD 20m 7.5% subordinated notes due 15/06/2028 20 20 20 20
Total other subordinated notes 130 530 130 530
--------------------
(1) These extendable notes were initially issued with a maturity of June
8, 2000. $110 million were redeemed on June 10, 1997. As from June 8, 2001,
$22 million have a maturity date of June 8, 2004, $25 million have a maturity
date of June 8, 2006 and the remaining $40 million have a maturity date of June
8, 2008.
(2) The call options to redeem these subordinated notes were exercised
during 2003. The notes were redeemed in full.
32 Other debt issues
Perpetual floating rate notes 367 460 367 460
Exchangeable capital units 1,262 1,262 - -
Fixed rate securities 114 144 - -
Total other debt issues 1,743 1,866 367 460
Perpetual floating rate notes
On October 9, 1986, the Company issued US$250 million (A$460 million) undated
subordinated floating rate notes. Interest is payable semi-annually in arrears
in April and October at a rate of 0.15% per annum above the arithmetic average
of the rates offered by the reference banks for six month US dollar deposits in
London.
The notes are unsecured obligations of the Company, subordinated in that:
* payments of principal and interest on the notes will only be
payable to the extent that, after such payment, the Company remains solvent;
* the payment of interest will also be optional if a dividend
has not been declared, paid or made in the preceding 12 months; and
* in the event of the winding-up of the Company, the rights of
the noteholders will rank in preference only to the rights of preferred and
ordinary shareholders and creditors whose claims rank, or are expressed to rank,
after the noteholders and couponholders.
The notes have no final maturity. All or some of the notes may be redeemed at
the option of the Company with the prior consent of APRA.
Exchangeable capital units
On March 19, 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 (or, at the Company's option, cash) 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 September 30, 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 March 19, 2007, with the prior consent
of APRA.
132
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Fixed rate securities
MLC Limited has US$75 million (A$114 million) (2002: US$75 million, A$144
million) of funds raised through the issue of subordinated securities in a
global offering outside Australia. The securities have a fixed coupon of 7.53%
per annum until July 2004, have no stated maturity and are redeemable at the
option of MLC Limited. Of this debt, US$30 million (A$45 million) (2002: US$32
million, A$63 million) resides in the shareholders' fund of MLC Limited and
supports the investment in HK MLC Holdings Limited. The balance of the debt is
held in the statutory funds of MLC Limited. The subordinated debt is measured
at net present value of the payments to the next restatement date, July 14,
2004.
33 Other liabilities
Group Company
2003 2002 2003 2002
$m $m $m $m
Accrued interest payable 1,282 1,962 896 872
Notes in circulation 2,349 2,579 - -
Other life insurance liabilities (1)
Unsettled investment liabilities 301 935 - -
Outstanding policy claims 79 84 - -
Reinsurance creditors 68 84 - -
Other 110 221 - -
Other 10,050 7,753 6,396 2,184
14,239 13,618 7,292 3,056
--------------------
(1) Life insurance statutory fund liabilities are quarantined and will be
settled from the assets of the statutory funds (refer to note 1(p)).
34 Contributed equity
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Issued and paid-up share capital
Ordinary shares, fully paid 6,078 7,256 8,050 6,078 7,256
Ordinary shares, partly paid to 25 - - - - -
cents(1)
Preference shares, fully paid 730 730 730 730 730
Other contributed equity
National Income Securities 1,945 1,945 1,945 1,945 1,945
Trust Preferred Securities 975 - - - -
9,728 9,931 10,725 8,753 9,931
--------------------
(1) Ordinary shares, partly paid to 25 cents have a value of less than $1
million.
Reconciliations of movements in contributed equity
Ordinary share capital
Balance at beginning of year 7,256 8,050 7,180 7,256 8,050
Shares issued
Dividend reinvestment plan 170 323 610 170 323
Executive option plan - - 10 - -
Executive option plan no. 2 (1) 135 81 195 135 81
Share purchase plan 80 47 52 80 47
Paying up of partly paid shares 2 3 3 2 3
Shares bought back (1,565 ) (1,248 ) - (1,565 ) (1,248 )
Balance at end of year 6,078 7,256 8,050 6,078 7,256
133
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The number of ordinary shares on issue for the last three years at September 30
was as follows:
Company
2003 2002 2001
No. '000 No. '000 No. '000
Ordinary shares, fully paid
Balance at beginning of year 1,533,920 1,550,303 1,514,361
Shares issued
Dividend reinvestment plan 5,161 9,812 19,185
Bonus share plan 3,187 2,613 2,655
Staff share ownership plan (1) 501 623 105
Staff share allocation plan (1) 1,065 734 666
Executive option plan - - 807
Executive option plan no. 2 (1) 6,395 4,235 10,389
Share purchase plan 2,435 1,399 1,657
Paying up of partly paid shares 241 352 478
Shares bought back (48,949 ) (36,151 ) -
1,503,956 1,533,920 1,550,303
Ordinary shares, partly paid to 25 cents
Balance at beginning of year 920 1,272 1,750
Paying up of partly paid shares (241 ) (352 ) (478 )
679 920 1,272
Total number of ordinary shares on issue at end of year 1,504,635 1,534,840 1,551,575
--------------------
(1) Refer to note 39 for details on employee share and option plans.
Holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share on a show of hands or, on a
poll, one vote for each fully paid ordinary share held at shareholders'
meetings.
In the event of a winding-up of the Company, ordinary shareholders rank after
all other shareholders and creditors and are fully entitled to any residual
proceeds of liquidation.
During 2003, the Company completed an on-market buy-back of 48,949,487 (2002:
36,150,513) fully paid ordinary shares, representing 3.3% (2002: 2.4%) of fully
paid ordinary shares on issue. The total consideration for shares bought back
on-market was $1,565 million (2002: $1,248 million), being an average, including
incidental costs, of $31.98 per share (2002: $34.52 per share). The highest
price paid per share was $34.35 (2002: $36.05) and the lowest price paid was
$28.40 ((2002: $31.00).
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Preference shares
Balance at beginning of year 730 730 730 730 730
Balance at end of year 730 730 730 730 730
On September 30, 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 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 December 31, 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.
134
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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 each 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
and the Trust Preferred Securities, described below.
TrUEPrSSM is a service mark of Merrill Lynch & Co., Inc.
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
National Income Securities
Balance at beginning of year 1,945 1,945 1,945 1,945 1,945
Balance at end of year 1,945 1,945 1,945 1,945 1,945
On June 29, 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 a NIS preference share will become due in certain limited
circumstances, such as if an event of default occurs. If the amount unpaid ona
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 August 15, 1999. A minimum interest rate of
at least 6% per annum was payable until May 15, 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 APRA, 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 ASX and on a 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 is 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 and
the Trust Preferred Securities.
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
Trust Preferred Securities
Trust Preferred Securities issued 975 - - - -
Balance at end of year 975 - - - -
On September 29, 2003, the Group raised GBP400 million through the issue by
National Capital Trust I (a controlled entity formed in Delaware) of 400,000
Trust Preferred Securities at GBP1,000 each, to be used by the Company's London
branch. Each Trust Preferred Security earns a non-cumulative distribution,
payable semi-annually in arrears until December 17, 2018 equal to 5.62% per
annum and, in respect of each five year period after that date, a non-cumulative
distribution payable semi-annually in arrears at a rate equal to the sum of the
yield to maturity of the five-year benchmark UK government bond at the start of
that period plus 1.93%. The securities are constituted by instruments governed
by New York and Delaware law.
135
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In certain limited circumstances, the Trust Preferred Securities will be
exchanged for redeemable preference shares in the Company (TPS preference
shares). These take the form of Global Depositary Shares evidenced by Global
Depositary Receipts. The circumstances in which the exchange event will occur
include if a distribution is not paid on the Trust Preferred Securities or if
the Company does not maintain certain prudential regulatory standards. The
Company also has discretion to exchange the Trust Preferred Securities for TPS
preference shares at any time.
If issued, each holder of a TPS preference share would receive, if declared,
non-cumulative dividends calculated at the same rate and payable on the same
basis as apply to the Trust Preferred Securities.
If a distribution is not paid on the Trust Preferred Securities, or a dividend
is not paid on the TPS preference shares, the Company cannot, with certain
exceptions, pay distributions, redeem, buy back or reduce capital on any other
shares or other capital instruments of the Company that rank equally with or
junior to the securities unless it has paid 12 months distributions on the
securities or an optional dividend.
Holders of the TPS preference shares (if issued) would be entitled to vote
together with the holders of ordinary shares in the Company (to the extent that
these shareholders were entitled to vote) on the basis of one vote per TPS
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 TPS
preference shares.
With the prior consent of APRA, the Trust Preferred Securities may be redeemed
by the issuer in certain limited circumstances. These circumstances are on
December 17, 2018 and on every subsequent fifth anniversary, in which case the
redemption price is GBP1,000 per Trust Preferred Security plus the unpaid
distributions for the last six-month distribution period, and otherwise only
where certain adverse tax or regulatory events have occurred, in which case the
redemption price may include a 'make-whole' adjustment to compensate the
investor for the investment opportunity lost by the early redemption (except
where the tax event relates to withholding tax).
The TPS preference shares may be redeemed at any time after their issue (except
where the Company has exercised its discretion to issue the TPS preference
shares, in which case they can only be redeemed if certain adverse tax or
regulatory events have occurred). The redemption price includes a '
make-whole'adjustment to compensate the investor for the investment opportunity
lost by the early redemption (except where the redemption relates to withholding
tax). The TPS preference shares may also be redeemed on December 17, 2018 and
on any subsequent fifth anniversary at par value of GBP1,000 per share plus the
unpaid dividend for the last six month dividend period.
In a winding-up of the Company, the Trust Preferred Securities and (if issued)
the TPS preference shares will generally rank equally with the holders of other
preference shares and will rank for return of capital behind all deposit
liabilities and creditors of the Company, but ahead of ordinary shareholders.
35 Reserves
Group Company
2003 2002 2001 2003 2002
$m $m $m $m $m
General reserve 1,128 856 649 12 11
Asset revaluation reserve 16 7 16 8 8
Foreign currency translation reserve (251 ) 1,242 1,762 14 54
Total reserves 893 2,105 2,427 34 73
Reconciliations of movements in
reserves
General reserve
Balance at beginning of year 856 649 422 11 9
Transfer from retained profits 272 207 227 1 2
Balance at end of year 1,128 856 649 12 11
The general reserve includes statutory funds' retained profits from the Group's
life insurance business. Profits from the statutory funds are not immediately
available for distribution. These profits will only be available after the
respective life company's board has approved the transfer of surpluses from the
statutory funds to the shareholders' fund.
Asset revaluation reserve
Balance at beginning of year 7 16 14 8 5
Net increment on revaluation of land 9 9 8 - 3
and buildings
Transfer to retained profits - (18 ) (6 ) - -
Balance at end of year 16 7 16 8 8
The asset revaluation reserve includes the net revaluation increments and
decrements arising from the revaluation of non-current assets in accordance with
Australian Accounting Standard AASB 1041 "Revaluation of Non-Current Assets".
136
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Foreign currency translation reserve
Balance at beginning of year 1,242 1,762 1,570 54 80
Currency translation adjustments (1,251 ) (520 ) 1,380 (40 ) -
Transfer to retained profits - - (70 ) - (26 )
Transfer to retained profits on sale (242 ) - (1,118 ) - -
of foreign controlled entity
Balance at end of year (251 ) 1,242 1,762 14 54
The foreign currency translation reserve records the foreign currency
differences arising from the translation of self-ustaining foreign operations,
the translation of transactions that hedge the Company's net investment in a
foreign operation or the translation of foreign currency monetary items forming
part of the net investment in a self-sustaining operation.
36 Retained profits
Balance at beginning of year 11,148 10,337 9,500 7,306 7,083
Net profit attributable to members of 3,955 3,373 2,083 5,720 2,502
the Company
Net effect on adoption of AASB 1044 "
Provisions, Contingent Liabilities
and Contingent Assets" 1,151 - - 1,151 -
Transfer to general reserve (272 ) (207 ) (227 ) (1 ) (2 )
Transfer from asset revaluation - 18 6 - -
reserve
Transfer from foreign currency - - 70 - 26
translation reserve
Transfer from foreign currency
translation reserve on sale of
foreign
controlled entity 242 - 1,118 - -
Dividends paid or provided for (2,255 ) (2,266 ) (2,080 ) (2,255 ) (2,266 )
Dividend provision not required - 80 80 - 80
Distributions on other equity (183 ) (187 ) (213 ) (122 ) (117 )
instruments
Balance at end of year 13,786 11,148 10,337 11,799 7,306
37 Outside equity interest
Life Insurance Business
Contributed equity 2,288 68 74 - -
Reserves (26 ) - - - -
Retained profits/(accumulated losses) 352 (1 ) (6 ) - -
Outside equity interest -Life 2,614 67 68 - -
insurance business (1)
Other
Contributed equity 198 - - - -
Accumulated losses (8 ) - - - -
Outside equity interest -Other 190 - - - -
Total outside equity interest 2,804 67 68 - -
--------------------
(1) During 2003, the Group's life insurance statutory funds reorganised
their business operating model to increase the level of investments held through
registered schemes rather than directly held investments in debt and equity
securities. As the statutory funds are considered to have the capacity to
control a certain number of these registered schemes, the Group has consolidated
them. Refer to notes 1(g) and 43(e).
38 Total equity reconciliation
Balance at beginning of year 23,251 23,557 21,407 17,310 17,902
Total changes in equity recognised in 3,864 2,862 3,471 6,831 2,505
the statement of financial
performance (1)
Transactions with owners as owners
Contributions of equity 1,362 454 870 387 454
Share buy-back (1,565 ) (1,248 ) - (1,565 ) (1,248 )
Dividends (2) (2,255 ) (2,186 ) (2,000 ) (2,255 ) (2,186 )
Distributions on other equity (183 ) (187 ) (213 ) (122 ) (117 )
instruments
Total changes in outside equity 2,737 (1 ) 22 - -
interest
Balance at end of year 27,211 23,251 23,557 20,586 17,310
--------------------
(1) This represents comprehensive income using US GAAP terminology (refer
to note 58 for total comprehensive income under US GAAP).
(2) Comprises dividends paid or provided for net of dividend provisions
not required.
137
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FR GLBDBLXDGGXL