STANDARDISATION OF FINANCIAL DATA

The figures used in this publication differ from those published by the companies. The BFA standardises all the published financial statements because the accounting conventions used by companies differ, making it practically impossible to compare and rank companies using their published data.

The JSE-listed companies to be compared with each other are diverse. There are also many financial items to be considered in the process of standardisation. It is therefore impossible to describe, in a few words, what is done with each item in the process of standardisation to achieve the goal of comparability. In interpreting and allocating specific items, however, basic accounting principles are followed.

INTERNAL RATE OF RETURN

The internal rate of return is a market-related return taking into account, by way of a discounted cash flow calculation, both share price movements and dividends paid. The share price five years ago (end-March 2004) is taken as a cash outflow and all annual dividends for the next five years (both cash dividends and dividends in specie) as well as the share price at end-March 2009 are taken as cash inflows.

The internal rate of return is then quantified by finding the discount rate that equates the present value of all dividends and the share price at end-March 2009 with the share price five years ago (end-March 2004). All data is adjusted for share splits and share consolidations.

The annual internal rate of return is calculated using monthly data during 2008. In this case the opening price is that at the end of December 2007 and the end price is that at the end of December 2008. The discounting, in this case, is done on a month-to-month basis, with the dividend discounted from the month paid. The result of this calculation is a monthly return which is then converted to an annual return.

GOLD COMPANIES, FINANCIAL COMPANIES AND THE REST

The structure of the financial statements in the database of the BFA differs between gold companies and all other companies. The reason for this is basically the difference in the nature of business of the two categories. The definitions of the ratios of the two categories of companies therefore differ, but the meaning and quantification are the same. Financial companies comprising the banking, short-term insurance, long-term insurance and financial services sectors, are also treated differently in defining the various ratios. Again this is done because of the difference in the nature of the business.

In all cases care is taken to maintain the comparability of the performance and other measures; for example, all the ratios are calculated before taking extraordinary and exceptional items in the income statement into consideration. Naturally these items include the profit or loss on transactions in the financial markets. These transactions have been treated as "in the normal course of business" for financial companies but as extraordinary for all other companies.

As no turnover in the normal sense of the word exists for banks, the total of interest received, commission earnings, currency exchange earnings and other fee earnings has been used instead of turnover.

DEFINITIONS OF THE MOST IMPORTANT VARIABLES USED

Turnover: Total turnover as published by the company. (For banks refer to the paragraph above.)

Total assets: Fixed assets and current assets are included. Investments are at market value or directors' valuation at latest balance sheet date. Other assets, such as land and buildings, are at book value. Where revaluations are not taken into the balance sheet, these are ignored. Where cash balances are netted off against bank overdrafts, the cash balances are added back. Tax paid in advance is netted off against tax payable, and only the net amount included.

Cost of control and intangible assets, such as goodwill, patents and licences, is not included; mining assets are, however, included. Where amounts invoiced on contracts in progress exceed the value of the contracts in progress, the difference is included with retained income; or, if the amounts received consist of deposits received, the difference is included with creditors. If inventories are valued using last in first out (Lifo), it is adjusted to reflect the first in first out (Fifo) or average value.

Market capitalisation: Market capitalisation equals the market value of all fully paid and issued ordinary shares calculated at the closing price of the last trading day of April 2009.

Equity funds: Equity funds (ordinary shareholders' funds) consist of ordinary share capital, all capital reserves and distributable reserves, adjusted for the same items as the "total assets" above. Provisions included with credit balances such as warranty provisions, provisions for self-insurance and provisions for maintenance are included with long-term loans or creditors in the case of short-term provisions. Deferred tax is regarded as retained profit. Cost of control and intangible assets is not included with total assets but deducted from equity funds.

Net profit: Taxed profit attributable to ordinary shareholders excluding extraordinary and exceptional items, deferred tax and amounts transferred to reserves is regarded as retained profit, thus increasing taxed profit disclosed. Provisions are treated as disclosed under the equity funds definition above. Currency conversion gains and losses are excluded in all cases as not all companies treat this item in the same manner. Also excluded are items such as cost of control written off and prospecting expenditure. The pretax difference in profit between Lifo and Fifo or average inventory values is added to net profit. The share of associated companies' retained profits is included.

Pretax profit: The effect of extraordinary and exceptional items is excluded from pretax profit (profit after interest paid but before taxation). Apart from this pretax profit has been adjusted with all the variables as described in "net profit" above.

Earnings per share: Headline earnings per share as published by the company are used in all instances. Where historical EPS (as in the case of growth in EPS) is used this is adjusted for stock splits and consolidations.

Dividend per share: Dividends per share consist of the total of cash dividends and stock dividends (as a proxy for cash dividends), declared in respect of the years under review.

Debt: Total debt (the sum of long-term interest-bearing debt, short-term interest-bearing debt and current liabilities) is used in all ratios with the exception of serviced debt to equity and serviced debt as a monetary figure. In these cases the total of long-term interest-bearing debt and short-term interest-bearing debt has been used.

DEFINITIONS OF SOME OF THE RATIOS

Compound growth: in earnings per share, return on equity, return on assets and pretax profit.

The compound growth in the above variables is calculated using the available data for the latest five years available. Where a company has not been listed for five years, the compound growth has been calculated for the shorter period. Where either the beginning or ending figures or both are negative, N/A is indicated because the calculation would result in bias.

Average dividend yield: The average dividend yield for the five years ending December 2008 is calculated. If a company is listed for less than five years the average dividend yield for the shorter period is given.

Return on assets: Profit before interest but after tax as defined above, divided by total assets as defined above.

Return on equity: Net profit as defined above, expressed as a percentage of equity as defined above.

Interest and financial lease cover: Profit before interest, operating financial lease charges, tax and extraordinary items divided by the total of interest and operating financial lease charges paid.

Debt to equity: The total of long-term interest-bearing debt plus the total of short-term interest-bearing debt (including overdraft facilities utilised) divided by total equity as defined above.

Total serviced debt: The total of long-term interest-bearing debt plus the total of short-term interest-bearing debt (including overdraft facilities utilised).

Cash and cash equivalents: The total of cash, positive bank balances and short-term loans advanced.

Average daily monetary value of shares traded: The average of the daily value of all shares traded during 2008.

Annualisation: Financial statements not covering 12 months are annualised. If more than one financial period is reported on in a calendar year, the results are consolidated and then annualised.