ME64380_FinancialReport_cover 13/11/00 4:39 PM Page 2

Financial Report 2000
Australia and New Zealand Banking Group Limited

Financial Report 2000

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Australia and New Zealand Banking Group Limited ABN 11 005 357 522

ME64380_Financials_recombined 13/11/00 4:12 PM Page 1

Ta b l e o f C o n t e n t s
Page

Page
ALPHABETICAL INDEX2

PROFIT AND LOSS ACCOUNTS

3

BALANCE SHEETS

4STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY

5STATEMENTS OF CASH FLOWS

6

31

Average balance sheet and related interest ..............4232

Interest spreads and net interest average margins....45

33

Market risk..................................................................46

34

Interest sensitivity gap ..............................................48

35

Net fair value of financial instruments........................50

36

Derivative financial instruments ................................52

37

Life insurance ............................................................58

38

Segment analysis ......................................................59

NOTES TO THE FINANCIAL STATEMENTS

39

Notes to the statements of cash flows ....................621

Accounting policies ..........................................................740

Controlled entities ......................................................64

2

Income ..........................................................................11

41

Associates ..................................................................65

3

Expenses........................................................................1142

Commitments ............................................................65

4

Remuneration of auditors ..............................................13

43

Contingent liabilities and

5

Abnormal items..............................................................14

6

Income tax expense ......................................................17

44

Superannuation commitments ..................................68

7

Dividends ......................................................................1745

Fiduciary activities ......................................................69

8

Earnings per ordinary share ..........................................1946

Employee share and option plans ..............................69

9

Liquid assets ..................................................................20

47

Related party disclosures ..........................................71

10

Due from other financial institutions..............................20

48

Remuneration of directors..........................................74

11

Trading securities ..........................................................21

49

Remuneration of executives ......................................75

12

Investment securities ....................................................2250

US GAAP reconciliation ..............................................76

13

Net loans and advances ................................................25

51

Exchange rates ..........................................................82

14

Impaired assets..............................................................28

52

Events since the end of the financial year ................82

15

Provisions for doubtful debts ........................................31

16

Customers’ liabilities for acceptances ..........................32

DIRECTORS’ DECLARATION

83

17

Regulatory deposits ......................................................33

AUDITORS’ REPORT

84

18

Shares in controlled entities and associates..................33

19

Other assets ..................................................................34

RISK MANAGEMENT

85

20

Premises and equipment ..............................................35

21

Due to other financial institutions ..................................35

22

Deposits and other borrowings......................................36

1

Cross border outstandings ........................................87

23

Income tax liability ........................................................36

2

Certificates of deposit and term

24

Creditors and other liabilities ........................................37

25

Provisions ......................................................................37

3

Volume and rate analysis............................................88

26

Bonds and notes ............................................................37

4

Concentrations of credit risk ......................................90

27

Loan capital ....................................................................38

5

Doubtful debts - industry analysis ..............................92

28

Share capital ..................................................................39

6

Short term borrowings ..............................................9329

Outside equity interests ................................................39

30

Capital adequacy ............................................................40

credit related commitments ..................................66

FINANCIAL INFORMATION

deposit maturities ..................................................88

GLOSSARY94

1

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Alphabetical Index
Page

Page

Abnormal items ..................................................................14

Income tax liability ..............................................................36

Accounting policies ..............................................................7Interest sensitivity gap ......................................................48

Associates ..........................................................................65

Interest spreads and net interest average margins............45

Auditors’ report ..................................................................84

Investment securities ........................................................22

Average balance sheet and related interest ......................42

Life insurance ....................................................................58

Balance sheets ....................................................................4

Liquid assets ......................................................................20

Bonds and notes ................................................................37

Market risk..........................................................................46

Capital adequacy ................................................................40

Loan capital ........................................................................38

Certificates of deposit and term deposit maturities ..........88

Net fair value of financial instruments ................................50

Commitments ....................................................................65

Net loans and advances......................................................25

Concentrations of credit risk ..............................................90

Notes to the financial statements ........................................7

Contingent liabilities and credit related commitments ......66

Notes to the statements of cash flows..............................62

Controlled entities ..............................................................64

Other assets ......................................................................34

Creditors and other liabilities ..............................................37

Outside equity interests ....................................................39

Cross border outstandings ................................................87

Premises and equipment....................................................35

Customers’ liabilities for acceptances ................................32

Profit and loss accounts ......................................................3

Deposits and other borrowings ..........................................36

Provisions............................................................................37

Derivative financial instruments..........................................52

Provisions for doubtful debts..............................................31

Directors’ declaration ..........................................................83

Regulatory deposits............................................................33

Dividends ............................................................................17

Related party disclosures ..................................................71

Doubtful debts - industry analysis ......................................92

Remuneration of auditors ..................................................13

Due from other financial institutions ..................................20

Remuneration of directors ..................................................74

Due to other financial institutions ......................................35

Remuneration of executives ..............................................75

Earnings per ordinary share................................................19

Risk management ..............................................................85

Employee share and option plans ......................................69

Segment analysis................................................................59

Events since the end of the financial year ........................82

Share capital ......................................................................39

Exchange rates ..................................................................82

Shares in controlled entities and associates ......................33

Expenses ............................................................................11

Short term borrowings........................................................93

Fiduciary activities ..............................................................69

Statements of cash flows ..................................................6

Glossary ..............................................................................94

Statements of changes in shareholders’ equity ..................5

Impaired assets ..................................................................28

Superannuation commitments ..........................................68

Income................................................................................11

Trading securities ................................................................21

Income tax expense ..........................................................17

US GAAP reconciliation ......................................................76
Volume and rate analysis ....................................................882

ME64380_Financials_recombined 13/11/00 4:12 PM Page 3

Australia and New Zealand Banking Group Limited and Controlled Entities
Profit and Loss Accounts for the year ended 30 September 2000

Note

2000
$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

Interest income
Interest expense2
3

10,241(6,440)8,684(5,029)9,499(5,952)

6,984(4,728)

5,693(3,510)Net interest income
Other operating income

2

3,801
2,583

3,655
2,377

3,547
2,142

2,256
4,230

2,183
2,159

Operating income
Operating expenses

3

6,384
(3,314)

6,032(3,300)5,689(3,442)6,486(2,474)

4,342(2,411)

Operating profit before debt provision
Provision for doubtful debts

15

3,070
(502)

2,732
(510)

2,247
(487)

4,012
(353)

1,931
(245)

Operating profit before abnormal items
Abnormal profit (loss)

5

2,568
221

2,222
–

1,760
(102)

3,659
(550)

1,686
–

2,789

2,222

1,658

3,109

1,686

Operating profit before income tax
Income tax (expense) benefit
Operating profit
Abnormal (profit) loss

6
6

(863)
(177)

(736)
–

(576)
33

(584)
(218)

(387)
–

Income tax expense

6(1,040)

(736)

(543)

(802)

(387)

Operating profit after income tax
Outside equity interests

1,749
(2)

1,486
(6)

1,115
(9)

2,307
–

1,299
–

Operating profit after income tax
attributable to members of the Company

1,747

1,480

1,106

2,307

1,299

Retained profits at start of year

2,952

2,412

1,830

1,802

1,317

Total available for appropriation
Transfers (to) from reserves
Ordinary share dividends provided for or paid
Preference share dividends paid

4,699
(49)
(941)
(102)

3,892
(54)
(814)
(72)

2,936
223
(747)
–

4,109
–
(941)
–

2,616
–
(814)
–

3,607

2,952

2,412

3,168

1,802

103.9
106.8

90.6
90.6

77.2
72.6

n/a
n/a

n/a
n/a

103.5
106.3

90.3
90.3

76.9
72.4

n/a
n/a

n/a
n/a

7
7

Retained profits at end of year

Earnings per ordinary share (cents)
Basic
Before abnormal items
After abnormal items
Diluted
Before abnormal items
After abnormal items

8

The notes appearing on pages 7 to 82 form an integral part of these financial statements
n/a Not applicable3ME64380_Financials_recombined 13/11/00 4:12 PM Page 4

Australia and New Zealand Banking Group Limited and Controlled Entities
Balance Sheets as at 30 September 2000

Note

Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

AssetsLiquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Due from controlled entities
Life insurance investment assets
Regulatory deposits
Shares in controlled entities and associates
Other assets
Premises and equipment

9
10
11
12
13
16

17
18
19
20

Total assets

5,648
5,822
4,126
3,006
116,315
15,482
–
4,739
103
29
15,938
1,259

5,283
3,472
4,259
4,695
104,063
14,858
–
4,063
616
32
10,036
1,424

4,381
4,620
3,451
1,795
87,540
15,482
6,962
–
75
6,348
13,319
572

3,564
2,212
2,940
1,856
71,798
14,674
7,169
–
49
7,117
7,277
511

172,467

152,801

144,545

119,167

12,247
100,602
15,482–
1,303
13,371
2,089
4,360
9,519
3,687

9,001
96,55914,858
–
1,051
9,421
1,010
3,795
4,456
3,221

11,94974,61815,482
5,826
958
11,550
1,872
–
9,369
3,457

7,980
60,828
14,674
9,887
551
7,805
859
–
4,298
2,959

162,660

143,372

135,081

109,841

9,807

9,429

9,464

9,326

4,028
1,374
786
3,607

4,770
1,145
536
2,952

4,028
1,374
894
3,168

4,770
1,145
1,609
1,802

9,795
12

9,403
26

9,464
–

9,326
–

9,807

9,429

9,464

9,326

Liabilities

Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Due to controlled entities
Income tax liability
Creditors and other liabilities
Provisions
Life insurance policy liabilities
Bonds and notes
Loan capital

21
22

23
24
25
26
27

Total liabilities
Net assets
Shareholders’ equity

Ordinary share capitalPreference share capital
Reserves
Retained profits
Share capital and reserves attributable tomembers of the Company
Outside equity interests

28
28

29

Total shareholders’ equity and outside
equity interests
Derivative financial instruments
Commitments
Contingent liabilities and credit related
commitments

36
42
43

The notes appearing on pages 7 to 82 form an integral part of these financial statements

4ME64380_Financials_recombined 13/11/00 4:12 PM Page 5Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Changes in Shareholders’ Equity for the year ended 30 September 2000
2000
$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

5,915

5,226

4,335

5,915

5,226

236
26
10
#
(1,014)
–
229

176
4
9
#
–
578
(78)

218
5
22
1
–
645
–

236
26
10
#
(1,014)
–
229

176
4
9
#
–
578
(78)

5,402

5,915

5,226

5,402

5,915

Balance at start of year
Revaluation of investments in controlled entities
Revaluation of properties

–
–
31

–
–
–

–
–
–

1,293
(910)
18

1,419
(126)
–

Total asset revaluation reserve

31

–

–

401

1,293

Balance at start of year
Currency translation adjustments, net of hedges, after tax

(152)
170

63
(215)

(79)
142

261
177

320
(59)

Total foreign currency translation reserve

18

(152)

63

438

261

Balance at start of year
Transfers from (to) retained profits

539
49

485
54

708
(223)

55
–

55
–

Total general reserve

588

539

485

55

55

Capital reserve

149

149

149

–

–

Total reserves

786

536

697

894

1,609

Balance at start of year
Operating profit after income tax
attributable to members of the Company

2,952

2,412

1,830

1,802

1,317

1,747

1,480

1,106

2,307

1,299

Total available for appropriation
Transfers (to) from reserves
Ordinary share dividends provided for or paid
Preference share dividends paid

4,699
(49)
(941)
(102)

3,892
(54)
(814)
(72)

2,936
223
(747)
–

4,109
–
(941)
–

2,616
–
(814)
–

Retained profits at end of year

3,607

2,952

2,412

3,168

1,802

Total shareholders’ equity attributable tomembers of the Company

9,795

9,403

8,335

9,464

9,326

Note
Share capital

Balance at start of year
Ordinary shares
Dividend reinvestment plan
Group employee share acquisition scheme
Group share option scheme
Group share purchase scheme
Share buyback
Preference shares
Retranslation of preference share issues

28
28

Total share capital
Asset revaluation reserve

Foreign currency translation reserve

General reserve

Retained profits

77

The notes appearing on pages 7 to 82 form an integral part of these financial statements# Amounts less than $500,000

5ME64380_Financials_recombined 13/11/00 4:12 PM Page 6

Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Cash Flows for the year ended 30 September 2000

2000
$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

9,916
192
2,460
(6,108)(1,735)(283)(1,199)
(754)
4
(25)

8,679
157
2,089
(5,039)(1,840)
(282)
(977)
(535)
–
1,442

9,403
169
1,797
(6,238)(2,001)(291)(1,085)
(423)
–
926

6,453
2,490
1,916
(4,279)(1,357)
(238)
(646)
(478)
(1)
(511)

5,672
615
1,647
(3,520)(1,434)
(235)
(663)
(238)
–
1,743

2,468

3,694

2,257

3,349

3,587

(792)
(90)
(17,633)
(50)

616
828
(12,936)
–

2,299
(308)
(9,680)
–

(469)
(20)
(14,902)(2,189)506
700(10,775)(1,308)(8,109)8,553(5,527)
4,670(5,490)5,279(2,779)2,926(1,817)
1,340

(43)
1,510
–

(2)
–
(94)

(8)
–
–

–
2,360
–

–
–
–

(275)
249
(3,160)

(177)
142
(610)

(143)
75
1,483

(189)
147
(693)

(170)
4
(83)

(19,840)(13,090)(6,493)(15,808)(11,603)

3,111
12,763
–
(843)

(779)
5,202
–
743

(2,047)
2,131
–
(288)

3,036
12,696(3,855)(1,089)

(317)
405
2,942
991

5,555
(1,341)

4,330
(479)

802
(2,174)

5,555(1,341)

4,172
(479)

152
(147)
(19)
(749)
36
(1,014)

–
(256)
(1)
(671)
591
–

559
(273)
(3)
(491)
714
–

–
–
–
(647)
36
(1,014)

–
(256)
–
(599)
591
–

Net cash provided by (used in) financing activities

17,5048,680(1,070)13,377

7,450

Net cash provided by operating activities
Net cash (used in) investing activities
Net cash provided by (used in) financing activities

2,468(19,840)
17,504

3,694(13,090)
8,680

2,257
(6,493)(1,070)3,349(15,808)
13,377

3,587(11,603)7,450

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign currency translation on opening balances

132
6,634
(304)

(716)
8,981
(1,631)(5,306)
12,456
1,831

918
4,177
(371)

(566)
5,183
(440)

6,462

6,634

8,981

4,724

4,177

Note
Cash flows from operating activities

Interest received
Dividends received
Fees and other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Income taxes paid
Goods and services tax received (paid)
Net (increase) decrease in trading securities
Net cash provided by operating activities

39(a)Cash flows from investing activities

Net decrease (increase)
Due from other financial institutions
Regulatory deposits
Loans and advances
Shares in controlled entities
Investment securities
Purchases
Proceeds from sale or maturity
Controlled entities and associates
39(c)Purchased (net of cash acquired)Proceeds from sale (net of cash disposed)
Transferred from controlled entities to associates (net of cash)
Premises and equipment
Purchases
Proceeds from sale
Other
Net cash (used in) investing activities
Cash flows from financing activities

Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Due from/to controlled entities
Creditors and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease in outside equity interests
Dividends paid
Share capital issues
Share buyback

Cash and cash equivalents at end of year

39(b)The notes appearing on pages 7 to 82 form an integral part of these financial statements

6ME64380_Financials_recombined 13/11/00 4:12 PM Page 7

Notes to the Financial Statements
1: Accounting Policies(i) Bases of preparation
This general purpose financial report complies with theaccounts provisions of the Banking Act, applicable
Australian Accounting Standards, the accounts provisionsof the Corporations Law, Urgent Issues Group Consensus
Views and other authoritative pronouncements of theAustralian Accounting Standards Board.The accounting
policies are consistent with those of the previous year
except for the change disclosed in note (ii).

the year was $49 million (1999: $54 million).This net
contribution was calculated using the margin on services
methodology and was unaffected by the adoption of
AASB1038. Comparative figures have been restated.
(iii) Consolidation
The financial statements consolidate the financial
statements of Australia and New Zealand Banking Group
Limited (the Company) and its controlled entities.

Where controlled entities and associates have been sold or
acquired during the year, their operating results have been
included to the date of disposal or from the date of
Certain disclosures required by the United States
Securities and Exchange Commission in respect of foreign acquisition.
registrants have also been included in this report.
The Group adopts the equity method of accounting
for associates. Shares in associates are stated in the
The financial report has been prepared in accordance
consolidated balance sheet at cost plus the Group’s sharewith the historical cost convention as modified by theof post acquisition net assets. The Group’s share of results
revaluation of certain properties and trading instruments.
The preparation of the financial report requires the use of of associates is included in the profit and loss account.
management estimates. Such estimates may require review (iv) Goodwill
in future periods.
Goodwill, representing the excess of the purchase
The Company is a company of the kind referred to in the consideration over the fair value of the identifiable net
Australian Securities and Investments Commission classassets of a controlled entity at the date of gaining control,
order 98/100, dated 10 July 1998. Consequently, amounts is recognised as an asset and amortised on a straight linein the financial report have been rounded to the nearest
basis over the period during which the benefits are
million dollars except where otherwise indicated.
expected to arise, not exceeding 20 years.
All amounts are expressed in Australian dollars, unless
The unamortised balance of goodwill and the period ofotherwise stated.Where necessary, amounts shown foramortisation are reviewed annually.Where the balance
the previous year have been reclassified to facilitate
exceeds the value of expected future benefits, thecomparison.
difference is charged to the profit and loss account.
(ii) Changes in accounting policy(v) Foreign currency
Life Insurance Standard
The Group conducts life insurance business through
ANZ Life Assurance Company Limited (ANZ Life). A new
Accounting Standard AASB 1038 ‘Life Insurance Business’,
was applied from 1 October 1999.This standard requires
the first time consolidation of approximately $4 billionof assets and liabilities in the statutory funds of ANZLife which relate to policy holders. Previously, only theGroup’s interest in the actuarially assessed surplus of
ANZ Life’s statutory funds, after allowing for increases
in policyholder reserves determined under the margin onservices methodology, together with the assets and liabilitiesof the shareholders funds of ANZ, were included.
AASB1038 requires all assets held by ANZ Life, including
subsidiary companies to be marked to market, however
this requirement under the current structure has nil
impact on the Group. Accordingly, no appraisal orembedded values for subsidiary companies have been
booked in these accounts. AASB1038 also requires theGroup to consolidate income, expenses and the income
tax expense relating to the statutory funds.This resulted
in an increase to other income of $58 million, an increase
to other expenses of $7 million and an increase of$51 million in income tax expense in the twelve months
to September 2000.Transactions between ANZ Lifeand other Group entities have been eliminated on
consolidation.The net contribution from ANZ Life for

Assets and liabilities denominated in foreign currencies aretranslated into Australian dollars at the rates of exchangeruling at balance date.
Revenues and expenses of overseas branches andcontrolled entities are translated at average exchange rates
for the year.
Net translation differences arising from the translation ofoverseas branches and controlled entities considered to be
self-sustaining operations are included in the foreign
currency translation reserve, after allowing for thosepositions hedged by foreign exchange contracts and related
currency borrowings.
(vi) Fee Income
Fee income is brought to account on an accruals basis.
Yield-related front-end application fees received are
deferred and accrued to income as an adjustment of yieldover the period of the loan. Non yield-related application
and activation lending fees received are recognised asincome no later than when the loan is disbursed or thecommitment to lend expires. Fees received on an on-goingbasis that represent the recoupment of the costs ofproviding service (for example, maintaining andadministering existing facilities) are taken to income
when the fees are receivable.

7ME64380_Financials_recombined 13/11/00 4:12 PM Page 8

Notes to the Financial Statements(vii) Net loans and advances(ix) Acceptances

Net loans and advances include direct finance provided tocustomers such as bank overdrafts, credit cards, term loans,lease finance, hire purchase finance and commercial bills.

Commercial bills accepted but not held in portfolio
are accounted for and disclosed as a liability with acorresponding contra asset.
The Group’s own acceptances discounted are held aspart of either the trading securities portfolio or the loan
portfolio, depending on whether, at the time of suchdiscount, the intention was to hold the acceptances forresale or until maturity.
(x) Trading securities

Overdrafts, credit cards and term loans are carried atprincipal balances outstanding. Interest on amounts
outstanding is accounted for on an accruals basis.
Finance leases and hire purchase contracts are accounted
for using the finance method whereby income is taken
to account progressively over the life of the lease or thecontract in proportion to the outstanding investment
balance. Investments in leveraged leases are recorded at an
amount equal to the investment participation, and income
is taken to account on an actuarial basis over the term ofeach lease.
Customer financing through redeemable preference sharesis included within net loans and advances. Dividends
received on redeemable preference shares are taken to
the profit and loss account as part of interest income.
All loans are subject to regular scrutiny and gradedaccording to the level of credit risk. Loans are classified aseither productive or non-accrual. The Group has adopted
the Australian Prudential Regulation Authority Impaired
Assets Guidelines in assessing non-accrual loans.
Non-accrual loans include loans where the accrual ofinterest and fees has ceased due to doubt as to full recovery,and loans that have been restructured with an effective
yield below the Group’s average cost of funds at the dateof restructuring. A specific provision is raised to cover the
expected loss, where full recovery of principal is doubtful.
Restructured loans are loans with an effective yield above
the Group’s cost of funds and below the yield applicable
to a customer of equal credit standing.
Cash receipts on non-accrual loans are, in the absence of acontrary agreement with the customer, applied as income
or fees in priority to being applied as a reduction inprincipal, except where the cash receipt relates to proceedsfrom the sale of security.
(viii) Bad and doubtful debts
Specific provisions are maintained to cover identified
doubtful debts. All known bad debts are written off in
the year in which they are identified.
The Group’s annual debt provision charge represents
the expected average annual loss on principal over the
economic cycle for the lending portfolio.The debt
provision charge is credited to the general provision.
The specific provision requirement (representing new andincreased specific provisions less specific provision releases)
is transferred from the general provision to the specificprovision. Recoveries, representing excess transfers to thespecific provision, are credited to the general provision.
Provisions for doubtful debts are deducted from loans andadvances in the balance sheet.

8

Securities held for trading purposes are recorded atmarket value. Unrealised gains and losses on revaluation
are taken to the profit and loss account.
(xi) Investment securities
Investment securities are those which the Group intends
and has the ability to hold until maturity. Such securities
are recorded at cost or at cost adjusted for amortisationof premiums or discounts.
Premiums and discounts are capitalised and amortisedfrom the date of purchase to maturity. Interest anddividend income is accrued. Changes in market valuesof securities are not taken into account unless there isconsidered to be a permanent diminution in value.
(xii) Repurchase agreements
Securities sold under repurchase agreements are retainedin the financial statements and a counterparty liability isdisclosed under the classifications of Due to otherfinancial institutions or Deposits and other borrowings.
The difference between the sale price and the repurchaseprice is amortised over the life of the repurchaseagreement and charged to interest expense in the profit
and loss account.
Securities purchased under agreements to resell arerecorded as Liquid assets, Net loans and advances, or Duefrom other financial institutions, depending on the termof the agreement and the counterparty.
(xiii) Derivative financial instruments
Derivative financial instruments (derivatives) are contracts
whose value is derived from one or more underlying
financial instruments or indices.They include swaps,
forward rate agreements, futures, options andcombinations of these instruments.
Trading derivatives, comprising derivatives entered into
for customer-related or proprietary reasons or for hedging
the trading portfolio, are measured at fair value and all
gains and losses are taken to the profit and loss account.
Fair value losses arising from trading derivatives are notoffset against fair value gains unless a legal right of set-off
exists.
Derivatives designated, and effective, as hedges ofunderlying non-trading exposures are accounted for on
the same basis as the underlying exposures.To be
designated as a hedge, the fair value of the hedge mustmove inversely with changes in the fair value of theunderlying exposure.

ME64380_Financials_recombined 13/11/00 4:12 PM Page 9

Notes to the Financial Statements
Gains and losses resulting from the termination of a
derivative that was designated as a hedge of non-trading
exposures are deferred and amortised over the remaining
period of the original term covered by the terminatedinstrument where the underlying exposure still exists.
Where the underlying exposure no longer exists, the gains
and losses are recognised in the profit and loss account.

(xv) Income tax
The Group adopts the liability method of tax effectaccounting whereby income tax expense is calculated basedon accounting profit adjusted for permanent differences.
Permanent differences are items of revenue and expense
which are recognised in the profit and loss account but are
not part of taxable income or vice versa.

Gains and losses on derivatives related to hedging
exposures arising from anticipated transactions aredeferred and recognised in the financial statements when
the anticipated transaction occurs.

Future tax benefits and deferred tax liabilities relating totiming differences and tax losses are carried forward at tax
rates applicable to future periods. These future tax benefits
are not brought to account unless realisation of the asset is
These gains and losses are deferred only to the extent that assured beyond reasonable doubt. Future tax benefits
there is an offsetting unrecognised (unrealised) gain or loss relating to tax losses are only carried forward whereon the exposures being hedged. Deferred gains and losses realisation of the benefit is considered virtually certain.
are amortised over the expected term of the hedged
Provision for Australian income tax is made where theexposure.
earnings of overseas controlled entities are subjected to
Gains and losses that arise prior to and upon the maturity Australian tax under the attribution rules for the taxationof transactions entered into under hedge rolloverof foreign sourced income.
strategies are deferred and included in the measurement
Otherwise, no provision is made for overseas withholdingof the hedged anticipated transaction if the transaction is
tax or Australian income tax which may arise on
still expected to occur. If the forecasted transaction is no
repatriation of earnings from overseas controlled entities,
longer expected to occur, the gains and losses arewhere it is expected these earnings will be retained byrecognised immediately in the profit and loss statement.
those entities to finance their ongoing business.
(xiv) Premises and equipment(xvi) Employee entitlements
Premises and equipment (including computer equipment)
The amounts expected to be paid in respect of employees’
are carried at cost less depreciation or amortisation, or at
valuation. Any surplus on revaluation of a class of assets is entitlements to annual leave are accrued at current salarycredited directly to the asset revaluation reserve except to rates including on-costs. Liability for long service leave is
accrued in respect of all applicable employees at the present
the extent that it reverses a revaluation decrement
previously taken to profit and loss. Where a deficit arises, value of future amounts expected to be paid.
(xvii) Superannuation commitments
this is debited to the asset revaluation reserve to theextent of any previous revaluation surplus for that class,Contributions, which are determined on an actuarial basis,and the excess debited to the profit and loss account.
to superannuation schemes are charged to personnel
Potential capital gains tax arising from revaluations is not expenses in the profit and loss account.
taken into account unless the Group intends to dispose of
Any aggregate deficiencies arising from the actuarial
the properties.
valuations of the Group’s defined benefit schemes have
Profit or loss on the disposal of premises and equipment is been provided for in the financial statements.
determined as the difference between the carrying
The assets and liabilities of the schemes have not beenamount of the assets at the time of disposal and theconsolidated as the Company does not have direct orproceeds of disposal, and is included in the results of theindirect control of the schemes.
Group in the year of disposal.
(xviii) Leasing
Assets other than freehold land are depreciated at rates
based upon their expected useful lives to the Group, using Leases entered into by the Group as lessee are
the straight line method. The depreciation rates used for predominantly operating leases, and the operating lease
payments are included in the profit and loss account ineach class of asset are:equal instalments over the lease term.
Buildings
1%
Building integrals
10% (xix) Goods and services tax
Furniture & equipment
10%
Computer & office equipment
12.5% to 33%
Leasehold improvements are amortised on a straight line
basis over the remaining period of each lease.
The carrying values of all non-current assets have beenassessed and are not in excess of their recoverable amounts.
In assessing recoverable amounts, the relevant cash flows
have not been discounted to their present value.

Revenues, expenses and assets are recognised net of theamount of goods and services tax (GST), except where theamount of GST incurred is not recoverable from theAustralian Tax Office (ATO). In these circumstances the
GST is recognised as part of the cost of acquisition of theasset or as part of the expense.
Receivables and payables are stated with the amount of
GST included.The net amount of GST recoverable from,or payable to, the ATO is included as an other asset or
liability in the balance sheet.
9ME64380_Financials_recombined 13/11/00 4:12 PM Page 10

Notes to the Financial Statements
Cash flows are included in the statement of cash flows on
a gross basis.The GST components of cash flows arisingfrom investing and financing activities which arerecoverable from, or payable to, the ATO are classified as
operating cash flows.
(xx) Life insurance

Claims under investment-linked business are recognised
when the policy ceases to participate in the earnings ofthe fund. Claims on non investment-linked business arerecognised when the liability to the policyowner under thepolicy contract has been established or upon notification of
the insured event depending on the type of claim.

The Group’s life insurance business is conducted through
ANZ Life Assurance Company Limited (ANZ Life).

Policy liabilities and other liabilities are measured at netpresent value of estimated future cash flows. Changes in netpresent values are recognised in the profit and loss as revenue
or expenses in the financial year in which they occur.

Components of life insurance margin on services
operating income disclosed are premium revenue andrelated revenue, investment revenue, claims expense andinsurance policy liabilities expense (refer note 37).
Premiums with no due date are recognised as revenue ona cash received basis. Premiums with a regular due date
are recognised as revenue on an accruals basis. Unpaid
premiums are only recognised as revenue during the days ofgrace or where secured by the surrender value of the policy
and are included as “Other Assets” in the balance sheet.

10

All assets are measured at net market values as at thereporting date. Changes in the net market values arerecognised in the profit and loss as revenue or expenses
in the financial year in which they occur.

ME64380_Financials_recombined 13/11/00 4:12 PM Page 11

Notes to the Financial Statements
2000$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

243
5
573
8,930
490

227
9
534
7,549
365

556
10
818
7,494
621

174
1
320
5,729
285

137
1
260
4,732
269

From controlled entities

10,241
–

8,684
–

9,499
–

6,509
475

5,399
294

Total interest income

10,241

8,684

9,499

6,984

5,693

727
1,133

679
1,022

592
930

598
722

563
616

From controlled entities

1,860
–

1,701
–

1,522
–

1,320
222

1,179
189

Total fee income

1,860

1,701

1,522

1,542

1,368

342
–

340
–

373
26

223
–

212
–

175
87
13
7
3
19
77

174
89
16
10
(2)
–
49

133
(83)
18
34
(4)
–
123

–
79
–
7
–
–
2,379

–
71
–
7
–
–
501

723

676

620

2,688

791

Total other operating income

2,583

2,377

2,142

4,230

2,159

Abnormal profit (loss) (refer note 5)

1,207

–

(70)

351

–

Total income4

14,031

11,061

11,571

11,5657,852

2: IncomeInterest income
From other financial institutions
On regulatory deposits
On trading and investment securities
On loans and advances
Other

Other operating income(i) Fee income
Lending
Other, commissions1(ii) Other income
Foreign exchange earnings
Gain on sale of investment securities
Life insurance margin on services operating
income (refer note 37)
Profit (loss) on trading instruments
Profit on sale of premises2
Rental income
Share of associates profit (net of writeoffs)
Dividend income from strategic investments
Other3
Total other income

Includes commissions from funds management business
2
Gross proceeds on sale of premises is $164 million (1999: $127 million)
3
The Company’s dividends include dividends received from controlled entities of $2,363 million (1999: $491 million)
4
Includes external dividend income of $192 million (1999: $157 million) for the Group and $127 million (1999: $124 million) for the Company
1

3: Expenses
Interest expense
To other financial institutions
On deposits
On borrowing corporations’ debt
On commercial paper
On loan capital, bonds and notes
Other

577
4,082
409
486
596
290

518
3,299
382
315
301
214

687
3,929
415
228
308
385

522
2,953
–
206
568
117

419
2,119
–
109
288
218

To controlled entities

6,440
–

5,029
–

5,952
–

4,366
362

3,153
357

Total interest expense

6,440

5,029

5,952

4,728

3,510

11

ME64380_Financials_recombined 13/11/00 4:12 PM Page 12

Notes to the Financial Statements
2000$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

68
33
99
33
1,201
324

63
38
95
33
1,237
266

69
44
88
29
1,427
197

63
26
77
32
880
264

61
35
72
29
937
209

1,758

1,732

1,854

1,342

1,343

13
23
145
101
12

14
31
159
102
8

16
30
181
113
7

8
4
109
73
5

8
5
121
74
4

To controlled entities

294
–

314
–

347
–

199
38

212
37

Total premises expenses

294

314

347

237

249

(iii) Computer
Computer contractors
Data communication
Depreciation
Rentals and repairs
Other

34
41
96
71
101

32
43
94
65
110

46
47
93
53
102

33
31
67
59
69

26
34
63
53
51

343

344

341

259

227

103
12
3
42
28
6
55
45
136
63
79
83
157

84
10
3
46
29
6
53
44
130
61
90
77
186

83
3
3
49
40
8
15
43
112
66
99
90
169

74
8
1
29
24
4
20
32
106
41
51
55
116

55
8
1
31
26
2
39
31
110
38
63
54
59

812

819

780

561

517

(v) Restructuring1

107

91

120

75

75

Total operating expenses

3,314

3,300

3,442

2,474

2,411

Total expenses

9,754

8,329

9,394

7,202

5,921

3: Expenses (continued)
Operating expenses(i) Personnel
Employee taxes
PayrollFringe benefits tax
Pension fund
Provision for employee entitlements
Salaries and wages
Other
Total personnel expenses(ii) Premises
Amortisation of leasehold improvements
Depreciation of buildings and integrals
Rent
Utilities and other outgoings
Other

Total computer expenses(iv) Other
Advertising and public relations
Amortisation of goodwill
Audit fees (refer note 4)
Depreciation of furniture and equipment
Freight and cartage
Loss on sale of premises and equipment
Non-lending losses, frauds and forgeries
Postage
Professional fees
Stationery
Telephone
TravelOther
Total other expenses

1

12

In addition restructuring costs of $361 million (Company $276 million) have been treated as abnormal (1999: Group nil, Company nil), (1998: Group nil,Company nil). Refer note 5ME64380_Financials_recombined 13/11/00 4:12 PM Page 13

Notes to the Financial Statements
2000
$’000

Consolidated
1999
$’000

1998
$’000

The Company
2000
1999
$’000
$’000

2,755
12

3,046
36

3,123
13

1,275
–

1,202
21

2,767

3,082

3,136

1,275

1,223

3,420
690
12,543
4,900
3

2,428
321
13,552
510
51

2,269
140
24,525
240
100

1,148
–
10,690
4,791
–

1,022
136
12,782467
22

21,556

16,862

27,274

16,62914,42924,323

19,94430,41017,904

15,652

4: Remuneration of Auditors
Amounts received and due and receivable
Auditing the accounts
By KPMGBy other Group auditors

Other services
By KPMG
Audit related services1
Accounting
Consulting2
Taxation
By other Group auditors

Total remuneration of auditors

Audit related services are services other than those relating to the audit or review of the statutory financial statements of the Group.These services include
prudential supervision reviews for central banks, prospectus reviews, trust audits and other audits required for local statutory purposes2
1998 include fees paid to KPMG Barents (a wholly owned entity of the USA practice of KPMG) of $23,146,000 for consultancy work principally inconnection with the ANZ Global Project1

By virtue of an Australian Securities and Investments Commission class order dated 30 September 1998, the auditors ofAustralia and New Zealand Banking Group Limited and its related bodies corporate, KPMG, have been exempted fromcompliance with the requirements of Section 324 of the Corporations Law.The class order exemption applies in thatpartners and associates of KPMG not engaged on the audit of Australia and New Zealand Banking Group Limited andits related bodies corporate may be indebted to the Company, provided that such indebtedness arose upon ordinary
commercial terms and conditions.

13ME64380_Financials_recombined 13/11/00 4:12 PM Page 14

Notes to the Financial Statements
2000$M

Consolidated
1999
$M

30
33
1,225

–
–
–

–
–
–

30
–
321

–
–
–

–

–

(102)

–

–

(575)
(361)
(50)
(81)

–
–
–
–

–
–
–
–

(575)
(276)
(50)
–

–
–
–
–

221

–

(102)

(550)

–

–
(64)

–
–

33
–

–
(77)

–
–

(246)
116
17

–
–
–

–
–
–

(246)
88
17

–
–
–

(177)

–

33

(218)

–

44

–

(69)

(768)

–

1998
$M

The Company
2000
1999
$M
$M

5: Abnormal Items
Profit before tax
Revaluation of properties
Gain on sale of investment in Colonial
Income from sale of Grindlays and associated businesses(Loss) before tax
Costs of exiting businesses
Provisions raised on sale of Grindlays and associatedbusinesses (refer to note below)
Restructuring provision
Provision for litigation
Writedown of investment in Panin
Total abnormal profit (loss) before tax
Income tax (expense) benefit applicable to
Costs of exiting businesses
Restatement of deferred tax balances
Sale of Grindlays and associated businesses
and provisions raised
Restructuring provision
Provision for litigation
Total abnormal tax (expense) benefit
Total abnormal profit (loss) after tax

Sale of Grindlays businesses
On 31 July 2000, the Group sold ANZ Grindlays Bank Limited and the private banking business of the Group in the
United Kingdom and Jersey together with ANZ Grindlays (Jersey) Holdings Limited and its subsidiaries (the Grindlays
business) to Standard Chartered Bank (SCB). Income from sale of $1,225 million represents goodwill of
USD 750 million, less costs of hedging and transaction costs.

Contribution to Group Profit(figures exclude abnormal items)

Net interest income
Other operating income
Net operating income
Operating expenses
Operating profit before debt provision
Provision for doubtful debts
Income tax expense and outside equity interest
Operating profit after tax

14

Sold Business
Period to
31 July 00$M

Remaining
Businessto Sept 00$M

Total Groupto Sept 00$M

Sold Business
Full year
Sept 99
$M

336
239

3,465
2,344

3,801
2,583

345
224

575
(288)

5,809
(3,026)

6,384(3,314)

569
(300)

287
(62)
(116)

2,783
(440)
(749)

3,070
(502)
(865)

269
(83)
(71)

109

1,594

1,703

115

ME64380_Financials_recombined 13/11/00 4:12 PM Page 15

Notes to the Financial Statements
5: Abnormal Items (continued)
Balance Sheet of Operations Sold

As At
31 July 001$M

AssetsLiquid assets
Due from other financial institutions
Trading and investment securities
Net loans and advances including acceptances
Other assets
Total external assets
Net intragroup assets
Total assets

515
338
1,699
5,657
1,321
9,530
3,015
12,545

Liabilities
Due to other financial institutions
Deposits and borrowings
Acceptances
Other
Total liabilities
Net assets
1

808
10,009250
382
11,4491,096

Adjusted for dividends paid to the Company and exclusive of provisions related to warranties and indemnities given by the Company

Other Matters
As part of the sale of the Grindlays businesses to SCB, the Group has provided warranties relating to the Grindlays
business.Where it is anticipated that payments are likely under these warranties, provisions have been made to cover the
anticipated liability.
In addition the Group has provided SCB and/or Grindlays with certain indemnities namely:
1. an indemnity relating to liabilities Grindlays may incur as a result of certain claims made against Grindlays and its
officers in India (the Indian Indemnity). Details of this indemnity are set out below;
2. an indemnity in relation to certain customer accounts written by Grindlays prior to 31 July 2000.The indemnity
covers 80% of losses emerging on accounts currently totalling up to USD 186 million;
3. an indemnity for certain cross-border risks in relation to import letters of credit issued by Grindlays Pakistan to its
customers in Pakistan prior to 31 July 2000.The duration of the indemnity is 1 year.The indemnity covers losses
emerging on accounts totalling USD 80 million. It is not currently anticipated that the Group will be called on to
make any material payments under this indemnity; and4. an indemnity relating to tax liabilities of Grindlays (and its subsidiaries) and the Jersey Sub-Group to the extent towhich such liabilities have not been provided for in the Grindlays accounts as at 31 July 2000.
The Indian Indemnity requires the Group to pay SCB for losses that Grindlays incurs as a result of certain claims thathave been or may be made against Grindlays and its officers in India. Under the terms of the Indian Indemnity, theGroup will have control of matters for which it is liable. No settlement offer can be made or paid by Grindlays without
the prior agreement of the Group.The Group will continue to pursue these matters taking into account its legal
obligations in the best interests of shareholders.
Details of the main claims for which the Group is liable under the Indian Indemnity are set out below.
(a) National Housing Bank Litigation
In 1992 Grindlays in India received a claim, aggregating approximately Indian Rupees 5.06 billion ($202 million at
30 September 2000 rates) from the National Housing Bank (NHB) in that country.The claim arose out of certain
cheques drawn by NHB in favour of Grindlays, the proceeds of which were credited into the account of one of
the customers of Grindlays.
On 29 March 1997, pursuant to an Arbitration Agreement entered into on 4 November 1992, the Arbitrators madean award on this dispute in favour of Grindlays. NHB paid to Grindlays the principal and interest due under theaward aggregating Indian Rupees 9.12 billion ($364 million at 30 September 2000 rates). Subsequently, NHB had
the award reviewed by the Special Court at Mumbai, which on 4 February 1998 ordered that the award be set
aside. Grindlays has filed an appeal with the Supreme Court of India seeking that the Special Court's order be set
aside. Should Grindlays be required to repay NHB the Indian Rupees 9.12 billion, interest at 18% on that amount
may also be required to be paid.
(b) Foreign Exchange Regulation Act
In 1991, certain amounts were transferred from non-convertible Indian Rupee accounts maintained with Grindlays
in India. In making these transactions it would appear that the provisions of the Foreign Exchange Regulation Act,
1973 were inadvertently not complied with. Grindlays on its own initiative, brought these transactions to theattention of the Reserve Bank of India.

15

Notes to the Financial Statements
The Indian authorities have served notices on Grindlays and certain of its officers in India that could lead toprosecutions and possible penalties. Grindlays has commenced proceedings in the courts contesting the validityof these notices.
Provisions for liabilities
Provisions of $575 million have been made out of the proceeds of sale to cover all estimated liabilities under theindemnities and warranties and other costs. In addition tax provisions of $246 million, which include the provision
for capital gains tax, have been raised.
Refer note 18 for details covering disposals of controlled entities.
Property Revaluation
The Group revalued its class of assets ‘Property’ at directors’ valuations, based on independent valuations by Arthur
Andersen (most Australian and Pacific properties) and Jones Lang LaSalle Advisory (other major International
properties) as at 31 March 2000. Consistent with Australian Accounting Standards, a $30 million revaluation surplus
has been taken to profit and loss, to reverse a decrement previously taken to profit on revaluation of properties.
The remaining revaluation increment of $31 million has been taken to asset revaluation reserve.
Impact of Taxation Reform
The Australian Government has announced a change in corporate tax rates.The Groups’ Australian tax rate will fallfrom 36% for the year ended 30 September 2000, to 34% for the 2001 year and 30% thereafter. Deferred tax balances
have been restated at these rates (impact ($64 million)).
Profit on Sale of Investment in Colonial
During the March half year the Group sold its small stake in Colonial Limited, realising a gain of $33 million.
Restructuring Provision
Using the financial capacity provided by the abnormal profit from the sale of Grindlays, the Group has decided toaccelerate the implementation of its new strategy. In particular, the Group will bring forward the development of the 21
specialised businesses, including three new customer businesses, together with the eTransformation of the Group’s
technology and operational platforms to fund the development of several new high-growth businesses that are essential
for the Group’s future success.
This will require a substantial restructuring of current technology, premises and operational infrastructure across theGroup. Hence the Group has recognised a provision of $361 million to cover restructuring costs involved with thisprogram.
The program comprises thirty-five major initiatives, spread across the Group’s 21 businesses plus support activities. Eachhas specific implementation plans, and will be rolled out at different times over the next two years. Announcement of
the detail of these programs will be made in due course, internally and externally as appropriate.
The main initiatives include:
•

•
•
•
•
•

the modernisation and reshaping of the Group’s metropolitan branches and sales and services outlets into specially
tailored retail outlets, configured around the specialised needs of the Group’s three new customer businesses ofWealth Management, General Banking and Small Business;
the transformation of the Group’s General Banking delivery platform, including a new sales and service platform,
and imaging technology to improve productivity of processes and workflow;a substantial reengineering and upgrading of the Esanda systems and operations environment;
the upgrading of the Group’s EFTPOS network to reduce maintenance and telecommunications changes and toincrease flexibility for future enhancements such as chip technology;
the simplification of the Asia Pacific business platforms and centralisation of operations;the rationalisation of the Group’s IT platforms, including the decommissioning of mid range IT systems, workflow
improvements and other hardware upgrades required for eTransformation.

The program is intended to be completed during this year and next, and the Group is expected to recover the majorityof this expenditure by the third year from annual productivity improvements and revenue enhancements.These funds
will be available to invest in the Group’s growth businesses and to contribute to the Group’s earnings per share growthcommitments.
Revaluation of Panin
Following recent turmoil in the Indonesian equity markets, the market value of the Group’s investment in Panin has
decreased markedly to well below the Group’s carrying value.The Group still regards this as a sound long term
investment; however, the Group has determined it is no longer prudent to carry at an historical amount which is above
market value.
Provision for Litigation
Provisions have been made for the resolution of litigation arising from exited businesses and previous practices. Further
disclosures may be prejudicial to the Group’s position on these matters.
16

ME64380_Financials_recombined 13/11/00 4:12 PM Page 17

Notes to the Financial Statements
2000$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

2,568

2,222

1,760

3,659

1,686

924

800

634

1,317

607

4
(9)
(70)
(10)
17
18

2
(21)
(55)
(3)
17
6

14
(45)
(55)
–
25
3

6
(2)
(892)
–
–
159

11
–
(221)
–
–
(3)

Income tax over provided in prior years

874
(11)

746
(10)

576
–

588
(4)

394
(7)

Total income tax expense on operating profit
before abnormal items

863

736

576

584

387

Abnormal profit (loss) before tax (refer note 5)

221

–

(102)

(550)

–

Prima facie income tax at 36%
Tax effect of permanent differences
Overseas tax rate differential
Revaluation of properties
Net capital gain on sale of Grindlays and associated business(net permanent difference)
Restatement of deferred tax balances
Writedown of investment in Panin
Restructuring provision (composite tax rate)
Gain on sale of investment in Colonial

80

–

(37)

(198)

–

–
(11)

–
–

4
–

–
(11)

–
–

12
64
29
15
(12)

–
–
–
–
–

–
–
–
–
–

339
77
–
11
–

–
–
–
–
–

Total income tax (benefit) expense on abnormal items (refer note 5)

177

–

(33)

218

–

Total income tax expense

1,040

736

543

802

387

Ordinary dividends
Interim dividend
Proposed final dividend
Bonus option plan adjustment

445
528
(32)

404
470
(60)

366
431
(50)

445
528
(32)

404
470
(60)

Dividends on ordinary shares

941

814

747

941

814

6: Income Tax Expense
Reconciliation of the prima facie income tax payable
on operating profit and abnormal items with the income
tax expense charged in the profit and loss accountOperating profit before income tax andabnormal items
Prima facie income tax at 36%
Tax effect of permanent differences
Overseas tax rate differential
Other non–assessable income
Rebateable and non–assessable dividends
Application of available capital lossesLife insurance accounting
Other

7: Dividends

A final dividend of 35 cents, fully franked, is proposed to be paid on each fully paid ordinary share on 15 December 2000 (1999: final
dividend of 30 cents, paid 20 December 1999, partially franked to 80%; 1998: final dividend of 28 cents, paid 21 December 1998,
partially franked to 60%).The 2000 interim dividend of 29 cents, paid 3 July 2000, was fully franked, (1999: interim dividend of 26
cents, paid 5 July 1999, partially franked to 75%; 1998: interim dividend of 24 cents, paid 6 July 1998, partially franked to 60%).
The tax rate applicable to the franking credits attached to the interim dividend and to be attached to the proposed final dividend is
34% (1999: 36%, 1998: 36%).

17

ME64380_Financials_recombined 13/11/00 4:12 PM Page 18

Notes to the Financial Statements
7: Dividends (continued)

Dividends on preference shares

2000
$M

Consolidated
1999
$M

102

72

1998
$M
–

The Company
2000
1999
$M
$M
–

–

The Company has issued 124,032,000 preference shares, raising USD 775 million via Trust Securities issues.The Trust Securities
carry an entitlement to a distribution of 8% (USD 400 million) or 8.08% (USD 375 million).The amounts are payable quarterly inarrears. Shown above are amounts paid for the year to 30 September 2000 (1999: from the dates of issue, 23 September 1998 and
19 November 1998, to 30 September 1999). Payment dates are the fifteenth days of January, April, July and October.

Dividend Franking Account
The amount of franking credits available for the subsequent financial year is nil (1999 and 1998: nil), after adjusting for
franking credits that will arise from the payment of tax on Australian profits for the 2000 financial year, less franking
credits which will be utilised in franking the proposed final dividend and franking credits that may not be accessable by
the Company at present.
Restrictions which Limit the Payment of Dividends
There are presently no significant restrictions on the payment of dividends from controlled entities to the Company.
Various capital adequacy, liquidity, statutory reserve and other prudential requirements must be observed by certain
controlled entities and the impact on these requirements caused by the payment of cash dividends is monitored. In
practice however, there are significant tax considerations associated with the receipt of dividends from controlled
entities by a company. Payment of dividends from domestic controlled entities constitutes assessable income to arecipient Australian company.Where the dividend is received from a company within the wholly owned group or, if thepayer company is not wholly owned, to the extent that the dividend is franked, the recipient company is generally
entitled to a rebate of tax otherwise payable on the assessable dividend. Should the recipient company’s total assessable
income be less than the rebateable dividend income, or it be in a tax loss position, the rebate will reduce or be
eliminated.The Group therefore acts to preserve the availability of rebates by avoiding the payment of rebateable
dividends by domestic controlled entities in this situation.
Payments of dividends from overseas controlled entities may attract withholding taxes which have not been provided
for in these financial statements.
There are presently no restrictions on payment of dividends by the Company. Reductions of shareholders’ equity
through payment of cash dividends is monitored having regard to the regulatory requirements to maintain a specified
capital adequacy ratio. In particular, the Australian Prudential Regulation Authority has advised Australian banks that abank under its supervision must consult with it before declaring a dividend if the bank has incurred a loss, or proposes
to pay dividends which exceed the level of profits earned.
Dividend Reinvestment Plan
During the year, 9,796,980 ordinary shares were issued at $11.50 per share, and 10,619,991 ordinary shares at $11.62
per share, under the Dividend Reinvestment Plan.
Bonus Option Plan
Dividends paid during the year have been reduced by way of certain shareholders participating in the Bonus Option
Plan and forgoing all or part of their right to dividends in return for the receipt of bonus shares.
During the year, 1,631,515 ordinary shares were issued at $11.50 per share, and 1,154,845 ordinary shares at $11.62 pershare, under the Bonus Option Plan.

Final dividend 1999
Interim dividend 2000

18

Declared
dividend$M

Bonus options
exercised$M

Amount
paid
$M

470
445

(18)
(14)

452
431

915

(32)

883

ME64380_Financials_recombined 13/11/00 4:12 PM Page 19

Notes to the Financial Statements
2000$M

Consolidated
1999
$M

1998
$M

Operating profit after income tax
attributable to members of the Company
Abnormal items after tax

1,747
(44)

1,480
–

1,106
69

Operating profit after income tax before abnormal items
Less: preference share dividend paid

1,703
102

1,480
72

1,175
–

Operating profit after income tax and preference share
dividend before abnormal items
Weighted average number of ordinary shares (millions)

1,601
1,540.3

1,408
1,553.5

1,175
1,522.9

Basic earnings per share (cents)

103.9

90.6

77.2

1,601

1,408

1,175

5

2

2

Total adjusted earnings

1,606

1,410

1,177

Weighted average number of ordinary shares (millions)
Add: potential dilution of options to ordinary shares

1,540.3
12.1

1,553.5
7.5

1,522.9
6.6

Total adjusted number of shares

1,552.4

1,561.0

1,529.5

Diluted earnings per share (cents)

103.5

90.3

76.9

Operating profit after income tax
attributable to members of the Company

1,645

1,408

1,106

Weighted average number of ordinary shares (millions)

1,540.3

1,553.5

1,522.9

Basic earnings per share (cents)

106.8

90.6

72.6

1,645

1,408

1,106

5

2

2

Total adjusted earnings

1,650

1,410

1,108

Weighted average number of ordinary shares (millions)
Add: potential dilution of options to ordinary shares

1,540.3
12.1

1,553.5
7.5

1,522.9
6.6

Total adjusted number of shares

1,552.4

1,561.0

1,529.5

Diluted earnings per share (cents)

106.3

90.3

72.4

8: Earnings per Ordinary Share
Before abnormal items
Basic

DilutedOperating profit after income tax and preference share
dividend before abnormal items
Add: notional interest earned on capital raised fromexercise of options

After abnormal items
Basic

DilutedOperating profit after income tax
attributable to members of the Company
Add: notional interest earned on capital raised fromexercise of options

19

ME64380_Financials_recombined 13/11/00 4:12 PM Page 20

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

9: Liquid Assets
Australia

Coins, notes and cash at bankers
Money at call
Securities purchased under agreement toresell less than 90 days
Bills receivable and remittances in transit

558
201

540
170

536
121

442
115

437
84

960
400

407
84

937
400

1,280

2,070

1,148

1,894

148
457
3,046

312
494
1,427

49
–
2,916

28
5
1,174

49
668

224
756

–
268

–
463

4,368

3,213

3,233

1,670

Total liquid assets

5,648

5,283

4,381

3,564

Maturity analysis based on original term to maturity at 30 September
Less than 90 days
More than 90 days

2,662
2,986

4,243
1,040

1,404
2,977

2,676
888

Total liquid assets

5,648

5,283

4,381

3,564

Australia
Overseas

2,741
3,081

1,620
1,852

2,109
2,511

1,137
1,075

Total due from other financial institutions

5,822

3,472

4,620

2,212

Maturity analysis based on remaining term to maturity at 30 September
Overdraft
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

11
5,098
606
75
32

54
3,008
301
93
16

11
3,981
572
27
29

49
1,920
203
24
16

Total due from other financial institutions

5,822

3,472

4,620

2,212

Overseas

Coins, notes and cash at bankers
Money at call
Other banks’ certificates of deposit
Securities purchased under agreement toresell less than 90 days
Bills receivable and remittances in transit

10: Due from Other Financial Institutions

20

ME64380_Financials_recombined 13/11/00 4:12 PM Page 21

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

190
816
–

223
63
86

190
816
–

223
63
–

1,006

372

1,006

286

–
478
1

8
633
76

–
–
1

–
–
2

479

717

1

2

1,485

1,089

1,007

288

915
1,009
520

913
1,229
587

915
1,009
520

913
1,225
512

2,444

2,729

2,444

2,650

96
101

234
207

–
–

–
2

11: Trading Securities
Trading securities are allocated between Australia andOverseas based on the domicile of the issuer
Listed – Australia

Commonwealth securities
Local and semi-government securities
Other securities and equity securities

Listed – Overseas

Indian government securities
Equity securities
Other non-government securities
Total listed
Unlisted – Australia

Other government securities
ANZ accepted bills
Other securities and equity securities

Unlisted – Overseas

Other government securities
Other securities and equity securities

197

441

–

2

Total unlisted

2,641

3,170

2,444

2,652

Total trading securities

4,126

4,259

3,451

2,940

21

ME64380_Financials_recombined 13/11/00 4:12 PM Page 22

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

12: Investment Securities
Investment securities are allocated between Australia andOverseas based on the domicile of the issuer
Listed – Australia

Other securities and equity investments

472

213

52

43

472

213

52

43

–
–
139
165

848
23
145
239

–
–
135
29

–
–
88
18

304

1,255

164

106

776

1,468

216

149

100
610
35

466
793
309

100
610
35

466
793
5

745

1,568

745

1,264

489
605
–
–
378
13

695
225
146
156
416
21

–
605
–
–
216
13

–
225
–
–
207
11

Listed – Overseas

Indian government securities
Indian non-government securities
Other government securities
Other securities and equity investments
Total listed
Unlisted – Australia

Commonwealth government securities
Local and semi-government securities
Other securities and equity investments
Unlisted – Overseas

New Zealand government securities
US government securities
Pakistan government securities
Bangladesh government securities
Other government securities
Other securities and equity investments

1,485

1,659

834

443

Total unlisted

2,230

3,227

1,579

1,707

Total investment securities

3,006

4,695

1,795

1,856

458

205

29

36

458

205

29

36

–
–
139
165

867
23
146
258

–
–
135
29

–
–
89
18

304

1,294

164

107

762

1,499

193

143

100
610
25

466
793
309

100
610
23

466
793
5

735

1,568

733

1,264

489
605
–
–
378
13

695
225
149
156
416
22

–
605
–
–
216
13

–
225
–
–
207
11

1,485

1,663

834

443

Total market value of unlisted investment securities

2,220

3,231

1,567

1,707

Total market value of investment securities

2,982

4,730

1,760

1,850

Market value information
Listed – Australia

Other securities and equity investments
Listed – Overseas

Indian government securities
Indian non-government securities
Other government securities
Other securities and equity investments
Total market value of listed investment securities
Unlisted – Australia

Commonwealth government securities
Local and semi-government securities
Other securities and equity investments
Unlisted – Overseas

New Zealand government securities
US government securities
Pakistan government securities
Bangladesh government securities
Other government securities
Other securities and equity investments

22

ME64380_Financials_recombined 13/11/00 4:12 PM Page 23

Notes to the Financial Statements
12: Investment Securities (continued)
Investment Securities by Maturities and Yields
Based on remaining term tomaturity at 30 September 2000

At book value

BetweenLess than 3 months and3 months
12 months$M$M

BetweenBetween
1 year and 5 years and5 years
10 years
$M
$M

After
10 years$MNo
maturity
specified
$M

Total
$M

MarketValue$M

Australia

Commonwealth securities
Local and semi-government securities
Other securities and equity investments

100
610
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
507

100
610
507

100
610
483

710

–

–

–

–

507

1,217

1,193

114
22
225
11

375
230
175
55

–
353
86
66

–
–
30
4

–
–
1
–

–
–
–
42

489
605
517
178

489
605
517
178

372

835

505

34

1

42

1,789

1,789

Total book value

1,082

835

505

34

1

549

3,006

n/a

Total market value

1,082

835

505

34

1

525

n/a

2,982

Overseas

New Zealand government securities
US government securities
Other government securities
Other securities and equity investments

Less than
1 year%

Between
1 year and5 years%

Between
5 years and
10 years%

After
10 years
%

6.14
6.31
–

–
–
–

–
–
–

–
–
–

6.82
6.05
9.08
6.44

–
7.26
6.30
7.05

–
–
5.80
6.86

–
–
8.00
–

Weighted average yields1
Australia

Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Overseas

New Zealand government securities
US government securities
Other government securities
Other securities and equity investments
1

Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 2000

23

ME64380_Financials_recombined 13/11/00 4:12 PM Page 24

Notes to the Financial Statements
12: Investment Securities (continued)
Investment Securities by Maturities and Yields
Based on remaining term tomaturity at 30 September 1999

At book value

BetweenLess than 3 months and3 months
12 months$M$M

BetweenBetween
1 year and 5 years and5 years
10 years
$M
$M

After
10 years$MNo
maturity
specified
$M

Total
$M

MarketValue$M

Australia

Commonwealth securities
Local and semi-government securities
Other securities and equity investments

163
744
302

–
49
–

303
–
–

–
–
1

–
–
–

–
–
219

466
793
522

466
793
514

1,209

49

303

1

–

219

1,781

1,773

201
7
–
18
41
19
281
15

494
189
10
15
38
86
95
10

–
565
13
192
67
51
172
81

–
82
–
–
–
–
1
3

–
5
–
–
–
–
12
3

–
–
–
–
–
–
–
148

695
848
23
225
146
156
561
260

695
867
23
225
149
156
562
280

582

937

1,141

86

20

148

2,914

2,957

Total book value

1,791

986

1,444

87

20

367

4,695

n/a

Total market value

1,795

984

1,456

93

22

380

n/a

4,730

Overseas

New Zealand government securities
Indian government securities
Indian non-government securities
US government securities
Pakistan government securities
Bangladesh government securities
Other government securities
Other securities and equity investments

Less than
1 year%

Between
1 year and5 years%

Between
5 years and
10 years%

After
10 years
%

4.77
5.06
4.98

4.78
–
–

–
–
–

–
–
–

4.97
11.07
13.43
4.83
10.96
8.48
10.99
6.81

–
11.79
17.20
5.99
15.00
9.48
9.34
5.88

–
10.10
–
–
–
–
8.00
5.61

–
13.84
–
–
–
–
9.77
13.90

Weighted average yields1
Australia

Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Overseas

New Zealand government securities
Indian government securities
Indian non-government securities
US government securities
Pakistan government securities
Bangladesh government securities
Other government securities
Other securities and equity investments
1

24

Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 1999

ME64380_Financials_recombined 13/11/00 4:12 PM Page 25

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

2,877
2,837
40,571
31,446
2,821
7,958
510

2,776
2,138
31,68427,431
3,585
7,257
384

2,877
2,837
40,571
29,528
746
173
510

2,776
2,138
31,684
26,247845
43382

89,02075,25577,24264,115

569
311
8,487
5,688
201
394
838

478
249
8,000
5,817
222
322
594

–
–
–
–
–
–
–

–
–
–
–
–
–
–

16,48815,682

–

–

655
27
370
12,708
303
22
39

1,970
164
449
13,514
183
295
39

556
7
345
10,839
278
22
39

530
5
190
8,406
174
38
–

14,124

16,61412,086

9,343

Total gross loans and advances

119,632

107,551

89,32873,458Provisions for doubtful debts (refer note 15)
Income yet to mature(2,082)(1,235)(2,302)(1,186)(1,787)(1)(1,657)(3)(3,317)(3,488)(1,788)(1,660)116,315

104,063

87,54071,798

1,326
1,999

1,787
2,203

208
816

292
727

3,325

3,990

1,024

1,019

13: Net Loans and Advances
Loans and advances are classified between Australia, New Zealandand Overseas based on the domicile of the lending point
Australia

Overdrafts
Credit card outstandings
Term loans – housing
Term loans – non-housing
Lease finance (refer below)
Hire purchase
Other

New Zealand

Overdrafts
Credit card outstandings
Term loans – housing
Term loans – non-housing
Lease finance (refer below)
Hire purchase
Other

Overseas Markets

Overdrafts
Credit card outstandings
Term loans – housing
Term loans – non-housing
Lease finance (refer below)
Commercial bills
Other

Total net loans and advances
Lease finance consists of gross lease receivables
Current
Non-current

25

ME64380_Financials_recombined 13/11/00 4:12 PM Page 26

Notes to the Financial Statements
13: Net Loans and Advances (continued)
Maturity Distribution and Concentrations of Credit Risk
Overdraft$M

Less than
3 months$M

Between
3 months and
12 months$M

Between
1 year and5 years$M

After
5 years
$M

Total
$M

732
568
94
472
23
–
646
1,952
230
141
721
275

1,292
180
391
440
–
87
1,194
677
68
1,128
1,715
1,542

533
272
310
700
1
311
921
571
194
1,828
748
405

766
624
581
3,781
21
2,368
1,001
6,167
435
7,680
885
918

834
562
686
139
58
55
474
522
449
35,974
1,622
1,056

4,157
2,206
2,062
5,532
103
2,821
4,236
9,889
1,376
46,751
5,691
4,196

30
8
11
40
8
5
32
38
8
325
30
32

46
6
8
75
1
4
82
92
16
449
63
87

109
40
22
187
60
50
237
199
44
255
305
189

185
145
198
839
154
135
486
530
149
781
340
466

508
22
74
29
8
7
92
246
8
7,601
171
121

878
221
313
1,170
231
201
929
1,105
225
9,411
909
895

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other

21
4
4
6
54
–
117
15
13
10
215
93

116
16
23
388
7
14
1,519
214
156
293
373
435

724
13
22
137
147
16
627
78
80
193
72
389

266
14
112
229
136
64
1,162
226
339
425
256
1,537

424
6
31
22
52
209
427
238
7
296
125
917

1,551
53
192
782
396
303
3,852
771
595
1,217
1,041
3,371

Gross loans and advances

6,973

13,197

10,98934,40154,072

119,632

Specific provision for doubtful debts
Income yet to mature

(709)
–

–
(294)

–
(309)

–
(626)

–
(6)

(709)
(1,235)

(709)

(294)

(309)

(626)

(6)

(1,944)

6,264

12,903

10,68033,77554,066

117,688

–

–

–

–

(1,373)(1,373)

6,264

12,903

10,68033,77552,693116,315

472
6,501

5,598
7,599

6,220
4,769

24,216
10,18516,02438,04852,53067,102

6,973

13,197

10,98934,40154,072

119,632

Based on remaining term
to maturity at 30 September 2000
Australia

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other
New Zealand

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other
Overseas Markets

Loans and advances net of specificprovision and income yet to mature
General provision
Net loans and advancesInterest rate sensitivity

Fixed interest rates3
Variable interest rates

26

ME64380_Financials_recombined 13/11/00 4:12 PM Page 27

Notes to the Financial Statements
13: Net Loans and Advances (continued)
Maturity Distribution and Concentrations of Credit Risk
Overdraft$M

Less than
3 months$M

Between
3 months and
12 months$M

Between
1 year and5 years$M

After
5 years
$M

Total
$M

451
229
98
139
16
–
621
1,238
198
498
771
229

480
106
377
141
13
82
656
698
52
1,428
914
1,134

1,667
235
245
3,024
22
277
877
627
207
1,207
1,004
684

960
646
659
609
10
3,126
1,270
4,979
512
4,387
874
709

730
501
628
525
45
100
391
1,738
407
28,342
1,383
1,079

4,288
1,717
2,007
4,438
106
3,585
3,815
9,280
1,376
35,862
4,946
3,835

19
10
6
16
1
–
23
40
10
175
38
141

101
44
74
31
2
6
155
69
58
58
90
357

132
27
22
220
9
14
63
131
43
167
93
101

333
77
257
260
309
202
635
300
109
1,215
503
621

322
29
54
4
16
–
87
161
21
7,351
72
198

907
187
413
531
337
222
963
701
241
8,966
796
1,418

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other

80
38
9
45
114
–
459
303
64
15
355
345

430
261
106
414
63
15
2,638
430
205
176
464
920

275
29
77
433
103
6
782
208
72
173
300
430

270
31
48
517
77
162
1,150
320
128
156
84
845

169
4
12
274
56
–
501
342
43
159
11
418

1,224
363
252
1,683
413
183
5,530
1,603
512
679
1,214
2,958

Gross loans and advances

6,794

13,24813,98627,35046,173

107,551

Specific provision for doubtful debts
Income yet to mature

(907)
–

–
(190)

–
(377)

–
(607)

–
(12)

(907)
(1,186)

(907)

(190)

(377)

(607)

(12)

(2,093)

5,887

13,05813,60926,743

46,161

105,458

–

–

–

–

(1,395)(1,395)

5,887

13,05813,60926,74344,766

104,063

Based on remaining term
to maturity at 30 September 1999
Australia

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other
New Zealand

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other
Overseas Market

Loans and advances net of specificprovision and income yet to mature
General provision
Net loans and advances

27

ME64380_Financials_recombined 13/11/00 4:12 PM Page 28

Notes to the Financial Statements
13: Net Loans and Advances (continued)
Overdraft$M

Less than
3 months$M

Between
3 months and
12 months$M

Between
1 year and5 years$M

After
5 years
$M

Total
$M

1,348
5,446

4,017
9,231

9,212
4,774

17,401
9,949

13,192
32,98145,17062,381

6,794

13,24813,98627,35046,173

107,551

Interest rate sensitivity

Fixed interest rates3
Variable interest rates

Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
2
Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must be
secured by property
3
Housing loans and other loans that are capped for an initial period are fixed interest rate loans and their maturities based on the principal repayments due
over the term of the loan
1

Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

Non-accrual loans
Restructured loans
Unproductive facilities

1,391
1
73

1,543
7
91

1,016
1
58

886
7
70

Gross impaired assets

1,465

1,641

1,075

963

Specific provisions
Non-accrual loans
Unproductive facilities

(692)
(17)

(886)
(21)

(495)
(12)

(467)
(8)

Net impaired assets

756

734

568

488

Non-accrual loans
Specific provisions

1,391
(692)

1,543
(886)

1,016
(495)

886
(467)

Total net non-accrual loans

699

657

521

419

1

7

1

7

–

–

–

–

Unproductive facilities
Specific provisions

73
(17)

91
(21)

58
(12)

70
(8)

Net unproductive facilities

56

70

46

62

367

354

293

281

14: Impaired Assets
Summary of impaired assets

Non–accrual loans

Restructured loans

For these loans interest and fees are recognised asincome on an accrual basis
Other real estate owned

In the event of customer default, any loan security is held
as mortgagee in possession and therefore the Group
does not hold any other real estate owned assets
Unproductive facilities

Accruing loans past due 90 days or more

These amounts, comprising loans less than $100,000 or fully
secured, are not classified as impaired assets and therefore
are not included within the above summary28

ME64380_Financials_recombined 13/11/00 4:12 PM Page 29

Notes to the Financial Statements
14: Impaired Assets (continued)
Further analysis of impaired assets at 30 September 2000 and interest and/or other income received during the year under
Australian Prudential Regulation Authority guidelines is as follows:Grossbalanceoutstanding$M

Consolidated
Interest and/orSpecific other income
provision
received
$M
$M

Gross
balanceoutstanding$M

The Company
Interest and/orSpecific other income
provision
received$M$M

Non-accrual loans

Without provisions
Australia
New ZealandOverseas markets

281
13
51

–
–
–

3
–
7

272
–
41

–
–
–

3
–
4

345

–

10

313

–

7

349
38
573

250
23
374

16
1
15

256
–
412

217
–
267

12
–
10

960

647

32

668

484

22

21
8
57

8
3
34

1
1
10

21
–
14

8
–
3

1
–
–

86

45

12

35

11

1

Total non-accrual loans

1,391

692

54

1,016

495

30

Restructured loans
Unproductive facilities

1
73

–
17

–
–

1
58

–
12

–
–

1,465

709

54

1,075

507

30

With provisions and no, or partial performance1
Australia
New ZealandOverseas markets

With provisions and full performance1
Australia
New ZealandOverseas markets

Total
1

A loan’s performance is assessed against its contractual repayment schedule29

ME64380_Financials_recombined 13/11/00 4:12 PM Page 30

Notes to the Financial Statements
14: Impaired Assets (continued)
Interest and other income forgone on impaired assets
The following table shows the estimated amount of interest and other income that would have been recorded hadinterest and other income on non-accrual loans and unproductive facilities been accrued to income (or, in the case ofrestructured loans, had interest and other income been accrued at the original contract rate), and the amount of interest
and other income received with respect to such loans.
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

Gross interest and other income receivable on non–accrualloans, restructured loans and unproductive facilities

Australia
New ZealandOverseas markets
Total gross interest and other income receivable on non-accrualloans, restructured loans and unproductive facilities

48
6
92

73
7
92

39
–
41

60
–
30

146

172

80

90

(20)
(2)
(32)

(29)
(2)
(22)

(16)
–
(14)

(29)
–
(4)

(54)

(53)

(30)

(33)

28
4
60

44
5
70

23
–
27

31
–
26

92

119

50

57

Interest and other income received

Australia
New ZealandOverseas markets
Total interest and other income received
Net interest and other income forgone

Australia
New ZealandOverseas markets
Total net interest and other income forgone

30

ME64380_Financials_recombined 13/11/00 4:12 PM Page 31

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

Balance at start of year
Transfers from controlled entities
Adjustment for exchange rate fluctuations
Sale of Grindlays
Charge to profit and loss accountTransfer to specific provision
Recoveries

1,395
–
(51)
(90)
502
(429)
46

1,401
–
(34)
–
510
(515)
33

1,182
–
(13)
–
353
(273)
31

1,186
(3)
(21)
–
245
(240)
15

Total general provision

1,373

1,395

1,280

1,182

Balance at start of year
Adjustment for exchange rate fluctuations
Sale of Grindlays
Transfers from controlled entities
Bad debts written off
Transfer from general provision

907
88
(176)
–
(539)
429

819
(45)
–
–
(382)
515

475
52
–
30
(323)
273

497
(28)
–
2
(236)
240

Total specific provision

709

907

507

475

Total provisions for doubtful debts

2,082

2,302

1,787

1,657

New and increased provisions (by country of risk)
Australia
New Zealand
Asia
Other overseas markets

319
52
98
79

253
32
150
211

243
–
93
14

172
–
57
96

Provision releases

548
(119)

646
(131)

350
(77)

325
(86)

Recoveries of amounts previously written off

429
(46)

515
(33)

273
(31)

239
(15)

Net specific provision
Net credit to general provision

383
119

482
28

242
111

224
21

Charge to profit and loss

502

510

353

245

%
0.5
1.0

%
0.7
1.1

%
0.5
1.2

%
0.5
1.3

0.5
1.1

0.8
1.2

0.5
1.3

0.6
1.4

Bad debts written off as a % of total advances2

0.4

0.3

0.3

0.3

Net specific provision as a % of total advances

0.2

0.4

0.2

0.3

15: Provisions for Doubtful Debts
General provision

Specific provision

Provision movement analysis

RatiosProvisions1 as a % of total advances2
Specific
GeneralProvisions1 as a % of risk weighted assets
Specific
General2

1
2

Excludes provisions for unproductive facilities
See definitions on page 95

31

ME64380_Financials_recombined 13/11/00 4:12 PM Page 32

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

808
594
1,469
579
3,559
223
184
4,410
2,700
791

817
333
1,712
701
3,429
148
106
4,385
2,204
648

808
594
1,469
579
3,559
223
184
4,410
2,700
791

817
333
1,712
701
3,429
148
106
4,385
2,204
648

15,317

14,483

15,317

14,483

1
1
130
28
–
5

19
10
143
134
41
28

1
1
130
28
–
5

–
1
143
12
33
2

165

375

165

191

15,482

14,85815,482

14,674

16: Customers’ Liabilities for Acceptances
Australia

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Manufacturing
Personal1
Real estate – construction
Real estate – mortgage2
Retail and wholesale trade
Other

Overseas

Agriculture, forestry, fishing and mining
Business service
Financial, investment and insurance
Manufacturing
Retail and wholesale trade
Other

Total customers’ liabilities for acceptances

Personal includes non-business acceptances to individuals
2Real estate mortgage includes residential and commercial property exposure. Acceptances within this category are for the purchase of such properties andmust be secured by property
132

ME64380_Financials_recombined 13/11/00 4:12 PM Page 33

Notes to the Financial Statements
17: Regulatory Deposits
Consolidated
2000
1999
$M
$M

Overseas central banks

103

The Company
2000
1999
$M
$M

616

75

49

18: Shares in Controlled Entities and Associates
Refer notes 40 and 41 for details of material controlled entities and associates
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

Total shares in controlled entities
Total shares in associates

6,337

7,116

29

32

11

1

Total shares in controlled entities and associates

29

32

6,348

7,117

Date
acquiredInterest
acquired%Consideration$M

Net tangible
assets on
acquisition$M

Goodwill$M

30 May 2000

100%

48

3

45

Acquisitions of controlled entities

Year ended 30 September 2000
EFTPOS New Zealand Limited1

There were no acquisitions of controlled entities during the year ended 30 September 1999.
Disposals of controlled entities

Year ended 30 September 2000
ANZ Grindlays Bank Limited2
Grindlays (Jersey) Holdings Limited2
ANZ Grindlays Bank (Jersey) Limited2
ANZ Banking (Guernsey) Limited–
245

Interest
held
remaining
%
Nil
Nil
Nil

59

10

Nil

2,378

1,235

Consideration
$M
1,963
5
351

Income on
disposal$M
980

There were no material controlled entities disposed of during the year ended 30 September 1999.
1
2

The acquisition of EFTPOS New Zealand Limited also included a number of immaterial controlled entities
The disposal of Grindlays and associated businesses also included a number of immaterial controlled entities

33

ME64380_Financials_recombined 13/11/00 4:12 PM Page 34

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

19: Other Assets
Property held for resale
Cost of acquisition
Development expenses capitalised

28
20

50
33

–
–

–
–

Provision for diminution in value

48
(4)

83
(10)

–
–

–
–

44

73

–

–

Accrued interest/prepaid discounts
Accrued commission
Prepaid expenses
Future income tax benefits (refer below)
Treasury instruments revaluations
Security settlements
Goodwill1
Operating leases residual value
Available for sale emerging markets portfolio
Other

1,368
81
248
1,228
11,531
148
145
415
43
687

965
103
177
1,207
6,108
96
109
445
43
710

1,200
38
97
978
10,658
68
92
–
43
145

725
54
66
869
5,112
70
97
–
43
241

Total other assets

15,93810,036

13,319

7,277

454
774

544
663

402
576

434
435

1,228

1,207

978

869

914
314

832
375

778
200

688
181

1,228

1,207

978

869

Future income tax benefits comprises
General provision for doubtful debts
Other

Future income tax benefits
Australia
Overseas

Certain potential future income tax benefits within the Group have not been recognised as assets because recovery
cannot be regarded as virtually certain.These potential benefits arise from tax losses and timing differences (benefits
could amount to $4 million, 1999: $31 million) and from realised capital losses (benefits could amount to $nil million,
1999: $123 million).
These benefits will only be obtained if(i) the relevant entities derive future assessable income of a nature and amount sufficient to enable the benefit of thetaxation deductions to be realised;(ii) the relevant entities continue to comply with the conditions for deductibility imposed by law; and(iii) there are no changes in taxation legislation adversely affecting the benefit of the taxation deductions.
1

34

Goodwill is net of accumulated amortisation of $29 million (Company: accumulated amortisation of $18 million)

ME64380_Financials_recombined 13/11/00 4:12 PM Page 35

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

20: Premises and Equipment
Freehold and leasehold land and buildings
At directors’ valuation 2000
At directors’ valuation 1999
Provision for depreciation

Leasehold improvements
At costProvision for amortisation

Furniture and equipment
At costProvision for depreciation

Computer and office equipment
At costProvision for depreciation

Capital works in progress
At costTotal premises and equipment

564
–
(5)

–
810
(37)

46
–
(1)

–
93
(3)

559

773

45

90

131
(94)

128
(86)

92
(68)

89
(61)

37

42

24

28

911
(518)

890
(533)

580
(298)

500
(281)

393

357

282

219

777
(548)

769
(541)

589
(409)

520
(363)

229

228

180

157

41

24

41

17

1,259

1,424

572

511

Valuations of premises are assessed annually by officers of the Group. All premises over a specific value are also subject toexternal valuation at least once every three years by independent valuers.Valuations are based on the estimated open
market value and assume that the premises concerned continue to be used in their existing manner by the Group.
The Group revalued its class of assets freehold land and buildings at directors valuation at 31 March 2000, based on
independent valuations by Arthur Andersen (most Australian and Pacific properties) and Jones Lang La Salle Advisory(other major International properties).The valuations estimated that the market value of properties exceeded bookvalue by $61 million. Consistent with Australian Accounting Standards, $30 million of the revaluation surplus was taken
to the profit and loss, to reverse a decrement previously taken to profit on revaluation of freehold land and buildings in
1993, with the remaining $31 million booked in the asset revaluation reserve.There have been no material movements
in property valuations to 30 September 2000.

21: Due to Other Financial Institutions
Australia
Overseas952
11,295

1,364
7,637

952
10,997

1,364
6,616

Total due to other financial institutions

12,247

9,001

11,9497,980

Maturity analysis based on remaining term to maturity at 30 September
At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years

800
9,093
2,322
32

550
7,725
724
2

612
8,983
2,322
32

348
6,963
667
2

Total due to other financial institutions

12,247

9,001

11,9497,980

35

ME64380_Financials_recombined 13/11/00 4:12 PM Page 36

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

7,654
15,22828,323
3,790
6,098
6,104
741

6,787
14,26524,649
3,296
4,836
5,798
902

7,654
15,53328,323
3,790
4,275
–
741

6,750
14,26524,649
3,296
3,144
–
902

67,93860,53360,31653,006

6,284
14,359
5,028
1,207
4,416
1,218
–
152

3,607
17,259
7,831
2,358
3,757
1,071
24
119

4,693
8,376
830
251
–
–
–
152

1,042
5,639
763
288
–
–
–
90

32,66436,026

14,302

7,822

Total deposits and other borrowings

100,602

96,55974,61860,828Maturity analysis based on remaining term to maturity at 30 September
At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

36,84644,556
14,7904,319
91

29,83343,222
18,6034,847
54

31,38531,062
9,967
2,116
88

21,69827,986
9,316
1,784
44

Total deposits and other borrowings

100,602

96,55974,61860,828

237
741

217
494

261
499

169
216

978

711

760

385

159
166

170
170

102
96

80
86

325

340

198

166

1,303

1,051

958

551

185
722

207
457

36
559

16
286

907

664

595

302

22: Deposits and Other Borrowings
Deposits and other borrowings are classified between Australia
and Overseas based on the location of the deposit taking point
Australia

Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase

Overseas

Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase
Other unsecured borrowings

23: Income Tax Liability
Australia

Provision for income tax
Provision for deferred income tax

Overseas

Provision for income tax
Provision for deferred income tax

Total income tax liability
Provision for deferred income tax comprises

Lease finance
Other

36

ME64380_Financials_recombined 13/11/00 4:12 PM Page 37

Notes to the Financial Statements
Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

851
983
6,752
310
–
433

395
625
4,650
214
55
227

746
826
6,719
282
–
399

375
486
4,650
179
55
146

9,329

6,166

8,972

5,891

263
658
2,485
118
8
510

556
626
1,237
121
240
475

11
488
1,780
52
–
247

291
332
799
39
203
250

4,042

3,255

2,578

1,914

13,371

9,421

11,5507,805

Employee entitlements
Dividends (refer note 7)
Non-lending losses, frauds and forgeries
Restructuring costs and surplus leased space
Other

233
528
721
401
206

238
470
120
67
115

204
528
676
299
165

186
470
86
46
71

Total provisions

2,089

1,010

1,872

859

6,314
108
91
150
174
1,730
803
149

3,295
101
91
158
233
489
89
–

6,314
108
91
–
174
1,730
803
149

3,295
101
91
–
233
489
89
–

9,519

4,456

9,369

4,298

Maturity analysis based on remaining term to maturity at 30 September
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

342
2,573
6,549
55

307
732
3,326
91

342
2,573
6,399
55

307
732
3,168
91

Total bonds and notes

9,519

4,456

9,369

4,298

24: Creditors and Other Liabilities
Australia

Creditors
Accrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities

Overseas

Creditors
Accrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities

Total creditors and other liabilities

25: Provisions

26: Bonds and Notes
Bonds and notes by currency

USD
GBP
AUD
NZD
JPY
EUR
HKD
CHF

United States dollars
Great British pounds
Australian dollars
New Zealand dollars
Japanese yen
Euro dollars
Hong Kong dollars
Swiss francs

Total bonds and notes
Bonds and notes by maturity

37

ME64380_Financials_recombined 13/11/00 4:12 PM Page 38

Notes to the Financial Statements
27: Loan CapitalInterest
Rate%

Consolidated
2000
1999
$M
$M

The Company
2000
1999
$M
$M

551
475

459
396

551
475

459
396

1,026

855

1,026

855

161
220
–
460
230
919
23
8
459
10
26
145

151
245
71
383
191
765
19
7
383
8
22
121

161
220
–
460
–
919
23
8
459
10
26
145

151
245
–
383
–
765
19
7
383
8
22
121

2,661

2,366

2,431

2,104

3,687

3,221

3,457

2,959

3,508
161
18

2,984
222
15

3,278
161
18

2,793
151
15

3,687

3,221

3,457

2,959

161
910
1,590
1,026

71
779
1,516
855

161
680
1,590
1,026

–
779
1,325
855

3,687

3,221

3,457

2,959

Perpetual subordinated notes

USD 300m
USD 258.7m

floating rate notes
fixed rate notes

LIBOR1 + 0.15
9.125

Subordinated notes

GBP
USD
GBP
USD
USD
USD
USD
JPY
USD
JPY
USD
USD

60m
120m2
22.7m
250m
125m
500m
12.5m
482m
250m
568.8m
14.3m
79m

fixed notes due 2001
floating rate notes due 2002
fixed notes due 2000
fixed rate notes due 2004
floating rate notes due 2005
fixed notes due 2006
floating rate notes due 2007
floating rate notes due 2007
floating rate notes due 20073
floating rate notes due 2008
floating rate notes due 2008
floating rate notes due 20084

12.625
LIBOR + 0.70
7.050
6.25
LIBOR + 0.45
7.55
LIBOR + 0.50
LIBOR + 0.50
LIBOR + 0.25
LIBOR + 0.55
LIBOR + 0.50
LIBOR + 1.03

Total loan capital
Loan capital by currency

USD United States dollars
GBP Great British pounds
JPY
Japanese yen

Loan capital by maturity

Maturity analysis based on remaining term to maturity at 30 September
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years
Perpetual

LIBOR is an average of rates offered on loans to leading banks in the London inter-bank market
As at 30 September 1998 principal of note outstanding was US$200 million. Note is repayable over 5 years ($40 million (20%) per annum), commencing
in October 1998
3
After February 2002 the interest rate is LIBOR+ 0.75%
4After January 2002 the interest rate is LIBOR+ 0.53%
1
2

Loan capital is subordinated in right of payment to the claims of depositors and all other creditors of the Company and its controlled entities which haveissued the notes, and constitutes tier 2 capital as defined by the Australian Prudential Regulation Authority for capital adequacy purposes38

ME64380_Financials_recombined 13/11/00 4:12 PM Page 39

Notes to the Financial Statements
28: Share Capital
2000

The Company
1999

1998

Ordinary shares each fully paid
Ordinary shares each paid to 10 cents per share
Preference shares each fully paid

1,506,210,690
73,000124,032,000

1,565,428,469
95,000124,032,000

1,539,440,677
169,000
64,016,000

Total number of issued shares

1,630,315,690

1,689,555,469

1,603,625,677

Number of issued shares

Preference shares
The preference shares are fully paid non-converting non-cumulative preference shares issued for USD 6.25 per share
via Trust Securities Issues in 1998.
The Trust Securities are mandatorily exchangeable for the preference shares issued by the Company, and carry anentitlement to a non-cumulative trust distribution of 8.00% or 8.08% per annum payable quarterly in arrears.The Trust
Securities were issued by a non diversified closed end management investment company registered under the US
Investment Company Act of 1940.The preference shares themselves carry no present entitlement to dividends.
Distribution to investors in the Trust Securities are funded by income distributions made by the Group.
Upon maturity of the Trust Securities in 2048, investors will mandatorily exchange the Trust Securities for the
preference shares and thereupon the preference shares will carry an entitlement to non-cumulative dividends of 8.00%
or 8.08% per annum payable quarterly in arrears.The mandatory exchange of the Trust Securities for the preference
shares may occur earlier at the Company’s option or in specified circumstances.
With the prior consent of the Australian Prudential Regulation Authority, the preference shares are redeemable at theCompany’s option after 5 years, or within 5 years in limited circumstances.The entitlement of investors to distributions
on the Trust Securities will cease on redemption of the preference shares.
The transaction costs arising on the issue of these instruments were recognised directly in equity as a reduction of theproceeds of the equity instruments to which the costs relate.
Consolidated
2000
1999
$M
$M

Preference share capital
Balance at start of year
Issued during the year
Issue costs
Preference share net proceeds
Preference share net proceeds
translated to AUD at 30 September rate

The Company
2000
1999
$M
$M

USD
USD

748
–

400
375

748
–

400
375

USD

–

(27)

–

(27)

USD

748

748

748

748

AUD

1,374

1,145

1,374

1,145

Share Buybacks

The Company conducted the following on-market buybacks to 30 September 2000 in accordance with directors’
resolutions:
Date of Group
Announcement1

3 November 1999
27 April 2000

Date
Buyback
Completed

28 March 2000
on-going

Total
1
2
3

No. ofordinary sharesbought back48 million
41 million3

Averageprice
Per Share

Total
Consideration2$M$10.60$12.39509
505

89 million

1,014

Approval date of the buyback by directors’ resolution
Consideration is allocated to Share Capital
Bought back up to 30 September 2000

29: Outside Equity Interests

Consolidated
2000
1999
$M
$M

Share capital
Reserves
Retained profits

2
–
10

7
8
11

Total outside equity interests

12

26

39

ME64380_Financials_recombined 13/11/00 4:12 PM Page 40

Notes to the Financial Statements
30: Capital Adequacy
The Australian Prudential Regulation Authority (APRA) adopts a risk-based capital assessment framework forAustralian banks based on internationally accepted capital measurement standards. This risk-based approach requires
eligible capital to be divided by total risk weighted assets, with the resultant ratio being used as a measure of a bank’s
capital adequacy.
Capital is divided into tier 1, or ‘core’ capital, and tier 2, or ‘supplementary’ capital. For capital adequacy purposes,
eligible tier 2 capital cannot exceed the level of tier 1 capital. Banks are required to deduct from total capital any
strategic holdings of other banks’ capital instruments and investments in entities engaged in life insurance, funds
management and securitisation activities. Under APRA guidelines, banks must maintain a ratio of qualifying capital torisk weighted assets of at least 8 per cent.
The measurement of risk weighted assets is based on: a) A credit risk-based approach wherein risk weightings areapplied to balance sheet assets and to credit converted off balance sheet exposures. Categories of risk weights are
assigned based upon the nature of the counterparty and the relative liquidity of the assets concerned and: b) The
recognition of risk weighted assets attributable to market risk arising from trading and commodity positions.Trading
and commodity balance sheet positions do not attract a risk weighting under the credit risk-based approach.
2000
$M

1999
$M

Total shareholders’ equity and outside
equity interests1
Unamortised goodwill
Investment in ANZ Lenders Mortgage Insurance

9,776
(118)
(18)

9,429
(82)
(18)

Tier 1 capital

9,640

9,329

31
1,026
919

–
855
851

1,976

1,706

Subordinated notes3

2,432

2,211

Tier 2 capital

4,408

3,917

(298)
(489)

(298)
(286)

(787)

(584)

13,261

12,662

Qualifying capital

2000
$M

1999
$M

Tier 1

Tier 2

Asset revaluation reserve
Perpetual notes – subordinatedGeneral provision for doubtful debts2

Deductions

Investment in Funds Management entities
Other

Total qualifying capital
Balance sheet assets
Cash, claims on Australian Commonwealth and State Governments,
and Territories, claims on OECD central governments, local currency
claims on non-OECD governments and other zero weighted assets
Claims on approved banks and local governments
Advances secured by residential mortgages, approved merchant banks
and stockbroking positions
Other assets – credit risk

40

AssetsRisk weighted assets

24,497
10,51022,015
5,665

–
2,105

–
1,133

53,54378,86843,44275,547

26,771
78,86821,72075,547

Total balance sheet assets – credit risk
Trading assets – market risk

167,418
5,049

146,669
6,132

107,744n/a

98,400n/aTotal balance sheet assets

172,467

152,801

107,744

98,400ME64380_Financials_recombined 13/11/00 4:12 PM Page 41

Notes to the Financial Statements
30: Capital Adequacy (continued)
2000$M

Off balance sheet exposures

1999
$M

2000
$M

Contract/
notional amount

1999$M
Creditequivalent

2000
$M

1999
$M

Risk
weighted assets

Direct credit substitutes
Trade and performance related items
Commitments
Foreign exchange, interest rate andother market related transactions

6,323
11,022
49,087

4,828
12,24847,391

6,323
5,007
8,038

4,828
5,613
6,716

4,846
4,529
7,758

3,824
4,836
6,501

559,150

577,310

14,008

8,572

4,010

2,491

Total off balance sheet exposures– credit risk

625,582

641,777

33,37625,72921,143

17,652

Total risk weighted assets – credit risk
Risk weighted assets – market risk

128,887801

116,052
1,985

Total risk weighted assets

129,688

118,037

Capital adequacy ratios
Tier 1
Tier 2
Deductions

%
7.4
3.4
(0.6)

%
7.9
3.3
(0.5)

Total

10.2

10.7

Excluding asset revaluation reserve
2
Excluding attributable future income tax benefit
3
Subordinated note issues are reduced by 20% of the original amount during each of the last five years to maturity
141

ME64380_Financials_recombined 13/11/00 4:12 PM Page 42

Notes to the Financial Statements
31: Average Balance Sheet and Related Interest
Averages used in the following table are predominantly daily averages. Interest income figures are presented on a taxequivalent basis. Non-accrual loans are included under the interest earning asset category “Loans, advances and bills
discounted”. Intragroup interest earning assets and interest bearing liabilities are treated as external assets and liabilities
for the geographic segments.
2000
Averagebalance$M

1999

Interest$M

Averagerate%

Averagebalance
$M

1,134
344
2,407

62
19
162

5.4
5.6
6.7

–

–

4,881
1,040
2,234

1998

Interest$M

Averagerate%

Averagebalance$M

Interest$M

Average
rate
%

1,237
545
2,486

45
21
161

3.6
3.9
6.5

754
269
7,463

30
16
510

3.9
6.0
6.8

–

501

–

–

606

–

–

289
60
227

5.9
5.8
10.1

4,686
1,009
2,585

222
47
270

4.7
4.7
10.5

4,814
1,763
4,383

254
135
431

5.3
7.7
9.8

81,373
16,625
17,118

6,156
1,368
1,428

7.6
8.2
8.3

69,251
15,28816,918

4,970
1,178
1,411

7.2
7.7
8.3

59,133
14,717
17,546

4,575
1,443
1,484

7.7
9.8
8.5

1,705
1,005
3,292

98
81
317

5.7
8.1
9.6

1,593
960
3,132

82
75
218

5.1
7.9
6.9

2,143
1,097
5,040

112
109
407

5.2
9.9
8.1

9,042

420

4.6

7,238

388

5.4

2,781

165

5.9

142,200(9,042)

10,687(420)

127,429(7,238)

9,088
(388)

122,509(2,781)

9,671
(165)

133,158

10,267

120,191

8,700

119,7289,506Interest earning assets

Due from other financial institutions
Australia
New ZealandOverseas markets
Regulatory deposits with
Reserve Bank of Australia
Investments in public securities
Australia
New ZealandOverseas markets
Loans, advances andbills discounted
Australia
New ZealandOverseas markets
Other assets
Australia
New ZealandOverseas markets
Intragroup assets
Overseas markets
Intragroup elimination

7.7

7.2

Non-interest earning assets

Acceptances
Australia
New ZealandOverseas markets
Premises and equipment
Other assets
Provisions for doubtful debts
Australia
New ZealandOverseas markets

15,061–343
1,353
18,09016,04549
420
1,457
15,90815,052
233
540
1,544
18,232(1,830)
(163)
(381)

(1,664)
(168)
(437)

(1,487)
(178)
(367)

32,47331,61033,569165,631

151,801

153,297

Australia
New ZealandOverseas markets

117,181
20,337
37,155

103,109
19,36636,56491,08919,67345,316

Intragroup elimination

174,673(9,042)

159,039(7,238)156,078(2,781)

165,631

151,801

153,297

29.3%

32.1%

40.6%

Total assets
Total average assets% of total assets attributable
to overseas activities

42

7.9

ME64380_Financials_recombined 13/11/00 4:12 PM Page 43

Notes to the Financial Statements
31: Average Balance Sheet and Related Interest (continued)
2000
Averagebalance$M

1999

Interest$M

Averagerate%

Averagebalance$M

24,7508,159
15,234

1,387
476
931

5.6
5.8
6.1

9,181
2,894
1,359

247
85
57

17,053
1,469
1,371

1998

Interest$M

Averagerate%

Averagebalance$M

Interest$M

Averagerate%

21,337
8,035
14,569

1,008
406
872

4.7
5.1
6.0

19,537
8,358
17,971

975
657
1,243

5.0
7.9
6.9

2.7
2.9
4.2

9,006
3,330
1,599

202
90
84

2.3
2.7
5.3

8,705
2,883
1,562

186
109
87

2.1
3.8
5.6

781
66
52

4.6
4.5
3.8

14,638
1,633
1,525

522
58
58

3.6
3.5
3.8

13,114
1,913
1,482

476
134
62

3.6
7.0
4.2

232
482
8,976

15
20
542

6.3
4.1
6.0

276
631
8,544

12
20
467

4.3
3.2
5.5

387
752
10,160

17
56
614

4.5
7.5
6.0

5,256
3,079

307
180

5.8
5.8

3,844
2,597

187
127

4.9
4.9

3,806
720

188
40

4.9
5.6

5,935
1,136

340
69

5.7
6.1

5,414
1,067

317
65

5.9
6.1

5,171
1,073

332
83

6.4
7.8

8,491
316
276

554
23
19

6.5
7.3
7.0

4,677
160
380

270
9
22

5.8
5.6
5.7

3,913
167
417

247
15
28

6.3
9.0
6.8

1,454
116
246

63
156
70

n/a
n/a
n/a

1,727
193
508

61
81
91

n/a
n/a
n/a

2,094
766
1,142

138
140
125

n/a
n/a
n/a

5,511
3,531

286
134

5.2
3.8

5,018
2,220

280
108

5.6
4.9

1,673
1,108

137
28

8.2
2.5

126,507(9,042)

6,860
(420)

112,928(7,238)

5,417
(388)

108,874(2,781)

6,117
(165)

117,4656,440

105,690

5,029

106,0935,952Interest bearing liabilities

Time deposits
Australia
New ZealandOverseas markets
Savings deposits
Australia
New ZealandOverseas markets
Other demand deposits
Australia
New ZealandOverseas markets
Due to other financial institutions
Australia
New ZealandOverseas markets
Commercial paper
Australia
Overseas markets
Borrowing corporations’ debt
Australia
New Zealand
Loan capital, bonds and notes
Australia
New ZealandOverseas markets
Other liabilities1
Australia
New ZealandOverseas markets
Intragroup Liabilities
Australia
New Zealand
Intragroup elimination

1

5.5

4.8

5.6

Includes foreign exchange swap costs

43ME64380_Financials_recombined 13/11/00 4:12 PM Page 44

Notes to the Financial Statements
31: Average Balance Sheet and Related Interest (continued)
2000
Averagebalance$M

1999
Averagebalance$M

1998
Averagebalance
$M

3,636
794
1,280

3,204
730
1,481

3,041
836
1,636

15,061–
343
17,037

16,04549420
14,855

15,052233
540
18,234

38,15136,78439,572

155,616

142,474

145,665

Australia
New ZealandOverseas markets

110,537
19,347
34,77495,50018,54835,66485,732
18,924
43,790Intragroup elimination

164,658(9,042)

149,712(7,238)148,446(2,781)

155,616

142,474

145,665

8,789
1,226

8,237
1,090

7,620
12

10,015

9,327

7,632

Total average liabilities andshareholders’ equity

165,631

151,801

153,297% of total average liabilities attributable
to overseas activities

32.5%

36.5%

42.3%

Non-interest bearing liabilities

Deposits
Australia
New ZealandOverseas markets
Acceptances
Australia
New ZealandOverseas markets
Other liabilities
Total liabilities
Total average liabilities

Total average shareholders’ equity

Ordinary share capitalPreference share capital44

ME64380_Financials_recombined 13/11/00 4:12 PM Page 45

Notes to the Financial Statements
32: Interest Spreads and Net Interest Average Margins
2000
$M

1999
$M

1998
$M

2,625
499
703

2,460
484
727

2,275
481
798

3,827

3,671

3,554

89,09319,01434,093(9,042)

77,26817,80232,359(7,238)67,45017,846
37,213(2,781)

133,158

120,191

119,728

%

%

%

7.41
8.04
7.49
7.71

6.88
7.43
7.56
7.24

7.37
9.54
8.05
7.94

Gross interest spread
Interest forgone on impaired assets3

2.33(0.03)

2.60(0.06)

2.82(0.07)Net interest spread
Interest attributable to net non-interest bearing items

2.30
0.65

2.54
0.64

2.75
0.63

Net interest average margin – Australia

2.95

3.18

3.38

Gross interest spread
Interest forgone on impaired assets3

2.37(0.02)

2.62(0.03)

2.39(0.03)Net interest spread
Interest attributable to net non-interest bearing items

2.35
0.28

2.59
0.14

2.36
0.34

Net interest average margin – New Zealand

2.63

2.73

2.70

Gross interest spread
Interest forgone on impaired assets3

1.61(0.18)

1.99(0.22)

1.56(0.08)Net interest spread
Interest attributable to net non-interest bearing items

1.43
0.63

1.77
0.48

1.48
0.66

Net interest average margin – Overseas markets

2.06

2.25

2.14

Gross interest spread
Interest forgone on impaired assets3

2.30(0.07)

2.58(0.10)

2.40(0.07)Net interest spread
Interest attributable to net non-interest bearing items

2.23
0.64

2.48
0.57

2.33
0.64

Net interest average margin – Group

2.87

3.05

2.97

Net interest income1

Australia
New ZealandOverseas markets

Average interest earning assets

Australia
New ZealandOverseas markets
Intragroup elimination

Gross earnings rate2

Australia
New ZealandOverseas markets
Group
Interest spreads and net interest average margins may be analysed as follows
Australia

New ZealandOverseas markets

Group

On a tax equivalent basis
2
Average interest rate received on interest earning assets. International markets includes intragroup assets
3
Refer note 14 to the financial report145

ME64380_Financials_recombined 13/11/00 4:13 PM Page 46

Notes to the Financial Statements
33: Market Risk
Market risk is the risk to earnings arising from changes in interest rates, currency exchange rates, or from fluctuations inbond, commodity or equity prices.
The Risk Management Committee, a Committee of the Board, has overall responsibility for market risk within theGroup. Routine management of market risk is delegated to two senior management committees chaired by the Chief
Financial Officer and Chief Executive Officer respectively.The Credit and Trading Risk Committee is responsible fortraded market risk, while the Group Asset and Liability Committee is responsible for non-traded market risk (orbalance sheet risk).
The Credit and Trading Risk Committee monitors traded market risk exposures (including Value at Risk and Stress
Testing) and is responsible for authorising the trading risk limit framework.The Group Asset and Liability Committee
reviews balance sheet based risk measures and strategies on a monthly basis.
The Value at Risk (VaR) Measure
A key measure of market risk is Value at Risk ("VaR").VaR is a statistical estimate of the likely daily loss and is based on
historical market movements.The confidence level is such that there is 97.5% probability that the loss will not exceed
the VaR estimate on any given day.
The Group’s standard VaR approach for both traded and non-traded risk is historical simulation.The Group calculates
VaR using historical changes in market rates and prices over the previous 500 business days.
It should be noted that because VaR is driven by actual historical observations, it is therefore not an estimate of the
maximum loss that the Group could experience from an extreme market event. As a result of this limitation, the Grouputilises a number of other risk measures (eg stress testing) and associated supplementary limits to measure and manage
traded market risk.
Traded and non-traded market risks have been considered separately below.
Traded Market Risks
Trading activities are focused on customer trading, distribution and underwriting of a range of securities and derivative
instruments.The principal activities include foreign exchange, interest rate and capital markets.These activities arediversified and managed on a global product basis.
Below are aggregate VaR exposures covering both derivative and non-derivative trading positions for the Group’s
principal trading centres.
As at
Sep 00$M

High for
period
Sep 00$M

Low forperiod
Sep 00$M

Ave forperiod
Sep 00$M

As at
Sep 99$M

High for
period
Sep 99$M

Low forperiod
Sep 99$M

Avg forperiod
Sep99$M

Value at risk at 97.5% confidence
Foreign exchangeInterest rate
Diversification benefit

0.9
2.9
(1.1)

2.2
5.1
(1.3)

0.7
2.1
(0.1)

1.2
3.4
(0.2)

1.5
3.5
(1.4)

2.9
8.9
n/a

1.0
2.5
n/a

1.8
5.1
(1.5)

Total

2.7

6.0

2.7

4.4

3.6

n/a

n/a

5.4

VaR is calculated seperately for Foreign Exchange, Interest Rates and Total Group.The diversification benefit reflects
the correlation implied by historical rates between Foreign Exchange and Interest Rate Markets.
Non-Traded Market Risks (Balance Sheet Risk)
The principal objectives of balance sheet management are to hedge the market value of the Group's capital and to
manage and control the sensitivity of interest income while maintaining acceptable levels of interest rate and liquidity
risk.
Interest Rate Risk
The objective of balance sheet interest rate risk management is to secure stable and optimal net interest income overboth the short (next 12 months) and long term. Non-traded interest rate risk relates to the potential adverse impact ofchanges in market interest rates on the Group's future net interest income.This risk arises from two principal sources:
mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of capital and othernon-interest bearing liabilities in interest bearing assets. Interest rate risk is reported as follows using three measures:
VaR, scenario analysis (to a 1% shock) and disclosure of the interest rate sensitivity gap (Note 34).

46

ME64380_Financials_recombined 13/11/00 4:13 PM Page 47

Notes to the Financial Statements
33: Market Risk (continued)a) VaR Interest Rate Risk
Below are aggregate VaR figures covering non-traded interest rate risk.

Value at risk at 97.5% confidence
ANZ (ex Grindlays)
Grindlays
Diversification impact
Total

As at
Sep 00$M

High for
period
Sep 00$M

Low forperiod
Sep 00$M

Ave forperiod
Sep 00$M

As at
Sep 99$M

High for
period
Sep 99
$M

42.0
–
–

44.5
2.6
(2.8)

32.4
2.8
(3.5)

38.0
2.6
(2.9)

32.9
2.4
(2.4)

39.3
2.6
(2.8)

42.0

44.3

31.7

37.7

32.9

39.1

Separate reporting of the risk related to the Grindlays business units, which were sold as at 31 July 2000, has been
provided for the year ended September 2000.The level of portfolio diversification effect, which reduces the overall levelof risk measured, relates to offsetting short term risk positions in Grindlays.
b) Scenario Analysis - A 1% Shock on the Next 12 Months' Net Interest Income
A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest
income over the immediate forward period of 12 months.This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and previous financial years expressed as a percentage of reported net interest income.The sign indicates the nature of the rate sensitivity with apositive number signifying that a rate increase is positive for net interest income over the next 12 months. Conversely, anegative number signifies that a rate increase is negative for the next 12 months’ net interest income.
Impact of 1% Rate ShockConsolidated Group Position
2000
1999

As at 30 September
Maximum exposure
Minimum exposure
Average exposure (in absolute terms)(0.22%)

0.14%

0.75%

0.68%

0.00%

(0.01%)

0.37%

0.36%

The extent of mismatching between the repricing characteristics and timing of interest bearing assets and liabilities atany point has implications for future net interest income. On a global basis, the Group quantifies the potential variationin future net interest income as a result of these repricing mismatches each month using a static gap model.
The repricing gaps themselves are constructed based on contractual repricing information. However, for those assets andliabilities where the contractual term to repricing is not considered to be reflective of the actual interest rate sensitivity(for example, products priced at the Group's discretion), a profile based on historically observed and/or anticipated ratesensitivity is used.
The majority of the Group’s non-traded interest exposure exists in Australia and New Zealand. In these centres, asophisticated balance sheet simulation process supplements this static gap approach.This allows the net interest income
outcomes of a number of different scenarios - with different market interest rate environments and future balance sheet
structures - to be identified.This better enables the Group to accurately quantify the interest rate risks associated withthe balance sheet, and to formulate strategies to manage current and future risk profiles.
Foreign Currency Related Risks
The Group’s investment of capital in non-Australian operations generates an exposure to changes in the relative valueof individual currencies against the Australian Dollar.Variations in the value of these foreign currency investments arereflected in the Foreign Currency Translation Reserve.
The Group incurs some non-traded foreign currency risk related to the potential repatriation of profits from
non-Australian business units.This risk is routinely monitored and hedging is conducted where it is likely to add
shareholder value.
The risk relating to mismatching of foreign currency assets and liabilities has not been presented, as this type of risk isminimal for the Group.

47

ME64380_Financials_recombined 13/11/00 4:13 PM Page 48

Notes to the Financial Statements
34: Interest Sensitivity Gap
The following table represents the interest rate sensitivity as at 30 September 2000 of the Group’s assets, liabilities andoff balance sheet instruments repricing (that is, when interest rates applicable to each asset or liability can be changed)
in the periods shown.
Repricing gaps are based upon contractual repricing information except where the contractual terms are notconsidered to be reflective of actual interest rate sensitivity, for example, those assets and liabilities priced at the Group’s
discretion. In such cases, the rate sensitivity is based upon historically observed and/or anticipated rate sensitivity.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding
liability funding.These mismatches are managed within policy guidelines for mismatch positions.

Less than
3 months$M

Between
3 months and6 months$M

Between
6 months and
12 months$M

Between
1 year and5 years$M

After
5 years$M

Notbearing
interest
$M

Total
$M

Liquid assets and due fromother financial institutions
Trading and investment securities
Net loans and advances
Other assets

8,899
4,244
85,771
47

443
428
6,179
279

1,092
792
7,595
690

34
667
16,972
285

36
325
514
82

966
676
(716)
36,167

11,4707,132
116,315
37,550Total assets

98,961

7,329

10,16917,958957

37,093

172,467

28,91432,301

4,249
110

5,433
221

4,907
895

22
–

–
4,821

43,52538,34820,239
872
7,968

4,662
1
1,179

3,606
1
214

2,036
–
2,351

113
18
1,494

320
35,713–30,97636,605
13,20690,294

10,201

9,475

10,1891,647

40,854

162,660

–

–

–

–

–

9,807

9,807

(10,598)

1,413

2,354

5,957

874

–

–

(1,931)(1,931)(1,459)(3,390)

3,048
(342)

13,726
13,384

184
13,568(13,568)–––

At 30 September 2000

Certificates of deposit
and term deposits
Other deposits
Other borrowings and due toother financial institutions
Other liabilities
Bonds, notes and loan capital
Total liabilities
Shareholders’ equity andoutside equity interests
Off balance sheet items affecting
interest rate sensitivity
Interest sensitivity gap– net– cumulative

The bulk of the Group's loan/deposit business is conducted in the domestic balance sheets of Australia and New
Zealand and is priced on a floating rate basis.The mix of repricing maturities in these books is influenced by theunderlying financial needs of customers.
Offshore operations, which are generally wholesale in nature, are able to minimise interest rate sensitivity throughclosely matching the maturity of loans and deposits. Given both the size and nature of their business, the interest ratesensitivities of these balance sheets contribute little to the aggregate risk exposure, which is primarily a reflection of thepositions in Australia and New Zealand.
In Australia and New Zealand, a combination of pricing initiatives and off-balance sheet instruments are used in the
management of interest rate risk. For example, where a strong medium to long term rate view is held, hedging andpricing strategies are used to modify the profile's rate sensitivity so that it is positioned to take advantage of the
expected movement in interest rates. However, such positions are taken within the overall risk limits specified by policy.

48

ME64380_Financials_recombined 13/11/00 4:13 PM Page 49

Notes to the Financial Statements
34: Interest Sensitivity Gap (continued)
The following table represents the interest rate sensitivity as at 30 September 1999 of the Group’s assets, liabilities andoff balance sheet instruments repricing (that is, when interest rates applicable to each asset or liability can be changed)
in the periods shown.

Less than
3 months$M

Between
3 months and6 months$M

Between
6 months and
12 months$M

Between
1 year and5 years$M

After
5 years$M

Notbearing
interest
$M

Total
$M

Liquid assets and due fromother financial institutions
Trading and investment securities
Net loans and advances
Other assets

6,586
5,788
71,151
520

246
593
7,068
27

776
1,143
7,869
7

66
1,237
18,302
8

42
109
432
49

1,039
84
(759)
30,4188,755
8,954
104,063
31,029Total assets

84,045

7,934

9,795

19,613632

30,782

152,801

28,70327,364

5,601
1,194

2,863
1,646

4,735
2,274

16
2

–
5,654

41,91838,134

17,170
439
4,875

4,359
12
531

1,925
3
98

2,054
–
1,346

–
2
827

–
29,679–25,50830,135
7,677

78,551

11,697

6,535

10,409847

35,333

143,372

At 30 September 1999

Certificates of deposit
and term deposits
Other deposits
Other borrowings and due toother financial institutions
Other liabilities
Bonds, notes and loan capital
Total liabilities
Shareholders’ equity andoutside equity interests
Off balance sheet items affecting
interest rate sensitivity

–

–

–

–

–

9,429

9,429

(2,004)300(1,247)

1,382

979

590

–

Interest sensitivity gap– net– cumulative

3,490
3,490

(3,463)
27

2,013
2,040

10,586
12,626764
13,390(13,390)
–

–
–

49

ME64380_Financials_recombined 13/11/00 4:13 PM Page 50

Notes to the Financial Statements
35: Net Fair Value of Financial Instruments
Australian Accounting Standard AASB 1033: Presentation and Disclosure of Financial Instruments (AASB 1033) requires
disclosure of the net fair value of on and off balance sheet financial instruments.The disclosures exclude all nonfinancial instruments, such as income taxes and regulatory deposits, and specified financial instruments, such as interests
in controlled entities.The aggregate net fair value amounts do not represent the underlying value of the Group.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm’s length transaction. Net fair value is the fair value adjusted for transaction costs.
Quoted market prices, where available, are adjusted for material transaction costs and used as the measure of net fairvalue. In cases where quoted market values are not available, net fair values are based on present value estimates or othervaluation techniques. For the majority of short-term financial instruments, defined as those which reprice or mature in
90 days or less, with no significant change in credit risk, the net fair value was assumed to equate to the carrying
amount in the Group’s balance sheet.
The fair values are based on relevant information available as at 30 September 2000.While judgement is used in obtaining
the net fair value of financial instruments, there are inherent weaknesses in any estimation technique. Many of the estimates
involve uncertainties and matters of significant judgement, and changes in underlying assumptions could significantly affectthese estimates. Furthermore, market prices or rates of discount are not available for many of the financial instruments
valued and surrogates have been used which may not reflect the price that would apply in an actual sale.
The net fair value amounts have not been updated for the purposes of these financial statements since 30 September
2000, and therefore the net fair value of the financial instruments subsequent to 30 September 2000 may be different
from the amounts reported.
Financial Assets
Liquid assets
Due from other financial institutions
Trading securities
Investment securities and shares in associates
Loans and advances
Customers’ liabilities for acceptances
Other financial assets

2000
$M

Net fair value
1999
$M

5,648
5,822
4,126
3,011
117,661
15,482
19,189

5,283
3,472
4,259
4,762
105,229
14,85812,641

Carrying value
2000
1999
$M
$M
5,648
5,822
4,126
3,035
116,315
15,482
19,013

5,283
3,472
4,259
4,727
104,063
14,85812,534

Liquid assets and Due from other financial institutions

The carrying values of these financial instruments are considered to approximate their net fair values as they are shortterm in nature or are receivable on demand.
Trading securities

Trading securities are carried at market value. Market value is generally based on quoted market prices, broker or dealer
price quotations, or prices for securities with similar credit risk, maturity and yield characteristics.
Investment securities and Shares in associates

Net fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available,
net fair value has been estimated using quoted market prices for securities with similar credit, maturity and yieldcharacteristics, or by reference to the net tangible asset backing of the investee.
Loans, advances and Customers’ liabilities for acceptances

The carrying value of loans, advances and acceptances is net of specific and general provisions for doubtful debts andincome yet to mature.The estimated net fair value of loans, advances and acceptances is based on the discounted
amount of estimated future cash flows and accordingly has not been adjusted for either specific or general provisions for
doubtful debts.
Estimated contractual cash flows for performing loans are discounted at estimated current market rates to determine fairvalue. For loans with doubt as to collection, expected cash flows (inclusive of the value of security) are discounted usinga rate which includes a premium for the uncertainty of the flows.
The difference between estimated net fair values of loans, advances and acceptances and carrying value reflects changes
in interest rates and the credit worthiness of borrowers since loan origination.The excess of net fair value of loans andadvances over the carrying value is primarily a result of offsetting the general provision for doubtful debts against thecarrying value.
Net lease receivables, with a carrying value of $2,090 million (1999: $2,804 million) and a net fair value of$2,080 million (1999: $2,799 million), are included in loans and advances.

50

ME64380_Financials_recombined 13/11/00 4:13 PM Page 51

Notes to the Financial Statements
35: Net Fair Value of Financial Instruments (continued)
Other financial assets

Included in this category are accrued interest, fees receivable and derivative financial instruments.The carrying values ofaccrued interest and fees receivable are considered to approximate their net fair values as they are short term in natureor are receivable on demand.
The fair values of derivative financial instruments such as interest rate swaps and currency swaps were calculated using
discounted cash flow models based on current market yields for similar types of instruments and the maturity of each
instrument. Foreign exchange contracts and interest rate option contracts were valued using market prices and option
valuation models as appropriate.
Properties held for resale, future income tax benefits and prepaid expenses are not considered financial assets.
Financial Liabilities
Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Bonds and notes
Loan capital
Other financial liabilities

2000
$M

Net fair value
1999$M

Carrying value
2000
1999
$M
$M

12,247
100,563

9,001
96,583

12,247
100,602

9,001
96,55915,482

14,85815,482

14,858

9,515

4,462

9,519

4,456

3,743

3,198

3,687

3,221

13,1379,189

12,8939,046

Due to other financial institutions

The carrying value of amounts due from other financial institutions is considered to approximate the net fair value.
Deposits and other borrowings

The net fair value of a deposit liability without a specified maturity or at call is deemed by AASB 1033 to be theamount payable on demand at the reporting date.The fair value is not adjusted for any value expected to be derived
from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings and acceptances without quoted market prices,market borrowing rates of interest for debt with a similar maturity are used to discount contractual cash flows.
Bonds and notes and Loan capital

The aggregate net fair value of bonds and notes and loan capital at 30 September 2000 was calculated based on quoted
market prices. For those debt issues where quoted market prices were not available, a discounted cash flow model usinga yield curve appropriate for the remaining term to maturity of the instrument was used.
Other financial liabilities

This category includes accrued interest and fees payable for which the carrying amount is considered to approximate
the fair value. Also included are derivative financial instruments, where fair value is determined on the basis describedunder “Other financial assets”.
Income tax liabilities, other provisions and accrued charges are not considered financial instruments.
Commitments and contingencies

As outlined in note 43, the Group has various credit related commitments. Based upon the level of fees currently
charged for granting such commitments, taking into account maturity and interest rates, together with any changes in
the creditworthiness of counterparties since origination of the commitments, their estimated replacement or net fairvalue is not material.
Transaction costs

The fair value of financial instruments required to be disclosed under US accounting standard, Statement of Financial
Accounting Standards No. 107 “Disclosures about Fair Value of Financial Instruments” (SFAS 107) is calculated without
regard to estimated transaction costs. Such transaction costs are not material, and accordingly the fair values shown
above would not differ materially from fair values calculated in accordance with SFAS 107.

51

ME64380_Financials_recombined 13/11/00 4:13 PM Page 52

Notes to the Financial Statements
36: Derivative Financial Instruments
Derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial instruments orindices.They include swaps, forward rate agreements, futures, options and combinations of these instruments.The
use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading
activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in exchange and interest
rates as part of its asset and liability management activities and are classified as other than trading. Derivatives are
subject to the same types of credit and market risk as other financial instruments, and the Group manages theserisks in a consistent manner.
The principal exchange rate contracts used by the Group are forward foreign exchange contracts, currency swaps
and currency options. Forward foreign exchange contracts are agreements to buy or sell a specified quantity offoreign currency on a specified future date at an agreed rate. A currency swap generally involves the exchange, or
notional exchange, of equivalent amounts of two currencies and a commitment to exchange interest periodically
until the principal amounts are re-exchanged on a future date. Currency options provide the buyer with the right,
but not the obligation, either to purchase or sell a fixed amount of a currency at a specified rate on or before afuture date. As compensation for assuming the option risk, the option writer generally receives a premium at thestart of the option period.
The principal interest rate contracts used by the Group are forward rate agreements, interest rate futures, interest
rate swaps and options. Forward rate agreements are contracts for the payment of the difference between a specified
interest rate and a reference rate on a notional deposit at a future settlement date.There is no exchange ofprincipal. An interest rate future is an exchange traded contract for the delivery of a standardised amount of a fixedincome security or time deposit at a future date. Interest rate swap transactions generally involve the exchange of
fixed and floating interest payment obligations without the exchange of the underlying principal amounts.
Derivative transactions generate income for the Group from buy sell spreads and from trading positions taken by
the Group. Income from these transactions is taken to net interest income, foreign exchange earnings or profit on
trading instruments. Income or expense on derivatives entered into for balance sheet hedging purposes is accrued
and recorded as an adjustment to the interest income or expense of the related hedged item.

52

ME64380_Financials_recombined 13/11/00 4:13 PM Page 53

Notes to the Financial Statements
36: Derivative Financial Instruments (continued)
Credit risk
The credit risk of derivative financial instruments arises from the potential for a counterparty to default on its
contractual obligation. Credit risk arises when market movements are such that the derivative has a positive value to theGroup. It is the cost of replacing the contract in the event of counterparty default.The Group limits its credit risk
within a conservative framework by dealing with creditworthy counterparties, setting credit limits on exposures tocounterparties, and obtaining collateral where appropriate.
The following table provides an overview of the Group’s exchange rate and interest rate derivatives. It includes all
trading and other than trading contracts. Notional principal amounts measure the amount of the underlying physical or
financial commodity and represent the volume of outstanding transactions.They are not a measure of the risk associatedwith a derivative.
The credit equivalent amount is calculated in accordance with the Australian Prudential Regulation Authority’s Capital
Adequacy guidelines. It combines the aggregate gross replacement cost with an allowance for the potential increase invalue over the remaining term of the transaction should market conditions change.
The fair value of a derivative represents the aggregate net present value of the cash inflows and outflows required toextinguish the rights and obligations arising from the derivative in an orderly market as at the reporting date. Fair value
does not indicate future gains or losses, but rather the unrealised gains and losses from marking to market all derivatives
at a particular point in time.

Consolidated

Notional
principal
amount2000$M

Creditequivalentamount2000$M

Fair value
2000$M

Notional
principal
amount1999$M

Creditequivalentamount1999$M

Fair value
1999$M

170,328
28,106
12,661
12,956
4,368

6,731
3,073
1,037
n/a
411

507
1,222
904
(457)
90

159,229
20,93812,914
14,497
5,201

3,091
1,947
516
n/a
313

24
659
302
(360)
–

228,419

11,252

2,266

212,779

5,867

625

51,817
230,885
52,127
8,857
6,789

36
2,674
n/a
46
n/a

5
(247)
(7)
31
(4)

84,114215,238
74,545
5,131
5,706

59
2,604
n/a
42
n/a

2
(98)
(27)
25
(29)

350,475

2,756

(222)

384,734

2,705

(127)

578,894

14,0082,044

597,513

8,572

498

Foreign exchange contracts

Spot and forward contracts
Swap agreements
Options purchased
Options sold1
Other contracts

Interest rate contracts

Forward rate agreements
Swap agreements
Futures contracts2
Options purchased
Options sold1

Options sold have no credit exposure, as they represent obligations rather than assets
Credit equivalent amounts have not been included as there is minimal credit risk associated with exchange traded futures where the clearing house is thecounterparty
n/a not applicable

1
2

53

ME64380_Financials_recombined 13/11/00 4:13 PM Page 54

Notes to the Financial Statements
36: Derivative Financial Instruments (continued)
The maturity structure of derivative activity is a primary component of potential credit exposure.The table below
shows the remaining maturity profile by class of derivatives and based on notional principal amounts.The table also
shows the notional principal amounts of the derivatives held for trading and other than trading purposes.
Consolidated
Less than
1 year$M

Remaining life
1 to 5 years$M

Greater than
5 years
$M

Total
$M

Trading$M

Other than
Trading$M

162,336
11,696
9,540
10,3492,174

7,506
13,394
2,853
2,436
1,806

486
3,016
268
171
388

170,328
28,106
12,661
12,956
4,368

162,944
11,96012,661
12,956
4,368

7,384
16,146–––

196,095

27,995

4,329

228,419

204,889

23,53049,373
117,568
41,726
5,306
6,439

2,444
82,93010,4013,384
350–
30,387–
167–

51,817
230,885
52,127
8,857
6,789

51,719201,480
52,127
8,857
6,789

98
29,405–––

220,41299,50930,554350,475

320,972

29,503

416,507

127,504

34,883578,894

525,861

53,033

153,885
9,145
10,911
12,391

5,142
9,516
1,851
1,817

202
2,277
152
289

159,229
20,93812,914
14,497

147,398
13,687
12,835
14,418

11,831
7,251
79
79

3,900

982

319

5,201

5,201

–

190,232

19,308

3,239

212,779

193,539

19,240Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold

79,424
105,643
63,7492,331
4,064
255,211

4,690
81,81910,796
2,800
1,454
101,559–
27,776––
188
27,964

84,114215,238
74,545
5,131
5,706
384,734

82,706
182,852
74,5455,113
5,688
350,904

1,408
32,386–18
18
33,830Total

445,443

120,867

31,203

597,513544,443

53,070

At 30 September 2000
Foreign exchange contracts

Spot and forward contracts
Swap agreements
Options purchased
Options sold
Other contracts

Interest rate contracts

Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options soldTotal
At 30 September 1999
Foreign exchange contracts

Spot and forward contracts
Swap agreements
Options purchased
Options sold
Other contracts

Interest rate contracts54

ME64380_Financials_recombined 13/11/00 4:13 PM Page 55

Notes to the Financial Statements
36: Derivative Financial Instruments (continued)
Concentrations of credit risk exist for groups of counterparties when they have similar economic characteristics. Major
concentrations of credit risk arise by location and type of customer.
The following table shows the concentrations of credit risk, by class of counterparty and by geographic location,measured by credit equivalent amount. In excess of 60% (1999: 63%) of the Group’s exposures are with counterparties
which are either Australian banks or banks based in other OECD countries.
Consolidated

At 30 September 2000

OECD govts$M

Australian andOECD banks$M

Corporations, non-OECDbanks and others
$M

Total
$M

Australia
New Zealand
UK and Europe
Other International

540
23
–
2

5,694
674
1,350
661

4,276
500
193
95

10,510
1,197
1,543
758

565

8,379

5,064

14,008

At 30 September 1999

OECD govts$M

Australian andOECD banks$M

Corporations, non-OECDbanks and others
$M

Total
$M

Australia
New Zealand
UK and Europe
Other International

364
2
21
3

2,474
537
2,015
389

1,943
366
365
93

4,781
905
2,401
485

390

5,415

2,767

8,572

55

ME64380_Financials_recombined 13/11/00 4:13 PM Page 56

Notes to the Financial Statements
36: Derivative Financial Instruments (continued)
The next table shows the fair values of the Group’s derivatives by product type, disaggregated into gross unrealised gains
and gross unrealised losses.The fair value of a derivative represents the aggregate net present value of the cash inflows
and outflows required to extinguish the rights and obligations arising from the derivative in an orderly market as at thereporting date. Fair value does not indicate future gains or losses, but rather the unrealised gains and losses frommarking to market all derivatives at a particular point in time.

Consolidated

Other than Trading
Fair value
Fair value
as at
as at
30 Sep 2000
30 Sep 1999
$M
$M

Trading
Fair value
Fair value
as at
as at
30 Sep 2000 30 Sep 1999
$M
$M

Trading
Fair value
Fair value
Average
Average
2000
1999
$M
$M

Foreign exchange contracts

Spot and forward contracts
Gross unrealised gains
Gross unrealised losses
Swap agreements
Gross unrealised gains
Gross unrealised losses
Options purchased
Options sold
Other contracts
Gross unrealised gains
Gross unrealised losses

282
(62)

55
(49)

4,323
(4,036)

1,516(1,498)2,782(2,164)2,417(2,411)

2,008
(84)
–
–

435
(3)
–
–

297
(999)
904
(457)

607
(380)
302
(360)

655
(836)
518
(326)

896
(440)
376
(351)

–
–

–
–

214
(124)

201
(201)

166
(144)

50
(88)

2,144

438

122

187

651

449

1
–

–
–

22
(19)

36
(34)

25
(18)

41
(38)

347
(191)

127
(174)

1,486
(1,889)1,697(1,748)1,886(2,180)2,211(2,289)

–
–
–
–

–
–
–
–

18
(25)
31
(3)

26
(53)
25
(29)

18
(23)
4
(3)

19
(35)
36
(31)

157

(47)

(379)

(80)

(291)

(86)

2,301

391

(257)

107

360

363

Interest rate contracts

Forward rate agreements
Gross unrealised gains
Gross unrealised losses
Swap agreements
Gross unrealised gains
Gross unrealised losses
Futures contracts
Gross unrealised gains
Gross unrealised losses
Options purchased
Options sold
Total

The fair values of derivatives vary over time depending on movements in interest and exchange rates and the trading or
hedging strategies used.

56

ME64380_Financials_recombined 13/11/00 4:13 PM Page 57

Notes to the Financial Statements
36: Derivative Financial Instruments (continued)
In addition to customer and trading activities, the Group uses, inter alia, derivatives to manage the risk associated with its
balance sheet and future revenue streams.The principal objectives of asset and liability management are to hedge the market
value of the Group’s capital and to manage and control the sensitivity of the Group’s income while maintaining acceptablelevels of interest rate and liquidity risk.The Group also uses a variety of foreign exchange derivatives to hedge against
adverse movements in the value of foreign currency denominated assets and liabilities and future revenue streams.
The table below shows the notional principal amount, credit equivalent amount and fair value of derivatives held by theGroup, split between those entered into for customer-related and trading purposes, and those entered into for other than
trading purposes.

Consolidated

Notional
principal
amount2000$M

Creditequivalentamount
2000
$M

Fair
value
2000
$M

Notional
principal
amount1999$M

Creditequivalentamount
1999
$M

Fair
value
1999
$M

204,889
23,530

8,265
2,987

122
2,144

193,539
19,240

5,006
861

187
438

228,419

11,252

2,266

212,779

5,867

625

320,972
29,503

2,446
310

(379)
157

350,904
33,830

2,480
225

(80)
(47)

350,475

2,756

(222)

384,734

2,705

(127)

578,894

14,0082,044

597,513

8,572

498

Foreign exchange contracts

Customer-related and trading purposes
Other than trading purposes

Interest rate contracts

Customer-related and trading purposes
Other than trading purposes

Total

Detailed below are the net deferred realised and unrealised gains and losses arising from other than trading contracts used
to hedge interest rate exposure or to hedge anticipated transactions.These gains and losses are deferred only to the extent
that there is an offsetting unrecognised gain or loss on the exposure being hedged. Deferred gains or losses are generally
amortised over the expected term of the hedged exposure.

Consolidated

Foreign Exchange
Contracts
2000
1999
$M
$M

Interest Rate
Contracts
2000
1999
$M
$M

(10)
(10)
(34)
–

(1)
–
–
–

(1)
(23)
(23)
32

(54)

(1)

(15)

Total
2000
$M

1999
$M

(25)
(15)
2
2

(11)
(33)
(57)
32

(26)
(15)
2
2

(36)

(69)

(37)

Expected recognition in income

Within one year
One to two years
Two to five years
Greater than five years

57ME64380_Financials_recombined 13/11/00 4:13 PM Page 58

Notes to the Financial Statements
37: Life Insurance
Consolidated
2000
$M

1999
$M

1,689
369
(1,249)
(634)

1,295
222
(932)
(411)

Life insurance margin on services operating income

175

174

Operating expenses

(73)

(61)

Operating profit before income tax

102

113

Income tax expense

(53)

(59)

Operating profit after income tax

49

54

Movements in policy liabilities separated between:
Planned margins of revenues over expenses released
Difference between actual and assumed experience
Investment earnings on assets in excess of policy liabilities

36
(4)
17

42
(1)
13

Operating profit after income tax

49

54

Reconciliation of Life Insurance margin on services operating
income to operating profit after income tax:
Premium and related revenue
Investment revenue
Claims expense
Insurance policy liabilities expense

Operating profit after income tax arose from:58

ME64380_Financials_recombined 13/11/00 4:13 PM Page 59

Notes to the Financial Statements
38: Segment Analysis
For management purposes the Group is organised on a business basis into three major operating divisions being
Personal Financial Services, Corporate Financial Services and International. Group includes the results of asset andliability management and earnings on central capital and abnormals. Each segment is identified by the type of products
and services it provides to various customers. A description of each of the operating business segments, including thetypes of products and services that the segment provides to customers, is detailed in the Glossary on pages 94 to 95.
The following analysis details financial information by business segment.
Business Segment Analysis1, 2
Consolidated
30 September 2000

Personal
Financial
Services$M

Corporate
Financial
Services$M

International
$M

Group
and
Abnormals$M

Discontinued
businesses3$M

Consolidated
Total
$M

Total income

5,834

4,974

569

1,685

969

14,031

Net interest income
Other operating income

1,999

1,022

159

285

336

3,801

1,151

1,039

129

25

239

2,583

Operating income

3,150

2,061

288

310

575

6,384

Depreciation/amortisation
Other expenses
Doubtful debt provision

(57)

(27)

(15)

(71)

(16)

(186)

(1,692)

(937)

(175)

(52)

(272)

(3,128)

(171)

(214)

(22)

(33)

(62)

(502)

Operating profit before abnormal items
Abnormal profit

1,230

883

76

154

225

2,568

–

–

–

221

–

221

Operating profit before income tax

1,230

883

76

375

225

2,789

Income tax and outside equity interests

(458)

(236)

(36)

(196)

(116)

(1,042)

Operating profit after income tax

772

647

40

179

109

1,747

Total assets

71,673

77,1698,011

14,702

912

172,467

Total liabilities

40,99460,25910,66748,556

2,184

162,660

59

ME64380_Financials_recombined 13/11/00 4:13 PM Page 60

Notes to the Financial Statements
38: Segment Analysis (continued)
Business Segment Analysis1,2
Consolidated
30 September 1999

Personal
Financial
Services$M

Corporate
Financial
Services$M

International$M

Total income

4,740

4,309

588

353

1,071

11,061

Net interest income
Other operating income

1,875

984

185

266

345

3,655

1,010

967

128

48

224

2,377

Operating income

2,885

1,951

313

314

569

6,032

Depreciation/amortisation
Other expenses
Doubtful debt provision

(44)

(31)

(11)

(92)

(17)

(195)

(1,740)

(924)

(157)

(1)

(283)

(3,105)

(123)

(221)

(51)

(32)

(83)

(510)

978

775

94

189

186

2,222

–

–

–

–

–

–

Operating profit before income tax

978

775

94

189

186

2,222

Income tax and outside equity interests

(362)

(213)

(32)

(64)

(71)

(742)

Operating profit after income tax

616

562

62

125

115

1,480

Total assets

59,70969,842

5,814

7,726

9,710

152,801

Total liabilities

39,00459,881

7,902

24,34912,236

143,372

Operating profit before abnormal items
Abnormal profit

Group
and
Discontinued Consolidated
Abnormals
businesses
Total
$M
$M
$M

Results are “Equity Standardised”. See definition on page 94
Intersegment transfers are accounted for and determined on an arms length basis. Intersegment transfers are immaterial
3
Results of Grindlays and associated businesses sold on 31 July 2000 to Standard Chartered Bank are included here1260

ME64380_Financials_recombined 13/11/00 4:13 PM Page 61

Notes to the Financial Statements
38: Segment Analysis (continued)
The Group operates in five major geographical locations. They are Australia, New Zealand, UK and Europe, Asia Pacificand Americas.The composition of each geographical location is detailed in the Glossary on page 94. As a result of thesale of the Grindlays operations, the Group no longer has material operations in South Asia and the Middle East.
The following analysis details financial information by geographic location.
Geographic Segment Analysis4,5
2000
Consolidated

1999

1998

$M

%

$M

%

$M

%

7,991
1,843
777
1,463
728
683
546

57
13
6
10
5
5
4

6,867
1,624
620
584
623
349
394

62
15
6
5
6
3
3

6,446
2,008
800
868
572
419
458

56
17
7
7
5
4
4

14,031100

11,061

100

11,571

100

127,306
20,354
9,147
7,892
9
7,625
134

74
12
5
5
#
4
#

107,551
19,730
6,444
5,622
4,802
4,988
3,664

71
13
4
4
3
3
2

97,68920,15513,803
7,104
5,008
4,919
4,537

64
13
9
5
3
3
3

172,467100

152,801100

153,215100

6

IncomeAustralia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East

Total assets

Australia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East

Intersegment transfers are accounted for and determined on arms length basis. Intersegment transfers are immaterial
The geographic segments represent the locations in which the transaction was booked
6
Includes abnormal items#
Less than 1%
4561

ME64380_Financials_recombined 13/11/00 4:13 PM Page 62

Notes to the Financial Statements
39: Notes to the Statements of Cash Flows
2000$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

a) Reconciliation of operating profit after income
tax to net cash provided by operating activities
Inflows(Outflows)

Operating profit after income tax

Inflows(Outflows)

1,747

1,480

1,106

2,307

1,299

502
186

510
195

487
191

353
116

245
107

1,354
(297)
(17)
(7)
(1,239)
(4)
(81)

272
(290)
(13)
1
–
(1)
–

284
(521)
(10)
(12)
–
(11)
–

1,152
(187)
(2)
(7)
(331)
–
–

230
(233)
2
–
–
–
–

(25)
(325)
23
286

1,442
78
(8)
95

926
16
(38)
115

(511)
(415)
17
324

1,743
85
2
152

(67)

(73)

(112)

(4)

(7)

332
89
11

(10)
15
1

(239)
116
(41)

449
111
(23)

(10)
(33)
5

Total adjustments

721

2,214

1,151

1,042

2,288

Net cash provided by operating activities

2,468

3,694

2,257

3,349

3,587

Adjustments to reconcile operating profit after
income tax to net cash provided by operating activities
Provision for doubtful debts
Depreciation and amortisation
Provision for employee entitlements, restructuring
and other provisions
Payments from provisions(Profit) loss on sale of premises and equipment
Provision for surplus lease space(Profit) loss on sale of controlled entities and associates
Profit on sale of investment securities
Writedown on investment securities
Net decrease (increase)
Trading securities
Interest receivable
Accrued income
Net debit tax balances
Amortisation of discounts/premiums included
in interest income
Net increase (decrease)
Interest payable
Accrued expenses
Otherb) Reconciliation of cash and cash equivalents1
Cash and cash equivalents include liquid assets and amounts due from other financial institutions with original term to maturity ofless than 90 days. Cash and cash equivalents at the end of the financial year as shown in the statements of cash flows are reconciled
to the related items in the balance sheets as follows
Liquid assets – less than 90 days
Due from other financial institutions – less than 90 days

1

62

2,662
3,800

4,243
2,391

6,687
2,294

1,404
3,320

2,676
1,501

6,462

6,634

8,981

4,724

4,177

At 30 September 2000, cash and cash equivalents totalling $2 million (1999: $357 million) were not available for use outside the local operations of India$2 million (1999: $123 million), Pakistan - nil (1999: $137 million), Bangladesh - nil (1999:$77 million), Sri Lanka - nil (1999: $2 million) and Nepal - nil(1999: $18 million) due to exchange control regulations

ME64380_Financials_recombined 13/11/00 4:13 PM Page 63

Notes to the Financial Statements
39: Notes to the Statements of Cash Flows (continued)
2000$M

Consolidated
1999
$M

1998
$M

c) Acquisitions and disposals1
Details of aggregate assets and liabilities of controlled entities andbranches acquired, and disposed of, by the Group are as follows:
Fair value of net assets acquired
Other assets
Premises and equipment
Creditors and other liabilities
Deposits and other borrowings
Income tax liability
Provisions

4
14
(6)
(9)
(2)
–

–
–
–
–
–
–

–
–
–
–
–
–

Fair value of net assets acquired
Goodwill on acquisition

1
42

–
–

–
–

Consideration paid
Cash acquired
Cash consideration paid (received)

43
–
43

–
–
–

–
–
–

Fair value of net assets disposed
Liquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Regulatory deposits
Shares in controlled entities and associates
Other assets
Premises and equipment
Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Income tax liability
Creditors and other liabilities
Provisions
Loan capital

520
338
107
1,592
6,028
250
661
60
3,333
272
(808)
(10,589)
(250)
11
(295)
(25)
(76)

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Fair Value of net assets disposed
Net profit on disposal
Consideration received/receivable
Deferred settlements
Cash consideration received

1,129
1,239
2,368
–
2,368

–
–
–
–
–

–
–
–
–
–

1

For details on acquisitions and disposals refer to Note 18.

d) Non-cash financing and investing activities

Share capital issues
Dividend reinvestment plan
Bonus option plan

2000
$M

Consolidated
1999
$M

1998
$M

The Company
2000
1999
$M
$M

236
–

176
–

218
2

236
–

176
–

63

ME64380_Financials_recombined 13/11/00 4:13 PM Page 64

Notes to the Financial Statements
39: Notes to the Statements of Cash Flows (continued)
2000

1999

Available$M

Unused$M

Available$M

Unused$M

Financing arrangements which are available under normal financial arrangements
Credit standby arrangements
Standby lines
Other financing arrangements
Overdrafts and other financing arrangements

710

436

749

436

880

92

949

105

Total finance available

1,590

528

1,698

541

e) Financing arrangements

Incorporated in

Nature of Business

Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New ZealandSingapore
Australia
EnglandEngland
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Papua New Guinea
Australia
Australia
Australia
Indonesia
USA
USA
Australia
Australia

Banking
Insurance
Trustee/Nominee
Holding Company
Holding Company
Eftpos Service Provider
Banking
Investment
FinanceFinanceFinanceFinance
Merchant Banking
Investment
Holding Company
Export FinanceMortgage Insurance
Property Owner
Investment
Investment Activities
Life Assurance
Investment Services
Property Owner
Holding Company
Banking
General Finance
Finance
Investment Banking
Banking
Investment
Investment
Investment
Investment

40: Controlled Entities
All controlled entities are 100% owned unless otherwise noted.
The material controlled entities of the Group are
Australia and New Zealand Banking Group Limited
ANZCover Insurance Pty Ltd
ANZ Executors & Trustee Company Limited
ANZ Funds Pty Ltd
ANZ Holdings (New Zealand) Limited *EFTPOS New Zealand Limited*
ANZ Banking Group (New Zealand) Limited *Bage Investments Limited *UDC Finance Limited *Endeavour Finance Limited *Tui Endeavour Limited *ANZ International Private Limited *ANZ Singapore Limited *LFD Limited
Minerva Holdings Limited *ANZ Grindlays Export Finance Limited *ANZ Lenders Mortgage Insurance Pty Limited
ANZ Holdings Limited
ANZ Investment Holdings Limited
530 Collins Street Property Trust
ANZ Life Assurance Company Limited
ANZ Managed Investments Limited
ANZ Properties (Australia) Limited
ANZ Securities (Holdings) Limited
Australia and New Zealand Banking Group (PNG) Limited *Esanda Finance Corporation Limited
Fleet Partners Pty Limited
ANZ Capel Court Limited
PT ANZ Panin Bank *1
US Distribution Trust I
US Distribution Trust IIAlliance Holdings Limited
NMRSB Limited* Audited by overseas KPMG firms
1Outside equity interests hold ordinary shares or units in the controlled entities listed above as follows:
PT ANZ Panin Bank – 7,500 IDR 1M shares (15%) (1999: 7,500 IDR 1M shares (15%))64

ME64380_Financials_recombined 13/11/00 4:13 PM Page 65

Notes to the Financial Statements
41: Associates
Significant associates of the Group are as follows:
1

AEX Enterprises Ltd
2
ECard Pty Ltd
Other associates
Total shares in associates
1
2

Interest
held

Incorporated inCarrying Value$M

Principal
activity

19%

Hong Kong

14

Online Banking

20%

Australia

10

Smart Cards

529

An associate from 1 July 2000
An associate from 1 June 2000

2000
$M

Consolidated
1999$M

The Company
2000
1999
$M
$M

Contracts for outstanding capital expenditure
Not later than 1 year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years

23
5
7

40
7
12

4
–
–

6
–
–

Total capital expenditure commitments

35

59

4

6

127
302
401

133
229
377

105
246
385

106
156
350

830

739

736

612

42: Commitments
Capital expenditure

Lease rentals

Future rentals in respect of leases
Land and buildings
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years

Furniture and equipment
Not later than 1 year
Later than 1 year but not later than 5 years

1

3

–

1

–

7

–

–

1

10

–

1

Total lease rental commitments

831

749

736

613

Total commitments

866

808

740

619

The Group leases land and buildings under operating leases expiring from one to five years. Leases generally provide theGroup with a right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus anincremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or
operating criteria.

65

ME64380_Financials_recombined 13/11/00 4:13 PM Page 66

Notes to the Financial Statements
43: Contingent Liabilities and Credit Related Commitments
Credit related commitments
The credit risk of the following facilities may be less than the contract amount, but as it cannot be accurately
determined, the credit risk has been taken to be the contract amount.
Consolidated
2000
1999
Contract
Contract
amountamount$M$M

Undrawn facilities
Underwriting facilities

The Company
2000
1999
Contract
Contract
amountamount$M$M

Controlled Entities
2000
1999
Contract
Contract
amountamount$M$M

48,816271

46,816536

42,92754

35,457
408

5,889
217

11,359128

49,08747,352

42,98135,865

6,106

11,487

Contingent liabilities
The Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties.
The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore
these transactions are subjected to the same credit origination, portfolio management and collateral requirements forcustomers applying for loans. As the facilities may expire without being drawn upon, the notional amounts do notnecessarily reflect future cash requirements.
The credit risk of these facilities may be less than the contract amount, but as it cannot be accurately determined, thecredit risk has been taken to be the contract amount.
Consolidated
2000
1999
Contract
Contract
amountamount$M$M

The Company
2000
1999
Contract
Contract
amountamount$M$M

Controlled Entities
2000
1999
Contract
Contract
amountamount$M$M

Guarantees
Standby letters of credit
Bill endorsements
Documentary letters of credit
Performance related contingents
Other1

3,315
1,182
280
1,680
9,342
1,546

2,477
1,087
233
1,702
10,545
1,031

3,265
1,159
280
1,535
9,214
1,472

2,157
1,030
210
954
8,737
655

50
23
–
145
128
74

320
57
23
748
1,808
376

Total contingent liabilities

17,345

17,075

16,925

13,743

420

3,332

1

In addition the Group had no equity underwriting commitments at 30 September 2000 (1999: $39 million) which are classified as market risk exposures

The details and estimated maximum amount of contingent liabilities that may become payable are set out below.
(i) In accordance with the clearing and settlement arrangements set out in the Australian Payments Clearing
Association Limited (APCA) Regulations for the Australian Paper Clearing System, the Bulk Electronic Clearing
System and the High Value Clearing System (HVCS) and Austraclear Limited Regulations, the Company has acommitment to provide liquidity support in the event of a failure to settle by a member institution. For APCA,HVCS and Austraclear, the obligation arises only in limited circumstances.
(ii) The Group will indemnify each customer of controlled entities engaged in nominee activities against loss suffered
by reason of such entities failing to perform any obligation undertaken by them to a customer.
(iii) Pursuant to class order 98/1418 dated 13 August 1998, relief was granted during that year to a number of wholly
owned controlled entities from the Corporations Law requirements for preparation, audit, and publication offinancial statements.The entities to which relief was granted are
A.F.T. Investors Services Limited
ANZ Holdings Limited
ANZ Properties (Australia) Limited
Alliance Holdings Limited
ANZ Adelaide Group Limited
ANZ Capital Hedging Limited
ANZ Finance (Far East) Limited
ANZ Funds Pty Ltd

66

ANZ Investment Holdings Limited
ANZ Nominees Limited
Binnstone Traders Pty Ltd
Deori Pty Ltd
ES&A Holdings Limited
ES&A Properties (Australia) Limited
NMRB Limited
NMRSB Limited

ME64380_Financials_recombined 13/11/00 4:13 PM Page 67

Notes to the Financial Statements
43: Contingent Liabilities and Credit Related Commitments (continued)
It is the condition of the class order that the Company and each of the above controlled entities enter into a Deed of
Cross Guarantee. A Deed of Cross Guarantee under the class order was lodged and approved by the Australian Securities
and Investments Commission.The effect of the Deed is that the Company guarantees to each creditor payment in full ofany debt in the event of winding up any of the controlled entities under certain provisions of the Corporations Law.The
Company will only be liable in the event that after six months any creditor has not been paid in full.The controlled
entities have also given similar guarantees in the event that the Company is wound up.The consolidated profit and loss
statement and consolidated balance sheet of the Company and its wholly owned controlled entities which have enteredinto the Deed of Cross Guarantee are:Consolidated

2000
$M

1999
$M

Operating profit before tax
Income tax expense

3,177
(788)

2,258
(380)

Operating profit after income tax
Retained profits at start of year1

2,389
1,876

1,878
835

Total available for appropriation
Ordinary share dividends provided
for or paid

4,265

2,713

(941)

(814)

Retained profits at end of year

3,324

1,899

Liquid assets
Investment securities
Net loans and advances
Other assets
Premises and equipment

5,033
2,674
87,88649,286
927

3,564
1,899
71,87038,564936

Total assets

145,806

116,833

74,618987
59,002
1,872

60,828575
45,363
859

136,479

107,625

Net assets

9,327

9,208

Shareholders’ equity

9,327

9,208

AssetsLiabilities

Deposits and other borrowings
Income tax liability
Creditors and other liabilities
Provisions
Total liabilities

1

The Companies included in the class order have changed, accordingly retained profits have not carried forward(iv)

The Company has guaranteed payment on maturity of the principal and accrued interest of commercial paper
notes issued by ANZ (Delaware) Inc. of $4,454 million (1999: $3,783 million).

(v)

The Company is party to an underpinning agreement with ANZ Banking Group (New Zealand) Limited whereby theCompany undertakes to assume risk in relation to credit facilities extended by ANZ Banking Group (New Zealand)
Limited to individual customers which exceed 35% of ANZ Banking Group (New Zealand) Limited’s capital base.

(vi)

The Company is party to an underpinning agreement with Australia and New Zealand Banking Group (PNG)
Limited whereby the Company undertakes to assume risk in relation to credit facilities extended by Australia and New
Zealand Banking Group (PNG) Limited to individual customers which exceed 50% of Australia and New Zealand
Banking Group (PNG) Limited’s capital base.

(vii) The Company has guaranteed, on a subordinated basis, the issue of $230 million (1999: $191 million) SubordinatedFloating Rate Notes issued by ANZ Banking Group (New Zealand) Limited.
GeneralThere are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of whichcannot readily be quantified.Where appropriate, legal advice has been obtained and, in the light of such advice,provisions as deemed necessary have been made.

67

ME64380_Financials_recombined 13/11/00 4:13 PM Page 68

Notes to the Financial Statements
44: Superannuation Commitments
A number of pension and superannuation schemes have been established by the Group worldwide.The Group is obliged tocontribute to the schemes as a consequence of legislation and provisions of trust deeds. Legal enforceability is dependent on
the terms of the legislation and trust deeds.The major schemes with assets in excess of $25 million are:Contribution levels
Employee
Employer

Country

SchemeScheme type

Australia

ANZ Australian Staff
Superannuation Scheme1,2

Defined Contribution Scheme
ContributoryorDefined Contribution Scheme
Section A
orDefined Benefit Scheme
Pension Section Account4

New ZealandEnglandANZGROUP (New Zealand)
Staff Superannuation Scheme1, 2Defined Benefit Scheme5orDefined Contribution Scheme

ANZ UK Staff Pension Scheme1

2.5% minBalance of cost3

optional

8% of salarynil

Balance of costnil

Balance of cost

2.5% minDefined Benefit Scheme

nil

7.5%
of superannuation
salaries
Balance of cost

Balance of cost: the Group’s contribution is assessed by the actuary after taking account of members’ contributions and the value of the schemes’ assets
1
These schemes provide for pension benefits
2
These schemes provide for lump sum benefits
3
As recommended by the actuary, currently 8% of members’ superannuation salaries
4
As at November 30 1999, all assets and associated accrued benefits of the ANZGroup (Australia) Staff Pension Scheme were transferred to the ANZAustralian Staff Superannuation Scheme at market value.
5
Closed to new members on 31 March 1990. Operates to make pension payments to retirees who were members of that section of the fund

The details of major defined benefit schemes with assets in excess of $25 million are as follows:

2000
SchemesANZ Australian Staff
Superannuation Scheme
Pension Section Account1,3
ANZ UK Staff Pension Scheme

1

1999
SchemesANZGROUP (Australia)
Staff Pension Scheme2
ANZ UK Staff Pension Scheme

2

Employer’s
contribution$M

Accruedbenefits$M

Net market value of
assets held by scheme$M(Deficiency) excess ofnet market valueof assets overaccrued benefits
$M

2

50

52

2

50

–

828

1,153

325

785

Vestedbenefits$M

Employer’s
contribution$M

Accruedbenefits$M

Net market value of
assets held by scheme$M(Deficiency) excess ofnet market valueof assets overaccrued benefits
$M

4

54

52

(2)

54

–

685

959

274

650

Amounts were measured at 31 December 1999
Amounts were measured at 31 December 1998
3
As at November 30 1999, all assets and associated accrued benefits of the ANZGroup (Australia) Staff Pension Scheme were transferred to the ANZAustralian Staff Superannuation Scheme at market value
1
2

68

Vestedbenefits$MME64380_Financials_recombined 13/11/00 4:13 PM Page 69

Notes to the Financial Statements
45: Fiduciary Activities
The Group conducts investment management and other fiduciary activities as trustee or manager for investment funds
and trusts, including superannuation and approved deposit funds, equity trusts, property trusts and deceased estates.
These funds have not been consolidated as the Company does not have direct or indirect control of the funds.
Where the Company or its controlled entities incur liabilities in respect of these operations as trustee, a right ofindemnity exists against the assets of the applicable funds or trusts. As these assets are sufficient to cover the liabilities andit is therefore not probable that the Company or its controlled entities will be required to settle the liabilities, theliabilities are not included in the financial statements.
The aggregate amounts of funds concerned are as follows

Funds managed
Trusteeships

2000
$M

1999
$M

15,546
2,928

15,2683,318

18,474

18,586

46: Employee Share and Option Plans
The Company has four share purchase and option plans available for employees of the Group: the ANZ Employee Share
Acquisition Plan; the ANZ Group Share Purchase Scheme; the ANZ Share Option Plan and the ANZ Directors’ SharePlan. Shareholders of the Company have approved the implementation of each of the current plans. Fully paid ordinary
shares issued under these plans rank equally with other existing fully paid ordinary shares, except for fully paid ordinary
shares issued on conversion from partly paid shares which are not entitled to the first dividend paid. Partly paid ordinary
shares, paid to 10 cents, issued under the ANZ Group Share Purchase Scheme are not entitled to dividends payable by
the Company, but are entitled to one vote for every ten partly paid shares.They are also entitled to participate in rights
and bonus issues.
Each option granted under the ANZ Share Option Plan entitles a holder to purchase one ordinary share subject to any
terms and conditions imposed on issue.
An offer to employees and directors cannot be made under any of the schemes if an issue pursuant to that offer will
result in the aggregate of shares issued and options granted over unissued shares held for employees under various
employee share and option schemes exceeding 7% of the issued capital of the Company.
Amounts received from the ANZ Employee Share Acquisition Plan and the ANZ Group Share Purchase Scheme, on fully
paid and partly paid shares are recognised as share capital.
The market price of one ordinary share at 30 September 2000 was $13.28.
Amounts received from exercising options under the ANZ Share Option Plan during the financial year, excluding callson partly paid shares issued in prior financial years, were recognised as follows
The Company

Share capital
General reserve

2000
$

1999
$

9,679,911(17,154)

8,919,570(18,439)

ANZ Employee Share Acquisition Plan
All permanent employees who have had continuous service for one year with the Company or any of its controlled
entities are eligible to participate in a scheme enabling the issue of up to $1,000 of shares in each financial year. During
the financial year, 1,722,361 shares were issued under the $1,000 scheme.
Selected employees may also be issued deferred shares which vest in the employee after a qualifying period. Ordinary
shares acquired under this plan will be subject to restrictions on disposal whilst held in trust. During the financial year,
2,565,559 deferred shares were issued under this deferred Scheme.

69ME64380_Financials_recombined 13/11/00 4:13 PM Page 70

Notes to the Financial Statements
46: Employee Share and Option Plans (continued)
ANZ Share Purchase Scheme
Officers eligible to participate in this scheme may be offered fully paid ordinary shares. During the financial year, nofully paid ordinary shares were issued under the scheme.
At 30 September 2000, 11,035,400 fully paid ordinary shares and 7,805,000 partly paid ordinary shares had been issued
since the commencement of this scheme.The partly paid ordinary shares were paid to 10 cents on application and thebalance payable either at the request of the employee or upon cessation of employment, except in the event of death,retirement or illness, in which case, the balance is payable three months after the event.
During the year the issue proceeds from conversion of partly paid shares to fully paid shares were:
12,000 ordinary shares at $4.83 per share
5,000 ordinary shares at $5.26 per share
5,000 ordinary shares at $3.34 per share

ANZ Share Option Plan
Executive directors and executive officers may be granted options which entitle them to purchase shares.These options
do not entitle the holder to participate in a share issue of any other body corporate apart from the Company.
4,671,000 options were issued during the financial year, 230,563 options granted under the Plan lapsed during thefinancial year.
At 30 September 2000, 13,443,974 options were outstanding under this scheme.
No. of options outstandingat 30 September 2000

99,404
22,699500,000
82,891500,000
500,000
10,4801,450,000
100,000
200,000
1,025,000
660,000
10,000150,000
165,000
2,795,000
380,000
7,500
25,000150,000
1,000,000
750,000
140,000
1,341,000
350,000
165,000
515,000
60,000200,000
90,000Exercise price

$8.76
$8.76
$8.76
$11.45$12.12$11.40$11.45$9.51$10.64$8.93$8.97$10.34$10.41$10.44$11.44$11.20$11.20$11.26$11.29$11.30$9.94$11.49$10.63$10.11$10.20$11.81$11.81$11.64$12.23$12.75

Exercisable period

Not exercisable before 31 Jan 2000, or later than 30 Jan 2002
Not exercisable before 14 Feb 2000, or later than 13 Feb 2002
Not exercisable before 2 Jun 2000, or later than 1 Jun 2002
Not exercisable before 23 Jan 2001, or later than 22 Jan 2003
Not exercisable before 1 Feb 2000, or later than 1 Oct 2002
Not exercisable before 1 Jun 2001, or later than 1 Oct 2002
Not exercisable before 18 Feb 2001, or later than 17 Feb 2003
Not exercisable before 24 Feb 2001, or later than 23 Feb 20031
Not exercisable before 22 Jun 2001, or later than 21 Jun 20031
Not exercisable before 2 Oct 2001, or later than 1 Oct 20031
Not exercisable before 28 Oct 2001, or later than 27 Oct 20031
Not exercisable before 11 Dec 2001, or later than 10 Dec 20031
Not exercisable before 28 Jan 2002, or later than 27 Jan 20041
Not exercisable before 24 Feb 2002, or later than 23 Feb 20041
Not exercisable before 25 Mar 2002, or later than 24 Mar 20041
Not exercisable before 2 Jun 2002, or later than 1 Jun 20041
Not exercisable before 2 Jun 2002, or later than 1 Jun 2004
Not exercisable before 7 Jun 2002, or later than 6 Jun 2004
Not exercisable before 5 Jul 2002, or later than 4 Jul 20041
Not exercisable before 12 Jul 2002, or later than 11 Jul 20041
Not exercisable before 27 Oct 2002, or later than 26 Oct 20041
Not exercisable before 31 Dec 2002, or later than 31 Dec 20041
Not exercisable before 31 Jan 2003, or later than 30 Jan 20051
Not exercisable before 23 Feb 2003, or later than 22 Feb 20071
Not exercisable before 8 Mar 2003, or later than 7 Mar 20071
Not exercisable before 23 May 2003, or later than 22 May 20071
Not exercisable before 23 May 2003, or later than 22 May 2007
Not exercisable before 26 May 2003, or later than 25 May 20071
Not exercisable before 7 Jun 2003, or later than 6 Jun 20071
Not exercisable before 26 Sept 2003, or later than 25 Sept 2007

subject to performance condition

1

These options will expire immediately on termination of employment, except in the event of retirement, death or whereagreed by the Directors of the Company, in which case the Directors may allow the options to be exercised.
70

ME64380_Financials_recombined 13/11/00 4:13 PM Page 71

Notes to the Financial Statements
46: Employee Share and Option Plans (continued)
With the consent of the directors, the following options were exercised during the financial year by employees andformer employees:
559,401
100,000
40,00075,000100,000
100,000
40,695

options exercised at $8.76 per shareoptions exercised at $8.97 per shareoptions exercised at $10.34 per shareoptions exercised at $10.64 per shareoptions exercised at $10.65 per shareoptions exercised at $11.40 per shareoptions exercised at $11.45 per share

In the event of a takeover offer or takeover announcement, the directors of the Company may allow the options to be
exercised.
If there is a bonus issue prior to the expiry or exercise of the options, then upon exercise of the options, option holders
are entitled to those shares as if the options had been exercised prior to that issue.Those shares will be allotted to theoption holder when the options are exercised.
As at the date of the Directors’ Report, unexercised options over ordinary shares are as per the table above, adjusted forthe exercise of: 7,500 options at $11.20 per share, 66,853 options at $8.76 per share and 30,000 options at $10.34 pershare which were exercised by employees and former employees since the end of the financial year.
ANZ Directors’ Share Plan
Directors may elect to forgo remuneration to which they may have otherwise become entitled and receive shares to thevalue of the remuneration forgone. Participation in the Plan is voluntary.
The shares are purchased on market and are held upon Trust for periods ranging from 1 to 10 years.The shares may
also be subject to forfeiture for gross misconduct.
At 30 September 2000, 56,684 shares were held under this Plan.

47: Related Party Disclosures
The directors during the year were:C B Goode (Chairman)J C Dahlsen
R S Deane
J K Ellis

J McFarlane
B W Scott
G K Toomey
M A Jackson

Australian banks, parent entities of Australian banks and controlled entities of Australian banks have been exempted,
subject to certain conditions, by an Australian Securities and Investments Commission class order, 98/110 dated 10 July
1998, from making disclosures of loans made, guaranteed or secured by a bank to related parties (other than specified
categories of directors) and financial instrument transactions (other than shares and share options) of a bank where a
director of the relevant entity is not a party to the transaction and where the loan or financial instrument transaction is
lawfully made and occurs in the course of ordinary banking business either at arm’s length or with the approval of ageneral meeting of the relevant entity and its ultimate chief entity (if any).
The class order does not apply to a loan or financial instrument transaction of which any director of the relevant entity
should reasonably be aware that, if not disclosed, would have the potential to adversely affect the decisions made byusers of the financial statements about the allocation of scarce resources.

71

ME64380_Financials_recombined 13/11/00 4:13 PM Page 72

Notes to the Financial Statements
47: Related Party Disclosures (continued)
A condition of the class order is that for each financial year to which it applies, the Company must provide evidence
to the Commission that the Company has systems of internal controls and procedures which(i)in the case of any material financial instrument transaction, ensure that; and(ii)

in any other case, are designed to provide a reasonable degree of assurance that,any financial instrument transaction of a bank which may be required to be disclosed in the Company’s financial
statements and which is not entered into regularly, is drawn to the attention of the directors.
(a) Transactions with directors and director-related entities
Shares and Share Options
The aggregate number of shares and share options issued to directors of the Company and their director-related
entities by the Company during the financial year were as follows:
The Company

Fully paid ordinary shares in the Company
Fully paid deferred shares in the Company
Options issued under the ANZ Share Option Plan

2000
No.

1999
No.

–
87,190750,000

22,319––Certain former executive directors had previously acquired fully paid ordinary shares under the ANZ Share Purchase
Scheme on conditions no more favourable than those offered to other employees. All other fully paid ordinary shareswere acquired on terms and conditions no more favourable than those offered to other shareholders.
Aggregate number of shares and share options held directly, indirectly or beneficially by directors of the Company andtheir director-related entities, as at balance date, were as follows:

Fully paid ordinary shares in the Company
Fully paid deferred shares in the Company
Share options over ordinary shares in the Company

2000
No.

1999
No.

868,867
87,1901,750,000

1,031,186–
1,210,710

Directors of the Company and their director-related entities receive normal dividends on these shares.
Loans made to Directors
Loans made to non-executive directors of the Company and controlled entities are made in the course of ordinary
business on normal commercial terms and conditions. Loans to executive directors of the Company and controlled
entities are made pursuant to the Executive Directors’ Loan Scheme authorised by shareholders on 18 January 1982,
on the same terms and conditions applicable to other employees within the Group in accordance with establishedpolicy.
Under the Australian Securities and Investments Commission class order referred to above, disclosure is limited to theaggregate amount of loans made, guaranteed or secured by:(i) the Company to its directors;(ii) any controlled entity to the directors of the Company;(iii) banking corporation controlled entities to their directors; and(iv) non-banking corporation controlled entities to directors of controlled entities and to parties related to any one ofthem or the directors of the Company.
The directors involved were:
S Armstrong3
D Fisher1
A Hamid1
M J Horn1,2
J McFarlane1,2,3,4
M Rostain1,3,4
1
2

72

Repayments made during the year
Loans made during the year

I Brandon3,4
C B Goode2,4
J Henderson1,2
D Hornery2
J Ries3,4
G Tunstall1,2
3
4

Repayments made during the prior year
Loans made during the prior yearME64380_Financials_recombined 13/11/00 4:13 PM Page 73

Notes to the Financial Statements
47: Related Party Disclosures (continued)
The aggregate amount of such loans outstanding at 30 September 2000 were:

Balance outstanding at 30 September
Total interest received
The aggregate amount of repayments received from directors and theirdirector-related entities during the financial year was:Normal terms and conditions
Employee terms and conditions
The aggregate amount of loans made during the financial year was:Normal terms and conditions
Employee terms and conditions

Consolidated
2000
1999
$’000
$’000

The Company
2000
1999
$’000
$’000

4,693
248

4,792
155

4,016
219

4,176
112

–
76

837
39

–
–

837
–

2,132
278

1,500
2,482

2,132
–

1,500
2,293

Other transactions of Directors and Director-Related Entities(i) Financial instrument transactions
Under the Australian Securities and Investments Commission class order referred to above, disclosure of financial
instrument transactions regularly made by a bank is limited to disclosure of such transactions with a director of theentity concerned. Financial instrument transactions which have occurred on arm’s length terms and conditions, and are
deemed trivial or domestic in nature are required to be disclosed by general description.
Financial instrument transactions between the directors and the banks during the financial year were in the nature of
normal personal banking, investment and deposit transactions.These transactions occurred on an arm’s length basis andon normal commercial terms and conditions no more favourable than those given to other employees or customers.
(ii) Transactions other than financial instrument transactions of banks
All transactions with directors and their director-related entities are conducted on arm’s length terms and conditions,and are deemed trivial or domestic in nature.These transactions are in the nature of deposits, debentures, or investment
transactions conducted with non-bank controlled entities.
All other transactions with director-related entities occur within a normal customer or supplier relationship and are onarms length terms.
(b) Transactions with associated entities
During the course of the financial year the Company and the Group conducted transactions with associated entities on
normal commercial terms and conditions as shown below:
Consolidated
2000
1999
$’000
$’000

Aggregate
Amounts receivable from associated entities
Interest revenue
Dividend revenue

–
–
4,920

60,000953
1,243

The Company
2000
1999
$’000
$’000

–
–
–

60,000953–

73

ME64380_Financials_recombined 13/11/00 4:13 PM Page 74

Notes to the Financial Statements
48: Remuneration of Directors
Remuneration includes income from salaries, bonuses, other benefits (including non-cash benefits), retirement benefits
and superannuation contributions.The maximum total remuneration for non-executive directors of the Company wasset at the Annual General Meeting held on 21 January 1998 at $1.5 million.Total fees paid to non-executive directors
by the Company for the year were $1.0 million (1999: $1.3 million). Retirement benefits paid to directors of theCompany are detailed in the Directors’ Report.
The number of directors of the Company with total income in each of the following bands was:The Company
2000

1999

$80,001 to $90,000–

1$90,001 to $100,000

1

1$100,001 to $110,000

22$110,001 to $120,000

2

1$140,001 to $150,000–

1$180,001 to $190,000

1–$300,001 to $310,000–

1$320,001 to $330,000

1–$370,001 to $380,000$1,460,001 to $1,470,000$2,790,001 to $2,800,000$2,810,001 to $2,820,000

–
–
–
1

1
1
1
–

Total number of directors

8

10

Total income paid or payable todirectors of the Company and controlled
entities from the Company or related entity1
1

74

Consolidated
2000
1999
$’000
$’000

The Company
2000
1999
$’000
$’000

44,0373,856

45,481

Including the total income of executive directors, excluding directors of controlled entities who are executives of the Company

4,125

ME64380_Financials_recombined 13/11/00 4:13 PM Page 75

Notes to the Financial Statements
49: Remuneration of Executives
Remuneration includes salaries, bonuses, other benefits (including non-cash benefits), and superannuation contributions.
The remuneration of executives who work wholly or mainly outside Australia are excluded from this disclosure.
The number of executives with total remuneration exceeding $100,000 in each of the following bands was:

Consolidated
2000
1999

The
Company
2000
1999

Consolidated
2000
1999

The
Company
2000
1999$160,001 to $170,000

–

1

–

1

$930,001 to $940,000

1

–

1

–

$190,001 to $200,000

–

1

–

1

$940,001 to $950,000

1

–

1

–

$310,001 to $320,000

1

–

1

–

$950,001 to $960,000

1

1

1

1

$430,001 to $440,000

–

1

–

1

$970,001 to $980,000

–

1

–

1

$500,001 to $510,000

2

–

2

–

$980,001 to $990,000

1

–

1

–

$600,001 to $610,000

–

1

–

1

$1,060,001 to $1,070,000

2

1

2

1

$630,001 to $640,000

–

1

–

1

$1,070,001 to $1,080,000

–

1

–

1

$650,001 to $660,000

–

1

–

1

$1,130,001 to $1,140,000

–

1

–

1

$690,001 to $700,000

1

–

1

–

$1,240,001 to $1,250,000

–

1

–

1

$710,001 to $720,000

–

1

–

1

$1,410,001 to $1,420,000

2

–

2

–

$740,001 to $750,000

–

1

–

1

$1,440,001 to $1,450,000

–

1

–

1

$750,001 to $760,000

1

–

1

–

$1,460,001 to $1,470,000

1

1

1

1

$770,001 to $780,000

1

–

1

–

$1,510,001 to $1,520,000

1

–

1

–

$800,001 to $810,000

–

1

–

1

$2,790,001 to $2,800,000

–

1

–

1

$820,001 to $830,000

1

–

1

–

$2,810,001 to $2,820,000

1

–

1

–

$840,001 to $850,000

2

–

2

–

$3,590,001 to $3,600,000

1

–

1

–

$870,001 to $880,000

–

1

–

1

21

19

21

19

24,243

17,98324,243

17,983

Total number of executives
Total remuneration received or due and receivable directly
or indirectly by executives of the Company and controlled entities ($’000)

75

ME64380_Financials_recombined 13/11/00 4:13 PM Page 76

Notes to the Financial Statements
50: US GAAP Reconciliation
The consolidated financial statements of the Group are prepared in accordance with Generally Accepted Accounting
Principles applicable in Australia (Australian GAAP) which differ in some respects from Generally Accepted Accounting
Principles in the United States (US GAAP).
The following are reconciliations of the operating profit after income tax, shareholders’ equity and total assets, applying
US GAAP instead of Australian GAAP.
2000
$M

1999
$M

1998
$M

1,747

1,480

1,106

(xii)

(54)

(23)

–

(i)

3

2

3

(i)
(i)
(iii)
(ii)

168
(72)
(80)
(48)

–
–
(16)
(36)

9
–
–
(36)

(iii)
(vi)
(xvii)

19
8
361
(112)

–
(1)
–
4

–
19
–
(5)

1,940

1,410

1,096

119.3
116.5

86.1
85.2

72.0
69.0

1,940
170
(23)

1,410
(215)
7

1,096
142
–

2,087

1,202

1,238

9,795
(330)
(16)
44
692
(477)
(12)
528
245
62

9,403
(340)
7
41
807
(544)
(12)
470
–
57

8,335
(340)
–
39
807
(508)
–
431
–
58

10,531

9,889

8,822

(i)
(ix)
(i)
(ii)
(ii)
(vi)

172,467
(227)
(24)
44
692
(477)
45

152,801
(340)
11
41
807
(544)
39

153,215
(340)
–
39
807
(508)
44

(v)

(662)

(400)

(484)

171,858

152,415

152,773

Note

Operating profit after income tax reported
under Australian GAAP1
Items having the effect of increasing (decreasing)reported income (total tax impact of adjustments shown separately):
Employee share issue and options
Depreciation charged on the difference between revaluation
amount and historical cost of buildings
Difference in gain or loss on disposal of properties revalued
under historical cost
Revaluation of properties
Deferred profit on sale and leaseback transactions over the lease term
Amortisation of goodwill not recognised for Australian GAAP
Amortisation of deferred profit on sale and leaseback transactions
over the lease term
Pension expense adjustment
Provisions
Total tax impact of adjustments
Net income according to US GAAP
Earnings per share (cents) according to US GAAP
Basic
DilutedAdjustments to determine other comprehensive
income for US GAAPNet income according to US GAAP
Currency translation adjustments (net of tax)
Unrealised profit (loss) on available for sale securities (net of tax)

(xv)

(ix)

Total comprehensive income according to US GAAP
Shareholders’ equity reported under
Australian GAAP2
Elimination of gross asset incremental revaluations
Unrealised profit (loss) on available for sale securities
Adjustment to accumulated depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation of goodwill
Deferred profit on sale and leaseback transactions
Provision for final cash dividend
Provisions
Pension expense adjustment

(i)
(ix)
(i)
(ii)
(ii)
(iii)
(iv)
(xvii)(vi)

Shareholders’ equity according to US GAAP
Total assets reported under Australian GAAP
Elimination of gross incremental revaluations
Unrealised profit (loss) on available for sale securities
Adjustment to accumulated depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation of goodwill
Prepaid pension adjustment
Reclassification of deferred tax assets against deferred
tax liabilities
Total assets according to US GAAP
1
2

76

After abnormal items
Excluding outside equity interests

ME64380_Financials_recombined 13/11/00 4:13 PM Page 77

Notes to the Financial Statements
50: US GAAP Reconciliation (continued)(i)
Premises and equipment
Properties have been revalued by the Group at various
times, increasing the book value of these assets (refer note
1(xiv)). Under Australian GAAP, any increments onrevaluation are credited directly to the Asset Revaluation
Reserve (ARR), and decrements are debited to the ARR
to the extent of any previous revaluation increments.
Decrements in excess of any previous revaluation
increments are charged to the Profit and Loss Account.
The ARR forms part of Shareholders’ equity. Under US
GAAP, revaluation of properties is not permitted except
for decrements which are regarded as other than
temporary. Any such decrements are recorded in theincome statement. Subsequent recoveries to the income
statement are not allowed.
The impact of revaluations is that under Australian GAAP,
depreciation charges are generally higher and profits on
disposal are lower than those recorded under US GAAP.
The depreciation charges, together with the profits andlosses on revalued assets sold have been adjusted tohistorical cost in the US GAAP reconciliation.
(ii)
Goodwill
The Group changed its accounting policy in respect of
goodwill in the financial year ended 30 September 1993.
Previously, goodwill on acquisition was charged in full to
the Group’s Profit and Loss Account in the year ofacquisition.
Under US GAAP, goodwill is capitalised and amortisedover the period of time during which the benefits are
expected to arise, such period not exceeding 40 years
generally or 20 years in respect of bank acquisitions.
Adjustments have been made in the US GAAP
reconciliation statement to restore goodwill written-off in
full under Australian GAAP and to amortise such
goodwill over the period of the expected benefits.
Additionally, to the extent that periodic reviews of thecarrying amount of goodwill lead to a write-down of
goodwill previously capitalised for US purposes, this isadjusted in the US GAAP reconciliation.
(iii)
Sale–leaseback transactions
Under Australian GAAP for operating leases, gains on
disposal under sale-leaseback transactions can berecognised in the period of sale. Under US GAAP, thegain is amortised over the remaining lease term.This
difference in treatment has been adjusted in the US
GAAP reconciliation.

(iv)
Dividends
Under Australian GAAP, dividends are shown in theProfit and Loss Account in the period to which they
relate rather than in the period when they are declared as
required by US GAAP.This difference in treatment has
been adjusted in the US GAAP shareholders’ equity
reconciliation.
(v)
Income taxes
Under Australian GAAP, tax benefits relating to carryforward tax losses must be “virtually certain” of being
realised before being booked. Realisations of benefits
relating to other timing differences must be “beyond
reasonable doubt” before they may be booked.These tests
are as stringent as those applied under US GAAP andhence no write-down of future tax benefits is required.
Australian GAAP allows offsetting of future income tax
benefits and liabilities to the extent they will reverse in
the same period. US GAAP requires separate offset on
current deferred tax assets and liabilities and non-current
deferred tax assets and liabilities. However, no offset isallowed for deferred tax assets and liabilities attributable todifferent tax jurisdictions.The impact of the difference inthis approach to Australian GAAP has been adjusted forin the US GAAP reconciliation.
(vi)
Pension commitments
Under Australian GAAP, contributions in respect ofdefined benefit schemes are recorded in the income
statement and are made at levels necessary to ensure thatthese schemes are maintained with sufficient assets tomeet their actuarially assessed liabilities. Any net
deficiency arising from the aggregation of assets andliabilities of the Group’s defined benefit schemes isprovided for in the Group’s financial statements (refer
note 44 in the Financial Statements).
Under US SFAS 87 “Employers’ Accounting for
Pensions” and the new disclosure requirements of SFAS
132 “Employers’ Disclosures about Pensions and Other
Post Retirement Benefits”, pension expense is a functionof an employee’s service period, interest costs, expected
actuarial return on the schemes’ assets, amortisation of net
transition asset and recognised prior service cost. In
addition, reconciliation between the accrued pension
liability/prepaid asset and the funded status (difference
between projected benefit obligation and fair value ofpension plan assets) of the pension schemes is required.
(vii)

Post retirement and post employment
benefits
Post retirement and post employment benefits other thanpension payments are not material and no adjustment isrequired in the US GAAP reconciliation.

77

ME64380_Financials_recombined 13/11/00 4:13 PM Page 78

Notes to the Financial Statements
50: US GAAP Reconciliation (continued)(viii) Trading securities
US GAAP requires that in instances where trading
securities are not bought and held principally for the
purpose of selling them in the near term, they should beclassified as available for sale and recorded at market value
with unrealised profits and losses in respect of market value
adjustments recognised as other comprehensive income in
Shareholders’ equity.
The residual emerging markets portfolio had been classified
as available for sale with the market value write down
taken through the profit and loss account for both
Australian GAAP and US GAAP purposes.
Except for the above no adjustment is required to be madein the US GAAP reconciliation as the effect of reclassifying
certain trading securities as available for sale is not material.
(ix) Investment Securities
US GAAP requires that investments not classified as
trading securities or as held to maturity securities shall beclassified as available for sale securities and be recorded atmarket value in accordance with SFAS 115 “Accounting
for Certain Investments in Debt and Equity Securities”.
An adjustment is made in the US GAAP reconciliation toreflect available for sale securities which are carried atmarket value with unrealised profits and losses in respectof market value adjustments being reported as othercomprehensive income in shareholders’ equity.
(x)
Accounting for the impairment of loans
SFAS 114 “Accounting by Creditors for Impairment of aLoan”, as amended by SFAS 118 “Accounting by
Creditors for Impairment of a Loan – Income
Recognition and Disclosures”, requires the value of an
impaired loan to be measured as the present value of
future cash flows discounted at the loan’s initial effective
interest rate, the loan’s observable market price or the fairvalue of the collateral, if the loan is collateral dependent.
There is no requirement under Australian GAAP todiscount the expected future cash flows attributable toimpaired loans in assessing the level of specific provision
for doubtful debts.
No adjustment is required in the US GAAP
reconciliation as the estimated fair value of impaired loans
is not materially different from the carrying value.
(xi)

Accounting for the impairment of long
lived assets and for long-lived assets tobe disposed of
SFAS 121 “Accounting for the Impairment of LongLived Assets and for Long-Lived Assets to be Disposedof ”, requires that where an event or a change in78

circumstance indicates that the carrying value of an asset
that is expected to be held and used may not berecoverable, an impairment loss should be recognised.
The standard also requires that where there is acommitted plan to dispose of an asset, the asset should
be reported at the lower of the carrying value or fairvalue less selling costs.
The Group has assessed the carrying values of all
non-current assets and determined that they are not inexcess of their recoverable amounts.
(xii) Accounting for stock-compensation plans
Under Australian GAAP an expense is not recognised forshare options issued to employees or for shares issued at a
discount.
SFAS 123 “Accounting for Stock-Based Compensation”
requires shares and options issued to employees to berecognised using either the fair value method or the
intrinsic value method as prescribed by APB No. 25 andits related interpretations.
For US GAAP disclosure the Group measures share-based
employee compensation cost using the intrinsic value
based method. US GAAP compensation cost relating toshare options is attributable to the impact of the increasein the market price of the Group’s shares on those shareoption plans defined as variable under APB 25.Variable
share option plans include all plans with performance
conditions.The Group’s policy is to generally grant shareoptions at the average market price of the underlying
shares at the date of grant.
Share issues to employees under the ANZ Employee
Share Acquisition Plan are recognised at intrinsic value
under US GAAP.
Details of the share-based compensation plans areincluded in Note 46 to the Financial Statements.
(xiii) Accounting for transfers and servicing
of financial assets and extinguishmentsof liabilities
SFAS 125 “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities”
prescribes the accounting and reporting requirements fortransfers of financial assets and extinguishments ofliabilities. Under certain circumstances, the statement also
requires a transferor of financial assets that are pledged ascollateral to reclassify those assets, and the transferee torecognise those assets and their obligation to return them.
No adjustment is required in the US GAAP
reconciliation as the effect of adopting the provisions of
SFAS 125 on total assets is not material.

ME64380_Financials_recombined 13/11/00 4:13 PM Page 79

Notes to the Financial Statements
50: US GAAP Reconciliation (continued)(xiv)

Comprehensive Income

SFAS 130 “Reporting Comprehensive Income”
establishes standards for reporting and display ofcomprehensive income and its components.
Comprehensive income is defined as all changes inshareholders’ equity during a period excluding thoseresulting from investments by shareholders anddistributions to shareholders.
Accordingly, the Group has shown currency translation
adjustments and unrealised profit on available for salesecurities as components of other comprehensive income
with net income according to US GAAP forming theremaining component of comprehensive income.
(xv)

Earnings per share (“EPS”)

Under US GAAP, EPS is computed in accordance with
SFAS 128 “Earnings Per Share”.This standard is similar toAustralian GAAP. One area of difference relates to thecalculation of diluted EPS. Under US GAAP, assumed
proceeds from potentially dilutive stock options are
assumed to be used to repurchase outstanding shares at
the average market price during the period. Under
Australian GAAP, the assumed proceeds are invested ininterest earning investments, thereby increasing earnings
used in the calculation of diluted EPS.
(xvi)

Accounting for derivative instruments
and hedging activities

The Group is required to adopt SFAS 133 “Accounting
for Derivative Instruments and Hedging Activities” andSFAS 138 “Accounting for Certain Derivative Instruments
and Certain Hedging Activities” in its US GAAP
reconciliation from 1 October 2000. SFAS 133 requires allderivatives to be recognised on balance sheet at fair value.
Movements in the fair value of derivatives are taken to
profit and loss, unless the derivatives meet the criteriaprescribed in SFAS 133 for fair value, cash flow, or foreign
currency hedges. If certain criteria are met derivatives canbe designated as hedges. Under SFAS 133 normalbanking hedging practices may not qualify for hedge
accounting, notwithstanding their ability to hedge existingbalance sheet positions from an economic perspective.

Further information on the results of the Group’s hedging
activities, and the effectiveness of the risk management
policies, can be assessed better by considering theinformation provided on interest rate risk on page 47(page 38 in 1999), and the information on hedging
derivatives provided in note 36: Derivative Financial
Instruments, of the Financial Report.
Under SFAS 133, movements in the value of derivatives
designated as fair value hedges are taken to profit and loss,
along with the movement in the fair value of theunderlying exposure that is being hedged to the extent
the hedge is effective.These amounts largely offset eachother with any ineffectiveness recognised in the US
GAAP profit and loss. Movements in the effective portionof the fair value of derivatives designated as cash flow
hedges are taken to other comprehensive income. Any
ineffectiveness is recognised in US GAAP profit and loss
immediately. Amounts are subsequently reclassified out ofother comprehensive income into earnings as the hedgedtransaction impacts earnings.
The impact on adoption of SFAS 133 and SFAS 138 at
1 October was a transitional adjustment to increase US
GAAP profit by $11 million, and a transitional adjustment
to decrease other comprehensive income by $54 million.
Changes in market conditions and the Group’s hedging
policies may result in volatility in these US GAAP
adjustments going forward.
(xvii)

Provisions

The Group has recorded a provision for restructuring
in accordance with Australian GAAP amounting to$361 million before tax with an associated taxationcredit of $116 million. US GAAP requires certain criteria
to be met before a restructuring provision is recognised.
These criteria, which are more detailed than theAustralian recognition criteria, include publicannouncement of many details of the programs prior tobalance date. Accordingly, the provision and associatedtaxation effect have therefore been adjusted in the US
GAAP reconciliation.

As a result future fair value movements recognised in
US GAAP reconciliation may not be indicative of theGroup’s risk profile.The Group uses instruments andhedging techniques that are effective in managing interest
rate risk and foreign exchange risk.

79ME64380_Financials_recombined 13/11/00 4:13 PM Page 80

Notes to the Financial Statements
50: US GAAP Reconciliation (continued)(xvii) Details of Pension Schemes and Pension Expense
Reconciliations of the funded status of major defined benefit schemes as at 30 June 2000 are summarised below.
Details of the funding of the schemes are set out in note 44.
2000$M

Australian Scheme
1999
$M

1998
$M

Balance at start of year
Interest costs
Benefits paid
Actuarial gains

58
4
(7)
(1)

57
4
(7)
4

59
4
(7)
1

Benefit obligation, 30 September

54

58

57

Change in plan assets
Fair value at start of year
Actual return on plan assets
Employer contribution
Benefits paid

53
6
–
(7)

51
5
4
(7)

47
7
4
(7)

Total fair value of plan assets, 30 September

52

53

51

Funded status
Unrecognised net transition loss
Unrecognised net loss
Adjustment required to recognise minimum unfunded
projected benefit obligation

(2)
4
4

(5)
5
7

(6)
6
3

(8)

(12)

(10)

Net amount recognised

(2)

(5)

(7)

–
(2)

–
(5)

–
(7)

2000

1999

1998

6.5%

6.5%

7%

3%
7.5%

3%
7.5%

3%
8%

Change in benefit obligation

Amounts recognised in the consolidated balance
sheet consist of:Prepaid benefits costs
Accrued benefit liabilities
The assumptions used in the actuarial calculations are as follows:
Discount rate used in determining present values- pensioners
Annual increase in future compensation levels- pensions
Expected long-term rate of return on assets

80

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Notes to the Financial Statements
50: US GAAP Reconciliation (continued)(xviii) Details of Pension Schemes and Pension Expense (continued)

2000
$M

UK Scheme
1999
$M

1998
$M

Balance at start of year
Service cost
Interest cost
Plan amendment
Benefits paid
Actuarial gains
Foreign currency exchange rate fluctuations

818
9
24
–
(45)
26
91

833
21
47
24
(41)
35
(101)

596
18
50
–
(40)
36
173

Benefit obligation, 30 September

923

818

833

Change in plan assets
Fair value at start of year
Actual return on plan assets
Employer contribution
Benefits paid
Foreign currency exchange rate fluctuations

1,004
89
2
(45)
70

1,094
82
2
(41)
(133)

748
163
–
(40)
223

Total fair value of plan assets, 30 September

1,120

1,004

1,094

Funded status
Unrecognised net transition gain
Unrecognised net gain
Unrecognised prior service cost

197
(33)
(171)
52

186
(37)
(162)
52

261
(50)
(202)
35

Net amount recognised

45

39

44

45
–

39
–

44
–

2000

1999

1998

6.0%
6.0%

6.0%
6.0%

6.5%
6.5%

4.75%
2.9%
7.0%

4.75%
3.0%
7.0%

5.0%
2.75%
7.5%

2000
$M

1999
$M

1998
$M

Service cost
Interest cost
Expected return on schemes’ assets
Amortisation net transition asset
Recognised prior service cost

17
52
(68)
(6)
4

21
51
(66)
(6)
1

18
54
(66)
(6)
1

Net periodic pension cost

(1)

1

1

Change in benefit obligation

Amounts recognised in the consolidated balance
sheet consist of:Prepaid benefits costs
Accrued benefit liabilities

The assumptions used in the actuarial calculations are as follows:
Discount rate used in determining present values- active members- pensioners
Annual increase in future compensation levels- salary- pensions
Expected long-term rate of return on assets

The elements of the net periodic pension cost of the above schemes are as follows:

The Group also sponsors defined contribution schemes.The Group’s contributions to major defined contribution
schemes amounted to $77 million for the year (1999: $66 million).

81

ME64380_Financials_recombined 13/11/00 4:13 PM Page 82

Notes to the Financial Statements
51: Exchange Rates
The exchange rates used in the translation of the results and the assets and liabilities of major overseas branches andcontrolled entities are:
2000

Great British pound
United States dollar
New Zealand dollar

1999

1998

Closing

Average

Closing

Average

Closing

Average

0.37200.5444
1.33240.39030.61011.26470.39720.6533
1.25980.39320.64031.20140.3496
0.5972
1.18680.39130.64681.1581

52: Events Since the End of the Financial Year
There have been no significant events since 30 September 2000 to the date of this report.

82

ME64380_Financials_recombined 13/11/00 4:13 PM Page 83

Directors’ Declaration
The directors of Australia and New Zealand Banking
Group Limited declare that the financial statements andnotes of the Company and the consolidated entity(a) are in accordance with the Corporations Law,
including(i) complying with applicable Australian AccountingStandards and other mandatory professional
reporting requirements; and(ii) giving a true and fair view of the financial
position of the Company and of the consolidated
entity as at 30 September 2000 and of theirperformance as represented by the results of
their operations and their cash flows, for the year
ended on that date; and(b) in the directors’ opinion at the date of this declaration
there are reasonable grounds to believe that theCompany will be able to pay its debts as and when
they become due and payable.

The Company and some of its wholly owned controlled
entities listed in note 43 executed a Deed of Cross
Guarantee enabling them to take advantage of theaccounting and audit relief offered by the class order
98/1418, dated 13 August 1998 issued by the Australian
Securities and Investments Commission.
The nature of the Deed of Cross Guarantee is to guarantee
each creditor payment in full of any debt in accordancewith the terms of the Deed of Cross Guarantee.
At the date of this declaration, there are reasonablegrounds to believe that the Company and its controlled
entities to which the class order applies, are able, as an
economic entity, to meet any obligations or liabilities towhich they are, or may become, subject by virtue of theDeed of Cross Guarantee.

Signed in accordance with a resolution of the directors

Charles Goode
ChairmanJohn McFarlane
Chief Executive Officer

6 November 2000

83

ME64380_Financials_recombined 13/11/00 4:13 PM Page 84

Auditors’ Report
To the Members of Australia and New Zealand Banking Group Limited
Scope
We have audited the financial report of Australia and
New Zealand Banking Group Limited for the financial
year ended 30 September 2000, consisting of the profit
and loss statements, balance sheets, statements ofchanges in shareholders’ equity, statements of cash flows,
accompanying notes and the directors’ declaration set
out on pages 3 to 83.The financial report includes theconsolidated financial statements of the consolidated
entity, comprising the Company and the entities it
controlled at the year’s end or from time to time during
the financial year.The Company’s directors are
responsible for the financial report.We have conducted
an independent audit of this financial report in order toexpress an opinion on it to the members of theCompany.
Our audit has been conducted in accordance with
Auditing Standards of Australia and the United States ofAmerica to provide reasonable assurance whether thefinancial report is free of material misstatement. Our
procedures included examination, on a test basis, ofevidence supporting the amounts and other disclosuresin the financial report, and the evaluation of accounting
policies and significant accounting estimates.These
procedures have been undertaken to form an opinion
whether, in all material respects, the financial report ispresented fairly in accordance with AccountingStandards and other mandatory professional reporting
requirements and statutory requirements in Australia so
as to present a view which is consistent with ourunderstanding of the Company’s and the consolidated
entity’s financial position and performance as
represented by the results of their operations and their
cash flows.

Audit Opinion
In our opinion, the financial report of Australia and New
Zealand Banking Group Limited is in accordance with:(a) the Corporations Law, including:(i) giving a true and fair view of the Company’s andconsolidated entity’s financial position as at
30 September 2000 and of their performance forthe year ended on that date; and(ii) complying with Accounting Standards and the
Corporations Regulations; and(b) other mandatory professional reporting requirements.
Accounting principles generally accepted in Australia varyin certain respects from accounting principles generally
accepted in the United States of America. An explanationof the major differences between the two sets of principles
is presented in note 50 to the financial statements.The
application of the United States principles would haveaffected the determination of consolidated net profit foreach of the three years in the period ended 30 September
2000 and the determination of the consolidated financial
position as of 30 September 2000, 1999 and 1998 to theextent summarised in note 50 to the financial statements.

The audit opinion expressed in this report has been
formed on the above basis.

KPMG
Chartered Accountants
Melbourne
6 November 2000

84

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Risk Management
ANZ has engendered a robust culture of sound risk management principles and processes throughout all lines ofbusiness and across all risk dimensions, and is committed to achieving global best practice in our risk management
processes. During 2000 ANZ has continued to reduce risk across the Group by re-balancing the risk profile towards
lower risk business.
Sale of Grindlays
The sale of Grindlays Bank was completed in July 2000.The transaction is a substantial step in our strategy to reduce
the Group’s risk and complexity. It reduced ANZ’s exposure to high risk countries by approximately USD 4.6 billion
and will enable us to improve our return on capital, through a lower tier one capital ratio more in line with ourdomestic peers.
Risk Management Processes
ANZ’s risk management function supports the business objective of creating shareholder value. In order to establish
a common ‘language’ for risk across all risk types, ANZ allocates economic capital to each line of business and key
product areas.This enables business units and decision-makers to evaluate the real contribution of their activities against
the risk capital they use, aligning the performance of individual managers with the interests of shareholders.
The Group’s risk management processes are subject to oversight by the Risk Management Committee of the Board.
This includes the review of risk portfolios and the establishment of prudential policies and controls. Core risk
management functions, including market risk and corporate lending approvals are independent of the business units.
The Group’s risk management processes have served to foster the development of a Risk Management culture within thelines of business and to enhance the awareness of risk across the Group’s activities. In this context, 2000 saw substantial
progress towards the objective of creating a culture of transparency and dialogue about risk at all levels within ANZ.
Credit Risk:
Credit risk is the potential financial loss resulting from the failure of a customer to honour fully the terms of a loan orcontract. The Risk Management Committee of the Board approves a set of policy controls that aim to develop andmaintain a well-diversified credit portfolio. The authority for individual credit decisions that are within policy has beendelegated to the Credit and Trading Risk Committee. The Credit and Trading Risk Committee is also responsible forthe ongoing development of credit policy, while at operational levels, all major lending decisions are made under dual
authority, involving signoff by a separate and independent credit line.
The credit process is supported by an advanced risk grading system that allows for the objective measurement of thecustomer’s default risk.
Under Group policy, the expected loss on the portfolio of credit risks is charged to profit and added to the generalprovision. ANZ believes that this expectation provides a better reflection of the fundamental risk of the portfolio forthe year than the actual losses brought to account in that period. Actual credit losses are subsequently transferred fromthe general provision.
The improvement in the Group’s risk profile is clearly reflected in its Economic Loss Provisioning (ELP).The ELP as apercentage of average net lending assets has declined from 0.43% in September 1999 to 0.39% as a result of lower risk
in International (including the Grindlays sale) and strong mortgages growth in the Australian portfolio.
International
The sale of Grindlays has had significant impact on the International portfolio reducing the book by nearly 32% andalso reducing risk. Higher risk exposures as a result of the Asian crisis continue to be managed down with focus being
maintained on higher quality credit exposures and developing network business, particularly trade finance.
Australia and New Zealand
Strong growth in the mortgage lending book continues to influence the shape of the portfolio with continued strategicemphasis towards consumer related business.Within Australia and New Zealand, consumer related lending now
accounts for 50% of on-balance sheet lending exposures (46% in 1999) with the mortgage lending portfolio increasingby 24%.The Corporate portfolio profile continues to improve driven by an emphasis towards lower risk lending.This
reduction in risk and further diversification continues with no individual industry's exposures exceeding 10% ofAustralian and New Zealand lending assets.

85

ME64380_Financials_recombined 13/11/00 4:13 PM Page 86

Risk Management
Traded Market Risk:
Trading risk is controlled by a specialist function within Group Risk Management.This function provides specificoversight of each of the main trading areas and is responsible for the establishment of Value at Risk and supplementary
limits. ANZ has implemented models across all trading areas that provide Value at Risk information and comparison
against risk limits on a daily basis.These models comply with the Australian Prudential Regulation Authority Prudential
Supervision Statement C3 (Capital for Market Risk). Increasingly the principal focus of attention of the management oftraded market risk is stress testing. Stress tests are conducted daily and the results are used to identify
and rectify areas of excessive risk concentrations.
Balance Sheet Risk Management:
The balance sheet risk management process embraces the management of balance sheet interest rate risk, liquidity andrisk to capital and earnings as a result of exchange rate movements.The objective of balance sheet management is to
produce strong and stable net interest income over time. ANZ uses models to simulate the impact of interest rate changes
on earnings and on the market value of the balance sheet. A specialist balance sheet management unit manages these risks
and is overseen by the Group Asset and Liability Committee.
Operational Risk:
Operating risk arises from the potential break down of day to day operational processes, which directly or indirectly can
result in loss.This may arise from failure to comply with policies, laws and regulations, from fraud or forgery or from a
breakdown in the availability or integrity of services, systems and information.
A structured methodology is in place to support the business areas in the identification and management of key operating
risks.The Operating Risk Executive Committee, supported by specialist staff, is responsible for the development andimplementation of the policies surrounding operating risk. In light of the push towards greater reliance on automation ofbanking operations, more sophisticated banking products and disciplined cost management strategies, this element of ourrisk management framework will continue to receive increasing emphasis going forward.
During 2000, ANZ has initiated and completed a project to establish a sophisticated methodology for operational risk
measurement and capital allocation.This process gives managers strong and clear incentives to reduce operational risks
over time.
As a result of this process, ANZ has considerably extended the depth and breadth of operational risk awareness acrossthe Group, and expects that the longer-term outcome will be a continuing improvement in its operational risk profile
over a sustained period. The project also places ANZ in a strong position to contribute to the evolving discussions withother banks and regulators regarding the evolution of an appropriate methodology for determining minimum
regulatory capital requirements for operational risk.

86ME64380_Financials_recombined 13/11/00 4:13 PM Page 87

Financial Information
1: Cross Border Outstandings
Cross border outstandings of the Group to countries which individually represented in excess of 0.75% of the Group’s total assets
and certain selected countries are shown below. There were no cross border outstandings to any other country exceeding 0.75%
of total assets.
Cross border foreign outstandings are based on the country of domicile of the borrower or guarantor of the ultimate risk and compriseloans (including accrued interest), placements with banks, acceptances and other monetary assets denominated in currencies other thanthe borrower’s local currency. For certain countries, local currency obligations are also included. Cross border foreign outstandings are
before specific and general provisions.
Governments
and other
official institutions$M

Banks andother financial
institutions
$M

Other
commercial
and industrial
$M

Total
$M

% of
Group
assets

49
–
–
–
–
–
–
–
–
–
–
–
–
75
–

1,189
280
174
898
617
443
1,666
175
253
347
415
400
367
186
298

4,312
4,364
2,591
1,418
1,537
1,642
187
1,572
1,043
593
487
465
320
322
250

5,550
4,644
2,765
2,316
2,154
2,085
1,853
1,747
1,296
940
902
865
687
583
548

3.2
2.7
1.6
1.3
1.2
1.2
1.1
1.0
0.8
0.5
0.5
0.5
0.4
0.3
0.3

74
6
–
9
5
2
–
–
8
–
–
–
–
–
–
–
–

760
1,022
348
283
390
621
681
1,257
472
665
274
219
349
429
196
285
205

3,789
2,982
2,609
2,379
2,079
1,675
1,298
306
808
580
804
692
453
328
537
415
355

4,623
4,010
2,957
2,671
2,474
2,298
1,979
1,563
1,288
1,245
1,078
911
802
757
733
700
560

3.1
2.7
2.0
1.8
1.7
1.5
1.3
1.0
0.9
0.8
0.7
0.6
0.5
0.5
0.5
0.5
0.4

At 30 September 2000

United Kingdom
New Zealand
USA
Japan1
FranceGermanySouth Korea1
Hong Kong1
Singapore1
India1
Taiwan1China1
Brazil1
Indonesia1
Philippines1
At 30 September 1999

United Kingdom
India1New Zealand
USA
Germany
Japan1
U.A.E1
South Korea1
FranceSwitzerland
Pakistan1
Hong Kong1
China
BrazilSingapore1
Taiwan1
Indonesia1
1Includes local lending in local currency

87

ME64380_Financials_recombined 13/11/00 4:13 PM Page 88

Financial Information
2: Certificates of Deposit and Term Deposit Maturities
The following table shows the maturity profile of the Group’s certificates of deposit and term deposits in excess of $100,000
issued at 30 September 2000
Less than
3 months$M

Between
3 months
and 6 months$M

Between
6 months
and 12 months
$M

After
1 year
$M

Total
$M

5,043
10,048

1,083
864

48
565

1,480
226

7,654
11,70315,091

1,947

613

1,706

19,357

3,340
10,114

284
781

2,412
612

240
262

6,276
11,76913,454

1,065

3,024

502

18,04528,545

3,012

3,637

2,208

37,402Australia

Certificates of deposit
Term deposits
Overseas

Certificates of deposit
Term deposits
Total

3: Volume and Rate Analysis
The following table allocates changes in interest income and interest expense between changes in volume and changes in rate
for the past two years.Volume and rate variances have been calculated on the movement in average balances and the change
in the interest rates on average interest earning assets and average interest bearing liabilities. The variance caused by thechange of both volume and rate has been allocated in proportion to the relationship of the absolute dollar amounts of eachchange to the total.
Volume$M

2000 over 1999
Change due to
Rate
$M

Total
$M

Volume$M

1999 over 1998
Change due to
Rate
$M

Total
$M

Interest earning assets

Due from other financial institutions
Australia
New ZealandOverseas markets
Regulatory deposits with
Reserve Bank of Australia
Investments in public securities
Australia
New ZealandOverseas markets
Loans, advances and bills discounted
Australia
New ZealandOverseas markets
Other assets
Australia
New ZealandOverseas markets
Intragroup assets
Overseas markets
Change in interest income
Intragroup elimination

88

(4)
(9)
(5)

21
7
6

17
(2)
1

18
12
(324)

(3)
(7)
(25)

15
5
(349)

–

–

–

–

–

–

10
1
(36)

57
12
(7)

67
13
(43)

(7)
(46)
(186)

(25)
(42)
25

(32)
(88)
(161)

906
107
17

280
83
–

1,186
190
17

743
54
(53)

(348)
(319)
(20)

395
(265)
(73)

6
4
12

10
2
87

16
6
99

(28)
(13)
(138)

(2)
(21)
(51)

(30)
(34)
(189)

88

(56)

32

240

(17)

223

1,097

502

1,599

272

(855)

(583)

(88)

56

(32)

(240)

17

(223)

1,009

558

1,567

32

(838)

(806)

ME64380_Financials_recombined 13/11/00 4:13 PM Page 89

Financial Information
3: Volume and Rate Analysis (continued)
2000 over 1999
Change due toRate$M1999 over 1998
Change due to
Rate
$M

Total
$M

Volume
$M

Total
$M

175
6
40

204
64
19

379
70
59

87
(25)
(217)

(54)
(226)
(154)

33
(251)
(371)

4
(12)
(12)

41
7
(15)

45
(5)
(27)

7
15
2

9
(34)
(5)

16
(19)
(3)

95
(6)
(6)

164
14
–

259
8
(6)

54
(17)
2

(8)
(59)
(6)

46
(76)
(4)

(2)
(5)
24

5
5
51

3
–
75

(5)
(8)
(92)

–
(28)
(55)

(5)
(36)
(147)

78
26

42
27

120
53

2
92

(3)
(5)

(1)
87

30
4

(7)
–

23
4

15
–

(30)
(18)

(15)
(18)

245
11
(7)

39
3
4

284
14
(3)

45
(1)
(2)

(22)
(5)
(4)

23
(6)
(6)

(11)
(43)
(60)

13
118
39

2
75
(21)

(21)
(154)
(90)

(56)
95
56

(77)
(59)
(34)

26
54

(20)
(28)

6
26

199
42

(56)
38

143
80

Change in interest expense

654

789

1,443

(70)

(630)

(700)

Intragroup elimination

(80)

48

(32)

(241)

18

(223)

574

837

1,411

(311)

(612)

(923)

435

(279)

156

343

(226)

117

Volume$M

Interest bearing liabilities
Time deposits
Australia
New ZealandOverseas markets
Savings deposits
Australia
New ZealandOverseas markets
Other demand deposits
Australia
New ZealandOverseas markets
Due to other financial institutions
Australia
New ZealandOverseas markets
Commercial paper
Australia
Overseas markets
Borrowing corporations’ debt
Australia
New Zealand
Loan capital, bonds and notes
Australia
New ZealandOverseas markets
Other liabilities
Australia
New ZealandOverseas markets
Intragroup liabilities
Australia
New Zealand

Change in net interest income89ME64380_Financials_recombined 13/11/00 4:13 PM Page 90

Financial Information
4: Concentrations of Credit Risk
Concentrations of credit risk exist if a number of counterparties are engaged in similar activities and have similar economic
characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic orother conditions. Off balance sheet transactions of the Group are substantially with other banks.
2000

1999

1998

Loans andadvances1$M

Specific
provision$M

Loans andadvances1$M

Specific
provision$M

Loans andadvances1$M

Specific
provision
$M

4,157
2,206
2,062
5,532
103
2,821
4,236
9,889
1,376
46,751
5,691
4,196

34
6
4
1
–
8
19
131
7
9
24
17

4,288
1,717
2,007
4,438
106
3,585
3,815
9,280
1,376
35,862
4,946
3,835

12
5
25
5
–
5
19
94
6
48
23
39

3,648
2,632
1,952
4,501
63
3,505
2,586
7,112
1,293
28,924
4,860
3,599

11
3
19
3
–
4
24
96
6
64
19
48

89,020260

75,255281

64,675

297

2,429
274
505
1,952
627
504
4,781
1,876
820
10,628
1,950
4,266

12
1
6
128
25
–
118
16
36
16
35
56

2,131
550
665
2,214
750
405
6,493
2,304
753
9,645
2,010
4,376

17
7
4
156
–
1
213
35
32
25
72
64

2,118
536
657
2,843
821
115
6,733
3,509
799
8,825
2,180
4,100

27
8
3
66
30
–
193
20
41
19
37
78

30,612449

32,296626

33,236522

119,632

709

107,551907

97,911

819

Australia

Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other

Overseas

Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other

Total portfolio

90

ME64380_Financials_recombined 13/11/00 4:13 PM Page 91

Financial Information
4: Concentrations of Credit Risk (continued)
1997

1996

Loans andadvances1$M

Specific
provision$M

Loans andadvances1$M

Specific
provision
$M

2,716
1,488
1,392
3,997
68
3,152
2,446
6,229
1,216
26,095
4,375
3,398

12
5
28
6
–
5
29
90
8
54
14
64

2,038
950
1,302
2,472
70
3,116
2,998
7,384
857
23,518
4,210
3,008

21
27
18
22
–
8
17
35
12
82
51
53

56,572315

51,923

346

2,439
346
555
3,189
656
299
5,172
2,852
900
9,412
1,851
2,781

4
6
–
4
–
–
53
12
8
2
15
34

1,471
439
393
4,493
377
284
3,722
3,115
753
8,034
1,711
2,254

4
6
3
23
3
–
55
15
16
8
28
2

30,452

138

27,046

163

87,024453

78,969509

Australia

Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other

Overseas

Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other

Total portfolio
1
2
3

Loans and advances exclude acceptances
Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must
be secured by property

91

ME64380_Financials_recombined 13/11/00 4:13 PM Page 92

Financial Information
5: Doubtful Debts – Industry Analysis
2000
$M

1999
$M

1998
$M

1997
$M

1996
$M

Balance at start of year
Adjustment for exchange rate fluctuations
Bad debts written off (refer (i) below)
Charge to profit and loss account
Recoveries (refer (ii) below)
Other1

2,302
37
(539)
502
46
(266)

2,220
(79)
(382)
510
33
–

1,883
34
(221)
487
37
–

1,617
16
(199)
400
49
–

1,758
(16)
(346)
175
46
–

Total provisions for doubtful debts

2,082

2,302

2,220

1,883

1,617

(12)
(5)
(10)
(3)
(9)
(11)
(133)
(5)
(51)
(28)
(8)

(6)
(4)
(3)
(28)
(5)
(18)
(67)
(8)
(16)
(19)
(48)

(4)
(4)
(3)
(3)
(5)
(11)
(81)
(5)
(40)
(14)
(4)

(5)
(3)
(11)
(8)
(5)
(10)
(55)
(6)
(26)
(11)
(4)

(11)
(17)
(19)
(8)
(12)
(49)
(46)
(6)
(77)
(33)
(23)

Other

(264)

(160)

(47)

(55)

(45)

Total write-offs

(539)

(382)

(221)

(199)

(346)

4
–
1
4
2
5
9
1
4
2
2

–
–
–
3
2
1
8
–
1
–
2

–
3
1
1
3
4
10
1
2
1
1

4
1
1
2
2
4
9
–
7
2
7

3
1
2
3
3
2
9
1
9
2
2

Other

12

16

10

10

9

Total recoveries

46

33

37

49

46

Net write-offs

(493)

(349)

(184)

(150)

(300)

Ratio of net write-offs to averageloans and acceptances

0.4%

0.3%

0.2%

0.1%

0.3%

(i) Total write-offs by industry
Australia

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
Overseas(ii) Total recoveries by industry
Australia

Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other
Overseas

Includes $266 million reduction from the sale of Grindlays
Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
3
Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must
be secured by property
1292

ME64380_Financials_recombined 13/11/00 4:13 PM Page 93

Financial Information
6: Short Term Borrowings
The Group’s short-term borrowings comprise commercial paper, as well as unsecured notes issued by subsidiaryborrowing corporations with an original term to maturity of less than one year.The Group has commercial paper
programs in the United States, where it issues paper through ANZ (Delaware) Inc., and in Europe and Asia, where theGroup issues paper direct.
2000
$M

1999
$M

1998
$M

4,416
6,098
98

3,757
4,836
856

184
3,264
683

6.50%
6.20%
5.57%

5.27%
4.69%
4.25%

5.25%
6.96%
6.71%

5,503
6,209
742

4,063
4,847
858

1,870
4,555
686

3,079
5,256
504

2,597
3,844
800

490
4,036
570

5.84%
5.83%
4.86%

4.89%
4.86%
4.53%

5.51%
4.96%
6.06%

Balance at end of year

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Weighted average interest rate at end of year

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Maximum amount outstanding at any monthend during year

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Average amount outstanding during year

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Weighted average interest rate during year

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes

93ME64380_Financials_recombined 13/11/00 4:13 PM Page 94

GLOSSARY
Corporate Financial Services comprises Corporate and Institutional Banking, Structured Finance, Foreign
Exchange, Capital Markets, Asset Finance, Global Transaction Services and Business e-Commerce operations in Australia,
New Zealand, UK, Europe and the Americas. Corporate Financial Services provides a range of products and services tocommercial customers from middle market companies to large corporates and institutions. Products include commercial
bill lending, term lending, corporate and project financing, originations and syndications, tax based financing, transaction
banking, insurance services, trade finance services, and asset based financing including motor vehicle and equipment
leasing and hire purchase. The foreign exchange and capital markets operations provide foreign exchange and financial
risk management products for customers. Business e-Commerce operations cover electronic business to businessinteractions such as secure online payments, direct and indirect procurement and on-line foreign exchange transactions.
Economic loss provisioning (ELP) charge is determined based on the expected average annual loss of principal
derived from the Group’s risk management models.
Equity standardisation Economic Value Added (EVATM) principles are in use throughout the Group, whereby risk
adjusted capital is allocated and charged against business units. Equity standardised profit is determined by eliminating theimpact of earnings on each business unit’s book capital and attributing earnings on the business unit’s risk adjusted capital.
This enhances comparability of business unit performance. Geographic results are not equity standardised.
Geographic segmentation
UK and Europe includes France, Germany, Jersey, Switzerland and United Kingdom.
Asia Pacific includes Cook Islands, Fiji, Indonesia, Japan, Korea, Malaysia, Papua New Guinea, Philippines, Samoa,
Singapore, Solomon Islands,Taiwan,Thailand,The People’s Republic of China,Tonga,Vanuatu and Vietnam.
South Asia includes Bangladesh, India, Nepal and Sri Lanka (operations in these countries sold on 31 July 2000).
Americas includes United States of America.
Middle East includes Bahrain, Greece, Iran, Israel, Jordan, Pakistan, Palestine, Qatar and United Arab Emirates(operations in these countries sold on 31 July 2000).
Group comprises the results of asset and liability management, earnings on central capital, costs relating to hedging
capital positions and certain central costs not recharged to business units.
Impaired assets are loans or other credit facilities where there is reasonable doubt about the collectability of interest,
fees (past and future) or principal outstanding, or where concessional terms have been provided because of the financial
difficulties of the customer.
International comprises the result of operations outside Australia and New Zealand for Personal Banking (including
Private Banking and Funds Management) and the Foreign Exchange, Capital Markets, Business Banking and Structured
Finance operations of other countries, excluding the mature markets of UK, Europe and Americas. Products include
trade finance, personal banking services, project and corporate finance, syndications and foreign exchange and financial
risk management services. International also includes the recently announced joint e-venture with Overseas Chinese
Banking Corporation.
Net advances include gross loans and advances, acceptances and ANZ accepted bills held as part of trading securities
less income yet to mature and specific provisions (for both as at and average volumes).
Net interest average margin is net interest income as a percentage of average interest earning assets. Non-assessableinterest income is grossed up to the equivalent before tax amount for the purpose of these calculations.
Net interest spread is average interest rate received on interest earning assets less the average interest rate paid on
interest bearing liabilities. Non-assessable interest income is grossed up to the equivalent before tax amount for the
purpose of these calculations.

94ME64380_Financials_recombined 13/11/00 4:13 PM Page 95

GLOSSARY
Net non-interest bearing items, referred to in the analysis of interest spread and net interest average margin, includes
shareholders’ equity, provisions for doubtful debts, and deposits not bearing interest and other liabilities not bearing
interest, offset by premises and equipment and other non-interest earning assets. Non-accrual loans are included withininterest bearing loans, advances and bills discounted.
Net specific provision is the transfer from the general provision to the specific provision (representing new and increased
specific provisions less specific provision releases) less recoveries.
Operating expenses exclude charge for doubtful debts and abnormal items.
Overseas geographic segment includes the results of all operations outside Australia (except for Net Loans and Advanceswhere this includes the results of all operations outside Australia and New Zealand).
Personal Financial Services comprises Personal Banking (including Private Banking) and Funds Management
operations in Australia and New Zealand. Personal Financial Services provides a wide range of services and products
to consumers and small and medium sized businesses. Products include current account facilities, credit card services,
EFTPOS, electronic banking services, term deposits, money market and savings accounts, foreign exchange services,
payroll, superannuation, insurance services, fixed and variable rate residential mortgage loans, overdraft facilities and termloans and other consumer and commercial loans. The funds management operations provide financial planning, estateplanning and management, insurance, superannuation and investment management.
Service transfer pricing is in use throughout the Group, whereby business and support units recover the cost ofservices provided to other units.There are some head office costs which are not recharged.
Total advances include gross loans and advances, acceptances and ANZ accepted bills held as part of trading securities
less income yet to mature (for both as at and average volumes).
Unproductive facilities includes standby letters of credit, bill endorsements, documentary letters of credit andguarantees to third parties, undrawn facilities to which the Group is irrevocably committed and market related exposures.

95

ME64380_Financials_recombined 13/11/00 4:13 PM Page 96

NOTES

96

ME64380_FinancialReport_cover 13/11/00 4:39 PM Page 4

ME64380_FinancialReport_cover 13/11/00 4:39 PM Page 1

Financial Report 2000

Australia and New Zealand Banking Group Limited