different.
Australia and New Zealand Banking Group Limited
www.anz.com ABN 11 005 357 522

Concise Annual Report 2006 - Part 2 of 2 - Annual Review

guide to the concise report

Contents
Guide to Concise Report

54

Corporate Governance Report

56

Directors’ Report
Discussion and Analysis
Principal Activities
ResultState of Affairs
Dividends
Review of Operations
Events Since the End of the
Financial Year
Future Developments
Environmental Regulation
Directors’ Qualifications, Experienceand Special Responsibilities
Company Secretaries’ Qualifications
and Experience
Non-Audit Services
Auditor’s Independence Statement
Directors and Officers Who Were
Previously Partners of the Auditor
Chief Executive Officer / Chief Financial
Officer Declaration
Directors’ and Officers’ Indemnity
Rounding of Amounts

67
67
67
67
67
67
67
67
67
68
68
68
68
69
69
69
69
69

Executive Officers’ and Employee Share Options 69
Remuneration Report
70
Directors’ Remuneration
70
Executive Remuneration
72
Chief Executive Officer’s Remuneration
78
Disclosed Executives’ Contract Terms
80
Equity Instruments Relating toDisclosed Directors and Executives
82
Financial Statements
92
Consolidated Income Statement
92
Consolidated Balance Sheet
93
Statement of Recognised Income and Expense 94
Consolidated Statement of Cash Flow95
Notes to the Concise Financial Statements
96
Directors’ Declaration
102
Independent Audit Report102
Shareholder Information

103

Glossary of Financial Terms

106

ANZ presents two reports, the ANZ Concise Annual Report (thisdocument) and the ANZ Financial Report. Both reports show how ANZ
performed during the year ended 30 September 2006 and the overall
financial position of the Group at the end of the year. The ANZ Concise
Annual Report Part 2 of 2 includes Financial Statements which are an
extract of and have been derived from the ANZ Financial Report. ANZ
also publishes an announcement to the market each half year. All
these documents are on anz.com. ANZ prepares its financial reports inaccordance with applicable Australian Accounting Standards. Particular
terms required by the Standards may not be familiar to some readers.
This guide and the Glossary of Financial Terms (on pages 106 and 107)are designed to assist readers to understand the Concise Annual Report.

CONCISE Annual Report Contents
The ANZ Concise Annual Report has two main sections – the 2006 Annual Review
and the Concise Report. The front section, the Annual Review, contains information
about significant matters that impacted the management and performance of ANZ
during the year, including discussion and analysis of the financial results, updates
on the specialist business units and Group-wide programs, the ten year summaryand information on the directors.
The Concise Report contains information required by the Corporations Act 2001
(as amended), including:a Concise Financial Report, drawn up in accordance with applicable Australian
Accounting Standards, including the Consolidated Income Statement, Balance Sheet,
Statement of Recognised Income and Expense, and Statement of Cash Flow.
the Directors’ Report, including the Remuneration Report.
the Independent Audit Report; andthe Corporate Governance Report, as recommended by the ASX Corporate GovernanceCouncil’s Principles of Good Corporate Governance and Best Practice Recommendations.
These statements have been reviewed by ANZ’s Audit Committee and approved by
the Board.

The ANZ Concise Annual Report is a concise report for the purposes of section 314(2) of the Corporations Act 2001 and comprises twoparts: Part 1 (Annual Review) and Part 2 (Concise Report). The two parts are distributed together as one document and should be read
together. These documents may only be distributed by a person on the basis that Part 1 (Annual Review) and Part 2 (Concise Report)
are distributed together.
The Concise Annual Report Part 2 of 2 cannot be expected to provide as full an understanding of the financial performance, financial
position, and financing and investing activities of the Group as the ANZ Financial Report. A copy of the Financial Report for the year
ended 30 September 2006 for the Group, including the independent Auditor’s Report, is available to all members, and will be sent
to a member without charge upon request. The Financial Report can be requested by telephone (Australia 1800 11 33 99 Overseas+613 9415 4010), by email at investor.relations@anz.com or viewed directly on the Internet at anz.com

54  ANZ Concise Annual Report 2006

Corporate Governance Report
To ensure the reader is up-to-date with
ANZ’s corporate governance practices,
this report provides information on theGroup’s governance framework, alignment
with Australian and overseas governanceissues, the Board and its procedures
as well as Group codes, policies andrelated processes.

Directors’ Report
This report is prepared in accordance withthe requirements of the Corporations Act andprovides information on how the businessis performing and includes details about theGroup’s principal activities and the Directors
and Company Secretaries. Details about
the non-audit services and the Auditor’s
independence statement also form part of thisreport. In addition, it contains remuneration
information on the Directors and senior
executives, and details of declarations areprovided by the Chief Executive Officer andthe Chief Financial Officer.

CONSOLIDATED INCOME STATEMENTThe Income Statement provides ANZ’s profit
for the year including:the sources of ANZ’s income split between
net interest income and other income;the expenses incurred by ANZ during
the year;provision for credit impairment; andANZ’s tax expense for the year.
The results of controlled companies areincluded in the consolidated results of
the Group.

CONSOLIDATED BALANCE SHEETThe Balance Sheet is a summary of theassets, liabilities and shareholders’ equity
as at 30 September 2006. It shows what
ANZ as a Group owns as assets, what it owes
as liabilities and its net assets. Net assets
are equal to total shareholders’ equity. The
assets and liabilities are listed in order ofliquidity, with those assets representing
cash shown first and those hardest toconvert to cash, such as premises, last.
The assets and liabilities of controlled
companies are included within the
consolidated Balance Sheet of the Group.

STATEMENT OF RECOGNISED INCOME
AND EXPENSEThe Statement of Recognised Income andExpense summarises the Group’s income
and expense items, other than those arisingfrom transactions with equity holders, which
are recognised directly in equity as requiredby Australian Accounting Standards.

CONSOLIDATED STATEMENT OF
CASH FLOWThe Consolidated Statement of Cash Flowsummarises the Group’s cash payments
and cash receipts for the financial year.
The values may differ from those shown in
the Consolidated Income Statement because
the Consolidated Income Statement isprepared on an accrual accounting basis.
Cash in this Statement refers to cash on
hand, bank deposits and other forms ofhighly liquid investments that can readily
be converted to cash.

Notes to the Concise
Financial Statements
These notes provide details on the basis ofpreparation of the Concise Financial Report
including details on critical accounting
estimates and judgements, segment
analysis and dividends.

Directors’ Declaration
This declaration is prepared in accordancewith the requirements of the Corporations
Act and contains the directors’ sign-off that
the Concise Financial Report complies with
Australian Accounting Standards.

Auditor’s Report
The independent audit report is the external
and independent opinion on the Concise
Financial Report.

Shareholder Information and StEPS
Information is provided on ordinary shares
including the twenty largest holders andthe distribution of holdings. It also includes
on-market buy-back information, details on
voting rights for ordinary shares and ANZ
StEPS, employee shareholder informationand information relating to Stock Exchanges,
ANZ StEPS, American Depositary Receipts
and Euro Trust Securities.

Glossary of Financial Terms
The glossary of financial terms on pages
106 and 107 contains an explanation of
key financial terms.

Guide to the Concise Report 55

corporate governance
A SOLID FOUNDATION AT ANZThis report sets out the Company’s corporate governance framework. Further
detail is contained on anz.com > about anz > corporate governance. This website
is regularly updated to ensure it reflects the Company’s most recent corporate
governance information.

ANZ’s shareholders depend on the
Company’s Board for strategic guidance
and oversight of the Company as set out
in the Board Charter (anz.com). The Board
recognises its overriding responsibility to act
honestly, fairly, diligently and progressively,in accordance with the law, in serving theinterests of ANZ’s shareholders andother stakeholders.
Corporate governance is an important focus for
the Board. Good corporate governance meets
ethical and stewardship responsibilities, andgives ANZ a strong commercial advantage.

It receives close scrutiny, particularly since
the establishment of the Board’s GovernanceCommittee in 2002.
ANZ has equity securities listed on theAustralian (ASX), New Zealand (NZX) and New
York (NYSE) Stock Exchanges and has debt
securities listed on these and other overseas
Stock Exchanges. As such, ANZ must comply
with a range of listing requirements fromboth Australia and overseas.
In general, the Board seeks:
to embrace principles considered to be
best practice across the jurisdictions;

to be an ‘early adopter’, where possible,
by complying before a published law orrecommendation takes effect; andto take an active role in discussions
regarding best practice in corporate
governance in Australia and overseas.
Consequently, the Board continually monitors
governance developments to align ANZ’s
practices with best practice standards. During
the year, the Board continued to work closelywith management to review and update ANZ
policies and procedures in light of changes
to regulations, legislation and guidelines
across relevant jurisdictions.

DIRECTORSMr C B Goode, AC

Chairman, Independent Non-Executive Director

B Com (Hons), MBA, HON LLD (Melb),
HON LLD (Monash)

and resources industries and has been aprofessional non-executive director since1989. Mr Goode brings a wide range of skills
and significant experience of the financeindustry to his role as Chairman of the Board.

Non-executive director since July 1991.
Mr Goode was appointed Chairman inAugust 1995 and is an ex officio memberof all Board Committees.

Investment Company Limited (Director
from 1990), Diversified United Investment
Limited (Director from 1991), and The Ian
Potter Foundation Ltd (Director from 1987).
Former Directorships include
Former Director: Singapore Airlines Limited(from 1999–2006).

Skills, experience and expertise
Mr Goode has a background in the finance

Current directorships
Chairman: Woodside Petroleum Limited(Director from 1988), Australian United

Mr J McFarlane OBE

Chief Executive Officer

MA, MBA, SFFIN, FSI, FHKIB, FRSA

Kingdom and Managing Director of Citicorp
Investment Bank Ltd.

1997, including term as Chairman) and theAsia Business Council (from 2004).

Current Directorships
Director: Financial Markets Foundation
for Children (from 1999) and AustralianBusiness Arts Foundation (from 2000).
Member: Foreign Affairs Council (from2005), Business Regulation Advisory Group(from 2002), Financial Literacy Foundation
Advisory Board (from 2005), the Council of
the Australian Bankers Association (fromFormer Directorships include
Former Director: The International Monetary
Conference (2001–2006, including term as
President), Business Council of Australia(1999 –2003), Australian Graduate Schoolof Management Ltd (1999 –2003) and The
London Stock Exchange (1989 –1991).

Chief Executive Officer since October 1997.
Mr McFarlane is also a Director of ANZ’slargest subsidiary, ANZ National Bank
Limited in New Zealand.
Skills, experience and expertise
Mr McFarlane brings broad leadership,
management and banking skills following a
31-year career in banking. Mr McFarlane isa former Group Executive Director, Standard
Chartered Plc, Head of Citibank in the United

56  ANZ Concise Annual Report 2006

Age 68. Residence Melbourne.

Age 59. Residence Melbourne.

Dr G J Clark

Independent Non-Executive Director, Chairman of the Technology Committee

PHD, BSC (Hons), FAP, FTSE

positions in IBM, News Corporation and Loral
Space and Communications. He brings to theBoard international business experience anda distinguished career in micro-electronics,
computing and communications.

Non-executive director since February 2004.
Dr Clark is a member of the GovernanceCommittee.
Skills, experience and expertise
Dr Clark is Principal of Clark Capital Partners,
a US based firm that advises internationallyon technology and the technology market
place. Previously he held senior executive

Current Directorships
Director: Babcock & Brown Capital Limited(from 2006) and KaComm Communications
Pty Ltd (from 2006).

Mr J K Ellis

Independent Non-Executive Director

MA, FAICD, HON FIE AUST, FAus IMM,
FTSE, HON DR ENG (CQU)

across a range of sectors including natural
resources, manufacturing, biotechnology
and education.

Non-executive director since October 1995.
Mr Ellis is a member of the Audit Committee.
Mr Ellis’ term as Chairman of the Risk
Committee ended on 30 September 2006
and he will continue as a member of the
Risk Committee.

Former Directorships include
Former Director: James Hardie Industries NV(2002–2006), Digex (2000 –2002) and Acton
Semiconductor Pty Limited (2001–2005).
Age 63. Residence Based in New York, UnitedStates of America but also resides in Sydney.

Former Directorships include
Former Chairman: Broken Hill Proprietary
Company Limited (1997–1999), Black
Range Minerals Limited (2000–2004),
Australia-Japan Foundation (1999–2005)
and National Occupational Health & Safety
Commission (2003–2005).
Former Director: Australian Minerals & Energy
Environment Foundation (1999–2003) and
GroPep Limited (2000–2005).

Skills, experience and expertise
A trained engineer, Mr Ellis brings to theBoard his analytical skills together withhis practical understanding of operational
issues, investments and acquisitions

Current Directorships
Chairman: Pacifica Group Limited (Director
from 1999), Future Directions International
Pty Ltd (from 2003), Landcare Australia
Limited (from 2004), Golf Australia (from2005), and the Earth Resources Development
Council (from 2006).
Chancellor: Monash University (from 1999).
Consultant: Monash Energy Advisory Board(from 2006).

Mr D M Gonski, AO

Independent Non-Executive Director, Chairman of the Governance Committee

B Com, LLB, S.I.A. (Aff), FAICD, FCPA

Current Directorships
Chairman: Coca Cola Amatil Limited(Director from 1997), the Investec Groupin Australia (Director from 2001), Sydney
Grammar School Trust (from 1993) andUniversity of New South Wales Foundation
Limited (from 2006).
Chancellor: University of New South Wales(from 2005).
Director: The Westfield Group (from 1985)
and Singapore Airlines Limited (from 2006).

Non-executive director since February 2002.
Mr Gonski is a member of the Risk Committee.
Skills, experience and expertise
A lawyer, Mr Gonski has a broad experience
across business, the law and investmentbanking. He also brings to his role on the
Board an appreciation for the community
through his work in the arts and thenot-for-profit sector.

Age 69. Residence Melbourne.

President: Board of Trustees of Art Galleryof NSW (from 1997).
Former Directorships include
Former Chairman: Morgan Stanley Australia
Limited (1999–2002), National Instituteof Dramatic Art (2001–2005) and Australia
Council for the Arts (2002–2006).
Former Director: John Fairfax Holdings
Limited (1993–2005) and ING Australia
Limited (2002–2005).
Age 53. Residence Sydney.

Ms M A Jackson, AC

Independent Non-Executive Director, Chairman of the People Committee

B Ec, MBA, HON LLD (Monash), FAICD, FCA

work in health and education contributeto her role on the Board.

Non-executive director since March 1994.
Ms Jackson is a member of the Audit
Committee.
Skills, experience and expertise
A Chartered Accountant, with significant
financial expertise, Ms Jackson has broad
industrial and commercial experience
including her involvement in transportation,mining, the media, manufacturing andinsurance. This expertise coupled with her

Current Directorships
Chairman: Qantas Airways Limited (Director
from 1992) and Asia Pacific BusinessCoalition on HIV/AIDS (from 2006).
Director: Billabong International Limited(from 2000) and Brain Research Institute(from 2006).
Member: Executive Committee
Australia-Japan Business Co-operation(from 2002) and Business Council ofAustralia Chairman’s Panel (from 2002).

Corporate Governance 57

Former Directorships include
Former Deputy Chairman: Southcorp Limited(2004–2005).
Former Co-Chairman: Australia NZ Leadership
Forum (2003–2006).
Former Director: John Fairfax Holdings Limited(2003 –2004) and Howard Florey Instituteof Experimental Physiology and Medicine(1998–2006).
Former Partner: Consulting Division of KPMG
Peat Marwick (1991–1992).
Age 53. Residence Melbourne.

Mr D E Meiklejohn

Independent Non-Executive Director, Chairman of the Audit Committee

B Com, Dip. Ed, FCPA, FAICD, FAIM

directorships of major Australian companies
spanning a range of industries.

Non-executive director since October 2004.
Mr Meiklejohn is a member of the GovernanceCommittee and the Risk Committee.

Former Directorships include
Former Chairman: SPC Ardmona Limited(2002–2005) and former Deputy Chairman
of GasNet Australia Limited (2001–2004).
Former Director: WMC Resources Limited(2002–2005) and OneSteel Limited(2000–2005). Director and Chief Financial
Officer Amcor Limited (1985–2000).

Skills, experience and expertise
Mr Meiklejohn has a strong background in
finance and accounting. He also brings to
the Board his experience across a number ofCurrent Directorships
Chairman: PaperlinX Limited (from 1999).
Director: Coca Cola Amatil Limited (from2005) and Mirrabooka Investments Limited(from 2006).
Vice President: Melbourne Cricket Club
(from 1987).

Mr J P Morschel

Independent Non-Executive Director, Chairman of the Risk Committee

DipQS, FAIM

banking and financial services, and brings
the experience of being a director of major
Australian and international companies.

Non-executive director since October
2004. Mr Morschel is a member of the Risk
Committee and, on 1 October 2006, became
its Chairman. He is also a member of thePeople Committee.
Skills, experience and expertise
Mr Morschel has a strong background in

BOARD RESPONSIBILITY AND
DELEGATION OF AUTHORITY
The Board is responsible to shareholders forthe governance of the Group, and oversees
its operations and financial performance.
To this end, it sets the strategic direction
and financial objectives, and monitors
operational performance. It also monitors
compliance in terms of ethical standards
and regulatory requirements. The Board
also appoints and regularly reviews theperformance of the Chief Executive Officer.
The ANZ Board is chaired by an independent
non-executive director. Its structure provides
for a division of responsibility between the
Chairman and the Chief Executive Officer.
This is supported by the ANZ Board Charter  which states that the Chairman must be an
independent non-executive director andthat the majority of the Board must comprise
independent non-executive directors.
The Board Charter clearly sets out theBoard’s purpose, powers, and specificresponsibilities. The business of ANZ ismanaged under the direction of the Board.
The Board delegates to the Chief Executive
Officer, and through the Chief Executive
Officer to other senior management, theauthority and responsibility for managing
the everyday affairs of the Company.
The Board monitors management andperformance on behalf of shareholders.

Current Directorships
Chairman: Rinker Group Limited (from 2003).
Director: Singapore Telecommunications
Limited (from 2001), Tenix Pty Limited (from1998) and Gifford Communications Pty
Limited (from 2000).

ROLE OF THE CHAIRMAN
The Chairman plays an important leadershiprole with ANZ and is involved in:chairing meetings of shareholders andBoard meetings;
monitoring the performance of the Boardand the mix of skills and effectiveness of
individual contributions;maintaining ongoing dialogue with theChief Executive Officer and appropriate
mentoring and guidance;overseeing Board review processes; andongoing mentoring of individual directors.

BOARD COMPOSITION, SELECTION
AND APPOINTMENT

Age 64. Residence Melbourne.

Former Directorships include
Former Director: Rio Tinto Plc (1998–2005),
Rio Tinto Limited (1998–2005), CSR Limited(1996–2003), Leighton Holdings Limited(2001–2004) and Westpac Banking
Corporation (1993–2001).
Age 63. Residence Sydney.

Chairman of the Governance Committee.
The Committee assesses the potential
candidates against Board approved
selection criteria including integrity,
fitness and propriety, skills, qualifications,experience, communication capabilities
and community standing. If found suitable,
and where there is a need for any new
appointments, candidates are recommended
to the Board. Otherwise, the Chairman of
the Committee maintains names of suitable
candidates for succession purposes. The
Chairman of the Board, unless otherwise
agreed, is responsible for approachingpotential candidates. The Board selection
criteria and above process are reviewed
by the Committee on a regular basis.
A new director receives an appointment
letter. In addition, the appointment processincludes the following key elements:

The Board strives to achieve a balance ofskills, knowledge, experience, tenure andperspective among its directors. Details
regarding the skills, experience and expertiseof each director in office at the date of thisConcise Annual Report can be found on
pages 56 to 58.

Directors’ Handbook – The Handbook
includes information on a broad range ofmatters relating to the role of a director.

The Governance Committee (see page61) is delegated responsibility for thenominations process. The Committee
regularly reviews the size and compositionof the Board and Committees and whether
there is a need for any new non-executive
director appointments. Nominations may beprovided from time to time to the

Directors’ Deed – Each director signs a
Deed in the form approved by shareholders
at the 2005 Annual General Meeting which
covers a number of issues including
indemnity, directors’ and officers’ liability
insurance, the right to obtain independent
advice and requirements concerning
confidential information.

58  ANZ Concise Annual Report 2006

Receipt of appointment-related documents

Undertaking induction training – New
directors take part in a formal induction
program which ensures they have dedicatedsessions with ANZ directors, executives andother key staff members regarding ANZ’svalues and culture, the Group’s governanceframework, the Directors’ Code of Conduct
and Director related policies, Board andCommittee policies, processes and key
issues, financial management andbusiness operations.
In addition, each new Committee member
participates in Committee-specificeducational sessions with the relevantCommittee chairman and ANZ executives.
Meeting share qualification – Non-executive
directors are required to accumulate overtime a holding in shares in the Company
that is equivalent to at least 100% of anon-executive director’s base fee (and 200%of this fee in the case of the Chairman).
Election at next Annual General Meeting –Subject to the provisions of ANZ’s Constitution
and the Corporations Act 2001, the Board
may appoint a person as a director of ANZ
at any time but that person must retire, andmay seek election by shareholders, at thenext Annual General Meeting.

Fit and proper ANZ has an effective and robust frameworkin place to ensure that individuals appointed
to relevant senior positions within the
ANZ Group have the appropriate fitness
and propriety to properly discharge theirprudential responsibilities on appointment
and during the course of their appointment.
The framework, set out in ANZ’s Fit andProper Policy, addresses the requirementsof APRA’s new Fit and Proper Prudential
Standard (APS 520). It involves regularassessments being carried out for eachdirector, relevant senior executive andthe external auditor using role-specificcompetencies as a benchmark, as wellas assessments prior to the appointmentof a new director, relevant senior executive
or external auditor.

INDEPENDENCE AND MATERIALITY
Under ANZ’s Board Charter, a majority of
non-executive directors must satisfy ANZ’scriteria for independence. The Board Charter
sets out independence parameters in orderto establish whether a non-executive director
may have a relationship with ANZ which
could (or could be perceived to) impede
their decision-making.

All non-executive directors are required to
notify the Chairman of a potential change in
his/her outside Board appointments. The
Chairman reviews the proposed appointments
and will consult with other directors as the
Chairman deems appropriate.
In the 2006 financial year, the Board
conducted its annual review of criteria for
independence against international bestpractices including the ASX Corporate
Governance Council’s Best Practice
Recommendations, NZX and NYSE
Corporate Governance Standards, andthe US Sarbanes-Oxley Act of 2002.
ANZ’s criteria are more rigid than those
set in most jurisdictions including
criteria stipulated specifically for audit
committees. The criteria and process
are both set out on ANZ’s website.
The Board applies the following test
in making its determination as to theexistence of a material relationship: does
the non-executive director (or a related
party) have a relationship as either anacquirer from or supplier to the Bank thatin the mind of a reasonable person would
influence the non-executive director in
making a decision on matters likely tocome before the Board or its Committees?
During 2006, the Board considered each
non-executive director’s independence andconcluded that the independence criteria
were met by each non-executive director.
The Board noted some corporate
customers/suppliers were associated with
two non-executive directors as follows:
Mr Gonski is a director of Westfield
Holdings Ltd. ANZ leases properties from
Westfield for its branch network in Australia.
Ms Jackson is Chairman of Qantas Airways
Limited. ANZ has commercial relationships
with Qantas as a partner in the co-branded
ANZ Frequent Flyer Visa Cards, and as an
acquirer of travel services for ANZ people.
In each case, the Board concluded thathaving regard to the nature and value of thecommercial relationship and the materiality
criteria described above, both Mr Gonski
and Ms Jackson are independent.
Directors do not participate in any decisions
regarding transactions with organisations
with which they are associated as acquireror supplier (see Conflict of Interest on this  page). Directors’ biographies on pages
56 to 58 and on anz.com highlight theirassociations outside of ANZ.

Corporate Governance 59

CONFLICT OF INTEREST
Over and above the issue of independence,each director has a continuing responsibility
to determine whether he or she has apotential or actual conflict of interest in
relation to any material matter which comes
before the Board. Such a situation may arise
from external associations, interests or
personal relationships which might affect,
or be seen potentially to affect, the director’s
position to act in the best interest of ANZ.
Under the Directors’ Disclosure of Interest
Policy and Policy for Handling Conflictsof Interest (see page 64 and anz.com), a
director may not exercise any influence overthe Board if a potential conflict of interest
exists. In such circumstances, the director
may not receive relevant Board papers,
may not be present for Board deliberations
on the subject, and may not vote on any
related Board resolutions. These matters,
should they occur, are recorded in the
Board minutes.

TENURE AND RETIREMENTANZ’s Constitution provides that an electionof directors must be held at each annual
general meeting. Each non-executive
director must retire from office at the third
annual general meeting after being electedor last re-elected, and may seek re-election.
An appointee who is filling a casual vacancy
has to stand for election at the first Annual
General Meeting after their appointment.
This requirement does not apply to theChief Executive Officer.
In the opinion of the Board, the lengthof service of a non-executive director is
not a disabling criterion affecting that
director’s independence. During the year,
the Board resolved that the majority of
the non-executive directors serving on the
Board will comprise non-executive directors
who have served less than 9 years, except
in circumstances of an even number of
non-executive directors in which case it
will be fifty percent or more. The Board
maintains that having some Board memberswith a length of service greater than 9 years
is beneficial in complex organisations thatare subject to significant economic cycles.
It is also Board policy that directors
appointed since July 1993 will, except inunusual circumstances, retire after 15 yearsof service as a director of ANZ.
During 2006, Dr Deane, who served for
12 years, retired from the Board.

PERFORMANCE EVALUATIONS
Performance evaluations are conductedinternally and cover the Board, each
non-executive director and Board
Committees.

BOARD AND INDIVIUAL DIRECTORSThe framework used to assess the
directors is based on the expectation they
are performing their duties in a manner
which should create and continue to build
sustainable value for shareholders, and inaccordance with the duties and obligations
imposed upon them by the ANZ Constitution
and the law.
The performance criteria take into accounteach director’s contribution to:
the charting of direction, strategy andfinancial objectives for ANZ;
the monitoring of compliance withregulatory requirements and ethicalstandards;
the monitoring and assessing ofmanagement performance in achieving
strategies and budgets approved by
the Board;
the setting of criteria for, and evaluation of,
the Chief Executive Officer’s performance; andthe regular and continuing review
of executive succession planning andexecutive development activities.
Board and non-executive performance
evaluations are conducted in two ways:
Annual review – On an annual basis,or more frequently if appropriate, theChairman has a one-on-one meeting witheach director specifically addressing theperformance criteria including compliancewith the Directors’ Code of Conduct. In
addition, they discuss the effectiveness of
the Board and related issues including theBoard’s oversight and contribution to theCompany, Board discussion (including theperformance of the non-executive directors
and the Chairman), Board memberships,
Committees, and other relevant issues. They
also discuss the performance of the Board
against its Charter and goals set for theyear. The Chairman provides a report to theBoard on the outcome of these meetings.
Re-election statement – Directors whennominating for re-election are required tosubmit a written or oral statement to theBoard setting out the reasons why they seek
re-election. In the director’s absence, theBoard evaluates this statement (having

regard to the performance criteria) and
resolves whether to endorse the relevant
director’s re-election.

BOARD COMMITTEESEach of the five main Board Committees
conducts a self-evaluation at least annually(see Board Committees on this page) andreports the outcome to the Board (seepages 60 to 62).

ADDITIONAL EVALUATION
In addition to the above evaluations,each director is also asked to complete
a questionnaire setting out their views on
the roles and responsibilities of the Board,
the Chairman and the directors as well as
the effectiveness and performance of theBoard, the Chairman, individual directors,
the Board’s Committees and each Committee
Chairman. The questionnaires are returned to
the Chairman of the Governance Committee
who presents the findings to the Board.

INDEPENDENT ADVICE
In order to assist directors to fulfill their
responsibilities, each director has the right(with the prior approval of the Chairman)
to seek independent professional advice
regarding his/her responsibilities at theexpense of the Group. In addition the Boardand each Committee, at the expense of theGroup, may obtain whatever professional
advice it requires to assist in its work.

BOARD COMMITTEESEach of the five principal Board Committees
is comprised solely of independent
non-executive directors, has its own Board
approved Charter and has the power toinitiate any special investigations it deems
necessary. Committee membership isreviewed annually. Membership criteria are
based on a director’s skills and experience,as well as his/her ability to add value
and commit time to the Committee. Board
Committee attendance is contained on
page 47.
The Chairman is an ex-officio memberof all Committees. The Chief Executive
Officer, Mr McFarlane, is invited to attend
Committee meetings, as appropriate. Hispresence is not automatic, however, andhe does not attend any meeting where his
remuneration is considered or discussed.
Non-executive directors may attend any
meeting of a Committee.
The principal Board Committees engage
in extensive meeting planning, following

60  ANZ Concise Annual Report 2006

a process approved by the Board. Annual
calendars of business are preparedinvolving relevant stakeholders and set byeach Committee. The executives who areappointed to assist each Committee review
any potential gaps and overlaps between
the Committees. Any issues arising fromthis are reported to, and resolved by, therelevant Committee Chairmen. The results ofthis process are then reported to the Board
to assist them in fulfilling their oversight
responsibilities in respect of the delegations
they have made to the various Committees.
Changes to Committee calendars must
be approved by the Committee Chairmen
and communicated to the Committee
members. Committees report to the Board
through the Committee Chairmen following
each Committee meeting. When there is across-Committee item, the Committees willcommunicate with each other through their
Chairmen. Throughout the year, Committee
Chairmen also conduct agenda planningmeetings involving relevant stakeholders totake account of emerging issues.
Committee performance self-evaluations are
conducted annually to review performanceagainst its Charter and goals set for theyear. The suitability of the Charter and any
areas for improvement are also assessed.
The review and stated objectives for the
new financial year are submitted to thefull Board for discussion and approval.
A copy of each Committee Charter andStanding Rules applicable to each Committee
can be found on ANZ’s website.
The Audit Committee is responsible foroversight and monitoring of:
the Company’s financial reporting
principles and policies, controls andprocedures;the work of Internal Audit which reports
directly and solely to the Chairman of the
Audit Committee (refer to Internal Auditon page 63 for more information);
the Audit Committees of subsidiarycompanies such as ANZ National Bank
Limited; andthe integrity of the Company’s financial
statements, compliance with regulatory
requirements and the independent
audit thereof.
The Audit Committee is also responsible for:the appointment, evaluation and oversightof the external auditor;
compensation of the external auditor; andwhere appropriate, replacement of theexternal auditor.

Under the Committee Charter, all membersof the Audit Committee must be financiallyliterate and at least one member of theCommittee must be a “financial expert”
as defined in the US Sarbanes-Oxley Act.
Mr Meiklejohn and Ms Jackson were
designated as the Audit Committee’s‘financial experts’ for this purpose for the2006 financial year. Refer to pages 57 and58 for their qualifications.
The Audit Committee meets with theexternal auditor without management
being present. The Chairman of the Audit
Committee meets separately and regularly
with the Group General Manager Audit, theexternal auditor and management.
Some key 2006 financial year activities
included:
Review of the transition toAustralian Equivalents of International
Financial Reporting Standards (AIFRS) –The Committee monitored the Group’s
preparations for transition to the newstandards including staff education andskill enhancement, systems modifications,
new systems development and financial
reporting changes. The Group reported inaccordance with these standards for the2006 financial year.
Addressing ANZ Finance staff – The
Chairman of the Audit Committee addressed
ANZ Finance staff on the importance ofinternal controls over financial reporting
and also provided insights and guidance on
what the Committee expects from Finance.
Overseeing the controls over financial
reporting – The Committee oversaw thecontrols over financial reporting as requiredby Section 404 of the US Sarbanes Oxley Act.
The Governance Committee identifies andrecommends prospective Board members

and succession planning for the Chairman(see page 58), recommends processes for
Board performance evaluations (see page60), corporate governance principles andpractices, and monitors the direction andcontrol of corporate responsibility for ANZ.
Some key 2006 financial year activities
included:
Board oversight review – The Committee
conducted a review of Board oversight andreported its findings to the Board.
Monitoring changes to domestic andoverseas legislation and regulations –The Committee received regular updates
on changes to relevant legislation andregulations and considered potential
impacts on ANZ’s customers, staff,
operations and the community. The
Committee oversees related changes torelevant Codes, Charters, policies andprocedures reporting these to the Board.
Endorsement of Shareholder Charter –The Committee oversaw the development
and endorsed ANZ’s Shareholder Charter.
The People Committee is responsible forrecommendations to the Board in respectof the Group’s compensation program
including any equity-based programs (details
in the Remuneration Report on pages 70 to
91). It also evaluates the performance ofand approves the compensation for Board
appointees (including the Chief Executive
Officer) and approves compensation levels
and policy guidelines (details in the
Remuneration Report on pages 70 to 91).
Some key 2006 financial year activities
included:
Annual review of remuneration for
non-executive directors, the Chief Executive
Officer and direct reports to Chief Executive

Officer and review of the reward structure
for the senior executive population.
Review of succession plans – The
Committee conducted reviews of the current
succession plans for the Chief Executive
Officer, Chief Executive Officer’s direct
reports and other business-critical roles.
Preparation of the 2005 Remuneration
Report on which shareholders were asked
to vote for the first time (non-binding) at
the 2005 Annual General Meeting.
Review of Global Superannuation
arrangements, Health and Safety, andDiversity at ANZ.
The Risk Committee is responsible foroverseeing, monitoring and reviewing theGroup’s risk management principles andpolicies, strategies, process and controls
including credit, market, balance sheet,
operational risk and compliance. It may
approve credit transactions and othermatters beyond the approval discretionof executive management.
Some key 2006 financial year activities
included:
Greater strategic focus in risk
management – The Committee reviewed,
endorsed and monitored a number of risk
framework and policy enhancements,
designed to enable the Committee to better
anticipate and monitor risk in a forward
looking manner. These included risk appetite
framework, capital adequacy and stresstesting capabilities.
Continued oversight of Basel II – The
Group is progressing well in its preparation
for the Basel Accord implementation in
January 2008 including the accreditation
submission. In addition, the Committee
took part in a number of dedicated Basel II
education sessions.

ANZ BOARD COMMITTEE MEMBERSHIPS – from 1 October 2005 – 30 September 2006
Audit

GovernancePeopleRisk

Technology

David Meiklejohn FE, C

David Gonski C

Margaret Jackson C

Jerry Ellis C

Gregory Clark C

Margaret Jackson FE

Gregory Clark

John MorschelJohn Morschel▲

Jerry Ellis

David Meiklejohn

David Gonski

Charles Goode (ex-Officio)

Charles Goode (ex-Officio)

Roderick Deane(retired 30 June 2006)

Roderick Deane(retired 30 June 2006)

Charles Goode (ex-Officio)

David Meiklejohn(commenced 1 February 2006)

Charles Goode (ex-Officio)

Charles Goode (ex-Officio)
C – Chairman, FE – Financial Expert (for the purposes of the US Sarbanes-Oxley Act requirements)▲ – Mr Morschel replaced Mr Ellis as Chairman of the Risk Committee on 1 October 2006, although Mr Ellis remains as a member of the Committee.

Corporate Governance 61

Regular Governance and Oversight –The Committee received regular reportson the Group’s compliance positions,and Management’s responses to ensurea strong culture of compliance. In addition,
the Committee received reports on new andemerging risk issues and Management’s
responses necessary to ensure timely andnecessary mitigation.
The Technology Committee assists the Boardof Directors in the effective discharge of its
responsibilities in relation to technology andoperations related matters. The Committee is
responsible for the oversight and evaluationof new projects in technology above $50
million and security issues relevant to ANZ’stechnology processes and systems. It is also
responsible for the review and approval ofmanagement’s recommendations forlong-term technology and operations
planning and the overall framework forthe management of technology risk.
Some key 2006 financial year activities
included:
Review of technology systems –To enhance understanding of the Group’ssystems, the Committee took part in site
visits of key operations and partner facilities.
In addition, the Committee received several
reports on technology systems and reviewed
future technology strategy.
Oversight of information security –The key drivers of information security werereviewed by the Committee, and emerging
technology risks and management’s
responses necessary to ensure proper
mitigation were monitored.
Monitoring of New Zealand systems
integration – The Committee oversaw thesuccessful integration of our New Zealandtechnology operations into the Group.

ADDITIONAL COMMITTEESIn addition to the five principal Board
Committees, the Board has constituteda Shares Committee and an Executive
Committee, each comprised solely of
directors, to assist in carrying out
specific tasks.
The Executive Committee has the full powerof the Board and is convened as necessary
between regularly scheduled Board
meetings. The Shares Committee has thepower to administer ANZ’s Employee SharePlan and Employee Share Option Plan. The
Board also forms and delegates authority
to ad hoc Committees of the Board as andwhen needed to carry out its functions.

DIRECTORS’ MEETINGS
The number of Board meetings andCommittee meetings held during the year
ended September 30, 2006 and attended
by each director are set out in the table on
page 47.

CONTINUING EDUCATIONANZ directors take part in a range of training
and continuing education programs. In
addition to a formal induction program(see page 59), continuing education
sessions are held throughout the year
focusing on a range of topics which may
include accounting standards, corporate
responsibility, tax accounting, payments,
remuneration, economic developments,
pending legislation, risk management andcorporate governance.
Directors also receive a quarterly newsletter
designed to keep them abreast of mattersrelating to their duties and responsibilities
as directors.
In addition to formal Board-wide workshops,
each Committee conducts its own continuing
education sessions. Internal and/or external
experts are engaged to conduct all
education sessions.
Directors also receive regular Divisional
briefings at Board meetings. These briefings
provide directors with an insight into
each area of the Company, in particular,
performance, key issues, risks and strategy
for growth. In addition, directors participate
in site visits from time to time which provide
them with the opportunity to meet with staff
and customers.

ROLE OF COMPANY SECRETARY
The Board is responsible for the appointmentof ANZ’s Company Secretaries. Currently
there are three people appointed as
Company Secretary.
The Group General Counsel and Company
Secretary is normally in attendance atall Board and Committee meetings. He
prepares minutes and provides legal
advice to the Board if and when required.
He works closely with the Chairman of
the Governance Committee to develop
and maintain ANZ’s corporate governanceprinciples. He is responsible to the Boardfor the Company Secretary’s Office function.
The Company Secretary is responsiblefor day-to-day operations of the Company
Secretary’s Office including lodgementswith relevant stock exchanges, theadministration of Board and Committee
meetings, the management of dividend

62  ANZ Concise Annual Report 2006

payments, the administration of the Group’s
Australian subsidiaries and the relationshipwith the share registry provider. The Chief
Financial Officer is also appointed as
Company Secretary.
Profiles of ANZ’s Company Secretaries canbe found in the Directors’ Report on page 68.

RISK MANAGEMENT ANDCOMPLIANCE
ANZ’s business controls are governed byan ongoing focus on risk and complianceissues within the framework of theCompany’s overall strategy. ANZ hasestablished a comprehensive risk andcompliance management framework toensure best practice alignment.
The Board is principally responsible forestablishing risk tolerance, approving
related strategies and policies, monitoring
and assessing the activities of management,
overseeing policy compliance and theeffectiveness of the risk systems andpolicies to meet the requirements ofapplicable regulations and the interestsof shareholders, customers and staff.
The Risk Committee of the Board
oversees the Group’s risk management
policies and controls, and may approvecredit transactions and other mattersbeyond the approval discretion of
executive management.
On a day-to-day basis, the various risks
inherent in ANZ’s operations are managed
by both Group Risk Management and eachbusiness unit.
For further information on risk management,
please see pages 18 to 19 and anz.com.

FINANCIAL CONTROLSAs previously noted, the Audit Committee of
the Board oversees the Company’s financial
reporting policies and controls, the integrityof the Company’s financial statements,
the relationship with the external auditor,
the work of Internal Audit, and the Audit
Committees of the subsidiary companies.
ANZ is registered with the Securities andExchange Commission (SEC) as a Foreign
Private Issuer of securities in the UnitedStates. As such, ANZ is required to comply
with Section 404 of the Sarbanes Oxley Act
with 2006 being the first year of compliance.
Compliance will be represented in the formof a management report on internal control
over financial reporting, which will be
included in ANZ’s Annual Report on Form
20-F to be filed with the SEC later in 2006.

Within this management report, ANZ
intends to include: (1) a statement ofmanagement’s responsibility for establishingand maintaining adequate internal control
over financial reporting for the Company;(2) management’s assessment of theeffectiveness of the Company’s internal
control over financial reporting as at 30
September 2006; (3) a statement identifying
the framework used by management toevaluate the effectiveness of the Company’s
internal controls over financial reporting; and(4) a statement that the Company’s external
auditor, KPMG, will issue an attestation
report on management’s assessmentof the Company’s internal controls overfinancial reporting.

AUDITInternal Audit
Internal Audit provides independent
assurance that the design and operationof the risk and control framework acrossthe Group is effective. It operates undera Charter from the Audit Committee thatgives it unrestricted access to review allactivities of the Group. The Group General
Manager Audit reports to the Chairman of
the Audit Committee.
The Audit Committee reviews the performanceof the Group General Manager Audit.
A risk-based audit approach is used toensure that the higher risk activities in eachbusiness are audited each year. All audits
are conducted in a manner that conforms
to international auditing standards. Audit
results also influence incentive compensationof business heads.
Internal Audit plays an active role in ensuring
compliance with the requirements ofsupervisory regulatory authorities. Internal
Audit also works collaboratively with theexternal auditor to ensure a comprehensive
audit scope.
The Audit Committee plays an active role
in reviewing significant issues arising fromthe work performed by Internal Audit. Thereis a robust process for ensuring prompt
resolution of audit issues, which includes
regular reviews of progress by the Chief
Executive Officer and the Chairman of the
Audit Committee.
The Audit Committee also receives formal
reports on significant issues to ensure thatany remedial action is undertaken promptly.

External audit
The external auditor’s role is to provide an
independent opinion that ANZ’s financial

reports are true and fair and comply withapplicable regulations. The external
auditor performs an independent audit
in accordance with Australian and UnitedStates Auditing Standards.
The Audit Committee oversees ANZ’s Policy
on Relationship with External Auditor. Under
the policy, the Audit Committee is responsible
for the appointment (subject to ratificationby shareholders), compensation, retention
and oversight of the external auditor.
The policy also stipulates that the
Audit Committee:
pre-approves all audit and non-audit
services;
regularly reviews the independenceof the external auditor; andevaluates the effectiveness of theexternal auditor.
Details of non-audit services, together withthe statement from the Board as to theirsatisfaction with KPMG’s compliance withthe related independence requirementsof the Corporations Act 2001, are in the
Directors Report on pages 68 to 69.
In addition, ANZ requires a two-year period
before any former partner or employeeof the external auditor is appointed asa director or senior executive of ANZ.
The lead partner of the external auditor isrequired to rotate off the ANZ audit after five
years and cannot return for a further five
years. Certain other senior audit staff are
required to rotate off after a maximum ofseven years.
Any potential appointments of ex-partners
or ex-employees of the external auditor as
ANZ finance staff, at senior managementlevel or higher, must be pre-approved by
the Chairman of the Audit Committee.
As disclosed in the 2004 and 2005 Concise
Annual Reports, the US Securities andExchange Commission (SEC) commenced
an inquiry into non-audit services provided
by ANZ’s auditor, KPMG. ANZ has provided
the information requested by the SEC. Thisinquiry has not concluded. Should the
SEC determine that services provided by
KPMG did not comply with the US auditor
independence rules, the SEC may seek
sanctions, the nature and amount of which
are not known. Whilst ANZ cannot predict
the outcome of the inquiry, based on
information currently available, ANZ does
not believe it will have a material adverse
effect on the Company.

Corporate Governance 63

ETHICAL AND RESPONSIBLE
DECISION-MAKING
The Board encourages management topromote and maintain a culture within ANZ
which draws upon a set of unifying values
to guide the actions and decisions of theBoard and all employees (see anz.com >sustainability > our values).
More than 26,000 ANZ employees haveparticipated in the Breakout culture
development program. The program
includes workshops to help staff to apply
values-based decision-making, and tobalance the competing needs of staff,
shareholders, customers and thecommunity in their roles and activities.
To assist directors and staff in theirunderstanding of the culture of theorganisation, ANZ has three main codesof conduct which also guide everyday
business practice and decision-making
throughout the Group. These aredetailed below.

CODES OF CONDUCT AND POLICIESBelow is an overview of ANZ’s key codesand policies which apply to directors andemployees. Summaries of these and othercompany policies can be found on anz.com.
Codes of Conduct for Directors and for
Employees – These policies set out the
ethical standards to which directors andemployees are expected to adhere. The
Codes require that directors and employees
adhere to the law, disclose any relevantinterests, and act honestly and ethicallyin all their dealings. The codes also cover
the confidentiality of information, limits on
acceptance of gifts or entertainment and on
use of ANZ goods, services and facilities.
Key contact – Group General Counsel andCompany Secretary.
Code of Conduct for Financial Officers –(adopted from the Group of 100 Code of
Conduct for CFOs and Senior Financial
Officers). The Code requires that chief
financial officers and other finance staff
influencing financial reporting adhere toprinciples of honesty and integrity, respectconfidentiality of information, declareconflicts of interest, maintain transparency
in reporting, exercise diligence andgood faith, ensure sound internal controls
and set a standard for other financial
professionals. Key contact – Chairmanof the Audit Committee.

Continuous Disclosure Policy – ANZ iscommitted to achieving best practice in thearea of continuous disclosure. The policy
is designed to ensure that there is full andtimely disclosure of ANZ’s activities toshareholders and the market. The policy
requires that information disclosed to
the relevant stock exchanges is placedon ANZ’s website. Key contacts – Headof Investor Relations, Head of Media
Relations and Group General Counsel
and Company Secretary.
Critical Accounting Policies – Details of thecritical accounting policies and any changes
in accounting policies made since the dateof the 2005 Annual Report are set out on
page 96 in this Concise Annual Report andin the 2006 Financial Report. Key contact –Group General Manager Finance.
Directors’ Disclosure of Interest Policy and
Policy for Handling Conflicts of Interest – The
Board has adopted a policy on disclosureof interests requiring that directors disclose
certain interests and setting out a process
for dealing with actual or potential conflictsof interest. Key contact – Group GeneralCounsel and Company Secretary.
Employee Indemnity Policy – This policy
provides that the Group will indemnify
employees against any liability that they
incur in carrying out their role subject tomeeting certain requirements. Further
details on this policy and on indemnities
given to certain employees can be foundon page 69 of this Concise Annual Report.
Key contact – General Manager Operational
and Technology Risk.
Fit and Proper Policy – The Board adopted
this policy as part of the framework whichaims to ensure individuals appointed to
relevant senior positions within ANZ havethe appropriate fitness and propriety
to properly discharge their prudential
responsibilities on appointment and during
the course of their appointment. The policy
sets out the assessment procedures forthe determination of fitness and propriety
of directors, senior executives and theexternal auditor. The policy is supported byrole-specific competencies. Key contacts –Group General Counsel and Company
Secretary and Group General Manager,
People Capital and Breakout.
Policy on the Prevention of Money
Laundering, Criminal and Terrorist Financing– This policy covers Anti-Money Launderingand Anti-Terrorism laws and regulations. It

sets out principles related to identification
and record keeping procedures, the needfor staff awareness and related training,
and annual requirements for independent
testing and compliance reporting. The policy
is aimed at ensuring that ANZ is able toprotect its reputation, integrity, assets,
liabilities and shareholder funds. Key
contacts – General Manager Operational
and Technology Risk and General Manager
Group Compliance.
Policy on Relationship with External
Auditor – The Board and the Audit
Committee’s policy on audit and non-audit
services regulates the audit-related andnon-audit services that may be conductedby ANZ’s external auditor. It sets in place
a formal approval process regarding theprovision of audit and non-audit services.
This approval process is the responsibilityof the Audit Committee. In addition it sets
out the rotation requirements for the leadpartner and other members of the audit
team, and processes related to the potential
appointment of ex-partners or ex-employeesof the external auditor. Key contact –Chairman of the Audit Committee.
Securities Trading Policy – The policy
prohibits trading in ANZ securities or
the securities of other companies for all
employees, contractors and consultants
engaged by ANZ who are aware of
unpublished price-sensitive information.
In addition, the policy specifically prohibits
restricted employees trading in ANZ
securities during ‘blackout periods’, which
are the six weeks leading up to the day
following the half-yearly and annual results
announcements. Non-executive directors
are required to seek approval from the
Chairman in advance of any trading in ANZ
securities. The Chairman of the Board isrequired to seek approval from the Chairmanof the Governance Committee. With respect
to trading in non-ANZ securities, a process
is in place which enables non-executive
directors to request the Group GeneralCounsel and Company Secretary to makeappropriate enquiries within ANZ as towhether any confidential information isin ANZ’s possession that would cause thedirector any risk of trading in securities withinsider knowledge. Key contacts – General
Manager Group Compliance and Group
General Counsel and Company Secretary.
Whistleblower Policy (formerly known
as Serious Complaints Policy) – The

64  ANZ Concise Annual Report 2006

Whistleblower Process is an additional
mechanism by which ANZ staff, contractors
and consultants may voice any concerns
they may have regarding any malpracticeor impropriety that they find within ANZ.
It requires that protection be given to
employees against dismissal or penalty
as a result of disclosing concerns ingood faith. Key contacts – Chairman of the
Audit Committee, Group General Manager
Audit, and Group General Counsel andCompany Secretary.
New Zealand Policies – Recognising
the importance of ANZ’s presence in New
Zealand and the requirements of the Reserve
Bank of New Zealand, the ANZ National Bank
Limited Board reviews and approves all ANZ
governance and risk management polices
before they are adopted by ANZ National
Bank Limited to ensure that they meet all
New Zealand regulatory requirements. Key
contact – General Counsel and Company
Secretary, ANZ National Bank Limited.

COMMITMENT TO SHAREHOLDERCOMMUNICATION
Shareholders are the owners of ANZ, andthe Company’s stated aim is to ‘perform andgrow to create value for our shareholders’.
In order to make informed decisions
about ANZ, and to communicate views
to the Company, shareholders need anunderstanding of the Company’s business
operations and performance.
ANZ encourages shareholders to take anactive interest in the Company, and seeks
to provide shareholders with quality
information in a timely fashion generally
through ANZ’s reporting of results, theCompany’s Concise Annual and Financial
Reports, briefings, half yearly newslettersand via its dedicated shareholder site
on anz.com.
ANZ strives for transparency in all its
business practices. The Company recognises
the impact of quality disclosure on the trustand confidence of the shareholder, the wider
market and the community.
Should shareholders require any information,
they are also provided with relevant contact
details for ANZ and relevant share registries
in the half-yearly shareholder newsletters,
the Concise Annual Report (under Informationfor Shareholders) and anz.com.

ACCESS TO DIRECTORSManagement is able to consult directors as
required on a regular basis. Employees haveaccess to the directors directly or through theCompany Secretary. Shareholders who wish
to communicate with the directors may direct
correspondence to a particular director, or to
the non-executive directors as a whole.

UPHOLDING SHAREHOLDER RIGHTS
ANZ upholds shareholder rights and provides
shareholders with the opportunity to be
involved in shareholder meetings.
To allow as many shareholders as possible tohave an opportunity to attend a meeting, ANZ
rotates shareholder meetings around capitalcities and makes them available to be viewed
online using Webcast technology. Further
details on meetings and presentations held
throughout this financial year are available
on anz.com > shareholders > presentations.
Prior to the Annual General Meeting,shareholders are given the opportunity
to submit any questions they have for the
Chairman or Chief Executive Officer to enable
key common themes to be considered.
The external auditor is present at ANZ
Annual General Meetings and available toanswer shareholder questions. The auditor
can respond on any business item thatconcerns them in their capacity as auditor.
Shareholders have the right to vote on
various resolutions related to Company
matters. If shareholders are unable toattend a meeting they can submit theirproxies via post or electronically throughanz.com. Where votes are taken on a poll,
ANZ appoints an independent party to verify
the results, which are reported to the ASX
and posted on anz.com.

CONTINUOUS DISCLOSURE
ANZ’s practice is to release all price-sensitive
information in a timely manner and as
required under the ASX listing rules:
to all relevant stock exchanges on which
ANZ’s securities are listed; andto the market and community generally
through ANZ’s media releases, website andother appropriate channels. ANZ-related
releases are posted on anz.com.
Through ANZ’s Continuous Disclosure Policy(see page 64 and anz.com) the Company
demonstrates its commitment to continuous
disclosure. The policy reflects relevant

obligations under applicable stock exchange
listing rules and legislation.
For reporting purposes, price-sensitive
information is information that a reasonable
person would expect to have a material effecton the price or value of ANZ’s securities.
Designated disclosure officers have
responsibility for reviewing proposed
disclosures and making decisions in relation
to what information can be or should be
disclosed to the market. All ANZ staff are
required to inform a disclosure officer
regarding any potentially price-sensitive
information concerning ANZ as soon as
they become aware of it.

Alignment with Australian and overseas corporate governance issues

NZX Listing Rules provided that it remains
listed on the ASX, complies with the ASX
listing rules and provides the NZX with all
the information and notices that it provides
the ASX.
The Australian Stock Exchange (ASX)
corporate governance rules and principles
may materially differ from the New Zealand
Stock Exchange’s (NZX) corporate
governance rules and the principles of
the NZX’s Corporate Governance Best
Practice Code. More information about thecorporate governance rules and principlesof the ASX can be found at www.asx.com
and, in respect of the NZX, at www.nzx.com.
Irrespective of any differences, ANZ complies
with all applicable governance principles
and requirements both in Australia and
New Zealand.

INTERNATIONALOTHER JURISDICTIONS

Australian Equivalents to International
Financial Reporting Standards – (AIFRS) –ANZ complied with Australian equivalents
to IFRS as issued by the International
Accounting Standards Board when it
reported its results for the half-year ended
31 March 2006 and the full year ended
30 September 2006. Subsequent reportingof the Company’s results will continue inaccordance with the Australian equivalents.

United States of America – As a ‘foreign
private issuer’ registered with the SEC
with securities listed on the NYSE, ANZ isrequired to comply with certain corporate
governance requirements contained in US
securities laws, including applicable sectionsof the Sarbanes-Oxley Act of 2002 andapplicable New York Stock Exchange (NYSE)
Listing Standards. Under the NYSE ListingStandards, ANZ is required to provide a brief
description of the significant differences
between its corporate governance practices
and corporate governance requirements for
US listed companies under the NYSE ListingStandards on the Group’s website (anz.com).
Information will also be provided in the
Company’s US Form 20-F 2006 Annual Reportand available on ANZ’s website (anz.com).

Basel II – Work towards compliance with
the Basel II Capital Accord continues within
ANZ, with full implementation of the new
Accord scheduled for January 2008. ANZ’s
program is aimed at ensuring the Company
achieves accreditation at the advanced
levels for both credit and operationalrisk under Basel II. Many of the tools andprocesses that meet the accreditation
demands of Basel II are in place and inuse throughout the Group.

AUSTRALIAASX Corporate Governance Council –Principles of Good Corporate Governanceand Best Practice Recommendations –ANZ considers these principles important,including the “if not, why not” disclosure
approach to governance, and has compliedwith each of the recommendations
throughout the financial year.

NEW ZEALANDNZX Corporate Governance Rules andPrinciples – As an overseas listed issuer on
the NZX, ANZ is deemed to comply with the

Corporate Governance 65

United Kingdom and other jurisdictions –ANZ monitors best practice developments
in corporate governance across otherrelevant jurisdictions.

POLITICAL DONATIONSIn the year to 30 September 2006, ANZ
donated $100,000 to the Liberal Party and$50,000 to the Australian Labor Party.

ANZ’s compliance with the ASX Corporate Governance Principles
Focus & Principle
12

3

Lay solid foundation for management and oversight
1.1
Formalise the functions reserved to the Board and those delegated to management
Structure the board to add value
2.1
The majority of the Board should be independent directors
2.2
The chairperson should be an independent director
2.3
The roles of the Chairperson and Chief Executive Officer should not be exercised by the same person
2.4
The Board should establish a nomination committee
2.5
Provide related disclosures

3.2
3.3

5

6

7

8
9

10

Pg 58

3

Pg 58
Pg 58
Pg 58
Pg 61

3

See above3

Pg 63
Pg 63, 64
Pg 64
See above

3

Pg 69

3

Pg 60
Pg 60

3

Pg 60
See above3

Pg 63, 653

See above

3

Pg 64

3

Pg 65

3

Pg 62

3

Pg 69

3

3
3
3

Promote ethical and responsible decision-making
3.1

4

ANZ’S Compliance   3

Establish a code of conduct to guide the directors, the Chief Executive Officer, the Chief Financial Officer and any other key
executives as to:
3.1.1 the practices necessary to maintain confidence in the company’s integrity
3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices
Disclose the policy concerning trading in company securities by directors, officers and employees
Provide related disclosures

Safeguard integrity of financial reporting
4.1
Require the Chief Executive Officer and the Chief Financial Officer to state in writing to the Board that the company’s financial
reports present a true and fair view, in material respects, of the company’s condition and operational results and are inaccordance with accounting standards
4.2
The board should establish an audit committee
4.3
Structure the audit committee so that it consists of
only non-executive directors
a majority of independent directors
an independent chairperson, who is not chairperson of the Board
at least three members
4.4
The audit committee should have a formal charter
4.5
Provide related disclosures
Making timely and balanced disclosure
5.1
Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements
and to ensure accountability at a senior management level for that compliance
5.2
Provide related disclosures
Respect the rights of shareholders
6.1
Design and disclose a communications strategy to promote effective communication with shareholders and encourage
effective participation
6.2
Request the external auditor to attend the AGM and be available to answer shareholder questions about the conductof the audit and the preparation and content of the auditor’s report

3
3
3

3

3

Recognise & manage risk
7.1
The Board or appropriate committees should establish policies on risk oversight and management
7.2
The Chief Executive Officer and the Chief Financial Officer should state to the Board in writing that
7.2.1 the statement given in accordance with best practice recommendation 4.1 is founded on a sound system of risk
management and internal compliance and control which implements the polices adopted by the Board
7.2.2 the company’s risk management and internal compliance and control system is operating effectively and efficiently
in all material respects
7.3
Provide related disclosures

Pg 69

3

See above3

Encourage enhanced performance
8.1
Disclose the process for performance evaluation of the Board, its committees, individual directors and key executives

Pg 59, 60

3Pg 70 to 91

3

Pg 61
Pg 70 to 91
Pg 70 to 91

3

See above

3

Pg 63

3

Remunerate fairly and responsibly
9.1
Provide disclosure in relation to the company’s remuneration policies to enable investors to understand the costs and benefitsof the policies, and the link between remuneration paid to the directors and key executives and corporate performance
9.2
The Board should establish a remuneration committee
9.3
Clearly distinguish the structure of non-executive directors remuneration from that of executives
9.4
Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plansapproved by shareholders
9.5
Provide related disclosures
Recognise the legitimate interests of stakeholders
10.1 Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders

66  ANZ Concise Annual Report 2006

33

directors’ report
The directors present their report together with the Concise Financial Report of the consolidated entity (the Group), being
Australia and New Zealand Banking Group Limited (the Company) and its controlled entities, for the year ended 30 September
2006 and the Independent Auditors’ Report thereon. The information is provided in conformity with the Corporations Act 2001.

discussion and analysis
PRINCIPAL ACTIVITIESThe principal activities of the Group during
the year were general banking, mortgage
lending, leasing, hire purchase and general
finance, international and investmentbanking, nominee and custodian services,
executor and trustee services, life insurance
and funds management activities through the
ING Australia Limited (INGA) joint venture.
There has been no significant change in thenature of the principal activities of the Groupduring the financial year.
At 30 September 2006, the Group had 1,265
points of representation.

RESULT
Consolidated net profit after income tax
attributable to shareholders of the Company
was $3,688 million, an increase of 16% overthe prior year.
The increase in consolidated net profit after
income tax attributable to shareholders is
predominately due to an increase in net
interest income of 19% to $6,943 million.
This increase was driven mainly by growthin average interest earning assets andaverage deposits.
The provision for credit impairment charge
decreased by 30% to $407 million. The
decrease is principally due to a reduction
in both the individual and collective
provision charges driven by favourable
economic conditions as well as the Group’s
strengthening risk profile.
One of the key drivers of the Group’s
performance has been strong overall balance
sheet growth over the past 12 months. The
major components of the Group’s balance
sheet and the related movements from theprior year are as follows:
Net loans and advances increased by 10%
from $232,490 million to $255,410 million,
primarily due to growth in mortgage andinstitutional lending in Australia.
Deposits and other borrowings increased
by 8% from $190,322 million to $204,794
million principally to fund business growth.

Bonds and notes increased by 28% from
$39,073 million to $50,050 million primarily
to fund asset growth.

STATE OF AFFAIRSIn the directors’ opinion, there have been no
significant changes in the state of affairs of theGroup during the financial year, other than:Simplified Divisional Structure – From 1 May
2006 the Group simplified its structure into
the following divisions; Personal, Institutional,
New Zealand and Partnerships & Private Bank.
Adoption of Australian Equivalents toInternational Financial Reporting Standards(AIFRS) – 2006 is the first financial year tobe presented under AIFRS. This represents
a major change to the Group’s accounting
policies and basis of reporting.
Growth in Asia – ANZ acquired a 20% stakein Tianjin City Commercial Bank in China, 10%
stake in Sacombank in Vietnam and opened
the Group’s third office in mainland China.
Further review of matters affecting the Group’s
state of affairs are also contained in thisConcise Annual Report Part 1 of 2 under the
Chief Executive Officer’s Report on page 13.

DIVIDENDS
The directors propose that a final fully
franked dividend of 69 cents per fully paid
ordinary share shall be paid on 15 December
2006. The proposed payment amounts toapproximately $1,267 million.
During the financial year, the following fully
franked dividends were paid on fully paid
ordinary shares:
Type

Cents
Amount before bonus
per option plan adjustment
share
$m

Final
2005
59
Interim2006
56

Date ofpayment

16 December
1,078
2005
1,024

3 July 2006

The proposed final dividend of 69 cents
together with the interim dividend of 56 centsbrings the dividends in relation to the year
ended 30 September 2006 to 125 cents
fully franked.
Directors’ Report  67

REVIEW OF OPERATIONSOver the past decade ANZ has improved
financial performance, productivity and returns
to shareholders. Focus has increased on ourcustomers, our people and our communities.
The 30 September 2006 financial year
has produced a strong result based onsolid business performance. Divisional
performance showed good growth in theGroup’s three main segments; Personal,
Institutional and New Zealand.
Additional review of the operations of theGroup during the financial year including
an assessment of the business strategiesof the Group is contained in the Chief
Executive Officer’s Report on page 13 ofPart 1 of 2 of this Concise Annual Report.

EVENTS SINCE THE END OF THE
FINANCIAL YEAR
Details of significant events that have arisen
between 30 September 2006 and date ofthis report can be found on page 101 of thisConcise Annual Report.

FUTURE DEVELOPMENTS
The Group plans to enhance future
shareholder returns and distinguish itself
from other banks through:Investing to increase revenue growth;
Improving cost and capital productivity; andAdvancing stakeholder foundations.
The Group’s major objective is to buildon the strong base created to date and to
be a bank that truly differentiates itself
in the eyes of shareholders, customers,
employees, and its various communities.
In addition to the above, details of likely
developments in the operations of theGroup and its prospects in future financial
years are contained in Part 1 of 2 of thisConcise Annual Report under the Chief
Executive Officer’s Report on page 13. In theopinion of the directors, disclosure of any
further information would be likely to resultin unreasonable prejudice to the Group.

ENVIRONMENTAL REGULATIONANZ recognises our obligation to ourstakeholders – customers, shareholders,
staff and the community – to operate ina way that advances sustainability andmitigates our environmental impact. Ourcommitment to improve our environmental
performance is integral to our “making
a sustainable contribution to society”.
We acknowledge that we have an impact
on the environment:
directly through the conduct of ourbusiness operations; andindirectly through the products andservices we provide to our customers.
As such, ANZ has established an
Environment Charter, strategy and internal
responsibilities for reducing the impact of
our operations and business activities on
the environment.
The operations of the Group are notsubject to any particular and significant
environmental regulation under a law of
the Commonwealth or of a State or Territory.
However, the operations of the Group may
become subject to environmental regulation
when enforcing securities over land. ANZ
has developed policies to manage suchenvironmental risks. Having made due
enquiry, to the best of our knowledge nomember of the Group has incurred any
environmental liability during the year.

DIRECTORS’ QUALIFICATIONS,EXPERIENCE AND SPECIALRESPONSIBILITIESAt 1 October 2005, the Board comprised
8 non-executive directors and one executive
director, the Chief Executive Officer.
Dr Roderick Deane retired on 30 June 2006.
At the date of this report, the Board
comprises 7 non-executive directors who
have a diversity of business and community
experience and one executive director, theChief Executive Officer, who has extensive
banking experience. The names of directors
and details of their skills, qualifications
and experience are contained on pages
56 to 58 of this Concise Annual Reportand on anz.com.
Details of the number of Board and Board
Committee meetings held during the year,
directors’ attendance at those meetings, anddetails of directors’ special responsibilities
are shown on page 47 of this Concise
Annual Report.

For those directors in office at 30 September
2006, details of the directorships of otherlisted companies held by each director in
the 3 years prior to the end of the 2006
financial year are listed in this Concise
Annual Report on pages 56 to 58.

COMPANY SECRETARIES’QUALIFICATIONS AND EXPERIENCE
Currently there are three people appointed
as Company Secretary of the Company.
Details of their roles are contained on page
62. Their qualifications are as follows:
Tim L’Estrange, LLB, BCom, ANZ Group
General Counsel and Company Secretary
Mr L’Estrange has a long-standing legal
career spanning 27 years. He has significant
experience in corporate law. Mr L’Estrange
joined ANZ in 2003. Prior to ANZ, he worked
closely with boards and senior managementof major corporations, banks and financial
institutions. Mr L’Estrange was the National
Executive Partner, Litigation and Dispute
Resolution of Allens Arthur Robinson anda member of the Board of Management ofthat firm. He was also Managing Partner ofAllen Allen & Hemsley. Mr L’Estrange is alsoa member of Chartered Secretaries Australia.
Peter Marriott, BEc (Hons), ANZ Chief
Financial Officer.
Mr Marriott has been involved in thefinance industry for more than 25 years.
Mr Marriott joined ANZ in 1993. Prior to his
career at ANZ, Mr Marriott was a Partnerin the Melbourne office of the then KPMG
Peat Marwick. He is a Fellow of a numberof professional organisations including
the Institute of Chartered Accountantsin Australia and the Australian Instituteof Banking and Finance. He is also a
Member of the Australian Institute ofCompany Directors.
John Priestley, BEc, LLB, FCIS, ANZ
Company Secretary.
Mr Priestley, a qualified lawyer, joined
ANZ in 2004. Prior to ANZ, he had a longcareer with Mayne Group and held positions
which included responsibility for thelegal, company secretarial, complianceand insurance functions. He is a Fellow
of Chartered Secretaries Australia andalso a member of Chartered Secretaries
Australia’s Legislation Review Committee.

NON-AUDIT SERVICES
The Company’s Relationship with External
Auditor Policy (which incorporates
requirements of the Corporations Act 2001

68  ANZ Concise Annual Report 2006

and applicable requirements for companies
listed in the United States) states that theexternal auditor may not provide services
that are perceived to be in conflict withthe role of the auditor. These include
consulting advice and sub-contracting ofoperational activities normally undertaken
by management, and engagements where
the auditor may ultimately be required toexpress an opinion on its own work.
Specifically the policy:
limits the non-audit services that may
be provided;
requires that audit and permitted
non-audit services must be pre-approvedby the Audit Committee, or pre-approved by
the Chairman of the Audit Committee andnotified to the Audit Committee; andrequires the external auditor to notcommence an audit engagement (orpermitted non-audit service) for the Group,
until the Group has confirmed that theengagement has been pre-approved.
The Audit Committee has reviewed asummary of non-audit services provided
by the external auditor for 2006, and has
confirmed that the provision of non-audit
services for 2006 is consistent with theCompany’s Relationship with External
Auditor Policy and compatible with thegeneral standard of independence for
auditors imposed by the Corporations Act
2001. This has been formally advised to
the Board of Directors.
The external auditor has confirmed to the
Audit Committee that they have compliedwith the Company’s Relationship with
External Auditor Policy on the provision of
non-audit services by the external auditor
for 2006.
The non-audit services supplied to the Groupby the Group’s external auditor, KPMG, andthe amount paid or payable by the Groupby type of non-audit service during the year
ended 30 September 2006 are as follows:
Amount paid/
payable $’000s
Non-audit service

2006

2005

Tax compliance andrelated services
Controls and process reviews
US Sarbanes-Oxley1
Accounting advice
Sustainability review
Training courses
Other

–
–
–
–
203
44
–

4
254
885
74
82
–
6

Total

247

1,305

1 Treated as audit fees in 2006. 2005 work related to thecompliance trial.

For the reasons set out above, the directors
are satisfied that the provision of non-audit
services by the external auditor during
the year ended 30 September 2006 iscompatible with the general standard of
independence for auditors imposed by
the Corporations Act 2001.

AUDITOR’S INDEPENDENCE
STATEMENTThe lead auditor’s independence statement
given pursuant to Class Order 05/910 isset out on page 102 and forms part of
the Directors’ Report for the year ended
30 September 2006.

DIRECTORS AND OFFICERS WHO
WERE PREVIOUSLY PARTNERS OF
THE AUDITOR
The following persons were during thefinancial year and are currently directors
or officers of the Group and were partners
of KPMG at a time when KPMG was theauditor of Australia and New Zealand
Banking Group Limited:
Ms Margaret Jackson, Non-executive
director (left KPMG in June 1992); andMr Peter Marriott, Chief Financial Officer(left KPMG in January 1993).

CHIEF EXECUTIVE OFFICER/CHIEF
FINANCIAL OFFICER DECLARATIONThe Chief Executive Officer and the Chief
Financial Officer have given a declaration
to the Board concerning the Group’s
financial statements under section
295A(2) of the Corporations Act 2001 andrecommendations 4.1 and 7.2 of the ASX
Corporate Governance Council Principles
of Good Corporate Governance and Best
Practice Recommendations.

DIRECTORS’ AND OFFICERS’INDEMNITY
The Company’s Constitution (Rule 11.1)
permits the Company to indemnify each
officer or employee of the Company against
liabilities (so far as may be permitted underapplicable law) incurred in the execution
and discharge of the officer’s or employee’s
duties. It is the Company’s policy that its
employees should not incur any liability for
acting in the course of their employment
legally, within the policies of the Company
and provided they act in good faith.
Under the policy, the Company will indemnify
employees against any liability they incurin carrying out their role. The indemnity
protects employees and former employees

who incur a liability when acting as an
employee, trustee or officer of the Company,
or a subsidiary of the Company at therequest of the Company.
The indemnity is subject to applicable law
and will not apply in respect of any liability
arising from:a claim by the Company;a claim by a related body corporate;a lack of good faith;illegal or dishonest conduct; or
non-compliance with the Company’s
policies or discretions.
The Company has entered into Indemnity
Deeds with each of its directors, with certain
secretaries of the Company, and withcertain employees and other individuals
who act as directors or officers of related
body corporates or of another company. To
the extent permitted by law, the Company
indemnifies the individual for all liabilities,
including costs, damages and expenses
incurred in their capacity as an officer of thecompany to which they have been appointed.
The Company has indemnified thetrustees and former trustees of certainof the Company’s superannuation funds
and directors, former directors, officers
and former officers of trustees of various
Company sponsored superannuation
schemes in Australia. Under the relevant
Deeds of Indemnity, the Company must
indemnify each indemnified person if theassets of the relevant fund are insufficient
to cover any loss, damage, liability or
cost incurred by the indemnified person
in connection with the fund, being loss,
damage, liability or costs for which theindemnified person would have been
entitled to be indemnified out of the assetsof the fund in accordance with the trust
deed and the Superannuation Industry(Supervision) Act 1993. This indemnity
survives the termination of the fund.
Some of the indemnified persons areor were directors or executive officersof the Company.
The Company has also indemnified certain
employees of the Company, being trustees
and administrators of a trust, from andagainst any loss, damage, liability, tax,
penalty, expense or claim of any kind or
nature arising out of or in connection withthe creation, operation or dissolution of
the trust or any act or omission performed
or omitted by them in good faith and in amanner that they reasonably believed to bewithin the scope of the authority conferredby the trust.

Directors’ Report  69

Except for the above, neither the Company
nor any related body corporate of theCompany has indemnified or made anagreement to indemnify any person who
is or has been an officer or auditor of theCompany or of a related body corporate.
During the financial year, and again since
the end of the financial year, the Company
has paid a premium for an insurance policy
for the benefit of the directors, secretaries,and senior managers of the Company,and directors, secretaries and senior
managers of related bodies corporate of
the Company. In accordance with common
commercial practice, the insurance policy
prohibits disclosure of the nature of theliability insured against and the amountof the premium.

ROUNDING OF AMOUNTSThe Company is a company of the kindreferred to in Australian Securities andInvestments Commission class order 98/100(as amended) pursuant to section 341(1)of the Corporations Act 2001.
As a result, amounts in this Directors’ Report
and the accompanying financial statements
have been rounded to the nearest million
dollars except where otherwise indicated.

Executive Officers’ and Employee Share Options
Details of share options issued over unissued
shares granted to the Chief Executive Officer
and disclosed executives, and on issue asat the date of this report are detailed in the
Remuneration Report.
Details of share options issued over unissued
shares granted to employees and on issue asat the date of this report are detailed in Note
47 of the 2006 ANZ Financial Report.
No person entitled to exercise any option
has or had, by virtue of an option, a right toparticipate in any share issue of any otherbody corporate.  The names of all persons
who currently hold options are entered in
the register kept by the Company pursuant
to section 170 of the Corporations Act 2001.  
This register may be inspected free of charge.

remuneration report
Introduction
This Remuneration Report details ANZ’s remuneration policies which apply to key management personnel (KMP) and ANZ’s senior executives.
The report identifies the link between remuneration and ANZ’s performance, and individual outcomes relating to remuneration and equity for
ANZ’s directors and top executives (as required by AASB 124 and the Corporations Act 2001).
This report covers the KMP of the Company and the Group (which includes the directors of the parent) and the five highest paid executives in
the Company and the Group.
KMP were selected according to the following criteria:
All directors of the ANZ Board: Based on responsibility for providing direction in relation to the management of ANZ. The Board Charter
clearly sets out the Board’s purpose, powers, and specific responsibilities.
SHORT-TERM
EMPLOYEE BENEFITS

Section A: Remuneration Tables
Financial
Year

Cash
salary/fees$

Value of sharesacquired inlieu of cash
salary/fees1$

Associatedentity Board
fees (cash)$

Committee
fees (cash)
$

2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005

78,724
79,415
137,250130,000
144,426
103,000
122,52188,970183,000
130,000
183,000
130,000
149,526
111,723

621,118
420,585
45,738–38,55127,00060,44641,030––––45,73830,000

–
–
–
–
–
–
–
22,150
–
–
–
–
–
–

–
–
34,80825,44065,50042,25046,77522,51265,50042,25066,86631,02740,00019,500

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

R Deane (Appointed September 1994; retired 30 June 2006)
Independent Non Executive Director
J Dahlsen (Appointed May 1985; retired 3 February 2005)
Independent Non Executive Director
B Scott (Appointed August 1985; retired 23 April 2005)
Independent Non Executive Director

2006
2005

137,250130,000––

122,1417
122,384

21,025
17,618

n/a
n/a

2005

44,417––18,809n/a

2005

72,857–28,516

17,234n/aTotal of all Non-Executive Directors

2006
2005

1,135,697
1,020,382

811,591
518,615

122,141
173,050

340,474
236,640n/an/a

J McFarlane (Appointed October 1997)9,10
Chief Executive Officer

2006
2005

50
44

2,071,192
1,882,896

–
–

–
–

2,420,005
2,100,004

Total of all Directors

2006
2005

1,135,747
1,020,426

2,882,783
2,401,511

122,141
173,050

340,474
236,640

2,420,005
2,100,004

TABLE 1: DIRECTOR REMUNERATION
For the year ended 30 September 2006,
remuneration details of the KMP identified
as directors of the Company, are set out below:

Value ofshares acquiredin lieu of cash
incentive1,2$

Current Non-Executive Directors
C Goode (Appointed director July 1991; appointed
Chairman August 1995)
Independent Non Executive Director, Chairman
G Clark (Appointed February 2004)
Independent Non Executive Director
J Ellis (Appointed October 1995)
Independent Non Executive Director
D Gonski (Appointed February 2002)
Independent Non Executive Director
M Jackson (Appointed March 1994)
Independent Non Executive Director
D Meiklejohn (Appointed October 2004)
Independent Non Executive Director
J Morschel (Appointed October 2004)
Independent Non Executive Director

Former Non-Executive Directors

Executive Director

Commentary on changes
between 2005 & 2006
Non-Executive Directors
As a result of the closure of the ANZ Directors’
Retirement Scheme as at 30 September 2005,
Non-executive Directors’ fees were adjusted
based on an independent actuarial valuationof the scheme. A subsequent market
adjustment was also applied to fees. Refer
to Section B1 for further details.

Executive Director (Chief Executive Officer)
As a result of an independent market analysis
on the competitiveness of J McFarlane’s
remuneration against other major companies,
the Board approved a $200,000 increase to
J McFarlane’s fixed remuneration (effective
1 October 2005). The last fixed remuneration
increase occurred 1 October 2003. Increasing
J McFarlane’s fixed remuneration to $2.2m
also uplifts his target incentive to $2.2m(100% of his fixed remuneration). His actual
incentive payment for the financial year ended
30 September 2006 was $2.4m (compared
to $2.1m in 2005) reflecting the Board’s

70 ANZ Concise Annual Report 2006

assessment of his performance against
agreed balanced scorecard objectives which
include ANZ’s financial performance and its
performance against specified measures
for shareholders, customers, staff and thecommunity. The last Long Term Incentive(LTI) allocation issued in December 2004,
was approved by shareholders at the 2004
AGM. There are no further LTI allocations
under J McFarlane’s existing employment
contract which has resulted in a reductionin amortised LTI equity for the 2006 year(compared with 2005).

Executives: Based on direct reports of the CEO with key responsibility for the strategic direction and management of a major revenue-generating
division or who controls material revenue and expenses.
The People Committee has responsibility for making recommendations to the Board for both director and executive remuneration and executive
succession (refer to page 61 of the Corporate Governance Report for more details about the Committee’s role, and anz.com > about ANZ (listingat top of screen) > Corporate Governance > ANZ People Committee Charter, which details the terms of reference under which the Committee
operates). On a number of occasions throughout the year, both the People Committee and management received external advice on mattersrelating to remuneration. The following advisors were used: Blake Dawson Waldron, Ernst & Young, Hay Group, Greenwoods & Freehills,
and PricewaterhouseCoopers.
POSTEMPLOYMENTLONG TERMEMPLOYEE BENEFITSSHARE-BASEDPAYMENts5

Retirement
benefit accrued
during year4$

Long service
leave accrued
during the year$

Total
amortisation
value ofLTI shares$

Total
amortisation
value of
LTI options
$

Other
$

Total
$

Super
contributions3$

Total
Remuneration6
$

–
–
–
–
–
–
–
–
–
–
–
–
–
–

699,842500,000
217,796
155,440
248,477
172,250
229,742
174,662
248,500
172,250
249,866
161,027
235,264
161,223

12,276
11,723
12,276
11,723
12,276
11,723
12,276
11,723
12,276
11,723
12,276
11,723–––
243,284–
50,189–110,981–
104,001–
122,008–
64,781–60,459

n/a
n/a
n/a

n/a
n/a
n/a

n/a
n/a
n/a

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

712,118755,007230,072
217,352
260,753294,954
242,018
290,386
260,776
305,981
262,142
237,531
235,264
221,682

1,6008–282,016
270,002

9,104
11,723–49,169

n/a
n/a

n/a
n/a

n/a
n/a

291,120
330,894–

63,226

4,423

111,303

n/a

n/a

n/a

178,952–

118,607

6,803

127,089

n/a

n/a

n/a

252,499

1,600–

2,411,503
1,948,687

82,76093,287–
1,043,264

n/a
n/a

n/a
n/a

n/a
n/a

2,494,263
3,085,238

219,37011,12
4,031124,710,617
3,986,975

428,700
417,000––

59,376
31,242

1,310,649
982,987

756,311
1,791,718

7,265,653
7,209,922

220,970
4,031

7,122,120
5,935,662

511,460
510,287–
1,043,264

59,376
31,242

1,310,649
982,987

756,311
1,791,718

9,759,916
10,295,160

1 Shares acquired through participation in Directors’ Share Plan (relates to CEO only in relation to his cash incentive, as Non-executive Directors (NEDs) do not participate in short-term incentive
arrangements). Value reflects the price at which the shares were purchased on market (amortisation not applicable). Share purchases for NEDs were made on 28 October 2004 and 4 May 2005
for the 2005 year and on 31 October 2005 and 1 May 2006 for the 2006 year.
2 100% of the CEO’s cash incentive vested during the financial year that performance relates to.
3 Includes $300,000 additional employer contribution, agreed as part of the CEO’s contract extension announced 26 October 2004 (refer to section D2). For J Morschel, superannuation guarantee
contributions paid in respect of each other NED, are paid to him as cash in lieu.
4 The accrual for the ANZ Directors’ Retirement Scheme relates only to the 2005 financial year, due to its closure as at 30 September 2005. The following benefits were paid under the ANZ Directors’
Retirement Scheme to the following former directors: R Deane (retired 30 June 2006) – $723,107; J Dahlsen (retired 3 February 2005) – $513,668; B Scott (retired 23 April 2005)– $516,214. The
accrued entitlements fixed under the ANZ Directors’ Retirement Scheme as at 30 September 2005 are as follows: C Goode – $1,312,539; G Clark – $83,197; J Ellis – $523,039; D Gonski – $249,445;
M Jackson – $487,022; D Meiklejohn – $64,781; J Morschel – $60,459.
5 In accordance with the requirements of AASB 2 Share-based Payment, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of allequity that had not yet fully vested as at the commencement of the financial year. It is assumed that the options will vest at the commencement of their exercise period (i.e. the shortest possible
vesting period is assumed) and that the LTI performance shares will vest after 3 years. The fair value is determined at grant date and is allocated on a straight-line basis over the expected vesting
period. The fair value for options and performance shares was determined using a binomial pricing model that is explained in section F9 for options, and F10 for performance shares. The amountincluded as remuneration is not related to nor indicative of the benefit (if any) that may ultimately be realised should the options become exercisable or the performance shares vest.
6 Amounts disclosed for remuneration of directors exclude insurance premiums paid by the consolidated entity in respect of directors’ and officers’ liability insurance contracts which cover current
and former directors and officers, including senior managers of the entity and directors, senior managers and secretaries of the controlled entities. The total premium, which cannot be disclosed
because of confidentiality requirements, has not been allocated to the individuals covered by the insurance policy as, based on all available information, the directors believe that no reasonablebasis for such allocation exists.
7 Amounts paid in NZD are converted to AUD at an average rate for the year of 1.1433 (1.0847 in 2005).
8 Other for R Deane relates to a non-monetary benefit received on retirement as a gift from the Board.
9 Amortisation value of options as a percentage of total remuneration (as shown in the Total column above) was 10% in 2006 (25% in 2005).
10 J McFarlane elected to use almost all of his cash salary and incentive to purchase on market deferred shares under the Directors’ Share Plan. The purchase dates were 28 October 2004, 1 February
2005, 2 May 2005 and 8 August 2005 for the 2005 year and 31 October 2005, 30 January 2006, 1 May 2006 and 7 August 2006 for the 2006 year.
11 Relates to reimbursement to J McFarlane of $202,837 for the additional tax liability on his UK Pension Plan holdings, arising as a result of Australian Foreign Investment Fund rules, and J McFarlane’scontinuing Australian residency (in accordance with the contractual arrangements detailed in section D2).
12 Relates to professional services rendered in respect of taxation matters ($16,533 in 2006).

Directors’ Report  71

Section A: Remuneration Tables (continued)
TABLE 2: EXECUTIVE KEY MANAGEMENT PERSONNELREMUNERATION AND TOP 5 REMUNERATED
For the year ended 30 September 2006, remuneration
details of the KMP identified as executives of theGroup, (as required under AASB 124), and the five
most highly remunerated executives in the Company
and the Group (as required under the Corporations Act
2001), other than the Chief Executive Officer, are set
out below:

SHORT-TERM
EMPLOYEE BENEFITS

postemployment

Financial
Year

Cash
salary/fees$Nonmonetary
benefits1$

Total cash
incentive2,3$m

R Edgar8
Senior Managing Director

2006
2005

787,068
727,696

14,78828,281B Hartzer
Group Managing Director, Personal Division

2006
2005

883,626
694,435

G Hodges9
Chief Executive, ANZ National Bank
Limited (New Zealand)

2006
2005

P Marriott
Chief Financial Officer

Total
$

Super
contributions$

850,000
800,000

1,651,856
1,555,977

49,72546,80059,64061,5421,300,000
1,080,000

2,243,266
1,835,977

58,50046,800841,866
648,556

71,92011,465895,000
863,000

1,808,786
1,523,021

7,459
40,838

2006
2005

842,618
748,700

6,313
7,277

1,080,000
920,000

1,928,931
1,675,977

52,65046,800S TargettGroup Managing Director Institutional

2006
2005

936,600
748,700

6,313
7,277

1,000,000
880,000

1,942,913
1,635,977

58,50046,800P Hodgson10
Chief Risk Officer

2006

701,393

6,313

825,000

1,532,706

43,875Sir J Anderson(retired effective 31 December 2005)11,12
Chief Executive & Director,
ANZ National Bank Limited (New Zealand)

2005

838,110–

460,960

1,299,070

83,811E Funke Kupper(resigned effective 1 February 2006)13
Group Managing Director, Asia Pacific

2006
2005

234,483
654,550

2,110
7,277

–
770,000

236,593
1,431,827

14,663
40,950Total of all Executive KMPs

2006
2005

4,526,261
5,060,747

161,084
123,119

5,125,000
5,773,960

9,812,345
10,957,826

241,497352,799

Total of all Disclosed Executives

2006
2005

5,227,654
5,060,747

167,397
123,119

5,950,000
5,773,960

11,345,051
10,957,826

285,372
352,799

Current Executives

Former Executives

Commentary on changes
between 2005 & 2006
A review of 2005 remuneration (based on
fixed remuneration, short-term incentives
and long-term incentives) was undertaken
to assess the competitiveness of executive
remuneration relative to the market. To
ensure appropriate recommendations fromthis review, ANZ used multiple data sources
such as Annual Report disclosures from
ANZ’s major competitors, and independent
financial services market data sourced
externally. Overall, it was found that reward
levels were not market competitive andbelow the median of the market. As a result,adjustments to individual reward mixes
were made. The remuneration adjustments

were assessed individually, based onmarket positioning, role changes and market
pressures. The remuneration adjustments
for ANZ’s disclosed executives can besummarised as follows: i) Increased Fixed
Pay for B Hartzer and S Targett to reflectincreased responsibilities associated with
ANZ’s restructure into three broad divisions.
ii) A corresponding increase in target STI
amounts for B Hartzer and S Targett due totheir adjusted TEC. iii) Increased LTI allocation
awarded to current disclosed executives.
Other year on year variations include:i) A greater proportion of S Targett’s
amortised sign-on equity falling into the2006 financial year (refer to footnote 6).
ii) Change in position (and responsibility)

72 ANZ Concise Annual Report 2006

for G Hodges from Group Managing Director
Corporate in the 2005 financial year, to
the Chief Executive, ANZ National Bank
Limited, New Zealand in 2006. iii) P Hodgson
not included in 2005 total of all disclosed
executives (2006 only). iv) 2005 disclosures
only for Sir J Anderson, therefore not includedin the 2006 totals. v) E Funke Kupper’s
remuneration for the 2006 year is basedon four months only.

LONG-TERM
EMPLOYEE BENEFITSSHARE-BASEDPAYMENTS5

Retirement
benefit accrued
during year4$

Long service
leave accrued
during the year$

Total
amortisation valueof STI shares$

Total
amortisation valueof LTI shares$

Total
amortisation valueof LTI options$

Total
amortisation valueof performancerights$Total amortisationof otherequity allocations6
$

–
1,672

37,607
13,928

108,692
173,907503,179
555,470

181,819
264,095

202,340–––

2,735,218
2,611,849––

40,575
19,46994,597
149,259

175,183
237,943

174,542
282,929

216,792–––

3,003,455
2,572,377–
1,635

48,447
46,14082,179131,825

150,066
186,089

149,602
218,920

202,340–––

2,448,879
2,148,468––

34,83012,422

127,015
208,525

206,816
295,175

206,831317,175

209,566–––

2,766,639
2,556,074––

20,02012,497––44,85740,544

43,21539,059216,795–

1,166,859
789,238

3,493,159
2,564,115–

11,716

130,541

113,241

30,377

173,434–

2,035,890

33,367

–

–

–

–

–

477,452

1,893,700–––
10,860104,930
184,924

146,895
221,068

147,119
239,523

152,622–––

802,8222,129,152–
36,674

181,479
115,316

517,413
848,440

1,226,996
1,536,289

903,128
1,361,701

1,200,455–

1,166,859
1,266,690

15,250,172
16,475,735–
36,674

193,195
115,316

647,954
848,440

1,340,237
1,536,289

933,505
1,361,701

1,373,889–

1,166,859
1,266,690

17,286,062
16,475,735

1
2
3
4

Total
Remuneration7,14$

Non-monetary benefits consist of salary packaged items such as car parking, novated lease motor vehicles and G Hodges’ non-monetary benefits include housing and airfares.
Total cash incentive relates to the full incentive amount for the financial year that the performance relates to.
100% of the cash incentive awarded in both 2005 and 2006 vested to the person in the applicable financial year.
Accrual relates to Retirement Allowance. As a result of being employed with ANZ prior to November 1992, R Edgar and G Hodges are eligible to receive a Retirement Allowance on retirement,
retrenchment, death, or resignation for illness, incapacity or domestic reasons. The Retirement Allowance is calculated as follows: 3 months of notional salary (which is 65% of fixed remuneration)plus an additional 3% of notional salary for each year of full-time service above 10 years, less the total accrual value of long service leave (including taken and untaken).
5 In accordance with the requirements of AASB 2, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of all equity that had not yet fully
vested as at the commencement of the financial year. It is assumed that the options / performance rights will vest at the commencement of their exercise period (i.e. the shortest possible vesting
period is assumed) and that deferred shares will vest after 3 years. The fair value is determined at grant date and is allocated on a straight-line basis over the 3-year vesting period. For options, thefair value is determined using a Binomial Option Pricing (BOP) model. For performance rights a modified Black-Scholes and a BOP model were used. The valuation models are explained in section
F9. The amount included as remuneration is not related to nor indicative of the benefit (if any) that may ultimately be realised should the options / performance rights become exercisable. For
deferred shares, the fair value is the volume weighted average price of the Company’s shares traded on the ASX on the day the shares were granted.
6 Amortisation of other equity allocations for Sir J Anderson relates to the granting of zero priced options (ZPO). ZPOs were granted as part of his employment contract. Refer to section E2 for further
details. Amortisation of other equity allocations for S Targett relates to the grant of deferred shares beginning on 11 May 2004 (four tranches to the value of $700,000 each issued at 6 monthintervals in May and November in 2004 and 2005, subject to Board approval and continued employment) and hurdled A options (refer to section F11.1 for performance hurdle details) tocompensate S Targett for the loss of access to equity as a result of his resignation from his previous employer.
7 Remuneration amounts disclosed exclude insurance premiums paid by the consolidated entity in respect of directors’ and officers’ liability insurance contracts which cover current and former
directors and officers, including senior managers of the entity and directors, senior managers and secretaries of the controlled entities. The total premium, which cannot be disclosed because ofconfidentiality requirements, has not been allocated to the individuals covered by the insurance policy as, based on all available information, the directors believe that no reasonable basis for suchallocation exists.
8 B Edgar was the Chief Operating Officer prior to October 2005.
9 Prior to November 2005, G Hodges was the Group Managing Director Corporate. Between 1 November 2005 and 31 December 2005, he was the Chief Executive Designate (New Zealand), with his
position changing to Chief Executive, ANZ National Bank Limited, New Zealand effective 1 January 2006.
10 P Hodgson is disclosed as one of the five most highly remunerated executives in the Company for 2006 only (as required under the Corporations Act 2001). Therefore 2005 comparative information
has not been provided, and he has not been included in the Executive KMP totals.
11 Amounts paid to Sir J Anderson in NZD in 2005 were converted to AUD at an average rate for the 2005 year of 1.0847.
12 Sir J Anderson ceased employment during the year, effective 31 December 2005, and received his fixed pay during the period 1 October 2005 to 31 December 2005 of NZ$250,250, a retirement
gratuity payment of NZ$1,193,150 as part of his employment contract, a payment in lieu of notice plus annual leave entitlements totalling NZ$437,109, a payment in lieu of his equity participationfor 2006 of NZ$250,000 and a payment in relation to his 2006 STI bonus of NZ$250,000. Total payment NZ$2,380,509.
13 E Funke Kupper received a final payment on resignation of $165,554 relating to his accrued annual leave and long service leave. With the inclusion of the final payment his total remuneration for2006 would be $968,376.
14 Amortisation value of options and rights as a percentage of total remuneration was: R Edgar 14% (2005: 10%); B Hartzer 13% (2005: 11%); G Hodges 14% (2005: 10%); P Marriott 15% (2005: 12%);
S Targett 15% (2005: 11%); P Hodgson 10%.

Directors’ Report  73

Section B. Non-executive Directors’ Remuneration
B1. NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
Non-executive Directors’ (NEDs) fees are reviewed annually and are determined by the Board of Directors based on advice from external advisors
and with reference to fees paid to other NEDs of comparable companies.
The total of NEDs’ fees (including superannuation contributions) are within the maximum annual aggregate limit agreed to by shareholders at theAnnual General Meeting held on 16 December 2005 ($3 million, excluding superannuation benefit payouts and retirement benefits), and are set
at levels that fairly represent the responsibilities of, and the time spent by the NEDs on Group matters. NEDs receive a fee for being a director of
the Board, and additional fees for either chairing or being a member of a committee. Work on special committees may attract additional fees ofan amount considered appropriate in the circumstances. An additional fee is also paid if a NED serves as a director on a subsidiary board. NEDs
do not receive any performance / incentive payments and are not eligible to participate in any of the Group’s incentive arrangements.
To compensate for the removal of the Non-Executive Directors’ Retirement Scheme (as at 30 September 2005), NED fees were increased by 27.5%
effective 1 October 2005. This amount was determined based on an independent actuarial valuation of the scheme by Mercer Finance andRisk Consulting and advice from expert remuneration consultants PricewaterhouseCoopers. This increase is also in line with market practicein relation to fee increases due to the removal of Directors’ Retirement Schemes, where increases have typically ranged from 25% to 30%.
Market adjusted fee increases of ~10% were also approved for 2006 based on market analysis and independent advice that market movementsof 10% to 15% were expected in 2006. Committee membership fees received a larger market adjustment (excluding Governance Committee
and Technology Committee) to ensure market competitiveness.
The fee structure is illustrated in Table 3 below:
TABLE 3
Breakdown of 2005/2006 Fees

Role

Chairman
Non-Executive Director
Committee Chair1
Committee Member1

2004/05 Fees$

Increase relating toclosure of Retirement
Scheme$Increase relating tomarket adjustment$

Total
2005/06 Fees$

500,000
130,000
32,5009,750

137,500
35,7508,938
2,681

62,50017,2504,062
7,569

700,000
183,000
45,50020,000

1 Except Governance Committee and Technology Committee, where the current Chair and Member Fees are $26,775 and $8,033 respectively. These 2005/2006 fee amounts reflect the fee increase
due to the removal of the ANZ Directors’ Retirement Scheme. No additional market adjustment was applied.

For details of remuneration paid to directors for the year ended 30 September 2006, refer to Table 1 in section A of this Remuneration Report.
NED Shareholding Guidelines
NEDs have agreed to accumulate ANZ shares, over a five-year period, to the value of 100% (200% for Chairman) of the base annual NED Fee
and to maintain this shareholding while a director of ANZ. NEDs have agreed to apply up to 25% of their base fee annually through the Directors’
Share Plan or other means, towards the purchase of ANZ shares in order to achieve / maintain the desired holding level. This guideline wasapproved by the Board in September 2005.

B2. NON-EXECUTIVE DIRECTORS’ RETIREMENT POLICYThe NED retirement scheme was closed effective 30 September 2005.
Accrued entitlements relating to the ANZ Directors’ Retirement Scheme were fixed at 30 September 2005 and will be carried forward to retirement,
and collected by the NED when they retire (refer to footnote 4 in Table 1 for the fixed entitlement for each NED). Based on shareholder approvalat the 2005 AGM, NEDs nominated the proportion of their accrued entitlement to be held until retirement as either cash or shares. Those electing
the cash alternative receive an additional amount relating to the interest accrued at the 30 day bank bill rate from 1 October 2005 to the date ofretirement. Those electing shares will be entitled to receive dividends on the shares purchased. Refer to the 2005 notice of AGM for further details.

B3. DIRECTORS’ SHARE PLAN
The Directors’ Share Plan is available to both non-executive and executive directors. Directors may elect to forego remuneration to which they
may have otherwise become entitled and receive shares to the value of the remuneration foregone, and therefore the shares acquired are notsubject to performance conditions. Participation in the plan is voluntary.
Shares acquired under the plan are purchased on market and are held in trust for up to 10 years. Shares are subject to a minimum 1 year
restriction, during which the shares cannot be traded, and are subject to forfeiture for serious misconduct. All costs associated with the plan
are met by the Company.

74 ANZ Concise Annual Report 2006

Section C. Executive
Remuneration Structure
C1. REMUNERATION GUIDING PRINCIPLESANZ’s reward policy approved by the Board
shapes the Group’s remuneration strategies
and initiatives.
The following principles underpin ANZ’s
reward policy:
1. Focus on creating and enhancing value
for all ANZ stakeholders;
2. Differentiation of individual rewards
commensurate with contribution to
overall results and according to individual
accountability, performance and potential;
3. Significant emphasis on “at risk”
components of total rewards; and4. The provision of a competitive reward
proposition to successfully attract, motivate
and retain the highest quality individuals
required to deliver ANZ’s business andgrowth strategies.
Shareholding Guidelines
Direct Reports to the CEO are expected toaccumulate ANZ shares, over a five year
period, to the value of 200% of their Fixed
Pay and to maintain this shareholding while
an executive of ANZ. Our next most senior
executives are expected to accumulate ANZ
shares to the value of 100% of their Fixed
Pay and to maintain this shareholding while
an executive of ANZ. This guideline wasintroduced in June 2005. New executives
will be expected to accumulate the required
holdings within five years of appointment.

Variable or “at risk” component (Refer to C4):
– Short-Term Incentive (STI); and– Long-Term Incentive (LTI).
Depending on the competitive market,
the proportion of remuneration “at risk”
generally increases for the most senior orcomplex roles, or for those roles where there
is strong market pressure to provide greaterlevels of remuneration. Figure 1 below shows
the relative mix of Fixed, STI and LTI at target
payment levels.

the finance industry in the relevant global
markets in which ANZ operates, and a range
around this midpoint.

C4. VARIABLE REMUNERATION
Variable remuneration forms a significant
part of executives’ potential remuneration,
providing an at-risk component that isdesigned to drive performance in both theshort-term (annually) and in the medium
and long-term (3 years or more).
The opportunities available to executives
under ANZ’s variable reward programs aredesigned to reinforce the achievement ofshort and long term performance targets andto ensure remuneration competitiveness in
the relevant markets in which they operate.

Fixed Pay is set at the median of themarket. STI and LTI payments for on target
performance are also set at market median.
The plan design allows for the opportunity
to earn upper quartile total remuneration for
significant out performance, and significantly
reduced payment for underperformance. In
this way the remuneration structure is heavily
weighted towards “reward for performance”.

Most executives participate in the short-term
incentive (STI) plan detailed in section C4.1
and the long-term incentive (LTI) plan detailed
in section C4.2.

C3. FIXED REMUNERATION
For most executives, Fixed Pay comprises
cash salary, a superannuation contribution,and the remainder as nominated benefits.
The types of benefits that can be packaged
by executives include novated car leases,
additional superannuation contributions,car parking, child care, laptops andcontributions towards the Employee
Share Save Scheme.
Executive remuneration is reviewed annuallybased on individual performance and market
data. ANZ operates with a midpoint targetedto the local market median being paid in

Equity allocated under ANZ incentive schemes
remains at risk until fully vested (in the caseof Deferred Shares) or exercisable (in thecase of Options or Performance Rights).
As such, it is a condition of grant that noschemes are entered into that specificallyprotect the unvested value of shares, options
and performance rights allocated. Doingso would constitute a breach of the grantconditions and would result in the forfeitureof the relevant shares or options. We also
advise that all current disclosed directors
and executives did not enter into (and are
not currently involved in) any schemes toprotect the value of their interests in any
vested ANZ securities.

C2. REMUNERATION STRUCTURE
OVERVIEWThe executive remuneration program(which includes the remuneration of senior
managers, the company secretaries and other
KMP) aims to differentiate remunerationon the basis of achievement against group,business unit and individual performancetargets which are aligned to sustained growthin shareholder value using a balanced
scorecard approach.

Figure 1: Target reward mix
36%

28%

36%

Disclosed Executives1

49%

33%

18%

Larger Senior Executive Roles2

Fixed pay %61%

The program comprises the following
components:

Smaller Senior Executive Roles2

Fixed Pay component: salary, non-monetary
benefits and superannuation contributions.
(Refer to C3)

1 2006 disclosed executives’ (current employees only) reward mix pertains
to Dr R Edgar, B Hartzer, G Hodges, P Hodgson, P Marriott and S Targett.
2 The reward mix for larger senior executive roles and smaller senior
executive roles is based on average data

Directors’ Report  75

26%

13%

STI %
LTI %

C4.1 Short-Term Incentives
ANZ’s STI approach supports our strategic
objectives by providing rewards that are
significantly differentiated on the basis ofachievement against performance targets.
Most executives participate in the plan
explained below. All STI plans are reviewed
and approved by the People Committee.
Determination of STI Levels
The size of the overall pool available
each year is based on performance against
a cash earnings per share (EPS) growthtarget. This pool is then spread between
the Divisions based on their performanceagainst a balanced scorecard of financial
and qualitative measures, and thendistributed to individuals based on relative
performance. The Board is required
to approve the STI Group and Divisionoutcomes and the distribution of the
STI pool amongst the Divisions.
Each executive has a target STI which
is determined according to job size andmarket relativities. The size of the actual STI
payment made at the end of each financial
year to individuals may be at, above or
below the target and this will be determinedaccording to ANZ Group, Division andIndividual Performance.
Individual performance objectives are set
and aligned at the start of each financial
year according to a balanced scorecardof measures at the Group, Division andIndividual level. These measures arealigned with the achievement of ANZ’s
overall balanced scorecard, and therefore
considered the most appropriate measures
for aligning with company performance.
Division and Individual objectives are asubset of the Group objectives, which
ensures there is alignment of objectives
throughout the executive population.
Performance objectives under ANZ’s balanced
scorecard include a number of qualitative andquantitative measures which include, but are
not limited to:
Financial Measures including: Economic
Value Added (EVATM); Revenue, EPS and Net
Profit After Tax
Customer Measures including: Customer
Satisfaction and Market Share

Performance against these objectives isassessed at the end of the financial year andrewards are made based on performanceagainst targets.
The STI is payable 100% in cash (except
where specific business plans require
otherwise). Executives are able to elect tosacrifice part or all of their incentive towards
the purchase of ANZ shares which are
restricted from sale for 12 months, or towards
additional superannuation contributions.
As the incentive amount has already been
earned, there are no performance measuresattached to the shares.
The target STI award level for disclosed
executives is 100% of TEC in 2006 witha maximum STI award of 150% of TEC. For
larger senior executive roles in the ANZ STI
plan, the target STI is 67% of TEC, with amaximum of 100% of TEC, and for smaller
senior executive roles the target is 43% of
TEC and the maximum 65% of TEC. Note, thetarget and maximum STI amounts for larger
and smaller senior executive roles may varyfor customised incentive schemes.

C4.2 Long-Term Incentives
Long-term incentives (LTIs) are used as amechanism to link a significant portion of
executives’ remuneration to the attainmentof sustained growth in shareholder value. LTI isdelivered as 100% Performance Rights, witha single long-term performance measure.
A Performance Right is a right to acquire ashare at nil cost, subject to meeting time andperformance hurdles. Performance Rights
are designed to reward executives for shareprice growth dependent upon the Company’s
Total Shareholder Return (TSR) outperforming
peers. TSR represents the change in thevalue of a share plus the value of reinvested
dividends paid. TSR was chosen as themost appropriate comparative measure
as it focuses on the delivery of shareholder
value and is a well understood and tested
mechanism to measure performance.
The conditions under which Performance
Rights are granted are approved by the Boardin accordance with the rules of the ANZ Share
Option Plan.
Each Performance Right has the following
features

Employee Engagement, Risk Management
and Compliance Measures

Performance rights held by eligible
executives will be tested once only against theperformance hurdle at the end of three years;

Environment, Health & Safety andCommunity Measures.

Subject to the performance hurdle being
met, the executive has a two-year exercise

76 ANZ Concise Annual Report 2006

period that commences three years after the
grant date;Upon exercise, each Performance Right
entitles the executive to one ordinary share;
In case of dismissal for serious misconduct,
Performance Rights are forfeited;
In case of resignation or termination on
notice, only Performance Rights that become
exercisable by the end of the notice period
may be exercised;
In case of retrenchment or retirement,
the Performance Rights will generally be
performance tested at the date of termination,
and where performance hurdles have beenmet, Performance Rights will vest on a pro-ratabasis and a grace period provided in which
to exercise;
In case of death or total & permanent
disablement, the performance hurdle iswaived and a grace period is provided inwhich to exercise all Performance Rights; andA performance hurdle applies, which is
explained below.
The proportion of Performance Rights that
become exercisable will depend upon a single
point testing of the TSR achieved by ANZ
relative to the companies in the comparatorgroup (shown below) at the end of a three-year
period. An averaging calculation will be used
for TSR over a 90 day period for start and end
values in order to reduce the impact of shareprice volatility.
TSR Vesting Scale
Relative TSR Performance< 50th percentile
50th to 74th percentile
75th percentile or above% Vesting0%50% – 98%
100%

Where median performance is achieved,
executives’ total remuneration will typicallybe below market median for the financial
services industry. 75th percentile performanceis required for full vesting which enables
executives to receive the full value of
their LTI. To ensure an independent TSR
measurement, ANZ engages the servicesof an external organisation (Macquarie
Financial Services) to calculate ANZ’s
performance against the TSR hurdle.
Comparator GroupThe peer group of companies against which
ANZ’s TSR performance is measured,comprises the following companies:

Refer to section F11 for details pertaining
to legacy LTI equity vehicles (which are yet
to vest).

AMP Limited
AXA Asia Pacific Holdings Limited
Commonwealth Bank of Australia

including the performance conditions, lifeof instrument, share price at grant date etc.
These valuations are then reviewed by KPMG
and the highest value is then approved by the
Board as the allocation value. LTI allocations
are made annually in or around November.

Size of LTI Grants
The size of individual LTI grants is determinedby an individual’s level of responsibility,
performance and the assessed potential of
the executive. Typically, at the most seniorlevels the Target LTI value will range fromaround 13% to 28% of the individual’s target
reward mix, as shown in Figure 1 in Section C2.

Insurance Australia Group Limited
Macquarie Bank Limited
National Australia Bank Limited
QBE Insurance Group Limited
St George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation
The companies in this comparator group werechosen because they represent ANZ’s key
competitors in the financial services industry,
are an appropriate reference group forinvestors and are of sufficient size by market
capitalization and weight in the ASX Top 50.

ExampleExecutive granted LTI value of $60,000
Approved Allocation Valuation
is $11.60 per Performance Right$60,000 / $11.60 = 5,173 Performance
Rights allocated to executive

Executives are advised of their LTI dollar
value, which is then converted into a
number of Performance Rights based ona valuation. ANZ engages external experts(PricewaterhouseCoopers and Mercer Finance& Risk Consulting) to independently value the
Performance Right, taking into account factors

C5. Performance of ANZ
Table 4 shows ANZ’s annual performance over the five-year period spanning 1 October 2002 to 30 September 2006. The table illustrates theimpact of ANZ’s performance on shareholder wealth, taking into account dividend payments, share price changes and other capital adjustments
during the financial year.
Table 4

FY 2002

FY 2003

FY 2004

FY 2005

FY 20061

Basic Earnings Per Share (EPS)
NPAT ($m)
Total Dividend (cps)
Share price at 30 September ($)
Total Shareholder Return (%)

141.4
2,322
85
16.88
15.3

142.4
2,348
95
17.17
6.7

153.1
2,815
101
19.02
17.0

160.9
3,018
110
24.00
32.6

200.0
3,688
125
26.86
17.1

1 Figures are based on AIFRS results

In table 4, ANZ’s Total Shareholder Return (TSR, which includes share price growth, dividends and other capital adjustments) has been shown foreach individual financial year between 2002 and 2006. Figure 2 compares ANZ’s TSR performance against the median TSR of the LTI comparatorgroup and the S&P/ASX 200 Banks Accumulation Index over the 2002 to 2006 measurement period. The difference between the S&P/ASX 200
Banks Accumulation Index and the median of ANZ’s comparator group over the 2005 and 2006 financial years is due to the weightings in the Indexof the large banking institutions that have underperformed comparatively during this period; whereas the organisations in ANZ’s comparatorgroup are weighted evenly.

Total shareholder return %

220
200
180
160
140
120
100
Performance period end dateDirectors’ Report  77

Oct 06

Apr 06

Oct 05

Apr 05

Oct 04

Apr 04

Oct 03

Apr 03

Oct 0280
Apr 02

ANZ TSRMedian of Peer Group
Upper Quartile of Peer Group
S&P/ASX 200 Banks
Accumulation Index

240

Oct 01Figure 2: ANZ 5-Year
Cumulative Total Shareholder
Return Performance2,3082,089

125% of target STI paid
to executive directors
and disclosed executives

100
75

02

05

06

3,560

2,858

3,133

Cash earnings (AGAAP)1
Cash earnings (AIFRS)2
Average STI payments against target

2,089

2,308

Target STI% of target STI paid
to executive directors
and disclosed executives

Figure 3 illustrates the relationship between the average actual STI payments
against target and the Group’s performance measured using cash earnings overthe last 5 years. The average STI payments for each year are based on those
executives (including the CEO) disclosed in each relevant reporting period. As
illustrated in the chart, the average STI payments are generally in alignment withthe cash earnings trend.

100
75

03

04

Figure 3: ANZ – Cash Earnings & Average STI payments ($m)

125

02

03

04

05

1 Earnings excluding goodwill, significant items and NBNZ incremental integration costs.
2 Earnings adjusted for non-core items and AIFRS 2005 adjustments.

06

Figure 3: ANZ – Cash Earnings & Average STI payments ($m)
Cash earnings (AGAAP)1

Section D. Chief Executive
Officer’s remuneration
Cash earnings (AIFRS)
2

Average STI payments against target

D1. chief executive Target
officer(CEO) REMUNERATION OVERVIEWSTIThe CEO (identified as a KMP) is ANZ’s only executive director. The structure of J McFarlane’s remuneration, which is in accordance with his
employment agreement, is as follows:
Fixed Pay: Consists of salary, benefits and superannuation contributions. Since October 2003, J McFarlane has elected to receive almost all of his
Fixed Pay in the form of shares purchased under the Directors’ Share Plan. These shares are not subject to a performance condition as they areprovided in place of cash remuneration at the CEO’s choice. However, they are subject to forfeiture in case of termination for serious misconduct.
Short-Term Incentive: The Board sets J McFarlane’s balanced scorecard at the beginning of the financial year. The Board then assesses performanceagainst these objectives at the end of the year to determine the appropriate incentive (relative to target). These objectives are aligned with theachievement of ANZ’s business plan, and are the most appropriate indicators of performance. These objectives include a number of quantitativeand qualitative measures, which include (but are not limited to) financial, customer, people, environment and community measures. J McFarlane’s
STI may be paid in cash or in shares purchased under the Directors’ Share Plan. J McFarlane has typically elected to receive shares.
Long-Term Incentive: J McFarlane’s Long-Term Incentive is made up of Hurdled Options and Performance Shares as approved by shareholders
at the 2001 and 2004 Annual General Meetings respectively. No equity was issued to J McFarlane in the 2006 financial year. The performance
conditions pertaining to the Options and Performance Shares issued during the 2005 year are indicated in F11.1 Hurdled A options and F11.3
respectively. They are linked to Company performance and increasing shareholder value. There are no further LTI allocations under his existing
employment contract.
The remuneration of J McFarlane for the year ended 30 September 2006 is set out in Table 1 in section A of this Remuneration Report. The mixof remuneration for J McFarlane under his current contract is made up as follows:
Fixed Remuneration of $2,200,000 per annum;
Target variable Short-Term Incentive of $2,200,000 per annum;Long-Term Incentive of $2,600,000 granted on 31 December 2004 - one allocation only in 2005 financial year (based on valuation of 175,000
performance shares at issue). Note, the fair value of LTI equity granted since December 2003, and annualised over the period from grant date tocontract end date is $1,530,000. This amount has been reflected in the reward mix bar in figure 4 below.
Variations to J McFarlane’s remuneration structure which will impact remuneration in future periods, require Board approval.
Figure 4: Target reward mix – Chief Executive Officer
37%

37%

Fixed pay %

26%

STI %
LTI %

Shareholding Guideline
The Chief Executive Officer of ANZ is expected to accumulate ANZ shares, over a five year period, to the value of 200% of his Fixed
Remuneration and to maintain this shareholding while CEO of ANZ. This shareholding guideline was introduced in September 2005.
The CEO is currently compliant, with 1,973,422 beneficially held shares.

78 ANZ Concise Annual Report 2006

D2. CEO’S CONTRACT TERMS
On 26 October 2004, the Company announced
an extension to J McFarlane’s contract:
The term of the contract was extended by
one year to 30 September 2007;
In addition to mandatory superannuation
contributions, the Company makes additional
employer contributions of $300,000 per
annum (effective from 1 October 2003),
paid quarterly to J McFarlane’s chosen
superannuation fund; andJ McFarlane was granted 175,000
Performance Shares on 31 December 2004.
A separate agreement, made on 23 October
2001, provides for reimbursements to
J McFarlane for any additional tax liabilities
that may arise on his UK Pension Plan
holdings as a result of his continuing
Australian residency. Under this agreement,
ANZ reimburses J McFarlane for any additional
tax liability incurred on his UK Pension Plan
during his employment with ANZ, arising as aconsequence of Australian Foreign Investment
Fund rules. In the event of decreased
Australian tax liabilities due to a decreased
value in J McFarlane’s UK Pension Plan,
the reduced liability will be used to offset
potential subsequent reimbursements.

D3. CEO’S RETIREMENT AND
TERMINATION BENEFITSJ McFarlane can terminate his employment
agreement by providing 12 months’ notice.
ANZ may terminate the employment
agreement by providing notice equal to theunexpired term of the employment agreement(which ends on 30 September 2007). If
ANZ terminates the employment agreement
without notice and thus breaches its
obligation to provide the required notice, ANZ
has agreed with J McFarlane that the damages
payable by ANZ for breach of contract would
be equal to the Total Employment Cost (TEC)that would otherwise be received over theremainder of the contract (TEC comprises
salary or fees, non-monetary benefits andmandatory superannuation contributions).
In circumstances of serious misconduct,
J McFarlane is only entitled to payment of
TEC up to the date of termination. Paymentof accumulated superannuation benefits plus
statutory entitlements of long service leave
and annual leave (calculated on the basis ofsalary) applies in all events of separation.

In the event of resignation not approved by
the Board or dismissal for serious misconduct,
all unexercised options and Performance
Shares will be forfeited. In the event oftermination on notice or agreed separation,
all vested options and Performance Sharesmust be exercised within 6 months of thetermination or agreed separation date,subject to meeting the relevant performance
hurdles. In the event of serious misconduct,
shares held in the Directors’ Share Plan will
be forfeited. On resignation or termination on
notice, shares held under the Directors SharePlan will be released.
In accordance with J McFarlane’s contract
variation (refer section D2), J McFarlane’s
nominated superannuation fund receives$300,000 per annum (effective from 1 October
2003, paid quarterly) in addition to
mandatory superannuation contributions.

D4. CEO’S PARTICIPATION IN
EQUITY PROGRAMS
Hurdled Options:
At the 2001 Annual General Meeting, fourtranches of options were approved for
granting by the Board: 500,000 in 2001;
1,000,000 in 2002; 1,000,000 in 2003 and
500,000 in 2004. For options granted to
the CEO, the exercise price is equal to theweighted average share price on the ASX
during the 5 trading days immediately before
or after the Company’s Annual General
Meeting that immediately precedes the
allocation. The exercise of these options
is subject to performance hurdles being
satisfied. J McFarlane’s specific performance
hurdles are indicated in section F11.1(Hurdled A), and for Performance Sharesin section F11.3. For options granted to
the CEO, the life and exercise period may
differ, as disclosed in F3.
Performance Shares:
175,000 Performance Shares were issued
to J McFarlane on 31 December 2004 as partof his contract extension, as approved byshareholders at the 2004 Annual General
Meeting. No dividends will be payable on
the shares until they vest. Vesting will be
subject to time and performance hurdles
being satisfied as detailed in section F11.3.
As these Performance Shares were granted
as part of J McFarlane’s contract extension
to 30 September 2007, as opposed to a newcontract, the conditions of grant were aligned

Directors’ Report  79

with those of the original contract (eg thevesting and exercise period) apart from theapplication of a TSR performance hurdle.
Given we expect the decisions and actionsof J McFarlane to be based on long-term
considerations (with the impact of decisions
and actions to extend well beyond the endof his contract), the adoption of an exercise
period (31 December 2006 to 31 December2009) that commences before and extends
beyond his contract end date encourages
a balanced focus. The performance hurdles
ensure that full benefits are not achieved
if targets are not met.
Directors’ Share Plan
J McFarlane participates in the Directors’
Share Plan, which is explained in section B3.
Please refer to section F for details of grants
and holdings.

Section E. Disclosed executives’ contract terms
Contractual terms are similar, but do, on occasion, vary to suit different needs. Section E1 details the contractual terms for those disclosed
executives who are on open-ended contracts. Section E2 details the contractual terms for Sir J Anderson, who was on a fixed term contract.
Note, the contract terms detail the structure of disclosed executive remuneration. Variations to the remuneration structure which will impact
remuneration in future periods, requires Board approval.

E1. OPEN-ENDED CONTRACTS: Dr RJ EDGAR, E FUNKE KUPPER, BC HARTZER, GK HODGES, PJ HODGSON, PR MARRIOTT AND S TARGETT
Length of Contract

Open-ended.

Fixed Remuneration

Remuneration consists of salary, mandatory employer superannuation contributions and benefits.

Short-Term Incentive

Eligible to participate. Refer to section C4.1 for details of short-term incentive arrangements.

Long-Term Incentive

Eligible to participate at the Board’s discretion – refer to section C4.2 for long-term incentive arrangements.

Resignation

Employment may be terminated by giving 6 months’ written notice.
On resignation any options and unvested deferred shares will be forfeited.

Retirement

On retirement, shares and options are released in full.

Termination on Notice by ANZANZ may terminate the executive’s employment by providing 12 months’ written notice or payment in lieu
of the notice period based on Fixed Pay.
On termination on notice by ANZ any options or LTI deferred shares that have vested, or will vest during the notice
period will be released, in accordance with the ANZ Share Option Plan Rules. LTI shares that have not yet vested
will generally be forfeited, although for some executives (E Funke Kupper, BC Hartzer and PR Marriott) theseshares will be released in full. Deferred shares granted under STI arrangements will vest in full for all executives.
There is discretion to pay incentives on a pro-rata basis (depending on termination date and subject tobusiness performance).

Redundancy

If ANZ terminates employment for reasons of bona fide redundancy, a severance payment will be made thatis equal to 12 months Fixed Pay.
All STI deferred shares are released. All options granted since 24 April 2002 are released on a pro-rata basis.
All LTI deferred shares are released on a pro-rata basis.
There is discretion to pay incentives on a pro-rata basis (depending on termination date and subject tobusiness performance).

Death or Total andPermanent Disablement

All options and shares are released; pro-rata short-term incentive.

Termination forserious misconduct

ANZ may immediately terminate the executive’s employment at any time in the case of serious misconduct, andthe employee will only be entitled to payment of Fixed Pay up to the date of termination. Payment of statutory
entitlements of long service leave (only if minimum 15 years of service) and annual leave applies in all eventsof separation.
On termination for serious misconduct any options and any deferred shares still held in trust will be forfeited.

Other Aspects

S Targett: Subject to continued employment and the approval of the Board, four tranches to the value of$700,000 each of deferred shares to be granted at six month intervals in May and November in 2004 and 2005,
and Hurdled Options with the value of $750,000 granted within 3 months of commencement of employment, tocompensate for the loss of equity from S Targett’s previous employer. On Termination on Notice, sign-on options
can be exercised as a pro-rata proportion to the period of employment. Sign-on deferred shares will vest in full,including any scheduled to be granted during the notice period.

80 ANZ Concise Annual Report 2006

E2. FIXED TERM CONTRACT (SIR J ANDERSON)
Length of Contract

Contract was effective from 1 December 2003 to 30 September 2005, and extended to 15 April 2006. Retired
effective 31 December 2005.

Fixed Remuneration

The Fixed Pay package was NZD1,000,000 per annum and was inclusive of employer contributions to thesuperannuation fund.

Short-Term Incentive

STI payments were subject to both business and individual performance. The target payment was 50% of Fixed Pay.

Equity Participation

Zero Priced Options (ZPOs) were granted as part of Sir J Anderson’s contract under the ANZ Share Option Plan.
A ZPO is a right to acquire a share at nil cost. They were designed to deliver equity to the CEO of the National
Bank of New Zealand (NBNZ) and to meet the particular needs and circumstances at the time of the acquisition
of NBNZ. Grants were fixed at NZD500,000 worth of ZPOs annually, granted in two tranches per annum and witha nil exercise price. The ZPOs had no time based vesting criteria, and so were able to be exercised at any time
during employment and within 6 months of the termination of employment.

Resignation

Sir J Anderson was able to terminate his employment by giving 12 months’ written notice. On resignation any ZPOs
not exercised as at the termination date would lapse.

Retirement

A policy for payment of retirement gratuities was in place with NBNZ employees prior to the acquisition by theCompany of NBNZ. This policy has been continued for eligible staff who were ANZ National Bank Limited employees
as at 1 December 2003, including Sir J Anderson. Under this policy, a payment was made to Sir J Anderson on his
retirement equal to the number of full years’ service divided by 35 and multiplied by 85% of finishing salary (where
finishing salary is fixed remuneration less any superannuation contribution).

Termination on Notice by ANZ

The employment contract provided ANZ National Bank Limited with a right to terminate Sir J Anderson’s employment
by providing notice or payment in lieu of notice equal to the unexpired term of the employment agreement (which
had an end date of 15 April 2006). On termination on notice, any options could be exercised in accordance with the
ANZ Share Option Plan Rules.

Death or Total andPermanent Disablement

Exercise any ZPOs; pro rata incentive.

Termination forserious misconduct

The employment contract provided ANZ National Bank Limited with a right to terminate Sir J Anderson’s employment
at any time without notice for serious misconduct, on the basis that Sir J Anderson would have been entitled to
payment up to the date of termination. On termination for serious misconduct any ZPOs which had not been exercised
as at the termination date would lapse.

E3. PARTICIPATION IN EQUITY PROGRAMS
A number of shares and options are granted to executives under the remuneration programs detailed in Section C. For disclosed executives,
details of all grants made during the year and legacy LTI programs are listed in Section F. Aggregate holdings of shares and options are also
shown. The deferred shares component of the LTI is administered under the ANZ Employee Share Acquisition Plan. For executives, the sharesare deferred for three years.

Directors’ Report  81

Section F. Equity instruments relating to disclosed directors and executives
F1. SHAREHOLDINGS OF NON-EXECUTIVE DIRECTORS (INCLUDING MOVEMENTS DURING THE 2005 & 2006 YEARS)

NameBalance ofshares as at
1 Oct
20051

Sharesacquired during
the year in lieu
of salary2

Shares resulting
from any otherchange during
the year3

CB Goode
G Clark
RS Deane
JK Ellis
DM Gonski
MA Jackson
DE Meiklejohn
JP Morschel

535,637
5,000
75,364
91,19654,90493,2975,156
5,502

26,046
1,920
–
1,614
2,534
–
–
1,920

65,345––22,00011,510
–
2,000
–

Name

Balance ofshares as at
1 Oct
20041

Sharesacquired during
the year in lieu
of salary2

Shares resulting
from any otherchange during
the year3

CB Goode
G Clark6
JC Dahlsen (retired 3 February 2005)
RS Deane
JK Ellis7
DM Gonski7
MA Jackson
DE Meiklejohn8
JP Morschel
BW Scott (retired 23 April 2005)

502,464
2,000
121,91575,36484,476
52,612
93,2972,656
4,000
72,47520,781
–
–
–
1,703
2,055
–
–
1,502
–

12,3923,000(8,441)
–
5,017
237
–
2,500
–
(6,494)2006 Financial Year2005 Financial Year

Balance ofshares held as
at 30 Sept
20061,4Balance ofshares held as
at reportsign-off date1

627,028
6,920
75,364
114,81068,94893,2977,156
7,422

648,0038,501
75,364
115,951
68,94893,297
7,156
9,003

Balance ofshares held as
at 30 Sept
20051,5

Balance ofshares held as
at reportsign-off date1

535,637
5,000
113,474
75,364
91,19654,90493,297
5,156
5,502
65,981

559,451
6,766
113,474
75,364
115,042
67,892
93,297
6,326
7,268
65,981

1 Balance of shares held at 1 October 2004/2005, 30 September 2005/2006, 2 November 2005 and 1 November 2006, includes directly held shares, nominally held shares and shares held byrelated parties.
2 All shares acquired in lieu of salary were done so under the Directors’ Share Plan (refer to section B3 of this Remuneration Report for an overview of the Directors’ Share Plan).
3 Other shares resulting from any other changes during the year include the net result of any shares purchased/sold or acquired under the Dividend Reinvestment Plan.
4 The following shares were nominally held as at 30 September 2006: CB Goode – 408,553; G Clark – 1,920; RS Deane – 73,000; JK Ellis – 47,898; DM Gonski – 66,076; MA Jackson – 10,632;
DE Meiklejohn – 4,654; JP Morschel – 3,422.
5 The following shares were nominally held as at 30 September 2005: CB Goode – 141,860; RS Deane – 73,000; JK Ellis – 23,900; DM Gonski – 52,159; MA Jackson – 10,632; DE Meiklejohn – 2,656;
JP Morschel – 1,502.
6 Shareholding for G Clark includes 3,000 shares held by G Clark’s related party previously omitted.
7 Balance of shares held as at report sign-off date (2005) includes shares purchased on 27 October 2005 under the Directors’ Retirement Benefit scheme previously omitted for JK Ellis and DM Gonski.
8 Shareholding excludes shares held through JB Were and RBC investment products previously disclosed.

F2. SHAREHOLDINGS OF CEO (INCLUDING MOVEMENTS DURING THE 2005 & 2006 YEARS)
Balance ofshares as
at 1 Oct
2005/2006 1

Shares acquired
during the year
in lieu of salary2

2006

1,819,715

81,1182005

1,690,507

89,995

Value of performance
shares granted
during the year5$

Shares acquired
during the year
through the exercise
of options6

Shares resulting
from any otherchange during
the year7

Balance ofshares held as
at 30 Sept
2005/20061,8

Balance ofshares held
as at reportsign-off date1––

2,000,000(1,927,411)

1,973,422

2,074,993

175,000

2,628,500

500,000(635,787)

1,819,715

1,820,056

Performance
shares granted
during the year3,4

1 Balance of shares held at 1 October 2004/2005, 30 September 2005/2006, 2 November 2005 and 1 November 2006 includes directly held shares, nominally held shares and shares held byrelated parties.
2 All shares acquired in lieu of salary were done so under the Directors’ Share Plan (refer to section B3 of this Remuneration Report for an overview of the Directors’ Share Plan).
3 The grant of performance shares on 31 December 2004 was approved by shareholders at the 2004 AGM, with the earliest vesting date being 31 December 2006. Refer to section F11.3 forfurther information.
4 Nil performance shares forfeited or vested. The maximum amortisation balance is $331,263 for subsequent financial years, however the value will be nil if the minimum performance hurdle is
not achieved.
5 The fair value of performance shares granted during the 2005 financial year (and approved at the 2004 AGM) is based on the fair value of the shares as at 31 December 2004 ($15.02) multipliedby the number granted.
6 All options held/exercised by the CEO have been approved by shareholders (December 1999 and December 2001).
7 Other shares resulting from any other changes during the 2005 / 2006 years include the net result of any shares purchased, sold, or acquired under the Dividend Reinvestment Plan. For 2005, it
also includes those shares received on 28 October 2004 in regards to the 2004 incentive (for the period ending 30 September 2004), and for 2006 it includes those shares received on 31 October2005 in regards to the 2005 incentive (for the period ending 30 September 2005)
8 1,270,176 shares were held nominally as at 30 September 2005 and 1,486,294 shares as at 30 September 2006.

82 ANZ Concise Annual Report 2006

F3. OPTIONS GRANTED TO CEO1
Financial Year

2005

Type ofoptions

Hurdled2
Hurdled A
Hurdled A
Hurdled A
Hurdled A3
Total

2006

Grant date

First date
exercisable

Date ofexpiry4

Exercise
price5$31-Dec-01
31-Dec-01
31-Dec-02
31-Dec-03
31-Dec-04

31-Dec-04
31-Dec-03
31-Dec-04
31-Dec-05
31-Dec-06

31-Dec-05
31-Dec-07
31-Dec-07
31-Dec-08
31-Dec-08

16.48
16.80
16.69
17.48
20.49

Numbergranted6,7

500,000
500,000
1,000,000
1,000,000
500,000
3,500,000

Number vested
during the
2005/2006 FY

Percentage thatvested during
the 2005/2006
FY %Vested andexercisable asat 30 Sept
2005/2006

Vested andunexercisable asat 30 Sept
2005/2006

100
–
100
100
–

–
500,000
500,000––
1,000,000––
500,0008––
500,000

500,000–
1,000,000
1,000,000–
2,500,000

1 All options granted to the CEO have been approved by shareholders (December 1999 and December 2001).
2 The options may be exercised only if the “ANZ Accumulation Index” over the period from the date on which the options are granted to the last trading day of any month occurring during the relevant
exercise period equals or exceeds the “ASX 100 Accumulation Index” calculated over the same period. Refer to section F11.1 for Hurdled A details.
3 The fair value per option at the 31 December 2004 grant date is $1.98. Refer to section F9 for details of the valuation methodology and inputs.
4 Treatment of options on termination of employment is explained in section D3 of the Remuneration Report.
5 The exercise price is equal to the weighted average share price during the 5 trading days immediately after the Company’s Annual General Meeting. Note, the original exercise price of options issued
prior to the Renouncable Rights issue in November 2003 have been reduced by 72 cents, because of the dilution of share capital associated with the Renouncable Rights issue.
6 Nil options forfeited or expired during the period.
7 The maximum amortisation balance is $124,767 for subsequent financial years, however the value will be nil if the minimum performance hurdles are not achieved.
8 The options have met the time vesting hurdle, however only 50% of the 1 million granted have passed the performance hurdle at this stage.

F4. OPTION HOLDINGS OF CEO (INCLUDING MOVEMENTS DURING THE 2005 & 2006 YEARS)1

Type ofoptions

2006

Hurdled2005

HurdledBalance as
at 1 Oct
2005/2006

Grantedduring theyear asremuneration1

Valueof options
grantedduringthe year2$

3,000,000––

500,000
500,000
1,000,000

3,000,000

500,000

990,000

500,000

Exercisedduringthe year

Balance
as at
30 Sept
2005/2006

Total valueof options
granted andexercisedduring the year
$

26.71
26.75
27.21

16.80 1,000,000
16.69
17.48

4,955,000
5,030,000
9,730,000

21.54

16.48 3,000,000

3,520,000

Number ofordinaryshares issued
on exercise
of options

Value ofoptions
exercisedduring theyear3$

Share priceon date of
exercise of
options$

03-Jul-06
500,000
04-Jul-06
500,000
31-Aug-06 1,000,000

4,955,000
5,030,000
9,730,000

08-Aug-05

2,530,000

Date ofexercise of
options

500,000

Amountpaid pershare$

1 All options granted to the CEO have been approved by shareholders (December 1999 and December 2001).
2 The value of options granted during the 2005 year is based on the fair value of the option ($1.98) multiplied by the number granted. Refer to section F9 for details of the valuation methodology
and inputs.
3 The value per option used in this calculation is based on the difference between the volume weighted average price of the Company’s shares traded on the ASX on the day the options were
exercised, and the exercise price. This is then multiplied by the number granted.

Directors’ Report  83

F5. DEFERRED SHARES GRANTED TO DISCLOSED EXECUTIVES
Financial Year

2005

2006

LTI Deferred Shares1
Name

Dr RJ Edgar

Total
E Funke Kupper

Total
BC Hartzer

Total
GK Hodges

Total
PJ Hodgson

Total
PR Marriott

Grant date

Vesting date24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
05-Nov-03
11-May-04
05-Nov-04
05-Nov-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
05-Nov-06
11-May-07
05-Nov-07
05-Nov-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07

24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
08-Dec-04

24-Apr-05
23-Oct-05
20-May-06
05-Nov-03
11-May-07
05-Nov-07
08-Dec-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07

Total

84 ANZ Concise Annual Report 2006

Numbergranted2,3

2,700
3,200
7,600
8,500
8,889
25,0008,452
6,519
26,00096,860
6,000
4,500
8,000
6,800
6,838
6,256
6,018
44,412
2,800
4,600
6,600
6,500
7,408
7,135
9,127
44,170
1,000
1,400
3,800
6,500
5,699
6,586
7,522
32,507
800
900
1,000
1,097
1,111
1,974
12,481
19,363
5,700
5,500
9,300
9,100
9,573
9,275
8,475
56,923

Value of deferredshares granted
during the 2005
or 2006 year4$

134,941
538,189
673,130

124,570
124,570

188,925
188,925

155,702
155,70240,822
248,402289,224

175,429
175,429

Number thatvested during
the 2005 or2006 year

Percentage thatvested during
the 2005 or2006 year
%

2,700
3,200
7,600
8,500
–
–
–
–
–
22,000
6,000
4,500
8,000
6,800
–
–
–
25,300
2,800
4,600
6,600
6,500
–
–
–
20,500
1,000
1,400
3,800
6,500
–
–
–
12,700
800
900
1,000
–
–
–
–
2,700
5,700
5,500
9,300
9,100
–
–
–
29,600

100
100
100
100
–
–
–
–
–
23
100
100
100
100
–
–
–
57
100
100
100
100
–
–
–
46
100
100
100
100
–
–
–
39
100
100
100
–
–
–
–
14
100
100
100
100
–
–
–
52

Financial Year

2005

2006

LTI Deferred Shares1 (continued)
Name

S Targett

Grant date

Vesting date

Numbergranted2,305-Nov-04

05-Nov-07

6,519

Value of deferredshares granted
during the 2005
or 2006 year4$

Number thatvested during
the 2005 or2006 year

Percentage thatvested during
the 2005 or2006 year%

134,941––

1 LTI deferred shares were last granted under the ANZ Long-Term Incentive Program in the 2005 year, and therefore were not granted in the 2006 year. LTI is now delivered in the form of Performance
Rights (refer to section C4.2). The LTI deferred shares are restricted for 3 years and may be held in trust beyond this time. Refer to section F11.2 of the Remuneration Report for more details.
2 Nil shares forfeited during the 2005 & 2006 years.
3 The maximum amortisation balance for each executive for subsequent financial years is as follows: Dr RJ Edgar $296,805; BC Hartzer $99,681; GK Hodges $84,525; PJ Hodgson $118,134;
PR Marriott $103,853; S Targett $49,417.
4 The value of shares granted during the 2005 year is based on the volume weighted average price of the Company’s shares traded on the ASX on the day the shares were granted, multiplied by the
number granted.

STI Deferred Shares1
Name

Dr RJ Edgar

Total
E Funke Kupper

Total
BC Hartzer

Total
GK Hodges

Total
PJ Hodgson

Total
PR Marriott

Grant date

Vesting date24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07

24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04

24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-05

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04

24-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07

Total

Numbergranted2,3

3,891
4,302
6,423
5,622
6,781
7,683
34,702
6,510
5,724
8,554
4,148
7,636
7,052
39,624
7,058
6,364
4,457
1,992
7,322
7,244
34,437
3,128
3,324
4,761
4,503
5,129
5,653
26,498
4,888
8,305
4,776
7,835
9,330
4,262439,396
5,963
5,475
8,527
5,403
7,978
9,604
42,950

Value ofdeferred shares
granted during
the year
$

–

–

–

–

–

–

Number thatvested during
the 2005 or2006 year

Percentage thatvested during
the 2005 or2006 year
%

3,891
4,302
6,423
5,622
–
–
20,238
6,510
5,724
8,554
4,148
–
–
24,936
7,058
6,364
4,457
1,992
–
–
19,871
3,128
3,324
4,761
4,503
–
–
15,716
4,888
8,305
4,776
–
–
4,262
22,231
5,963
5,475
8,527
5,403
–
–
25,368

100
100
100
100
–
–
58
100
100
100
100
–
–
63
100
100
100
100
–
–
58
100
100
100
100
–
–
59
100
100
100
–
–
100
56
100
100
100
100
–
–
59

1 STI deferred shares issued were granted under a historical ANZ Short-Term Incentive Program. (STI is now delivered generally as 100% cash, therefore no STI deferred shares were granted to the
Executives during the year. Refer to section C4.1). STI deferred shares are restricted for 3 years and may be held in trust beyond this time.
2 Nil shares forfeited during the 2005 & 2006 years.
3 The maximum amortisation balance for each executive for subsequent financial years is as follows: Dr RJ Edgar $32,162; BC Hartzer $30,848; GK Hodges $23,743; PJ Hodgson $38,831;
PR Marriott $39,922.
4 These STI deferred shares were granted as part of the Institutional Bonus Scheme in 2004. 20% of bonus amounts in excess of $125,000 were delivered as one year deferred shares.

Directors’ Report  85

F5. DEFERRED SHARES GRANTED TO DISCLOSED EXECUTIVES (continued)
Financial Year

2005

2006

Other Deferred Shares1
Name

S Targett

Grant date

Vesting date

11-May-04
05-Nov-04
13-May-05
07-Nov-05

11-May-07
05-Nov-07
13-May-08
07-Nov-08

Numbergranted2,3

38,41935,10532,08029,838135,442

Total

Value of deferredshares granted
during the 2005
or 2006 year4$

n/a726,659
707,339703,282
2,137,280

1 Other shares issued to S Targett relate to the issue of deferred shares (four tranches to the value of $700,000 each issued at 6 month intervals in May and November in 2004 and 2005, subject toBoard approval and continuing employment) to compensate S Targett for the loss of access to equity as a result of his resignation from his previous employer upon commencement with ANZ.
2 Nil shares forfeited or vested during the 2005 & 2006 years.
3 The maximum amortisation balance is $1,282,669 for subsequent financial years.
4 The value of shares granted during the 2005 year is based on the volume weighted average price of the Company’s shares traded on the ASX on the day the shares were granted, multiplied by the
number granted.

F6. SHAREHOLDINGS OF DISCLOSED EXECUTIVES (INCLUDING MOVEMENTS DURING THE 2005 & 2006 YEARS)

NameBalance ofshares as at
1 Oct 2005 1

Shares granted
during the year
as remuneration

Number ofshares acquired
during the year
through exercise
of options

Shares resulting
from any otherchange during
the year2

Dr RJ Edgar
E Funke Kupper5
BC Hartzer
GK Hodges
PJ Hodgson
PR Marriott
S Targett421,733
189,892
88,638
171,91959,557
641,633
113,123

–
–
–
–
–
–
29,838–––67,400–168,000––(89,450)
7,445–(5,798)(149,120)–

Name

Balance ofshares as at
1 Oct 2004 1

Shares granted
during the year
as remuneration

Number ofshares acquired
during the year
through exercise
of options

Shares resulting
from any otherchange during
the year2

Sir J Anderson
Dr RJ Edgar
E Funke Kupper5
BC Hartzer6
GK Hodges
PR Marriott
S Targett

12,022384,214185,008
79,046
164,397
677,867
38,419–32,519
6,018
9,127
7,522
8,475
73,704

22,37075,000134,000–
55,00080,000––(70,000)(135,134)465(55,000)(124,709)
1,000

2006 Financial Year2005 Financial Year

Balanceof shares
held as at
30 Sept 20061,3

421,733
100,442
96,083
239,31953,759660,513
142,961
Balanceof shares
held as at
30 Sept 20051,4

34,392421,733
189,892
88,638
171,919
641,633
113,123

1 Balance of shares held at 1 October 2004/2005 and 30 September 2005/2006, include directly held shares, nominally held shares and shares held by related parties.
2 Other shares resulting from any other changes during the year include the net result of any shares purchased, or sold or any acquired under the Dividend Reinvestment Plan.
3 The following shares were held nominally as at 30 September 2006: Dr RJ Edgar – 213,510; E Funke Kupper – 0; BC Hartzer – 78,607; GK Hodges – 104,012; PJ Hodgson – 53,759;
PR Marriott – 177,930; S Targett – 141,961.
4 The following shares were held nominally as at 30 September 2005: Sir J Anderson – 55; Dr RJ Edgar – 213,510; E Funke Kupper – 189,242; BC Hartzer – 78,607; GK Hodges – 104,012;
PR Marriott – 177,930; S Targett – 112,123.  
5 Amounts shown do not include ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS). Elmer Funke Kupper held 500 ANZ StEPS as at 1 October 2005; this holding remained unchanged
up to and including 30 September 2006. No other disclosed executives held ANZ StEPS.
6 Shareholding for GK Hodges includes 25,000 shares held by GK Hodges’s related party previously omitted.

F7. OPTIONS GRANTED TO DISCLOSED EXECUTIVES1
Financial Year

Name

Sir J Anderson
Total
Dr RJ Edgar

Total

2005

2006

Type ofoptions2

Exercise
price4,5
$

Grant
date

First date
exercisable

Date ofexpiry3

Zero-Priced
Zero-Priced

05-Nov-04
13-May-05

05-Nov-04
13-May-05

04-Nov-06
12-May-07––

Hurdled A
Hurdled A
Index Linked
Index Linked
Hurdled A
Hurdled A
Hurdled B
Performance Rights

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
18-Nov-05

25-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07
19-Nov-08

24-Oct-08
24-Apr-09
22-Oct-09
19-May-10
04-Nov-10
10-May-11
04-Nov-11
18-Nov-10

16.33
18.03
17.34
17.60
17.55
18.22
20.68
–

86 ANZ Concise Annual Report 2006

Numbergranted6,7

11,69910,671
22,37034,00041,000125,000
147,000
66,666
63,11552,00060,346589,127

Numbervestedduring the2005 or2006 year

Percentage thatvested during
the 2005 or2006 year%

11,69910,671
22,37034,00041,000125,000
147,000––––
347,000

100
100
100
100
100
100
100
–
–
–
–
59

Vested andexercisable
as at 30 Sept2005 or 2006

–
–
–
–
–
–
–
–
–
–
–
–

F7. OPTIONS GRANTED TO DISCLOSED EXECUTIVES1 (continued)
Financial YearName

E Funke Kupper8

Total
BC Hartzer

Total
GK Hodges

Total
PJ Hodgson

Total
PR Marriott

Total
S Targett9
Total
1
2
3
4
5
6
7
8
9

2005

2006

Type ofoptions2

Grant
date

First date
exercisable

Date ofexpiry3

Exercise
price4,5$

Hurdled A
Hurdled A
Index Linked
Index Linked
Hurdled A
Hurdled A
Hurdled B
Performance Rights

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
18-Nov-05

25-Oct-04 24-Oct-08
24-Apr-05 24-Apr-09
23-Oct-05 22-Oct-09
20-May-06 19-May-10
05-Nov-06 04-Nov-10
11-May-07 10-May-11
05-Nov-07 04-Nov-11
19-Nov-08 18-Nov-10

16.33
18.03
17.34
17.60
17.55
18.22
20.68
0.00

Hurdled A
Hurdled A
Hurdled A
Hurdled A
Index Linked
Index Linked
Hurdled A
Hurdled A
Hurdled B
Performance Rights

24-Apr-01
24-Oct-01
24-Apr-02
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
18-Nov-05

25-Apr-04 24-Apr-08
25-Oct-04 24-Oct-08
24-Apr-05 24-Apr-09
24-Apr-05 24-Apr-09
23-Oct-05 22-Oct-09
20-May-06 19-May-10
05-Nov-06 04-Nov-10
11-May-07 10-May-11
05-Nov-07 04-Nov-11
19-Nov-08 18-Nov-10

12.98
16.33
18.03
18.03
17.34
17.60
17.55
18.22
20.68
0.00

Hurdled A
Hurdled A
Hurdled A
Index Linked
Index Linked
Hurdled A
Hurdled A
Hurdled B
Performance Rights

24-Oct-01
24-Apr-02
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
18-Nov-05

25-Oct-04 24-Oct-08
24-Apr-05 24-Apr-09
24-Apr-05 24-Apr-09
23-Oct-05 22-Oct-09
20-May-06 19-May-10
05-Nov-06 04-Nov-10
11-May-07 10-May-11
05-Nov-07 04-Nov-11
19-Nov-08 18-Nov-10

16.33
18.03
18.03
17.34
17.60
17.55
18.22
20.68
0.00

Hurdled A
Hurdled A
Index Linked
Index Linked
Hurdled A
Hurdled A
Hurdled B
Performance Rights

24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
18-Nov-05

25-Oct-04 24-Oct-08
24-Apr-05 24-Apr-09
23-Oct-05 22-Oct-09
20-May-06 19-May-10
05-Nov-06 04-Nov-10
11-May-07 10-May-11
05-Nov-07 04-Nov-11
19-Nov-08 18-Nov-10

16.33
18.03
17.34
17.60
17.55
18.22
20.68
0.00

Hurdled A
Hurdled A
Hurdled A
Hurdled A
Hurdled A
Index Linked
Index Linked
Hurdled A
Hurdled A
Hurdled B
Performance Rights

23-Feb-00
21-Nov-00
24-Apr-01
24-Oct-01
24-Apr-02
23-Oct-02
20-May-03
05-Nov-03
11-May-04
05-Nov-04
18-Nov-05

23-Feb-03 22-Feb-07
22-Nov-03 21-Nov-07
25-Apr-04 24-Apr-08
25-Oct-04 24-Oct-08
24-Apr-05 24-Apr-09
23-Oct-05 22-Oct-09
20-May-06 19-May-10
05-Nov-06 04-Nov-10
11-May-07 10-May-11
05-Nov-07 04-Nov-11
19-Nov-08 18-Nov-10

9.39
13.62
12.98
16.33
18.03
17.34
17.60
17.55
18.22
20.68
0.00

Hurdled A
Hurdled B
Performance Rights

11-May-04
05-Nov-04
18-Nov-05

11-May-07 10-May-11
05-Nov-07 04-Nov-11
19-Nov-08 18-Nov-10

18.22
20.68
0.00

Numbergranted6,7

77,00057,000131,000
119,000
51,282
46,72248,00045,518575,52242,00036,00059,00050,000109,000
113,000
55,55553,27972,80064,656655,290
13,00017,40050,00063,000113,000
42,73549,18160,00060,346468,662
9,000
9,600
14,70017,2008,221
8,300
15,75051,725
134,496
25,000170,000
80,00073,00070,000153,000
158,000
71,794
69,26367,60062,5011,000,158
307,377
52,00064,657424,034

Numbervestedduring the2005 or2006 year

Percentage thatvested during
the 2005 or2006 year%

Vested andexercisable
as at 30 Sept2005 or 2006

77,00057,000131,000
119,000––––
384,000–
36,00059,00050,000109,000
113,000––––
367,000
13,00017,40050,00063,000113,000––––
256,400
9,000
9,600
14,70017,200––––50,500–––73,00070,000153,000
158,000––––
454,000
–
–
–
–

100
100
100
100
–
–
–
–
67
–
100
100
100
100
100
–
–
–
–
56
100
100
100
100
100
–
–
–
–
55
100
100
100
100
–
–
–
–
38
–
–
–
100
100
100
100
–
–
–
–
45
–
–
–
–

–
–
–
–
–
–
–
–
–
42,00036,00059,00050,000––––––187,000–
17,40050,000––––––67,400
9,000
9,600
–
–
–
–
–
–
18,60025,000170,000–
73,00070,000––––––338,000––––

Options granted pertains to those options granted, vested or exercised during the year, options yet to vest and any unexercised options.
Refer to section F11.1 for more details pertaining to hurdled A, hurdled B and index linked options. Refer to section E2 for further information on zero priced options granted to Sir J Anderson.
Treatment of options on termination of employment is explained in section E of the Remuneration Report.
The exercise price for hurdled A & B options and index linked options is equal to the weighted average share price over the 5 trading days up to and including the grant date. The exercise price for zero-priced
options and performance rights is nil. Note, the original exercise price of options issued prior to the Renouncable Rights issue in November 2003 have been reduced by 72 cents, because of the dilution ofshare capital associated with the Renouncable Rights issue. Given index-linked options have a dynamic exercise price, the original exercise price is shown in F7 (refer to F11.1 for more details).
Refer to section F9 for details of the valuation methodology and inputs.
For the 2005 report, no additional options were granted in the period up to and including 2 November 2005. For the 2006 report, Performance Rights were granted on 24 October 2006 (before thereport sign-off date). The allocation price was $13.08 with an expiry date of 5 years from the date of grant. The number of Performance Rights granted to each disclosed executive is as follows:
Dr RJ Edgar 45,872; BC Hartzer 64,985; GK Hodges 57,340; PJ Hodgson 45,872; PR Marriott 57,340; S Targett 57,340. These amounts relate to the 2007 financial year.   
The maximum amortisation balance for each executive for subsequent financial years is as follows: Dr RJ Edgar $584,181; BC Hartzer $633,200; GK Hodges $582,742; PJ Hodgson $447,821;
PR Marriott $619,771; S Targett $736,140. The value will be nil however, if the minimum performance hurdles are not achieved.
E Funke Kupper forfeited 441,522 options (unexercised options granted from 23 October 2002) in 2006 at the time of resignation.
S Targett was granted Hurdled Options to compensate for the loss of equity from S Targett’s previous employer.

Directors’ Report  87

F8. OPTION HOLDINGS OF DISCLOSED EXECUTIVES (INCLUDING MOVEMENTS DURING THE 2005 & 2006 YEARS)2006 Financial Year
Name

Type ofoptions

Balance as at
1 Oct 2005

Granted during
the year as
remuneration

Resulting fromany other change
during year2

Value of options
granted during
the year1$

Dr RJ Edgar

Hurdled181,781–––

E Funke Kupper

Index-Linked
Performance Rights
Hurdled

272,000–
146,004–
60,346–––(146,004)–––

GK Hodges

Index-Linked
Performance Rights
HurdledIndex-Linked
Performance Rights
Hurdled

250,000–
368,634
222,000–
219,316–
45,518––64,656–(250,000)(45,518)
–
–
–
–

–
–
–
–
–
–

PJ Hodgson

Index-Linked
Performance Rights
Hurdled

176,000–
50,871–
60,346
–

–
–
–

–
–
–

PR Marriott

Index-Linked
Performance Rights
Hurdled31,900–546,657–
51,725
–

–
–
–

–
–
–

Index-Linked
Performance Rights
Other4
Hurdled
Performance Rights

311,000–
11,442359,377––
62,501––64,657

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
17,40050,000––––––25,00073,00070,000–––––

Balance as at
1 Oct 2004

Granted during
the year as
remuneration

Resulting fromany other change
during year

Value of options
granted during
the year1$

Exercised during
the year–

22,370–477,452

BC Hartzer

S Targett2005 Financial Year
Name

Type ofoptions

Sir J Anderson

Zero-priced

Dr RJ Edgar

Hurdled

204,781

52,000–130,000

E Funke Kupper

Index-Linked
Hurdled

272,000
232,004–
48,000–––120,000

Index-Linked
HurdledIndex-Linked
Hurdled

250,000
295,834
222,000
214,316–
72,800–60,000–––––
182,000–
150,000

Index-Linked
HurdledIndex-Linked
Other4
Hurdled

176,000
559,057
311,000
11,000307,377–
67,600––52,000

–
–
–
442
–

–
169,000––
130,000

BC Hartzer
GK Hodges

PR Marriott

S TargettExercised during
the year

11,69910,671
34,00041,000–77,00057,000–––26,00016,00013,000–80,000–––

1 The value of options granted during the year is based on the fair value of the option multiplied by the number granted. Refer to section F9 for details of the valuation methodology and inputs.
2 Refers to forfeiture of options upon resignation for E Funke Kupper. Value of options on forfeiture was $2,229,912.
3 The value per option used in this calculation is based on the difference between the volume weighted average price of the Company’s shares traded on the ASX on the day the options were
exercised, and the exercise price. This is then multiplied by the number granted.
4 Other refers to share options granted to a related party. 11,000 of these options were vested and exercisable as at 30 September 2005 and 30 September 2006.
5 Aggregate value of options exercised, granted and forfeited during the 2006 year for each disclosed executive is as follows: PR Marriott – $1,225,430; E Funke Kupper – $2,229,912;
GK Hodges – $612,666.
6 Aggregate value of options exercised, granted and forfeited during the 2005 year for each disclosed executive is as follows: Sir J Anderson – $940,500; Dr RJ Edgar – $474,966;
E Funke Kupper – $599,069; BC Hartzer – $182,000; GK Hodges – $578,148; PR Marriott – $862,166; S Targett – $130,000.

88 ANZ Concise Annual Report 2006

Date of exercise
of options

Number of ordinary
shares issued on
exercise of options

Value of options
exercised during
the year3$

Share price ondate of exercise
of options$

Amount paid
per share
$

n/a
n/a
–
–
–
–
–
–
–
–
–
17-May-06
17-May-06
–
–
–
–
–
–
10-Nov-05
11-Nov-05
11-Nov-05
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
17,40050,000––––––25,00073,00070,000
–
–
–
–
–

n/a
n/a
–
–
–
–
–
–
–
–
–
158,166454,500––––––
342,000
511,730
371,700
–
–
–
–
–

n/a
n/a
–
–
–
–
–
–
–
–
–
27.12
27.12
–
–
–
–
–
–
23.07
23.34
23.34
–
–
–
–
–

n/a
n/a
–
–
–
–
–
–
–
–
–
18.03
18.03
–
–
–
–
–
–
9.39
16.33
18.03
–
–
–
–
–

Date of exercise
of options

Number of ordinary
shares issued on
exercise of options

Value of options
exercised during
the year3$

Share price ondate of exercise
of options$

Amount paid
per share$

10-Nov-04
17-May-05
20-May-05
20-May-05–
27-Oct-04
06-May-05–––
20-May-05
20-May-05
20-May-05–
11-May-05–––

11,69910,671
34,00041,000–77,00057,000–––26,00016,00013,000–80,000–––233,515
229,533
187,982
156,984–
264,403214,666–––
214,211142,062
71,875–
693,116
–
–
–

19.96
21.51
21.86
21.86
–
19.76
21.80
–
–
–
21.86
21.86
21.86
–
21.64
–
–
–

00.00
00.00
16.33
18.03
–
16.33
18.03
–
–
–
13.62
12.98
16.33
–
12.98
–
–
–

Directors’ Report  89

Balance as at
30 Sept 20065

181,781
272,000
60,346––––368,634
222,000
64,656
151,916
176,000
60,34650,871
31,90051,725
378,657––
311,000
62,501
11,442359,377
64,657

Balance as at
30 Sept 20056–
181,781
272,000
146,004
250,000
368,634
222,000
219,316
176,000
546,657
311,000
11,442359,377

F9. OPTION VALUATIONS
Option type

HurdledHurdled (CEO)Zero-priced
Zero-priced
Zero-priced
Performance Rights

Grant date

Optionvalue1$

Exercise price(5 day VWAP)$

Share priceat grant$

ANZ
expected
volatility2%

Optionterm(years)Vesting
period(years)Expected
life(years)Expected
dividend
yield3%

Risk freeinterest
rate4%

05-Nov-04
31-Dec-04
05-Nov-04
13-May-05
07-Nov-05
18-Nov-05

2.62
1.98
20.70
22.05
23.57
11.64

20.68
20.49
–
–
–
–

20.77
20.59
20.77
22.15
23.60
24.05

18.50
16.50
n/a
n/a
n/a
15.00

7
4
2
2
1
5

3
2
–
–
–
3

3
2
n/a
n/a
n/a
4

5.30
5.50
n/a
n/a
n/a
5.00

5.24
5.16
n/a
n/a
n/a
5.31

1 The Binomial Option Pricing Model (“the model”) is used to assess the value of ANZ’s options and Performance Rights (other than zero priced options granted to Sir J Anderson, for which the value
is the volume weighted average price of the Company’s shares traded on the ASX on the day the options were granted). The model utilises probability theory to determine the value of an ANZ option
based on likely share prices at the expiry date of the option. In accordance with AASB 2, the model reflects both the performance hurdles that currently apply to the Hurdled Options and the nontransferability of the options. Under the terms of the Options, the hurdle conditions (outlined in section F11.1) must be met before the options may be exercised during the exercise period.
2 Expected volatility represents a measure of the amount by which ANZ’s share price is expected to fluctuate over the life of the options. The measure of volatility used in the model is the annualised
standard deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility
is then used to estimate a reasonable expected volatility over the expected life of the options.
3 In estimating the fair value of the ANZ option grant, expected dividends were included in the application of the model. The expected dividend yield applied to the model was based on an analysis
of ANZ’s historical dividend payments and yields.
4 The risk-free interest rate is based on the implied yield currently available on zero-coupon bonds issued by the Australian government, with a remaining term equal to the expected life of
ANZ’s options.

F10. PERFORMANCE SHARE VALUATION
Share typeCEO Performance Shares

Grant dateSharevalue1$

Share priceat grant$

ANZ
expected
volatility2%

Term ofshares(years)Vesting
period(years)Expected
life(years)Expected
dividend
yield3%

Risk freeinterest
rate4%

31-Dec-04

15.02

20.59

16.50

5

2

2

5.40

5.00

1 The Binomial Pricing Model (“the model”) is used to assess the value of the Performance Shares. In accordance with AASB 2, the model utilises probability theory to determine the value of theperformance shares which also reflects the performance hurdle. Under the terms of the performance shares, the hurdle conditions (outlined in section F11.3) must be met before the sharescan vest.
2 Expected volatility represents a measure of the amount by which ANZ’s share price is expected to fluctuate over the life of the options. The measure of volatility used in the model is the annualised
standard deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility
is then used to estimate a reasonable expected volatility over the expected life of the performance shares.
3 In estimating the fair value of the performance shares, expected dividends were included in the application of the model. The expected dividend yield applied to the model was based on an analysis
of ANZ’s historical dividend payments and yields.
4 The risk-free interest rate is based on the implied yield currently available on zero-coupon bonds issued by the Australian government, with a remaining term equal to the expected life of theperformance shares.

F11. LEGACY LONG TERM
INCENTIVE (LTI) PROGRAMS
F11.1 Options (Granted prior to
October 2005)
Each option has the following features:
An exercise price (or for index-linked
options, the original exercise price) thatis set equal to the weighted average saleprice of all fully paid ordinary shares in
the Company sold on the Australian Stock
Exchange during the 1 week prior to andincluding the date of grant;
A maximum life of 7 years and an exercise
period that commences 3 years after thedate of grant, subject to performance hurdles
being cleared. Options are re-tested monthly(if required) after the commencement of theexercise period;
Upon exercise, each option entitles theoption-holder to one ordinary share;

In case of resignation or termination on
notice or dismissal for misconduct: options
are forfeited;
In case of redundancy: options are pro-rated
and a grace period is provided in which toexercise the remaining options (with hurdles
waived, if applicable);
In case of retirement, death or total &permanent disablement: A grace period isprovided in which to exercise all options(with hurdles waived, if applicable); andin the comparator group shown below.
Performance equal to the median TSR of thecomparator group will result in half the options
becoming exercisable. Performance above
median will result in further options becoming
exercisable, increasing on a straight-line basis
until all of the options become exercisable
where ANZ’s TSR is at or above the 75th
percentile in the comparator group.
Comparator GroupAMP Limited

Performance hurdles, which are explained
below for each type of option.

AXA Asia Pacific Holdings Limited

Hurdled Options (Hurdled B) (Granted
November 2004)
In November 2004 hurdled options were
granted with a relative TSR performance
hurdle attached.

Insurance Australia Group Limited

The proportion of options that become
exercisable will depend upon the TSR
achieved by ANZ relative to the companies

90 ANZ Concise Annual Report 2006

Commonwealth Bank of Australia
Macquarie Bank Limited
National Australia Bank Limited
QBE Insurance Group Limited
St George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation  Hurdled Options (Hurdled A) (Granted to
Executives from February 2000 until July
2002, and from November 2003 until May
2004. Granted to CEO from December 2001
until December 2004.)
Until May 2004, hurdled options were granted
to executives with the following performance
hurdles attached. The following performance
hurdles also pertain to the options granted to
the CEO:
1. Half the options may only be exercised
once ANZ’s TSR exceeds the percentagechange in the S&P/ASX 200 Banks (Industry
Group) Accumulation Index, measured overthe same period (since issue) and calculated
as at the last trading day of any month (oncethe exercise period has commenced); and2. The other half of hurdled options may
only be exercised once the ANZ TSR exceeds
the percentage change in the S&P/ASX 100
Accumulation Index, measured over thesame period (since issue) and calculated
as at the last trading day of any month (oncethe exercise period has commenced).
Index-linked options (Granted from October
2002 to May 2003)
Index-linked options have a dynamic
exercise price that acts as a built-in
performance hurdle, i.e. the exercise priceis adjusted in line with the movement in
the S&P/ASX 200 Banks (Industry Group)
Accumulation Index (excluding ANZ). As an
additional constraint, the adjusted exercise
price can only be set at or above the original
exercise price. They are exercisable between
the 3rd and 7th year after grant date, subject
to the adjusted exercise price being above
the prevailing share price.

F11.2 Deferred Shares (Granted fromFebruary 2000)
Deferred Shares granted under the LTI
arrangements were designed to reward
executives for superior growth whilst also
encouraging executive retention and anincrease in the Company’s share price.
Shares are subject to a time-based vesting
hurdle of 3 years, during which time they areheld in trust;During the deferral period, the employee isentitled to any dividends paid on the shares;
Shares issued under this plan may be heldin trust beyond the deferral period;

The value used to determine the numberof LTI deferred shares to be allocated has
been based on the volume weighted average
price of the shares traded on the ASX in theweek leading up to and including the dateof issue;
In case of resignation or termination on
notice or dismissal for misconduct: LTI sharesare forfeited;
In case of redundancy: the number of
LTI shares that are released is pro rated
according to the time held as a proportionof the vesting period; andIn case of retirement, death or total &permanent disablement: LTI shares are
released to executives.
Deferred Shares no longer form part of ANZ’s
Senior Executive LTI program, however there
may be circumstances (such as retention)
where this type of equity (including Deferred
Share Rights) will be issued.

F11.3 Performance Shares (Granted
December 2004 to CEO)In December 2004 Performance Shares were
granted to the CEO of ANZ with a relative TSR
performance hurdle attached. The proportionof shares that vest will depend upon the TSR
achieved by ANZ relative to the companies
in the comparator group shown below.
Performance equal to the median TSR of
the comparator group will result in half the
Performance Shares becoming exercisable.
Performance above median will result infurther Performance Shares becoming
exercisable, increasing on a straight-line basis
until all of the Performance Shares become
exercisable where ANZ’s TSR is at or above
the 75th percentile in the comparator group.
No dividends will be payable on the shares
until they vest, with the earliest possible
vesting date being 31 December 2006.
Comparator GroupAMP Limited
AXA Asia Pacific Holdings Limited
Commonwealth Bank of Australia
Insurance Australia Group Limited
Macquarie Bank Limited
National Australia Bank Limited
QBE Insurance Group Limited
St George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation

Directors’ Report  91

Signed in accordance with a resolutionof the directors

Charles Goode
Director

John McFarlane
Chief Executive Officer
1 November 2006

financial statements

Australia and New Zealand Banking Group Limited and Controlled Entities
Consolidated income statement
for the year ended 30 September 2006
Consolidated
2006
$m

20053
$m

Total income

25,51021,297

Interest income
Interest expense

22,301(15,358)

17,719(11,901)

Net interest income

6,943

5,818

Other operating income
Share of joint venture profit from ING Australia and ING New ZealandShare of associates profit

3,015
138
56

3,377
149
52

Operating income
Operating expenses

10,152(4,531)

9,396(4,418)

Profit before credit impairment and income tax
Provision for credit impairment

5,621
(407)

4,978
(580)

Profit before income tax
Income tax expense

5,214(1,522)

4,398(1,220)

Profit for the year

3,692

3,178

Profit attributable to minority interest
Profit attributable to shareholders of the Company1,2

4
3,688

3
3,175

Earnings per ordinary share (cents)
Basic
Diluted

200.0
194.0

169.5
164.4

The notes appearing on pages 96 to 101 form an integral part of these financial statements.
1 The results of 2006 include the impact of these significant items:
Settlement of ANZ National Bank Limited claims ($14 million profit after tax); andSettlement of NHB insurance claim ($79 million profit after tax).
The results of 2005 include the impact of the significant item:
Gain on sale of NBNZ Life ($14 million profit after tax).
2 Includes NBNZ incremental integration costs of $26 million (2005: $52 million) after tax.
3 The 2005 comparative is not restated for the financial instruments standards being AASB 132, AASB 139 and AASB 4, as permitted under the first time adoption transitional provisions.

92  ANZ Concise Annual Report 2006

Australia and New Zealand Banking Group Limited and Controlled Entities
Consolidated BALANCE SHEET
as at 30 September 2006
Consolidated
2006
$m

20051
$m

AssetsLiquid assets
Due from other financial institutions
Trading securities2
Derivative financial instruments
Available-for-sale assets/investment securities3
Net loans and advances
Customers’ liabilities for acceptances
Regulatory deposits
Share of associates and joint venture entities
Deferred tax assets
Goodwill and other intangible assets4
Other assets
Premises and equipment

15,019
9,665
9,179
9,164
10,653
255,410
13,435
205
2,200
1,384
3,337
5,011
1,109

11,601
6,348
6,285
6,511
10,042
232,490
13,449
159
1,926
1,389
3,458
6,173
1,054

Total assets

335,771

300,885

Liabilities
Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Liability for acceptances
Current tax liabilities
Deferred tax liabilities
Payables and other liabilities
Provisions
Bonds and notes
Loan capital

14,118204,794
8,753
13,435569
1,384
10,679957
50,05011,126

12,027
190,322
7,006
13,449
199
1,602
7,618
914
39,073
9,137

Total liabilities

315,865

281,347

Net assets

19,906

19,538

Ordinary share capitalPreference share capital
Reserves
Retained earnings

8,271
871
(354)
11,084

8,053
1,858
(46)
9,646

Share capital and reserves attributable to shareholders of the Company
Minority interest

19,872
34

19,51127

Total equity

19,906

19,538

Shareholders’ equity

The notes appearing on pages 96 to 101 form an integral part of these financial statements.
1
2
3
4

The 2005 comparative is not restated for the financial instruments standards being AASB 132, AASB 139 and AASB 4, as permitted under the first time adoption transitional provisions.
Includes bills held in portfolio $1,569 million (September 2005: $1,182 million).
In 2005 available-for-sale assets were reported as investment securities.
Excludes notional goodwill related to the ING Australia joint venture of $826 million (September 2005: $826 million) and the ING New Zealand joint venture $79 million(September 2005: $82 million).

Financial Statements  93

Australia and New Zealand Banking Group Limited and Controlled Entities
statement of recognised income and expense
FOR THE YEAR ENDED 30 September 2006
Consolidated
2006
$m

2005
$m

(203)

(443)

Available-for-sale assets
Valuation gain taken to equity
Cumulative (gain) transferred to the income statement on sale

20
(8)

n/a
n/a

Cash flow hedges
Valuation gain taken to equity
Transferred to income statement for the year

121
(56)

n/a
n/a

Actuarial (loss)/gain on defined benefit plans

(55)

25

Net income/(loss) recognised directly in equity

(181)

(418)

Profit for the year

3,692

3,178

Total recognised income and expense for the year

3,511

2,760

4

3

Total recognised income and expense for the year attributable to shareholders of the Company

3,507

2,757

Effect of adoption of AASB 132 and AASB 139 on shareholders’ equity:2
Available-for-sale reserve
Cash flow hedging reserve
Retained earnings

(10)
162
(431)

Items recognised directly in equity1
Currency translation adjustments
Exchange differences on translation of foreign operations taken to equity

Total recognised income and expense for the year attributable to minority interest(279)
The notes appearing on pages 96 to 101 form an integral part of these financial statements.
1 These items are disclosed net of tax.
2 No portion is attributable to minority interest.

94  ANZ Concise Annual Report 2006

Australia and New Zealand Banking Group Limited and Controlled Entities
Consolidated statement of cash flow
FOR THE YEAR ENDED 30 September 2006
Consolidated
2006
$m

2005
$m

Inflows (Outflows)

Cash flows from operating activities
Interest received
Dividends received
Fee income received
Other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Recovery from NHB litigation
Income taxes paid
Australia
Overseas
Goods and services tax received (paid)(Increase)/decrease in operating assets
Liquid assets – greater than three months
Due from other financial institutions
Trading securities
Regulatory deposits
Loans and advances
Increase/(decrease) in operating liabilities
Deposits and other borrowings
Due to other financial institutions
Payables and other liabilities
Net cash (used in) operating activities
Cash flows from investing activities
Net decrease /(increase)
Available-for-sale assets
Purchases
Proceeds from sale or maturity
Controlled entities and associates
Purchased (net of cash acquired)Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Proceeds from sale
Other
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Net (decrease) increase
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Change in minority interest
Dividends paid
Share capital issues
Share capital buyback
Euro Trust security issue
Euro Trust issue costs
Net cash provided by financing activities
Net cash (used in) operating activities
Net cash provided by/(used in) investing activities
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign currency translation on opening balances
Cash and cash equivalents at end of year
The notes appearing on pages 96 to 101 form an integral part of these financial statements.

Financial Statements  95

23,014
53
2,082
1,057
(14,676)(2,737)(379)(2,416)
114

17,868
144
2,303
1,013
(11,414)(2,498)(367)(2,144)
–

(788)
(437)
(18)

(572)
(500)
18

(1,300)1,318(1,681)(42)(26,848)

(728)
(371)
(821)
5
(28,788)

16,1291,859
541(5,155)19,856
4,972(1,339)(3,363)(15,480)
16,239(17,188)
17,856

(289)
14

(208)
360

(250)
19
1,697
1,950

(325)
86
(1,719)(1,138)17,506(8,949)17,968(5,025)

1,248
(656)
–
(1,930)
147
(146)
–
–
7,220
(5,155)
1,950
7,220
4,015
13,702
2,627
20,344

1,225
(93)
8
(1,808)
120
(204)
875
(4)
13,062(3,363)(1,138)13,0628,561
7,854(2,713)
13,702

Notes to the Concise Financial
Statements

2: Critical accounting ESTIMATES
AND judgements

1: Basis of preparation of concise
financial report

The Group has identified the following
critical estimates and judgements used
in applying accounting policies:
Provisions for credit impairment;This Concise Financial Report has been
derived from the Group’s 2006 full Financial
Report and is prepared in accordance with
the Corporations Act 2001 and Australian
Accounting Standard AASB 1039 ‘Concise
Financial Reports’. A complete descriptionof the accounting policies adopted by
the Group is provided in the 2006 ANZ
Financial Report.

Valuation of investment in ING Australia
and ING(NZ) Holdings Limited; andThe Group revised its accounting
policies effective 1 October 2004 to enable
the preparation of financial statementsthat comply with Australian Equivalents toInternational Financial Reporting Standards(AIFRS). Australian Accounting Standard
AASB 1 ‘First-time adoption of Australian
Equivalents to International Financial
Reporting Standards’ has been appliedin preparing the ANZ Financial Report.

3: Major events this financial year

The ANZ Financial Report on which thisConcise Financial Report is based is thefirst annual ANZ Financial Report to beprepared in accordance with AIFRS. With
the exception of Australian AccountingStandard AASB 132 ‘Financial Instruments:
Presentation and Disclosure’, Australian
Accounting Standard AASB 139 ‘Financial
Instruments: Recognition and Measurement’and Australian Accounting Standard AASB 4‘Insurance Contracts’, comparative figuresfor 2005 have been restated. The Group hastaken the exemption available under AASB 1
to apply AASB 132, AASB 139 and AASB 4
from 1 October 2005.
The presentation currency used in thisconcise financial report is Australian Dollars.

Special purpose and off-balance
sheet entities;

Goodwill and valuation of goodwill in
ANZ National Bank Limited.
Details of all significant accounting policies
and critical accounting estimates andjudgements are contained in the 2006 ANZ
Financial Report which can be obtained
from anz.com.

Simplified Divisional Structure – From 1 May
2006 the Group simplified its structure into
the following divisions; Personal, Institutional,
New Zealand and Partnerships & Private Bank.
Investment in China’s Tianjin City
Commercial Bank: During the year ANZ
completed a 20% (US$111.4 million)
investment in China’s Tianjin City Commercial
Bank. ANZ is the first foreign bank to own a
20 per cent shareholding in a Chinese bank.
Settlement of the NHB Insurance Claim:
During the year ANZ settled its $130 million
claim against a number of reinsurers in
relation to the National Housing Bank
(NHB) matter. $113 million pre-tax profit
was recovered in relation to the longrunning dispute.
New Property Strategy: ANZ made adecision during the year to progress a newproperty strategy with the development ofa purpose-built campus in Melbourne by
the year 2009.

96  ANZ Concise Annual Report 2006

4: ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDSThe 2006 ANZ Financial Report is the Group’s first annual report prepared in accordance with AIFRS. The accounting policies have been
consistently applied to all periods presented and the opening AIFRS balance sheet as at 1 October 2004, except in relation to Australian
Accounting Standard AASB 132 ‘Financial Instruments: Presentation and Disclosure’, Australian Accounting Standard AASB 139 ‘Financial
Instruments: Recognition and Measurement’, and Australian Accounting Standard AASB 4 ‘Insurance Contracts’. The Group has taken the
exemption available under Australian Accounting Standard AASB 1 ‘First-time adoption of Australian Equivalents to International Financial
Reporting Standards’ to apply these accounting standards from 1 October 2005.
Reconciliations and descriptions of the effect of transition to AIFRS on the Group’s reported income statement, balance sheet and cash flow
statement are set out in Note 51 of the ANZ Financial Report. A summary of this information is set out below and on the following page.

Effect of transition to AIFRS(i) Impact on the balance sheet

1 Oct 2005$m

30 Sept 2005$m

1 Oct 2004$m

Total assets under AGAAP
Adjustments from 1 October 2004
Adjustments from 30 September 2005
Credit loss provisioning
Fee revenue
Derivative reclassification and accounting
Financial instruments remeasurement
Reclassification of StEPS
Accounting for INGA
Goodwill
Defined benefit superannuation schemes
Share based payments
Securitisation vehicles
Other
Total assets under AIFRS
Total liabilities under AGAAP
Adjustments from 1 October 2004
Adjustments from 30 September 2005
Derivative reclassification and accounting
Financial instruments remeasurement
Reclassification of StEPSDefined benefit superannuation schemes
Share based payments
Securitisation vehicles
Taxation
Other
Total liabilities under AIFRS
Total equity under AGAAP
Adjustments to retained earnings
From 1 October 2004
From 30 September 2005
Credit loss provisioning
Fee revenue
Derivative accounting
Financial instruments remeasurement
Reclassification of StEPS
Accounting for INGA
Goodwill
Defined benefit superannuation schemes
Share based payments
Securitisation vehicles
Resetting of reserves
Taxation
Other
Adjustments to reserves
From 1 October 2004
From 30 September 2005
Credit loss provisioning
Derivative accounting
Financial instruments remeasurement
Accounting for INGA
Share based payments
Resetting of reserves
Adjustments to share capital
From 1 October 2004
From 30 September 2005
Reclassification of StEPS
Share based payments
Taxation
Total equity under AIFRS

295,9661
–
4,919
184
(276)
89
(199)
7
(138)
–
–
–
–
(14)
300,538

295,9661
5,090
–
–
–
–
–
–
–
224
(7)
5
(388)
(5)
300,885259,345
–
–
–
–
–
–
–
–
–
59
–
5,026
5
264,435

276,4781
–
4,869
81
(145)
1,000
–
–
–
–
6
282,289
19,488276,4781
5,286
–
–
–
–
(31)
4
(388)
–
(2)
281,347
19,488241,420
–
–
–
–
–
200
24
5,029
(18)
51
246,706
17,925

–
253
207
(276)
(153)
(37)
(6)
(146)
–
–
–
–
–
–
(20)

71
–
–
–
–
–
–
–
224
24
(63)
–
–
–
(3)

–
–
–
–
–
–
–
–
–
(141)
(4)
(3)
249
16
(46)

–
(182)
(23)
161
(17)
8
–
–

(205)
–
–
–
–
–
23
–

–
–
–
–
–
–
44
(249)

–
(21)
(987)
–
–
18,249

(62)
–
–
41
–
19,538

–
–
–
(64)
2
17,7291 Includes restatement of derivative financial assets and liabilities not intended to be settled on a net basis.

Financial Statements  97

Effect of transition to AIFRS (continued)(ii) Impact on the income statement
2005$mProfit attributable to shareholders under AGAAP
Goodwill amortisation
Share based payments
Other
Profit attributable to shareholders under AIFRS

3,018
224
(63)
(4)
3,175

(iii) Impact on the statement of cash flows
The adoption of AIFRS has not resulted in any material adjustments to the statement of cash flows.

5: Dividends
Ordinary Dividends
2006
$m

2005
$m

Interim dividend
Final dividend
Bonus option plan adjustment

1,024
1,0781
(34)

930
9831
(36)

Dividends on ordinary shares

2,068

1,877

1 Dividends are not accrued and are recorded when determined. Final dividend of $1,267 million for 2006 not included in above table.

A fully franked final dividend of 69 cents, is proposed to be paid on each fully paid ordinary share on 15 December 2006 (2005: final dividendof 59 cents, paid on 16 December 2005, fully franked). The 2006 interim dividend of 56 cents, paid 3 July 2006, was fully franked (2005: interim
dividend of 51 cents paid on 1 July 2005, fully franked).
The tax rate applicable to the franking credits attached to the interim dividend and to be attached to the proposed final dividend is 30%(2005: 30%).

Dividend Franking Account
The amount of franking credits available to the Company for the subsequent financial year is $341 million (2005: $78 million), after adjustingfor franking credits that will arise from the payment of tax on Australian profits for the 2006 financial year, $543 million of franking credits
which will be utilised in franking the proposed final dividend and franking credits that may not be accessible 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 theserequirements caused by the payment of cash dividends is monitored.
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 that a bank under its supervision must consult with it before declaring a coupon payment on a
Tier 1 instrument, including a dividend if the bank has incurred a loss, or proposes to pay coupon payments on Tier 1 instruments (including
dividends), which exceed the level of current year profits.

Dividend Reinvestment Plan
During the year, 3,545,901 ordinary shares were issued at $23.85 per share, and 3,039,401 ordinary shares at $26.50 per share, under thedividend reinvestment plan (2005: 3,900,116 ordinary shares at $19.95 per share, and 3,406,775 ordinary shares at $21.85 per share). All
shareholders can elect to participate in the dividend reinvestment plan.

Bonus Option Plan
Dividends paid during the year have been reduced as a result of certain shareholders participating in the bonus option plan and foregoing allor part of their right to dividends. These shareholders were issued bonus shares.
During the year, 1,384,144 ordinary shares were issued under the bonus option plan (2005: 1,749,584 ordinary shares).

98  ANZ Concise Annual Report 2006

Preference Dividends
2006
$m

2005
$m

ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)1
Euro Trust Securities

–
27

66
18

Dividends on preference shares

27

84

1 Under AIFRS, the ANZ StEPS issue is now treated as loan capital with distributions being reported as an interest expense in the financial year ended 30 September 2006.

ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)
On 23 September 2003, the Group issued 10 million ANZ StEPS at $100 each, raising $1 billion ($987 million net of issue costs of $13 million).
ANZ StEPS comprise 2 fully paid securities – an interest paying unsecured note issued by a New Zealand subsidiary (ANZ Holdings (New
Zealand) Limited) which is stapled to a fully paid preference share issued by the Company.
Dividends are not payable on the preference share while it is stapled to the note. If distributions are not paid on ANZ StEPS, the Company
may not pay dividends or return capital on its ordinary shares or any other share capital or security ranking equal or below the preference
share component of ANZ StEPS. Distributions are reported as interest expense from 1 October 2005 due to the reclassification of thepreference securities as loan capital under AIFRS.

Euro Trust Securities
On 13 December 2004, the Group issued 500,000 Euro Floating Rate Non-cumulative Trust Securities (‘Euro Trust Securities’) at €1,000
each into the European market, raising €500 million (A$871 million at the spot rate at the date of issue, net of issue costs). The Euro Trust
Securities comprise 2 fully paid securities – an interest paying unsecured note issued by a United Kingdom subsidiary (ANZ Jackson Funding
PLC) and a fully paid €1,000 preference share issued by the Company, which are stapled together and issued as a Euro Trust Security by ANZ
Capital Trust III.
Distributions on Euro Trust Securities are non-cumulative and are payable quarterly in arrears (on 15 March, 15 June, 15 September,
15 December of each year) based upon a floating distribution rate equal to 3 month EURIBOR rate plus a 66 basis point margin. At eachpayment date the 3 month EURIBOR rate is reset for the next quarter. Dividends are not payable on the preference share while it is stapled
to the note. If distributions are not paid on Euro Trust Securities, the Company may not pay dividends or return capital on its ordinary sharesor any other share capital or security ranking equal or below the preference share component.

Financial Statements  99

6: Segment Analysis
For management purposes the Group is organised into three major business segments comprising Personal, Institutional and New ZealandBusiness. A description of each of the operating business segments, including the types of products and services each segment provides tocustomers, is detailed in the 2006 ANZ Financial Report.
As the composition of segments has changed over time, September 2005 comparatives have been adjusted to be consistent with the 2006
segment definitions detailed in the 2006 ANZ Financial Report. September 2005 business segment comparatives have not been adjusted for
AASB 132 and AASB 139.
Business Segment Analysis1, 2
Consolidated
At 30 September 2006

Personal$m

Institutional$m

New
ZealandBusinesses$mExternal interest income
External interest expense
Net intersegment interest

9,323(2,663)(3,647)

7,393(4,774)
(550)

5,421
(3,450)(452)

164(4,471)
4,649

22,301(15,358)–

Net interest income
Other external operating income
Share of net profit/loss of equity accounted investments
Net intersegment income

3,013
1,180
7
34

2,069
1,245
15
(70)

1,519
463
20
(2)

342
127
152
38

6,943
3,015
194
–

Operating income

4,234

3,259

2,000

659

10,152

Profit after income tax

1,256

1,396

683

353

3,688

Total external assets

136,730

119,104

66,064

13,873335,771

Total external liabilities

67,449108,686

57,15382,577

315,865

Consolidated
At 30 September 2005

Personal$m

Institutional$m

New
ZealandBusinesses$mOther3$m

Consolidated
total
$m

External interest income
External interest expense
Adjust for intersegment interest

7,996(2,294)(3,113)

4,603(3,721)
508

4,779(3,058)(223)

341(2,828)2,828

17,719(11,901)–

Net interest income
Other external operating income
Share of net profit/loss of equity accounted investments
Net intersegment income

2,589
1,117
7
41

1,390
1,680
5
(75)

1,498
530
8
4

341
50
181
30

5,818
3,377
201
–

Operating income

3,754

3,000

2,040

602

9,396

Profit after income tax

1,095

1,213

639

228

3,175

Total external assets

122,372

105,455

61,98011,078300,885

Total external liabilities

60,35091,75555,45873,784

281,347

Other3$m

Consolidated
total
$m

Business Segment Analysis1, 2

1 Results are equity standardised.
2 Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3 Includes Partnerships & Private Bank, Treasury, Operations, Technology and Shared Services, Corporate Centre, Risk Management and Group Financial Management. Also includes the London
headquartered project finance and certain structured finance transactions that ANZ has exited as part of its de-risking strategy.

100  ANZ Concise Annual Report 2006

7: EXCHANGE RATESThe exchange rates used in the translation of the results and the assets and liabilities of major overseas branches and controlled entities are:
2006

Euro
Great British pound
New Zealand dollar
United States dollar

2005

Closing

Average

Closing

Average

0.5882
0.3982
1.14550.74760.60710.41501.14330.74680.63250.43251.09980.76230.60240.4142
1.08470.7657

8: Events Since the End of the Financial Year
On 1 September 2006, the Group announced that it had agreed to sell Esanda Fleetpartners in Australia and New Zealand to Nikko Principal
Investments Australia, the Australian private equity arm of Nikko Cordial Corporation for approximately $380 million. The profit after tax on saleis anticipated to be approximately $130 million. This sale was completed during October 2006. Esanda Fleetpartners contributed approximately$20 million to the Group’s net profit after tax for the year ended 30 September 2006.
There have been no other significant events from 30 September 2006 to the date of this report.

Financial Statements  101

Directors’ Declaration
The directors of Australia and New Zealand
Banking Group Limited declare that in theiropinion the accompanying Concise Financial
Report of the Consolidated Group for theyear ended 30 September 2006 complies
with Australian Accounting Standard
AASB 1039 ‘Concise Financial Reports’and has been derived from, or is consistent
with, the full financial report for the year.
In our declaration in the Group’s 2006
Financial Report required by section 295(4) of
the Corporations Act 2001 we declared that:a) in the directors’ opinion, the financial
statements and notes of the Company andthe consolidated entity have been preparedin accordance with the Corporations Act
2001, including that they:i) comply with applicable Australian
Accounting Standards, and othermandatory professional reporting
requirements; andii) give a true and fair view of thefinancial position of the Company
and of the consolidated entity as
at 30 September 2006 and of theirperformance as represented by the
results of their operations and their
cash flows, for the year ended onthat date; andb) in the directors’ opinion, theremuneration disclosures that are containedon pages 70 to 91 of the Remuneration
Report in the Directors’ Report found in Part
2 of 2 of the Concise Annual Report 2006
comply with Australian Accounting Standard
AASB 124 ‘Related Party Disclosures’ whenread in conjunction with the Corporations
Act 2001; andc) the directors have received thedeclarations required by section 295Aof the Corporations Act 2001; andd) in the directors’ opinion, there arereasonable grounds to believe that theCompany will be able to pay its debts as
and when they become due and payable.
Signed in accordance with a resolutionof the directors.

Charles Goode
Director

John McFarlane
Chief Executive Officer
1 November 2006

Independent audit report on
concise financial report to themembers of Australia and New
Zealand Banking Group Limited
Scope
We have audited the concise financial reportof Australia and New Zealand Banking
Group Limited and its controlled entities
for the financial year ended 30 September
2006, consisting of the income statement,
statement of recognised income andexpense, balance sheet, statement of cash
flow, accompanying notes 1 to 8 and theaccompanying discussion and analysis
on the income statement, statement ofrecognised income and expense, balance
sheet and statement of cash flow set out
on page 67. We have audited information
disclosed by the Company, as permitted
by the Corporations Regulations 2001,
about the remuneration of directors andexecutives (‘remuneration disclosures’),required by Australian Accounting Standard
AASB 124 Related Party Disclosures, under
the heading ‘Remuneration report’ on pages
70 to 91 of the directors’ report and not in
the concise financial report. The company’s
directors are responsible for the concise
financial report and the remuneration
report. We have conducted an independent
audit of the concise financial report andthe remuneration report in order to express
an opinion on them to the members of
the company.
Our audit has been conducted inaccordance with Australian AuditingStandards to provide reasonable assurance
whether the concise financial report is freeof material misstatement. We have also
performed an independent audit of thefull financial report and the remuneration
report of Australia and New Zealand Banking
Group Limited and its controlled entities forthe year ended 30 September 2006. Our
audit report on the full financial report andthe remuneration report was signed on
1 November 2006, and was not subject
to any qualification.
Our procedures in respect of the auditof the concise financial report included
testing that the information in the concise
financial report is consistent with the full
financial report and examination, on atest basis, of evidence supporting theamounts, discussion and analysis andother disclosures which were not directly
derived from the full financial report. These
procedures have been undertaken to form
an opinion whether, in all material respects,

102  ANZ Concise Annual Report 2006

the concise financial report is presented
fairly in accordance with Australian
Accounting Standard AASB 1039 ‘Concise
Financial Reports’.
The audit opinion expressed in this reporthas been formed on the above basis.

Audit Opinion
In our opinion the concise financial report ofAustralia and New Zealand Banking Group
Limited and its controlled entities for theyear ended 30 September 2006 complies
with Australian Accounting Standard
AASB 1039 ‘Concise Financial Reports’.

KPMG
MelbourneMichelle Hinchliffe
Partner
1 November 2006

Copy of the auditor’s
independence statement
LEAD AUDITOR’s INDEPENDENCE
STATEMENTI state that, to the best of my knowledge
and belief, in relation to the audit for thefinancial year ended 30 September 2006
there have been:a) no contraventions of the auditor
independence requirements of the
Corporations Act 2001 in relation to theaudit, other than contraventions (relating
to minor matters rectified within 7 days
and reported to the directors) coveredby ASIC Class Order 05/910; andb) no contraventions of any applicablecode of professional conduct in relation
to the audit.

KPMG
MelbourneMichelle Hinchliffe
Partner
1 November 2006

shareholder information

Ordinary shares
At 6 October 2006, the twenty largest holders of ordinary shares held 1,061,035,417 ordinary shares, equal to 57.77% of the total issued
ordinary capital.
Name

Number of shares%

1 NATIONAL NOMINEES LIMITED
2 CHASE MANHATTAN NOMINEES LTD
3 WESTPAC CUSTODIAN NOMINEES LIMITED
4 CITICORP NOMINEES PTY LIMITED
5 ANZ NOMINEES LIMITED
6 RBC GLOBAL SERVICES AUSTRALIA
7 COGENT NOMINEES PTY LIMITED
8 QUEENSLAND INVESTMENT CORPORATION
9 HKBA NOMINEES LIMITED
10 AMP LIFE LIMITED

224,059,389
217,393,315
193,204,045
93,182,832
89,258,228
52,179,530
47,922,326
34,152,561
21,239,228
19,410,884

12.20
11.84
10.52
5.07
4.86
2.84
2.61
1.86
1.16
1.06

Name

11 WESTPAC FINANCIAL SERVICES LIMITED
12 PSS BOARD
13 POTTER WARBURG NOMINEES PTY LIMITED
14 UBS NOMINEES PTY LTD
15 SUNCORP CUSTODIAN SERVICES PTY LIMITED
16 ANZEST PTY LTD (DEFERRED SHARE PLAN A/C)
17 IAG NOMINEES PTY LIMITED
18 VICTORIAN WORKCOVER AUTHORITY
19 ANZEST PTY LTD (ESAP SHARE PLAN A/C)
20 AUSTRALIAN FOUNDATION INVESTMENTCOMPANY LIMITED

Total

Number of shares%

10,887,249     9,222,086     8,913,914     7,250,000     6,332,335     6,083,136     5,445,352     5,126,337
4,895,621

0.59
0.50
0.48
0.39
0.34
0.33
0.30
0.28
0.27

4,877,049

0.27

1,061,035,417

57.77

Distribution of shareholdings
At 6 October 2006
Range of shares

Number of holders% of holders

Number of shares% of shares

1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
Over 100,000

162,364
103,346
15,521
9,739
438

55.72
35.46
5.33
3.34
0.15

71,650,288
227,422,508
108,433,556
205,854,483
1,223,214,237

3.90
12.38
5.91
11.21
66.60

Total

291,408100

1,836,575,072

100

At 6 October 2006:
there were no entries in the register of Substantial Shareholdings;
the average size of holdings of ordinary shares was 6,302 (2005: 6,927) shares; andthere were 5,023 holdings (2005: 5,037 holdings) of less than a marketable parcel (less than $500 in value or 19 shares based on the market price of $ 27.42), which is less than 1.73% of thetotal holdings of ordinary shares.

Voting rights of ordinary shares
The Constitution provides for votes to be cast:i)  on show of hands, 1 vote for each shareholder; andii) on a poll, 1 vote for each fully paid ordinary share.

On-market buy-back
The Group commenced an on-market buyback of $350 million of ordinary equity on 10 January 2005. The buy-back period was extended to
30 March 2006. The buy-back was completed on 14 March 2006 and the Group had repurchased 15.7 million shares at an average cost of$22.26 per share.

Shareholder Information 103

Preference Shares – ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)
At 6 October 2006, the twenty largest holders of ANZ StEPS held 4,427,873 securities, equal to 44.28% of the total issued securities.
Name

1 ANZ NOMINEES LIMITED
2 NATIONAL NOMINEES LIMITED
3 CHASE MANHATTAN NOMINEES LTD
4 POTTER WARBURG NOMINEES PTY LIMITED
5 CITICORP NOMINEES PTY LIMITED
6 UBS NOMINEES PTY LTD
7 UCA CASH MANAGEMENT FUND LTD
8 WESTPAC CUSTODIAN NOMINEES LIMITED
9 WOODROSS NOMINEES PTY LTD
10 COGENT NOMINEES PTY LIMITED
11 QUESTOR FINANCIAL SERVICES LIMITED(TPS RF A/C)
12 RBC GLOBAL SERVICES AUSTRALIA

Numberof securities%

935,718
840,036
768,498362,629
325,124
216,366
152,500
131,358
101,185
93,646

9.36
8.40
7.68
3.63
3.25
2.16
1.52
1.31
1.01
0.94

62,564
61,904

0.63
0.62

Name

13 TRANSPORT ACCIDENT COMMISSION
14 THE AUSTRALIAN NATIONAL UNIVERSITY
15 AUSTRALIAN EXECUTOR TRUSTEES LIMITED(NO 1 ACCOUNT)
16 SHARE DIRECT NOMINEES PTY LTD(GLOBAL MARKETS ACCOUNT)
17 CAMBOOYA PTY LTD
18 CITICORP NOMINEES PTY LIMITED(CFSIL CWLTH SPEC 5 A/C)
19 RBC DEXIA INVESTOR SERVICES AUSTRALIANOMINEES PTY LIMITED (GSJBW A/C)
20 UOB KAY HIAN PRIVATE LIMITED(CLIENTS A/C)

Total

Numberof securities%

60,00050,0000.60
0.50

49,9270.50

46,92245,2690.47
0.45

42,8800.43

40,8070.41

40,5400.41

4,427,873

44.28

Distribution of ANZ StEPS holdings
At 6 October 2006
Range of securities

Number of holders% of holders

Number of securities% of securities

1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
Over 100,000

11,344
631
60
47
9

93.82
5.22
0.50
0.39
0.07

2,984,544
1,433,210
481,821
1,267,011
3,833,414

29.85
14.33
4.82
12.67
38.33

Total

12,091100

10,000,000

100

At 6 October 2006: There were 3 holdings (2005: 1 holding) of less than a marketable parcel (less than $500 in value or 5 securities based on the market price of $ 102.00), which is less than 0.03% of
the total holdings of StEPS.

Voting rights of ANZ StEPSA preference share does not entitle its holder to vote at any general meeting of ANZ except in the following circumstances:a) on a proposal:i) to reduce the share capital of ANZ;ii) that affects rights attached to the preference shares;iii) to wind up ANZ; oriv) for the disposal of the whole of the property, business and undertaking of ANZ;b) on a resolution to approve the terms of a buy-back agreement;c) during the period in which a dividend which has been declared as payable on a dividend payment date has not been paid in full; ord) during the winding-up of ANZ.
If a poll is conducted on a resolution on which a holder is entitled to vote, the holder has one vote for each preference share held.

104  ANZ Concise Annual Report 2006

Employee shareholder information
At the Annual General Meeting in January
1994, shareholders approved an aggregate
limit of 7% of all classes of shares andoptions, which remain subject to the rulesof a relevant incentive plan, being held byemployees and directors. At 30 September
2006 participants held 2.25% (2005: 2.41%)of the issued shares and options of ANZ
under the following incentive plans:
ANZ Employee Share Acquisition Plan;
ANZ Employee Share Save Scheme;
ANZ Share Option Plan;ANZ Directors’ Share Plan; andANZ Directors’ Retirement Benefit Plan.

Stock exchange
The Group’s ordinary shares are listed on
the Australian Stock Exchange and the New
Zealand Stock Exchange.
The Group’s other stock exchange listings
include:Australian Stock Exchange – ANZ Stapled
Exchangeable Preferred Securities (ANZStEPS) [ANZ Holdings (New Zealand) Limitedand Australia and New Zealand Banking
Group Limited]; senior and subordinateddebt [Australia and New Zealand Banking
Group Limited];
Channel Islands Stock Exchange –Subordinated debt [ANZ Jackson Funding PLC];
London Stock Exchange – Senior andsubordinated debt securities issued off theEuro Medium Term Note program [Australia
and New Zealand Banking Group Limitedand ANZ National (Int’l) Limited]; senior debt
securities issued off the US Medium Term
Note program [ANZ National (Int’l) Limited];
Luxembourg Stock Exchange – Senior debt
[ANZ National Bank Limited] and senior andsubordinated debt [Australia and New Zealand
Banking Group Limited]; Non-cumulative Trust
Securities [ANZ Capital Trust III];New York Stock Exchange – American
Depositary Receipts [Australia and New
Zealand Banking Group Limited];

New Zealand Stock Exchange – Seniorand subordinated debt [ANZ National Bank
Limited]; andSwiss Stock Exchange – Senior debt
[Australia and New Zealand Banking
Group Limited].

ANZ StEPS
In September 2003, 10 million ANZ Stapled
Exchangeable Preferred Securities (ANZStEPS) were issued at an issue price of$100.00 each. Each ANZ StEPS is a stapled
security comprising a Preference Share inAustralia and New Zealand Banking Group
Limited and an unsecured Note issued by ANZ
Holdings (New Zealand) Limited. ANZ StEPS
are quoted on the Australian Stock Exchange.

American depositary receipts
The Bank of New York is the Depositary for
ANZ’s American Depositary Receipt (ADR)
program in the United States of America.
The ADRs are listed on the New York Stock
Exchange. ADR holders should deal directlywith the Bank of New York, New York on all
matters relating to their ADR holdings, by
telephone on 1-888-269-2377 (toll freefor domestic callers), 1-610-382-7836(for international callers) or by email toshareowners@bankofny.com.

Euro Trust Securities
In December 2004, ANZ issued 500,000
Floating Rate Non-cumulative Trust Securities
at an issue price of €1,000 each through
ANZ Capital Trust III. Each Euro Trust Security
represents an interest in a stapled security
comprising a Preference Share in Australia
and New Zealand Banking Group Limited
and an unsecured Note issued by ANZ
Jackson Funding PLC. The Euro Trust
Securities are quoted on the Luxembourg
Stock Exchange, and the unsecured Note
is listed on the Channel Islands Stock
Exchange but cannot be traded separatelyfrom the Euro Trust Securities.

Shareholder Information 105

glossary of financial terms

Adjusted common equity (ACE) – Tier one
capital less preference shares at current
rates, deductions from regulatory capital andtransitional capital relief as approved by theAustralian Prudential Regulation Authority.
AIFRS – Australian Equivalents toInternational Financial Reporting Standards.
Arrears – a contractually due and payable
sum which remains overdue/unpaid.
Assets – resources controlled by the Group.
Assets can be in the form of money, suchas cash or amounts owed; they can be fixed
assets such as property or equipment; orthey can be intangibles such as a company’s
goodwill, trademarks and patents. For
accounting purposes, assets are future
economic benefits which are controlled by
the entity and result from past transactions or
events. For banks, loans are assets.
Available-for-sale securities – comprisenon-derivative financial assets which theGroup considers to be ‘available for sale’
but which are not considered to be
trading securities.
Bonds and notes – the Group’s liability
for long-term financing issued in wholesalemarkets.
Capital adequacy ratio – a measure thatcompares our regulatory capital with our
risk-weighted assets.
Cash earnings per share – earnings per shareexcluding significant items and non-core items.
Collective provision – Provision for Credit
Losses that are inherent in the portfolio
but not able to be individually identified;presently unidentified impaired assets. A
collective provision may only be recognised
when a loss event has already occurred.
Losses expected as a result of future events,
no matter how likely, are not recognised.

Consolidated balance sheet – a financial
statement that reports a company’s assets
or resources and the claims against them –including liabilities or obligations ofa business and shareholders’ equity.
Cost to income ratio (CTI) – a businessefficiency measure. It’s the ratio of our
expenses to our income.
Credit rating – a measurement of thecredit-worthiness of a business. AAA is
the top credit rating accorded by ratings
agencies such as Moody’s Investors Service
and Standard & Poor’s. The better our credit
rating, the cheaper we can borrow moneyfrom capital markets. ANZ’s long-term credit
rating is AA–.
Credit risk – the potential for loss arising fromthe failure of a customer or counter-party tomeet its contractual obligations.
Customers’ liability for acceptances – theamounts owed to the Group from customers
for acceptances, a form of lending.
Deferred tax assets – the future tax savingsto the Group as a result of timing differencesthat arise due to different treatment oftransactions under accounting and tax rules.
Deposits and other borrowings – ANZ’slargest liability, this represents ANZ’sobligations to our depositors.
Dividend (final) – the amount of theCompany’s after tax earnings determinedand paid to shareholders on the day of theAnnual General Meeting.
Dividend (interim) – the amount of theCompany’s after-tax earnings determinedand paid to ordinary shareholders at the
beginning of July.
Dividend per share (DPS) – the amount of theCompany’s after tax earnings determined andpaid to ordinary shareholders. It is usually
expressed as a number of cents per share,or as a dividend per share.

106 ANZ Concise Annual Report 2006

Due from other financial institutions – themonies owed to ANZ by other banks andfinancial institutions.
Earnings per share (EPS) – the amount, in
dollars, of earnings divided by the numberof shares. For example, if the earnings
are $2 million and 1 million shares areoutstanding, the earnings per share would be$2.00 ($2 million ÷ 1 million shares = $2.00).
The earnings figure is based on profit after tax
less preference share dividends.
Economic value added (EVA™) – a measureof risk-adjusted accounting profit. It is basedon operating profit after tax, adjusted for
one-off items, the cost of capital, imputationcredits and economic credit costs.
Equity – the residual interest in the assets ofa company after deducting all liabilities. Asa publicly listed company, our shareholders
own these net assets. This is calledshareholders’ equity.
Equity standardisation – EVA™ 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 thebusiness unit’s risk adjusted capital. Thisenhances comparability of business unit
performance. Geographic results are notequity standardised.
Franked dividends – dividends paid by
the company out of profits on which thecompany has already paid Australian tax.
Full-time equivalent (FTE) – our total staff
numbers based on the working week. For
example, two part-time staff in Australia
each working 20 hours a week would be
defined as one FTE as their hours add up
to 40 hours a week.

Goodwill – the remaining amount, of thehistoric excess over net asset value paid by
ANZ for the acquisition of other companies.
Impaired assets – loans or other credit
facilities where there is reasonable doubt
about the collectibility of interest, fees
(past and future) or principal outstanding,or where concessional terms have been
provided because of the financial difficultiesof the customer.
Income tax liabilities – the amounts payable
in respect of income tax.
Individual provision charge – the amountof impairment of those loans and advances
assessed for impairment on an individual
basis (as opposed to on a collective basis).
Interest margin – a measure which tells
us how much interest we have generated
by lending money after accounting for ourcosts of borrowing that money, either from
customers or financial markets. The interest
margin is calculated by dividing net interestby average interest-earning assets. This isexpressed as a percentage.
Liability – a company’s obligations to a lender,
supplier of goods and services, a tax authority
and others. For accounting purposes, liabilities
are future sacrifices of economic benefits thatan entity is obliged to make as a result of pasttransactions or events. For ANZ, liabilities arelargely money we have borrowed to fund ourlending activities.
Liability for acceptances – the amount owed
to customers who have purchased customer
acceptances from the Group.
Liquid assets – the cash or cash equivalents
held by ANZ.
Loan capital – the long-term funding that would
rank behind other creditors, and ahead of only
shareholders in the event of a winding up.
Market capitalisation of ordinary shares –the stock market’s assessment of a company’svalue, calculated by multiplying the number ofshares on issue by the current share price.
Market risk – the potential loss the Group may
incur from changes to interest rates, foreignexchange rates or the prices of equity sharesand indices, commodities, debt securities
and other financial contracts, including
derivatives. It also includes the risk that theGroup will incur due to increased interest
expenses arising from funding requirements
during periods of poor market liquidity.
Net loans and advances – ANZ’s largest asset
by value, this consists of the loans ANZ has
advanced to individuals and organisations,less provision for credit impairment.

Net profit after tax (NPAT) – a company’s net
profit after all taxes, expenses and provision
for credit impairment have been deductedfrom the operating income.
Net tangible assets (NTA) – the share capitaland reserves attributable to shareholdersof the company less preference shares,
goodwill and other intangible assets.
Non-performing loans – loans where there
is reasonable doubt about the collectibilityof interest, fees (past and future) or principal
outstanding, or where concessional terms
have been provided because of the financial
difficulties of the customer.
Non-interest income – includes fees, profits
on capital markets trading, foreign exchangeearnings and any other revenue that is notinterest income.
Operating revenue – the income ANZ
generates from its activities. This includes net
interest, fee income and earnings from capital
markets and foreign exchange dealings.
Operational risk – the direct or indirect loss
resulting from inadequate or failed internal
processes, systems or from external events.
Ordinary and preference share capital – theamounts received when shares were originallysubscribed for.
Organic growth – where we have grown assets
or liabilities through growth in our existing
businesses rather than through acquisitionof another company.
Other assets – includes assets that do not
fit into the categories listed including interest
accrued and not yet received.
Payables and other liabilities – includes
various operating creditors and accrued
interest payable.
Premises and equipment – the value of all
the land, buildings, furniture, equipment, etc.
which are owned by the Group.
Profit per full-time employee – productivity
measure that shows, on average, howmuch profit is earned by each full-time
equivalent employee.
Provisions – the Group’s accrued obligations
for long service leave, annual leave and otherobligations, which although known, are not
yet payable.
Regulatory deposits – the cash ANZ has
deposited at central banks to meet
regulatory requirements.
Reserves – retained profits plus surpluses
or deficits arising from, for example, foreignexchange gains or losses on offshore
operations, available-for-sale securities
and cash flow hedging.

Glossary of Financial Terms 107

Retained earnings – the amount of profits
retained by the Group.
Return on equity (ROE) – a calculation whichshows the return the company has made on themoney ordinary shareholders have invested in
ANZ. It is expressed as a percentage.
Risk-weighted assets – the Group’s assets
adjusted for the risk of the counter-party.
The relative risk weight for each counter-party
is determined by the Bank for International
Settlements. For example, a mortgage with a
LVR (loan to valuation ratio) below 80 per centcarries a risk weighting of just 50 per cent.
Service transfer pricing – is used to allocate
services that are provided by central areas of
the company to each of its business units.
Shares in associates – ANZ’s investment incompanies where the interest is large enoughto provide influence rather than control overthe company.
Significant items – events which are ‘one-off’and not expected to be repeated. These aredescribed in detail within the results. Special
notations are made for any calculations which
either include or exclude these transactions.
Tier one capital – consists of Shareholders’Equity plus Hybrid Loan Capital, lessspecific deductions. Tier one capital before
deductions is divided into “Fundamental
Capital” (Shareholders’ Equity plus some
exclusions and deductions) and “Residual
Capital” (Hybrid Tier one instruments) withlimits required for each category.
Tier two capital – consists of Upper Tier
two capital, being provisions for credit
impairment, equity accounted profits andreserves, and perpetual subordinatednotes, and Lower Tier two capital which isdated subordinated notes. Limits apply
to each category and sub-category of Tier
two capital.
Total shareholder return (TSR) – thepercentage return to ordinary shareholders
from share price movements and dividends.
Trading securities – the securities held by ANZ
that are regularly bought and sold as part ofits normal trading activities with a view toshort-term profit taking.

different.
Australia and New Zealand Banking Group Limited
www.anz.com ABN 11 005 357 522

Concise Annual Report 2006 - Part 2 of 2 - Annual Review