creating the bank oftomorrow

today

2002 Financial Report

Table of Contents
Page
Statements of Financial Performance2
Statements of Financial Position
3
Statements of Changes in Shareholders’ Equity 4
Statements of Cash Flows5
Notes to the Financial Statements
1 Accounting Policies
62 Income
8
3 Expenses
8
4 Equity Instruments Issued to
Employees
10
5 Remuneration of Auditors
10
6 Items Reported as Abnormal in
Prior Periods
11
7 Income Tax Expense
11
8 Dividends
12
9 Earnings per Ordinary Share
13
10 Liquid Assets
13
11 Due from Other Financial Institutions
14
12 Trading Securities
14
13 Investment Securities
15
14 Net Loans and Advances
18
15 Impaired Assets
21
16 Provisions for Doubtful Debts
23
17 Customers’ Liabilities for Acceptances 24
18 Regulatory Deposits
24
19 Shares in Controlled Entities, Associates
and Joint Venture Entities
25
20 Deferred Tax Assets
26
21 Goodwill
26
22 Other Assets
26
23 Premises and Equipment
27
24 Due to Other Financial Institutions
28
25 Deposits and Other Borrowings
29
26 Income Tax Liabilities
29

Contents
27 Payables and Other Liabilities
28 Provisions
29 Bonds and Notes
30 Loan Capital
31 Share Capital
32 Outside Equity Interests
33 Capital Adequacy
34 Average Balance Sheetand Related Interest
35 Interest Spreads and Net Interest
Average Margins
36 Market Risk
37 Interest Sensitivity Gap
38 Net Fair Value of Financial Instruments
39 Derivative Financial Instruments
40 Securitisation
41 Life Insurance
42 Segment Analysis
43 Notes to the Statements of Cash Flows
44 Controlled Entitites
45 Associates
46 Interests in Joint Venture Entities
47 Commitments
48 Contingent Liabilities andCredit Related Commitments
49 Superannuation Commitments
50 Fiduciary Activities
51 Employee Share and Option Plans
52 Related Party Disclosures
53 Remuneration of Directors
54 Remuneration of Executives
55 US GAAP Reconciliation
56 Exchange Rates
57 Events Since the Endof the Financial Year

Page
30
30
30
31
32
33
33
35
38
39
41
43
45
51
52
53
55
57
58
58
59
60
63
64
64
67
69
70
71
76
76

Directors’ Declaration
Auditors’ Report
Critical Accounting Policies
Financial information
1 Cross Border Outstandings
2 Certificates of Deposit and Term
Deposit Maturities
3 Volume and Rate Analysis
4 Concentrations of Credit Risk
5 Doubtful Debts – Industry Analysis
6 Short Term Borrowings
Glossary
Alphabetical Index

Page
77
78
79
82
83
83
85
87
88
89
90

Statements of Financial Performance for the year ended 30 September 2002
Note

2002
$m

Total Income

2

12,007

Interest income
Interest expense2
3

Net interest income
Proceeds, net of costs, on disposalof investments
Carrying amount of assets given up

Consolidated
2001

The Company
2000
$m

2002
$m

2001
$m

12,824

14,031

9,061

10,1409,037(5,019)10,251(6,418)

10,241(6,440)6,426(3,813)

7,479(4,828)

4,018

3,833

3,801

2,613

2,651

566
(392)

–
–

–
–

780
(588)

–
–

Profit from disposal of investments
Other operating income
Prior period abnormal income

2
6

174
2,796
–

–
2,573
–

–
2,583
1,207

192
2,443
–

–
2,661
–

Operating income
Operating expenses
Prior period abnormal expenses

3
6

6,988
(2,905)–

6,406(3,092)–

7,591(3,314)
(986)

5,248
(2,388)–5,312(2,641)–

Profit before debt provision
Provision for doubtful debts

16

4,083
(860)

3,314
(531)

3,291
(502)

2,860
(710)

2,671
(414)

3,223

2,783

2,789

2,150

2,257

Profit before income tax
Income tax expense
Prior period abnormal tax

6

(898)
–

(911)
–

(863)
(177)

(643)
–

(647)
–

Total income tax expense

7

(898)

(911)

(1,040)

(643)

(647)

2,325

1,872

1,749

1,507

1,610

(3)

(2)

(2)

–

–

2,322

1,870

1,747

1,507

1,610

Currency translation adjustments,
net of hedges after tax
Revaluation of properties

(98)
–

197
–

170
31

(214)
–

195
–

Total adjustments attributable to shareholdersof the company recognised directly into equity

(98)

197

201

(214)

195

Total changes in equity other than those resulting
from transactions with shareholders as owners

2,224

2,067

1,948

1,293

1,805

n/a
n/a

n/a
n/a

Profit after income tax
Net profit attributable to outside
equity interests
Net profit attributable to shareholdersof the Company
1

Earnings per ordinary share (cents)
Basic
Diluted9

The notes appearing on pages 6 to 76 form an integral part of these financial statements
1 The results of 2002 include the impact of these significant transactions:• The sale of businesses to ING joint venture (profit after tax of $170 million);• National Housing Bank recovery ($159 million profit after tax); and• Special general provision for doubtful debts ($175 million charge after tax)
Further details on these transactions are shown in notes 2, 3 and 16

147.3
146.6

117.4
117.0

106.8
106.0

2
3

Statements of Financial Position as at 30 September 2002
Consolidated
2002
$m

2001
$m

2002
$m

2001
$m

18

7,410
3,815
5,873
3,609
132,060
13,796
–
–
178

7,794
4,829
4,827
3,487
123,657
14,324
–
4,774
133

5,994
2,649
5,219
2,593
99,90013,796
6,495
–
138

5,981
4,234
4,438
2,400
92,393
14,324
5,031
–
98

19
20
21
22
23

1,692
1,218
180
11,810
1,464

64
1,200
137
18,906
1,361

6,256
835
94
9,603
866

6,101
866
87
16,774731

183,105

185,493

154,438

153,458

10,860113,297
13,796–
1,340
12,4501,744–
14,7083,445

12,690104,874
14,324–
1,335
15,9482,142
4,458
15,3403,831

10,37285,258
13,796
3,895
921
10,703
1,611–
14,536
3,186

11,961
76,552
14,324
5,052
899
13,874
1,981–
15,175
3,576

Total liabilities

171,640

174,942

144,278

143,394

Net assets

11,465

10,551

10,16010,064

3,939
1,375
534
5,600

3,733
1,526
717
4,562

3,939
1,375
875
3,971

3,733
1,526
1,089
3,716

11,44817

10,53813

10,160–10,064–

11,465

10,551

10,16010,064

Note

AssetsLiquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Due from controlled entities
Life insurance investment assets
Regulatory deposits
Shares in controlled entities, associates
and joint venture entities
Deferred tax assets
Goodwill
Other assets
Premises and equipment
1

10
11
12
13
14
17

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

Shareholders’ equity
Ordinary share capitalPreference share capital
Reserves
Retained profits
Share capital and reserves attributable to shareholdersof the Company
Outside equity interests

24
25

26
27
28
29
30

31
31

32

Total shareholders’ equity
Derivative financial instruments
Commitments
Contingent liabilities and credit related commitments
The notes appearing on pages 6 to 76 form an integral part of these financial statements
1 Includes bills held in portfolio (September 2002: $1,453 million; September 2001: $1,933 million)

39
47
48

The Company

Statements of Changes in Shareholders’ Equity for the year ended 30 September 2002
Note

2002
$m

Consolidated
2001
$m

2000
$m

2002
$m

The Company
2001
$m

31

3,733
94
55
57
–
–
–
–

4,028
86
65
21
–
12
16
(495)

4,770
236
26
10
#
–
–
(1,014)

3,733
94
55
57
–
–
–
–

4,028
86
65
21
–
12
16
(495)

3,939

3,733

4,028

3,939

3,733

1,526
(151)

1,374
152

1,145
229

1,526
(151)

1,374
152

1,375

1,526

1,374

1,375

1,526

5,314

5,259

5,402

5,314

5,259

31
–

31
–

–
31

401
–

401
–

31

31

31

401

401

215

18

(152)

633

438

(98)

197

170

(214)

195

117

215

18

419

633

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

322
(85)

588
(266)

539
49

55
–

55
–

Total general reserve

237

322

588

55

55

149

149

149

–

–

534

717

786

875

1,089

Retained profits
Balance at start of year
Net profit attributable to shareholders of the Company

4,562
2,322

3,607
1,870

2,952
1,747

3,716
1,507

3,168
1,610

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

6,884
85
(1,252)
(117)

5,477
266
(1,062)
(119)

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

5,223
–
(1,252)–

4,778–(1,062)–Retained profits at end of year

5,600

4,562

3,607

3,971

3,716

Total shareholders’ equity attributable
to shareholders of the Company

11,448

10,538

9,795

10,16010,064

Share capital
Ordinary shares
Balance at start of year
Dividend reinvestment plan
Group employee share acquisition scheme
Group share option scheme
Group share purchase scheme
Small shareholder voluntary top up scheme
New Issues
Share buyback
Balance at end of year
Preference shares
Balance at start of year
Retranslation of preference share issues

31

Balance at end of year
Total share capital
Asset revaluation reserve
Balance at start of year
Revaluation of properties

1

Total asset revaluation reserve
Foreign currency translation reserve
Balance at start of year
Currency translation adjustments,
net of hedges after tax

2

Total foreign currency translation reserve
3

Capital reserve3

Total reserves

88

The notes appearing on pages 6 to 76 form an integral part of these financial statements# Amounts less than $500,000
Nature and purpose of reserves
1 Asset revaluation reserve
Prior to 1 October 2000, the asset revaluation reserve was used to record certain increments and decrements on the revaluation of non-current assets. As the Group has elected to adopt deemed costin accordance with AASB 1041, the balance of the reserve is not available for future non-current asset write downs while the Group remains on the deemed cost basis
2 Foreign currency translation reserve
Exchange differences arising on translation of foreign self-sustaining operations are taken to the foreign currency translation reserve, as described in accounting policy note 1
3 General reserve and Capital reserve
The balance of these reserves have resulted from prior period allocations of retained profits and may be released to retained profits

45Statements of Cash Flows for the year ended 30 September 2002
Note

Cash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Income taxes paid
Goods and services tax (paid) received
Net (increase) in trading securities
Net cash provided by operating activities
Cash flows from investing activities
Net decrease (increase)
Liquid assets -greater than three months
Due from other financial institutions
Regulatory deposits
Loans and advances
Shares in controlled entities and associates
Investment securities
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
Recovery from NHB litigation
Other

43(a)

43(c)

Net cash (used in) investing activities

2002
$m

Consolidated
2001
$m

2000
$m

2002
$m

The Company
2001$m10,1483
2,919(5,367)(1,900)(268)(1,893)(853)(28)(1,030)11,05475
2,783(6,703)(1,827)(253)(1,775)
(823)
(53)
(629)

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

6,723
67
2,689
(4,158)(1,576)
(249)
(913)
(574)
(8)
(782)

7,683
565
2,230
(5,112)(1,466)
(245)
(769)
(667)
(18)
(987)

1,731

1,849

2,468

1,219

1,214

(442)
554
37
(9,441)
(1)

983
909
(27)
(4,829)(36)(1,755)(792)(90)(17,633)
(50)

(416)
557
(47)
(9,216)
1,023

(973)
263
(20)
(4,064)251(2,851)
2,436(4,005)
3,630(8,109)8,553(1,480)977(2,319)1,802(1,050)
–

(36)
–

(43)
1,510

(893)
–

–
–

(385)
101
248
201

(452)
127
–
(454)

(275)
249
–
(1,405)

(309)
51
248
50

(218)
43
–
794

(10,593)(4,190)(19,840)(9,455)(4,441)

Cash flows from financing activities
Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Due from/to controlled entities
Payables and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease in outside equity interests
Dividends paid
Share capital issues
Share buyback(1,211)
9,152
–
362

(826)
890
–
581

3,111
12,763
–
(843)

(917)
9,888
(2,907)875(1,228)
463
1,159
225

4,538
(3,519)7,542(2,878)

5,555(1,341)

4,538(3,519)7,542(2,878)

759
(589)
1
(1,178)
112
–

–
(244)
(1)
(1,028)
114
(495)

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

500
(398)
–
(1,061)
112
–

–
(164)
–
(909)
114
(495)

Net cash provided by financing activities

8,427

3,655

17,504

7,111

3,829

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

1,731(10,593)
8,427

1,849
(4,190)
3,655

2,468
(19,840)
17,504

1,219(9,455)
7,111

1,214
(4,441)
3,829

(435)
9,071
(711)

1,314
6,462
1,295

132
6,634
(304)

(1,125)
6,747
(169)

602
4,724
1,421

7,925

9,071

6,462

5,453

6,747

Net (decrease) 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

43(b)The notes appearing on pages 6 to 76 form an integral part of these financial statements

Notes to the Financial Statements
Our critical accounting policies are described on
page 79.
1: Accounting Policies(i)Basis of preparation
This general purpose financial report complies
with the accounts provisions of the Banking
Act, applicable Australian AccountingStandards, the accounts provisions of the
Corporations Act 2001, Urgent Issues Group
Consensus Views and other authoritative
pronouncements of the Australian AccountingStandards Board. The accounting policies are
consistent with those of the previous year.
Certain disclosures required by the United States
Securities and Exchange Commission in respectof foreign registrants have also been included inthis report.
The financial report has been prepared inaccordance with the historical cost convention
as modified by the revaluation of trading
instruments, life insurance assets and liabilities
and the deemed cost of properties. The
preparation of the financial report requires theuse of management estimates. Such estimates
may require review in future periods.
The Company is a company of the kind referred
to in Australian Securities and Investments
Commission class order 98/100, dated 10 July
1998. Consequently, amounts in the financial
report have been rounded to the nearest million
dollars except where otherwise indicated.
All amounts are expressed in Australian dollars,
unless otherwise stated. Where necessary,amounts shown for the previous year have been
reclassified to facilitate comparison.
(ii)
Consolidation
The financial statements consolidate thefinancial statements of Australia and New
Zealand Banking Group Limited (the Company)
and its controlled entities.
Shares in controlled entities are stated at deemed
cost in the statement of financial position.
Where controlled entities and associates havebeen sold or acquired during the year, theiroperating results have been included to the dateof disposal or from the date of acquisition.
The Group adopts the equity method of
accounting for associates and the Group’s interestin joint venture entities. Shares in associates andjoint venture entities are stated in the
consolidated statement of financial position at
cost plus the Group’s share of post acquisition net
assets. The Group’s share of results of associates
and joint venture entities is included in the
consolidated statement of financial performance.
The Group may invest in or establish special
purpose companies, or vehicles, to enable it toundertake specific types of transactions. Where
the Group controls such vehicles, they are
consolidated into the Group financial results.
(iii) Goodwill
Goodwill, representing the excess of thepurchase consideration over the fair value of theidentifiable net assets of a controlled entity at
the date of gaining control, is recognised as an
asset and amortised on a straight line basis overthe period during which the benefits are
expected to arise, not exceeding 20 years.
The unamortised balance of goodwill and theperiod of amortisation are reviewed annually.
Where the balance exceeds the value of expected
future benefits, the difference is charged to thestatement of financial performance.
(iv) Foreign currency
Assets and liabilities denominated in foreign

currencies are translated into Australian dollars
at the rates of exchange ruling at balance date.
Revenues and expenses of overseas branches
and controlled entities are translated at averageexchange rates for the year.
Net translation differences arising from thetranslation of overseas branches and controlled
entities considered to be self-sustaining
operations are included in the foreign currencytranslation reserve, after allowing for thosepositions hedged by foreign exchange contracts
and related currency borrowings.
(v)
Fee income
Fee and commission income are brought toaccount on an accruals basis. Yield-related frontend application fees received are deferred andaccrued to income as an adjustment of yieldover the period of the loan. Non yield-related
application and activation lending fees received
are recognised as income no later than when theloan is disbursed or the commitment to lend
expires. Fees received on an ongoing basis that
represent the recoupment of the costs ofproviding service (for example, maintaining andadministering existing facilities) are taken to
income when the fees are receivable.
(vi) Net loans and advances
Net loans and advances include direct financeprovided to customers such as bank overdrafts,
credit cards, term loans, lease finance, hire
purchase finance and commercial bills.
Overdrafts, credit cards and term loans arecarried at principal balances outstanding.
Interest on amounts outstanding is accounted
for on an accruals basis.
Finance leases and hire purchase contracts areaccounted for using the finance method whereby
income is taken to account progressively over thelife of the lease or the contract in proportion to theoutstanding investment balance.
Customer financing through redeemablepreference shares is included within net loans
and advances. Dividends received onredeemable preference shares are taken to thestatement of financial performance as part ofinterest income.
All loans are subject to regular scrutiny andgraded according to the level of credit risk.
Loans are classified as either productive or nonaccrual. The Group has adopted the Australian
Prudential Regulation Authority Impaired Assets
Guidelines in assessing non-accrual loans. Nonaccrual loans include loans where the accrual ofinterest and fees has ceased due to doubt as tofull recovery, and loans that have been
restructured with an effective yield below theGroup’s average cost of funds at the date ofrestructuring. A specific provision is raised tocover the expected loss, where full recovery of
principal is doubtful.
Restructured loans are loans with an effective
yield above the Group’s cost of funds andbelow the yield applicable to a customer of
equal credit standing.
Cash receipts on non-accrual loans are, in
the absence of a contrary agreement with thecustomer, applied as income or fees in priority
to being applied as a reduction in principal,
except where the cash receipt relates toproceeds from the sale of security.
(vii) Bad and doubtful debts
Each month the Group recognises an expense for
credit losses based on the expected long term loss
ratio for each part of the loan portfolio. The
monthly charge is transferred to the General
Provision which is maintained to cover losses
inherent within the Group's existing loan portfolio.

The method used by the Group for determining
this monthly expense charge is referred to as'economic loss provisioning' (ELP). The Group
uses ELP models to calculate the expected loss
by considering:> the history of credit loss for each typeand risk grade of lending; and> the size, composition and risk profile ofthe current loan portfolio.
The Group regularly reviews the assumptions
used in the ELP models. These reviews are
conducted in recognition of the subjective
nature of ELP methodology. Methodologies are
updated as improved analysis becomes
available. In addition, the robustness ofoutcomes is reviewed considering the Group's
actual loss experience, and losses sustained byother banks operating in similar markets.
To the extent that credit losses are notconsistent with previous loss patterns used todevelop the assumptions within the ELP
methodology, the existing General Provision may
be determined to be either in excess ofor insufficient to cover credit losses not yet
specifically identified. As a result of thereassessments, ELP charge levels may beperiodically increased or decreased.
Specific provisions are maintained to coveridentified doubtful debts. All known bad debts
are written off in the year in which they are
identified. The specific provision requirement(representing new and increased specificprovisions less specific provision releases) istransferred from the general provision to thespecific provision. Recoveries, representing excesstransfers to the specific provision, are credited to
the general provision.
Provisions for doubtful debts are deductedfrom loans and advances in the statement offinancial position.
(viii) Acceptances
Commercial bills accepted but not held in
portfolio are accounted for and disclosed as aliability with a corresponding contra asset.
The Group’s own acceptances discounted areheld as part of either the trading securities
portfolio or the loan portfolio, depending onwhether, at the time of such discount, theintention was to hold the acceptances for resaleor until maturity.
(ix) Trading securities
Securities held for trading purposes arerecorded at market value. Unrealised gains andlosses on revaluation are taken to the statementof financial performance.
(x)
Investment securities
Investment securities are those which the Groupintends and has the ability to hold until maturity.
Such securities are recorded at cost or at costadjusted for amortisation of premiums or
discounts.
Premiums and discounts are capitalised andamortised from the date of purchase to maturity.
Interest and dividend income is accrued.
Changes in market values of securities are nottaken into account unless there is considered to
be a permanent diminution in value.
(xi) Repurchase agreements
Securities sold under repurchase agreements are
retained in the financial statements and acounterparty liability is disclosed under theclassifications of Due to other financial institutions
or Deposits and other borrowings. The difference
between the sale price and the repurchase price isamortised over the life of the repurchaseagreement and charged to interest expense in thestatement of financial performance.

Securities purchased under agreements to resell
are recorded as Liquid assets, Net loans andadvances, or Due from other financial
institutions, depending on the term of theagreement and the counterparty.
(xii) Derivative financial instruments
Derivative financial instruments (derivatives)
are contracts whose value is derived from one
or more underlying financial instruments orindices. They include swaps, forward rateagreements, futures, options and combinationsof these instruments.
Trading derivatives, comprising derivatives
entered into for customer-related or proprietary
reasons or for hedging the trading portfolio, aremeasured at fair value and all gains and losses
are taken to the statement of financial
performance. Fair value losses arising fromtrading derivatives are not offset against fairvalue gains unless a legal right of set-off exists.
Derivatives designated, and effective, as
hedges of underlying non-trading exposures
are accounted for on the same basis as theunderlying exposures. To be designated as ahedge, the fair value of the hedge must moveinversely with changes in the fair value of theunderlying exposure.
Gains and losses resulting from the terminationof a derivative that was designated as a hedge
of non-trading exposures are deferred andamortised over the remaining period of theoriginal term covered by the terminatedinstrument where the underlying exposure still
exists. Where the underlying exposure no longer
exists, the gains and losses are recognised in
the statement of financial performance.
Gains and losses on derivatives related tohedging exposures arising from anticipatedtransactions are deferred and recognised in
the financial statements when the anticipatedtransaction occurs.
These gains and losses are deferred only tothe extent that there is an offsetting
unrecognised (unrealised) gain or loss on the
exposures being hedged. Deferred gains andlosses are amortised over the expected termof the hedged exposure.
Gains and losses that arise prior to and upon
the maturity of transactions entered into underhedge rollover strategies are deferred andincluded in the measurement of the hedged
anticipated transaction if the transaction isstill expected to occur. If the forecasted
transaction is no longer expected to occur, thegains and losses are recognised immediately
in the statement of financial performance.
(xiii) Premises and equipment
Premises and equipment (including computerequipment) are carried at cost less depreciationor amortisation.
Profit or loss on the disposal of premises andequipment is determined as the difference
between the carrying amount of the assets atthe time of disposal and the proceeds ofdisposal, and is included in the results of theGroup in the year of disposal.
Assets other than freehold land are depreciatedat rates based upon their expected useful lives to
the Group, using the straight line method. The
depreciation rates used for each class of asset are:
Buildings
1%
Building integrals
10%
Furniture & equipment
10%
Computer & office equipment
12.5% to 33%
Software

14% to 33%

Leasehold improvements are amortised on astraight line basis over the remaining period ofeach lease.
Costs incurred in acquiring and building
software and computer systems arecapitalised as fixed assets and expensed as
depreciation over periods of between 3 and 5
years except for the branch front end
applications where 7 years is used. Costs
incurred in planning or evaluating software
proposals, or in maintaining systems after
implementation, are not capitalised.
The carrying values of all non-current assets
have been assessed and are not in excess of
their recoverable amounts. The expected net
cash flows included in determining recoverable
amounts of non-current assets are discounted totheir present values using a market determined,risk adjusted discount rate. The discount rateused ranged from 9% to 15% depending on thenature of the assets.
(xiv) Income tax
The Group adopts the liability method of tax effectaccounting whereby income tax expense iscalculated based on accounting profit adjusted forpermanent differences. Permanent differences are
items of revenue and expense which are recognisedin the statement of financial performance but are
not part of taxable income or vice versa.
Future tax benefits and deferred tax liabilities
relating to timing differences and tax losses arecarried forward at tax rates applicable to future
periods. These future tax benefits are notbrought to account unless realisation of theasset is assured beyond reasonable doubt.
Future tax benefits relating to tax losses are only
carried forward where realisation of the benefit
is considered virtually certain.
Provision for Australian income tax is madewhere the earnings of overseas controlled
entities are subjected to Australian tax under theattribution rules for the taxation of foreignsourced income.
Otherwise, no provision is made for overseas
withholding tax or Australian income tax which
may arise on repatriation of earnings fromoverseas controlled entities, where it is expected
these earnings will be retained by those entities
to finance their ongoing business.
(xv) Employee entitlements
The amounts expected to be paid in respect of
employees’ entitlements to annual leave areaccrued at current salary rates including on-costs.
Liability for long service leave is accrued in
respect of all applicable employees at the present
value of future amounts expected to be paid.
(xvi) Superannuation commitments
Contributions, which are determined on an
actuarial basis, to superannuation schemes arecharged to personnel expenses in the statementof financial performance.
Any aggregate deficiencies arising from theactuarial valuations of the Group’s defined
benefit schemes have been provided for in thefinancial statements.
The assets and liabilities of the schemes havenot been consolidated as the Company does nothave direct or indirect control of the schemes.
(xvii) Leasing
Leases entered into by the Group as lessee
are predominantly operating leases, and theoperating lease payments are included in thestatement of financial performance in equal
instalments over the lease term.

6(xviii) Goods and services tax
7
Revenues, expenses and assets are recognised
net of the amount of goods and services tax(GST), except where the amount of GST incurred
is not recoverable from the Australian Tax Office(ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated with theamount of GST included. The net amount of GST
recoverable from, or payable to, the ATO isincluded as an other asset or liability in thestatement of financial position.
Cash flows are included in the statement of cash
flows on a gross basis. The GST components ofcash flows arising from investing and financing
activities which are recoverable from, or payable
to, the ATO are classified as operating cash flows.
(xix) Life insurance
The Group’s life insurance business was
conducted through ANZ Life Assurance Company
Limited until 30 April 2002 and its results
consolidated until that date.
Components of life insurance margin on services
operating income disclosed are premium
revenue and related revenue, investment
revenue, claims expense and insurance policy
liabilities expense (refer note 41).
Premiums with no due date are recognised asrevenue on a cash received basis. Premiums
with a regular due date are recognised asrevenue on an accruals basis. Unpaid premiums
are only recognised as revenue during the daysof grace or where secured by the surrender valueof the policy and are included as “Other Assets”
in the balance sheet.
Claims under investment-linked business arerecognised when the policy ceases to participate
in the earnings of the fund. Claims on noninvestment-linked business are recognised
when the liability to the policyowner under thepolicy contract has been established or upon
notification of the insured event depending on
the type of claim.
Policy liabilities and other liabilities aremeasured at net present value of estimatedfuture cash flows. Changes in net present values
are recognised in the statement of financial
performance as revenue or expenses in thefinancial year in which they occur.
All assets are measured at net market values asat the reporting date. Changes in the net market
values are recognised in the statement offinancial performance as revenue or expenses in
the financial year in which they occur.
On 1 May 2002 the Group’s life insurance
business was transferred to a joint venture
entity, (see note 46) which is accounted forin accordance with the equity method of
accounting. The joint venture adopts similaraccounting policies to those described here.
(xx) Capitalised expenses
Expenses related to the acquisition of interest
earning assets are initially recognised as partof the cost of acquiring the asset and writtenoff as an adjustment to its yield over its
expected life. For assets subject toprepayment, expected life is determined on
the basis of the historical behaviour of theasset portfolio, taking into accountprepayments.

Notes to the Financial Statements
2: Income2002$mConsolidated
2001
$m

2000
$m

2002
$m

2001
$m

Interest income
From other financial institutions
On regulatory deposits
On trading and investment securities
On loans and advances
Other

121
1
397
8,245
273

214
1
471
9,122
443

243
5
573
8,930
490

83
1
324
5,733
192

153
1
340
6,613
185

From controlled entities

9,037
–

10,251–

10,241
–

6,333
93

7,292
187

Total interest income

9,037

10,251

10,241

6,426

7,479

876
1,196

787
1,105

727
1,133

771
861

686
794

From controlled entities

2,072
–

1,892
–

1,860
–

1,632
284

1,480
372

Total fee income

2,072

1,892

1,860

1,916

1,852

174
365
–
72

–
348
99
27

–
342
–
–

192
264
–
72

–
279
–
27

99
59
5
4
2
29
–
–
89

190
63
3
5
–
(25)
21
(84)
34

175
87
13
7
–
3
19
–
77

–
44
2
3
–
–
–
–
142

–
40
3
4
–
–
–
(41)
497

898

681

723

719

809

2,970

2,573

2,583

2,635

2,661

–

–

1,207

–

–

12,007

12,824

14,031

9,061

10,140

Other operating income(i) Fee income
Lending
Other, commissions

1(ii) Other income
Significant transaction: Net profit before tax from sale of business
to ING Australia joint venture
Foreign exchange earnings
Profit on sale of strategic investments
Hedge of TrUEPrs Cash Flows
Life insurance margin on services operating
income (refer note 41)
Profit on trading instruments
Profit on sale of premises
Rental income
Share of associates: profit from ING joint venture
Share of associates profit (net of writeoffs)
Dividend income from strategic investments
Writedown of equity investments
Other
2

3

Total other income
4

Total other operating income

Items reported as abnormal in prior periods(refer note 6)
5

Total income

The Company

1 Includes commissions from funds management business (up to 30 April 2002)
2 Preference shares are issued via the TrUEPrs structure. This income is earnt on a fixed receive/floating pay swap of the fixed dividend commitments
3 Gross proceeds on sale of premises is $42 million (2001: $98 million, 2000: $164 million)
4 The Company’s ‘other income’ include dividends received from controlled entities of $65 million (2001: $516 million)
5 Includes external dividend income of $3 million (2001: $75 million, 2000: $192 million) for the Group and $2 million (2001: $47 million) for the Company

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

246
3,019
404
251
801
298

590
3,597
454
584
797
396

577
4,082
409
486
596
290

225
2,371
–
46
793
210

568
2,860
–
211
768
224

To controlled entities

5,019
–

6,418
–

6,440
–

3,645
168

4,631
197

Total interest expense

5,019

6,418

6,440

3,813

4,828

8
9

Notes to the Financial Statements
3: Expenses (continued)
2002$mConsolidated
2001
$m

2000
$m

2002
$m

2001
$m

66
31
103
32
1,134
348

60
40
93
31
1,124
327

68
33
99
33
1,201
324

62
26
88
29
892
293

57
32
79
30
893
280

1,714

1,675

1,758

1,390

1,371

14
17
161
92
15

15
18
152
89
11

13
23
145
101
12

8
2
131
70
11

8
3
129
70
10

To controlled entities

299
–

285
–

294
–

222
37

220
34

Total premises expenses

299

285

294

259

254

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

34
62
140
59
129

44
49
108
61
102

34
41
96
71
101

29
44
112
49
99

50
37
62
51
87

Total computer expenses

424

364

343

333

287

98
20
3
35
36
2
51
47
97
50
53
77
84

106
17
3
42
32
5
45
42
114
52
70
79
75

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

71
8
2
28
30
1
36
36
79
35
38
57
171

76
8
2
31
27
1
30
32
91
33
49
58
218

653

682

812

592

656

63

86

107

62

73

Total operating expenses

3,153

3,092

3,314

2,636

2,641

Significant transaction: recovery from NHB litigation

(248)

–

–

(248)

–

Total operating expenses including recovery from NHB litigation

2,905

3,092

3,314

2,388

2,641

–

–

986

–

–

7,924

9,510

10,740

6,201

7,469

Operating expenses(i) Personnel
Employee taxes
PayrollFringe benefits tax
Pension fund
Provision for employee entitlements
Salaries and wages
Other
Total personnel expenses(ii) Premises
Amortisation of leasehold improvements
Depreciation of buildings and integrals
Rent
Utilities and other outgoings
Other(iv) Other
Advertising and public relations
Amortisation of goodwill
Audit fees (refer note 5)
Depreciation of furniture and equipment
Freight and cartage
Loss on sale of equipment
Non-lending losses, frauds and forgeries
Postage
Professional fees
Stationery
Telephone
TravelOther
2

Total other expenses
1(v) Restructuring

Items reported as abnormal in prior periods (refer note 6)
Total expenses

The Company

1 In addition, for 2000, restructuring costs of $361 million (Company $276 million) have been treated as abnormal
2 In addition, there is a notional goodwill amortisation charge (2002: $18 million; 2001: nil) included in the calculation of the share of associates income from the ING Australia joint ventureNotes to the Financial Statements
4: Equity Instruments Issued to Employees
Under existing Australian Acounting Standards, equity instruments issued to employees are not required to be expensed. The impact of expensing
options1, and shares issued under the $1,000 employee share plan, have been calculated and are disclosed below.
Consolidated
2002$m

Net profit attributable to shareholders of the Company
Expenses attributable to:
Options issued to Management Board1
Options issued to general management1
Shares issued under $1,000 employee share plan

2,322

Revised net profit attributable to shareholders of the Company

2,278

Revised earnings per share basic (cents)

144.4

(7)
(19)
(18)

1 Based on fair values estimated at grant date using a modified Black Scholes model. Value of options amortised over vesting period

5: Remuneration of Auditors
2002
$’000

Consolidated
2001
$’000

2000
$’000

2002
$’000

2001
$’000

2,065
2,793
8,188

2,296
1,753
2,811

2,386
1,707
1,745

1,586
2,685
7,453

1,465
308
2,811

13,046

6,860

5,838

11,724

4,584

–
1,278

10,867
1,681

9,578
4,791

–
1,256

10,867
1,681

1,278

12,54814,3691,256

12,54814,324

19,40820,207

12,98017,132

1,305
1,611
316

1,024
1,755
937

763
1,319
97

271
861
101

343
1,045
167

3,232

3,716

2,179

1,233

1,555

–
200

–
452

1,813
109

–
111

–
283

200

452

1,922

111

283

3,432

4,168

4,101

1,344

1,838

Other auditors
Audit or review of financial reports of Group entities
Other services

n/a
n/a

n/a
n/a

12
19

n/a
n/a

n/a
n/a

Total remuneration

n/a

n/a

31

n/a

n/a

17,75623,57624,33914,324

18,970KPMG Australia
Audit or review of financial reports of the Company
or any entity in the Group
Other audit-related services
Other assurance services3
1,2

Consulting
Taxation

4

Total remuneration
Overseas Related practices of KPMG Australia
Audit or review of financial reports of Group entities
Other audit-related services
Other assurance services
1,2

3Consulting
Taxation

4

Total remuneration

Total remuneration of auditors

The Company

By virtue of an Australian Securities and Investments Commission class order dated 30 September 1998, the auditors of Australia and New Zealand
Banking Group Limited and its related bodies corporate, KPMG, have been exempted from compliance with the requirements of Section 324 of the
Corporations Act 2001. The class order exemption applies in that partners and associates of KPMG not engaged on the audit of Australia and New Zealand
Banking Group Limited and its related bodies corporate may be indebted to the Company, provided that such indebtedness arose upon ordinary
commercial terms and conditions.
It is Group policy that KPMG Australia or any of its related practices may provide assurance and other audit-related services that, while outside the scope ofthe statutory audit, are consistent with the role of auditor. These include regulatory and prudential reviews requested by the Company’s regulators such as
the Australian Prudential Regulation Authority. KPMG Australia or any of its related practices may not provide services that are perceived to be materially in
conflict with the role of auditor. These include consulting advice and subcontracting of operational activities normally undertaken by management, andengagements where the auditor may ultimately be required to express an opinion on its own work. However, non-audit services that are not perceived tobe materially in conflict with the role of auditor may be provided by KPMG Australia or any of its related practices subject to the approval of the ANZ Audit
Committee.
1 Includes completion accounts review
2 Includes services for the audit or review of financial information other than financial reports including prudential supervision reviews for central banks, prospectus reviews, trust audits and other audits
required for local statutory purposes
3 Includes due diligence services principally related to ING joint venture. Under the policy adopted by ANZ in April 2002, due diligence services are no longer provided by the external auditor, unlessspecifically approved by the Board
4 KPMG sold its consulting business effective 1 September 2001

10
11

Notes to the Financial Statements
6: Items Reported as Abnormal in Prior Periods
2002$mConsolidated
2001
$m

2000
$m

2002
$m

The Company
2001$mProfit before tax
Revaluation of properties
Gain on sale of investment in Colonial
Income from sale of Grindlays and associated businesses(Loss) before tax
Provisions raised on sale of Grindlays and associated businesses
Restructuring provision
Provision for litigation
Writedown of investment in Panin

–
–
–

–
–
–

30
33
1,225

–
–
–

–
–
–

–
–
–
–

–
–
–
–

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

–
–
–
–

–
–
–
–

Total prior period abnormal profit (loss) before tax

–

–

221

–

–

Income tax (expense) benefit applicable toRestatement of deferred tax balances
Sale of Grindlays and associated businesses andprovisions raised
Restructuring provision
Provision for litigation

–
–

–
–

(64)
(246)

–
–

–
–

–
–

–
–

116
17

–
–

–
–

Total prior period abnormal tax (expense)

–

–

(177)

–

–

Total prior period abnormal profit after tax

–

–

44

–

–

3,223

2,783

2,789

2,150

2,257

967

946

1,004

645

767

24
(39)
(11)
–
7
–

2
(36)
(32)
–
18
–

10
(9)
(70)
(10)
17
(11)

15
(1)
(20)
–
–
–

12
(1)
(191)
–
–
–

–
–
–
–
–
15
(48)
(19)

–
–
27
–
–
–
–
(18)

12
64
29
15
(12)
–
–
12

–
–
–
–
–
15
(55)
41

–
–
12
–
–
–
–
32

Income tax under/(over) provided in prior years

896
2

907
4

1,051
(11)

640
3

631
16

Total income tax expense

898

911

1,040

643

647

Australia
Overseas

683
215

716
195

782
258

578
65

591
56

898

911

1,040

643

647

7: Income Tax Expense
Reconciliation of the prima facie income tax payableon profit with the income tax expense charged in
the statement of financial performance
Profit before income tax
Prima facie income tax at 30% (2001: 34%; 2000: 36%)
Tax effect of permanent differences
Overseas tax rate differential
Other non-assessable income
Rebateable and non-assessable dividends
Application of available capital lossesLife insurance accounting
Revaluation of properties
Sale of Grindlays and associated business(net permanent difference)
Impact of corporate tax rate change
Writedown of investments
Restructuring provision (composite tax rate)
Gain on sale of strategic investment
NHB settlement tax rate differential
Sale of business to ING Australia joint venture
OtherNotes to the Financial Statements
8: Dividends

Ordinary dividends
Interim dividend
Proposed final dividend
Bonus option plan adjustment
Dividends on ordinary shares

2002
$m

Consolidated
2001
$m

2000
$m

2002
$m

The Company
2001
$m

583
692
(23)

491
595
(24)

445
528
(32)

583
692
(23)

491
595
(24)

1,252

1,062

941

1,252

1,062

A final dividend of 46 cents, fully franked, is proposed to be paid on each fully paid ordinary share on 13 December 2002 (2001: final dividend of 40
cents, paid 14 December 2001, fully franked; 2000: final dividend of 35 cents, paid 15 December 2000, fully franked). The 2002 interim dividend of
39 cents, paid 1 July 2002, was fully franked, (2001: interim dividend of 33 cents, paid 2 July 2001, fully franked; 2000: interim dividend of 29 cents,
paid 3 July 2000, 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%(2001: 30%, 2000: 34%).

Dividends on preference shares

2002
$m

Consolidated
2001
$m

2000
$m

2002
$m

The Company
2001
$m

117

119

102

–

–

The Company has issued 124,032,000 preference shares, raising USD 775 million via Trust Securities issues. The Trust Securities carry an entitlement to a
distribution of 8% (USD 400 million) or 8.08% (USD 375 million). The amounts are payable quarterly in arrears. Payment dates are the fifteenth days ofJanuary, April, July and October in each year.
Dividend Franking Account
The amount of franking credits available to the Company for the subsequent financial year is nil (2001 and 2000: nil), after adjusting for franking creditsthat will arise from the payment of tax on Australian profits for the 2002 financial year, less 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.
From 1 July 2002 the franking credits available have been measured in accordance with the New Business Tax System (Imputation) Act 2002 as theamount of income tax paid rather than being based on after-tax profits as in previous periods.
This change in the basis of measurement does not change the value of franking credits to shareholders who may be entitled to franking credit balances.
Restrictions which Limit the Payment of Dividends
There are presently no significant restrictions on the payment of dividends from controlled entities to the Company. Various capital adequacy, liquidity,
statutory reserve and other prudential requirements must be observed by certain controlled entities and the impact on these requirements caused by thepayment of cash dividends is monitored. In practice however, there are significant tax considerations associated with the receipt of dividends fromcontrolled entities by a company. Payment of dividends from domestic controlled entities constitutes assessable income to a recipient Australian company.
Where the dividend is received from a company within the wholly-owned group or, if the payer company is not wholly-owned, (up to 30 June 2002) to theextent that the dividend is franked, the recipient company is generally entitled to a rebate of tax otherwise payable on the assessable dividend. With effectfrom 1 July 2002, for franked dividends received from non wholly-owned companies a gross up and offset mechanism applies. Should the recipientcompany’s total assessable income be less than the rebateable/grossed up dividend income, or it be in a tax loss position, the rebate/offset will reduce orbe eliminated. The Group therefore acts to preserve the availability of rebates/offsets by avoiding the payment of rebateable/grossed up dividends bydomestic controlled entities in this situation.
Payments of dividends from overseas controlled entities may attract withholding taxes which have not been provided for in these financial statements.
There are presently no restrictions on payment of dividends by the Company. Reductions of shareholders’ equity through payment of cash dividends ismonitored having regard to the regulatory requirements to maintain a specified capital adequacy ratio. In particular, the Australian Prudential Regulation
Authority has advised Australian banks that a bank under its supervision must consult with it before declaring a dividend if the bank has incurred a loss,
or proposes to pay dividends which exceed the level of profits earned.
Dividend Reinvestment Plan
During the year, 2,533,819 ordinary shares were issued at $18.33 per share, and 2,484,694 ordinary shares at $19.24 per share, under the Dividend
Reinvestment Plan.
Bonus Option Plan
Dividends paid during the year have been reduced by way of certain shareholders participating in the Bonus Option Plan and forgoing all or part of theirright to dividends in return for the receipt of bonus shares.
During the year, 679,408 ordinary shares were issued at $18.33 per share, and 672,437 ordinary shares at $19.24 per share, under the
Bonus Option Plan.

Final dividend 2001
Interim dividend 2002

Declared
dividend$m

Bonus options
exercised$m

Amount
paid
$m

595
583

(12)
(12)

583
571

1,178

(24)

1,154

12
13

Notes to the Financial Statements
9: Earnings per Ordinary Share2002$mConsolidated
2001
$m

2000
$m

Basic earnings per share (cents)

147.3

117.4

106.8

Earnings reconciliation
Net profit
Less: net profit attributable to outside equity interests
Less: preference share dividend paid
Earnings used in calculating basic earnings per share

2,325
3
117
2,205

1,872
2
119
1,751

1,749
2
102
1,645

Weighted average number of ordinary shares (millions)
Used in calculating basic earnings per share

1,496.9

1,492.1

1,540.3

Diluted earnings per share (cents)

146.6

117.0

106.0

Earnings reconciliation
Net profit
Less: net profit attributable to outside equity interests
Less: preference share dividend paid
Earnings used in calculating diluted earnings per share

2,325
3
117
2,205

1,872
2
119
1,751

1,749
2
102
1,645

Weighted average number of ordinary shares (millions)
Used in calculating basic earnings per share
Add: potential conversion of options to ordinary shares
Used in calculating diluted earnings per share

1,496.9
7.6
1,504.5

1,492.1
4.2
1,496.3

1,540.3
12.1
1,552.4

The weighted average number of converted and lapsed options, weighted with reference to the date of conversion or lapse, and included in the calculationof diluted earnings per share is 1.2 million.
10: Liquid Assets
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

924
112
524
1,179

571
191
753
269

894
101
522
1,179

495
86
752
269

2,739

1,784

2,696

1,602

293
548
2,725
12
1,093

231
483
3,934
326
1,036

109
1
2,418
–
770

82
1
3,637
–
659

4,671

6,010

3,298

4,379

Total liquid assets

7,410

7,794

5,994

5,981

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

4,821
2,589

5,504
2,290

3,432
2,562

3,692
2,289

Total liquid assets

7,410

7,794

5,994

5,981

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

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

Notes to the Financial Statements
11: Due from Other Financial Institutions
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

Australia
Overseas

706
3,109

951
3,878

695
1,954

946
3,288

Total due from other financial institutions

3,815

4,829

2,649

4,234

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

275
2,805
597
118
20

794
3,070
816
121
28

272
1,657
586
116
18

792
2,561
794
65
22

Total due from other financial institutions

3,815

4,829

2,649

4,234

149
1,692

58
805

149
1,692

58
805

1,841

863

1,841

863

289
–

–
6

–
–

–
–

289

6

–

–

Total listed

2,130

869

1,841

863

Unlisted – Australia
Other government securities
ANZ accepted bills
Other securities and equity securities

828
1,453
1,096

761
1,933
875

828
1,453
1,096

761
1,933
875

3,377

3,569

3,377

3,569

300
66

198
191

1
–

6
–

366

389

1

6

Total unlisted

3,743

3,958

3,378

3,575

Total trading securities

5,873

4,827

5,219

4,438

12: Trading Securities
Trading securities are allocated between Australia andOverseas based on the domicile of the issuer
Listed – Australia
Commonwealth securities
Local and semi-government securities

Listed – Overseas
Equity securities
Other non-government securities

Unlisted – Overseas
Other government securities
Other securities and equity securities

14
15

Notes to the Financial Statements
13: Investment Securities
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

23

15

18

13

23

15

18

13

63
–

167
96

63
–

167
43

63

263

63

210

Total listed

86

278

81

223

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

–
756
252

–
917
60

–
756
252

–
903
46

1,008

977

1,008

949

488
1,322
169
536

425
1,025
334
448

–
1,322
149
33

–
1,025
189
14

2,515

2,232

1,504

1,228

Total unlisted

3,523

3,209

2,512

2,177

Total investment securities

3,609

3,487

2,593

2,400

20

15

15

13

20

15

15

13

63
–

168
96

63
–

168
43

63

264

63

211

Total market value of listed investment securities

83

279

78

224

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

–
756
252

–
917
60

–
756
252

–
903
46

1,008

977

1,008

949

488
1,322
169
541

426
1,025
334
448

–
1,322
149
28

–
1,025
189
14

2,520

2,233

1,499

1,228

Total market value of unlisted investment securities

3,528

3,210

2,507

2,177

Total market value of investment securities

3,611

3,489

2,585

2,401

Investment securities are allocated between Australia andOverseas based on the domicile of the issuer
Listed – Australia
Other securities and equity investments

Listed – Overseas
Other government securities
Other securities and equity investments

Unlisted – Overseas
New Zealand government securities
US government securities
Other government securities
Other securities and equity investments

Market value information
Listed – Australia
Other securities and equity investments

Listed – Overseas
Other government securities
Other securities and equity investments

Unlisted – Overseas
New Zealand government securities
US government securities
Other government securities
Other securities and equity investments

Notes to the Financial Statements
13: Investment Securities (continued)
Investment Securities by Maturities and Yields
Based on remaining term tomaturity at 30 September 2002
Between 3
Less than months and3 months 12 months$m$m

At book value

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

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

After
10 years$mNomaturity
specified
$m

Total
$m

Market
Value
$m

–
644
85

–
50
–

–
62
135

–
–
–

–
–
–

–
–
55

–
756
275

–
756
275

729

50

197

–

–

55

1,031

1,031

164
100
126
93

324
–
68
21

–
1,222
38
414

–
–
–
1

–
–
–
–

–
–
–
7

488
1,322
232
536

488
1,322
232
538

483

413

1,674

1

–

7

2,578

2,580

Total book value

1,212

463

1,871

1

–

62

3,609

n/a

Total market value

1,212

464

1,872

1

–

62

n/a

3,611

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

Less than
1 year%

Between
1 year and5 years%

Between
5 years and
10 years%

After
10 years
%

–
5.03
5.22

–
6.34
5.05

–
–
–

–
–
–

5.89
2.19
3.54
3.96

–
3.88
3.69
2.11

–
–
–
8.00

–
–
–
–

1

Weighted average yields
Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Overseas
New Zealand government securities
US government securities
Other government securities
Other securities and equity investments

1 Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 2002

16
17

Notes to the Financial Statements
13: Investment Securities (continued)
Investment Securities by Maturities and Yields
Based on remaining term tomaturity at 30 September 2001
Between 3
Less than months and3 months 12 months$m$m

At book value

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

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

After
10 years$mNomaturity
specified
$m

Total
$m

Market
Value
$m

–
814
–

–
1
–

–
100
30

–
2
–

–
–
–

–
–
45

–
917
75

–
917
75

814

1

130

2

–

45

992

992

275
–
354
24

150
–
119
48

–
1,025
28
267

–
–
–
185

–
–
–
–

–
–
–
20

425
1,025
501
544

426
1,025
502
544

653

317

1,320

185

–

20

2,495

2,497

Total book value

1,467

318

1,450

187

–

65

3,487

n/a

Total market value

1,467

319

1,451

187

–

65

n/a

3,489

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

Less than
1 year%

Between
1 year and5 years%

Between
5 years and
10 years%

After
10 years
%

–
5.60
–

–
6.57
0.85

–
6.35
–

–
–
–

5.52
–
7.28
7.36

–
6.30
8.21
4.03

–
–
–
3.84

–
–
–
–

1

Weighted average yields
Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Overseas
New Zealand government securities
US government securities
Other government securities
Other securities and equity investments

1 Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 2001

Notes to the Financial Statements
14: Net Loans and Advances
Loans and advances are classified between Australia, New Zealand and Overseas markets based on the domicile of the lending point.
Consolidated

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

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

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

Total gross loans and advances
Provisions for doubtful debts (refer note 16)
Income yet to mature

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

The Company

2002
$m

2001
$m

2002
$m

2001
$m

3,151
3,888
52,381
31,420
2,503
8,203
992

2,430
3,352
43,96931,381
2,524
8,075
724

3,151
3,888
52,381
28,688
878
332
973

2,430
3,352
43,96928,685767
302
724

102,538

92,45590,29180,229

619
462
9,796
6,460
375
477
908

707
409
9,394
6,154
294
445
902

–
–
–
–
–
–
–

–
–
–
–
–
–
–

19,09718,305

–

–

860
108
323
11,938
469
7
9

579
70
320
14,291
642
28
–

722
26
239
9,983
449
7
3

426
20
251
12,737382
28–

13,714

15,93011,42913,844

135,349

126,690

101,720

94,073(2,081)(1,208)(1,886)(1,147)(1,819)(1)(1,680)–(3,289)(3,033)(1,820)(1,680)132,060

123,657

99,90092,393

741
2,606

463
2,997

103
1,224

135
1,014

3,347

3,460

1,327

1,149

18
19

Notes to the Financial Statements
14: Net Loans and Advances (continued)
Maturity Distribution and Concentrations of Credit Risk
Based on remaining term
to maturity at 30 September 2002
Overdraft$m

Less than
3 months$m

Between
3 months and
12 months$m

Between
1 year and5 years$m

After
5 years
$m

Total
$m

398
278
98
1,467
3
–
381
3,131
235
116
756
178

891
215
175
67
–
93
1,483
4,208
29
969
1,748
1,443

433
396
442
818
3
319
710
270
91
1,407
915
635

575
481
893
2,016
22
1,570
1,011
6,723
347
9,130
752
723

1,139
750
857
235
39
521
718
561
450
45,427
1,786
1,011

3,436
2,120
2,465
4,603
67
2,503
4,303
14,893
1,152
57,049
5,957
3,990

54
15
26
59
7
22
91
41
13
619
54
79

124
40
20
69
11
62
134
173
55
297
57
205

91
31
17
46
6
57
450
137
39
275
108
160

269
109
342
863
60
102
688
296
77
1,050
547
786

436
64
59
5
37
132
252
74
52
8,704
184
166

974
259
464
1,042
121
375
1,615
721
236
10,945
950
1,396

18
11
5
7
18
–
211
14
18
41
295
329

135
10
10
26
–
188
549
84
102
7
166
439

141
29
6
56
12
–
711
50
27
341
24
433

714
121
75
223
52
188
910
400
123
360
200
1,778

544
5
26
207
9
93
705
579
45
262
13
1,568

1,552
176
122
519
91
469
3,086
1,127
315
1,011
698
4,547

Gross loans and advances

9,088

14,284

9,686

34,57667,715

135,349

Specific provision for doubtful debts
Income yet to mature

(585)
–

–
(286)

–
(272)

–
(642)

–
(8)

(585)
(1,208)

(585)

(286)

(272)

(642)

(8)

(1,793)

8,503

13,9989,414

33,93467,707

133,556

–

–

–

–

(1,496)(1,496)Net loans and advances

8,503

13,9989,414

33,934

66,211132,060

Interest rate sensitivity
Fixed interest rates
Variable interest rates

938
8,150

8,519
5,765

6,434
3,252

21,481
13,095

15,552
52,16352,92582,424

9,088

14,284

9,686

34,57667,715

135,349

1

Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
New Zealand
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
Overseas Markets
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
2

3

2

3

2

3

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

4

1 Overdraft includes credit cards and unsecured lending
2 Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
3 Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must be secured by property
4 Housing loans and other loans that are capped for an initial period are fixed interest rate loans and their maturities based on the principal repayments due over the term of the loanNotes to the Financial Statements
14: Net Loans and Advances (continued)
Maturity Distribution and Concentrations of Credit Risk
Based on remaining term
to maturity at 30 September 2001
Overdraft$m

Less than
3 months$m

Between
3 months and
12 months$m

Between
1 year and5 years$m

After
5 years
$m

Total
$m

345
251
96
1,282
4
–
424
2,406
212
116
664
157

1,007
190
218
155
43
95
1,164
3,690
39
1,354
1,745
1,208

649
328
617
849
1
327
802
570
107
1,321
1,005
931

565
600
542
1,866
28
1,550
1,025
6,269
357
8,038
924
739

934
675
820
159
46
552
619
500
483
38,298
1,679
815

3,500
2,044
2,293
4,311
122
2,524
4,034
13,435
1,198
49,127
6,017
3,850

37
4
8
45
4
11
53
42
9
391
45
57

54
3
4
9
2
4
68
79
23
92
387
86

150
8
9
379
5
15
70
252
49
84
78
149

455
77
155
287
83
35
762
565
120
955
506
647

274
16
44
444
16
229
58
144
40
8,967
143
518

970
108
220
1,164
110
294
1,011
1,082
241
10,489
1,159
1,457

92
9
2
494
28
–
112
21
10
8
150
299

454
8
17
170
11
–
1,204
137
188
72
479
698

400
33
5
84
61
11
1,151
108
36
138
62
958

648
52
94
93
45
462
1,259
201
436
575
149
1,286

122
4
23
271
117
169
416
255
10
356
22
1,155

1,716
106
141
1,112
262
642
4,142
722
680
1,149
862
4,396

Gross loans and advances

7,888

15,157

11,80232,45059,393

126,690

Specific provision for doubtful debts
Income yet to mature

(500)
–

–
(276)

–
(287)

–
(575)

–
(9)

(500)
(1,147)

(500)

(276)

(287)

(575)

(9)

(1,647)

7,388

14,881

11,51531,87559,384125,043

–

–

–

–

(1,386)(1,386)Net loans and advances

7,388

14,881

11,51531,87557,998

123,657

Interest rate sensitivity
Fixed interest rates
Variable interest rates

589
7,299

6,873
8,284

7,140
4,662

21,744
10,706

16,85942,53453,20573,485

7,888

15,157

11,80232,45059,393

126,690

1Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
New Zealand
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
Overseas markets
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
2

3

2

3

2

3

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

4

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

2021

Notes to the Financial Statements
15: Impaired Assets
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

1,203
1
54

1,260
1
41

1,006
1
52

961
1
39

1,258

1,302

1,059

1,001

(575)
(10)

(490)
(10)

(500)
(9)

(388)
(9)

Net impaired assets

673

802

550

604

Non-accrual loans
Non-accrual loans
Specific provisions

1,203
(575)

1,260
(490)

1,006
(500)

961
(388)

628

770

506

573

Restructured loans
For these loans interest and fees are recognised asincome on an accrual basis

1

1

1

1

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

–

–

–

–

Unproductive facilities
Unproductive facilities
Specific provisions

54
(10)

41
(10)

52
(9)

39
(9)

Net unproductive facilities

44

31

43

30

Accruing loans past due 90 days or more
These amounts, comprising loans less than $100,000 or fully
secured, are not classified as impaired assets and therefore
are not included within the above summary

216

351

153

265

Summary of impaired assets
Non-accrual loans
Restructured loans
Unproductive facilities
Gross impaired assets
Specific provisions
Non-accrual loans
Unproductive facilities

Total net non-accrual loans

Notes to the Financial Statements
15: Impaired Assets (continued)
Further analysis of impaired assets at 30 September 2002 and interest and/or other income received during the year under Australian Prudential
Regulation Authority guidelines is as follows:
Consolidated
Grossbalanceoutstanding$m

The Company

Specific
provision$mInterest and/or
other income
received$m

Grossbalanceoutstanding$mSpecific
provision$mInterest and/or
other income
received
$m

78
7
46

–
–
–

4
1
10

75
–
17

–
–
–

4
–
6

131

–

15

92

–

10

436
30
353

204
20
337

5
2
5

362
–
307

178
–
310

5
–
5

819

561

12

669

488

10

9
–
244

4
–
10

1
–
1

6
–
239

4
–
8

1
–
1

253

14

2

245

12

2

Total non-accrual loans

1,203

575

29

1,006

500

22

Restructured loans
Unproductive facilities

1
54

–
10

–
–

1
52

–
9

–
–

1,258

585

29

1,059

509

22

Non-accrual loans
Without provisions
Australia
New ZealandOverseas markets

1

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

1

With provisions and full performance
Australia
New ZealandOverseas markets

Total

1 A loan’s performance is assessed against its contractual repayment schedule

Interest and other income forgone on impaired assets
The following table shows the estimated amount of interest and other income that would have been recorded had interest and other income on nonaccrual loans and unproductive facilities been accrued to income (or, in the case of restructured loans, had interest and other income been accrued at
the original contract rate), and the amount of interest and other income received with respect to such loans.
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

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

50
3
30

47
12
67

42
–
23

37
–
38

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

83

126

65

75

Interest and other income received
Australia
New ZealandOverseas markets

(10)
(3)
(16)

(20)
(4)
(14)

(10)
–
(12)

(18)
–
(10)

Total interest and other income received

(29)

(38)

(22)

(28)

40
–
14

27
8
53

32
–
11

19
–
28

54

88

43

47

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

22
23

Notes to the Financial Statements
16: Provisions for Doubtful Debts
2002$m

Consolidated
2001
$m

2000
$m

2002
$m

2001
$m

1,386
(22)
–
610

1,373
2
–
531

1,395
(51)
(90)
502

1,283
(41)
–
460

1,280
2
–
414

250
(788)
60

–
(595)
75

–
(429)
46

250
(677)
35

–
(461)
48

Total general provision

1,496

1,386

1,373

1,310

1,283

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

500
(6)
–
(697)
788

709
30
–
(834)
595

907
88
(176)
(539)
429

397
(6)
–
(559)
677

507
22
–
(593)
461

Total specific provision

585

500

709

509

397

2,081

1,886

2,082

1,819

1,680

Provision movement analysis
New and increased provisions
Australia
New Zealand
Asia
Other overseas markets

423
54
12
409

562
67
17
30

319
52
98
79

348
–
6
403

461
–
20
26

Provision releases

898
(110)

676
(81)

548
(119)

757
(81)

507
(46)

Recoveries of amounts previously written off

788
(60)

595
(75)

429
(46)

676
(35)

461
(48)

Net specific provision
Net credit to general provision

728
132

520
11

383
119

641
69

413
1

Charge to statement of financial performance

860

531

502

710

414

General provision
Balance at start of year
Adjustment for exchange rate fluctuations
Sale of Grindlays
Charge to statement of financial performance
Significant transactions: special charge tostatement of financial performance
Transfer to specific provision
Recoveries
1

Total provisions for doubtful debts

RatiosProvisions2 as a % of total advances
Specific
GeneralProvisions2 as a % of risk weighted assets
Specific
General2

3

Bad debts written off as a % of total advances3

Net specific provision as a % of total advances

The Company

%

%

%

%

%

0.4
1.1

0.4
1.0

0.5
1.0

0.4
1.1

0.4
1.2

0.4
1.1

0.4
1.0

0.5
1.1

0.5
1.3

0.4
1.2

0.5

0.6

0.4

0.5

0.5

0.5

0.4

0.2

0.5

0.4

1 Following an assessment of the general provision balance in March 2002, a special provision for doubtful debts of $250 million ($175 million after tax) was charged to restore the provision balance toan appropriate level in the current environment of unexpected investment grade defaults
2 Excludes provisions for unproductive facilities
3 See definitions on page 89

Notes to the Financial Statements
17: Customers’ Liabilities for Acceptances
Consolidated

Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
1

2

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

Total customers’ liabilities for acceptances

The Company

2002
$m

2001
$m

2002
$m

2001
$m

645
464
474
730
2,921
14
147
5,012
1,851
1,426

823
574
1,017
555
3,204
144
223
4,225
2,349
999

645
464
474
730
2,921
14
147
5,012
1,851
1,426

823
574
1,017
555
3,204
144
223
4,225
2,349
999

13,684

14,113

13,684

14,113

2
1
51
7
18
33

7
1
137
34
12
20

2
1
51
7
18
33

7
1
137
34
12
20

112

211

112

211

13,796

14,324

13,796

14,324

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

18: Regulatory Deposits
Consolidated

Overseas central banks

The Company

2002
$m

2001
$m

2002
$m

2001
$m

178

133

138

98

24
25

Notes to the Financial Statements
19: Shares in Controlled Entities, Associates and Joint Venture Entities
Refer notes 44 to 46 for details.
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

Total shares in controlled entities
Total shares in associates
Total shares in joint venture entity

–
99
1,593

–
64
–

6,238
18
–

6,088
13
–

Total shares in controlled entities, associates
and joint venture entities

1,692

64

6,256

6,101

Acquisitions of controlled entities
There were no material controlled entities acquired during the year ended 30 September 2002 and 2001.
Disposals of controlled entities
On 30 April 2002, ANZ formed a joint venture with ING Australia Pty Ltd. ANZ have a 49% equity interest in the joint venture and 49% of the voting rights.
ANZ sold a controlling interest in ANZ Life Assurance Company Limited, ANZ Managed Investments Limited, ANZ General Insurance Limited and Investment
and Administration Services Limited to the joint venture representing net assets of $392 million (fair value of business $879 million) as well as paying$960 million in cash. ING also contributed net assets of $1,091 million into the joint venture.
ANZ’s businesses were sold at fair value to the joint venture and a profit on sale of $170 million (after tax and transaction costs) was recognised.
Subsequent to 30 April 2002 ANZ accounts for its interest in the joint venture using the equity method of accounting. The results of the joint venture havebeen included in the consolidated financial statements since the date of acquisition.
There were no material controlled entities disposed of during the year ended 30 September 2001.

Notes to the Financial Statements
20: Deferred Tax Assets
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

489
729

436
764

413
422

383
483

Total income tax assets

1,218

1,200

835

866

Future income tax assets
Australia
Overseas

883
335

920
280

644
191

714
152

1,218

1,200

835

866

Future income tax assets comprises
General provision for doubtful debts
Other

Certain potential future income tax assets within the Group have not been recognised as assets because recovery cannot be regarded as virtually certain.
These potential benefits arise from tax losses and timing differences (benefits could amount to $6 million, 2001: $7 million), and from realised capital
losses (benefits could amount to $2 million, 2001: nil).
These benefits will only be obtained if(i) the relevant entities derive future assessable income of a nature and amount sufficient to enable the benefit of the taxation deductions to be realised;(ii) the relevant entities continue to comply with the conditions for deductibility imposed by law; and(iii) there are no changes in taxation legislation adversely affecting the benefit of the taxation deductions.
21: Goodwill
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

Goodwill – at cost
Accumulated amortisation

250
(70)

187
(50)

126
(32)

111
(24)

Total goodwill1

180

137

94

87

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

25
–

18
20

–
–

–
–

Provision for diminution in value

25
–

38
–

–
–

–
–

25

38

–

–

Accrued interest/prepaid discounts
Accrued commission
Prepaid expenses
Treasury instruments revaluations
Security settlements
Operating leases residual value
Available for sale emerging markets portfolio
Other

941
133
373
7,918
305
437
24
1,654

1,310
118
348
13,579
771
410
44
2,288

750
93
126
7,044
283
–
24
1,283

1,010
70
129
12,936
593
–
44
1,992

Total other assets

11,81018,906

9,603

16,774

1 Excludes notional goodwill related to the ING joint venture of $865 million

26
27

Notes to the Financial Statements
23: Premises and Equipment
Consolidated

Freehold and leasehold land and buildings
At costProvision for depreciation
1

Leasehold improvements
At costProvision for amortisation

Furniture and equipment
At costProvision for depreciation

Computer and office equipment
At costProvision for depreciation

SoftwareAt costProvision for amortisation

Capital works in progress
At costTotal premises and equipment

The Company

2002
$m

2001
$m

2002
$m

2001
$m

469
(14)

494
(11)

28
(1)

28
(1)

455

483

27

27

154
(110)

145
(102)

99
(69)

96
(68)

44

43

30

28

706
(475)

748
(505)

477
(316)

454
(283)

231

243

161

171

717
(434)

768
(508)

536
(301)

582
(367)

283

260

235

215

515
(96)

349
(46)

474
(85)

314
(42)

419

303

389

272

32

29

24

18

1,464

1,361

866

731

1 In accordance with AASB 1041 this represents deemed cost

From 1 October 2000 as allowed by AASB 1041 ‘Revaluation of Non Current Assets’ the Group elected to revert to the cost basis for measuring the classof assets land and building.
All premises over a specific value are subject to external valuation at least once every three years by independent valuers. Valuations are based on theestimated open market value and assume that the premises concerned continue to be used in their existing manner by the Group.
The independent valuation of the Group’s freehold land and buildings carried out as at 30 June 2002 by Jones Lang La Salle Advisory resulted in avaluation of $464 million (The Company: $32 million). As land and buildings are recorded at cost, the valuation has not been brought to account.

Notes to the Financial Statements
24: Due to Other Financial Institutions
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

Australia
Overseas

2,340
8,520

2,457
10,233

2,340
8,032

2,457
9,504

Total due to other financial institutions

10,86012,69010,372

11,961Maturity analysis based on remaining term to maturity at 30 September
At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years

2,639
6,623
694
904

2,636
7,890
2,124
40

2,338
6,453
677
904

2,185
7,612
2,124
40

Total due to other financial institutions

10,86012,69010,372

11,961

28
29

Notes to the Financial Statements
25: Deposits and Other Borrowings
Deposits and other borrowings are classified between Australia and Overseas based on the location of the deposit taking point.
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

5,340
18,86437,905
3,539
3,963
6,430
10
1,085

2,714
15,96333,552
3,818
5,043
5,989
30
574

5,340
19,24037,890
3,539
2,868
–
10
1,085

2,714
16,341
33,552
3,818
3,265
–
30
574

77,136

67,68369,97260,294

6,333
18,395
6,317
1,710
1,654
1,713
39

5,062
19,032
6,184
1,470
4,059
1,353
31

4,075
9,870
869
472
–
–
–

3,472
11,580
827
348
–
–
31

36,16137,191

15,286

16,258

Total deposits and other borrowings

113,297

104,874

85,25876,552

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

46,12149,284
13,6154,091
186

44,26345,225
10,3784,909
99

39,32536,347
8,089
1,404
93

37,65230,274
6,289
2,254
83

Total deposits and other borrowings

113,297

104,874

85,25876,552Australia
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase
Other borrowings
1

Overseas
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Other unsecured borrowings
1

1 Included in this balance is debenture stock of controlled entities. The debenture stock is secured by a trust deed and collateral debentures, giving floating charges upon the undertaking and all theassets of the entities involved other than land and buildings. All subsidiaries of the controlled entities (except for some subsidiaries which have been placed or are expected to be placed in voluntary
deregistration and have minimal book value) have guaranteed the payment of principal, interest and other monies in relation to all debenture stock and unsecured notes issued by the controlled entity.
No subsidiaries have given any charge over their respective assets in support of the above mentioned guarantees

26: Income Tax Liabilities
Consolidated

Australia
Provision for income tax
Provision for deferred income tax

Overseas
Provision for income tax
Provision for deferred income tax

Total income tax liabilities
Provision for deferred income tax comprises
Lease finance
Other

The Company

2002
$m

2001
$m

2002
$m

2001
$m

538
593

460
615

476
315

357
414

1,131

1,075

791

771

37
172

49
211

32
98

65
63

209

260

130

128

1,340

1,335

921

899

111
654

209
617

43
370

31
446

765

826

413

477

Notes to the Financial Statements
27: Payables and Other Liabilities
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

2,174
721
4,142
258
363
128

1,515
865
7,598
261
–
444

2,137
611
4,134
237
363
128

1,349
738
7,586
394
–
259

7,786

10,6837,610

10,326

124
333
3,344
136
48
679

190
561
3,202
136
327
849

10
171
2,197
52
37
626

11
343
2,461
62
318
353

4,664

5,265

3,093

3,548

12,45015,94810,703

13,874

253
692
216
143
440

242
595
775
280
250

222
692
184
103
410

213
595
717
231
225

1,744

2,142

1,611

1,981

Bonds and notes by currency
USD
United States dollars
GBP
Great British pounds
AUD
Australian dollars
NZD
New Zealand dollars
JPY
Japanese yen
EUREuro dollars
HKD
Hong Kong dollars
CHF
Swiss francs
CAD
Canadian dollars
NOK
Norwegian krone
SGD
Singapore dollars

5,758
1,346
160
183
83
4,550
2,188
173
14
98
155

8,076
1,225
151
165
111
3,581
1,854
177
–
–
–

5,758
1,346
160
11
83
4,550
2,188
173
14
98
155

8,076
1,225
151
–
111
3,581
1,854
177
–
–
–

Total bonds and notes

14,70815,34014,53615,175

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

399
3,502
10,807–995
2,856
11,428
61

399
3,330
10,807–995
2,856
11,26361

Total bonds and notes

14,70815,34014,53615,175Australia
PayablesAccrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities

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

Total payables and other liabilities
28: Provisions
Employee entitlements
Dividends (refer note 8)
Non-lending losses, frauds and forgeries
Restructuring costs and surplus leased space
Other
Total provisions
29: Bonds and Notes

30
31

Notes to the Financial Statements
30: Loan CapitalInterest
Rate%

Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

551
476

612
528

551
476

612
528

1,027

1,140

1,027

1,140

71
459
–
919
23
7
–
9
26
145
400
100
259

163
510
255
1,020
25
8
510
10
29
161
–
–
–

71
459
–
919
23
7
–
9
26
145
400
100
–

163
510
–
1,020
25
8
510
10
29
161
–
–
–

2,418

2,691

2,159

2,436

Total loan capital

3,445

3,831

3,186

3,576

Loan capital by currency
AUD Australian dollars
NZD New Zealand dollars
USD United States dollars
JPY Japanese yen

500
259
2,670
16

–
–
3,813
18

500
–
2,670
16

–
–
3,558
18

3,445

3,831

3,186

3,576

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

71
1,378
969

–
1,948
743

71
1,378
710

–
1,693
743

Perpetual

1,027

1,140

1,027

1,140

3,445

3,831

3,186

3,576

Perpetual subordinated notes
USD 300m
floating rate notes
USD 258.7m fixed rate notes

1

LIBOR + 0.15
9.125

Subordinated notes
USD 40m
floating rate notes due 2002
USD 250m
fixed notes due 2004
USD 125m
floating rate notes due 2005
USD 500m
fixed notes due 2006
USD 12.5m
floating rate notes due 2007
JPY 482m
floating rate notes due 2007
USD 250m
floating rate notes due 2007
JPY 568.8m floating rate notes due 2008
USD 14.3m
floating rate notes due 2008
USD 79m
floating rate notes due 2008
AUD 400m
floating rate notes due 20084
AUD 100m
floating rate notes due 20084
NZD 300m
floating rate notes due 2012
2

3

LIBOR + 0.70
6.25
LIBOR + 0.45
7.55
LIBOR + 0.50
LIBOR + 0.50
LIBOR + 0.25
LIBOR + 0.55
LIBOR + 0.50
LIBOR + 0.53
BBSW + 0.57
BBSW + 0.57
bkbm(3) + 0.50

1 LIBOR is an average of rates offered on loans to leading banks in the London inter-bank market
2 As at 30 September 1998 principal of note outstanding was US$200 million. Note is repayable over 5 years ($40 million (20%) per annum), commencing in October 1998
3 Prior to January 2002, the interest rate was LIBOR+ 1.03
4 After March 2007 rate changes to BBSW+ 1.07
Loan capital is subordinated in right of payment to the claims of depositors and all other creditors of the Company and its controlled entities which have issued the notes, and constitutes tier 2 capitalas defined by the Australian Prudential Regulation Authority for capital adequacy purposesNotes to the Financial Statements
31: Share Capital
2002

The Company
2001

2000

Ordinary shares each fully paid
Ordinary shares each paid to 10 cents per share1
Preference shares each fully paid

1,503,886,082–
124,032,000

1,488,267,146–
124,032,000

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

Total number of issued shares

1,627,918,082

1,612,299,146

1,630,315,690

Number of issued shares

1 90 cents outstanding per share.

Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts
paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share isentitled to one vote.
2002

The Company
2001

2000

Balance at start of year
Bonus option plan
Dividend reinvestment plan
ANZ employee share acquisition plan
ANZ share option plan
ANZ share purchase scheme
Share buy back
Purchase of Amerika Samoa Bank

1,488,267,146
1,351,845
5,018,513
4,144,988
5,103,590–––

1,506,210,690
1,554,453
5,828,303
5,925,928
2,125,120
73,000(34,626,158)
1,175,810

1,565,428,469
2,786,360
20,416,971
4,346,635
1,947,138
22,000(88,736,883)–

Balance at end of year

1,503,886,082

1,488,267,146

1,506,210,690

Number of issued shares

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

The Company

2002
$m

2001
$m

2002
$m

2001
$m

Preference share net proceeds at start and end of year

USD

748

748

748

748

Preference share net proceeds
translated to AUD at 30 September rate

AUD

1,375

1,526

1,375

1,526

Share Buybacks
The Company conducted no on-market buybacks during the year ended 30 September 2002.

32
33

Notes to the Financial Statements
32: Outside Equity Interests
Consolidated
2002
$m

2001
$m

Share capital
Retained Profits

2
15

2
11

Total outside equity interests

17

13

33: Capital Adequacy
The Australian Prudential Regulation Authority (APRA) adopts a risk-based capital assessment framework for Australian banks based on internationallyaccepted capital measurement standards. This risk-based approach requires eligible capital to be divided by total risk weighted assets, with the resultant
ratio being used as a measure of a bank’s capital adequacy.
Capital is divided into tier 1, or ‘core’ capital, and tier 2, or ‘supplementary’ capital. For capital adequacy purposes, eligible tier 2 capital cannot exceed thelevel of tier 1 capital. Banks are required to deduct from total capital any strategic holdings of other banks’ capital instruments and investments in entities
engaged in life insurance, funds management and securitisation activities. Under APRA guidelines, banks must maintain a ratio of qualifying capital to risk
weighted assets of at least 8 per cent.
The measurement of risk weighted assets is based on: a) A credit risk-based approach wherein risk weightings are applied to statement of financial
position assets and to credit converted off balance sheet exposures. Categories of risk weights are assigned based upon the nature of the counterparty
and the relative liquidity of the assets concerned and: b) The recognition of risk weighted assets attributable to market risk arising from trading andcommodity positions. Trading and commodity balance sheet positions do not attract a risk weighting under the credit risk-based approach.
Consolidated
2002
$m

2001
$m

Tier 1
Total shareholders’ equity and outside equity interests
Asset revaluation reserve
Accumulated retained profits of insurance and funds management entities
Unamortised goodwill
Investment in ANZ Lenders Mortgage Insurance

11,465
(31)
(48)
(158)
(27)

10,551
(31)
–
(115)
(18)

Tier 1 capital

11,201

10,387

Tier 2
Asset revaluation reserve
Perpetual notes – subordinatedGeneral provision for doubtful debts

31
1,027
1,007

31
1,140
950

2,065

2,121

Subordinated notes

1,872

2,436

Tier 2 capital

3,937

4,557

Deductions
Investment in Funds Management entities
Investment in joint venture with ING
Other

(43)
(1,593)
(67)

(567)
–
(37)

(1,703)(604)

13,435

14,340

8,123

8,257

Qualifying capital

1

2

Total qualifying capital
Adjusted common equity

3

AssetsRisk weighted assets
2002
2001
$m
$m

2002
$m

2001
$m

21,188
10,82728,173
12,831

–
2,165

–
2,567

65,57582,69757,42084,28332,78882,69728,71084,283

Total statement of financial position assets – credit risk
Trading assets – market risk

180,287
2,818

182,707
2,786

117,650n/a

115,560
n/a

Total statement of financial position assets

183,105

185,493

117,650

115,560

Statement of financial position

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

1 Excluding attributable future income tax benefit
2 Subordinated note issues are reduced by 20% of the original amount during each of the last five years to maturity
3 Tier 1 capital less preference share, less deductions

Notes to the Financial Statements
33: Capital Adequacy (continued)

Off balance sheet exposures

2002
$m

Contract/
notional amount
2001
$m

2002
$m

Creditequivalent
2001
$m

2002
$m

Risk
weighted assets
2001$mDirect credit substitutes
Trade and performance related items
Commitments
Foreign exchange, interest rate andother market related transactions

9,853
12,78160,4098,268
10,57056,976

9,853
5,905
7,296

8,268
4,866
7,241

8,304
5,431
6,506

6,503
4,479
7,010

470,287

779,830

10,08016,446

3,126

5,025

Total off balance sheet exposures– credit risk

553,330

855,644

33,13436,821

23,36723,017

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

141,017373

138,579
550

Total risk weighted assets

141,390

139,129%%

Tier 1
Tier 2
Deductions

7.9
2.8
(1.2)

7.5
3.2
(0.4)

Total

9.5

10.3

Adjusted common equity1

5.7

5.9

Capital adequacy ratios

1 Tier 1 capital, less preference shares, less deductions

34
35

Notes to the Financial Statements
34: Average Balance Sheet and Related Interest
Averages used in the following table are predominantly daily averages. Interest income figures are presented on a tax-equivalent basis. Non-accrual loans
are included under the interest earning asset category “Loans, advances and bills discounted”. Intragroup interest earning assets and interest bearing
liabilities are treated as external assets and liabilities for the geographic segments.
2002

Interest earning assets
Due from other financial institutions
Australia
New ZealandOverseas markets
Investments in public securities
Australia
New ZealandOverseas markets
Loans, advances and bills discounted
Australia
New ZealandOverseas markets
Other assets
Australia
New ZealandOverseas markets
Intragroup assets
Overseas markets
Intragroup elimination

Non-interest earning assets
Acceptances
Australia
New ZealandOverseas markets
Premises and equipment
Other assets
Provisions for doubtful debts
Australia
New ZealandOverseas markets

Averagebalance$m

2001

Interest$m

Averagerate%

Averagebalance
$m

653
570
2,404

26
26
69

3.9
4.6
2.9

5,384
1,253
1,550

259
55
82

95,84618,12914,195

2000

Interest$m

Averagerate%

Averagebalance$mInterest$m

Average
rate
%

858
589
2,326

47
34
133

5.5
5.7
5.7

1,134
344
2,407

62
19
162

5.4
5.6
6.7

4.8
4.4
5.3

4,517
1,690
1,613

254
103
114

5.6
6.1
7.1

4,881
1,040
2,234

289
60
227

5.9
5.8
10.1

6,273
1,363
627

6.5
7.5
4.4

90,02817,25815,087

6,694
1,466
986

7.4
8.5
6.5

81,373
16,625
17,118

6,156
1,368
1,428

7.6
8.2
8.3

1,463
1,349
3,124

17
83
179

1.2
6.1
5.7

1,475
1,109
2,751

98
69
276

6.7
6.3
10.0

1,705
1,005
3,292

98
81
317

5.7
8.1
9.6

9,525

211

2.2

12,358

536

4.3

9,042

420

4.6

155,445(9,525)

9,270
(211)

145,920

9,059

151,659 10,810(12,358)(536)
6.2 139,301

10,274142,200 10,687(9,042)(420)
7.4 133,158

14,556–152
1,349
18,18915,421–249
1,264
19,957

15,061–343
1,353
18,090(1,805)(176)(58)(1,742)
(166)
(156)

(1,830)
(163)
(381)

32,207

34,82732,473

Total assets

178,127

174,128

165,631

Total average assets
Australia
New ZealandOverseas markets

130,515
22,60734,530126,530
21,92538,031

117,181
20,337
37,155Intragroup elimination

187,652(9,525)

186,486(12,358)

174,673(9,042)

178,127

174,128

165,631

26.7%

27.3%

29.3%

% of total average assets
attributable to overseas activities

10,267

7.7

Notes to the Financial Statements
34: Average Balance Sheet and Related Interest (continued)
2002

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

2001

2000

Averagebalance$mInterest$m

Averagerate%

Averagebalance$mInterest$m

Averagerate%

Averagebalance$mInterest$m

Averagerate%

20,741
8,894
15,113

937
456
417

4.5
5.1
2.8

19,395
8,411
13,156

1,081
519
658

5.6
6.2
5.0

24,7508,159
15,234

1,387
476
931

5.6
5.8
6.1

10,964
3,113
449

245
76
7

2.2
2.4
1.5

9,623
2,832
353

269
89
7

2.8
3.1
2.0

9,181
2,894
1,359

247
85
57

2.7
2.9
4.2

23,397
1,903
704

792
78
11

3.4
4.1
1.6

20,456
1,621
809

872
82
20

4.3
5.0
2.5

17,053
1,469
1,371

781
66
52

4.6
4.5
3.8

942
514
7,399

49
17
180

5.2
3.3
2.4

434
481
10,224

31
20
539

7.2
4.2
5.3

232
482
8,976

15
20
542

6.3
4.1
6.0

3,888
3,641

178
73

4.6
2.0

5,275
5,408

310
274

5.9
5.1

5,256
3,079

307
180

5.8
5.8

6,097
1,472

316
88

5.2
6.0

6,108
1,334

365
88

6.0
6.6

5,935
1,136

340
69

5.7
6.1

15,639
441
540

756
30
15

4.8
6.8
2.7

12,397
399
600

733
29
35

5.9
7.2
5.9

8,719
316
276

554
23
19

6.4
7.3
7.0

1,463
117
37

165
98
33

n/a
n/a
n/a

1,938
108
47

169
160
66

n/a
n/a
n/a

1,454
116
246

63
156
70

n/a
n/a
n/a

6,778
2,747

128
83

1.9
3.0

8,763
3,595

395
141

4.5
3.9

5,511
3,531

286
134

5.2
3.8

136,993(9,525)

5,228
(211)

133,767(12,358)

6,952
(536)

126,735(9,042)

6,860
(420)

127,468

5,017

3.9 121,409

6,416

5.3 117,693

6,440

1

Intragroup elimination

1 Includes foreign exchange swap costs

5.5

36
37

Notes to the Financial Statements
34: Average Balance Sheet and Related Interest (continued)
2002
Averagebalance$m

2001
Averagebalance$m

2000
Averagebalance
$m

3,925
873
597

3,713
883
432

3,636
794
1,280

14,556–
152
19,634

15,421–
249
21,917

15,061–
343
17,14739,73742,61538,261

Total liabilities

167,205

164,024

155,954

Total average liabilities
Australia
New ZealandOverseas markets

123,341
21,50731,882

120,416
20,98834,978110,875
19,347
34,774Intragroup elimination

176,730(9,525)

176,382(12,358)

164,996(9,042)

167,205

164,024

155,954

9,507
1,415

8,666
1,438

8,451
1,226

10,922

10,104

9,677

178,127

174,128

165,631

30.3%

31.9%

32.4%

Non-interest bearing liabilities
Deposits
Australia
New ZealandOverseas markets
Acceptances
Australia
New ZealandOverseas markets
Other liabilities

Total average shareholders’ equity
Ordinary share capitalPreference share capital
1

Total average liabilities and shareholders’ equity% of total average liabilities attributable
to overseas activities
1 Includes reserves and retained profits

Notes to the Financial Statements
35: Interest Spreads and Net Interest Average Margins
2002
$m

2001
$m

2000
$m

3,009
601
432

2,868
544
446

2,625
499
703

4,042

3,858

3,827

103,346
21,30130,798(9,525)96,87820,64634,135(12,358)

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

145,920

139,301

133,158

%

%

%

6.36
7.17
3.79
6.21

7.32
8.10
5.99
7.38

7.41
8.04
7.49
7.71

Interest spreads and net interest average margins may be analysed as follows
Australia
Gross interest spread
Interest forgone on impaired assets

2.44(0.04)

2.35(0.03)

2.35(0.03)Net interest spread
Interest attributable to net non-interest bearing items

2.40
0.51

2.32
0.64

2.32
0.63

Net interest average margin – Australia

2.91

2.96

2.95

New ZealandGross interest spread
Interest forgone on impaired assets

2.34
–

2.13
(0.03)

2.37(0.02)Net interest spread
Interest attributable to net non-interest bearing items

2.34
0.48

2.10
0.54

2.35
0.28

Net interest average margin – New Zealand

2.82

2.64

2.63

Overseas markets
Gross interest spread
Interest forgone on impaired assets

1.20(0.05)

0.92(0.16)

1.61(0.18)Net interest spread
Interest attributable to net non-interest bearing items

1.15
0.25

0.76
0.55

1.43
0.63

Net interest average margin – Overseas markets

1.40

1.31

2.06

Group
Gross interest spread
Interest forgone on impaired assets

2.31(0.04)

2.15(0.06)

2.31(0.07)Net interest spread
Interest attributable to net non-interest bearing items

2.27
0.50

2.09
0.68

2.24
0.63

Net interest average margin – Group

2.77

2.77

2.87

1

Net interest income
Australia
New ZealandOverseas markets

Average interest earning assets
Australia
New ZealandOverseas markets
Intragroup elimination

2

Gross earnings rate
Australia
New ZealandOverseas markets
Group

3

3

3

3

1 On a tax equivalent basis
2 Average interest rate received on interest earning assets. Overseas markets includes intragroup assets
3 Refer note 15 to the financial report38
39

Notes to the Financial Statements
36: Market Risk
Market risk is the risk to earnings arising from changes in interest rates, currency exchange rates, or from fluctuations in bond, commodity or equity prices.
The Board of Directors through the Risk Management Committee, a Committee of the Board, has responsibility for oversight of market risk within theGroup. Routine management of market risk is delegated to two senior management committees chaired by the Chief Financial Officer. The Credit andTrading Risk Committee is responsible for traded market risk, while the Group Asset and Liability Committee is responsible for non-traded market risk(or balance sheet risk).
The Credit and Trading Risk Committee monitors traded market risk exposures (including Value at Risk and Stress Testing) and is responsible forauthorising the trading risk limit framework. The Group Asset and Liability Committee reviews balance sheet based risk measures and strategies ona monthly basis.
The Value at Risk (VaR) Measure
A key measure of market risk is Value at Risk (VaR). VaR is a statistical estimate of the likely daily loss and is based on historical market movements.
The confidence level is such that there is 97.5% probability that the loss will not exceed the VaR estimate on any given day.
The Group’s standard VaR approach for both traded and non-traded risk is historical simulation. The Group calculates VaR using historical changes inmarket rates and prices over the previous 500 business days.
It should be noted that because VaR is driven by actual historical observations, it is therefore not an estimate of the maximum loss that the Group could
experience from an extreme market event. As a result of this limitation, the Group utilises a number of other risk measures (eg stress testing) andassociated supplementary limits to measure and manage traded market risk.
Traded and non-traded market risks have been considered separately below.

Traded Market Risks
Trading activities are focused on customer trading, distribution and underwriting of a range of securities and derivative instruments. The principal activities
include foreign exchange, interest rate and debt markets. These activities are managed on a global product basis.
Below are aggregate VaR exposures covering both derivative and non-derivative trading positions for the Group’s principal trading centres.
As at
Sep 02$m

High for
period
Sep 02$m

Low forperiod
Sep 02$m

Ave forperiod
Sep 02$m

As at
Sep 01$m

High for
period
Sep 01$m

Low forperiod
Sep 01$m

Avg forperiod
Sep 01$m

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

1.1
1.0
(0.6)

2.3
3.4
(1.8)

0.5
0.7
(0.2)

1.1
1.5
(0.5)

1.6
1.6
(0.3)

2.8
4.8
(2.5)

0.8
1.5
(0.4)

1.3
2.8
(0.9)

Total

1.5

3.9

1.0

2.1

2.9

5.1

1.9

3.2

VaR is calculated separately for Foreign Exchange/Commodities and for Interest Rate/Debt Markets businesses as well as Total Group. The diversification
benefit reflects the correlation implied by historical rates between Foreign Exchange/Commodities and Interest Rate/Debt Markets.
Non-Traded Market Risks (Balance Sheet Risk)
The principal objectives of balance sheet management are to manage interest income sensitivity while maintaining acceptable levels of interest rate andliquidity risk and to hedge the market value of the Group’s capital.
Interest Rate Risk
The objective of balance sheet interest rate risk management is to secure stable and optimal net interest income over both the short (next 12 months)
and long term. Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Group’s future net interest
income. This risk arises from two principal sources: mismatches between the repricing dates of interest bearing assets and liabilities; and the investmentof capital and other non-interest bearing liabilities in interest bearing assets. Interest rate risk is reported as follows using three measures: VaR, scenario
analysis (to a 1% shock) and disclosure of the interest rate sensitivity gap (Note 37).

Notes to the Financial Statements
36: Market Risk (continued)a) VaR Interest Rate Risk
Below are aggregate VaR figures covering non-traded interest rate risk.
As at
Sep 02$m

High for
period
Sep 02$m

Low forperiod
Sep 02$m

Ave forperiod
Sep 02$m

As at
Sep 01$m

High for
period
Sep 01$m

Value at risk at 97.5% confidence
ANZ
Diversification impact

56.9
–

56.9
–

45.0
–

49.7
–

44.7
–

48.0
–

Total

56.9

56.9

45.0

49.7

44.7

48.0

b) Scenario Analysis – A 1% Shock on the Next 12 Months’ Net Interest Income
A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest income over the immediate forward
period of 12 months. This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and previous financial years – expressed as a percentage of reported
net interest income. The sign indicates the nature of the rate sensitivity with a positive number signifying that a rate increase is positive for net interest
income over the next 12 months. Conversely, a negative number signifies that a rate increase is negative for the next 12 months’ net interest income.
Impact of 1% Rate ShockConsolidated Group Position
2002
2001

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

0.43%
0.63%
0.04%
0.25%

(0.01%)
1.47%
0.01%
0.50%

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

40
41

Notes to the Financial Statements
37: Interest Sensitivity Gap
The following table represents the interest rate sensitivity as at 30 September 2002 of the Group’s assets, liabilities and off balance sheet instruments
repricing (that is, when interest rates applicable to each asset or liability can be changed) in the periods shown.
Repricing gaps are based upon contractual repricing information except where the contractual terms are not considered to be reflective of actual interest
rate sensitivity, for example, those assets and liabilities priced at the Group’s discretion. In such cases, the rate sensitivity is based upon historicallyobserved and/or anticipated rate sensitivity.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability funding. These mismatches
are managed within policy guidelines for mismatch positions.

At 30 September 2002

Less than
3 months$m

Between
3 months and6 months$m

Between
6 months and
12 months$m

Between
1 year and5 years$m

After
5 years$m

Notbearing
interest
$m

Total
$m

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

8,071
6,339
99,459
86

893
717
6,918
56

11
646
7,130
73

44
1,247
19,028
245

32
365
545
104

2,174
168
(1,020)29,774

11,225
9,482
132,060
30,338

Total assets

113,955

8,584

7,860

20,564

1,046

31,096

183,105

38,231
38,073

5,183
820

3,638
984

1,869
4,283

11
–

–
5,312

48,93249,472

16,494
124
8,646

2,694
2
1,087

2,589
–
486

2,014
1
7,458

25
22
476

1,937
29,181–25,75329,33018,153

101,568

9,786

7,697

15,625534

36,430171,640

11,465

11,465

Certificates of deposit
and term deposits
Other deposits
Other borrowings and due toother financial institutions
Other liabilities
Bonds, notes and loan capital
Total liabilities
Shareholders’ equity andoutside equity interests
Off balance sheet items affecting
interest rate sensitivity(7,873)(1,859)(2,189)12,289

(368)

–

–

Interest sensitivity gap– net– cumulative

4,514
4,514

(3,061)
1,453(2,026)(573)

17,22816,655

144
16,799(16,799)–––

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

Notes to the Financial Statements
37: Interest Sensitivity Gap (continued)
The following table represents the interest rate sensitivity as at 30 September 2001 of the Group’s assets, liabilities and off balance sheet instruments
repricing (that is, when interest rates applicable to each asset or liability can be changed) in the periods shown.

At 30 September 2001

Less than
3 months$m

Between
3 months and6 months$m

Between
6 months and
12 months$m

Between
1 year and5 years$m

After
5 years$m

Notbearing
interest
$m

Total
$m

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

9,343
5,531
89,803
699

1,264
815
8,045
106

217
343
7,774
78

3
1,484
18,666
265

23
23
594
72

1,773
118
(1,225)39,67912,623
8,314
123,657
40,899Total assets

105,376

10,2308,412

20,418712

40,345

185,493

33,27035,167

3,856
728

3,163
874

2,467
3,966

15
17

–
4,272

42,77145,024

19,683
170
11,576

3,609
1
1,151

2,510
1
474

1,780
21
5,381

–
71
589

2,187
37,943–29,76938,207
19,171

99,866

9,345

7,022

13,615692

44,402

174,942

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

–

–

–

–

–

10,551

10,551(2,005)(7,218)

(23)

9,848

(602)

–

–

Interest sensitivity gap– net– cumulative

3,505
3,505

(6,333)(2,828)1,367(1,461)

16,651
15,190(582)
14,608(14,608)
–

–
–

42
43

Notes to the Financial Statements
38: Net Fair Value of Financial Instruments
Australian Accounting Standard AASB 1033: Presentation and Disclosure of Financial Instruments (AASB 1033) requires disclosure of the net fair value of onand off balance sheet financial instruments. The disclosures exclude all non-financial instruments, such as income taxes and regulatory deposits, and specified
financial instruments, such as interests in controlled entities. The aggregate net fair value amounts do not represent the underlying value of the Group.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s lengthtransaction. Net fair value is the fair value adjusted for transaction costs.
Quoted market prices, where available, are adjusted for material transaction costs and used as the measure of net fair value. In cases where quoted
market values are not available, net fair values are based on present value estimates or other valuation techniques. For the majority of short-term financial
instruments, defined as those which reprice or mature in 90 days or less, with no significant change in credit risk, the net fair value was assumed toequate to the carrying amount in the Group’s statement of financial position.
The fair values are based on relevant information available as at 30 September 2002. While judgement is used in obtaining the net fair value of financial
instruments, there are inherent weaknesses in any estimation technique. Many of the estimates involve uncertainties and matters of significant
judgement, and changes in underlying assumptions could significantly affect these estimates. Furthermore, market prices or rates of discount are notavailable for many of the financial instruments valued and surrogates have been used which may not reflect the price that would apply in an actual sale.
The net fair value amounts have not been updated for the purposes of these financial statements since 30 September 2002, and therefore the net fairvalue of the financial instruments subsequent to 30 September 2002 may be different from the amounts reported.
Net fair value
Financial Assets

Liquid assets
Due from other financial institutions
Trading securities
Investment securities, shares in associates
and joint venture entities
Loans and advances
Customers’ liabilities for acceptances
Other financial assets

Carrying value

2002
$m

2001
$m

2002
$m

2001
$m

7,410
3,815
5,873

7,794
4,829
4,827

7,410
3,815
5,873

7,794
4,829
4,827

5,389
133,793
13,796
12,114

3,595
125,687
14,32424,061

5,301
132,060
13,796
11,413

3,551
123,657
14,32423,305Liquid assets and Due from other financial institutions
The carrying values of these financial instruments are considered to approximate their net fair values as they are short-term in nature or are receivable
on demand.
Trading securities
Trading securities are carried at market value. Market value is generally based on quoted market prices, broker or dealer price quotations, or prices forsecurities with similar credit risk, maturity and yield characteristics.
Shares in associates and Joint venture entities
Net fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available net fair value has been estimatedusing quoted market prices for securities with similar credit, maturity and yield characteristics, or by reference to the net tangible asset backing of theinvestee.
Investment securities
Net fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available, net fair value has been estimatedusing quoted market prices for securities with similar credit, maturity and yield characteristics.
Loans, advances and Customers’ liabilities for acceptances
The carrying value of loans, advances and acceptances is net of specific and general provisions for doubtful debts and income yet to mature. The estimatednet fair value of loans, advances and acceptances is based on the discounted amount of estimated future cash flows and accordingly has not beenadjusted for either specific or general provisions for doubtful debts.
Estimated contractual cash flows for performing loans are discounted at estimated current bank credit spreads to determine fair value. For loans withdoubt as to collection, expected cash flows (inclusive of the value of security) are discounted using a rate which includes a premium for the uncertaintyof the flows.
The difference between estimated net fair values of loans, advances and acceptances and carrying value reflects changes in interest rates and the credit
worthiness of borrowers since loan origination.
Net lease receivables, with a carrying value of $3,151 million (2001: $3,249 million) and a net fair value of $3,155 million (2001: $3,259 million),
are included in loans and advances.

Notes to the Financial Statements
38: Net Fair Value of Financial Instruments (continued)
Other financial assets
Included in this category are accrued interest, fees receivable and derivative financial instruments. The carrying values of accrued interest and fees
receivable are considered to approximate their net fair values as they are short term in nature or are receivable on demand.
The fair values of derivative financial instruments such as interest rate swaps and currency swaps were calculated using discounted cash flow models
based on current market yields for similar types of instruments and the maturity of each instrument. Foreign exchange contracts and interest rate option
contracts were valued using market prices and option valuation models as appropriate.
Properties held for resale, deferred tax assets and prepaid expenses are not considered financial assets.
Net fair value
Financial Liabilities

Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Bonds and notes
Loan capital
Other financial liabilities

Carrying value

2002
$m

2001
$m

2002
$m

2001
$m

10,860113,380
13,79614,9993,505
12,194

12,690105,041
14,324
15,525
3,888
15,755

10,860113,297
13,796
14,7083,445
11,975

12,690104,874
14,324
15,3403,831
15,513Due to other financial institutions
The carrying value of amounts due to other financial institutions is considered to approximate the net fair value.
Deposits and other borrowings
The net fair value of a deposit liability without a specified maturity or at call is deemed by AASB 1033 to be the amount payable on demand at thereporting date. The fair value is not adjusted for any value expected to be derived from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings and acceptances without quoted market prices, market borrowing rates of interest for
debt with a similar maturity are used to discount contractual cash flows.
Bonds and notes and Loan capital
The aggregate net fair value of bonds and notes and loan capital at 30 September 2002 was calculated based on quoted market prices. For those debt
issues where quoted market prices were not available, a discounted cash flow model using a yield curve appropriate for the remaining term to maturityof the instrument was used.
Other financial liabilities
This category includes accrued interest and fees payable for which the carrying amount is considered to approximate the fair value. Also included
are derivative financial instruments, where fair value is determined on the basis described under “Other financial assets”.
Income tax liabilities, other provisions and accrued charges are not considered financial instruments.
Commitments and contingencies
As outlined in note 48, the Group has various credit related commitments. Based upon the level of fees currently charged for granting such commitments,
taking into account maturity and interest rates, together with any changes in the creditworthiness of counterparties since origination of the commitments,
their estimated replacement or net fair value is not material.
Transaction costs
The fair value of financial instruments required to be disclosed under US accounting standard, Statement of Financial Accounting Standards No. 107“Disclosures about Fair Value of Financial Instruments” (SFAS 107) is calculated without regard to estimated transaction costs. Such transaction costs
are not material, and accordingly the fair values shown above would not differ materially from fair values calculated in accordance with SFAS 107.

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

4445

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

Consolidated

Foreign exchange contracts
Spot and forward contracts
Swap agreements
Futures contracts1
Options purchased
Options sold
Other contracts
2

Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold2
1

Credit contracts
Credit default swaps3

Notional
principal
amount2002$mCreditequivalentamount2002$m

Fair value
2002$m

Notional
principal
amount2001$mCreditequivalentamount2001$m

Fair value
2001$m

140,867
23,834337
8,779
11,741
3,046

3,390
1,807
n/a
435
n/a
623

815
(13)
–
272
(216)
456

274,880
34,507–
13,586
13,481
3,776

7,312
3,519
n/a
1,068
n/a
580

2,171
959
–
834
(614)
363

188,604

6,255

1,314

340,230

12,4793,713

35,890212,765
26,934
16,118
9,244

18
3,491
n/a
127
n/a

5
634
(4)
88
(65)

68,997278,152
97,825
8,067
11,766

84
3,814
n/a
65
n/a

13
519
(9)
76
(89)

300,951

3,636

658

464,807

3,963

510

5,722

3,277

(13)

507

4

–

495,277

13,168

1,959

805,544

16,446

4,223

1 Credit equivalent amounts have not been included as there is minimal credit risk associated with exchange traded futures where the clearing house is the counterparty
2 Options sold have no credit exposure, as they represent obligations rather than assets
3 The Group has entered structured financing transactions that expose it to the performance of certain assets under credit default swaps. The total investment of the Group in these transactions
is USD 750 million

46
47

Notes to the Financial Statements
39: Derivative Financial Instruments (continued)
The maturity structure of derivative activity is a primary component of potential credit exposure. The table below shows the remaining maturity profile
by class of derivatives, based on notional principal amounts. The table also shows the notional principal amounts of the derivatives held for trading andother than trading purposes.
Remaining life
Consolidated
At 30 September 2002

Less than
1 year$m

1 to 5 years$mGreater than
5 years
$m

Total
$m

Trading$m

Other than
Trading$m

Foreign exchange contracts
Spot and forward contracts
Swap agreements
Future contracts
Options purchased
Options sold
Other contracts

132,923
5,315
325
7,019
9,658
955

7,480
13,448
12
1,498
1,918
1,789

464
5,071
–
262
165
302

140,867
23,834337
8,779
11,741
3,046

130,940
6,534
337
8,779
11,741
2,959

9,927
17,300–––87

156,195

26,145

6,264

188,604

161,290

27,31435,60895,83018,087
9,012
8,959

282
86,697
8,847
6,554
280

–
30,238–552
535,890212,765
26,934
16,118
9,244

32,681
173,199
26,705
16,1189,244

3,209
39,566229––

167,496

102,660

30,795300,951

257,947

43,004

1,520

4,156

46

5,722

1,718

4,004

Total

325,211

132,961

37,105495,277

420,955

74,322

Consolidated
At 30 September 2001

Less than
1 year$m

1 to 5 years$mGreater than
5 years
$m

Total
$m

Trading$m

Other than
Trading$m

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

261,717
10,581
11,294
11,597897

12,66418,090
2,029
1,590
2,439

499
5,836
263
294
440

274,880
34,507
13,586
13,481
3,776

267,332
11,123
13,586
13,481
3,776

7,548
23,384–––

296,086

36,812

7,332

340,230

309,298

30,932

62,237
126,91286,0793,453
11,3196,760
114,655
11,7464,460
442–
36,585–154
568,997278,152
97,825
8,067
11,76667,006
242,042
97,825
8,067
11,766

1,991
36,110–––290,000

138,063

36,744

464,807426,706

38,101

467

40

–

507

40

467

586,553

174,915

44,076805,544736,044

69,500Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold

Credit contracts
Credit default swaps

Remaining life

Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold

Credit contracts
Credit default swaps
Total

Notes to the Financial Statements
39: Derivative Financial Instruments (continued)
Concentrations of credit risk exist for groups of counterparties when they have similar economic characteristics. Major concentrations of credit risk arise
by location and type of customer.
The following table shows the concentrations of credit risk, by class of counterparty and by geographic location, measured by credit equivalent amount.
In excess of 40% (2001: 55%) of the Group’s exposures are with counterparties which are either Australian banks or banks based in other OECD countries.
Consolidated
At 30 September 2002OECD
governments$mAustralian andOECD banks$mCorporations,
non-OECD
banks and others
$m

Total
$m

Australia
New ZealandOverseas markets

402
17
1

3,113
378
2,206

6,351
333
367

9,866
728
2,574

420

5,697

7,051

13,168

Consolidated
At 30 September 2001

OECD
governments$mAustralian andOECD banks$mCorporations,
non-OECD
banks and others
$m

Total
$m

Australia
New ZealandOverseas markets

566
17
2

5,662
600
3,425

5,372
374
428

11,600
991
3,855

585

9,687

6,174

16,446

48
49

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

Consolidated

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

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

Credit contracts
Credit default swaps
Gross unrealised gains
Gross unrealised losses

Total

Other than Trading
Fair value
Fair value
as at
as at
2002
2001
$m
$m

Trading

Trading

Fair value
as at
2002
$m

Fair value
as at
2001
$m

Fair value
Average
2002$mFair value
Average
2001
$m

1,452
(349)

1,514
(41)

553
(841)

2,964
(2,266)

2,187(1,689)4,679(4,252)

333
(96)
–
–

1,821
(33)
–
–

436
(686)
272
(216)

249
(1,077)
834
(614)

354
(728)
348
(412)

540
(1,063)
896
(529)

–
–

–
–

501
(45)

416
(54)

459
(45)

204
(142)

1,340

3,261

(26)

452

474

333

–
–

6
(19)

16
(11)

44
(18)

19
(11)

34
(34)

605
(267)

470
(217)

2,013
(1,717)

2,379(2,113)2,181(1,911)

2,339(2,086)

–
–
–
–

–
–
–
–

36
(40)
88
(65)

84
(93)
76
(89)

51
(56)
81
(71)

80
(82)
50
(56)

338

240

320

270

283

245

–
(15)

–
–

75
(73)

–
–

42
(33)

–
–

(15)

–

2

–

9

–

1,663

3,501

296

722

766

578

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

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

Consolidated

Foreign exchange and commodity contracts
Customer-related and trading purposes
Other than trading purposes

Interest rate contracts
Customer-related and trading purposes
Other than trading purposes

Credit contracts
Customer - related and trading purposes
Other than trading purposes

Total

Notional
principal
amount2002$mCreditequivalentamount
2002
$m

Fair
value
2002
$m

Notional
principal
amount2001$mCreditequivalentamount
2001
$m

Fair
value
2001
$m

161,290
27,314

3,689
2,566

(26)
1,340

309,298
30,932

8,366
4,113

452
3,261

188,604

6,255

1,314

340,230

12,4793,713

257,947
43,004

2,992
644

320
338

426,706
38,101

3,391
572

270
240

300,951

3,636

658

464,807

3,963

510

1,718
4,004

189
3,088

2
(15)

40
467

4
–

–
–

5,722

3,277

(13)

507

4

–

495,277

13,168

1,959

805,544

16,446

4,223

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

Consolidated

Foreign Exchange
Contracts
2002
2001
$m
$m

Interest Rate and Credit
Contracts
2002
2001
$m
$m

2002
$m

2001
$m

Expected recognition in income
Within one year
One to two years
Two to five years
Greater than five years

(10)
(7)
(3)
–

(22)
(36)
(46)
–

165
130
105
102

183
143
190
101

155
123
102
102

161
107
144
101

(20)

(104)

502

617

482

513

Total

50
51

Notes to the Financial Statements
40: Securitisation
During the year ended 30 September 2002, the Group securitised residential mortgage loans amounting to $nil (2001: $2,470 million) and commercial
loans amounting to $66 million (2001: $190 million).
These loans have been removed from the Group’s balance sheet and transferred to third party special purpose entities (SPEs).
The Group retains servicing and (for some loans) custodian responsibilities for the loans sold. Following a securitisation, the Group receives fees forservicing the loans, custodian fees, fees for facilities provided and any excess income derived by the SPE after interest has been paid to investors and net
credit losses and expenses absorbed.
The Group does not hold any material retained interest in the loans that have been sold. There is no recourse against the Group if cash flows from thesecuritised loans are inadequate to service the obligations of the SPE except to the limited extent provided in the transaction documents through theprovision of arms length services and facilities.
The securities issued by the SPEs do not represent deposits or other liabilities of the Company or the Group. Neither the Company nor the Group in any
way stands behind the capital value and/or performance of the securities or the assets of the SPEs except to the limited extent provided in the transaction
documents through the provision of arms length services and facilities.
The Group may also provide liquidity facilities and other forms of credit enhancement to ensure adequate funds are available to the SPEs. The facilities are
undrawn and are classified as contingent liabilities. The Group also provides hedging facilities to the SPEs to mitigate interest rate and currency risks.
All these transactions are completed on an arms length basis.
The following table summarises the cash flows between the Group and the SPEs in respect of securitisation activities.

Proceeds from securitising loans
Servicing fees received
Other cash inflows

2002
$m

2001
$m

66
6
17

2,660
2
6

Notes to the Financial Statements
41: Life Insurance
20021
$m

Consolidated
2001
$m

2000
$m

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

701
238
(636)
(204)

1,600
20
(1,330)
(100)

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

Life insurance margin on services operating income
Operating expenses

99
(54)

190
(105)

175
(73)

Profit before income tax
Income tax expense

45
(20)

85
(47)

102
(53)

Profit after income tax

25

38

49

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

18
(1)
8

36
(11)
13

36
(4)
17

Profit after income tax

25

38

49

Profit after income tax arose from:

1 ANZ Life Assurance Company Limited was sold into a joint venture with ING Australia in April 2002. Accordingly the results shown only include profits to 30 April 2002

52
53

Notes to the Financial Statements
42: Segment Analysis
For management purposes the Group is organised into seven major business segments including Personal Banking and Wealth, Corporate Banking,Investment Banking, Consumer Finance, Mortgages, Asset Finance and Small to Medium Business.
A description of each segment is shown below:
Personal Banking and Wealth

Provides a full range of banking and wealth management services for consumers.

Corporate Businesses

Comprises corporate banking, global institutional banking and global transaction services.

Investment Banking

Comprises global foreign exchange, global capital markets, global structured finance and corporate financing
and advisory.

Consumer Finance

Provides consumer and commercial credit cards, ePayment products, personal loans and merchantpayment facilities.

Mortgages

Provides mortgage finance secured by residential real estate.

Asset Finance

Provides secured financing for motor vehicles and other assets, fleet management and vendor financing facilities,
and fixed interest securities through the issue of debentures.

Small to Medium Business

Provides a full range of banking services for metropolitan-based small to medium businesses.

As the composition of segments has changed over time, September 2001 comparatives have been adjusted to be consistent with the 2002 segment
definitions. Comparatives for the year ended 30 September 2000 have not been provided because data could not reasonably be disaggregated into thechanged segments.
The following analysis details financial information by business segment.
1, 2Business Segment Analysis
Consolidated
Total
30 September 2002

Personal
Banking Corporate Investment& Wealth Businesses
Banking
$m
$m
$m

Asset
Finance$m

Small toMediumBusiness
$m

Other
$m

Consolidated
Total
$m

External interest income
External interest expense
Net intersegment interest

555(1,011)
1,533

1,421
(744)
(12)

989
(1,433)
706

598
(1)
(208)

3,671
(159)
(2,830)

967
(472)
(159)

423
(191)
87

413
(1,008)883

9,037(5,019)–Net interest income
Other external operating income
Net intersegment income

1,077
789
306

665
720
(36)

262
536
(4)

389
393
(86)

682
89
(230)

336
69
(8)

319
80
(33)

288
263
91

4,018
2,939
–

Operating income

2,172

1,349

794

696

541

397

366

642

6,957

Other external expenses
Net intersegment expenses(1,056)
(284)

(306)
(139)

(335)
(27)

(234)
(74)

(119)
(42)

(150)
(29)

(124)
–

(581)
595

(2,905)–

Operating expenses(1,340)

(445)

(362)

(308)

(161)

(179)

(124)

14

(2,905)

Share of net profit/loss of equity
accounted investments
Charge for doubtful debts
Income tax expense
Outside equity interests

32
(38)
(253)
–

–
(144)
(231)
(2)

2
(68)
(54)
(1)

(5)
(161)
(73)
–

–
(28)
(106)
–

–
(69)
(47)
–

–
(16)
(69)
–

2
(336)
(65)
–

31
(860)
(898)
(3)

Profit after income tax

573

527

311

149

246

102

157

257

2,322

59
3

8
1

11
–

20
7

6
7

11
2

1
–

90
–

206
20

10,635
1,661
39,342

42,822–40,373

25,66924
20,654

5,551
4
249

64,826–
3,551

12,410
1
9,704

6,764
–
7,589

14,4282
50,178183,105
1,692
171,640

Non-Cash Expenses
Depreciation
Amortisation of goodwill
Financial Position
Total external assets
Associate investments
Total external liabilities

1 Results are equity standardised
2 Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis
3 Includes Treasury; Operations, Technology & Shared Services; Corporate Centre, Risk & Finance
4 Includes net profit from disposal of investments

Consumer
Finance Mortgages
$m
$m

3, 4

Notes to the Financial Statements
42: Segment Analysis (continued)
1, 2Business Segment Analysis
Consolidated
30 September 2001

Personal
Banking Corporate Investment& Wealth Businesses
Banking
$m
$m
$m

Asset
Finance$m

Small toMediumBusiness$m

Other 3, 4$m

Consolidated
Total
$m

External interest income
External interest expense
Net intersegment interest

626(1,162)
1,632

1,802
(865)
(268)

1,761
(2,043)
491

567
–
(233)

3,768
(154)
(2,959)

1,012
(552)
(122)

405
(185)
83

310
(1,457)
1,376

10,251(6,418)–Net interest income
Other external operating income
Net intersegment income

1,096
816
272

669
665
(38)

209
547
(8)

334
329
(70)

655
78
(203)

338
59
(9)

303
68
(38)

229
36
94

3,833
2,598
–

Operating income

2,184

1,296

748

593

530

388

333

359

6,431

Other external expenses
Net intersegment expenses(1,038)
(292)

(303)
(147)

(331)
(23)

(205)
(61)

(108)
(42)

(158)
(30)

(113)
(8)

(836)
603

(3,092)–

Operating expenses(1,330)

(450)

(354)

(266)

(150)

(188)

(121)

(233)

(3,092)

Share of net profit/loss of equity
accounted investments
Charge for doubtful debts
Income tax expense
Outside equity interests

(2)
(38)
(288)
–

–
(149)
(229)
(2)

1
(64)
(43)
–

–
(171)
(57)
–

–
(24)
(120)
–

–
(65)
(43)
–

–
(17)
(65)
–

(24)
(3)
(66)
–

(25)
(531)
(911)
(2)

Profit after income tax

526

466

288

99

236

92

130

33

1,870

48
–

7
1

9
–

17
7

1
7

9
2

1
–

91
–

183
17

13,59737
39,99844,245–
37,13329,851
12
26,112

4,881
10
313

55,901–
3,014

12,013
–
9,566

6,013
–
6,873

18,992
5
51,933

185,49364
174,942

Non-Cash Expenses
Depreciation
Amortisation of goodwill
Financial Position
Total external assets
Associate investments
Total external liabilities

Consumer
Finance Mortgages$m$m

1 Results are equity standardised
2 Intersegment transfers are accounted for and determined on an arms length or cost recovery basis
3 Includes Treasury; Operations, Technology & Shared Services; Corporate Centre, Risk & Finance
4 Includes net profit from disposal of investments

The following analysis details financial information by geographic location.
5, 6

Geographic Segment Analysis
Consolidated

2002

2001

2000

$m

%

$m

%

$m

%

8,697
1,917
1,393

72
16
12

9,012
2,011
1,801

70
16
14

7,991
1,843
4,197

57
13
30

12,007100

12,824100

14,031100

135,050
23,79924,25674
13
13

133,057
22,33730,09972
12
16127,306
20,35424,80774
12
14183,105100

185,493100

172,467

100

7

IncomeAustralia
New ZealandOverseas markets

Total assets
Australia
New ZealandOverseas markets

5 Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis
6 The geographic segments represent the locations in which the transaction was booked
7 2000 includes abnormal items

54
55

Notes to the Financial Statements
43: Notes to the Statements of Cash Flows2002$mConsolidated
2001$m

The Company
2000
$m

2002
$m

2001
$m

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

Net profit after income tax

Inflows(Outflows)

2,322

1,870

1,747

1,507

1,610

860
226

531
181

502
186

710
113

414
111

248
(436)
(5)
1
(170)
(248)
(4)

300
(288)
(1)
–
–
–
–

1,354
(297)
(17)
(7)
(1,239)
–
–

224
(299)
(1)
1
–
(248)
–

221
(179)
(2)
–
–
–
–

(1,030)
328
(16)
46

(629)
137
(34)
88

(25)
(325)
23
286

(782)
230
(25)
69

(987)
254
(31)
(20)

(30)

(52)

(67)

(6)

(5)

(348)
(1)
(12)

(285)
(42)
73

332
89
(74)

(272)
(2)
–

(283)
117
(6)

Total adjustments

(591)

(21)

721

(288)

(396)

Net cash provided by operating activities

1,731

1,849

2,468

1,219

1,214

Adjustments to reconcile net profit after income tax
to net cash provided by operating activities
Provision for doubtful debts
Depreciation and amortisation
Provision for employee entitlements, restructuring
and other provisions
Payments from provisions(Profit) on sale of premises and equipment
Provision for surplus lease space(Profit) on sale of controlled entities and associates
Recovery from NHB litigation
Profit on sale of investment securities
Net decrease (increase)
Trading securities
Interest receivable
Accrued income
Net debit tax balances
Amortisation of discounts/premiums included
in interest income
Net increase (decrease)
Interest payable
Accrued expenses
Other

1

b) Reconciliation of cash and cash equivalents

Cash and cash equivalents include liquid assets and amounts due from other financial institutions with an original term to maturity of less than 90 days.
Cash and cash equivalents at the end of the financial year as shown in the statements of cash flows are reconciled to the related items in the statementsof financial position as follows

Liquid assets – less than 90 days
Due from other financial institutions – less than 90 days

2002
$m

Consolidated
2001
$m

2000
$m

2002
$m

The Company
2001
$m

4,821
3,104

5,504
3,567

2,662
3,800

3,432
2,021

3,692
3,055

7,925

9,071

6,462

5,453

6,747

1 At 30 September 2002, cash and cash equivalents totalling nil (2001: nil; 2000: $2 million) were not available for use outside the local operations
due to exchange control regulations

Notes to the Financial Statements
43: Notes to the Statements of Cash Flows (continued)
2002$mConsolidated
2001
$m

2000
$m

141
–
106
5
(7)
(230)
–

408
4
30
5
(11)
(348)
(42)

–
–
4
14
(6)
(9)
(2)

Fair value of net assets acquired
Goodwill on acquisition

14
53

46
5

1
42

Consideration paid
Cash consideration paid

67
67

51
36

43
43

8
–
–
36
–
–
–
5,090
–
38
4
–
–
–
–
(22)
(4,798)
36
–

99
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

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

Fair value of net assets disposed
Profit on disposal net of transaction costs

392
174

99
–

1,129
1,239

Net consideration received/receivable

566

99

2,368

–

99

2,368

1

c) Acquisitions and disposals
Details of aggregate assets and liabilities of controlled entities andbranches acquired, and disposed of, by the Group are as follows:
Fair value of net assets acquired
Net loans and advances
Trading securities
Other assets
Premises and equipment
Payables and other liabilities
Deposits and other borrowings
Income tax liability

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

Cash consideration received
1 For details on acquisitions and disposals refer to Note 19d) Non-cash financing and investing activities

Share capital issues
Dividend reinvestment plan

2002
$m

Consolidated
2001
$m

2000
$m

2002
$m

The Company
2001
$m

94

86

236

94

86

56
57

Notes to the Financial Statements
43: Notes to the Statements of Cash Flows (continued)
2002e) Financing arrangements
Financing arrangements which are available under normal financial
arrangements
Credit standby arrangements
Standby lines
Other financing arrangements
Overdrafts and other financing arrangements
Total finance available

2001

Available$m

Unused$m

Available$m

Unused
$m

1,197

551

1,048

188

1,124

68

1,273

64

2,321

619

2,321

252

44: Controlled Entities
Incorporated in

Nature of Business

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

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

All controlled entities are 100% owned unless otherwise noted.
The material controlled entities of the Group are
Australia and New Zealand Banking Group Limited
ANZCover Insurance Pty Ltd
ANZ Executors & Trustee Company Limited
ANZ Funds Pty Ltd
ANZ Holdings (New Zealand) Limited
EFTPOS New Zealand Limited
ANZ Banking Group (New Zealand) Limited
Tui Securities Limited
UDC Finance Limited
Endeavour Finance Limited
Tui Endeavour Limited
ANZ International Private Limited
ANZ Singapore Limited
Minerva Holdings Limited
ANZEF Limited
ANZ Lenders Mortgage Insurance Pty Limited
ANZ Holdings Pty Ltd
ANZ Investment Holdings Pty Ltd
530 Collins Street Property Trust
ANZ Properties (Australia) Pty Ltd
ANZ Securities (Holdings) Limited
Australia and New Zealand Banking Group (PNG) Limited
Esanda Finance Corporation Limited
Fleet Partners Pty Limited
ANZ Capel Court Limited
PT ANZ Panin Bank
US Distribution Trust I
US Distribution Trust IIAlliance Holdings Limited
NMRSB Pty Ltd
ANZ Financial Products Pty Ltd
Orchard Investments Pty Ltd
*

*

*

*

*

*

*

*

*

*

*

*

*1

* Audited by overseas KPMG firms
1 Outside equity interests hold ordinary shares or units in the controlled entities listed above as follows:
PT ANZ Panin Bank – 7,500 IDR 1M shares (15%) (2001: 7,500 IDR 1M shares (15%))

Notes to the Financial Statements
45: Associates
Significant associates of the Group are as follows:
Ownership
Interest
held

VotingInterest

Incorporated in

11%
20%
68%
81%
46%

11%
20%
25%
25%
20%

Indonesia
Australia
New Zealand
New ZealandAustralia

1

PT Panin Indonesia Bank
ECard Pty Ltd
Alto Plastics Limited
Motion Industries Limited
Australian Convenience Foods Pty Ltd5
Other associates
2

3

4

Total shares in associates

Carrying Value$m

Reportingdate

Principal
activity

67
4
7
6
7
8

31 December
30 June31 March
31 March
30 JuneBanking
Smart Cards
Manufacturing
Manufacturing
Manufacturing

Reportingdate

Principal
activity99

1 An associate from 1 April 2001. In addition, the Group holds options over a further 18% of PT Panin Indonesia Bank
2 An associate from 1 June 2000
3 An associate from 31 October 2000
4 An associate from 1 April 2001
5 An associate from 20 August 2002

46: Interests in Joint Venture Entities
The Group has an interest in a joint venture entity as follows:1

ING Australia Ltd

2

Interest
held

VotingInterest

Incorporated inCarrying Value
$m

49%

49%

Australia

1,593

31 December Funds Management
and Insurance

1 A joint venture entity from 1 May 2002
2 The Group has right of veto on certain decisions

2002
$m

Retained profits attributable to the joint venture entity
At the beginning of the financial year
At the end of the financial year–
2

Movement in the carrying amountof the joint venture entity
Carrying amount at the commencementof the joint venture entity
Share of net profit
Distributions received

1,591
2
–

Carrying amount at the end of the financial year

1,593

1

Share of assets and liabilities
Investments
Other assets

9,140
732

Total assets

9,872

Policy holder liabilities
Other liabilities

8,508
373

Total liabilities

8,881

Net assets

991

Share of revenues, expenses and results
Revenues
Expenses

195
169

Profit from ordinary activities before income tax

26

Income tax

6Profit from ordinary activities after income tax

20

Amortisation of notional goodwill(18)

Net equity accounted profit

2

Share of commitments
Lease commitments
Other commitments

163
166

Total expenditure commitments

329

1 This represents the Group’s share of the assets and liabilities of ING Australia, less outside equity interests and including goodwill on acquisition of ANZ Funds Management entities

58
59

Notes to the Financial Statements
47: Commitments
Consolidated

The Company

2002
$m

2001
$m

2002
$m

2001
$m

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

75
–

32
1

38
–

9
–

Total capital expenditure commitments

75

33

38

9

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

163
426
450

133
359
471

133
347
427

110
290
450

1,039

963

907

850

16
7

9
17

10
3

4
14

23

26

13

18

Total lease rental commitments

1,062

989

920

868

Total commitments

1,137

1,022

958

877

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

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

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

Undrawn facilities
Underwriting facilities

2002
Contract
amount$m

2001
Contract
amount$m

2002
Contract
amount$m

The Company
2001
Contract
amount$m

Controlled Entities
2002
2001
Contract
Contract
amountamount$m$m

60,37336

56,766
210

54,271
36

49,751
54

6,102
–

7,014
156

60,40956,97654,30749,805

6,102

7,170

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

The Company

Controlled Entities
2002
2001
Contract
Contract
amountamount$m$m

2002
Contract
amount$m

2001
Contract
amount$m

2002
Contract
amount$m

2001
Contract
amount$m

Guarantees
Credit derivatives - soldStandby letters of credit
Bill endorsements
Documentary letters of credit
Performance related contingents
Other

3,580
3,088
1,952
298
1,620
11,161
935

4,496
–
1,412
430
1,396
9,174
1,930

3,526
3,088
1,932
298
1,505
10,907
552

4,417
–
1,329
430
1,274
9,049
1,874

54
–
20
–
115
254
383

79
–
83
–
122
125
56

Total contingent liabilities

22,634

18,83821,80818,373

826

465

1

1 In addition the Group had no equity underwriting commitments at 30 September 2002 (2001: nil) which are classified as market risk exposures

The details and estimated maximum amount of contingent liabilities that may become payable are set out below.
(i) Clearing and Settlement Obiligations
In accordance with the clearing and settlement arrangements set out in the Australian Payments Clearing Association Limited (APCA) Regulations for
the Australian Paper Clearing System, the Bulk Electronic Clearing System and the High Value Clearing System (HVCS) and in the Austraclear System
Regulations, the Company has a commitment to participate in loss-sharing arrangements in the event of a failure to settle by a member institution.
For both the APCA HVCS and Austraclear, the obligation arises only in limited circumstances.
(ii) The Group will indemnify each customer of controlled entities engaged in nominee activities against loss suffered by reason of such entities failingto perform any obligation undertaken by them to a customer.
(iii) Interbank Deposit Agreement
ANZ has entered into an Interbank Deposit Agreement with the major banks in the payments system. This agreement is a payment system support
facility certified by the Australian Prudential Regulatory Authority, where the terms are such that if any bank is experiencing liquidity problems, theother participants are required to deposit equal amounts of up to $2 billion for a period of 30 days. At the end of 30 days the deposit holder has theoption to repay the deposit in cash or by way of assignment of mortgages to the value of the deposit.
(iv) Tax Audit
ANZ in Australia is being audited by the Australian Taxation Office (ATO). There are several major issues that the ATO is considering, including:>Lease assignments in 1991 and 1992. Tax assessments have been received and are being contested in the Federal Court.
Profit after tax of approximately $50 million was earned from these transactions.

>

During the years 1996 - 2002 ANZ was involved in securities lending, equity swaps, and other similar kinds of transactions in the normal courseof its business of banking. Total profit after tax from these transactions was less than $200 million. The ATO is reviewing these transactions.
ANZ received external advice in support of the taxation treatment of these transactions prior to commencing them. This advice was based on
the taxation law as understood at the time these transactions were undertaken, and strongly supports ANZ’s position.

>

Sale of Grindlays in 2000. At ANZ’s request the ATO is reviewing the taxation treatment of this transaction. ANZ’s profit after tax from thistransaction was $404 million.

Based on external advice, ANZ has assessed the likely progress of these issues, and believes that it holds appropriate provisions.

60
61

Notes to the Financial Statements
48: Contingent Liabilities and Credit Related Commitments (continued)(v) Sale of Grindlays businesses
As part of the sale on 31 July 2000 of ANZ Grindlays Bank Limited and the private banking business of ANZ in the United Kingdom and Jersey, together with ANZ
Grindlays (Jersey) Holdings Limited and its subsidiaries (the Grindlays businesses), to Standard Chartered Bank (SCB), ANZ provided warranties relating to thosebusinesses. Where it is anticipated that payments are likely under these warranties, provisions have been made to cover the anticipated liability.
In addition, ANZ provided SCB and/or Grindlays with certain indemnities. Those indemnities under which ANZ remains exposed as at 30 September 2002 are:>an indemnity relating to liabilities Grindlays may incur as a result of certain claims made against Grindlays and its officers in India (the Indian Indemnity).
Details of this indemnity are set out below;>

an indemnity in relation to certain customer accounts written by Grindlays prior to 31 July 2000. This indemnity covers 80% of losses emerging
on accounts totalling up to USD 64 million at 30 September 2002; and>an indemnity relating to tax liabilities of Grindlays (and its subsidiaries) and the Jersey Sub-Group to the extent to which such liabilities have not been
provided for in the Grindlays accounts as at 31 July 2000.

Claims have been made under the above indemnities and also in relation to certain warranties made by ANZ at the time of sale. Discussions are continuingon the outstanding claims; at present the Group is confident that they will have no material impact on the Group.
The Indian Indemnity requires ANZ to pay SCB for losses that Grindlays incurs as a result of certain claims that have been or may be made against Grindlays
and its officers in India. Under the terms of the Indian Indemnity, ANZ will have control of matters for which it is potentially liable. No settlement offer can bemade or paid by Grindlays without the prior agreement of ANZ. ANZ will continue to manage these matters in the best interests of the shareholders taking into
account its legal obligations.
On 19 January 2002 Grindlays completed the settlement of its long running dispute with India’s National Housing Bank (NHB). The dispute originated in 1992.
Since January 2001 the amount in dispute had been deposited with the Supreme Court of India. Of this amount (including interest) of Rupees 16.45 billion(AUD 661 million at 19 January 2002 rates), Grindlays recovered under the terms of the settlement Indian Rupees 6.20 billion (AUD 248 million), with NHB
receiving the balance. ANZ in turn received a payment of USD 124 million from SCB under the terms of the Indian Indemnity.
ANZ remains liable for other claims under the Indian Indemnity, including in relation to the following two matters that are the subject of current proceedings
involving Grindlays or its officers:>

In 1991, certain amounts were transferred from non-convertible Indian Rupee accounts maintained with Grindlays in India. In making these transactions it
would appear that the provisions of the Foreign Exchange Regulation Act 1973 were inadvertently not complied with. Grindlays on its own initiative, broughtthese transactions to the attention of the Reserve Bank of India. The Indian authorities have served notices on Grindlays and certain of its officers in India
that could lead to possible penalties. Grindlays has commenced proceedings in the courts contesting the validity of these notices.

>

In July 2002, Grindlays was ordered to repay, with interest, two payments it received from a stockbroker in 1991 in connection with securities
transactions. Grindlays has commenced proceedings challenging the validity of these orders, which direct repayment of Indian Rupees 24 million(AUD $0.9 million at 30 September 2002 rates, plus interest accruing at 24% since 1991). Since July Grindlays has been given notice of hearings inrelation to a further six payments received by it in 1991 in similar circumstances totalling Indian Rupees 31 million (AUD 1.2 million at 30 September
2002 rates).

(vi) Pursuant to class order 98/1418 dated 13 August 1998, relief was granted to a number of wholly owned controlled entities from the Corporations
Act 2001 requirements for preparation, audit, and publication of financial statements. The entities to which relief was granted are
ANZ Properties (Australia) Pty Ltd1

Binnstone Traders Pty Limited1

Alliance Holdings Pty Ltd1

Deori Pty Ltd1ANZ Capital Hedging Pty Ltd1E S & A Holdings Pty Ltd1ANZ Funds Pty Ltd1NMRSB Pty Ltd1ANZ Nominees Limited1

Jikk Pty Ltd1

Orchard Investments Pty Ltd2LFD Limited1
Votraint No. 1103 Pty Limited2

1 Relief granted on 21 August 2001
2 Relief granted on 13 August 2002

Notes to the Financial Statements
48: Contingent Liabilities and Credit Related Commitments (continued)
It is the condition of the class order that the Company and each of the above controlled entities enter into a Deed of Cross Guarantee. A Deed of Cross
Guarantee under the class order was lodged and approved by the Australian Securities and Investments Commission. The effect of the Deed is that theCompany guarantees to each creditor payment in full of any debt in the event of winding up any of the controlled entities under certain provisions of the
Corporations Act 2001. The Company will only be liable in the event that after six months any creditor has not been paid in full. The controlled entities
have also given similar guarantees in the event that the Company is wound up. The consolidated statement of financial performance and consolidated
statement of financial position of the Company and its wholly owned controlled entities which have entered into the Deed of Cross Guarantee are:Consolidated
2002
$m

2001
$m

1,955
(654)

2,841
(674)

1,301
4,348

2,167
3,363

Total available for appropriation
Ordinary share dividends provided for or paid

5,649
(882)

5,530
(1,062)Retained profits at end of year

4,767

4,468

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

5,998
2,606
100,999
40,520
1,189

6,032
2,512
93,48247,396
1,070

Total assets

151,312150,492

Liabilities
Deposits and other borrowings
Income tax liability
Payables and other liabilities
Provisions

85,258
1,064
53,218
1,611

76,552989
61,004
1,981

Total liabilities

141,151

140,526

Net assets

10,161

9,966

Shareholders’ equity

10,161

9,966

Profit before tax
Income tax expense
Profit after income tax
Retained profits at start of year

1

1 The Companies included in the class order have changed, accordingly retained profits have not carried forward(vii) The Company has guaranteed payment on maturity of the principal and accrued interest of commercial paper notes issued by ANZ (Delaware) Inc.
of $1,654 million (2001: $4,059 million).
(viii)The Company is party to an underpinning agreement with ANZ Banking Group (New Zealand) Limited whereby the Company undertakes to assume riskin relation to credit facilities extended by ANZ Banking Group (New Zealand) Limited to individual customers which exceed 35% of ANZ Banking Group(New Zealand) Limited’s capital base.
(ix) The Company is party to an underpinning agreement with Australia and New Zealand Banking Group (PNG) Limited whereby the Company undertakes
to assume risk in relation to credit facilities extended by Australia and New Zealand Banking Group (PNG) Limited to individual customers which
exceed 50% of Australia and New Zealand Banking Group (PNG) Limited’s capital base.
GeneralThere are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of which cannot readily be quantified.
Appropriate legal advice has been obtained and, in the light of such advice, provisions have been made as deemed necessary.

62
63

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

SchemeScheme type

Australia

ANZ Australian Staff
Superannuation Scheme

Defined Contribution Scheme
Section C
orDefined Contribution Scheme
Section A
orDefined Benefit Scheme
Pension Section Account

1,2

New Zealand

ANZGROUP (New Zealand)
Staff Superannuation Scheme

1, 2EnglandEmployee

Employer

optional

Balance of cost

optional

9% of salarynil

Balance of cost

5

1

ANZ UK Staff Pension Scheme

34Defined Benefit SchemeorDefined Contribution Schemenil

Balance of cost

2.5% min7.5%
of salaries

Defined Benefit Schemenil

Balance of cost

Balance of cost: the Group’s contribution is assessed by the actuary after taking account of members’ contributions and the value of the schemes’ assets
1 These schemes provide for pension benefits
2 These schemes provide for lump sum benefits
3 As recommended by the actuary, currently 9% of members’ superannuation salaries
4 From 1 October 2001 to 30 June 2002 the contribution rate was 8% of salary
5 Closed to new members on 31 March 1990. Operates to make pension payments to retirees who were members of that section of the scheme

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

2002
SchemesANZ Australian Staff Superannuation Scheme
Pension Section Account
ANZ UK Staff Pension Scheme
1

1

2001
SchemesANZ Australian Staff Superannuation Scheme
Pension Section Account
ANZ UK Staff Pension Scheme
22

1 Amounts were measured at 31 December 2001
2 Amounts were measured at 31 December 2000

Employer’s
contribution$mAccruedbenefits$m

Net market value of
assets held by scheme$mExcess ofnet market valueof assets overaccrued benefits
$m

–
–

46
998

47
1,053

1
55

46
963

Vestedbenefits
$m

48
904

Employer’s
contribution$mAccruedbenefits$m

Net market value of
assets held by scheme$mExcess ofnet market valueof assets overaccrued benefits
$m

–
–

48
943

50
1,228

2
285

Vestedbenefits$mNotes to the Financial Statements
50: Fiduciary Activities
The Group conducts investment fiduciary activities for trusts, including deceased estates. These trusts have not been consolidated as the Company does
not have direct or indirect control.
Where the Company or its controlled entities incur liabilities in respect of these operations as trustee, a right of indemnity exists against the assets of theapplicable funds or trusts. As these assets are sufficient to cover the liabilities and it is therefore not probable that the Company or its controlled entities
will be required to settle the liabilities, the liabilities are not included in the financial statements.
The aggregate amounts of funds concerned are as follows:

Funds managed
Trusteeships

1

2002
$m

2001
$m

–
1,849

15,810
3,240

1,849

19,050

1 As at 30 September 2002, the ANZ/INGA joint venture had funds under management of $26,642 million

51: Employee Share and Option Plans
The Company has five share purchase and option incentive plans available for employees and directors of the Group: the ANZ Employee Share Acquisition
Plan; the ANZ Share Purchase Scheme; the ANZ Employee Share Save Scheme ; the ANZ Share Option Plan and the ANZ Directors’ Share Plan.
Shareholders of the Company have approved the implementation of each of the current plans. Fully paid ordinary shares issued under these plans rank
equally with other existing fully paid ordinary shares.
1

Each option granted under the ANZ Share Option Plan entitles a holder to purchase one ordinary share subject to any terms and conditions imposed on issue.
An offer to employees and directors cannot be made under any of the schemes if an issue pursuant to that offer will result in the aggregate of sharesissued and options granted over unissued shares held for employees under various employee share and option incentive schemes exceeding 7% of theissued capital (and unexercised options) of the Company.
Amounts received from the ANZ Employee Share Acquisition Plan and the ANZ Share Purchase Scheme, on fully paid and partly paid shares,
are recognised as share capital.
The closing market price of one ordinary share at 30 September 2002 was $17.65.
Amounts received from exercising options under the ANZ Share Option Plan during the financial year, excluding calls on partly paid shares issued in priorfinancial years, were recognised as follows:
The Company

Share capital
General reserve

2002
$

2001
$

57,131,915(26)

21,426,988(12,113)

ANZ Employee Share Acquisition Plan
All permanent employees who have had continuous service for one year with the Company or any of its controlled entities may be eligible to participate ina scheme enabling the issue of up to $1,000 of shares to an employee in each financial year. During the financial year, 1,070,986 shares with an average
issue price of $17.21 were issued under the $1,000 scheme.
Selected employees may also be issued deferred shares which vest in the employee after a qualifying period. Ordinary shares acquired under this plan areheld in trust and have restrictions on their disposal. During the financial year, 3,074,002 (2001: 4,756,024, 2000: 2,565,559) deferred shares were issued
under this Plan.
1 The ANZ Employee Share Save Scheme is a scheme which operates under the ANZ Employee Share Acquisition Plan

64
65

Notes to the Financial Statements
51: Employee Share and Option Plans (continued)
ANZ Share Purchase Scheme
Officers eligible to participate in this scheme may be offered fully paid ordinary shares. During the financial year, no fully paid ordinary shares were issued
under the scheme.
At 30 September 2002, 1,272,500 fully paid ordinary shares remained subject to the rules of this scheme.
ANZ Employee Share Save Scheme
Employees have the opportunity to request that a proportion of their income be directed to the purchase of ANZ shares. The amount they elect to contributeis deducted fortnightly and shares are purchased on market quarterly in arrears. The Company contributes 5% of the purchase price and pays for brokers
fees and (prior to 1 July 2001) stamp duty. During the financial year 1,831 employees participated in the scheme and 288,324 shares were purchased.
The number of shares acquired since the commencement of the scheme is 472,442. Senior executives are not eligible to receive the 5% discount.
ANZ Share Option Plan
Selected employees may be granted options which entitle them to purchase ordinary fully paid shares in the Company at a price fixed at the time when
the options are issued.
11,119,785 options with a weighted average grant date fair value of $3.21 were issued during the financial year and 760,506 options lapsed during
the financial year.
At 30 September 2002, 32,435,347 options were outstanding under this scheme.
No. of options outstandingat 30 September 2002

2,565
325,000
71,501
250,000
195,000
500,000
10,00082,00023,421
1,852,500
2,500
150,000
900,000
750,000
750,000
100,000
500,000
1,050,000
350,000
447,500
200,000
75,0002,373,258
2,676,000
4,510,025
75,00050,0003,604,752
194,800
453,500
76,00084,00050,0004,399,250
20,0004,821,805
145,000
297,970
17,000Exercise price

Earliest exercise
date

Expiry date

$11.45
$9.51
$0.00
$8.97
$10.34$17.52$10.41$11.44$0.00$11.20$11.26$11.30$9.94$11.49$14.78$10.63$17.20$10.11$10.20$11.81$12.23$12.75$14.34$14.63$14.92$15.47$15.66$13.70$13.70$15.33$16.49$16.81$17.05$17.05$18.21$18.75$19.27$19.27$17.9023 Mar 2001
24 Feb 2001
24 Oct 2002
28 Oct 2001
11 Dec 2001
31 Dec 2003
28 Jan 2002
25 Mar 2002
24 Oct 2003
2 Jun 2002
7 Jun 2002
12 July 2002
27 Oct 2002
31 Dec 2002
31 Dec 2003
31 Jan 2003
31 Dec 2004
23 Feb 2003
8 Mar 2003
23 May 2003
7 Jun 2003
26 Sep 2003
22 Nov 2003
25 Oct 2003
21 Feb 2004
27 Feb 2004
7 Mar 2004
25 Apr 2004
7 May 2004
1 Jun 2004
21 Aug 2004
27 Aug 2004
24 Oct 2004
25 Oct 2004
26 Feb 2005
24 Apr 2005
14 May 2005
28 Jun 2005
27 July 2005

22 Jan 2003
23 Feb 20031,2
27 Oct 20031
27 Oct 20031,2
10 Dec 20031,2
31 Dec 20071
27 Jan 20041,2
24 Mar 20041,2
24 Apr 2004
1 Jun 20041,2
6 Jun 20042
11 Jul 20041,2
26 Oct 20041
31 Dec 20041
31 Dec 20041
30 Jan 20051
31 Dec 20061
22 Feb 20071
7 Mar 20071
23 May 20071
6 Jun 20071
25 Sept 2007
21 Nov 20071
7 Feb 2008
20 Feb 2008
26 Feb 20081
6 Mar 20081
24 Apr 20081
6 May 2008
31 May 2008
20 Aug 20081
26 Aug 2008
23 Oct 20081
24 Oct 20081
25 Feb 20091
24 Apr 2009
13 May 200927 Jun 200921 Jul 20091

1 subject to performance condition
2 options exercisable as at 30 September 20022

Notes to the Financial Statements
51: Employee Share and Option Plans (continued)
These options will expire immediately on termination of employment, except in the event of retirement, retrenchment, death or disablement or whereagreed by the Directors of the Company, in which case the exercise of the options may be allowed.
The following options were exercised by employees and former employees during the financial year:
171,550
100,000
625,000
600,000
120,000
310,000
150,000
50,000812,500
25,000500,000
63,000

options exercised at $ 8.76 per shareoptions exercised at $ 8.93 per shareoptions exercised at $ 8.97 per shareoptions exercised at $ 9.51 per shareoptions exercised at $10.11 per shareoptions exercised at $10.34 per shareoptions exercised at $10.44 per shareoptions exercised at $10.64 per shareoptions exercised at $11.20 per shareoptions exercised at $11.29 per shareoptions exercised at $11.39 per shareoptions exercised at $11.44 per share

36,95960,000
195,000
500,000
160,450
121,000
172,500
213,750
16,5006,750
81,375
12,256

options exercised at $11.45 per shareoptions exercised at $11.64 per shareoptions exercised at $11.81 per shareoptions exercised at $12.11 per shareoptions exercised at $13.70 per shareoptions exercised at $14.34 per shareoptions exercised at $14.63 per shareoptions exercised at $14.92 per shareoptions exercised at $15.33 per shareoptions exercised at $16.81 per shareoptions exercised at $17.05 per shareoptions exercised at $18.75 per share

In the event of a takeover offer or takeover announcement, the directors of the Company may allow the options to be exercised.
If there is a bonus issue prior to the expiry or exercise of the options, then upon exercise of the options, option holders are entitled to those sharesas if the options had been exercised prior to that issue. Those shares will be allotted to the option holder when the options are exercised.
As at the date of the Directors’ Report, unexercised options over ordinary shares are as per the table above, adjusted for the exercise of the following
options which were exercised by employees and former employees since the end of the financial year:
11,727100,000
150,000
40,00025,000785,000
20,0002,500

options exercised at $ 0.00 per shareoptions exercised at $ 8.97 per shareoptions exercised at $ 9.94 per shareoptions exercised at $10.11 per shareoptions exercised at $10.34 per shareoptions exercised at $11.20 per shareoptions exercised at $11.44 per shareoptions exercised at $11.81 per share

38,72538,00028,40046,70013,0002,250
37,850202

options exercised at $13.70 per shareoptions exercised at $14.34 per shareoptions exercised at $14.63 per shareoptions exercised at $14.92 per shareoptions exercised at $15.33 per shareoptions exercised at $16.81 per shareoptions exercised at $17.05 per shareoptions exercised at $18.75 per share

For options granted in the current year the valuation is based on a numerical pricing method which takes into account the probability of achieving theperformance hurdle required for these options to vest. The following significant assumptions were adopted to determine the fair value of options:
Weighted Average

2002

Risk free interest rate
Life of options
Volatility of share price
Dividend rate

2001

6.14%
6.8 years
22.00%
4.45%

2000

6.33%
6.9 years
24.96%
4.66%

5.98%
6.2 years
24.88%
6.03%

The following table provides information in respect of movements in the number of options and the weighted average exercise price:

Options outstandingat the start of the year
Options granted
during the year
Options expired
during the year
Options exercised
during the year
Options outstandingat the end of the year

2002
Number

Weighted
Average
Exercise
Price $

2001
Number

Weighted
Average
Exercise
Price $

2000
Number

Weighted
Average
Exercise
Price $

27,179,658

12.91

13,443,974

10.53

10,018,633

10.35

11,119,785

17.73

16,365,860

14.49

4,671,000

10.73

760,506

13.99

505,056

12.54

230,563

10.76

5,103,590

11.19

2,125,120

10.08

1,015,096

9.54

32,435,347

14.81

27,179,658

12.91

13,443,974

10.53

66
67

Notes to the Financial Statements
51: Employee Share and Option Plans (continued)
ANZ Directors’ Share Plan
Directors may elect to forgo remuneration to which they may have otherwise become entitled and receive shares to the value of the remuneration forgone.
Participation in the Plan is voluntary.
The shares are purchased on market and are held upon trust for periods ranging from 1 to 10 years. The director selects the period. The shares may also
be subject to forfeiture for serious misconduct. All costs associated with the Plan are met by the Company.
At 30 September 2002 344,843 shares were held under this Plan. During the year, 128,044 shares were issued under this Plan.
52: Related Party Disclosures
The directors during the year were:C B Goode (Chairman)
M A Jackson
J C Dahlsen
J McFarlane
R S Deane
B W Scott
J K Ellis
G K Toomey (resigned 8 October 2001)
D M Gonski (appointed 7 February 2002)
Australian banks, parent entities of Australian banks and controlled entities of Australian banks have been exempted, subject to certain conditions, by anAustralian Securities and Investments Commission (ASIC) class order, 98/110 dated 10 July 1998, from making disclosures of loans made, guaranteed or
secured by a bank to related parties (other than specified categories of directors) and financial instrument transactions (other than shares and shareoptions) of a bank where a director of the relevant entity is not a party to the transaction and where the loan or financial instrument transaction is lawfully
made and occurs in the course of ordinary banking business either at arm’s length or with the approval of a general meeting of the relevant entity and its
ultimate chief entity (if any).
The class order does not apply to a loan or financial instrument transaction of which any director of the relevant entity should reasonably be aware that, if notdisclosed, would have the potential to adversely affect the decisions made by users of the financial statements about the allocation of scarce resources.
A condition of the class order is that for each financial year to which it applies, the Company must provide evidence to ASIC that the Company has systems
of internal controls and procedures which:(i) in the case of any material financial instrument transaction, ensure that; and(ii) in any other case, are designed to provide a reasonable degree of assurance that, any financial instrument transaction of a bank which may berequired to be disclosed in the Company’s financial statements and which is not entered into regularly, is drawn to the attention of the directors.
(a) Transactions with directors and director-related entities
Shares and Share Options
The aggregate number of shares issued to, acquired for, disposed or no longer held by directors, and share options granted to directors of the Company
and their director-related entities by the Company during the financial year were as follows:
The Company

Fully paid ordinary shares in the Company acquired
Fully paid ordinary shares in the Company disposed of or no longer held by directors
Options granted under the ANZ Share Option Plan

2002
No.

2001
No.

1,127,098
605,864
1,000,000

258,333–
750,000

2002
No.

2001
No.

1,561,350
87,1902,500,000

1,040,116
87,1902,500,000

Aggregate number of shares and share options held directly, indirectly or beneficially by directorsof the Company and their director-related entities, as at balance date, were as follows:

Fully paid ordinary shares in the Company
Fully paid deferred shares in the Company issued under previous employee Plan
Share options over ordinary shares in the Company
Directors of the Company and their director-related entities receive normal dividends on these shares.

Notes to the Financial Statements
52: Related Party Disclosures (continued)
Loans made to Directors
Loans made to non-executive directors of the Company and controlled entities are made in the course of ordinary business on normal commercial terms
and conditions. Loans to executive directors of the Company and controlled entities are made pursuant to the Executive Directors’ Loan Scheme
authorised by shareholders on 18 January 1982, on the same terms and conditions applicable to other employees within the Group in accordance withestablished policy.
Under the Australian Securities and Investments Commission class order referred to above, disclosure is limited to the aggregate amount of loans made,guaranteed or secured by:(i) the Company to its directors;(ii) any controlled entity to the directors of the Company;(iii) banking corporation controlled entities to their directors; and(iv) non-banking corporation controlled entities to directors of controlled entities and to parties related to any one of them or the directors of the Company.
The directors involved were:2

1,2,3,4

P Cromby

S Armstrong
2

2

D GonskiC B Goode
1,2

1,2

D Hannam

D Hornery
1,2

1,2

M A Jackson

M Kalangis

1,2,3,4

1,2,3,4

J McFarlane

N Merrick
1,2,3,4

B Poedijirahard
1,2

M Tilbrook

1,2,3,4

M Rostian
1,2

J Todd

1,2,3,4G Tunstall

1 Repayments made during the year
2 Loans made or outstanding during the year
3 Repayments made during the prior year
4 Loans made during the prior year

The aggregate amount of such loans outstanding at 30 September 2002 were:
Consolidated

The Company

2002
$’000

2001
$’000

2002
$’000

2001
$’000

Balance outstanding at 30 September
Total interest received

12,663
843

4,790
300

11,984
775

4,379
292

The aggregate amount of repayments received from directors and theirdirector-related entities during the financial year was:Normal terms and conditions
Employee terms and conditions

6,518
106

516
27

6,518
–

516
–

The aggregate amount of loans made during the financial year was:Normal terms and conditions
Employee terms and conditions

11,51836879
68

11,518–879–

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

68
69

Notes to the Financial Statements
52: Related Party Disclosures (continued)(b) Transactions with associates and joint venture entities
During the course of the financial year the Company and the Group conducted transactions with associated and joint venture entities on normal
commercial terms and conditions as shown below:
Consolidated

Aggregate
Amounts receivable from associates andjoint venture entities
Interest revenue
Dividend revenue
Commissions received from joint venture
Costs recovered from joint venture

The Company

2002
$’000

2001
$’000

2002
$’000

2001
$’000

26,097–760
32,01912,213

12,412896
12,400––––760
32,01912,213–––––

53: Remuneration of Directors
Remuneration includes income from salaries, bonuses, other benefits (including non-cash benefits), retirement benefits and superannuation
contributions. The maximum total remuneration for non-executive directors of the Company was set at the Annual General Meeting held on 21 January
1998 at $1.5 million. Total fees paid to non-executive directors by the Company for the year were $1.1 million (2000: $1.0 million). Retirement benefits
paid to directors of the Company are detailed in the Directors’ Report.
The number of directors of the Company with total income in each of the following bands was:The Company
2002

2001

$90,001 to $100,000$110,001 to $120,000$120,001 to $130,000$130,001 to $140,000$190,001 to $200,000$210,001 to $220,000$320,001 to $330,000$350,001 to $360,000$2,890,001 to $2,900,000$3,090,001 to $3,100,000

2
–
1
3
–
1
–
1
1
–

1
4
–
–
1
–
1
–
–
1

Total number of directors

98Consolidated

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

1

The Company

2002
$’000

2001
$’000

2002
$’000

2001
$’000

42,60642,503

4,194

4,163

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

Notes to the Financial Statements
54: Remuneration of Executives
Executives are defined as members of the Chief Executive’s Group. The membership of this Group was expanded in 2002. Remuneration includes salaries,
bonuses, other benefits (including non-cash benefits), and superannuation contributions. The remuneration of executives who work wholly or mainly
outside Australia are excluded from this disclosure. Executive emoluments disclosed in the Directors’ Report include the emoluments of the five highest
paid executives, calculated to include the fair value of options issued in 2002. For the purposes of this note, options are valued at intrinsic value (nil).
The number of executives with total remuneration exceeding $100,000 in each of the following bands was:
Consolidated$130,001 to $140,000$190,001 to $200,000$250,001 to $260,000$260,001 to $270,000$280,001 to $290,000$290,001 to $300,000$330,001 to $340,000$340,001 to $350,000$350,001 to $360,000$360,001 to $370,000$370,001 to $380,000$390,001 to $400,000$400,001 to $410,000$420,001 to $430,000$430,001 to $440,000$440,001 to $450,000$460,001 to $470,000$470,001 to $480,000$530,001 to $540,000$550,001 to $560,000$560,001 to $570,000$570,001 to $580,000$590,001 to $600,000$600,001 to $610,000$610,001 to $620,000$620,001 to $630,000$640,001 to $650,000$670,001 to $680,000$680,001 to $690,000$690,001 to $700,000$740,001 to $750,000$760,001 to $770,000$770,001 to $780,000$790,001 to $800,000$810,001 to $820,000$820,001 to $830,000$830,001 to $840,000$860,001 to $870,000$910,001 to $920,000$920,001 to $930,000$930,001 to $940,000$950,001 to $960,000$970,001 to $980,000$980,001 to $990,000$1,030,001 to $1,040,000$1,101,001 to $1,110,000$1,110,001 to $1,120,000$1,120,001 to $1,130,000$1,140,001 to $1,150,000$1,160,001 to $1,170,000$1,190,001 to $1,200,000$1,200,001 to $1,210,000$1,240,001 to $1,250,000$1,290,001 to $1,300,000$1,340,001 to $1,350,000$1,430,001 to $1,440,000$1,470,001 to $1,480,000$1,480,001 to $1,490,000$1,490,001 to $1,500,000

The Company

2002

2001

2002

2001

–
1
1
1
1
–
–
1
1
1
1
2
1
1
1
1
3
1
1
–
2
4
1
1
1
1
–
1
–
–
1
1
1
1
1
1
–
2
1
1
–
–
1
–
–
–
2
–
–
1
1
1
1
–
1
2
–
–
1

1
1
–
–
–
1
1
–
–
1
–
–
–
–
–
–
–
–
–
1
–
–
–
1
–
–
1
–
1
1
–
–
–
–
–
–
1
–
–
1
1
1
–
1
1
1
–
1
1
–
–
–
–
1
–
–
1
1
1

–
1
1
1
1
–
–
1
1
1
1
2
1
1
1
1
3
1
1
–
2
4
1
1
1
1
–
1
–
–
1
1
1
1
1
1
–
2
1
1
–
–
1
–
–
–
2
–
–
1
1
1
1
–
1
2
–
–
1

1
1
–
–
–
1
1
–
–
1
–
–
–
–
–
–
–
–
–
1
–
–
–
1
–
–
1
–
1
1
–
–
–
–
–
–
1
–
–
1
1
1
–
1
1
1
–
1
1
–
–
–
–
1
–
–
1
1
1

70
71

Notes to the Financial Statements
54: Remuneration of Executives (continued)$1,500,001 to $1,510,000$1,540,001 to $1,550,000$1,550,001 to $1,560,000$1,580,001 to $1,590,000$1,590,001 to $1,600,000$2,890,000 to $2,900,000$3,090,001 to $3,100,000

–
1
1
1
–
1
–

1
–
–
–
1
–
1

–
1
1
1
–
1
–

1
–
–
–
1
–
1

Total number of executives

55

26

55

26

43,47725,50043,47725,500Total remuneration received or due and receivable directly or indirectly
by executives of the Company and controlled entities ($’000)
55: US GAAP Reconciliation

The consolidated financial statements of the Group are prepared in accordance with Generally Accepted Accounting Principles applicable in Australia(Australian GAAP) which differ in some respects from Generally Accepted Accounting Principles in the United States (US GAAP).
The following are reconciliations of the net profit, shareholders’ equity and total assets, applying US GAAP instead of Australian GAAP.
2002
$m

2001
$m

2000
$m

2,322

1,870

1,747

(xviii)

(40)

(49)

(54)

(i)

2

2

3

(i)
(i)

5
–

17
–

168
(72)

(iii)
(ii)

(9)
(6)

–
(28)

(80)
(48)

(iii)
(vi)
(xvi)
(xv)
(xv)
(xvii)

25
18
–
–
(17)
(205)
2

23
20
(361)
11
284
–
7

19
8
361
–
–
–
(112)

2,097

1,796

1,940

132.3
131.6

112.4
110.8

119.3
118.4

2,097
(98)
3
–
60

1,796
197
15
(52)
(66)

1,940
170
(23)
–
–

2,062

1,890

2,087

Note

Net profit reported under Australian GAAP
Items having the effect of increasing (decreasing)reported income (total tax impact of adjustments shown separately):
Employee share issue and options
Depreciation charged on the difference between revaluation
amount and historical cost of buildings
Difference in gain or loss on disposal of properties revalued
under historical cost
Revaluation of properties
Deferred profit on sale and leaseback transactions
over the lease term
Amortisation of goodwill not recognised for Australian GAAP
Amortisation of deferred profit on sale and leaseback transactions
over the lease term
Pension expense adjustment
Provisions
Transition adjustment related to the initial application of SFAS 133
Derivatives and hedging activities
Adjustment on entering joint venture
Total tax impact of adjustments
1

Net income according to US GAAP
Earnings per share (cents) according to US GAAP
Basic
DilutedAdjustments to determine other comprehensive
income for US GAAPNet income according to US GAAP
Currency translation adjustments (net of tax)
Unrealised profit (loss) on available for sale securities (net of tax)
Transition adjustment related to the initial application of SFAS 133 (net of tax)
Derivatives and hedging activities (net of tax)
Total comprehensive income according to US GAAP
1 2000 after abnormal items

(xiv)

(ix)
(xv)
(xv)

Notes to the Financial Statements
55: US GAAP Reconciliation (continued)
Note

2002
$m

2001
$m

2000
$m

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

11,448
(266)
3
48
714
(533)
(14)
681
–
88
173
(203)

10,538
(287)
–
46
692
(505)
(12)
583
–
75
77
–

9,795
(330)
(16)
44
692
(477)
(12)
514
245
62
–
–

12,139

11,207

10,517

183,105
(205)
3
48
714
(533)
67
(462)
501
(203)

185,493
(210)
(1)
46
692
(505)
58
(552)
552
–

172,467
(227)
(24)
44
692
(477)
45
(662)
–
–

183,035

185,573

171,858

1

Shareholders’ equity reported under Australian GAAP
Elimination of gross asset incremental revaluations
Unrealised profit (loss) on available for sale securities
Adjustment to accumulated depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation of goodwill
Deferred profit on sale and leaseback transactions
Provision for final cash dividend
Provisions
Pension expense adjustment
Derivatives and hedging activities
Adjustment on entering joint venture
Shareholders’ equity according to US GAAP
Total assets reported under Australian GAAP
Elimination of gross incremental revaluations
Unrealised profit (loss) on available for sale securities
Adjustment to accumulated depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation of goodwill
Prepaid pension adjustment
Reclassification of deferred tax assets against deferred tax liabilities
Revaluation of hedges
Adjustment to carrying value of the ING joint venture
Total assets according to US GAAP
1 Excluding outside equity interests

(i)
(ix)
(i)
(ii)
(ii)
(vi)
(v)
(xv)
(xvii)

Notes to the Financial Statements(iii)

55: US GAAP Reconciliation (continued)

Under Australian GAAP for operating leases,
gains on disposal under sale-leaseback
transactions can be recognised in the period ofsale. Under US GAAP, the gain is amortised over
the remaining lease term. This difference intreatment has been adjusted in the US GAAP
reconciliation.

(i)

Premises and equipment

In accordance with Australian GAAP, the Groupholds its properties at a deemed cost value(refer note 1). However in the past the Group at
various times, has revalued properties,
increasing the book value of these assets. Any
increments on revaluation were credited directly
to the Asset Revaluation Reserve (ARR), anddecrements were debited to the ARR to theextent of any previous revaluation increments.
Decrements in excess of any previous
revaluation increments were charged to thestatement of financial performance. The ARR
forms part of Shareholders’ equity and is notavailable for future property writedowns whileproperties are measured at deemed cost.
Under US GAAP, upward revaluation ofproperties is not permitted except for
decrements which are regarded as other than
temporary. Any such decrements are recorded in
the statement of financial performance.
Subsequent recoveries to the statement offinancial performance are not allowed.
The impact of previous revaluations under
Australian GAAP is that depreciation charges
are generally higher and profits on disposal are
lower than those recorded under US GAAP. The
depreciation charges, together with the profits
and losses on revalued assets sold have beenadjusted to historical cost in the US GAAP
reconciliation.
(ii)

Goodwill

The Group changed its accounting policy inrespect of goodwill in the financial year ended
30 September 1993. Previously, goodwill on
acquisition was charged in full to the Group’s
statement of financial performance in the yearof acquisition.
Historically, under US GAAP, goodwill has been
capitalised and amortised over the period oftime during which the benefits are expected toarise, such period not exceeding 20 years. For
goodwill acquired during the year ended
30 September 2002 and for all goodwill
balances after 30 September 2002 a recoverable
amount test will apply rather than systematic
goodwill amortisation.
Adjustments have been made in the US GAAP
reconciliation statement to restore goodwill
written-off in full under Australian GAAP and toamortise such goodwill over the period of the
expected benefits. Additionally, to the extent
that periodic reviews of the carrying amountof goodwill lead to a write-down of goodwill
previously capitalised for US purposes, this isadjusted in the US GAAP reconciliation.
In accordance with the revision of US GAAP rules
dealing with goodwill, goodwill acquired during
the year has not been amortised in thecalculation of these adjustments as it isconsidered recoverable.

(iv)

Sale-leaseback transactions

Dividends

Under Australian GAAP, dividends are shownin the statement of financial performance inthe period to which they relate rather than in
the period when they are declared as required
by US GAAP. This difference in treatment has
been adjusted in the US GAAP shareholders’equity reconciliation.
(v)

Income taxes

Under Australian GAAP, tax benefits relating
to carry forward tax losses must be “virtuallycertain” of being realised before being booked.
Realisations of benefits relating to other timing
differences must be “beyond reasonable doubt”
before they may be booked. These tests are
more stringent than those applied under
US GAAP. However no material adjustment tofuture tax benefits for US GAAP is required.
Australian GAAP allows offsetting of future
income tax benefits and liabilities to the extent
they will reverse in the same period.
Under US GAAP, deferred tax liabilities anddeferred tax assets are offset and presented foreach tax paying component of an enterprise andwithin each particular tax jurisdiction. The
impact of the difference in this approach toAustralian GAAP has been adjusted for in the
US GAAP reconciliation for total assets.
(vi)

Pension commitments

Under Australian GAAP, contributions in respectof defined benefit schemes are recorded in theincome statement and are made at levels
necessary to ensure that these schemes aremaintained with sufficient assets to meet theiractuarially assessed liabilities. Any net deficiency
arising from the aggregation of assets andliabilities of the Group’s defined benefit schemesis provided for in the Group’s financial statements(refer note 49 in the Financial Statements).
Under US SFAS 87 “Employers’ Accounting for
Pensions” and the disclosure requirements of
SFAS 132 “Employers’ Disclosures about
Pensions and Other Post Retirement Benefits”,
pension expense is a function of an employee’s
service period, interest costs, expected actuarial
return on the schemes’ assets, amortisation of
net transition asset and recognised prior service
cost. In addition, reconciliation between theaccrued pension liability/prepaid asset and thefunded status (difference between projected
benefit obligation and fair value of pension plan
assets) of the pension schemes is required.

(vii)

Post retirement and post employment
benefits

Post retirement and post employment benefits
other than pension payments are not material
and no adjustment is required in the US GAAP
reconciliation.
(viii) Trading securities
US GAAP requires that in instances wheretrading securities are not bought and heldprincipally for the purpose of selling them in
the near term, they should be classified asavailable for sale and recorded at market value
with unrealised profits and losses in respect ofmarket value adjustments recognised as othercomprehensive income in Shareholders’ equity.
The residual emerging markets portfolio had
been classified as available for sale with themarket value write down taken through thestatement of financial performance for both
Australian GAAP and US GAAP purposes.
Except for the above no adjustment is required
to be made in the US GAAP reconciliation as theeffect of reclassifying certain trading securities
as available for sale is not material.
(ix)

Investment Securities

US GAAP requires that investments not classified
as trading securities or as held to maturity
securities shall be classified as available for salesecurities and be recorded at market value inaccordance with SFAS 115 “Accounting for
Certain Investments in Debt and Equity
Securities”. An adjustment is made in the US
GAAP reconciliation to reflect available for salesecurities which are carried at market value withunrealised profits and losses in respect of market
value adjustments being reported as othercomprehensive income in shareholders’ equity.
(x)

Accounting for the impairment of loans

SFAS 114 “Accounting by Creditors for
Impairment of a Loan”, as amended by SFAS
118 “Accounting by Creditors for Impairment ofa Loan – Income Recognition and Disclosures”,
requires the value of an impaired loan to bemeasured as the present value of future cash
flows discounted at the loan’s initial effective
interest rate, the loan’s observable market priceor the fair value of the collateral, if the loan iscollateral dependent.
There is no requirement under Australian GAAP
to discount the expected future cash flows
attributable to impaired loans in assessing thelevel of specific provision for doubtful debts.
No adjustment is required in the US GAAP
reconciliation as the estimated fair value of
impaired loans is not materially different fromthe carrying value.

72
73

(xi)

Accounting for the impairment of long
lived assets and for long-lived assets tobe disposed of

SFAS 121 “Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to
be Disposed of”, requires that where an event ora change in circumstance indicates that thecarrying value of an asset that is expected to beheld and used may not be recoverable, an
impairment loss should be recognised. The
standard also requires that where there is acommitted plan to dispose of an asset, the asset
should be reported at the lower of the carrying
value or fair value less selling costs.
The Group has assessed the carrying values of
all non-current assets and determined that they
are not in excess of their recoverable amounts.
(xii)

Accounting for transfers and servicing
of financial assets and extinguishmentsof liabilities

SFAS 140 “Accounting for Transfers and Servicingof Financial Assets and Extinguishments ofLiabilities” prescribes the accounting anddisclosure requirements for transfers of financial
assets and extinguishments of liabilities. Undercertain circumstances, the statement also
requires a transferor of financial assets that arepledged as collateral to reclassify those assets,
and the transferee to recognise those assets andtheir obligation to return them.
No adjustment is required in the US GAAP
reconciliation as the effect of adopting theprovisions of SFAS 140 on total assets is notmaterial. Refer to Note 40 in the Financial
Statements for the required disclosures.
(xiii) Comprehensive Income
SFAS 130 “Reporting Comprehensive Income”
establishes standards for reporting and displayof comprehensive income and its components.
Comprehensive income is defined as all changes
in shareholders’ equity during a period
excluding those resulting from investments byshareholders and distributions to shareholders.
Accordingly, the Group has shown currencytranslation adjustments, unrealised profit on
available for sale securities and certain
SFAS 133 adjustments as components of othercomprehensive income with net income
according to US GAAP forming the remaining
component of comprehensive income.
(xiv) Earnings per share (“EPS”)
Under US GAAP, EPS is computed in accordancewith SFAS 128 “Earnings Per Share”. This
standard is similar to Australian GAAP. One areaof difference relates to the calculation of diluted
EPS. Under US GAAP, assumed proceeds frompotentially dilutive stock options are assumed to
be used to repurchase outstanding shares at the
average market price during the period.

(xv)

Accounting for derivative instruments andhedging activities

The Group has adopted SFAS 133 “Accounting
for Derivative Instruments and Hedging
Activities” as amended by SFAS 138“Accounting for Certain Derivative Instruments
and Certain Hedging Activities” in its US GAAP
reconciliation from 1 October 2000. SFAS 133
requires all derivatives to be recognised onbalance sheet at fair value. Movements in thefair value of derivatives are taken to thestatement of financial performance, unless thederivatives meet the criteria prescribed in SFAS
133 for fair value, cash flow, or foreign currency
hedges. If certain criteria are met derivatives canbe designated as hedges. Under SFAS 133
normal banking hedging practices may not
qualify for hedge accounting, notwithstanding
their ability to hedge existing balance sheet
positions from an economic perspective.
As a result future fair value movements
recognised in US GAAP reconciliation may not be
indicative of the Group’s risk profile. The Group
uses instruments and hedging techniques thatare effective in managing interest rate risk andforeign exchange risk.

detailed than the Australian recognition criteria,
include public announcement of many details of
the programs prior to balance date. Accordingly,
the provision and associated taxation effectwere recognised for US GAAP during the year
ended 30 September 2001.
(xvii) Gain and non-capitalisable costs
recognised on entering joint venture
In accordance with Australian GAAP the Group
recognised a profit (net of transaction costs)
based on the difference between fair value andcarrying value of the share of businesses
transferred to an external party on entering intoa joint venture.
Under US GAAP the gain may not be recognised
as it occured as a result of a non-monetarytransaction, which involved transferring
ownership of controlled entities in exchange fora non-controlling ownership interest in the joint
venture.
(xviii) Accounting for stock - compensation
plans
Under Australian GAAP an expense is notrecognised for share options issued to
employees or for shares issued at a discount.

Further information on the results of the Group’s
hedging activities, and the effectiveness of therisk management policies, can be assessed
better by considering the information provided
on interest rate risk in note 36, and theinformation on hedging derivatives provided innote 39: Derivative Financial Instruments, of the
Financial Report.

SFAS 123 “Accounting for Stock-Based
Compensation” requires shares and options
issued to employees to be recognised using
either the fair value method or the intrinsic value
method as prescribed by APB No. 25 and its
related interpretations.

Under SFAS 133, movements in the value ofderivatives designated as fair value hedges aretaken to the statement of financial performance,along with the movement in the fair value of theunderlying exposure that is being hedged to theextent the hedge is effective. These amounts
largely offset each other with any ineffectivenessrecognised in the US GAAP statement offinancial performance. Movements in theeffective portion of the fair value of derivatives
designated as cash flow hedges are taken toother comprehensive income. Any
ineffectiveness is recognised in US GAAP
statement of financial performance immediately.
Amounts are subsequently reclassified out ofother comprehensive income into earnings as
the hedged transaction impacts earnings.

Variable share option plans include all plans
with performance conditions. The Group’s policy
is to generally grant share options at the average
market price of the underlying shares at the dateof grant.

The impact on adoption of SFAS 133 and SFAS
138 at 1 October 2000 was a transitional
adjustment to increase US GAAP profit by$11 million, and a transitional adjustment todecrease other comprehensive income by $52
million. Changes in market conditions and theGroup’s hedging policies may result in volatility
in these US GAAP adjustments going forward.
(xvi) Provisions
At 30 September 2000, the Group recorded a
provision for restructuring in accordance with
Australian GAAP amounting to $361 million
before tax with an associated taxation credit of$116 million. US GAAP requires certain criteria
to be met before a restructuring provision isrecognised. These criteria, which are more

For US GAAP disclosure the Group measures
share-based employee compensation cost using
the intrinsic value based method. US GAAP
compensation cost relating to share options is
attributable to the impact of the increase in themarket price of the Group’s shares on those shareoption plans defined as variable under APB 25.

Share issues to employees under the ANZ
Employee Share Acquisition Plan are recognised
at intrinsic value under US GAAP.
If the fair value basis of accounting had been
applied to account for compensation costs as
stipulated in SFAS 123, the following profit
after income tax and earnings per share would
have appeared.

74
75

Notes to the Financial Statements
55: US GAAP Reconciliation (continued)(xviii) Accounting for stock-compensation plans (continued)
2002

Net income according to US GAAP ($m)
- Basic earnings per share (cents)- Diluted earnings per share (cents)

2001

2000

As
Reported

Pro
Forma

As
Reported

Pro
Forma

As
Reported

Pro
Forma

2,097
132.3
131.6

2,093
132.0
131.3

1,796
112.4
110.8

1,813
113.5
111.9

1,940
119.3
118.4

1,970
121.3
120.3

Details of the share-based compensation plans are included in Note 51 to the Financial Statements.
(xix) Details of Pension Schemes and Pension Expense
Reconciliations of the funded status of major defined benefit schemes as at 30 June 2002 are summarised below.
Details of the funding of the schemes are set out in note 49.
2002$mAustralian Scheme
2001
$m

2000
$m

Balance at start of year
Interest costs
Benefits paid
Actuarial gains (losses)

54
3
(6)
–

54
3
(6)
3

58
4
(7)
(1)

Benefit obligation, 30 June

51

54

54

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

49
–
–
(6)

52
3
–
(6)

53
6
–
(7)

Total fair value of plan assets, 30 June

43

49

52

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

(8)
2
10

(5)
3
7

(2)
4
4

(12)

(10)

(8)

Net amount recognised

(8)

(5)

(2)

Amounts recognised in the consolidated statement of financial
position consist of:Prepaid benefits costs
Accrued benefit liabilities

–
(8)

–
(5)

–
(2)

6.0%

6.0%

6.5%

3%
7.5%

3%
7.5%

3%
7.5%

Change in benefit obligation

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

Notes to the Financial Statements
55: US GAAP Reconciliation (continued)(xix) Details of Pension Schemes and Pension Expense (continued)
2002$m

UK Scheme
2001
$m

2000
$m

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

1,038
15
62
–
(62)
27
(46)

923
17
55
–
(50)
(15)
108

818
9
24
–
(45)
26
91

Benefit obligation, 30 June

1,034

1,038

923

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

1,152
(69)
(2)
(62)
(37)

1,120
(43)
2
(50)
123

1,004
89
2
(45)
70

Total fair value of plan assets, 30 June

982

1,152

1,120

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

(51)
(19)
91
46

114
(28)
(81)
53

197
(33)
(171)
52

Net amount recognised

67

58

45

Amounts recognised in the consolidated statement of financial position consist of:Prepaid benefits costs

67

58

45

Accrued benefit liabilities

–

–

–

5.75%
5.75%

6.0%
6.0%

6.0%
6.0%

4.5%
2.5%
6.75%

4.75%
2.9%
7.0%

4.75%
2.9%
7.0%

2002
$m

2001
$m

2000
$m

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

13
59
(77)
(7)
4

17
55
(74)
(7)
4

17
52
(68)
(6)
4

Net periodic pension cost

(8)

(5)

(1)

Change in benefit obligation

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

The Group also sponsors defined contribution schemes. The Group’s contributions to major defined contribution schemes amounted to $80 million forthe year (2001: $83 million).
56: Exchange Rates
The exchange rates used in the translation of the results and the assets and liabilities of major overseas branches and controlled entities are:2002
Closing

Great British pound
United States dollar
New Zealand dollar

0.34770.5441
1.15852001
Average

0.3621
0.53231.2001

57: Events Since the End of the Financial Year
There have been no significant events since 30 September 2002 to the date of this report.

Closing0.33310.49031.2127

2000
Average

0.36270.52301.2473

Closing

0.37200.5444
1.3324

Average

0.39030.61011.2647

Directors’ Declaration
The directors of Australia and New Zealand
Banking Group Limited declare that the financial
statements and notes of the Company and theconsolidated entity:(a) are in accordance with the Corporations Act
2001, including:(i)complying with applicable Australian
Accounting Standards and othermandatory professional reporting
requirements; and(ii)

giving a true and fair view of thefinancial position of the Company andof the consolidated entity as at 30
September 2002 and of theirperformance as represented by the
results of their operations and their
cash flows, for the year ended on that
date; and(b) in the directors’ opinion at the date of thisdeclaration there are reasonable grounds
to believe that the Company will be able topay its debts as and when they become dueand payable.

The Company and some of its wholly owned
controlled entities listed in note 48 executed a
Deed of Cross Guarantee enabling them to takeadvantage of the accounting and audit relief
offered by class order 98/1418, dated 13
August 1998 issued by the Australian Securities
and Investments Commission.
The nature of the Deed of Cross Guarantee is toguarantee each creditor payment in full of any
debt in accordance with the terms of the Deed of
Cross Guarantee.
At the date of this declaration, there arereasonable grounds to believe that the Company
and its controlled entities to which the classorder applies, are able, as an economic entity, tomeet any obligations or liabilities to which they
are, or may become, subject by virtue of theDeed of Cross Guarantee.
Signed in accordance with a resolutionof the directors

John Dahlsen
Director
4 November 2002

John McFarlane
Chief Executive Officer

76
77

Auditors’ Report

Audit Opinion

Independent audit report to the membersof Australia and New Zealand Banking
Group Limited

In our opinion, the financial report of Australia
and New Zealand Banking Group Limited is inaccordance with:

Scope(a) the Corporations Act 2001, including:

We have audited the financial report of Australia
and New Zealand Banking Group Limited for thefinancial year ended 30 September 2002,
consisting of the statements of financial
performance, statements of financial position,statements of changes in shareholders’ equity,
statements of cash flows, accompanying notes
1 to 57 and the directors’ declaration set out on
pages 2 to 77. The financial report includes theconsolidated financial statements of theconsolidated entity, comprising the Company
and the entities it controlled at the end of theyear or from time to time during the financial
year. The Company’s directors are responsible
for the financial report. We have conducted an
independent audit of this financial report inorder to express an opinion on it to themembers of the Company.
Our audit has been conducted in accordancewith Auditing Standards of Australia and theUnited States of America to provide reasonableassurance whether the financial report is free ofmaterial misstatement. Our procedures included
examination, on a test basis, of evidence
supporting the amounts and other disclosuresin the financial report, and the evaluation of
accounting policies and significant accounting
estimates. These procedures have been
undertaken to form an opinion whether, in allmaterial respects, the financial report ispresented fairly in accordance with AccountingStandards and other mandatory professional
reporting requirements in Australia and statutory
requirements so as to present a view which isconsistent with our understanding of theCompany’s and the consolidated entity’s
financial position, and performance as
represented by the results of their operations
and their cash flows.
The audit opinion expressed in this report has
been formed on the above basis.

(i)

giving a true and fair view of
the Company’s and consolidated
entity’s financial position as at
30 September 2002 and of theirperformance for the financial year
ended on that date; and(ii)

complying with Accounting Standardsin Australia and the Corporations
Regulations 2001; and(b) other mandatory professional reporting
requirements in Australia.
Accounting principles generally accepted inAustralia vary in certain respects fromaccounting principles generally accepted in the
United States of America. An explanationof the major differences between the two setsof principles is presented in note 55 to thefinancial statements.
The application of the United States principles
would have affected the determination of
consolidated net profit for each of the three
years in the period ended 30 September 2002
and the determination of the consolidated
financial position as of 30 September 2002,
2001 and 2000 to the extent summarised innote 55 to the financial statements.

KPMG
Chartered Accountants
Melbourne
4 November 2002

Peter Nash
PartnerCritical Accounting Policies
The Group prepares its consolidated financial statements in accordance with Australian Accounting Standards and other authoritative accounting
pronouncements. However, notwithstanding the existence of relevant accounting standards, there are a number of critical accounting treatments,
which include complex or subjective decisions or assessments. The Group requires all such applications of judgement to be reviewed and agreed
by Group Finance, and where the impact is material, the accounting treatment be reviewed during the audit process by the Group's external auditors.
All material changes to accounting policy are approved by the Audit Committee of the Board.
Historical changes
No change has been made to any of the critical accounting policies or their related methodologies over the last 3 years.
A brief discussion of critical accounting policies, and their impact on the Group, follows:(a) Economic Loss Provisioning
Description and Significance
Each month the Group recognises an expense for credit losses based on the expected long term loss ratio for each part of the loan portfolio.
The monthly charge is transferred to the General Provision which is maintained to cover losses inherent within the Group's existing loan portfolio.
The method used by the Group for determining this monthly expense charge is referred to as 'economic loss provisioning' (ELP). The Group
uses ELP models to calculate the expected loss by considering:>

the history of credit loss for each type and risk grade of lending; and>the size, composition and risk profile of the current loan portfolio.

Ongoing reviews
The Group regularly reviews the assumptions used in the ELP models. These reviews are conducted in recognition of the subjective nature of ELP
methodology. Methodologies are updated as improved analysis becomes available. In addition, the robustness of outcomes is reviewed considering
the Group's actual loss experience, and losses sustained by other banks operating in similar markets.
To the extent that credit losses are not consistent with previous loss patterns used to develop the assumptions within the ELP methodology,
the existing General Provision may be determined to be either in excess of or insufficient to cover credit losses not yet specifically identified.
As a result of the reassessments, ELP charge levels may be periodically increased or decreased with a direct impact on profitability.
As part of its review of the ELP model outputs, the Group also regularly evaluates the overall level of the General Provision. The Group is required, by
APRA prudential standards, to have policies which cover the level of General Provisions that are needed to absorb estimated losses inherent in the credit
portfolio. In some limited circumstances, the assessment of the inherent losses in the portfolio may require an additional charge to profits to ensure theadequacy of the General Provision. The Group considers it appropriate to maintain its General Provision in excess of the APRA guidelines.
Quantification of Sensitivity
For 2002, the balance of the General Provision of $1,496 million (Sep 2001: $1,386 million) represents 1.1% (Sep 2001: 1.0%)
of risk weighted assets.
Specifically identified credit losses net of recoveries during the year were $728 million (Sep 2001: $520 million). During the same period,
the average charge to profit for ELP was 0.43% of average net lending assets (Sep 2001: 0.38%).
During the year an additional provision for bad debts of $250 million, identified as part of the regular review process, was added to the general provision
to restore its balance to an appropriate level. Also, recognising the unexpected default experience on international exposures,
an additional ELP charge of $72 million has been recognised at the Group level.
(b) Specific Provisioning
Description and Significance
The Group maintains a specific provision for doubtful debts arising from its exposure to organisations and credit counterparties.
The Group's ELP provisioning methodology is used to estimate the extent of losses inherent within the loan book. Once a specific doubtful
debt loss is identified as being probable, its value is transferred from the General Provision to the Specific Provision. Specific provisioning methodology
applies when the full recovery of one of the Group's exposures is identified as being doubtful resulting in the creation of a specific provision equal to thefull amount of the expected loss plus any enforcement/recovery expenses.
Recoveries resulting from excess specific provisions arising when actual losses are determined to be less than the amount provided for within the specificprovision are transferred back to the General Provision.

78
79

Critical Accounting Policies (continued)
Quantification of Sensitivity
The recognition of losses has an impact on the size of the General Provision rather than directly impacting profit. However, to the extent that theGeneral Provision is drawn down beyond a prudent amount it will be restored through a transfer from the current year's earnings. Recoveries ofamounts previously specifically provided against are applied to the restoration of the General Provision balance. The amount of draw down from theGeneral Provision to the Specific Provision, net of recoveries, during the year was $728 million (Sep 2001: $520 million).
(c) Deferred acquisition costs, software assets and deferred income
Description and Significance
The Group recognises assets and liabilities that represent:>

Capitalised expenses - direct costs from the acquisition of interest earning assets;>

Software assets - direct costs incurred in developing software systems; and>Deferred income - liabilities representing income received in advance of services performed.

Capitalised expenses - Initially, expenses related to the acquisition of interest earning assets are recognised as part of the cost of acquiring the asset
and written-off as an adjustment to its yield over its expected life. For assets subject to prepayment, expected life is determined on the basis of thehistorical behaviour of the asset portfolio, taking into account prepayments. Commissions paid to third party mortgage brokers are an example ofexpenditure that is deferred and amortised over the expected average life of a mortgage of 4 years.
Software assets - Costs incurred in acquiring and building software and computer systems are capitalised as fixed assets and expensed as
depreciation over periods of between 3 and 5 years except for the branch front end applications where 7 years is used. The carrying value of theseassets is subject to a 'recoverable amount test' to determine their value to the Group. If it is determined that the value of the asset is less than its'book' value, the asset is written down to the recoverable amount. Costs incurred in planning or evaluating software proposals, or in maintaining
systems after implementation, are not capitalised.
Deferred income - Income received in advance of the Group's performance of services or in advance of having been earned, is initially recorded as
a liability. Once the recognition criteria are met, it is then recognised as income.
Quantification of Sensitivity
Deferred acquisition costs - At 30 September, the Group's assets included $289 million (Sep 2001: $258 million) in relation to costs incurred inacquiring interest earning assets. During the year, amortisation of $132 million (Sep 2001: $121 million) was recognised as an adjustment to theyield earned on interest earning assets.
Software assets - At 30 September, the Group's fixed assets included $419 million (Sep 2001: $303 million) in relation to costs incurred in acquiringand developing software. During the year, depreciation expense of $50 million (Sep 2001: $22 million) was recognised and $24 million (Sep 2001:$14 million) was written off in relation to software assets. The software depreciation expense will increase going forward, as projects are completed
following a period of above average project activity which has replaced significant parts of the Group's core infrastructure. The Group anticipates thatsoftware depreciation will exceed $90 million in 2003. Consistent with US accounting rules on software capitalisation only costs incurred duringconfiguration, coding and installation stages are capitalised. Administrative, preliminary project and post implementation costs including
determining performance requirements, vendor selection and training costs are expensed as incurred.
Deferred income - At 30 September, the Group's liabilities included $128 million (Sep 2001: $131 million) in relation to income received in advance.
This income is comprised of 2 components: (1) fees received for services not yet completed; and (2) profit made on an interest rate swap that was
hedging future payments (years 2004 and forward) on the Group's preference shares. Under Australian Accounting Standards, this profit is deferred
and recognised when the hedged transaction occurs, or immediately if the hedged transaction is no longer expected to occur. As the Group presently
plans to retain the preference shares, recognition of the income from the hedging transaction is deferred.
The balances of deferred assets at 30 September were:
Deferred acquisition costs
2002
2001
$m
$m

Software Assets
2002
2001
$m
$m

Deferred Income
2002
2001
$m
$m

Personal Banking & WealthCorporate Businesses
Investment Banking
Consumer FinanceMortgages
Asset Finance
Small to Medium Business
Other

–
–
27
–
73
189
–
–

–
–
39
–
57
162
–
–

177
17
–
45
27
29
6
118

142
16
–
30
17
31
3
64

–
4
11
–
–
–
–
113

1
5
11
–
–
1
–
113

Total

289

258

419

303

128

131

80
81

Critical Accounting Policies (continued)(d) Derivatives and Hedging
Description and Significance
The Group buys and sells derivatives as part of its trading operations and to hedge its interest rate risk, foreign exchange risk and equity risks(in the ING Australia joint venture). The derivative instruments used to hedge the Group's exposures include:>

swaps;>

forward rate agreements;>

futures;>

options; and>combinations of the above instruments.

Accounting treatment - In accordance with the requirements of Australian Accounting Standards, derivative instruments entered into for the purposeof hedging are accounted for on the same basis as the underlying exposures or risks.
Derivative instruments entered into to hedge exposures that are not recorded at fair value do not have their fair values recorded in the Group's Statementof Financial Position (in accordance with Australian Accounting Standards).
Exposures hedged by derivatives not recorded at their fair value include risks related to:>revenues from foreign operations;>structured lending transactions;>lending assets; and>funding liabilities.

Hedge accounting is only applied when the hedging relationship is identified at the time the Group enters into the hedging derivative transaction.
If a hedge ceases to be effective, the hedging derivative transaction will be recognised at fair value. Gains and losses on derivative instruments not
carried at their fair value amounts are recognised at the same time as the gain or loss on the hedged exposure is booked.
Movements in the value of foreign exchange contracts that are hedging overseas operations are not recognised as income or expenses. Insteadthese movements are recognised in the Foreign Currency Translation Reserve together with the net difference arising from the translation of theoverseas operation.
Fair value determination - Derivatives entered into as part of the Group's trading operations are carried at their fair values with any change in fair value
being immediately recognised as part of trading income. Where liquid markets exist, fair value is based on quoted market prices. For certain complex
or illiquid derivative instruments, it may be necessary to use projections, estimates and models to determine fair value. In addition, judgemental factors
such as the need for credit adjustments, liquidity and other valuation adjustments affect the reported fair value amountsof derivatives.
(e) Special purpose and off balance sheet vehicles
The Group may invest in or establish special purpose companies, or vehicles (SPVs), to enable it to undertake specific types of transactions.
Where the Group controls such vehicles, they are consolidated into the Group financial results.
Certain SPVs may be set up by the Group to facilitate Group strategic aims, or to assist with structured transactions for clients. The accounting treatmentof each SPV is assessed using existing Australian guidance, with reference also to International and US accounting standards where specific issues are yet
to be addressed in Australia. The table below summarises the main types of SPVs that are not consolidated into the Group, the reason for theirestablishment, and the key risks associated with them.
SPV Assets$mType of Special
Purpose Vehcile (SPV)

Reason for establishment

Key Risks

Securitisation vehicles

Assets are transferred to a SPV,
which funds the purchase byissuing securities.

ANZ may manage securitisation
vehicles, service assets in a vehicle
and provide liquidity support, andretains the risks associated with theprovision of these services. Credit
and market risks associated withthe underlying assets are notretained by ANZ. ANZ may also
provide other services (eg. swaps,
credit guarantees), for which ANZearns a fee at commercial rates.

6,992

Enables ANZ or customers toincrease diversity of funding
sources.

Structured finance entities

These entities are set up to assist
with the structuring of client
financing.

ANZ may retain liquidity risk, if itprovides liquidity support to thevehicle. ANZ may also manage
these vehicles.

1,968Managed funds

These funds invest in specified
investments on behalf of clients.

The ANZ/ING Australia joint
venture, as manager of the funds,
exposes ANZ to operational risk andreputational risk.

26,642Financial Information
1: Cross Border Outstandings
Cross border outstandings of the Group to countries which individually represented in excess of 0.75% of the Group’s total assets are shown below.
There were no cross border outstandings to any other country exceeding 0.75% of total assets.
Cross border foreign outstandings are based on the country of domicile of the borrower or guarantor of the ultimate risk and comprise loans (including
accrued interest), placements with banks, acceptances and other monetary assets denominated in currencies other than the borrower’s local currency.
For certain countries, local currency obligations are also included. Cross border foreign outstandings are before specific and general provisions.
Governments
and other
official institutions$mBanks andother financial
institutions
$m

Other
commercial
and industrial
$m

Total
$m

% of
Group
assetsAt 30 September 2002
United Kingdom
USA
South Korea
Singapore
FranceGermany

273
29
245
603
358
370

1,079
2,456
1,305
388
349
345

4,581
1,705
171
629
890
797

5,933
4,190
1,721
1,620
1,597
1,512

3.2
2.3
0.9
0.9
0.9
0.8

At 30 September 2001
United Kingdom
USA
Germany
New ZealandFranceSingapore
South Korea

394
31
598
–
252
476
1

2,238
3,981
696
21
193
369
1,120

3,976
2,355
1,025
2,093
1,613
951
428

6,608
6,367
2,319
2,114
2,058
1,796
1,549

3.6
3.4
1.3
1.1
1.1
1.0
0.8

1

1

1

1

1 Includes local lending in local currency

82
83

Financial Information
2: Certificates of Deposit and Term Deposit Maturities
The following table shows the maturity profile of the Group’s certificates of deposit and term deposits in excess of $100,000 issued at 30 September 2002.

Australia
Certificates of deposit
Term deposits

Overseas
Certificates of deposit
Term deposits

Total

Less than
3 months$m

Between
3 months and6 months$m

Between
6 months and
12 months$m

After
1 year
$m

Total
$m

3,650
11,886

528
1,275

350
792

812
379

5,340
14,332

15,536

1,803

1,142

1,191

19,672

4,098
15,065

709
961

1,218
689

284
346

6,309
17,061

19,163

1,670

1,907

630

23,37034,699

3,473

3,049

1,821

43,042

3: Volume and Rate Analysis
The following table allocates changes in interest income and interest expense between changes in volume and changes in rate for the past two years.
Volume and rate variances have been calculated on the movement in average balances and the change in the interest rates on average interest earning
assets and average interest bearing liabilities. The variance caused by the change of both volume and rate has been allocated in proportion to therelationship of the absolute dollar amounts of each change to the total.
2002 over 2001

2001 over 2000

Change due to
Rate
$m

Total
$m

Volume$m

Change due to
Rate
$m

Total
$m

(10)
(1)
4

(11)
(7)
(68)

(21)
(8)
(64)

(15)
14
(5)

–
1
(24)

(15)
15
(29)

–

–

–

–

–

–

45
(23)
(4)

(40)
(25)
(28)

5
(48)
(32)

(21)
39
(54)

(14)
4
(59)

(35)
43
(113)

414
71
(55)

(835)
(174)
(304)

(421)
(103)
(359)

645
53
(156)

(107)
45
(286)

538
98
(442)

Volume$mInterest earning assets
Due from other financial institutions
Australia
New ZealandOverseas markets
Regulatory deposits with
Reserve Bank of Australia
Investments in public securities
Australia
New ZealandOverseas markets
Loans, advances and bills discounted
Australia
New ZealandOverseas markets
Other assets
Australia
New ZealandOverseas markets
Intragroup assets
Overseas markets

(1)
15
34

(80)
(1)
(131)

(81)
14
(97)

(14)
8
(54)

14
(20)
13

–
(12)
(41)

(104)

(221)

(325)

145

(29)

116

Change in interest income

385(1,925)(1,540)

585

(462)

123

Intragroup elimination

104

221

325

(145)

29

(116)

489

(1,704)(1,215)

440

(433)

7

Financial Information
3: Volume and Rate Analysis (continued)
2002 over 2001

2001 over 2000

Change due to
Rate
$m

Total
$m

Volume$m

Change due to
Rate
$m

Total
$m

71
29
87

(215)
(92)
(328)

(144)
(63)
(241)

(299)
15
(117)

(7)
28
(156)

(306)
43
(273)

34
8
2

(58)
(21)
(2)

(24)
(13)
–

12
(2)
(29)

10
6
(21)

22
4
(50)

115
13
(2)

(195)
(17)
(7)

(80)
(4)
(9)

148
7
(17)

(57)
9
(15)

91
16
(32)

28
1
(122)

(10)
(4)
(237)

18
(3)
(359)

14
–
70

2
–
(73)

16
–
(3)

(72)
(71)

(60)
(130)

(132)
(201)

1
121

2
(27)

3
94

(1)
9

(48)
(9)

(49)
–

10
13

15
6

25
19

171
3
(3)

(148)
(2)
(17)

23
1
(20)

220
6
19

(41)
–
(3)

179
6
16

(47)
12
(12)

43
(74)
(21)

(4)
(62)
(33)

26
(11)
(95)

80
15
91

106
4
(4)

(75)
(29)

(192)
(29)

(267)
(58)

151
2

(42)
5

109
7

Change in interest expense149(1,873)(1,724)

265

(173)

92

Intragroup elimination

104

221

325

(153)

37

(116)

253

(1,652)(1,399)

112

(136)

(24)

236

(52)

184

328

(297)

31

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

Change in net interest income

84
85

Financial Information
4: Concentrations of Credit Risk
Concentrations of credit risk exist if a number of counterparties are engaged in similar activities and have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Off balance sheet transactionsof the Group are substantially with other banks.
2002

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

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

Total portfolio

2001

2000

Loans andadvances1$mSpecific
provision$m

Loans andadvances1$mSpecific
provision$m

Loans andadvances1$mSpecific
provision
$m

3,436
2,120
2,465
4,603
67
2,503
4,303
14,893
1,152
57,049
5,957
3,990

16
5
28
13
–
2
7
27
5
32
15
61

3,500
2,044
2,293
4,311
122
2,524
4,034
13,435
1,198
49,127
6,017
3,850

104
7
27
3
–
5
11
36
11
13
16
70

4,157
2,206
2,062
5,532
103
2,821
4,236
12,728
1,376
43,912
5,691
4,196

34
6
4
1
–
8
19
131
7
9
24
17

102,538

211

92,455303

89,020

260

2,526
435
586
1,561
212
844
4,701
1,848
551
11,956
1,648
5,943

3
1
4
21
–
1
34
7
1
5
15
282

2,686
214
361
2,276
372
936
5,153
1,804
921
11,638
2,021
5,853

8
1
1
26
27
4
30
18
9
12
18
43

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

12
1
6
128
25
–
118
16
36
16
35
56

32,811

374

34,235

197

30,612

449

135,349585

126,690500

119,632709

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

Financial Information
4: Concentrations of Credit Risk (continued)
1999

Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
2

3

Overseas
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal
Real estate – construction
Real estate – mortgage
Retail and wholesale trade
Other
2

3

Total portfolio

1998

Loans and1
advances$mSpecific
provision$m

Loans andadvances1$mSpecific
provision
$m

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

12
5
25
5
–
5
19
94
6
48
23
39

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

11
3
19
3
–
4
24
96
6
64
19
48

75,255281

64,675

297

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

17
7
4
156
–
1
213
35
32
25
72
64

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

27
8
3
66
30
–
193
20
41
19
37
78

32,296626

33,236

522

107,551907

97,911819

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

86
87

Financial Information
5: Doubtful Debts – Industry Analysis
2002
$m

2001
$m

2000
$m

1999
$m

1998
$m

Balance at start of year
Adjustment for exchange rate fluctuations
Bad debts written off (refer (i) below)
Charge to statement of financial performance
Recoveries (refer (ii) below)
Other

1,886
(28)
(697)
860
60
–

2,082
32
(834)
531
75
–

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

2,220
(79)
(382)
510
33
–

1,883
34
(221)
487
37
–

Total provisions for doubtful debts

2,081

1,886

2,082

2,302

2,220

(i) Total write-offs by industry
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other
Overseas
Other

(72)
(8)
(4)
(8)
(7)
(17)
(237)
(12)
(19)
(47)
(37)

(14)
(6)
(5)
(7)
(11)
(22)
(292)
(13)
(13)
(97)
(28)

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

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

(4)
(4)
(3)
(3)
(5)
(11)
(81)
(5)
(40)
(14)
(4)

(229)

(326)

(264)

(160)

(47)

(697)

(834)

(539)

(382)

(221)

3
1
2
–
2
3
27
2
4
3
1

5
1
1
2
1
2
30
1
3
2
1

4
–
1
4
2
5
9
1
4
2
2

–
–
–
3
2
1
8
–
1
–
2

–
3
1
1
3
4
10
1
2
1
1

12

26

12

16

10

60

75

46

33

37

Net write-offs

(637)

(759)

(493)

(349)

(184)

Ratio of net write-offs to averageloans and acceptances

0.4%

0.5%

0.4%

0.3%

0.2%

1

Total write-offs(ii) Total recoveries by industry
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Lease finance
Manufacturing
Personal2
Real estate – construction
Real estate – mortgage3
Retail and wholesale trade
Other
Overseas
Other
Total recoveries

1 2000 includes $266 million reduction from the sale of Grindlays
2 Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
3 Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must be secured by property

Financial Information
6: Short Term Borrowings
The Group’s short-term borrowings comprise commercial paper, as well as unsecured notes issued by subsidiary borrowing corporations with an originalterm to maturity of less than one year. The Group has commercial paper programs in the United States, where it issues paper through ANZ (Delaware) Inc.,and in Europe and Asia, where the Group issues paper direct.

Balance at end of year
Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Weighted average interest rate at end of year
Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Maximum amount outstanding at any month end during year
Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Average amount outstanding during year
Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Weighted average interest rate during year
Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes

2002
$m

2001
$m

2000
$m

1,654
3,963
12

4,059
5,043
28

4,416
6,098
98

1.85%
4.92%
6.22%

4.67%
3.78%
5.69%

6.50%
6.20%
5.57%

5,541
5,647
29

7,096
7,193
99

5,503
6,209
742

3,641
3,888
14

5,408
5,275
53

3,079
5,256
504

2.00%
4.57%
5.54%

5.07%
5.87%
5.73%

5.84%
5.83%
4.86%

Glossary
Asset Finance operating under the Esanda and UDC brands, ANZ Asset Finance provides secured financing for motor vehicles and other assets,fleet management and vendor financing facilities, and fixed interest securities through the issue of debentures.
Consumer Finance provides consumer and commercial credit cards, ePayment products, personal loans, and merchant payment facilities in Australia,
New Zealand and selected overseas markets.
Corporate Banking provides financial products and develops product strategies for medium sized businesses (turnover $10 million to $100 million) in
Australasia.
Economic loss provisioning (ELP) charge is determined based on the expected average annual loss of principal over the economic cycle for the current risk
profile of the lending portfolio.
Equity standardisation Economic Value Added (EVATM) principles are in use throughout the Group, whereby risk adjusted capital is allocated and charged
against business units. Equity standardised profit is determined by eliminating the impact of earnings on each business unit’s book capital and attributing
earnings on the business unit’s risk adjusted capital. This enhances comparability of business unit performance. Geographic results are not equity
standardised.
Impaired assets are loans or other credit facilities where there is reasonable doubt about the collectability of interest, fees (past and future) or principal
outstanding, or where concessional terms have been provided because of the financial difficulties of the customer.
Investment Banking comprises Global Foreign Exchange, Global Capital Markets, Global Structured Finance and Corporate Financing & Advisory.
Mortgages provision of mortgage finance secured by residential real estate in Australia and New Zealand.
Net advances include gross loans and advances, acceptances and ANZ accepted bills held as part of trading securities less income yet to mature andspecific provisions (for both as at and average volumes).
Net interest average margin is net interest income as a percentage of average interest earning assets. Non-assessable interest income is grossed up to theequivalent before tax amount for the purpose of these calculations.
Net interest spread is the average interest rate received on interest earning assets less the average interest rate paid on interest bearing liabilities.
Non-assessable interest income is grossed up to the equivalent before tax amount for the purpose of these calculations.
Net non-interest bearing items, referred to in the analysis of interest spread and net interest average margin, includes shareholders’ equity, provisions for
doubtful debts, and deposits not bearing interest and other liabilities not bearing interest, offset by premises and equipment and other non-interest
earning assets. Non-accrual loans are included within interest bearing loans, advances and bills discounted.
Net specific provision is the transfer from the general provision to the specific provision (representing new and increased specific provisions less specificprovision releases) less recoveries.
Operating expenses exclude charge for doubtful debts.
Operations, Technology & Shared Services comprises technology and payments operations, central support units and costs relating to hedging overseas
revenue and capital positions. Also includes the residual results of discontinued businesses.
Overseas geographic segment includes the results of all operations outside Australia and New Zealand.
Overseas markets includes the results of operations in the UK and Europe, Asia, Pacific and Americas. The Group’s geographic segments are Australia,
New Zealand and Overseas markets.
Personal Banking and Wealth comprises Personal Banking Australia, New Zealand and Pacific Asia and Wealth Management and the INGA joint venture.
Personal Banking Australia provides a full range of banking services for personal and rural small business customers in Australia through branches, callcentres and on line banking. Personal Banking New Zealand provides a full range of banking and wealth management services for consumers across
New Zealand. Personal Banking Pacific Asia provides retail banking services in the Pacific Region and Asia, including ANZ’s share of PT Panin Bank inIndonesia. Wealth Management delivers comprehensive financial advisory and distribution services to high net worth customers in Australia covering
investment, risk, lending and banking. ING Australia, the joint venture between ANZ and the ING Group, provides integrated manufacture and distributionof wealth creation, management and protection products and services aligned to ANZ distribution and the open market.
Service transfer pricing is in use throughout the Group, whereby business and support units recover the cost of services provided to other units. The basisof pricing for internal services varies from cost recovery, to market equivalent. There are some head office costs which are not recharged.
Small to Medium Business provides a full range of banking services for metropolitan based small to medium business in Australia and New Zealand withturnover up to $10 million.
Total advances include gross loans and advances, acceptances and ANZ accepted bills held as part of trading securities less income yet to mature (for bothas at and average volumes).
Group Treasury is the banker to all ANZ businesses. Charged with providing cash flow support, ensuring liquidity, managing interest rate risk andproviding capital to the businesses.
Unproductive facilities comprises standby letters of credit, bill endorsements, documentary letters of credit and guarantees to third parties, undrawn
facilities to which the Group is irrevocably committed and market related exposures.

88
89

Alphabetical Index
Page
Accounting Policies
6
Associates
58
Auditors’ Report
78
Average Balance Sheet and Related Interest 35
Bonds and Notes
30
Capital Adequacy
33
Certificates of Deposit andTerm Deposit Maturities
83
Commitments
59
Concentrations of Credit Risk
85
Contingent Liabilities andCredit Related Commitments
60
Controlled Entities
57
Critical Accounting Policies
79
Cross Border Outstandings
82
Customers’ Liabilities for Acceptances
24
Deferred Tax Assets
26
Deposits and Other Borrowings
29
Derivative Financial Instruments
45
Directors’ Declaration
77
Dividends
12
Doubtful Debts – Industry Analysis
87
Due from Other Financial Institutions
14
Due to Other Financial Institutions
28
Earnings Per Ordinary Share
13
Employee Share and Option Plans
64
Equity instruments issued to employees
10
Events Since the End of the Financial Year76
Exchange Rates
76
Expenses8
Fiduciary Activities
64
Glossary89
Goodwill
26
Impaired Assets
21
Income8
Income Tax Expense
11
Income Tax Liabilities
29
Interest Sensitivity Gap
41
Interest Spreads andNet Interest Average Margins
38

Alphabetical Index
Interests in Joint Venture Entities
Investment Securities
Items Reported as Abnormal
in Prior Years
Life Insurance
Liquid Assets
Loan CapitalMarket Risk
Net Fair Value of Financial Instruments
Net Loans and Advances
Notes to the Financial Statements
Notes to the Statements of Cash Flows
Other Assets
Outside Equity Interests
Payables and Other Liabilities
Premises and Equipment
Provisions
Provisions for Doubtful Debts
Regulatory Deposits
Related Party Disclosures
Remuneration of Auditors
Remuneration of Directors
Remuneration of Executives
Securitisation
Segment Analysis
Share Capital
Shares in Controlled Entities,
Associates and Joint Venture Entities
Short Term Borrowings
Statements of Cash Flows
Statements of Changes
in Shareholders’ Equity
Statements of Financial Performance
Statements of Financial Position
Superannuation Commitments
Trading Securities
US GAAP Reconciliation
Volume and Rate Analysis

Page
58
15
11
52
13
31
39
43
18
6
55
26
33
30
27
30
23
24
67
10
69
70
51
53
32
25
88
5
4
2
3
63
14
71
83

90
91

This page has been intentionally left blankThis page has been intentionally left blankAustralia and New Zealand Banking Group Limited
is a company limited by shares, incorporated anddomiciled in Australia. Its registered office andprincipal place of business is:Australia and New Zealand Banking Group Limited
Level 6, 100 Queen Street Melbourne,
Victoria 3000 Australia
The principal activities of the Group during theyear were general banking, mortgage lending,life insurance, leasing, hire purchase and general
finance, international and investment banking,investment and portfolio management andadvisory services, nominee and custodian services
and executor and trustee services.
The number of employees (full time equivalents)
as at 30 September 2002 was 22,482.

ANZ 2002 Financial Reportwww.anz.com